How I achieved financial independence without mutual funds or stocks

Published: August 21, 2021 at 7:41 am

Last Updated on August 22, 2021

Is it possible to achieve financial independence without investing in equity? Yes! In this edition of the reader audit (part one of two), Anil explains how he did it.  In March 2020, I received an interesting comment from a reader in response to The Financial Arrow of Time (an account of how I wasted money when I was young).

Anil wrote: I achieved financial freedom in 15 years of my work experience as a software professional in Bangalore (it includes about four years of working abroad). I never invested in the equity market or mutual funds. I only invested in FD, PPF, EPF etc. After achieving financial freedom, I bought my first residential house last year ( in cash without any loan or EMI ).

The saving rate was the secret to achieving it, which started with 50%, then 60%, 70%, then 80% consistently year after year. Living frugally was the key to it. At one point, the saving rate was 100% for three years when working abroad, and expenses were covered by extra income from overtime work.

I am diversifying from this year, creating multiple sources for income generation and creating a rental building that will cover all our expenses. Now my goal is to make income 3X of my retirement expenses(not 1x or 2x). So new income from salary is fed into creating the rental buildings. Also expecting recession and market crash (this was sent days before the bottom of the March 2020 crash), so will be investing first time in the stock market to take advantage of the crash and recession.


My deviation from you is that I have achieved financial freedom (45x of annual expenses saved up in liquid assets till now and own house paid in cash without any loan or EMI, child higher education saved up separately) without investing any penny into the stock market or real estate or mutual fund and purely by investing into FD, PPF, EPF, bonds which are all debt products.

Probably this idea might be a new thing for you that financial freedom can be achieved without investing in equity. So I thought of sharing it with you. One disclaimer is that I too blew up all my salary money in my first two years of job, and I have absolutely no regret of it as I already achieved FI.

So I requested Anil to write a complete account of his journey. I did not hear back from him and forgot all about it until he contacted me again a few days – possibly inspired by all the excellent reader audits stories published recently.

I am grateful to readers for sharing intimate details about their financial lives for the benefit of readers. This is the 16th such reader audit. Previous editions are linked at the bottom of this article. If you would like to contribute to the DIY community in this manner, send your audits to freefincal AT Gmail. They will be published anonymously (such as this one) if you so desire.

Before we read about Anil’s journey, I would like to point out an undesirable aspect of reactions to FIRE stories. Even for those who achieve financial independence early with stocks or equity mutual funds, the income has to be high, the expenses low, and the debt low. So it should not be a surprise that the same is the case here too.

Many readers tend to focus on a person’s salary or income or where they worked without respecting the hard work and discipline that went into it. The harsh reality is, not all of us earn the same and not all of us will achieve financial independence (early or regular). Cribbing about others peoples salaries is undoubtedly not going to help us in any way. Now over to Anil.

Dear Readers, my name is Anil, and I am here to share my Financial Independence Journey without investing in equity, mutual funds of any type. This article I am writing on the request of Dr Pattu for his audience reading. I am a silent audience of Dr Pattu too, and occasionally write comments on his youtube videos once or twice a year.

I have great respect and regard for Dr Pattu, and I find his postings very practical and useful with evidence of data. I will not disclose too much personal data here, as suggested by Dr Pattu in his mail to me. First, my apologies to Dr Pattu for taking more than a year (1 year five months) to write this article.

I am a software professional. I did my B.Tech from REC/NIT. Started working in Thermal Power plant in control and instrumentation area. Not satisfied with the village area of stay, nothing happened in personal and professional life with no great scope of rapid progress in life.

I was bored of the place, life and found nothing challenging in work. I decided to change the course of my life, take small risks (very low downside risk and infinite upside potential), and change my work and life course and direction. So after working for few years, I decided to quit and do my M. Tech from IIT (The best decision of my life).

Small decisions, small risks result in significant impacts later in time. From 2004 after passing out from IIT, I started working in the software industry (after saying goodbye to govt power plants and govt setups). I realised that MNCs and top PVT sectors have immense potential to multiply your salary several times in a short period provided you work hard, learn and practice the latest happenings in your area of work, stay relevant and be ready to take on new opportunities, new challenges.

In the initial few years of my work journey, I did not save any money and started saving seriously from 2006 onwards. I got married in 2007 and was blessed with a baby girl in 2010. We decided not to have any more children. I started saving 40-50% of my income from 2007 onwards.

As my salary increased with time, my savings rate increased from 50% to 60% to 70% to 80% to 90%. I worked for about four years abroad (Finland, USA, South Korea), and I was working overtime in those countries to make my salary 100% saved and expenses to be taken care of by overtime pay, weekend work pay.

