The circus around Akshaya Tritiya (the auspicious day to buy gold according to Hindu tradition) this time tells me that we should be near the peak of the gold cycle. It’s when the retail investor gets it, that the party is really over. The exchanges have extended trading hours and knocked off transaction charges. Full-page ads, TV spots, hoardings and expert columns (I declined one last week that I see in another pink paper) are talking about this great investment opportunity. Returns data is pulled out to showcase the super returns gold has given: 23% per annum returns over the last five years ( 1 lakh is now worth 2.8 lakh), comparing poorly with the broad market index that has done worse than bank fixed deposits at just under an inflation negative 5% return a year (taking the investment to 1.27 lakh). This is just the time that you will be the most vulnerable to making a hasty, lumpy investment decision.

Shyamal Banerjee/Mint

For you (and I place myself in the same category) the advice around money remains desperately boring. The road should be one that needs minimum steering and plenty of time left over to do other things, like composting and growing green chillies in the free time! This approach, let’s call it the hands-free money mode, looks at clearly identifying how much you can afford to invest each month. This means that you take into account the predictable emergency money needs—like a medical emergency or death—by buying health and life cover. You’ve also kept away three months of expenses in a near liquid product that you find easy to use—like a fixed deposit or a liquid fund (I would sacrifice some basis points of return for the comfort of a product that will actually get used over one that scares you off). You’ve had your automatic 12% provident fund deduction and you’ve gone ahead and topped up the PPF even if you don’t need the tax break (your PF deduction may have sufficed). You’ve taken into account the family gold and if short of the 5% of net worth thumb rule, you have begun investing in a gold ETF. Your home loan EMI is active and works as a kind of forced systematic investment plan as well. The rest goes into equity funds each month. You’ve chosen the funds either through your own analysis or out of Mint50. You’ll miss out on the high and low emotion periods with this approach. But if there is still a twinge of not knowing what you are missing, keep a small bit of money aside. If it goes to zero, you’ve lost a bit and if you win, well! The trick is to treat this as gambling money—money that you know you are putting at stake and don’t mind losing. It’s all about taking conscious decisions and taking the responsibility for them.

Endnote

It would be reasonable to assume that a doctor who heals babies of holes in their little hearts is not unintelligent. Cousin in law is visiting from the UK where through the National Health Service he cures little hearts. While asking me for some investment ideas, he told me of one that I thought had passed me and my team by. Specially for NRIs, he said, is this product, that gives you the upside of the Sensex but gives 11.58% guaranteed if the market falls or remains stagnant. Though all the red lights were buzzing Ulip, I told the angry voice to be quiet and not jump to conclusions, and actually searched for this product. Got my team to search. When we drew a blank (the voice gleefully said: I told you so), I asked him more questions. He’s just used the cool-off period to return ICICI Prudential Life Insurance’s Pinnacle to the seller ICICI Bank at Vadodra. And the 11.58% return? This cardiologist was told 11.58 guaranteed. They just forgot to tell him it was net asset value and not interest!

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

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Also Read | Monika Halan’s earlier columns

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