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Balance both for goodness of life

Posted by sandhyaravii on June 13, 2012

An oft repeated adage — health is wealth — is true to label in all aspects. Be it health or wealth, both need to be carefully nurtured to enjoy and experience a good life. While a sound health keeps us fit, a sound wealth plan can help an individual meet his/her financial goals and help him/her remain stress free.
If we closely observe, there are many more commonalities between the two (see chart When health is wealth).
In today’s fast-paced life, people are conscious about their health but awareness about creating long-term wealth is negligible. Individuals fail to follow the five-step financial planning process — risk profiling, goal analysis, asset allocation, product selection and portfolio monitoring.
Since the various aspects of a sound health and wealth are similar, an investor just needs to know the ingredients to put together a diet/financial plan that is right for him or her.
Just like we have a ‘food pyramid’ that helps us identify the proportion of carbohydrates (bread, cereals, pasta), vitamins (fruits and vegetables) and proteins (meat, legumes, dairy products) for a healthy ecosystem, a ‘wealth pyramid’ must be followed for a ‘wealthy ecosystem’. This includes the asset classes and products that can be mapped according to one’s risk profile (see pic of The wealth pyramid).
Mutual funds can be a convenient and effective way to achieve long-term financial goals and investors can diversify their assets through investments in various classes like equity, debt, gold, etc.
Regular checkups
Be it a health plan or a financial plan, both change according to the individual’s physical and financial health, his/her age and other situational parameters. Hence, a regular review of an individual’s health as well as wealth profile is very important. For investments, at a young age, people can focus on risky investment products such as equity. But as they near their retirement age, they can move to debt investments to provide security and stability to their retirement income.
Conclusion
While the importance of a good health can never be underestimated, it is equally important to maintain a financially healthy life with the help of disciplined investment planning. Having the right balance between a health plan and a wealth plan is the key. What physical trainers/dieticians are for physical fitness and health, financial advisors are the equivalent for wealth creation as both health and wealth need expert advice. Regular check-ups can ensure a stress-free life.
Thus, for an individual, while being healthy is not an option but a way of life, following a financial plan is not a luxury but a necessity of life.
The author is senior director (capital markets), Crisil Research
COMMON GOAL: The wealth pyramid
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