My financial journey: from novice to goal-based investor

Published: July 25, 2021 at 8:08 am

Last Updated on July 25, 2021 at 8:08 am

One of the best aspects of the freefincal reader community is their willingness to write about their experiences and portfolio details to help and inspire fellow DIY investors. In our 12th reader audit, we have an academic (name withheld on request) sharing his personal money management journey. Previous articles in this series are linked at the bottom of the article.

I will be completing 10 yrs in my current job as a faculty in an educational institute in Mumbai. When I joined this job, I was 31 yrs old and single. Prior to joining the job, I had managed to save around Rs. 7 lakhs from the PhD and Post Doctoral fellowships that I was getting.

Coming from a typical average middle class south Indian family, saving money and spending wisely was part of my upbringing but unfortunately, investing was not! So, all my savings were in a savings account.

I had no notion of investment, insurance, retirement and wealth creation in general. In fact, wealth creation is sort of scoffed upon where I come from. Until 8 yrs back, I was probably no different. But I have now changed. I am taking this opportunity to share my transformative financial journey story.

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The first time I gave some serious thought about my finances was by the end of the financial year period in which I joined the job. I happened to be reading a newspaper, and there was an article on investment options to reduce income tax.

Among all the possible options, investing money in PPF appealed to me as I did not understand any of the other products mentioned in the article. I was still single at the time, and I still had all my savings in a savings account. Not even part of it in an FD!

Without thinking much, I opened a PPF account and invested Rs. 1 lakh. Soon, I got married. Most of the savings I had was spent on marriage, expenses towards setting up basic necessities required in a home and purchase of a two-wheeler vehicle. I also had to spend some money on my sister’s marriage. It was during this time when my networth was zero, I was approached by a relative of mine to sell LIC insurance products.

Growing up, I had heard of stories about insurance agents coaxing unsuspecting people into buying their products. So an image of insurance agents had firmly set in my mind, and I was wary of them. Although the person who approached me was a very close relative, I did not commit to him but asked him for details about the product. I told him that I would get back to him after few days.

I did not know whom to ask for advice, so I started googling about insurance. Luckily, I was drawn towards and similar websites. What I read on these websites were financially transformative. I spent the next few months reading every article published on the freefincal website.

At the end of my initial learning process, I was convinced about the following: (i) inflation and its compounding effect on our expenses; (ii) starting to invest early and the effect of compounding; (iii) goal-based financial planning; (iv) staying away from unnecessary insurance products; and (v) role of equity in financial planning.

With these ideas now firmly rooted, I was able to confront my relative and vehemently oppose his overtures to sell me undesirable insurance products. I did, however, end up buying a LIC term insurance policy for Rs. 50 lakhs from him as I was not insured. Eventually, after I learnt a bit more about term policies, I got out of this product. I now have an Rs. 1.5 crore term policy from a Canara HSBC OBC term insurance.  

It was now time for action as I had to put my learnings into practice. In the month of July 2013, I started investing. Fortunately, I did not dwell too much into the nitty-gritty of investing monthly and the right choice of equity mutual funds etc. Based on certain notions I had developed from my readings, I just picked the following MFs: (i) ICICI Pru Bluechip fund; (ii) UTI Value Opp fund (new name); (iii) SBI Focused equity fund (new name); (iv) Parag Parikh Flexi cap fund (new name); (v) ICICI Pru Nifty Next 50 index fund.

I have been investing in these without fail for the last 8 years through all the ups and downs. I don’t do direct investing but through an online intermediary portal. While I wish I had the foresight to invest directly but at present, I am ok with the convenience the portal provides me. All the investments were towards only one goal – retirement

By the time I had completed my initial readings on investing, I was convinced about the futility of owning a house given my circumstances. There was a bit of pressure from family to buy a flat after marriage. But I managed to convince my wife against it. So, buying a house was not a goal. No child yet in 2013, and consequently, child education/marriage was also not a goal initially.

