Invest in shares

I am sticking my neck out here.
I do not invest in equity - at least not directly.
So it is kind of stupid to give advice on share markets.
But here goes anyways ...

1) I believe that the world economy will recover, sooner or later. It has to.
2) The share market will also, therefore, climb.
3) If you are young, have some money to spare, and have the risk appetite buy shares in sectors that was doing well before the financial meltdown and is now performing poorly only because of financial meltdown. In other words, if the financial meltdown hadn't happened, would you expect these sectors to continue doing well? If yes, this is the sector you should go for.
4) Most people look to make quick money from share market. For what my understanding is worth, I do not think so. You may hit a jack pot once in a while, but most shares give good returns only in about 3-5 years time.

What do you say? Do you agree with me?

Rich Attitude

Take that Auto-Driver; or that panwala who sits round that corner near your house.

How much do you think he earns?
Never thought of it, eh?
By the most conservative estimates, I would say an auto-rickshaw driver takes home anything between Rs. 1500 to Rs. 3000 a day. And he pays no taxes.

Make no mistake, his income is more than yours.
Yes, he might have a neat little house tucked in some corner of the city.

Why, then, doesn't his life style reflect his income?

A rich life style is an attitude.
And this attitude is a learnt behaviour.
You pick it up from your parents, your surroundings or your idols.
And, perhaps, from blogs like this.

The Secret behind Google's success can be yours

In the 2009 list of Fortune 500, Google is ranked 117. It has a revenue of $21,795.6 million.

Wow!
That is big money!
But what is even more mind-boggling is the fact that much of this fortune comes from the clicks on the internet advertisements that generate a few cents worth of revenue per click.
This truly is a case of drops filling up an ocean.

Think about it the next time you spend money casually.

Lost Opportunities

The thing about opportunity is that you will know about it only when it passes you by. The gate opens now but what will happen if you enter (or if you choose not to enter) can be known only post-facto. That is how the life unfolds and there is nothing you can do about it.

But what you can do is spread your risk.
First, figure out your risk appetite.
Then enter every window of 'opportunity' that opens up within your risk band.
Some will click and some will not.
But you would have tried.

For a person who is as risk averse as I am, the goal to shoot for would be: preserve my initial investment + 14% return.

What is your goal?

That little drop

Yesterday I got a call from a sales girl who pushed to sell me a membership card for a chain of hotel. The chain offered a host of discounts. Of course, you have to spend to get those discounts - that being the whole idea. I hesitated. Did not want to spend Rs. 6000 on something I did not need desperately. The girl persisted. "It is only Rs. 16 per day, sir," she said.

She is right. Less than Rs. 16.50 per day for an entire year would be around Rs. 6000.

The funny thing is that the reverse is also true.
If I save Rs. 16 per day I would save Rs 6000 per year.
That's the crux of saving.
You only need to save a little every day.
Just a little.
Every day.

SAving for your child's future

Are you getting married? Congratulations!

Oh! Not yet married? No problemo! You will soon / someday.
Oh! You are already married and have children too? Wonderful.

Have you thought of your child's need 18 years down the line? No?
Then I recommend you do.

I know a few people who start accumulating shares and gold (especially, if they have daughters).

There are other ways also. A really low risk mechanisms (but with the magic of compound interest thrown in) is opening a recurring deposit. Force yourself to save so that in 18-20 years time, when your kid is ready for higher education you have sufficient amount. Saving Rs. 2000 per month for 20 years at 6% interest will fetch you Rs.7,20,000. (Not sure of the prevailing interest rates; I think the maximum period for which you can open a recurring deposit is 5 years. Feedback the matured amount into some other low-risk investment and open yet another recurring deposit till you reach 20 years).

This does not stop you from going for medium risk investments. We will talk about those some day.

It's all about enjoying life

Are you obsessed with money?

Do you desperately want to become rich?
Then you have come to the wrong blog.
The 70-10-10-10 rule is all about the 70% and not the other 10%'s.

Set goals. (I will talk about this in my next few posts)
Put a plan in place (It doesn't have to be my recommendation - any good plan will do).
Set up mid-course correct points (basically don't look at the results of your investment everyday).
Enjoy life.

Buy that dream house

"Homes are now most affordable since '05" scream today's headlines in Times of India. "Wow!" you say and dive into read more. It turns out that the average housing prices have dropped from 4.6 times the average annual income to 4.5 times the average annual income. Big deal!

