In the course of a year, the assets under management of mutual funds in India have increased to ₹46-lakh crore from about ₹38-lakh crore, a jump of nearly 17 per cent. This is much higher than the growth in bank deposits during this period which has been only about 10-11 per cent. The investing class in the country, more particularly the younger salary-earners, have started putting aside a portion of their surpluses in mutual funds. Financial planners/advisors have played no mean role in this perceptible shift in financial investments.
Two books, The Financial Independence Marathon by Vinod V Bhat and If God was your Financial Planner by Suresh Sadagopan, published recently deal with the whys and wherefores of financial planning in a language which dumbs down the subject to readers of all levels.
If there is one common thread binding the two books it is the simplicity of language and the directness of communication. They both use the technique of conversations to drive home their pith and substance. Both avoid jargon and sophistry and attempt to present the issues and the solutions for salary-earning youngsters, including those who have children.
While Bhat is an IIT Mumbai engineering graduate with subsequent degrees in finance from various universities, including the Wharton School, Sadagopan is well known in the industry as the voice of financial planners — having been a founding member of the Association of Registered Investment Advisors (ARIA). Both thus represent the increasing tribe of financial planners in India.
The advent of such professionals into the financial advisory arena is itself evidence of the need for specialists who can advise high salary-earners like doctors, engineers, lawyers and even media professionals who all have relatively high incomes but not the stability associated with government jobs.
How to plan and invest your money wisely with targets to be met — like giving your children education in private schools where the fees will be high, higher education abroad which has become a fad now, an apartment in a plush locality and life after early retirement, if that is possible.
An analysis of the options for deployment of surplus income with relatively better returns is what this audience requires. Bhat and Sadagopan address these needs in their books.
Bhat frames the subject as a matter of achie ving financial independence. It is a thoughtful term. After each chapter, the key takeaways are summarised. So in terms of organisation of the content it becomes easier for any reader to get the thrust of his points. At the end of the first chapter itself he builds the case by stating that money “creates” time, re-discoursing the old theme of whether time is money or money is time.
His book is instructive and builds from the basics. He lays out the principles and then writes about the various options giving a lowdown on them. For instance, Chapter 11 is on mutual funds. He also writes about such relevant themes like the Peter Lynch principle, which even investors who deal only through mutual funds should be aware of because it would increase their ability to critically compare and contrast the performances of various funds. Ultimately, it is concentration and focus which can yield you good returns. Bhat quotes one of the contemporary greats of athletics, Usain Bolt: “I trained four years to run nine seconds and people give up when they don’t see results in two months.” That sums up Bhat’s advice to investors too.
Sadagopan, on the other hand, is more upfront. In his first chapter, for example, he busts a few myths about the mad rush to own a house/apartment. “Renting is a great decision as the rental yield for the owner is just about 2/3 per cent. The owner is subsidising your stay and allowing you to reside in a property that otherwise you cannot afford.” This is relatively relevant advice at least for people who have transferable jobs. And the government is also trying to make IT assessees opt for the non-exemption route, at least as revealed in the last Union Budget.
Sadagopan deals with ethics in the field of financial advisors and the need for these professionals to be wary of conflicts of interest. People who take advice should also remember that there is no liability for these advisors if their advice proves either useless or it devalues your hard-earned savings.
It is advisable to read such books before you engage with advisors because then you will have clarity on what you can expect and what you need not. Ultimately it is your money.
So the bottomline is that both these books greatly improve your understanding of the opportunities for making money work for you. You may do it yourself if you have the time and inclination. Or you can choose to have professional advice and then take a call. But always remember that when you retire for the night and sleep you are going to be alone.
The reviewer is a commentator on banking and finance
Title: The Financial Independence Marathon
Author: Vinod V Bhat
Publisher: Penguin Business
Title: If God was your Financial Planner
Author: Suresh Sadagopan
Publisher: Westland Business