Make your money work for you

We slog for money, but do we make our money work for us? To create wealth, it is not enough to earn more, but it is also important to invest your money judiciously so that it creates wealth for you. With a market flush with financial products that suit different risk appetites and financial needs, all it takes to set out on the path of financial freedom is careful analysis and planning. So if you aren’t setting aside money for investment, or if your savings are sitting idle in your bank account, it’s time you make them work for you.

Analyse your goals and plan your investments

Your financial well being is an important determinant of your overall well being and hence financial planning deserves more than an ad hoc approach. Your financial needs and your ability to take on risk determine the right investment choices for you. I have seen people invest in a product because someone they knew did, or because of the product’s compelling advertising. Often such impulsive decisions take you away from financial freedom rather than closer to it. So if you haven’t given a thought to your goals yet, now is the time.

Consult a financial planner

Sound financial planning requires you to understand your goals, risk appetite and financial products available, and needs careful monitoring. Often people don’t have the time necessary for doing so, or the essential understanding. If that is the case with you, don’t just give up – choose an experienced financial planner who can help you wade through. Your financial planner will not only help you create a diversified portfolio suitable for your needs, but can also help you restructure and rebalance your portfolio periodically, in tandem with your changing needs and market conditions.

Invest for the long-term

Investments in equities and mutual funds are proven to deliver high returns in the long run. Often investors take short sighted view of investments and make purchase/sell decisions based on immediate market swings. Though volatility is the name of the market game, it has been proven historically that in the long-run, a well managed investment avenue will deliver superior returns. An investor who stays invested in a good stock or scheme for the long-term is likely to earn more than one who pursues quick profits.

SIP is the way to go in mutual funds

Investing in mutual funds through SIP allows you to benefit even from a volatile market. A recent article in The Economic Times says that while top equity diversified funds have returned 16-18% in three years, SIP investors have earned returns in the range of 25-28% (investing into the same funds) during the same period. With most fund houses allowing investors to invest amounts as low as Rs. 100 per month through SIP, even those with small investible surplus can begin their mutual fund journey.

Stay away from bad debt

Nothing disrupts your financial well being like a huge credit card debt or those personal loans you took to indulge in little luxuries. While good debt like a home loan or an education loan are essential to achieve your and your family’s long-term objectives, bad debts only push you into a vicious cycle of high interest payments. Use your credit card prudently. Money wisely spent is money earned.

The principles I have shared are not some breakthrough, novel strategies, but simple financial wisdom that have been known for long. They have worked well for me. Sometimes all it takes to get back on track is a gentle reminder and a signpost. I hope these signposts will help you successfully tread your journey towards wealth creation.

Disclaimer: All views expressed in this blog are my personal and in no way express or implied, of that of the company I work with, or have worked with in the past.

Ranjan Das, Managing Director of SAP India, died of a heart attack recently, at the young age of 42. His friends and family say that he was an unlikely candidate for heart problems, as he exercised regularly and had a regimented diet. At almost the same time, Ravi Mohan, Executive Director with Reliance Industries (RIL) died of a heart attack at 52 years while on a walk along Marine Drive. Touted by Mukesh Ambani as “one of the finest financial and risk management minds in the world,” he was a leader with an inspirational career.

Both these men were trailblazers professionally, who met success early in their lives. Perhaps their careers required longer hours and greater levels of stress than those in mid-level management, simply because they were more driven individuals. Notwithstanding their high success rates and consequent vigilance against failure which could have been the cause of their early demise, the stress levels in these two sectors have also been particularly high in the last 18 months. Since the markets crashed in late 2008, these two very critical industries have been placed under enormous strain. The recoil reaction, after the easy promotions and bonuses for five years prior, has been felt by professionals in this field.

The long hours and frequent travel required by these industries may lead professionals to become more susceptible to stress and other health related problems. There could be several instances below the radar of people with severe health issues which have gone unnoticed – or even worse, waiting to happen. As a finance professional myself, I see this vulnerability to high levels of stress daily, and this is an area of concern to me. As such, to stay sharp enough physically and to make sure that my mental faculties are geared to take up any stress, I am running the 6 km Dream Run in the Standard Chartered Mumbai Marathon 2010 on the 17th of January. To read more about the marathon and to support my cause, please click here.

While I am not a health professional, I would like to add my two bits for my readers. If you are in either of these professions or in any high-stress job, there are some ground rules that you can live by to ensure a well-balanced life.

• Remember to always have health checkups, eat healthy and live a regular disciplined lifestyle. Nonetheless, the stresses of your profession can overwhelm you with long working hours where one is mostly stationary, as well as frequent high-pressure situations which require fast turnaround times. In such a job, stress is part of the parcel and cannot be wholly avoided. Yet one must learn to switch on and off, and observe your work from a detached and logical perspective. This will not only help you preserve your health, but also help you keep work stress limited to the office.
• Another factor to consider is the Happiness Quotient (HQ) at your workplace. One might scoff at such a feel-good statement, but it is a proven fact that organizations with high HQ attract and retain the brightest and more committed professionals, and thereby have higher productivity. As a manager or team member in any company, it is imperative to organize activities for the team to relieve stress and build a community of owners. Activities might include some sports activity (certainly not a run to the nearest bar!), an office quiz, a movie outing or a drawing competition. The focus in organizations should move from IQ (Intellectual Quotient) and EQ (Emotional Quotient) to HQ (Happiness Quotient), which is an ideal balance of the two.
• Finally, I would like to leave you with a word of caution, especially for those of us in Mumbai and in other cities who are daily participating in the rush of the throng. More and more, we seem to be falling into the western mindset of leading individualized lives; both these men unfortunately collapsed when they were out alone. One of the advantages that our forefathers and parents have enjoyed is the pleasure of more communal lives, which helped guard them from mishaps as well. An example of the power of communal gatherings that is still evident in Mumbai is the laughter club. These groups consisting of people from all walks of life meet at dawn and dusk and enjoy the health benefits of laughter. There are few better stress busters than relaxing with a friend while going for a walk or taking a group yoga class. This is soothing to one’s nerves and will help take your mind off work.

India Inc. will certainly miss these professionals, but we can learn some key lessons from their deaths as we have from their lives. We can ensure that we work in a well-balanced environment with adequate breaks, spend time with family and friends, and maintain a good health regime so we can work longer, harder and better as we aspire to greater heights.

Disclaimer: All views expressed in this blog are my personal and in no way express or implied, of that of the company I work with, or have worked with in the past.