Personal finance is a tricky thing.
Step 1 : You need to decide how much you want to invest. Balance short-term needs with long-term goals.
Step 2 : Find the right opportunities to invest.
Step 3 : Once the investment is made - Wait till the schedule time to redeem the investment.
Like any other process, you can mess up in any of the steps.
According to me, step 1 is the easiest… To know one’s needs and aspirations is the most controllable step in these series of process steps. Whether you want to lead a luxurious life now with 3 parties every week or save up a little more for the future so that you can retire that bit earlier or risk that startup which you always wanted to do. The best part about this step is that there is no right or wrong. The only messing up that people can do, is, decide about one set of requirements today and change their wish list in some time. The changing, wavering nature of our mind leads to disappointment and messed up portfolios.
Next comes, step 2 - Equities, bonds, real estate, margin trading, futures, options, gold, commodities, art, currency, interest rates… The list of what you can invest in keeps increasing and changing. Things which were goods till yesterday are suddenly packaged as assets and sold for appreciation. Who would have though that mustard is the next big opportunity for holding your money. But most people, i have seen, dont make any major mistake here. People usually tend to invest only in places which they appear to have understood to a decent extent. Most people still invest in fixed deposits and post office instruments - why - because they understand that banks and governments promise return. Some people invest in mutual funds and not equities, because they understand that equities provide good returns, but they do not know how to selectively invest and hence choose the funds. Etc etc. With increasing discourses on risk and return of every asset class, the expected holding period and written advice of so many sources, this is also becoming easier by the day.
The third thing, according to me is the most difficult. Its difficult because, most people do not even reach this stage. Most of us, are always perennially in the “investing” zone. We never accept that we are invested and we are just waiting for the dividends to mature. Most of us, are not investors, in the true sense. We are entertainment seekers, and investment is one of those avenues providing excitement. We constantly want to seek to seen as “Investing”. Because this is that golden stage when you have money, are generating insights, people are watching you, looking up to you for some smart moves, you can spread gyaan you have self generated or acquired, and can acquire more gyaan in return. This is the zone of the “performer”. We never want this performance to be over. We never want our investment to ever become the hero. Its always about the investor. We dont want to talk about the old investment. We always want to make that better opportunity come alive. We always want to better the past - even if its always not the case. We dont believe in time giving us results - we dont want results - the journey of investing is our result.
And our weakness at step 3, my dear friends, is the biggest need that wealth management companies play on. Its a deep insight about the “investor” and not “investment” which makes all this money go around in wealth management. Private bankers, boutique investment firms, elite service, red carpet advisory etc etc are all services provided for the “investor performer” need alive in all of us.
Long live the insight generator!