Is your spouse your partner?

For most Indian men and women, financial planning often feels like a solo endeavour. The men, for whatever reasons often lead this. I see the role of women growing in recent years but financial planning is still a men led activity for most Indian families. I have written a post about women in financial planning a few years ago which you can read here.  Men pore over spreadsheets late at night, consult apps for investment tips, discuss with colleagues etc. as we work towards our retirement.  But here's a sobering truth: if you're married, your finances aren't just yours. They're belong to the family. Yet, too many couples treat money like a forbidden topic, with one partner—often the man—calling the shots while the other nods along or tunes out entirely. This isn't just inefficient; it's a recipe for failure

Make your spouse a true partner in the financial planning process. Not an onlooker. Not a rubber stamp, but an active collaborator. And yes, this means discussing every decision, even if they're "not interested." Spousal partnership is non-negotiable

Financial planning must reflect the partnership that marriage is supposed to be. Think of it as co-piloting a plane: one person might handle the controls, but the other monitors instruments, navigates weather, and shares the flight plan. A joint approach to managing finances also ensures a deep understanding of the situation at all times, especially when the financial journey becomes tumultuous. A joint decision making process allows both sides to put priorities on the table. The man may have certain priorities like planning for retirement. The woman may have more urgent priorities like the renovation of the house. And frankly any one can be argued to be more important than the other. However, here is the point. Financial planning needs to put all priorities or objectives on the table.  Discuss all priorities from every angle. This will sometimes lead to conflict. Nevertheless, despite the short term disagreements, the decisions need to be made jointly. It allows a frank discussion around the immediate and longer-term objectives. Not just for the purpose of taking the right decisions.  Research shows that managing finances jointly also means higher satisfaction in the relationship

Most men take it as their sole responsibility to manage the finances and to provide for the family. Often men operate like self-appointed CEOs of the family. Often, the investments are completely out of sight or awareness of the spouse. And what happens where the markets tank? Or the man passes away suddenly? If you are not involving the spouse in the planning process, you are putting the family in the way of risk and challenges. Unilateral decisions also cause suspicion and erosion of trust. 

Every decision, from refinancing the mortgage to choosing a mutual fund strategy, ripples through your shared ecosystem. Discussing them isn't micromanaging; it's safeguarding the fortress you build together. 

The risk with ROCE focussed investing

As an investor, understanding the profitability of a business is a key measure to track. We need to know if the business is profitable and preferably measure it over a longer period of time. It is in fact a critical metric in the analysis of a company, providing insights into its financial performance from an investment perspective.

ROCE or Return on Capital Employed is defined as earnings before interest and tax (EBIT) divided by the value of the capital employed. It essentially represents the value of the capital (typically total assets minus current liabilities) that the company uses to generate the EBIT. It quantifies how adeptly a business is deploying its capital to generate profits. A higher ROCE signals a machine firing on all cylinders, signifying a more efficient use of capital to generate profits. This makes ROCE an indispensable filter to screen out mediocre or inefficient companies.

While this is the best point to filter out companies, it can often be a blind spot in the process. It can be a myopic trap. It is excellent for validating past performance but woefully inadequate for spotting the big winners of the future. Screening companies based on a certain ROCE score also means weeding out some potential winners of the future. Especially for new-age businesses that require a lot of upfront capital investment in order to build scale and momentum. And that brings us to the key point: will over-fixation on ROCE take our eye off the multi-baggers of the future? ROCE is an excellent metric when analyzing mature industries or categories. But in high-growth new-age businesses, there could be an extended period of low ROCE followed by exponential growth. It is during this period that investors face a challenge when using ROCE as a key metric.

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Investing is not about rewarding past efficiency; it is about identifying and getting into the game early, thus capturing future value creation. Estimating the future performance of a company requires a forward-looking lens that ROCE just cannot provide. ROCE tells us how well the company has done in the past, but estimating the future is the crystal ball that needs to inform us about how well the company will do in the future. Despite an excellent ROCE, a forward-looking view can identify future disruptions to the industry or company. It is often subjective, based on several what-if scenarios and one’s view of the possible outcomes in each scenario.

In summary, over-fixation with ROCE could blind us to multi-baggers. But ditching it also brings its own risks. It makes sense to use ROCE as a baseline filter in the case of established industries. However, in the case of new-age businesses, using ROCE may be dangerous. New-age businesses need to be viewed differently, with a higher emphasis on future scenarios and assumptions. 

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Luck versus skill

In the world of investing, stories abound of overnight millionaires. Take the case of Jiten, who struck gold with his investment in Bharti Airtel. Over the last five years, the share has grown 6x, giving Jiten a sense of expertise in picking shares. It may well be skill, but all too often, it is luck disguised as skill. That Jiten did badly with some other investments is unlikely to change his opinion about his investing skills. Often, the wins are not from a secret superpower. They are just luck. And when we mix up luck with skill, the consequences can be dangerous.

The investing world is full of such examples where random luck often masquerades as expertise. This confusion doesn't just lead to overconfidence; it sows the seeds of ruin. Understanding why this happens requires peeling back the layers of psychology, probability, and market dynamics. There are blurred lines between fortune and finesse, between mere luck and skill.

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I am not downplaying the role and importance of skill. The ability to read the numbers, understand the strengths and weaknesses of a business, and make assumptions about the future of the business is an important one. I am a fan of fundamental analysis; a business needs to have strong performance data to back it up. A growing business with a strong ROCE is likely to perform well over the years. But the share performance itself is driven by several other factors, including the narratives managed by the participants. The performance of a share may, despite the robust performance of the business, be guided by sentiment and general market conditions. But luck? That’s the wild card. So, was the last success down to skill or luck? It is often difficult to tell them apart. Markets move fast, and one lucky call can look like genius.

When a decision leads us to strong gains, our minds play games with us, making us feel awesome. We hunt for proof we were right. And this leads to overconfidence. Overconfidence is not just cocky—it is dangerous. It makes us make bigger decisions. The thrill of being right with the next investment decision is heady. And it does not stop bad decisions. In fact, we start taking many bad decisions.

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Luck is part of the game. The dangerous part? Thinking that the luck you had was all due to your skill. We all try to interpret data; we guess. Sometimes we get it right, and often we get it wrong. And it's very difficult to know if it was all down to skill or just luck.

So the next time you feel like the next Warren Buffett, take a pause. Was it really your brilliance, or just one of the many unpredictable market moves? We will never know.