I plan to achieve financial independence by 46 this is my master plan

Published: October 19, 2021 at 8:18 am

Last Updated on October 19, 2021 at 8:18 am

In this edition of the reader story, we meet Vasu, who is two years away from financial independence. He explains his approach to personal finance: “Own what you know, Loan  (to) who you know” to maximize risk-adjusted rewards or minimize reward-adjusted risks.

About this series: I am grateful to readers for sharing intimate details about their financial lives for the benefit of readers. This is the 20th such reader audit. Previous editions are linked at the bottom of this article.

Opinions published in reader stories need not represent the views of freefincal or its editors.  We must appreciate that there are multiple solutions to the money management puzzle and be empathetic to diverse views.

If you would like to contribute to the DIY community in this manner, send your audits to freefincal AT Gmail. They can be published anonymously if you so desire.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

Please note: We welcome such articles from young earners who have just started their investing journey (this edition is a good example. Also see, for example, audits by Suhas and Avadhoot linked below). Now over to Vasu.

Unknowingly all of us have followed a certain style to saving, investing, and managing our money, and I am no different. For over the last five years, I have been trying to make a conscious effort to improve and refine my finance knowledge to make “self-informed” decisions.

I am 44 years and employed with a large global tech major for close to two decades now. I aim to achieve financial independence with an iota of Buffet (yes, it is not a typo, I meant an iota of Mr Buffet).

Given the current spend rate, inflation, forecasted milestones of my two kids’ education and marriage (over the next 5-15 years), I believe I am a couple of years away from achieving it.

Following Mr Pattu and Mr PV Subramanyam has had an immense influence on my thinking about money, retirement, and goal-based investing with asset allocation strategies.

Here, I wanted to share my approach to growing the money with a balanced view of risk and rewards. I called it “Own what you know, Loan who you know”. Let me explain, splitting this into two.

Own what you know – for Equity Portion: All of us understand certain things more than others or certain other things. E.g. my company, my profession, my industry, my country.

This should naturally give us an advantage & arbitrage of wisdom to evaluate them as investment opportunities. E.g. can I invest in my company shares ?, can I explore an alternative career or passive income in the area of my profession ?, can I invest in a thematic fund of my industry?

Can I invest in an index fund of my country or a market I understand intimately? For example, from an early stage of my career, I availed Employee Stock Purchase Plan (up to 10% of monthly salary) to accumulate company shares.

Listed on NYSE, this has resulted in a steady compounding due to stock price appreciation and rupee depreciation over the years.

There were occasional RSU (Restricted Stock Unit) allocations that further helped accumulation and compounding. This now forms a significant portion of my portfolio. While I have not invested in technology thematic MFs, I chose flexi cap funds that have more weightage to global tech companies and well run Indian tech companies. I also plan to further invest in NIFTY index funds to strengthen my core portfolio in large cap space.

Loan (to) who you know – For Debt Portion: With so much volatility in bond markets (credit risk, interest rate risk), I am better off investing in otherwise boring ideas of loaning to central & state governments and top-rated corporate papers thru EPF, NPS which can generate superior, safer and tax-efficient results.

As it suited my style, I always tried to keep the basics of the CTC on a higher side with every salary hike so that PF outflow is higher (as you may know, for most private-sector employees, both employer and employee contributions come from CTC).

I found that employment in a corporate that allows you to customize compensation structure can be a huge advantage, i.e. maximize the contributions to employer PF and employer NPS to hit the ceiling of 7.5 lakhs, which is straight away is taken out from taxable income.

This is so important if you are in a higher tax bracket of over 30%. Tax-exempt returns with no limits on contribution amount to VPF and employee PF was a longstanding lifetime opportunity till last year, which was stopped from 1st April 21.

I consider this was a much more significant lifetime opportunity loss than the equity bull run post-Mar ’20. Despite these constraints, you can further maximize tax-adjusted return on employer + employee PF contributions to align with prevailing PFF rates.

NPS has not gained popularity, but I am using it as a ‘balanced advantage’ fund. This low-cost product can yield the amazing experience of shock-absorptions of equity markets, investments in high-quality papers of G-Sec, State Developments Loan. They can also invest in REITs and even IPOs in a small way.

With imminent innovations & improvements to NPS as a product (pending legislation. E.g.. proposal to allow SWP instead of a compulsory Annuity purchase and such), this can be used as a great part of the core retirement portfolio and used as an “aggressive hybrid” and/or “balanced advantage” fund.

For example, I calibrated the equity allocation from 75% down to 50% in Mar ’21, when the consensus was that market was overheating. I can evaluate and change it myself as a fund manager twice a year (in Active choice) and switch the fund house once a year.

As you can see, I am biased towards making cost-efficient, self-informed investment choices with my mantra of “own what you know, loan who you know” principles to diversify across both equity and debt assets. I have recently started buying SGB (Sovereign Gold Bonds), but that is a tiny portion (<2%) of my portfolio.

I am looking to learn more from experts like Mr Pattu and others willing to share investment options in commodities and metals as an asset class. I like to take this opportunity to thank Mr Pattu for sharing my experience, and I hope you find it helpful. Thanks, Vasu.

Reader stories published earlier

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.

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

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.
🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • 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.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

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 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.
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 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 the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We 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, as well as teaching 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 is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the 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 with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will 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 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 300 (instant download)