In those days, I used to work 14-16 hours a day, including on weekends. As my salary increased with time, my savings rate increased without increasing the expenses, and I was mindful of expenses. I am not a miser, and we usually eat out 1-2 times per month, depending on my daughter’s demands and wishes.

In all these years, I never invested money in any mutual fund, stock market etc. All my savings went into PPF, EPF, VPF, FDs, tax-free bonds, Real estate (Plots, houses) etc. Once my liquid cash accumulated became several crores, we bought our first house in 2018 for our living with a 100% cash down payment and moved in.

We bought this house 30-40% cheaper in bank auction after looking out for three years in 100s of auction properties. The house price was 1.1 or 1.2 crore in the open market for several years, but in bank auction, we bought the same house in the same locality for Rs. 72 Lakhs (Thanks to Robert Kiyosaki’s Rich Dad Poor Dad book from where I got this idea to buy properties in Bank auction).

I bought a plot/Land in 2014 and another plot in 2019. In 2020, I started to make my networth statement in an excel sheet and share it with my wife. While making the networth statement, I did not inflate the properties values. I kept the same values as purchase price even though those plots or houses’ market values are significantly higher.

After adding all my liquid cash in different instruments, real estate, I realised that I am way ahead of the financial independence number suggested by Dr Pattu or any financial gurus. My liquid component of net worth (Not accounting for our house or two plots which I bought) accounted for retirement alone, is close to 70X (where X is the annual expense which will persist in retirement.

Here X excludes child school fees, her piano/gymnastics/Karate class fees. Another fund of 7X is accumulated and reserved for my daughter’s graduation and post-graduation studies (7X is enough for graduation and postgraduation assuming current B. Tech cost of most expensive IIT, MBA of most expensive IIM.

It’s not enough for private medical education or education abroad). This corpus is growing every year as I add about 1X every year. I am using four debt fixed income instruments for this (My PPF account, my wife’s PPF account, my daughter’s Sukanya Samridhi account, my senior citizen mother’s account without shooting her taxable limit etc. Which I max out every year in April itself).

She is currently in class 6, and I have six more years to accumulate more. I might start an aggressive Hybrid fund in 2022 for her marriage (Inspired by Dr Pattu) apart from one plot of land I purchased for this goal.

If I add my all items, including real estate (real estate at the purchase price and not at the current higher market price), my retirement fund, child fund, it’s close to 100X (excluding gold and gold jewellery. Gold holdings I have not added either in my retirement portfolio or net worth calculation.

Similarly, I have not added stock gains that I invested in 2020 during the market crash and have taken only my purchase price in the calculation. After all, I am a super conservative investor ☺ ). I achieved all this in the last 15 years after my post-graduation from IIT without ever investing in mutual funds or stocks.

My superpower has been a strong focus on my job, career, learning, growing in career, saving money and putting it away every month in Fixed income assets and real estate.

In one of the videos, I saw Dr Pattu’s recommendation of 70X (negative 2% real return) to be a super conservative estimate of Financial Independence even though my fixed income is running with zero real return (not -2% return) considering inflation to be in 7.5% to 8% range. I have achieved this in 2021 in the last 15 years. Dr Pattu’s link of 70X recommendation: How to retire early in India? FIRE basics. 

How does Cash Flow look now after 15 years of savings and poor investing: -? My Liquid cash fixed income investment generates a post-tax return of 5.3X every year (X is annual expenditure in retirement if I retire today). My take-home salary savings (after expenses) are 5X, and another X gets added in retiral benefits (EPF, Gratuity).

So total of 5X + X + 5.3 X = 11.3X is extra cash generated each year which goes into adding for my daughter’s education fund(1X) and our retirement corpus addition(10.3X). That means for each year of my work and time, 10.3 years of cash is accumulated in my fixed income portfolio.

After making the networth statement and cash flow statement, I realised that my passive cash flow is close to my active cash flow. I track three numbers (1) My liquid net worth in terms of X (2) My liquid net worth increase per year in terms of X (3) My Liquid portfolio % Return which should not be in –ve return % after taking care of Inflation and taxes. A zero real return is fine with me.

Continue reading part 2: Lessons from my financial independence journey and future investment plans.

Similar audits by other readers

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.

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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About the Author Pattabiraman editor freefincalM. 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 Twitter or Linkedin Pattabiraman has co-authored three print books, You can be rich too with goal-based investing (CNBC TV18), Gamechanger, Chinchu Gets a Superpower! and seven other free e-books on various money management topics. 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 based on money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements, write to pattu [at] freefincal [dot] com
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