How to overcome the inertia in investing
Raghav has read about the need to start investing early and is concerned about his inability to do so yet. He is 35 years old and has been married for three years. He has reached middle management level at his job and earns well. However, he is not able to save at all. The couple enjoys frequent outings, shopping and holidays, which leaves little for savings. While Raghav has every intention of saving and investing a portion of his income, he finds that there is either very little left at the end of the month or the money lies idle in his savings account. He likes the thought of having to make a financial plan, but is unable to take the decisions to put it into action. He finds reasons to avoid doing so. What can Raghav do to overcome the problem that he is facing?Inertia in taking investment decisions is a common problem faced by many people despite the right intentions. While some people postpone saving and investment decisions for valid reasons, such as low income and important commitments, others like Raghav struggle to do so for no apparent reason. For such people, the best way to ensure that a portion of their income is put to good use is to automate their savings. This does not require them to take frequent decisions about where and how much to invest. There are various ways in which Raghav can put his saving and investment exercise on auto mode. He can do so till he is willing to give it the time and attention it requires. He can use the salary deduction option with his employer, wherein a fixed amount can be deducted from his salary for an additional Provident Fund contribution, insurance premium, or mutual fund investment. He can also instruct his bank to move the money from his salary account to any investment avenue, including fixed deposits, on a specified date.
All these options require Raghav to create a mandate for investing a fixed amount from his salary before it is available for spending. It goes into an auto mode and creates an investment portfolio for him with minimal action or decision on his part. Since Raghav realises the need to start investing, he will be ready to make the one-time effort. The low involvement required on his part to keep the investment going will suit his current reluctance to participate actively in such decisions. Some of the options, such as increasing his contribution to the Provident Fund account, may not be the optimal usage of his surplus funds, considering his age. However, he can opt for this arrangement till the time he is ready to commit to a financial plan that can apportion his savings according to his requirements, risk appetite and priorities. In the meantime, using these options will force Raghav to cut back on his spending habit since he has committed his income to other avenues and, at the same time, created an investment portfolio.
Content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.
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This story originally appeared on: India Times - Author:Faqs of Insurances
