Why Isn’t My Money Growing ?

“This is ridiculous !! I have been saving and investing since last 10 years now. Still the growth I can see in my money is not even peanuts!!” said Anurag Srivastav, a 37 year old Senior Executive working with a renowned FMCG Company. “Everyone keeps telling me that one should follow some principles of saving and investing, which I have followed so religiously over the last 10 Years. But what’s the result?”

“What Happened Anurag?” asked his colleague Kapil. “You look so depressed”

“Depressed ?? That’s an understatement Kapil. I am agitated, disappointed and devastated.” Said Anurag.

“Oh My God !! Now that’s something worrisome. Please tell me what happened.” Asked Kapil.

“Ever since I started working, almost 10 years back, people used to tell me, that I should be saving and investing money. Also, few super-minds also told me to diversify my investments. As per them, this would create wealth for me.” Said Anurag.

“That’s absolutely right. So why are you disappointed then?” asked Kapil

“That’s right?? I have been saving and investing around Rs. 60,000 per year from last 10 years. And guess what, my so-called Wealth accumulated till date is just Rs. 7.75 Lakhs.” Said Anurag.

“Well, I agree with your disappointment now. This is actually no growth at all. But where did you invest, that you got such insignificant growth? Didn’t you Diversify your portfolio ?” Asked Kapil.

“I have a completely diversified portfolio Kapil. I am investing Rs. 5000 p.m. Out of this, Rs. 1000 goes into an Endowment plan, Rs. 1000 goes into a Money-back plan, Rs. 1000 is invested in a Post-office RD, Rs. 1000 is invested in a bank RD and lastly Rs. 1000 goes into NSC (National Savings Certificate). Even I understand that one should not put all his savings to a single avenue. Thus, I had diversified my portfolio completely. But no results !!”

Kapil Smiled. “Do you really think your portfolio is diversified?”

“Yes, haven’t I invested in all different asset classes?” asked Anurag.

“Absolutely not!! Ok, tell me first, what are the different asset classes which you know?” asked Kapil.

“Yes, asset classes are like NSC, PPF, Insurance Policies, Govt Bonds, Mutual Funds etc.” Said Anurag.

“First of all, let me tell you, that NONE of the products you have mentioned is an asset class. They are tools to invest in different asset classes. Basically the main asset classes are Equity, Debt, Precious Metals, Real Estate and Commodities. Then there are some alternative asset classes like Art etc. NSC, PPF, Mutual Funds etc are the tools to invest in these asset classes.” Said Kapil.

“Oh is it ? Then what about my portfolio? Which asset classes I have invested actually?” asked Anurag.

“Your portfolio is a totally debt-oriented portfolio. All your investments are finally being invested in debt-securities. You have no exposure to any other asset class as of now.” Said Kapil.

“I just thought I will invest money in safe and guaranteed return products” said Anurag.

“That’s apparent from your portfolio. But you can yourself see the flip-side of such conservative thinking. Ok, tell me something, what happens when you drive your car or bike with the brakes fully or partially applied all the time ?” asked Kapil.

“Multiple problems would occur. One is I will not be able to drive freely. The speed will be irritatingly slow, I will not reach my destination on time and also the brake apparatus will need to be replaced quite often.” Said Anurag.

“That’s right. And does that ensure enhanced safety ?” asked Kapil.

“Not really. I just need to have working brakes in my car /bike which I should be able to apply when I want. That should be good enough for the safety sake. Also, I should drive with a reasonable speed, so as to avoid any accidents.” Said Anurag.

“There you are!! This is the same principle one needs to follow with investing. One needs to have accelerating components like equity, gold and real estate in their portfolio. Having only debt products in the portfolio don’t really ensure safety, on the contrary they expose you to the inflation risk. In debt, your portfolio grows by 5-6% wherein the inflation is eating it at 8-9% every year. Now, when you say equity, do not get into F&O or intra-day kind of trading, which could have flip-side like rash driving. But not having exposure to equity at all is going to kill your money.” Said Kapil.

“But suppose I invest money in equity, and suddenly the market falls, then wont I lose my money.” Asked Anurag.

