Risk, of not taking Risk…..

Most of the prospects I meet, are very reluctant when it comes to investing in Mutual Funds or shares. Their usual answer is “Even if I get l less returns it is fine, but I want safety” Are you too in the same boat? If yes, please continue reading….
I am taking help of this recent meeting which I had with one of my friend’s dad. This gentleman is in his 70’s and has never invested in Mutual funds or Shares. According to him these are very risky investment avenues. He is a big fan of Postal Schemes and Bank Fixed Deposit’s (FD’s). I know his son for some time now, who is a good friend of mine. I had suggested him several times in the past about starting Systematic Investment Plan (SIP) in Mutual Funds. Somehow he never did it. Recently when we met, I asked him why he is not investing in SIP’s. He said his father is very conservative and that he is not in favor of it, and he will not do any investments without his father’s approval.
So with this backdrop, I asked my friend to arrange my meeting with his father. We all met at his residence about two days later in the evening. Everyone was sitting in front of me. My friend, his wife, parents and his brother. This is what happened….
After initial greetings I asked his father’s view about investing in Mutual Funds. He immediately said “Nahi re baba humko kuch maloom nahi hai iske bare mein, paisa doob gaya tou” (No no….. we don’t know anything about mutual funds, what if we lose money?) I understood the problem, the problem was lack of knowledge and understanding of the product, and hence unwillingness to invest in it. Now I could have spoken lots of things supporting my statements but I tried using a different approach. This is what I asked … Uncle, is it not true that people die on road due to accidents, some even while walking and some while driving, so is it not risky to walk or drive on road? And even when you see accidents happening why still you go out on road? He said yes accidents do happen and I am aware of this, but I am careful and keep an eye while walking and crossing the roads. I said, well that’s right uncle, because you have identified the risk, you take all the necessary precautions while walking on the road and hence it is not that risky now, yes? He agreed to this point. Then I asked his wife, aunty fire is very dangerous and yet you use it in your day to day life in your house to prepare food and light candle in the house temple, why? She said yes she is aware of it but she knows how to control the flame of the gas and so it is not that dangerous anymore. To this I said, that is exactly what my point is. Everything has an inherent risk. But if we know and understand the risk it can work in our favor. With these two explanations, they were now in the listening mode and wanted to know more. 
His father asked, but Mutual Funds are private funds, what is the guarantee if they close the shops tomorrow (Now, this was a valid concern). So I asked him, if he worked in a government organization or private? He said private organization. Then, I asked him why he worked in a private organization, even when he knew that there is no job security in private sector companies? He explained how large and good the company he worked for was. He also told that he had several senior friends and relatives who were working in private sector companies.  Talking to them and seeing them working for several years gave him the confidence, of joining a private sector organization. Knowing this, I then explained to him how well regulated and transparent Mutual Funds industry is and hence safe. 
His next concern then was that the returns are not guaranteed in mutual funds. Again a very valid question. This time I asked him about something which he knew well. What about the bank or Post office interest rates, are they the same now as it was about 5 years back, or increasing? He said it has come down. Yes, it has come down and he knew this because he has seen this happening to his investments. Next I asked him, will the current interest rate remain same going forward in future? He said possibly no. So is it not a risk you are taking, I asked. He was speech less. 
I then told him that the bank or post office FD’s guarantees the rate of interest only for the time for which it is taken. No one can say with surety what the interest rates will be 2 or 3 or 5 years down the line. Also the interest rates for PPF has changed several times in the past. It has come down from as high as 12 % per annum  in the year 2000 to present interest rate of 7.80 % per annum. Knowing these facts you still continue investing in FD’s and PPF, why? He said he only knew about these two investment avenues as there is not much to understand.
The lack of awareness and understanding about Mutual funds has kept him away from trying or investing in these wonderful product. I assured him that he need not worry because I know and understand financial products and the risks associated with each of them, as this is what I have been doing for almost 16 years now. I told him that I will take all necessary steps to ensure that his son’s investments in Mutual funds are managed well and that he will make some good money in long run if he follows my guidance and advice.
Uncle was relieved, as by now he understood that I know and understand the Art and Science of managing risk associated with Mutual Funds and other investments products. That day, I left their house carrying signed cheques and application forms of his son to start investments in Mutual Funds SIP’s. 
My friends, not knowing something is a “RISK”. But, when you know the risk, all you have to do is understand how it can be managed. And if you do not have enough time and energy to understand or learn it, please do not feel hesitant to take help of an expert.  Just like having a family doctor is important so is having a family financial advisor. 
I hope you enjoyed reading this article as much as I did writing it. For more information and knowledge on investing please keep reading my posts. Next article coming out soon…. “Good SIP, Bad SIP”.

My observations while Making Tea …..

Making tea in the morning is a daily chore for most of us. A refreshing cup of tea is a great way to start our day. But have you noticed something beyond, than just making the tea? Okay, let me take you through a virtual tour and the important lesson behind this tea making process.

The tea making process involves some basic ingredients. The vessel to contain the water, fire to heat and bring out the desired outcome from tea leaves, sugar and milk; a tea-cup or the mug ( I personally prefer drinking my tea in a coffee mug) and most importantly the filter. Why filter? Because we only want to have the tea in its purest form and not the contents which made it, right? As much as the contents are important in the making process but the desired intake is the tea which we want to drink. This is what we look forward for every day in the mornings…. the little joy of life and great way to start our day, a good cup of TEA.

Now, why so much fuss over this tea making process and the tea itself?

Well if we observe closely and apply this to our day to day life we will find that each of us wants to lead a good life and grow as an individual also, every day. But we are not leaving alone, there are others with whom we all deal in our day to life. Our mind is like that water for the tea which is inside the container over the gas flame. Throughout the day we meet various people of which some are sweet like sugar, while some are bitter like the tea leaves, and most importantly do not forget about those who make our blood pressure shoot up, just like the fire which makes the water boil. While dealing with all these people we also look upon someone who is bright as a milk and who inspires us to look at the brighter side of life. Each one of these people is important and contribute in our life, and in making us who we are.

Each one has a role to play and we need to develop the humility and grace to understand the teaching or lessons they impart. It is only when we learn and understand how to extract/ filter (just like we filter the tea from its ingredients) the lessons which they are imparting without even knowing it themselves, will we appreciate the art and science of tea making and our own making too.
Just as making a good and refreshing tea every morning is our ultimate goal in making it, and then discarding the unwanted stuff from these ingredients, similarly to grow as an individual and becoming a good human being we must look out for the good things in all and stay away from those who are bringing negativity into our lives. This filtering needs to be practiced every day consciously until it becomes our second nature. If we are open to learning and growing as a person, we need to start paying attention to everything possible. All important life lessons are everywhere, even in tea making ;)