Investing lessons from Bhagavad Gita

… How you enter truth is irrelevant; whether you call your path Christian, Hindu, Jewish, Buddhist, Islam etc is not important, all paths lead to divinity. If your focus is on right action, action for the greater good, offering this action without attachment, you will arrive in the light.

The above is an extract from Gita – a timeless piece of art and knowledge. What investing lesson we can learn from this? Many, but for now let’s concentrate on three vital terms of investment first – Investment products (often discussed, reviewed and analysed); financial goals (often ignored); strategies (most ignored area).

Let me familiarise you with these three terms before we proceed.

Investment products: There are many – fixed deposit, mutual fund, equity shares, gold, property, sometime life insurance policy etc.

Financial goals: There could be many, but often very personal. Examples are – children’s education and marriage, buying a home or a second home, buying a bike or a car, going for holidays abroad, saving enough for retirement or even buying the new iPhone!

Strategies: There cannot be many. We will talk more about this as we proceed.  

Now let’s rephrase the above text from Gita this way –

… How you achieve your financial goals is irrelevant; whether you invest in equities or in debts or in both is not important. If your focus is on right strategy, strategy for achieving the goal without any emotional attachment or biasedness, you will achieve your goal.

Got it?

The process of investment for you and me, who are not millionaires or billionaires, should consist of the below 5 steps, if we take inspiration from Bhagavad Gita –

Step 1: Set your financial goals first. As mentioned above, there could be many. Once goals are set – quantify them. For example, if my goal is to secure my child’s higher education then I can quantify the goal this way – Today higher education i.e. 4 years post 10+2 costs 10 lacs; and my child will be requiring this after 10 years as he is now 8 years old; hence by that time I should be able to accumulate 22 lacs (approx.) assuming 8% inflation p.a.

Step 2: Next, check your circumstances. This includes your incomes and expenses, existing assets and liabilities, possible growth scenarios in your job or profession, any other short term goals etc. Make a note of all these.

Step 3: Now, formulate and finalise your strategy. Based on your goal details and circumstances, the right strategy can be decided. This process could be very simple and quick or very complex and time taking. But whatever is the case, one thing is sure that the strategy has to be customised for you. Importance of a strategy can very well be understood by observing the skill of a captain or a team manager in the game of cricket or football, and for that matter any game. Unless there is a proper game plan, a game can never be won. Whether it is the battle of Kurukshetra or achieving your financial goal – strategy is important. The right strategy will tell you how much to invest, for how long and what returns should your chosen investment products generate in the process. If your goal and circumstances lead to a very simple and obvious strategy, then you can do it on your own. Otherwise, it is always recommended to seek professional help in this matter.

Step 4: Build your portfolio of investment products over and around the strategy. Say, for example, if your strategy asks for an investment product which has the potential to generate average 12% return p.a. long term then go for equity stocks or equity mutual funds or properties as your surplus and existing liquid assets allow. If your strategy asks for a return of 6.5% p.a. in next 3 years, go for a fixed deposit which is giving you 9% or more interest pre-tax. So, you can see – once strategy is set, investment products will follow. Not the other way round.

Step 5: Review your portfolio and also the strategy regularly, say every year. This is because, over a period of time lots of things may change – your goal details, your priorities, your circumstances and so on. Hence review is a must.

So let us implement this very important lesson that we have just learnt from Bhagavad Gita. You can also share some source of inspiration which has worked for you. We would love to hear. 

Thanks & Regards,

Hirannya Fin Plan.

www.hirannyafinplan.com