Your income meets your needs and looks after your present, and your savings and investments create wealth for you and takes care of your future.

Welcome to the investment world!

It's great that you are thinking about your future and are ready to take the first step on to the ladder. When we invest, what we see is gains coming through and how our investment will be quadrupled within a short span of time. What we often overlook is the darker side of the mirror. Whenever you try your hands on something new, mistakes are bound to happen and it's okay, since we learn from our mistakes. But when it comes to investments, mistakes are counted in financial terms. And it is always good to avoid the mistakes and save our money. It is better not to get very high hopes of making quick money and you should be aware of few things. Following are the common money mistakes which not only a newcomer but any investor can commit:

Money making is the only goal
This is the primary mistake of an investor. He believes that he is investing and he will profit from it soon. If someone asks him, what's the purpose behind him investing? What future goal will he be able to meet with the investment? He most likely will not have an answer. And when need arises, he would either not have the money, since it's illiquid or it is not sufficient to fulfill the need. The solution to this is make it a point that you will plan before you perform. Plan and allocate your investment into different goal paths.

TV We believe that the TV journalist or the author of a magazine article on investments is the God of investments, whatever he says is set in stone. What we do not realize is, if he actually knew what's going to happen next and where to invest, he would have been the next Bill Gates. He would not have been giving free advice. The solution is switch to a movie channel and relax.

Emotions
Emotions play a very important role in our investment practice. You would somehow have a very strong conviction in a particular stock. You would fall in love with that stock because you have read so much about it, you like the brand, or at times the investment manager is from your hometown and you know he is very knowledgeable. However, these investments are not a good deal and not performing. But because of your emotional connect, you believe that a day will come when they will perform and you will gain and the day might never come. So, keep your emotions separate from your investments, the latter should not be influenced by the former, rather should be based on thorough research and performance records.

No time horizon
Not having a time horizon in mind, or having a time frame too short to meet a goal, is a problem. You have to give appropriate time to an investment to get the best out of it. It is better to invest according to the time period left to accomplish a goal.

Speculation
Some investors are often tempted by speculation. Easy and quick money appeals and in order to make money quickly, they become speculators and not investors. They engage in risky transactions like hedging, take short and long positions and attempt to profit from fluctuations in the market, than by capital gains, interests and dividends. They deal in huge amounts, and they can't afford to purchase these stocks. The result is if the price of the purchase transaction is higher than the sale transaction, they are bound to book losses. Most new investors are wiped out because of such speculative activities. So, we should always keep in mind that we are investors and not punters.

Trying to average out
An experienced investor is easily able to get rid of a wrong product that has entered his portfolio, he would book a loss and concentrate on the rest. On the contrary, an unseasoned one would try to average out the purchase price by buying more of the This strategy has offered historic trading losses especially in the short term. Investors need to accept the fact that a wrong stock has entered and it has to be removed to protect the health of his portfolio. It is better to go by the advice of a financial advisor, and rely on the mutual fund managers because they are experienced enough to handle such things.

Lose focus easily
We tend to purchase and sell at very short intervals based on others' recommendations. One friend who is an active trader suggested, stock A is the best, so we will also invest in A, another friend who is a researcher suggested stock B will outperform all others, so we will sell A and buy B. Lack of conviction in a particular product would lead you nowhere, you would not be able to ripe the benefits of either.

Market timing
Even the big shots have not been able to time the market, nobody can predict what will happen next. Some investors on the basis of their research try to time the market and it does nothing but damage. Investors should rely on professionals, they shall resort to mutual funds, concentrate on their goals and should not panic due to a here and there in the market conditions.

Ignoring the cost
Every investment has a cost associated with it. You have to pay commissions in stock trading, real estate investment exit loads for mutual funds. Investors generally analyse their profits on gross basis and compare products likewise. However, commissions form a part of the cost and at times can bring down the profits significantly. So, you should consider the impact of costs while evaluating a particular investment.

Lack of diversification
Some investors do not have a proper financial plan or even if they have, they often go off track. They tend to purchase a particular product or invest in a particular segment only. This inclination results in lack of a diversified portfolio and if that particular segment or stock fares poorly, his entire portfolio fails, because there is nothing else which can cover up.

Procrastination
Procrastination is the mother of failure. The markets move very fast and we take time in researching and by the time we go ahead with implementing our research, the markets have moved to a different level, however our strategy is the same. And thus we lose out because of improper time management. All these mistakes are mainly due to lack of planning and knowledge. The investor should resort to the services of a financial advisor, devise a proper financial plan and invest accordingly. He should go for professionally managed mutual funds than burning his hands by experimenting on his own.

Ramesh: Hey Suresh, good morning, how are you doing?

Suresh: Hey.. I am doing good, how about you?

Ramesh: I was wondering if you would be interested in investing in that bond which Anil was talking about yesterday, I am thinking to invest in the new bond too.

Suresh: Why do you want to invest in that bond?

Ramesh: Because I have never invested, and I have some money left from my last bonus. So I thought to go for it since a lot of people in the HR department are investing in it and it is supposedly a hot pick.

