admin@pahalforfinfree.com No Comments

Unlocking the Power of Compounding: Why Mutual Funds Outshine Direct Stock Investing?

The power of compounding can greatly benefit those looking to build wealth through investing. It is essential to understand the advantages of compounding and select the appropriate investment vehicle. While direct stock investing may be tempting, mutual funds offer specific benefits that can accelerate your investment growth. This blog will discuss why mutual funds excel over direct stock investing in harnessing the power of compounding.

When it comes to compounding, mutual funds, and direct stock investing have different levels. With direct stock investing, your investments grow over time as you earn returns from dividends and capital gains. This is called basic compounding or level 1 compounding, where you earn returns on both your initial investment and the accumulated returns. Let’s take an example to illustrate this: Suppose you invest Rs. 1,00,000 in a stock. After one year, it grows by 10% and becomes Rs. 1,10,000. In the second year, it grows by another 10%, resulting in Rs. 1,21,000.

Mutual funds harness the power of pooling money from numerous investors, allowing you to tap into the advantages of compounding on a grander scale. Rather than going it alone, you join forces with others, contributing your funds to a collective investment vehicle. This approach opens doors to larger and more diversified opportunities that an individual investor might find challenging to access independently. With professional expertise at the helm and the economies of scale that come with pooled resources, mutual funds provide a strategic avenue for growing your wealth through compounding over time.

Over time, the fund increases in value by reinvesting its earnings, such as dividends and capital gains, into more shares. This helps to boost the compounding effect.

Mutual funds provide the opportunity to access better investments and lower transaction costs, which can potentially lead to higher returns. It allows people to pool their money and benefit from combined resources for increased returns.

As a result, there are higher returns due to economies of scale, diversification, and professional management, which enhance growth potential for all involved as opposed to investing directly in individual stocks.

Happy Reading & Happy Investing!!!

Viralkumar Shah (Certified Financial Planner CM – USA, Financial Happiness & Wellness Coach)

Author – Financial Planning Sahi Hai! – Keep Your Life Organized

https://amzn.eu/d/8v4czuw

admin@pahalforfinfree.com 1 Comment

Don’t Work for Money Let Your Money Work for You.

Source: Vietnam Manpower

The rich don’t work for money. The poor and the middle class work for money. The rich have money to work for them. – Robert Kiyosaki

When you work for money, you pay a 30% tax; when money works for you, you pay only a 10% tax. You have a boss to please when you work for money; when money works for you, you are the boss to please. When you work for a living, your pay is a mystery. But when money works for you, it’s a beautiful story.

When you work for money, you must apply for holiday leave; when your money works for you, your life is a vacation. When you work for money, your time is not your time; when your money works for you, you are the lord of your time.

Source: Slideshare

When you work for money, you must wear various masks to survive. You can be yourself when your money works for you. When you work for money, you become a puppet in the political whirlpool; when money works for you, you remain above politics.

You are in the rat race when you work for money. You can casually walk at your own pace when money works for you. When you work for money, your EMI is like a sword that hangs over you; when money works for you, your SIP is like a shield that protects you from every adversary.

You are full of jealousy when you work for money. Nobody can envy you when money works for you. When you work for money, Monday morning blues set in; when money works for you, you do not know what day it is.

When you work for money, everything around you is insecure; when money works for you, everything around you is very secure. You crave a little family life when you work for money; when money works for you, your family becomes your entire life.

When you work for money, your vision is leadership, and your mission is market share; when money works for you, your vision is problem-solving, and your mission is team building. When you work for money, your hunger grows; when money works for you, you consider world hunger.

You want a jet-like speed when you work for money; when money works for you, you can slow down and see, smell, and savor the surrounding beauty. You hope for compounding when you work for money; when money works for you, you experience compounding.

When you work for money, you see wealth in happiness; when money works for you, you see happiness in wealth. If you want money to work for you, create a financial freedom road map.

Happy Reading!!!

Viralkumar Shah (Certified Financial Planner CM – USA)

Financial Happiness and Wellness Coach

admin@pahalforfinfree.com No Comments

A Secret of Wealthy Person

Only 1% of people are wealthy (>$1 Million) in the world as per Credit Suisse 2020 Global Wealth Report.

This is due to how they are managing money and their mindset towards money. I got the inspiration to write this blog from Ken Honda’s Japanese Book (Solutions to Money Issues).

Wealthy people spend money on things that generate money. If you want to become wealthy then you have to increase your money IQ that is “spend your money wisely”.

Often, the reason people can’t save money is that they make poor choices when they spend their money. In fact, I would even say that learning how to spend your money is often a more difficult task than learning how to earn your money.

Let me introduce a secret wealth people follows:

Wealthy people spend money on “Things that make them Wealthy.”

Poor people spend money on “Things that make them feel Wealthy.”

Contrary to popular belief, truly wealthy people don’t own a ton of brand-name products and expensive vehicles (although they do own some).

The reason is simple: Branded products and expensive vehicles don’t generate money for them. In other words, it would be a typical “consumption” to spend money on branded products and expensive vehicles, because the money spent on them will just disappear.

Some people say, “Wearing branded clothes makes me feel good, and it has a positive impact on my work.” But if you really think about it, such a purchase is sure to make you poorer by taking the money out of your wallet.

In other words, you spent the money to get the “feeling of wealth.”

Truly wealthy people spend money in an entirely different manner. When they purchase a product, they will find a craftsman that they truly like, and ask the craftsman to make something that sparks joy in them.

Such a craftsman may not be famous. But if the craftsman is highly skilled, he can produce a high-quality product (at the level equal to brand-name products) for half the price or less.

To elaborate further, instead of consuming luxury, wealthy people purchase good stocks and good pieces of real estate. They spend money on things that generate money.

In other words, wealthy people spend money on “investments” rather than consumption.

Of course, Wealthy people invest money in themselves, too. If acquiring knowledge helps them generate more money, they don’t hesitate to invest money in themselves.

People often say that wealthy people make detailed calculations to make sure that they don’t waste even a rupee. Such a stereotype creates an image of wealthy people as just stingy people.

But that’s not who they really are. Wealthy people think about whether the money that they spend (even if it’s just a dollar) will come back to them with “friends.”

Wealthy people spend money in a way that brings life to money.

Happy Reading!!! 

CFP CM ViralKumar Shah (Financial Happiness & Wellness Coach)