Life is a Marathon – Here’s how to plan for it

RELATED NEWS Beware! Discounts, tax deductions can ruin your finances ABC of investing in Fixed Income Value v/s Price Equation – Know it all Investment strategies for small investors How to play your cards right in the stock market

Come January and the Mumbai city is ready for one of the greatest races on the earth, the Standard Chartered Mumbai Marathon. This year is the 5th anniversary of the race. While a lot has been written about the fitness aspect of the race, let us look at the learning that an investor can take from the race.

While planning for your life's goals, it is important to remember, this is not a 100-meter race, it is a marathon. While 100-meter race is run for the speed, a marathon is all about endurance and stamina. While one uses all the strength to acquire the speed to finish the 100-meter dash, one has to keep balance between how much energy one uses and how much one conserves.

Conserve your energy
If one starts running too fast in the beginning, one may take an early lead but may not have the energy to complete the distance. We all need money to live and enjoy our lives, but life does not end in days. One needs to have enough money to last beyond one's life. And hence, while spending money is a need, saving for old age also is a very important need. It is the balance one needs to strike between enjoying life now and ensuring safer future. It is the balance one needs to strike between current expenses and future needs.

Extrapolation
Running 100 meters at a particular speed is a different matter, but maintaining the same speed for 42 kilometers is a different thing altogether. Let us say one can complete a 100 meter run in 12 seconds (while this is much slower than the world record, it is quite fast for an amateur runner).This does not mean that one would be able to complete a kilometer in 120 seconds (i.e. 2 minutes) or the 42 kilometer marathon in 84 minutes. For most amateurs, completing 42 kilometers is a huge challenge and that is why in the Mumbai marathon, those who are not professional marathon runners opt for 21 kilometers at the most.

Extrapolation is quite easy while one is on a calculator, but it is a totally different thing while on the ground. Same is the case with one's investments. While one may have a good run for a year or two - or at times even longer like in the present scenario. It is foolhardy to expect such a run to continue for long stretches of time and hence while planning for one's future, it is always better to assume more reasonable future returns from one's investments.

Run light
Most professionals advise one to wear light cloths and light shoes. One is also advised not to carry any load in form of water bottles or any such thing. Any excess weight on the body affects one's ability to sustain the strength required to complete the race. Back in the world of investments (or life goals), the excess weight is nothing but various liabilities; medical, social or financial. Your liabilities mean that you need to maintain liquidity in the portfolio to meet the obligations and that means the portfolio cannot run fast - one needs to give up some upside that can come through investment in high risk investment options.

One could be better off getting rid of most of the liabilities - especially those financial in nature. Investments in risky options to generate higher returns could become dangerous if one has outstanding financial liabilities (loans). Some of the medical liabilities could be covered through insurance.

One kilometer at a time
The thought of running the full distance of a marathon (or even a half-marathon) is quite intimidating for most amateurs. However, if the total distance is broken in small parts and small goals are set, the whole journey becomes a series of small challenges. Life's goals also may seem intimidating at first, and the amount required for the long term goals may also look huge, but if one invests systematically and allows the investments to earn the benefits of "power of compounding" and "rupee cost averaging", the goals become quite achievable.

continued on Page 2..