A couple of weeks ago, I announced my Free Course, Financial Freedom for Smart People – a 10 part course on building a solid foundation for your financial freedom.
Filled with no nonsense, straightforward action points that help you bring clarity on where you are, where do you want to go and how to get there.
The first couple of lessons are already out. I am hoping that you would also want to benefit.
You can know more and subscribe here.
Here is an excerpt from Lesson 0 – Don’t be a monkey with the darts.
Burton Malkiel, a Princeton University Professor, claimed in his bestselling book, A Random Walk Down the Wall Street, published in 1973 that a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.
This shook up several investors, specially the professional investors, who were up in arms at this ridiculous claim. They felt that Malkiel was belittling them by saying that there was no need for skill in investing. A monkey could do as fine.
Really?
This idea was put to test in 1988 by Wall Street Journal when it got its staffers to throw darts at its financial newspaper and picked random stocks. The portfolios thus created were then pitted against those created by professional investors or pros.
In 61% cases, the pros performed better than the dart portfolios.
Yet, in a huge 39% of the cases the pros lost, which means that the portfolios built by throw of darts did better. Wow!
Will the monkeys really do better than human? Your guess is as good as mine.
A different perspective
I am looking at this experiment in a different way.
I want to understand if financial knowledge has role in delivering better investment performance. Basically, if you understand financial concepts, would you do better with your money?
My own belief is you will. And I base this on my years of experience working with hundreds of investors. Those who were not equipped with the knowledge ended up making massive mistakes and losing a lot of money.
There is a famous saying that if you throw peanuts you only get monkeys.
By reverse logic, if you are a monkey, you can end up getting just peanuts. Well, sometimes, bananas too.
Get out of the monkey (novice) mode
I welcome you again to this free course on “Financial Freedom for Smart People” – an education series to enable you to make the most of your money and achieve your financial freedom, faster than sooner.
In the words of Swami Vivekananda, education is that by which character is formed, strength of mind is increased, intellect is expanded and by which one can stand on one’s own feet.
While this is true for any walk of life, I would give it special importance in money, investing or the overarching term Personal Finance.
Personal Finance is a commonly used phrase but a less understood one. It is generally associated with numbers, calculations, economics, etc. Nothing could be further from the truth. Personal finance is more about personal, that is you, than finance.
While financial concepts and numbers are important, there is something more important. It is your approach towards money, what you do with your money, how you treat it (spend it, save it, invest it).
It is about understanding and controlling your emotions, your greed and fear. It is about the ability to sit tight when the markets are in a free fall or rising like a high tide.
Your financial freedom is as much about you as it is about your money.
In this course, we will work on enhancing both – your money and yourself.
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Note: This is FREE course and there is an absolutely no-obligation for you. If anytime you feel that you don’t want to continue with this course, you can simple unsubscribe in just one click.
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