Frugal Is Rich

Humans are naturally hardwired to resist change and the usual stance is to keep the risk as low as possible. Change may induce fear or uncertainty and the body tries to protect itself in such scenarios. This is a number of times also reflected in people's investment strategy. If people are trying to keep their risk absolutely low, they save and invest in cash or government backed securities and if they are willing to take on more risk they may be heavily invested in the equities market. My recommendation to everyone is to only take risk until it does not interfere with your sleep or day to day activities. There is no point in taking high risk if that makes you feel panicky or makes you constantly question yourself. Although, I must say its definitely worth testing the waters by taking small risks and understanding your thresholds. One of the best strategies to reduce the risk is to diversify your portfolio as much as possible and ensure you have a big enough emergency fund. I talk ...

Russia is the largest country in the world by area and eleventh-largest by nominal Gross Domestic Product (GDP). It is the world's third largest producer of oil and natural gas after the US and Saudi Arabia. Europe is significantly dependent on Russia's oil and natural gas reserves. In simple words, it is no small power and its vast control on key natural resources makes it an extremely dominant nation. Historically, how American citizens have invested in Russia has been largely through Exchange Traded Funds (ETF), Mutual funds and American Depositary Receipts (ADR). Recently, the  New York Stock Exchange (NYSE) put a trading halt in some of the key Russian ETFs and ADRs. Example ETFs that were halted were the iShares MSCI Russia ETF ( ERUS ), Franklin FTSE Russia ETF ( FLRU ) and Direxion Daily Russia Bull 2X Shares ( RUSL ). These major ETF companies have suspended creation of new shares until further notice but buying and selling of shares remains available on secondary mar...

The year 2022 has not had a great start so far from a socioeconomic standpoint. The pain and suffering of the people in Ukraine is starting to reach another extreme and things do not look to calm down any sooner.  The MOEX Russian Index took a nose dive because of the war situation, the ongoing sanctions and the geopolitical unease that has been caused between the global nations. Source: Google Finance Russia is the world's third largest producer of oil and overall supplies about one-third of European natural gas consumption as per the Council on Foreign Relations . For the EU to completely move away from Russian dependence is not easy and achievable in the short term without having a very large economic impact. Crude oil prices have shot up over the $100 price limit as we speak further making it challenging with the rising inflation for the common people. This is expected behavior and if there is any disruptions in oil exports from Russia, then this could even drive the prices muc...

If you have read a number of my posts then you probably know cash is my least favorite savings option because it's very hard to put it to work. What I mean by that is liquid cash earns a very small amount of interest when you compare it with the rise in inflation. Hence, I do not recommend to maintain more cash then what you need in the form of a monthly supplies fund or an emergency fund. There may be other situations, where for example you could be close to buying a home and yes it would make sense to hold the down payment money for the home in cash. For maximizing the value of liquid cash, there aren't a lot of great options, but there are a few where you still get something back to fight inflation. How an average American saves varies by each household, demographics and their income status. In 2019, the U.S. Federal Reserve did a study where they found the median transaction account balance was $5300 and the average transaction account balance was $41,600 . Transaction acc...

This is the continuation of how I started investing Part 1 of my blog. If you have not read it, I recommend giving it a read prior to starting with this one. Once I had maximized my 401K, it was time to look at other opportunities to grow my wealth even further. I had started to understand how mutual funds work, specially after the research and study I did as part of getting my 401K in a good spot. Next I was onto individual stocks and I felt I could win the world by being an excellent trader. I had already started imagining my self on Wall Street as a brilliant investor. But as all things in life, nothing is ever so simple. I opened an app based trading account and was amazed seeing the individual stocks all online. In the past, stock trades had a price per trade and it was not as "free" in today's times. Hence I wanted to be cautious to recoup my investment and the money i spent on executing the trade. Initially, I was a little nervous hoping not to make a mistake as s...

Growing up in my early teens, I used to have a piggy bank. Anytime someone gave me any money as a gift or what I received from my parents, I used to quickly put it all in my piggy bank. In those days my understanding of investment was if I kept the money in the piggy bank, it somehow would magically grow over the years. Well, I never thought about the laws of compounding as a child, hence all I dreamed of is one day I am going to take out all the money and be a rich person. At that time, no one really taught me that putting the money in the piggy bank was not really helping as the value of money was actually depreciating each day as inflation increased. This kept going on and on for years. After several years, I was exposed to financial banks and learnt that these banks provided you some interest for keeping your money with them. The other cool factor was that you could quickly know how much money you had saved by going to the bank rather than having to break your piggy bank. Online ba...

