TRADING PSYCHOLOGY AND THE ROLE OF SUBCONSCIOUS MIND

               How many times have we heard this word ‘psychology’ getting associated with trading profession? Innumerable times. To the uninitiated, it seems to be an over-rated (probably abused) word. I will make an attempt to give a different perspective about psychology’s part in trading as there are lot of literature that talks about cliched topics like ‘handling fear/greed and discipline issues’. We will not focus on those items in this blogpost.

To all the readers reading this post, have you ever faced any of the following issues?

1. Not taking a trade in your plan because you did not think it would work (after a couple of losses in a row)?
2. Taking a trade immediately after a loss that is not in your plan? And then after another loss, another trade not in your plan?
3. Chasing a price move because you are afraid it is going to run without you only to see it reverse after you jump in?
4. Averaging into a losing position because you just believe you are right and price will come back to where you bought?
5. Moving your stop further away from your original stop to give the trade more room or moving to break-even too early?
6. Continuous counter trend trades because you feel price has moved too far and you expect a reversal?
7. Refusal to close out a losing trade and holding it until later in the day or the next day taking a bigger loss than your original stop?

If you haven’t had any of these issues, please stop reading this blogpost further – you are either a master/legendary trader or have never traded before!! Chances are if we have had several of these happen to us, we either have no trading plan or should not be trading or our mindset around trading needs some work. We can call it psychology, call it mindset, call it mental discipline, or whatever suits our fancy.

The difference between unsuccessful traders, net profitable traders, and big money making traders is smaller than we think. It usually boils down to a small but perceptible edge, and while it can be related to poor money management, inadequate funds, or a bad methodology, it is usually an internal factor – a lack of discipline, emotional control, patience, and especially an improper attitude about losing and risk. Mind you, all these factors collectively called as ‘trading psychology’. So, it does not matter what we call it, but the intrinsic difficulties are real and they reflect in our trading P&L.

But to understand this phenomenon more deeply, we need to understand how mind works and how it relates to trading profession. Let’s start by dividing the mind into three divisions – inner subconscious mind, the subconscious mind and the conscious mind. We’re not going to talk about the inner subconscious mind (its primary function is to run our organs automatically) and the conscious mind (as our emotions are not relevant to them). Our focus will be on the ‘sub-conscious mind’. On a daily basis, we spend about 1-5% in the conscious mind. The rest is spent in the subconscious mind. The conscious mind perceives about 40 bits of information per second and on the contrary, the subconscious mind about 20 million bits of information/second. As they say -“Your brain (subconscious mind) sees even when you don’t”. And it’s never dormant. In fact, it has been awake and recording since the time we were a fetus.

Subconscious mind and the way it works

Subconscious mind can be divided into 3 subsections –

1. The Memory Mind – It has recorded all our memories, all events, and actions, everything that ever happened in our life since the time we were a fetus. Think of it as a video camera with five senses. All of our memories (from brain’s inception) are there and they are present constantly in every moment of your life.

2. The Emotional Mind – It’s the part that contains all of our emotions. Whenever we act, react on an emotional basis, the subconscious mind is involved. Have you ever thought of that situation when we reacted so silly, and we asked ourselves later, why in the whole world did we react like that, or why did we say that? It’s because of the emotive information that’s stored in our subconscious mind. Remember, that conscious mind has no role here – analytical part of the brain (part of conscious mind) cannot even start processing the information yet.

3. The Protective Mind – It has the role of protecting us against what it perceives as dangerous.

How subconscious mind is built

The basis for sub-conscious mind is created from day zero of our life till the age of about 7. That’s because, our brain waves, in that period are in a kind of hypnotic state. They move very slowly, and our whole subconscious is very much completely open. During these years, we lack the critical factor –the analytical and rational mind. And that means that every little thing that’s put there (not that it stays there) creates the fundamentals of our character, and our outcomes in life.

