Prime Takes

Short essays on assorted topics from the Prime Team

Psychology of Money: What we think about when we think about money

Most best-selling books on investing and personal finance are from the west (mostly US). With such publications, readers in India will need to do some sifting through and quite a bit of mental arithmetic before deriving value from the book.

psychology of money

Rarely does a book come along that is readily accessible and relevant to the Indian audience. “The Psychology of Money” by Morgan Housel is one such book. I heartily recommend it.

Morgan distils the enduring wisdom about the relationship between people and their money in 20 chapters. Some of these chapters are about stocks and the market, but most of them are about people – about the games they play with money.

Each of these chapters can, as the author notes, be read individually as well. But they are not disjoint essays. Each essay pushes the narrative farther, and helps the reader to get a fulsome understanding of how the relationship with money works for people – all the misconceptions about money and wealth and all the traps and pitfalls investors land themselves in time and again.

That said, this book is definitely not a litany of “don’ts”. For every single admonition that the author makes, he points to the right way as well.

The concepts themselves are simple and time-tested – the role of luck in investing, why timing the market will not work over long periods of time, importance of patience, the right way to do planning and more. 

But Morgan writes about them with a straightforward clarity and with persuasive arguments, and always keeps it interesting. To illustrate the power of compounding, he goes all the way to the geology of ice ages. To show the power and importance of luck, he cites an example from the early life of Bill Gates. And he uses examples from his own youth to tell readers about how people perceive being rich.

The most important point that the author makes is about why one should strive to build wealth – why one should save and invest. If one reads the book and takes that single point to heart, it would have served its purpose.

I would recommend the book especially to young people – the sooner they understand these points, the better the rest of their lives would be.

The book is definitely worth the time and effort (It is neither long – 240 pages, nor expensive Rs 285). However, if you don’t want to spend the time/money to get the book, you can read a synopsis of the book here in Morgan Housel’s website.

Link to the book 

(not an affiliate link)

Where to invest your Franklin debt fund proceeds?

You would have started getting the locked money from 5 of the 6 debt schemes of Franklin India Mutual after a stressful 10 months. Now that the money has started flowing in, where should you invest?

After all the hassle, you would likely not be in a mood to park it in any risky asset – for a while at least. So, FDs may be your natural choice and rightly so.

All FD investment

Where capital preservation scores over everything else, do not scout for options. Simply opt for bank FDs of large banks. But broadly, at this juncture, locking into FDs would mean entering at very low rates. So, if you do enter FDs, remember to enter for shorter periods of 6 months to 1 year and lock in later for longer periods when rates go up. You could go with your bank or check other FD options in our deposits section.

If your amount is large and you wish to build a portfolio, then consider using the options below. Some of them will have debt funds that you can opt for or choose to ignore.

#1 Income need

If you are a senior citizen and in need of income, it is best to stick to traditional options. Please check our retire income portfolio that has a mix of FDs and govt. schemes. https://primeinvestor.in/portfolio-life-situation-retiree/

For others (not senior citizens) who depend on income from your corpus please check our income portfolio https://primeinvestor.in/portfolios-need-based/ but make sure you have some liquidity by parking in short-term FDs.

#2 Liquidity need

If liquidity is a priority for you, then lock some amount into short-term FDs of 3-6 months and the rest in highly liquid and low risk debt funds. Our emergency portfolio will fit this bill.  https://primeinvestor.in/portfolios-need-based/

#3 Asset allocation need

If your Franklin proceeds were used as part of an asset allocated portfolio, and you still have faith in debt funds, then you can consider low risk funds. Check out our very short and short and medium duration funds listed in Prime Funds. These categories will readjust to the higher rate scenario (there will be some volatility for few months) and will settle to benefit from higher coupon in the new instruments they will add over time. Choose the category appropriate to your time frame.

Welcome to Prime takes – Short-takes on assorted things

We’re happy to get started with a new, experimental section in the PrimeInvestor platform. We are calling it ‘Prime Cuts’ – short essays published in an ad-hoc fashion (meaning, whenever we feel like 🙂 ) about things we find interesting.

You can access these by going to https://primeinvestor.in/short-takes

Please note:

  1. There will be no specific email notifications about these essays. However, we will include them in our digest mail on the weekends.
  2. These will not be in-depth research articles – they will be opinion pieces (i.e not really recommendations) or observations about markets and personal finance that we think are worth sharing, but not quite worth a detailed write-up
  3. There is no set schedule for these articles

The rest – we’ll figure out as we go along! 🙂

Login to your account