How to segregate your financial goals?
Updated: May 11
Each person has specific requirements and knowingly or unknowingly specific biases.
“Take up one idea. Make that one idea your life; dream of it; think of it; live on that idea. Let the brain, the body, muscles, nerves, and every part of your body be full of that idea, and just leave every other idea alone. This is the way to success, and this is the way great spiritual giants are produced.” - Swami Vivekananda
There are many ways you can invest. I chose a conservative style of investing. Since this is my style of investing, I apply the same to the investors. I have practised this style of investing for a decade now. I cannot point out a single source that has taught me this. It is a combination of extensive reading and self-reflection.
Over the last decade, I had an opportunity to interact with a variety of people. Working with individuals is unique, each person has specific requirements and knowingly or unknowingly specific biases.
To get rid of biases, I focus on areas that require little to no argument. Everyone has basic goals; I call these goals as safety goals. There is no argument that at one point people will retire, there is no argument that people want to save for their child’s future education, and there is also no argument that people want to buy at least one primary home.
At the portfolio level, an investor must allocate safe investments towards these goals. A combination of mutual funds, portfolio management schemes (PMS), new pension scheme (NPS), provident fund (PF) and public provident fund (PPF) helps in meeting safety goals. This way investors can create a conservative portfolio to meet their safety goals.
I also allocate to domestic and global equities as part of portfolio allocation. To meet safety goals, I prefer investing in companies that generate a high return, have minimal or no debt, and have a long history of creating shareholders’ wealth.
Many people focus on money management to meet safety goals. However, India is changing, wealth creation is happening at a young age. So, working with a few founders helped me understand goals beyond basics. I called these goals ‘comfort goals’. Since these are investors' personal goals, there are natural biases. These goals are in the likes of travel, kids’ foreign education, moving into a bigger house et cetera.
As a priority, safety goals must be covered first. As far as safety goals are met, allocation towards comfort goals is advisable.
A combination of mutual funds, portfolio management schemes (PMS) and alternative investment funds (AIF) is suitable. I do not prefer taking debt allocation in the form of credit risk. However, a Short-term debt allocation or a conservative debt allocation using mutual funds is fine.
Similarly, a stock portfolio is created to meet comfort goals. The criteria of high returns and minimal or no debt continue. Instead of large global/domestic companies, market leaders in small and mid-caps are selected.
An area which requires an extensive argument is the luxury category. These goals include buying a second home, extensive luxury travel, buying expensive cars, etc. This may require the person to invest in start-ups, private equity, land, crypto etc. Ideally, there should be no assets overlap between luxury and safety/comfort allocation. As a practice, I stay away from meeting luxury goals.
The idea of investing is first safety of capital and then growth. Avoid investments that are narrative-driven and not fundamentally driven.
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
The securities quoted are for illustration only and are not recommendatory.
Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
Details of the advisor
Advisor: Ankur Kapur
SEBI RIA No.: INA100001406
BASL Member ID: BASL1337