25 minute read

v2.0 - 2019.01

Creating



your
financial
freedom

🐌
A brief summary of the tools that can help you create
the financial freedom to do more of what you want,
whenever you want, with whomever you want.

Niki Mukhi, 2019

 Creating your financial freedom 3

Introduction
I am sharing this with you because I believe personal finance is an area
neglected by many of us and our education systems, and this costs us
a great deal of time and hard work in our lifetime.

Managing personal finance sounds complicated and time consuming,

and worst of all people think it is only something that people with lots
of money need to think about. The truth is, it is important for all of us,
and the best part is that it can actually be quite simple.

The information and thoughts shared here come from conversations

with some excellent financial minds, some great books and my own
research and experience. I hope it is useful for you, and helps you on
your way to achieving your own financial freedom.

P.s. This is an action doc, so feel free to print it (A5 booklet),

grab a pen and make notes as you go.
 Creating your financial freedom 4

‘More money seldom solves money

problems, financial intelligence does.’
- Robert Kiyosaki
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Contents

1. Seriously, why? 7

Section 1 - Protection

2. Life insurance 10

3. Write a will 11

4. Your emergency fund 12

Section 2 - Investing

5. Assets VS liabilities 14

6. Compounding 16

7. Investment types 18

8. Why the stock market rules 20

9. Why bonds and fixed income investments rule 28

10 What about real estate? 29

.
11 What about private equity and crowd funding? 32
.
12 The fundamentals 34
.
Section 3 - Getting started

13 Ten steps to set you free 39

.
14 TechNikhil support 44
.
Appendix

15 Notes & FAQs 46

.
16 Will template 50
.
17 Stock scorecard 53
.
Creating your financial freedom 6
 Creating your financial freedom 7

1. Seriously, why?
There’s only a handful of things that really matter in our lives, including:

" Your health

# Your work (and passions, for me it’s music 🎸 )

% Your family and friends (optional)

😘 Marriage/making out (optional)

👶 Parenting (optional)

💰 And last but not least, your personal finances

The realest reason to take care of your personal finances is to gain the freedom to do
more of what you want, whenever you want, with whomever you want.

The good news is that in order to achieve this, there are only four things that you
need to take care of outside of your work, and they don’t have to take much time or
effort once you understand the fundamentals and get started. They are:
1. Life insurance - to take care of any current/future dependents (2 hours).
2. Your will - to prevent confusion, family disagreements and expensive legal work
during a stressful and emotionally difficult time for your loved ones (1 hour).
3. An emergency fund - funds that you can access instantly in case of an
emergency (½ hour).
4. Your investments - to slowly build enough assets (things that make you money)
until you can stop working and let your money take care of you (1-2 days/year).

The goal of this doc is to help you understand how to use these financial tools to start
building towards your own financial freedom, and to show you that:
- It can be quite simple.
- It doesn’t matter how much you have saved or earn, you will be able to create
your financial freedom over time.
- Taking a little care of your finances will save you years (if not decades) of having
to work in your lifetime. Seriously.
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 Creating your financial freedom 9

Section 1 - Protection
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2. Life insurance (two hours)

What is it?
Life insurance is a layer of protection for you and your family incase you pass away, if
you get a critical illness, or become disabled in such a way that prevents you being
able to do your job. Without a life insurance policy in place, any of these things can
put you or your family at risk financially.

Do I need it?
If you happen to have no debts and $5 million in the bank, you probably don’t need
life insurance because if something happens to you, your family’s financial needs will
be covered. However, if this isn’t you, and you provide for your family (or plan to at
some point), you should set it up asap (note: the earlier you set it up the cheaper it is).

How much cover do I need?

Depending on your circumstances the kind of policy and cover amount you need will
vary, however a general rule is that you want to be covered for at least five times your
salary. If you have young kids, outstanding debt or a mortgage, then you will probably
want enough to cover that as well. Note: before setting up a policy, see if your work
provides any coverage and then get additional cover if you need it.

How long do I need it for?

You can set up a Term Insurance policy for specific lengths of time (e.g. 5, 10, 20
years), or take a Whole of Life policy (these generally cover you till age 99). Whole of
Life policies are more expensive but depending on your requirements, you should set
up a policy for however long you need it (e.g. until your kids are 21).

Added perk
Another great thing about life insurance is that you can use this to help you build your
assets. For example, when taking a mortgage to buy a house, you need life insurance
to back it up (as a layer of protection for your family and the bank). Being insured for a
larger amount can potentially enable you to get a larger mortgage from a bank.

 Creating your financial freedom 11

3. Write a will (an hour)

Regardless of where you live, your marital status or your wealth, if you are over 25, it is
important to write a will because it reduces confusion, family disagreements and
heavy legal work/expenses during a stressful and emotionally difficult time for your
loved ones, and it takes little time and effort to do. A will enables you to:
- Ensure that your possessions will be distributed as you wish. Without a will,
the government decides how your assets will be distributed (and that’s not good
for anyone). Although some property may automatically be passed to a spouse or
children, the exact distribution depends on the value of the property and the
terms of title deeds. A will is the only way to to make sure your wishes will be
carried out.
- Appoint an executor/trustee to manage the distribution of your assets.
Choosing someone you trust will give you peace of mind in that the wishes in
your will shall be carried out as you want.
- Appoint a guardian for your children. This is the most important part. Your will
is the legal guiding document for who takes care of your children in the event of
the death of both parents.
- Specify funeral wishes. This reduces confusion for loved ones and ensures your
body will treated in the way you desire.
- State what to do in a medical emergency if you are incapacitated. By clearly
stating what to do in these situations, it takes the most difficult decision burden off
your loved ones that can save them additional grief.

Note:
- At the end of this doc there's a will template to help you write yours.
- Depending on where you live you may need to get your will notarised to become
legally binding.
- If you don’t have any legal assets (e.g. a property), you should still write a will, but
may not need to get it legally notarised till later when you do (I did this for now).

 Creating your financial freedom 12

4. Your emergency fund (½ hour)

What is it?
Your emergency fund is a stash of funds that you keep aside to handle the financial
surprises life throws your way (e.g. if you lose your job, home or medical
emergencies, unplanned travel etc.).

Where should it be?

Your emergency fund should be in a savings account or a breakable fixed deposit that
you can access at any time if you need it.

How big should it be?

Ideally your emergency fund should be able to cover 3-6 months of your living
expenses. Also bear in mind that:
- If you live in a place where the costs are high and the rights are minimal you
might want to increase this to 6-12 months.
- In time you may need to add to your emergency fund as your living expenses
increase.

Once you have your emergency fund and life insurance in place, everything else you
save should then be invested to grow for your future.
 Creating your financial freedom 13

Section 2 - Investing
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5. Assets and liabilities

What is investing?
Investing is when you use your savings to buy things that make money. In this section I
will cover the different ways to invest and fundamental rules surrounding them that
help you reduce your risk and maximise your returns (profits).
The profit from an investment, usually referred to as ‘return on investment’ or ‘ROI’
is measured in percentages per year. For example, the average ROI from the US stock
market over the last 100 years has been ±10% per year, meaning that if you invested
$1000 a year ago, today you would have $1,100.

Assets VS liabilities
When starting to invest your savings, the first (and most important) thing you need to
understand is the difference between an asset and a liability. In a nutshell, an asset is
something that makes you money and a liability costs you money.
Here are cash flow diagrams for assets VS liabilities (as described in Robert
Kiyosaki’s excellent book Rich Dad Poor Dad).

