An investor’s mid-life crisis: the dilemma of delayed financial gyan

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Many 35-40+ investors face a crisis: they realise need for equity in the portfolio but have a huge fixed income corpus. In this guest post, Ananth, a member of FB group, Asan Ideas for Wealth discusses how one can handle this problem.

Ananth made this important observation in response to this video: I started investing late, can I catch up? Can I achieve my financial goals? When I requested him to write his experience and thoughts, he immediately responded. I am delighted to have another reader story after a long time (follow the link to check out the archives). So now over to Ananth.

An investor’s mid-life crisis: the dilemma of delayed financial gyan

The dilemma of delayed onset of financial gyan: An investor’s mid-life crisis

So life is cool, slowly saving one’s salary in FD, PPF and traditional investment products. You might have dabbled a little in mutual funds because people say it is good. You are in mid-30s, early 40s and then it hits you: one of your friends adds you to a financial literacy group, or gives you a nice “Personal Finance For Dummies” book.

Initially, you are reluctant: these guys sound like experts, but do they really know what they are talking about? Then you learn stuff and are horrified with the gargantuan, horrendous investment mistakes you have made in the past.

Bulk of your investments are parked in FD, NSC, PPF, a small amount in couple of Mutual Funds Regular Plans with high TER that your banker\advisor\distributor suggested, maybe you own 2 houses, maybe 1 plot of land on outskirts you have not bothered to check in last 5 years. You realize 90-95% of assets is under FD\Real Estate\others which might just barely beat inflation, if lady luck smiles.

You do the math and take the first big step: Accept your mistake & your illiteracy. You realize the biggest mistake of all is financial illiteracy. You repent why schools did not have a subject in 10th and 12th that teaches Personal Finance, a subject that details all available investment vehicles, pros & cons of each. You kick the system asking why this subject was not in syllabus instead of Chemistry that mostly was water over head, anyway. You then realize the system is not at fault: the one who has lost money – you –  the fault is with you and you alone.

Realization dawns and you now realize there are 2 paths: go to a fee only advisor. Or become DIY. (One more realization dawns: this is too much of a preamble).

Cut to the chase, you become a DIY Investor<~ this post is about DIY folks.
You know you are starting late in the game, and you must invest aggressively in Equity MF to have reasonable Asset Allocation.

And here comes the dilemma. Since most savings are in FD, and maybe because you liquidated Real Estate, Insurances, etc: there is a significant corpus. Should you go SIP route or invest a lump sum or break-up lump sum into parts?

You know it does not matter in the long run: both SIP\LumpSum give similar returns. Though brain argues for the lump sum route, with glimpses of all the empirical studies you have read on SIP vs LumpSum: the mind voice does not yield. This is a serious problem.

What if market tanks tomorrow?  What if 2008 happens next week?

Theory is fine, would I be okay with seeing -15% on my portfolio 1 month after investment?  This is the bulk of my life savings. Am I playing the lottery at 30-40? Why didn’t I focus on financial literacy 10 years before?

This is a big problem, and no amount of financial literacy can quench the monkey that is a middle-aged man’s mind.

How I overcame this difficult pill to swallow

(1)  Start small.  Experience one bull\bear cycle. It does not matter what all you have read and understood. It does not matter what all the experts you are following say and prove with empirical data. The money is yours. The first time you see Equity MF in deep red gives a sinking feeling in the stomach. Need to see the deep Red once, and how it recovers to green. This gives you hands-on experience and confidence, and from that time onwards it gets so much easier to be dealing in a lump sum amounts in equity MF.

(2) You do your SIP (or you break the lump sum into small parts) and investing from Nifty @ say 10,500. You continue your plan till Nifty reached 11,500. Then market tanks to 10,200 <~ you MUST go lump sum.
But the mind monkey says wait till 9,200. These are the times where the brain needs to bash the mind monkey and keep him in check.

Why? Reasoning being you were happy to invest at Nifty 11,500. Nifty @ 10,200 is a practically a gift handed to you. If you want to quell the monkey mind-voice, decide you will not invest for next 6 months. That 6 month’s budget can be done as one shot lump sum now @ Nifty 10,200 <~ this thinking has always worked for me.

