Chapter 3: Strategy or How the heck do I get to Financial Freedom?

3.3 By riding the market to beat inflation


What is the guiding principle to investing successfully and reaching your financial goals? Are you still playing to beat the market and still around? What is the basic nature of the market and how do you use it to succeed at investing?  Will it take you to financial freedom?
 
How do leaders of successful companies ensure that employees take decisions and work in a manner that enables them to achieve the company goals? And that they don’t do things in the short term that are detrimental to achieving the long-term goals. From the many paths that are available leaders choose the path to achieve the goals of the business. And they provide clear guiding principles and policies to help their employees take the right decisions. This enables employees to choose what to focus on and what to ignore, what are non-negotiable and where there is room to be flexible.  This is short is called the Strategy which essentially answers the question How the heck do we reach our goals? 
 
This is considered to be so important, like a make-or-break thing, that companies spend a huge amount of money as fees to the best consulting firms to get it right. And guess what happens at the end of blowing up a couple of million dollars? They get common-sense dressed up it glamorous clothes. Can’t blame the consultants; Strategy has to be simple and common-sensical for it to be implemented well. This is true for Investing successfully to reach your goals.  
 
You have your Bucket List-what you want to do, achieve before you are dead. Great. But it cost money, more money than you have currently. The problem is therefore clear, how do you afford all this. Luckily, most of the things you want are sometime in the future and you have time to make the arrangements. But they will cost more in the future thanks to some necessary-evil called inflation. Right? Right, but inflation is not evil, not something you want to get rid of. Why? 
 
Let’s say we hate inflation and we work hard to get inflation to zero. But guess what, we were really good at it and brought it below zero, negative inflation. It called deflation and that is a bigger monster even the Feds and Central Banks, Governments and Putin is scared of. Why? Because that means things will cost lesser tomorrow than today and that kind of screws up everything because then everybody is waiting for tomorrow to make things, buy things and shopkeeper don’t keep any stocks because tomorrow they become worth less, literally. The same thing happens for you house, it is worth less in the future than today. It’s chaos. 
 
What happens if there is high inflation. This also creates huge problems; panic amongst consumers who will want to buy everything they need tomorrow, today and it makes manufacturers and sellers hoard goods because they will get a higher price tomorrow. Even if sellers don’t hoard, not everything consumers need tomorrow can be produced today. So, common sense says we need a little bit of inflation, so that we are all motivated to consume things when it is the right time to do so.
 
So, anybody who is somebody in the government wants to keep inflation at the right level, so that there is no chaos and we can all go about living peacefully knowing that things will be a little more expensive tomorrow. Strange as it may sound, it the only sane solution. Think of inflation as the pulse-rate of the economic-body, as long as it keeps going at a certain rate, the economy is in good health.  In India, inflation between 4 to max 6% is seen as healthy.  
 
But you are still grappling with the problem that whatever you want and need tomorrow will be more expensive, so how do you handle this? Common sense says that whatever money you save, invest has to grow faster than inflation. Money grows or compounds according to this equation which should help you figure out your strategy : 
 
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