Subconscious mind and need for security

We understood how the mind is built but who’s putting in the information? Well, most of it comes from our parents or the people who raise us up. They are the ones in charge of our lives. One of our primate need is the ‘need for security‘. As I have a 8 months old baby now, I can give an example w.r.t to a baby. Normally, when a baby starts crying, it is taken up by the mother, it continues to cry. The mother checks the diaper, changes it. The baby keeps on crying. The last step – the one that always works – is to bring the baby to the bosom and feed it with breast milk (or stick a bottle with milk in its mouth if one is not breastfeeding). That’s when the baby finally stops crying.

What’s actually happening? The need for security is fulfilled. Being brought up to the bosom, the baby feels the warmth/care from the mother and the need for security is fulfilled. The only problem, is that it creates an association. The brain creates that association to food. In other words, when I get food, then I’m secure. We grow up, and every time, we had a stressed day or we feel depressed, we find ourselves putting something in your mouth. If we start to abuse food, we give birth to obesity. But, remember it has to do with the need of fulfilling ones security. Other quick examples are classical as well. Just think of how many parents out there telling their children, things like “you’re not worthy”, “you can’t do that”, “you’re bad”, “you’ll never be able to” and so on and so forth. So, it is prudent for a parent to watch what they are really telling their kids as that information is shaping up our kid’s future (more so, when they are in their young/blossoming years).

The real us, is our subconscious mind, because we’re spending there about 95% of our daily lives. The subconscious mind is this device ‘playing on’ the program we got and it is put there by our parents and by society.

Subconscious mind and trading

Ok great!! But, what does all this has to do with trading then? Have you guys ever heard of, fear of success? We do want to make money, we love money, we love trading but we’re still losing money. What we’re experiencing here is a conflict between the conscious mind and the subconscious mind. Remember, who the real you is! We’re actually the sum of all our programming. Funny thing right? So, being the sum of all our programs and given the fact that subconscious mind has the role of protecting us – Bingo, we got a great recipe!! It doesn’t allow us to make money. Because somewhere in the program, we’ve got a bad experience that has a negative charge and it keeps holding us back from getting hurt again.

See this innocuous looking statement – “In order to earn money, you have to work hard”. It has probably been put there, somewhere between the age of 0-7. Unfortunately, our parents became parents without getting any instruction manual on how to raise kids and we have the social construction as well in the picture. Nothing against the parents here but just wanted to put the facts across. Our parents inadvertently created ‘reward and punishment’ mechanism. They punish us when we’re not following their instruction and reward us when we do as we’re told. The kind of reward we get is, acceptance. When we get that acceptance, we then fulfill one of our basic needs – the need for security.

This creates a dogged association here –”In order to earn money, we have to work hard” which in turn equalizes to ‘safety’. We grow up, and start to work, and eventually we find out that, working hard equals earning money. And the safety need is fulfilled. Now, fast forward few years and you enter the arena of trading. We get into situations that can make us money easily, without having to work hard. BANG – That’s when we blow it!!

Dealing with the core issue

It is very difficult to buy this concept. I understand that. Personally, it took me a while before I finally had the courage to face it, and to understand that, it doesn’t matter how I take it or perceive it, by my conscious mind. The subconscious plays the lead here. And no matter how much I refused to accept that, it wasn’t that way. Any amount of self-talk and affirmations were not helping here and the subconscious mind just snickered back at me by decreasing my account. This was of course a very basic example but am sure you get the drift. There are various ways of overcoming this obstacle – NLP (Neuro-linguistics programming), Hypnosis and many more. I do not want to dwell in to those vast topics in this blogpost but I hope I have enabled the readers to think in that direction.

Bottom line, discounting psychology is the same as discounting your mental health. Psychology doesn’t mean seeing a shrink. It means being aware of your mind and its behaviors. Surely, we are not going to try and make an argument that mental health is unimportant. Skill is composed of more things than just physical prowess. There is also mental aptitude. And in order to exercise our mind, we must at least accept that psychology (and the subconscious mind) is not a “prank”.

Happy trading all !!

General Trading Guidelines

Golden Rules to Live Joyfully in Stock Market Game

As the word ‘ game ’ used here is not for a fun…  really stock market is a game, any game it should have some rules without that it cannot grow and sustain for longer, so the Rules for Stock Market game is a must.

