How to use the freefincal robo advisory tool to track the progress of our financial goals

Published: March 26, 2022 at 6:00 am

Last Updated on March 28, 2022

In this article, we explain how we can use the freefincal robo advisory tool to track the progress of our financial goals. The robo tool as many readers would know is a financial planning tool. It automates the process of systematic risk management and suggests a variable asset allocation schedule with step-wise equity reduction.

The above features have been demonstrated in several illustrations before. A screenshot of the variable asset allocation schedule and how the expected portfolio return changes are shown below. The investment schedule factors into these changes from day one.

Screenshot-from-the-freefincal-robo-advisory-template-showing-the-suggested-asset-allocation-and-change-in-assumed-portfolio-return
Screenshot-from-the-freefincal-robo-advisory-template-showing-the-suggested-asset-allocation-and-change-in-assumed-portfolio-return

In addition, the tool also provides a detailed retirement bucket strategy implementation plan to generate inflation-protected income after retirement by taking into account up to three different sources of income (pension, rent etc.).

Retirement Buckets Recommend by The Robo Advisory Tool
Retirement Buckets Recommend by The Robo Advisory Tool

Video: Features of the Robo tool explained

How to use the robo tool to track the progress of our financial goals?

Example 1:

Consider a 30-year-old with Rs. 40,000 monthly expenses that will continue in retirement. In addition, he has Rs. 40,000 as annual expenses too (health insurance premium etc,)


Build a complete financial plan with our Robo Advisory Tool. More than 1000 investors and financial advisors use it!
Get free money management solutions delivered to your mailbox! Subscribe to get posts via email! (Subscribers get exclusive discounts!)


New Tool! => Track your mutual funds and stocks investments with this Google Sheet!
Age he wishes to retire50
Years to retirement20
Total average monthly expenses (annual/12)43,333
Percentage by which monthly investments can increase each year (until you have accumulated enough for retirement)10%
Post-tax return expected from  equity investments %10
Post-tax return expected from current taxable fixed income %6
Rate of return expected from current tax-free fixed income  %7

These percentages can be freely changed by the user at the back-end (settings page).

We will assume no current investments.

Inflation before retirement (%)8
The assumed life expectancy of the younger spouse (if married)90
Inflation during retirement (%)8
Years to retirement20
Monthly expenses in the first year of retirement2,01,975
Years in retirement (until younger spouse reaches age 90)40

Results

 NET corpus required at retirement (assuming money will be invested in different buckets. This is after accounting for the future value of current investments, post-retirement benefits (cells C14-C18 in step 2) any post-retirement income specified in step 2)9,53,63,113
The GROSS Corpus required for retirement is (provided only for information. Your investment target is the net corpus above9,53,63,113

So the target corpus is about Rs. 9.5 Crores.

The recommended asset allocation is 60% equity for the next eight years and then gradually reducing to 36% at the time of retirement.

Initial monthly investment required including EPF/NPS contributions (scroll down to see investment schedule)68,451
Percentage by which your monthly investments can increase each year (until you have accumulated enough for retirement)10%

So these are the results obtained upon the first use of the robo tool.

One year later, assuming the person has invested as per the schedule and assuming his equity and debt instruments have grown to (including gains) Rs. 4L and Rs. 7 lakhs and Rs. 4 lakhs respectively.

If we account for this, the required corpus decreases. This is because we have factored in how much the current investment will grow.

 NET corpus required at retirement (assuming money will be invested in different buckets. This is after accounting for the future value of current investments, post-retirement benefits (cells C14-C18 in step 2) any post-retirement income specified in step 2)8,26,30,524
The GROSS Corpus required for retirement is (provided only for information. Your investment target is the net corpus above8,82,99,179

The monthly investment required also has decreased.

Initial monthly investment required including EPF/NPS contributions (scroll down to see investment schedule)68,081
Percentage by which your monthly investments can increase each year (until you have accumulated enough for retirement)10%

Thus all a user has to do is to redo the calculations with fresh inputs once a year. Taking into account the accumulated corpus, the required target corpus and the investment required will gradually decrease. This is a practical way to find how close we are to achieving our goal. The user can simply copy the above results and paste them on a new sheet to check their progress across years.

The proof of the pudding is to see the investment amount required gradually decrease. The robo tool offers an accurate way to track the progress of our financial goals. In the above-mentioned new tracker, we will have basic goal tracking features but those are based on simplistic assumptions and is only a ballpark estimate.

