Nuances of Investment

End Goal

To have enough financial strength

  • Job is more of an option than a necessity
  • Be able to handle emergency bills or change of plans
  • Able to withstand slump in economy
  • Be able to make new investments with least effort


Hoarding money doesn't work

  • Government will tax savings because it wants the money to flow back into the economy
  • If interest rate is less than inflation rate/cost of living per year, then the saved money will depreciate in value
  • Investment Loans or debts of any kind also hit your bottom line, so they will eat away at income/savings

Goal of Investments

To provide us with positive cashflow in terms of assets. That is., be able to live off of your assets than your salary.


Assets are properties (physical & virtual) that you are not taxed or at least after taxes still provide decent money though you don't actively work on it.


Price of a product depends on two factors

  • Demand vs. Supply Scarcity & desirability of a product
  • Buyer's Price The price a buyer is willing to pay

This means that at any given time, it is the market's willingness to pay that determines how profitable a product is and not the seller's perception of how valuable the product might be.

For example, X is a product that is currently in hype and everyone wants to pay big bucks for it. However a few months later Product Y comes out which not only makes X outdated but shows disadvantages of owning X. Then no one will be willing to pay even the production cost of X.

Price is primarily affected by Market Health i.e, even if you have a ton of gold, it might be worth only $10 if the market is at an all time low and no has money or the most anyone can afford to pay is $10.

This is an important factor to consider because Boom/Bust cycles will happen and the goal of investment should also be to safeguard against Bust cycles.

Fundamental Rule of Investing

Buy low & sell high

So when is the best time to invest/buy low? During a Bust Cyle.

This has a lot of implications

  • Have lot of capital during bust cycle
  • Have financial stability via safe job or positive cashflow
  • In worst case scenario, have assets that you can sell for cash during a bust which still get you high price


Diversification also insures against going broke during Bust Cycle or Market failure.

For example, if all investment were made in terms of shares in Housing Market and it collapses, the shares will significantly depreciate in value and it will be hard to get our money back.

Diversification can be done along two axis

  • Types of assets
  • Types of business sectors

Types of Assets

Real Estate Bonds Stocks Intellectual Property (IP) Hard Assets
Rental House Government Issued Bonds Books Gold
Plot of Land Company Issued Bonds Company Issued Stocks YouTube Videos Silver
Rental Apartments Courses

Types of Business Sectors

Technologies Utilities Services Real Estate Banking Commodities
Software Electricity Railways Coal
Hardware Telephone Airways Zinc
etc etc Lumber

If you have N Asset types & M Business Sectors, the best possible diversification would be to make NxM investments. That is, invest in everything.

Not everyone has the required capital or knowledge to invest in such a diversified portfolio but we all have to start somewhere. Diversifying across Business Sectors is especially challenging because having more knowledge gives you better investment options.


This post is about the investment strategy for a person who is starting from ground zero. Hence it will start off with a very conservative approach which will gradually keep opening up.

Basic Assumptions

  • No Debt
  • Stable job
  • Decent monthly savings

Markets are volatile and you can never predict when it can fail.

This is one of the fundamental principles of this investment strategy.

Let us say that we end up in an economic slump and unfortunately are unemployed, this will affect our financial & mental stability.

Hence the first goal would be to secure Basic Assumptions before we even begin thinking about investment.

It is impossible to secure 100% financial security, especially when starting out. This means that we need to build up our savings to be "enough" to start investing. How do we know we have enough savings? Let's start with a simpler question

Can I live my current lifestyle for 10-12 months purely based on my savings and without running into debt?

If the answer is Yes, then you can assume you have financial stability.

If the answer is No, then let's start with the question

What are the main sources of expenses I have apart from essentials like Tax, Utility Bills, Insurance, Rent & Food?

One-time use purchases

  • Clothing: Do you need to buy a new pair of clothes every month? Perhaps investing in good or decent quality clothes that last you at least a year is a better purchase.
  • Gadgets: Do you need that fancy gadget? It is most likely a One-time use purchase. Do you need to buy a new phone or laptop every year? In general if you buy mid-high end phones and laptops, they are future proof for at least 3 years. That is, they won't become slow which is the biggest problem with such tech.
  • Discounted Purchases: An item might be on a big sale but do you really need it right now? "Maybe" is not good enough. Remember the adage, "A bird in hand is worth two in the bush." One way to think about it is, purchase without discount means that you are "paying a premium" to have more cash available while you don't really need the item.

Restaurant & Social Expenses

This is somewhat trickier because we have to consider how much do we want to sacrifice in terms of time & social interaction.


Home cooked meals are generally healthier and can give you better bang for buck. However, they are also time consuming. So now it becomes a question of how much time do we want to spend cooking & cleaning vs. How much are we willing to pay for better health and free time? Essentially it turns into a Time vs. Money trade-off.

Here's a realistic scenario: Once you come home from office do you have enough time and energy to cook for your next day lunch? Or would it be easier to cook for dinner and eat out during lunch? The answer to this completely depends on each individual.

### Social Interactions Everyone needs social interactions as part of our personal well-being. This is a very important asset to take into consideration. Furthermore, it can also help us come up with new ideas and opportunities while we are not looking.

However there is indeed a price you have to pay for this. For example,

  • Going to movies
  • Eating out at restaurant