10 things we observed after working with 2,000+ financial planning clients

A few days back, I was sitting with financial planning in our Pune Office and we did a very detailed discussion on his financial life. We looked at various parameters and did basic number-crunching which gave a deeper understanding to this client about financial status.

The first step was to record all his financial details in one place and that exercise alone took more than 40 min because it’s a task in itself to just bring all the financial details in one place.

For the next 2 hours, the husband and wife were totally into discussing some of the aspects of their financial life which they had never thought of or never dealt in detail. It was a wonderful experience in itself.

2000+ Families have gone through the process

My team has done this same exercise with more than 2,000 families to date across the world (Indian residents and NRI’s). Most of these discussions have happened online and few of them have happened face to face. But overall, what matters is the interest and dedication of the client and not the medium of communication.

While we were doing this exercise with the client, I thought that there are many things which are so common among the clients we deal with. I can see a lot of things which get repeated all the time and there is a pattern with the majority of the cases.

So I thought why not share some of common observations and I made a list of 10 points which is true for almost 80-90% of the clients we have dealt till now.

These 10 points will give you a good idea of how a typical financial planning case looks like and you can also check if these points are true for you or not.

Let me put these points now one by one.

1. No idea of their exact expenses

One thing which is most common is that most of the people do not have much idea of their own expenses and how much they are spending in different categories. Now you will feel – “How is it possible, that a person does not know their own expenses?”

The point is that most of the people have a very vague idea of how much they are spending on various categories because most of the people do not note down and follow a stringent budget. People have a high-level idea for everything, but once they put down all the numbers – They get surprised on their own expenses and feel like – “Ohh .. I spend so much!!, Never realized that”

2. The legacy of LIC policies

Almost everyone who comes to us for financial planning always has 2-3 LIC policies which were taken long back for tax saving purpose. If not for tax saving purposes, it was bought by their parents and they are now continuing it and paying the premium.

They have a high-level idea of the Sum Assured and when it’s maturing and hardly a few people recall the exact policy name.

3. People are Surprised

When we do the detailed analysis and show where they stand in their financial life (backed by data and proper reasoning), most of the people are surprised on how bad or how good they are doing.

Mostly we all are so consumed in our life that we never realize the status of our finances. We have a very fuzzy understanding if things are going bad or good.

Some of the people realize that they are worrying too much, where as they are well placed and are on right track (very few people are like that) and majority of people realize after meeting us that they have underestimated how bad they are in their financial life and its HIGH time they need to quickly take action.

4. Confused on how much they would need to retire today

When we discuss their retirement planning, almost everyone fails to reach a number which will be enough for them to retire today.

Just think about it.

If I ask you today that assume you retire today and you have to spend another 30-40 yrs of your life without any debt or EMI burden and no commitment like children related expenses. Assume you are 60 yr old today, and now need a big amount to live your life till you die, how much money would you need?

Just think about this for yourself and you will realize that it’s a tough question to answer. Will it be Rs 2 crore? 5 crore? 10 crore?

5. No clear Financial Goals in life

Most of the investors we see are mostly living in present and dealing with financial goals as and when they arrive. They know they would need “lots of money” in the future. But almost no one has properly planned for their financial goals.

One of the couples we met recently wanted to plan for their kid’s related goals. The wife was clear that the education was the biggest goal, but the husband was confused if they should also plan for the Marriage goal or not.

6. Decisions are taken based on “Instant Gratification”

We see that almost everyone has taken lots of decision-based on “instant gratification” or “the short term benefit” . Someone called from the bank and said they will save tax on a product, and they buy it.

The gold prices were rising and it “felt” right decision at that moment, so they bought lots of gold and not from the last 4 yrs gold has given a 0% return.

Like this, we see that decision is not carefully thought of with all pros and cons, but rather a very narrow approach.

7. “I could have done much much better” – The feeling of Regret

Every 1 out of 2 people we dealt with told us that they regret what they have done with their finances in the past and they wish if they could have done things differently.

More than doing “right things” , these people have done many “wrong things” and that has a higher impact (in a negative sense) in their financial lives.

8. The biggest part of Net worth is the House on loan

Almost always the house was the biggest part of the net worth, not the mutual funds, or stocks or fixed deposits .. I think it’s because we mostly deal with middle class or upper-middle-class salaried investors and the house is generally there in the portfolio.

Almost everyone had a big home loan.

9. Too many financial products

Another common issue which we see in most of the cases is that they have too many financial products. Many Fixed Deposits, many LIC policies, too many mutual funds (if any), various policies.

These people are more of product collectors who have added something new in their financial life each year when the tax season comes or whenever they had surplus money.

This is one reason that their financial lives get very complex.

10. Unable to meet Financial goals with current resources

When we check if these investors will be able to achieve their financial goals or not. We find that most of the people are not going to reach their goals easily .. and in some cases, they are seriously short of money and are in very bad shape.

It’s like a disaster waiting to happen. Investors are already in the age range of 40-45 yrs. They have some portfolio, but looking at their financial goals, it feels like they will be able to reach just 30-40% of it ..

Bonus #11 – Low Finscore©

So you must be wondering what is this “Finscore©” .. It’s our copyrighted model of evaluating someone’s financial life based on 15 parameters and it gives you a score from 0-100 (something like CIBIL) and almost 8 out of 10 people get low to average Finscore©.

Do you want to know what is your Finscore©? If Yes, apply for Financial Planning and our team can talk to you regarding the next steps

What are the important elements of setting your financial goals?

One of the most important part of financial planning is setting financial goals. The first step involved is to know where you want to go ?

If you have no goals set , then you will be randomly investing and as your goals in life comes along the way, you fulfill them. It can happen many times that you are not prepared and some important goals is near by, however you didn’t give much thought to it from many years or months and at the end you have to take decisions in hurry, which you don’t want to take.

Financial goals

By setting your financial goals in advance you can get a good idea of what lies in future and start preparation for it (Goal of financial planning)

What is goal setting ?

Goal setting is a process of defining your goals in Life. There are many important and intuitive characteristics of any goal, which makes it SMART . Lets see what those 5 important element of goal setting is .

Specific : Your goals should be specific and not a very general one, It should contain detailed information and should not leave a room for further questions.5 “I want to buy a house” is a very general goal , however “I want to buy a 3 BHK Flat in Karvenagar area in Pune costing around 35 lacs within next 5 yrs” is a more specific goal which gives a clear picture to you . Look at returns from Real Estate in India

Measurable :  Your goals should be measurable in terms of “How many” or “How much”. It should not happen that you have a rough idea of the goal. Many people I talk with; say “I want to buy a big house”. It’s a great thing to dream for a big house, but at some point in life you will actually decide the actual size and how many rooms and what will be the area.

Not having a clear view means no idea of how much it will cost and then you can’t save for it properly. “I want to buy a 4 BHK house in 5 yrs” will mean you can exactly find out how much you need to save per month so that you can achieve the goal with higher accuracy, you should be able to track your goal.

That means goal being measurable .

goal setting in financial planning

Achievable : This mainly means that your goals should be achievable given your current situation. When financial planners start working with some client, one of the major issues is targeting unrealistic goals in life. Just because you are hiring a financial planner does not mean that he is a magician and will somehow create a strategy for you .

If you are saving Rs 20,000/ month , dont target “3 BHK House in 5 years without loan” as one of the goal because it’s not possible given your current situation. If you put a lot of unattainable goals, the first thing is you will not be able to define how you can achieve them in the first hand.

Relevent : What will happen, if you always wanted to become IAS officer, whereas your goal is “To crack CAT exam” ?

If this happens , you will start with some enthusiasm in start but at some point, it would be tough to sustain the enthusiasm and energy, because that’s not you really wish to and even if you some day achieve that goal which you planned, it would not make sense because it’s not aligned with your life objectives.

This is very much true for financial goals also. You have to make sure your goals are very much what you wish in life .

Lets see some of my personal goals in life .

a) As I like to travel a lot so I would like to generate enough money in next 15-20 yrs , so that I can travel to different countries every 6 months .

b) I would like to build a Farm Land by year 2035, where I can personally do “Vegetable Agriculture”. (I personally have experience of growing things like corn, potato, tomato, carrots, radish, peanuts, cabbage, cauliflower, chana, almost all green vegetables, pulses, peas , onion , garlic) . Yes I have done it in UP at my hometown as a hobby. Do you know hybrid tomato seeds can cost upto Rs 75,000/KG 🙂 so we bought 1 gm 😉 .

c) I would not like to save much for my child marriage, as I would like to encourage them for love marriage and settle things with a simple ceremony , that’s all . I dont believe in lavish marriges anyways .

d) I have no long-term goals of buying house, I would rather like to live in rent for long and build a corpus in pure equity + debt . If things changes and one day I feel real estate is something which should really be part of my portfolio, I will change my mind .

vegSeriously, do you want to buy that 55 lacs flat which is ‘almost’ out of city and commands a rental yield of not even 3% ? Do you ?

Timely : Imagine your goal is like “I would like to buy car of 5 lacs”, Fine ! . Now what do you do ? Do you save 5,000  per month or 20,000 and for how long , It’s important to set a time line so that you have a clear idea of how much does it take to achieve some goal. You can calculate the investment needed for that (See how to calculate) .

