My Journey as a First-Time Investor
I had been that person who feared making investment decisions and always had someone else to take it on my behalf. However, I also understood that this is one crucial area that I can't outsource to a consultant who will offer me generic advice that he/she is offering to thousand other people. With this being said, I respect them as they are the ones who help most of us in getting started with our investment journey.
The harsh reality is that in a world where inflation is increasing, and the savings rate is decreasing, it's going to be tough to save for our goals without proper financial planning. The question that remains for most of us is how do I start with personal financial planning? It is such a vast field with so many investment instruments available that one can just spend their whole life reading about them. But what I have understood as a 9-month old investor is that this isn't where one starts with.
The first step for starting your financial planning is to determine what are your goals for the next 2 yrs, 5 yrs, and 10 yrs (maybe more years). How do you that? By simply visualizing your life for the next 2, 5, and 10 yrs. Imagine it as vividly as you can. Ask yourself how your mornings would be, what kind of food would you be eating, where you would be staying, what all you would like to have, what projects you would like to work on, who would be in your inner circle, what hobbies would you like to pursue, how your afternoons would be, how many hours you would be working, what luxuries would you like to have, and more.
Now once you have imagined your life for the next coming years try deducing your goals from it. For example: If you imagine that after 5 years you would like to leave your job and work remotely, then a few of the goals could be buying a laptop, preparing an emergency fund for at least 6 months, and so on. I also mark my goals as primary (need-something that is necessary) and secondary goals (want-something that I would like to have). For example, a retirement fund is a primary goal and a luxurious car is a secondary goal. This classification can differ from person to person depending on how one classifies needs and wants.
Further, take your primary short-term (2 yrs), mid-term (5 yrs) and long-term goals, find out their current cost (approx) and estimate their future value. For example, if a laptop now costs Rs. 50,000 and you need it after 5 yrs, the future value considering the inflation at 8%, would be Rs. 73,466. You can use this calculator to calculate the future value. Don't fear the numbers :) You can follow this for secondary goals too. Once you have your short term, mid-term and long-term goals with their future value determined, then it's time to figure out the right investment options for each goal.
How I did that? I started my investment journey with mutual funds and further moved on to other asset classes. I also did two structured courses by the Women on Wealth community to learn about personal finance management and then further about stocks investment. I highly suggest you find out a practical course for yourself and invest in it. It's a life skill. I checked these parameters while choosing a course for me (specifically for personal finance management):
Is there a real instructor or is it just a recorded course? It's ok if there are recorded videos combined with a few live sessions. I also talked and researched about the instructor.
Does this course provide me with basic knowledge about different asset classes?
How action-driven is this course? Am I just listening to the recorded videos or do I have some specific homework to do? Remember it's your investment planning and you have to work for it.
What do I accomplish during the course and at the end of this course? For me, the goal was that I should have my basics of investing cleared and have my investment plan ready.
Does anyone in my circle has done it? I reached out to that person for asking what they got from the course and whether it was practical enough.
Is it just a one-off course or is there an active community that I can join after completing the course? This made a huge difference in my life as investment planning is not just a one-off thing, rather it's a continuous process and community are the best places to learn and also set a certain kind of discipline. I am thankful to the Women on Wealth community and regularly join all their monthly community meetups which is a real knowledge booster for me.
If you can't invest now in a course, then start with this book - Let's Talk Money by Monika Halan. It talks about the major asset classes (Equity, Debt, Real Estate, Gold) and provides an overview of the financial pillars. And if you wish to go ahead then I suggest these four easy-to-read books:
Rich Dad, Poor Dad by Robert T. Kiyosaki
Warren Buffet Invests Like a Girl by Louann Lofton
The Psychology of Money by Morgan Housel
Coffee Can Investing by Saurabh Mukherjea, Rakshit Ranjan, and Pranab Uniyal (specifically for stock investing, maybe a bit tough to read)
Other than this, reading ET Wealth (a weekly newspaper) has helped me a lot in understanding personal finance management. The language is super easy. I also started reading the Economic Times newspaper which I still find a bit tough to comprehend. I read, read and read. I am currently reading 'The Intelligent Investor by Benjamin Graham. I do spend at least an hour a day upskilling myself in this field. You find time if you want to :)
I am an almost 9-month old investor. I discovered that I can never be too sure of my investment even after doing thorough research because I can never predict the market or a pandemic like COVID. What I can do is I can manage my risk by well-diversifying my investments, keeping an adequate emergency fund, and insuring myself for any health-related risks. I also feel that investing is more about managing my emotions, having a quest to know more and keeping patience. So if somebody is looking for making some quick bucks, then I will just say may your luck be with you ;)
Feels like this is too much? It is, but as I said it's a life skill and you learn as you progress in life. You need not read everything in just a single day. Take small baby steps. And even after all this, if you decide to hire a consultant then see if they ask for your goals or just blindly suggest random investment instruments. Just say goodbye to a consultant who does not take time in understanding your goals. It's a red flag. Ask them questions about their methodology, what kind of reporting they follow, how much their personal investment has grown, how many clients are they handling, talk to a few of their clients..the list is endless :)
Here is an excerpt from the book ‘The Intelligent Investor’ that I want to leave you with:
Graham's definition of investing could not be clearer: "An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return." Investment according to Graham consists equally of three elements :
you must thoroughly analyze a company, and the soundness of its underlying businesses, before you buy its stock;
you must deliberately protect yourself against serious losses;
you must aspire to "adequate", not extraordinary performance.
I am here to answer any queries that can help you get started with your investment journey. Remember I am not a consultant and I am just learning :) Feel free to start the conversation in comments, or via personal messages. Available for a chit-chat here. Stay home and take care :)
What I am up to?
I am transitioning to a new career path - Instructional Designing. This month was spent on improving my LinkedIn profile (working quite effectively for me) and updating my resume (did it almost after 10 yrs). I also joined the Clubhouse just for upskilling and networking with other people in my field. I am loving it, it's a good break from the Zoom calls :)
PS: I am referring to the paid programs by the WOW Community as I believe in ‘Paying-it forward’ but please clear all your doubts regarding the program from the WOW Team. Take care and keep growing :)
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