6 reasons why you still haven’t given time to manage your finances and 1 reason why you should

6 reasons why you still haven’t given time to manage your finances and 1 reason why you should

So, what gets people to have a serious look at their finances and take some concrete steps towards assessing their financial position and formulating a plan for their financial security?


Of course, there are some people who are “born” meticulous and organized and hence have their plans all chalked out. But for most of us (based on our experiences), it usually doesn’t happen gradually, rather needs a trigger of some sort in our lives. The trigger could be some sort of personal experience or something that has happened with someone close, or even the sudden unpleasant remembrance of some childhood memory.


But until this happens, managing your own money takes a back-seat, while prioritizing work, family, current needs, perceived emergencies and in the absence of all this, pure lethargy. So, here are six reasons why many still haven’t got around to putting their finances in order, and one reason why some have.






  1. “Whats the hurry? My goals are far away, I have enough time on my side” – THE CAREFREE

Some of us typically think we have a lot of time, and many a times mistake urgent for important. We avoid contemplating the future, thinking that it has a way of sorting itself out. We usually need some unpleasant shock to make us realize that the future is something that doesn’t just happen, but needs to be planned for.




  1. “I know I have to save, but I don’t have any savings left after I pay my EMIs!” THE OVERSTRETCHED

Some of us love running after material acquisitions. We hanker after the latest gadgets. We usually also end up having a lot of unsecured debt (either a personal loan or revolving debt on our credit cards) because we keep running into sudden cash-flow issues. For us, planning horizons are not long.




  1. “I know it’s important, but am too caught up right now, will do it as soon as I can” THE ALWAYS-ON-THE-TREADMILL

Many of realize the importance of putting our finances in order, but somehow never seem to think it important enough to be top of the list. We would be putting in 12 hours at work and still think that’s not enough to meet our commitments. Somehow, crises have a way of finding us and keeping us always in fire-fighting mode.




  1. “I have checked with my friend, colleague as well as online, I just don’t know whose advice is right!” THE CONFUSED

Then there are some of us who will ask, then validate, then re-validate and then re-re-validate. We will seek inputs from the colleague, the friend, the neighbourhood uncle and maybe then go online to check whether we are missing a point of view. Trusting someone and taking decisions doesn’t come easy to us.




  1. “I am sorted, I have invested my savings in some hot stocks and I also have these 2 apartments” – THE KNOW-IT-ALL

A few are us are those who are both knowledgeable and also proud of our knowledge. We will be clear on why things are and how they are going to unfold. We usually have strong views of our own on money and investments eg. owning multiple houses through leverage since we believe we “understand” real estate, buying some stocks because “they are tipped to do well”, and so on.




  1. “I think this is not the right time, market is too high, it might crash” – THE PERFECTIONIST

And then, there are some of us who understand both the need to keep their finances in order and can see the benefits of doing so, but just are waiting for the “right time”. For us, the market is either “too high” and likely to fall, or “too low” and therefore may not go up in a hurry. Strangely, we don’t have a problem seeing our money idle in the bank while we make up our mind.




  1. “I know time is important, every day lost is lost forever. I am in it for the long haul” – THE MARATHONER

Then, finally there are a few of us who understand the value of time and the benefits of long-term-investing. At the same time, we take our time to ask the right questions, understand the value of financial planning, and then quickly get into action mode. Lastly, we are disciplined, at least about money, and once we make up our mind, we trust our judgement and get on with it. Truly, we are called a “planner’s delight”.




So, do some of these “reasons” seem familiar? Which one is yours? Most people we see have more than one, sometimes even a few of these. But importantly, it is when you put on the last “reasoning hat”, that things start moving for you on the personal finances front. For some its timely, for some late, but as the popular saying goes, better late than never.



Image credit: Anemone123%, Pixabay



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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“What problem of mine can you help me solve?”

“What problem of mine can you help me solve?”

It is that time of the year, when everyone seems to be in a bit of a party mode. It is also that time of the year, when increasingly, school/college friends are meeting up for reunions! I was at one such reunion a couple of weeks back, and, as is oft the case, was meeting some friends after many many years. After many hugs and a few jugs of beer, during which time we reminisced about old times, discussions veered towards the serious stuff, including politics, the economy as well as catching up on each of us, both on the personal and professional front.


With everyone’s kids around similar age bands, there was some serious collective letting-off of steam about the pressures involved in being parents to children who preparing for their Std X or XII exams (Eg. don’t ever remember studying so much even for an engineering paper in our 3rd year as compared to what kids nowadays have to do for a Std X paper, OR how the current standard of Maths and Science in Std X is akin to what was done in 1st or 2nd year graduate courses in our generation!)


Things then moved on to what we were doing on the professional front and how we were coping with the pressures on the job, the state of the economy, and so on. I had left my corporate career to join my spouse in our small personal financial planning and advisory business and when I explained that I was a financial planner, there were the usual reactions – how exciting it must be to be on our own, how courageous we were to have taken such a step, some questions on how I was liking it, etc.


