no time to invest problem

Excusing ‘No time to invest’ has become a National Problem!

It’s a known fact that the majority of the Indian population do not invest their money. Apart from little allocation in a few traditional investment options like gold, savings, fixed deposits or LICs, the involvement of Indians in the higher-rewarding investment opportunities like Stocks, mutual funds, ETFs is quite minimal. If we look into the equity market, hardly 2.5% of Indians are actively involved.

Now, according to the non-investing population, the two biggest reasons that stop them from investing are ‘lack of education’ and ‘lack of time’.

For the first part i.e. the lack of education, it might be a little fault of our education system, somewhat of the parents but mostly of the individuals. Investing is not a rocket-science that only people with high-IQ can pursue. Anyone can learn and start investing. People should not always blame others if they are not ready to learn. There are a lot of free resources available online and offline, which is enough to get adequate investing knowledge.

Anyways, the other common excuse that most people make for not investing is that they don’t have enough time to invest. “No time to research where to invest!”. A few may even argue that setting up a trading account and making investments takes a lot of time which prevents them from investing.

However, all these are just excuses. In this online era, setting up demat and trading account is very fast, paperless and hassle-free. In fact, you can set up your trading account with online brokers like Zerodha, within 10 minutes. The problem is that you never researched where to open your trading account or how to get started.

It all depends on your priority…

“It takes too long to invest” — This is just another myth among beginners. However, it does not take as much time as every newbie assumes and investing habit can be easily adjusted in your day to day life.

If you can make time to go to the gym everyday, dining out every other day, partying on weekends, or going on vacations every three months, then stop saying you don’t have time. As a matter of fact, if you are ready to spend 2–4 hours every week, it is good enough to start and monitor your investments.

Further, even if you have a very hectic routine, you can steal a few minutes here and there. Like while traveling in your cab/metro, during your lunchtime, or even while having your coffee. At these time, instead of scrolling on facebook, you can do your investment research using mobile apps, which are super easy, fast and provides with all the facilities that you need.

Moreover, even if you are not ready to put a lot of efforts or time, there are still many easier routes to start investing. For example– investing in mutual funds or investing through Robo-advisors. If you believe that you won’t even be able to spend 2–4 hours per week for your investments, then pick a fund and start a monthly SIP. All these investment options do not take a lot of time.

Having no time to invest in a lame excuse for non-investors. The thing is these people never prioritize investing. They always keep procrastinating to invest for later, arguing that they do not have enough income/savings. Here, people are not investing because of the lack of priority, not the lack of time!

priority no time

You are losing ‘Time’…

“Start investing early” — this is the best advice that anyone can give you.

When you begin investing early, time is in your favor and so is the power of compounding. You will be way ahead of your peers towards building your investment corpus if you start investing even just a few years prior to them.

When you are excusing not enough time to invest, you are losing time that could have been your biggest ally. Remember, time can help or hurt you.

Also read: Bunty and Babli: A financial story of how Bunty lost Rs 1,29,94,044!

Sometimes later becomes never…

Every week, I receive dozens of emails from people in their 50s or 60s who have never invested in the equity market and now planning to enter.

Now, by no means, I am saying that people in their 50s or 60s cannot invest. As a matter of fact, it’s never too late to get started. However, these people kept excusing ‘no time to invest’ during their adulthood, which later resulted in them not to invest at all.

If you are young, you have a great advantage. Instead of throwing it away by making a lame excuse, take the best out of it.

Besides, you do not need to have a high paying job or large savings to start investing. Even people with medium to low salary range can invest smartly to reach their goals. If you are not sure how much, then a monthly SIP of Rs 5,000 is good enough to begin. That doesn’t sound too much to invest, does it?

No one cares about your financial goals except you…

Your friends will encourage you to party harder. You relatives will emotionally charge you to buy a fancy car/house to impress them. Your neighbors will challenge you to live above your standards to match them. But no one will motivate you to save more or to invest more.

No one cares whether your net worth or total asset is growing overtime or not. Everyone is dealing with their own financials/hardships and they don’t have any time for you.

The only one who cares about your financial situation is yourself. If you do not take charge of your investments, no one else is going to do it for you. The only way to secure your future and have enough money in your bank account is by becoming proactive and responsible for your financials.

Closing Thoughts

Stop excusing that you do have spare time to invest, instead start acting. Everyone has the same 24 hours in a day. If you are not investing, it’s not because you don’t have time. It’s because you do not understand the importance of investing.

And five years from now, you’ll regret why didn’t you start investing early.

Finally, as a bonus, if you are ready to take your first steps in the world of investment, here’s a free guide that can help you to get started. Good luck!

tax saving ELSS Equity linked saving scheme

Should you invest in multiple Equity Linked Saving Schemes (ELSS)?

Equity Linked Saving Schemes or ELSS Fund is a variety of Equity Mutual Fund where the majority of the corpus is invested in equities and equity-oriented instruments. It is a tax saving Mutual Fund where your investments are locked in for 3 years.

