This is a guest post by Guhan Ramanan, a friend I got to know through the blog. I requested Guhan to share his money management journey and hence this post.
Guhan is what I would call a 'quick-to-understand' investor.When he saw the value of managing money with a plan and in an organized way, a force awakened!
Guhan describes himself as
"an avid but quiet reader of this blog, hugely interested in technology, photography and spends most of his time sitting in airports, trying to make light of things!"
Despite his extremely busy schedule, Guhan was kind enough to videograph and post-process the second Chennai investor meet held on June 14th, 2015
Over to Guhan. Ps. The title is mine. If you don't like it, I am to blame. All of us have the force within us to manage money well. We just need to believe that we do and harness it.
Till last year, I didn’t know my elbow from my head when it came to personal finance. I still have a long way to go, but this blog and Pattu have been a great source of inspiration, ideas and confidence in getting me started. Thank you Pattu for letting me share my experiences with your highly erudite readers.
A little context to demonstrate how dangerous an Engineering and MBA degree can be.
- 2004-2006 – Invested in well advised “stock tips” from friends and uncles – I never understood why they went up or down. (“Equity is long term you see…”)
- 2007 - Invested in Futures and Derivatives (“I learnt call and put options in MBA –it’s simple!”) – I lost all of it and then some.
- Intermittently reading “Outlook Money” and vague blogs, investing randomly in star-rated mutual funds and believing I was “distributing risk across asset classes”
- 2007, Q3 - Returning from the US, I thought the market was headed for 30K and jumped straight in. Oh, well the deep end was fun, till the waters receded next quarter. In hindsight, when my barber gave me stock tips in Mumbai, I should have paid closer attention!
- 2009 - The crash literally knocked some sense in me and my bank accounts.
- 2009-2014: I stuck to bank FDs! I even started a Recurring Deposit!
2014 - Two kids and a Vedanta class got me thinking as to what I was doing in life. Vedanta exhorts you to find purpose in life- and since it spoke of Artha (“security”) as the first step, I decided to figure out how much I really needed to be “secure”. And soon enough, I found this site and few others which caused me to think very differently about money.
Going through the retirement calculator and thinking “Wow – that much?” Naah, it must be an Excel mistake. Several hours of (unnecessary) formula-searching later, I came to the dismal conclusion that the sheet was right.
So, I thought about it some more and read some more blogs about investing (easier to read about it than do something about it!) It eventually dawned on me, other than a few scattered bookmarks in browsers and downloaded Excel files, I was essentially in the same place, where I started months ago. So, I consolidated the action plan post into a simple table – and filled up what I knew and didn’t.
Here is a quick before and after.
|Item||When I started||Plan||Today|
|Setup Emergency Fund||All investment was in FDs – so all of it was “emergency”||Consolidate FDs and earmark buckets||Specific FDs + looking at liquid funds|
|Buy Term Insurance||1 Jeevan Shree was all I had.||Buy LIC. Period||LIC eTerm(815) done.|
|Buy Health Insurance||Provided by office||Look at options||Still looking at options!|
|Decide Investment Strategy||Mostly hoping everything will work out (Vague XL sheets that never got updated). It was mostly prayer, “tips” and bad luck.||Quantify goals, and then build plan to get there.||Wrote an investment plan that helped clarify what I was doing.|
|Equity/Debt Allocation||Huh? Think asset diversification <insert fancy MBA jargon>||60% Equity and 40% debt||It’s not as watertight, but generally there.|
|Choose instruments||Identified 3 MFs using Fund picker||Well defined equity portfolio, and 3 MFs that I invest in monthly|
Sporadic equity purchases;
"Well recommended MFs" -
New ideas every time I read an article
|Invest each month||No SIP. I don’t like being bound to it - still prefer to invest when I like, every month though.|
Fair warning: Pattu’s time estimates for how long each item should take – and how long it actually takes differ by a significant margin! I attribute this to my own ineptitude.
How has all this helped? Fundamentally, it altered the way I look at investment in 5 ways.
- Defining goals gave me perspective on *why* I’m investing, in the first place.
- My “Aha” moment was when I saw the Russian babushka dolls as a metaphor to understanding investment – The actual investments is only the smallest doll inside – there are many layers of risk to remove before that!
- Learnt to admire pretty TV anchors’ on CNBC and ignore their investment advice.
- Read a lot about behavioural biases and multi-disciplinary thinking and how influence investing.
- Investment advice is much like make-up tips – Products that look good on Aishwarya Rai might not necessarily work for you. Like all things “personal” – has to be “personalized” and apply with care, it is your money after all!
Ultimately you recognize that nobody is more interested making your money grow than you are. If you let others get more interested in your money than you – it isn’t your money any more!
Unlike youth and good looks, when you start investing, time is your friend. The journey to a 12% CAGR for 15 years begins on the day you invest – not the day you read about it!
May your investing journeys give you happy stories to tell by 2031, if you start today!
If you find Guhan's jouney inspiring and would like awaken your own force within, do consider consulting the links below (in the 'you may also like' segment)
May the force be with all of us!
Buy our New Book!You Can Be Rich With Goal-based Investing A book by P V Subramanyam (subramoney.com) & M Pattabiraman. Hard bound. Price: Rs. 399/- and Kindle Rs. 349/-. Read more about the book and pre-order now!