The fact remains that houses - good houses, those that you would love to stay in - will remain out of your reach. Always.

So if you are waiting to buy / build that dream house when you have enough money, it will remain just that - a dream house.

Here are some tips:

1) Start Young.

2) Set up a low-risk investment plan that will get you sufficient returns in say 3-4 years. Banks give up to 80% (in some cases 90%, or so I have been told). The rest has to come from you. So, if you are looking to buy or build a RS 800,000 house, at least Rs. 160,000 has to come from you. a well planned SIP will fetch you that amount in 5 years or earlier.


3) Always look for a house that you would like to live in 5-10 years from now. In 5-10 years your income will grow and you will not feel the pinch so much.

4) Another way to obtain the money you need to build a house. Buy two plots of land. Sell one. Use that money to build on another. I haven't done this myself. But I have heard of others who have done so.

5) Some people I know have done this. Four of them pooled money to buy a biggish plot of land and later on constructed a house with four independent flat.

6) Look out for bargains during economic downturns. I purchased my house just after the software bubble burst.

7) Unless you can afford it, do not buy house in a central location. It will cost you more. Cities have a habit of expanding. That house in the outskirts of the city will one day become a hub.

8) Also read Before You Take a Home Loan and After You Take a Home Loan

Plan your death

Just read an interesting piece of news. The Apollo 11 heroes had planned their death. Identifying that their journey to moon was hazardous, aware that the government compensation would be meager and since no insurance company was willing to insure them, they worked out a sort of 'family-pension' plan. Read more here.

My advise: take this lesson to heart. Plan for your death, even if you are not planning to go to moon any time soon. You have a family to look after. Look after them even after your death.

Enhance your skills

When was the last time you enrolled yourself for a class to upgrade your skills. And I don't mean a 2-day course where someone speaks and you listen. I mean a course that is aimed at enhancing your skills. Any skill that you have identified as something that is essential for you to do what you love doing the most.

You see, the formal education you get at college is just adequate to get you a job. That is not sufficient. All those who have some work experience will know that very little that you have studied in your college is of any use at work. Almost certainly, nothing that you studied at college is of any use to you to do what you love most. Yes, the extracurricular activities that you were involved in is of greater use. But is that sufficient?

Do you love to paint?
Do you think you can become a great author some day?
DO you love coding?

Get yourself enrolled into an evening course. Now!

And how is this relevant to becoming rich?

All investment schemes I have suggested in this blog and all advise that I give you in this blog are force-multipliers. These schemes ensure a comfortable life, at worst, and a prosperous life, at best. But these are, as I said, force multipliers; not the force themselves. Your income is still the source of supply to these schemes. You still need to feed these schemes. For that you need to improve your earning capability. If your present job is something you love, good. But if you think you will do better in an entirely different domain, then you need to try that as well.

I do not advise you to drop that day job of yours. You will find many people advising you to break away, take that risk, and try a new possible future. I would advise against it. Do all this if you are extremely confident, are willing to slug it out and do not have any additional responsibility. This can be done, perhaps, when you are still young, unmarried and do not have to look after your parents.

An easier way is to enroll into a evening course and find out if you are really that good. These evening courses will bring in the discipline you need to learn a new skill. (Unless you are really driven I do not advise correspondence course; the discipline is lacking). And when you do find out you are good, go all out for it. Till then keep that day job.

The Indian Woman

Perhaps I have been a little unfair to the women readers of my blog. You see, I have been writing from my perspective. But when I look back at the 40 odd posts in this blog I am not at all surprised to conclude that all of these apply to women. In fact more so. Being financially well-off is a goal that every women should strive for. An old woman is more vulnerable that her male counter part.

The Indian woman who always - almost always - puts family before self. I am pretty confident that the 70-10-10-10 rule will help them as much as it will help the family. The male ego may put up a little resistance, but once the benefits are apparent, you will see the change.

In fact, every post on this blog applies to the family as a whole. The unit for financial prosperity is the family not the individual.

On my part, I will keep the family in mind in all my future posts.

Financial Independence

My father was in AirForce. So after he retired he had a good pension and after his death my mother gets family pension. My mother is 64. The money she gets is sufficient. And she has never had to ask money from me. When she goes to visit her brothers and sisters, she travels by air or comfortably in air conditioned compartment in train. I don't have to buy a ticket for her. In fact, she insists in paying for the tickets herself. In other words, she is financially independent.

