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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Knowledge is of no use

Posted by Muthu on May 26, 2013

Muthu (yours truly) is well read about various meditation techniques, learnt yoga from renowned schools and can lecture for one hour about benefits of walking.

There are trainers who teach macro, micro factors, fundamental analysis, use of charts, how legends made their money etc.

I come across people who read personal finance (PF) blogs and magazines regularly. Their knowledge is some times on par with a professional in the field. When I suggest something, not only they understand what I say but offer more suggestions as well. They enjoy arguments and discussion thoroughly.

Now lets us see what happens in real life.

Muthu has been irregular in meditation though he can explain how and why thoroughly. He has stopped doing yoga long ago though he regularly discusses about the same with yoga teachers. Feeling guilty about the huge gap between knowledge and daily practice, only in the recent past he has been regular in daily walking. The simple most meditation technique of breath watching is also done regularly only for last 6 months or so after merely discussing about meditation and enlightenment for 2 decades.

Trainer Guru, when he talks about how macro data affects stock market, what is the best way to pick equities, why stocks are must in every portfolio, how to be wealthy like Buffett etc; students listen with rapt attention. So impressed with Guru, I wanted to know from him, what percentage of his portfolio is in equities, is he directly picking stocks or investing through mutual funds etc. Guru said he prefers only fixed deposits (if and when he has surplus) whereas talking about equity is his livelihood.

He has invested in many IPOs in the past and lost money so that he never goes near equity. When I mentioned that by following some of the technique he himself knows and teaches, he can rebuild his financial situation; he quietly turned attention to the next student:-) 

Mani (our regular character who sounds like money) is an expert in sharing data about past performance of asset classes, how equity is superior, posts comments in popular PF blogs regularly but is having a severe starting problem. He knows term insurance is good; he is convinced that SIPs would build wealth and talks in length about the same in tea breaks with colleagues, glorify people who have made crores through stock picking, but can never start.

When you ask Mani, why he has not invested in a SIP, he says that he is looking for the best fund and the problem is that the best one keeps changing. He has not taken term insurance yet because he feels that the premiums would go down in future (he has been feeling the same for many years).

When asked about PPF, he says that what if it gets taxed in future. Can any one give him guarantee it would be only EEE (Exempt, Exempt, Exempt (i.e.) investment is exempt from tax, interest is exempt from tax and withdrawals are exempt from tax)? Though he knows about the advantage of PPF, tax benefits etc, he doesn’t want to commit to the same fearing he may loose out on some other better option.

I asked him why don’t he either start on his own or take the help of a professional. He says he is looking for a best advisor and then he’ll start. Again, he has been looking for last of couple of years unable to locate Mr. Best.

I can write more and more such scenarios.

The years spent by Muthu would have been more productive, had he done some kind of exercise every day for 30 minutes in the last 2 decades. Like compounding, thousands of hours of exercise might have positively influenced his health.

Had Guru followed some of his own training, he would be better off by having wealth and passive income at the age of fifty, instead of making a livelihood only by training others on wealth and money.

Our hero Mani should settle for good instead of best. He can go for good advisor, good funds, PPF, cheap term plans instead of waiting for the perfect and best moment. With out some action on his part, his expert knowledge is of no use to him.

Many people want to start investing or take insurance only when a planner provides blue print for rest of the life. These blue prints are useless (useful for planners to earn money) as it is always difficult to predict future. The future would always remain unpredictable and uncertain.

The best way is to start with available information and keep reviewing and make changes as life unfolds.

Knowledge is of no use if it doesn’t help to take some action. Knowledge gives a false sense of control and comfort.

Be it health or wealth or career- starting today and adapting as we move on is the way to go.

All the best.

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