ELSS are multi-cap equity funds which invest at least 4/5th of their assets in equities. Such stocks could be small-caps, large-caps, or mid-caps. ELSS funds can invest in the companies of any sizes. Apart from investing in the stocks of private companies, these funds also invest in the Government undertakings to a significant extent.

Note: If you are new to ELSS, you can read our previously published article here.

ELSS: A tax saving instrument

Previously people used to find FD, NPS, PPF, and ULIP as effective tax saving schemes. Nowadays, the taxpayers are feeling more interested in investing their savings in ELSS funds for availing tax benefit.

ELSS is not only having the lowest lock-in period but it also yields higher returns than the other conventional tax-saving instruments. If you are going to redeem your ELSS investments after 3 years, your capital gain will be taxed @ 10% if it crosses Rs 1 lakh.

As per section 80C of the Income Tax Act, 1961, you can get the benefit of tax deduction in a financial year up to Rs 1.5 lakhs. ELSS or Equity Linked Saving Scheme is a prescribed instrument under the said section. So, you can easily save your tax liability up to Rs 46, 800 (Tax plus Cess on such Tax).

Investing in ELSS for generating long-term wealth

If you are looking to create long-term wealth but willing to accept the risk, let me tell you that equities or equity-oriented funds are the best for you. Equities can fetch you substantial returns if you are willing to stay invested for the long term.

You can choose any form of Mutual Fund i.e. a small-cap fund, large-cap fund or a mid-cap fund. But, neither of the funds can provide you with tax benefits which ELSS can give. Moreover, if the markets seem to be bearish or moving sideways in the short run, you might feel like redeeming your units immediately.

If you have invested in ELSS, you can’t withdraw your investments before the expiry of three years. In that way, investing in ELSS ensures that you stay invested for a long-term irrespective of short-term volatility. So, if you are interested in staying invested for a considerably long period of time, ELSS is definitely an ideal investment option for you.

Should you go for only one ELSS or multiple?

In an ELSS fund, the underlying portfolio consists of around 70 to 100 stocks. Around 5,000 stocks are listed in the Indian markets. Out of such stocks, the top 250 of them contributes towards 90% of the total market capitalization. So, if you are investing in 6 ELSS funds, it means you are indirectly investing in around 600 stocks. This implies that you will end up investing in the stock market as a whole. Therefore, you are virtually removing all possibilities to beat the stock market.

Investing in excessive ELSS funds means you are indirectly looking to form a market portfolio. So, if you are looking to earn what a market index earns, you can opt for such a portfolio. It is highly probable that you won’t earn more than what the market earns but you are also not going to earn less than the same.

There is another limitation of investing in too many ELSS funds. Investing in an excessive number of ELSS will lead to portfolio overlapping. It means that you will be investing in the same stocks through multiple schemes. This would unnecessarily increase your expense ratio instead of yielding the benefit of diversification.

Well, if you are simply looking to invest in the market portfolio, you should consider investing in an Index Mutual Fund or an Index ETF. Through the passive funds, you will be investing in the market indices at a lower cost.

Let us discuss how the situation might look like if your portfolio consists of a single ELSS. If you own only one ELSS fund, it indicates that you have not diversified your investments at all. It seems to be a risky portfolio as you will be exposing it to the risk of underperformance of the Fund Manager. It is of no doubt that you have a higher chance of beating the market if the underlying assets of your scheme consist of top-performing stocks. But, if the market witnesses a downfall, your portfolio will crash down at a higher rate.

An ideal number of ELSS funds for your portfolio

Now, if you ask how many ELSS funds you should have in your portfolio, the ideal number could be either two or three. An ELSS fund is a multi-cap equity fund. Therefore, if you have chosen two to three ELSS funds in your portfolio, you can certainly form a strong portfolio in all possible ways.

Through a single ELSS fund, it is not possible for you to cover a substantial number of top equities. The likeliness increases if you add one or two more ELSS funds in your armory. If your investments can be spread across a good number of profitable stocks, you are going to make significant returns in the days to come. Although your portfolio expenses in the form of equity ratio will go up, the returns are high enough to cover the same comfortably.

We have discussed earlier that too many funds would lead to portfolio overlapping. But, you would not experience the same if you create your portfolio with two to three funds. Investment in a limited number of schemes is not going to capture the major portion of market capitalization. Therefore, you are not forming a portfolio which can replicate the market. So, whatever you will be earning will supposedly beat the market.

Also read:

Closing thoughts

No assurance can be given whether a portfolio consisting of two to three ELSS funds can alone serve all your wealth generation and tax-saving requirements. Forming a portfolio for an individual is dependent on several factors. If you are an investor with a high-risk appetite you can team up a small-cap equity fund with a ULIP. On the other hand, if you are highly risk-averse, you can go for a debt fund with a PPF.