Example 2:

Consider a 45-year old investor who wants to retire by 50. He wants to know the value of his current corpus. Can he retire now instead of five years from now? (also see video guide below).

To do this, the user must set the retirement age as 45.

(a) Suppose he has about 1 Crore in assets about 50% in equity and 50% in debt. The tool would say:

Corpus necessary to provide inflation-protected income for the first 15Y in retirement. This amount includes an emergency corpus for about 13.3 Lakhs                     1,24,83,733
Total amount in currently in hand                     1,00,00,000
You will not be able to generate an indexed pension, in addition to regular pension (if any), please consider buying an annuity with your corpus keeping at least the sum mentioned (cell C36) above as emergency corpus

So the user knows how much more he has to accumulate. He can set the retirement age as 46, 47 etc. to find out how much more he has to invest.

(b) Suppose we increase the existing corpus to 75 Lakhs in equity and 75 Lakhs in debt and set the retirement age back to 45. The current equity: debt asset allocation will not influence the recommendations.

Corpus necessary to provide inflation protected income for first 15Y in retirement.This amount includes an emergency corpus for about 13.3 Lakhs                     1,24,83,733
Total amount in currently in hand                     1,50,00,000
‘excess’ corpus available for investment                        25,16,267
Corpus required to provide inflation protected income after the first 15Y in retirement to remainder of your lifetime                     1,55,40,667

For a person who is still working this is enough to say that they are not yet ready to quit! For someone who has stopped working, this is bad news. The tool would further say:
“The required corpus (cell B39) is too high. You may need to buy an annuity with your corpus at some stage in your life. Please consult a trusted SEBI registered fee-only financial planner, who charges a flat fee to review this case*”. Most advisors would also concur with this view and recommend an annuity with some stash for emergencies and a drastic reduction in expenses.

*The tool recognises that there are many grey areas in retirement planning and a human advisor may be necessary for these. Whether they would do a better job or not is an unknown though. Any user who appreciates commonsense should appreciate the results.

If the user is not happy with these results, a DIY bucket strategy sheet is available to design their own retirement bucket (not recommended at low corpus levels).

(c)  Suppose the user has assets of about 3 crores, then the tool is finally happy and outputs a retirement bucket strategy. This means the user is ready to retire.

This is a snippet of the full message. All return assumptions can be varied. In addition, there is a DIY bucket strategy sheet available.

Retirement BucketsAmount to be invested in each bucket
Income bucket (100% liquid fixed income) to provide income in retirement with a return of 6 % p.a. This will ensure income for the first 15 years in retirement                     1,19,05,373
low risk bucket with 50 % fixed income (rest equity) expeced to grow at a rate of 9 % p.a.                        73,13,253
medium risk bucket with 30 % fixed income (rest equity) expeced to grow at a rate of 9 % p.a.                        53,03,464
High risk bucket with 0 % fixed income (rest equity) expeced to grow at a rate of 10 % p.a.                        39,77,910

Thus the robo tool can be used to judge how soon a user is ready to retire by changing the retirement age and current asset and income sources.

Video Guide

How to use the Robo Advisory Tool to check if you are ready to retire

Get the Robo Advisory Tool

The tool is an Excel file with macros. It will work on Mac Excel and Windows Excel. All inputs are fully customisable. It can be used for commercial purposes as well. As of Feb 2022, 900+ investors and financial advisors are using the tool. Users will get all future updates as well.

Get the robo tool by paying Rs. 5160 (Instant Download. No refunds allowed). For support write to freefincal [AT] Gmail [DOT] com.

Outside India? Then use this Paypal link to pay USD 80 (Kindly write to freefincal [AT] Gmail [DOT] com after you pay).

Do share this article with your friends using the buttons below.

Use our Robo-advisory Excel Tool for a start-to-finish financial plan! More than 1000 investors and advisors use this!
  • Follow us on Google News.
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Join our YouTube Community and explore more than 1000 videos!
  • Have a question? Subscribe to our newsletter with this form.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Get free money management solutions delivered to your mailbox! Subscribe to get posts via email! (Subscribers get exclusive discounts!)
 
Explore the site! Search among our 2000+ articles for information and insight!

About The Author

Pattabiraman editor freefincalDr 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 nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or 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 for 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 3000 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 what 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.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu gets a superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both boy and girl version covers of Chinchu gets a superpower.
Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low volatility stock screeners.
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)