Zebu blog

Tag: Wealth Building

  • The Best Lessons From “The Psychology Of Money” – Part 2

    The power of compounding is surprising

    Making versus saving money “To make money, you have to take risks, have faith, and stand up for yourself. But taking risks needs to be stopped if money is to be kept. It requires humility and the fear that everything you’ve worked for could be taken away from you just as quickly. You can’t always count on repeating past success, so you have to be thrifty and realise that at least some of what you’ve made is due to luck.

    Money management is different from money management. To make money, you have to take risks, work hard, and keep a positive attitude. Keeping money is a different skill. It requires you to take less risk, not be greedy, and remember that things could be taken away from you at any time.

    Money is not the enemy

    A plan is only useful if it can stand up to the real world. The truth is that everyone has a future that is full of unknowns.

    If you’re still young and have more income than expenses, the best way to get the most out of your long-term investments is to put most of your money into a diversified portfolio of low-cost index funds. Cash loses value over time, so it’s not smart to keep more than a small amount of your net worth in cash. Instead, you should invest in assets like stocks, which have historically grown at a rate of 10-11% per year.

    Even though it might seem appealing to invest in ways that will give you the best returns, these ideas often don’t take your personality into account. Think about having 95% of your money in stocks and bonds and only 5% in cash. The market falls 20 to 25%. Having such a small amount of cash on hand may make you more likely to sell some of your stocks in a panic when the market goes down, depending on how that drop makes you feel. And if you sell in a panic, you can lose out on a lot more money than if you kept a bigger part of your portfolio in cash and didn’t sell because you felt safer.

    Spreadsheets are not like people!

    Even though the models say you should only keep 1% to 5% of your assets in cash, you may want to keep 10% to 20% to protect yourself from having a bad attitude when bad things happen. It can also be the best choice for your portfolio if having more cash on hand keeps you from making one big mistake.

    Long Tail

    In finance, a small number of events can be responsible for most of the outcomes. This is where long tails, or the ends of a distribution of outcomes, have a big effect.

    Most of the time, your choices about investing don’t matter. What happens depends on the choices you make on a few days when something important happens, like a severe downturn, a frothy market, a speculative bubble, etc. Warren Buffet has held between 400 and 500 stocks over the course of his life. Most of his money came from just 10 of them.

    Highest level of wealth

    Having the freedom to do what you want, when you want, with who you want, and for as long as you want is very valuable. This is the best return that money can buy.

    Being more flexible and in charge of your own time is much more useful than staying up late or making risky bets that keep you from sleeping just to boost your returns by 2%.

  • The Best Lessons From “The Psychology Of Money” – Part 1

    In The Psychology of Money, Morgan Housel shows you how to get along better with money and make better financial decisions. He doesn’t try to make people seem like machines that can maximise their return on investment. Instead, he shows how psychology can both help and hurt you.

    Main Points

    The real world isn’t a theory – the problem is that studying or having an open mind can’t really make us feel the same way that fear and uncertainty do.

    We’re not like mathematical equations. Reading about historical events like stock market crashes or how stocks have gone up and to the right over time can teach us a lot, but it’s not the same as actually going through them. So be careful. You might think you can hold on to your stocks during a 30% drop in the market because you know that only fools sell at the bottom. However, you won’t know what to do until you actually go through a drop of that size.

    Risk and reward

    It’s easy to think that the quality of your decisions and actions is the only thing that affects your finances, but that’s not always the case. You can make smart decisions that lead to bad financial results. You could also make bad decisions that turn out to be good for your finances. You have to think about how chance and risk will play a role.

    To make it less likely that people will stress how much individual effort affects results:

    Be careful of the people you both look up to and look down on. Those at the top may have gotten lucky, while those at the bottom may have lost money because they took more risks.

    Pay less attention to individual people and more attention to larger trends. It’s hard to copy what successful people have done, but you might be able to join larger patterns.

    But what’s more important is that even if we agree that luck plays a role in success, we shouldn’t be too hard on ourselves when we fail because risk also plays a role.

    Be kind to yourself when you make a mistake or find yourself in a dangerous situation. Since the world is unpredictable, if something goes wrong, it might not even be your fault.

    What Buffett Says

    According to legendary investor Warren Buffet, there’s no reason to put our needs and resources at risk for something you don’t need.