Of course, there were some who also wanted to know what exactly financial planning was, and what exactly it was that I do, which again is something that I am (by now) used to. I then (as usual, passionately) launched into a description of what we do as financial planners, how it helps people, and what our typical assignments are. Things took an interesting twist, when one of them asked a very interesting question – “What problem of mine can you help me solve?”


While I of course answered the question and the follow-ups that came post that, it set me thinking. As I have discovered over the past many months, over various interactions with customers and others, financial planning means different things to different people. Importantly, it actually is “solving different problems” for different people, as long as the problems related to money. In fact, it actually doesn’t matter what I say I do as a financial planner, as long as people, including my customers see that I am helping them solve some money problem of theirs, which for them becomes “their understanding” of financial planning.


So, what “money problems” can a good financial planner-adviser help you solve?




A few people we meet are earning well and spending even better. No, it doesn’t mean that they don’t have any savings or assets, just that they underestimate the needs of the future while getting hooked onto today’s pleasures. For such a person, a financial planner acts as a quick wake-up call, who puts things in perspective, and is a catalyst for habit changes.




Quite a few people we see are financially prudent, but are successful individuals, so caught up in their day-to-day work and life that they are simply are unable to spend quality time on growing their money. Their investment decisions therefore are impulsive, driven by products that get sold to them or event-driven eg. taxation insurance. They end up collecting a disparate set of investments, lacking purpose and inefficient in performance. In such cases, a good financial planner can help become both the filter to weed out wrongly-sold or ill-intended products as well as the channel to invest their money in vehicles that are both risk-appropriate and goal-appropriate.




Many customers in the middle years bracket (age 40-50, double incomes, good jobs) are reasonably secure on the wealth creation and savings front. Like most of their generation, they own multiple houses, and while these were popular investment avenues, they are not necessarily the right asset-mix for future goals like children’s education and retirement, due to their illiquidity, as well as the current question-mark on long-term appreciation prospects. For such customers, a good financial planner helps them restructure their portfolio, keeping their risk profile and goal horizons in mind.



The “WHERE TO INVEST” problem

Some customers we meet are both personal finance savvy and investment-aware, meaning they have a good handle on their financial position as well as understand most investment asset classes and their risk features. That said, they lack the time as well as inclination to identify the right products, which will give them the right performance metrics while keeping in mind their interests and their risk appetite. In such situations, a good financial advisor helps provide the right mix of adequately diversified high-quality products to meet their needs.



The “NEED PEACE OF MIND” problem

Lastly, a few are completely sorted and only need a bouncing board to help validate their approach as well as decisions. Some may be good on the financial investments front but are inadequately prepared to face unplanned challenges in their life in case of unforeseen events. For such people, a good financial planner provides peace of mind and a tangible improvement in quality of life by allowing them to outsource their worrying nature as well as the outside chances of having uncovered risks.



Whichever it is, suffice it to say that a good financial planner/advisor’s primary role is to “solve money problems”. So, rather than try and understand from prospective financial advisors what they do, ask them – “What problem of mine can you help solve?”


Credit: M, a good friend from college whose pertinent question not only made me pen this, but also helped hone our customer propositions.


Image credit: Mohd. Hasan, Pxhere


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.

3 easy ways to know if your financial advisor is good for you

3 easy ways to know if your financial advisor is good for you

In a recent article, we shared 3 simple approaches that can help you determine whether you need a financial planner/advisor. But once you decide you need one (or already have one), how do you know whether he or she is giving you your money’s worth, if not more?


Personal Finance advisors who manage money range across a broad spectrum of names. A few of these are Financial Advisor, Investment Consultant, Wealth Advisor, Financial Planner, Relationship Manager, etc. Unfortunately, while there are certifications and qualifications* that can help customers determine whether the advisor is actually an “expert”, the awareness about these are very low and the average customer has no clue about these.


* Some (but not all) of these qualifications are CFP (Certified Financial Planner, issued by Financial Standards Planning Board, USA), CWM (Chartered Wealth Manager, issued by American Academy of Financial Management) and RIA (Registered Investment Advisor, issued by SEBI).


So, how can a customer determine whether the “advisor” is qualified to give him advice and is experienced enough to be able to manage his investments? Here are 3 easy ways for you to check whether the financial advisor is right for you.



  1. The advisor asks you “What’s the goal/purpose for the investment?”


In our experience, most retail investors start investing as and when they have savings, based on advice that they get from whoever they know. Many a times, they discover the need for an advisor when there is a “penny-drop” moment in their lives, usually due to some realization eg. need to plan for child’s education, lost a significant sum of money in some investment, etc.