You do not enter in to  the Stock Market because of compulsion or someone would have told to do so; you think twice… think thrice before entering into the Stock Market …once enter  then do not look back 

• Rules are Mine …I am responsible for my act..I must able to respond any situation

• Be calm.. Keep your mind peaceful while trading  and Be patient  … always  patience pays you the reward

• If, You are disturbed mentally,  do not engage the trade ..  it will fail

• Keep Positive thinking will hold you in the game.. Negative thinking neglect you from the game

• Close your eyes, ears & mouth too.. Business Channels, Dailies, rumors about stock market will make you polluted

• Have faith in your system and  trading levels, your stop loss and the target levels …   trade accordingly

• Greed and Fear are two sides of the coin in Stock Market failure – You must ignore it

• Always Trade with Stop loss (Try to restrict the risk/loss)

• Cut the loss when it little and  Ride the profit carefully and book your profit then and there

• Emotional trade makes you sick and disappear you from the game and Ego is the direct enemy for stock market game

• Do not borrow money to trade/ invest in share market

• Don’t Trade on Free Tips/Rumors and don't ask any free tips or advice to any one

•  Protect the capital is foremost then making profit.. it is secondary

How to Identify A Trend Reversal In A Stock

This is a list of things to look for as possible signs before a stock makes a top and rolls over. Alone these are just possibilities but the probabilities increase as more of the signs are in place.

• When the RSI gets near 70 on the daily chart for a stock and it becomes overbought resistance, the price momentum to the upside slows, and the the price settles into a trading range.
• A Gravestone Doji is a bearish candlestick that indicates a downside reversal could be about to take place. This candle shows a lack of buyers holding positions at higher prices and profit taking setting in. Price ends up near where it started after higher prices are rejected. 

• If  the market opens higher but fails to go over the opening price level for the entire trading day, this is a sign that buyers are rejecting higher prices. This is called a hammer or hanging man candlestick. 

• The market opens below the previous days trading range and never gets over the previous days low, that is an early sign of a new trading range.
• The market starts to open higher but closes lower, that is a sign of distribution.
• The average daily trading range expands and volatility starts to grow.
• A huge volume day that gaps way up and then sells off into negative territory on high volume.
• A stock is far extended from all moving averages. The odds increase for a reversion to at least the 5 day or 10 day moving average. 
• A major “good news” event happens but with little or no price movement higher, and the market is out of catalysts to drive it higher.
• When the majority of people think the stock will not pullback and they are against you short selling the stock.

These are just things to look for that could result in a short term top that lasts weeks or months and maybe nothing more than a pullback or a new range being traded. There are times to buy a breakout and times to wait for a pullback. There is a fine line between chasing the market higher and buying momentum. 

10 #TradingMistakes............................!!

11 Lessons for #Traders

3 Things That Stop You From Being A Winner: •Fears •Doubts •Indecision They come from your past experiences and from the negativity of others.

Largest companies by market cap 1. Microsoft $1.0tn 2. Apple $939bn 3. Amazon $890bn 4. Google $813bn 5. Facebook $527bn 6. Berkshire Hathaway $497bn 7. Alibaba $459bn 8. Tencent $416bn 9. Visa $393bn 10. JPMorgan $351bn

George Soros ‘ 10 Trading Principles

George Soros gained international notoriety when, in September of 1992, he risked $10 billion on a single currency speculation when he shorted the British pound. He turned out to be right, and in a single day the trade generated a profit of $1 billion – ultimately, it was reported that his profit on the transaction almost reached $2 billion. As a result, he is famously known as the “the man who broke the Bank of England.”

Soros went off on his own in 1973, founding the hedge fund company of Soros Fund Management, which eventually evolved into the well-known and respected Quantum Fund. For almost two decades, he ran this aggressive and successful hedge fund, reportedly racking up returns in excess of 30% per year and, on two occasions, posting annual returns of more than 100%.

“I’m only rich because I know when I’m wrong…I basically have survived by recognizing my mistakes.”

Understanding that he was not always right enabled him to cut losses short and position size right.

“My approach works not by making valid predictions but by allowing me to correct false ones.”

