Personal Finance: From darkness to light

Diwali is here and we have some really great words of wisdom from many investors and advisors on investment strategy and on behaviour patterns required to be successful in investing and reaching financial goals.

The avalanche of news articles, advertisements along with lower returns from traditional investment avenues that guarantee returns have prompted many to seek out newer products. Many of you are new, first time investors, shifting tentatively from FDs to investments that give market related (not guaranteed) returns.

The most common places for information we go to are news articles, opinion in the finance pages, TV channels. We do get some really great information from here but truly useful information is hidden among a lot of rubbish. Unfortunately much of what is bandied about is exaggerated, inappropriate and I find many getting utterly confused on what to do. More importantly, they make you feel you are missing out and lead you to hara-kiri.

Another person who freely dishes out information is that Bank “Relationship Manager”. I’ve personally never seen so many untruths being spoken as when I hear a Relationship Manager speak about an investment. His/her only relationship is with the money in your account which may have come from a matured FD.

So, what should investors do?

First – take some effort to move from darkness of ignorance of financial instruments towards the light of knowledge

Spend some time learning about various financial instruments, how they work and what you can expect. Such information does not come from the questions on in newspapers or on CNBC asking “Which is the best Fund?”. Neither will it come from WA forwards on investment tips. It requires some time to read relevant books on investments and simple financial primers explaining various instruments.

An investment in knowledge pays the best interest. This learning does not take too much time and only requires some interest and commitment on your part.

Second – seek advice and learn

While I was addressing a large group on personal finance – a group of about 80, only two persons could answer a question of mine on how a mutual fund worked. If you don’t know, it makes sense to seek advice, have someone to guide you and teach you. Your advisor, guide, financial mentor can keep you focused, impart his wisdom. Wisdom is more than just knowledge about financial instruments. As I hinted above – right at the start, your behaviour, your reaction to various events, attitude towards finances can be changed which is the most important factor in attaining financial goals.

While many of you have entered the markets for the first time in this bull run and have had a great experience  in the last four years, it is imperative that you are aware of what you are getting into and enjoy the ride, with the light of knowledge guiding you in your path to financial freedom.

I wish you all a Happy Diwali, healthy and prosperous new year and success in your journey to financial freedom.

असतो मा सद्गमय । तमसो मा ज्योतिर्गमय । मृत्योर्मा अमृतं गमय ।