  • In either case, a genuine advisor will try to understand your goals and aspirations. Money is usually itself never the purpose (for investing), it needs to be put to good use to achieve some personal milestone for you.
  • It’s the job of a good advisor to understand your current financial health, and where needed, suggest re-structuring for your existing investments to align with your goals
  • Lastly, a good advisor will prioritize your goals and create an overall financial plan for you, that will act as your financial road-map


  1. The advisor says “I need to know more about you to suggest the right investments”


While the phrase “every customer is unique” sounds cliched, it is something that definitely needs to be borne in mind when it comes to personal finances. Your personal experiences with money, along with your financial health determine your risk-profile which, when combined with your goals, makes you unique.

  • A good advisor will spend time understanding you and your personal experiences with money, so that over time, he is able to address your fears and concerns about money.
  • He will help you understand your risk capacity (your financial ability to take risk) and your risk tolerance (the risk you are willing to take basis your personal experiences/biases), which together form your risk appetite
  • He will then suggest the right “Asset Allocation” as per risk profile and accordingly invests across asset-classes, while keeping in mind your goals. He will also come back to tell you basis your risk profile if some goals are unachievable, unless you are willing to take some higher risks


  1. The advisor says “I charge a fee, my advice is not free”


For us as advisors, one key moment when we know that a customer may not be suitable for us, is when we talk about fees. Quite a few customers balk at the idea of paying a fee, understandably so, when there would be many so-called “financial advisors” who don’t charge.

  • A good financial advisor is as much a qualified professional as a respected doctor, lawyer or chartered accountant is. He therefore charges a fee for his time and advice
  • That said, a good financial advisor also clearly explains the value that he would be able to deliver for the fee that is getting charged, so that the customer understands clearly what he is getting
  • Lastly, a good financial advisor operates in a structured manner – recorded/documented conversations, in-writing recommendations along with rationales, periodic reporting and pre-planned financial reviews, all of which mean that the number of hours that the advisor puts in for you behind you is far more than the mere conversations that he has with you


So, next time you feel the need to hire a financial advisor, and are short-listing one, understand how many of the above boxes does he or she tick? Alternately, use the above to understand for yourself whether your current financial advisor meets the grade, or do you need to find a new one.


Image Credit: Tim Graf, Unsplash


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.


3 ways to quickly check if you need a financial planner

3 ways to quickly check if you need a financial planner

Personal finance and investments related advice is omnipresent today. Open any regular newspaper and they have a daily page devoted to personal finance. Surf the TV and even normal entertainment and mainline news channels have programs which “help” customers on their personal finances and give product-related advice. On most infotainment portals, Personal Finance is a separate section and every few articles, one on personal finance advice pops up.


This surfeit of information has created a not-so-desirable impact for us though – easy access and availability of so much information makes us think that we now “know enough” and can even “do it ourselves”. That said, there is an information overdose even on the products side, so how does one be sure? That’s where financial planners and advisors come in. In our experience, hiring a financial planner is usually a big decision for people to make, and hence they end up delaying both this decision as well as their investment decisions, doing themselves more financial harm in the process.


So, how can you decide if you need a financial planner to help you with your personal finances? I am sharing below 3 simple thumb-rules which can help you decide. If your answer to even one of these is a NO, then you surely need one.




RULE 1 – THE SAVINGS RULE – Save at least “your Age %” of post-tax income


What – At age 25, you should be saving at least 25% of your post-tax income, and as you grow older, this % should increase beyond your age. Eg. at age 35 should be 40-45% and at age 45 should be 50-60%.


Why – Remember, for every year you work, you will live a year, possibly even more, post-retirement. Now, even assuming that your needs in retirement are more spartan than when you are young, unless you save an average of 40% of your income across your working life span, you may end up not having enough to fund your retirement.



RULE 2 – THE NET WORTH RULE – Your NW should be at least “(your Age * Pre-tax annual Income) / 10”


What – Your Net Worth is defined as your Assets minus your Liabilities. Do not include the house that you stay in, unless you are willing to liquidate it and move into a smaller one.


Why – This rule helps you assess 2 things – how much your savings have transformed into assets and how over-leveraged you are in terms of liabilities. Also, this is a “minimum” rule, to check whether you have “enough”. To understand whether you are “wealthy”, multiply this by 2 (or more). Eg. If you are 40 and your pre-tax income is Rs. 50 lakhs per year, then your minimum Net Worth should be (40 * 50 lakh) / 10 = Rs 2 Cr. Remember this is net of your liabilities and the house you are staying in.



RULE 3 – THE ROI (RETURN ON INVESTMENTS) RULE – Your investments should grow at minimum your country’s nominal GDP rate


What – Return on Investments is the rate at which your investments are growing on an annualized basis. Nominal GDP is Inflation + Real GDP. Your investments include both real and financial assets (excluding the house where you stay).

(NOTE: An easy rule to calculate your current ROI is the Rule of 72 – Divide 72 by the number of years it took you to double the value of your investments. Eg. If your investments were Rs 2 Cr in 2012 and today their value is Rs 4 Cr, ie. took approx. 7 years to double in value, the approx. ROI you have generated is 72/7 ~ 10%).


