The "monkey" who bought a Ferrrrr.... (read: Car)

Disclaimer: The reference made to a "monkey" in the given title is fictitious and does not intend to harm or be mean to any living being (including monkeys). This reference is subjective and purely related to signify the 'herd mentality' amongst human beings, to copy one another and get ahead in life rather than focusing on self improvement.

Well, you may be wondering when did monkeys start buying cars?

The human race is derived from the monkey race, and whether we like it or not, we have imbibed a lot of their traits. One of the commonly observed traits is buying a vehicle. Most of the people I have observed and also stories that I have heard lead me to a sound conclusion: 

A vast majority of the cars sold worldwide, are mere a status symbol, rather than actual utility. Now, you're wondering again: Why only cars? There are other noteworthy material possessions that are bought to score brownie points. I agree. There are many such items in the list of material possessions that add to a long list of liabilities.

However, a car is an example of an investment gone horribly wrong. Imagine spending the amount churned on that elusive "dream" vehicle, on some other financial instrument, which could have been an appreciating asset, rather than a depreciating asset. Also, there is a very strong lobby, jobs, manufacturing, industry demands behind the whole process of car making and car sales. I respect that and appreciate the effort behind the process as it leads to creation of jobs.

However, those cars would have been made anyway because of demand in public transport vehicles, cab aggregator purchases and other third party transactions.

My reference is not with vehicle consumption for public transport. We are all for improving and maintaining public transport. The point of discussion here is strictly with reference to private vehicles.

For vehicles driven 15,000 miles a year, average car ownership costs were $8,469 a year, or about $706 a month, in 2017, according to AAA. However, that doesn’t include the whole monthly payment, only the cost of interest on a car loan.

Source: https://www.nerdwallet.com/blog/loans/total-cost-owning-car/

These are just reasonable estimates that can hit the roof depending on your car model, type, mileage, etc. Also, not to mention the additional costs that go on accessories, insurance, styling a car, etc. Irrespective of your social status: i.e. that you are a rich man or a poor kid living in a first world country. Whatever strata of society you belong to: Just imagine the other investment alternative with $8,469 annual investments.

This amount invested annually for a period of 10 years at a modest compounded annual growth rate (CAGR) of just 13% per year grows to approximately $230,000 ! You can do the math and check this part on any systematic investment plan (SIP) calculator or CAGR calculator.

On the other hand your beloved car literally "depreciates" over 20% in value just after the first year of purchase.

Source: https://www.nerdwallet.com/blog/loans/total-cost-owning-car/

Look around you: You are fooling yourself in wasting your hard earned money on liabilities rather than accumulating assets. Even if you invest in NASDAQ or any other tested scrip on Sensex, Nifty, Nikkei, Hang Seng, etc. your compounded earnings will be more than 13% over a decade, depending on your investment strategy, which is again subjective.

Example: Taking a cue from Singapore, which has arguably the best public transport in the world,the government is discouraging people from owning vehicles. In-fact, if you've been to Singapore, you know very well that you actually DO NOT need a vehicle to get around town. Ditto for travelling around the entire Schengen area, Tokyo, Dubai, Sydney, etc. where you can easily get your way on world class public transport.

Wake up call: Compounding is also known as the eight wonder of the world for some reason. True power of building wealth lies in investing and no consumption. Numerous references of this fact can be seen in various self-help books on building value.

Bottom line: 

Build assets using the technique of value investing. Do not fall prey to FOMO (fear of missing out) and add unnecessary liabilities to your life's balance sheet.

A truly developed country is NOT where the poor have cars; but where the rich use public transport !

For more details on value investing or modifying your portfolio or for obtaining proven investment ideas and compounding wealth generation plans, DM me on LinkedIn)