“The ability to do what you want, when you want, with who you want, for as long as you want, is priceless. It is the highest dividend money pays”- Morgan Housel
In India, parenting has a lot to do with customs, morality and manners which is often an outcome of what, Indians call, our home grown culture. While parents may introduce the ideas of good and bad, right and wrong early in a child’s life, one hardly talks about money or what we call personal finance today. How often has your father talked about mutual funds or systematic investment plan? How often do we talk about compounding power of money?
Due to lack of a systematic approach towards understanding money, there we diverge into two paths; either complete ignorance towards this subject until our first job in late 20s or approach it wrongly and lose all of our savings.It was only during the early months of the pandemic that I was exposed to the world of personal finance.
What I can tell you from my journey is that personal finance, just like food and lifestyle preferences, is a very personal jouney that depends on one’s personality and a few externalities posed by the times that we live in.
I had a pretty decent start towards the journey of personal finance. Today, I invest regularly in stocks, mutual funds and a small portion of my portfolio into cryptocurrencies. But the story wasn’t so even a year back. When I was in my first year in law school, I would earn some stipend from internships and recieve pocket money from parents that would roughly touch 10k a month. I would often spend all of it into eateries, junk food and buying books. While I returned home around March’20, my parents continued to give me a small ransom of money to incur my basic necessary utlities. However, I started to have some money left over increasing with every passing month and decided to start experimenting with it.
I decided to start with the stock market. After carefully browsing dozens of YouTube videos, I felt confident to part with Rs. 1500 that I earned from tutoring a high school student for his exam. Thus, I bought one share of State Bank of India and Reliance Industries each. Within a week, I had a return of 10% that really cheered me up.
With time, I was convinced that one must set up what I call a base portfolio. It typically must consist of shares of companies which are generally well established and have a good market share over their industry. Before you google for companies to buy, I would suggest you to invest in companies whose products you generally use and appreciate. I bought a few shares of State Bank of India, Reliance Industries and Hindustan Unilever because they were names I have heard while I was growing up and believed in what they could do. Today, roughly 45–50% of my portfolio comprises such companies.
After creating a base portfolio, I moved on to certain sectors that I believed in. This has to do a lot with your sense of business aptitude and forcasting and I believe this is what I love the most about investing in the stock market. Having read articles and having conversations with like minded folks, I have come to believe that pharmaceuticals could be the next big industry to boom in the next ten years. Hence, I put 25–30% of my money into companies within one or two such industries I personally believe it. In my case, I strongly believe in Fortis Healthcare and Dr. Reddy’s Lab apart from a few other companies to bloom in the next ten years.
After experimenting with the stock markets, I moved on to the next big tool of personal finance: Mutual Funds. That’s usually the most common personal finance option heard and appreciated by Indian parents. For me as an investor with a moderate risk capacity, I have chosen two well-performing funds, ICICI Technology Fund and Parag Parekh Flexi Cap Fund for myself. They are comparatively well managed funds and look promising in terms of their holdings.
The remaining 5–10% of my portfolio is where today’s buzz is: Cryptocurrency. When we talk cryptos, let’s just forget the easy money component for once. Crypocurrency is a unique tool of personal finance that has allowed people to store wealth which is beyond the purview of Government regulation and control. The market works by itself and a lot of thought leaders believe that cryto is the future currency we shall have.
When we try to understand cryptocurrency, a lot of information on it is filled with stigma and stereotype. However, one must be extremely careful while approaching this market. Why I personally believe in this currency is due to its digital nature free from a lot of externalies posed to physical currency. Further, it allows open and easy transfer of funds across the globe. Personally, I do believe that the next half of this century is where cryptos shall be what today’s banks are. However, due to the volatility and risks involved, I prefer to restrict my investments here upto only a small percentage.
The best gift that the pandemic has given to me is the lesson of personal finance. In today’s world, the most important type of freedom I believe is the freedom of choice, be it choice of career or lifestyle. Thus when one has financial freedom, they can choose to do what they love without caring about what they earn and I think, that’s the best gift one can give to themself.