Let us play a game – in school and college we used to call it True or False.

Q1. If a person is well educated he will be good at managing money.

Ans. FALSE. Completely false. Why do you expect a doctor or an engineer to be suddenly good (or bad) at managing money? No, there is no connection between education and money management skills. No co-relationship has been observed at all.

Q2. If the person is a CA or an MBA (finance), he or she will be good at understanding personal finance.

Ans. FALSE. A degree is normally obtained during your young age when you are seriously wondering what you will do in life. Most degrees including CA and MBA finance do not equip you with personal finance knowledge.

Q3. If a person works in financial services he or she will be good at understanding personal finance.

Ans. Absolutely untrue. If a person works in Marketing or Sales he/she says so many things about their own products, that they start believing it themselves. If they are in HR, Accounts, Operations they normally do not understand compounding, SIP, long term, patience, etc. so they keep their money in bank fixed deposits. So again not true at all.

Q4. If a person is a Wealth Manager he can understand markets so they can manage their own wealth.

Ans. Not at all. Being a WM in a bank means you have sales targets, NOT WEALTH targets. So he/she is used to churning, selling products with the highest margins…if they end up buying what they are pushed to sell the chances are it will be financially ruinous for himself/herself.

Clearly personal finance is no rocket science. The fact that it is simple does not mean it gets done. Many people who do it themselves also ruin themselves because of overconfidence or choosing the wrong adviser. I know people in all the categories mentioned above, but will not name them – some of them may even be reading the blog.

more to follow…………

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  1. Could not agree more. A classmate of mine from school – with the ultimate Indian status symbol in education – IIT and a foreign MBA makes such huge losses in the equity markets that it is unbelievable. In fact he is now not in the market – he bailed out at 9000. As if on cue the market went up. He says the markets are not properly run in INdia. If he has ever made money it is because one of our classmates runs a successful PMS business – and this fellow took one tip from him. He still would not hand over his portflio – I think he feels superior to all of us and frustrated that the others are better than him in wealth creation :). I think that hurts.

  2. As Buffett (despite the criticisms on him recently) says, one only needs a little more than average IQ , but temperament is the differentiating factor, which plays a vital role in Markets. Add to that – lot of reading, tendency to veer away from herds, acting decisively on opportunities.

    OR simply do SIP on well chosen funds 🙂 .

  3. respected sir,
    Iam practising chartered accountant, one of claint is paying Income taxe regularly and filling income tax return in the month of first week of april every year.I never understand this but after due inquary it is come to understand that he is gurantor to many small borrowers and used to charge rs 10 to 25 thousand as fees for to become gurantor he is just 4th standard but still showing Rs 400000/- income.as conusltation fees received
    so it is true that education and money has no any relation

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