By Tensing Rodrigues
Very often we talk about setting goals. They are meant to guide our investment decisions. One crucial element of goal setting is the horizon we choose. When do I want this goal to be achieved? Because our goal for a short term will be different from our goal for medium term which will be different from our goal for the long term. The term or the horizon for our goals cannot be defined simply in term of years. We define it in the context of a certain stage in our life. Because our needs and aspirations change as we move through life.
George Kinder, a leading name in the financial planning industry, drives home this point to his clients with a vivid scenario analysis. The clients are asked to picture these three scenarios and then answer the questions that follow.
Scenario 1: You are financially secure. You have enough money to take care of your needs, now and in the future. How would you live your life? What would you do with the money?
Scenario 2: You visit your doctor who tells you that you have 10 years left to live. What will you do in the time you have remaining to live?
Scenario 3: Your doctor shocks you with the news that you have only one day left to live. What dreams will be left unfulfilled? What do you wish you had finished? What do you wish you had done?
These do not have a direct bearing on our investment. But these help us to confront the reality face to face. Because, most of the time, we do not like to accept the fact that we do not have all the time at our disposal. So we avoid prioritizing. These are not questions to be answered with clear, reasoned out answers. These are just the shocks meant to kick us out of our slumber.
So, rather than looking for cohesive answers, we need to just awake to the possibilities, immerse ourselves in the feelings that would arise at such a moment, and look at life as it really is, not as we tend to imagine it to be, or would like it to be. Notice the change in feelings as we move from the first scenario to the second to the third.
Once that is done we can set the goals during the different stages of life. As one just begins working and earning, the first preoccupation is to settle in life. Here itself one faces the challenge to seek a balance between the different horizons. One sees a long future ahead, and feels the need to provide for it. One needs to begin right now creating the corpus for the sunset years. But at the same time one also needs to focus on the near future. Who knows, one may not have the luxury of the distant future. And there are so many things that one would like to do while one can. So with all humility one needs to resign to the reality: Plan for the future, but also do one’s duties towards the present.
In investment terms it would mean setting aside something for the long term, and at the same time, spending on the present needs. One may have many commitments towards one’s household. One also has the responsibility to start and sustain a new household. So a part of the available resources have also to be set aside for shorter term goals.
Investing in oneself is always a high priority. The investment has to be in maintaining good health and high productivity because it is these that will take one into the future. Often one feels grossly unsatisfied even at the end of a long and busy career. Going back to Kinder’s question: What do you wish you had finished? One needs to invest in that “life’s dream” as well because one does not know whether one will get the extra time at the end of the match. We may not always be able to strike the best balance. Well, mostly we will not be able to. But it does not matter. It is enough that we feel at every point that we have spent the life well. Then it means that we have invested well.
*The author is an investment consultant. Readers can send their comments and queries to email@example.com