Suresh: My brother recently got associated with ABC Life Insurance company, and they are offering very good investment options. All of us in the family have invested in it. Why don't you invest in a ABC policy through my brother, he will also pass on a % of his commission to you.

Ramesh(excited): Hey, that's amazing, tell your brother I will buy ABC Life policy. Can you ask him to meet me in the morning tomorrow?

Suresh: Sure. Bye

Ramesh: Bye

What do we interpret from this conversation?
Ramesh is an amateur investor, and wants to park his money into some investment option. But even if that money is spare, it is his hard earned money and it should not go into any channel whatsoever, irrespective of his suitability and requirement. So, what should Ramesh do? Should he look for a financial advisor, who can devise a financial plan for him and suggest investments for him?

Ramesh should not rush through the process, or for that matter anyone, one who is a first time investor or the one who has been investing regularly. The first step is to prepare a list of goals that you want to achieve in life. What all should be accomplished in the next 5 years, the next 15 years and the 20 years and so on. Your life plan should be penned down before proceeding to invest. Before buying an investment, it's important to ask yourself if you really require it. More than half of the mess can be cleared just by asking yourself certain questions pertaining to your investment. Don't just enter into an agreement for any investment before asking the following questions from yourself:

Why do I want to invest?
The first question that should come to the investor's mind is what is my investment objective? What is the reason behind taking the pains of the entire investment process? What future purpose will it serve?

Will I be able to afford it?
Do I have the money to commit to it. There can be lump sum or regular payments. Will you be able to save money for this investment after providing for your routine expenses, other investment commitments and emergencies.

How much will I need at for the goal?
If this investment is allocated towards a specific goal, will the maturity value be sufficient to meet the goal? This will take into consideration the inflation factor as well.

What is my risk profile? What if I lose?
Will I be able to sail through the loss? What is the worst case scenario? Is the product matching your risk profile. What if you are not in a position to take risk and the investment that you are choosing is equity oriented. And if it fails, you fall in a pit of economic crunch which you can't handle.

Does the investment fit into my financial plan?
Is the product a hit or a miss in my existing portfolio? Does it complement my existing investments? This should be measured in terms of your ideal asset allocation and according to priority of goals. If you have enough of debt in your portfolio, and this is another debt investment, then there is no point going for it.

Do I know everything about the product?
Do I understand the investment product such that I can explain it to someone else? Do I know how exactly does it work?Any decision being uninformed can prove to be fatal for the health of your investment portfolio.

Do I know the company fundamentals?
Who is the provider of the product? What is the cash and debt position of the company? Who are the executives of the company? What are the company policies, etc? You should be aware of the demographics of the company from whom you are buying the investment.

What are the costs associated with the investment?
What am I paying to purchase the investment? Higher the cost, lesser the profit. It does not, however mean that you should always consider cheap options, rather the cost should be able to justify its worth. A good way to evaluate the cost is comparing it with similar products, it will give you a better idea.

What is the track record of the investment?
How has been the product performing in the past? Not only in absolute number but also in terms of peer performance, if the absolute number was low, but it outperformed the peer average and there is scope for growth, then it is a good product, worth considering.

Will I be able to liquidate if required? What if I need the money before maturity?
Or what if the investment doesn't prove to be as good as I thought it would be? There may be penalties for premature withdrawal, or there may be a complete no-no to withdrawal before a certain period. The easier and cheaper the withdrawal, the better it is.

Have I confirmed the authenticity of the financial advisor?
Which organization does the financial advisor represent? What is the track record of the advisory? How well does it caters to customers? Or at least, does it even exist? It is your responsibility to find out about the person to whom you are entrusting your hard earned money.

What are the alternates available?
What are the other options available? Is the product under consideration any better than others in terms of cost or performance? You must evaluate other options before making an investment decision.

There are so many people who do not ask themselves these questions and go ahead with investing without a thorough thought. They could have avoided troubles later, by asking themselves these basic questions in the beginning. You might not have answers to all the questions. Your financial advisor will be there to answer the one's which are beyond your understanding. He will devise a solution for you, and direct you if you shall or shall not invest in the product under consideration.

There is a strong correlation between your investments and your goals. To make life simple, every goal must have an investment attached to it. To justify its presence, the investment must qualify in two tests viz. it must mature at the time of attainment of the goal and the maturity value of the investment must be adequate to meet the goal. We have spoken a lot about the investment options that are available and how they can be customised according to your goals. Today we would talk about the latter, i.e. the basis of investments “your goals”. Most people do not invest because of lack of excitement to achieve or lack of knowledge. “Plan for your retirement” may not excite you, but “Having R5 crore at the time you retire” or “Getting R50,000 a month even after retirement” would definitely excite you. It's just a matter of choosing the right set of words. You have to make your goals simple and exciting and your financial advisor will take care of the need for knowledge. Personal finance, saving and investments are terms which might scare you off, but a little modification in your perception and presentation of these terms can make things smoother to understand and apply. As a part of the simplification process, you must make your goals exciting, as the thrill will motivate you to invest for them and work to achieve them. Following are a few key points which can help you make your goals exciting:

Pen down your goals

We do remember what is important for us, what do we want to achieve at the back of our minds, yet it is prudent to write down your goals along with the target date. Writing down your goals will remind you constantly that you have to work hard to achieve them, you can go on check marking the ones you've

accomplished. You can review the list to track your status and edit them as per your requirements. So, whatever short and long term goals you have set for yourself, just write them down irrespective of how and when you'll achieve them.

