Hello Manoj, how are you? Hello. How are you doing? I'm also doing very well. Thank you so much. Wonderful. So manage today, we continue our conversation around common mistakes made while planning for Financial Freedom. This is for all the listeners from the listeners. This is the third conversation in this series. We have already had two more conversations would highly recommend you to check it out. Listen to those as well and Manoj. Can you would you like to start with just a quick recap of what we discussed? Those previous ones. Yeah sure. So I think last two conversations that we had in this series. The first one we talked about, you know, the first two steps involved in you planning for Financial Freedom and the common mistakes people do and the first step was about, you know, understanding our cash flow how much money is flowing in how much money is going out every month. So this essentially we talked about income and expenses and however cash flow Mine's over speed towards the Journey of Financial Freedom. Then the second step we talked about our network is understanding our Network. So we talked about sh, we talked about liabilities and how you know, the Network's determines our starting point of the journey. So where we are today determined is determined by the net worth and we also talked about certain mistakes people do in identifying assets liabilities expenses and so on. Then the third step which we talked about in our second talk in the series there. We talked about the future events that are likely to occur in our life, you know where we talked about events, like our children's education their marriage, maybe some people want to open up a new Venture some people want to travel to charity and so on. So those are also important points that you know, we need to incorporate when we plan for our Financial Freedom other than things like inflation adjustment of our plan looking at how many years is still our money needs to be sustained for us to be financially free and so on so after you know incorporating all these we can arrive at something called as a freedom Corpus, which is essentially how much money do we really need to be financially free and the freedom year. Long it's going to take us, you know to reach that point. That's what we covered in step 3. And we also covered one more step in our last talk which was on which is step four which is basically once we have the goal in front of us. Once we know how many years it's going to take then we go to start tracking it, you know, we were divided into smaller units month by month. We would have a Target and then you start tracking. Okay where we are reaching every month compared to the targets. That's also very important. Important because you know plants do not work of their own you go to keep tracking it and see if you're deviating from the plan and then take action accordingly. So that's that's all we covered in our first two talks. Absolutely. Absolutely and and the way we concluded it last time no judge was that you know, now we have everything in place ready and we have at least understood. What are the basic mistakes we made before we start the Planning so let's Jump Right In the next Point. Yeah. Yep. So today we're going to talk about three steps. And the first one is which is essentially in series. So it's step number five and this step talks about a very key parameter, which is most often again. It's a mistake people do which tend to miss out this parameter and that's liquidity of our portfolio. You know, we talk a lot about okay how to build a portfolio then we're Investor money and love people. I see they don't talk more about which investment is going to give me a better return. And so that people are more focused on returns, which is fine, which is also an important parameter definitely but a portfolio needs to be balanced and for a balanced portfolio returns are not the only criteria, you know that decide where to invest your money and this step talks about liquidity as liquidity of your portfolio as one of the important data point. That you should monitor. First of all, you should understand. What is the current liquidity of your portfolio and then how do improve or reduce the liquidity depending on your needs? So that's we call it as event asset mapping. So this basically determining the liquidity of your portfolio just to give you an example, you know, just having enough money or enough net worth with you may not be may not be sufficient, you know to meet you. Needs as an example. Let's say three years down the line or four years down the line. I have to to pay for my kids education and my net worth. I have sufficient network, but my net worth is primarily invested into let's say real estate, you know, then it the liquidity becomes a challenge then I have to you know, start thinking about liquidating real estate and if I need let's say 20 lakhs for my kids education and my real estate each Real estate is let's say 50 lakhs of 1 crore. Then I go to anyway liquidate the entire real estate and that liquidation of real estate is not an easy thing to do. So you go to start planning from it quite early, right? And so, you know these things people often ignore and often when the time comes near to put in your money in your kids education. For example, then at that stage, you will start thinking okay from where am I going to get the money? Any and then that's just not enough time left to really, you know, really liquidate it the right way and you might be liquidating it in a loss and or you might be wrong liquidating it in a hurry which again is not good for your overall portfolio. I have seen so many people, you know, putting in their money in mutual funds till I mean, let's say when I give an example, let's say two years down the line if I have to withdraw money. For my kids education. I've seen people continuing to