Investment in Various Stages of Your Career

By Mr. Girirajan Murugan, CEO, FundsIndia

From your grandparents’ times to the current times, the average annual salary has grown from 3 digits to 7 digits. Don’t be blinded by the positive image this presents. The expenses and inflation rate also grow along with the salaries.

This change is proof enough to show that our financial plan should also evolve with our finances.

Before we get to how to tailor our finances with age and advancing career, let’s see the factors that drive these changes.

Risk Profile: Notice how one’s average driving speed decreases over the years? It’s the same with risk, too. As one ages, it is suggested to limit the risk exposure, and shift from high risk instruments with high yields, to safe avenues with nominal returns.

Career changes: A change in career equals a change in income. If it includes a change of track, say a salaried person wants to take up entrepreneurship, the mode of investment, goals, and commitment also vary accordingly.

Commitments and Additional Goals: When one starts investing, they might have 2 goals and zero commitments. But it may not stay the same 20 years down the lane.

Market Progression: 20 years ago, one had to get hold of a broker to buy stocks and mutual funds was a new term that sounded risky. 30 years before that, very few were aware of the concept of stocks. Now one can invest in stocks, mutual funds or other instruments directly, within minutes. New products could widen the scope for minimal and easier investment structures.

How to approach these changes?

Reevaluate Periodically

If I ask what an Emergency Fund is, I’d get several answers. But if I ask when they last upgraded it, I don’t think I’d get many answers. If I did, I’d be ecstatic.

When your lifestyle changes, it is prudent to upgrade your investment accordingly. A monthly expenditure of Rs 10,000 may have been good enough for a 23-year-old you, but what about the 43-year-old you?

Be or Get

To be a successful investor, you have to Be an Expert or Get an Expert. Trial and Error, and making decisions based on hearsay, cannot be your investment style if you expect it to be your future’s backbone.

Count the ‘What ifs’

You must have heard people say, “as your career moves forward, your investment should also increase”. But here’s a situation you won’t hear often – what if there’s a dent in your career. Your plan should factor both sides of the coin flip.

The action to be followed after a forward move is pretty obvious. Increase your investment as your income increases. We leave the how and the choice of avenue to your consultant.

Now comes the less-spoken side. What if the change is not positive? Don’t press the ‘Panic’ button as soon as you sense an unfavourable situation. If you find it difficult to finance your periodic investments, you can opt to pause. Most AMCs offer a pause option up to 3 months. If you still feel that you’re up for a dry season that may exceed 3 months, stop the SIP, but keep the existing investment in the fund, without redeeming it, or resort to a partial withdrawal. Why so? The following picture will show you the reason.

Hope I’ve given some clarity on this much-needed topic. Lastly, I’d like to remind you that it’s natural to be overwhelmed by changes. But approach the solution without haste and factor the best interest of your long term goals before taking a decision.