Being financially independent in old age is a good goal to shoot for.

When you retire, will you be financially independent?
Will you have a house - your house - to live in?
After you die will your wife be financially independent?

It doesn't matter what your age is today. But are you thinking about your old age?
Some day you will become old, won't you?
Time to prepare for this is now.

Becoming rich - from the first principles

To become rich beyond your wildest dream you need opportunities.
Opportunities come to those who look out for them.
Networking is a good way to look out for opportunities.
Networking is all about trust and belief.
People will believe in you and have trust in you if your are trustworthy and true.
To be trustworthy you have to be a good person.
So the first step to riches is being a good person.
It is that simple.

How Not To Save

By now you must have decided how to implement the 70-10-10-10 formula or a suitable variation. Just as it is necessary to know what to do with your income, it is equally important to have an idea of what not to do. And one thing that is clear in my mind is not to use Savings Account (also known as Checking Account in some countries) for saving. Savings account does not save you anything. It has the lowest interest rate (some 3 - 4%per annum) and until recently had the most cockeyed interest computation scheme.

The interest was computed on a monthly basis on the lowest balance of that month between the days 11th to the end of the month.

Example:

Date----------Balance
1st Jan ----- Rs. 50,000
7th Jan ----- Rs. 1,000
10th Jan --- Rs. 100,000
15th Jan ---- Rs. 2,000
25th Jan ---- Rs. 500,000

In this case, the monthly interest will be computed on Rs. 2000.

This has thankfully now changed. The interest is now computed on a daily basis on the minimum amount per day. See here.

That said, even this does not make a Savings Account very attractive. Savings account should only be used for parking your money temporarily. As a rule of thumb, I would recommend that at any given time no more than 1.5 months salary be parked in such an account. With intelligent use of credit card (yes, credit cards can be used intelligently) the maximum amount to be parked in a Savings Account can be brought down drastically.

Ideas or Action

And those who are inspired by my previous post, click on the link to know a view on the difference between ideas and action.

Just to give my take on the subject: Be prepared to give up your ideas if they do not make sense. But not too soon. Some ideas take time to germinate. It is easy to say that you need to throw away the business plan that does not work - especially with the benefit of hindsight. Wisdom when you stick and when to quit comes only after lots of sticking comes undone. There is no short cut.

It is your ideas AND your action AND wisdom that will lead you to success.

The next big idea

Since you are reading this post, I can safely assume you are net savvy. I can also assume that you are aware that the Net provides you the opportunity to launch yourself into the stratosphere of the rich and famous. It is so easy. Come up with a business model, launch the next big thing and laugh all the way to the bank. The entry and exit levels on Internet are relatively low. And you get to see so many EARN $$$$ blogs and websites on Internet. (Beware of these sites. The only people who become rich are the webmasters themselves).

But what makes you think you are unique? As I type there are 100's of 1000's of net savvy people thinking exactly along the same line. But you have to try, don't you?
Do you have that next big idea and a business model?
Then go for it - before someone else in some corner of the world steals it from right under your nose.
You don't have one yet?
Then stop dreaming and work towards it.

Prescription to riches

Here's a prescription for becoming richer than you are now.
1) Divert 10% of salary to low-risk investments, such as SIP, Unit-Linked Insurance, Bonds, etc.

2) Divert 10% of your salary to high risk investments, such as shares.

3) Keep 10% of your salary liquid. You may have to spend it should there be an emergency. If there is no sudden requirement of this money sweep this into your savings. (Some banks offer such accounts, where after reaching a threshold your money is moved into a long-term deposit)

4) Enjoy rest of the 70%.

Do the above without fail.
Try it and let me know.

What? You mean to say 70% of your salary is too less.
Too less for what?
If you cannot control your expenses, you will not become richer.
That much is assured.

The World's Richest

Here's the richest men of the world - taken from Forbes.

1) William Gates III
2) Warren Buffett
3) Carlos Slim Helú
4) Lawrence Ellison
5) Ingvar Kamprad
6) Karl Albrecht
7) Mukesh Ambani
8) Lakshmi Mittal
9) Theo Albrecht
10) Amancio Ortega

How many in the above list do you think have inherited wealth?
The answer is only two. They are number 7 and 8. Mukesh Ambani's and Makshmi Mittal's wealth is indicated by Forbes as Inherited and Growing. Rest started from scratch. They are all self-made billionaires.

