I used the current bull run to reduce my mutual funds from 14 to 4!

Published on / By M. Pattabiraman Twitter: @pattufreefincal

Published: September 19, 2021 at 7:59 am

Last Updated on September 19, 2021 at 7:59 am

In this edition of the reader audit, we meet Shrawan, a computer science engineer working in IT since Sep 2012. He explains how he adopted a goal-based investing approach and utilised the current bull run for pruning his mutual fund portfolio.

I am grateful to readers for sharing intimate details about their financial lives for the benefit of readers. This is the 18th 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. Please note: We welcome such articles from young earners who have just started their investing journey (see, for example, audits by Suhas and Avadhoot linked below). Now over to Shrawan.

Initially, I started my investment journey just with LIC, FD, RD etc.… Introduced to direct equity by one of my colleagues and started trading in Sep 2013. Those days I used to buy random stocks just based on news/broker recommendations. The 2013-14 bull run helped me to make good profits. Parallelly, I started learning about basic fundamental & technical analysis like moving average, RSI, etc.

I was unaware of asset allocation and almost 100% allocated to direct equity except for EPF & LIC. In 2016, I was added to the FB group( ‘Asan Ideas for Wealth’) and saw a couple of MF related posts and comments then slowly moved my direct equity to MF but again made a lot of mistakes like investing in multiple ELSS funds, all MF categories(LC, MC, SC). After the 2018-19 budget day, the mid/small cap stocks started falling, and by Dec 2018, I lost all my gains and was in some losses. In between, I traded in Option as well and lost few thousand.

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Then learned about risk management, asset allocation, goal-based investing with the help of Pattu Sir’s videos and our FB group. I watched almost all his videos and tried to read all the posts/comments in the same FB group. Still a lot many things to learn. Below are the details of how I am managing my finance now.

Basics:

1. Term Insurance: Done a few years back, but I have to increase the sum insured, will do it soon.

2. Health Insurance: Apart from Corporate insurance of 3L taken ICICI Family floater of 50L for Myself, Wife and 1.5yr old Son.

3. Emergency Fund: Current Emergency fund is equal to 12 months expenses, and it is parked as 20% in a Saving account and 80% in FD.

4. Goals: Currently Focusing on two Goals

I. Retirement: I am 32 yrs old with two dependents (Wife & Son). We are targeting Financial independence at the age of 45, in the worst case 50, post that I have some other plan. Initially messed up my investment with a lot of MF & wasn’t following Goal-Based investing, utilised this bull run to clean up my portfolio and reduced the MF count from 14 to 4 now.

  • Equity 50%
    • UTI Nifty 50 10%
    • UTI Nifty Next 50 4%
    • Direct Equity 20%
    • Mirae Asset HEF 8%
    • ABSL ELSS 8%
  • Debt 40%
    • EPF & VPF 23%
    • NPS 9%
    • Mirae Money Market Fund 8%
  • SGB 10%

Plan for the next couple of years: Will move the entire ELSS to index fund once the lock-in period is over and keep investing in other funds with the same allocation 50:40:10 (E:D: G).

2nd Goal (Kid’s Higher Education): My son is 1.5 yr old, investing as per below. Again, LIC is my early age mistake, but I continue with a 4%/annum return expectation.

  • Equity (Parag Parikh Flexi Cap) 50%
  • Debt 50%
    • LIC 12%
    • PPF 38%

Future Plans:

1. Will add one liquid/Money Market fund for proper rebalancing.

2. PPF will mature in 2029 and LIC in 2033 post that I will move this money to some liquid instrument.

Couple of points which I am following for both the goals:

1. Portfolio rebalancing: Till now, I have not done proper rebalancing. In the future, I will rebalance in case equity allocation moves to 45% or 55%.

2. Will slowly reduce equity allocation as the goal comes closer.

Assets: Apart from the assets mentioned above, I will be inheriting some Commercial, Residential & Agricultural land.

Liabilities: No liabilities to date. I have not taken any loans.

Earning: Doing ok for the primary source of income. For Secondary sources of income, even after putting in a lot of effort & time, there is not much progress. Hopefully, in the next 4-5 years, I should make some money out of it.

Saving: My saving rate (savings/income) is around 60%, targeting 75% by 2025.

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.