Example of Goal setting

Very simple way of doing this is to categorize your goals in Short Term , Mid Term and Long Term and each of them will have “High Priority” and “Low Priority” . This way you have a clear idea of what is important and first preference in all the time frame , For example .

  • “I want to buy a Car worth 6 lacs in next 5 yrs, which can accommodate around 5-6 people” can be a High priority , Mid Term goal , where as
  • “I would like to take a 2 weeks vacation in Kerela with my family worth 50k , can be a Low priority, Mid term goal .

Let us see the full example of Goal settings



High Priority


Low Priority


Short Term (<3



  • Sister Marriage contribution: 3 lacs in 2012
  • Buy a Car in 2013 : Rs 3.5 lacs
Mid Term (3-6



  • Initial Child Expenses : Rs 2 lacs in 2015
  • Abroad vacation with spouse : 5 lacs in 2016
  • Invest in a unique startup idea in year 2016 : Rs 2 lacs
Long Term (7+



  • Child Higher Education : 40 lacs in 2035
  • 60% down payment money for a house : Rs 45 lacs in 2025
  • Retirement Corpus : 5 crores in 2035
  • House in a small town : Rs 15 lacs in 2025
  • Passive monthly income of Rs 50,000 per month starting in year 2030

You might want to look at subra’s post on Financial Resolution , it gives a good idea of how you should start and stick to financial goals .

Importance of Goal Setting with an Example

Even though it looks nonsense,  you need to understand its importance and its impact. Financial Planning is all about achieving goals in the best possible manner by considering your current situation. If you do not have a goal set with some target amount and target date, then you don’t have a clear idea of reaching there.

Imagine a goal of “Child Education” which costs Rs 10 lacs in today’s value. If your target date is after 25 yrs, then considering a 10% education inflation (historically it stands at 10%), the target amount will be 1.08 crores { 10 X (1 + 10% ) ^ 25 }. Now lets take 3 scenarios with return assumption of 12% per annum .

1) You plan for it and start saving for next 25 yrs

In this case , you will have to save Rs 5,710 per month for next 25 yrs . So you can start an SIP today and consistently start investing for this goal . If you get 12% over long-term , and you do not deviate from your goal and consistently invest with discipline , you can reach the target .

2) You plan for it and save more in the starting years

In this case , lets assume you can save more money in the starting 10 yrs and then do leave your money to grow for next 15 yrs , then you just need to save 7,800 per month for next 10 yrs and then leave the money to grow for next 15 yrs .

3) You do not plan for it and start saving at later point

Incase you do not plan for it and lose the starting years of your earning life and once your child is 9-10 yrs old (suppose you lose 10 yrs) and then you start thinking about the higher education , then to meet the same goal you need to save 21,500 per month for next 15 yrs .


The most important learning we should take from this article is that planning for a goal gives a direction and enables us to start thinking in that direction. We spread out the effort of achieving that goal in different stages, rather than struggling at the end when that goal is near .

Comments , share your thoughts on setting financial goals , what are the problems in real life which does not encourage us for setting the goals in this manner , Is it realistic ?

“I created 1.5 crores in last 7 yrs” – here is an Inspiring Money Story !

This time we are going to share money story of another reader of ours (Name not disclosed as per request). This person is from Bangalore, belonging to the middle class and is now working in the US from the last 2.5 years. He is a regular reader of this blog and agreed to share his money story with a bigger audience.

Money Story from India

Over to him…

When I was Growing Up

Born and Bought up in Bangalore, I have spent ~30 years of my life in Bangalore and 4 outside of India. Yes, I have seen Bangalore go from a quaint friendly place where I could cycle 20 km in 30 odd mins through peak traffic, be out any time of the night, ask strangers for help to the current madness on the streets.

My parents were both employed in Banks. My sister and I were never left wanting for anything that would enrich our lives. Looking back; there are things that are more evident to me now with some wisdom that I have gained.

My dad standing in ration line 20 odd years ago for necessities like sugar, our first vehicle – A Luna if anyone remembers, the frown and anger (a reflection of his inability to shell out more cash ) when I asked for something by the month end.

Our Financial life improved with new Pay Scales

Things improved significantly around 10 years back when with new pay scales and an open economy, and a mortgage that was paid off, my parent had more disposable income and could get us (almost) anything we wanted – All I wanted was 500 INR per month pocket money when I was in engineering.

dreaming of money

We did have a very sheltered life though. My parent’s primary focus was to get us educated and to ensure there are no stones unturned in giving us a quality education

I completed my BE in Computers Science and after 3 years of work experience, completed MBA from a top 3 business school in India

The Financial Struggle – Money Matters

Unfortunately, like most Indian families, this education never covered financial education. While it’s easy to now look back and fathom what my parents underwent financially when we were growing up – I still remember an incidence when I was in high school and I wanted a quiz book which costed around 5 INR (yes, 5 INR . Not a typo).

My father had told me he can only get that after a week (payday) and I had thrown a fit calling him names (I was a mean teenager). That night, when I was miserable for shouting at my father, I walked towards his bedroom to apologize and I could hear him almost apologizing (sobbing) and informing my mother that he couldn’t get what was necessary for me.

This incident for some reason stuck with me through.

Parents financial struggle for children

I have seen poverty up close through my relatives and some of my friends (while we were relatively bit better). When I was in 5th, I realized that a friend of mine wasn’t able to pay his school fees for the month. It was Rs 30 per month (I studied in a small govt aided Kannada school) and I had asked my mom to pay his fees which she graciously did until he completed his schooling!. Experiences like these made me dread having less money than what was necessary to sustain and to some extent experience life

No money matters discussed openly!

Money matters were never openly discussed and this translated into my spending habits in my initial working years. I was making around 25k take home a month ( a princely amount on 2007 ) and I just burnt through all this – Food, gifts for friends. Zero savings except for a ULIP plan of 60k per year and a couple of LIC plans based on relatives recommendation.

Fair to say that when I wanted to complete my post-graduation, I had to borrow the ~15 lacs for my MBA from banks and relatives and also withdrew the 1 lac I had in PPF

3 years of work and negative 16 lacs to show for it!

Then my financial life took a new and positive direction

During MBA, thankfully, I ran into some good, positive money minded individuals, courses, blogs (Jago investor and Subra money for example) which opened my eyes towards my financial fallacies.

27 year old, out of MBA school and 20 lacs in debt, with a salary of ~1 lac per month, I ensured that I paid off the debt in 2-2.5 years ( I had a consulting stint for 6 months in Canada that helped). My parents btw thought I had gone cuckoo in trying to repay my loans early and selling off my non-performing ULIPS and LIC plans (at a loss).

Now, 7 years later, with 7 more years of work experience, I have more than ~1.5 crores in assets. I don’t own any real estate and am looking for the best investment. I am not in love with Bangalore anymore, as I used to and the area I would like to stay is way-way-way beyond my reach.

Here is my current breakup

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My savings Amount
401(K) (retirement saving in the US) $55000 (Rs 33 Lacs)
Mutual funds (in the US) $35000 (Rs 21 Lacs)
Liquid cash (in the US) $50000 (Rs 30 Lacs)
Mutual Funds in India Rs 55 Lacs
Stocks in India Rs 3 Lacs
PPF Rs 21 Lacs
Fixed Deposits Rs 10 Lacs
Total Rs 1.73 Crores


Let me share how I started my savings

Once I started saving money, they were always in small amounts. The guideline was to keep aside 15-20 % take home income into savings right away. This was apart from the mandatory cuts like PF from pre-tax income. Just think that your take home is 15% less and stretch the rest of the money for your needs. Else, your monetary demands will always stretch to match the supply.

I was surprised at how quickly they all add up. Investing in PPF is a good example.

It’s surprising to see that I have 20 lac in that debt-like instrument. Or the mutual fund which was mainly based on small SIPs of around 20-25 k per month, to begin with. With the way markets have behaved over the past years, they quickly grew and have resulted in the current amount.

Over a long-term, a small investment on a regular basis can create huge wealth .. below is one small example of it.

I have learned that the difficult part is to start and I maintain disciple in investing systematically. Once you do that, they give you some surprising results.

My next 6 yrs plan

I intend to not touch my Indian mutual funds, invest another 50 lacs there over the next 6 years and just let it marinate and grow over the next 20-25 years when I retire.

These numbers indicate that I am potentially ahead of some peers in the income and asset curve in the same age range

Money for me now is a means of where I want to be in 20 years from now while enjoying life on the way and being able to help everyone who matters to me. I hope I am able to use money as a tool to enrich not just my life but many others – Next stop, for now, is a small home of my own.

How important is money in life?

Currently, Money is a contributing factor for peace of mind.

I’m glad that I can provide for my family, spend some good amount, have a security blanket in case of emergencies, help my family and potentially don’t have to worry about money when I retire.

It’s not the end at all but is a means to achieve my goals. I know people romanticize having less money, but having stared at poverty up close in many cases, I can tell for sure that it’s always better to have enough money to ensure peace of mind. At the same time, the definition of “enough money” keeps changing. In college, 500 INR per month was enough money.

First job – 7000 per month for the first 6 months was enough for me to live like a king. My salary jumped to 25k per month and 3 years later and I thought I ruled the world. This is how I felt!

