Investing for a Dream / House!

Ever thought of buying a house?  What a silly question, isn’t it?  Of course, if we don’t have a house, then it’s always on our mind.  Even if there is one house, a second house is also a distant thought which is stored somewhere in the subconscious.  The adrenaline rush of having a personal house or having 2 houses either in the same city is an amazing feeling.  Just a look at an empty slot of land, dreams about having a life in that house become reality.  Kids playing in the garden, parking spot for cars, family and friends coming over for a party and spending those quality quiet moments alone or with a loved one.  Don’t some of these things happen to you as well?(Just to be clear, this article is not to discourage any reader from buying a house)

Image Courtesy : houseplans.com

Simply, ask a question to yourself that what is all this if not ‘planning’?  Isn’t there a plan being put in place through vivid imaginations about how life will turn out if money is invested in the house?  If Yes, then let’s go to another part of the story – ‘Investment’.

It certainly takes money to buy a house.  So what is there isn’t enough money? There is always a bank, right?  Loans can be drawn against business income or salary for buying a house.  What a great relief! Now, dreams can become a reality.  Banks pay that money for us to the seller of the house and in return we pay in installments to the bank over a period of time. Because of this great gesture by bank, we also agree to pay additional money as gratitude in the form of interest to the bank.  Slowly and gradually, every month in a systematic fashion the loan is paid off, giving us feeling of relief and pride. House is now completely free from any loans and an asset is created which will secure generations to come.

Wasn’t this investment planned in the most systematic fashion?  Expectations were clearly set for everyone.  Even if there was a miss out on one monthly installment then bank would impose a penalty.  If the relationship with the bank became better during the course of loan, then the same bank would become a default choice for the purchase of second house.

But when it comes to investment in an investment product other than house, it certainly raises great deal of speculation.  Whether it would be wise to give away our current comforts of life to invest our money which might or might not grow in the future?  Or, why to invest money for future, when life happens now? These are two broad range of thoughts that arise, there could be a more streamlined speculative thoughts towards the same. The biggest fear always comes, investing in stock market is too risky and the money can just completely go away as well.  (These days the fear of 2008 crash is still fresh in our minds.)

Fear in such a scenario is quite real. Unlike while buying a house, no institution pays an upfront money which can be later on paid back in parts.  On the contrary, the money is invested right now with no guarantee of giving a return while the risk being present for it to diminish in value.  Boom!!!!

Let’s look at a real life example of a mother who wanted to by a motorcycle for his younger son.  Every month she used to keep some money aside from the household expenses.  She followed the activity religiously over 2 years and could gather Rs. 50,000/-.  Since the younger son wanted a motorcycle worth well above Rs. 1 lakhs, it was still a distant dream for her.  One day, her elder son came to her and requested that money to start a business.  Being a mother, she quickly gave her money saved and told him that this money is marked for buying a motorcycle 2 years down the line, so he better take good care of it.  Initially, the business went into some trouble and the elder son requested for more money and his mother gave him the money saved which would have otherwise added to buy a motorcycle.  Over the course of next 6-8 months, business of the elder son began improving. Within a year, the elder son gave back the money to his mother with some profits which he had accumulated in his business. That amount was well above Rs. 1 lakhs and enough for the purchase of a motorcycle for the younger son.  Her dream became a reality far before it she had dreamed about. An asset was created without taking a loan!

Image Courtesy : Royal Enfield

Isn’t this almost similar when we put our money in an investment product? Just the striking difference being that she had complete confidence on her elder son that he will stand on her expectations.  Money put into an investment product will be serving a business which will in return reward that investment with a share in their profits.  Now, since we can’t sit to understand each and every business and it’s challenges, it’s best to pick up an investment advisor who does.  Just set the expectations right and allow some time for your expectations to pay off.

Just a food for thought – what if you have an investment advisor who will your expectations? An investment advisor who treats your money with like his own and invests with great concern so that the goal of retirement, education of children, marriage of children, etc. could be easily taken care of without going to a bank. Won’t that serve you as a chocolate mousse with a cherry on the top?