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How often do books get straight to the point? Mind you, Sandeep Tyagi’s work is no textbook. The Little Book of Big Gains manages to keep us hooked while we learn everything we wish we learned if we hadn’t slept off while reading an investment guide. Tyagi challenges the common misconception that successful investing requires complex strategies or insider knowledge. Instead, throughout the book, he maintains that adhering to basic principles and maintaining a consistent approach can lead to above average results over a period of time.
The book wastes no time and starts with asking us to stick to the basics. While we all know that the way to a healthy life is to eat right, exercise well and sleep better, it humbles us by asking ‘How many of us do that?’ Investing too, isn’t very different. The book keeps repeating that until we get it. It emphasises harnessing the power of compounding to build wealth over time. This fundamental principle is crucial for long-term investment success.
The book effectively tackles the psychological side of investing. Tyagi shows you how to keep your cool when everyone else is losing theirs. A significant portion of the book is dedicated to managing emotions in investing. It emphasises the importance of maintaining emotional discipline when making investment decisions and sticking to a long-term plan. He goes deeper and gets the reader involved by providing examples where funds produced good returns, but average investors in those funds did not benefit fully due to their emotional decision-making driven by greed and fear. He reiterates that investing isn’t a get-rich-quick scheme and emphasises the importance of sticking to your guns and playing the long game.
Long-term perspective
The book elaborates on developing a long-term perspective to avoid knee-jerk reactions to short-term market movements. As investors, we tend to spend a lot of time trying to identify the next big thing. Tyagi points out that investors would enjoy a far superior investment experience if they devote a small portion of their time understanding common cognitive biases that can lead to poor investment decisions. That begins with viewing market downturns as opportunities rather than threats.
A significant portion of the book is dedicated to the crucial topic of asset allocation. The author explains how distributing investments across various asset classes can help manage risk and optimise returns. He gets us excited by introducing the concept of ‘Investment Gears’. This is aimed at helping us assess and apply our risk tolerance to our investment strategy. This framework allows investors to tailor their portfolios according to their risk appetite, using distinct ‘gears’ to represent varying levels of equity and debt. While most of us focus on absolute returns on a specific instrument, little focus is often given to what we get on hand post-tax.
Tyagi explains the importance of tax-loss harvesting, understanding the difference between short-term capital gains and long-term capital gains and suggests regular rebalancing of our portfolios by taking into account the necessary tax implications. The book ensures that we consider tax planning as a significant portion of our overall investment strategy. Tyagi believes that technology plays a huge part in democratising investment advice. He sees it as an affordable, personalised guidance to new investors who may not have access to traditional financial advisors.
Info overload
While we know how artificial intelligence and machine learning are shaping today’s world, the book explains how they become relevant with respect to investment analysis. The author, however, does not shy away from cautioning us about potential pitfalls, such as information overload and the temptation to trade excessively.
What sets this book apart is its simple and lucid language. Tyagi doesn’t bog us down with complex financial jargon. Instead, he offers clear, actionable advice that even investing novices can follow and implement. He stresses that a good investment plan should be easy to understand and implement, reducing the likelihood of costly mistakes or unnecessary stress.
The book also comes with some nifty extras. There are templates and quizzes to help us apply what we’ve learned, and a companion web site for those who want to dive deeper. The Little Book of Big Gains, as the name suggests, is little in size, but is abundant in financial literacy. The book’s strength lies in its ability to simplify complex concepts and is free from pretence. It serves as a comprehensive guide for anyone looking to improve their financial situation and build long-term wealth. By combining fundamental investment principles with practical advice and psychological insights, the author provides readers with a clear roadmap to financial success. A KISS: Keep it simple, stupid, would be appropriate for the book.
(The reviewer is AVP – Investments, Ithought Financial Consulting LLP)
Check out the book on Amazon.
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