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Are You Taking Enough Risk

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Do you have a Dream?

Mr. Intikhab Chougle,
Associate Vice-President,
HSBC India

I am hoping this week to be a memorable week for me and my wife as it is my wife's birthday followed by our wedding anniversary (gosh we complete 9 years of togetherness) in few days. The dedicated / devoted husband that I am, forces me to ensure that I make every effort so the week becomes a very special & memorable for her. After thinking about many options, finally decided to take a weeks leave and take her away from the hustle bustle of this city. I did not spare any effort to ensure that everything was well planned and organised as for once I wanted her to be happy & me to be at peace for the entire vacation. Though I have planned at last moment but with help from few friends here and there, I was for sure able to put in all my efforts to make it real.

This entire episode has inspired me for my current write-up and I have knitted my thoughts around the efforts that we put only in the things that we want to do for our self. Otherwise, we might only keep contemplating the possibilities of being in various situations in life. It might be so funny but true, if it is about anything that we want we will take our chances, put our best resources and work the thing around by making it possible.

A small story that comes to my mind is of 'circus elephant', most people in life remain like him. Have you ever seen a giant grey elephant in a circus tent, chained to a wooden plank? The jumbo can uproot any tree with its trunk, yet it stays peacefully tied to a light plank. Why? The logic goes, when that elephant was just a baby, and not very strong, it was tied by a huge chain to an iron stake that could not be moved. Regardless of how hard it tried, it could not break the chain and run free. After a while it just gave up. Later, when it is strong, it never attempts to break free. The “imprint” is permanent. “I can’t! I can’t!” it says, without even trying.

Many of us in real life behave like the circus elephant, all through our lives we have been conditioned to doing things in a particular manner. We never experiment / never challenge the obvious and hence never find a different way to doing things. And finally, we give up and accept status quo. Imagine what would happen, if you do not dare to dream and follow your dream with courage. Almost all of us, play safe and tread the path cautiously. We do not explore different means of doing things as the fear of failure dogs us. It comes in the way of us fulfilling our dreams. Eliminate the source of your limitations. When you mentally break free, the boundaries will be removed from your future. Believe in yourself and your ability to achieve. Do not be a circus elephant, else you will be forever be tied to the wooden plank of your mindset.

In other words one should develop your ability to take risk, indulge in the race to achieve your dreams, one should also dare to dream as only then you will attempt to achieve the same. Here I think the following attributes are the main factors that affect the ability of an individual to take risk in life:

AGE

The lower the age, the higher is the appetite for you to take the risk as the over-all time that you would have to bounce back from your down-turn/loss (if any) will be high and this only encourages you to take higher risk. Hence it is sensible to start early in life and ensure that you have planned your investments / life with a long term view.

RESPONSIBILITIES / DEPENDANTS

This is the most important criteria for being able to develop the risk appetite for investments as your responsibilities and number of dependants allows you to plan your investments. If you are a sole earner of a big family with higher number of dependants then more then taking risk in investments, the focus should be in securing the future of the dependants and that could be done through insurance policies. But if you are heading a small family and have spouse who is earning too or maybe you are a part of family with multiple bread-winners then you should assess the potential and jointly or independently whatever suits your situation should plan your investments balancing it with risk factor.

INCOME SOURCE

Generally there are people who have 2 categories of income class, either salaried or business class. In case of a salaried class individual the investments can be planned in more staggered manner over a period of time and it should be done with stability. In case of a business person, the investments are more associated with the turnover of the business which is unstable and accordingly the investments must be planned.

LIABILITIES

In today’s environment most of us have indulged into planned borrowings for our needs of buying a new house or car, in that case we must always ensure that our outgoing towards loan repayment should not be more the 50% of our net earnings. Also if you have a home loan then you should rather concentrate on pre-paying the loan over a period of time as that is the asset which belong to you and will reap you long term benefit. If you are debt free, then you should plan investments with higher risk as in long run they will surely give you very high returns.

PAST INVESTMENTS

The investments done by you over a period of time act as a cushion and provide you a platform for you to increase your risk appetite and accordingly plan your future investments. Here I would like to give an example of our PF savings which is more of a regular nature with our organisation, in addition to this we can look at equity or mutual funds as a balancing option.

INDUSTRY YOU WORK FOR

This is somehow; I feel a very important assessment that one should do before planning the risk / investment. Most of the NRI’s are on contract basis and the surety of their extension is totally driven by the performance and work they do. In these kinds off situation one should save for ‘the rainy days’ as if there is a lull then the savings will act as a cushion during that phase. In other words, it is important to identify the shelf life of the work being done by you as accordingly you may want to plan the future and indulge into taking appropriate risk.

At the cost of being repetitive, my emphasis would be on the point that not all of us have similar needs in life and hence it might be worthy to sit back and plan our risk appetite as per our need / market situation / future goals. While planning, it might be a worthy effort to consider the above mentioned attributes as they may only help you plan or act as a toll to assess your right appetite for risk you must take.

My honest take on our individual planning potential and risk appetite is ‘A simple way to remove the fear of unknown is by seeking knowledge & understanding of the same’.

 

Mr. Intikhab Chougle, is Associate Vice President with HSBC Group in India and has been a retail banker for past 11 years. He has completed his Bachelors in Commerce from Mumbai University and is currently pursuing his MBA with major in 'Banking & Finance'. With a total working experience of close to 15 years in Mumbai, he has been an active member in social service in Mumbai for promoting causes like 'education for girl child' and promoting medical assistance for old and deserving people. He has also traveled to Malaysia, Paris, a part of UAE market for professional reasons and has acquired vast market knowledge about investments and business approaches adopted in different markets.

He believes, it is very important that we must return back to the community what we have earned and learned from the society and hence is willing to extend his support to the people who would want to seek his expertise in setting and achieving their financial goals.

He can be reached on his email id This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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Comments (1)
Assessing Risk
1Wednesday, 08 June 2011 16:22
Mustafa Bukhari
Indeed a very good article, clearly explaning the need of assessing risk in the individual life.

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