Soros’ is flexible in his trades, he changes his mind and reverses positions when needed. He does not marry his trades.

“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”

George Soros knows that the key to profitability for him is more about big wins and small losses than his winning percentage. 

“The markets are always on the side of exuberance or fear. It’s fear and greed. Right now greed has the better of it, which is rather nice (for investors) as long as it doesn’t get out of hand,”

Market trends are caused more by the extremes of  investors emotions than fundamental reasons.

“Once we realize that imperfect understanding is the human condition there is no shame in being wrong, only in failing to correct our mistakes.”

The problem is not in a losing trade but in failing to cut the loss or add to a losing position.

“The worse a situation becomes, the less it takes to turn it around, and the bigger the upside.”

The more extended a trend gets from its average the greater the odds of a snap back and reversion to that mean.

“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”

Systematic and profitable trading based on math and probabilities is usually not exciting and fun. Good trading is boring in almost all instances.

“Markets are constantly in a state of uncertainty and flux, and money is made by discounting the obvious and betting on the unexpected.”

The obvious trade is usually not the profitable one. Profitable trades tend to be the one that is not expected and counter intuitive.

“We try to catch new trends early and in later stages we try to catch trend reversals. Therefore, we tend to stabilize rather than destabilize the market. We are not doing this as a public service. It is our style of making money.”

George Soros trades with the trend until the end when it starts to bend.

“The financial markets generally are unpredictable. So that one has to have different scenarios… The idea that you can actually predict what’s going to happen contradicts my way of looking at the market.”

George Soros likely uses some form of reactive analysis to tell him in which direction to take a trade based on how a scenario or price action unfolds. He may have multiple possibilities on what could happen and trades in the direction of the one that plays out.

Shekhar's Tech 10,000 Hours of Trading: What does It Take to Hone your Trading Skills

        The question of what it takes to become a master in any field (sport or business) has been in the epicenter of research for many years. It has occupied psychologists and philosophers alike for decades. Is it the innate talent what matters or a skill can be mastered with practice. What does it take for professional athletes to become first among others with inborn talents…

Almost fifty years ago Herbert Simon and William Chase summed up a groundbreaking conclusion that is still echoing with importance:

There are no instant experts in chess—certainly no instant masters or grandmasters. There appears not to be on record any case (including Bobby Fischer) where a person reached grandmaster level with less than about a decade’s intense preoccupation with the game. We would estimate, very roughly, that a master has spent perhaps 10,000 to 50,000 hours staring at chess positions…

After Simon and Chase there have been numerous psychologists and authors testing this hypothesis and proving and disproving the rule of “The 10, 000 Hours“. For example, John Hayes researched the works of over 70 of the most famous classical composers and found that almost none of them did create a masterpiece before they have been composing for a minimum of 10, 000 hours. There were just a few exceptions and they were Shostakovich and Paganini, who took them only 9, 000 hours.

In trading, it seems to be the same or at least really similar. I don’t know a lot of other traders, whom after an honest conversation have not shared with me that have spent years of losing money consistently before becoming profitable. In my trading career I remember just one trader who told me that was successful straight from the very beginning. He was sharing with me that it only took him 3 months on a simulator and with the help of his trading mentor, he became successful. He is an exception because in his case- he managed to save a lot of costly mistakes by following his mentor’s trading approach. But most traders are doing it alone and that is why it takes them such a long time. Trading, as any other highly competitive sport discipline, takes a lot of hours in front of the screens and practice.

In a book that I recently read (Focus: The Hidden Driver of Excellence), Daniel Goleman reveals the complex truth behind the popular 10,000 rule:

The “10,000-hour rule” — that this level of practice holds the secret to great success in any field — has become sacrosanct gospel, echoed on websites and recited as litany in high-performance workshops. The problem: it’s only half true. If you are a duffer at golf, say, and make the same mistakes every time you try a certain swing or putt, 10,000 hours of practicing that error will not improve your game. You’ll still be a duffer, albeit an older one.

No less an expert than Anders Ericsson, the Florida State University psychologist whose research on expertise spawned the 10,000-hour rule of thumb, said, “You don’t get benefits from mechanical repetition, but by adjusting your execution over and over to get closer to your goal.”