“Correct. And that is the reason why you should not invest at one go in the markets. You should invest the same way, which you are doing currently. Invest some amount every month, so that you are only positively affected by the movements of the market.”said Kapil.

“But advisors generally advise to invest in these products only e.g. Endowment, Money back, NSC , Post office RD etc.” said Anurag.

“Then you need to find out if they are really ‘Advisors’. How much fees do you pay them for their advice?” asked Kapil.

“I don’t pay any fees to them. Why should I pay a fee?” asked Anurag.

“See, you don’t want to pay them a fee but want them to give you an unbiased advice. This is when they will only advise you products wherein they earn more, not you.” Said Kapil.

“So what do you suggest I should be doing?” asked Anurag.

“First of all, update yourself about the importance of asset allocation and the need for various assets in your portfolio. Second, seek a good advisor who can give you unbiased advice. Third, pay him a fee for his advice, so that he is not inclined to give you biased advice. Lastly, review your portfolio at least once a year and consult your advisor if any changes need to be done in the same.” Said Kapil.

“But isn’t advisor fees an additional cost for me, When I can get advice for free?” asked Anurag.

“Free advice would always prove to be more costly to you. Best example is your current portfolio. You have saved on fees all these years, but the strangled growth is proving to be much costlier than the saved fees. Its similar to directly taking medicines to save doctor’s fees to realise that the wrong medicines have done so much damage to the body that the cost to treat it will be much higher than the doctor’s fees saved.” Said Kapil.

“You have a point, Kapil. I will not shy away from other asset classes now and seek professional help so that my money starts growing. Thanks for your inputs.” Said Anurag.

We look forward to your feedback and comments on the above article. Please feel free to contact us on saurabh@nidhiinvestments.com if you have any questions.

(The views mentioned in the article are personal opinion of the author. The characters used in the article are hypothetical).

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Published by professorbajaj

Prof. Saurabh Bajaj is an Author, Mentor, Motivational Speaker and Wealth Planner. He has done his MBA from Narsee Monjee Institute of Management Studies (NMIMS) Mumbai, one of the top 10 management institutes in India. He holds the prestigious FRM (Financial Risk Manager) degree awarded by Global Association of Risk Professionals (GARP), USA. Till date, there are less than 15,000 professionals in the world, who have been honored with this degree. He has also been awarded CFGP (Chartered Financial Goal Planner) Certification by AAFM (American Academy of Financial Management). After his MBA, he joined J P Morgan, the second largest Investment Bank in the world. He has worked with J P Morgan as Risk Analyst for more than two years. Prof. Bajaj also holds an Advisory certification awarded by AMFI (Association of Mutual Funds of India). During his stint at Bombay Stock Exchange, he has handled Investment Management and Treasury operations of the BSE Corpus. He has set up an entrepreneurship venture in the field of Wealth Planning and Investment Consulting under the name “Nidhi Investments” and holds the profile of CEO. Prof. Bajaj sits on the Expert Panel of CAClubindia.com and MBAClubindia.com as Investment Expert. He is actively involved in investor education through his blog www.professorbajaj.com which has a readership from 78 Countries all over the world. His articles are also regularly published in caclubindia.com , mbaclubindia.com , totalca.com , charteredclub.com, bankbazaar.com and lawyersclubindia.com . He has been awarded the title of “Best Article Writer” from caclubIndia.com in Jan 2012 and has been selected amongst “Top 5 Technical Writers” from all over India in Feb 2013. He has been invited by various TV Channels like SPIN TV, CNBC TV18, UTV Bloomberg Etc for programs like "Expert Advice" , "What Markets Want ", "Budget Analysis" etc. He has been invited by Several organisations like Lions Club, Rotary Club, Agrawal Welfare Foundation, Rajasthan Mandal, Agroha Vikas Trust, Union MF, UTI MF, Arthamitra Gurukulam, Vidyalankar Institute of Technology etc for expert lecture on "Smart Investing", "Life is A Celebration", "Financial Freedom", "The Digital IFA" etc. He was ranked 8th Merit at All India level NMAT which got him selected for MBA programme at NMIMS, Mumbai. He did his MBA with Capital Markets as his specialisation. Soft Skills has become an inevitable part of every selection process and teaching learning process these days. The students from small towns and tier II cities, in spite of being talented and well equipped with technical skills, are seen struggling in the selection process. This is because of their lack of exposure to these soft skills. Mr. Bajaj has a zeal for training candidates to develop these skills and has been imparting the same on since last two years. This zeal and passion inspired him to set up his own firm called “Knowledge Circle” which aims to train candidates for soft skills. Till date, he has trained more than 5000 participants from over 220 organizations across various fields of soft skills. He has been associated with MSBTE (Maharashtra State Board of Technical Education) to conduct Soft skills training workshop for the faculties of Polytechnic Colleges in Entire Maharashtra (Mumbai Region, Pune Region, Aurangabad Region and Nagpur Region) since last 8 years. He has also been associated with ICAI (Institute of Chartered Accountants of India) for training CA Students on various topics related to Communications skills, Group Discussions etc. He was invited by Fr. Agnel Polytechnic College, Vashi for a motivational workshop for faculties. He was also invited by Vivekanad Polytechnic College for "Communication Skills and Email Etiquette" training for non-teaching staff. Apart from these, he has conducted “Capacity Building Soft Skills workshop for Faculties” at ITI Gunj, ITI Pusad, ITI Digras and ITI Umarkhed. This was the first ever soft skills workshop for faculties in the history of ITI’s in Vidarbha. He was also invited by Shivaji Education Society to conduct similar Soft skills workshops for the faculties and office staff of Shivaji Junior College Pusad, Shivaji High School Pusad, Shivaji Vidyalaya Belora and Shivaji Vidyalaya Bhojla. He has conducted training workshop on “Effective Presentation Skills” for the relationship managers of HDFC Mutual Fund, Andheri Branch, Mumbai. He has also been invited at College of Management and Computer Science, Yavatmal, College of Dairy Technology, Warud, B N College of Engineering, Pusad, B D College of Engineering, Wardha, College of Engineering and Technology, Akola, Dr.N.P.Hirani Institute of Polytechnic, Pusad etc. for the Guest lecture on “Developing Interview Skills”.