How happy one feels when one gets the salary first time in life

Now, with 15x – 20x that income, I am still not sure if it’s enough money (especially as I plan my retirement and my child’s education 15 years from now). I am still trying to find my answers there. My wife calls me a compulsive worrier and over thinker and maybe that’s true.

I started educating others on money

When I meet my friends with less money than me or family members with less money, my first thought is how to help – not necessarily financially, but in terms of education. But it’s not always easy. I tried educating my uncle on how his LIC policies are a bad investment and he can look at markets and MFs as he’s retiring 20 years from now and I was snubbed as a know it all in some circles.

I also donate at least 10k a month or two into micro ventures such as https://www.rangde.org/ to ensure I can contribute some way and make a difference in some small way. One of my goal, when I retire, is to ensure I have enough money to generously help those in real need

Don’t make stupid mistakes when it comes to money

When I see my cousins burning through their money in their 20s with no investment or investing in something just for the sake of 80C, friends buying the latest gadget (iPhone upgrades every year ! ), spending insane money on cars, to me it looks like people are finding happiness through small things which is never-ending.

There will always be the next thing that money can buy. I don’t want to judge anyone. Maybe they know something I don’t. But I find this very running after materialist things/brands and spending without a thought about the future very concerning

My younger cousins make fun of me (all in good humor) for not wearing branded clothes. But I am glad in the “cheaper” clothes that keep me comfortable and have never understood why I should pay 5k for a pair of Nike floaters

I am glad to share my story

After I shared my story with all readers on Jagoinvestor platform, it bought back so many memories – I’m literally in tears thinking about what our parents had to go through to get us this life that we now take for granted. I feel lucky to have such parents and in general to have been bought up in an environment that could get me to where currently I am.

Thank you for giving me an opportunity to share my experience with you ! and I request all readers to share their own money stories with all of us, there is so much to learn and know how others have lived their financial life and think about money matters.

What is your money story?

If you want to write your money story, Leave your details here and Jagoinvestor team will get in touch with you with next actions.

What do you think about my money story? Did you enjoy it? Can you share your views about money and how it changed over the years?

7 alarming signals that you will not retire RICH in future

Will you become RICH in the future?

I know it’s your aim and you want to become rich, but there might be many things you are doing which are increasing your chances of remaining poor or middle class going forward. These are clear indications or signals that you might not become RICH and it’s time to do something about it.

Will you retire Rich or Poor?

I want you to read each point I am going to talk below and check if it’s applicable for you or not. Rather than an intimidating article, I want you to see this article as a wakeup call for yourself and redesign your financial life.

Signal #1 – Your Focus is not on increasing your income

Is your focus on increasing your current income? Do you think about it, fantasize about it and try to take any action? No, it’s fine if you are not succeeding right now, but the main question is – “Is it on the conscious checklist that you need to increase your income?”

Not increasing their income was one of the top most regret of most of the people in our survey

A lot of investors are just going with the flow of life and treat their income increase as fate. They feel they do not have much control over it and hence don’t do anything about it.

Given the way expenses are increasing these days, it’s almost a given that you will not be able to create wealth if you do not work towards an increase in your income.

Signal #2 – You depend too much on credit cards and loans

Are credit cards and personal loans your lifeline?

Are you consuming most of the things like Car, Bike, Vacations, Mobile on EMI? If that’s the case, you are in the EMI trap already and coming out of it is not easy.

Time will keep passing and it will be difficult for you to get out of it. This is a big signal that there is something seriously wrong in your way of life. Other than a home loan and the Education loan, or any emergency personal loan, if you have made taking loans and swiping your credit card every now and then for trivial things, it’s a big signal that you will not end RICH

Signal #3 – You are unable to save anything from last many years

Past performance is not an indicator of future, BUT past indicator is at least signal of what can happen in the future. If you are unable to save much from your salary from the last many years, it’s something to worry about.

There is a great chance that what has happened in past will continue unless you give it a direction yourself.

[clickToTweet tweet=”Once you reach #retirement, your income will stop, but your expenses will not. ” quote=”Once you Retire, your income will stop, but your expenses will not, That’s the reason you should start your retirement planning”]

It’s time to meet a good advisor and work on your financial life. Either you seriously need to work on your income potential or take some drastic steps to reduce your expenses.

There is huge number of investors who think that – “From next year, I will start saving” and this is not happening from the last many years. It’s a signal that you might not get RICH in the coming decades.

Signal #4 – You are already very late in saving

Just because you are late, does not mean that things can’t change now, but the effort you will have to put in will be a lot now. It’s like a game of cricket. If you have to chase a big score and you have lost some wickets before 25 yrs and have not made many runs, now you need to show the extraordinary game to win the match. The run rate required will be quite high.

Let’s take an example of 3 people who started saving at 30 yrs of age, 40 yrs of age and 45 yrs of age and they all want to retire at 60 with Rs 10 crore corpus.

The one who starts saving at 30 yrs, will have to save Rs 35,000 per month throughout his life. However, the one who was late by 10 yrs will have to now save Rs 1.15 lacs, around 3 times more.

And the one who is late by further 5 yrs (at 45 yrs) will have to save Rs 2.25 lacs (almost 7-8 times more).

late investing example

In the same way, in your financial life, if you have lost a good chunk of time already, you will have to save much more and take more risks to reach the goal of wealth creation.

I anyone wants to start their wealth creation, then you can open a FREE mutual fund account with Jagoinvestor.

Signal #5 – Every month-end is a struggle

If every month end a struggle for you financially?

If it’s happening from the last many years, you need to understand that this is not a good sign for the future. You first need to get into a situation, where your month-end is not a struggle, then at the next stage you need to move to a stage where you save some month each month and finally, you need to work towards a situation that you save substantial money each month.

Signal #6 – If your job opportunities are very limited

Are you into a business or a job where it’s very tough to survive to find another job easily? In short, are employed in a sector that does not have enough opportunities? If that’s the case, and if you rank yourself “average”, then you might find it tough to search for other jobs that pay better salaries.

Also if your skillset is limited, your main challenge is of “survival” and that’s not a great aim to have.

Signal #7 – You seek too much “safety” in your investments

Finally, if you are an investor who does not want to take enough risk with their investments, means they just want to get predictable near inflation returns, then it means you are a Fixed deposit or PPF lover. Nothing wrong in that, because it’s your design internally and you have got developed as that kind of investor, but you need to be clear that you are earning only near inflation returns.

Check out the video below where I talk about why investors should avoid fixed deposits for long term investments.

If you invest in FD’s or equivalent products, your corpus will become bigger and bigger in number over the years, but it will not increase your purchasing power. Unless you invest very huge amounts, the corpus you will create will not be enough to be called RICH in the future.

How many signals are present in your financial life?

Out of these signals which we discussed above, how many are true for you? What are your thoughts on the points above? Can you share them in the comments section?

11 investing Bias which impacts investors – An audio Podcast !

Do you take all your decisions based on facts or emotions? Be it personal or financial life, it’s a well-known fact that 95% of our decision are based on emotions.

Today we are going to look at various kinds of behavioral biases in the area of money and in general. For this, I got in touch with Mr. Siddhartha K Garg who is an expert on this topic.

We had an hour-long conversation on various things and how investors make mistakes in their financial life because of various emotions. You can listen to a 1-hour long audio podcast below. Just make sure you listen to the full conversation as there are various points discussed.

If you do not want to listen to the audio podcast, you can go through the summary point of our talk below.

What are biases?

Simply put our brains give more attention to something but less attention to something else, despite there being no actual inherent reason to make such a distinction.

And hence it is a bias – that is making a distinction without any reason. A simplest example which you yourself can notice right now – how many positive stories from today’s news do you remember v how many negative stories? I am certain many more negative stories than positive ones.

This is because our brains are hardwired to pay more attention to negative stores than positive ones as the negative ones are more likely to harm us. Or why that pollution in Delhi only becomes an issue every winter, but not so much in summers. Because we are biased to give more attention to an issue when it is right in front of us as opposed to something in the future (this is called proximity bias and we will shortly discuss it).

Now, apart from small purchases like everyday items, these biases can wreak havoc on your long term wealth if you don’t take steps to check them! Want to know more? Let’s read on and think which ones of the following have you already fallen prey to?

Bias #1 – Anchoring effect

Definition – Rather than explaining what this bias is, allow me to illustrate how it originated – once a shopkeeper was trying to sell a mixer grinder and was having a very hard time trying to do so. He had priced it at 25US$ and was aggressively marketing it, yet the customers just wouldn’t buy it.

But one day suddenly his sales started shooting up. Perplexed as to what is the cause of this upward selling, he went to the aisle where the mixer-grinder was stocked and noticed that a shop employee had put another similar company mixer-grinder next to it and accidentally put a tag of $100 US on this 2nd model, despite there being barely any difference in the 2 models.

What the shopkeeper noticed was that the customers would anchor the price at the heaviest figure and then judge the models based on such price and not go into the features etc of the models at the display. As a result no one even touched the 100$ mixer-grinder but the sales of the 25$ shot up.