“You have to tweak the system by pushing,” he adds, “allowing for more errors at first as you increase your limits.

The words of Ericsson cannot be more true regarding the trading field. Professional traders know that going out of the comfort zone is what makes a difference in the long-run. Imagine you are doing the same trading mistake over and over again. The only way to get rid of your bad habits is to get out of your “comfort zone” and do something differently. Even if you are not sure where your mistake is, you should put all of your efforts into trying to find it. Only then and after long hours of practice, you would be able to become profitable. What matters in this case is not only the time invested in trading, but the quality of the time. It appears that even if you stay 20,000 hours in front of your screens, it won’t make a difference if you are doing the same mistakes repeatedly.

It seems obvious and simple, but modern education is build on the premise of sheer time investment. That is why it is important to emphasize on the fact that success is “deliberate practice”, concentrated training with the sole aim of personal improvement, many times accompanied or guided by a professional and skilled coach or mentor. That is how I became successful myself- I have been mentored by one of the biggest and most successful traders in London. Before I had the chance to meet this important person to me, I was making too many mistakes- 80% of which I was not even aware of! That is such a striking number when I look back at it now. According to Goleman, what I have found also applies to other disciplines:

Hours and hours of practice are necessary for great performance, but not sufficient. How experts in any domain pay attention while practicing makes a crucial difference. For instance, in his much-cited study of violinists — the one that showed the top tier had practiced more than 10,000 hours — Ericsson found the experts did so with full concentration on improving a particular aspect of their performance that a master teacher identified.

That is completely in-line with trading field. You need an objective feedback from somebody, who can monitor your performance. Human beings tend to be subjective when it comes to measuring their own performance. That is why, it is crucial that you have a profitable trader helping you along the 10, 000-hours of trading journey. It is imperative that you are coached by a real professional or at least somebody with years of trading behind his back. No wonder that every world-class sports champion has a coach. If you keep on trading without a feedback from a proven profitable trader, you won’t be able to get to the very top.

In the end, it seems that the trading strategy that you are using is not the most important element of becoming a master trader. It is the feedback that you receive from really experienced traders and the quality of the time invested in improving you own mistakes. Now stop thinking how good you are- start seeing how you can improve

Shekhar's Tech : YOUR ROBUST METHOD

YOUR ROBUST METHOD

1.    “Trade What’s Happening…Not What You Think Is Gonna Happen.” – Doug Gregory
2.    Go long strength; sell weakness short in your time frame.
3.    Find your edge over other traders.
4.    Your trading system must be built on quantifiable facts not opinions.
5.    Trade the chart not the news.
6.    A robust trading system must either be designed to have a large winning percentage of trades or big wins and small losses.
7.    Only take trades that have a skewed risk reward in your favor.
8.    The answer to the question, “What’s the trend?” is the question, “What’s your timeframe?” – Richard Weissman. Trade primarily in the direction that a market is trending in on your time frame until the end when it bends.
9.    Only take real entries that have an edge, avoid being caught up in the meaningless noise.
10.    Place your stop losses outside the range of noise so you are only stopped out when you are likely wrong.

Shekhar's Tech : RISK MANAGEMENT

1.    Never enter a trade before you know where you will exit if proven wrong.
2.    First find the right stop loss level that will show you that you’re wrong about a trade then set your positions size based on that price level.
3.    Focus like a laser on how much capital can be lost on any trade first before you enter not on how much profit you could make.
4.    Structure your trades through position sizing and stop losses so you never lose more than 1% of your trading capital on one losing trade.
5.    Never expose your trading account to more than 5% total risk at any one time.
6.    Understand the nature of volatility and adjust your position size for the increased risk with volatility spikes.
7.    Never, ever, ever, add to a losing trade. Eventually that will destroy your trading account when you eventually fight the wrong trend.
8.    All your trades should end in one of four ways: a small win, a big win, a small loss, or break even, but never a big loss. If you can get rid of big losses you have a great chance of eventually trading success.
9.    Be incredibly stubborn in your risk management rules don’t give up an inch. Defense wins championships in sports and profits in trading.
10.    Most of the time trailing stops are more profitable than profit targets. We need the big wins to pay for the losing trades. Trends tend to go farther than anyone anticipates.

