Delaying investments can cost you DEARLY

When it comes to decision making about finances and investments, most of us like to postpone it to some other day. This stands true not only for decision making about investments but also for evaluating existing finances.

Yes, I agree. Even I have not thought of investments as of now. Somehow I feel it is not my cup of tea and anyways my money is safe in bank, I can always invest it at a later date when I feel the time is right.

Unknowingly, you are ignoring an important fact that there is a REAL cost which is associated with the delay in investments. Most of us tend to get away with this as there are no immediate visible effects of these delays. Nor we proactively calculate the potential damage it can cause. 

Your money laying in savings account gives you 3%-4% returns whereas it can give you 12%-14% if invested in proper channels. Imagine the difference a 9% returns can make on INR10,00,000 over a period of 20 years. As per compound interest calculator – it comes to INR5,604,410

You realize this only when you need funds for a certain life goal. Then you realize that had you invested your money at the right place, you would have got much better returns. Be it while buying a car, buying a house or for kid’s higher education or a wedding in family. If you keep delaying, you need more amount as investment at a later stage to achieve desired funds. The early you realize this, better it is for you. You must know how to use the magic of compounding to your advantage.

What could be the possible ways to avoid this delay and properly set the investment cycle?

There could be many things responsible for the delay at your end. You first need to identify the problem which is withholding you. It could be

• A large sum of money laying around in savings account
• Multiple savings accounts you have opened over the years – each with certain minimum balance and other service charges
• Some investments got matured, amount in savings account but no re-investment done
• Your own belief that “this is not the right time to enter the markets”
• Not taking any decision to exit from certain bad investment
• Not nominating anyone for your accounts/ investments

Your reason for postponing investments can be many

• You are too busy and you do not have time to build and manage your portfolio
• You think that you do not have enough money to start investing
• You are afraid of making some wrong investment decision and you fear losing money
• If someone suggests some investment product and handover the brochure, you find it too technical to read and it seems decoding the product attributes is too complicated job for you
• You are comfortable with what you know that is you have done some fixed deposits as they are simple and easy for you to understand. For this reason, you do not think beyond fixed deposits.

Rightly said, looks like I am also holding some of my investment decisions because of the points raised above. Now tell me how to break ice ad keep going strong on investment front?

You have to overcome your fear. To learn swimming, you need to enter the waters. You then need to test the depth of the water and then swim where you are comfortable. So

• You think that you do not have enough money to start investing – Investments can be started with an amount as low as INR500 per month. If you keep thinking that you do not have enough money, you will never be able to start investments. Remember – “The journey of a thousand miles begins with one step.”

• You are afraid of making some wrong investment decision and you fear losing money – Start small. Start with products which gives you fixed returns and keep reading about investments. The only way to overcome your fear is knowledge about investment basics

• If someone suggests an investment product and handover the brochure, you find it too technical to read and it seems decoding the product attributes is too difficult job for you – Do not enter into complex investments. Start with basic and simple products which your bank offers over the counter like fixed deposits, recurring deposits etc.

• You are comfortable with what you know –  To diversify and to make an optimized portfolio, you need to add different forms of investments at some point of time. Even if you are comfortable with fixed deposits only, you will still have to gradually add mutual funds, stocks, commodities etc in order to make your folio slightly more stable and to give you returns which are above the market inflation rate.

You can take few small steps on how to start investments and be consistent with it

• The key is planning – You must spend some time in evaluating your current status, identify the problems and plan the corrective actions based on your findings 
• Study a little bit – Read finance blogs, magazines, read economic times and gain some basic knowledge about investing, mutual funds, equity markets, portfolio diversification etc.

• BUDGET – This is the most important step as it will tell you how much investible surplus you have for investments month on month. A simple budget can be made using this link

• Automate investments – Do not wait till the month end to invest the leftover amount after expenses from your salary. Learn to pay yourself first. Your monthly investments should be done within the first week of the month. With the budget thing, you will know how much investible surplus you have for a month. Plan investments based on it and automate your investments. 
• Review your investments every quarter – If possible, take stock of your investments every month. This will not only motivate you but also will keep you on top of your investments. You will have figures handy about your exact net worth, liabilities etc based on the monthly data you compile. 
• IF NOTHING WORKS, hire a financial planner – Take professional help. But do involve yourself in planning and execution so that you can learn and you are aware of what is happening with your money. Afterall it’s your money. But make sure that you hire a good professional, not the local insurance agent who is always eager to sell you insurance policies.

We at wealth samurai always believe Your money is your money – it is you who has to take care of your money. None else is more interested in growing your money through investments than you. Whoever shows interest will have his/her personal interest attached in helping you. So take charge of your money, your financial investments, your budgeting and work towards achieving financial freedom

Happy Investing !!!