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‘Balancing it out’ is a key skill for investors

Money does not talk. It screams. When Bob Dylan said that, it was probably a reflection of the times. You can safely assume that it had nothing to do with personal finance. 

Published: 21st June 2021 09:07 AM  |   Last Updated: 21st June 2021 09:08 AM   |  A+A-

Illustration by Soumyadip Sinha

Express News Service

Money does not talk. It screams. When Bob Dylan said that, it was probably a reflection of the times. You can safely assume that it had nothing to do with personal finance. But you can reinterpret that for your relationship with your money. No matter the stage of your life. There are questions and answers that you are seeking for issues that have something to do with money.   

Investing is not about just moving in one direction or doing something just once. It is also telling yourself to anticipate more crossroads where you must make hard choices to shepherd your money. Our lives are always full of situations where we have to do a tight rope walk. ‘Balancing it out’ is a skill useful on this long journey. 

To move anywhere in the wonderland of investments, you need to get to the centre of things first. Your data points are your friends. They guide you to your first steps when the environment around you may not make any sense.   

Share prices are at a record high, but the headline numbers show a weak economic growth ahead. The inflation rate is raising its head, so that could spook passive investors in the stock market. Yet, stock market analysts continue to remain bullish on the bounce back in economic activity and profit growth for businesses. 

To add to that, foreign portfolio investors continue to fancy Indian shares. There is also a lot of private equity money flowing into companies that are not even publicly traded.  Personal finance is more about your mindset and less about anything else. The key to success in investing is in being humble about your abilities. American behavioural finance expert and psychologist Daniel Crosby writes in his book, ‘The Laws of Wealth’, that you must accept that managing money needs teamwork. You cannot do it alone.   

It is near impossible for you to know it all. Even if you do, you cannot be right all the time. You have to start looking at investing and managing your money as teamwork—the first step in that effort to engage a professional advisor. Crosby cites the results of a survey done in the US by Vanguard, a firm that oversees $3.3 trillion in assets. Those using a professional advisor end up getting an average 2-3 per cent higher return than other investors.    

Your money matters are not just about the money you invest. They are also about the way you manage your income and expenditure. The humility factor comes into play here. An ability to learn from mistakes helps. You need to train your minds to save whenever you can and spend and invest in a disciplined manner.   

What does it mean
Striking a balance does not mean merely investing in a balanced mutual fund. A lot of marketing effort gets underway where financial services companies tell you that. They suggest that defence is investing in fixed income securities and attack is investing in equities. However, money affairs are more than just deploying the money in asset classes. The game is first played in your mind. 

Your resolve to save money and discipline to invest regularly is the only way you can create wealth. You can own multiple asset classes directly or through mutual funds. Bit by bit, you need to build resilience to market volatility and ride through cycles. Staying dispassionate about investments is a way to go.   

You have to monitor the performance of your investments regularly. If you notice any underperformance, you must make necessary changes. You must know what works for you and your goals. Your financial advisor may help you up to a point. However, it would help if you equip yourself with the necessary knowledge.

Your spending is the loose end in all of this planning. The way you tell yourself to curb impulse spending mattersa lot. But, saving and investing does not mean giving up on good things in life. It means working for them. You can shepherd your habits towards your spending goals. That is a positive way of looking at spending.

(The author is editor-in-chief at www.moneyminute.in)


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