What is your relationship with risk…???


‘Mutual Funds take a long time to give returns. Stocks are risky. Bank Deposits are safe. Do not indulge in high risk investments!’ We keep on hearing these statements lot of time, isn’t it?

But before you blindly trust these statements, let us understand the relationship between risk & returns.

Risk is never a one-sided situation. When you avoid one risk, you are accepting another. Generally, the higher the potential return of an investment, higher is the risk! Though, there is no guarantee that you will actually get a higher return by accepting more risk. The trade-off between risk and return is a key element of effective financial decision making.

Generally, the negative news & risks are exaggerated & over emphasized. This thing drives less informed investors away from the potential opportunities in favor of the investments that can give higher returns over long time.

It is perfectly normal for any individual to avoid risks. Any sane and responsible person who has worked hard for his money should avoid the risk of losing his hard earned money. But that is just one side, the investor who respects his capital, should also fear the monster like inflation. So which risks do you fear most? The risk that we did not anticipate or think about, is always the one that causes the most damage!

Well, do you know what is your Risk Profile or risk taking ability…???

Answer these questions…

  • How much risk are you able to handle?
  • How much risk are you willing to handle?

Your ability to handle risk is your ability to handle an investment loss. For instance, a young investor with no liabilities can invest in high risk investments since he has got a long period of time before retiring. So he can afford maintaining a high risk portfolio whereas, a retired investor with a limited budget of monthly expenses cannot afford a financial loss. He has no time to recover the losses unlike the young investor!

Your willingness to tolerate risk is called your psychological risk which involves the emotional side of investing! Your behavior is more influenced by past investment experiences. It is the level of stress you can handle with the market ups & downs.

What is more important is…you must identify your own Risk Profile first & then build your portfolio accordingly. You may have one of the following Risk Profiles:

  • Aggressive
  • Moderate
  • Moderately Conservative
  • Conservative

In the end it comes down to identifying and understanding all the risks you are exposed to. Decide which of those risks you fear most, and avoid them. Embrace the productive risks that have the potential to deliver higher returns. Devise a strategy to manage and control them. We cannot avoid risk; we can only select certain risks over others!

More later…


Changing Goals as the decades change…!


Every decade of your life brings fresh challenges. As your maturity, experience, education & expertise increase over the time, so does your income! Your goals may be Financial or Life Goals keep on changing as you grow.

Let us look exactly how your goals are going to change as the decades pass by…

Your twenties

During your twenties, you must aspire to become financially independent. This is the time when you finish your education & try to establish a career. When you pay your own bills, you learn to budget & live within your own means. Make sure that you get an insurance cover for yourself. Develop a retirement plan & start contributing….the more you contribute at a younger age, the more your wealth will grow over time!

Your thirties

By this time, you may have started a family. Now, your main responsibility would be looking after your family, you may have dependent spouse, children & parents. You must start investing for your children’s higher education from now only. If you think of buying a house then, start saving up for down payment of the house – the bigger the down payment, the lower the interest you’ll have to pay and the quicker you can pay off your home! And most important, continue contributing to your retirement fund.

Your forties

As your children grow up, make sure that the corpus for their education is on track. As years pass by, your lifestyle also changes, rather your standard of living increases. Diversify your investment portfolio with the goal of spreading your risk & increasing your returns. Do not stop contributing to your retirement fund.

Your Fifties

 It is time to revisit your Financial Statements & household budget to check whether they are up to date. Focus on paying off all the debts. Review your retirement annuities & continue contributing to it. Your children may have finished their education & started earning. Your till now major goals like children’s education & marriage would have been accomplished.

Your Sixties

By the time you retire in your sixties, you must have a sizable corpus for you & your spouse to sustain & lead the same standard of living. If you are still fit & happy to work, you definitely should! Or else you can think of part time employments. Last but not the least, it is time to make a will so that your kids can easily inherit your legacy!

More later…

Should you stop your SIP or continue…???


Hello Everyone!

Being an investor, the current market movements must be giving you jitters, isn’t it? From last few days, the market has seen a downturn. Almost every other day, the Indian markets are caught in a sinking situation because of macroeconomic & global factors.

The sharp correction in the Equity Markets has led to negative returns in SIPs as well. The question whether to continue or discontinue your SIP must be popping in your head.

Well, being a Financial Planner I would suggest the same thing that other advisors say…don’t be swayed by volatility, instead stay focused on your investment goals!