    It’s easy to make a goalpost that can be moved. When you reach one of your goals, you move on to the next one. The cycle will never stop. Often, you do this because you’re comparing yourself to others, and most of the time, you’re comparing yourself to someone higher up on the ladder.

    Someone else will always have more money than you do. Not a problem. It’s fine to look for ways to make more money, but don’t risk what you already have to get something you don’t need.

    More lessons from the book follow on the next article.

  • If You Are A Student, Here’s Why You Should Invest Today

    Indians are renowned for their sophisticated financial reasoning, yet there is a severe lack of information and investment appetite when it comes to understanding investing and financial diversification. Young professionals find it challenging to file their taxes, learn about the equity markets, or engage in trading and investing since schools and colleges did not place enough focus on teaching pupils about these significant life subjects.

    Less than 10% of Indian families participate in alternative assets like mutual funds or equities, the bulk of which choose to preserve their money in bank accounts. When it comes to stock trading and investing, gold, post office savings, and real estate are favoured.

    While there is nothing wrong with safer investment options like Savings and Fixed Deposits, that money’s value could eventually decline due to inflation. This highlights the necessity of early education in stock trading and investing, educating kids about the ideas of compounding, the stock market, portfolio diversification, and much more that may make them more financially literate as adults.

    College students have an advantage over other adults who begin investing in their 30s since they are youthful, active, and have the passage of time on their side.

    Consider a capital of Rs100. It has the potential to earn 10% a year in returns when invested in Nifty 50 stocks. Rs 110 will be the total sum for the first year, Rs 121 for the following year, and Rs. 133 for the following year.

    For college students, the power of compounding really shines since it gives their money more time to grow.

    Early investment also enables them to take measured risks without worrying about how they would damage their families and livelihoods. In reality, it provides insight into stock evaluation and investment dangers, enabling customers to evaluate current share prices and watch their rise and fall in order to make wise decisions.

    Recently, the Sensex and Nifty both reached their all-time highs when it was thought that Indian shares were valued at their highest ever levels. Although the pandemic has led to a weak economy, negative growth, and the lowest GDP ever, the stock market is shattering all previous records. People who lack understanding tend to label anything as “gambling” or unrelated to reality. However, with the right information and its understanding, you can build generational wealth in a few decades.

    Since students are beginners in investing, even a little investment if done properly, may generate significant returns over time and serve as a reliable source of income. It is a fantastic chance for students or recent graduates to generate enormous returns and support their families. It is crucial to have an accurate understanding of the market before starting to invest, even if it is for a small capital.

    Here’s a quick tip for student investors:

    Invest in businesses or brands that you use frequently, in products that you require frequently and that are in great demand. By doing this, you boost your chances of getting a positive return because you are a consumer of the brand and are assisting them in growing sales and making profits, which will eventually increase the brand’s stock value and benefit you.

    It goes without saying that investing is a wise approach to increasing money. However, investing all of your funds in the market out of a desire to make money is not a good idea. Trade wisely by becoming knowledgeable about the financial market. Being an early investor, especially during the market’s all-time high, should enable you to take advantage of the benefits and see your net worth increase.

    What investing choices are available to college students?

    The most fundamental type of financial investment, a savings account enables you to safely deposit money while receiving interest. On certain occasions, the real rate of return obtained from an investment, also known as the annual percentage yield, exceeds 0.50%.

    Fixed Deposits: These types of accounts are comparable to savings accounts but have a fixed term and a higher fixed interest rate.

    Stocks: By acquiring a stock, you are effectively buying a share of a certain corporation. Depending on how much stock they possess, the shareholder is entitled to a piece of the corporation’s assets and income.

    Mutual funds: Mutual funds pool the money contributed by several investors and invest it in stocks, bonds, and other assets. The “portfolio” refers to the particular stocks, bonds, and assets that the funds are invested in.

    Exchange Traded Funds (ETFs): While ETFs and mutual funds both consist of a group of assets, ETFs are specifically created to track a certain index, industry, commodity, or another set of assets. As a result, you may have an ETF that tracks real estate or corporate bonds. You should invest in low-cost, well-diversified ETFs as a college student since they provide you access to hundreds of stocks without requiring you to individually examine each one.