  • Example – Another similar example would be that of a famous café in Italy, that apart from the usual coffee and food items in the menu also have available for purchase a Vespa! (one of those hipster scooters) Now they obviously don’t expect anyone to buy it, but just by seeing that price tag of 800 Euros on the menu card makes the 30 Euro coffee seem not that expensive.
  • Solution – Now that you know about this bias, you will automatically notice yourself gravitating towards such an item, whose actual value is not worth the price or maybe you just don’t need it. Point being – decide on the purchase on the cost of the item relative to its own quality and your need and not to some item thrown in the menu to throw you off track

Bias #2 – Sunk-Cost Fallacy

Definition – Divestiture aversion or in simple we are averse to letting anything go which we already possess. In more common terms this is when we throw good money after bad.

  • Example – keep sticking with some stock despite consistent under-performance because we think it may improve
  • Solution – cut your losses – yes, a little bit of loss is better than huge loss and what you get back can be re-invested and earn to counter the loss made

Bias #3 – Confirmation Bias

Definition – we look for sources of information that confirm our beliefs rather than oppose our beliefs

  • Example – people who have a right-wing philosophy prefer Facebook pages that cater to that view or with left-wing philosophy will only follow pages that talk about their beliefs. Or in investment parlance – those who believe that FD is safest and surest will try and avoid news outlets or people who say that you must have equity exposure also.
  • Solution – get a mix of information sources and don’t just limit to one side. Hear everyone and have contrast exposure to all investment strategies.

Bias #4 – Halo effect

Definition – Halo is the golden circle you see above the heads of angels. Like in Tom and Jerry, whenever one died they showed the character in white robes in heaven with a golden circle above their head.

So in this bias, we get a halo above our head after we do something good (like not over-spending throughout the week or doing a financial review of all your insurances and investment on a weekend), that now you think that you are good boy and can get away with a little bit of unexpected spending.

  • Example – Sometimes people work out a lot in a gym and think that now they deserve it and come home and order Dominoes. Similarly, people can do in financial life, like for example after spending a weekend going through your finances, documents and portfolio status people think that they have done all the right financial habits that they go and splurge in the mall on Sunday evening.
  • Solution – notice that this is a common behavioral trap when you see yourself falling for it, back off and stick to your investment or budgetary plans.

Bias #5 – Bandwagon Effect

Definition – in simple words it is the herd mentality

  • Example – in your office everyone decides to invest in gold because the market is low and do so you. Or your relatives and uncles decide that life insurance is the best way to save tax, you also decide to follow. When clearly they are the wrong choice. One person example – in the SCBA (Supreme Court Bar Association) there is a tie-up with a particular company’s life insurance. And I see many people just buying that insurance because most of the other lawyers are also buying it. Now I am not saying that this particular company’s offering is bad but only saying that just because everyone else is purchasing it, makes it the right option. One should always purchase, not blindly following the herd, but after carefully analyzing the options.
  • Solution – Don’t just follow the crowd but analyze what are your requirements and then what are the best solutions based on your investment need. If you are a young salaried person then invest in equity and if about to retire and obviously can’t carry many risks then look for safer options – maybe debt funds. But don’t just follow the crowd and invest based on your requirements and financial situation.

Bias #6 – Proximity bias

Definition – we give more importance to things in our current than in the future.

  • Example – The study of people under F-MRI shows that for future they viewed themselves with the same regard as a stranger. In fact, doctors in the US, show the pictures of people on a computer screen that if they don’t exercise or take their medicine then in the future they will look so and so and this caused more compliance to the diet plan.
  • Solution – it might not seem important now but your future will be present soon. Days are long but years are short – so, start saving for retirement from the very first cheque and start your SIPs early to take advantage of cumulative interest.

Bias #7 – Recency Bias + Negativity bias

Definition – we pay more attention to negative and recent things

  • Examplestock market crashed – as opposed to a long string of bull runs or that many companies did farewell and decide to go for FD and not invest in mutual funds
  • Solution – Stick to a chosen investment strategy based on goals and not let blips change your mind

Bias #8 – Status Quo Bias

Definition – that we prefer to let things stay as they are and not rock the boat – it’s going fine then why shake things up

  • Example – simples would be not analyzing your portfolio – it’s going fine. Why apply mind and let it be
  • Solution – No! Get over the laziness and devote some good time like Sunday afternoon after lunch one hour once a month without phone calls or emails or any distractions and get things done.

Bias #9 – Information Overload and attention deficit

Definition – you are overloaded with information and you just get paralyzed. You stop taking any actions because you are over-analyzing things and not able to arrive at decision.

  • Example – let’s say you want to decide which mutual fund to invest in and get bombarded with options and decide that let’s just get the simple FD done. In fact, a study from the US shows that a company offered its mutual funds to invest in on the company’s expense. With 3 options, 75% of people selected a fund. But with 10 mutual funds options, the purchase rate dropped down to 25%.
  • Solution – get basic research done and then keep cutting out irrelevant information, get the main data and then decide with the help of an expert – hired or a family or friend. But just because lots of work doesn’t mean you should not do it at all.

Bias #10 – Snowflake fallacy

Definition – if you see snowflake under the microscope the you see that each snowflake is unique and so do we, think that we are special in the universe and that we know what we are doing is right or that our problem is unique and no solution to it out there, as result don’t look for the solution

  • Example – We think we know it all and can conquer the stock market. Stop – if you are an average person who wants full-time work in the field you are better with mutual funds. Which is basically a collection of stocks picked by experts.
  • Solution – remember that you are not unique and get your major decisions reviewed by someone knowledgeable in the field and don’t just ignore the basic rules of investment.
  • Main example – Even Sir Isaac Newton was not able to beat the stock market! In the 1720s had lost about 3 million US$ (in today’s term) when he tried to play the market on the stock of a company called “South Sea Company”.

Bias #11 – Lifestyle inflation

Definition – This is also called the “Hedonistic adaptation” – it basically means that once your salary etc starts increasing, subconsciously your spending also starts to increase. You won’t even notice it. And hedonism means the philosophy of seeking pleasure and when your salary increases you adapt your lifestyle for more pleasure, hence causing the hedonistic adaptation.

  • Example – You have a nice 50 inch LED. Your salary increases and you start thinking why not a 60 inch LED TV. Then after some time, you decide why not a 4k LED. Then you decide why not an Android enabled LED. Now even with the 50 inches LED you were fine. But slowly and creepingly there was inflation in your lifestyle. And to afford the same TV on EMI, you have to work more, the same time you could have just spent with your family enjoying the latest movies on the 50 inch LED! The problem that I am highlighting here is that I am not at all saying that don’t buy more as your income increases. Obviously, with more income, you would want more things but don’t go overboard and stick to your needs. And make sure that as your income increases so do your savings for retirement etc also increase because otherwise with more income and also more expenditure your savings rate will remain the same and maybe, if you don’t notice, it might even decline – as you save less even though are earning more!
  • Solution – be wary of your purchases. Keep strict logs and budget your discretionary spending. If you start going overboard then you know that you have become a victim of lifestyle inflation. In fact, a US study showed that people would be happiest at the income of 75,000 USD income and after that particular level of income, the happiness level remained the same and it meant only more stuff in the house.

Few general solutions to deal with biases

  1. Accept and acknowledge that you are not perfect and can make mistakes – Remember – that you are human and our minds are not in as much control as we think we are. Accept that our mind works in ways that we can’t even imagine and not all decisions are “rational” decisions. This acknowledgment and acceptance is important because then you will know that yes I can make mistakes and I must setup safeguards so that I do not commit these mistakes.
  2. Never buy major items on the spur of the moment
  3. Never make any investment decision when (a) sleepy, (b) hungry and (c) irritated
  4. Sleep over it! – Economists call this as a cool-off period – so you had the requirements with you and you got the various pitches. Now just take all the data and the pitches to your home, go through them once and just forget about it for one day. In a day or two automatically your brain will tell you which one to choose.
  5. Write it down and be accountable! – When going purchasing – be it a TV, or in the market for an equity mutual fund or new health insurance for greater coverage because you want separate insurance for your old parents away from your family floater policy – WRITE DOWN your requirements and your budget and give them to your partner/spouse/friend. And if you exceed or breach the budget then again write it down again and tell your partner/wife/friend to question such a breach. This will make you accountable for the decision you took. In fact, keep looking at your written note (paper, Google keep, iPhone notes whatever) when doing the purchasing so that any aggressive sales pitch doesn’t throw you off your goal.

We hope you liked this audio podcast and the article. Please share your personal experiences around this topic? Which bias do you feel you have gone through? Share in the comments section.

(This piece is authored by Siddhartha K Garg who is an Advocate in the Supreme Court of India and a former Junior Research Scholar in the Law and Economics Department of University of California, Berkeley. He also runs an NGO Angel Trust for Animal Care in Delhi and can be reached at [email protected])

6 proven ways of becoming RICH (are you one of them) ?

Can you name a billionaire who didn’t start a company?

Or a $ millionaire for that case?

In this article, we are going to talk about various ways people become RICH. No, it’s not a tutorial on how to become rich, but just a conversation on are various ways using which people have become rich. Maybe you will get some idea of which path you want to take or try for yourself.

how to get rich


#1 – Starting a successful business

One of the ways, most people become rich is owning a successful business. Yes, think of any rich person and chances are that they own a business. It can be a tech company, a big store or some kind of traditional business, but it’s BUSINESS.

A job gives you linear income and growth. The business gives you exponential growth and income over time, along with the huge risk of losing the money. That’s the primary reason why most of the people are into jobs and not business.

