Prashant Desai is a CA and a CWA. Since 1995, he has worked and has managed treasury assets of Rs 3000 cr. Desai has also risked investing into almost everything from fixed deposit, corporate deposit, chit fund, gold, real estate, and stocks. He has learnt only by losing money. In his own words, ‘investing cannot be taught, it has to be learnt.’
Read on to know his take on common finance mistakes, when to start investing, and his one key advice for all his readers.
Q. What are the common mistakes people make when it comes to managing their finances?
PD: When it comes to making money, mindset is more important to make money than making money itself. People, in general, have the perception that they want to take less risk and earn higher rewards. That’s a mistake. I feel when it comes to money, risk and reward go hand-in-hand. There is no bigger truth. People should make peace with the fact that to get higher returns, whatever anyone says, you have to take higher risk. Another mistake people make is that they don’t invest time. On average, an Indian works 2000 hours every year to make money, but does not even spend 200 hours to make more money out of their existing money. And lastly, we Indians lack discipline. We first spend, and then save, and hardly make any time to think of investing options. In my view, the order should be, save first, invest next and then spend.
Q. When is the right time in life to start saving?
PD: I think it is the moment you start earning. For some it could be 18 or 20, for some it could be a bit later, and for some even younger, perhaps. I tell my friends and colleagues that every time they receive a cheque in their bank, they should immediately make an FD of 25% so that they don’t see that amount in their bank account. And then with the rest, enjoy life. The key is to be disciplined about it.
Q. Most of the younger generation depends a lot on their parents for investing. What would be your advice to them? And how should parents approach this?
PD: Like sex and politics, Indian families have a blind side when it comes to talking about money with their kids. I would like that to change. I discuss money matters very openly with my daughters. They can grow young without money, but I don’t want them to grow old without it. Besides, no school teaches financial education. I have also learnt that investing cannot be taught, it has to be learnt. What I mean is, I encourage my kids to make mistakes. The other day, one of my daughter’s friend’s dad asked her to buy a stock. She asked me for advice and I suggested that she should take a call. She bought the stock and eventually lost money; but it is absolutely fine. That’s the only way they learn. Let them ‘play’ with money. I write ‘play’ with responsibility. But let them explore. The more mistakes they make early on, the better they will become at avoiding these mistakes when they grow. Trust me, mistakes early on are far less expensive than later. Make money a dining table conversation, car-ride conversation, holiday topic. Talk about money freely. Encourage them to not think of money as a villain. There is no bigger hero in life than money.
Q. From all these years spent in finance and investing, what is your biggest takeaway. What advice would you like to give to your readers?
PD: Money matters. Greed is good. Take risks. Not taking risk, in my view, is a bigger risk. You may start small, but do start by taking risks. Because without higher risk, you won’t get higher returns. And in a country like India, where inflation or mehangai keeps going up every year, you don’t have a choice. And be disciplined about saving every month. Money is beautiful. Fall in love with money. The financial world is not scary. Your expectations are scary. Moderate them. And make so much money that you can have a good life and use the balance to make a difference to the lives of others.