    Index Funds: An index fund is a similar thing to a collection of assets, but it is tied to an index, such as the Nifty 50 or the Sensex. One benefit of index funds is that they often have cheaper costs as no professional takes the time to choose stocks or bonds for the portfolio.

    Bonds: A bond is, in the simplest sense, a loan from an investor to a borrower, such as a particular corporation. Bonds are an essential component of a balanced portfolio because they may lessen the impact of a decline in the stock market.

    As you can see, there are several options for students to choose from. However, they require a significant amount of knowledge to get started. This is where Zebu School comes in. We have market experts who teach about the basics of the share market and help investors make the right financial decisions. Our courses are simple and pocket-friendly and can help you make the most out of the share market. To start learning today, please get in touch with us now.

  • Here are some reasons why you should buy dividend growth stocks

    Some stocks pay you just to hold them. Stocks that pay dividends can be a good way to make money without doing anything. They can also protect you from inflation.

    “Buy low, sell high” is a phrase that is often used to describe a good way to trade stocks. But investors can also make money on the market by getting dividends.

    Dividends, in short, are a way for companies to share some of their profits with their investors. Shareholders benefit because each share of stock they own gives them the right to a set dividend payment. Companies give out dividends on a regular basis, usually monthly, quarterly, or annually. Dividends can be paid out in cash or in the form of more company stock. Because of this, you can almost think of stocks that pay dividends as a way to make money while you sleep.

    Growing dividends from good companies can make a big difference in a portfolio and reinvested dividends are a much bigger source of growth than market returns alone.

    Dividend-paying stocks have been getting a lot of attention lately because they do more than just give you a steady stream of income. They also protect your money from inflation, which makes them perfect for the current market.

    How stocks that pay dividends protect against inflation

    In an inflationary environment, it’s good for big companies that have a long history of paying consistent dividends every year because they can handle higher prices and even benefit from them. As inflation causes prices of goods and services to rise, a company’s revenue, earnings, and dividends will also rise.

    Looking for a portfolio of stocks with strong cash flows that yield an average of 3% to 4% or more and consistently grow dividends by 5% to 10% each year. These are the kinds of businesses that investors should go after. Many companies with high-dividend stocks have used business models for a long time that work well when prices go up, which helps them make money in the long run.

    People still have to heat (or cool) their homes, drive to work, and eat, even when prices are going up quickly. Generally, companies in the energy, natural resources, and food and consumer staples sectors have strong pricing power and cost management, which lets them raise prices, keep demand up, and make more money.

    What investors need to remember

    Beginner investors should definitely buy stocks with dividend growth, but they should be careful when making investment decisions.

    Portfolio rebalancing, which is reacting to events as they happen in real-time, can be pricey when inflation is going up. Inflation pressures have been growing for a while, and the prices of many high-dividend stocks already reflect this.

    In general, the best idea is to think long-term, try to build a diversified portfolio of holdings, and resist the urge to try to time the market and shop around.

  • Financial Independence, Retire Early (FIRE): What Is It?

    Financial Independence, Retire Early (FIRE) is a movement of individuals committed to extreme savings and investing strategy that enables them to retire significantly sooner than typical budgets and retirement plans allow. FIRE was born out of Vicki Robin and Joe Dominguez’s 1992 best-selling book Your Money or Your Life. It came to reflect the book’s central premise: People should analyse every expense in terms of the number of work hours required to pay for it.

    The FIRE retirement movement is a direct challenge to the traditional retirement age of 65 and the business that has developed to encourage people to plan for it. By allocating the majority of their income to savings, members of the FIRE movement aspire to be able to retire decades before they reach 65 and live entirely off tiny withdrawals from their holdings.

    The concept of FIRE is extremely popular with millennials and there is no reason that Gen Z Indians will not follow suit. Followers of FIRE work for several years and save up to 70% of their annual salary. When their savings accumulate to approximately 30 times their annual expenses, or approximately $1 million, they may decide to quit their jobs or retire entirely.

    At Zebu, we understand that traders and investors with very high aspirations need nothing short of the best Indian trading platform with its plethora of features and scanners. As one of the top brokers in share market in India, we have the privilege of providing our users with their best trading accounts.

    To fund their living expenses after early retirement, FIRE enthusiasts make small annual withdrawals from their investments, often between 3% and 4% of the sum. Depending on the size of their funds and desired lifestyle, this may require extraordinary care in monitoring costs as well as a commitment to investment upkeep and reallocation.

