You used to go doctor who examines your health and comes up with a diagnosis of what the ailment is and what medicines you need and for how long. Would you turn around and say the doctor that you want the best set of medicines instead of the medicines advised are, therefore may not be suitable you. Obviously, this sounds silly; No one in his senses would do that… and yet it happens when it comes to people’s investment. People assume that they know well enough to dictate what they would want to take up for investments. They spend a lot of time and energy trying to find the “best” stocks, mutual funds, or other investment. All financial magazines devote covers to this approach, and authors write books about it. There are entire financial industries build around this wild goose chase. But let me clear this up right now, there is no such thing as the best investment and best financial product in the real world which could make you rich or enable to achieve your financial goal in overnight.

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Planning for Future

Every day, I often get calls too many prospects, especially well educated ones, literally trying to know “dream” features financial products. They are so much excited to know the high illusive rate of return about their investment. Though the pursuit of higher investment returns may make a positive difference in our outlook as we do hope, there are other things you can do that are more certain as you don’t have to rely on hope and just as effective. Instead of that you should consider a planning for your financial future which is a balancing act rather than a single-minded pursuit of the highest return. Real planning requires thought, frequent course corrections and, above all, an effort to keep thing in balance. Rate of return is only one relatively small part of the planning but finding the rate of return as the balance is a different process for everyone. Hence, no replicate investment portfolio would match with your aspirations. Since your goals are unique, your financial situation is different, what might be right for you as could be a disaster for someone else. Moreover the specific investments you choose probably would not determine your financial prospects. The best investments for you depend on personal factors such as your financial goals, your overall risk profile, your existing investments, your loan liabilities… This list is endless. Financial products including like bank FDs, PPF, NSCs and insurance policies as well as mutual fund investments should be judged on how well they help you reach your goals, not getting highest return.

 Are you collector or Investor

Some people collect investments like a stamp collection or coin collection hobby like kids. This year they buy the best mutual funds they read about in Smart Money Magazine. Next year they buy top ten funds recommended by other Money Magazine. A year later they buy two or three new NFOs that blinking up on the home page of moneycontrol.com. Before they know it, these collectors do not recognized that number of mutual funds does not matter, but the underlying thing matters, the allocation in different stocks and their quality matters. Worse, those investment often are concentrated in similar type of funds, may be large cap or blue chip funds just as a stamp collection might focus on the Gandhis’ family picture. I often meet people who believe they are properly diversified because they have had own mutual funds portfolio of 5 funds, 15 or 20 mutual funds. But different funds can have either very similar investment strategies or the same category. And when the value of one fund falls, the shares of funds with similar categories will fall as well. Meanwhile, there are cost and time involved in maintaining such hotchpotch portfolio which trouble it takes to keep track of them all. Remember, you are not collector. You are an investor. You want investments that work together to close the gap between you and your financial goal. You also need to make sure that what you own does not expose you to more risk than you can handle. The financial magazines on your coffee table are kind of like your dentist or brother-in-law. They may play a constructive role in your life. But they do not know which investments are suitable, let alone best for you.

Find Your Financial Balance

Financial balance for your financial goals is about making trade-offs. It largely a question of dealing with the constant tension between livings for today and saving for some future event. What seems like a complicated process so much so that we often give up before we even start is really just a balancing act. I have found that it helps you to put a framework around this process, which you can do it yourself by asking a few questions:

  • How much can you reasonable save?
  • What rate of return will you require to achieve your financial goals?
  • How much do you need?
  • And when will you need it?

While these questions may sound simple, they are not necessarily easy to answer. And certainly there are more questions that you can ask yourself. But these four are pretty central. Before looking for the next hot or best product, find out that you should have adequate life or health coverage insurance to protect your financial goals. Pathological events may wipe out all your wealth including your best financial products. Hence, there is no best investment out there. But sometimes, the best decision is obvious. As far as ‘The Best Financial Product” part is concerned, I haven’t really seen one in the last 10 years or so, from the time I have been practising in Financial arena .  I look like an unlucky one in this regard as everyone else seem to know what is the best. Please invest according to your financial goals and time horizon and have a common sense.

 PS: This article got published at Hindi Dainik Bhaskar on 30-05-2017

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Suresh Kumar Narula

SEBI Investment Advisor, Founder & Principal Financial Planner at Prudent Financial Planners
Suresh K Narula is founder and Principal Financial Planner at Prudent Financial Planners. He has earned the professional CERITIFIED FINANCIAL PLANNER and got registered with SEBI as Investment Advisor. He writes on personal and financial planning articles and got published in Dainik Bhaskar, Business Bhaskar and The Financial Planner's Guild, India. He is also a member of Financial Planner's Guild India ( An association of practicing SEBI registered Investment advisers) to create awareness about Financial Planning in general public, promote professional excellence and ensure high quality practice standards. Suresh received his an M.com from Himachal Pardesh University and an MFC from Punjab University, Chandigarh. He can be reached at info@prudentfp.in
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