“Written goals have a way of

transforming wishes into wants;

cant's into cans; dreams into plans;

and plans into reality”

~ Michael Korda

Step by step

If you are the one who is averse to investments, try your luck with investing for one short term goal. Start with a small step - you may go for a one year debt mutual fund to actualise your dream of going for a vacation with your wife, the one which you have been postponing for dearth of money. After one year, when you get the first hand experience, you will not be hesitant but an eager investor. The contentment of achieving one goal will help you in setting and working for the next goal. The joy which you will imbibe

from this vacation will motivate you to invest for your next goal, and this motivation will set you on track.

Challenge yourself

If you feel you may not be able to conserve money from your income, to provide for your investments, “Challenge Yourself”. Your income is limited and you have a lavish lifestyle. Due to maintenance of your standard of living, you have not been able to own a house and it is your dream to have your own house. However, you feel setting a goal to buy a house is of no point since you will not be able to achieve it. It is only you who can help yourself at this point. Provoke yourself, start with a short period, say a month, develop a conviction that you will not waste money in parties, fine dines and shopping, and for this month you will limit your expenses to necessities only. After a month, when you see the extra money, you'll realize that your dream can be actualized. And at that point, the goal of buying a house occupies a place in your mission list.

Process driven

Make a list of short and long term goals. Break down your longer term goals into short term goals. Let's say you want to leave certain assets for your kids to inherit. This is a very long term goal. But before that you must provide for their education,

Baghban is a captivating and a heart melting hindi movie with a mix of all the bollywood masala, emotions and songs. You all might remember crying an ocean at the melodramatic scenes, fluttering at the peppy numbers, going awww at the fairy-tale chemistry between Amitabh and Hema Malini, but might not have looked at it from a financial point of view. In this article, we will review the movie from a financial angle. Although the film was critically acclaimed for direction, story, acting, etc., it also has a very important life message for it's viewers. The movie was a perfect example of “the backlash of no retirement planning”.

In Baghban, Amitabh Bachchan has four kids and he spends all his money on the upbringing of his kids and meeting his family needs, as many Indian families do, he even takes a loan against his gratuity for his sons, expecting that his sons will take care of the old couple after retirement. Amitabh retires, and then came the series of atrocities. None of the sons is willing to take responsibility of the poor couple, they finally decide to split them, with one parent living with one son for six months and then rotating to another son. Next lies a life of dismay for the couple, and the misery is accentuated because of the grief of living separately. Finally after six months, when the date of moving them to the other son came, the couple decide to elope, thus leaving their future to fate, since they have no money.

In the movie, fate was on the couple's side, and their adopted son, Salman Khan, bumps in to take care of his mum and dad. Luck favours them a little more, Amitabh had been writing a book on his plight during those six months in his son's house, the book gets published and it is a huge success. Amitabh gets immense appreciation and huge money from the sales of the book, to take care of the rest of his life.

This film has taught us a very important lesson for life, “Plan for your Retirement”

We all want to give the best education and quality of life to our children, but in the process many parents forget about their own future. Getting our kids into the best schools and colleges or foreign universities cost a bomb. And in order to pay for the skyrocketing fee and expenses, or to sponsor our kids' extravagant weddings, we sell our investments, property, we compromise on our present and even put our future on stake.

The idea is not discouraging you from spending on your kids, and saving for your retirement only, rather keeping both, your retirement and kids' future separate. The money that you have saved for your retirement is not meant for your kids' education and the kids' education money is distinct from your retirement money. Here, you must keep in mind that most times people withdraw from their retirement corpus because they have either not planned or under planned for their kids. You need to carefully plan for both goals independently. And this should be followed religiously at all times.

Secondly, nuclear families are becoming the norm. Parents wish to retire in a serene and quiet place, in the hills or along the beach and want to spend a peaceful life, away from the hustle and bustle of cities. While the kids want to have an independent life in the cities, some even move abroad for their careers. And the kids may not be able to afford or willing to take care of two families. So, if you want to live your dream of a peaceful retirement, you need to save & plan for your future financial independence.

The bottomline is, neither are we getting any messiah 'Salman Khan', nor are we becoming a celebrity writer. Sadly real life is different from reel life. There is an interesting dialogue between Amitabh Bachchan and his boss when he wants to take a loan against his gratuity for his son, the latter advises Amitabh “Retirement ke baad apna paisa hi sabse badi taakat hota hai”. And it holds absolutely true. So, during your working life, ensure that you are investing for securing enough strength for your post-retirement years. Love your children, spend time with them, give them a good education, but do not be a traitor to your own future. Manage your finances in a way that you are able to gratify your kids' future as well as yours.