After 5 years of equity MF investing I feel confident about my retirement planning

Last year in our reader story series, we met 30-year old Rohit, whose early struggles led him, to start investing early in a goal-based manner. He has been kind enough to share an update on his finances – how he handled short term goals last year and why he feels confident about his retirement planning.

About this series: I am grateful to readers for sharing intimate details about their financial lives for the benefit of readers.  Some of the previous editions are linked at the bottom of this article. You can also access the full reader story archive.

Opinions published in reader stories need not represent the views of freefincal or its editors.  We must appreciate multiple solutions to the money management puzzle and empathise with diverse views. Articles are typically not checked for grammar unless necessary to convey the right meaning to preserve the tone and emotions of the writers.

If you would like to contribute to the DIY community in this manner, send your audits to freefincal AT Gmail dot com. They can be published anonymously if you so desire.

Please note: We welcome such articles from young earners who have just started their investing journey. See, for example, this piece by a 29-year old: How I track financial goals without worrying about returns.

We have also started a new “mutual fund success stories” series. This is the first edition: How mutual funds helped me reach financial independence. Now over to Rohit.

Wishing everyone a very happy new year, may this new year bring health, wealth and prosperity to us all, and discipline and focus to fulfill our goals.

I am writing my second audit, at almost the same time as last year. As we all know, a lot has changed in the last year. We continue to have a global pandemic causing immense disruption in our lives (please maintain covid appropriate behaviour) and back to back nerve-wracking events in both debt and equity markets. This has forced most of us to reprioritise and make relevant changes to our approach to life and investments. I am no exception.

Short term goals achieved in last 1 year

I have successfully achieved my short term goals of buying  a car for family and getting married (I gathered my rosebuds, while I may 🙂 )

Car purchase

I wanted to buy a car for my parents this year. We had never owned a car before, so this was a big event for all of us. I was able to accumulate money for this in my savings account and didn’t require a car loan. 

Only thing is, this required a little higher corpus than expected as the lower end cars didn’t inspire confidence. I ended up buying a car costing nearly 8.5L on road, after supplementing some money from active income. 

The research required for this has been very educational, I knew nothing about cars before this, and every conversation about cars among people my age ended with me punching a wall to feel manly again!

Marriage

Don’t know how this happened – but someone deemed it worthy enough to get married to me! Hurray!

For marriage as well, I was able to save money in my savings account and kept on supplementing preparation expenses with active income, as expenses spanned across months.

With both short term goals reached, I am thankful that I was able to keep myself debt free in my quest to achieve them.

My next short term goals

Car purchase (yet again)

Since my wife and I are professionals who will live in a different city than our parents, I will likely buy a car sooner or later. I will start earmarking some funds towards this goal. Savings account and money market funds will be the saving instruments.

Managing increased expenses

Now that we are two, I am expecting an increase in expenses once we move back to the city. Technically, it may not appear like a goal, but I will prefer being explicit about it. This keeps me connected to reality.

Long term goals

My long term goals remain the same for now. I am yet to sit back and evaluate the changes in my current plan post marriage.

Retirement

I will continue contributing to my retirement corpus. Calculating conservatively, I am currently at ~12.5X my annual expenses.

I am satisfied with the growth in corpus this year, given that I had to fulfil my two short term goals this year, and monthly expenses have and will increase going forward. Gains from the equity market rally have contributed significantly to the portfolio growth this year. 

After 5 years of investing, I am feeling for the first time that my equity portfolio has formed a good base – gains from accumulated corpus combined with investments henceforth, has the potential to be life-changing in the next bull run (Sensex staircase climb), whenever that happens.

Equity portfolio

I would consider this year a win for myself on the behavioural aspect of personal finance. The markets presented lots of opportunities to disrupt any decent plan we had. Thankfully, I stuck around. Special thanks to Pattu sir for his timely videos and posts throughout the crash and recovery. 

Mutual funds

The plan is to keep investing every month like always – irrespective of market conditions. Not much change in equity MF portfolio since last time – money is still almost equally divided among PPFAS, Axis, Mirae and Invesco AMCs, and I am happy with portfolio performance. Here, I have started thinking about the comfort level of the corpus in a single fund – but no course of action is currently in the plan.