The cash flow pattern of an asset: The cash flow pattern of an liability:

The top half of these diagrams represent an income statement (measuring money in
and money out). The bottom half is a balance sheet (balancing assets and liabilities).
For every dollar you get in your hand, you can either spend it on liabilities (new
shoes, food, bills, your mortgage etc.), or to buy assets (stocks, bonds, properties that
you don’t live in, etc.). In this doc I hope to show you how to use your savings to build
 Creating your financial freedom 15

assets until they generate enough passive income for you to be financially free (AKA
chill forever).

The difference between poor, middle class and rich (financially free) people
The main difference between poor, middle class people and rich people is that the
poor and middle class buy liabilities, whereas the rich buy assets.
In Robert Kiyosaki’s book, he goes on to demonstrate the cash flow pattens of
these different groups of people with these diagrams:

The cash-flow pattern of The cash-flow pattern of The cash-flow pattern of

a poor person: a middle class person: a rich person:


The trap
The biggest trap we fall into is that that when our income increases, we tend to
increase our spending (on liabilities). This is what makes us feel like we perpetually
need more income. The smart thing to do when your income goes up would be to
increase your spending on assets.

The financial freedom goal

Almost everyone (incorrectly) believes that in order to become financially free you
need to either get really lucky or make a gigantic income, but actually anyone can get
there by steadily buying assets until they passively generate enough income for you
to do whatever you want with your time. This may seem impossible, but hopefully
once you understand the tools available to you it won’t. Here’s an intro to the most
powerful tool in investing: Compounding.

 Creating your financial freedom 16

6. Compounding
Compounding (also known as compounding interest) is when you re-invest your
profits from an investment (instead of spending them) so that your profits and your
original investment both work to make more profits for you.
It is the single most powerful force in investing, and is the ultimate tool to make
your money work for you in time. In Tony Robbins’ excellent book Unshakeable, he
illustrates the power of compounding with this simple example:

Imagine a regular guy (Joe) invests $300 a month in a fund that returns an
average of 10% per year (this is roughly the rate of the US stock market over the
last 100 years).
He starts when he is 19 years old, reinvests his profits each year, and stops
when he is 27 (saving a total of $28,800 over 8 years). Joe’s money compounds at
a rate of 10% until he is 65 where he now has $1,863,287 (see the table on the
right). His $28,800 turned into almost two million bucks.
The compound interest Joe earned added more value to his account than he
likely could have on his own.

I hope this literally blows your socks off 🧦 💨 .

Most people never take advantage of this incredible tool that is lying in plain
sight. Instead, they continue to believe that the only way to become financially free is
if their income becomes big enough. The truth is, the simplest way to achieve your
financial freedom is to set aside a portion of your savings and invest it over
many years.
 Creating your financial freedom 17

$300/monthly ($3,600 annually) growing at 10%

Joe’s age Amount Joe saves each year ($) Total value at the end of the year ($)

19 3,600 3,960
20 3,600 8,316

21 3,600 13,108

22 3,600 18,378

23 3,600 24,176
24 3,600 30,554

25 3,600 37,569

26 3,600 45,286

27 - 49,815
28 - 54,796

29 - 60,276

30 - 66,303

31 - 72,934
32 - 80,227

33 - 88,250

34 - 97,075

35 - 106,782
36 - 117,461

37 - 129,207

38 - 142,127

39 - 156,340
40 - 171,974

41 - 189,171

42 - 208,088

43 - 228,897

44 - 251,787
45 - 276,966

46 - 304,662

47 - 335,129

48 - 368,641
49 - 405,506

50 - 446,056

51 - 490,662

52 - 539,728
53 - 593,701

54 - 653,071

55 - 718,378

56 - 790,216
57 - 869,237

58 - 956,161

59 - 1,051,777

60 - 1,156,955
61 - 1,272,650

62 - 1,399,915

63 - 1,539,907

64 - 1,693,897
65 - 1,863,287
 Creating your financial freedom 18

7. Investment types
There are many types of investment (also known as securities), however I’m just going
to focus on the simplest and most accessible ones.

🚀 Stocks
A stock (also known as shares or equity) is a type of investment that signifies
ownership in publicly traded companies (such as Apple, Nike and Starbucks), and with
it a claim on part of the company’s assets and earnings. As companies grow you can
share in their profits with dividends, and sell your shares when the company value
goes up for a profit.

📈 Exchange Traded Funds (ETFs) - Also known as index funds/indicies

ETFs are collections of stocks that you can buy into as a single unit. For example, a
well known index fund, the S&P 500, is a fund that holds shares in 500 of the largest
public companies in the US at once. These are great because they spread your risk
massively compared to buying individual stocks.

- Mutual funds
A mutual fund is a company that you pay to manage your investments for you that
buys stocks, bonds and other securities on your behalf. They allow you to ‘set and
forget’, but they charge you high fees to manage your funds for you regardless of
whether they create a decent return for you or not.
Note: As it’s so simple to invest in a few low cost ETFs/index funds, you will almost
always be better off doing it yourself as 90% of mutual funds fail to beat the S&P500’s
returns in the long run once you deduct their management fees (more on this later).

🏠  Real estate
Real estate is probably the most well known type of investment. It encompasses
owning land, the buildings on it, and potentially the natural resources on it (such as
water or oil). People generally buy properties to make money by renting them out,
and in the hope that the value of the property will rise.
 Creating your financial freedom 19

🏦 Bonds
Bonds are interest paying loans that you give to governments, companies or other
entities for a fixed amount of time. Bonds generally have a lower return than stocks
that perform well (around 2-4% for government bonds or 4-8% for corporate bonds),
and are much less risky. People like bonds because they generally know what they are
going to get in return, and can sleep well knowing that they rarely fail.

🐌 Fixed deposits
A fixed deposit is when you give a bank a lump sum (e.g. $10,000) for a fixed amount
of time (e.g. five years), and they pay you a fixed interest (profit) each year (e.g. 4%).
During the fixed period however, your savings are locked in and you do not have
access to your funds. This is a service offered by many commercial/high street banks.
Note: You can break a fixed deposit but you will lose the future interest.

🔶  Commodities (such as gold, silver, oil and coffee)

Commodities can be used to store wealth as well as being traded to generate it. You
can buy them physically (e.g. gold coins) or buy/sell them on paper.
Note: I recommend avoiding investing in commodities because it requires a lot of
research and ongoing attention.

💡 Private equity (PE) and equity crowdfunding

Private equity is when you buy shares in private companies that you believe will grow
and either get acquired, pay dividends or IPO (become a publicly traded company).
Equity crowdfunding has made this investment class more accessible as you can now
invest in private companies for as little as $10.
Note: Private equity is most risky type of investment. I would recommend
avoiding it unless you are willing to do a lot of research or have private equity or start
up experience.

🤯 Other investment types

There are many other ways to invest such as options, futures, ForEx trading (foreign
exchange), however all of these require a lot of know-how and ongoing attention.

