Timeless, Timely & Timing

Timeless

There are very few things that an average investor can refer to as – timeless advice.

Know what goals you are saving for. Know how distant these goals are in future. Know how much these goals will cost you. Understand the asset allocation required to achieve these goals (it may be different from what your risk appetite might suggest). Keep your base SIPs running all the time irrespective of market conditions. Don’t mix investments and insurance. Don’t put money in something that you don’t understand. Say ‘No’ often. Reducing your expenses is fine but there is a limit to that – focus more on increasing your income (but don’t kill yourself doing that). If everyone is doing something, chances of making profits in that ‘something’ are low.

Its not tough to understand these things if you give them a deep thought. But it requires common sense to stay on course and benefit from these timeless principles.

Timely

Then there are things that have to be done in a timely manner. Or else, there are huge costs to be paid in case of being late.

Simple example can be that of buying a life insurance. If you are under-insured and you die without much savings for your family to depend on, you would have put your family’s future in jeopardy.

A simple way to assess whether you are under-insured or not is to calculate the money you family gets if you were to die today (= insurance money + savings + investments – outstanding loans). If this amount is sufficient for your family’s future needs and goals, then its fine. If its not, then you are gambling with important things (your family’s future) and which I think is unpardonable.

Timely purchase of insurances (all types – life, health, disability) and putting in place a solid emergency fund – can be the biggest building blocks of your financial life. Its like fortifying your personal finances before you actually start your wealth creation journey. And these require you to take Timely actions.

Timing

Coming to timing. We all want to time the market. Don’t we?

After all, it is as important as time in the market – if you can do it well and on a regular basis.

But 95% of us cannot time the market 95% of the time. So odds are stacked against us.

Its not easy. I won’t say its impossible. But its tough.

For common investors, if you have surplus money that you don’t need for 7+ years, put it in equity-heavy instruments. That is as good a timing-act as most people can and should do. 🙂

As for real timing of markets as we perceive it (getting in and out of the markets frequently), its best left to those who can do it.

If you don’t know whether you are good timer of markets or not, chances are high that you are not. 🙂

But if you think you are a good timer of market, then go ahead and do it. No one should stop you from making money if you can do it.

I don’t consider myself to be a good timer of markets. A large part of my portfolio is based on ‘Timeless’ principles whereas a small part is based on ‘Timing’ decisions. Also, I firmly believe in few things –

My family’s present or future should not be put in jeopardy because of my time / timing / timely / timeless decisions. Time in market is more important than timing. But there will be times when I can make money by simply participating (forget timing and not timing) in markets. And there will also be times when I will not be able to make money no matter how good I have been with my analysis or timing. So I need to be ready and mentally prepared for all such times.