invest the money in mutual funds till the last month before they needed and that's a very big mistake people do because putting it in mutual funds although you can withdraw it at any date, but it's a volatile market. So when you need the money at that time, if the market is down, then you will have to withdraw it in losses again, that's again not advisable. So the way people Invest regularly systematically there has to be a systematic withdrawal also, so you're going to start planning for it a few months or few years. In fact before your actual, you know expense is forthcoming. So there's lot of things that play on, you know, the liquidity becomes a very very important factor in determining what's the health of your portfolio. Right, right, right and Manoj, what would you say for some who's right now who maybe just starting their Journey who's not really understood this concept of liquidity. So L that how do they understand? You know, what what are the liquidity parameters for any any investment that they are making? That is the question. There are churches that lets say I invested in equipped while equities is a very highly liquid Market or high liquid asset or investment analysis. But then it's the portfolio is down by a 20% Then would I'm just saying that from your experience does it still count as completely liquid or how does somebody who's just starting? You know liquid how do they understand this? Concept of liquidity in any investment that they make is there a yeah, I mean of thumb or a guideline that that they can deploy there is the basic criteria for liquidity. There are two things we should be careful about one of courses is your money going to get logged in for example, a lot of people who are in a job most of their wealth is initially built through EPF, you know Provident fund and all those things. You know, you do remember that your money is Logged in there, which is always a very good investment. You get tax credit earns you everything is fine with it. But then you're locking in your money. So first thing to check is whether you're locking in your money or not. The more money is logged in the less liquid is your portfolio and then a lot of other things people do like for example to save taxes people would buy insurance, you know, and again, you'll remember that even if the insurance going to give you returns you're locking. In your money, it's not liquid money people would go on and buy a less has funds. You know, these are specific mutual funds to save taxes again. They have a lock-in period so first thing is the more is the lock-in period the less liquid is your portfolio. So you do analyze out of your total portfolio how much investment of it is logged in cannot be withdrawn. That's one and second whatever Investments you have even if they are not logged in. Is it in a volatile? Investment, is it a volatile investment. It's a stable investment. For example, if it's in mutual fund the equity base Mutual points, then it is in a volatile Market. Okay. So while you can withdraw it any day, but you are in a volatile market so you may have to redraw it in losses. So then the strategy is to you go to start planning for withdrawal also couple of years before your expense. Right? Right, right. So these two things you'd be careful about mr. Answer so liquidity and also planning that planning. Of course that would come to that would go back to point number three that when you are figuring out your needs that's when you you know, figure out a plan for liquidity and apprehend and subsequently the investment into the ride acid or or that portfolio great great understood, correct, correct. And even even you know other mistake in this step what people do is let's say suddenly you have to withdraw 20 30 lat Folder for one group portfolio, which is around 30 percent of your portfolio and people will just jump onto one particular asset Lexi mutual funds or real estate or whatever and they just filter out of it people don't understand that the moment you will draw it your entire portfolio balance goes for a toss. Okay. So we for example your portfolio balance is recommended to be having let's say 30% equity and seventy percent debt Investments. Now if you withdraw everything from the DET certainly your balance will take a Twist. You know, your equity percentage will certainly go up from 30% to 50% Maybe. Okay. So the moment you balance is Disturbed your optimal returns are also disturb. So while we drawing also you to be careful. Okay, I have to maintain 30% Equity balance. So I have to withdraw certain amount from Equity certain amount from dead and that's how you would proceed. So it's a lot of planning involved in all these things and that's what we do in step 5. Can I call? Oh, yeah. Okay, so so that was about liquidity of Step number 5 and it's very important how we do is we essentially map our upcoming events to assets. Okay. I say I have to redraw 30 lakhs in 2022. So I'm going to map this study legs to 10 lakhs from Mutual Funds 10 lakhs from fixed deposit 10 lakhs from some ppf account. So and so So I do that proper mapping and then accordingly I move it, you know, so that kind of activity becomes important. Okay, so I think let's move on to step number six, which is another key parameter other than you know, your returns and liquidity in all those factors the 6-cell step 6 talks about the parameter of risk capacity and risk tolerance. Okay, so essentially we're trying to understand. What is the risk profile of an investor? Okay, for example, if if you are an investor and I am an investor if both of us are there, both of us have similar needs both of us have a similar goal. It's a but your tolerance of risk can be significantly different than my tolerance of risk. Okay why I say that is because how I behave when I when my investment for sees a risk, for example, let's say I invested 10 