How Goal-Based Investing Helped Me Catch Up After Starting Late

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Please note: We welcome articles like this 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 also have a “mutual fund success stories” series. See, for example, how mutual funds helped me achieve financial independence. Now, over to the reader.

After 4.5 years, I’m writing this article to share an update and the lessons learnt. A quick summary before I start. As I mentioned in my earlier article, I started investing late, in my late 30s, which is a common mistake. But I am able to catch up because of my 2 onsite tenures. My first onsite helped me to own a home, with a small home loan. My second onsite helped me to close my home loan and start building my portfolio. During my second onsite tenure, I landed in freefincal and started vigorous investing. Now I am in my mid-40s, returned to India 3 years ago, and continue working at the same Corporate from India.

I bought robo robo-advisory tool in 2021, which changed my investing thought process and gave me peace of mind. It directed me what to invest, when to invest and where (asset class) to invest for each goal which I did religiously for past 4.5 years and now I feel I am peaceful.

I have 2 goals. 1 is my child’s higher education, which is due in the next 4 years. I almost reached the amount required for that goal recently.  2nd goal is my financial freedom; if everything goes well, I should be able to achieve financial freedom around the end of 2030. I don’t want to call it as retirement plan, because I don’t want to retire as soon as I achieve it. I will continue to work as long as I am able to do or I am allowed to do by the Corporate, atleast till early 50s. 

At present I am continuing to invest for my financial freedom as advised by robo advisory tool. Infact I am investing more than the amount suggested by the tool, as I am able to do that.

I don’t track every expense, I track only investments. Almost 65% of my monthly income goes to investment and remaining 35% for monthly expenses. I allocate a blanket amount (around 35% of my salary) for all monthly expenses and as long as my expenses are within that, I don’t track each expense. When there is spare amount, I keep that as cash separately reserved for our family tour or any medical related expenses (like scanning, tablets etc).  Every month, money gets deducted for SIPs, which is automated, so that I don’t need to spend much time in administration of it. I track and review my portfolio once in a quarter. So I don’t keep seeing things daily or spending more time on it. 

I didn’t change my life style significantly after returning from onsite. I lead same lifestyle like earlier at same time I didn’t miss to upgrade for few things as well (like AC for my bedroom, OTT subscriptions spending, family tour once in a quarter etc) . I still prefer public transit during my family trips except in certain areas where transportation is in limited frequency.  Being in  Tier 2 City, I didn’t have a necessity for a car and hence I don’t own a car which cut down my monthly expenses significantly. Infact I have a 2 wheeler which is used for office commutation and all other personal commutation. For family commutation, if required I don’t miss to use cabs within the City.  

My kid’s higher education goal-related portfolio: 

Fixed income – 72% (PPF, NSC, FDs, RBI Bonds – all maturing during the time of the higher education) XIRR ranges from 7.1 to 8% based on the product

Equity – 0%

Gold mutual fund – 28% – XIRR : 30.25%  I started investing significant amount per month in gold only from 2023 co-incidentally and , it has helped me a lot to achieve the goal. I understand it is highly volatile like equity and can be at this same price for next several years, as it has raised significantly already. I took this risk knowingly.

My Retirement portfolio:

Fixed income: 32%   Debt mutual funds, EPF, NSC.  XIRR: 7.1 to 8.5% based on the product 

Equity mutual funds : 48%  XIRR: 17.18% I have a combination of Index funds and Active equity funds. My oldest equity fund was started in 2018, and still continuing it. It has a XIRR of 22.23%. That is power of equity when we have some luck as well. After knowing more about index funds, my preference is index funds. 

Direct Equity: 20%  XIRR: 12.72% (This excludes dividends. I get dividends from the stocks close to rental income, which I reinvest in hybrid mutual funds). I started gradually in Dec 2021. As per the Zerodha report, my portfolio has outperformed the Nifty 50 by 2.24% since the date I started direct equity investing. Recently, I bought IT stocks, which went down significantly in past 12 months. Otherwise, I left the other stocks in my portfolio largely unchanged. 

Equity allocation looks bit higher than the standard recommended allocation. This year, I reduced my monthly equity investments and increased my fixed-income investments. At present my retirement corpus is 25x of my current monthly expenses. So still long way to go, considering my current age.

Lessons Learnt:

Start investing early early early. Invest in a disciplined manner without worrying about returns. Magic will happen as the years pass by.  

Don’t invest 100% in equity. Follow asset allocation always

As you invest for your future, invest for your health also. Health is real wealth. We need to change our lifestyle (mainly eating habits) to lead a healthy life, which I learnt from my own experience recently.

Read more stories: reader story archive.