For many years our team of financial coaches would ask people a question: How do you take financial decisions? The responses were varied, but there was a common thread: most of them seemed to adopt an ad-hoc approach. If they had liquidity and money in the bank, they ended up buying investments from the first sales-person walking in to sell a product. What they did not realise, is that ad hoc actions would only lead to random results. Others researched the ‘product’ they were thinking of buying. But even they had got it wrong. 

As an investor and the decision maker for your finances, the first thing you need to do is ask, “Why am I investing?” This is a question that gets skipped too often.  None of us would trust our health with a doctor who writes prescriptions before examining patients.  It comes as surprise then that people seem perfectly at peace with the more traditional financial services industry, which has followed the product-first approach for decades. It is common for many advisors to push investments to clients and only later even attempt to fit them into a larger plan.

We are inclined to think “What” first, because it’s what you hear about all day long. It’s the message you read in some financial publications and see on TV. But “What” questions should come only after we think about “Why” and understand “How”.

So, the right way to approach investments is to invert the traditional decision matrix of investments. Start with the plan. Ask why are you saving and investing; to ensure a peaceful retirement, pay for the child’s education or purchase a dream home? Then move on to the process. Ask how these goals will be reached; how much to save and invest each month for each goal? Then look for the specific products. Ask what avenues will help your savings grow. With the vast range of investment avenues like bank fixed deposits, insurance products, real estate, equity, mutual funds, etc, this can get overwhelming. Investment decisions like buying or holding are best made when you do so in the context of your financial goals. Picking the next Infosys is not a financial goal. Saving for retirement or having enough money to send your kids to college are. 

“Once we’re clear about the why, about the goals, and we have a simple framework to represent a plan to get there, making investment decisions becomes much more simple” – Carl Richards, author of The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money.

The writer is founder & chief happyness officer at

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