 Creating your financial freedom 20

8. Why the stock market rules

Introduction to stocks
A stock (also known as shares or equity) is a type of investment that signifies
ownership in a company, and with it a claim on part of the company’s assets and
earnings.
People buy stocks because they believe the company value is going to grow (to
sell later at a higher price), because they pay dividends (a share of the profits), or
both.
Historically, stocks have grown in value faster than any other investment type
making them the most profitable investment type over time over the last two
centuries. This table shows the returns for $1 invested across different investment
types from 1802 to 2012 (adjusted for inflation):*

Investment type Invested in 1802 Value in 2012 **

Interest-free bank account $1 $0.05

Gold $1 $4.52

Short-Term US Government Bonds $1 $281

Long-Term US Government Bonds $1 $1,778

US Stocks $1 $704,997

When you invest in a stock, you make the shift from being a consumer to being an
owner. If you buy an iPhone, you’re a consumer of Apple products; if you buy Apple
Inc. stock, you become an owner of the company, and are therefore entitled to a
percentage of its future earnings.
By putting your savings into the stock market instead of your savings account, you
let the scientists at Johnson & Johnson, bankers at Bank of America, technologists at
Google, sales people at Costco etc. work to grow your savings, giving you more time
to do whatever you want in your life!***

* From The Motley Fool Investment Guide by Tom and David Gardner
** From Stocks for the Long Run by Jeremy Siegel
*** From Unshakeable by Tony Robbins
 Creating your financial freedom 21

Stocks or index funds?

There are two main ways to invest in the stock market. You can either buy individual
stocks in companies you believe in (such as Visa 💳 , Apple 🍎 , Google 🔍 , Netflix
📺 ), or you can buy into a group of stocks using index funds/ETFs (such as the S&P
500 7 , FTSE 8 , SENSEX 9 , NIKKEI : ).

Why index funds rule

An index fund (or ETF) is a collection of stocks that you can buy into as a single unit.
The most famous index fund, the S&P 500, is a single investment that you can buy into
that holds shares in the largest 500 public companies in the US covering all sectors
(financial, energy, technology, construction etc.).
They are the simplest and possibly the best way to invest in the stock market for
many reasons:
- They instantly add diversification to your portfolio (this reduces risk as one
company can fail, whereas it’s unlikely many will at once).
- They can require little due diligence before you invest in them, and require little
attention to manage them.
- They charge small fees to buy (fees are hugely important, more on this later).
- With compounding and some time, index funds can single handedly achieve
incredible returns with practically no effort from your side.

Why individual stocks rule

The great thing about individual stocks is that they have the ability to turn
thousandaires into millionaires in less time. This however takes a lot more effort, risk
and knowhow to get it right.
As a general rule, buying individual stocks should only represent a small portion
(5-20%) of your overall investments unless you are willing to take greater risks with
your savings. There are many things to consider when buying individual stocks, such
as: What does the company do? Will they be valuable to people in the future? Do you
think the people that are running the company are capable of growing it? Is it based
in the right place/country to grow and expand? etc.
Public companies are put into categories based on their value (also known as
market cap). Large cap are companies valued at more than $4 billion, mid caps are
 Creating your financial freedom 22

between $1-4 billion, small caps are between $300 million - $1 billion and micro caps
are under $300 million.
The advantage of investing in large cap companies like Apple is that they are
hugely established, and unless they are disrupted by new technologies, have a long
road ahead.
The disadvantage however, is that there is usually less room to grow. For example,
in the last 10 years, Apple’s valuation has grown 50 times larger, do you think Apple
can become 50 times more valuable than it is today? Probably not, but many mid,
small and micro cap companies can.
Lastly and very importantly, if you’re not interested in being an active investor it’s
best to stick with index funds and not invest in many individual stocks.
Note: At the end of this doc I have shared my stock scorecard that I use to
quantify whether a stock is worth adding to my portfolio. These 20 questions help me
to remove my personal bias as much as possible (just because I love Adidas shoes
and Boeing aeroplanes doesn’t necessarily make them good stocks to own).

How to tame the beast

The stock market seems like dangerous waters (and it can be), but there is a way to
tame the beast with these few basic rules:

1. Diversify properly
Diversification is the best tool for spreading your risk and increasing your returns over
time. Later I will talk about diversifying between investment types (stocks, bonds, real
estate etc.), this section however is just about diversifying within the stock market.
By holding completely uncorrelated investments, you reduce your
risk factor greatly and increase your returns over time. A decent starting point would
be to invest across US markets (e.g. S&P 500), international markets (e.g. the FTSE All-
World Index), emerging-market stocks (e.g. MSCI Emerging Markets Index), and then
maybe add at a few individual stocks in different sectors that you believe in (e.g.
Google, Nike, Starbucks, Visa). More on creating a portfolio later.

2. Be ready for the bull 🐂 , dips and the bear 🐻

A bull market is when the stock market is going up, a dip (also known as a correction)
is when the market drops 10-15%, and a bear market is when it goes down > 20%.
 Creating your financial freedom 23

One of the reasons why so many people lose in the stock market is that they get
scared of dips and bears. Dips happen every year or so, bears come every 3-10
years, and most importantly, the bull always follows the bear (look at the history
of the S&P 500 and you will see that the bull has always followed the bear).
In 2008 the market dropped 38% creating the biggest financial crisis in our
lifetime (a big grizzly bear). Since then however it has been a raging bull going up an
average of 16% per year, meaning that if you didn’t get scared off by the bear, you
would be up over 270% in the last 9 years.

3. Play the long game 🐌

Here’s a few things we now know:
- The stock market has 10-15% dips at some point every year.
- Every few years there is a > 20% dip, AKA a 🐻 .
- Occasionally (like in 2008), there is a massive 30-40% bear.
- All of these things are ok if you play the long game because the bull always
follows the bear!

As a general rule of thumb, when investing in stocks (individual stocks or indices), you
should aim to stay in the market for at least five years (longer the better). Stocks can
and will go up and down a lot, so will the markets (indices), but the long term
prognosis is incredible.
Holding periods of 10 years in the market have resulted positively 88% of the
time, and for twenty and thirty year periods, this is historically been 100(freakin’)%!
More importantly, the longer you are in the market, the more time compounding has
to work its magic.

4. Don’t try to time the market ⏱

One thing you hear people talk about is timing the market (to get in while it is low to
maximise your returns). Fact: There is no actual way to time the market. No one in
the world knows when it is going to zig vs zag. The worst mistake you can make is to
wait for the ‘right’ time to get in the market, when in reality it’s always the right time
to get in and play the long game.
 Creating your financial freedom 24

Here’s an example from Tony Robbins’ book Unshakeable highlighting the

importance of not trying to time the market:
The Schwab Centre for Financial Research studied the impact of timing on the
returns of five hypothetical investors who had $2000 to invest once a year for 20
years, starting in 1993.
The most successful of these investors (Ms. Perfect) invested her money on the
best possible day each year (the day when the market hit its lowest point that
year). This mythical investor ended up with $87,004. The investor with the worst
timing, Mr. Hapless, invested his money when the market hit its highest point in
the year, ended up with $72,487.
The lesson? If you stay in the market long enough, compounding works its
magic, and you end up with a healthy return even if your timing was hopelessly
unlucky.
Even after this 20 year run with the worst possible timing, Mr. Hapless still
made a substantial profit. The worst-performing portfolio of all was the guy who
stayed on the bench because he was waiting for the ideal time.

Note: You can study a stock for a few months and try to find the optimal time to invest
for short term gains (as many people do), but this requires spending a lot of time
doing research and being glued to a screen. The point I am making is that if you are
playing the long game you don’t need to.

