We all have wisened up, it seems, as regards financial planning. Even so, we fail. Although wisdom is manifest in the way we tend our health, yet its applicability is found wanting in finances. Let me illustrate by revealing to you the relation between gastronomic and economic capital.
We eat bread, vegetables, dal and rice for lunch and dinner. We may have soup, salad or namkeen for dessert once in a while. We do not, however, live off desserts only, just because they thrill our taste buds. If we ever attempt doing so, we would end up bed-ridden. In case this happens, we seek control over our food habits. This is how we remain in rude health.
Similarly, for our financial health to remain in the pink as well, we advise asset allocation. That is, creating a portfolio of bank deposits, debentures, equity shares, mutual funds, gold and real estate. Like a balanced diet, a balanced portfolio helps.
We consult a doctor when we fall ill. He prescribes medicines, but not before writing their dosage. We adhere to the dosage instructions to get well. We don't gulp all medicines at once, wishing for a speedier recovery. If this be the case, we would give up our ghost! Therefore, we systematise our medicinal intake. If the disease proves stubborn, we keep popping pills for years! No matter what, we stick to the medication to maintain good health. Likewise, we take the systematic investment plan route in investments for good financial health.
Consulting your doctor is much like consulting a financial advisor. Even if, at first go, we are not cured, we allow him to change prescription. If we stray a little from the course of medicine, again, we do not curse the doctor. In fact, the doctor never guarantees us results. Yet, it is we who expect them.
Similarly, you can't insist on guaranteed success from your financial advisor. He can guarantee only his best efforts, not success. If, at first, the advisor is unable to produce results, don't flee from him. Also, no SIP should be stopped just because markets are down. Moreover, don't judge the advisor in the short term; instead, allow him a long-term mandate.
We don't accuse the entire profession for a few black sheep in it. Similarly, the entire profession of financial advising should not be unfairly accused for a few black sheep in it.
Just as we combine a balanced diet with the occasional advice of the doctor, we need to merge a well-balanced portfolio with sound advice.
The writer is president, corporate banking, Axis Bank. The views expressed are personal
