In this edition of the reader story, we have a success story of resilience and smart investing. How a 44-year-old managed to attain a net worth of Rs. 8.5 Crores or the equivalent of a million USD by working only in India. This article was first published as a thread on the Facebook Group Asan Ideas for Wealth.
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 and 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 investing. 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 the reader.
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After 1.5-2 years, yesterday, at the beginning of the weekend, I was reviewing my net worth. I am surprised and very happy that I am a USD millionaire now.
A few key things that worked for me (but some of these may not work for others)
In my early career, I passed out of college (some ok-ish college) and, out of advice from my guide, joined a small start-up division of a bigger company.
My salary was pathetically low, and I could not afford a good honeymoon. But at the same time, the work I did was phenomenal. I/ we as a team failed a lot during this time, but I learned a lot each time. That stint remains my best work done. I have worked with all PhD and postdocs from famous institutes. Fortunately, the same skill that I was gaining was popular at that time.
When a frustrated me quit the job after a grave personal financial crisis, the increments were multifold. Until that financial crisis, I never had a money orientation. I had to go for money to my friends and relatives (and I lost a lot of relationships and respect forever. People did not receive my call).
I just promised myself that this should never happen again. That time, I started reading about personal finance. At that time, I landed in the Jago investor blog. Their old articles are simply gems.
At the same time, I read multiple books in a short period. The books, in particular, Think and Grow Rich, Secrets of Millionaire Mind, Intelligent Investor, Rich Dad Poor Dad series, and the next-door millionaire one up on Wall Street, were life changers.
For my portfolio, It’s a financial assets-heavy portfolio. Most of my assets are financial. Equity is the largest component. It’s mostly an index fund (HDFC Sensex PLAN, UTI NIFTY 50) and a flexicap fund (Parag Parikh 😊). I also own a dedicated small-cap part and mid and large-cap fund. Index and Flexicap fund has almost 45-50% of my net worth. Small cap and others are tactical allocations, and maybe 5%—another 5%, mostly in my company’s RSUs.
Throughout my journey, I kept a simple strategy. Do plain dumb SIP (earlier automated SIP, nowadays manual SIP). Keep this going in a monotonous manner. I just kept buying assets and Never redeemed them. I never rebalanced equity.
As and when my knowledge grew, I learned about things like technical chart analysis and short-term investments and applied these to start opportunistic investments. This was a key.
2018-2019, when I was buying my home, I could buy it in full cash. Instead, I took a home loan and kept the cash with me. Then came covid. The index started crashing from 12K and went to some 7.5K. I dumped this whole cash in the market. 😊. Yes. I agree. It was very, very risky. I won’t suggest that others do it. But it just worked splendidly. My average buy price was close to 8.5-9K in Nifty.
During this time, I learned about portfolio hedging through FnO. During COVID-19, shorting nifty/ban-nifty almost became a regular affair. From this point onwards, I have always remained partly in cash and debt (from here onwards, I built my debt component).
I monitor various indices, and whenever I find any opportunity, I deploy that cash/debt. I have gained in small-cap indices, IT stocks, and banking nifty by doing this. All these (MY SIP and my investment in a trading way) compounded on top of each other, leading to wealth creation.
In my personal opinion, if a market crash of 15-20% is happening in front of your eyes and I/you don’t have the cash to deploy, that crash is rather an extremely painful crash to tolerate. Moreover, CASH and debt give me resilience in a crisis. It allows me to be confident when there is a chance of layoff, etc. I always keep 2-3X worth of redeemable debt/cash at my disposal.
Now, what happened to that home loan? Well, when my mother and wife came to know that I had a handful of cash 😊 a family fight started. After fighting with my mother and wife relentlessly and getting mentally tired, I closed that SBI MAX gain loan last December-January.
The story’s moral for me is that market crashes are god sent opportunities. No one can time it perfectly, but an approximate timing for deep/very deep crashes (but not shallow corrections) can be done if you know the charts. Don’t be afraid of debt (loan) if you are mentally ok with it. There are a lot of people who will get worried about debt, if you are such a person avoid debt but otherwise, it simply does not make sense to prepay a home loan at 7-8% when you can earn 15% with the same capital. I closed the loan because of the reason I mentioned earlier.
My debt components are EPF (> 1 cr. Never withdraw it). Rest is PPF, GILT fund (SBI magnum GILT fund). I am investing a lot in GILT since the rate cut is approaching. I always prefer locked-in debt for long-term debt that I can’t touch. EPF, with all its operational flaws, EPFO remains the best debt product available in the Indian capital market by a country miles.
Coming to Real estate, my real estate also gave me a wonderful return. In my early life, due to my paltry salary, I did not have money to buy a home. So it has to be a delayed purchase. Fortunately (by sheer luck), in that same period, the real estate market was in a long bear phase where prices stayed constant. Simultaneously, my salary increases and investment gains outpaced real estate prices.
Extremely luckily for me, when I purchased it, that was the start of a fantastic real estate bull market, and my apartment almost doubled in value in the last 5-6 years. So real estate is not that bad (contrary to the public belief) if you buy it in the bull phase (but I would suggest staying away from real estate as an investment). I am saying the value (of the real estate) is based on some actual buy offer I got and not on my imagination.
If you want to know the worth of real estate, post some ads in online portals and negotiate with buyers, and you will know its actual on-ground value.
One thing about real estate is that if you are delaying your purchase, thinking of accumulating more cash (for a down payment, maybe), or letting your salary increase more so that you can pay more EMI, and at that time, real estate market is in bull phase, you stand no chance whatsoever to win over builders. after-2-3-4 years, the prices will be even more unaffordable for you.
