Fortnightly Market Commentary: 25th December 2017


Make the most of assets at every point of your life (Source: The Economic Times, Wealth, Article by Uma shashikant dated November 27th - December 3rd, 2017)

As we grow old, simplifying our financial lives can be a rewarding process. Make money decisions while you are able and use your money the way you want to,

Last week Jo passed away. She was 92. She went in her sleep, refusing to be hospitalised for the breathing problems she was experiencing for the last few days. My time is up, she said. Jo did not think of herself or her life as anything exceptional. She always told me that the joy of living is in the ordinary things we do everyday and the quest for the extraordinary should not make us dissatisfied with what we have been able to accomplish. This story is about her personal financial practices.

Jo simplified her financial life in her mid seventies. She decided that as her earnings dropped and her agility with her limbs came down, she should have fewer things to worry about. She set benchmarks for herself, sell off all the equities and investments at 75 and invest in government bonds, dispose all collectibles, jewels and artifacts at 80, sell off the house and move into assisted living at 85, reduce personal belongings to the minimum by 90and so on. There was a systematic process of bringing her ownership of things down as she aged. Hoarding is a serious disease of old age, she would say. Memories can be stored in the head rather than in the form of objects.

Selling off the investments was a decision she took when she found it difficult to read and comprehend the reports and recommendations her advisers were sending her. During the boom preceding the financial crisis of 2008, many exotic products had come into the market. Senior citizens like her were the targets of campaigns that sought to sell real estate linked instruments. Jo steered clear of them because she thought she needed products that served her need for regular income. She was not seeking appreciation in the value of her investments. She did not want to worry about her money and trusted the government more than all else at her age.

Asset allocation decisions for seniors is a tough one to make. If one is leaving assets behind for the next generation, investing for growth is a sensible choice to make. However, the investors should convince themselves that the short term fluctuations in value were fine to bear in the interest of long term growth. If Jo had grandchildren for whom she would have wanted to leave something behind, equity shares would have been an ideal choice. The mix of equity and debt is to be decided based on how the corpus will be used, the portion that is intended to be consumed by the investor, should be in income yielding investments and the portion that is being left behind should be in growth generating investments. The adequacy of the first part should determine the allocation to the second part. It makes little sense to live in penury and leave behind a large legacy.

To align investments to one’s need is a skill to develop in investing. Many of us decide that whatever be our requirement, the investment decision should be something that seems ideal and optimal. Or something that seems tough, but is a choice made by most others. Many of us are unable to make the decision that the house we built and lived in can be disposed of and we could move to a more manageable smaller accommodation, or assisted living. In many societies, assisted living is seen as harsh and secluded. Jo would say that a house is what we get and a home is what we make of it. If we are able to look at our assets and ask what we get out of them and what is the best way to make the most of them at every point of our lives, we may be able to deal with them better.

Jo donated the proceeds of the sale of her house to causes she was devoted to. She felt very satisfied about being able to do it in her lifetime and see that her money was making a difference. She went to the orphanages she supported, ate with the little children and as she sang songs with them, she told me that the lonely living in a large house was a terrible choice compared to this joy. Most of us are scared to let go, she would say and we need help and counsel to get there. She bemoaned the lack of financial advice for seniors that helped them in this aspect.

Jo was meticulous about her belongings. She made annual lists and gave them away or sold them. She did not want to be a desperate seller. She said that the markets for earning money are different from the markets for spending money. There is no point mixing the two up. If there is someone who is willing to pay top dollars for an antique piece of furniture, it makes sense to sell to such a person and use the proceeds to do whatever one wants. Giving away that piece of furniture is like donating to someone who actually is capable of paying. She systematically sold whatever she thought was valuable, before she sold her house.

When she moved to assisted living, she only had her personal belongings and a few artifacts that were dear to her. She had reduced her jewellery to a small box. She would laugh with a twinkle in her eyes about the need to change her bracelets and earrings every week! Surrounding ourselves with beauty is what makes our life richer, she would say. If there is enough money for fresh flowers that would mean we have enough, she said.She sadly did not have any children and her husband passed when she was 70. As for the extended family, she held the view that privilege is a harmful thing. Someone should not be entitled to someone else’s wealth, only because they belong in the family. She did send out gifts for near and dear ones, but she was clear that her money was her’s to use as she wished and did not let anyone else make those decisions.

Her funeral had been prepaid for and the balance in her bank was going to charities she wanted. She told me that as one ages, time is what one has in plenty and that should be used to make these decisions and complete the paperwork. Who would get her watch and how her footwear would be given away, were all listed in her neat hand on a sheet of paper. There were no immovable properties or expensive assets for her to need a formal registered will. She wanted to make her money decisions when she was alive and had the confidence to manage her assets the way she thought fit.

Jo was an inspiration not just for her meticulous planning, but for her attitude about aging. She always was learning new things, reaching out to people around her, making new friends and doing things she wanted to do. If you decide to give up, resign and get laid back at 60, how horrible would you feel if you lived up to 90 and looked back at those wasted years, she would ask. Instead, if you took on new things to do and to learn at 60 and passed away at 65, you did not lose anything, did you? Those words are what I will remember Jo by.

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