How many of you are aware that the CHILD PLAN that you pay monthly SIP for has literally nothing to do with your child.
The product is not different from any other mundane run of the mill equity fund. Why do you think the word CHILD was added.
You think it found a mention because of some coincidence or randomness. In the capitalistic arrangement, nothing is random, every word has a backing of million hours of research and data.
The reason why word CHILD is used with a product is because researchers have figured out that it is a shortest way to induce an emotional reaction which in turn helps in loosening your PURSE strings.
You see, I am not questioning your relationship but a sales rep would have a hard time selling the same product as a HUSBAND/WIFE plan.
Child plan on the other hand will have your eyes moist in no time, (patsies among us mite even start visualizing our son/daughter in white doctor robe)
I had an interesting long conversation with my trader/investor friend Mr Aniket Krishna (Twitter handle @aniketkrishna )on varied topics revolving around the lessons from Seneca, Gerald loeb, Ed Seykota and Taleb.
It is amazing how birds of the same feather flock together and you instantly connect with anyone who love the books you loved.
After sharing notes on marketing gimmicks and double standards in financial industry, i decided to check it first hand.
I called up a “Relationship manager” of a bank to advise me on “Financial planning”.
Just like any other industry, sales rep are always responsive, quick and proactive, its the customer service guys you have to search in the amazing vicious maze of IVR, anyways this dude showed up in 30 mins and an interesting conversation ensued.
He opened his chart to figure out my financial freedom figure. It is nothing but calculation of TIME VALUE of money (inflation adjusted) i would need considering all foreseeable and unforeseeable expenses and reverse calculate the SIP I need to make to achieve that goal. (presuming a “reasonable” 15–18% return from Equity)
Apparently as per his chart, when i reverse calculated it (instead of SIP, how much money lump-sum i should have right now, (inflation adjusted, presuming 15% return) I was already FINANCIALLY INDEPENDENT**
- * don’t draw wrong conclusions, it has less to do with the quantum of money I have and a lot more to do with my frugal lifestyle. zero debt, zero addictions, no urge to create legacy or inheritance for my kid, comprehensive medical insurance, own house, earning and more importantly frugal wife;
When this rep realized that as per his own chart, I am financially independent, he took out his ultimate weapon. “GOAL BASED INVESTING”.
He saw my kid Zohan playing around and said, sir you did not count his HIGHER EDUCATION. By the time he grows up, to become a doctor, he would need 3–5 cr.
If i had a girl, he would have brought out an ACE from his pocket, would have made me visualize a mandap, and probably done a kanya dan by next scene and demanded a check for first SIP.
My personal take on this subject is rather controversial. I believe (and luckily my wife agrees) that my kid needs to be good in studies to warrant a seat in medicals(or any stream) on merit. If he does, rates are subsidized by government. If he does not, and wishes to go private, then he needs to calculate the ROI of his decision and take an “Education loan” and pay it off himself.
I completely agree with Dr Vijay Pahwa (it makes no monetary sense to become a doctor with a private set-up). and if you are hard bent on adding a stupid ‘TAG’ to your name, then you should pay for it by mortgaging your life.
As for girl/marriage, me and my wife got married under 5 lakhs. (60% of it in honemoon btw) (Just elope man, saves a lot of money)
On a serious note, the reason why I am writing this blog is to QUESTION the REASONABLE EXPECTATION priced in the chart of Advisors.
Did oracle’s mom come to whisper in their ears that India growth story would remain intact, dips will be bought, there will be troughs, but in the “long run” everything would be fine.
All this calculation is based on past which might or might not repeat itself. I would love to listen to interesting sob stories in JAPAN or now GREECE where Dad’s are postponing their daughter’s wedding because 20 years ago, some advisor sold em a lemon.
Just like “Child Plan” has nothing to do with child. Goal based investing has nothing to do with your goal.
Market does not give a horse’s petute to your “goals”. Advisors use this because it has the ability to induce the emotional reaction which will soften you up.
Now, I am not saying that shit will hit the roof and India growth story would stall or we will have a same fate as any other country. But I am not saying the opposite either, because nobody should and nobody can.
If you are basing your Life goals on “ Reasonable Presumptions” shoved by an advisor, you are the PATSIE. Because what that advisor does not tell you is that he has no answer to what if scenarios. He is just selling a hope trade coz his incentives are aligned accordingly.
(As per Aniket, it is called masala dosa money management) and I am more critical as it tantamount to being long volatility with no downside risk (no skin in the game) (no exit strategy)
See some people get it intuitively, to use Taleb’s analogy FAT TONY gets it immediately. there is no rocket science to it. One just needs to think in terms of probability and avoid blind corners.
One of the things that fascinate me on this topic is the BARBELL strategy. Invest 80–90% of your corpus in very safe instruments (govt treasury)
put the remaining 10–20% in CRAZY, WILD, SPECULATIVE bets with MASSIVE PAYOFF POTENTIAL.
YOUR Overall portfolio should always be anti fragile (should thrive in volatility) and not the other way around where you are SIPPING away for your daughter’s wedding and KABOOM…..!!!!!!