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Here's where you should invest your money

INTRODUCTION

I have come across many people who ask me where should I invest my money when I tell them that I have done CFP - Certified Financial Planning. Well, financial planning is completely a different thing rather than just telling someone where they should invest. But let's keep this aside. Let's focus on the question, WHERE SHOULD YOU INVEST?

It's a norm in Indian society that people want free advice even regarding the most sensitive issue, MONEY. So yes, whenever they come across someone who seems to be knowledgeable in financial matters, they straightaway throw this question, WHERE SHOULD I PUT MY MONEY or in some cases WHICH STOCKS SHOULD I BUY?



WHAT SHOULD YOU DO?

First of all, THERE'S NO STRAIGHT FORWARD ANSWER TO THIS QUESTION.

And If someone is telling you to invest your money in mutual funds, insurance policies, Bank FDs or suggesting you to buy particular stock... You are just getting exploited.

It's a heavy judgment to pass that someone is exploiting you, so allow me to justify why it is true most of the time and most importantly HOW?


There's a thing called FINANCIAL PROFILE. A mutual fund or insurance agent might never tell you this because there are chances that they themselves don't know it.



What is a FINANCIAL PROFILE?

It's a profile that has all the accumulated data of your finances. Financial Profile covers an end number of things and it varies from person to person. Let's just look at the basics. It includes the following stuff:-

  • Your Emergency fund

  • Current risk coverage

  • Current cash/bank holdings

  • All the Investments

  • Your Financial Goals

  • Risk taking capacity (most important)

Financial advisors will seek such information from you before telling you anything on what you should do with your money.


WHY IS IT NECESSARY?

Here's a real-life example.

When was the last time you visited your doctor? Don't worry this was just to remind you what happens when you visit the doctor. What happens is that we tell our doctor what is going on with our body, what's wrong and all. What doctors do with you is they examine you, they find out what you need based on your health profile, they take utmost care while giving you a prescription taking all the things into consideration such as your age, body type, your allergies, your medical history, your current condition & many more things.


Now ask yourself a question is it necessary for the doctors to do this with the patients? YES, IT IS. Even if 2 people are having the same symptoms, there are chances that the prescription will be different for both of them based on their suitability & health profile.


The same thing goes with the finances.

Every person has their own unique profile, their own requirements & most importantly their own risk appetite.

Imagine your doctor giving you prescriptions straight away without even examining you. That would be terrible, right? That's what happens when someone straightly tells you to invest your money into something without even knowing your FINANCIAL PROFILE.


CONCLUSION

There's a popular saying in our culture that HALF KNOWLEDGE IS DANGEROUS.

Read it again.

So if someone is giving you straightforward answers regarding your money matters without taking all the information into consideration, it is certainly dangerous for you.


So that's it from my side. Let me know what's your take in the comments section below.




 

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