Nov 2021 resurrected memories of 2015. Residents and Chennai-based readers would now be able to draw parallels. Chennai and many parts of the state were under water. Areas that were unaffected in 2015 were badly inundated this time around. When questioned, officials retorted thus: “broken, outdated and ill-maintained weather prediction system used by the Regional Meteorological Centre failed to predict that the city would witness such heavy rainfall in a short span of 24 hours. Two weather radars had been under maintenance on November 6, this was the primary reason for failing to warn residents of the record rainfall on November 7! 

Lesson: Rainfall history of the last 100 years shows us that Chennai and coastal TN receive their largest proportion of natural rainfall during the months of Nov & Dec. The most damaging floods and water logging happen during this time of the year. Yet, the RMC decided that they would have their radars under maintenance during this time! Rains in Nov are a certainty, as  evidenced by  past history, Attempting to face off against the weather without  radars in place. was simply foolhardy! Forewarned is forearmed – and with no warning in place, we were simply washed away!

Preparedness is one way to offset uncertainty. Residents of Chennai should always anticipate a situation such as this, during these months. Proactive is better than reactive. Proactive is a product of preparedness. Reactive, on the other hand, is acting,  after a warning. 

 But, how is this linked to Money Management? 

Of the many clients, prospects and new entrants that I have encountered, a large percentage remain reactive. The world of finance is one of the most dynamic. Products, markets, players, regulations, methods and even scams are always “ work in progress.” This magnifies uncertainty, thus amplifying risk. Therefore, many stay away. And you, perhaps, could be one amongst them. 

Let me lay this out straight.  If learning to swim is a life skill, learning to manage money is even more important – it is a survival skill!

Back to the example of the rains. To understand Chennai’s problems, it is important to know the two kinds of weather prediction — nowcasting and forecasting.

Nowcasting is a technique used to forecast weather conditions in the short range, i.e. within a period of zero to six hours. Nowcasting is done by taking estimates of wind speed and direction of wind movement to forecast weather in the short range. Forecasting, on the other hand, attempts to predict weather changes for longer time periods.  Money Management too is similar. Nowcasting managing short term and forecasting managing for the longer term. 

“Nowcasting” as applied to money management deals with the now and the morrow. It is reactive in nature. Sherlock Holmes stated thus: “The world is full of obvious things which nobody, by any chance, ever observes.” Read that quote again, and you will understand why we as humans, are always more reactive. Our failure to observe the obvious! 

NOWCASTING as applied to money management is learning to observe signals that emerge from the financial world and quite like observing the traffic lights on the street. It directs us when to drive and when to stop.  Likewise, signals from the markets direct the “nowcasting” of our finances. What changed overnight, what changed while we were asleep, what new opportunities present themselves for us to profit, what could hamper and severely  erode our investment is what nowcasting in money management is all about.

FORECASTING, on the other hand is all about the longer term. It’s like staying on a long highway on cruise control or on auto-pilot. Three decades ago, technology and tech related developments gained ground as a leading sector. From mobile telephony to a digital existence, from banking to de-fi (decentralized finance),, adoption  of a tech-led existence has propelled a tremendous growth across this sector. This is what forecasting is all about. We saw this coming across the years and will be be witnesses to greater evolution in the future. And, the only course correction we ever needed to do was to alter within the space – meaning move from ordinary to emerging technology. Successful forecasting in money management is adapting to Siri and Alexa while realizing that voice based technology is the emerging trend,, gushing over space travel and comprehending the transition to electric cars or vehicles that could drive themselves. Keeping abreast of the changes around us helps direct our forecasting, leading us to being overweight on select investment choices, underweight on certain others and retaining a small portion of our liquidity to deploy in the emerging “bleeding-edges”!

As you read this, your thoughts rush back to the money you need to manage. So let me help you with this.  Start by making a note of the sum you wish to manage, and try to make this a family driven decision. The second step is allocating portions of this into the “nowcasting “part and the “forecasting” part and the liquid part. Forecasting should take the largest chunk at about 70%, nowcasting at 20% and liquid at 10%.  Once done, do a little bit of homework, reading, observe and then set out to meet a money manager who would help you set this up. Ask questions, seek information and then deploy when satisfied. Remember, these ratios are not cast in stone. They are customizable to suit individual affinity towards uncertainty! 

Is uncertainty “ befriendable”? To those of us who are risk averse, uncertainty is an enemy. To those who comprehend that returns cannot exist without risk, uncertainty can befriended. Take a leaf from how weather forecasts are made. Seasons, patterns and changes happen with a sort of fixed regularity and we tend to be prepared. Our wardrobe is defined by the weather, our food habits are altered to suit the weather so why not adopt this lesson to our financial management and benefit from it? Looking ahead, it is advisable that we learn to befriend uncertainty. Willingly, yet unwittingly, so that when a little adversity confronts us, we tolerate it as a “friendly tantrum”. If we choose not to, then it remains a wound that can never heal. Like they say, when in London, never leave home without an umbrella.

So somebody asked me the other day – “What about Crypto? Can I invest here?”  “Negative nowcast, positive forecast” I answered, and parted, as he glared at me cryptically!


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