5. Pay attention to fees

One of the big killers when investing in the stock market is the fees. Whether you use
an online platform to manage your investments or buy into a mutual fund (🤢 ), you
need to understand their fees. When you buy or sell a stock, you pay a small
transaction fee, so in order to actually make a profit, the company’s share value needs
to go up more than you paid in the transaction fee, and then (depending on where
you live), you may need to pay tax on your profits.
To show you how much fees can affect you over time, see the table (on the right)
showing the earlier example of Joe earning 10% returns versus what happens to Joe
earning 8% returns because 2% was lost in fees.
2% doesn’t sound like a lot, but as you can see this example it accumulates to
over a million dollars of lost earnings.
 Creating your financial freedom 25

$300/monthly ($3,600 annually) compounding at 10% VS 8%

Joe’s age Saved/invested ($) Joe growing at 10% ($) Saved/invested ($) Joe growing at 8% ($)

19 3,600 3,960 3,600 3,888

20 3,600 8,316 3,600 8,087

21 3,600 13,108 3,600 12,622

22 3,600 18,378 3,600 17,520

23 3,600 24,176 3,600 22,809

24 3,600 30,554 3,600 28,522

25 3,600 37,569 3,600 34,692

26 3,600 45,286 3,600 41,355

27 - 49,815 - 44,664
28 - 54,796 - 48,237

29 - 60,276 - 52,096
30 - 66,303 - 56,263

31 - 72,934 - 60,764
32 - 80,227 - 65,626

33 - 88,250 - 70,876
34 - 97,075 - 76,546

35 - 106,782 - 82,669

36 - 117,461 - 89,283
37 - 129,207 - 96,425

38 - 142,127 - 104,139
39 - 156,340 - 112,471

40 - 171,974 - 121,468
41 - 189,171 - 131,186

42 - 208,088 - 141,681
43 - 228,897 - 153,015

44 - 251,787 - 165,256

45 - 276,966 - 178,477
46 - 304,662 - 192,755

47 - 335,129 - 208,175
48 - 368,641 - 224,829

49 - 405,506 - 242,816
50 - 446,056 - 262,241

51 - 490,662 - 283,220
52 - 539,728 - 305,878

53 - 593,701 - 330,348

54 - 653,071 - 356,776
55 - 718,378 - 385,318

56 - 790,216 - 416,143
57 - 869,237 - 449,435

58 - 956,161 - 485,390
59 - 1,051,777 - 524,221

60 - 1,156,955 - 566,158

61 - 1,272,650 - 611,451
62 - 1,399,915 - 660,367

63 - 1,539,907 - 713,196
64 - 1,693,897 - 770,252

65 - 1,863,287 - 831,872

The difference between 8% and 10% is $1,031,415. That is many years of working hard VS chilling hard!
 Creating your financial freedom 26

This adds insult to injury when you realise you put up 100% of the funds, you took
100% of the risk, and you ended up with less than 50% of the return. Gross.
Note: It costs between 0.5-1% to invest in an index fund/ETF (👍 ), versus up to 6%
to invest in some mutual funds (after they take their fees and profit shares).

6. Be patient when things get rough

‘The stock market is a device for transferring money from the impatient to the patient’
- Warren Buffet
If you followed the rules above you wouldn’t wait for the ideal time to invest or
get spooked every time there’s a dip or a bear, but this does take an unnatural
amount of cool in the face of crisis. The last beast you have to tame with the stock
market is patience because if you exit the market even for short periods, this can cost
you massively. Here’s another example from Tony Robbin’s book Unshakeable.
From 1996 to 2015, the S&P 500 returned an average of 8.2% a year. If you
missed the top 10 trading days in those 20 years, your returns would have been 4.5%
a year (literally cut in half for missing 10 days in 20 years 😱 ). It gets worse still, if you
missed the top 20 days, your returns would be a measly 2.1% 🤕 , and if you missed
the top 30 days, your return would be down to 0% 🤒 . The chart below shows what
can happen to your returns when you miss a few of the market’s best trading days.
Meanwhile, a study at JPMorgan found that 60% of the best days over the last 20
years happened within two weeks of the worst days. The lesson, don’t jump in and out
of the market even for short periods as this can impact your profits massively and will
increase your fees.

9%
S&P500 annualised return (1996-2015)

5%

0%

-5%
S&P Index Excluding top Excluding top Excluding top Excluding top
10 days 20 days 30 days 40 days

Source: Schwab Centre for Financial Research

 Creating your financial freedom 27

Where do stocks and ETFs fit in my portfolio?

Stock based ETFs are the foundation of nearly every portfolio (comprising around
50-60%) because they can achieve great returns with compounding and time.
Individual stocks tend to play a smaller role in peoples’ portfolios (usually around
5-20%) as they are more risky and require more due diligence, but can generate
incredible returns.

 Creating your financial freedom 28

9. Why bonds and fixed income

investments rule
Bonds and fixed income investments are very different to stocks. They play an
important role in a portfolio because they are generally less risky and pay a return on
a fixed schedule, however the amount of the payments can still vary.

Bonds
Bonds are interest paying loans that you give to governments, companies or other
entities for a fixed period of time (e.g. five years).
The reason why bonds are more secure than stocks, is because unless the bond
issuer goes bankrupt, they are legally obliged to pay out the predetermined return
(e.g. 3% per year), and then when the bond matures (e.g. after five years), they return
the principal (the amount you originally invested).

Fixed deposits
Fixed deposits are great because they are generally very secure, and are usually
simple to set up at your current high-street bank.
A fixed deposit is when you give a bank a lump sum (e.g. $10,000) for a fixed
amount of time (e.g. five years), and they pay you a fixed interest (profit) each year
(e.g. 4%). During the five years however, you do not have access to your funds unless
you choose to break the fixed deposit and lose the future interest. (Note: This is
usually good because it prevents you from pulling out from your fixed deposit

whenever you get excited and want to buy a new guitar 🤟 ).

Where do bonds and fixed income investments fit in to my portfolio?

As bonds and fixed income investments are far more secure than stocks and ETFs,
they play an important role in every investment portfolio. They usually constitute
around 20-30% of a portfolios total holdings (and more as you get older and closer to
your financial goals).
 Creating your financial freedom 29

10. What about real estate

Real estate is probably the most well known type of investment. It encompasses
owning land, the buildings on it, and potentially the natural resources on it (such as
water or oil). The three main types of real estate are residential, commercial (anything
from malls to free-standing restaurants to office buildings) and industrial (such as
factories, mines and farms).
Investing in real estate can generate profits by renting out the property, and the
appreciation of the property/land value if you sell it.

Not your home!

In this section I am talking about real estate as an investment, this does not include a
property that you currently live in (for example, if you live in a place with a mortgage
that you are currently paying off). As long as you are living in a property you own, it is
wise to consider it a liability, not an asset.
Don’t let this dissuade you from buying a home, this is a great idea because
paying rent is a terrible way to throw money away. My point is simply that as long as
you live in a property you own, at that time it is a liability because it is costing you
money (even though the property value may be going up).

What’s good?
The thing people like most about investing in property is that you have a physical
asset. It can be a roof over your head if you need it, but hopefully would be rented
out to give you a passive income stream.
Another great aspect about buying real estate is that if it is in a good location, the
asset value can increase greatly in time.
One of the biggest reasons for peoples’ success from investing in real estate, is
that it usually involves setting up a mortgage which forces them to be disciplined
about using their savings to pay off an asset.

How much can you expect to make?

There’s two main ways to make money from real estate you own:
 Creating your financial freedom 30

1. By renting it out. This usually generates around 3-7% yield (of the property
value per year) depending on where you are.
2. By the property value going up.

