# An afternoon with teachers

Published: July 23, 2015 at 6:59 am

Last Updated on

Last week I was invited to speak to a group of faculty members at the B.S. Abdur Rahman University on the basics of money management. A brief report of what ensued.

Prof. Shriram from the department of computer  science engineering, who is also the head of their faculty training centre invited me for the meet. I was pleasantly surprised to see that about 90 people turned up for the talk.

Regular readers may recall that I had spoken earlier to a group of Ph. D students in my dept:

An evening with young earners

That was a much younger audience and I was able to talk about the importance of investing in aggressive assets and how fixed income exposure will not help us build wealth.

In this case, the audience ranged from age 25- 50-ish. Most of them were parents and most of them had little or no equity exposure.  Since I had under an hour to speak, I focussed only on the impact of inflation on retirement planning and for a goal like our children’s education.

Here  are a couple of photos followed by a few slides that I used.

A couple of slides based on  the Visual Goal Planner

Suppose your child’s education costs 10 Lakhs today. Assuming the cost increases at the rate of 8% each year, a person must invest about Rs. 8000 a month in a portfolio that earns 10% (after tax) in order to achieve the goal in 15 years (before the child graduates from school).

This is represented by the intersection of the two lines (cost of education and value of the investment).

Had the person invested in a money-back scheme or endowment plan, the two lines would never intersect. Meaning, the value of the investment has been degraded by inflation.

The visual planner is a simple tool that tells what our investment objective should be for the money that we can spare for that goal.

A snapshot of a ‘how much money will I need for retirement?’ sheet

The group was astonished to find out that a corpus of about 3 crores is necessary for current monthly expenses of Rs. 25,000.

Had someone with such a corpus made the mistake of putting it all into a pension plan, he/she would have got an annual pension of 21, Lakhs @ 7% (before tax!)

They will not be financially independent after about 7/8 years after retirement. It is little consolation for them that the corpus will not diminish in value.

Instead, a strategy for generating inflation protected income must be adopted.

Notice that the amount to be drawn for expenses is now in step with expenses. Therefore, the corpus being to decrease in value after a few years and drops to zero (hopefully not during the lifetime of the retiree!)

So the central message was that in order to combat inflation, investment in a productive asset like equity is essential.

Most members in the audience were scared about fluctuating market returns. I did what I could to assuage them that if our economy has to survive (meaning it grows at a reasonable pace), equity will  have to do well. I wish I had more time to dwell on this.

As I spoke, a wave uneasiness seemed to spread across the hall.  I was worried if I had bored them with my talk but Prof. Shriram later told me that it was because it was dawning upon them that something seriously is wrong with how they are managing money and they need to act on it.  Delighted that they have now invited me back for a sequel.

How to make such a group take the right baby steps in equity investing is a serious challenge that I need to contend with (more on this later).

Speaking engagements: If you would like me speak to the employees in your organization about the basics of money management (or about the Higgs boson or how quantum mechanics governs the universe  🙂 ), you can send a email to

freefincal [AT] gmail.com

There is no fee involved. You just need to take care of my travel expenses.

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About the Author M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
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