How many do you think are business people here?
The answer: all of them.
You cannot be become rich working for others.

How many won got a kick start in life by winning a lottery ticket or hitting a jackpot?
The answer: No one. Not even one of these. No one had it easy. It takes hard work to achieve anything.

The Barber and You

I hate visiting my neighbourhood barber shop (they call themselves beauty parlour) on weekends. The men are busy cutting hair the whole day. With every hair cut they add a free 10 minute head massage - aah! heavenly. They are tired by afternoon but they have to carry on till late evening. Their hands ache. One of the barbers advised me once not to come on a weekend. With a string of customers and busy weekends, you might think these men are making lots of money. Wrong! The person who is making money is the owner of the hair cutting salon - alright! beauty parlour. He does not cut hair. He just sits there are collects money and ensures that things are in order. He, of course, keeps the beauty parlour neat and clean - that's one of the reasons people flock to his place. He also ensures that the barbers are well dressed, the air-conditioning is working, the music system is on, etc., etc. That is his investment and running cost. And the barbers who work their heart out are actually making the owner rich. I am sure you know many such examples.

Question: Who are you making rich?

Escape the Curse of Credit Card

In my last post I showed you how deadly the credit card can be. Once you get into the credit cycle, you end up paying much more than you bargained for.

Does that mean you should throw away your credit card?
The answer to that is very simple: No you should not. Rather you need to use it with wisdom.

Here are two ways to escape the curse of the credit card.

1) Keep a track of what your expenditure. I always assume that the money paid by credit card belongs to this month's expenditure. It is easy to keep a track now-a-days. Banks let you see your credit card statements whenever you wish to - not just at the end of a billing cycle. At least, my bank, Standard Chartered, has that facility. Regular checks on your credit card will also help you look out for any credit card frauds.

2) Do not use the credit facility of the Credit Card. Pay your entire amount every month. One way to force this on yourself is to give a standing instruction to your bank to pay off 100% of the amount.

Of course, you could also use the Ice Glass Method

The Curse of The Credit Card

Credit card is a potential drain on your earnings. It doesn't seem so, but it is. You tend to spend more when you shop with a credit card. The removal of actual cash passing your hands to another desensitizes you. And all the small purchases add up when the credit card bill comes knocking you door. But there is something more pernicious in credit cards. And that is the minimum payment clause. Why do you think the bank / credit card company allows you to pay only a part of the total. It is not that they love you. It is because it gives them more revenue.

Let's see how it works.

Assume you have made a purchase of Rs. 100. You are allowed to make a minimum payment of 10%. You have to pay for the outstanding amount at 2.5% per month (yeah, it is per month). But there is another twist here. The interest free period disappears when you make a part payment. So you actually pay interest on the Rs. 90 from the day you make a purchase. Suppose you decide to pay off the whole amount in 10 months, you end up paying Rs 11.25 extra. Not much you say? I would loath to pay Rs. 11.25 on every Rs. 100.

But consider this. You not only pay 2.5% on the amount outstanding for the original purchase, you also pay 2.5% on any purchase you make in the payoff duration - even if you pay off the entire amount for the purchase within the billing cycle.

Let us take a simple example. This is your purchase and payment pattern

Month--Payment-----Outstanding-------Purchases------Interest
------------------------------------------------------------
Jan----Rs.100
Feb----Rs.10---------Rs.90------------Rs.1000--------Rs.2.25
Mar----Rs.1090-------Rs 0-------------Rs 0-----------Rs.27.25

Basically, you end up paying for the Rs 1000 for the month of February even though you paid it off without carrying anything forward.
Deadly, isn't it?

By the way, 2.5% per month does not work out to be 30% per annum. It works out to be approximately 34.5%. You might as well take a consumer loan from the bank at 12.5% and pay off the outstanding amount on credit card.

What others say about getting rich

I searched the web for other blogs that give good advice on becoming rich.

Here's a small list:

How to Get Rich - this one has 153 comments at the time of typing. The comments are valuable too.
Get Rich Slowly
Single Guy Money
I will teach you to be rich
and the inimitable Seth Godin's Get rich quick

It is always good to get different view points on a subject.

