Are there parallels in how we assess risk in life situations and manage our money?

Are there parallels in how we assess risk in life situations and manage our money?

Are real life situations and financial decisions assessed for risks in a very similar way by investors? There are parallels but they are not always handled similarly. Here are some anecdotes with some pertinent personal finance lessons, that helps us understand the differences in the choices people make in real-life situations, vs managing their money.

 


Read our latest article, published on Moneycontrol.



https://www.moneycontrol.com/news/business/personal-finance/are-there-parallels-in-how-we-assess-risks-in-life-situations-and-manage-our-money-6178711.html



Image credit: Moneycontrol



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A guide for Retail Investors to invest in equity

A guide for Retail Investors to invest in equity


Enough has been spoken about the markets in last few months, including the never-seen-before kind of drops and recoveries. In such times, one would have assumed that retail investors would have beaten a hasty retreat, hoping to come back when markets seem a bit saner.

 

Surprisingly, that is not the case. The below 2 published data points indicate otherwise.


  • New demat account openings for most brokers have surged, with anywhere between 50 to 200% increases being reported, many of them first-time users.

 

 

What this seems to indicate are 2 things


  1. Retail investors took advantage of the available time (due to the lockdown) and the valuations (in March & April post the ~ 35% crash) to enter and invest in the stock market to make some “quick” returns

 

  1. Considering that the bulk of these new additions are online, it can be presumed that the average new investor is young and technology-savvy, while not afraid to take risks while seeking to make a quick buck

 

Is this good news? Well, it depends on how one looks at it. History indicates that institutional investors are generally smarter than retail, who usually enter late to the party. The average holding returns of mutual funds is significantly higher than the average investor returns in the same funds, underscoring this fact.

 

On the other hand, the fact that the market participation is broadening and that too in times of market distress is heartening and shows some maturity in the mind of the average retail investor. This millennial generation is possibly different and smarter than its precursors. They are also adopting the new “do-it-yourself” way, already popular in developed countries.

 

That said, trading in the stock market for short term gains is fraught with risks, and can result in substantial capital loss, if one doesn’t have a good hang of what one is doing. Having an Investment Framework based on the following 4 levers can possibly help today’s investor to increase his or her chances of success in the stock market.

 

  1. Strong Knowledge-based Investment Hypothesis

Know each stock you invest in. Spend time on research, make sure you understand the company and its prospects, and do not get lured by tips and penny stock advice. This is fundamental to your framework and dilution here is akin to having a rotten foundation, leading your structure to fall, sooner or later.

 

  1. Laid-down Investment Horizons & Goals

Even the best race-car driver needs a destination, a target. Similarly, map your purchase to an outcome based on your investment hypothesis, with a time-horizon in mind. Tie it to a goal, so that neither does your horizon become a moving target, nor are you tempted to exit early during adversities, impacting your goal.

 

  1. Clear & Documented Process for Exits

Based on your investment hypothesis, you will know when you need to book profits, in case your target/goal is met. Similarly, however good your investment hypothesis might have been, factors change and hypotheses fail. So have a clear plan to exit in case things don’t play out the way you saw them. Having a documented process for both value-based and time-based exits, with clear rationales, is a good way to both, limit your losses and not fall in love with your darlings.

 

  1. Diversify Adequately

However good your stock selection maybe, expecting each to be a winner is unreasonable. Diversification is a hedge against both, failed hypotheses as well as capital loss. Build a portfolio of 15-20 stocks over time and have a cap on each stock as a % of your portfolio. 6 winners out of 10 is a good enough ratio for the portfolio.

 

 

Dear retail investor, Success in the stock market is an outcome of 3 factors – Relevant Knowledge, Robust Process and Resilient Temperament. Please use the above-mentioned levers to build a personal Investment Framework and whenever you feel swayed by emotion, go back to it and read it. You will find that not only is it helpful in the stock market, but in everyday life too. Happy investing!

 


Image credit: MayoFinance, Unsplash

 

Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families invest for their financial needs, follow their passions and achieve financial independence.

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A slightly modified version of this article was published recently on fpstudycircle.com.

Why we rush to buy goods during a discount sale, but won’t lap-up stocks when markets crash

Why we rush to buy goods during a discount sale, but won’t lap-up stocks when markets crash

We are now deep into the festival season, and normally, it would be visible, through the familiar sights and sounds associated with it. This time around though, things are different.

