Could ‘slow investing’ be your key to finally getting rich?
Minimum effort, maximum reward
The struggle of going shopping for new clothes, and then finding that seemingly every top on the market has puff sleeves or crop waists, is real. Whatever the trend of the moment is, it’s everywhere — until a few months later when it vanishes with hardly a trace. Instagram has moved on from athleisure to Barbiecore, and you’ve given up trying to keep up with the breakneck pace of trends.
The life cycle of a fashion trend used to last for more than a season, before clothes were made cheaply to be bought in bulk, worn a few times, and discarded quickly. To cut down on waste, many of us try shopping less, opting for local boutiques, and avoiding fast fashion (here’s how preloved couture can be a part of your dream wedding.)
But have you ever considered how sustainably you invest your money — beyond the simple calculus of paying the bills and putting some money into savings? Like fashion, trends in the finance world are shorter-lived than ever, and the downsides are massive. The ongoing fall of FTX has seen the embattled cryptocurrency hedge fund file for bankruptcy after losing $8 billion in client money over the course of a week.
Who can forget this time last year, when the sullen, colourful primates of Bored Ape were going viral? Major celebrities bought these non-fungible tokens (NFTs) which acted as membership cards to the virtual Bored Ape Yacht Club. The main argument for buying one of these tokens was that only 10,000 exist, so the scarcity would at some point create value.
Anyone who carefully preserved their WWF cards back in 1998 using the same logic will know what comes next. Because they were built on the Ethereum blockchain, Bored Apes and other NFTs were touted as the next big innovation in digital art and cryptocurrency — a legitimate financial asset. Yet only a few months later in May 2022, sales of NFTs dropped over 90% from their peak. Suddenly, the crypto enthusiasts grew quiet as the market plummeted, costing investors billions.
Financial microtrends are just as unsustainable as mass-produced clothes that end up in landfills; trends like Bitcoin mining, for example, consume massive amounts of energy. Valuations, too, are as ephemeral as the tissue-sheer fabric of a SHEIN dress. Just ask the aforementioned Bored Ape celebrities who are facing a lawsuit claiming that their paid promotions misled the public about the benefits of the NFT. As Shweta Jain — a certified financial planner and founder of Investography — advises, these assets should be treated like gambling. You might win big, but don’t bet if you’re not willing to lose.
If you’re a woman, chances are you weren’t one of the big losers of FTX or Bored Ape, nor in the small pool of winners. More than twice as many men invest in cryptocurrency — a discrepancy that shouldn’t be surprising. According to Aparna Mundani, a portfolio manager at Peak Alpha Investments, financial conversations still need to open up to women. “Popular media which depicts the world of money as a glamourous mix of adrenaline, testosterone and swear words, à la Wolf of Wall Street, has done little to bring balance,” she says.
What is slow investing?
For those of us who’ve resolved to start investing, only to be met with a culture of casinos and confusing terminology, putting down our hard-earned money can be intimidating. But just like you don’t need to chase fashion trends to dress well, Mundani insists that you do not need to invest in every asset out there to be a successful investor. Instead, slow and sustainable investing is the way to go.
“Slow investing is about building lasting and meaningful relationships and communities, investing in products and services that are sustainable, like handmade versus fast fashion,” explains Jain. Aligning our values with where we invest is the name of the game. It’s also about investing thoughtfully and consistently, so your money grows even if you don’t obsessively track the Sensex. Sustainable investing means you can keep it up while conserving your time and energy.
Why consider slow investing?
For one thing, investing slowly and steadily is a sound strategy, according to the experts. “A prevalent misconception is that successful investors spend a lot of time every day studying market sentiments and responding to every single one of the market’s mood swings,” says Mundani. It’s better not to focus on short-term ups and downs, both for your portfolio and your own mental health. Anxiety can cause you to make rash decisions — the antithesis of slow investing.
You don’t have to be willing to take a lot of risks, either. Slow investing is not about pulling off a coup against the markets as if you’re Shakuni playing dice. Instead, follow the lead of Warren Buffet, who cites never losing money and never overpaying for an asset as two cardinal rules of building wealth.
“Women are excellent at saving money and seldom over-pay. It is then little surprise that once they take their first step towards understanding financial markets, they turn out to be natural at it,” says Muldani. Similarly, Jain points out that women are patient investors, which works out in their favour.
The other advantage of a long-term outlook is that mistakes are less catastrophic. Women tend to be more risk-averse than men, reluctant to lose capital and be blamed for it. “Women are raised to be perfect, and hence don’t want to make mistakes. I urge women to get braver here and make small mistakes but move towards taking charge,” says Jain. Being in control of your own finances, and being able to look at a portfolio dip with equanimity, does wonders for your sense of confidence and independence.
On the other hand, taking a timid attitude towards investment will ensure you lose out in the long-run. Mundani doesn’t recommend fixed deposits due to the tax liabilities, and most accounts don’t even keep up with inflation. By keeping your money only in savings or conservative assets, it will shrink over time. Slow investing is a happy medium where you focus on relatively low-risk assets that still have growth potential. So how can you get started?
Tap into your appetite for investment
Embark on the journey of slow investing with mindfulness. Are you looking to make the most of your savings, or to build a holiday fund for next year? Do you have money to gamble on high-risk investments, or would you rather save it for the teenpatti table? Based on your personal goals and situation, your approach to investing will change.
Mundani suggests a systematic list of priorities, starting with first creating a safety net: health insurance, life insurance to take care of your family, and a contingency fund to tide you through at least six months of living expenses.
