Sahayak Gurukul: Common excuses for not investing!

“Mutual Fund Sahi Hai” campaign has ensured increased awareness of mutual funds as an investment option and also highlighted the need for investment. Wherever we go, potential investors corner us and start talking about investments, equity markets performance, and how can they start their investment journey. Some proudly claim that they also have a SIP, mostly initiated by a bank or a friend who is into this business.

Saving or Investment is required for your future, for a rainy day, to achieve your goals, for your children’s education, to ensure your retirement is comfortable and you don’t outlive your corpus.

You have to compromise your desires today for a comfortable tomorrow.

Investing is a great way to turn whatever money you have into even more money. Think about the cash you have right now sitting in a bank account. It's probably earning 3-4% interest in a saving account or a 6-7% in a FD at best. But what if you could generate a 12-15% return on your money, how much difference would it make?

Most people understand the need for investment, but are still stuck in the Holy Trinity of Insurance, FD & PPF or at best in Real Estate or Gold, which may not offer the best returns in the long run. The reasons for not investing in Equity are many.

A further probe on reasons reveals, a set of common excuses, almost like a fixed pattern; on why are they not investing.

I can almost speak out loud the reasons for not investing even before the discussion starts.

1. No money

“I barely make enough money to survive as it is – how am I supposed to invest money?”

“I’ll invest later after I get another raise.”

“ I just barely manage to live from paycheck to paycheck.”

A wise man has said:

In today’s digital age, no savings is too small to invest. Most investments—including deposits with banks, post office, small savings schemes, mutual fund investments and stock market investments—can be made with amounts as low as Rs 1,000.

At our office, One day I asked my 25 year old peon, “What is your dream, what would you like to retire with?” He was prompt in answering, “ Sir, I want to have Rs 1 Crore when I retire at 60.” An ambitious choice for somebody drawing a salary of Rs 10000 a month. On Calculation, we found, to achieve this figure in a 35-year working life, he just needs to invest Rs 867 per month or Rs 367 per month, if he can increase his annual SIP by 10% every year.

Something not difficult, with a little financial discipline, even for a peon.

An important aspect to remember in your investment journey is that there is no way to recover lost time.To illustrate, if you delay saving for retirement by 10 years, then your monthly contribution to reach the same goal value will be three times higher because, over time, compounding accounts for a significant portion of the corpus.

Start early, start small & increase your investment with time. Everything is achievable; if you start early and let compounding do the rest.

2. No knowledge

When it comes to personal finance, perhaps the most common excuse of all is “I’m too busy to think about this” and the reason might really be due to another common excuse, which is “it’s too complicated”.

Personal finance can be as simple or as complicated as you want it to be. Consult a good financial advisor, he will give you the right perspective and make it as simple as possible.

In today’s digital world, many aspects of personal finance can be put on “auto-pilot”, which leaves more time and mental energy for areas where a bit of focused time and effort could make a big difference to your financial well being.

3. Waiting for the right time

“I just want to wait until things become clearer.” Or “The market is too overvalued or I ‘am waiting for the correction to start” are the most common excuses for staying away from the Equity Market.

It’s understandable to feel nervous about volatile markets but waiting for stock markets to become more “stable” before investing often results in missing the return that goes with the risk.

Investors are often guilty of “anchoring” or focusing too heavily on arbitrary targets such as the NIFTY breaking through 12000 or falling under 10,000, but this is an illogical thing to do.

4. It is too risky

My favourite quote is “ Ships are the safest in the harbour, but that is not what they are built for.”

Driving a car is risky, eating street food is risky, adventure sport is risky, being in the Armed forces is risky, smoking is bad, drinking is harmful, wrong posture is bad, but we do all those everyday. We take a calculated risk based on risk return matrix.

Then why do we think so much when it comes to investment?

Many people think cash is risk free, but that simply is not true. After tax and inflation the real value of most cash savings is diminishing each year. An investment return, which cannot beat inflation, will be self-defeating in the long run.

Check out our blog on how Inflation & Taxes are the biggest Corpus destroyers.

https://sahayakgurukul.blogspot.com/2018/09/inflation-taxes-corpus-destroyers.html

When you have consulted a goof financial advisor, made an investment plan, decided a time horizon and have an asset allocation strategy in place, most risk would be automatically mitigated.

5. Bad past experience:

A lot of investors have also had a bad past experience in Equity wherein they have lost money. The reason so many investors get burned by the stock market is that they're in it for a quick profit; they invest money in stocks with the intention of multiplying their money in six months or max an year. After hearing get rich stories or tips, they put their money and even borrow to invest and end up on the losing side.

Check out our earlier blog on “Why don’t Investors make money” https://sahayakgurukul.blogspot.com/2018/10/why-dont-investors-make-money.html

In our experience, apart from the above reasons, most investors are comfortable with what they are doing and don’t want to get out of their comfort zone. They also have a fear of making mistakes, hence they keep on delaying their investment decisions.

Shall like to end with a famous Doha from Saint Kabir, which says:

When the going is good or in your youth, saving and investment is the last thing on your mind, but after you cross a certain age and you see your retirement and other goals approaching, you start repenting, “why didn’t I start at an early age?” If you had started investing earlier, you wouldn’t have to repent today and remember God.

Stop making excuses. All you need to do is find a good financial advisor and start the investing process today. I promise you, in 10, 20 or 30 years when you retire, you’ll be glad you did.

Happy Investing!

Stay Blessed Forever!

Sandeep Sahni