Musings of an Impatient Investor

Disclaimer: I am not a sebi registered financial advisor so whatever i express here is my opinion based on my observation, understanding and limited experience and may not suit anyone else’s financial and personal life and hence may prove counterproductive or even harmful to their personal financial journey. So please take whatever I say with a pinch of salt. Your money your call.

Investing, let me say right away, is a very tricky game. But it has very few simple rules: 

1) Earn a decent income.  Keep atleast 6 months of your expenses as Emergency Fund in Liquid funds or Modular Fixed Deposit which can be withdrawn at moment’s notice but only in case of emergencies. This is very important, even before you begin your investment journey. 

2) Keep a track of your expenses, more like a ball park estimate. Just add the debit section of your bank statement every month , that would pretty much do it.

2) Buy a term life insurance plan (almost 20 times your annual expenses which will be enough to cover 10 years of your family’s expenses in case of any eventuality) that has only death benefit and no add ons or moneyback, just good old life insurance policy that pays only when a person dies.

3) Have adequate health insurance, please don’t go overboard on them unless you are a govt. employee. The best health insurance is balanced diet, good sleep, moderate exercise, our very own RAKs and may be, meditation.

4) Save 25 to 50 percent of your take home salary after tax.

5) Donate a certain percent of your income so that you don’t end up being Uncle Scrooge ( no offense to Ducktales fans). 

6) Decide your financial goal and it’s timeline and plan accordingly.

Let me elaborate a bit on point 6.
If your goal timeline is less than 5 years, then forget risky assets such as Stocks, mutual funds, long term bonds, corporate bonds, rather stick to very low risk investment options like Bank fixed deposits, post office savings scheme, short term debt funds.

If your goal timeline is above 5 years, go for stocks, mutual funds not crypto or gold or reit or any other fancy things that may come up in future.

If you want to own a house, a house loan is good, but if you want a second house as investment because you will get rent and the property prices will go up with time. Bad Idea. Ugly idea.
Credit card debt, Personal loan : Financial Coma. Very very difficult to get out of that trap
Home loan, Car loan, even education loan : Much better

This is just a quick write up for people who need some reasonable estimate to start on the path of financial freedom. There is a lot of ‘believe me’ factor involved here. But the logic to most of what I have written will come up in subsequent posts and hopefully clarify most of the confusions.