The two mortal enemies of Mr Money

By Kartik Jhaveri

"Knock, Knock!"
"Who’s there?"

"Mr Money!"

"Wait a minute. I am coming."
(Door opens after some time)

"Where are you, Mr Money?"

"Gone...you took too long!"

If you had a conversation with money, would it run like this? Well, it happens to the best of us. 

With the click of a button Mr Money moves from one end of the world to another, and he moves fast! In fact if you follow the CNBC TV18 market action in the evening, the anchor is likely to say, “The turnover was a bit low today -- with only Rs 60,000 crores”. Can you imagine Rs 60,000 crores, being a low turnover! 

The bottom-line: how can you make Mr Money work for you? During a recent conversation I had with him, I realised that he is like a child and needs constant care and attention. Here are some excerpts from our chat:

Me:      Tell me, Mr Money. How can I always have ample of you?

MM:     Treat me properly!

Me:      You will have to elaborate.

MM:     I hate when people use me to gamble, treat me like a commodity. I don’t like it. They want me to multiply overnight. It’s crazy. They do nothing to help me to multiply but expect me to do it all by myself.

Me:      I see. What else?

MM:     They spend me like there is no tomorrow. Those who don’t spend lock me up in bank deposits. I lose value when I am locked up. People need to put me to better use but instead they abuse me. How can I stay with someone who abuses me?

Me:      You're right! You don’t share an emotional bond with us anyways, and are not compelled to stay with us. How can we help you and in turn help ourselves?

MM:      I have two enemies: inflation and taxation. If you help me fight them, the least I can do is protect you. And if you put me in a place that gives returns equal to or lesser than inflation, then I will get hurt and will bleed. But if you put me in a place that gives returns equal to inflation (after taxes) then I have breathing space. But if you want me to multiply, you have to do a lot of hard work to find avenues for me to reside in. Then I can function well.

Me:       How do I find these good places for you?

MM:      Very simple! If you look for a good avenue that equals double of inflation rate and park me there, then I shall be fine. Risk and tax management is your problem.

Me:       The avenues you ask for may be risky and I don’t want to lose even
             if I have little of you.

MM:      You have got to take some risks! Either you are happy with the little you have of me or you give me opportunity to grow. You can let me grow without interfering for a couple of years. I will be busy and may not give you my full attention. But, be assured that I will be there for you in the quantum that you will require in all the years to come.

Me:       I see. And my other options?

MM:      I have limited means and I can’t identify where to go. You need to identify the avenue, and I will work there. Then I will try to do my job.

Me:       But I am worried about put you in just one place.

MM:      That’s understandable. Divide me and place me in different avenues. That’s better for me as I have multiple places to reside but all said and done it is you who is in the driver’s seat.

Here is my inference from this conversation:

1. I have to work very hard to identify avenues for Mr Money. These include mutual funds, stock markets, etc, which might be a good place for Mr Money to grow.

2. I have to study trends and make my judgement. For example when interest rates fall, I need to put money into bonds as well. When the rates rise I need to prepay my home loan etc.

But the most important learning is this: I must treat Mr Money with respect and care.

Kartik Jhaveri, an expert at Financial Planning, is a Certified Financial Planner and a Chartered Wealth Manager. He may be reached at kartik.jhaveri@transcend-india.com.

Disclaimer:

The contents of the above articles are the intellectual property and copyright of the author, Kartik Jhaveri. No part may be used or reproduced in any form or manner. If you choose to act upon the information contained in the above article it is at your own risk. This article is purely educative and you are strongly advised to consult an expert prior to taking any significant decision.