(3) Talk to your close friends and near & dear ones who are also a noob like you were on personal finance. Once you tell them to enter in relatively safer avenues like Balanced Advantage or Hybrid Aggressive, you are also pleasantly surprised with the amount of increasing confidence in your voice.
And you also get shocked with your dear friends having 3 houses and paying home loan, but ready to invest only Rs.1,000 per month SIP and that too in Balanced Advantage. This puts your asset allocation in perspective and you realize maybe it is not too late for you.

(4) Constant learning and unlearning. Though this is true for everyone, this post is about middle aged folks, who already are matured and seen few things in life. So learnings for you will\should be multi-fold compared to 20-something fresher who has also just invested. Because learning is quick for you, unlearning should also be equally quick!

(5) Drop the shame.  I *KNOW* this for a fact: many people in this boat do not ask in financial groups openly thinking it is a shame. Drop the shame, shame puppy shame feeling, you are middle-aged now! There are people ready to help you, DIY fraternity itself is so small, other DIY folks know this and there is an unspoken brotherhood about DIY fraternity. But you must drop the shame and ask

(6) Once you ask for help and guidance: ignore 90% of the people who respond. Pick 1 Mentor, maximum 2. Listen only to them, but the decision to make is only yours. The amount of generic gyan is staggering and will surely feed the mental mind-voice money. Learn to differentiate wheat from chaff and be smart about whose advice you should take seriously, and the vast majority you must ignore.

End of the day, middle-aged folks where financial literacy gyan dawned late: it is an opportunity lost. Cannot replace it. Gone. Zilch. Nada. You did not invest in markets when Nifty was 6K because of illiteracy. Nothing will bring it back (recession might, but that will mean job security issue – a bigger problem! So do NOT wish for Nifty 6K!!)

So what we can do now?

There is only one solution. TINA = There Is No Alternative.

Where else are you going to invest, for best chance to beat inflation for your retirement years? Continue in FD, Liquid funds? Have to take the plunge into Equity MF with proper asset allocation sooner than later.

You must make up for lost years, start investing as aggressively as you can, as much as you can. It is not too late (unless you are closer to 50). You can still reasonably achieve the retirement corpus with right asset allocation, plan and execution.

At the end, There is only TINA my friends. Only TINA. Happy Investing

Can you relate to this post? Did you go through the same problem? How did you manage? Share in the comments section

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About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, has co-authored two print-books, You can be rich too with goal based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management.  He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
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  1. Can you please publish in this Blog, a detailed analysis of ” Tata Hybrid Equity Fund, Direct, Growth ?”
    I am not sure if it is proper to make a request to such a busy reputed Professional like you; please pardon me if I have erred.
    Best Regards

    1. Tata hybrid equity fund(G)

      A hybrid equity fund with current equity to debt exposure as 75:25, it is definitely underperforming compared to its peers because of its high exposure towards the financial sector and debt component of the fund is decent enough to maintain stability to the fund portfolio. (A and below is less than 2%)

      Apart from financials they also went long on cyclical’s(chemicals, FMCG etc) which has taken a big hit this year, my take on this fund is if you are holding try holding for a fund to hit cost to cost. you can avoid for fresh investment

  2. Good post!! To start with I suggest planning your financial goals before starting investments, list your goals, prioritize it, differentiate goals which are the need and wanted, calculate the future value of goals and you will find amount required for each.

    Based on each goal priority & time frame you can start investing.Goal based investing works and as mentioned asset allocation is always a key!!

  3. This is such a great,pertinent post. Thanks to both Ananth & Pattu. This is a dilemma faced by a number of middle-aged investors. Equity investing took off only in the mid-2000s and immediately there was this great recession. So a lot of our generation had very little equity component in investments.
    The suggestions given are very valuable and practical.
    Great post this one.

  4. The Freefincal post on asset allocation was an eye opener in this regard,
    What exactly does one mean by aggressive ?
    In any case the post has a max of 60% equity !
    Plus the draw-down , number of years under water have to be read before declaring that one is aggressive !!

  5. Nice well written post; straight out of heart. Kudos Ananth. This left out, underachiever feeling makes life miserable for many. Jostling oneself sometimes and changing course is really necessary. Next 20 years should be more rewarding for Equity so it’s never late – ‘Jab jago tab savera’

    Thanks for Pattu Sir for this guest post.
    – A fellow member of AIFW

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