Fixing India's bad money habits

When I wrote my first column in this series many years ago, I was addressing a very different India. The number of people investing in mutual funds was a small fraction of what it is today, and the idea that ordinary savers would one day invest Rs 29,000 crore every month through SIPs would have seemed like a fantasy. Yet here we are.

My association with this publication goes back much further than these fifteen years. ET Wealth is the successor to the original ET Investor's Guide, with which I had been associated since 1993, over three decades ago. Back then, I initiated mutual fund coverage in its pages, and for years, the data and analysis in Investor's Guide came from Value Research. When the ET Now TV channel was launched, we ran a weekly show, Investors Guide on Ideal Portfolios, for many years. Through all these avatars--the core mission has remained the same: helping ordinary savers make sense of their money.

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Looking back at those early columns, I'm struck by how much of the advice remains unchanged — keep things simple, don't trust salespeople, avoid derivatives, buy term insurance instead of endowment/ULIP policies, and let SIPs do the hard work. The principles of sound investing haven't changed because human nature hasn't changed. What has changed dramatically is the infrastructure that makes following these principles easier, as well as the number of people who are actually doing so.

In 2017, I wrote about how the financial services industry was fundamentally a zero-sum game where the provider's gains came from the customer's pocket. That remains true. I wrote about how insurance sellers were conniving and manipulative, pushing expensive products to earn higher commissions. That problem persists. I warned about the dangers of derivatives trading and how brokers were luring unsuspecting investors into what I called "effendo", a magic spell that makes money vanish. Today, with F&O trading volumes having exploded, that warning is more relevant than ever.

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And yet, something great has happened alongside these persistent problems. A quiet revolution has taken place in how Indians invest. The monthly SIP figure that once seemed impossible has become routine. More importantly, investors have learned the most important lesson of all: to keep their SIPs running through market turbulence.

This behavioural change is the real victory. In my early columns, I spent considerable energy explaining why SIPs worked — the mathematics of rupee-cost averaging, the psychology of automated investing, the power of staying invested when markets fell. I borrowed Nassim Nicholas Taleb’s idea and wrote about how SIPs were "antifragile"; they actually benefited from volatility. Back then, I had to make these arguments repeatedly because investors would panic and stop their SIPs at the first sign of trouble.

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Today, the evidence suggests that a new generation of investors has internalised this lesson. They've seen markets crash and recover. They've experienced the vindication of staying the course. The SIP investor who started in 2017 has now lived through multiple market cycles and emerged with returns that validate the approach. This lived experience is worth more than just reading my words.

The digital transformation of Indian finance has been a crucial enabler of this change. In 2017, starting an SIP required paperwork, in-person KYC, and considerable effort. Today, it can be done in minutes on a smartphone. The friction that once made good financial behaviour difficult has largely disappeared. Bank accounts, mutual fund investments, and tracking tools are all available at the tap of a screen. This infrastructure didn't create good behaviour, but it removed many of the obstacles to it.

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It’s been more than three decades since I founded Value Research, and 15years since I started this column, and I've never been moreoptimistic about the Indian saver's future. Yes, problems remain. Insurance mis-selling continues. Derivative trading has grown into a monster. Financial influencers peddle dangerous advice to millions. The industry's incentives remain misaligned with customer interests. But the core of sensible investing--regular investments in diversified equity funds held for the long term--has taken root in a way that seemed hardly possible when I began writing here.

The job isn't finished. There are still too many people being sold ULIPs instead of term insurance, too many young investors gambling in F&O, and too many savers falling for concepts they don't understand. But the direction of travel is right. Every month, 29,000 crore flows into mutual funds through SIPs, representing tens of lakhs of families building wealth the sensible way.

If my column here has played even a small part in that transformation, then these years have been well spent.

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