Over the last few weeks, there have been many columns and television shows on the best stocks and mutual funds for 2020. In my sessions too, I get asked all the time about the best investments that are safe and can give high returns. In the quest for getting the highest returns, investors forget about some basics.
When I reflect back on my life, I see so many parallels with money management and my life decisions; in some cases, my decisions had a direct bearing on my wealth. Your mindset towards money can impact your wealth.
Giving time: A big regret I have is not being able to prioritize time for myself. If something needs my attention, it is at the cost of my “ME” time. It’s the same with money management, which is considered drab and boring and is low-priority for individuals, especially youngsters, who mainly look at their finances during tax planning. For anything to work, it needs proper planning, which needs time and effort. The only investment which people generally tend to plan well is real estate as they spend lot of time researching about the proposed investment. With other investments, too, you need to make time to study the product, the way you give time to plan a trip or to purchase an expensive gadget.
Persistence: A lot of us take up many hobbies but give them up due to many reasons. I took up learning to play the keyboard but gave up in a few months. The problem with all of us is that we want to be able to get to an advanced level in a couple of months. Learning something needs patience and regular practice. Investments, too, need time to grow. Persistence is the key to success in all aspects of life, including investing.
Learning from failure: Life is full of ups and downs. We always remember our failures more, maybe because they hit us hard. But failures are a great opportunity to learn. I had introduced some e-learning courses on smart investing, which did not take off. Looking back, I think I should have done a deeper market survey before launching the courses. In investing, too, failures are common. So many investors crib about the returns from equity funds. But what they need to understand is why they failed. Did they choose a fund, which had outstanding recent performance, or did they exit in a short period. Each time there is a scam, one reads about individuals who had invested their savings for important goals and now it was all gone. But did they comprehend their mistake of concentrating investments in risky but high-yielding instruments?
Not falling for peer pressure: I remember when we bought our first house in 2001, our colleagues and friends were buying bigger houses (with bigger loans), but we took a conscious decision to buy a house where we could afford the EMI and also have fun. Peer pressure can be such a killer. The bigger property appreciated much more than our property, but looking back, while we had a smaller house, we were not burdened by the EMI and led a balanced life where we did not have to worry about the EMIs all the time. In a way it also helped us have more money to invest, as we saved on the interest outgo.
Staying away from loans: Going abroad for vacations is common now. About 15-20 years ago, taking loans for lifestyle expenses was not considered. These days, I find people are happy to fund every need and want through loans. It really depends on your mindset—are you the type who wants to be debt-free or are you happy to live on EMIs.
Obviously, your mindset has a huge bearing on your finances. Start 2020 with: a) Pledging to make time for your money; b) Figuring out the balance you want in your expenses and savings. Is there a way you can save and at the same time have fun with limited money? And maybe postpone some aspirational purchases for a better future?; c) Deciding how you will deal with loans; d) Finding out how your current investments are performing versus your financial goals? Are there instruments which need to be exited? Simple products invested into regularly and held for the long term are the best investments. These should be your investments for 2020 and beyond; e) Taking professional advice should be on your agenda.
Time is free but it’s priceless, more so in investing.
Mrin Agarwal is a financial educator, founder director of Finsafe India Pvt. Ltd and co-founder of Womantra