Why – In an Indian context, the nominal GDP over the next couple of decades can be conservatively estimated to be around 10% (4% Inflation + 6% real GDP growth). Preferably, add 1-2% to this, since lifestyle inflation is usually higher, and investment returns can be much more volatile than national Inflation/GDP, hence some buffers are needed so that you don’t fall short as you near financial goal horizons. So, a good number to plan for is 12%.




Benjamin Graham once said “The investor’s chief problem – and even his worst enemy – is likely to be himself”. And as if on cue, Jack Bogle said “An advisor serves as an emotional circuit-breaker, so you don’t abandon a well-thought-out plan”.

Frequent, sometimes even addictive perusal of “information” ends up making us over-reactive and take wrong decisions in the short-term, apart from stressing us out. A good financial planner allows you to forget about your money worries and gives you peace of mind, while also acting as a safety-net to prevent you from taking wrong money decisions.



So, use the above 3 rules to quickly check whether you need a financial planner to help you manage your finances. And use the bonus rule to assess whether your money is worrying you, rather than working for you.



Image Credit: TheDigitalWay, Pixabay


Rule 2 Credit: While the other 2 rules are commonly used thumb rule, Rule 2 is formulated by the authors of the book “The Millionaire Next Door”


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.

What role does your Financial Advisor play in your life?

What role does your Financial Advisor play in your life?

If you were asked to describe a good financial advisor, what would your response be? Based on our experiences over the years, let me go out on a limb here and say that the most popular responses are likely to be from among the below.

  • Someone who is trust-worthy, whom I can trust with my money
  • Someone who is available to me for advice when I need and has my interests at heart
  • Someone who will make my money grow at a decent pace while also ensuring that it is safe


Of course, there could be other responses, do add them in the comments section below. That said, if I am right till here, let me turn around and tell you that these expectations are rather basic and should describe any financial advisor worth his or her salt. I fact, these above “virtues” should be basic minimum expectations for anyone to qualify as a financial advisor. After all, why would you even consider using the services of someone who is not trustworthy or not available when you need or not competent?


So, what then actually makes a good, rather “really good” financial advisor? In my view, a truly good financial advisor will have the qualities of these professionals as well!







  1. Doctor

A doctor diagnoses ailments basis visible symptoms, necessary reports and probing, identifies them as chronic, acute or placebic (imaginary), and treats accordingly.

Similarly, a good financial advisor should be able to unpeel your personal finance onion layer by layer to identify your money problems so that the right approaches can be used to put them in order.


  1. Accountant

Just as an accountant helps you put and keep your books in order, as well as plan and stick to a budget, a financial advisor helps you understand your personal financial balance sheet and profit-loss statement, co-creates a plan with you to nurse them back to health and helps you execute a budget for your household.


  1. Designer-Architect

A designer-architect understands your personal desires and aspirations and helps you accordingly build a home that feels like yours and only yours.

In the same way, a financial advisor understands your personal financial goals, helps you prioritize them and works with you to construct your own castles.


  1. Policeman

A financial advisor is your personal money police and helps you stay on the right side of your plan and budget, while also reading you the riot act once in a while when you step out of line!

A financial advisor also is the person who you will run to in case of any doubtful or poor experience with your money, to seek advice on damage control as well as salvage.


  1. Lawyer

A lawyer helps you interpret the rules or the laws specific to your problem and finds a way to solve your problem for you within the available space to your best advantage.

Just like a good lawyer, a financial advisor always has your interests as paramount and protects them at all costs, even if you are at times being criminal with your money! Though at times she (or he) may not be civil about it!


  1. Psychologist

A psychologist studies people, their thoughts, feelings and behaviors, in an effort to understand the “why” behind people’s actions so that they can help plan appropriate corrective measures.

Likewise, a financial advisor understands you as a person, your relationship with money and your deeper motivations so that his advice is tailored to suit you as a person. At times he also gently corrects you when you are making common behavioral mistakes with your money.


  1. Teacher

Last but never the least, a teacher is someone who imparts knowledge and wisdom to her students, feels pride at their successes and then selflessly moves on to the next batch, ready to start the journey all over again.

A financial advisor too helps you move along the path of “personal financial wisdom” from safety to security to freedom, is there with you to celebrate your small wins at every step and when finally, your financial goals get achieved, feels proud to have helped make it happen.


So, if you have a financial advisor, how many of the above qualities does he or she have? And if you don’t have one as yet, use the above as benchmarks to set your expectations so that you select the right one!


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.

To receive our articles through email, pl subscribe here.

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


Image credit: foreside.com


With even banks failing, which asset class is safe enough for me to invest?

With even banks failing, which asset class is safe enough for me to invest?

The last couple of years have not been kind to investors at all. Equities (the broader indices) have near-crashed, debt mutual funds have also sprung unpleasant surprises, real estate has languished. And if things couldn’t get any worse, the so-assumed last bastion of safety for investors – banks, has also been breached.


