All about managing money...

Am down with a bad cold and fever.... so some random tidbits/ observations :

1. You make money by taking concentrated bets - if you are convinced about a stock and can lose all the money you are investing in it, then bet a substantial portion of the portfolio in it. Remember - a 100% return on a 10% part of your portfolio is not much if the others are averaging 25% - A study says, most people in the Forbes richest 400 made it there because of the one big idea that worked for them. So spend sometime, research and come up with a few bets u think will work
2. Once money reaches a critical mass - passive income keeps you going if you harness the power of compounding. So while the attraction of being frugal might not seem great, frugality when you still can ( read : no wife, no kids, no huge medical bills, lifestyle diseases) pays well when you want to party later - so make that large sum of money and build capital
   
3. Use Leverage - Debt is a bad thing. I plays on your mind and creates chaos in times when you want to splurge. But then when investing using debt prudently will allow you to add that zing to your effort to build a passive income stream. Set a level , say you will use 20% of your current income to service debt, that should allow you to get 10X of that money to invest, club it with your capital, which is usually 25% margin and voila you have an asset of 12.5X. Remember - don't use this for stock market investing or debt or commodity. Use this for real assets where the return is higher than the cost of debt
   
4. Protect your capital through diversification - Before you think I am joker who has lost it due to fever, ( Pt 1 says - take concentrated bets, and here I say otherwise) - The same study also says that on an average over 3 centuries ( or was it some lower number of years?) only 20% of people remained in the next Forbes 400 richest list. The ones who did diversified. This is simple, once you have capital built, diversify and protect it from cyclicality.
   
5. Don't self medicate - Since you will not operate on your loved one and will seek a doctor, why do you think you can invest on your own? ( Yeah we know you made 100% on the stock market last week, my pet fish can do better in this market bozo!!) - so set aside a part of your portfolio to be managed by the ( so called !!) experts - Mutual fund ( for aam junta like you and me) , Portfolio managers ( for creatures of higher living) and maybe own fund manager ( Read : Azim Premji , Narayan Murthy , Anil ambani etc who can setup a private equity fund from their dividends)
   
6. Don't forget leakages - Shoddy government working, death, taxation and transaction charges are the only certainties in life - cant avoid the first two, don't let the latter two kill the return % ( and you thought love was also a certainty?)
7. Don't forget to have fun - All the bloody money in the world is to let you have the choice to say "No I don't want to do that crap, maybe something else" - so work towards freedom of choice.