A few weeks back one of a good friend of mine, let’s name him Amit, approached me for some investment advice. At first, I felt honored to guide someone on their investment objectives. As we have been together from past more than 3 years I have had a fair idea about his risk profile. As per his risk profile, I did suggest him a fund to invest, but as fate would have it, few other good friends suggested him few aggressive funds to invest and at the end he was lost in the jungle of suggestions. Analysis Paralysis bug had bitten him. On following up after few days I was shocked to know that he decided to go with Recurring Deposits and discarded all suggestions. I could understand why he did so, he did not want to waste time as his investment objective was time-bound.
In last few months, I got several call/message/email asking very basic personal finance questions to which most likely even person who was asking had a fair idea but he/she was afraid to commit to personal finance.
Financial Decisions are supposed to be taken keeping one’s risk tolerance and future need of money in mind, no wonder that’s the reason probably it is called Personal Finance.
Over last weekend one of my close relative called me and asked to give him the list of mutual funds I am investing in so that he could also mirror my investments. In certain cases, it may work, but for that to work our risk tolerance and future need should be close enough. In our case, we are poles apart. I have risk tolerance of above average, wherein he was more curious to compare it with 8% of fixed deposit. I have all the investments based on goals and their future need of money. Except one, all of my goals are long term goals, 15-20 years in future. Wherein my relative just started earning, he needs to plan for his marriage and buying home for the future family. Marriage could be considered short term goal as it might happen in 3-5 years or earlier than that, but buying a home is certainly long term goal for him, it might happen in 5-7 years or even later than that.