Several studies have indicated that minimalism is one of the keys to getting rich. Minimalism is therefore defined as the process of removing unnecessary possessions from an individual home. In this case, one sells out all the possessions which are not important to his/her survival. In most cases, one sells out property which is always distractive and does not bring joy to an individual life. Thus, this article evaluates the impact of minimalism on getting rich.
One excellent option to get rich is to avoid spending money on stuff one does not need. This is achieved through proper planning. When one avoids impulse buying, a lot of money is saved and this amount of capital can be channeled to other productive projects which may yield a higher return. Another crucial step which can make an individual save a substantial amount of money is working for oneself. There are a lot of simple tasks which can help an individual save money such as undertaking some chores by oneself without necessarily giving another person to do at a fee.
One can also save a substantial amount of capital by desiring to own less. Individuals who own less have a lot of practical benefits because it cost less, requires less time and energy to manage. Additionally, owning less brings a lot of freedom and greater opportunity to pursue other important lifestyle goals and thus the desire to own less is more valuable than owning less. Another essential step of getting rid of unnecessary possessions is selling off a handful of clothes and other possessions which are not much important for an individual survival. This decision to scrap off unwanted clothing must come from one’s soul because the journey toward minimalism runs through the soul and the heart. To effectively achieve minimalism, one needs to keep in mind that the potential of minimalism always lies in value addition rather than subtraction. The potential of achieving minimalism always lies in what an individual chooses to pursue in life in place of material possessions. An individual should realize that life is too valuable to waste chasing possessions. Another step which may make one achieve minimalism in life is a change of lifestyle. There are some activities which people spend a lot of time and money doing yet they add little or no wealth to an individual life. When individuals change their lifestyle especially minimizes wastage of money and other resources, they are capable of changing the whole world.
Another important step which may be helpful in getting rich is learning to let some things go. While there is nothing wrong with owning almost everything, one needs to have less stuff. This will reduce cost, stress and time wastage. All these factors which need to be reduced are all important determinants of getting rich.
In conclusion, living a minimalist lifestyle can make someone rich but it will on how they spend the money that they get to save from being a minimalist and what’s important is they are living a comfortable life aside from having lesser expenses. What matters most at the end of everything is you have lived a meaningful life and you felt safe.
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Tankless Water Heater by Bosch
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Electric Tankless Water by Ecosmart
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One of the most popular charts to post in the financial community is the S&P 500 correlation link with the Fed’s balance sheet, especially since the bull market began in early parts of 2009. Just about every trader, investor, analyst, economist, market “guru” and media anchor quotes it on regular basis. If everyone says it, then it must be true… right? Well, maybe it isn’t.
But what if this relationship stops correlating soon and the Fed loses the control of the stock market? Or maybe it never had the control in the first place? Historically, there is nothing new under the sun (Jesse Livermore quote), so a bull market will stay in a bull market until buyers get exhausted.
Chart 1: Central banks policy & equity prices don’t always correlate
The chart above is broken into three sections. Firstly, Deutsche Bank shows how S&P and Fed’s balance sheet are moving in link since March 2009. Secondly, Ed Yardeni shows how ECB has reduced its balance sheet since mid-2012, while Fed has increased its starting in late 2012. Finally, BCA shows how despite the falling ECB balance sheet, German DAX 30 has moved up a like a rocket. Here are some interesting points to think about:
- So how can one market move up when its local central bank is increasing its balance sheet and yet another market also move up while its local central bank is decreasing its balance sheet?
- Do you remember the correlation charts link to Gold and central banks? That one worked for awhile, but just as everyone was expecting it to work the third time around… it stopped.
- What about the correlation between the Euro and commodities, and in particular Gold? Rising Euro usually meant falling Dollar, so Gold would rally too… however in 2013 as Fed increased its balance sheet and ECB reduced its own, Euro gained against the Dollar while Gold had a worst annual loss since 1981.
It seems to me that certain correlations between central banks and assets work until they don’t, while the majority of the analysts in the industry just guess and make up the reasoning behind the moves. I do not have the answer for all of the questions above, as I do not pay too much attention to what central banks do. I believe in following markets and I believe that assets eventually reflect fundamentals in the long run.
I thought sharing this chart would be extremely interesting since we are closely approaching two major milestones. The first is year-end performance and the second is a five year anniversary of the bull market in equities. Since the majority of assets bottom between late 2008 and early 2009, the chart above also shows how they have performed for the overall investment cycle.
Chart 1: Performance of various major assets for the investment cycle
I bet if I told you that the top two performing assets are Copper and European High Yield, considering all of the issues both China and Europe have been through since 2011, you would tell me I am lying. Remaining in the top 5 best performers, the ones that are easier to pick would be US assets such as S&P 500 and US High Yield. Interestingly Russian equities as well as the overall Emerging Market stock complex is also seen near the top. The fact is that these assets had tremendous moves out of their lows and funnily enough, just about all of the investors missed it.
Not too many assets have lost ground, but a couple comes to mind, such as the Greek stock market and the Japanese Yen (with its recent crash). Surpassingly, Euro-Dollar exchange rate has been essentially flat. Despite ongoing media coverage of bond performance during the Euro Crisis (2011 and 2012) Treasures and Bunds have really lagged rest of the asset classes. One could argue that these assets outperform during recessions like that did during 2007/08 period.
Observing this chart, where do you see the value and what do you rate overly expensive?
Chart 1: Despite new highs, breadth continues to bearishly diverge
Just a quick update on one of my favorite indicators for the stock market – the percentage of stocks within the S&P 500 trading above the 200-day moving average. The indicator continues to flash a warning signal, something I have discussed on my blog for the last few months. So far the market has turned a cold shoulder to ongoing bearish divergence as it continues to tear higher into record territory.
Chart 2: The stock market has been overbought for the whole of 2013
And while bearish divergence is in progress, the same indicator can also be looked at from another perspective – either an overbought or an oversold level. As we can clearly see in Chart 2, the overall stock market breadth has remained overbought for the whole of 2013. Breadth isn’t the only group of indicators flashing overbought levels, as technical indicators, as well as sentiment, are also flashing warning signals.
Here at Short Side of Long blog, contrarian analysis is the core of executing investments, while fundamental research is the selective process between asset classes. And while I understand that being a contrarian doesn’t always work, over the long term it is definitely one of the better ways to invest. This is also confirmed by the recent study conducted by Russell Jame of the University of Kentucky. Bloomberg writes:
“The best hedge fund managers tend to find profits in short-term, contrarian bets.
That’s the finding of a study published this year by Russell Jame of the University of Kentucky and set to be presented next month at the American Economic Association’s annual meeting in Philadelphia.
Star hedge funds secure profits over short periods, with more than 25 percent of an annual outperformance occurring within a month after a trade. The profits are also often made when managers have bet against the prevailing market view.“
Personally, I do not trade as frequently as some of these market experts, but I do find that the contrarian approach works just as well over the long term. Just remember that in this game, patience is a virtue. In other words, buy something and wait five years (instead of just five weeks haha!).