lakhs in mutual funds in inequality Market. You also invested when the market drops it becomes 8 lakhs for both of us, but I get you know panicked with that drop while you are you're a cool guy. You don't get panicked. So you continue to invest and I get panicked and I withdraw my money. The behavior that both of us have towards the same volatility can be very different. So it's important to understand what is each individual investors risk tolerance. And that also defines. Where should we invest our money and how much should we invest our money? All right. So risk tolerance tolerance is won its second is risk capacity. This capacity is essentially how much capable you are of taking this? Not mentally but how much assets to you have let's say I am already dealing with a negative net worth a lot of loans with me. You know, this capacity is poor. I can't take too many risks. Even if the rate risks mentally I am prepared to do it, but then I am constrained by my financial capacity to take risks. So both these factors become important and you know how we judge risk capacity and risk tolerance is through set of questionnaires that we give to investors. They try to answer certain hypothetical scenarios and based on that. We try to come up with a score of how capable you are of taking risk hot tolerant you are of wisdom. So on and there they become very very important factor in terms of determining our future Investments. Giant Diet Rite and so then what would you say? What would you say when which is an objective way of measuring somebody's risk appetite or risk capacity, you know, so I today I'm a I'm a field that I am that I can okay. I can I'm okay too, or I will not get nervous if my 10% of 5% portfolio takes a hit or something like that. But then when really things happen, how what would you say then objective understand? Meaning that what is the risk appetite or S capacity of somebody? Yes, that's what I said. So we did a set of hypothetical scenarios. We create in a questionnaire. Okay. I'll tell you okay, you are investing 1 lakh rupees in the market. The market has gone up by 10% or gone down by 20% Let's say then what would you do out of the following options? You will continue to invest or you will stop investing but will not withdraw or you Will immediately withdraw so these kind of options will be put in front of you and you know, those selection of those options tells us a state of mind and that helps us arrive at a score for your risk tolerance and similarly for is capacity. Got it. Got it. Got it. And typically when I was in your expensive seen that the question is able to correctly map the risk tolerance and capacity of an individual because you would have seen uh seen users over over some you know, so do they really behave like what what it had come out in the questionnaire when you would have started working with them. How's the to a large extent? Yes, but there are of course exceptions. And in fact even risk capacity and risk tolerance also changes with time because the way I approach money in the way I approached volatility. It also changes with time today. I may feel that I am I cannot take too much risk my I'm not mentally prepared to do it but 5 is down the line. I may be more prepared to do it. So even this not a one-time activity that is done. So we do this questionnaire. Thing Once initially and then we repeat it once every year, you know, because we have observed that both this capacity and this tolerance would change with time for every individual although a major shift, but then it keeps changing and with the change in these factors our investment strategy also keeps changing. Right? Right, right understood. Okay good. So so we'll move on to the last step which is Step number seven, which is on I mean this is kind of a step 7 is kind of having an overall view of whatever we have done and up till now and you know start to monitor it start to review it and decide our investing strategy. So what we do is whatever information is collected till the first six steps based on all that. We arrived as we talked about at a portfolio. You balance that is ideal for an investor. So I would say for you based on all the inputs from step one to step 6. The right portfolio balance for you is you should go for the let's say 40% equity and 60% dead based Investments and even with it listen the equity you should go for certain high-risk certain medium risk in certainly low-risk. Okay again, depending on all the foods that we had to know. So we you know decide our entire investing strategy in Step number seven based on all the inputs that has been received so far and usually, you know in our Elite program. Also, we usually recommend certain funds or certain Investments for individual tools. There's a lot of people who are very high net worth but very low risk tolerance, you know, we invest them let them go for more of dead base mutual funds or You know fixed deposits also and all those kind of investments in people even if their net worth is low, but there is tolerance is high or we recommend and certain you know, high-risk funds also do a certain level entire balancing of portfolio and tracking of portfolio is done in Step 7. And again, it's not a one-time activity. So it every month we keep you reviewing how is it going? How's it going? Are you saving as for what you told in Step number one? You know, how do you use your network growing as as was decided in Step number four? So is your risk changing with time? So we keep monitoring is your liquidity maintain. So the lot of factors to be controlled and is all done in Step number seven. Okay. Okay. So you're saying that here here we bring together all the learnings salute from all our previous tabs and then create a balanced portfolio balanced portfolio Okay. So then then and how does sorry, please continue to send? Yeah. So one is the one