Insights

You are different and so are your needs

September 17, 2018 . Ashwini Arulrajhan

How many of you want to wear the same clothes as your friends or neighbours? Not only is your size and fit different, your taste too will likely be different. And importantly,  you want to look different and feel different. But when it comes to investments, why is it that you think FDs suit you because they suited your father, or the insurance policy your neighbour bought or the mutual fund your colleague bought, is what you also need? Just as your clothes need to be tailored to suit you, your investments need to be tailored to your needs.  What may suit someone else may not suit you. Nor would they give the same results. This article is about how your unique needs call for unique investment decisions.

Your goals are different

In all aspects of life, what our friends, colleagues, or other people do have an influence on us. More often than not, you hear about a fund that gave enormous returns. Or how investing in a particular fund was a bad decision. Or the claim that FD is the most stress-free option. You have multitude of opinions coming from various sources. But acting based on just that can be detrimental.

You may ask how your goal is different, if you are saving for your retirement and so is your friend. Yes, some goals are generic. Like retirement, education or just wealth building. But do you have the same number of dependents? Are you going to send your kids to the same college? Or do you envision a similar kind of lifestyle? There are distinctive characteristics about your life that make each of your goals different. How much you will need will also depend on when you need it and how much you already have. You may start investing for your retirement by the age of 35 while someone else started only at 45. With a longer time frame, you can up your portfolio risk.  

Your risk profile is different

More importantly, your appetite for risk is also different. By that, I don’t just mean the risk you are willing to take. There are also other factors. Whether or not you have a stable income, loans to tend to or other commitments; all have an effect on how much risk you can take. Someone may have ancestral assets to fall back on, while you need to build your own assets. Some of you may be prone to higher medical expenses while some are not. And these, in turn, will determine how much risk you can actually take.

You deal with your investments differently

Finally, there are behavioural aspects. Running SIPs on different dates spread throughout the month may help you catch volatility. But let’s say, you are the kind who doesn’t have a track on your bank balance and a SIP date falls somewhere in the last week of the month. It may so happen that you don’t have enough balance in your account and it gets bounced. In that case, you are better off with SIPs in the first week of the month. With the return differential between different days being very low, you will lose more by skipping an SIP.

In that way, your attitude towards money and how you manage investments can vary. And you need to figure what works for you. Spending patterns and how you prioritise needs are unique to you. Systematic plans, be it SIPs, STPs or SWPs can come in handy. According to your requirements, they can be used for different purposes.

Therefore, making investment choices is simply not limited to going for a fund that a friend told you about or picking from the top performers. For an investment to work for you, all the risks and limitations should be considered. So should be the opportunities and strategies that may give you optimal returns. Talk to your advisor today to make sure you are on the right track.

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