MF portfolio XIRR (as per VR) is 34.4%

Stocks

I am continuing to contribute to my stock portfolio every month as well – irrespective of market conditions. The % has grown from 1.5% in the last audit, to ~6% of the total equity portfolio. I have not cross-checked – but according to ValueResearch, the lifetime dividend earned from this has crossed Rs 1000. Hurray again! Stock weights have skewed a little, will correct it in the coming months.

Stock portfolio XIRR (as per VR) is 26.2%

Debt portfolio

As mentioned last time, I mostly use debt funds and PPF as part of the debt portfolio – with a minimal Rs 1800 contribution to EPF and no NPS.

The plan is to continue doing the same. However, the debt fund portfolio exposure has extended to gilt funds. Now that I understand them as well – I am tracking DSP Floater (benchmarked to short term gilt), ICICI Gilt, SBI Gilt and Parag Parikh Conservative Hybrid. I have started taking exposure to SBI Gilt. Apart from this, I mostly use money market and low duration categories.

We all know now, better than ever – debt investing is harder than equity. So I have aligned my portfolio as per my return expectations – and areas of risk I am comfortable with.

Overall asset allocation

Asset allocation is very close to desired 60:40, have no change in plans for this.

Insurance

There has not been much change in insurance.

• I took corporate offered Corona policies last year for my family and paid the required premium.
• I have also topped up the corporate offered group policy (now 5L + 5L) this year after paying the required premium.
• I have included my spouse in my corporate group insurance policy.
• I continue to have a personal 10L base + 20L super top-up policy.

Plans for 2022

• Be grateful, disciplined and focused. It feels I have come a long way, but an even longer way to go from here.
• Enjoy married life. Wish me luck!
• Increase emergency corpus, and again – do it fast.
• Revisit short term and long term goals in the context of new events in life.

Reader stories published earlier

As regular readers may know, we publish a personal financial audit each December – this is the 2020 edition: How my retirement portfolio performed in 2020. We asked regular readers to share how they review their investments and track financial goals.

• First audit: How Suhas tracks his MF investments and reviews financial goals.
  • Update: Why I hiked my retirement corpus target though my networth doubled since Dec 2019.
• Second audit:  How Avadhoot Joshi evaluates his investment portfolio.
  • Update: Why I redeemed from EPF to invest in Equity MFs.
• Third audit: How a single mom is on track to financial freedom
• Fourth audit: How Gowtham started goal-based investing & took control of his money
• Fifth audit: Why my financial independence & early retirement plans were postponed by four years
• Sixth audit:  How Abhisek funded his marriage & is on track to financial freedom.
• Seventh audit: How Rohit’s early struggles defined his investment journey
  • Update: After 5 years of MF investing I feel confident about my retirement planning (current article)
• Eighth audit: Why my investments are still on track despite job loss and lower-income
• Ninth audit: How a retirement planning calculation scared me to take action
• Tenth audit: I made several investment mistakes but have turned my life around.
• Eleventh audit: My net worth doubled in the last financial year thanks to patient investing!
• Twelveth audit: My financial journey: from novice to goal-based investor.
• Thirteenth audit: My journey: from a negative net worth to goal-based investing.
• Fourteenth audit: From Fixed Deposits to Goal-based investing in MFs.
• Fifteenth audit: My 10-year financial journey – mistakes made and lessons learnt.
• Sixteenth audit (part 1): How I achieved financial independence without mutual funds or stocks.
• Sixteenth audit (part 2): Lessons from my financial independence journey and future investment plans.
• Seventeenth audit: How I plan to achieve financial independence and move to my native place
• Eighteenth audit: I used the current bull run to reduce my mutual funds from 14 to 4!
• Nineteenth audit: How a conservative investor created his financial plan
• Twentieth audit: I plan to achieve financial independence by 46; this is my master plan
• Twenty-first audit:  I have made many investment mistakes but am on course to financial independence by 45.
• Twenty-second audit: I felt worthless six years ago but have achieved financial stability today
• Twenty-third audit: My financial journey was directionless until age 40: this is how I made up for lost time
• Twenty-fourth audit: Why I increased equity MF investments by 275% and reduced PPF contributions.
• Twenty-fifth audit: How I track financial goals without worrying about returns
• Twenty-sixth audit: I am 24 and started investing 1Y ago but what am I investing for?

These published audits have had a compounding effect on readers.  If you would like to contribute to the DIY community in this manner, send your audits to freefincal AT Gmail. They could be published anonymously if you so desire.