Have you ever asked yourself – what has all the technology advancement and development around brought us? Has it really added value to our lives? Has it added happiness, contentment and sense of security to us?

It would be a true eye-opener if we could ask this question to us every now and then. Those past their 30s would fondly remember the good old days when we had little possessions but also little to worry about so many things in life. We had plenty of friends, relatives and time to enjoy life. Were we not happier then?

Recently, there was a whatsapp forward which made me wonder about these things in life. Of course, there are many advantages of modern life which we could even dream off few decades back. Technology advancement and development and impacted every bit of our lives, be it medical care, communication, entertainment, education, travel, work or the daily comforts in our life. It has surely made our lives more comfortable and without boundaries.

The past few decades have also seen an alarming change. Wealth and income inequality has increased anywhere in the world despite substantial geographical differences. Today, the richest 1% are twice as wealthy as the poorest 50% put together globally. Unfortunately, the rising income disparity is true even for India. There is much evidence that rich are getting richer and poor are getting poorer, everywhere.

There is a visible change in our society happening in the past few decades. Families are growing smaller and more distant. We are becoming more commercial in our social dealings and there is much materialism which is evident in almost all aspects of our lives. True, the income opportunities may have increased for many but only a few have managed to increase their wealth substantially. In this article, we will focus only on this critical aspect of the modern life which has direct, tangible and measurable impact on our financial well-being.

Why are we not getting rich?

The Savings trap:

Post economic liberalisation in 1991, India pursued a path which encouraged open market and privatisation and capitalism. A change from the socialistic approach which was followed for many decades without visible growth in economy or the standard of living. Post this change, many new industries and markets took birth and prospered. The people who participated in this growth saw their wealth growth. However, a majority of the people did not participate in this economic growth of India.

Between 1979 (base year for Sensex launched in 1986) and now, the Sensex has grown from 100 to 41,150 in 40 years. That's gives us an annualised growth of 16.25% without counting dividends! Your money would have multiplied more than 411 times during this period. However, the only people who benefitted where those were the industrialists, entrepreneurs and the equity shareholders from this growth. Be it due to traditions or culture or awareness or lack of proper markets, a lot of us and our parents avoided equities. We gave our money to banks and government savings plans which gave us a paltry single digit returns.

Even today, equity savings culture has not growth substantially. A lot of us are looking at sovereign or guaranteed investment options which give us negative real returns after tax (real returns is returns less retail inflation). This simply means that even though we feel we are saving money, the fact is that we are eroding or slowing burning our money. The unfortunate irony is that we are happy to get that.

Here is a short example to get this message home. You get returns of 7%. Tax rate applicable is 30%. Your net returns is 4.9%. Inflation in December, 2019 was 7.35% as against 5.54% in November 2019. Even if we consider an average of 5%, for all practical purpose, we are loosing our money by 0.1% yearly.

In short, even though we are earning more than before and saving even more, we are not really creating wealth over time. This is the savings trap we need to break. Think over it.

The Security trap

We don't have adequate social security in India. That's an unpleasant and unfortunate fact. Even if available, often it is grossly inadequate. It is just about enough to cater to the 'poor segment' of the population but inadequate as far as the middle class is concerned. There is no debate that events like accidents, sickness, diseases, disability, death etc carry a huge burden on us and often give us unbearable financial shocks. I am not even counting things like theft, fire, etc for properties here.

There was an alarming report published in June 2018 by experts from Public Health Foundation of India. The report said that 55 million Indians were pushed into poverty in a single year because of having to fund their own healthcare and 38 million of them fell below the poverty line due to spending on medicines alone.

Most of us do not have the full required range of insurance of ourselves. Life, health and personal accident insurance are the three critical insurance policies we should have but most of don't. Even for those who have the same, most of the times there is underinsurance. A lot of insurance agents who sold traditional life insurance policies which promised nominal returns at the cost of insurance coverage, did grave injustice to investors. The investors neither got adequate insurance nor created wealth. Pure term insurance products was rarely sold till only recently when there was demand for same from investors.

The Spending trap:

In the past few years, we have undergone a cultural and behavioural change when it comes to our spending habits. As kids, we used to buy new clothes and shoes only on Diwali. We spend little on electronics, ate outside very rarely and went on holidays like on budget trips (by today's standards). We bought things only when we had money and we rarely borrowed as it was considered not good in our upbringing.

