Have you even wondered that there are way too many things that you have to face day after day?
Too many responsibilities, too many questions, too many possessions, too much information, too many options for everything, too many stocks to choose from, too many other investments that too many financial advisors push you to buy.
If that’s the case with you, what you need to bring back peace to your life is…minimalism.
Minimalism is basically an extension of simplicity – not only do you take things from complex to simple, but you try to get rid of anything that is unnecessary.
Practicing minimalism has brought simplicity to my life, and I love it for the time it gives me to focus on the bigger, more important things – taking greater care of my health and family.
Right from travelling with less personal luggage, eating less, using less number of apps on my mobile and less software on my PC, or having less number of stocks and other investments in my portfolio, I’ve adopted minimalism as a way of living my life.
How ‘minimalism’ has changed my investing life
After I quit my job last year, and got a chance to take notice of my personal investment portfolio, I realized things were not as nice as I would’ve expected.
I’m not talking about the overall performance of my investments. They were good enough even after the 2008 crash.
But what I realized then was that I had some investments that were just sitting as lame ducks in my portfolio – not adding any significant value to it, but just sitting there.
Thankfully, I had been practicing minimalism in my personal life for some years, so I tried to adopt it in with my investments.
Here is how I went minimalist as an investor.
First, I counted and listed all the stocks plus equity funds I had in my portfolio.
Second, I sold off/redeemed half of those investments based on their past performance, riskiness, and future potential.
Third, I reinvested the redeemed cash in the first 50% of the portfolio that I aim to hold for the next many years…possibly 15-20 years.
As of now, this is how my investment portfolio looks like:
- 15 stocks
- 5 mutual funds (ongoing SIPs)
- Infrastructure bonds
Apart from this, I regularly save money in a couple of PPF accounts (one each for my daughter and son).
I have zero loan liabilities (after having repaid my car loan 3 years back, and home loan last year), and invest whatever I save every month in a few of these 15 stocks and 5 mutual fund schemes.
One more financial commitment I have is towards life insurance, via a couple of term insurance policies.
In all, I’m practicing minimalism as an investor, and I can already see the immense benefits – like focus and clarity – that it has brought to my financial life.
Now I don’t worry about finding the ‘next best stock’ or ‘next outperforming mutual fund’.
I have complete belief in whatever little I have in terms of these 15 stocks and 5 funds and, luckily for me, this approach hasn’t disappointed me so far.
Minimalism is the path, not the destination
“There is no path to peace. Peace is the path,” said Mahatma Gandhi.
In the same way, minimalism in investing isn’t the destination you want to reach…it’s the path that you must follow.
Of course, practicing minimalism isn’t as easy as my words above might suggest. You cannot become a minimalist overnight.
But I believe you can take a few simple steps to reach ‘there’.
These are the three steps that I’ve taken in the pursuit of minimalism in my investing life. I believe these can be of help to you as well…
- Stop buying unnecessary stocks, funds, and other financial instruments (including unnecessary insurance policies). Buy only what you understand, and something that will not cause permanent loss of your capital.
- Get rid of the ‘obviously bad’ stuff from your portfolio, even if you have to take a loss. Get rid of at least 40-50% of your worst investments.
- Let go, emotionally.
That’s it!
The road to minimalism won’t be simple. But believe me, you will see something amazing there…not at the end of the road, but as you walk along.
This is such an important article for new, old or just about any investor. Often, we think about investing and when we start, we create a mess by selecting complex products that we don’t understand, over-diversify, select products that has got nothing to do with our goals and planning.
Most smart investor, stick to few good stocks and funds and make good money. This article talks just that.
I need to understand and get one clarification Vishal. You wrote you invest in your 15 stocks, not look for the next best stock. But value investing will not allow you to invest in stocks regularly as the prices will not be below it’s intrinsic value most of the time, especially for a good stock. Then how do you invest in them? I understand Mutual fund can be done via SIP, but stocks don’t generally work that way.
Also, don’t you think that in our developing economy where so many businesses are being setup, it would be difficult to find some really good business to invest by looking for the next best stock?
What are your views on Infrastructure bond? Do you invest for just that extra 20k IT deduction or because of the recent higher coupon rate you get?
Great article like always. Thanks for sharing.
Thanks for your feedback, Mansoor! Indeed you are right that good stocks are not always available at below intrinsic value. And that’s why a majority of my incremental investments flow into the 5 mutual funds that I own (via SIPs). As for the 15 stocks that I own, I keep adding to them as and when I find the prices appropriate.
Also, when I say I own 15 stocks and will continue to do so, I don’t necessarily mean I’ll hold the same 15 stocks. As I’ve done in the past, whenever I’ve come across a great stock that I must have in my portfolio, I have a re0look at my existing portfolio to see if there’s some stock that I can replace with this new, better stock. Also, 15 is just the current number. My point is that I just hold manageable number of stocks in my portfolio. Sometimes it can be 10, and sometimes 20, but never more than that.
As for your question on Infra bonds, yes I invest in them just from a tax-saving perspective.
I would be keen to know your current 15 stocks.
Actually the current 15 and when you bought them.
Yes Sudhir, I’ll soon write a post on that. 🙂
this is indeed synonym to ‘simple living high thinking’ and very apt. nowadays people mess-up everything around them, for the sake of what “he has it and i don’t, i ought to have it”. This is a good way to analyse and get rid of unwanted,unproductive things from ones life.
Can you please name the 5 mutual funds in which you have ur SIP’s in?
I will also mention the 5 funds I own in the post I’ll write soon.
Wow, crying baby does get the milk. 😉
Everyone should realize that we are all different and so is our investing style. Mutual fund SIP does make a sense to copy provided certain things are common but stock portfolio should be thoughtout and worked on, again its just my view.
Dear Vishal,
‘Minimalism’ is good but very tough to follow especially in a Stocks.
I am able to do that in Insurance. After I understood the different insurance policies, I buy only Term Insurance.
I am able to do that in Mutual Fund. Yes, when I started to invest in 2004 without any Goals, I used to gather funds. In one year I realized my mistake and have applied Minimalism and have brought it down to Minimum (more importantly to meet my Goals) and since 2005 my portfolio is almost same and performing very well.
When it comes to Stocks, the losses, the hopes and biases are stopping me from applying minimalism. It is a tough one to practice particularly when your are in loss.
I am ready to accept the losses and apply minimalism, is there any way, if you could help in advising me which stocks to be thrown out and where the amount to be reinvested. It is my inability to identify those stocks and therefore a fear stops me from applying minimalism.
Infact, in personal life, I apply mininalism effectively. I always try to apply KISS formulae (Keep it Simple Silly).
Regards
Ajay, I’ll quote Warren Buffett here, who has often said, “I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches – representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all. Under those rules, you’d really think carefully about what you did, and you’d be forced to load up on what you’d really thought about. So you’d do so much better.”
vow! this is great information! but i was wondering how do you generate cash for day to day expenses,sip,and misc. expenses,what about social stigma of not working?
Hi Kirti, I am a professional writer and earn my bread by writing for companies. So I am not “out of work”. 🙂
Very good article :). I also want to target it, eases lots of pain of unnecessary maintenance.
Sir,
Doesn’t the Idea of Minimalism contradict principle of Diversification?
Not really…when you diversify adequately and not excessively.