My point is simple. If your goal is to be in the middle class or higher middle class, you can continue doing your job. However if your dream is to own that exotic villa, or to drive the most amazing cars and never worry about money all your life, you need to own a business, otherwise, it’s going to be really tough to get rich (apart from other 9 points)

You might want to read this article called Indian Entrepreneurs Success Stories – Who Started With Nothing to some inspiration.

#2 – Let someone else run business and get a share

A lot of people have become extremely wealthy by investing money in other business and just holding the shares for long. No, this is not stock investing.

I am talking about funding others’ businesses and keeping a share of ownership to cash on in the future. This is definitely not very common or an easy thing to do. The failure rate is very high, but many people have become very rich through this method.

Paytm Founder sold 40% equity for 8 lacs many years back

For example, you have heard about PAYTM. Right?

You know it’s now a multibillion company and its owner is already a billionaire. But did you know that years ago, there was a guy who helped paytm founder with Rs 8 lacs and in exchange took 40% of the company and exited the company with a couple of 100 crores?

Watch the interview with Paytm founder Vijay Shekar Sharma, where he shares about his journey and this incident (Just click the video and watch the next 1 min)

It’s not always the case that you have to start the business, the main point is to be part of a business and contribute in the journey of the business since the start when it was not successful.

Most of the people who joined large companies as employees got equity in the company (ESOP’s and stocks) and years later when the company becomes big, they all became rich.

Take Infosys for example, It was a business owned by a few people, but those who stayed with Infosys and contributed for its growth over years were rewarded and now they are quite RICH.

At Infosys, drivers, electricians are millionaires

The Infosys management has over the years rewarded selected staff belonging to the C, D and E grades with shares for faithful service and excellence in work. By the time Infy began skyrocketing in value, 67 of these people including eight drivers, owned enough stock to make them very rich men indeed. Kannan’s portfolio of 2,000 shares when multiplied by the latest share value makes for a huge value statement

#3 – By Inheritance

Another way a lot of people become rich is when they inherit a lot of money from their parents or some relative. As per this report, around 31% of ultra-rich people in India have inherited their wealth, which is quite a good number. Every 1 out of 3 people in an ultra-rich category is rich through inheritance.

inheritance rich India

However, this option is not applicable to most people like us.

#4 – Become a highly paid top executive

If you are very clear that you do want to own a business and will keep continuing doing the job, then your salary is the most important factor which can make you rich. No, we are not talking about packaged of Rs 10 lacs or 20 lacs here.

We are talking about packages which some top executives earn at important positions in the company. They are people like

  • CEO
  • Managing Directors
  • Vice Presidents
  • Top Managerial Positions
  • Top-Level Professionals (Doctors, Lawyers)

It comes only when you are really out of the class in what you do. If you have skills to manage the company or help a company excel at something, you can reach these top positions, but it takes quite an amount of hard work, smart moves and a bit of luck too. Many professionals earn very high salaries like examples below.

Top Salaries in India

Here is another example of a high salary –


It’s not always the case that you own a business to earn high income. To run a company or business many skills are required and if you have that in you, you can help someone else to build and manage the company in exchange for your skills.

As per this report, around 42,800 have reported an income of Rs 1 crore per annum in India. You now have to set yourself to be in that club

#5 – Speculation or Gambling

This is not a recommendation, but a lot of people become rich by speculation or gambling. This has more to do with Luck and smart thinking at times, but not with hard work.

I do not want to label speculation as BAD, because speculation takes guts and courage and those who take that route also get lucky at times and make a lot of money. There are two kinds of speculation

  1. Blind Speculation – A speculation where you are just shooting in the dark. Things like buying lottery, horse race etc is pure speculation and unless you get lucky, you will lose your time and money. A lot of people are into these speculative and gambling activities
  2. Calculation Speculation – Then there are many situations where you have to take a very calculated risk, where the risk is still high, but then the return potential is huge and clear at times. These are high risk, high return situations where if you take a chance, you can get really lucky.

One can get lucky, only when you take a risk and speculate. Speculation is seen as a bad word, but one can’t deny that it also has a brighter side to it. If you want to innovate something, you need to speculate on the fact that it will become successful.

#6 – By Investing money regularly – the boring & long route

In the end, if you feel you are not made for the above 5 points, then the only way to get rich is to invest your surplus money on regular basis and that too in high return instruments like equity mutual funds or stocks and wait for a long time to become rich.

The big problem is that there is too much-delayed gratification here. If you start your investments today, you can’t expect to get rich in just a few years which is possible in other ways mentioned above.

You need to have time on your side and extreme discipline. On top of that, you need to invest a good amount of money. You can’t expect to become rich by doing just Rs 4,000 SIP in an equity fund. You need to invest a good amount like Rs 20,000 or Rs 50,000 per month (at times Rs 1 lacs per month too) to accumulate a good amount of wealth.

how to get rich by investing

So, the only option left for most of people to become rich (that too in future) is only by investing their money and that will happen only if you earn a good income because only then you will be able to invest a good chunk left out of it.

Let us know what do you think about the points mentioned above?

Here is what 11000+ investors told us about their top financial goal?

A few months back, I read an article that talked about the biggest financial goals of Indians. As per their survey, the biggest financial goal for 34% of the respondents was “Securing Child Future”. The only issue was that their survey size was just 150.

“Retirement” was the biggest goal for only 2% of the respondents, which means just 3 out of 150 people marked “Retirement Planning” was their biggest goal.

The biggest financial goal in India

What is your biggest financial goal in life?

I was somehow not very convinced with their survey size of 150 because it’s not a big enough sample size to decide what most of the people feel. So I thought of conducting my own survey with a big enough sample size, and I was able to get 11,324 survey responses.

The first thing I asked was “Which is your biggest financial goal in life?”

Think about it?

What if I posed this question to you directly and asked – “Which is your biggest financial goal in life?”, what would you say?

I gave 6 options to people to choose from, and below were the results.

Top most financial goals of urban Indians

Goal #1 – Accumulating enough wealth in life to enjoy

“Accumulating enough wealth to enjoy life” was the topmost goal picked by the maximum people. This was very surprising for me because it was not a small sample size.

We had more than 11,000 people taking this survey and 3553 people out of that (around 31%) chose this option, which shows that somewhere priorities of people are changing these days. Now people want to accumulate wealth not just for retirement, but even to enjoy life before retirement.

They want to travel, experience new things in life, explore new hobbies and spend on themselves. In short, they want to enjoy life before retirement itself and not keep all the money only for retirement.

Goal #2 – Giving the best education to children

The next goal which was voted by maximum people was “Give the best education to their children”. Around 21% marked it as the biggest goal of their life, which confirms that still “children education” is an important and most sought after goal for investors.

It’s a given fact that giving the best education to your children is the best way to care for them and their future. Their life foundation is set by the quality of education you provide for them. It’s surely one of the most satisfying goals for a person.

Goal #3 – Planning for my retirement

I was happy to note that a big percentage (around 19%) said that planning for their retirement was their biggest financial goals. I want to reinforce the point that this survey was taken by people who are net savvy and mostly belong to big cities and earning decent money each month.

This result shows that a good number of people have realized that retirement is something they need to take seriously.

If I talk about you – Are you retirement ready? Do you feel you are doing enough for your retirement goal? If you are not sure, You can explore our pro membership program

We all have 30 yrs of working life to save money for 30 yrs of retirement on an average. So look at each year of working life-saving as a fuel which will help you each year of retirement. So what you invest in the year 2016 will help you in the year 2046 (2016 + 30 yrs). This concept comes from my book – “How to be your own financial planner in 10 steps”

Goal #4 – Buying a House

15% of people said that buying a house was their biggest financial goal. Given the unaffordable housing prices and the social stigma attached to “owning a house”, I am sure a lot of people feel the “pressure” of owning a house. Only the people who still don’t own home can feel the pressure and the worry associated with it.

No matter how many articles claiming “Renting is better than buying a house in India” comes, still its an emotional decision for people. They feel pressure from family, spouse, and society to buy a house and that’s the reality.

Goal #5 – Becoming Debt-free in life

A big number of investors are getting into a debt trap and a big portion of their income goes into serving the loan or paying off some family debt. It’s surely not a very great feeling to know that a part of your income will just go away somewhere and never return back or form any capital.

A lot of people want to get rid of debt as soon as possible and the high expenses these days make it very tough for someone to close their loan by paying off the debt soon.

Goal #6 – Saving enough money for kids marriage

I am sure we all have this goal in life.

We all want to save some money (or a little) for our kid’s marriage, but 2% of people marked it as their biggest goal in life. I am not sure if they have achieved rest other goals already or not. I do not have much comment on this point, because I don’t want to say if this is wrong or right. Maybe you can share what you feel about it?

So what is your biggest financial goal?

We saw all these 6 goals and how people responded to them. Would like to know what is your biggest financial goal in life and what do you think about this?

Apply compounding to your life – Secret of creating a great financial life

To create wealth, you have to first get in touch with the power of compounding. I am not just talking about the mathematical concept here but making the “compounding” your way of life. You will understand what I am talking about as you move forward.

Today’s write-up is close to my heart.