Cut to today. There is a popular line which says 'today we spend money which we don't have on things which we don't need to please people who we don't know'. We have replaced what we need with what we desire and what we can afford the most, by stretching our budgets. We buy the best gadgets we can even though the old ones are working fine. We buy cloths, watches, shoes, cars as a status symbol. We holiday in exotic locations to post pictures on Facebook and get happy on the likes. Today our celebrations for birthdays, anniversaries, marriages are grand and lavish. We are buying things on loans which are based on our current /projected income growth.

Unless we break this spending trap, we will not realise the full opportunity of saving and investing in growth assets. Every time we spend unnecessarily, we are sacrificing future wealth for our immediate gratification. This has to be controlled and if possible, stopped.

Conclusion:

It is not possible for 'all' of us to become very very rich in our lifetime. To be honest, most us avoid taking risks and/or do not have the necessary skills or talent or opportunities to do so. But we can all strive for a much better future for us and our families and we can become rich by our present standards. At the worse, we should avoid stagnating at our current levels of wealth (in real terms) while making sure that we never fall down from our present levels. Remember, it is not just important to become rich but also stay rich.

The clear message is that we need to get over the three traps mentioned in this article. How? We need to [1] save and invest in growth assets that give us real returns in long term [2] get adequate insurance to protect ourselves from any unfortunate events that can wipe out a life time of our savings and [3] control our arbitrary spendings and reduce debt. These simple things are very simple and easy to execute and possible for everyone of us.

As we start a new decade of 2020s, let us also pledge to make this decade a decade dedicated for our family's prosperity and financial well-being.

"Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market." - Warren Buffet.

These words spoken by the investing legend has proved to be true in the present market conditions. The past two decades have seen a few such times of uncertainty and market crashes. Beginning with the dotcom bust in 2000, quickly followed by the 9/11 crisis in 2001 and later the global financial crisis in 2008-09. Time and again, the message to equity investors has been clear.

• Equity markets carry unforeseen risks.

• Markets can be highly volatile in the short term.

• Over long periods, equities are good wealth creators.

These learnings have been reinforced in the current markets. However, for many new investors, especially millennials who have started investing in the past decade, the temporary crash may have come as a surprise. It would be perhaps best if we set ourselves in the right mindset, attitude and expectations. Here are a few things that you must remember with equity investing…

Focus on basics:

Risk comes from not knowing what you are doing. Before starting with equity investing, it would do us good if we understand the asset class properly. Equity is not recommended for everyone and it has to match your risk profile and investment objectives. These are the prerequisites of equity investing and the next step is deciding on your asset allocation. A properly diversified portfolio with proper adherence to asset allocation over time is a very basic principle and strategy for portfolio management. Apart from this, starting early, choosing the right product for the asset class and investing regularly are other basic points one needs to follow. Stock selection and market timing have been repeatedly flagged by experts as futile as they cannot be practised accurately and sustained over long periods of time.

Long-Term:

How much is long-term? Many investors might be wondering. This is really a subjective question and there is no right answer. At times, market crashes can potentially wipe out many years of growth. Looking at returns during such temporary times is not the right thing to do. History has shown us that there are much more ‘positive’ or bullish investors than ‘negative’ or bearish investors by nature. That's why we find the bronze sculpture of the ‘Charging Bull’ or the Wall Street Bull standing on Broadway in the Financial District of Manhattan, New York City. Thus, markets have remained in bull and or neutral market phases much longer than bearish phases. Thus, the probability of profits increases as you increase your horizon. For many, long term is anything over 10 years but every wise investor agrees that it must never be below five years.

Conviction:

Investors who demonstrate conviction, especially during market corrections, have a big advantage over those who do not have such conviction. Typically equity assets change hands in markets when such conviction is tested. Your buying at lower prices means that someone is selling at those prices, booking losses or forgoing future profits. That is the cost of not having the conviction that the person is paying and you are benefitting from. As Indians, we are blessed to have a growing economy with huge potential for growth over the next few decades. It is destined to emerge as a global economic powerhouse within our lifetime. Equities should give us the opportunity to participate in that growth.

