Is your investing similar to your eating?
Let us see. If I were to call in a team of about 40 people into a class room and ask them a few questions…let us see what kind of answers we are likely to get. Then later on we will see why.
1. What kind of food should we eat?
A: Fresh food, lots of greens, with low salt and nutritious, preferably no oil – or minimum amount of oil.
2. How should you eat?
A: we should have 3 meals a day, breakfast being the most important meal. This should be followed by a heavy lunch and the dinner should be light.
3. How should you eat?
A: One should eat with the full family, sitting down at the table, the TV should be off, and the food should be freshly cooked. It should have 50% greens as in a salad and the remaining food should have been made about 2 hours before eating time.
We should chew our food properly give it a lot of saliva and ensure that it is swallowed only after chewing.
Now let us see what happens when we invest what is the process that is followed:
1. Where should you invest?
A: We should invest in products that we know well and understand properly.
2. Do you understand how the equity markets work?
A: No. Not really, especially if you are going to ask us questions if we say yes!!
3. How often should you invest?
As often as we can, as much as we can, and keep it there as long as possible.
4. Should you do proper asset allocation?
A. Yes sir! we should invest in serious amount of equities when we are younger, but by the time we are 70 years of age we should be in about 50% of debt and the balance in equities.
Now let us see what happens in real life.
You are sitting with a pretty representative from a bank and she is doing the following sales:
Sir this is a fantastic life insurance product….
You: Yes but is it ULIP? I know subramoney says I should not buy ULIPs
RM: No sir, this is not ulip. This is a classic endowment with a limited paying term. You need to pay only for 10 years and the policy will be valid for 20 years. So sir since you are 49, you will pay till you are 59, and the amount will be yours at your age of 70.
You: So this is like a retirement plan
RM: No sir, this is a life insurance plan – and hence the whole amount is tax free in your hands and that too at the age of 70 years exactly when you need it.
In case of food it is even worse. Imagine you are standing next to a paani puri stall, and you call your ‘food and health planner’
You: Sir I am hungry what should I eat?
Adviser: exactly what you eat at 5pm every day: some sprouts and if you are still hungry, pick up a fruit.
You: Ok sir!
then you eat the Paani puri.
Sadly in life you will pay the price for what you do, NOT what you say in a classroom. That is the difference between an Idiot and a Chatur!!
So do not just parrot the ‘good things of life’. If you do it, you benefit, if you do not do it, you do not benefit.
Does it require a PhD in behavioural finance to tell you that? well I do not have a degree so I do not really know….
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