Are you one of those guys who has trouble making money decisions? Join the biggest club on Earth! I have some good news and some more good news for you. The good news is that everyone is confused about one thing or the other – that is a certainty! The more good news is that just as courage is not the absence of fear, clarity is not the absence of confusion. Hard as it may seem to believe, clarity is the acceptance of confusion because confusion can never be removed.
Before we start, my book with PV Subramanyam, You Can Be Rich Too is available at 50% discount (Rs. 198) for short periods of time this month as it was among the top 25 bestsellers in the last 3 months.Grab it now!
There is a difference between, “I don’t know which product gives the best returns” and “I don’t know which asset allocation to choose for my goal”.
Confusion is bad if we did not know what we are looking for (the former). Confusion is good, natural and healthy if we have trouble making choices after understanding what our requirement is. The two situations should not be er.. confused with!
Spending a reasonable amount of time researching product options and reviews for a specific need is quite healthy. However, no matter how much we investigate, when we finally click the ‘add to cart” and “buy” buttons, we must recognise that we are taking a chance.
Be it a smartphone, LED TV, a holiday, a stock, term life insurance, or a mutual fund, we are always taking a chance. Our experience with it can be better than the ones we studied or worse. This is true if we studied options for a minute or for days.
Take the case of a term life insurance. Studying or comparing products will not eliminate confusion. Some people think asking opinions in a forum will make them feel better. One guy would say company ABC is great (how is another matter) and another would she had trouble with the same company. Who do we trust?
We have this tendency to take a bad review more seriously. The truth is, if we wait long enough or ask enough people, every product will have unsatisfied customers.
Since we are here to buy a product and not do research with customer experiences, we will have to stop looking for opinions and take a chance at some point.
Most of our opinions are baseless – before and after we buy.
- Claim settlement ratio is not a probability
- LIC rejects 1000s of policies each year.
- Insurance is a personal product and no two claims are the same, even if the policyholders died together.
- A smooth purchase does not mean smooth claim settlement or vice versa.
- A 120% return after 6 months SIP does not mean you have invested in the best fund
All we can do is to buy a term policy that we can afford and from an insurer that we are “comfortable with” (this often means an irrational affection). If we have no preferences, to begin with, here is how we can choose a term life insurance provider in 30 minutes.
Fact remains that the confusion can never be eliminated satisfactorily and that we are always taking a chance. And in the case of life insurance, we won’t be around to find out if we made the right choice.
Clarity, or in this case, eventual decision making is not the absence of confusion, but its acceptance. How well we manage money is decided by how well we manage our confusion. This is true for any product – choosing a mutual fund/stock, reviewing a fund/stock etc.
The “am I doing the right thing by choosing this?” dilemma may go away in the case of a phone or TV when we see it work for while. It is unlikely to go away in the case of financial products.
The trouble is, a “successful” choice can make us forget the confusion we felt earlier. When we tell that world, “we had a good experience with X or Y”, it would help to point out that we took a chance and could not have predicted it. Perhaps that will a beginner some confidence to embrace confusion.
Ps1. Everyone is confused, including financial advisors. They just cannot afford to say so.
Ps2: If you are confused after reading this post, mission accomplished!
New Delhi DIY Investor Workshop April 23rd 2017
You Can Be Rich Too With Goal-Based Investing
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