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Know Your Portfolio

The book will make the investor more aware of the factors influencing one’s portfolio returns and make him more knowledgeable to have a better informed discussion with the investment advisor

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The common feeling about Indian financial saving habits was that Indians were ‘savers’, and not ‘investors.’ What it means is that the average middle class person would save diligently, but would let that money remain in banks, rather than put it to work in any of the investment avenues available. However, in the past few years, there has been a change in this behaviour pattern, with meaningful flows in other financial products, earlier in insurance products, and now, very substantially in mutual funds. This has been driven by various factors like the emergence of knowledgeable and quality financial advisors, the growth of the financial media and its role in popularising financial products, and the regulatory push (especially from Sebi) to make the product offerings more customer friendly.

However, it is also true that the average person is not financially literate, that is, he is not usually very comfortable with financial products and lacks awareness of the factors he should watch out for while investing his money. While his financial advisor can advise the investor on the different products in the market, it would be quite useful for the investor to get a broad perspective on investing.

Unshakeable: Your Financial Freedom Playbook by Tony Robbins covers such ground. Robbins, an American author, advocate and an entrepreneur covers areas like the impact of long term investing, the power of compounding, the need for diversification, the impact of fees on returns, the importance of asset allocation, watching for post-tax returns rather than gross (pre-tax) returns and the importance of having a trusted financial advisor. Each of this is important, and any person who puts money in a financial saving instrument will benefit from this knowledge.

Robbins writes, it is important to get good financial advice as,  ‘For many people, nothing has a more positive impact on their financial future than partnering with an intelligent guide who knows the territory..’. The book also covers the importance of not letting emotions get the better of you as that can otherwise get in the way of your investing. The chapter on this, ‘Silencing the enemy within’, can help a person become aware of such pitfalls.

Unshakeable is easy to read, but rigorous in the sense that assertions are usually backed by data, and wherever data is used, the source is quoted. On the flip side, the book is written for an American audience, so the chapter on 401 (k) is not relevant to a reader outside the US, though it does otherwise contain good information.

In other areas, the book recommends that investors exclusively use index funds. In India, the experience has been that actively managed funds have usually done better than indices, so that point is not so relevant here. This picture may change in the years to come, but that is not the case yet. One area that could have been covered is the importance of valuations in the market. Valuation of any asset is one of the most important determinants of the expected returns from that asset. Probably its need was not felt relevant in  a book for the average investor.

The book will make the investor more aware of the factors influencing one’s portfolio returns and make him more knowledgeable to have a better informed discussion with the investment advisor. While financial advisors would be aware of most of what the book covers, they can still use it to quickly refresh their knowledge.


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