29 Sept 2021

Career growth and inefficiency

When you start doing something new, you are usually pretty bad at it. Once you figure out how to do it right, you stop being bad. With practice, you’ll become good, and the work will become effortless. If you are rapidly growing to new heights, you won’t be spending a lot of time on such effortless tasks. You’ll keep on moving to newer problems and you will likely find yourself struggling again and again.

A woman covering her face, as if overwhelmed by challenges
Image source: pxfuel.com

It’s counterintuitive, but the faster you grow, the more time you spend being inefficient. If you’re too hard on yourself for being inefficient, your growth won’t be fast. Newer challenges will make you feel bad, and you’ll involuntarily resist growth.

If you want rapid growth, you need to change the way you assess yourself. Avoid thinking “It took me 2 full days to write a short business proposal.” Such a thought causes negativity. Instead, you may think “I have finished writing my first ever business proposal. Until today I was only an engineer, but now I am growing into also becoming a businessperson.” Feed on the positives rather than focusing on the negatives.

You need to consciously derive happiness and pride from the challenges that enable your growth. If you expect yourself to be flawless every time no matter what, your growth will be slow and painful.

PS: Implicit assumption here is that you can tell good results from bad: either you are capable of assessing it yourself or you have people who will give you reliable feedback. This post is not for people who declare victory too quickly even when the quality of their work is poor.

11 Sept 2021

Using credit card rewards to increase emergency corpus

I am scared of inflation. Not just ‘aware’ of inflation and plan with inflation in mind. I am really scared of purchasing power eroding due to inflation. This fear influences all my financial plans.

I have set aside some liquid investment as my emergency fund, to manage unexpected expenses. Because I am always afraid of inflation, I have set a goal of increasing the emergency corpus by 10% every year. While having a growing corpus is reassuring, it’s not easy to add to your corpus every year. I don’t have a plan for how to fund this increase.

I got an idea last week. I use cash back credit cards that give me some cash regularly. The reward shows up as credit on the card statement, but it’s cash nonetheless. From this month on, I am going to move that money into my emergency corpus. That will not be sufficient for the target increase of 10%, but every little bit helps.

In a way, credit card cash rewards encourage spending. The more we spend, the larger the size of the rewards are. Credit cards give me free money every month. I’ll consciously moving this free money over to my emergency corpus. I somehow feel like this is a better habit than unconsciously spending the cash back rewards.

4 Sept 2021

Confused about investing in a bull market (or a bear market)?

Many years ago, I watched a video on riding motorbikes. That video said that a rider should always be willing to fall. They didn’t say the rider should want to fall, because no one wants to fall. Rather the rider should be willing to fall because falling off a motorcycle is a question of when, and not a question of if.

The same advice is appropriate for investing too.

If you’re investing in the share market, you should be willing to lose money. Notice that I am not saying you should want to lose money, because no one really wants to lose money. Rather, you should be willing to lose money. That means being prepared for when the investment does inevitably go down in value.
Image source: pixabay.com

Today we are in the middle of a raging bull market, and the price of equities is going up almost on a daily basis. What is the narrative that we hear in the media? “The market is overheated.” “The market is expensive.” “The valuations are too high.” We often hear advice to not invest large sums into equity now because the bull run can end any day. That sure sounds like sensible advice.

I haven’t witnessed a bear market yet, but I can imagine what the narrative will be in a bear market. “Don’t invest large sums into equity now because we don’t know how much further the market will fall.” “If you wait a few days/weeks/months, you can get more shares for the same money; why invest now?” Again the same advice despite the inverted market trend.

Thinking critically will reveal to us that waiting with liquid cash runs counter to the more fundamental investing advice: “don’t try to time the market, because it’s a very very hard thing to do.”

But what’s wrong with waiting? We all like a good deal, and why not wait for a bit if you can get the same asset for a better price tomorrow? Because we don’t know when we’ll get that better deal or if a better deal will ever come at all. Waiting for a better deal is actually predicting the future. Predicting the future can be a fun exercise, but do you want to bet your money on such predictions?

If you have the money today, invest it today; don’t wait for a better time that may or may not arrive. Rain or shine, continue your SIP, because the best time to invest is when you have the money to invest. Rather than trying to find the right time to enter or exit based on market conditions, spend your energy in finding the ideal asset allocation for you so that you are systemically buying low and selling high without taking too much (or too little) risk.