It is phenomenal to know how many different types of financial products exist. The more I read, the better I get. Some concepts are easy, less risky to follow as individual investors while some are complicated and come with higher risks.  Putting my individual investor hat, I feel if you spend a little bit of time, then index funds can be your friends and you may become your own fund manager. I highly recommend looking at the Vanguard funds and starting your journey there. I will do a separate blog on how I started my investment journey and will discuss all my anxiety and excitement. This path of low cost investment is really awesome. Invest early and invest often is the key to success. This is the number one advice I would give to start with in the field of investments. There are a number of complicated products like options, futures, swaps which are also known Derivatives in finance. In simple terms these are complex financial products that allow you to hedge some of your risks ...

Carbon, a chemical element with the atomic number 6 is an interesting investment topic and hence this post. Some people might feel like I am talking about chemistry rather than investing while others might think I am talking about the environment. The focus of this post is definitely investing and I will get into the details as you read further. Gold, the shiny metal has been valuable for many years as a form of alternate investment. If you are one of those that live in developing nations, it is still regarded as a safer asset in many cases as compared to the local currency because it appreciates and can be used as a medium of exchange during times of inflation and in the longer run. A lot of people end up holding physical gold as an asset, although the market is quickly evolving into Exchange Traded Funds (ETF) and Gold Bonds.  When we think about assets, the more common ones would be gold, silver, platinum and may be diamonds. Who thinks about carbon? Absolutely true, but this is...

The tech bubble in the late 1990s helped us all learn a lot of things about startups, both exciting and stressful. People who were successful made millions and billions but yes there were people who lost a lot of money as well. History teaches us many things and its impressive on how much perspectives you can get just looking back and learning so much from time. The Silicon Valley boom still exists and a lot of people are excited about startups and doing great things. An attractive way for startups to get talent has been to offer a piece of the pie. Hence the idea is to take on a larger risk for a larger return. The conventional way of providing a piece of the pie (a percentage share in the company) has been through Options . Its a phenomenal idea, since it gives a person the right, but not the obligation to buy or sell a stock at a price. To give you an example, Company X may offer me 100 options at $1. Now I have the right to sell them if I want or just let them expire away. Let'...

A number of people don't realize the value of using credit cards the right way. If you use your credit with certain rules, it is a friend otherwise it can keep haunting you for years. When I learnt about credit cards and the idea of cash back, I made some rough calculations in my head and felt I was losing so much by not having one. Earlier in life when I didn't had income, I tried but I got rejected by credit card companies every time. You won't believe but even my secure credit card application which you apply for by providing a deposit upfront also was rejected.Imagine the fun! But I never stopped trying because it was a simple math example that got me motivated. Lets say I was spending $300 in groceries a month which is fairly standard, you end up paying roughly $3600 for the whole year. Now imagine, if I paid just using a debit card or cash then I would have hardly gotten anything in return. On signing up with one of the credit cards, I got 3% cash back for my grocerie...

I am always interested in knowing about how to save better for retirement and learn about tax deferred opportunities to save on as much money. I started thinking seriously about life insurance and how it could be beneficial. Everyone has different situations but I believe life insurance could be helpful if you have dependents that you directly support and who would be financially strapped if something were to happen to you. As you can imagine with financial instruments, things can get complex and its not easy to similarly traverse the land of insurance as well. Products are complex and too many and its hard to figure out which one's the best for you. The other thing you have at the back of your mind is sales people want to think whats best for them and not you since there are big sales incentives tied to the product they sale. Meaning a kiwi would be more beneficial than selling an apple. At the end of the day, its all about margins but that's just how sales works. Hence as a c...

The fight or flight response is an interesting phenomenon that surfaces many times in our life. The way it works is the brain pretty much figures through physiological response whether to be in the ring and fight or to leave and run. It is phenomenal how the human body reacts in so many different ways. It’s a very similar feeling a lot of people can have while thinking of investing the first time. As a safer approach you would always hear, banks are your best bet because you can get your dollars of the same value any time and the price does not go up or down. Banks definitely are a safer bet because most of them come with FDIC insurance which ensures that the government will step in if the bank is in trouble. But what you don't realize is inflation and how it eats into your capability to buy the same thing with $1 year over year. For example, an ice cream might cost $1 in 2021 but costs $2 in 2022 and hence the same dollar has less power to buy than it did in the pr...