Which investments are right for me? The real question is, who am I, and what do I want?
06-Dec-2022 •Dhirendra Kumar
Sometimes, even the most routine questions about investing come alive when wrapped up in an investor's personal circumstances. That's the main reason that I really enjoy doing live Q&As. It may be a question that, when written in a bland textual form will have a 'same old' air to it but in a conversation with some contextual details, it really comes alive for listeners.
Every Sunday evening, for half an hour, I'm on the "Market Mantra" of All India Radio, where viewers call in with their investing queries, and I answer on live radio. This has been going on for more than a decade, and I quite enjoy a format that is so different from writing articles and even being on TV. Over the years, through hundreds of shows and thousands of callers, I have become quite used to the kind of questions that come because after all, there are only so many things that investors can ask about investments. However, while the topics remain the same, the people change and that lends it great interest.
In the episode a couple of weeks ago, there was a call from someone running a small trading business in a traditional market in Delhi. My mental image of such a person would be that to him, 'investing' would mean gold and real estate, but that's an outdated idea now. People need and want actual financial services.
My caller's problem is that he wants to invest some money, and he has two friends (or acquaintances) who are offering him investing advice. There's a bank manager who has explained that fixed deposits are the best option, while someone else who deals in mutual funds has explained that mutual funds are the best option. Of course, nowadays, one has to be thankful that my friend did not run into someone who was into crypto!
Anyhow, this is typical of savings and investment choices and, unfortunately, quite a difficult problem to solve. Everyone who sells something has their own story and product to sell, and they will say that is the correct choice to make. It would be an easy thing to do if they were all wrong, but actually, at least one of them will be right. In fact, in many cases, including this one, they will all be a little bit right. However, that makes the problem worse. The only way to make the right choices when you save, invest and insure yourself is to educate yourself independently and make your decisions without having to depend on what a salesperson is telling you.
The starting point of the problem is the belief that the primary point of investing is to know about investments. You can see this all over in the online Q&A. There are savers who think that investing is about investments, and there are those that think investments are about themselves. I'll give a pair of contrasting examples to demonstrate what I'm talking about. Here's one question (a real one): 'Is it advisable to invest in mid-cap and small-cap mutual funds at the current situation of the stock market?' Sounds like a perfectly reasonable question. However, contrast it with this question: 'I am 40 years old but haven't started saving for retirement, apart from the EPF deduction. When I retire, I will need Rs 75,000 a month....', and then there were personal details that I'll omit here.
The moment you read my second example, you'll immediately realise that the first question is completely misguided - in fact, it's not a question at all but an invitation for someone to sell something. The first questioner thinks investing decisions are to be based on what's happening in the outside world while the second one sees saving and investing as a way to find solutions to the problems of one's own life.
Fixed deposits could be right for you, or mutual funds of one sort or another could be right for you, maybe directly investing in stocks could be right for you. No one else knows. We all have to do a little bit of work to find out what the right question actually is.
Suggested read: Spirituality and investing