Develop a winning trading system that fits your personality.

Shekhar's Tech : TRADER PSYCHOLOGY

1.    Be flexible and go with the flow of the markets price action, stubbornness, egos, and emotions are the worst indicators for entries and exits.
2.    Understand that the trader only chooses their entries, exits, position size, and risk and the market chooses whether they are profitable or not.
3.    You must have a trading plan before you start to trade, that has to be your anchor in decision making.
4.    You have to let go of wanting to always be right about your trade and exchange it for wanting to make money. The first step of making money is to cut a loser short the   moment it is confirmed that you are wrong.
5.    Never trade position sizes so big that your emotions take over from your trading plan.
6.    “If it feels good, don’t do it.” – Richard Weissman
7.    Trade your biggest position sizes during winning streaks and your smallest position sizes during losing streaks. Not too big and trade your smallest when in a losing streak.
8.    Do not worry about losing money that can be made back worry about losing your trading discipline.
9.    A losing trade costs you money but letting a big losing trade get too far out of hand can cause you to lose your nerve. Cut losses for the sake of your nerves as much as for the sake of capital preservation.
10.    A trader can only go on to success after they have faith in themselves as a trader, their trading system  as a winner, and know that they will stay disciplined in their trading journey.

Bring your risk of ruin down to almost zero.

8 steps to save and invest more money

Money saved is money earned, and cutting down your expenses could well be the single-most important step towards an organised financial life.

Lack of organisation can harm your finances much more than just being short of cash. Faltering on credit card payments could lead to late fees.

At the same time, not keeping track of your bank account could lead to a fall in your average minimum balance, resulting in levying of charges.

1. Review your budget at least once every month

Your bills may change on a monthly basis. Revising your budget and adjusting expenses, as your bills come is the first step towards a sound financial life.

In this way, you won't have to empty your bank to pay the expenses.

Also, factor in the maximum cost in your budget so that you have buffer money. For instance, electric bills shoot up during the summer months of May and June. Maybe you are paying Rs 5,000 during peak summer, which is otherwise Rs 3,500 in the other months.

Now, if you had based your budget on the winter months, you could be in for a major surprise, not knowing from where to extract the extra money. You may have to scrap that weekend trip, until a more opportune time.

Since these two months may signal a change in your expenses, you just have to redo your budget to see which other costs can be pruned. An easy way out is to put away some extra money from your earnings every month to fund the expenses for those months when there's an extra outflow of cash.

Worse still, what if you don't have a budget at all?

Well, stop reading right here and make one as early as possible.

Start by writing down your expenses as you believe they will unfold over the months. Start tweaking the budget at the end of the month by adjusting other expenditures, when one expense is bigger than expected.

2. Plan your future

All of us have our goals and aspirations. They may get expensive sometimes. You may need money for your children's higher education. Or maybe you want to go on that dream holiday to Europe.

Try to fund these goals little at a time. You may not be able to meet them simultaneously. But at least you can make a beginning.

Having an organised life plan goes a long way to ensure financial security.

3. A single place for all your bills

Most bills arrive in the electronic form these days. But some utility bills like municipality taxes, electricity, water etc. may still come in the printed format. Life insurance premium reminders may also come via regular post.

To store your bills, keep them where you usually write cheques or make online payments. You may archive the bills for future reference or shred them to pieces once they are paid.

Keeping scanned copied of the bills in your computer is a good idea. Make a folder and save them. Give the folder a logical name so that it can be easily retrieved.

4. Pay bills promptly

Pay your bills as soon as they come. If you have included the bills in your monthly budget, you should have money in your bank account to pay them off. At least pay them within the stipulated date.

Don't default because it usually attracts fines. Credit card bills are the worst. Besides the normal 3.49 per cent retail interest, which translates to more than 41 per cent in a year, late fines on credit cards could be as high as Rs 1,000 for each cycle and send your budget into a tailspin.