Patience:

“If you aren’t willing to own a stock for ten years, don’t even think of owning it for ten minutes” - Warren Buffet. Patience is simple yet very difficult to practice. In a fast-paced world, we expect that our investments too deliver returns within a year or so. Most investors become impatient quickly and either redeem or move their investments if returns are not visible soon or if there is a correction in prices. There is absolutely no need for ‘active’ portfolio management for long-term wealth creation. Many studies point out that it is not very helpful to do so. Only those investors who have patience, stay invested with conviction in equities will emerge successful.

Courage for Action:

All the world’s knowledge and wisdom is futile unless it is put to use. Many investors, in spite of having all the knowledge and even guidance from advisors /experts, fail to take timely and/or required action when needed. The courage to back your conviction is the last impediment to success as an equity investor. Investors to be really successful, have to back their basics, long-term investment horizon, conviction and patience with ‘meaningful’ action to get ‘meaningful’ results. Going forward, we would do well to stay put and perhaps even increase allocation in a staggered and disciplined manner.

Conclusion:

We have summarised almost all the key points necessary to be reminded at current times. We believe that the uncertainty is still not over and we may expect subdued and volatile markets with low economic growth in the coming months. We must stick to basics, not panic and follow the disciplined approach to investing. Covid-19 has made us realise our weakness as humanity and also showed us a mirror in many aspects of our lives. Let us take the investing experience also in our stride and put it to good use in future.

“He that is good for making excuses is seldom good for anything else.” - Benjamin Franklin

Most people have many reasons 'not' to invest. Even those who do save, little is saved in new investment vehicles. A large part of the income is understandably spent on meeting needs, repaying loans and leisure/entertainment only a very little part is left with most of us. However, many have adequate income today to invest meaningfully. It is really unfortunate that even then people find excuses not to save and invest. In this article we will talk about the most common excuses people have to avoid making investments. Most of these excuses are ungrounded, not true even though the person may believe them so. will also unmask the fact and truth behind these excuses.

I Don't Have Enough Money

This is the most common reason quoted by people. Let us dissect the truth behind it.

• You can start with any amount: When we say we don't have enough money do we have an amount in mind? Most people do not think of what amount they can invest and hope that they will start saving once they have enough. However, this is futile exercise and quite often it only delays your savings till you regret it. To be honest, there is no minimum amount for saving and you can even start by saving Rs.500 per month if the intent is really there.

• You can always prioritise spending: Those you find it difficult to save would be better off having a closer look at where the money is being spent. It can be quite surprising how much you could save if you would only be paying attention. Petty expenses on dining out, movies, ordering food, impulsive shopping online, etc can go a long way when diverted to investments. Only the right intent is needed.

• It may because of lack of intent: Intent or rather the lack of it as we now see is perhaps the true reason you have the excuse of not having money. Surely, those who despise saving and believe in only living to the fullest in life openly declare their lack of intent. It may suit you if you have enough wealth to retire and take care of your family. But what if not? Surely, there has to be a balance and a good reason and space for the intent to save.

• If you can't save, it is an alarm to talk to your advisor: If you have the genuine intent and still do not have adequate money to save, there is a severe problem. You need to consult a financial advisor to really understand your financial situation and guide you further.

I Am In Debt

This can be a genuine excuse which is not impossible to handle. Let us see what we can do if you find it really hard to save because of huge debt.

• You need to have a plan: The first thing you need is a better understanding of your situation – how much you are earning, how much you own and owe, what is the cost of servicing each loan and so on. Perhaps the plans can unravel ways you can still manage to save a bit by cutting corners in other areas.

• You need to pay off expensive debts: It is also advisable if we can dilute some of our assets and pay off expensive loans and find space to divert the EMIs saved towards real savings and wealth creation.

• You may restructure the loans: When you think things have reached a point of no return and it is impossible to manage your affairs, there is still a way out. We would suggest you restructure your loans, leverage your good credit rating to negotiate with the lenders. Perhaps there may be a way out still, if you really wish to pursue it.

I Don't Have Time:

Call it procrastination, laziness or just simple lack of interest. Lack of time is a common excuse. Let us unmask the truth behind this.

Why this may not be true?

• Account opening is now digital: Gone are the days of physical transactions. Now everything is digital and so is the first step is to open an online account. Thankfully, the account opening process is entirely online. You may chose the right financial advisor, distributor, broker and open the account online yourself.