Unlike other investments, real estate is hugely affected by its surroundings and
immediate geographic area; hence the well-known saying ‘Location, location,
location.’ With the exception of a severe national recession or depression, residential
real estate values in particular are affected primarily by local factors, such as the area's
employment rate, economy, crime rates, transportation facilities, quality of schools
and other municipal services, and property taxes.
There are key differences in residential and commercial real estate investments to
think about when investing. Residential real estate is usually less expensive and
smaller than commercial real estate so it is more affordable for the everyday investor.
However, commercial real estate is often more valuable per square foot and its
leases are longer, which often ensures a more predictable income stream for the
owner. Also when investing in commercial real estate it is important to bear in mind
that it is more heavily regulated than residential real estate, and these regulations can
add a layer of unwanted complexity to commercial real estate investments.

What’s bad?
There are some other factors to bear in mind when considering real estate as an
investment tool, such as:
- It is an illiquid asset, meaning that if you needed to turn it into cash it can take
some time (unlike a stock which you can sell anytime at the current market price),
and if you need to sell it quickly you usually do so by taking a hit on the sale price.
- As real estate is expensive, it can put too much of your asset value in one thing
(this is bad for diversification and increases the overall risk in your portfolio).
- You may need to manage tenants and property related issues such as leaky pipes
(this can take time and effort).
- If at any time you don’t have a tenant, your earnings drop to zero but will still have
maintenance and other expenses.

Real Estate Investment Trusts (REITs)

 Creating your financial freedom 31

Besides buying a property outright, another way to invest in real estate through real
estate investment trusts. REITs own and manage a collection of properties in a single
portfolio that you can buy into at once. This is great because it spreads your risk
across several properties at once, and you don’t have to manage them or the tenants.
Another great thing about REITs is that they can be less expensive to buy into than
buying a property of your own, and they are also potentially easier to exit.

Where does real estate fit in to my portfolio?

Unless you are a property developer, or own a series of properties, traditionally real
estate investments belongs in the ‘satellite investments’ category which would
normally consist of 5-20% of your overall portfolio (more on this later).
 Creating your financial freedom 32

11. What about private equity

and crowd funding
Private equity is when you buy shares in private companies that you believe in (such
as Monzo* or Deliveroo). It is probably the funnest type of investing there is as you
get to support ideas and entrepreneurs you like with the potential to generate
astronomical returns. It is, however, by far the most risky investment type.
When you invest in a private company, you usually expect to sit on your shares for
many (e.g. 5-10) years in the hope that the company continues to grow enough to
start paying dividends, gets acquired at a higher value or does an IPO (becomes a
publicly traded company). In reality, over 90% of companies fail and you will not see a
penny returned. Additionally, when you invest in a private company, it is very difficult
(if not impossible) to sell your shares if you need the cash (unlike if you have shares in
public companies like Apple Inc.).

How do I invest in private equity?

Today, there are startups and other companies raising funds everywhere you look.
You can either invest in them by:
- Speaking to them directly if you see an idea you like and want to be part of it.
- Using a crowdfunding platform (such as Crowdcube**/Seedrs in the UK or
SeedInvest/Republic in the US). The advantage of doing it this way is that you can
invest much smaller amounts (e.g. $50), and the companies will have had a little
bit of due diligence carried out by the platforms’ management teams.
- Buying into a private equity fund. These are managed by venture capital firms
(VCs) who find, evaluate, invest in and support companies on your behalf. They
are famous for funding many of the great companies we know today (Google,
Apple, Uber, AirBnb, Deliveroo etc.), and have often played a role in their success.
The disadvantage of investing in private equity funds is that you would likely have
to invest a much larger amount to take part (e.g. $20,000).
 Creating your financial freedom 33

Where does private equity fit in to my portfolio?

Short answer is, it probably doesn’t. You shouldn’t make any private equity
investments unless this is an area that you are truly interested in, and even then, it is
not something you should put your nest egg into. If you do choose to do any private
equity investments, these should be considered as satellite investments and only
make up a tiny portion of your overall portfolio (e.g. 5-10%), because more often than
not these companies do not succeed and you won’t see a penny of your investment
returned.

* & ** Disclosure: I currently own shares in Monzo and Crowdcube.


 Creating your financial freedom 34

12. The fundamentals

Regardless of your goals and how you choose to invest, there are a few fundamental
rules that will help you on your way.

Save first, then spend

When you save money you are saving for at least two people, you today and you
tomorrow (as well as your spouse, kids, parents, etc.). The best way do this is to
prioritise savings, then spend later. For example, when you get your salary, keep a
portion aside to invest before paying your rent, bills or anything else. Then, if you
have extra at the end of a month, you can save/invest that too.
Note: Statistically, people who spend their money first and then save at the end of
the month end up working for people that save first then spend later.

Aim to save at least 10%

If your salary is 50k, you can live on 45k, If your salary is 10k, you can live on 9k, If your
salary is 5k, you can live on 4.5k. See the theme? Aim to start by saving 10% of your
salary each month to buy assets, and ramp this up when you can. The more you can
save, the quicker you can grow your assets (passive income) to set you free.

Do it yourself
There is no way to get someone to care for your money and future like you can, and
more importantly, there’s no reason to because:
- It is simple to set up and manage your savings and investments online.
- Other peoples’ fees can be devastating on your long term wealth.
- The financial professionals usually make money every time you buy/sell
something, but transacting less is usually in your best interest. #misalignment.

Diversify properly
Diversification is the best tool for spreading your risk and increasing your returns over
time. There are four important ways to diversify properly:
- Diversify across types of investment. Avoid putting all your money in real
estate, stocks, bonds, or any single investment class.
 Creating your financial freedom 35

- Diversify within asset classes. Don’t put all your money into your favourite stock
(e.g. Google) or a single property that could be washed away in a storm.
- Diversify across markets, countries and currencies across the world. We live in
a global economy so don’t make the mistake of only investing in one place.
- Diversify across time. You’re never going to know the right time to invest, but if
you keep adding to your investments systematically over months and years, you’ll
reduce your risk and increase your returns over time (this is known as dollar cost
averaging).

This may sound over the top when starting out, but is hugely important to keep in
mind as you grow your investments towards your goals.
Note: There is also a limit to diversifying! If you diversify too much you will spend
too much of your time researching and managing your portfolio as opposed to letting
it work for you. The superstar investor Ray Dalio’s rule of thumb is that your ideal
portfolio should hold around 15 decent uncorrelated investments across investment
types and sectors as this can reduce your overall risk by 80% and increase your
return-to-risk ratio by a factor of 5.

Rebalance yearly
You should aim to rebalance your portfolio once or twice a year at most. This helps
you keep moving towards your goal without letting your natural fears and instincts let
you make bad decisions during short term market movements.
A great and simple rule to help you stay on track is to maintain your ratio between
fixed income/bonds and your equity (index funds/ETFs) investments. For example: If
you have 60% in the stock market (ETFs and stocks) and 40% in fixed income or
bonds, a year from now these percentages will change. If the value of your stocks now
represent 70% of the value in your portfolio and bonds/fixed income constitutes 30%,
you may want to move 10% from your equity investments and into fixed income/
bonds so you’re back at a 60/40 portfolio split.
The reason this has proven to be good practice it that it forces you to buy stocks
when the market is down, and to sell them when the market is up. That sounds
obvious, but is actually counter to our natural human instinct.
 Creating your financial freedom 36

Know your tax

Depending on where you live, you may need to pay tax on your capital gains (the
profit you make from selling your property or investment). This can play a serious role
in how you invest so you don’t end up paying all your profits in tax.
If you are in the US learn about 401ks, or in the UK learn about ISAs and SIPPs.
These are great schemes designed to help you minimise the taxes on your
investments. Regardless of where you are, take a moment to speak to a qualified
person about your taxes to make sure you don’t pay more than you actually need to.

