Step 4: Decide What Kind of investor You Want to Be

Few investors require an expert to suggest to them what to do, when what kind of decision requires to make, etc. They entirely rely on the expert. So that if they have made a mistake for choosing their expert then their chance of winning get reduced and sometimes, very less chance or increases in the chance of losing. They are financially uneducated and not interested in investing in learning financial education which makes them helpless to rely on so-called experts.

Few are those who interviewed many stockbrokers, advisors, before making any investment decisions. They are busy with their works and do not find time to gain knowledge. So that they would like to delegate their investment decision to those who are good at it.

And remaining having a good knowledge about investment which help them to make more wise decision with their investment without relying on others.

For gaining a good grip into the B and I quadrant, we learn to solve bigger financial problems. We try to be a good business owner because a good business owner can understand the business part well and also has an excess cash flow to invest. If we do not have a proper financial education then we can do a blunder in the I quadrant. So that financial education is key to making a wiser decision as well as avoiding blunders.

Read for more detail: Rich Dad’s Cashflow Quadrant: Guide to Financial Freedom

Step 3: Know the Difference Between risk and risky

Business and investing are not risky, but being under-educated is.

We are always taught in our school, family that business and investments are riskier so that we should stay far from it. But no one taught to build wealth, manage risk, and financial literacy.

Proper cash flow management can help us to go out of the rat race and debt trap. People not going for investment by considering it risky but when we are financially uneducated then that creates more risk to us. We have to understand what actual risk is. After the proper education, we can generate income from our assets as well as build more assets from income also. This will help us to attract fortune and financial freedom in our life.

When we write down our fears and work on overcoming them, then it will help us to grow fearlessly. Knowledge is the only option to grow substantially from any of the situations. We should start with scratch, learn about the various assets class, experiment small portion in all of them to find out which assets class suits our temperaments. After that start learning about mistakes made by others which helps us to stay one step ahead. Be ready to make mistakes and learn further from them.

Kindly check out mistakes and learn from well-known investors.

Bibliophile: Big Mistakes

Read for more detail: Rich Dad’s Cashflow Quadrant: Guide to Financial Freedom

Wish you all a happy and prosperous new year. Have a healthy and wealthy new year.

11 – Current temptation, future frustration

The eleventh part of the Series is “Current temptation, future frustration”. This series is based on the companies which are currently darling of the market and many trying to catch such opportunities but it has a probability to become a reason for future frustration. It can wipe out the majority of gains in wealth. I am trying to put some of the number-crunching facts by which we can identify ongoing issues in the companies and can be saved our wealth.

I am starting this article with one of the company which is engaged in the business of providing IT Consulting and Software Development Services has a 52 weeks low price of Rs.1.68 and LTP is Rs.7.59. This company has rewarded ~4.52x of return in a year.

Let’s start looking at the numbers.

We can see that sales of the company keeps falling losses at the operating level and not earning profits.

We can see that higher receivable days and lower payable days where we can say that almost 3.96 years of receivables.

The company has ~87% & 89% of other current assets to staff advances in FY21 & FY20 respectively. These advances keep growing and do not get repaid.

We can see that lower return ratio and worsen over a period as financial worsening. Also, the company has worsened with the worst performance.

We can see that majority of borrowings from related parties and interest expenses are very lower still the company cannot able to perform well.

This entire series is based on past available data and ignored the future development in companies and the stock market always looks at the future.

You Cannot See Money with Your eyes

If we see some tempting offer then we must have to be suspicious. There is no free lunch available.

We have to analyze various aspects before making any investment. We may make mistakes and mistakes are essential to learning about and correcting them for better growth.

People make an investment with emotion rather than with mind which led to losing money by a majority of people. At last, they become a dreamer, speculator, or broke down. When someone told us about a good deal and earning good in the future then our emotional bias comes into the picture and become greedy as well. This emotion stops us from making wise decisions.

If we want to be successful in the B and I quadrant then we have to train our mind that we can observe what others used to ignore. We can start by getting more about financial literacy. Our ability to create more money will bring more money for us. This education helps us with taking proper steps and investing becomes less risky for us. Education will help us to differentiate between good and bad advice.

Also, when we know about investing, we or our advisors choose to provide us higher yield with a less risky avenue.

We need to understand that when we buy any property on a mortgage then that’s not our assets rather than its and assets of a bank. It will fall under the liability side of the balance sheet. When we fail to make payment on time, the bank will take over that property from us. Taking debt is not always bad but if we take personal debt then it must be small. And if we go for a huge dent then someone working for paying it. That’s means business debt.

As we have learned in the series of rich dad poor dad that we consider assets to only be those properties that generate a cash inflow to us. All other properties are considered as our liabilities.

Now, comes to savings and deposits then yes those are not taking any cash flow out from us so that is our first level of assets.

Many of us spending our life on the opinion of others rather to focus on the fact. We should only trust facts nothing else.

When it comes to money, most people are either lazy or searching for shortcuts, so they don’t do enough due diligence. And there are still others who are so afraid of making mistakes that all they do is due diligence and then do nothing.  Too much due diligence is also called ‘analysis paralysis.’ The majority cannot become financially free because they live in debt till die. So, this will not bring freedom for them.

Read for more detail: Rich Dad’s Cashflow Quadrant: Guide to Financial Freedom

I am grateful to Mr.Meihol Jhaveri (Founder of Gatisofttech) for the development of the Lucky Idiot website.