Chapter Notes On Money Works

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This chapter tells us that every parent’s wish is to get their children a good education and a good job but in HBS they teach getting a good job is a means not an end.HBS defines income as Linear and investment. Linear income is the income which you get by selling your per unit time at a certain price and you get paid for the time you put your effort whereas investment income depends upon the money you invested and you get continuos pay-offs. Often people dream to have a certain job and later they realise the ground reality as well as the nature of people who can go to any extent to retain or get promoted at that particular project, after which they leave their job.

For all these reasons many
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Investing in multiple sources divide and manage the risk associated with them, thus minimising losses. It depends upon ones experience and skills to invest in the above sectors.

One has to understand the market through different analytical tools.No one really knows what will happen to market so the best decision one can take in investing is to invest in different things so that if one investment gives you loss you can still make up by success in another investment. Leverage can be used even when we can afford to pay with our own cash,it helps in increasing the amount we earn for every dollar we invest but your expenses and loan payments should not exceed your income. This will cause negative cash flow, thus forcing you into bankruptcy. Another way of cash flows is through tax deductions,which help property owners to pay less tax on their income.

HBS teaches that “Often, you do not make money when you sell.You make money when you buy”. Warren Buffett preaches the same phenomenon : Buy any property at bargain price, so when the market does not appreciate as forecast , you will have built in buffer because you bought below the market rate and you will still able to make profit when you sell.Therefore , leverage , multiple cash flows and availability of bargains are three of the key advantages of real estate investing.

HBS offers multiple courses related to finance in which advance concepts and
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