It is not just an article, it is about someone experiencing a breakthrough in his overall life. I thought of sharing some of the conversations we exchanged with one of our clients because there is something important to learn from it and it has the power to strengthen your journey as an investor.

Power of Compounding in your life

What happens if you just improve by 1%?


Yes, nothing will happen to you if you improve your skills, attitude, salary, net worth, relationship by 1%, but when you improve it constantly by a small margin for a very long time? What happens if you do that for 365 days?


Here is what happens!

You bring a drastic change in any area because you are allowing the compounding to work there. See the image below …


Let me share an incident with a client where he emailed me about himself and how he wanted to improve. Below is the conversation. Please go through the full conversation until the end.

Here is the first email, which hit my mailbox

Dear Nandish,

I am one of your financial planning clients and I would like you to coach me in the area of money. I am a competent person, have a solid work experience and also earn decent money each month but still my financial life is a mess”. Can you please help me find the solution to my problem?

I tried hard to get the answer but failed to crack this issue.



And here was my Reply

Dear Client,

Thanks for writing to me and for showing trust in me. I may not have a readymade solution for your problem but I can surely help you to see your situation under a different light.

Before I suggest you anything I have a simple question to ask:

Question: Tell me how many areas in your life you have you been consistent with from last 5-10 years time?

In Service,


To this, the client replies back …

Dear Nandish,

I really can’t figure out any such area from my life where I have been consistent from last 5 – 7 years.

Let me know what I need to do now.


My Reply

Dear Client,

I invite you to look into your life and check for yourself, maybe what is missing in your life is the power of compounding, compounding as a way of life and not just mere as a concept. The majority of people know compounding only as a concept. There are very few who experience the real power of it.

The Situation you are into may sound like a mystery to you but in reality it is not.

Now, getting this insight is not enough and so I have an assignment for you for the Next 1 year.


If you really want to experience the power of compounding you will have to take-up 3 more areas along with the area of money. Compounding is all about expanding your capacity as a person and so it is important to pick some more areas. Pick any four areas in your life which are new to you and engaging with them will help you to practice the power of compounding for the Next 1 year.

I would like to hear back from your experience exactly after a year from now and not before that.

If you are game for this assignment let me know.

I want you to just not have amazing ideas but also focus on the action part and execute what you are thinking because only that action will bring the compounding into action, Check the image below and you will get what I am trying to say.


Reply from client

Dear Nandish,

Thank you, coach. I am a game for this assignment.

My 4 areas

  1. Health: Will join gym and work with my trainer
  2. Music: I always wanted to learn Guitar but never started
  3. Quit Smoking: I would like to get rid of my smoking habit
  4. Money Management: Complete actions as per the plan and start my sip of 25k pm for next 1 year

Thanks, Nandish. Thanks for coaching me and for giving a sense of direction to my life. I will let you know my experience exactly after a year.

Thanks once again. Thanks a lot.

Excited Client


I then received his reply, exactly after a year.

Dear Nandish,

I am one of your most excited and enlightened Financial planning clients, remember you gave me an assignment 1 year back to practice the power of compounding.

Here is the assignment you gave me


If you really want to experience the power of compounding you will have to take-up 3 more areas along with the area of money. Compounding is all about expanding your capacity. Pick any four areas in your life which are new to you and engaging with them will help you to practice power of compounding for the Next 1 year

My Life has completely changed the day I started doing the assignment. I created a journal for all four areas and started to capture my experiences. Before I share about my assignment I just want to say I am extremely happy as an investor and in each and every area of my life.

Here are some of the highlights from each area:

  • Health: I joined the gym the very next day and the first thing I did was hired a personal trainer. I shared with him about my assignment and he chalked out a well designed 1-year exercise plan for me. We decided to exercise 5 Days a week along with a specific diet plan. The first month was tough to follow but I slowly daily exercise started to become an integral part of my life. My strength , stamina, and overall fitness have gone to a whole level in last 1 year. I would like to thank you and my personal trainer for getting me started.
  • Music: I joined the music school; again the first month was difficult. In the start, I could not even hold the guitar. I was not comfortable with the guitar and even the guitar was not comfortable with me. My Music sir always emphasizes on one word “PRACTICE”. My sir kept reminding me that practice leads to compounding and eventually it leads to mastery. I slowly started playing songs and now music really relaxes me from all the noise out in the world. I am so happy I got connected to music, it has taught me many things in last 1 year.
  • Quit Smoking: This was the hardest of the all. Initially, it looked impossible for me to quit smoking but I really wanted to get rid of my smoking habit and I started putting efforts. I decided not to hold the cigarette between my two fingers, no matter what. I also shared about my project with my friends and family members and they really supported me a lot in this area. My commitment to fitness and music also helped me a lot to get rid of my habit. I can now call myself a non-smoker. I am free, completely free from my habit of smoking and it feels great.
  • Personal finance: Happy to share all the personal finance actions that you suggested in the plan are complete. I took help of your team and completed all the required actions. I also started my sip as per the commitment I made. Today, my financial life is in sync with my dreams, goals, and aspirations. Thanks to you and your team for all the support and guidance. I realized that personal finance is all about actions; it is not about worrying about future or regretting about the past. I can say in this area things have shifted and things are moving in the right direction. I am happy in the area of money.

Thank you for assigning a wonderful project to me, I keep sharing with my team and other about the power of compounding and I keep getting people coming and sharing their results with me. Thank you for bringing the magic back into my life.


Can you see the real power that resides in the word “compounding”? It is not about how your money grows but how you grow as a person. Pick any 4 areas in your life and start engaging with them. The more you engage, the more you will grow in those areas. Don’t take only one area because one single area takes a back seat very easily.

Now tell me which area you want to improve and start working on improving it by 1% each day or even a week. Watch out this video below to get a more detailed idea on this

Many of you may be new to investing or equities do not get scared try out this assignment and see what happens after 1 year. Make the power of compounding your way of life and don’t just know it as a concept. Do share your views in the comment section; most importantly I would like to hear about your 1-year project which will help you to practice the power of compounding.

This article is written by Nandish Desai…

The Big Day Has Arrived – Jagoinvestor School Launches today

Our biggest dream gets fulfilled today. We are once again ready to serve investor’s community with our brand new offering jagoinvestor school.

There has been enough of text articles on our blog (which will continue as it is). We now want to go to the next level and for those who are committed to going to the next level, for then we will do more of webinars, video programs and online classrooms where learning and sharing insights will make personal finance FUN.

We both (Manish and Nandish) will give our best to the school members, but we will also get the best of the best people to share their knowledge, wealth creation ideas and strategies with school members.

What is Jagoinvestor School?

Jagoinvestor School is all about becoming a dedicated student of wealth. The school will help you to fall in love with the overall process of wealth creation. For the next few years we are going to dive deep into the school. We will dedicate our time, energy, knowledge and skills to empower members of the school.

We will teach and share everything that we have learnt so far from the time we started this blog. We will stay committed and will also generate high level of commitment amongst all school members. We will demand action and will ask members to do the required work.

The school is not for the faint of heart, it is for those who are committed to creating wealth. The foundation of the school will be FUN, ACTION and COMMITMENT.

Why you should join the school?

If you have benefited from the blog and want to learn more about personal finance, then come and be a part of our school. If you want to create an extra-ordinary financial life you should immediately join the school. The school is for those who want to get accountable in the area of money, who wants to work on their financial life and someone who wants to take their financial life to the next level.

It is our promise you will see a dramatic shift in your discipline level and will start to enjoy the overall process of wealth creation.

Here are the 10 things you will get in Jagoinvestor School

  • 360° evaluation report on your financial life
  • Access to DIY program “100moneyactions”
  • Access to 50+ Video/Audios under Wealth Club
  • Monthly Webinars/Classrooms on Various Topics
  • 23+ Excel-based Tools & Calculators
  • Monthly Reporting & Tracking Structure
  • Start SIP for your goals with Jagoinvestor
  • Discount on Workshops & other Services
  • Access to Network of Trusted partners
  • 3 ebooks on Signup
Join School Now !!

Why we love teaching and making a difference?

Because there are so many people waiting to get help in their financial world and when we help someone to reinvent their financial journey it fills our heart with a lot of fulfillment. In the last 2 months, we have received 100+ thank you emails, out of which we are sharing some of them below.

We are not sharing their names and these are personal sharing written straight from the heart. The sharing done is not about us it is about investors who have rigorously worked on their financial life and created an amazing financial life for themselves.

Success Story/ Sharing 1#

[su_note note_color=”#F1F1C7″ text_color=”#333333″]

Hello Manish and Nandish,

Hope you are doing great. After having consulted with you ~3 yrs back through “Financial Coaching” I had seen a phenomenal change in the way I treat things in lieu of financial discipline. I truly have to appreciate your efforts in transforming me like this.

I now am relatively confident that I will be able to tackle things much more carefully when it comes to policies / ULIPs etc.

I now want to go with you again, to review my new financial goals and the path I am taking to achieve those. Please let me know what is correct means to go over this with you. Please do revert at your convenience. Looking forward to a positive reply from you.


Success Story/ Sharing 2#

[su_note note_color=”#F1F1C7″ text_color=”#333333″]

Dear Manish/ Nandish,

Wishing you and your families a New Year 2016 Filled with good health, peace, and happiness.

