One should go on a “money date” at least once a month, says Tanvi Goyal, Founder, Wealth Aware. According to her, by dedicating an hour per month to understand cash flows, one can make better financial decisions.
In an interview with MintGenie, Goyal explained how people must plan their financial goals, shared her views on small-cap firms and gave an advice to new investors.
Edited excerpts:
Q. In your Wealth Aware training academy, what is the first step you recommend to make your clients aware of their finances?
Answer: The first step I recommend is to create a ritual to go on a “money date” at least once a month. For couples, it works wonders in their relationship as most women give the least importance to money matters in their lives. People who are single can go on a “money date” by themselves. Just by dedicating an hour per month to understanding the cash flows, people start to focus on money more consciously and realise what they lack and where they need to reach.
Q. How do you think people must plan their financial goals?
Answer: Once people identify all financial liabilities they have, they must classify them as short-term (less than three years), medium-term (three years to seven years) and long-term (beyond seven years) goals. Then different tenure goals can be linked to different portfolios. Apart from specific financial goals, one should also have a plan for emergencies like loss of life and health issues for which insurances need to be purchased.
Q. Financial independence can be difficult considering market volatility and the continued impact of inflation. What is your advice to people who learn about financial management late in their lives?
Answer: Most Indians are ignorant about the unfavourable impact inflation can have on money and that’s why remain content with the least risky investment options like LIC policies, fixed deposits at banks and PPF. With the right financial knowledge, one can easily select suitable asset classes and create a portfolio to beat inflation in the long term and ride over the market volatility.
For people who learn about financial management late in their lives, I would say, it’s never too late. With increased medical facilities the average life span of people has increased and they want to live an independent life without being a burden on their children. It’s wise to take charge of money and make investment decisions with confidence, no matter how late one starts.
Q. We now have tax-saver index funds in the market. How do you think this will change the investing mindset of mutual fund investors?
Answer: This is a great product for people who want to start their investment journey into equities. However, here financial education will play a key role. Since most people do not hire financial planners, they go by the advice of distributors. Does a distributor have enough incentive to sell an index fund in India, the answer is NO. I strongly believe that the change in investing mindset will be brought about by investor education only.
Q, In some sectors, small caps have outperformed large-cap stocks. Does this highlight a strong business environment for small-cap companies in the market?
Answer: Small caps can perform better than large caps in short bubble phases, however, the consistency of returns has to be monitored along with the risk of default of companies. There is no doubt that the business environment in India is getting stronger with each passing year but from an investor’s point of view, one has to know their risk profile very well to decide the right mix of large-cap, mid-cap and small-cap equity mutual funds.
Q. What is your advice to new investors in the market?
Answer: Every new investor in the market should find a financial mentor, learn the basics of investing and then start in the right asset classes. No matter how small one starts but the right product can do wonders with the magic of compounding.