time creation or decision on our investing strategy and you know recommending it to the investor. The other is Continuing to Monitor and review it and change it as per the needs. That's all done in Step 7, you know, it's not only about your taking a decision and then just sticking to it forever. It's all about viewing. How's it going? You know with the investment strategy that we have. How is it actually going is an Edward growing as we thought is the ROI growing as we thought so we keep you know, this entire Monitoring Center you can say step number seven. Okay. And and then merge, how does one do it without know if somebody is not yet taken a professional Mentor or is working with a professional Mentor than how does one do it themselves? Yeah. So see one thing which I can tell you is I think I talked about it in the some of the earlier talks as well that all this step one to step 7, everything is available free, of course to anyone who goes to the website logs in and we can start using These tools okay can assess their own risk capacity is tolerance they can do their liquidity tracking they can do everything. No and some people who want specific guidance from me. They become a part of an elite program where I personally, you know, monitor these things for that particular person and also recommend certain portfolio decisions. So otherwise it's free and moreover the books that I Of they're very very simple books in the sense. Normally Finance looks very complicated thing for for most people most common people. So whatever books I have written till date whether it's on Financial Freedom over there some stock market, you know, those are the books for beginners people who have just started on their, you know Financial journey of an inch of Freedom Journey or who want to start, you know, if you go through this books things will become Solutely clear to you and then you come to the website use the tool start doing it. And even if you have face any challenge or you have a question or a doubt you're free to ask me. I mean, I've shared my WhatsApp number on the website so you can free to Ping question. I'm absolutely okay to respond to you with whatever information I have and I mean, of course without any any charges or anything, so there's absolutely no issue. And that's exactly what I think that's really helpful. I did reach out. I did check out your website and found it really useful and I did reach out to you after that as well. Yeah for all the listeners, you know, if while we've discussed tons of things on open Talk we've talked about a number of Concepts do check out terminologies website is there in his in his file bio as well. And if you have any more questions if you have Have any more doubts when which is available here. You can create a request for him or you can drop in drop in your comments or your questions in any of these talks and we'll be happy to take it up whenever we discuss next on on any of the topics that were discussing. Yep, good. Great notes. So we'll just before we closed down. We we end this conversation. Would you like to also share? What where do we go from here? What will be our next step from here? What will be our next conversation or once you've identified the common mistakes or understood the common terminology and the steps Where Do We Go From Here what will be our next topic or discussion about I was thinking probably we should now talk more about specific Investments like Example simple investment like ppf or a fixed deposit. So they're very very simple things we can do to smartly invest in these, you know investment tool then we'll also talk about Investments like mutual funds. So we'll talk about all kind of Investments and what is more suited for what kind of person so we can begin do that conversation? Probably next. hmm Unless you have anything else in mind which you feel as a common person. I mean, I'm open that sounds good. Let's keep that as our continuation of this and we will cover that in the next conversation. Sure done, perfect. Perfect. All right - thank you so much for taking this time out and discussing with us about the financial freedom. And what are the mistakes that people make when a different steps that we need? You're most welcome planning for our Financial Freedom. I think this conversation is really helpful at least a personal level. I can definitely relate to it and learn so many things from this conversation. I hope all our listeners also. Benefited a lot and learned about a lot of things which they are uglier would have just undone would not have understood in depth. So thank you again for being hit home. Yeah, and I would just urge, you know people to just just go on get started, you know, not everything, you know, you will be able to understand or learn before you get started. So don't wait for the perfect time or wait for the perfect opportunity just go on get started. We will learn on the way. I mean, it's like there's no way somebody learn driving a car, you know, unless you actually sat on it and actually started moving from one destination to another that's how you learn everything. So you go to get going in this very very important. That's where I would say 80% of the people are stuck. They don't just get started, you know, the waiting for something right to happen in their life, which I don't know when will it happen and how it left. So I think absolutely nothing. In fact, in fact, if listeners any of you go back to our very first conversation with the the second conversation of this this was the very first one which minerals had mentioned that the very first thing in your financial Journey has to be get started get figure out your goal and get started. That's it to a static grass British Winnie wonderful having this conversation with you. Catch you soon. Catch you again. Thank you so much. Have a great lover. Take care. Yeah.