    Types of FIRE

    Fat FIRE—This option is for the conventional worker who wishes to save significantly more than the average worker but does not wish to sacrifice their existing way of living. It is often not feasible without a high salary and active savings and investing plans.
    Lean FIRE—This involves a strong dedication to minimalism and extreme savings, necessitating a significantly more restricted lifestyle. Numerous Lean FIRE devotees live on less than $25,000 per year.
    Barista FIRE—This is for those who choose to reside in the grey area between the two options above. They abandoned their typical 9-to-5 occupations but maintain a less-than-minimalist existence through a combination of part-time work and savings. The former enables individuals to receive health insurance, while the latter stops them from withdrawing assets from their retirement accounts.

    Who Is FIRE Really For?

    The majority of people believe that FIRE is only for people who have a big salary, typically in the six figures. Indeed, if your goal is to retire in your 30s or 40s, this is almost certainly true. However, there is much for everyone to learn from the movement’s ideals, which can help individuals save for retirement and even attain an early retirement, albeit not quite as early as 40.

    And keep in mind that the first part of FIRE stands for financial independence, which, if attained, enables you to work at something you enjoy rather than something you have to do. According to author Robin, FIRE is about more than early retirement; it teaches you how to consume less while living better.

    Meticulous planning

    The FIRE movement emphasises the necessity of developing a clear strategy and sticking to it, which are principles that will assist anyone in saving for retirement and building a sizable emergency fund.

    Economic self-control

    To attain a FIRE retirement, you must maximise your income while keeping your spending to a minimum. While retiring by 40 requires extreme measures, everyone can benefit from creating and adhering to a budget while working as hard as possible to earn as much money as possible, whether through a better job, adding a second one, or creating additional revenue streams through side hustles or rental property ownership.

    A prudent investment

    Nobody can retire comfortably if they do not invest in their retirement funds. FIRE devotees invest a greater percentage of their income than the ordinary person would. However, the notion of setting aside a fixed proportion of your salary each month for investment — and beginning as soon as possible — will enable you to grow your retirement savings to a level that will ensure your financial stability in your later years.

    According to Robin’s comments, the book’s purpose is not to impart a master plan for early retirement; rather, it is to demonstrate how to live better while spending less in order to live a more fulfilling life while consuming less of the world’s resources.

    If you are a FIRE enthusiast, we would love to support your goals with the best trading accounts from Zebu. As one of the top brokers in share market, we have created the best Indian trading platform for waiting for you to take charge of your financial future. To know more about our products and services, please get in touch with us now.

