The Most Authentic Guide on Personal Finance and Investments

Words of Wisdom : "No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant." ~ Warren Buffett

The best answer to 'Where should I invest my money'

One of the biggest problems bothering most people is — where to invest their money — safely and profitably.

The solution to above dilemma is not as simple as learning ABC. But rest assured, it is neither as difficult as rocket science.

The real underlying problem is that unfortunately most responses are often wrong and misleading. There is a serious issue of conflict of interest. Unbiased and honest opinion is tragically very (very) rare.

Therefore, to make it easy for you, I have in this blog post, answered the above question five times.

Yes, that's right... five different — but genuine answers — to your one bothersome issue.

Implement all these five solutions and there is no reason whatsoever why you can't become a great (if not the best) investor.

Answer 1.
If you are a regular reader of this blog, you would know of my strict warning.... do not copy others.

Your income, your assets, your liabilities, your time frame, your needs, your desires, your aspirations, your liquidity requirements, your risk appetite, your tax profile are all vastly different from your friends, colleagues and relatives. As such, it is but natural that your investments too have to be different from others. If you blindly do what others are doing, you are sure to invite deep financial trouble.

Since you should invest your money as per your "unique" financial profile only, best investments are a selfie not a photocopy.

Answer 2.
Actually, this answer is where you SHOULD NOT invest your money.

Most people make the mistake of "investing" in insurance policies that combine insurance with investment. These include particularly the traditional insurance plans viz. Moneyback, Endowment and Wholelife policies. 

This is a big (big) blunder. When compared to pure investment products, these policies will give you absolutely pathetic returns. Plus, they are extremely rigid... leaving you with very little scope to modify your investment plan, with changes in your financial profile (which, given the dynamic world, can often happen especially when we are talking of 10-30 years tenure of such policies).

As such, you would be much better off by NOT mixing insurance with investment.

Once upon a time, ULIPs too were disastrous investments. But, of late, with lots of regulatory changes, you can possibly look at a few ULIPs too for investment purposes.

Answer 3.
Actually, this answer is where I have to often advise people to "stop" further investment.

Here, I am talking of investment in property.

A good property would give you capital appreciation. A good property will you rental income. Moreover, this rent will increase year-on-year, thus providing you protection against inflation. Therefore, apart from your house, property is one investment you must have in your portfolio.

Since Indians love real estate, most of them try to own multiple properties comprising plots, houses, shops etc.

However, the problem is that this love for property is highly intense and blind. As such, people end up with too much property in their portfolio. This is bad because (a) you cannot part-sell your property when you need money, (b) it takes time to sell the property and (c) transaction costs are really high when buying / selling property.

So, here my advise would be to keep your asset allocation balanced across different asset classes and not just create a pile of properties.

The most honest and unbiased solution to your investment problem.

Answer 4.
This answer again is where I have to often advise people to "stop" further investment.

Here, I am talking of investment in fixed deposits and gold.

Remember! These investments do not make money. Their utility is restricted to only protecting your capital and giving you regular income (assuming, of course, you don't fall for the fraudulent schemes that give extraordinary returns... to the fraudsters, not to you). 

Moreover, even this so-called protection is only an illusion. Given the high inflation and high taxes, debt and gold will not be able to buy you the same things tomorrow as they do today. So this over-dependence on debt + gold investment could prove to be a big problem. Is blind faith in fixed deposits destroying your wealth?

Therefore, my advise again would be keep your asset allocation balanced across different asset classes and not just create a pile of fixed deposits and gold.

Answer 5.
This is the most difficult investment to convince people to consider... Equity.

Without equity you simply have no scope (or hope) to be financially comfortable... unless you earn vast amounts of income, coupled with having very limited needs and desires.

I know Indians don't have faith in equity. I know many people who have lost money in equity. But I also know many who have made good money in equity. The difference between winners and losers is the difference in their approach to equity investing. What this, therefore, means that you don't have to avoid equities... you have to avoid "wrong approach" to investing in equities.

In fact, I would strongly suggest not to take direct exposure to shares. Instead, go to the stock markets through the mutual fund route. Most of you do not have the Expertise, Capital and Time to beat the fund managers. It would be utterly foolish to believe that you can do a better job than them.

So that's the simple and efficient solution to your dilemma. I am certain that these five straightforward answers, to your most common query 'where to invest my money', will prove immensely beneficial.

Get them right and make your future bright.

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