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*M RERGM EP 4P ERRM RK .SYV REP
51
A
dear riend o mine is an extremely intelligent man,
and he has the credentials to proe it. He has
completed his engineering rom II1 and also secured
a Management degree rom IIM. He is highly successul in
his chosen career o marketing soaps and detergents at a
multinational lMCG company. Howeer, he is perennially
worried about his inancial status. 1his would surprise many.
Ater all, many parents would consider him as a role model to be
presented beore their children, considering him as a liing
example o the study hard, get a good job, and lie happily eer
ater` story.
My riend not only beliees in working hard but also
playing hard. Consequently his expenses are oer 95 o his
income. Hence he is always on tenterhooks at the end o the
month. He is now contemplating reducing his expenses and
saing more money. I elt that this was a good moe. So
what will you do with your Saings` I will look out or the
saest possible aenue or parking my saings, maybe some
Central Goernment Bonds or a Bank lixed Deposit` was
his reply. \hy not inest a part o your saings in instruments
such as equity`, I asked. He looked at me incredulously.
Inesting is not my cup o tea. Ater all, I am not an expert
in inesting`. \ell, apparently he had ailed to realise that
purchasing bonds and opening ixed deposits was also
inesting`. Also, although he was not an expert, no one will
doubt that he possessed the intelligence to understand the
basics o inesting. His mental block was, howeer, preenting
him rom taking steps towards a more secure and stable uture.
1his really set me thinking. \as inesting really as diicult
as it was made out to be \hy is it that many gited people
balked at the word inesting` when they should actually
welcome it because eicient inesting is the only insurance
premium against inancial misery.
\hy is inesting so conusing
\e get so inoled in the nitty gritty o things that we miss
out on the simple bigger picture. Let us take the concept o
Inesting`. \hy is inesti ng so conusing and
misunderstood At the outset, the most common
misconception people hae is that the term inesting` only
inoles inesting o money.
People ail to realise that they are indulging in inesting at
eery stage in their lie. Also, what most people call inesting is
not really inesting. People are all talking about dierent things
yet they oten think that they are talking about the same thing.
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1. laing a large amily.
1his may seem strange, but many people, especially rom
the poorer strata o society, beliee that more bodies mean
more income or the amily and hence haing a large amily
makes economic sense. In more well-o sections also, couples
beliee in haing more children in the hope that at least one
o them may take care o them in their old age.
2. Lducation
1his is certainly an inestment. Some recognise it as such,
while others are ignorant about it. It inoles outlays o time
and money. People spend nearly two decades o their lie in
the pursuit o ormal education in the hope that this will aid
in securing the rest o their lies.
\hile its importance especially amongst the middle class,
cannot be underestimated, people must be clear that education
is only a tool which will aid in securing your uture and not an
end in itsel.
3. Inestment in assets
Many people inest in hard assets such as gold, siler, real
estate, as well as in inancial assets like equity shares and bonds.
1his is also the most widely accepted deinition o inesting.
1here are dierent q-RZIWXQIRX4VSHYGXWrlike stocks,
bonds, mutual unds, real estate, insurance, commodities,
precious metals etc. Iach is designed to do something dierent
and that is another reason why the subject o inesting
becomes more conusing.
And then there are dierent q-RZIWXQIRX4VSGIHYVIWr
1hese are nothing but a technique, method or a ormula or
buying, selling, trading or holding the inestment products.
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1. Buy, hold and wait Going long,,
2. Buy and sell 1rading,,
3. Sell and then buy Short Selling,,
4. Options 1rading,,
5. Broking No personal trading positions, but inesting in
the business, etc.
Inestors are classiied by their procedures and their
products. \ou hae a stock trader, a real estate speculator,
collector o rare coins, commodity utures trader, a day trader,
and a saer who is happy putting his money in a bank. 1hese
*M RERGM EP 4P ERRM RK .SYV REP
52
are all examples o dierent type o inestors who are known
by their product specialties and the procedure adopted by
them. All this adds to the conusion on the subject o inesting
because under the banner o inesting we hae people who
are really gamblers, speculators, traders, saers, dreamers,
and.... losers.
Inesting is also conusing because it is a ery ast subject.
I we look around us we will see that people hae inested in
many dierent things. Look at the appliances we use. 1hey
are produced by companies in which someone has inested
in. 1he electricity we use is produced by a utility company
where someone has inested in. Look at the car we drie, the
sot drinks we consume, the clothes we wear, the urniture,
the airplane etc. All these things are there because someone
inested in the business that deliers these products. 1his is
what inesting is all about.
-RZIWXMRKMWETPERRSXETVSHYGXSVETVSGIHYVIIt is
also a ery personal plan. 1he indiidual has to decide as to
what his goals are and how he has to go rom one leel o
comort to the other leel. He needs to make a plan to go
rom a comort leel A to a higher comort leel B. One is
able to earn when one is young. Howeer, rarely do youngsters
know or realise that these earnings need to be inested wisely
because when old age comes and the capacity to earn
diminishes, it is only your inestments which will proide you
with income as well as a degree o independence. \ou need
not rely on your children, the Goernment or society to take
care o you. One can go back on the inestments. 1his is
only possible when one has made a plan or onesel and one
inests according to the plan.
1o digress a bit, why do we ind so many dierent types
o cars and trucks Simply because dierent people hae
dierent needs. 1hese ehicles are made to suit their needs.
lor instance, a armer in the illage will be more pleased to
receie a 1ata Sumo rather than a lerrari as a git. Similarly a
amily car like a 1oyota Qualis is more suited or a large amily
than or a couple staying in the city. Likewise, in the inestment
world the inestment products are called inestment ehicles.
Dierent people hae dierent needs and dierent inestment
goals and thus they use dierent inestment ehicles. Let`s
say i one has a plan to go to a hotel in New Delhi. He either
takes a train or lies to the city. lrom there he either takes a
rickshaw, a bus or a taxi to go to the hotel. In this plan he has
a choice o so many ehicles he can choose rom. He will
then decide upon the choice suitable to him. Similarly when
one has an Inestment plan one chooses the inestment ehicle
according to one`s needs and means.
\e ind so many people ocusing on a product say stocks
and then a procedure say trading but they do not hae an
inestment plan in place. Most people are thus trying to make
money by what they think is inesting. Many o them merely
mirror the purchases o their trusted associates without
undertaking any due diligence. \heneer the ineitable losses
occur, they will blame the inesting process, een though they
hae neer undertaken it in the irst place.
I would again reiterate that trading is not inesting, it is a
procedure or a technique. \hen people are not clear as regards
their own personal inestment plans, all these dierent
products and procedures become oerwhelming and
conusing.
Next time when you see your aourite 1V show on
Inestments` I hope you will be able to discern between the
essential stu and the mindless driel.
Do not be carried away by inestment tips but start making
your inestment plan. It is the discipline o an Inestment
Plan that will make you wealthy.
linally, proper inesting, though important, is only one
o the tools required or achieing inancial reedom. 1oday
there are many adequately qualiied Certiied linancial
Planners in the country and I hae suggested to my riend
that he isit one o them in order to receie holistic inancial
adice. As the adage goes, Better late than neer`.
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Inesting is a plan, not a product or a procedure. It is also a ery personal
plan. 1he indiidual has to decide as to what his goals are and how he has
to go rom one leel o comort to the other leel.