• Transactions are done digitally: Often we hate to do the paper work for transactions. We also hate depending on our advisor /distributor to bring in the papers and submit them to the operational offices. Good news is that transactions in most financial products, especially mutual funds, can be today done completely online, any time any where.

• Goal planning tools readily available: If you think you need too much time to plan for your finances and these things bore you, well you are mistaken. There are many user friendly tools available today which can help you plan for your financial goals. This can be an option for you if you do not wish to talk to your advisor. Explore these tools which hardly take few minutes and you will know how much SIP or lump sum you need to save to fulfil your financial goals in life.

• Ask your advisor: Some may find the investment topic boring. Finding and approaching a good advisor can make a huge difference in such a situation. However we do not recommend you start online investments all by yourself unless you have a good amount of experience and knowledge to handle things.

These are just three of the most common excuses for not saving. There could be many more and you may even have a hundred excuses, however, there is only one reason to save – financial well-being. If you have the foresight and the common sense but lack bank balance to retire, savings is the way forward, without excuse. You would do well to remember a famous quote from Florence Nightingale -“I attribute my success to this – I never gave or took an excuse.” Happy saving and investing.

The ultimate goal of every investor is collecting a big corpus to secure a peaceful Retirement. So, you invest throughout your life and once your retirement approaches, you have your retirement corpus in your hand. Now what do you do, is it the end of investing? Shall you keep the retirement corpus in your bank account and keep nibbling at the big piece of cheese inch by inch? No, you can't do that, you can't let your life long perseverance die in your saving account. You need to have a post retirement investment plan to deliver justice to your money. Also, you may live long, so the next 3-4 decades are at the mercy of your retirement corpus, you don't want to run out of money in the last 10 years, so your nest egg must be utilized in a way that it lasts you until your D Day.

There'll be no new addition to the corpus, hence you must spend and invest wisely. So what should be your approach to investing after you retire?

There are various approaches that you can follow, depending upon your risk appetite. The Risk Appetite is dependent upon a number of factors like:

- Passive income source if any, like pension, rental income, interest income, and the amount of income;

- Whether you live in your own or rented house;

- Other assets that you may own like property, gold, stocks, etc,;

- and your attitude towards Risk.

Your Portfolio Allocation between Equity and Debt will largely depend upon your Risk Appetite, the sum of the above factors. Although we suggest retired investors to concentrate on limiting risk, yet if you have a stable financial background and a high risk appetite, then you can expose a major chunk of your retirement corpus to market linked products and vice versa.

There may be various approaches to Portfolio Management after retirement, which are different from the way you have been managing your portfolio during the working years. Some investors prefer securing their basic monthly expenses first by investing a portion in products which may give them a monthly income at least equal to their expenses and dedicating the rest to products with a high growth potential. While there are some investors who break their Portfolio into parts, the early, middle and last stages of retirement and invest accordingly. And there may be some who invest largely in Equity initially and as they age, gradually increase the Debt component by selling of Equity. And likewise there are many approaches, depending upon individual needs and preferences.

We suggest you to sit with your advisor and figure out your Portfolio Allocation and Investing Approach, which is in line with your financial position and Risk Appetite. Devise a financial plan and review it from time to time like you have always been doing.

Whichever approach you choose, you must be mindful of certain key points, which are as follows:

> In absence of a regular source of passive income, do not expose your money to excessive risk. A large chunk of the Portfolio should be invested in products where money can be withdrawn easily, without incurring any loss to the Principal.

> If you have any outstanding loans, then before investing, secure your mental peace by paying off your debt.

> Increase your emergency fund, an emergency can lead to a serious financial crunch since now there is no hope of a monthly pay cheque coming in to rescue you. Plus medical emergencies are also likely to rise.

> Do not limit yourself to traditional investing products, explore newer options like bonds, debt mutual funds, company deposits, etc., even if your risk profile demands you to limit yourself within Debt. The modern products are capable of delivering better returns, better flexibility, liquidity and investing convenience.

> Don't invest in products where the volatility is more than you can tolerate.

The bottomline is, Retirement isn't the end of investing, Investing is important, even though if you have a very large corpus or limited expenses, it is likely to be exhausted if not invested. Your Retirement is the beginning of a new life, now is the time to do things that you've always wanted to do. It's the time to pursue your passions, and you can live your entire retirement life to the fullest by planning for your future and investing right.