The Mahabharata, Investments and Lord Krishna

The Mahabharata, needless to say, is one of the greatest epics. Though essentially a narrative of a war between the Kauravas and the Pandavas, it is known to offer valuable lessons on life, relationship and success – the good and the bad; the virtuous and the vile.

One of the excerpts of which I clearly remember from Mahabharata is of Draupadi being dragged into the court room by her hair. Draupadi due to no mistake of her own was embarrassed and insulted.

If we look at the situation closely, Shakuni wasn’t the only one to be blamed. To give it a different perspective, the Pandavas were lured.  They did not assess the risk of losing out. Even Dharamraj Yudhisthir could not see the fallacies in the scheme.

The same applies to Investments

Investors are lured by the high returns offered by Ponzi schemes. They are so lost in their dream wins that they do not assess the risks involved in such investments. Even the most risk averse investors get lured seeing quick and easy money making schemes.

When Ponzi schemes are exposed, millions of Rupees are lost of innocent investors. Ponzi schemes are blamed. But my friend, Ponzi schemes exist because people get lured by easy and quick returns. They do not do a background check. They risk everything for nothing.

Risk comes from not knowing what you are doing.

This applies to every financial decision taken by you or financial products bought by you without assessing the requirements, risk appetite, benefits of product, cost of product, opportunity cost, etc.

For example, Buying endowment Insurance policies, crypto-curencies, tip-based trading, tip-based investment in equity, investing in random / top rated mutual fund schemes, investing without Goals, etc.

the great battle of Mahabharata

The Kauravas had the Ruling King, greater Army and most of the greatest warriors on their side. They had Shakuni as their Advisor.

The Pandavas and their Army were comparitively less in strength. They had just returned from Exile. However, this time, they had Lord “Krishna” as their advisor.

Krishna not only helped them to see the truth but also guided them to the right path by overcoming their emotions. He did not participate in the battle but helped the Pandavas to Win. Krishna was NIMIT (a medium) to their Success. This is the true Role of an Advisor, isn’t it?

In your investment journey, you will take many decisions. Some of these may not be beneficial / in your interest. Even with lesser resources you can Win great battles, when you have Krishna by your side.

Happy Janmashtami!

CA Nitesh Buddhadev
CA Mitsu Buddhadev
Nimit Wealth Management

You may reach out to us at info@nimitwealthmanagement.com for any queries, suggestions or feedback.

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Thoughtful Thursday #09 Who Moved My Cheese?

In this series of Thoughtful Thursday , we have covered Importance of Insurance, Inflation, Financial planning,  Goal based planning, Difference between Savings and Investments. We hope that you all are enjoying our blogs and have subscribed to it.

When I meet some of my clients and they are skeptical about investing in new products  / financial markets, a glimpse of the book Who moved my Cheese? flashes in front of me.

The story is about four characters, 2 mice (Sniff and Scurry) and 2 little people (Hem and Haw) who look for Cheese every day. One day, they find that their regular stash of cheese is gone! The mice and little people respond very differently.

There are mainly 4 lessons one needs to take away from story. These lessons apply to our Investments too..

Take away 1 : Change happens

Just like we have moved from Landline to Smart phone, from hand written letters to e-mails and so on.. Our Investments also need to change. In the earlier days, investments in Gold, Silver, Fixed deposits, PPF etc. were considered as the best investments. Today, these assets do not make good investments. Let’s see the returns from 4 assets classes for the past 39 years.

Take away 2 : Anticipate change

Those who Anticipate change are likely more successful than others. Similarly, in our financial journey we should always be in the quest for knowing new things and anticipating changes. Those who invested in Equity in the earlier years have gained much more than others. Click here to see the value of Rs 100 invested in the Share market in 1979.

Current Value of Rs 100 invested in 1979 is 38690 (Aug 30, 2018).

Take away 3 : Monitor change

Be alert and keep sniffing your cheese to know when its getting old. Which in our financial journey means that we should keep checking the market and discussing with experts in the field about new products, opportunities, etc. and keep abreast with changes happening in the industry and economy. One should not fill it, shut it and forget it.

Take away 4 : Adapt to change quickly

If you are not one of those who could anticipate change, you could at least be the one to adapt quickly. Currently, the mutual fund penetration in India is only 11% whereas for developed countries its way higher.

As seen in the table above, India has a long way to go in mutual fund market and the earlier you enter the market, the better it is.

