Nothing is Free. And sometimes the Fee is not just “Money”!

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I was reading this book called “The Psychology of Money” and I came across a chapter with a similar name. And it got me thinking.

(Side Note — This book should be a Must-Read for everyone. Especially, people who are just getting into investing. The stories in this book will completely change the way you approach money.)

Now, there is an old saying which goes like this — “There is no such thing as a Free Lunch”.

And, people might think, this whole thing will be on that topic, based on the title.

Let me tell you, there is more to it.

Most of the time, the above-said phrase suggests that nothing is Free in this living world and somehow or the other you are paying for everything that you taking.

This Cost is mostly considered the “Opportunity Cost”.

What’s that? If you may ask.

Opportunity Cost — In simple words, it is the potential loss from the missed opportunity. When you choose a particular option, you tend to lose the other alternatives.

So it is considered the Cost you incur as you choose one of the alternatives.

This is very true but there is another Big time cost that you incur while jumping into the waves of the Financial Market.

The cost that you have to pay to win the game of Financial Market and Investing is called “Volatility”.

(Now, I am taking from the perspective of a Long-Term Investor. This mostly won’t apply to Short-Term Investors)

Again, what is Volatility?

It is the rate at which the price of a security increases or decreases for a given set of returns!

In simple words, for you, it is how much the security fluctuates while you are invested in that same.

Morgan, the author of “The Psychology of Money” said, Everything has a Price, but not all prices appear on labels.

He meant, that no matter what you get into, you should be willing to pay the price, and the same goes for Investing.

When you are making up your mind on investing with a particular company or a portfolio or index funds, whatever it is. You must find out the actual price tag for that investment and decide whether you are willing to pay the price for the expected return or not.

This is super essential while investing.

We all heard the advice “ stay for the long run”.

The money is in the long game.

Charlie Munger famously said, that one of the most important rules to see the magic of compounding is Not to interfere with the process in between.

He suggested that you keep your holdings for a long time so that you can provide compounding, the time necessary to do its magic.

In Investing, time is the biggest factor.

If you give your portfolio the needed time, you will be shocked to see that you have been so correct while choosing the stock.

But!

Is it really that easy, to hold long-term?

Is it really that easy to see your life’s savings going down 40%, and still doing nothing about it?

Is it really that easy to accept all your technical analysis was wrong?

Is it really that easy to see your family’s financial future at stake, just because of you?

It is NOT!

Emotions make us human and these kinds of sudden disruptions in our life can really catch you off guard.

And this exactly is the Price that you have to Pay.

You got to decide whether you are willing to pay or not.

People just overlook this Price.

To be a good and disciplined investor, the price that you have to pay is “Volatility”

Morgan says it is the fear, the insecurities, the ups and downs of the market, and your emotions, that you must be willing to accept while you go into that investment.

This is what the market demands from you and no one can get away from the Price.

Yet, no one considers this.

No one tends to believe that they will be charged and people only tend to understand when the charge is already Overdue.

When you ignore the price tag, you tend to make a decision without considering all the factors, or may without the most important factor.

So this hits hard.

You never realize that you will be charged and when the bill comes, you panic and try to get out of the market.

You cease to play the long game. You interfere with the compounding effect. And thus, could never see and feel the Magic of Compounding.

Warren Buffet is not the greatest investor of all time because of his stock selection. It is because he has the strength and emotional balance to Survive the price that the market asks for.

He has been invested for more than 50 years, and that’s why he is the greatest.

So, find out the price tag of your investment and then decide whether you are willing to pay or not.

Don’t believe in the False Fact that there is No Price in order to get into the Financial Game!

Finally, thanks a lot for taking the time to read my work. I am really grateful to all of you!

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