In the last few weeks, two specific pieces of bad news has hurt investors and further spooked markets which already were like a cat on a hot tin roof. The first relates to the NPA woes of Yes Bank, and despite the repeated assurances of the management, investors are panicking and not only are its shares being dumped by investors and employees, there are anecdotal stories of FDs and even basic accounts being moved.


The second piece of news is far more chilling to the retail investor. The RBI suddenly froze all accounts and transactions of PMC (Punjab & Maharashtra Cooperative) Bank, a medium-sized cooperative bank, throwing its depositors and customers into serious emotional turmoil and financial crisis. It turns out that nearly 3/4ths of its loans are NPA (non-performing asset, which in simple words means – unlikely to be paid back, at least in whole), having been advanced to a single customer (in brazen violations of existing regulations), which has gone bankrupt. What is sad is that there seems to be not much hope immediately in store for the thousands of retail investors who had deposited their hard-earned savings in the bank, and whose monies and access to liquidity has got stuck all of a sudden.


This leads me to the titular question – “As an investor, which asset class is safe enough to invest?” While I am sure this question is on many investor’s minds, this question is better answered by flipping it and instead asking oneself – “As an investor, how much do I understand the risks?”


Let me explain further. Most of the time, investors burn their fingers because they invest without fully understanding the products and the risks that they carry. Usually the only understanding of risk that they tend to have is volatility, which they then convert into a perception of capital protection. Ie. Equity is very volatile, and capital loss can be significant. Debt is not at all volatile and is like an FD, therefore capital protection is guaranteed.


Unfortunately, this is an incomplete picture of the risks that the products carry. At a recent seminar I attended, a speaker used the iceberg metaphor to depict the unseen factors behind results (success or failure) and it is apt here as well. Risk is also like an iceberg. While some part of it is seen, many parts of it remain unseen. And importantly, as an investor, while it may not be possible to identify all the risks (ie. many parts of it will remain unknown), it is necessary to understand and estimate it, to be able to manage it.


Eg, In the case of Equity, volatility is seen as the primary risk, but actually that’s not the risk investors should worry about, since over the medium to long term, the volatility subsides substantially. That said, business risk (how will the company perform) and concentration risk (% share of the company in the overall portfolio) are important risk factors that need to be managed.


In the case of debt, investors have some understanding about interest rate risk, since they know that FDs when renewed may be at a lower or higher rate, depending on the prevailing interest rate. On the other hand, the general investor belief about debt is that capital protection is guaranteed, and hence one sees a bee-line for some of these corporate deposits or debentures, which offer much higher rates vs the prevailing rate in the market. Key risks that investors ignore in the case of debt are credit risk (what if the company fails to pay either the interest, or worse, the principal as well) and business risk (what if the company you are putting your money in has bad lending practices and hence sinks eg. PMC Bank).


So, leading back to the question we asked originally, unfortunately, the answers aren’t black-or-white. Investors would be prudent not to chase so-called “safer” asset-classes basis their past experiences. They should instead spend time understanding the risks involved and managing them. Your investment is safe only if you have taken the necessary and right steps to manage the risks involved in those investments. Managing the risks involve having the right asset allocation basis your (the investor’s) investment time-horizons as well as appetite for risk, identifying the right investments within each asset class, as well as making sure that there is adequate diversification, both across and within asset-classes.


While the above is not rocket science, having both, the right expertise (analysis and research) and pain-staking effort (regular review and course-correction), is required. And importantly, the need to “unbias” yourself while evaluating your choices and taking your decisions is essential. If you are new or busy, then having access to a trusted advisor will help you manage your portfolio better in terms of both risk management as well as adapting the portfolio to best suit your needs and goals.


To summarize though, remember – understanding the risks is key to determining safety of your investments. Without adequate understanding, even the safest-seeming investment can turn out to be super-risky, while with some level of understanding and risk-management, investors can navigate their way safely through even seemingly high-risk investments.


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.


Image by MoteOo from Pixabay

My Equity Portfolio is down 20%! Have I made a mistake? What should I do now?

My Equity Portfolio is down 20%! Have I made a mistake? What should I do now?

The last 18 months have not been kind to investors in the stock markets. Depending on which period you are looking at, there have been severe corrections, across all market-caps. When mid and small-cap indices fell severely from their Jan 2018 highs, large-cap indices still held on and posted marginal gains. But post the budget presented in July 2019, they too have thrown in the towel.


So, how badly has equities done, and how much has it actually impacted investors? To put things in perspective, a diversified multi-cap index portfolio has fallen approximately 12%, both from the market peak in January 2018 (approx. 18 months back) as well as from the recovery peak in August 2018 (approx. 12 months back). The below table gives the details.


Of course, this varies across market capitalizations, with large-caps still managing to hold on, losing only between 4-9%, mid-caps dropping 18-22% and small-caps plummeting as much as 28-40%.


So, in such a situation, what should one do? Is the market likely to drop further, and if yes, should one exit one’s portfolios? Are equities not the right asset class to invest now?