Through this article, we have tried to give you a general idea regarding the number of ELSS funds which should be there in your portfolio. If you are seeking an investment option which combines wealth creation and tax saving, ELSS is your answer. Otherwise, if you have any specific requirements with respect to profitability, liquidity, and tax benefit, you are free to create your own portfolio accordingly.

How to learn faster- The Feynman Technique cover

How to learn faster- The Feynman Technique!

As the world around us evolves, we seek to constantly learn and absorb new information every day. Learning new skills and concepts is exciting and can expand your views on the world as you know it, making you a better student and human being. As Benjamin Franklin said ‘An investment in knowledge pays the best interest’.

But there is no denying that learning all this new information can sometimes get tedious and monotonous, there’s only so much knowledge that your mind can take in at any given time. However, thanks to scientific research, there is a method you can use to make the process of studying easier and efficient while increasing your ability to learn- the Feynman Technique. But before we discuss this technique, let me first introduce Richard Feynman to you.

Who was Richard Feynman?

richard feynmanTheoretical physicist and Noble laureate Richard Feynman was born in 1918 in Queens, New York. From a very young age, Feynman quickly took to science and engineering and had a laboratory in his parent’s home where he built various electronic devices.

By a young age, he was self-taught in various subjects such as algebra, trigonometry, and integrals. Eventually, Feynman went on to study at MIT and later Princeton for his Ph.d, where he made numerous contributions in the field of Physics. Some of his accomplishments include:

  • He contributed research papers on the theory of light and matter which earned him a joint Noble Prize in 1965.
  • When the Space Shuttle Challenger disaster occurred, Feynman helped research scientists understand the cause for the crash and the risks involved in flying the shuttle
  • He made a major contribution to quantum physics through the Feynman Diagram. The diagram aimed to visualize the interactions between elementary particles such as electrons and photons.

In addition to the major contributions to Physics, Feynman had the ability to apply his learnings to other fields such as mathematics and biology. He has the ability to comprehend and explain information on a variety of subjects that earned him the title ‘The Great Explainer.’ His vast knowledge led him to give numerous guest lectures at universities such as Cal Tech and UCLA. Many people, including Bill Gates, enjoyed his lectures due to his ability to break down and simplify complex scientific principles.

The Feynman Technique

Say you want to have a good understanding of a really hard concept in a discipline of your choice. There’s a chance that you may find the theory hard to comprehend as the crux of the matter is lost in translation aka with all the business jargon. The ability to understand and communicate these complex ideas in a simple way is what the Feynman technique addresses.

This method was developed by Richard Feynman when he was a student at Princeton. He kept a notebook of concepts and theories that he did not understand and spent time breaking down each process and understanding its parts individually, while looking for contradictory details in the theory. The technique essentially comprises of four parts as follows:

1. Pick the concept or theory you wish to learn

The first step in the Feynman technique is to identify what concept or theory you want to learn and list out everything that you know about the topic in a notebook. This could be any concept, under any discipline.

For instance, if you want to learn more about the game theory, your first step would be to write down all the existing (even limited) information that you have on the topic. Any new information about the theory from various other sources can be added to the notebook. For the game theory, you can start by writing down the definition of the concept and any information about the theory that you may have come across (for example prisoner’s dilemma…).

2. Teach or explain the concept in your own words to someone else

As you approach the second step in the Feynman technique, you would have gathered plenty of information on the subject (in this case game theory). Read through the information you have written down and try to understand the concept as best you can because this step involves teaching it to someone else.

But before you explain the concept, analyze the information in parts, this can also mean re-writing some of the information in your own words to have a better understanding. When explaining the concept, think of it as explaining to a child who has no background in what the concept is about. Hence, you need to use simple words (no jargon) and keep the information concise and to the point- children have a low attention span.

3. Identify any areas in your explanation that you can improve on

Now that you’ve explained the concept to someone else, it is likely that you will find a few areas in the theory that you can learn and improve on. So it’s back to the books to do additional research on certain concepts and breaking the data down further until you understand them completely. The goal is to make the information as simple as possible because that’s what the Feynman technique is all about.

4. Restructure the information and use examples as needed

The information you collected from various sources in the first step of the Feynman technique is essentially a puzzle that you need to solve.

Once you have identified the gaps in your information in step 3, your next move is to fill in these gaps to complete the puzzle. Think of your concept as a story and pretend that you are narrating it to a friend or co-worker.

When you say the information out loud, it can help identify the missing pieces and form new thought processes. Alternatively, you can use examples to simplify your learnings and add an element of creativity.

the feynman technique safal niveshak

(Image credits: Safal Niveshak)

Also read:

Conclusion

The Feynman technique aims to simplify complex learnings by breaking them down into smaller parts.

The technique can help you understand pretty much any concept or theory known to man and it helped Feynman amass large amounts of knowledge at a very young age. The trick is to break down any concept into a form so simple, that even a child would be able to comprehend the information. Albert Einstein famously said ‘if you can’t explain it simply, you don’t understand it well enough.’