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Business News/ Money / Personal-finance/  Are you a money yogi, an ostrich or a FD hugger?

Are you a money yogi, an ostrich or a FD hugger?

The money yogi has a cash flow system in place, insurances, SIPs targeting goals, a retirement plan and a will

Photo: Ramesh Pathania/MintPremium
Photo: Ramesh Pathania/Mint

It always happens. An introduction to mutual funds results in a feeding frenzy. I’d introduced a childhood friend to mutual funds two years ago. At age 45, she had left money and its management too late, but once she on-boarded mutual funds, she really went all the way. And beyond. Two years later, I’m horrified to see her portfolio. From the three-scheme portfolio she had started out with two years ago, she now sits on some 10 mutual fund schemes without a thought on what problem they solved. From an FD Hugger, she turned into a Feeding Frenzy Funder. I find that investors I meet fall into some stereotypes. Here are eight investor types—who are you?

The Ostrich: You have no plan, your money lies in your savings deposit and you are known to proudly say that you have no money to invest. You push away all help that comes your way because you are convinced that the world is full of cheats and you are just safer not doing anything rather than making an error. Beneath the don’t care mask, you are actually quite petrified about the state of your finance. And maybe for that reason believe that “something" will happen to make that pot of gold that you are convinced will come your way. Dream on.

The FD Hugger: You love your fixed deposits because they are familiar financial products and because of the certainty of return they carry. You are known to say that you are totally risk averse and any way FDs worked for my father and will work for me. You shut your ears to concepts like real return and post-tax return because it shows you that your money is actually losing purchasing power sitting in their iron jacket FDs. Your tight FD hug will not get your rich anytime now or in the future.

The Policy Wonk: You have overdosed on bundled insurance policies and proudly show off the 10-30 policies you own. You meticulously pay your premiums all through the year and have a register with maturity dates and amounts written in neat pearl like script. When asked what your sum assured is, you look blankly back and parrot, my 1 lakh will become 5 lakh. You have no clue what the policies return rate is, although you understand bank interest rates quite well. You believe that life insurance is an investment product. You, my friend, are under insured despite the policy pile. Worse, you are frittering away the chance of wealth creation sitting in these dud products.

The Unluckiest Investor: You stay away from the equity market and mutual funds because you firmly believe that your act of investing your tiny fraction into the almost 150 trillion Indian equity market will cause it to topple over. See, I invest and the market tanks, you are known to say. You need to understand that this is really not about you, but about you investing on tips on products you should stay away from. Remember that even the unluckiest investor in the Sensex has made about 14% by staying invested for at least 12 years.

The Land Shark: You’re always sniffing the wind for the next big real estate deal. You deeply believe that real estate is finite and therefore will always be in short supply. You showcase real estate returns from point to point—my 5 lakh became 1 crore—omitting the time period over which this happened or the costs over the lifetime of this investment. You also omit to talk about the duds you bought, the runaway builders or the stalled projects. You don’t speak about the title conflicts, the tenant problems, the black money component or the lack of speed when you want to liquidate an asset. Your investments for the last 10 years have given negative returns, but then you’re in it for the long term.

The Feeding Frenzy Funder: This is a mutual fund investor who has tasted the product and now can’t stop buying schemes. He will buy everything that is pitched to him—from his bank, from his agent, from his friend, after looking up the net, after getting a WhatsApp forward. He has more than 20 schemes and his portfolio is a mess. But then he wasn’t really building a portfolio, he was in a feeding frenzy trying to target a “high return". Apart from the lack of hygiene in such a portfolio, what the frenzied investor does not get is that too many equity schemes gives him an index return at a high cost. Managed funds cost more than index or exchange-traded funds. Why pay more when all you want to do is get index return?

The Monthly Sipper: The Sipper has far more order in her life. There are a finite number of funds and each is funded by a regular infusion of money. She may not have a goal in place or know why she is investing, but just having a mutual fund portfolio funded monthly makes her ahead of others we met earlier. Of course, the choice of funds matters the most, and the Sippers will do well to check what they have in their portfolio and see if it fits in with their overall risk taking ability.

The Money Yogi: The Yogi has a hands-free financial plan in place. He goes far beyond just investments and knows why each product sits in his money box. He has defined goals and each product serves that goal. The Yogi is meh about market movement, he does not target a return number. He targets goals, financial stability and finally financial freedom. The Yogi has a cash flow system, insurances, SIPs targeting goals, a retirement plan and a Will in place. Yogis are mostly found as clients of fee—for financial planners.

Monika Halan is Consulting Editor at Mint and writes on household finance, policy and regulation

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Published: 05 Jun 2018, 07:21 PM IST
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