Currently in India there are only 2 crores Mutual Fund Investors out of the total population of 134 crores.

As Warren Buffet rightly said.. “What the wise do in the beginning, fools do in the end”

It’s Never too Late to Start..

CA Nitesh Buddhadev
CA Mitsu Buddhadev
Nimit Wealth Management

You may reach out to us at info@nimitwealthmanagement.com for any queries, suggestions or feedback.

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Busted! 7 Personal Finance Myths That Have No Truth to Them

“Humans live through their myths and only endure their realities..”

WHAT IS MYTH..?
A traditional story, especially one concerning the early history of a people or explaining a natural or social phenomenon, and typically involving supernatural beings or events (This is what Dictionary speaks)
In short MYTH means a widely held but false Belief or Idea..
 
Many MYTHS prevail in society and the topic of “Personal Finance” is no exception.
Below are a few MYTHS on Personal Finance and the REALITY..

 

Myth 1 :
Financial Planning or investment planning means less spending i.e. becoming miser and hence less enjoying our life.
Reality :
Following a financial plan or investment plan means making guilt free spending and hence enjoying our life more.
[ When we first make necessary investments and then spend… then that is called ‘guilt free spending’.]

 

Myth 2 :
Paying premium for term insurance (a life insurance policy where if nothing happens to policy holder, nominee gets nothing) is a wasteful spending.
Reality :
If we live up to the age of 65 years, then Investment [MF, Shares etc] will take care of our family’s financial future. And if not, then TERM PLAN will.
Insurance is not an investment product; it is a protection instrument.
Buying a Term Insurance is like buying a Fire Extinguisher.
1. You wish that you will Never have to use it.
2. You don’t ask for a refund when it expires.
3. If need be it will save you and your family in time of difficulty.

 

Myth 3 :
There are many investment products available in the market – some are good and some are bad. We should always invest in good products.
Reality :
An investment product can never be good or bad, it can only be suitable or not.
Some investment products can be suitable for short-term goals, but not for long term. The opposite is also true – a product which is perfectly suitable for long term goals, can be a horrible choice for short term goals.
Hence we must always look for ‘suitability match’ when deciding on a product.
Myth 4 :
Like shares, fixed deposit, property or gold – mutual fund is also an asset class.
Reality :
Mutual fund is not a separate asset class as such. It is actually a ‘well-managed container’ which can contain different asset classes in it.
There are mutual funds which only invests into certificates of deposit. Then there are funds which are known as real estate fund or gold fund. And of course there are equity funds as well and mix of Equity and debt i.e Balanced Fund.
So, mutual fund gives you the facility to invest into different asset classes through it.

 

Myth 5 :
If I want to secure my retirement, I should invest in a Retirement Plan or Pension Scheme. Similarly if I want to secure my child’s future, I should invest in a Child Plan.
Reality :
While investing for a goal, name of the goal is never important. Instead nature of the goal is important – like after how many years the goal is due etc. This is because –  mathematics only understand numbers, not names.
Never go for attractively named investment products. Instead always go for simple, generic, all-purpose products and tag it or link it to a goal by yourself.
Packaged investment products are often found costly, illiquid and restrictive..

 

Myth 6 :
If I come to know of someone who has earned good return by investing in a particular product – my job becomes easier. I should simply invest in that product.
Reality :
Unfortunately it is not that simple. Many things (in regards to finance) of the other person may not be same as yours. Such as – financial background, current assets and liabilities, dependents and their age, income – expense, nature of job / business, liquidity needs, insurance and so on. It is almost impossible that your situation will be exactly same as of the other person.
Investment should always be made keeping every aspects in mind. It should never be made in isolation or adhoc. Personal finance is after all – ‘personal’.

 

Myth 7 :
I have made investments as required. Taken adequate insurance also. I have done my part. Now I am feeling happy and relaxed.
Reality :
Congratulations for whatever you have done so far! But sorry to say – that is not enough. If your answers to all the below 3 questions are not ‘Yes’, then you have reasons to worry:
1) Have you kept all your policy documents, statements, certificates – physical or digital – systematically  in one place so that your spouse or children can find those quickly without your help?
2) Have you kept right holding patterns in all your investments, made nominations or prepared a Will?
3) Are you reviewing your investments and insurance at regular interval..?

 

Compiled and Edited by
CA Nitesh Buddhadev – NB
Nimit Wealth Management
nitesh@nimitwealthmanagement.com
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