In the vibrant and lively tradition of Dahi Handi, celebrated during Janmashtami across India, we witness a compelling analogy for financial planning.
In this tradition, a human pyramid is formed where children climb on each other’s shoulders to break a pot (handi) filled with curd, symbolizing Lord Krishna’s childhood sport. The formation is meticulously planned: a strong, sturdy base supports the layers above, culminating in the lightest, most agile child at the top to reach the handi. This structure underscores the critical principle of building from a solid foundation upwards, applicable to constructing a sound financial portfolio.
Dahi Handi Analogy
Imagine if, in a reverse Dahi Handi scenario, the base was formed by the smallest, weakest child, and larger, heavier children climbed on top. The pyramid would collapse almost instantly. Similarly, many individuals mistakenly build their financial portfolios focused solely on high-return investments without establishing a solid financial base. This approach, while seemingly promising short-term gains, often leads to instability and potential financial collapse when emergencies arise or liquidity is needed.
Importance of Strong Base
Consider the Deshmukh family from Pune. Ashish Deshmukh, a 40-year-old engineer, and his wife, Anjali, a 37-year-old graphic designer, have two children. Inspired by high returns, they invested a significant portion of their savings in volatile stock markets and speculative assets, hoping to maximize their wealth quickly. However, they neglected to allocate funds for regular income generation, emergency reserves, and liquidity. When Ashish faced a sudden job loss, the family found themselves struggling without a stable income stream or easily accessible funds, highlighting the vulnerability of their financial pyramid’s weak base.
In a well-structured Dahi Handi, the strongest individuals form the base, providing stability and support. In financial planning, this equates to secure and reliable investments that form the foundation of a portfolio. These include:
Emergency Funds: Cash or liquid assets readily accessible in emergencies.
Regular Income Investments: Instruments like fixed deposits, bonds, or income-generating real estate that provide consistent returns.
Insurance: Adequate health, life, and asset insurance to protect against unforeseen events.
Building the Middle Layers: Balanced Investments
The middle layers of a Dahi Handi formation are critical for providing support and balance. These individuals, though not as heavily relied upon as the base, are essential in connecting the base to the top and distributing weight evenly. Similarly, a balanced financial portfolio should include moderately risky investments that offer potential for growth while still providing some degree of stability.
The Sharma family from Mumbai provides a practical example. Rohan Sharma, a 35-year-old marketing manager, and his wife Meera, a 33-year-old teacher, aimed to secure their children’s future and achieve financial growth. They diversified their portfolio by investing in a mix of mutual funds, balanced funds, and bonds. This approach provided a balance between risk and return, ensuring that their investments had growth potential while maintaining a degree of stability. When their elder child needed funds for higher education, they could access their investments without destabilizing their financial foundation, much like the middle layers of a Dahi Handi balancing the load above and below them.
Reaching for the Top: High-Risk, High-Reward Investments
At the top of a Dahi Handi, the lightest and most agile child climbs to break the handi. This climber represents high-risk, high-reward investments in a financial portfolio. These investments, such as equities, cryptocurrencies, or speculative ventures, can potentially offer significant returns but also carry the greatest risk.
Take the example of Verma family from Bangalore. Vivek Verma, a 42-year-old entrepreneur, and his wife Shweta, a 38-year-old software developer, decided to allocate a small portion of their portfolio to high-growth startups and tech stocks. Recognizing the volatility and high risk associated with these investments, they ensured that these were funded only after securing their base with emergency funds and insurance, and a balanced middle layer of more stable investments. When their tech investments performed well, they enjoyed substantial gains, but crucially, their financial stability didn’t depend on these high-risk ventures alone. This approach mirrors how the lightest climber relies on strong base and balanced middle layers to safely reach and break the handi.
Aligning Financial Portfolio with Financial Pyramid
A balanced financial portfolio should reflect the structure of a well-formed Dahi Handi:
Strong Base: Establish a secure foundation with emergency funds, insurance, and regular income investments to ensure stability.
Balanced Middle Layers: Include moderate-risk investments like mutual funds and bonds that offer growth potential while maintaining stability.
Agile Top: Allocate a smaller portion to high-risk investments, akin to the climber who attempts to break the handi, understanding that these should not undermine foundational security.
In the high-pressure environment of modern Indian families, where lifestyle enhancements often take precedence, the lessons from the Dahi Handi formation provide invaluable guidance for financial planning. Just as a sturdy human pyramid relies on a strong foundation and balanced middle layers to support the climber at the top, a well-structured financial portfolio requires a secure base of stable investments, a balanced middle layer of moderate-risk assets, and a careful allocation to high-risk ventures.
[The writer is a Financial Educator with 15-plus years of experience, a published author, a TEDx Speaker who hosts multilingual podcast shows ‘LaxmiGyaan Library’ & ‘A Sip of Finance’]
