Why “High Return” is “The Worst Point of Reference” when investing
Ashish Modani, Founder, SLA FINSERV
If someone asks ‘What would you do if you had Rs. 1 crore?’ like most, you would probably start listing all the things you want to buy or experience.How many of you thought of ‘saving’ as your first option? Not many, I’m sure!
Assuming you are one of those rare ones who thought of saving first,let me just say, you are one-step wiser than the rest.Now I am also assuming that you are probably planning to invest this money to create more wealth out of it eventually.And I completely agree with you here.
However, what investment option to choose? You are probably planning to consult your friend or a relative.Well, at least that’s what one of my 45-year-old client had been doing.Despite a substantial income and good investment portfolio,she was not sure if she had enough funds for her future goals.
Like most new investors,she had invested in 2 properties and now found herself stuck when unable to liquidate them. It is simple,if the house is bought to live in, then it is no form of investment. Because tomorrow, it would never happen that you would sell your house to pay for your kid’s education or your retirement etc. Secondly, it won’t help you in emergencies either.
This client had a sizeable portfolio, but there was no discipline or strategy involved in it.Her investments were scattered, and media driven. Most people lose money because of Investor Performance rather than Investment Performance.It happens when they make reckless, unplanned financial moves that harm them more, instead of securing them.To help you identify the red flags, there are three instances to be sure that your investment decision is reckless:
- When we act upon the information provided by media or our friends and colleagues over dinners and drinks.Here, I must add that friends, no matter how much they have your best interests at heart, are not experts and are themselves doing things by trial and error!
- When all we think about is the returns and we simply follow the herd without thinking about what WE really want or what OUR goals are. Can the herd predict the future? When you follow where the people flow, can you be sure that your investments will work for your goals?My point is – If your goals are your priority and your plans are aligned to meet them, why shift the focus to returns and do all the back and forth and messy transactions?
- When we make added investments for tax savings or compliance purposes. Most of us think that it has got nothing to do with our goals, but are we not blocking our limited money by doing so? You simply end up buying products that salespeople sell to you,making it sound as the most necessary product for you, until the next product comes along.Such wasteful expenditure just drains your resources and creates roadblocks to your future.
The simplest mantra towards creating a healthy investment journey is to sit down, mindfully list your financial aspirations, sort them by their timelines, align your investments with these goals and patiently let your investments grow with time. All you need to do is trust your financial assets and let them be.
The worst thing you can do to your investments is to invest after a recent good phase and withdraw them after a bad phase of returns. You don’t label a stranger as Good after a single pleasant association, and you don’t label your neighbor as Bad after a fleeting unpleasant situation. You have to give time to relationships for them to bloom to their true potential. Similarly, you have to nurture your investments and let them serve their purpose at their appointed time.
Quoting Warren Buffet here “Successful investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time.” With that prudent piece of wisdom, I leave you to think about how YOU have been handling your investments. Here’s hoping that you treat your money well and it treats you even better!
Views are personal: The author is Ashish Modani -Founder of SLA FINSERV PRIVATE LIMITED from Jaipur
Disclaimer: The views expressed are of the author and are personal. TAML may or may not subscribe to the same. The views expressed in this article / video are in no way trying to predict the markets or to time them. The views expressed are for information purpose only and do not construe to be any investment, legal or taxation advice. Any action taken by you on the basis of the information contained herein is your responsibility alone and Tata Asset Management will not be liable in any manner for the consequences of such action taken by you.
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