In 2014, work towards making the God of Small Things smile

I want to dedicate 2014 to the God of Small Things. Not to the God of High Return No Risk. Not to the God of Derivative Trading. Not even to the God of Guaranteed Return Pension Plans. Nope. Those are chimeras that disappear at touch. Mirages that dissolve as you approach. In contrast, The God of Small Things is all about the banal, the boring, the tedious, the ordinary. The rituals are painstaking and only the very dedicated persist. But, once you’ve made the God of Small Things smile, you move to another level in the game—that of being the Master of Your Universe. Not the entire Universe, just the little bit of blue that you call your own. And that’s not a bad place to be. Certainly, it’s less exciting than being a giant squid wrapped around the face of humanity, but unarguably more grounded and secure.

While everybody is talking about where to invest in 2014 and what the winning product is going to be, we’re going to talk about how to prepare a money grid that is online, flexible and fully in your control. The mistake we make, always, is to think up the big, hairy audacious goals of investing, stare at them a while, get excited at the audacity of doing this and then get distracted by the tedious processes needed to take even one step in that direction. Investing is not about finding the best stock or bond or mutual fund. It is not about deciding whether gold will outperform this year or not. It is not even about predicting inflation rates or rates of interest. Investing is the last piece to fall into a money box. Something you do once you have the rest of your finances in order—once your cash flow is in order, your emergency fund is secure and liquid, your own medical insurance policy is in the bag and a pure term life cover is all done. It’s only then that the first rupee of investment comes out of the wallet.

The tricks and tips of investing are not about somebody’s opinion about what will do well this year. They are about how to get an online investing system in place so that you have full control over your investments—Employees’ Provident Fund (EPF), Public Provident Fund (PPF), insurance (if you insist on staying with these low-return-high-cost products), stocks, bonds and mutual funds.

There are three things you need to have before you can build this grid. You need three bank accounts. One is your income account, one is your spending account and one is the investing account. All are online and each has the other two accounts as registered beneficiaries, i.e., accounts into which you can sweep money using the National Electronic Funds Transfer system. The second thing you need is a demat account. You may not be investing in direct stocks, but most bond issues are best bought online and for that you need a demat account. And now mutual funds are getting demat too. The process is painful. But just hunker down and do it. The third piece is the getting the know-your-customer (KYC) details in order. Each part of the market that you want to access has its own KYC norms. Very irritating, I know. But don’t fight it. Just do it.

Get your mutual fund KYC done. For the other investments, the usual documents you need are a photo identity and an address proof. Of course, you need your PAN card. Have these documents handy. Keep a bunch of passport size pictures ready to use. Scan these documents and have them ready to use somewhere. Have a place where all the cheque books reside—who knows when you might need a cancelled cheque!

Once all this is done, you next need an online vehicle that will allow you to buy, sell and maintain these products. There are online brokerages. Most banks allow access to a wide range of products. Then there are the Web portals that do the job. Choose one vehicle so that all your financial transactions are in one place and you can get a net worth statement when you want it. What all should you be able to do? Notice that there are a couple of lakhs in the spending account that you don’t need for a few months. You should be able to sweep that money into a short-term debt fund in 30 seconds. Or, you notice that a bonus is sitting in the invest-it account crying to be deployed. You should be able to hike the systematic investment plan (SIP) amounts for the next few months. Again, in 30 seconds. Or, you find a big expense that you did not bargain for, and so you’d rather not fund your SIP this month. You should be able to pause the SIP for a month, and restart it the next. Again, in not more than 30 seconds.

So, let’s leave the exciting world of high finance to those in sharp suits. For retail investors like us, a neat online money box with sensible products that don’t need annual predictions for it to do well is good enough. Have a great 2014!

Monika Halan works in the area of financial literacy and financial intermediation policy and is a certified financial planner. She is editor, Mint Money, Yale World Fellow 2011 and on the board of FPSB India. She can be reached at expenseaccount@livemint.com