DO NOT LET YOUR MONEY IDLE
Most of us are constantly reminded that we should put our money to work, protect our future, have enough when we retire and that all this will not happen on its own.However, when it comes to taking action with our money, many of us delay the decision or become reluctant.
Why do we postpone our money decision? There are some well known explanations for this.
First, we think we do not have enough money to warrant taking serious decisions. Whichever life stage we may be at, there is a nagging suspicion that we may not have enough to follow through on a systematic and detailed plan. Second, we are overwhelmed by the choices. Too many options, especially the ones attracting high penalty for making wrong choice, pushes us in inertia. We worry about the regret that invariably comes with having chosen the wrong product. We might have chosen a large cap fund or a blue chip stock when midcaps are performing better.Dealing with the regret is not everyones cup of tea. So we prefer to let our money idle, over having to deal with the regret of making a wrong decision. Third, we dislike the loss of control investing entails. Even with the best knowledge, plans, preparation and pre- work, our choices may turn out to be bad calls. Markets are volatile by nature, and predicting how they would behave in the future is not a science. We like to think that money lying in the bank accounts is at least not losing the nominal value. Fourth, we do not have the patience to deal with the investment process. While technology has simplified the operational aspects of making and investment decision, we still have to deal with the set-up, fill up forms that seek information, sign papers and remember to keep records of all investments.Instead, we postpone our decisions. Therefore, we opt for escapism as an easy route which actually makes your path to accumulate adequate wealth longer. There is no best choice, best route or best time for investing. To invest is to channel your savings towards diversified assets that will work for you over time. We can begin with the basics and work on it with time. There are only four asset classes we should bother with: equity, debt, cash and gold.
The house we own debt free or the EMI for the house is adequate investment in real estate. What we have idling in bank is our allocation to cash. If we have monthly kitty going with the jeweler or we have schemes to buy few grams every year , we have the gold in place too. Our bank deposits, PPF, VPF, EPF and post office savings, these are the debt allocation that is mostly in place. The crux of the problem is the reluctance to invest in equity. One can start investing in an Index fund, in a diversified portfolio of blue chip stocks. When you have balances in your bank account and you do not have time to research, you can simply set that portfolio as a default basic. Chose those with a track record and stable performance history. The benefit of this is that you do not need to worry about the allocation; the managers will take care of that. Another option is choosing SIPs to ensure that your money moves into the chosen products. You can do a one -time setup with your bank and adviser. Investing is an interesting activity, once you begin to involve yourself.It is not as tough as you imagine and your money deserves investment better than lying idle.