Be Your Own Investment Advisor
Business Today|August 08, 2021
NOBODY UNDERSTANDS YOUR SITUATION BETTER. SO TAKE CHARGE OF YOUR FINANCES, NOW
AVNEET KAUR

Spend each day trying to be a little wise than you were when you wake up,” the quote by legendary investor Charlie Munger tells us the importance of knowledge and learning. While there is a need to seek professional expertise when it comes to investing, divorcing yourself from the process completely can be injurious for your money. You should be able to perform basic supportive tasks on your own. For instance, you need not call your financial advisor for an account statement of your mutual fund. Get more involved in the planning process itself. Do basic calculations such as the amount of insurance you will need. After all, it’s your money and nobody understands your financial situation better than you.

Further, concealing your financial information from your spouse or other family members might be a bad idea! According to data available till 2018/19, ₹64,000 crore lay unclaimed with financial institutions. The number would have gone up by now. There are inactive accounts as well. So, to ensure your hard-earned money does not land up in the list of forgotten accounts after 15 or 20 years, take charge of your investments, now.

There are three ways to achieve financial independence — be active during the planning stage, implement your financial plan and make provisions to transfer assets to the next generation. The idea is not to remove financial advisors from the process, but to get more involved.

“People get so engrossed in making money and investing, but most of them do not care about succession planning,” says Suraj Malik, Partner, BDO India LLP. “I always tell them to be more involved in their financial planning to ensure their wealth creation efforts are not wasted and the plan is well structured to meet their family specific requirement,” he adds.

Why do you want to you invest, where do you want to invest, how much you want to invest, how much investment is needed to attain your goals, how long do you want to invest, what is your current financial status — in the first stage you should be able to answer all the questions. Prepare a roadmap with or without the help of a financial planner. He/she will ask you to fill a detailed questionnaire to ascertain your financial condition, risk tolerance and goals to develop a suitable investment plan. Some Do-It-Yourself (DIY) calculations might help as well.

Calculate Right

Doing basic calculations is no rocket science, but it will help you go miles in your investment journey. Most of these calculators are available online for free. Before you start playing with numbers, remember to work with actual numbers. Big ones such as a target corpus of ₹50 lakh or ₹1 crore might look impressive, but may not be enough to take care of your long-term goals. What seems a big number today may not be that big a deal in the future. Inflation is likely to make it difficult to buy the same amount of goods at the same price. A look at a few essential and basic calculations that will help you plan right:

Future Value (FV): What will be the value of your goal after 15 or 20 years? The future value calculator helps you understand the future value of a goal based on its current cost and inflation.

Assume that you want to save for your child’s higher education after 15 years. So, if a particular course is priced at ₹5 lakh today, how much will it cost 15 years later? You will need to factor in the inflation number to reach the FV of your child’s education. Here’s a formula to help you do it:

FV= PV (1+r/100)^n

FV= Future value of your goal

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