I did not think other goals were important to consider at the time. Although the salary I was drawing was not much (my take home after all the deductions was around Rs. 65,000 or so when I joined but has increased since) but I thought I could manage short term goals. A short term goal I had in mind at the time was buying a car. 

I started investing with a total SIP of Rs. 5000 per month, i.e., Rs. 1000 per fund mentioned above. At around the same time, I also started directly buying shares for the long term. Over the years and with confidence, I have aggressively invested and increased my monthly flexi-SIP to almost 50%-60% of my take-home salary.

The remaining surplus, after expenditure, is invested towards PPF and stocks. During this period, I have also bought a car without interrupting my SIP or taking money out from the investment. I decided to take EMI from the bank since the interest was less than the CAGR of my investments at the time. I had taken a 5 yrs EMI from the bank but eventually pre-paid it well in advance. I don’t have any debts.

Currently, my total investments are as below:

  • Equity: ~ 40 % (mostly MF and a small percentage of stocks which I have held for almost 8 years)
  • Debt: ~ 15% (PPF; I don’t have any FD or debt fund in my portfolio)
  • NPS: ~ 35%
  • Emergency fund: ~ 10% (kept in the savings account; again no exposure to debt funds)

I now have a two and half year daughter. Since her birth, I have included her education as a goal. I have not included separate funds or investment strategies towards this. I am only contributing more towards the SIP that I already have in place, in addition to the contributions towards the PPF. I have re-organized my current investments towards retirement and child education as below: 

1 Retirement goal: approx. 9 crores 

Current investments:

  • Equity (MF+stocks): ~ 47%
  • Debt (all of NPS): ~ 53%

Assumptions leading to retirement goal of 9 crores:

  1. Monthly expenses: Rs. 50,000 (this is actually significantly more than our monthly expense, but I am over-conservative in retirement calculation).
  2. Years to retirement: 19 (although my retirement is at 65 yrs for the purpose of calculation I have considered 60 yrs); Expected inflation: 8%; Post-retirement investment return: 8%; Expected return on debt and equity current investments is 8% and 10%, respectively; Expected life span of youngest spouse: 90 yrs

2 Child education: Rs. 2.0 crores in the next 15 yrs

Current investments towards the goal:

  • Equity: ~ 32%
  • Debt: ~ 68%

Where do I stand as of today?

  1. If I retire today, then my current retirement corpus can help me sustain for 12 yrs, i.e. until I am 53 yrs.
  2. If I retire when I am 60 yrs, then my current retirement corpus can help me sustain up to 73 yrs.
  3. If I maintain my current investment rate, I should be able to achieve my goal by the time I plan to retire or maybe even before.

As one can see, I am still a long way towards my goals, but I believe I have taken the necessary steps towards achieving them. Approximately the monthly SIPs currently in place necessary to achieve my goals over the next 15 yrs and beyond should help me achieve the goals.

This SIP contribution does not take into account the mandatory deductions towards my NPS. This means I might end up accumulating more than the target amount mentioned towards retirement. It is my hope that this unaccounted monthly investment will take care of uncertainties or goals not explicitly mentioned here.

At least two goals that I have in mind that are not explicitly mentioned here are: (i) daughter’s marriage; (ii) moving into an old age retirement community. While I am not overly concerned about (i), I am seriously thinking about (ii) and the cost associated with it. I have not been able to find reliable sources to plan for (ii). Maybe a series of articles on old age retirement communities, typical cost etc., on freefincal may be of help to general users. 

Articles in freefincal, over the last few years, have helped me shape and mould my investment rationale and bring in the sense of discipline. I am still in the early phase of the journey. For example, health insurance is something I am yet to think about, although I have convinced my parents and in-laws to get a suitable cover. My family is reasonably covered by my institute, but I feel it is not sufficient. In general, my financial journey is not perfect yet; however, the major goals, at least, seem reasonable for now.

Resources to get started

Similar audits by other readers

As regular readers may be aware, 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 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, 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.
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