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Forget the inflation-beating approach to investments! Instead, go for the simple principle of financial planning to meet your goals saysSudhakar Shanbhag, Chief Investment Officer, Kotak Life Insurance. Read on to find out how he manages and creates his personal wealth.
What does money mean to you?
Money is a means to an end and not an end in itself. By definition, it is a medium of exchange, a unit of account, a store of value. Money has moved away from commodity money to fiat money. This means that it doesn't have any intrinsic value as a commodity but gets its value from being declared as the legal tender from respective governments. Yes, it puts food on the table and buys us nice things. But it is good to remember that there still are things that money cannot buy!
How do you plan investments to beat inflation?
Inflation or the loss of purchasing power of money over a period of time is a reality in a growing economy. Rather than just looking at beating inflation, the approach one should follow should be based on the simple principles of financial planning.
Evaluate financial needs, objectives and goals along with your risk appetite to expose your investments across multiple asset classes. Reviewing the asset allocation at periodic intervals and rebalancing the portfolio is what would help. A disciplined approach and consistent plan moves you away from jumping asset classes based on flavour of the moment and ensures that your goals are met.
Does gold feature prominently in your portfolio?
Diversification across asset classes is a part of the financial planning process. Behaviour of gold prices across market cycles provides a hedge against other asset classes. So, yes, a portion of allocation to gold is a good strategy to adopt.
What is your one key learning experience from investment?
Sticking to one's philosophy and maintaining a disciplined approach is an absolute must to manage your investments well. One should not be under the impression that managing investments is glamorous or the place to be. To be successful in the world of investments one needs a lot of passion, hard work and discipline. We normally end up reflecting on the success stories but a lot of failures go unnoticed. Investment is not only an art but a valuable experience.
As in any other field, research must be done before the investment is made. Profits can be made through the purchase and sale of various investments made during your lifetime, but it is also easy to lose money doing so. So while investing one must follow a disciplined approach and keep tracking the portfolio at regular intervals.
What is your message on savings and investments for investors starting their career?
One should take full advantage of the ability to take risks in early in one's career. One is a slave of the market and not the other way around. If one overcomes the fear of failure or fear of losing, only then can he/she be a long-term player.
But then, young investors should not only think of benefiting from short-term gains alone. Rather, they should look at a larger picture, and have a right mix of various asset classes during their lifetime, Youngsters should not only save wisely but they should save sensibly while prioritising their family and personal needs from time to time
What are the investment books you wish to recommend for young investors?
Reading is an integral part and a continuous requirement in the world of investments. One up on Wall Street, Reminiscences of a Stock Operator andOptions, Futures, and Other Derivatives by John C. Hull makes a good read
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