  • The Best Books to Read On Personal Finance

    Large Cap vs Mid Cap vs Small Cap: Key Differences That Actually Matter

    Personal finance books can help you get started with money management more effectively. At the most fundamental level, you can learn personal finance fundamentals, such as why paying yourself first pays off or how to manage and pay off debt, to become smarter and more confident with your money. However, it does not end there. They can also teach you how to invest, manage a mortgage, build a nest egg, save for retirement, and ultimately assist you in avoiding common money pitfalls in order to foster a healthy relationship with your money. It’s not easy reading, but your wallet and future self will thank you. Before we begin… When you take full responsibility for your financial future, it helps to be supported by one of the top brokers in share market. Zebu is one of the fastest-growing platforms in the country for trading and investing and we have a team that would love to help you out with your financial objectives. We have Zebull, the best online trading platform with a host of features, and one of the lowest brokerage fees for intraday trading. Here are our recommendations for the best personal finance books. Why Didn’t They Teach Me This in School? If you ask anyone what they wish they had learned more about in school, the answer is almost certainly money. More specifically, how to properly manage one’s finances—hence the title of Cary Siegel’s book, “Why Didn’t They Teach Me This in School?” Siegel, a retired business executive, divides the book into 99 principles and eight financial lessons that you should have learned by high school or college but didn’t. When he realised his five children weren’t learning important personal finance principles before entering the real world, he wrote this book for them, but it grew into a well-reviewed read full of important financial lessons with Siegel’s first hand experiences as well. This simple book is ideal for recent graduates or anyone looking to begin their personal finance journey on the right foot. Rich Dad Poor Dad You’ve probably heard of Robert Kiyosaki’s book “Rich Dad, Poor Dad,” but there’s a reason it’s been around for over two decades. Kiyosaki shares what he learned growing up from his father and a friend’s father, the latter of whom is referred to as the “rich dad” in the title, in one of the most popular personal finance books of all time. These lessons cover topics such as how you don’t need a lot of money to get rich, assets and liabilities, and why schools won’t teach your children what they need to know about personal finance. This 20th anniversary edition includes an author update on money, the economy, and investing. The Total Money Makeover Debt management is critical to the health of your personal finances. Do you require assistance in this area? Examine Dave Ramsey’s “The Total Money Makeover.” This New York Times bestseller explains, without equivocation, how to get out of debt and improve your financial situation by avoiding common pitfalls such as rent-to-own, cash advances, and credit. It also provides sound advice on how to start an emergency fund, save for college and retirement, and use Ramsey’s famous “Snowball Method” to pay off debt. The Automatic Millionaire Who wouldn’t like to be a millionaire? The New York Times, USA Today, Bloomberg Businessweek, and Wall Street Journal business bestseller “The Automatic Millionaire” by David Bach teaches you how to do just that. The book begins with the storey of a couple who earns a combined $55,000 per year and how they achieved their financial goals. Consider this: owning two homes, paying for their children’s college, and retiring at 55 with a $1 million retirement nest egg. What is the secret? Creating a financial system that not only pays yourself first, but also does so automatically. Broke Millennial This is the personal finance book for you if you can decipher #GYFLT. (Hint: in social media speak, #GYFLT stands for “get your financial life together.”) In her signature conversational style, Erin Lowry’s “Broke Millennial” explains how 20-somethings can take control of their personal finances. This book covers the most pressing financial issues confronting millennials today, from understanding your relationship with money to managing student loans to sharing financial details with a partner. The One-Page Financial Plan Confused about your money, whether it’s how to invest properly or how to deal with unexpected financial challenges? “The One-Page Financial Plan” by Carl Richards removes the mystery of effectively managing your finances. This book not only helps you figure out what your financial goals are but also shows you how to get there in a simple, one-page plan. The author is a Certified Financial Planner as well as a New York Times columnist. I Will Teach You to Be Rich Financial expert Ramit Sethi explains in “I Will Teach You to Be Rich,” a New York Times and Wall Street Journal best-seller, that you can spend your money guilt-free as long as it is invested and allocated properly. This title discusses how to avoid common financial pitfalls, such as paying off student loans, saving money on a monthly basis, and even negotiating your way out of late fees. This tenth-anniversary edition includes new perspectives on technology, money, and psychology, as well as success stories from readers who have made a fortune after reading—you guessed it—book. Sethi’s Clever Girl Finance According to the US Department of Labor, women still earn $0.82 for every dollar earned by men, while mothers earn $0.71 for every dollar earned by fathers. In short, when it comes to money, women still have to work harder. Bola Sokunbi’s “Clever Girl Finance” aims to empower and educate a new generation of women on topics such as budgeting, creating and sticking to a budget, managing credit, saving for retirement, and taking responsibility for your own financial well-being. The Psychology of Money This book is an intriguing look at the psychology of money and how your ego, preconceived notions, and even your pride can influence your financial decisions. As you might expect, this isn’t the best way to manage your investment portfolio, and Morgan Housel’s “The Psychology of Money” provides readers with tips and tools for combating these biases in the form of 19 short stories that all focus on the same topic. Housel is a partner at The Collaborative Fund and a former Wall Street Journal columnist. Your Money or Your Life Vicki Robin’s book has sold over a million copies details a nine-step plan to help readers change their relationship with money. This book will teach you how to get out of debt, start investing, build wealth, and even save money by using Robin’s signature mindfulness technique. Accounting Books You Should Read The Final Word Whether you’re new to finances or simply want more financial advice, “Why Didn’t They Teach Me This In School?” by Cary Siegel is the best overall personal finance book (view at Amazon). It teaches eight important money lessons that you should have learned by high school, as well as a whopping 99 principles for saving, investing, and building wealth. While you take charge of your personal finances, we at Zebu, one of the top brokers in share market, are here to assist you with everything. From helping you understand different asset classes and how you can benefit from them, Zebu supports you with Zebull, a superb online trading platform and the lowest brokerage for intraday trading. Please get in touch with us to know more about our products and services.