Are
you in control?
Over the last couple of
weeks, I have been inundated with queries from investors on Brexit, Rexit,
equity outlook, how investments will be affected, which way the
markets will move etc. The happenings and consequent media noise has confused many.
Investors like to listen to anyone who “has an air of authority” and thus
listen to various, often conflicting statements made by “analysts / experts” on
various media. Speaking to many investors, I found that much of their fear and
confusion was because they were not in control – had jumped into investments
without really knowing what they were doing.
A change in the way you
approach your investing will keep you in charge. Ask yourself and answer the below two questions.
Is
there a direction to your investing or are you driving around aimlessly with no
actual destination in mind?
Many of us just invest “to
make money”. There is no clear destination in mind. Only when you have a certain
destination in mind, will you take the appropriate route. Without a
destination, it will be aimless wandering, allowing yourself to be tossed around
with the happenings and market ups and downs.
Right from the time we were
conceived, plans were made to get us into some school! Yes, some schools ask
parents to register the child for admission on conception!! A great deal of
planning and effort is put into getting into the right university course and
then a post graduate course. The direction of one’s life is planned very well.
Then we land that great job and start earning. This is where planning (financial planning) goes
missing and haphazard or random investing starts – to save taxes, to get some
returns from insurance and of course to make some money also from real estate, equity
etc.
Now suppose, you write down
your financial goals which may be varied and many, and work out each investment
towards achieving that goal, won’t it provide a great direction to your
financial life? You won’t be aimlessly driving around affected by all the
noise. You are focused and much more in control of the situation. In many cases
one may need an advisor to help in this process, in deciding asset allocation
and selection of appropriate products and intelligence is taking help if one
needs it. Once appropriate investments have been made keeping the destination
in mind, you will be less affected by all the noise around. You are in control
when your financial life has a direction.
Do
you fully understand what each investment entails?
We often invest based on
tips received from various fora - whats app groups, SMS and advice from “informed”
colleagues, promises of bank relationship managers. While we may know what we
have invested in, do we really understand the details and the fact that things
may not go as planned or what we buy will not give what is seemingly promised? I
find investors investing in equities and other instruments, with not much clue
of the possible downside. Worse still, investors get stuck in endowment insurance
policies, other products sold by bankers not having any idea of what they will
really get and how they fit in to their financial plans.
A little effort to
understand what exactly you are investing in, how it fits in to your financial
goal will go a long way in keeping you in control. When an advisor, a banker
or an insurance guy shows you details of a product, ask questions, plenty of
them. Only when you know each and every detail in simple layman’s language,
should you invest in a product.
“Know
what you own and why you own it” - Peter Lynch. As a
start, give yourself answers to the above two questions and you will find you
are more focused and in control of your financial life and far less swayed by
the noise and the volatility in the markets.
Write
to me at maheshmirpuri@yahoo.com