Be micro-disciplined
John Savage said it best: ‘It’s not the amount of interest, it’s how methodically and
systematically you can save money that will determine the success of your savings’.
You can become a boss at managing your personal finances and carry on living
your life just as you are. It just takes a little discipline over a long time to create your
financial freedom rather than huge changes that won’t be sustained.
 Creating your financial freedom 37

Section 3 - Getting started 

Creating your financial freedom 38
 Creating your financial freedom 39

13. Ten steps to set you free

Step 1: Figure out your goals
It is important to start by figuring out your financial goals as they will guide your
financial plan. Everyone’s goals will be different depending on what they want to do,
where they live, whether they have kids and so on. Here’s a few example financial
goals that can help you think about your own:
- Own a home in London.
- Have a $50k emergency fund hidden away in a high interest savings account.
- Have a life insurance policy that covers the family’s needs for five years.
- Be able to send the kids to a decent college when they’re 18.
- Have $120k/year passive income at age 56 to chill and travel.

Step 2: Sort out your life insurance

Set up a life insurance policy if you need one, or if you do have one (through work or
otherwise), take a look at it to make sure you’re getting the cover you need.

Step 3: Write a will

Take an hour to write a will (there’s a template on page 50 to help you write yours).

Step 4: Look at how much you have saved already

Take a look at how much you have saved so far, this will give you your starting point
(p.s. it’s ok if it’s zero).

Step 5: Figure out how much you can save each month

Figure out the maximum you can save each month without impacting your lifestyle
(aim for at least 10% of your salary). Note:
- Take a quick look at your expenses (e.g. your mobile phone plan, your mortgage,
interest on any debt etc.) because updating these may give you additional
savings to invest. I recently cancelled unused emails, websites, and services I
don’t need saving me around $40 per month.
- The more you can save each month, the quicker you will be able to reach your
financial goals.
 Creating your financial freedom 40

Step 6: Create your plan

By looking at how much you have saved so far, how much you can save each month,
and what your financial goals are, you can create a plan of how much you need to
save to achieve your goals.
For example, if you are 25 years old, have $20,000 in savings, and want to retire
when you are 56 with $120k/year passive income, you need to save $500/month
(increasing by 5% each year), and invest it across a series of assets that will generate
an average of 8% return over 30 years (see the table on the right).

Note: As your income grows each year you should try increase your savings by more
than 5%, and as you get closer to your goals, you should consider rebalancing your
portfolio to have more fixed income investments and less equity (ETFs and stocks) to
reduce your risk.
 Creating your financial freedom 41

Starting with $20,000, saving $500/month (increasing 5%/year) for 30 years, growing at 8%

Age Savings/year ($) Total asset value by end of year ($)

25 26,000 28,080

26 6,300 37,130

27 6,615 47,245

28 6,946 58,526

29 7,293 71,085

30 7,658 85,042

31 8,041 100,529

32 8,443 117,689

33 8,865 136,678

34 9,308 157,665

35 9,773 180,834

36 10,262 206,383

37 10,775 234,531

38 11,314 265,512

39 11,880 299,583

40 12,474 337,022

41 13,097 378,128

42 13,752 423,231

43 14,440 472,684

44 15,162 526,874

45 15,920 586,217

46 16,716 651,167

47 17,552 722,216

48 18,429 799,897

49 19,351 884,787

50 20,318 977,514

51 21,334 1,078,756

52 22,401 1,189,249

53 23,521 1,309,792

54 24,697 1,441,247

55 25,932 1,584,553

From age 56, you could live off over $120,000 passive income each year
 Creating your financial freedom 42

Step 7: Design a portfolio to achieve your goals

Now that you know how much you have, how much you can save to invest each
month and your financial goals, you can decide how you want to invest your savings
across the investment types. Portfolios are generally split into these main groups:
- Core/Equity (50-60%) - E.g. A few index funds/ETFs that can yield excellent
returns with compounding and time.
- Bonds/fixed income (20-30%) - E.g. In bonds and/or fixed deposits. These are
generally very secure and grow at a slow and steady pace.
- Satellite (5-20%) - E.g. In a few stocks, private equity investments or income
generating properties. These are all high risk but can generate great returns.
- A liquid cushion (5-15%) - This is a cash reserve that you keep aside so that you
can jump on an opportunity when it comes up (for example when a public
company announces a great new product). The other reason for having this is to
prevent you selling your investments if you suddenly need some cash (without
touching your emergency fund).
The table on the right shows is an example portfolio (don’t copy it exactly as it
likely won’t be ideal for your financial goals). You can use it as a template to design
your portfolio. Bear in mind how you choose to invest your savings will depend on
your goals and appetite for risk, but this is a decent place to start.

Step 8: Build your emergency fund

Open a savings account or fixed deposit at your bank and start building an
emergency fund that can cover your living expenses for 3-6 months (note: if you live
in a place where the costs are high and the rights are minimal you may want to
increase this to 6-12 months).

Step 9: Start investing

After your emergency fund is complete, start systematically investing your savings
into a portfolio of assets as per your plan.

Step 10: Rebalance once (or twice) a year

I recommend that you rebalance your portfolio once or twice (max) a year, and when
you do, take a moment to revisit the ten steps as you may have new financial goals
and have different income/expenses to consider. 

 Creating your financial freedom 43

Example Portfolio - 15 good decisions across ETFs, individual stocks, bonds

% of
Symbol Name Note
portfolio

Bonds/fixed income

7600 bonds in one. This ETF offers broad exposure to investment

grade U.S. bonds. It is a building block for investors constructing
AGG iShares Core U.S. Aggregate Bond ETF 15%
a balanced long-term portfolio as well as a potentially attractive
safe haven for investors pulling money out of equity markets.

65 bonds in one. This popular ETF offers exposure to entire

BND Vanguard Total Bond Market ETF 15%
investment grade bond market in a single ticker.

Core/Equity - ETFs/index funds

SPY S&P 500 ETF 20% 500 large cap stocks in US, updated quarterly.

SLY SPDR S&P 600 20% 600 small cap stocks in US, updated quarterly.

VFWAX FTSE All-World ex-U.S. Index 5% 2500+ global stocks outside of US.

INDA iShares MSCI India ETF 2% 80 top Indian stocks.

FXI iShares China Large-Cap ETF 2% 25 top Chinese stocks.

88 robotics & automation companies worldwide. I like this

Global Robotics & Automation Index
ROBO 2% because automation is being used more by businesses globally
ETF
everyday.

Satellite - Stocks

Pegged to Warren Buffet's growth, this is a bit like an ETF

BRK B Berkshire Hathway (B) 2%
because it is a company of companies.

E-commerce powerhouse with room to grow between their web

AMZN Amazon 2%
services, tv, music, prime, fresh etc.

MSFT Microsoft 2% Powers most business computer systems in the world.

MA MasterCard 2% Top payment systems company.

A company in Holland that processes payments for Netflix, Uber,

ADYEN Adyen 2%
Facebook, Spotify and more.

Top US aerospace company, and there’s more people flying

BA Boeing 2%
every year.

Top European aerospace company, and there’s more people

AIR Airbus 2%
flying every year.

Liquid Cushion - Cash

Cash in a savings account (separate Liquid cushion so that you can jump on an opportunity when it
Cash 5%
from your emergency fund) comes up.

