Saturday, March 14, 2009

Investing for financial freedom

The other day I met a batch mate from B-school, who has been working for a bulge bracket i-bank in the US for close to a decade now. He looked distraught. We got talking about the scene on Wall Street. Turns out that his job is safe, at least for now. What was bothering him was that he had to postpone his plans of returning to India for a while. He badly wanted to get back to India, for personal reasons, and not being able to do that was hurting.

I suggested that he should consider coming back and the nest egg he would have built up should support him and the family till such time that he found a job of his liking here. Apparently, he did not have a big enough nest egg! That was a bit of a shocker to me. Somebody that was earning the kind of salary that many of us can only dream of, did not have a big enough nest egg- after ten years of working! Turns out that he had invested all his money in ‘safe’ money market funds, for the first several years of his stay in the US. About a couple of years ago, he had bought a house and had pumped in a significant part of his savings into the down payment for that house. With the bursting of the housing bubble there, his home equity had almost evaporated. What was left in the money market accounts did not make him feel confident enough to think of a comeback, as he was not sure of landing a job quickly, on return.

While I did not have the heart to tell him so, I see that there are many things that he did wrong. The instrument he chose to deploy his savings in – the money market mutual funds – was a wrong choice. It guaranteed the return of the money he put in, but did little more. He could have afforded to take a few more risks, do equity investments – remember, when he started off the markets were in a bad shape and he would have had a few years good run. He bought into his house at the wrong time, when the housing market was a huge bubble. He could have avoided a lot of these mistakes and done better with his investments, all without the benefit of hindsight.

I am not getting into the timing of his actions here. It’s almost guaranteed that anybody that tries to time any market will fail. What I am faulting are the beliefs that drove his actions.

He opted for safety, when he had the luxury of a longish investment horizon. In spite of seeing the housing markets bubble over, he bought into his house because he thought real estate never does badly over time.

I see many of us doing similar mistakes, which come in the way of our achieving financial freedom, the freedom to do what we want to, without bothering about the next pay check. This blog is my attempt at initiating a dialog with the readers about the best ways of getting there, achieving financial freedom. I expect that some of the readers will benefit from the insights I bring in, in the realm of investing. I hope to learn too, from those that know better than I do. 

I have been obsessing over financial freedom for close to a decade now, and we – I and the wife- have convinced ourselves that we are there, or at-least almost there. It’s a fun feeling. I believe every hard working individual deserves achieving financial independence. I also firmly believe a lot of people can achieve this, with the right information and knowledge. This blog is about sharing such information, and developing such knowledge

This blog will be limited to discussing financial planning and investments – both equity and debt. Equity investing is something that is very close to my heart and something that I am constantly working on, with the hope that I will get better at it with time. So, expect to see a lot of discussion on that.


  1. interesting saaar, look fwd to see more posts..

  2. Samir,

    Thanks for the response.
    I intend to do a weekly post. Please continue visiting