On the flipside, pay proper attention to the bills that come both physically and electronically. You won't want to pay the same bill twice.

Schedule an electronic payment system where the money will be automatically debited from your bank account. It's hassle free, environment friendly, and relieves you of delayed payment woes.

5. Know your debts

It's important to know how much you owe towards your student loan, car loan, and credit card. Keep the numbers in a single file, or maybe on your computer, from where they can be easily retrieved.

If you have no plan in place to emerge out of your debt, it's time to have one. Try paying off the smaller dues first and then move to the next smallest amount. But as already said, pay off your credit card first.

6. Verify your salary deposit

Most companies these days use NEFT to pay salaries where the money is deposited directly into the employee's bank account.

Schedule all your payments after your salary date.

Link your mobile phone to the bank account so that you get instant updates whenever your salary arrives. Subscribe to internet banking so that you can check your account whenever you like.

7. Have two bank accounts

Have one account for spending and one for the bills. This will help prevent accidental spending of bill money on a dinner at a restaurant that was allotted for house rent. But you have to remember transferring the money from one account to another.

One of the two accounts could be used to build an emergency fund. Transfer whatever money is left in your salary account after paying off all the expenses to the new account. Every month, start with the minimum balance. This will help you to have enough money for exigencies.

8. Look to invest

Money begets money. Try to invest your excess of income over expenditure wisely. You may invest in stocks, realty or in other appreciative assets. But perhaps the best investment is to opt for a systematic investment plan (SIP) in a mutual fund.

Invest over a long term horizon and you can pocket lump sum money during retirement. Mutual funds are linked to the stock market but unlike investing in shares, where you have to track the price movements daily, a fund manager will manage your investments.

You can start with as little as Rs 500 and increase according to your risk appetite.

It doesn't take much pain to organise your financial life. A frugal lifestyle, coupled with regular investments can help you retire with sound solvency. You simply need some discipline. 

Five benefits of buying insurance online :

The digital era has made buying goods and services online easy and more transparent, says Parag Mathur

Gone are the days when buying insurance meant discussing your insurance needs with an advisor and then opting for the plan suggested to you even if you did not understand it fully.

Growing financial awareness and access to digital technology has meant you can now buy insurance online even if you are not a financial whiz kid.

Every insurance company offers multiple plans online along with a 24/7 helpline that can help you choose the right plan without having to worry about any mis-selling or other drawbacks associated with traditional insurance purchase.

So the next time you are seeking to buy an insurance plan, know that opting for online insurance purchase is far more beneficial and cost effective.

Here are the five major advantages of choosing online insurance over traditional method:

1. Cost benefit with lower premium

No matter how financially aware an insurance seeker is, the final cost of insurance remains a high priority on their list. Buying insurance online can help you get lower premium, making your insurance plan easier on your pocket.

Since insurance premium is something that you pay out every year, the benefits of cheaper premium hold good for your entire premium paying tenure.

If you are wondering why insurance plans are cheaper online, it is due to the absence of any intermediaries or insurance agents, and absence of advertising costs.

Buying insurance online means you are buying directly from the insurer and there are no escalated costs in between. The insurance company hands over the cost benefit to the buyer, leading to cheaper insurance plans with a lower premium.

2. Easy comparison options to get the best deal

With so many insurance companies and each company having multiple plans on offer, how do you choose the best one for your need?

The answer lies in active comparison of all shortlisted plans.

With online insurance purchase, you can easily compare pros and cons of all your shortlisted plans and then choose the one plan that offers you maximum protection and associated benefits.

3. Convenience of purchase

Online purchase comes with an ease of purchase that is unparalleled. You can buy insurance round the clock from the comfort of your home or office, or even while on the move. Insurers have an online chat module that can help you pick the most effective insurance plan for your needs.

All details of the policy you choose are well documented, allowing you ample time to study in detail and then pick the right policy as per your insurance needs.

Moreover, you fill in all personal information yourself, which means that the chances of error are much lower. Even if there are errors, the online nature of the application makes it easier to revise and update information.

