Principles from certain books on personal finance have become guideposts for individuals
There are textbooks on personal finance. And there are books on personal finance. The latter are easier to grasp and relate to, which often makes them recommended reading for not just professional advisers but individual investors as well.
The Intelligent Investor by Benjamin Graham, has stood the test of time continues to be a 'Bible' for personal finance. The key take away from the book, as dna reader Kasturi Kannan points out, is not profit maximisation but loss minimisation. It guides individuals to develop a rational plan for buying stocks and bonds, which must be a bulwark against the emotional behaviour that will always be tempting during abrupt bull and bear markets, she emphasises.
Time matters
Anand Radhakrishnan, Head of Equities & Portfolio Manager, Franklin Templeton Investments – India, advises that it’s the time that you give your investment that matters. Not timing. You get to know the best or worst times, only in hindsight. For instance, when the BSE Sensex was at 3300 levels a couple of years back, investors who thought markets had bottomed out, were surprised to see it go down further by 700 points in September 2001. And then, in August 2003, when the markets had rallied from 3300 to over 4000 points, investors who stayed away thinking that markets moved up too sharply missed another 500 points of the rally. The moot point is trying to successfully time the market is next to impossible. Your investment decision therefore should be based on the careful analysis of your investment situation rather than market conditions. It is important to remember that short-term volatility always tends to smoothen out over the long term, Anand underlines.
Another book, 'The Ten Most Common Mistakes Affluent Investors Make,' by James P. Owen, has inspired investment advisers to create their own check list based on the principles it espouses. Team Beauregard Farina Tourangeau, provides its list of investment essentials, following the book's philosophy.
Ensure
A business plan that covers both the short and the long term;
Quantifiable goals against which to measure your results;
A strategy for attaining your goals;
The right professionals to do the job.
Factor
Time Horizon
Income Requirements
Tolerance for Risk
Expectations for Return
Avoid
Letting emotions drive investment decisions
Hiring managers solely by the numbers
Getting caught up in the relative performance game
Not taking into account the fiscal impact
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