My investment journey: From random purchases to a goal-based portfolio

Published: February 12, 2022 at 6:00 am

Last Updated on February 12, 2022 at 6:27 pm

In this edition of the reader story, we meet a DIY investor who has transformed his approach to money management from making random purchases to a focused goal-based portfolio.

About this series: I am grateful to readers for sharing intimate details about their financial lives for the benefit of readers. Some of the previous editions are linked at the bottom of this article. You can also access the full reader story archive.

Opinions published in reader stories need not represent the views of freefincal or its editors. We must appreciate multiple solutions to the money management puzzle and empathise with diverse views. Articles are typically not checked for grammar unless necessary to convey the right meaning to preserve the tone and emotions of the writers.

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

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Please note: We welcome such articles from young earners who have just started their investing journey. See, for example, this piece by a 29-year old: How I track financial goals without worrying about returns.

We have also started a new “mutual fund success stories” series. This is the first edition: How mutual funds helped me reach financial independence. Now over to the author.

I am in my late 30s working for a global corporate company.  I am working for the past 16 years for global MNCs. I just switched companies only once in the early stage of my career.

When I started working it was the age of no smartphone, no YouTube, not much awareness about investments.  When I started my career, I neither had any loans nor had any assets from my parents. We were living in a rental home. My marriage expenses were taken care of by my parents and my in-laws. So I would thank them for keeping me debt-free. My spouse is not working. 

As everyone used to start in those days I started my journey with a LIC plan, PPF and NSC. I used to have the discipline of investing the maximum amount in PPF, NSC, FDs.  In those years (2005 to 2010), interest rates were higher in these instruments.  In 2010, one of my relatives approached for mutual fund investments, and I denied saying the sharemarket is a place to lose money.  Then I moved to on-site and in parallel continued my ppf contributions and FDs in banks. 

After I returned back to India, in 2015 I started a SIP in a gilt fund based on a mutual fund agent’s advice. Somehow, I was thinking to do experimentation and I agreed. However, I didn’t track much and also didn’t try to learn about it. 

Meanwhile, I had to buy a home for self-occupation. So, in 2016 I bought a home and most of my on-site earnings went for it plus a small loan. But I neither touched my ppf nor epf savings to buy my home. I still continued my ppf, NSC investments as usual.

Then in mid of 2016, I started SIPs in equity mutual funds through the same agent in a regular plan. Still, at that stage, I didn’t start my learning on market. At this stage, I stopped FDs, as the interest rate came down significantly.

In 2017 I got another onsite opportunity and I am at present about to complete this onsite tenure. By mid of 2017, I started thinking seriously about investments.  So I started learning many concepts in mutual funds. I started identifying different funds, categories and started SIP in a few funds in direct plans. 

In 2019, I landed in freefincal, where I could realize A to Z of mutual funds and I got more clarity. I understood about index investing. I started doing some corrections in my portfolio at this stage. I stopped SIP in a few active funds. However, I didn’t withdraw the money, I leave those, as it is even today. I switched the regular plans to direct plans. I increased my Gilt fund SIP contribution.

I gradually increased the index investing from March 2020 Corona fall. I also started investing in the international index fund S&P 500.  

For the fixed-income portion I have – EPF, PPF, NSC, Gilt fund and a couple of bonds funds. I am not much convinced with bond funds, just added two to see how it goes.

Until this stage, you could notice I didn’t think about goal-based investing, which is a crucial thing.  Recently in 2021 October, I decided to tag the goals to my portfolio. I purchased the freefincal robo tool which helped in this in very simple steps.

Now my Portfolio and monthly SIPs are tied to two main goals (retirement, kid’s higher education). I tagged appropriate asset classes to the goals based on the remaining duration (for the goals) as guided by the robo advisory template.  The template has clearly told me, what I have to do and how I have to do it and when in the upcoming years. So I did some new additions to align with the asset allocation %  suggested by the Robo template

At this stage, with my experience in mutual funds and the market, I decided to enter into direct equity. From November 2021 I started stock investing as an experiment for now. Later once direct stocks grow to considerable size I will tag it to my retirement goal and do the rebalancing, adjustments.

I had a practice of investing as much as possible (without worrying about returns) and now I am able to tie them to the goals and I feel comfortable as on track towards my goals. I have constantly tried to invest 60% of my monthly income and will continue the same. I increase it whenever possible.

Below is my current portfolio summary

  1. Term insurance from both employer and myself were bought separately.  Health insurance from my employer for the entire family and also separate health insurance I bought myself.
  2. Emergency cash – 10 to 12 months expenses in a savings account 
  3. Equity 45%
  4. Fixed income 52%
  5. Gold (digital format) 3% – probably I will move it to the debt portion later in future during rebalancing

I will bring the equity part to 50% and then plan to maintain a 50%-50% equity-debt percentage. Later while I am nearing retirement, I will start the bucketing strategy, for placing the corpus in different buckets planned for withdrawals during my retirement years.

Pie chart depicting portfolio breakup
Pie chart depicting portfolio breakup

I do a quarterly review of my portfolio. At present, I don’t have a need for rebalancing so far. Just I did cleanups and finetuning in 2019, and in 2021 end I increased some contributions in the fixed-income part in-line with Robo template advice. I have planned my retirement once my kid enters into under graduation, which is 9 to 10 years from now. 

Now I am educating my fellow workers, young earners about the importance of goal-based investing and portfolio rebalancing to ride in an investment path without worrying about market situations/chasing returns. I see a majority of my co-workers/friends and juniors doesn’t think seriously about goal-based investing, and they assume they can keep on earning and ride, and later plan for retirement while nearing 45 years old.

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.

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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(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.
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