With the IRDA making e-Insurance Accounts (eIAs) mandatory for several types of insurance in the near future, the KYC process also becomes one-shot, making the purchase even more simple.

4. Simple documentation and paperwork

Online purchase of insurance comes with the advantage of easy documentation and simplified paperwork. Being part of a digital purchase, your policy is serviced automatically with the documentation being managed electronically.

This means no more running around for photocopies of your ID or address proof or other documents for your insurance purchase. You can simply upload your desired KYC documentations, which are updated in real time.

Even if you are not net-savvy, the insurance company will update you on your insurance purchase using their helpline numbers, making buying insurance an easy and enjoyable experience.

5. Say goodbye to mis-selling

Insurance has been notorious for many insurance buyers being sold wrong policies in the past mostly by intermediaries just to get a higher commission. When buying insurance online, you are dealing directly with the insurance company and there are no intermediaries involved.

The insurance company helpline can guide you in picking the right policy, ruling out any mis-selling woes. With online insurance purchase, you get exactly what you see online so that you get maximum protection without having to worry about claim denials arising from mis-selling.

The digital era has made buying goods and services online easy and more transparent. Buying insurance online comes with many essential advantages apart from easy of buying and a transparent purchase system in place.

All knows 14 money lessons to create wealth ; but how many of you DO IT ?

This is a post that should be read by all those above 23. If you did not read this at 23, then read it now...!!

     Make sure that you get some other 23-year-olds also read this and see what works for whom.

1. Saving more is good. However to get rich, YOU need to invest more.

Saving is a good habit, but investing is a learnt habit which will put you on the path to financial freedom.

2. Save between 20-30 per cent of your take home salary. If you are staying with your parents, this can go up even more.

Make sure that you contribute to the household expenses, and house work.

Do save more, and invest the same as a habit.

3. Work your ass off. Doing 12 hour days and 80 hour weeks are not easy, but nothing that is easy takes you anywhere in life.

4. Work hard, work smart, but do get a hobby that creates nice big social groups -- swimming, cycling, running, cricket.

Work hard, play harder!

5. Learn money management -- and learn the advantages of simplicity, equity investing and compounding.

6. Learn the power of delayed gratification -- and teach it to your friends, siblings, parents, and kids -- as soon as you have them.

7. Tell your parents marriage and having kids is AWESOME, and you will do it by choice. These activities do not have an expiry date. Don't ever rush into it.

8. Make sure that you marry somebody financially compatible too.

9. Never ever stop learning. Education (no not the degree) is the gateway to differentiating yourself from the crowd and constantly improving yourself so you can adapt and evolve with the ever changing world. The internet has awesome stuff.

Khan Academy and Coursera are great places to explore.

If you are an Indian, subramoney dot com is a good place to learn a lot -- and there are enough links to the outside finance world. Make a start, today. Empower yourself.

10. Do something which others will love to pay you for. Create health or wealth for people.

Take away their worries. Keep them happy.

Yes, you have to make a living, but put clients' interests first. Always!

A happy client comes back.

11. Automate your finances -- EMI, phone bills, rent, electricity bills, gas bills, SIP, etc., get the routine out of the way. Be done with it.

Make sure you have auto bill pay set-up and automatically transfer funds from a savings account to an investment account on a monthly basis.

Automate your investment account in a systematic investment plan and don't get caught up in the allure of 'stock picking', 'market timing' and trying to become the next investing billionaire.

Reduce your taxes and fees as best you can. This means taking a long-term perspective with your investments (at least 60 months plus) and never paying for high fee investment accounts and managers.

12. Stop spending money on useless 'stuff'!!

It's not possible that all the stuff you're buying is making you happier.

In fact, it's perhaps putting a strain on your financial budget.

It is surely POSTPONING your financial freedom.

Don't spend to impress your friends and your neighbours.

You're not winning any brownie points or gold stars for owning things you can't afford.

13. Get sensible amounts of medical and pure term life insurance. Understand first, then, buy.

14. Be as debt light as possible.

If you must borrow, let it be only for a house. That too about 50 per cent of the cost of the house, not 110 per cent as the BFSI(Banking, Financial services and Insurance) wants you to borrow.