Sometimes we find that we are not happy with our portfolio or savings or how our money is being spent. The reason may not be discipline but other psychological factors like lack of clarity and too much of attention to the wrong factors. Let us understand some of the common mistakes and how to come out of it..
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Mistake: You blindly copy the investment
decisions of others.
•
Reality: You have to figure out what you want
your money to do for you.
We keep on hearing about tactical
asset allocation, economics, strategy, and deep analysis on stocks and mutual
funds etc. The first thing should be to link our investments with the goals
important to us.
I asked many people why they
invest the way they do, many replied that an influencer on social media
suggested it. Or a relative did. The ONLY correct answer would be, is this
really fit well into my portfolio to give me the highest likelihood of meeting
my goals?
Investing is a journey, not a
destination. We must be clear on why the money is invested where it is. If we
are not, then we are investing based on other people's goals and what we read
in the news/social media. Be an educated investor. Have access to really good
information. And then overlay that on top of your own personal situation.
You've got to have a financial expert with you and be actively engaged in that
process, like a co-pilot.
•
Mistake: You spend to imitate others.
•
Reality: What makes others feel rich and
fulfilled is not the same for you.
In today’s social media life, we desire
according to the desire of others. If my friend has put up his pictures of his Switzerland
vacation on Facebook/Instagram we also wish to take a picture at London Bridge to show that to him and
others.
These social comparisons really
impact our financial decisions and emotional well-being. You see the person’s
best on Instagram and compare it to your worst. But their failures and
disappointments and days of depression are not displayed for the world to see.
As explained by French thinker Montesquieu, “If we only wanted to be happy it
would be easy; but we want to be happier than other people, which is almost always
difficult, since we think them happier than they are.”
Getting clear about what really
matters to you is incredibly important, and not as simple as it appears. Don’t
follow the desires of another. What makes them feel rich and fulfilled is not
the same for you. Don't blindly follow the investments of another. It may suit
his overall portfolio and risk capability, not yours.
•
Mistake: Your goals are written in stone.
•
Reality: It is completely fine to change your
mind along the way.
You may decide today that you
want to retire at the age of 45. But a few years down the road, you may decide
that it is actually financial independence you desire and are completely fine
with not technically retiring from your job.
Goals may keep on changing based
on our life journey, we should realize that goals are not the final
destination, but a process and a journey.
If we know where we want to go,
it's much easier to decide. Do we want to take a train, a plane, or an
automobile to get there? But most of the time people argue about the mode of
transport without giving thought to about where they are going. Once the
destination (financial goals), is final the
mode of transport (investment options) will also be clear.