 

But one thing hasn’t changed much and that is us waiting with bated breath for Sale Season. Offline or Online, there is something about Sales that get us going. We are inherently deal-seekers, and good deals get us all pumped up.

 

Unfortunately, the same cannot be said of our actions when it comes to our investments in the markets. The same shopper as investor feels more comfortable entering the financial markets when markets are at highs rather than at lows. And panics to sell assets at a loss when there is a market crash, rather than buying more.

 

Read on to know more in our latest article, published on Moneycontrol.

 

https://www.moneycontrol.com/news/business/personal-finance/why-we-rush-to-buy-goods-during-a-discount-sale-but-wont-lap-up-stocks-when-markets-crash-6063521.html

 

 

Image credit: Moneycontrol

 

Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families invest for their financial needs, follow their passions and achieve financial independence.

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If IPL teams were equity mutual funds, which categories would they belong to?

If IPL teams were equity mutual funds, which categories would they belong to?

In the last couple of years, there has been a lot said and done with respect to categorization of mutual funds. The regulator has attempted to put some structure in place for fund houses and managers through the categorization guidelines, in order to help investors make informed choices.

 

That said, it can still be quite confusing for the lay investor to understand these categories. Thankfully, there is something else that is universally understood. Cricket! And within it, IPL!


Fans know every team’s strengths and weaknesses while having his or her favourite teams to root for. So, if equity mutual fund categories were IPL 2020 teams, who would they be?

 

Read our latest article, published on Moneycontrol.

 

https://www.moneycontrol.com/news/business/personal-finance/if-ipl-teams-were-equity-mutual-funds-which-categories-would-they-belong-to-5922831.html

 

Image credit: Moneycontrol

 

Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families invest for their financial needs, follow their passions and achieve financial independence.

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With a sharp fall and a swift rise in indices, how should investors position their portfolios?

With a sharp fall and a swift rise in indices, how should investors position their portfolios?

The last few months have seen market volatility at never-seen-before levels. We saw the sharpest drop ever, with nearly a 30-35% drop in key indices less than a month. Yet, before one could even say “bear”, the fastest-ever recovery also followed in the next 3 months, with most indices recovering smartly from their March bottoms, to be close to their pre-COVID highs.

 

For customers, emotional reactions are completely understandable. On one hand, there is loss-aversion at work, and on the other, there is the fear of missing out, or FOMO.

 

So, coming back to the question, how does one handle such situations? Is there a way to navigate markets, especially when they go through such roller-coaster rides?

 

Read our latest article, published on Moneycontrol, to help you wade through this emotional jungle and take the right decisions.

https://www.moneycontrol.com/news/business/personal-finance/with-a-sharp-fall-and-swift-rise-in-the-indices-how-should-investors-position-their-portfolios-5787221.html

 

Image credit: Moneycontrol

 

Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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8 timeless money lessons reiterated during the pandemic

8 timeless money lessons reiterated during the pandemic

For most people, the last few months has been a never-before experience. Whether it is about finding out how secure is your financial position in this crisis, or about understanding what is really important for you versus isn’t, or about looking for new opportunities in an otherwise generally hopeless time, it has been a period of discovery.

 

For me, this period has reiterated a few money lessons which I have learnt and personally tried to follow over the last few years. If anything, this crisis has confirmed to me that the path towards financial, in fact, overall well-being lies along successfully practicing these lessons.

 



Read about them in our latest article, published on Moneycontrol.

 

https://www.moneycontrol.com/news/business/personal-finance/8-timeless-money-lessons-reiterated-during-the-pandemic-5696081.html

 

Image credit: Moneycontrol

 

Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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Loans for Goals: 5 steps to use leverage for your financial well-being

Loans for Goals: 5 steps to use leverage for your financial well-being

A few months back, I met a friend of mine who was down from the US on a holiday. This is someone who had done quite well for himself over the last nearly 20 years in the US, and has built a fairly large investment portfolio. As part of it, he has also successfully built a real estate portfolio over the years in the US. Discussions veered towards that, and he said something that made me sit up.

 

His words were “I love Leverage”.

 

The use of the word “Leverage” instead of “Debt” somehow made all the difference for me to look at it in a new light. Yes, loans are bad, and one should be debt-free in one’s pursuit of financial well-being. That said, I have since also realized that Debt is not as one-dimensional as one thinks it is.

