Moneylife Foundation held a seminar on safe and smart investing for finance students of Atharva College, Malad. While most of the attendees, who are students of business administration and finance, would be expected to have a good grounding in matters of finance, there is little in a college education that can prepare you for the intricacies and the realities of the financial services sector. While many students would go on to work for financial firms, all of them would need to have a good understanding of what it takes to invest safely and in a manner that would deliver prosperity in the long term.
Ms. Sucheta Dalal, Founder Trustee of Money Foundation, spoke on the financial traps to avoid, in order to keep your savings and capital safe. Debashis Basu spoke in the second half of the sesssion, with a focus on investments and how you could invest safely and yet build a corpus to enable a secure and comfortable future. As Mr. Basu put it, “having the benefit of hindsight, I can now tell you what you can do, which many middle-aged and older people wish they had been told in their twenties.”
Ms Dalal began with explaining to the students how to identify financial traps and scams, which could lead to upending your financial lives. “Everytime you speak to a salesman, make sure you don’t fall for the sales pitch,” she said. She explained to the young audience that what salesmen of financial products say in their pitches can be far from the reality of the performance of the products. She spoke about the common mistake of falling for a well-known brand name and expecting good products, or performance, based solely on that.
She went on to detail the most ubiquitous scams, including Multi Level Marketing (MLM), Advance Fee Scams and Ponzi Schemes, among others. She also gave a brief account of safe financial behaviour over the internet, with a young and internet savvy audience, this was covered quite easily. “If scamsters are caught, the well-connected investors will be refunded and regular savers will rarely ever see their money.”
After a discussion on celebrity endorsements of bad financial products, Ms Dalal went on to explain the concepts of credit safety, credit scores and credit bureaus. This was of special significance, considering the profile of the audience, most of whom were in their twenties and as a result, most vulnerable to exuberant borrowing and credit expenditure.
In the second session of the seminar, Mr Basu’s presentation was titled, “Salary Cannot Make You Rich, What Can?” With a short introduction to the young students, on the usual spending patterns, he went on to explain the need to have a clear understanding of your salary outgoings and possible savings.
He then spoke about goal-based investments and the relevant products that one could use to achieve those goals. Coming to the kernel of investment decisions he said, “Like all good Indians, we all want to know, ‘kitna deti hai?’” He was, of course, referring to the average returns generated by the various asset classes available for investment. He went on to discuss the relationship between investment horizon and volatility, and then explained the immense power of compounding. The simple concept of compound interest, when applied to regular and relatively modest investments can deliver huge growth and future returns.
As if on cue, in his discussion of Real Estate as an investment, one of the students raised the question that he had forever heard and believed in the salience of real estate as a safe investment. Mr Basu stressed on the lack of reliable data, the numerous cases of builders cheating buyers and a comparison with the stock market. He then closed the exchange by saying that, “for every story you hear of a windfall gain on real estate investments, by your relatives or friends, there are many more cases where the investment has gone bad and which you don’t hear about.”
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