In the short-term Equity is volatile. In the long-term, Equity builds wealth!

There are enough and more market news and views answering the above questions, with necessarily no improvement in clarity post reading them. I do not intend to add more to this confusion by also pitching in. Rather, in my view, the best thing to do in such situations is to go back to the “wise men” and learn from them on how to handle such situations. So, let’s see what five such wise men have to say.



You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you are not ready, you won’t do well in the markets – Peter Lynch


The first lesson is about having the right attitude to invest in equity. Be prepared to travel the roller-coaster ride that it will take in the short term and to be unpleasantly surprised despite precautions. Building the temperament needed to invest in the stock markets takes time, so invest only what you can bear and slowly increase it over time as you get comfortable.



The stock market is filled with individuals who know the price of everything but the value of nothing – Benjamin Graham


Markets gyrate excessively, basis the laws of demand and supply, which in turn are driven by sentiment, fueled by a continuous dose of “news”. If you have the temperament and the knowledge, volatility can be an opportunity. That said, timing the market is tough and not advised and for the average retail investor, these are the times when your SIPs and STPs MUST continue, and if possible, topped-up, to take advantage of rupee-cost averaging.



Only when the tide goes out do you discover who has been swimming naked – Warren Buffett


When markets take a dive, the natural response from a retail investor, even some of the experienced ones, is to sell the stocks (or funds) that are holding on while retaining the stocks that have crashed, since they want to “wait for it come back up”.


It is pertinent though to remember that in good markets, even the mediocre performers get “swept up by the tide”. It is when markets go down that these average performers get called out. Also remember, every growth cycle has a different set of dominant contributors. So, use downturns to get rid of your not-so-good stocks while retaining the ones that are still good, thereby building a future-ready portfolio. While the urge to wait for markets to come back up is high, remember, that the good stocks by then would have run up even more.



It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent – Charlie Munger


Building a good, long-term, high-quality portfolio takes time and requires pain-staking effort. Make sure you are taking advice from a qualified investment advisor, whose interests are aligned to yours. But once done, sit back and enjoy the view. The key to benefiting from good equity investments is allowing them time to grow and compound. So, stay the course, and don’t take recourse to stupidity, such as exiting perfectly good portfolios just because the prices are down.



If you don’t know who you are, the stock market is an expensive place to find out – George J W Goodman


Lastly, investing in equity without having sight of what you are hoping to achieve, and over what time-frame, is fraught with risk. The danger is that since you do not know either, you will tend to over-track and get impacted by short-term volatility and performance. Anchor your investments to a goal, and you will suddenly see the big picture, and will not get swayed by what happens during the journey. A good financial planner will help you identify the right investments for your goals and will also help you course-correct over time, and ensure that your portfolio is always future-prepared, thereby allowing you to have peace-of-mind and enjoy the present.


In summary, use the below 5 inferences as guard-rails to both smoothen as well as make safe your equity investing ride.


1.     Build the temperament to invest in equity, by gradually increasing your investments

2.     Volatility is good. Ride it out, and if anything, use it in your favour through your SIPs

3.     Use downturns to clean up your portfolio and make it future-prepared

4.     Once you have a future-ready portfolio, stay the course, and avoid short-term decisions

5.     Finally, know why you are investing. Anchor your investments to your goals


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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Millennials – 7 mistakes to avoid in your wealth creation journey

Millennials – 7 mistakes to avoid in your wealth creation journey

For people in their middle-years, what would have been their biggest or deepest aspiration during their early working years? If I were to hazard a guess, I would think that for most people it would be “being wealthy”. The reasons for wanting to become wealthy may vary, since every person’s needs and wants are different, but it would be fair to say that for most people, their significant aspirations in life would be around money and what they could do with it.


A lot of young people think that wealth creation is something that requires tremendous smarts. That it requires access to knowledge not easily available to most, as well as huge skills that help apply the knowledge and convert it successfully into wealth. And that it requires some “big ideas” that will help one break out of the rat-pack. It may gladden you to know that not having access to all of the above can still make you wealthy.


Actually, the fail-safe way to having enough wealth to take care of all your (including your family’s) aspirations for your entire lifetime is in not doing a few basic things in life wrong, and in case you already have, correcting them as soon as you can. So, let me put down 7 mistakes that you should not make in order to build adequate wealth in your lifetime.


  1. Not having a check on your discretionary spending

For most young people, the first few years earnings are spent fulfilling their pent-up aspirations, without necessarily caring about keeping something aside. While some of it is understandable, the danger is if it continues without a check. The first principle of building wealth is to save first and then spend. So, keep aside something as soon as you start earning, and then spend on your material needs.



  1. Over-leveraging yourself early in life to buy “assets”

Another thing many people do early in life is take “big decisions”, the most common of which is buying a house. The power of money compounding over long periods of time is magical and early savings can multiply manifold if invested effectively. Unfortunately, these savings instead get locked into EMIs for repaying loans that leave a young earner barely any space to save or invest for most of his early years. In an “uberized” world, having a home as a personal asset is no longer a necessity. And even if it is, you should consider it much later, when it is a smaller part of a diversified portfolio.