 

Coming back to the original question, let’s look at Debt differently and build some simple rules around it, which can be generally followed, towards one’s financial well-being.

 

Read our latest article below, published on Moneycontrol.

 

https://www.moneycontrol.com/news/business/personal-finance/loans-for-goals-5-steps-to-use-leverage-for-your-financial-well-being-5549181.html

 

 

Image credit: Moneycontrol

 

Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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For advice, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.

Loan moratorium: When interest compounding works against you

Loan moratorium: When interest compounding works against you

Over the last 3 months, for many, salaries have been truncated, jobs have been lost and the health and lives of near and dear ones have been threatened. And for most, this is a first-time experience.

 

In support, the salaried middle-income person has also been given some breaks, importantly, an initially three, now extended to six months “moratorium” on their loans through banks/NBFCs. These include all kinds of loans, including credit card debt.

 

The terms of the moratorium are simple – it only defers your EMI, doesn’t waive it. There is no interest waiver. Non-payment (ie. deferral) does not impact your credit score.

 

Hence, it is advisable to pay your EMIs, and not take the moratorium, unless there are dire circumstances, because of which you are unable to pay. And if you do, pay back the deferred EMIs as soon as possible, to minimize the long-term impact.

 

But why so? The reason is simple. Taking a 6-month moratorium on a home loan that has 15 years left adds another 18 EMIs! And this is because of the effect of compounding over long periods of time.



Our latest article, published on Moneycontrol, explains exactly why. Click on the below link to read on.

 

https://www.moneycontrol.com/news/business/personal-finance/loan-moratorium-when-interest-compounding-works-against-you-5461361.html




Image credit: Moneycontrol

 

Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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For advice, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.

10 money steps to help you stay prepared in case of a job loss

10 money steps to help you stay prepared in case of a job loss

As the impact of the COVID-19 crisis takes a further hold on the economy, its impact is beginning to be felt on its foot soldiers as well. Over the last few weeks, more and more news about planned salary cuts have been percolating, and over the last few days, the dam seems to have broken, with large job cuts also being announced.



This is likely to be wide-spread, and in the last few days, we ourselves have seen cases of 25% salary cuts, work without pay for the next 6 months, and finally, job-losses.



How to handle such a crisis is something someone impacted would be struggling to grapple with. And in case you are not hit by it as yet, count yourself as lucky and prepare for an eventuality like this. The below 10 steps should hopefully help you plan for it and address much of the impact.




Please read our latest article, published on Moneycontrol.


https://www.moneycontrol.com/news/business/personal-finance/10-money-steps-to-help-you-stay-prepared-for-a-job-loss-5325361.html



Image credit: Moneycontrol



Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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For advice, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.

Celebrating the Men too, this International Women’s Day!

Celebrating the Men too, this International Women’s Day!

Its International Women’s Day on March 8th, 2020, and we can think of no better time during the year to reach out to you, to share a few inspiring success stories of people who are on the path to financial independence and well-being.

 

 

Last year, we shared stories of some successful women, who over the last few years, started their journey with Finwise and took charge of their financial lives to make it more secure for themselves and their families.

 

 

Conventionally, one would argue as to why we need a specific day in the year to celebrate Women? We should be doing that through the year, and we agree fully with the sentiment. Our monthly columns (published on Moneycontrol.com) on women and how they can handle money problems and achieve financial independence, is testimony to that fact.

 

 

We would instead like to respectfully submit that International Women’s Day need not only be about women individually. Women today are equal partners in life, whether at work or at home, and while they have fought to achieve this status, they have also been supported by a growing tribe of the opposite sex, who have actually lent credence to the theory that the “better half” is actually as good, if not better at managing money.

 

 

Over the last few years, we have come across many such success stories. While one kind is where both spouses are actively involved in planning and securing their financial future together (with, in some cases, the woman actually taking the lead), we also have the other, where the man, despite possibly being the sole or dominant earning member, consciously and actively involves his spouse in the financial decisions of the house, thereby, both literally and figuratively, “putting money where the mouth is”.

 

 

In our experience, it is this “absence of bias” in the relationship between spouses and respect for each other as equal partners, that is one of the true building blocks of well-planned and long-lasting financial and general well-being for the family.

 

 

This year, for International Women’s Day, we share journeys of some such couples over the next few days, and hope they inspire you to take similar actions to free your and families’ financial futures. Look out for the first journey tomorrow.

 

 

Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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For advice, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.