A small reality check

Posted on by Hitesh

Sir John Templeton once said “The four most dangerous words in investing are – ‘this time it’s different’”, but there is something which is even more dangerous than that – Postponing your investment decision. Isn’t it intriguing that we work hard to earn money and then we keep it in a bank account or a fixed deposit to depreciate? Most of the time we don’t postpone our “SPENDINGS” but somehow we defer our investments. One can have various reasons to defer investments but are any of them justifiable? Let’s run a reality check for few of such reasons:

  • Busy to decide?? You may be busy today but don’t forget that it’s just a matter of time when you will retire and the only thing that will rescue you from most of your troubles will be the money saved and invested today. So take out time. Just a couple of hours every 6 months are more than enough.
  • Not having sufficient money to invest? You just need to save Rs.1k per month to start a SIP.
  • What will Rs. 1k saving do? Well, something is better than nothing, so at least start one.
  • Is it the right time to invest? Somehow, no one has ever been able to time the market perfectly. So the right time to invest is now. Divide the amount you want to invest and spread it over a period of time.
  • Don’t know where to invest? Hire an advisor (not a banker) and he will do the homework for you. Don’t invest in something which is complicated or difficult to understand.

Another point of indecisiveness is whether it makes any difference to start investment early or not? Let’s run a reality check on that too. So, if you require Rs.25 lakhs after 20 years for your kids marriage, you just need to invest Rs.2k (assuming 15% CAGR) per month. The total investment you do in 20 years is Rs. 4.8 lakhs. However, if you postpone this investment for 5 years, you will have to save Rs.4500/- p.m. The total investment that you will do now is Rs.8.1 lakhs. The amount required to achieve your goal has almost doubled. This happened because you lost on compounding for 5 years.   So it’s important to start your investments early and then let the money work for you. Well, this was for just one goal. Now think how much additional investment you will have to do to achieve all your financial goals? So either start your investments today or be ready to forego some of your goals.

 

“Money is always eager and ready to work for anyone who is ready to employ it.” 
― Idowu Koyenikan

 

Lights, Camera, Action….

Posted on by Hitesh

Bollywood!!! Indians live by it and get inspired by it day in and out. Some aspire to dance like Hrithik, or have a physique like Salman bhai whereas some inspire to have a grace like Madhuri. Several people aspire to be an over-arching personality like Big B, or dream of a girlfriend like Katrina. And we Indians can be real crazy Bollywood fans, beyond all limits. We even wear clothes, have hair-cuts, use tooth paste and face wash which are endorsed by our favourite actor/actress.

Well, Bollywood has taught us many things – How to dance, how to propose, how to sing, etc. But is that all, that we can learn from Bollywood or is there something more? Certain things which may be non-glamorous but,real.

For example, have we learned anything from the Rajesh Khanna of Avtaar ? Or coming to more recent times, from Hema Malini and Amitabh Bachhan in Baghban?

A lot of people often give every penny of their savings to their children. It is perfectly fine to finance our kid’s education to make them able and independent to build their life. But, should we give them money for their marriage or to buy a car inspite of them earning money remains a debatable topic.

If your kids want to pursue higher education abroad, or throw a lavish marriage party, or purchase a high-end luxury car, allow them to get a loan and fund for the same. Luckily, our banking system provides a loan for everything. It is very good to give your kids, the best in the world (what you can afford, of course), but not at the cost of your retirement funds. One can get an education loan, home loan, car loan but not a retirement loan.

Let’s not forget what happened to Rajesh Khanna or Amitabh Bacchan in above-mentioned movies. Both these characters in the movies, worked hard to fulfill their kids wants, to the extent that they gave their retirement funds. But then what happened to them in the movie? Give it a serious thought. This is not the story of one or two individuals, but if we observe, we will notice several such incidents in our neighbourhood.

Movies like Avtaar and Baghban, were movies not based on fiction like Kkrish but stories inspired by social problems.

So do plan and invest for your kid’s education, higher studies, marriage but, most importantly your retirement. It’s not only important for you but also for your wife when you are no longer around her. Allow your kids to grow and let them take their own responsibility.

P.S : Don’t forget to teach your kids about financial planning along with loving their family.