9 thoughts on “Why Isn’t My Money Growing ?

  1. Somehow you managed to peep into my portfolio !! Lolzzz

    Very Nice article professor. I am having a similarly diversified portfolio which now I knw isnt diversified.

    For a change, I have some ULIPs too (thanks to some well wisher agent friends) to add some equity. But from your earlier articles, I know that even they are a disaster.

    The only solution left is, not try to save the advisor fees now and get the right advise than have such a “Jumbled up” portfolio.

    Karan

    1. Thank you Sir for your valuable comments.

      Good to know that you are getting some benefits from the articles. Yes, I do agree that getting a good advisor is a difficult task. But once you find one, never make a mistake of losing him by expecting free service.

      Thanks again for your visit and feedback. Look forward to more in future.

  2. After reading your every article it feels like I know this situation either with me or with someone close. I think thats the beauty of your atricles that it can be related directly. It doesn’t have those flavor of ‘not applicable to me’ like other so called advisors’ articles like “How to become Crorepati in 5yrs”.

    You give a very good sense of different aspects of investments for a common layman. It would be great if you can followup with little more details after you introduce the concept in later posts or share pointers to some good resources where we can read more about these and educate ourself.
    For example, you introduced/cleared my concept of asset classes, but now where can I read more about asset classes and risk associated with them etc.

    Generally people say “Char chand laga diye” but you are setting a record of one “chand” after another.

    In your site http://www.nidhiinvestments.com/ made a it a link to this post to people can click to reach here, no need to copy paste URL.

    1. Thank you so much for the compliments Sir !!!

      I get truly inspired with your comments.

      It will be a pleasure to be able to advice a veteran like you 🙂

      Thanks again for your visit and feedback !! Looking forward to more in future.

  3. Could you please point us to some good advisers ? The information in each of your posts have been an eye opener for me and feel it is high time I took advice from a “good adviser” but I don’t know how to find one .Any help in this regard would be appreciated

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