Thursday, January 08, 2009

Personal Finance: Lethargy all the way?

I have been asking around all junta that I know about their level of financial planning and its comes as a huge surprise that barring very few people most people do not seem to know where their money is going. These guys are very intelligent and are probably helping other s make money through their advice. Why then such gross negligence on their own money ?

Money is usually sitting in savings a/c s (some people even have it in current a/c), loan payments (housing/education) & credit card payments are regularly missed, investment options are regularly discussed but rarely executed and the year end rush to submit proofs. And the question " where does my money go?" is an often enough heard refrain. (There are guys who have made a killing on part of their portfolio s but end up paying arbit charges on late payments?)

One obvious reason is lethargy but psychologically when it comes to deploying your own capital (especially when that is the only source you have) decision making is not easy for people. There is always that better opportunity that will come along, that equity buying opportunity which the whole world has missed/the real estate opportunity (which few from my age group saw in its 'fallen' days) - during which you of course miss the rallies (g-sec made some neat 15-30% last 6 months) Thats why I guess you have the whole industry of financial planners and to some extent mutual funds. And with me any money that stays, gets spent - on ahem eating out.

What did I miss in 2008: Shorting the market - I did not invest too much (stayed in cash) but not shorting was an error. The g-sec play in a falling interest rate regime. Trading profits after the October cash. Entered gold in early 2008, but did not enter again even when the prices fell for a short while.

I dont see 2009 being any better.

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