Are you in control?

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