  1. Upgrading ever so often to “keep up with the Joneses”

Nearly every device that comes into the house (or driveway) turns old, if not obsolete, in a couple of years. And getting into a constant upgrade cycle, whether it is your mobile phone, cars, smart TV or household appliance, can be quite draining on your finances. It is important to have aspirations and fulfil them, but just make sure that you aren’t doing to it to “keep up” and importantly, that your finances can afford it.



  1. Investing based on “tips from friends” or even worse, your “private banking RM”

This is the easiest way to lose money, and at an early stage in life, can form experiences which impact decisions throughout your life. A basic principle behind taking investment advice is making sure that the person who gives the advice has incentives that are aligned to your needs. If you lack the discipline (most fall in this category), find an adviser who you can trust, and who represents you, not the products on offer.



  1. Confusing investments with tax-planning

For many young people, investing equals tax planning. And hence their quest for investments begins in tax season. And in the hurry, wrong decisions are taken basis faulty advice. Remember, the tax you pay is a miniscule part of the overall wealth you have today and in the future, and hence basing your investment decisions on your tax needs is plain wrong. A good adviser will also help you take care of your tax-related investments.



  1. Not having goals and time horizons for your investments

An investment by itself is incomplete, if it doesn’t have a goal. And depending on the nature or priority of the goal and it’s time horizon, the savings need to be channelized into the right investment. Not having goals in place means that your investments don’t have direction and hence decisions regarding them will get made ad-hoc, basis the vagaries of the market. So, while you deploy your savings into investments, make sure you have a goal in mind, and the investment is appropriate to the goal, basis its time-horizon and your risk appetite.



  1. Not planning adequately for the unexpected

Lastly, while the going is good, not making the above mistakes can put you on the right path to financial security. But over a lifetime of a few decades, there will be a few mishaps. Making sure that you have the resilience (both financial and otherwise) to overcome them will mean the difference between being wealthy and not, at the end of it. Hence, make sure that the unexpected is not unplanned. Take care of not only your insurances (life, health, assets) and contingencies, make sure you are nurturing your biggest source of wealth – your skills, by upskilling yourself periodically, and in time.



So, as I said before, building wealth over a lifetime, is more about not making big mistakes, rather than about getting everything right. For those who are already on the path, use the above rules to review your financial health and for those who are just setting out, make these your cornerstones for your wealth creation journey. As Charlie Munger said, “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”



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

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



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Mirror, Mirror, On the wall, Which is the biggest risk of them all?

Mirror, Mirror, On the wall, Which is the biggest risk of them all?

“If the highest aim of a captain were to preserve his ship, he would keep it in port forever” – Thomas Aquinas


With the market indices at all-time highs (the Sensex touched 40000 and the Nifty touched 12000 on 23rd May 2019, post the election results), it will be pertinent to congratulate those retail investors who have benefited from it. They have benefited because they have stayed invested through the bad year that 2018 was, and therefore benefited from this run up in 2019.


Such investors are in a minority today. Most investors either have never considered equity due to fear and lack of awareness or keep their investment to the minimum because they do not want to take the “risk”. By staying away from equities, they avoid a “risky” investment and invest their hard-earned money into other “safe” investments – bank fixed deposits, corporate bonds, gold, real estate.


But, is this really less risky? What investors fear in equity is the volatility that is associated with it. By investing in less-risky avenues, one is avoiding this volatility. When one looks at risk in this way, defined as “volatility”, then yes, equities are riskier.


But, as an investor, the actual risk that you should be worried about is not achieving your financial goals. After all, of what use is the avoidance of volatility risk in the short term, if one is unable to meet one’s financial requirements in the long term?


If you are investing a sum of money without a particular goal and time-frame in mind, then you are making 2 mistakes with your money.


  • One, you are not setting any expectation from your investment and therefore cannot review its performance over the right periodicity, and take appropriate course corrections.
  • Two, you will unnecessarily track the movement of your investment frequently and get impacted by the volatility, and since you don’t have a goal or a target in mind, you will move to take hasty short-term decisions with that investment, maybe at a loss.


To understand this better, let us look at two commonly occurring scenarios


  • A invested Rs 500000 in shares on the advice of his good friend at work, who traded frequently and hence was “knowledgeable”. His friend said that markets are doing very well and if he invests now, he can get a good return in a short time. Instead, 4 months after he invested, the market saw a steep correction and A saw his capital come down to Rs 400000. Not wanting to lose further, A sold the shares at a loss, in 6 months.



  • B bought a second house in an upcoming suburb and took a home loan of Rs 80 lakh for this purpose. He bought this house because the suburb was slated to be close to the new airport and as per everybody he talked to, the area was slated to explode in a few years. Unfortunately, the house took 3 more years than planned to get possession, and the location still hasn’t developed to that extent, and hence isn’t yielding a decent rental. B still has nearly another 10 years to repay of the loan, and the outstanding loan is more than Rs 60 lakhs.