SIP is a mode of investing in Mutual Funds for long term. A dip in the markets should not be the reason for investors to stop SIP. In fact, it gives them a chance to add higher number of units after a fall. The equity market will go through a number of ups & downs during the SIP tenure but in the long term it will surely rise! It helps the investor to average his cost over a period of time, by fetching more units when prices are low and fewer units when prices are high. In the current scenario, the SIP investor will accumulate more units at a lower price. Therefore, hardcore investors want to sit out and wait for the markets to correct.

Moreover, adding lumpsum purchases in the same folio is a good idea from a long term view.

Many people ask for how long should we continue our SIP….the answer is simple…unless & until you accomplish your goal!

Over the years, you must learn to ignore the market noises & continue your SIPs until you reach your Goal. This inculcates discipline within you & help to build an impressive corpus over the time!

It is always proved that regular investors earn more than those who try to time the market or who loose their nerve!

Thus, don’t get wobbled by the down turns in the market because markets are meant to be that way!
Disclaimer: Mutual Funds are subject to Market Risks. Read all scheme related documents carefully.

More Later…

When SMART Goals Are Not Always Wise!


Many of us have been taught about setting goals through the use of the SMART acronym.  The theory is that in order to be successful in our pursuits, our goals must be:






However, for most financial planning clients, this goal setting template is rigid and uninspiring.  It puts the concept of planning and achievement in a linear framework that appeals only to the rational side of their brains.  Goals become a list of “shoulds” that require them to be disciplined and methodical in order to reach their objectives. 

As an alternative, substitute words for the SMART acronym that speak to your clients on an emotional level.Using a more inspiring framework will engage and motivate them, and result in a goal setting process that is more successful and satisfying.Here is an example:






Significant—Goals that resonate with what is most important to your clients will keep them motivated and bring joy to their journey as they make progress in reaching their objectives.

Meaningful—Oftentimes individuals set goals based on what others—parents, employers, teachers, society—view as important.However, to be truly inspiring and satisfying, your clients’ goals must align with their own values and priorities.Only then will their goals be “full of meaning” on a personal level.

Attracting—Only when your clients’ goals are both significant and personally meaningful, will they create a positive image that engages them and inspires action.They won’t have to rely on pure grit and determination to achieve their goals, but rather a clear vision of what they want will focus their intention and guide their decisions on a day to day basis.

Rewarding—Sometimes our clients don’t make progress because, consciously or subconsciously, they are still weighing the costs and benefits of making a commitment to reaching their goals.An honest appraisal and conversation about this inner conflict can bring clarity, and resolve incompatible feelings.In a nutshell, your clients are more likely to move toward goals that bring them a clear sense of reward along the journey as well as in reaching the destination.

Timely—Do your clients actually have the time required to commit to a specific goal?Before embarking on this journey, encourage your clients to consider if the timing is right for them?Likewise, when helping your clients to set goals, it is important to realize that some goals should have specific target dates and others should not.

By imposing deadlines on your clients prematurely, you can create stress that stifles their ability to overcome obstacles in creative ways.In addition, deadlines tend to cause individuals to set goals that are within their current reality.More open-ended goals will encourage them to “dream big”—to stretch their imaginations and indulge in possibility thinking.

Carol Anderson


Posted & Published by the permission of Money Quotient, NP.

Helping Clients to Move from “Change” to “Transition”


Life is a continuum—an accumulation of experiences that makes us who we are and influences how we view ourselves and the world around us. As we review these experiences, we realize that our lives have been permeated with change, and the same is also true for our financial planning clients!  In fact, as ironic as it may seem, change is really the only constant in our lives.

William Bridges, author and preeminent authority on change and managing change, defines transition as the psychological process people go through to come to terms with a new situation.  Therefore, helping your clients to overcome challenges and recognize opportunities is a critical compone

nt of your holistic perspective, and a central objective in guiding your clients to successful life transitions.

It is also important to understand that making successful life transitions will require your clients to have an arsenal of both

 practical strategies and emotional fortitude.  We all encounter both expected and unexpected changes in every area of life.  However, those who are resilient are better able to navigate each change, bounce back from disappointments, and welcome new experiences.

In addition, because nearly all of life’s transitions have a financial tether, it is important to consider how you can help your clients to be more intentional about evaluating and strengthening their financial resilience. From a practical standpoint, financial resilience requires a foundation of basic financial knowledge and a strategy for building financial security. From an emotional standpoint, financial resilience requires self-awareness and self-confidence. This is achieved by helping your clients to identifying fears and behaviors that undermine their financial well-being, and by working to understand and overcome the underlying issues.

On a personal level, your life satisfaction will increase as you yourself continually seek to respond to change in healthier and more productive ways.  Similarly, your career satisfaction will increase as you guide your clients through a proven financial life planning process that focuses on helping them to navigate change and make successful life transitions.

