Financial Friday for Family and Friends

While waiting for my draft at the bank, I overheard the Banker telling a customer that she’ll get Rs 575 monthly interest for her Rs 1 Lakh deposit. The customer was aghast as such a low sum of Rs 575 monthly payouts per Rs one Lakh fixed deposit. She was distressed that her saving of Rs 10 lakhs will generate less than Rs 7000 per month.

The fixed deposit rates are gradually reducing after each passing year and hence it is not a good investment option in case you are looking for good returns on your investments.

Though unsolicited, I suggested to the Banker that investment in Mutual Funds can also be explored. The Banker’s eye lit up but she said that she had suggested Mutual Funds earlier too but the customer was not interested. The customer said that while Mutual Funds sound good, she does not know much about it whether it is safe and whether there are guaranteed monthly payouts

The customer said that she has heard that disclaimer that mutual funds are subject to market risk and she does not understand the markets. So it’s better to be safe than sorry.

By this time my draft had arrived and I said goodbye to the Banker. I also shared that my wife was also scared of the ups and downs of the market and mutual funds but is now slowly converting her fixed deposits into various mutual funds schemes and maybe it’s a good idea for the customer to spend some time understanding more about mutual funds.

Since our hard earned money is one of the most important resources in our lives, many of us invest that money in sub-optimal products where the value of money goes down because of inflation.

We are not really worried whether our money is working for us. The money invested in Banks do not really give a positive net return after factoring in inflation. In a Mutual Fund awareness program held by Reliance Mutual Fund, I came to know that over 113 Lakh crore is invested in Bank deposits and over 70 Lakh crores in gold in India. To put that in perspective, less than 20 Lakh crore is invested in professionally managed, transparent and well regulated Mutual Funds in India.

In the awareness program, many beliefs and mental blocks were laid threadbare and it was obvious that Mutual Funds and ETFs (Exchange Traded Funds) were a good choice for layman investors as it was professionally managed by expert fund managers while also being totally transparent and well regulated.

One of the key observations that I had after the program was that we need to invest our time & attention before we invest our money.

Thoughtless investment of our money can be costly if we do not factor in inflation and risks return tradeoffs while exploring all the investment options we have.

For a layman, other investments like ULIPs from Insurance companies come with a lot of costs and therefore they don’t deliver the returns that they promise. Other saving plans give a return close to saving bank accounts. Remember, we can do better to distinguish between our savings and investments.

To beat inflation, we have to invest and not just save.

So that’s why it’s important to fix up a day where you can learn about making your money work. Reliance Mutual Fund has started an initiative called Mutual Fund Day where they will conduct events on Investor Awareness on 7th of every month. You can learn more about their activity on their Facebook page. You can also test your financial quotient & participate in Mission Prosperity here

You can go beyond just Mutual Funds and schedule a Financial Friday for Family & Friends (FFFF Day)! On this FFFF Day, you can review/optimize your financial portfolio, track your expenses, spring clean your financial documents and plan for your next vacation!

 

And while you are at it, it’s a good idea to tag a friend on this agenda. Remember doing a joint study with friends?

You can help your friends with their financial goals on the next Mutual Fund Day by taking a #FundForAFriend campaign/quiz & helping them figure out their profile for investments.

And after all, sharing is caring! Do share your experiences with us about your own Mutual Fund Day!

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