Hesitating to invest

Let me start with the story of Edwin C Aldarin, also called as Buzz Aldarin. Do you know that he was chosen to be the first person to step on the moon as he was the pilot of Apollo mission? The story goes like this, when the spacecraft landed on the moon, they received a command from NASA center “Pilot first” Aldarin hesitated and not for long but a few seconds, but in the meantime NASA sent the next command “co-pilot next” and rest is history. Neil Armstrong become the first person to step on the moon. This happens to us in everyday life. Nobody remembers the person who comes second. Go through history, it is always first person to …. Etc. All of us the potential, but we hesitate. The only thing that stops us is our fear.

All of us know that equity gives us the best returns, but then we have heard so many stories of failures or have the fear of the unknown like Aldarin. We are even scared to ask for help. Is there any player who has succeeded without a coach? The reason they go to a coach is to bring out the best in them. Every person has the talent, but then the coach gets the best out of them. In investing also, we also fear or hesitate, because of the fear of losing money, but this fear will get us the next best think. Aldarin had all the qualifications and training, but he hesitated. Why are you hesitating, if you are not sure, get hold of a financial advisor, who will help you remove the fear? With the current market volatility there are a lot of opportunities, do not hesitate go out and invest. There is money to be made, be the first.

Rebalance your portfolio

One of my clients had a very large portfolio with major investments in Real Estate, Fixed Deposits and Insurance. He even had some money lying idle in his saving bank account waiting to pay his son’s fees which were to be paid a year from now. As per the government and RBI, inflation has been low and would remain low for some time, so they think the interest rates should be low and hence they have kept reducing the interest rates so that industry would take advantage of the low interest rates and start investing, whereas we would stop saving and start spending. This would bring about demand and so the economy would rise. But how does this impact my client? Now when he wants to invest his money lying in the saving bank account, in fixed deposits he would get a lower interest rate and when his existing fixed deposits come for renewal they would also be at a lower interest rate.

The era of high interest rates is gone. One option would be to go for debt mutual funds, depending on the time frame for which he intends to keep his money, he can decide on long term debt funds, medium term debt funds or even short term debt funds. The returns would be definitely higher than the bank FD’s he has and they will be tax efficient if the investment period is greater than 3 years. Net, the return after tax would always be better. This is the time to have a relook at your portfolio and decide if you still need to keep those FD’s. As regards insurance, don’t use it as an investment option at all. Returns from real estate depends on when and where you have invested, if the return has not been good, have a relook at it both from the investment and tax point of view. So rebalance your portfolio now.