How to treat your money well

Highlights

• Money makes journey of life somewhat smooth and bearable
• Beyond books, travel and charity there are fewer heads of expense that draw too much on our personal wealth

NEW DELHI: Regret is tough to deal with. If we could rework our past choices, we think we would be better off. But that’s not always feasible. Personal finance is one fluid space that offers some scope for corrective action. Here is my list of regrets and remedies.

First, in the heady early days of investing in the stock markets, we bought a few shares. Those were the days of paper shares and market lots. One had to buy at least 50 shares. After the demat revolution, these pieces of paper had to be converted. Through various loops of process and paperwork, we persisted and managed to bring most of those shares into the demat account. But there was a 100-share investment in one company that we missed. When we shifted homes, I found it. It was worth a lot by then. I did all the paperwork to convert it and handed it over to my banker. Then I misplaced the receipt and the folder that had copies of what I submitted. And thus, it got lost.

My rule to live by now is: Investments are precious. Know them all like the back of your hand. Treat them well and keep the paperwork in ship shape. Don’t have too many so you lose track.

Second, among the many stocks and funds we bought over the years, a few did poorly. An infrastructure fund here, a tax saving fund there, an IPO here, a small stock there—underperformers all. Too small to garner attention but bleeding all the same. The larger components of the portfolio got all the benefits of annual review and monitoring, but these little laggards languished.

I wish I had not invested in them at all. An investment must be sizeable for it to matter. Of what use is a fund, when the money invested is just Rs 5,000? How much difference would it make to the overall portfolio?

The two things I would not do are: One, investing too little in too many products, none of them big enough to matter. Two, holding on to what is not working. However small it is, what is clearly a dud must go.

Third, we have mostly lived in rented homes. Not that we did not try our hand at ownership, but our professional lives have demanded movement. We, therefore, did not live in houses we purchased. It’s been 20 years since we bought that first house. We are unlikely to go back and live there.

We have rented it. Our children are unlikely to like it as an inheritance. They won’t even have the time to come and sign off the paperwork. That asset is best converted to a financial asset and managed better. We have not come around to taking that action.

My regret is this: When the asset is well past its utility, why hold on to it and earn a low rental yield? Why glorify a decision that was good when it happened, but turned bad over the years?

Fourth, frugal living has become a habit. The idea of minimalistic living holds great appeal. The comfort and security that wealth provides is good but does not seem so important in life as I now see it. The basics to retire in comfort have been provided for. Beyond books, travel and charity there are fewer heads of expense that draw too much on our personal wealth.

Then why did we save so aggressively? Is there something like too much of a good thing? How did we not give away even more of our earnings? Why did we hold back on smaller joys for the fear of the future?

Life is not the cruel monster one makes it out to be. There is no dark future, that would take away everything we have. And even if it did, we can start over.

Money is a necessary companion that makes the journey of life somewhat smooth and bearable. It surely needs to be treated with the care, respect and diligence it deserves.

While I list the regrets, the abiding thought is this: the money that is neglected and wasted in one portfolio, is also the money that would enable another life somewhere else to bloom and prosper. That larger purpose should drive personal wealth management, so the smaller lapses are fixed. What you earn but don’t need is other people’s money, and a fiduciary responsibility should guide how it is managed. No room for sloth.

(The author is chairperson of The Centre for Investment Education and Learning)