Investments To Retirement: Why Financial Planning Should Be A Family Affair

The question of how one can make more money is a thought that lives rent-free in most people's mind. Despite this, fear is one of the most common things that hold people back from investing. Little do people realise that waiting on the sidelines, looking for the right time to start will result in long-term losses.

"Market tops and bottoms are only known after they happen," said Vijay Mantri, co-founder of JRL Money. The best thing to do is to start when you have the money to actually start.

Instead of looking only at the returns, one needs to also asses the draw down that they are comfortable with.

"Worst loss I incurred was 58% draw down in 2008, but I didn’t take money out and it recovered with the market. Volatility is not risk as one cannot lose your capital permanently. Serious wealth cannot be made without drawdowns. Wealth needs to be made by accommodating temporary draw-down," he said.

One can take signals from the market performance to anticipate and account for slips and losses to an extent. There can be strategies that are specific to the risk one is willing to take that can be adapted.

"Excess returns should signal incoming volatility. Micro, small and mid-cap are in challenging territory and better not to allocate fresh allotment," said Mantri.

One issue with equity is that there is a certain perceived risk. Essentially, there is a certain amount of apprehension and fear of loss that is attached to investment into equities.

Despite this, asset classes like gold and real estate that investors put money into as safe-haven investment. There is very little fear attached to this investment and lower return expectations as well.

“Gold and real estate make money because of holding period. They have not delivered much returns but people are not complaining,” he said. The way people own different asset class and their expectation are different.

"No one talks about returns or CAGR when it comes to gold or land. People have little faith in equity when compared to these asset classes," Mantri noted.

The biggest risk of not investing is loss of purchasing power. Over time, inflation picks up along with pace of consumption.

"The consumption will push prices and how can one pay without owning these companies through investment. Loads of people want to retire early, keep working and saving to build the corpus," said Mantri.

The value of one's corpus will fall short if it is not supported by investment returns. Retirement planning and finances should be done after factoring in elements like inflation, emergencies and expenses.

While financial plans are made, the biggest challenge is that most families do not have an investment plan together. The whole family may be depending on one person's skill to plan out all their finances.

This may be an issue when other members lack knowledge in the investments made and the plan to follow. It is important to involve the members concerned in the investment or financial plan that they are following.

"Involve your spouse and children in financial planning. Frame investment policy with family and it will help steer clear of right errors," said Mantri.