Yesterday, a young Engineer who has started earning good money wanted to know about investment products where her money would “multiply”. How much she knew about financial products? Zilch, nothing. But the investment product where her money would multiply was her only interest.

Now, this is what happens all the time. Though we don’t have time or interest to learn about building our “Money Tree”, we want instant solutions. We just want the big money tree. Even though we know that it takes years for a tree to grow. The only thing that can be done instantly with the tree, is to cut the tree!!

Moreover, this is a dangerous mistake we make. When the young engineer wanted instant solutions without learning more about financial products, she made herself vulnerable to financial advisors who sell products that suit their requirements and not the engineers’. These financial advisors come to know that their client/prospect is an ill informed person and they make the best use of this information to sell products that maximize their commissions and not their client’s!

So by looking for instant solutions, we have hurt ourselves. Instead of building a money tree, we are cutting the tree. As with a tree, nothing happens instantly. To be successful in any field, we need to constantly increase our knowledge and skills in that field.

So even though I wish I had a magic pill for all your investment needs, here’s a starter regimen that I recommend. These are 4 steps that can launch you into becoming a smart investor. Interested? Read on.

1. Learn: Becoming a smart investor is not rocket science that will take years to comprehend. You just need to freshen up what you learnt in school. For example, a bit of maths that would tell you about the power of compounding and therefore starting as early as possible. Or why you should use the power of cost averaging by investing regularly. And understanding the money story that you have in your mind that takes automatic decisions about your personal finance. We will cover each of the above topics and more in the coming editions of “Money Tree”

2. Track: If you want to manage something, you need to measure it first. You need to know, for example, what is the percentage of your income that you should save and invest. Or, what are your expenses in various categories like grocery, eating out, etc. You will be surprised with the results, I can bet on that. Start using a simple spreadsheet where you track your income, expenses and investment portfolio.

3. Plan: Most people put their money in a financial product as and when some advisor gets them to do it. It’s not based on any goals; it does not take care of your risk appetite and your asset allocation policy. In a future edition of this column, we will take a deeper look at the financial planning process.

4. Implement: Once you start taking your money matters seriously, learn, track and plan your personal finance, it’s important that you actually implement decisions and not be bogged down by “decision paralysis” or information paralysis”. Too much gyaan sometimes results in paralysis by analysis. That’s why you must be sure that you take decisions. The point is, get started and you’ll learn more and take better decisions as you go along.

Remember, marketers are here to make money. If they can weave a story that excites and attracts you, they will do it with great relish. What if the story is just a dream or does not have any shred of reality. Remember, the ads for perfume? You get a hot girl/boy instantly after applying those creams/deo/perfume! Instant gratification, anyone? It’s on a platter these days!!

The urge for instant gratification is dangerous. You make yourself vulnerable to snake oil sellers and marketers and help them make good money off you.

Unfortunately, this blog wants you to do the hard work. No free lunches, nothing on a platter instantly. No miracle investment products recommended.

Yes, money grows as a tree, not on some tree where you can pluck at will.

I will elaborate on each area as mentioned above. Let’s build our money tree.

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