Note: This is an example portfolio, not one to follow exactly! It follows Ray Dalio’s excellent advice about having around 15
good investments at a time (more takes too much time to manage, less will not have enough diversification to protect you).
 Creating your financial freedom 44

14. TechNikhil support

Hopefully having got this far, you understand the tools you can use to build your
financial freedom and feel a little more badass about the future.
For many reasons, we treat talking about finance and investments like dirty
underwear, but that’s silly because it is a hugely important part of our lives. Between
the internet and our extended group of pals, there’s lots of great people to speak to
and learn from, and I think if we share these learnings we’ll all be better off.

The lesson to remember

For every dollar you get in your hand, think about how much you are going to spend
on assets instead of liabilities. Once you make this small change in your spending,
your assets will start compounding in time, and the day your assets generate enough
income for you to not need to work anymore, you will be financially free.
The most important thing is that you start saving and investing today (regardless
of whether you invest in stocks, bonds, real estate or anywhere else ). The one thing
you just can’t do is nothing.

Buy me pizza
Some years ago I wanted to learn about payment systems (completely separate to
finance and investment), so I called my buddy Gaurav (before he was my buddy).
As we sat in his office he said: ‘Ask me anything, there’s no such thing as a stupid
question’. This was the best thing anyone could ever say to someone who is trying to
learn something new. I immediately felt free to ask the most basic of questions to get
a fundamental understanding of a new topic (thank you G).
I want to extend that same sentiment to you, if you have any questions about
anything please ask and hopefully I can help.

With love and high 5s,

Niki ❤
Creating your financial freedom 45

Appendix
Notes & FAQs
A will template
Stock scorecard
 Creating your financial freedom 46

15. Notes and FAQs

Are there completely safe investments?
While some investments are very secure, like a long term US treasury bond, it is
important to remember there is no 100% safe investment in any investment class.

Where do I buy a stocks, ETFs and bonds?

I recommend using online platforms to buy your stocks, ETFs and bonds rather than
traditional stock brokers because they can be cheaper and you can do it in your
pyjamas. There are many platforms out there, however they each have restrictions on
who can use them. Here are some top platforms I recommend checking out:
- Interactive Brokers (interactivebrokers.com) has access to the most markets’
stocks, ETFs, bonds, commodities etc., don’t take sneaky percentages from
transactions, charge $10/month, and is available for people to use from almost
every country.
- Freetrade (freetrade.io) if you are in the UK. They have the best fees and the
simplest interface, however they don’t have access to all the markets just yet (but
will do in the coming months/years).*
- Robin Hood (robinhood.com) if you are in the US is great for stocks and ETFs.
- Wealthfront (wealthfront.com) if you are in the US is great for stocks, ETFs and
bonds, and have some great tools to help you manage your portfolio.
- WiseAlpha (wisealpha.com) is great for investing in UK/EU corporate bonds
regardless of where you are based, and they allow you to invest from as little as
£10.**
* & ** Disclosure: I currently own shares in Freetrade and WiseAlpha.

Where’s a good place to find interesting ETFs to invest in?

A great place to learn about ETFs is ETF Database (ETFdb.com). They have useful
information about almost every ETF available.

Where’s a good place to find interesting stocks to invest in?

Here’s a few popular sites to hear about stocks: Motley Fool (fool.com), Seeking Alpha
(seekingalpha.com), The Street (thestreet.com) and Market Watch (marketwatch.com).
 Creating your financial freedom 47

Where’s a good place to learn about how to analyse stocks?

If you want to delve a little deeper with understanding stocks, The Motley Fool
Investment Guide is a great book that breaks down how they analyse companies they
invest in.

How do you calculate the the total value of a company (market cap)?
The value of a company is the total number of shares multiplied by the price per
share. Today Apple is valued at $897.14 billion ($174.93 per share). This is driven by
many factors including the company’s financial performance as well as peoples’
perceptions about the company’s future.

What are dividends?

Dividends are the distributions of profits to the shareholders of a company (this
usually happens quarterly). Note: Not all companies pay dividends.

What is the PE ratio (price to earnings ratio)

The price to earnings ratio is the measure of the share price relative to the annual net
income of the company per share. A high PE ratio generally indicates increased
demand because people think the company is going to grow in the future.
The average market PE ratio is 20-25 (Apple’s is currently 18.54), and companies
that are currently losing money do not have a PE ratio (e.g. Tesla in 2017), however
this doesn’t necessarily mean that they are a good/bad stock to buy.

What is an IPO (initial public offering)

Sometimes when a company wants to raise money for expansion, it ‘goes public’ by
making an initial public offering (IPO) of common stock. Typically the amount of the
company that is sold is only a fraction of its total ownership, and the price set for the
stock determines the value of the entire company. 

What is shorting a stock?

When you short a stock, you profit when the stock price falls (not rises).
 Creating your financial freedom 48

To short a stock, you would need to borrow shares from someone, sell them
instantly at the current market price, and then in the following days/weeks you wait
around hoping the stock price to fall. When you’re ready to close the position (at a
profit or a loss), you would re-buy the shares you sold to return them to the lender
(this sounds complicated but it simple to do with online platforms).
For example, if you originally borrowed 100 shares and then sold them for $1000
total, and then two weeks later re-bought the shares for $800 total (because the
company value fell 20%), you would then have made a profit of $200 minus the
borrowing fee.
If, however, the stock price goes up (as they so often do), then things get ugly.
Imagine the company value rose 20%, you would then have to buy the shares at a
higher price than you sold them, and pay the borrowing fee on top.
As the entire global economy is always growing because there are more people,
shorting means going against the long term tide. Unless you want to become a
serious full time trader and watch the screens 24/7, I’d recommend staying well clear
of shorting stocks.

Should I use leverage?

Leverage is when you borrow money to make an investment of some kind. For
example you may borrow $100 from a bank for a year at 2% (you will have to give
them $102 in a year), and invest it in something that will give you 4% return (earning
you $2 profit).
This sounds great, however if that investment drops you can find yourself in
serious debt, that is why leverage should only be used in certain low risk scenarios (or
never), and definitely not with stocks, indices or private equity investments.

What about tax?

Depending on where you live, you may need to pay tax on your capital gains (the
profit you make from selling your property or investment). This can play a serious role
in how you invest to not diminish your returns, so do speak to a qualified person
about it to make sure you are not paying more than you actually need to.
How come people always say the markets are at an all time high, does this make
it a bad time to invest my savings?
 Creating your financial freedom 49

Absolutely not (provided you have a long term outlook). Over time the global
population is constantly growing, and people/businesses are always becoming more
efficient and productive. This makes businesses more profitable, which in turn drives
up stock prices.
Tony Robbins put it best: ‘Despite all the wars, crashes and crises, over the long
term, the stock market news will be good. When you truly understand this, it will help
you to be patient, unshakeable, and ultimately rich.’

Can I practice investing before I jump in with all my savings?

With many online trading platforms (or at fool.com) you can create a fake portfolio
(without investing any real money) to see how it grows with real world figures. This is a
great way to practice investing in stocks before you put your real money to work.

Wouldn’t this be easier if I had billions?

It is actually easier to make higher % returns with $50,000 than it is with $5 billion.
With $50,000 you have the flexibility to invest in smaller underpriced listed stocks that
have more room to grow. If a fund with $5b invested a large amount in a small
underpriced company they would shoot the price up and lower their return, and just
as we can’t have 200 close relationships, we can’t manage 200 investments properly
at any one time.

