Finance Info

Finance can't buy happiness. But the lack of it can buy a lot of misery. And let's face it. You are going to need it for the rest of your mortal life or until you die and maybe after that (for your children). And unless you start planning now, no matter what your age, chances are you will end up in a financial mess. Most of us will say, Me? In a financial mess? Never! Think again. Take a look at some of your requirements. Have you planned for the $10000 - $20000 it will cost you to educate your child (and that's just for the bachelor's degree) in the next ten years? Or of how much you need in monthly income to retire comfortably without having to slog in your old age? Or, in the nearer future, of what would happen if you lost your job? It happens elsewhere in the world and it can happen here. And with no social security system worth its salt in India, I would certainly not wait for the government to bail me out. These are just a few examples of important financial milestones. There are many more that you will come across in this book and will have to plan for.

Our parents did just fine without planning. What is so different now? Our parents did not need to make as many decisions. It was an investment Eldorado and even if you wanted to plan there was nothing to plan for. There was no choice. We wanted choice and we got it. But with choice, responsibility shifted from the government to us. Look at the spectrum of investment advertisements that appear. There is not only a choice of insurance policies but soon there will be a choice of insurance companies as well. Colleges will continue to reduce the subsidies on your child's education and you will have to foot the bill. And that house your parents built for a thousands and is now worth a few millions well you may never be able to keep the same standard of living unless you begin now.

There are a number of other things that are different now from what they were in our parents' time. Lifetime employment was a given and most children cared for their parents in their old age. That's not the case any more. Another key issue is that most of us seem to have more disposable income or wealth than our parents ever had. That may be a good thing, but it also entails that we know what to do with the money with us.

Where is the money to save and invest? The fact is that most of us earn enough we all deserve more, but that's another story. Some of us even save enough. But investments that's for the aliens from Mars or my adviser or my friend or someone out there to think about. What do I have to do with it?. One of the greatest paradoxes of life is that we work so hard to earn and save but think that it is beyond us to understand investments, let alone put our savings to earn the best returns.

One more feature about human nature, one peculiar to India specially, is that we tend to trust our advisers entirely to the extent that we refuse to even use our common sense. Most of us will go ahead and Invest in a stock or a mutual fund just because our broker or our friend or our boss thought it was a good buy. And when our investments and our money go down the drain, we blame it on the government, the company, the system, India and whatever comes our way except, of course, ourselves.

We also have the tendency to feel secure about an investment if we see others going in for it, specially if they are our relatives, friends or peers. How many times have you invested in a company fixed deposit or a stock just because everyone you know is investing in it? If you are like most other people, I bet you that's exactly the way you invest. If you lose your money in such investments, it may comfort you psychologically that others you know lost money too, but it is not going to get back what you lost. But how many of us sit back and contemplate? Do we sit back and ask ourselves, Did I even spend an hour researching or asking independent sources about the stock I picked up? Without diligently following up on investment advice and putting our own minds to it, we should not blame the world for an investment disaster, Let's look at a classic example of how we risk our investments against our own good sense. A friend asks you to buy shares in a vegetable oil company. You don't really understand the stock market and in your experience, that oil brand is not selling well at your grocer or you heard that they sold adulterated oil on the news last night. You still pick up the stock. That's a classic case of going against common sense. A stock only reflects the actual performance of the company.

Let's look at a few facts. Did you know that your chances of earning a better return if you put in at least an hour a month to planning and tracking your investments were over 80 per cent better than leaving your money to find its own way and over 50 per cent better than letting the so called professionals manage it. But then, does that really surprise you? Who would have more value for your money than you? As for the money managers, they charge fees to manage your money and of course have to maintain their five star lifestyle and take their wives on expensive holidays. And who pays? No points for guessing that.