Financial planning is less about numbers and more about people. At times, thumb rules do not work. Every story is different, every financial situation is as unique as the fingerprint of a human hand. For instance, keeping too much idle money in bank savings or too much investment in FD like options beyond necessity of an emergency fund does not usually make sense. But one of my clients in the past had undergone a traumatic medical situation in the family, and was desperate to redeem all his investments in a staggered way to pay the huge medical bills over 2 months of hospitalisation. His comfort level since then – Rs.20 lakh in liquid options. Does not matter if they do not earn great returns but this arrangement gives him peace of mind.
One more example. Does it make sense to sell your investments in a falling market? No, but another client did. When I asked her the reason, she said she had redeemed portion of her mutual fund investments way back in 2020 to repay her entire home loan because of the uncertain Covid situation. Although it was a small portion of her portfolio and the market made a U-turn later, being totally debt-free provided her peace of mind.
As I stated, financial planning is more about emotions and handling life transitions. It is not just about accomplishments, but achieving peace of mind. A financial adviser always needs to bear this mind in the good interests of clients.