Is your money sleeping in fixed deposits because you are undecided?

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The reason I speak before employees is not to teach them money management (no such lofty ideas please) but to learn common practices from them.  Real people behave very differently from an Excel sheet! During the course of my talk, I say something like, “we do not know what to do our salary minus expenses, so we just open FD after FD”.

The idea is to look at how the audience reacts. Many of them let slip a guilty smile which says it all. As long as you do not have a plan, an FD is a perfect place for your money to rest. So you may have to pay a little more tax, but at least you sleep in peace. The problem, however, is, that one cannot keep doing this and it is so easy for the months to become years.

If you have not already done so, watch my corporate presentation here: Commonsense approach to managing money You could then download Re-assemble e-book and implement the steps. However, for many, that marks the start of a new challenge.

Is your money sleeping in fixed deposits because you are undecided?

Money management is all about making decisions, fast. As often, the first one is the most important: Should I outsource my money management to a fee-only financial advisor (no one else!) or should I DIY? Trouble is, 8 out 10 people would choose DIY without understanding what it actually means.

They would then go on forums, list their portfolio and ask for opinions. Graduation from inaction to indecision! If you think this description fits someone you know, my sincere request would be to consider hiring a SEBI registered fee-only advisor from this list (I do not get any money from this!). Work with them (100s of freefincal readers do), find out where you are, where you need to be and start your journey one step at a time. If you later wish to DIY, it is fine, but at least you quickly completed the most important steps.

I notice that many women part of a double income household are guilty of letting unutilized salary pile up in fixed deposits. Talk to your spouse and resolve to work towards your financial goals.

The DIY solution to money sleeping in FDs

If you do not wish to work with a fee-only financial planner, you can easily DIY this problem.

  1. List your goals.
  2. Jot down clearly the dates when you need money (do not just write the year, time to be specific!)
  3. For all goals that occur within 15 years, stick to the FDs (too late for equity here)
  4. You can consider some exposure to equity mutual funds only for goals more than 15 years away.
  5. Start slowly. Make a small investment in an equity fund. Say 10% of what you park in FD or RD each month. observe the volatility and then gradually increase exposure
  6. The Kindle edition of my book You can be Rich Too With Goal-Based Investing is now available for only Rs. 149. That is a reasonable starting point.
  7. Use the free calculators associated with the book to get an idea about where to invest.
  8. You can also use the freefincal robo advisory template to create a thorough financial plan

If you are used to fixed deposits all your life, do not make drastic changes. Start slow change small.

Yes, I have said these things again and again and again over the years, because each time I have done so, it meets with new sets of eyeballs. Hopefully, this would too.

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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)
Want to conduct a sales-free "basics of money management" session in your office?
I conduct free seminars to employees or societies. Only the very basics and getting-started steps are discussed (no scary math):For example: How to define financial goals, how to save tax with a clear goal in mind; How to use a credit card for maximum benefit; When to buy a house; How to start investing; where to invest; how to invest for and after retirement etc. depending on the audience. If you are interested, you can contact me: freefincal [at] Gmail [dot] com. I can do the talk via conferencing software, so there is no cost for your company. If you want me to travel, you need to cover my airfare (I live in Chennai)

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  1. It’s surprising to see the comment about opting for equity only for goals more than 15 yrs.
    It’s too defensive and if someone is having that kind of an approach, then most ppl can’t get into equity at all.
    What is the guarantee that after 14 yrs, there is no major crisis in economy which could make all your equity allocation go for a toss.

    It’s difficult if we go so defensive in our approach.
    Equity for goals of 5+ yrs should be good if one opts for largecap/hybrid funds with the current status of our economy. With a good fin advisor, this can be even bettered.

    Moreover with FDs fetching around 5pc returns post tax, what is the point in opting for them anyway for any major goals. With inflation, it just evens out.

  2. The income flooring excel is really simple and was an eye opener for me. At -2% negative returns over inflation, corpus required jumped to 85x from 51x for early retirement. Excel is real eye opener.

  3. In PMS investment how many years needs to be considered ? Same 15 years or less.
    In PMS fund manager is having entire control on the portfolio.

  4. Another trouble i am having with equity is profit booking. I invested in equity (via PMS)in aug-2016 n had 22% profit till feb-2018 n now its 1%. I didnt thought to perform profit booking as invested for 5yrs n expectation was 15%CAGR in period of 5 year.
    Its very painful at the moment but i believe in long term investment n believe things will term my way n will achieve target.

    Is this the right approach to stick to target n dont perform profit booking in middle.?

    1. It is been portrayed that long term is an answer for equity fluctuations such as yours and those gone through 7 year SIP should reap in above FD & inflation returns.

      Longer bull run in the last one decade followed by Crash in coming years could change the above hypothesis which is currently taken for granted.

      I am not really sure someone who invested lumpsum at PE levels of 29 in Mar’19 would reap in atleast FD returns in next 15 years.

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