It’s your convocation. From now on, you’ll be a degree-holder.

Yippeeee!

Just pause for a second.

All your life, you’ll be introducing yourself as a master’s in this or a bachelor’s in that, or perhaps even as a Ph.D. in xyz.

Have you even once considered, that your respective field will continue to evolve, long after you stop studying it?

For example, one fine day, in a Chemistry lecture to class XII, I noticed that the stuff I’d learnt for my master’s degree exams was the very stuff I was now teaching these 17-18 year-olds. That was a big realization for me. It then dawned upon me, that I had to either keep moving with the developments in the subject, or I needed to change my profession. I moved on from Chemistry in 2004.

So, for heaven’s sake, a paper degree is not your ticket to your subject for life. Things, people, seasons, subject-matter, issues at hand – everything changes. Every decade or so, there’s a complete overhaul. To stay on top, and still feel like a degree-holder of your subject, you need to be with things as they move, through the whole decade.

Does your marriage give you a licence to stay married to that same person for life without working on the relationship day in, day out? No, right?

Your degree doesn’t make you a king-pin in your subject for life either, without the appropriate ground-work everyday. Let’s please digest this truth.

The worst-case scenario of whatever I’ve said above happens in the markets. It is a worst-case scenario, because you enter the markets with some finance degree, thinking that the degree has taught you to play the markets successfully. Nothing is further from the truth. Here, you have a piece of paper that gives you false confidence, and you see your balloon bursting after your first few live shots at Mrs. Market.

Financial education in colleges and universities lacks two basic factors. The thing is, these two factors are game-changers. Get them wrong, or don’t know much about them, and your game becomes a losing one.

What are these two factors?

Everything and everyone around us teaches us not to be losers. We are taught to shove our losses under the carpet.

Cut to reality: winning market-play is about losing. Losing, losing, losing, but losing small. To be successful in the markets, we need to learn how to lose small, day in day out. It’s not easy, because our entire system is geared up to win, every time.

Then, everything and everyone around us teaches us to seal that win and post it instantly on our resume, on facebook, on twitter. Modern society is about showing off as many wins as possible. Losers don’t get too many breaks.

Cut to reality: winning market-play is about winning big, very big, every now and then, amidst lots of small losses. That can’t happen if we immediately book a winner. We need to learn to nurture a winner, and to allow it to win big. Again, that’s not easy, because as soon as a winner appears, our natural instinct tells us to book it and post it. So bury your “win it-cut it-post it” attitude. Instead, win, let the winner win more, and more, and when you feel it’s enough, without getting greedy, cut it, and then keep quiet, bring your emotions back to ground zero, and move on to the next winning play.

The reason, that most teachers of finance in colleges and universities don’t know about these two factors, is that their own money is almost never on the line. They have almost never felt the forces of live markets through this “line”, day in, day out. The line one puts on is one’s connection to market forces. Only a regular connection to these forces teaches one about realistic, winning market-play.

One could argue that the case-studies examined in finance school are very real. Well, they are very real for those protagonists who actually went through the ups and downs of the case-study in real-life. They got the actual learning by being exposed to live market forces. You are merely studying the statistics and drawing (dead) inferences, devoid of first-hand emotions and market forces. Whatever learning you are being imparted, is, well, theoretical.

Theory doesn’t cut it in the markets. Theory doesn’t make the grade.

So, what makes the grade?

I consider a seven year stint at managing your own folio a basic entry requirement into bigger market-play. What happens during this time?

Each body cell gets attuned to real market forces, live. You get to know yourself. You build up an idea about your basic risk-profile. Your market-strategy takes shape. It is fine-tuned to YOU.

During this stint, money needs to be on the line, again and again, but the amounts in play need to be small, because you are going to make many, many mistakes.

And please, make whatever mistakes you need to make in this very period. Get them all out of your system. Make each mistake once, and never repeat it, for life. Point is, that after this stint, money levels in play are going to shoot up. Mistakes from this point onwards are going to prove costly, even devastating. The kinds, where one can’t stand up again. You don’t want to be in that situation.

Once you are comfortable managing your funds, and don’t get rattled by Mrs. Market’s constant action, her turnarounds, crashes etc. etc., your market decisions are such, that you start applying your knowledge of money-management successfully. You have now become a practitioner of applied finance.

Applied finance is advanced level market-play. To win at applied finance, your money-management basics need to be fully in place and rock-solid. You can define applied finance as Money Management 2.0.

Winning at applied finance is self-taught. You don’t need a degree for it. In my eyes, a degree here is in fact detrimental, because you then spend a long time unlearning a lot of university stuff during real market-play. You actually see for yourself, that most of what you learnt applies only in theory. The stuff that makes winners, where is that? Why wasn’t it taught? Well, you’ve got to go out there and learn it for yourself.

Let theory be where it belongs. Respect it, but leave it in its appropriate world. The world needs its theoreticians to make it go round, but you need to go beyond theory, to win big.

Put on your practical shoes when you put your good and real money on the line, and be ready for anything.

Let your mistakes teach you.

Keep making the grade, day in day out.

Long after society tells you that you’ve made it.