Please find below a small write up on my personal finance journey in 2015.


  • One of my colleagues told me about the Jagoinvestor website.
  • Began reading the articles written by Manish/Nandish.
  • I had huge credit card bills during that period. The articles helped me take the right steps and gave me a perspective.
  • Planned and worked towards getting debt free on the credit card bills in 2014.
  • I had improved on that front but wanted to get better and make my financial life stronger and be more in control.
  • Dropped an email on 20th Dec 2014 wanting to connect with Jago and avail of their services/support.

2015 :

Since I was travelling on a business trip, Set up my 1st call with Nandish on Sat 24th Jan 2015 around 11:00 AM.

  • Nandish shared a couple of docs that entailed the complete flow of our association e.g. Data Sheets, Health Checkup Data Sheet > Final Report, etc..
  • Nandish invested some time in going through my data sheet and reverted with a Basic Financial Plan. Along with the plan were simple action check-list for taking actions for me.
  • Now commence the journey to bettering and being more in control in my financial life.
    • Learned on what basis were the most important and had to be in place.
    • Corrected and improved on the wrong choices and products I had made in the last 10 yrs.
    • Which never took into consideration inflation and may other critical areas that need to be looked at.
  • Based on Nandish/ Manish guidance we worked on strengthening the foundation in the below areas
  • Term Plan
  • Medical Insurance for Family
  • Investments (SIP)

Attended the Jago workshop held in Mumbai and personally met Manish and Nandish and various individuals like me, It boosted the confidence all the more, to stay focused and consistent on this journey leading to financial freedom.

It has been a slow and steady journey to correct the errors of the past and dig and build a New and strong financial foundation for the future for me.

I’m very happy about the progress we have made in 2015, this would not have been possible without the guidance and support from Manish and Nandish. Based on my personal experience I’ve recommended the same to my various friends and even my sister who is working with the Jago team.

Looking forward to keeping on bettering and strengthen the foundation each year and being more financially free and continue this associate with Manish and Nandish.

Not sure if I manage to cover all the points, as I just keep writing impromptu


Success Story/ Sharing 3#

[su_note note_color=”#F1F1C7″ text_color=”#333333″]

Starting the year 2015, I made a promise to myself that I will not ruin my sleepover money management issues. To fulfill this, I had taken the necessary steps towards being a better money manager of our(me & my husband’s) hard-earned money, i.e. meeting Nandish & Manish.

I was following the blog from 2014 but I was always having doubts in mind: Does these process really work and will it work for me as well?  I attended a one day workshop that is held in Pune by Jagoinvestor and that was the turning point of my life.

After the workshop, I decided to take help from Manish & Nandish and hand over all my worries to them. I did it and I can really sleep better now.

For 2016, my goal is to be a better organizer on maintaining Financial documents and do the remaining planning part of it.


Success story/ Sharing 4#

[su_note note_color=”#F1F1C7″ text_color=”#333333″]

Hi Nandish, happy new year to you and your family too.

2015 has been a great year for us. We continued on our monthly targets and never missed any. We saw great growth coming this year and we are completely debt-free this year. Though we need to improve on two fronts. Our expenses have increased a lot now after the kid.

So we need to be careful to plan nicely and stick to it. On the heath front, some health issues are cropping in. So we need to exercise much more and much harder.

Hope this was good information.


Success Story/ Sharing 5#

[su_note note_color=”#F1F1C7″ text_color=”#333333″]

The year 2015 gave me a better awareness of why Financial Management is important. In terms of finances throughout the year, the inflow was barely able to meet the outflow. Midway through the year, the realization dawned that my finances are more tilted towards Real Estate and questions on liquidity, gain in the context of a weak Real Estate market.

I was sincerely praying that I get proper guidance on how I should be saving for my next 5-10 Years. I do not know if I should call it as luck or prayers answered, I somehow got a chance to read Manish’s book “16 Financial Principals every investor should know” which was an eye-opener pointing me to the mistakes I have made in my investments.

It did not take time for me to connect with Jago Investors and have been interacting with Nandish. I feel I am in safe hands and hopeful that the year 2016 will be a year of consolidation and growth in my financial journey.


The School is about creating SUCCESS STORIES:

I shared a few stories with you because jagoinvestor school is all about creating success stories. Every month we will encourage school members to learn and to take action in their financial life. It is our promise if you will surrender to the structure of the school your financial world will go to the next level. You can visit a dedicated page of school to learn more about the elements of school.

Invitation to join the school

We invite readers, Asset Management Companies, Insurance companies, and various other financial institutions to get associated with this school. From the bottom of our heart, we invite each one of you to be a part of the school, this is one of the best choices you will be making as an investor.

We would like to join hands with some Asset Management companies or organizations to make sure the school reaches maximum investors.

The money generated from the school will be used for the expansion of the school, we will one-day eradiate financial illiteracy and every Indian investor will be a proud jagoinvestor. We need your love, blessings and encouragement, share about school with your loved ones and see that you join the school at the earliest.

If you have any questions about school feel free to ask in the comments section.

Join School Now !!

Love you all, see you at the school.

5 Challenges which you should overcome to create long term wealth

Do you want to create a lot of wealth? Do you want to see crores of rupees in your bank account? I am sure you know that’s not an easy task. You also know that it will take a lot of time and dedication to create wealth over the long term. Do do you know that it’s more tough than you think? I will show you why?

wealth creation

Have you ever seen those retirement calculators online, where you punch in your numbers and find out how much corpus you will be able to generate over the years if you consistently invest a fixed amount year after year at a certain rate of interest?

The calculator throws a big number at you and you feel – “Wow … That’s looks straight forward and simple”

Below you can see an example.

I calculated how much wealth a 30 yr old guy can generate by the time he retires at age 60 (30 yrs tenure) if he invests Rs 20,000 per month at a return of 12% per annum. Below is the result.

wealth creation long term

It looks so simple on paper. One can generate a wealth of Rs 7 crores in 30 yrs period if one consistently invests Rs 20,000 per month.

Doesn’t it look over simplified? It definitely is!

While the calculator above makes it look like a child’s play to create long term wealth, in reality – it’s definitely not that easy and there are various things to be considered here, which I want to discuss in this article.

What are the assumptions in the calculator above?

If you look at the calculator above and the numbers, you will realize that 5 assumptions which are

  • The investor keep earning over the years and bring back the income
  • The investor will have enough surplus each month
  • Investor will be able to generate a 12% return over long term
  • The investor will not disturb his wealth creation process
  • The investor will not use the money out of the accumulated money till the end of tenure

Now if you look at the 5 points above, long term wealth can be created only if all the 5 points above are true or maximum of them are true. Each of the point above is a challenge in itself. If you overcome all these 5 points, you are then set to build long term wealth.

So now, if you try to capture these points as the ACTION and RESULT, then here is how it looks like

wealth creation model

So let’s touch on each of these 5 assumptions one by one and see in detail and see what are the challenges in handling them

Assumption #1 – The investor will keep earning over the years and bring back the income

Let’s start from the most basic foundation point.

A lot of people who have been earning from many years (let’s say 5 yrs) and never faced any issues in their career seem to feel that its a cakewalk to continue doing it without any issues for the next 20-25 yrs of their life. They think that it would be a smooth ride. However, you need to know that

  • There is a section of the population who are struggling in their career and will not be getting the same salaries if they switch jobs
  • There are people whose income is not rising as per their expectation and a lot of people take salary cuts
  • A lot of investors are out of their jobs/business due to competition, policy changes in the industry
  • A lot of investors at times spend many months without bringing back any income because of health issues, layoffs, and other reasons.

At least 3 of our clients have stopped their SIP’s in the last 6 months because their income has stopped/reduced due to some issues at their workplace. While it might be a short term problem, you never know if it can extend for a very long time for some one. One client is working in the Middle East, and his job is not that stable and he is damn scared of this fact.

Another client told me that as per his understanding, he is getting the maximum salary he can command in his industry and if he loses his job for any reason, he will have to join another company at a lower salary.

One client is hell scared because he is just surviving his job from many years and if he is fired due to non-performance, he does not believe that other companies will hire him at the same salary

Focus on your “employability” and potential to earn

My partner Nandish Desai, says a very important point about employability – “To get a job, you need to be useful for someone”

You need to make sure that whatever you do, whichever sector you enter, which ever skill you acquire – do it like a pro. Become a highly useful person in your domain of work. Be among the best. Your skills should be outstanding and you should be the master of what you do. If that happens, you will be highly sought after and everyone will want to hire you.

This way you are ensuring that all your future income is secured. If things get tough in your industry, you will be one of the last people who will face issues. If you face any issue, you will soon find a new job. And if you want to switch, you can command a better salary.

Focusing on your career and investing in your own development is one of the most rewarding decisions you can make in your financial life. Only when you ensure that you have taken care of this point, other points will come into the picture.

You need to understand that only if your future cashflow is protected, only then you can save from it and only then you can think of the returns and everything else. No income, no wealth in the future!

Assumption #2 – The investor will have enough surplus each month

Taking the example above, the 2nd assumption was that the investor will continue investing Rs 20,000 per month over the next 30 yrs without fail. For you personally, this number can be Rs 10,000 or Rs 50,000, the same is true for yourself.

Will you be able to consistently invest that much each month? Will you be left with that much each month? year after year?

