Basics about Saving and Investing to keep in mind


Money in the right hand is an asset, in the wrong a liability.

You can tell a lot about a person by not how much he makes but by how he manages what he makes.

Money is not the most important thing in your life, neither is it any less important than your health and relationships.

If you do not respect your money, do not expect it to reward you.

Money gives you options when you feel like you had none, this is both a blessing as well as a curse depending on you.


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Room for Error

You will not always get it right all the time when it comes to investing.

Make sure you get most of your calls right and when things go wrong, try to keep the damage at a minimal.

Recovery of lost money is always more difficult than making money.

Do not test the depth of the waters with both feet, you are human so you will make mistakes.

Luck and uncertainty are a given irrespective of your outlook towards life, accept it even if grudgingly.

Have enough room for error with finances so when things go south, which they will from time to time it gives you a learning experience going forward rather than a reason to quit.


Additional reading: Click Here to read why there is no such thing as best mutual fund schemes.


Save, just save, you do not always need a strong reason to.

Often we find ourselves not having enough motivation to save,you do not need one.

When people think of long term goals like retirement planning, purchasing a house, etc. often they procrastinate the execution part since planning can be perceived as complicated and thereby never get to saving and investing for long term goals.

Availability of easy credit also plays a part here.

Imagine the number of times you have spent carelessly, like that time you bought that latest smartphone equivalent to 2-3 months of your salary or when you go out more times than you can financially afford to.

No matter how much you earn, if you do not save then you will always be dependent on the next salary.

If you can spend without much planning and thinking then you can save without much planning and thinking.

Save as you spend, don’t think much.


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Era of Information

This is the era of information, not to be confused with knowledge.

Information is about facts whereas knowledge is what you do with that information.

The modern human is bombarded with information on a daily basis from innumerable sources, unfortunately this is confused as knowledge.

Today it is easier to invest but difficult to stay invested, the latter is where you make wealth.



Keep things simple

Besides the obvious savings option of a bank account and fixed deposit, today we have options aplenty in newer spaces like PMS, AIF, Mutual Funds, Direct Equity, etc.

The first and foremost point to consider is whether what you are looking for is regulated, if not then stay away.

If the promised returns of any financial product seems too good to be true then it usually is.

The easiest way to understand your risk profile with equity investing is to look at returns during a market crash and ask yourself if you would consider investing.

If not then it is better to stay away no matter what your ego says.

Do not venture in to any investing venture if you do not understand the basics of it nor have a qualified professional to guide you, it never ends well.

No investment should keep you awake at night or occupy your thoughts for majority of the day, your investments are meant to make your life simpler and not complex.

Additional reading: Click Here to read whether you should invest directly in stocks or equity mutual funds



Lifestyle inflation

Lifestyle inflation is the worst form of inflation since it is self-induced.

As humans the natural tendency is to get our hands on shiny new toys and to consume more.

A society that encourages looking outside for internal validation does no favours.

Understanding the difference between your needs and wants is a good start but implementing your understanding is what eventually makes the difference.

Peer pressure is real, you may want a fancier car, smartphone and an even more expensive holiday than the last one since the pressure to showcase you are living a luxurious life is never ending.

Stay humble, stay stress free.

Even though lifestyle inflation is self-induced, the trigger point for that is mostly external.



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Give it more time

Be it savings or investing, it usually takes time to form a healthy habit.

Over time the law of averages usually takes shape, overnight success is usually the result of several nights.

Patience as a virtue cannot be taught, it can only be learned.

In an era of instant gratification and quick fix, patience does seem like a misfit and yet it is as valuable as it has always been.

We often complain of time passing by too quickly and yet baulk at the thought of waiting for 5 years to see any meaningful returns from our equity investments.



Understand Risk

There is a difference between risk and calculative risk, in the latter you know what you are doing.

Risk is omnipresent and an inherent part of life and yet when it comes to investing, the risk part is amplified and misunderstood.

Prior to the Liberalization, Privatization & Globalization (LPG) policy India was mostly a socialist economy whereas post the LPG policy, India is a mixed economy with a higher inclination towards capitalism.

Earlier when inflation rates were on the lower side, one could make inflation beating returns by saving in a fixed deposit.

This ensured that your money would keep appreciating and growing, you cannot do the same anymore since inflation rate is higher and fd rates lower.

You cannot grow your money with saving in a fd, you need equity investing for inflation beating returns.

Not doing so would be running the risk of the value of your money depreciating with time, the risk of the past is not the same as the risk of today which is why understanding risk is paramount when it comes to saving and investing.


Price versus Cost

When you avail the services of a qualified professional for his expertise, you pay him a price for his skills and experience.

When you invest without any expert and research backed input based on half baked information from friends, relatives, colleagues, etc. you pay the cost of it in the form of losses in various ways be it excess taxation, drop in valuation, poor investing experience, etc.

Nothing worthwhile is free and so is the case with investing.

You will need patience, the ability to sit tight through several lull phases and volatility but keep in mind this is the price you pay for growth.

Look at it as paying fees for your rewards and not as fines, growth does not come from a place of comfort.


Understand that things will not always go as planned.

Control what you can, mostly your behavior but also keep in mind how you manage what you cannot control will eventually decide whether your money transforms in to wealth.

Do not compare your journey with that of someone else, money may or may not bring you happiness but it definitely makes your life more comfortable.

Respect the volatility, embrace the uncertainty and value your hard earned money.


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Disclaimer : While due precaution has been undertaken in the preparation of this article, The Mutual Fund Guide or any of its authors will not be held liable for any investments based on the above article. The above article should not be considered financial advice and has been published only for your perusal. Due credit has been given in case wherever required, in case you feel any part violates any rights then do get in touch with us and we shall get it duly removed.  
Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing

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