Do these sound familiar? So, what went wrong? In both these cases, the investment was neither planned, nor reviewed, with an underlying purpose. And hence, while the vehicles (shares, house in suburbs) themselves may not have been poor investments, wrong actions were taken (sell shares early, hold on to the property too long).


The first step in investing is to identify what is the goal one is investing for, and what is the time horizon that one is investing for this financial goal.


Once one has identified the goal and the time horizon, then the logical next step is to identify the correct asset class (or mix of asset classes) that one should invest in, in order to achieve the financial goal in the most efficient manner.


This should, of course, be done while keeping in mind one’s risk appetite, but years of investing as well as observing investors, leads me to say that risk appetite is not something that is static – this evolves over time, through one’s experiences as well as knowledge.


Once one looks at the investing process in this fashion, volatility as a risk is something that gets taken accounted for while taking the investing decisions. And hence is not something that as an investor should worry you, since you have planned for it.


In order to achieve one’s financial goals, it is important that your investments not only grow at the right pace, to create adequate wealth to meet your goals, they should also be in the right asset classes so that you have the money when you need it.


By investing in so-called “less-risky” avenues, one is putting a sort of ceiling on the returns one can earn, by sacrificing them at the altar of short-term volatility. In addition, one is actually exposed to both liquidity as well as inflation risks.


By not taking “risks”, one ends up encountering the biggest risk of them all – not having enough money when one needs it, and in the right form so that one can access it easily without any trouble.


So, do yourself a favor and look in the mirror and ask yourself this – do you know what goals your investments are helping build wealth towards? And how many of your investments are actually helping you create wealth that is both, beating inflation and helping you meet your goals?


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


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Do you know your “Finish Line”?

Do you know your “Finish Line”?

Over the last few weeks, Std X and Std XII results across various boards have been announced. As usual students all over have done very well, with many students scoring a full 100% as well, and 95-96% almost seeming like an underperformance!

At the risk of sounding a bit geriatric, it seems to me that while our times were reasonably high-scoring too (if am not wrong, my school topper in Std X got around 88-89%, and I was very happy to be in the same decile), in this generation, this scoring business has gone a bit too far. I would like to think that, beyond a certain point, how much you score doesn’t actually determine success in later life, and vice-versa. Also, this extreme focus on scoring in academics in the early years takes away from valuable life-skills and competencies that should be learnt or built, that, I can say, from experience, are likely to hold our children in greater stead in the later years.

But as is said, life is a race, and you have to run it, like it or not. It’s just that no one tells you what kind of race it is! And hence, despite our best efforts both during education and work, we aren’t adequately prepared for it!

 Life in school and junior college seems like a 100-meters sprint, with everyone (well, it seems like nearly everyone nowadays!) scoring in the top few percentages (just like in a 100 mts race, where every finisher is within a few milli-seconds of each other).


And hence when we reach “real life”, ie. higher and post-education years, we are still prepared for a sprint and we get a rude shock when it starts resembling something completely different!

 My take on this is that Life is actually a special kind of long-distance race because of the following two reasons.

 One, like a steeple-chase, there are some reasonably-heighted thresholds that one needs to get past. Beyond a point, how high you jump doesn’t matter, as long as you cross the thresholds.

 These thresholds are personal performance as well as personal skills related, ie. making sure that you do reasonably well in your education and initial corporate life, including learning the necessary life-skills. Eg. good performance in your major exams, landing a good job, getting the right breaks at work, building the right professional skill-sets, etc.

 Like in a race, success is about making sure that one doesn’t trip on these thresholds. Else, the race in future can have various handicaps.

 Two, like in a long-distance race, while all are running, each is running at a different pace, and after a time not running together at all. The race also has a bit of trail thrown in, where one can get lost for a while, in search of directions! Importantly, after a point, each one is running his or her own race, trying to do as best as possible.

Like all races, this one too is a success only if you finish it. The unique thing about this race is that one can determine where is the “finish line” and plan for it. In a way, everyone has his or her own finish line, which they have the freedom of deciding, and which then, they have to reach.

 Reaching your finish line successfully means that you have gained financial independence and have the freedom to retire, to do what you love with your time, to follow your passions.

 The key to winning your own race is to identify your finish line well in time, having a plan to run this race well, including for any unplanned detours on the trail, and reaching your finish line in good shape, feeling happy that you could actually run a couple of miles more!

 So, do you know your finish line? What and where is it? If you do, then do you have a plan to reach it in good shape? And if you still have a good bit of the race to go, are you prepared for the thresholds that will come your way?

 Photo by Jenny Hill on Unsplash.com

Finwise is a personal finance solutions firm that helps individuals and families plan for their financial goals, follow their passions and achieve financial independence. For consultations, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.