You might be able to continue that for some months or years but think of the real-life issues which we all face. And you never know your life will take turns, you never know how unpredictable things are. You might have to switch jobs because of health?

When you will have kids, your expenses might shoot up, you may face an emergency which might last for many months to come, there can be health issues and you can get into the never-ending cycle of –

High income -> high expenses -> less saving.

In fact, I have seen this in reality. Forget about investing each month, one of our clients is redeeming back from his mutual fund’s corpus because there is a prolonged medical emergency at home and he is not able to handle all expenses the way he had planned before.

My whole point is that it’s very very tough to maintain the consistency and discipline in investing in real life and there will be disturbances.

High Lifestyle is making saving tougher

Now a day’s it’s more common to see people living on a paycheck to paycheck basis. The high lifestyle and the increased consumerism have ensured that even if you are earning high, it will get tough for you to save. Salaries like Rs 1 lac or 2 lacs per month are very common these days in many cities, but the savings are not in line with the salary.

Hence, you need to ensure that you after your expenses are done, you generate a consistent and a minimum 20% of investible surplus from your salary. Take it as a game and try to win it each month.

Assumption #3 – The investor will be able to generate a 12% return over the long term

The next assumption is that the investor will generate 12% return over long term from his investments? Now where do you invest your money to get more than 12% returns over such a long term?

Any guesses?

The answer is equities !. It has to be in shares, equity mutual funds, ETF’s, Index funds, etc. This is not an easy thing for the majority population in India, because most of the people in India do not understand how equities work and banking products are their lifelong favorite. They are earning 8-9% (6-7% post-tax) from years.

So for them to earn 12% would be very tough because first, they need to get clarity about how equities work and get comfortable with it.

Data and chart:

Now let me show you some data and charts which will convince you why you should be in equity to earn a 12% return on your investments.

Below is the chart which shows the CAGR return for 10 yrs periods if the money was invested in NIFTY. The data is from 1st Jan 2001 to 1st Jan 2016, so there are many 10 yrs period like

  • 1st Jan 2001 – 1st Jan 2011 (first point)
  • 2nd Jan 2001 – 2nd Jan 2011
  • 1st Jan 2006 – 1st Jan 2016 (Last point)

We then plotted the CAGR Return for all these periods and below is the answer. The CAGR return almost always was above 12%, however for few months towards the end it was a bit below 12% .

CAGR return nifty 10 yrs

Another graph which I want you to see is the 10 yrs CAGR return chart from Sensex, which is for its 36 yrs of existence.

So there are 26 different “10 yrs” tenures and we calculated the CAGR return for all the 26 data points and below is the result. Around 21 times out of 26, the return was more than 12% and at times it was very high like 20%-30 %. Few periods had fewer returns like 6% or 11 %, but then if you look at the overall 36 yrs period, the CAGR return converts to 17% return.

CAGR return sensex 10 yrs rolling returns

Now while it’s very easy to conclude that if you invest in equity over a long term, you will get required 12% return, its very tough to practice in real life, which we will see in next point very soon.

asset class returns

Lets me share with you that a very small percentage of our India population invests in Equity.

The major money lies in FD, Gold and insurance products and even real estate. And it’s going to be very tough to generate a 12% return from these asset classes. In fact, Morgan Stanley’s Research has clearly shown that equity has beaten all the asset classes in the long run and below is a snapshot of that research.

So if you want to build wealth over the long term and you are investing the majority of your money in FD, understand that your post tax return is lower than the inflation.

Your money might be growing in numbers (Rs 10 lacs became 20 lacs in 9 yrs), but the worth of your money has come down (20 lacs today can buy less of what 10 lacs could have bought 9 yrs back). You are in fact getting poorer in a slow-motion and you are not realizing that.

Assumption #4 – The investor will not disturb his wealth creation process

Read the following question and answer.

Q – Do you know what is the biggest challenge for an investor if he has invested in equities (mutual funds or Stocks)?

ANS – To remain inactive and sit tight without doing anything and let his wealth grow.

Making money in stock markets is challenging, not because markets have any issue, but because we investors have a behavioral issue. We can’t handle the uncertainty and volatility which comes with the stock market. It’s not for weak-hearted.

For some one who has been with FD’s and has the habit of seeing his investments grow in a linear fashion, he can literally go crazy with mutual funds because it brings so much of ups and downs and volatile movements.

Should I stop SIP when the market is falling?

In the last 2 weeks itself, we have got many emails from our clients whose SIP’s are going on in equity mutual funds, asking if they should stop their SIP’s as markets are falling? I have told them to act like a ninja investor and see it as an opportunity and pump in more money because in the coming years we might see a very good bull run? (any body remember what happens for the next 2-3 yrs after 2007 crash ?)

Note that all these clients SIP’s are running for very long term goals like retirement or children’s education which are going to arrive only after 15-20 yrs. There is no problem as such with that behavior.

It’s very natural, but I am just trying to tell you that it’s not that easy to handle the pressure which comes from the volatile nature of markets and very few investors have that dedication and understanding of how things work in the stock market.

Very few people can control their greed and fear and that’s the reason very few people are able to make the most of the returns from the equity markets over the long term. Below you can see a snapshot of kind of queries which start coming up if markets show any kind of fall for a long time like 6 months or a year.

markets are down

The cycle of Greed and Fear

If you see the stock markets right now, you will realize that we currently are in that same phase where investors panic and take out the money from their portfolios. Markets are falling from last 1 yr and especially this month it has gone down by a big margin.

So even if an investor is investing a good amount each month and he has read about how equity markets work and they understand the game of equity, still it’s very tough for an average investor to stay calm and stay with markets consistently for a very long time.

Some stop their SIP’s, Some redeem their money and shift it to FD’s thinking – “I will again be back, when the markets will calm down and start going up”.

However, you never know when that up move started and by the time you realize, you lose the next bull run. The below chart clearly shows how 99% of investors think and behave in stock markets.

cycle of greed and fear

So what is the solution? What should you do?

Remember that if you are in equities with a long term view like 10-15-20 yrs, then you are going to see many cycles of ups and down. You can’t escape it. You need to think of the down market as the “sale” where you can accumulate more stocks or mutual funds units at a cheaper price so as to gain from the up move later.

And when markets are going up, don’t redeem your money or try to “book the gains” because you will most probably miss the bigger up move trying to redeem the smaller up move. You need to understand that you are not there for “trading” or short term profit booking (incase, you are there for trading, then this does not apply to you)

Just sit tight, keep your SIP going and make sure you are in right mutual funds (not the best, because it does not exist). Review them in a few years and let the process of wealth creation take place. It requires patience and only a small percentage of investors are going to reach the final destination. Be one of them.

Assumption #5 – The investor will not use the money out of the accumulated money till the end of tenure

Having 5 lacs in your bank account is very different from having Rs 5 crores. You might think – “What’s the difference? it’s just 100X, rest everything is same”

No, your feelings about your money, your risk appetite, your thoughts around money, your desperation to do something will be at a very different level when you have 100X money in your bank account.

It’s a very tough thing to “not do anything” when you have so much money getting accumulated in your account. Once your corpus reaches a respectable limit like 80 lacs or 1 crore, you will start thinking in these lines

  • Let’s shift some money in FD now.
  • Let’s upgrade our house now, I can surely take out 50 lacs from my portfolio
  • Now I deserve that dream car I always wanted, I have good money now
  • Let me have a grand wedding for my children, after all – I have a good corpus now

Your lifestyle will go up, your vacations will get luxurious and you will get all the reasons to spend the money and take a dip in your portfolio.

Let me be clear, that I am not saying there is anything wrong with spending your money or using it for yourself.

please do that. After all, if you have managed to earn so much money and accumulated the good corpus, you surely deserve a better lifestyle.

All I am saying is that it’s a challenge to let your portfolio grow and not disturb it. So in our example at the start of the article, you might not reach 7 crores as per calculation, but may be 4.3 crores or just 3 crores, because you keep taking out the money out of your corpus many times in between for various reasons.

If you are just taking out a portion of your corpus and reinvesting in something else which you can redeem back later, it’s still fine. But if you are “spending” the money and consuming it, then it’s GONE. That part will not reflect in corpus now and you will have a lesser corpus to that extent.

If you can make sure you have that ability to stay calm and see your wealth grow without disturbing it, then you are bound to see a good amount of wealth in your life.

So here is the final checklist before you start your wealth creation journey

  • Spend a good amount to time to understand how equities work in the long run. I have explained about equity in the 3rd chapter of my 1st book – “16 personal finance principles every investor should know”. Get a copy and read it
  • Work on your career strongly and become very very good at what you are doing. Make sure you are highly employable even if the bad time comes. This will make sure your cash flows are more or less ensured.
  • Spend 10% time on cutting down your expenses if there is any scope, and spend 90% of your energy in increasing your income. Remember, reducing expenses is tough and has a lower limit. Increasing income does not have a ceiling.
  • Make sure you start the SIP in equity mutual funds with a long term perspective. When markets fall, rejoice ! and keep adding more money. Be a tough hearted and you will be rewarded over long term
  • Make sure you plan for other goals separately so that you do not use your main corpus in between for small things

Let me know if your way of looking at long term wealth creation has changed or not by reading this article. I would love to hear your views.