Things that matter
Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it. – Warren Buffett.
Phrases like “market panic”, “mayhem” and “meltdown” are being seen in headlines over what is happening in China, which has been dragging the worlds equity markets down for some time now.
As investors hearing news like these, we have two choices
1, Does it matter?
It does matter if your investment time frame is a week, month or may be even a couple of years. But if we are clear on our asset allocation ( how much we invest in equity and debt ) and are investing for what matters most to us like our children’s education and our own retirement, what is the headline on markets today, this week or next month does not really matter.
2. Can we control it ?
Obviously not, what happens to China or oil prices and how it affects our markets is something which we have no control over.
Instead if we focus on
A. Saving more : Having a budget, saving at least 30 -40% of our income, not falling for the ‘great online shopping sale’ that seems to happen every weekend. Having at least 3 months of monthly expense for a rainy day.
B. Investing the savings properly : Having a goal for the investments, investing for real tax efficient return ( ie post tax and post inflation return), Just as we earn monthly, investing the savings monthly helps us to create wealth.
C. While investing it is better to avoid products that are too complex. Avoid products which club insurance with investing, Keeping investments simple with bonds, equity via mutual funds is the best way to go.
Once we focus on the intersection between things that matter and things we can control, what happens in China last week or somewhere else next week becomes less of a concern.
