Men should learn the art of being fully dressed from women. Unlike men women think and dress better starting with their earrings, necklace, nail polish, bracelet, bangles, watch, top, bottom, vanity bag, sandals et al. The reason behind this meticulous planning is to look complete.
While investing too being fully invested is an art and essential to be successful with money. In life there are two types of events that can be broadly classified as ‘unforeseen events’ and ‘foreseen events’. On priority always unforeseen events should be covered such as premature or untimely death (dying young when one is earning and having financially dependent family members) and hospitalisation due to illnesses or accidents. Buying adequate sum assured under “term assurance” to cover untimely death and adequately insured under “health insurance” is the ideal way of beginning to be fully invested.
Keeping aside about six months of mandatory expenses such as living expenses, rent and EMIs in a fixed deposit or debt mutual funds is also part of being fully covered for any contingencies such as losing job due to various reasons or not being able to work for a temporary period.
Once you take care of being fully protected against unforeseen events as mentioned above, your investing to meet foreseen events should commence. Events such as children higher education, children marriage, your retirement, vacations and the likes are all foreseen events which can be planned financially at the early stages of life.
These are easy to plan because at particular ages these events will invariably take place; for example you have children who at their age of 18 years and 21 years would be entering into their graduation and post-graduation which are two of the expensive events of life. Apart from these, your retirement too is such an event which will happen at about 60 years of your life which also requires a sizeable corpus. Pick those dates today considering today’s cost of education, add about 10 per cent inflation and arrive at the amount that may be required in the future. If your two children are 3 & 5 year old today, then 15 and 13 years later they would definitely be pursuing their graduation and 18 and 15 years later would pursue post-graduation.
The amounts that may be required in those future years would run into several lakhs which if planned today would require you to invest small amounts in equity mutual funds through the SIP route. Choose those years, arrive at the amount required, choose the correct mutual fund themes and schemes and you will know how much should be your monthly commitment; invest for each of events separately and leave the rest to the market to perform.
Understanding the events of life, planning early, choosing right investment products, staying invested and meeting the events are all part of being “fully invested” that offers a great amount of convenience. Remember, if you are young the biggest asset you have is your age, utilise that to start early, invest wisely and being financially ready.
The author has written 6 books on investing and personal finance. He has 23 years of experience and 6 years in academics