Posted on September 8, 2017 by Zaharah Sheriff Imagine you are on vacation in China. You are having a good time. You have seen the sights, gone shopping and explored the local cuisine. The food was such a shock compared to the “Chinese” you have been eating in India! Your local tour guides taught you a few words to help you get around. So you have enjoyed chatting up with locals in your broken Mandarin as well. The more you practise the better your Mandarin seems to get. And then suddenly you become unwell. Things get worse to the point that it becomes a medical emergency and you find yourself in hospital. The doctors and nurses on duty in ER only speak Mandarin; one of them has come to explain the surgical procedure you are about to undergo. You are nervous; you have so many questions. Your limited Mandarin isn’t helping here at all. You are scared and worried about what is about to happen to you. And then, you hear some English! You look in the direction of the sound. The translator introduces herself and asks you if you would like to retain her services during your stay at the hospital. Would you accept her offer? I know I would! Relying on incomplete, superficial knowledge in such a critical situation seems unwise, if not life threatening! The anchors and journalists on television channels, business newspapers etc. are like the Chinese tour guides. Just like he speaks to the locals in Mandarin, they seem to be conversing with investment professionals in a foreign language while you observe and hear. Over time, you will pick up a lot of the words they speak. Your increasing vocabulary may lull you into thinking that you have learned the language of investing. Making investment decisions for yourself and loved ones is a very critical matter. The immediate pressure or dire consequences that accompany a medical emergency may be missing. But your choices will impact your life for decades. Financial decisions that were not thoughtfully made could manifest into financial emergencies years later. Maybe you will have to downgrade the standard of living you are now accustomed to. Your children may not be able to study as much as they would like due to lack of funds. You could be putting yourself and your family at risk. Just as in a medical emergency, with your financial future too, you need to fully understand the implications of your decisions. Superficial knowledge can be very harmful. Moral of the story: There is more to learning a language than just knowing the words. It is important to know the grammar and some nuance of the culture as well, else you will not be able to communicate effectively. The same holds true for the world of investing. “Jargon” is just a fancy word for vocabulary; words that make up the language of investing. It takes a lot more than just knowing the jargon to invest well. Business media may teach you the words but not the language of investing. If you want to learn the language, get a teacher. Read books, sign up for courses, follow experienced experts and give yourself time to learn. Else don’t put your financial life at risk. Get a translator instead by seeking an advisor with atleast a decade’s experience in investing to help you on your journey.
(Image Source: https://www.flickr.com/photos/karendotcom127/469222548/)Disclaimer: This article does not wish to hurt the sentiments of any fruit group. I like them all! You may have noticed that the names of some of your mutual fund schemes have changed. Are you thinking, “I don’t care! Neither the old name nor the new name makes much sense to me anyway!”? The name change might seem cosmetic but under the bonnet there has been a huge overhaul. SEBI – the regulator of the mutual fund industry in India, has brought about a change that has completely altered the way the mutual fund schemes will be designed and marketed from now. In the long run, it will hopefully lead to better information and transparency for all investors. As Robin Sharma says, change is messy in the beginning and beautiful in the end. So let’s deal with the messy part. Due to the new SEBI measure, the names of hundreds of schemes have changed, a lot of them have been merged with other schemes and some schemes have completely changed their characteristics. Most financial news is like mumbo-jumbo that does not really affect you or your investments directly. But this one is different. The overhaul is very important. And it requires you to take action. Let’s assume your mutual fund schemes are fruits. For better health, based on your body type, your doctor has asked you to have apples and avoid papaya for a few years. You have started regularly buying apples and eating them. Your health has also improved. Now here is the problem. The change of names and other below-the-bonnet changes in the mutual fund schemes may have converted your apples into papaya. Or your apple might still be an apple. Either way, you need to find out. If you find that your apples have turned into papayas, to preserve your health, you will need to sell the papayas and restock the apples. And if your apples are still apples, lucky you! There is nothing else to be done. That’s all. It is not very complicated. What I am saying is that you need to review all your mutual fund schemes to ensure that the essential features of the scheme have not changed during this overhaul. You will need the help of your mutual fund distributor or your investment advisor to do this. Please contact them soon to do a full review and take action, if required. Happy Investing! PS: I have deliberately not gone into the details of the changes mandated by SEBI and how the mutual fund schemes and categories have changed. I am assuming you have better things to do with your time. For the few who are interested, your advisor should be able to help you with the information.
In the stock market, there are atleast two parties to every trade – a buyer and a seller. This buy-sell relationship is not like it is in your everyday transactions like buying shoes for example. When you buy shoes whether from a store or a website, the person who is selling it to you is a supplier or even a manufacturer. They exist to sell you stuff. In the stock market, there is no such thing as a “supplier of shares” who can keep producing more shares to sell to you. The seller, here, is normally a person with a different world-view on the underlying asset. You think it is worth buying the shares at a price while he or she thinks it is worth selling at that exact same price. That is some serious disagreement! In a lot of cases the person on the other side is an institutional investor, trader or some big fish. In that moment when you do the trade, the 2 of you have exactly opposite opinions. Who is right and who is wrong? Why do you think you will make money from that investment? Do you have some kind of edge that gives you this confidence? Or are you just shooting in the dark? In the world of investing there are 3 kinds of edges:
- Information edge
- Analytical edge and
- Behavioural edge
You absolutely must remember these 6 truths before making any investment decision. They are timeless, and they are true. The more you use them, the more they will help you. Read on, and then share with your friends and family. They will thank you for it… #1 – There is no such thing as a risk-free investment Don’t believe anyone who tells you otherwise, no matter how smart or famous they are! And no, your money in the bank is not risk-free. #2 – Investing is not easy Unless you are an investment expert and have a lot of time to do research and analysis, it is best to keep things simple and avoid investing in new or untested financial products. #3 – Always remember the “human” angle Human beings are rational, but we are also emotional, and that affects our thought process and decision-making. Investing well is about both finance and human psychology. #4 – Make the Power of Compounding work for you Albert Einstein called it the 8th wonder of the world. He said, those who understand it, earn it, and those who don’t, pay it. #5 – Learn to Invest Investment education can have a game-changing impact on the wealth you create. Understanding how the world of money works will empower you to ask the right questions, be skeptical of tall claims and eventually, avoid big costly mistakes. That is more than half the battle won! Start learning now with our online video course “Investing is a Life Skill”. #6 – Always be vigilent Everything you watch on TV and read in newspapers, magazines or on the internet may not be true. And it is best to operate on the assumption that even the most well-intentioned and skilled investment professional is going to find it difficult to care for your money as much as you do. Common sense and some grounding in investment education will come very handy. Good luck! Enroll in our online video course “Investing is a Life Skill”
Do you have an email address? Have you ever used Google or YouTube for search; Facebook, LinkedIn or Whatsapp to connect? Used any apps on your smartphone? Now think about how much you know about the technology that drives these services we take for granted every day of our lives. What exactly is the meaning of terms like SEO, HTML, JAVA etc.? Unless you are working in the field or are a geek, or are a member of their respective families, you probably don’t know, and really, you don’t even care…just like the rest of us! We don’t need to know all the technicalities that go into making the internet happen, for us to enjoy it; we are consumers after all! Investing is no different. When you invest, you are a consumer, just like you are when you use the internet. Terms like alpha, beta, stop-loss, repo rate, CRR, etc. are technicalities you don’t have to understand. You do need to know some basic stuff to invest, just like you do to get online…
- dos & don’ts,
- how to get started, and
- a few new concepts…things like compounding, risk management, asset classes, NAV, mutual funds and so on…sort of like the terms download speeds, Wi-Fi, viruses, etc.