Do you want your investments to make more money? Follow this simple strategy A more effective approach involves projecting future financial needs and working backwards to determine the savings that are required. Its advisable to err on the side of caution in these calculations
Dhirendra Kumar
CEO, Value Research
Do you want your investments to make more money? There are many solutions to this problem, but only two sure-shot ones. One, invest more. Two, give it more time. Preferably, do both. To some people, this must sound like a joke or, worse, a mocking response. However, this is completely true. These are my solutions, the ones that will always work. Many expect investment analysts to unveil a magic technique—a perfect blend of investment types and timing that can transform modest savings into substantial wealth. For instance, turning monthly investments of Rs.20,000 over a decade into Rs.1 crore. Such unrealistic expectations are common among investors.
#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} However, it’s crucial to understand that some financial feats are simply unattainable. The crux is that investing is more than merely a theoretical exercise. Your savings must meet a tangible life goal at the end of your investment journey. Overly optimistic calculations can be counterproductive, often encouraging people to save less than necessary.
Predicting future market conditions with certainty is impossible. Every projection, whether from individual investors, seasoned analysts, or financial experts, is an extrapolation based on assumptions and historical trends. Instead of seeking more precise predictions or highyield investments, it’s wiser to accept that absolute accuracy in financial forecasting is unattainable. The better approach is to expect the unexpected. Moreover, it’s important to recognise that surprises in the financial world are more likely to be negative than positive.
The most reliable strategy for securing your financial future is to save more and for longer periods. A significant challenge is that the vast majority of people either don’t save at all or don’t save enough. Those who do save often do so without genuine awareness or foresight, failing to project their financial needs into the future.
This lack of planning prevents them from realising the need to save more effectively The investment media bears some responsibility for this situation. Focusing extensively on where to invest inadvertently sends a subconscious message that inadequate savings growth can be remedied simply by finding better investment opportunities. This narrative dominates financial discussions and shapes savers’ questions about money management. However, the real solution often lies in addressing the fundamental issue— most people simply need to save more.
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This challenge is made worse by increasing life expectancy. In India, for instance, life expectancy at age 60 has risen to 17.8 years, up from 14.8 years in 1990. This significant shift in the average suggests that some individuals, particularly those with access to better nutrition and healthcare, are living considerably longer. This trend is likely to continue, implying that retirement savings may need to sustain individuals for 25-30 years or more. To meet this extended timeline, savings will need to generate better returns, which we’ve established is likely to be challenging. Even if higher returns are achievable, there’s no substitute for saving more.
Currently, most people save whatever they can spare or an arbitrary amount driven by tax considerations. A more effective approach involves projecting future financial needs and working backwards to determine the savings that are required. It’s advisable to err on the side of caution in these calculations; assume higher future expenses and lower investment returns. This conservative approach can be challenging as the human mind (particularly those inclined towards investing) tends to gravitate towards optimism. While optimism is generally a positive trait, it can be detrimental when projecting investment returns far into the future. Being pragmatic is not very easy, but pragmatists end up being better off.
(The authot is CEO, VALUE RESEARCH)
#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
This story originally appeared on: India Times - Author:Faqs of Insurances
