Tuesday, December 26, 2006

Game Plan: Consistency

Consistency is a very essential attribute for an investor. You should be consistent with the way you approach the task of investing. If you are not consistent enough, you may lose this game. Basically investing is a game of probability. When you toss a coin, the probability of getting either an head or a tail is 50%. Now you toss the coin 3 times and the coin turns up as head, you would probably believe that now its the time of the tail to turn up. The probability of getting a tail is higher now. Right?? Answer is NO. The probability of getting tail/head is still 50%.

This is same as in investing. If your approach is right and when you calculate your risk properly and increase the probability of being right to 80%. So you have set up your investing process. Now following this investing process, you start investing but you are making steady losses. After some more losses, you start having doubts on your methodology and eventually, you move to some other process. But you would never know the losses which you were making were 20%. This is why you should have consistency. You should have belief in your system.

How can you be consistent? You can be consistent by saving a certain amount of money every month. You can be consistent by keeping on reducing your expenses regularly. You can be consistent enough by increasing the cash flow, the buzz word is being consistent. These are small drops, but eventually these small drops would form the ocean.. Keeping on waiting for the rain will not help.

I would like to be consistent in these following areas:

  1. To keep myself updated in all financial areas
  2. To save 50% of my monthly salary (I am a bachelor, so can help with 50%)
  3. Read atleast 4 financial books a month
  4. To reduce my expenses 10% a month.

Whatever field you want to be consistent in, just make it quantifiable. If you maintain it for a month, give yourself an inexpensive treat. This way you would keep the tempo high.

Let me know what you would like to be consistent. How?, by adding comments.. By stating it you make an commitment to yourself. (Haven't read about commitment, read this post Game Plan: The Three C's)

I am making my commitment to be consistent in the mentioned points.

Are you committed to be consistent??

1 comment:

Vishravars said...

regarding money, i would like to be consistent in the expense. i dont spend based on my earnings. more i earn more i save. doesnt grow in my spending part.
for example i spend x amount fixed on particular things every month, i can allow for small variations (like telephone bills). if the variation is too high, then i feel the alert by 20th of the month when i usually plan for the coming month.