Then, look at your money owed, such as mortgages and credit card debt. While paying off loans takes precedence, you can also work both EMIs and investing into your monthly budget as long as it’s sustainable for you.
Finally, consider your monthly savings between now and the time you retire, and your existing savings. This will help you visualise your long-term financial and lifestyle goals. “Even though the 100-minus-your-age rule is widely popular when it comes to deciding your desired exposure to equities, it may be too simplistic a view,” says Mundani.
The conventional idea is that your exposure to equities and the risks associated with them should decrease as you get older — hence if you’re 20, you can put 80% of your investments into equities, but if you’re 60, it would be only 40%. But it might be only in your 30s that you’ve gained enough disposable income to start investing in earnest, or you might continue earning well into your 60s. There are no set rules, so think about what works for you.
Focus on grasping the basics
As Muldani says, “The first step is to know that money management can be learned. Once the cobwebs of jargon are wiped clean, it becomes clear that it is often temperament and well-built processes that create successful investors.” A corollary to this is: you should always have a basic understanding of a product before investing in it.
Don’t worry about what’s trending, and forget complicated schemes that offer big rewards if you get your foot in the door now. Even professionals like Jain don’t necessarily understand NFT valuations. More important than perfectly timing your buying and selling is having the knowledge to decide a course of action.
“A good check of whether you should invest in a product or not is your ability to explain to someone how the instrument works,” says Mundani. Take the time to read about how an SIP works, and don’t be afraid to discuss with friends, family, and colleagues. If your partner is investing money into a scheme, ask them how it works.
Think of it as a financial knowledge routine. Like a good skincare routine, researching, consulting experts, and doing it consistently is transformative. And just like you never mix retinols and exfoliating acids, you can optimise your investments once you understand the purpose of each. For example, while many banks offer insurance investments, they often have poor return rates compared to market investments and higher premiums than regular insurance.
Slowly get comfortable with taking risks
Sure, you understand how an FD works and the value of gold. These are the kinds of investments Indian women usually opt for, and they do have a potential place in your portfolio. But they shouldn’t be the only investments you rely on. “Women are scared to lose money and hence choose options where they get fixed returns like FD or small saving schemes,” says Jain.
Unfortunately, these usually don’t provide good returns compared to equities. If you’ve only invested in low-risk asset classes thus far, slowly start diversifying your portfolio. There’s no such thing as too little to invest, so you can build up to bigger amounts once you get used to stocks and mutual funds.
You don’t need to overcomplicate your approach or eschew low-risk assets altogether. “A portfolio composed of the elementary asset classes like equity, fixed income and gold/silver is amply equipped to meet all your financial goals,” says Mundani.
Develop an investment strategy that works for you
If you’re a novice, it might make sense to outsource your portfolio management to investment professionals. “Executing tips from friends whose investment philosophy and prowess is different from yours can throw a spanner in the works,” warns Mundani. The professionals will be better equipped to speak to your unique situation.
Alternatively, you can look for reputable funds that are maintained by professionals, so you get the benefits of experienced management without the cost of hiring a financial advisor. But whether you have portfolio managers or not, it’s important to keep up with your investments yourself.
A financial advisor is like a fitness trainer. They bring the expertise of good form and safety, they know how you can achieve your individual goals, and they can help you build discipline and consistency. They can be an essential part of your slow investing journey, but doing the work is up to you.
If you’d rather do it all on your own, there are plenty of online platforms available to invest with a Demat account. Be sure to check how user-friendly they are and what their reputation is for customer service before you commit. And even if you’re going solo, this should not stop you from seeking sound financial assistance when you need it.
Your slow investing portfolio should reflect your values. As Jain says, “Women are often changemakers when it comes to making quality of life better and investing in this philosophy helps change the broader world, too.” The kind of investor you want to be will determine the assets you want to go for — whether it’s avoiding oil and gas corporations, or choosing a stock because you like the company’s practices.
Take the time to rebalance your portfolio
The quest to find balance is lifelong, and investment portfolios are no different. Once you’ve got an investment infrastructure up and running and have settled on a strategy that works for you, make it a routine to check in every month or quarter and re-assess the situation.
Of course, the markets themselves are in a constant state of flux, but your own circumstances are worth taking into account as well. For example, it’s shaadi season so you’ll be spending more on travel and clothes than most other months (check out these gorgeous wedding guest outfits for under ₹10,000). Or you’ve recently gotten an appraisal and have a little bit more to allocate. Tailor your portfolio to the needs of the moment along with long-term goals.
Mundani recommends that new and conservative investors practise strategic rebalancing for your portfolio any time you veer away from your ideal asset allocation. For example, if your portfolio is supposed to hold 60% equity, 30% fixed income, and 10% precious metals, a stock market collapse might cause the allocation to shift as equity drops. “If you follow strategic rebalancing, you will utilise your fixed income and precious metal holdings to buy more equity and come back to a 60-30-10 split,” she explains.
A more aggressive investor could take advantage of this market drop even if it means moving away from their decided asset allocation — for example, increasing equity to 70% because the stock market is undervalued and will bounce back in the future. This is called tactical rebalancing, and although it can sometimes fit into the principles of slow investing, it’s a fundamentally riskier approach.
“Unless you are an investor who has the stomach for market volatility and has spent enough time gaining investment experience, it is highly recommended that you stick to strategic rebalancing. This approach also protects your portfolio from your personal biases,” says Mundani. Make room to develop your intuition while trusting in the rational decisions you’ve already made. When you take it slow, you’ll see the difference with time.