I would like to begin this blog with a true story during World War II and how that knowledge can be considered for our investing
During the World war II, the most toughest fought battle between German troops and Soviet Union was The Battle of Stalingrad in late 1942. It was considered the German Tanks were one of the best engineered and efficient in fighting any situation. Germans believed it was one of their biggest assets
German troops had 104 tanks in the battle which were kept inactive few weeks, which were parked reverse in the grasslands outside the city. Germans thought they can be used in frontline anytime and relied on it
For their Surprise, Less than 20 tanks were operable and rest other failed to work during the need in the frontline. Everyone was left with high disappointment and later the situation was analyzed and Germans found, during the inactive time, the field mice damaged the insulation covering the electrical system
Can any engineer think of this situation while designing the tanks ? Can this be addressed as a failure in Engineering ? No, this is an situation which should be considered for unimaginable errors and any great engineering should allow some matter of doubt and Plan B should be kept in place. We can plan for every risk except the things that are too crazy to cross our mind
We know how a great business mind (Bill Gates) thought of this scenario and got prepared during his initial stage of business. He kept 1 year salary for all his employees and company expenses left in the bank and started the implementation of new ideas. He was prepared for the worst and had the plan to serve the days when no payments were received and carry forwarded the innovations
In Investing, it is always advisable to have your 6 months emergency fund in bank ( liquid cash ) before you start your investing and trading activities. Never think that you are all right with all the analysis and go ahead and invest all in one go. There is always an "Room for Errors"
It is always advisable to do SIP ( Systematic Investment Plan ) to beat any inflation and to have control over the market and emotions
Let's take an example: Consider we are investing in US Stock Market from 1900 to 2000 (Is that possible to be alive for 100 years ? lets believe, why not ? ) ok, for an example let's consider this for now. Below numbers were taken from a survey
Scenario 1: Let us take this person named "Naresh" 😉 invested $1.00 ( One Dollar ) every month since 1900 in US Stock Market irrespective of rain or shine. He keeps investing every month at what ever the price the markets was trading. He literally doesn't care anything. In reality he definitely cares for people😍
Scenario 2: Let us consider a person named "Vanitha" (Hope my wife doesn't see this blog) thought, may be investing during recession is too scary and waited for the recession to over and started investing $1 every month and sells everything when recession starts and saved $1 per month during the recession and invested that back when recession is over
Can you imagine how much Naresh & Vanitha would have saved / earned in 2000 ? By Investing just $1 every month for 100 years, Naresh would have earned $4,35,551.00 ( Rs. 3.26 Crores ) & Vanitha would have earned $2,57,386.00 ( Rs. 1.93 Crores )
This is just One Dollar a month ( Rs. 75 / Month, over 100 years. Rupee has depreciated a lot, so the worth over the past years would be even less ). Can you imagine a small SIP compound like anything for you in future
Never water the plant heavily today to get the fruit tomorrow. It takes time and you need to water the plant everyday with same amount of water. Imagine a huge tree as you can see in the movie Avatar giving lakhs of fruits a day in your garden. Make this a reality, start today.
Strong Disclaimer: Above blog is for your information, it is strictly not a trading or investing advise. Please contact your financial advisor, gain more knowledge before investing.
Have a Great Day
B G Nareshkumar
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