How much is enough?

We all invest in the hope of getting good returns. But is their any yardstick to judge how much is enough? No…because each person have different expectation from his investments.

We all know that return is directly proportional to risk. But still we all hope to get good returns. Even when we are looking for safer investments like Bank FDs we have tendency to look for best interest rate available in market. So it is natural including me to look for good returns. But sometimes it may bring some bad experience too. Below I will share two real life experiences which I faced few days back. One is from investor who is looking for high returns and another is insurance company who is luring investors by showing false claims.

1) Investor who expects high return-During my last travel to my hometown, I met one Marwari family. Few hours silence turned into discussion and to serious discussion when that Marwari family come to know that I am Financial Planner by profession. So discussion now turned into serious and he started to ask questions about equity investments, real estate investments and other avenues of investments. Obviously I asked him what will be his waiting period and expectations. Answer is so mild from him but shocking to me !!! his waiting period is 3-4 years and his expectation is just 10% to 12% more than current bank interests 🙂

I cautioned him about the risk reward ratio. But he is adamant and shared his experience that few months back one PMS firm offered him service to manage his money. But what he asked for is, he is ready to share his profit with that PMS firm but not ready to share the loss. Reason he shared is a wonderful business tactic. He simply reluctant to share loss because, while in profit PMS fund manager’s knowledge and his money both are participating. So he is ready to share profit. But for loss, no fault of his money but only fault of fund manager 🙂  Wonderful to hear. But in reality is it a case of over expectation?

2) Insurance company’s high return offer-Few days back my friend called and shared information about offering by one insurance company who are luring my friend to invest by false claim on return of around 19%. Scheme (I say scheme instead insurance, because of it’s marketing tactic and forgetting the real need of insurance) is, you need to invest Rs.50,000 yearly for 5 years and on 6th year investors will receive back around Rs.4,00,000. Pure return of around 19% in such a short span of around 6 years. Also they offer is Rs.2,50,000 of free insurance for life long. Wow what a gimmick 🙂

When I directly interacted with that concerned person of Insurance company, I found that it is traditional plan where current bonus rate is around 6.5% but that agent advising me to consider this rate of bonus as half yearly for compounding. After long discussion and advised him to meet me personally and if I satisfied then I guaranteed them that I am going to give them around 10 proposals within a week, I have neither received their call nor no one met met till now 🙂

So expecting more is wrong?

No not at all, it is your right to expect good returns. But over expectation is what is wrong. When you are looking at safe heaven for your investment and at the same time expecting more returns than equity or real estate may make yourself in wrong position. So you need to balance your needs according to your risk appetite and time horizon.