It was one of the New Year-eve parties that I attended with one of my close friends who grew up with me in Coimbatore, studying in the same school as I did but two years senior to me. A banker with experience, he was empathising with me on what I had discussed.
I said I was not able to sustain my recurring deposit (RD) in the bank for more than a few months as I had to lay my hands on the sum towards the month-ends, without allowing the investment to gather for the full term of the deposit. For which he said, you start with an amount which you can afford so it doesn’t pinch your pocket, and allow it to grow. Make it a habit that you can continue. Let the savings be the first expense on your salary credit. So, instead of an ambitious Rs. 2,000-a-month RD, I started with a Rs. 200 RD, and it ran its course for the 15-month period. That was around 20 years back.
Well, at the end of the 15-month period I could realise an amount in excess of Rs. 3,000 — for the first time. What a way to experience the power of compounding. I felt great and started increasing the amounts as I had the caught the knack.
A casual browsing through the bookshelves of the Ernakulam Public Library during my long stint in Kochi, landed a worn-out book, Rich Dad Poor Dad , by Robert T. Kiyosaki. It was a finance book well-written and easily digestible. One of the quotes: “Let money work for you and you do not work for money.” It was a powerful one. I picked up a new copy of the book and soon ended up being an evangelist for the book, giving out the gyan of what I had learnt, recommending it to anybody who was looking at building wealth, including my colleagues in office.
Back in 1985, in the second year of my graduation, my finance professor had mentioned a new asset class, something called mutual funds, which would pool the money collected for a specific purpose.
Today’s youth have myriad investment choices: mutual funds, equity and debt, besides traditional bank offerings. Salaries too have increased over the years, making savings and investment a real possibility.
The earlier you start, the bigger the corpus, provided you save consitently keep monitoring the investments on a regular basis. Based on your risk appetite and the time horizon of your investment, one can choose among the various asset classes, equity (high- risk, high-returns but needs a thorough knowledge of how the market functions), gold (something Indian women have always trusted), real estate, mutual funds (large caps, midcaps, small caps, again based on the risk appetite and the time horizon), which allows one to dip into the equity markets, with the fund manager managing it on our behalf.
According to one data source, the percentage of household savings invested in the equity markets is about 12 per cent. The government and the Securities and Exchange Board of India spend of lot of time and effort educating customers on the nuances of the finance market, including equity and mutual funds. This can be really useful for the uninitiated. Investor awareness camps are being conducted as a part of this exercise in Tier 2 and Tier 3 cities.
With close to a decade of service more, I am now planning to build a corpus for my retired life after fufilling my ongoing responsibilities, so I can perhaps hang up my boots in peace and prosperity. Tell me, any specific plan available?
venkynat.venkatesh@gmail.com
