Chanakya or Kautilya needs no introduction. Whether it is political strategies, governance, or management skills, Chanakya excelled in all of them. Legend has it that Chandragupta Maurya wiped off the Nanda Dynasty with the help of Chanakya’s mentorship. Chandragupta then established the Maurya Dynasty, which became one of the most prominent dynasties of ancient India, with emperors like Ashoka at its helm.
Chanakya’s ideas and principles (also known as Chanakya Niti) offer valuable insights into success in life. His principles are so impactful that they are still revered as management axioms to date. Chanakya Niti also includes lessons that can be of great help to achieve financial success in life.
This blog will look at some wise words from Chanakya that offer valuable investment lessons. Let’s look at some of Chanakya’s Nitis that can help us manage money better and become financially successful.
Give Your Wealth To The Worthy
Whether your investment grows at a healthy rate or diminishes rapidly depends on how you manage your money. As Chanakya points out, the water of the sea received by the clouds is always sweet. But once it goes into the sea, it becomes salty.
Therefore, your money will work for you if you invest in well-regulated asset classes like stocks, bonds, gold, etc. And trust products like Mutual Funds or NPS, where a team of qualified people manages your money. On the other hand, if you rely on hot-stock tips or unregulated risky asset classes, your hard-earned money will hardly help you when you need it the most.
If You Cannot Decide Your Goal, You Cannot Win
Like all aspects of life, having a goal in investments is also the key to success. Otherwise, you will find it confusing to answer questions like where to invest, how much to invest, and how long to invest.
However, when you link your investments to goals, it simplifies the entire investment process. Since you know your goals, you know how long you need to invest. A fair idea about your investment horizon helps you determine how much you need to invest and what kind of investment product you need to reach your target.
Moreover, setting investment goals also gives you a purpose to stay invested. And helps you fight your biggest enemy – Your impulsiveness. To understand more about smart goal-setting strategies, you can read our blog What Is Goal-Based Investing And How It Helps in Wealth Creation.
Don’t Fear Corrections, Continue Your Investments
Stock markets have corrected multiple times in the last 30 years. The reason for these corrections includes pandemics, scams, economic slowdowns, etc. But whatever may be the reason or how steep the fall may be, equity markets have always bounced back in the next few years.
Many investors panic during phases of market corrections. Consequently, they redeem their investments at a loss and convert their loss on paper to actual losses. But those investors who have been patient enough to stay invested turned out to be the happiest.
For instance, in the last 30 years, there have been 21 months when the SENSEX fell by more than 10%. Let’s assume there are two friends, Sudam and Suman. Both invested Rs. 10,000 a month through SIP in SENSEX for the last 30 years. While Sudam stayed invested throughout, Suman stopped investments whenever the SENSEX corrected by 10%.
|Benefit Of Continuing Investment|
|Sudam’s Investments||Suman’s Investments|
|Monthly SIP Amount||Rs. 10,000||Rs. 10,000|
|Investment Duration||30 years||30 years|
|Principal Investment||Rs. 36 lakh||Rs. 33.9 lakh|
|Final Corpus||Rs. 3.47 crore||Rs. 3.17 crore|
|SIP Missed = Rs. 2.1 lakh; Difference in final corpus = Rs. 30 lakh|
Because of stopping SIPs during the market correction, Suman earned Rs. 30 lakh less than Sudam. To put this in perspective, by not investing Rs. 2.1 lakh during market corrections, Suman missed the opportunity to accumulate as much as Rs. 30 lakh, nearly 9.5% of his final corpus.
Avoid Too Much Of Anything
The above quote by Chanakya rightly highlights the importance of not going overboard with anything. It applies to investments as well. Investing too much in any one asset class can be counterproductive. And this is why one of the cardinal rules of investing is to diversify.
The benefits of diversification are pretty straightforward. All investments don’t do well at all times. Therefore, you need to invest across different asset classes like equity, fixed-income products, and gold. It will provide better downside protection thus ensuring a smoother investment journey.
Learn From Others’ Mistakes
We learn from our experiences, especially mistakes. But time is a commodity that is available in limited quantities. Hence, a better and faster way to learn is to learn from others’ mistakes.
Many legendary investors have documented their mistakes in their books or autobiographies. To begin your learning journey, you can start by reading various books such as autobiographies of successful investors, etc. You can go ETMONEY’s various videos and blogs as well. We have a blog that explains 7 Investing Mistakes That You Can Avoid.
Over to you now. Hopefully, these quotes of the wisest political strategist of all time helped you learn some investment lessons. There are plenty of other lessons from Chanakya and we couldn’t write all of them. Do share your favorite quotes and learnings from Chanakya Niti in the comment section.