Introduction
Agile (Meaning: able to move quickly and easily) is a software development methodology. In this article, I will explain how agile principles can be used for your investment philosophy.
What is Agile
Agile is a software development methodology which comprises of various approaches to software development. The values and principles of agile has shown path to various software development framework. The agile manifesto helps in knowing the values (4) and the principles (12). So what are the values and principles ?
4 Values
- Individuals and Interactions over processes and tools
- Working Software over comprehensive documentation
- Customer Collaboration over contract negotiation
- Responding to Change over following a plan
12 PRINCIPLES OF AGILE
| Customer Satisfaction | Changing Requirements | Deliver Working Software | Collaboration |
| Motivated Individuals | Co-located Team | Progress Measure | Constant Pace |
| Continuous Attention | Simplicity | Self-Organising Teams | Retrospect & Adjust |
Reference Link : https://agilemanifesto.org/principles.html
What is Agile Investing
One of my friend was telling, “OK. I understood what is agile and the values behind it and the principles but, how is it related to investing? What should someone infer from this “Agile Investing” ?”
So, here is my explanation.
- Interact with people but make learning a practice while you decide to start Investing.
- Planning is important but, it will be useless until you don’t know how to execute it. Speculating (or) being a spectator in investing will not work.
- 4 Values and 12 principles helps us understand which is important over the other? So, for an individual, it helps to know what is prioritisation in Investing.
- There will be one thing permanent which is CHANGE. So, practice to live with it while Investing.
What is Scrum
Thousands of articles, tutorials, videos are available over internet to explain what is Scrum. Official documentation is available here.
In what context are you bringing SCRUM to Agile Investing ? Well, for any specification you might need a reference implementation to prove that it is a working model. Scrum is a framework and, I chose scrum over all the reference implementations available for an Agile methodology.
Ok. How is it related to investing ?
Creators of Scrum had these things in mind:
- Lightweight
- Simple to Understand
- Difficult to Master
These things are perfectly suitable for investing. Consider someone managing 100 different things vs Managing one thing. It’s quite easier with the later one right. Similarly, if a person doesn’t understand why he/she is investing, is it really worth of an investment? At the same time, not one single strategy will work for everyone and hence it will be difficult to master.
Hence the relation to scrum makes perfectly suitable for investing.
Scrum Team
As mentioned in scrum guide, Scrum teams are self-organising and cross functional. It is equivalent to the investing principle called “Don’t put all eggs in one basket”. Your team is your portfolio. It should be cross-functional and should not (over) react to incidents, sentiments, market fluctuations etc.,
Enough of Agile, Scrum and relation with Investing. Let me give you my way of explaining how to do agile investing.
How to do Agile Investing
In context to 12 agile principles, let me share the 12 rules of agile investing.
Disclaimer: If you are in late 50’s this might not be best suitable for you.
Rule 1: Identify your financial goals and timelines.
Rule 2: Track your income and expenses.
Rule 3: Start with saving for Emergency Fund.
Rule 4: Secure your Health.
Rule 5: Protect your family needs.
Rule 6: Understand Debt & Equity.
Rule 7: Identify instrument that suits your style.
Rule 8: Construct your portfolio.
Rule 9: Think Long Term but have continuous attention.
Rule 10: Keep it Simple and Understandable and let your family know.
Rule 11: Don’t deviate with your short term needs and wants.
Rule 12: Assess and adjust your portfolio according to your financial goal timelines
Summary of this article in this video. Check this out.
What are the benefits of Agile Investing
It’s quite easy for someone to put down the rules like this. Especially if you are a good writer. It would be more interesting to know the benefits š§. Right.
Let’s list down the 5 important benefits here.
- Understanding and drafting financial goals helps in knowing what is the difference between needs and wants. Let’s say for example: If your financial goal is to have a foreign trip (Once COVID-19 situation settles down) every three year vs saving for your health insurance.
- Preparing for the worst case scenarios. I have written an article on Emergency fund (Refer Here: https://blog.vaaniga.com/emergency-fund-what-why-how/) and this should help you to accumulate for your emergency fund needs.
- If you have constructed your portfolio without having an emergency fund and the worst case if you can’t liquidate (Convertible cash) then you are not doing it the right way. So prioritisation helps.
- One of the major benefit is this will reduce your debt (if you are already having it) (or) will help you when to go for debt. (Needs vs Wants). PS: Avoid Debt.
- Peace of mind when your timelines are long enough to be achieved since money is working for you.
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Related Articles:
- Emergency Fund – What, Why, How
https://blog.vaaniga.com/emergency-fund-what-why-how/
- Indian Stock Market – References and Urls
https://blog.vaaniga.com/indian-stock-market-are-you-aware-of-these/