In the world of music, the “passing note” is a note that is not part of a particular chord, but is placed between two chords to provide a smooth melodic transition from one to the other.  Likewise, it is important for you to recognize ways you can act as a “passing note” to facilitate successful transitions in our own life and in the lives of those we serve.

—Carol Anderson

Source: Money Quotient

Posted & Published with Permission of Money Quotient, NP

Why do you need a Financial Plan…?


Hello Everyone!

Last week, my few friends set on a Road Trip to Ladakh. They had planned each & everything properly. They jotted down the route of where to take a break & how much distance to be covered daily. They had a step by step series of maps of their planned route!

Planning your Trip is a vital thing…but have you thought of having a Financial Plan?

Reaching your Financial Goals is not less than a Trip…If you don’t know your destination, how will you know when you have arrived?

Many may wonder – “Do I really need a financial plan?” Some may feel that regularly saving in Bank RDs & investing through SIPs in Mutual Funds will do the job!

In order to become rich, you need to make your money work for yourself!

Well, a Financial Plan ensures that you are ready for the dynamic situations. Here are a few reasons depicting why having a Financial Plan is crucial.

  1. Managing Cash Flows

You definitely need a Financial Plan if you are not aware about your monthly expenses. Many people fail to understand how their monthly salaries get extinguished, leaving them with very little or absolutely nothing to save. Thus maintaining a budget is crucial to stay on track towards your long term goals!

  1. Managing Debt Efficiently

Almost every other person is under the debt of Home Loan or Car Loan…using Credit Cards is very common…People live their lives EMI to EMIs. When the liabilities turn into a debt trap, it ruins your Financial Well Being.

  1. Set the Right Asset Allocation

It is always advisable to put your eggs in different baskets. Understand your Risk Taking Ability first & allocate your resources accordingly. Moreover, it is extremely important to streamline your Investments.

  1. Set SMART Financial Goals

Write down your Financial Goals as per their time. For instance, your Short Term Goal would be in the time frame of less than 3 years & so on. This gives you a clear picture of how much you need to save for a specific goal.

  1. A Blue Print of your Life

If you don’t have road map of how to achieve your dreams, a prudently drawn financial plan can be your blue print to meet all your financial goals.

Hence financial planning is important to make your unclear pictures clear & making your desires achievable!

More Later…



Purpose drives Financial & Life Planning


Do your clients desire to be rich? The word “rich” can be defined as possessing great material wealth, and it can also be defined as that which is abundant, meaningful, and significant. Therefore, what kind of wealth do your clients desire the most? Do they want to experience a life of riches or a rich life? 

Author Pamela York asks a similar question reflected in the title of her book, How Much is Enough? She writes, “The question is deceptively simple, but the answer is critical to integrating money with other aspects of your life and finding happiness.”

In Drive: The Surprising Truth about What Motivates Us, bestselling author Daniel Pink presents the latest research in human motivation and explores how individuals establish and pursue goals. His review lead him to conclude that “satisfaction depends not merely on having goals, but on having the right goals. In other words, Pink learned that everyone (including your clients!) can dramatically increase their rate of success by first determining a meaningful and internally motivated “why” for each goal pursuit.

For evidence, Pink points to a myriad of studies based on Self-Determination Theory (SDT)―a model of human motivation that is concerned with supporting our natural or intrinsic tendencies to behave in effective and healthy ways. This widely accepted model was developed by Edward L. Deci and Richard M. Ryan, psychology professors at the University of Rochester, and is now used in research around the world.

According to Deci and Ryan, goal pursuit and attainment are highly influenced by “the degree to which people are able to satisfy their basic psychological needs as they pursue and attain their valued outcomes.” These studies showed that individuals with purpose-based goals experience higher levels of satisfaction and well-being, and also reported lower levels of anxiety and depression.

Pink summarized the conclusions of the researchers in this way: “Even when we do get what we want, it’s not always what we need.” In fact, these studies revealed that what we really need is a sense of purpose. Therefore, taking time to help your clients evaluate their pursuits, based on this essential psychological need, will increase their awareness of the “why” that underlies their aspirations. This will also form a strong emotional connection to their goals and strengthen their commitment to stay on course to achieving them.

In addition, it is also important to remind your clients that money can provide more avenues or options for achieving their most cherished goals, but financial resources alone cannot produce the essential ingredients of a rich and rewarding life such as happiness, good health, loving relationships, and meaningful activities.


Source: Money Quotient

Posted by Permission of Money Quotient, NP.