Mr Rajesh Mehta (name changed) works at a public-sector bank and his life’s dream is to own a house in the suburbs of Mumbai. He has been saving every rupee, sacrificing his numerous fancies to achieve this goal. His saving strategy is fixed deposits and other savings instruments offered by the bank.
One day he meets Manish, a childhood friend, who had purchased a new house. Rajesh was curious to know how he had built the enormous corpus within a few years.
Manish runs his family business in exports and follows the “buy low and sell high” investment strategy. Over time, his business had made enormous profits and his investments clocked high returns. Rajesh was really impressed with this strategy and asked Manish to help him achieve his life’s goal.
In the following months, Rajesh had invested all his liquid funds into the stock market. The rise and fall of prices in the market gave him an adrenaline rush, which became a hook. Unfortunately, Manish did not highlight the risks associated with stocks to Rajesh.
In time, Rajesh had invested his entire investible surplus into equity. By now, he invested the Rs 15 lakh inherited from his parents and Rs 10 lakh of his personal savings. His plan was to avail of a loan of Rs 30 lakh and expected his portfolio to grow at the rate of 20%. As Manish’s strategy had earned around 25% returns last year, he assumed this would happen this year as well.
In the meanwhile, as Rajesh’s portfolio started to appreciate in value, he invested the rest of his corpus into equity stocks. He felt Manish was a true friend helping him build his biggest dream – a suburban house for around Rs 80 lakh.
After much research, Rajesh zeroed in on one house his family loved, and it almost felt like a dream come true. As he prepared to collate all the necessary cash required to buy this house, the market crashed. His portfolio of Rs 25 lakh had depreciated by 50%.
When Rajesh called on PersonalFN’s board line number, he was worried. He had gotten our contact details from our website and was eager to speak to a financial planner who could guide him on his portfolio.
Being in the financial planning domain for over 15 years now, PersonalFN has assisted many people to build considerable wealth through investments. Cautious decision making, disciplined investment approach, and avoiding investment disasters have been the common steps for those who had made their money work for them. On the other hand, PersonalFN has also been approached by those who could have done much better with their investments if they had not fallen prey to the unbiased investment advisors, who misguided and wrongly advised them.
When you do less research, and take decisions in a haste, you constantly seek to reinforce your decision. It’s quite natural. Sometimes, you are too late to realise your mistakes. As it happened in case of Rajesh, a simple bank officer who lost a large portion of his savings, treasure. His dream to buy a house came crashing down. He couldn’t bear the disappointment of his family, but he had no option now.
Learning from Mr Mehta’s story
PersonalFN believes that you shouldn’t treat any asset class as the means to making a quick buck. You may meet some initial success, but even one mistake could prove to be very costly. So, avoid speculating on price trends. And this is true with every asset class.
Most importantly, don’t depend solely on the advice of self-proclaimed experts. Rather avoid such wealth stealers; who can easily make a hole in your pocket, drain your wealth, and fill their own coffers.
Unfortunately, in case of Rajesh, PersonalFN had little to offer. He had already made a huge loss. Chances of recovery are yet not in sight.
Again, no can predict the market movement and how quickly the market recovers is anyone’s guess.
Rs 25 lakh is a big amount for a simple government worker like Rajesh.
As for the financial goals of his family, his daughter is in the final stage of Chattered Accountancy and plans to get married within 3 years. His son is in second year of Engineering and has three more years to graduate. Rajesh himself is only a few years away from his retirement. He is in a situation that left him with very little option.
What PersonalFN could do was chalk out an adjusted plan for him, which was:
- Re-defined financial goals
- Highlighted the importance of having contingency funds
- Realigned his portfolio mix; giving him more balanced asset allocation
- Drew steps whereby he can make up the losses
- Provided a roadmap to creating an alternative investment plan to rebuild wealth, assuming there is a possibility of incurring some losses in the existing real estate deal.
Those who want to take exposure to equity markets now, should opt for
Systematic Investment Plans (SIPs). Taking the SIP route enables you to average out your buying when markets drift down and compound your money when markets scale up.
PersonalFN believes investors should concentrate on getting their asset allocation right. There are benefits of investing as per your personalised asset allocation.
PersonalFN provides extensive advice on money matters and helps people plan finances for achieving their long-term goals.
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child education, child marriage, vacation, retirement etc. They will provide you unbiased recommendations backed by research experience of more than a decade.
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Rajesh is unable to overcome losing money in the equity market, but he has decided to keep ill advisers, like Manish, at arm’s length.
What about you?
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