A few days ago, there was a story in The Times of India in which the sales head (and CEO-designate) of Mercedes Benz India lamented that Indians save too much and because of this strange attitude, luxury cars were not selling in large enough numbers. He specifically targeted mutual fund SIPs and seems to have implemented an anti-SIP strategy of some kind. The story quotes this person as saying, "They (SIPs) are our competitors, I tell my team if you are able to break that (SIP investment) cycle then exponential growth is a given."
First of all, let me hasten to assure you that this story is not satire, unbelievable though that may seem to any normal person. Moreover, as someone who has pretty much spent an entire lifetime exhorting people to start SIPs and postpone discretionary expenditure, this story makes me extremely happy. If we have reached a stage that people shilling luxury cars are worried about SIPs, then the job is getting done very nicely.
In fact, I know a number of mutual fund CEOs and I'm going to recommend a kind of an anti-Mercedes sales strategy to them, a counter to the anti-SIP strategy that Mercedes is implementing. Mutual fund sales should target people who are about to buy a luxury car and tell them not to waste their money on something that will depreciate by tens of lakhs of rupees within a few months. Instead, buy a nice but reasonably-priced car and put the rest of the money in an SIP.
A lot of people on social media pointed out that this statement is actually just one in a general class of statements from some businesses. For example, some years back, Netflix CEO Reed Hastings said that his company's real competitor was actually sleep. If customers slept less, it would be better for Netflix. Similarly, a senior executive from a restaurant delivery service said that it would be ideal if people just stopped cooking at home and ordered all their food from restaurants. Somehow, business executives get into a state of mind where customers damaging their own lives in order to increase a company's sales seems to be a reasonable trade-off. In this age of social media, such attitudes are noticed and publicised and have an impact on what people think of that business.
Anyhow, back to investments and savings. Mercedes apart, excessive expenditure on EMI-funded consumer goods are genuinely a drag on many young people's finances. They should try implementing a 'Reverse EMI' fund that I recommend. Choose a fund suitable for short-term investing and start an SIP in such a fund, one that you would comfortably pay in an EMI. Whenever you feel like buying something, see if there's enough money in your 'Reverse EMI' fund. If there is, just withdraw it and buy what you want, otherwise wait. This is an expenditure fund so no need to treat this as savings. Instead of paying an EMI interest rate of 15-17 per cent, you will end up having a return of 4-5 per cent. Moreover, you are not in debt. As COVID taught so many of us, negative surprises can hit any time and it's better to be as little in debt as possible.
In fact, if you have a child who is pestering you for some gadget, do a deal with the child and create a Reverse EMI fund. It's a great demo of that fact that postponing expenses creates money while preponing them destroys it. It's such a powerful idea to imbibe, and one that can actually become a bedrock on which a lifetime of prosperity can be built.
We live in a society where most of the messaging you see around you is basically about spending money rather than saving it. Having something useful to counter that narrative within your household is a must.
Suggested read: A long but certain road to wealth
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