Under normal circumstances, your/our salary increments and resulting savings and gains will never be sufficient to compensate for the price increase when real estate is in the bull phase. So, if you decide to delay your purchase, research real estate macro and be careful. Currently, in gated societies, in good locations, in metro or equivalent cities from good builders, most are ready to move in 3 BHK, which is more than 1.5 Cr (in fact, touching 1.75-2 Cr). If you don’t believe me, go to Whitefield in Bangalore, and you will realize the truth. 😊In my 20 years of career, I have been hearing for 20 years real estate prices will crash. I am still waiting for that crash.
For career, As I said earlier, I always concentrated on my career and my skills. I enjoy my job. It’s technically and intellectually challenging. Now and then, I encounter some problems at first sight, which I would think, no year, I cannot solve. It’s beyond me. The team will have no head-and-tail idea of how to solve the problem.
On the other hand, after solving these, I/we have landed multiple patents filed, with a few granted. This is, hands down, the absolute greatest asset. It’s a high-pressure environment, but it’s also pressure to solve quality problems. I have a great boss who is equally technical-minded.
This focus on tech stuff and increasing knowledge greatly increased my income (in my opinion). I never concentrated on cutting spending. Building wealth by cutting spending is not my cup of tea. I don’t believe in it. I spend well on things that I and my family like. But we are very frugal about things we don’t like but may be necessary for our life (phone, car etc).
Cutting spending has a mathematical lower limit (till the cost of living is 0), but increasing income does not have an upper cap. I am a believer in the fact that I have to enjoy today. I can’t simply attempt to accumulate a large retirement corpus, thinking that I shall be happy magically after 20 years by killing my desire each day of these 20 years.
Compounding and high income, this combination is deadly. It does wonders. At 36-37, I reached one crore net worth; at 43-44 (now), I am now close to 8.5 Crores. I contributed heavily to this. It’s from equity gains and my high investment—no onsite stint. No inheritance. I have not added jewellery, cars, etc, to my net worth. The entire money is made by working and residing in India.
It took 18-19 years to reach 1 Cr EPF. The next 1 CR (to 2 Crores, including my contribution) in EPF happened in the next 5.5-6 years. 18 years Vs six years. 😊
High income eases many things. It makes wealth creation easy. Focus on increasing income. Everything else will fall in place. By the way, I am happily a single earner.
I repeatedly say that income is high but has increased significantly. Etc. So, how high is my income? 😊😊 I pay yearly more than 50L in income tax (excluding the other capital gains). Well, by Indian standards, in my humble opinion, it’s high. It’s my personal opinion only. For someone, this may be much less.
I am an ordinary, average person. If I can do it, others can do it as well. I shall summarize and wrap up by saying, At the end of the day, personal finance is personal. Do whatever suits you. Don’t take anyone’s word as gospel truth. If you are a person who wakes up at night being afraid of an equity market crash, don’t invest in equity. No matter who tells you, don’t do what does not suit you.
Ultimately, the goal of investing is to be happy (Investing itself should not bring tension). I thought I would write this in case it gives pointers to others on what works in practical life. In the end, some conclusions are my conclusions based on my experience. Based on their experience, the conclusion may be exactly the opposite for someone else. Happy investing, happy wealth creation.
Reader stories published earlier:
As regular readers may know, we publish a personal financial audit each December – this is the 2022 edition: Portfolio Audit 2022: The Annual Review of My Goal-based Investments. 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.
- Second audit: How Avadhoot Joshi evaluates his investment portfolio.
- 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
- 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!
- Update: How I achieved investing nirvana.
- 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?
- Twenty-seventh audit: How we plan to achieve a retirement corpus 50 times our annual expenses.
- Twenty-eighth audit: I thought equity investing was a gamble, but now I aim to hold 60% equity for retirement
- Twenty-ninth audit: My journey: From 5 lakhs in debt to building a corpus worth six years in retirement
- Thirtieth audit: My investment journey: From random purchases to a goal-based portfolio
- Thirty-first audit: My investment journey: from product-driven to process-driven
- Thirty-second audit: How a young couple is trying to balance travelling and investing
- Thirty-third audit: My journey: From Rs. 30 bank balance to financial independence
- Thirty-fourth audit: Our journey: From scratch to a net worth of 18 times annual expenses.
- Thirty-fifth audit: From a net worth of Rs. 6000 to auto-pilot goal-based investing
- Thirty-sixth audit: How I retired from corporate bondage at 46, two years ago!
- Thirty-seventh audit: How I learnt to keep it simple and build a net worth 19 times my annual expenses
- Thirty-eighth audit: How Abhineeth plans to achieve financial independence and build a house.
- Thirty-ninth audit: How Sahil plans to achieve financial independence by efficient tracking
- Fortieth audit: My Journey to a Ten Crore Portfolio
- Forty-first audit: Burdened with debt for several years, I am now aggressively investing in equity
- Forty-second audit: From Engineer to Librarian after Financial Independence and Early Retirement (FIRE)
- Forty-third audit: I lost six months’ income in F&O and ditched it for systematic investing
- Forty-fourth audit: My retirement plan to handle the harsh realities of the IT industry
- Forty-fifth audit: My investment journey: mistakes, 10 years of MF investing and recovery
- Forty-sixth audit: My MF portfolio is worth six crores despite multiple mistakes
- Forty-seventh audit: Saving, Investing, and Running Marathons: My 25-year Journey to Financial Independence
- Forty-eighth audit: Never Too Late to Start: How I Became Financially Savvy at 40
- Forty-ninth audit: My Investment Journey to a net worth 29 times my annual expenses
- Fiftieth audit: How I audit my portfolio without tracking returns
- Fifty-first audit: Financial Lessons Learned During and After a PhD
- Fifty-second audit: Investment & Financial journey of a 23 year old
- Fifty-third audit: The system I use to draw income and spend after retirement securely
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.
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Dr 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. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
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