Google Map and Financial Map

When I landed in Chandigarh to go to a place called Jibhi (Himachal Pradesh), I got into a taxi and looked at the Google Map. I needed to know in how much time I would reach. It said I would reach at 21.18 hours.

Well, I got into the taxi for a 7 hour ride – and I knew it was going to be a beautiful journey of 7 hours and 18 minutes.

Google map knew the route, the amount of traffic, etc. What it did not know was the speed at which the driver would drive, and the breaks that we would take during the journey.

When you go to a Financial Planner and tell her about your goals, she tells you that if you invest Rs. 8000 a month for the next 36 years you will have a corpus of Rs. 8 crores and you can retire in the year 2057.

Your planner does not know whether YOU will contribute regularly for the next 36 years (how many breaks you will take – in Google map language)

Your planner does not know what is the rate of return that the market will give (speed at which you will drive)

We took a break, hand lunch, stopped for tea, and reached at 22.25 hours. Not too bad, right?

Google could not have anticipated the traffic on the road, the sudden deterioration of the road, traffic jam, driver driving too slowly, me taking a 3 hour lunch break, right?

Similarly when your planner tells you 8k contribution and Rs. 8 crore corpus, it is an estimate – an approximation. Many things could go right or wrong in the Financial Journey. You could take a 3 year break, you could get one sensational 60% return on your portfolio during one of those years. You could lose dramatically (1993), you may get scared and change the asset allocation.

She has no clue about YOUR behaviour, or about the behaviour of the market.

We still use Google maps, do we not? Yesterday (Sunday) on the journey from Jibhi to Chandigarh, we started the journey at 5am. Again Google maps told us we will reach at 13.30 pm – about 8 and half our journey. We travelled real fast during the first leg of the journey – the hilly region, good driver, but no traffic. Google map now revised the time to 12.57 based on the journey so far. We then took a break for breakfast – and decided to have lunch at Chandigarh. Suddenly the Google map went to predicting a 14.35 hours. We actually reached at 14.27 hours.

Did I think Google Map was wrong? Did I think it was inaccurate?

No. Of course not. I knew that Google was ONLY giving us a road map and guiding us during the journey. We did not err by taking a wrong turn or going in the wrong turn. G map did not know the length of our breaks. It of course could not have predicted fresh traffic jams. We could have had a flat tyre (unplanned break) or a 2 hour breakfast break (partially unplanned).

Exactly why we make a financial plan – a map. It gives us a sense of direction, assumed speed, etc. At the end of 36 years whether we reach Rs. 8 crores or reach it in 28 years or 42 years –is something we can’t predict now. However, we still need a map to keep us on course.