This is a dumb blog

Yes this is a dumb blog.
It does not give you a quick fix method of becoming rich.
It is not possible to become rich overnight.
Some people may become rich - temporarily - because of sheer dumb, luck.
Others might inherit wealth beyond imagination.
If you are one such I congratulate you.
You are an exception.
For the rest of us, we have no choice but to build wealth by applying our skill and industry.

After you take a home loan

Caution: Do this if and only if your investments are yielding less than the EMI's you are paying out towards your home loan.

In my previous post, I discussed what you should do before you take a home loan.

Now that you have taken that home loan and you are now the proud owner of your grand new home, start thinking of reducing debt. This is by far the biggest debt you are likely to have.

But first, take an account of the money you will be spending on your house from now on:

a) Maintenance - from now on you will be constantly engaged in some enhancement / repair or the other
b) Fresh coat of paint every 4-5 years - you cannot be seen dead in a shabby looking house, now, will you?
c) Yearly Property tax

What you save immediately are:

i) That rent that you were paying to someone else
ii) Income tax
Therefore, the actual EMI you are paying out is only the money you are paying on top of (i) and (ii).

If you are alright with the outflow, do not bother to reduce the debt. You may feel the pinch for the next few years but soon your income will increase (you are due for a promotion, aren't you?) and then the EMI will seem lot smaller (as a % of you total income, I mean).

But if your EMI is HUGE, then try reducing the debt as soon as possible.

Here are three methods that I know of:

a) Some banks offer an account along with the loan (often called a Home Saver Account or something similar). You could park your excess money in that account. The account will earn the same amount of interest as your home loan. You don't get the interest earned in your hand. It goes to the home loan interest. So, it is like paying off a part of the interest but having liquidity at the same time. The best way is to direct your office to pay your salary to this account. Here's an example.

b) Look out from banks that offer a much less interest if you are willing to move your home loan from other banks to this bank. Read the offer carefully though. There may be certain conditions in those fine prints that may not be to your liking. Also switching costs may be high. In any case, what you could do is go to your existing bank and tell them that the other bank is enticing me with a lower EMI, and whether they could do something about it. You have a great chance to reduce your existing EMI.

c) I have done this and works like magic - suppose, you get some extra money from somewhere (could be a bonus from your company). Pay off a part of your home loan. The trick is that you need to do this early on. You see, the initial EMI's have larger component of your principal and lesser component of your interest. Your EMI's that you pay later have substantial interest component. So, paying off even a small amount early on in the tenure goes a longer way in chopping off months from your tenure.

There is one last note I wish to add: If you are on floating interest and the interest drops, the bank will offer you a choice between reduced tenure or reduced EMI. I always chose the reduced tenure. By combining this and paying off parts of the principal early on, I reduced my home loan tenure from 15 years to 6.5 years, at which point I borrowed some money from my parents and paid off the entire home loan. Yes. Today I have a home that is debt free. That leaves me with an asset that can be mortgaged, should I need to.

Before you take a home loan

In my post yesterday, I talked about reducing your debt. This post is focused totally on reducing your debt created by your home loan. Having a roof over your head is a middle-class dream (actually everybody's dream - who wants to shuttle from one house to another every 11 months).

Here are a few aspects that you need to consider before you take a home loan:

1) Do not take loan from the first bank you approaches you. Talk to as many banks as you wish to. And let the banks know that you are talking to many banks.

2) It is not necessary to take loan from the same bank as your friend did.

3) Negotiate, negotiate, negotiate. Every aspect is negotiable.

4) If you tell one bank that the other bank is giving you the loan at a lower Equated Monthly Installments (EMI), the first bank will reduce its EMI to match. (Hint: Ask the first bank to better the offer; not just match.)

5) Floating interest rates are always better than the fixed loans. Remember that the fixed loan is not really fixed for life. If there is a huge upward difference between what was offered and what it is now, banks are within their right to hike your interest rate upwards. They will never reduce it downwards though.

6) Don't bother about interest rate. Instead find out what will be your EMI. There are many EMI calculators available online. Check out your EMI from that calculator and compare with what the banker has to say.

7) Always go for loans where you can make advance payments - in part or in full - without penalty. If all the banks offer pre-closure of loans with penalty, find out the penalty amount. Get this in writing.

8) Your insurance company, such as LIC of India, may also offer loans that also covers your death or disability. This is a good option, if you are already not covered adequately. There is a huge advantage in this. In case of your untimely death - God/Nature forbid - your dependents will no longer have to repay the loan.