Some book recommendations

- Unshakeable by Tony Robbins. This will give you a broad understanding of how
to manage and grow your wealth.
- Rich Dad Poor Dad by Robert Kawasaki. This is an awesome quick read about the
mindset of building assets.
- The Motley Fool Investment Guide by David and Tom Gardner. This is great to
learn about how to analyse companies to buy stocks.

Fun fact
When your money works for you it is literally like having your cake and eating it too.

 Creating your financial freedom 50

16. Will template

Will of [YOUR NAME] as of [DATE]
[NATIONALITY] Passport Number: [X123456789]

Executor/trustee
‘I hereby appoint [NAME], [RELATION TO ME], to be the executor and trustee to
oversee and manage distribution of my assets.’

Funeral wishes
State your funeral wishes here, and what you would like to be done with your body
(e.g. cremated, buried, donated to science, whatever my partner says etc.) so that
your loved ones don’t have to make this decision and can’t disagree about what you
may have wanted.

Guardian for my children (maximumly important)

State who should be the guardian for your children in the event that both parents
pass away.

Life insurance
Put the details of your life insurance policy/policies here.
Which company, policy type, policy number, amount covered etc.

Important documents
Note to your executor where can find all your important documents (e.g. title deeds,
share certificates, birth certificate etc.), and access to your main accounts & passwords
such as your:
- Phone passcode: 1234
- Computer passcode: joe123
- Apple ID: [email protected]. Password: joe123
- Gmail: [email protected]. Password: joe123

 Creating your financial freedom 51

My stuff
Asset For who Note

My House e.g. My wife State the address and any other info

Cash in my bank accounts

Shares & bonds

Future royalties from my

music/books etc.

Books

Computer

Clothes

Add new rows for each item

Note: In your table, add rows for any belonging/asset you want to go to a particular
person or institution. The clearer this is the easier it is to sort out for your trustee.

My internet accounts

Account What to do with it

Gmail

Dropbox e.g. Keep a copy of my ‘Important Docs’ folder, and feel free to delete the rest

iCloud

Photos e.g. Please keep or share any photos you want, then feel free to delete the rest

Instagram e.g. Can delete my account

Facebook

Whatsapp e.g. Can delete my account

YouTube Channel e.g. Can leave this as it is

Twitter

Notes (iCloud) e.g. Keep a copy of my ‘Passwords’ note, and feel free to delete the rest

Add rows for each account

Note: I added this section because I think it is hugely relevant today and not in most
will templates.

 Creating your financial freedom 52

Living will (the important medical stuff)

A living will (AKA advance directive), is not actually part of your will, and must be
completed separately. It is a directive for physicians and other healthcare providers
specifying your wishes regarding specific treatments or procedures to be used in
case you are incapacitated (the living will only becomes effective if you are unable to
express your wishes).
The reason for having a living will is to make your intentions known, so that your
family and your doctors will be able to lawfully act in accordance with your wishes.
The other (really important) reason to do this is so that in the event that you are
incapacitated, these impossible decisions don’t fall on your loved ones.
Note: Once completed, discuss your wishes in your living will with your family
members, and give them a signed copy to keep somewhere.

This is what you need to state:

If at any time:
(a) I am close to death and life support would only postpone the moment of my
death; or
(b) I am unconscious and it is very unlikely that I will ever become conscious again; or
(c) I have a progressive illness that will be fatal and the illness is in an advanced stage,
and I am consistently and permanently unable to communicate, swallow food and
water safely, care for myself and recognise my family and other people, and it is very
unlikely that my condition will substantially improve; or
(d) life support would not help my medical condition and would make me suffer
permanent and severe pain;
State clearly which option is the one you want.
- Choice NOT to prolong life - I do not want my life to be prolonged if (1) I have
an incurable and irreversible condition that will result in my death within a
relatively short time, (2) I become unconscious and, to a reasonable degree of
medical certainty, I will not regain consciousness, or (3) the likely risks and
burdens of treatment would outweigh the expected benefits.
- Choice to prolong life - I want my life to be prolonged as long as possible within
the limits of generally accepted health care standards.

Note: Check out doyourownwill.com for more information about wills.


 Creating your financial freedom 53

17. Stock scorecard

Company: Date:

Screening criteria Points (0-1) Notes, remarks, comments, questions, clarifications

Sector Example company: MasterCard Inc. (MA)

Is it sector big enough? 1 Yes, the payment sector is enormous.

Yes, more vendors around the world are adding digital

Is it sector growing? 1
payments.

Financial
The MasterCard brand is very strong. Currently the PE ratio
is around 40, meaning that people are expecting the
Is the PE ratio reasonable considering the brand power? 0.5
company’s earnings to grow (if it doesn’t the stock price will
go down).

Is there a lot of debt? And if so, does the debt reflect

1 No major debt issues.
aggressive expansion?
Is the company showing solid profits? 1 Yes.
Is the revenue showing solid growth? 1 Yes (±20% growth in 2018).

Yes, they make a small fee every time someone uses a

Is there a clear single line of business? 1
MasterCard to pay for something.
Has the company performed well to date? 1 Yes, very.

Not necessarily, they are already an established business

Will I have to hold this for a long time to see results? 1
with strong profits and are growing.

Competition
Is the brand strong? 1 Yes.

Is their product/service best-in-class? And is the USP

1 Yes.
clear?

People
Is the management strong? 1 Yes.

Is it founder led? Are the founders staying on to run the

Not applicable, MasterCard was owned as a cooperative by
company after the IPO. Note: this isn’t always important 0.5
the banks that issue the cards in the US prior to their IPO.
to the companies success, but is usually a good sign
Do people like working there? 1 Yes.

Product/service

Is there demand for their product/service? 1 Yes.

Is it scalable globally? 1 Yes.
Do they get good reviews? 1 Yes.

Are they investing in innovation to stay ahead of Yes. MasterCard is famous for investing and partnering with
1
competition? lots of new fintech companies to stay ahead of the curve.

Macro factors
It is a disruptable sector, but will take a long time for an
Is it in a highly volatile/disruptable sector? 1 incumbent to onboard banks, vendors and customers into a
new payment system.

Is there currency risk of where the company is set up, or Not really, the HQ is in the US and have a global presence
1
where it operates? (outside of China).
Total points (out of 20)

1. Is it a yes? 19/20 - I think so!

2. If so, how long should you hold it (aim for at least

Probably 5 years before international grow slows down.
3-5 years)

3. What is the target price to sell? 750% above today’s price.

Note: This is an example scorecard with my notes regarding MasterCard Inc. It is not a stock recommendation.
 Thoughts?
The goal of this doc is to give someone who has no experience or
interest in finance and investing the tools and motivation to start
building towards their financial freedom. Please let me know if you have
any thoughts on making it simpler, more actionable or better in any way.

Sharing this doc

If this doc has been useful for you, feel free to share it with your friends
and family and hopefully it can be useful for them too.

Thank yous
I am so grateful to have many excellent friends and minds that have
helped me learn about personal finance and put this doc together. Big
thank yous to my fam, the Brapp fam, the Nodjoumi’s, the Sardanas, the
Choitrams, the Anands, Gaurav, Imran, Hemant, Ryu and Rav for sharing
your experiences and lessons. Much love!
 The realest reason to take
care of your personal finances is
to gain the freedom to do more of
what you want, whenever you want,
with whomever you want.

This doc can show you how to get

started in 25 minutes.

2019 © Niki Mukhi

[email protected]