What Are Investments Actually?

Question:

What are investments exactly?

I’ve read some really awesome stuff on 'Quora' but one thing I’ve remembered was ”Save money not just for the sake of saving, instead save them to invest them later”. What long investments are we talking about? I’ve tried forex but I’m not really into graphs. I’ve also flipped minimal inexpensive things.

Answer:

Dear Friend!

Thank you for your valuable question.

Trading in forex, commodities and stocks is not at all investing but mere dangerously speculative activity disguised as investing. Margin Trading will surely ruin not only the financial position but life itself.

Please read and understand the correct meaning at ‘Investing-Definition’.

What long investments are we talking about?

Well we are talking about:

1. Systematic investments in Shares/ Mutual Funds/ SIPs/ ETFs
2. Shares and bonds if purchased directly, it shall be ensured that they are investible and safe and are purchased at a fair price.
3. Investing activity is sustained without a break for two to five decades.
4. Investments are held for two to five decades.
5. We have provided ‘Miracle of Compounding’ an opportunity to work in your favour and make you rich and wealthy.

Related Links:

• Day Trading Definition
• Margin Trading Definition
• Stock Definition
• Definition of Mutual Fund
• Exchange Traded Fund Definition
• Systematic Investment Plan (SIP)
• How to Find The Fair Price of A Stock?

I thank you once again and I hope I could give you a well rounded understanding of what long term investments are all about.

Anand

Please Note: This is almost a reproduction of the question I had answered on the website ‘Quora’, which I thought could be useful to the visitors to this blog site also.

Can We Achieve Warren Buffett Like Success?

Every humble value investor can achieve Buffett like success even today, in the altered scenario. The magnitude may not exactly match Buffett’s but the success could be equally significant and life changing. These are not my words. Buffett himself is proclaiming them from the rooftop of every forum.

In order to substantiate the statement that everyone of can do well as investors we have to analyse the principles of investing over which the edifice of investing success is built. These are:

Extraordinary Intelligence is not required:

Investing success does not require extraordinary intelligence. What it requires is a sound frame of mind, patience and discipline. It is about character and right attitude.

Never to lose money:

Buffet prescribes only two rules. “Rule No.1: Never lose money. Rule No.2: Don’t forget Rule No.1.”

When Buffett advises not to lose money, what is he meaning? He is talking about losing money, he is talking about dangerously speculative acts performed under the misunderstood guise of investing; day trading and margin trading.

He is warning against dabbling in stocks without prior knowledge when he says "Risk comes from not knowing what we are doing." For those who cannot afford to learn investing, he is advising them to invest in well diversified index funds.

A very long time is required:

The real secret behind investing success is the long time required. Only over very, very long timeframes does the miracle of compounding get an opportunity to wave its magic wand. There are absolutely no shortcuts. Buffett himself says that in life certain things take time and we cannot change them. He says"You cannot get a baby in one month by making nine women pregnant." 

To lead a simple life:

Leading a simple life and controlling the urge to splurge will put more extra cash in the hands which can be channelised into investments and compounding. Buffett says that those who understand what extraordinary compounding results can be produced even from humble sums of money will hesitate to throwaway a single dollar.

Mastering greed and fear:

Greed and fear are the two worst enemies of investors. Exorcising these twin ghosts through true knowledge is an essential ingredient of investing success.

Having identified and understood the founding principles behind investing success, we can safely conclude that everyone of us can replicate Buffett's achievement safely through lifetime investments.