9) Most of the time, you will be talking to an agent of the bank. The agent will promise you the earth. The bank may not follow it up. Maintain a note book and note down what each agent has promised you. When the bank gives you the loan letter check if all that was promised is included in the letter.

10) Do not burden yourself with the maximum offered home loan. Take on as less as possible. See Reduce your debt

Do you have some tips that I missed out?
Please leave a comment.

I will cover the "after" part of the home loan in my next post. Till then take care of your investments and your family.

Features to die for

That new cell phone has a fantastic feature that you are ready to die for. This credit card gives you facilities that you wish your existing credit card had. Your car is getting old. The new ones give you a great advantage in mileage AND has a fantastic pick up. Your house could do with a ionizer. What about that latest infrared burglar detector alarm?

The marketing people are geared to entice you. The advertisements are meant to attract. But do you really require that extra feature? Splurge by all means. But does it dig into your principal or are you buying it from the fruits of your investment? And 2 months down the line, will you really use that feature in the latest cell phone?

Reduce that debt

Coming from a middle class background, I was always wary of debt. My parents were never in debt. They postponed acquiring luxury items, but never borrowed money to buy that refrigerator and the colour TV (both purchased from a matured insurance). Besides, those days, India had not yet seen the consumer boom. Credit was not easily available.

Then things changed. Banks now call and ask if you need loan at easy (easy?) installments. You could buy anything on credit card and pay only 10% of the outstanding (never mind the HUGE interest you pay). Instant gratification is the name of the game.

But, hold on. Is debt such a bad thing?> I could not have purchased a house or my dream car (not every one dreams of a Ferrari or a BMW; some of us dream of Scorpio too) with borrowing from banks. Besides, many companies have debt ("a healthy debt to equity ratio").

So why it is that I have against debt. And it is not just my background. I don't think so. To be get onto debt if and only if you have an investment that is paying you more than you are paying for the debt.

Let me take an example. For most Indians, buying a house is beyond our means. We need to borrow money from the bank. The house will be yours for Rs. 32,00,000. Let's assume you have the paying capacity to borrow Rs. 22,00,000 @ 9% interest. You could have paid Rs 12,00,000 from your pocket but since bank is ready to pay that much amount, you put in Rs. 10,00,000. My question to you is: what would you do with the Rs. 2,00,000 left with you. Are you keeping it for some contingency? Or are you going to invest it in an instrument which returns you more than 9%? If you are saving it for some unknown contingency, you have not been reading my blog. Get an insurance, man!
If the Rs. 2,00,000 is not yielding you (after tax) more than 9%, you are just wasting that money. You are better off, taking Rs. 20,00,000 from the bank.

Explore other avenues. Do your parents have some money to spare. Perhaps they can lend you some money. They might have a fixed deposit that is paying them at 6.5%. Take that money and pay them at the rate of 7% (they may refuse to take money from you; but you should insist). Does your company offer loans at low interest. Take that. Reduce that debt.

Put it this way: Given a choice I would like to buy that centrally located house or that spanking car from the fruits of my investment. Ideal. Failing that I would reduce my debt as much as possible

The Risk-Reward Curve

Beware of wisdom that does not have any basis. "More risk carries more reward." Sure? Who told you that?

Just check out the Risk-Reward curve in Seth Godin's blog. I have no doubt that Seth means well. He is inspirational. But the questions you need to ask are:

Where did he get this risk-reward curve from?
Is this curve universal?
I could draw a risk-reward curve that goes exactly opposite.
Does this curve apply to all fields of endeavour?
How do you take care of Black Swan events?

In his brilliant book, The Dip, Seth Godin warns you of the cul-de-sac - dead end that go no where. What if your investments are in a cul-de-sac?

I am absolutely positive and brimming with confidence when I have to try out something that is relevant to my skill. Blogging? I will give it my best and am ready to serve my time out in the dip. Surely I know when to quit and when to stick around. But I am totally risk averse to putting my hard earned money in some investment that shows me a risk-reward curve that has no basis.

Lesson: When you invest in yourself, go all out - achieve that goal. You may get it, you may not. But it is definitely worth trying. But - and this is a big BUT - be extremely risk averse for your investment that depend on others. If a stock broker or an agent comes to you showing how your profit will grow based on some unsubstantiated risk-reward curve, throw him/her out.