Last Updated on January 2, 2024 at 1:13 pm
In Jan 2023, Pretorius shared his investment journey for our reader story section: How I learnt to keep it simple and build a net worth 19 times my annual expenses. This is an update. Thank you, Pretorius!
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 and 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 investing. 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 reader.
Hi, I’m Pretorius, a 28-year-old Software Engineer. I am back with my personal finance update for the year 2023. My upbringing has been very middle-classish, so investing and saving money is almost second nature to my family. I review my personal portfolio every year, and I thank Pattu sir, for allowing me to share this memory stamp with all of you for 2023.
My mistakes were rectified: All my tax-saver FDs have been redeemed and moved to debt funds, as I feel the taxation is better despite being taxed on slabs for debt funds than FDs. I have decluttered most of my ELSS funds, which were redundant this year and moved to mutual funds, which are part of my long-term retirement goal.
I keep my tax planning flat and minimal. I use ELSS and PPF (minimum contribution) to fill the gap left by EPF under 80c investments.
Freefincal’s role: Freefincal and goal-based investment has helped me commit big, chunky contributions to market-linked instruments and understand the risks involved in each instrument. This year, I have also nudged or nagged my siblings’ cousins to take control of their finances by following freefincal to learn about money management and goal-based investing. Partly, the above has been successful, giving me a small gratification.
My journey is a tunnel-visioned program involving my financial freedom, as I have no familial commitments. I guess luck favoured me here. This year has been a solid year on the investment influx front and gains aspect also, the market has been kind to me or most of us this year. I was able to influx a decent amount close to 5x this year thanks to a decent hike & bonuses received this year. The gains this year are almost 4.75x.
My targeted asset allocation is 60:40, but due to some decluttering of ELSS funds and the recent market up-move, I decided to book all of it into Debt mutual funds (Lazy Me-Simpler decision to make). This has compromised my AA a bit. I rebalanced twice during October 2023 and December 2023.
I have increased my direct stocks investment and removed the Nifty index fund from my PF partly due to the role of Adani stocks in it (personal preference). Now, I invest the same in direct stocks. I am comfortable doing it as I always wanted to cultivate this habit and have a bias towards it. Currently focused only on increasing the influx. The return expectations can be used as a guideline to check where we are and how much we need to invest. But this also has to be done with an open mind to course correct as and when needed.
My current net worth is between 29 times my annual expenses as of Dec 2023 (Real return 0). Asset allocation is close to 58:42 (Equity: Debt). But most of it is market-linked, so this could get slashed if the market corrects.
- Fixed debt instruments
- 7.94% (Percentage in total net worth)
- XIRR: 8.28% for EPF, 9.07% for NPS, 7.22% for PPF
- Liquid debt instruments
- 34.02% (Percentage in total net worth)
- XIRR: 10.89% (Debt MFs)
- Equity in Mutual funds
- 17.14% (Percentage in total net worth)
- XIRR: 25.44% (Most of it is due to the influx during covid)
- Equity in direct stocks
- 40.9% (Percentage in total net worth)
- XIRR: 19.11% (Recent up-move)
Fixed debt instruments: EPF, PPF, NPS (will discontinue the NPS post mandatory 5 years, will invest in PPF only as a profit booking instrument, EPF default contributions for tax saving.
Liquid debt instruments:
- PPFAS Conservative Hybrid fund (XIRR:13.28%)
- SBI Magnum Gilt fund (7.75%)
I am not hoping these returns will be sustained as they are relatively new investments and are bound to come down over the long term. Both are heavily volatile, but my horizon is 10+ years; hence, I use them as wealth accumulators. I expect the interest rate movements to favour them. (if & when it happens).
Equity MF:
- MIRAE Asset Tax Saver ELSS fund (XIRR: 19.47%) (Going forward, only top-ups for 80c limits).
- UTI Nifty50 index- I have decluttered it due to personal bias towards Adani Stocks (XIRR:13.55% at exit time).
- PPFAS flexi cap (XIRR: 23.38%) – This has been the darling of MF investors. Expecting the returns to come down with time.
- UTI LOW VOL INDEX FUND (XIRR: 39.5%) Again, this is a new instrument, so XIRR is due to a recent market-up move. My PF has gotten bigger, so I want 3 main Equity funds.
- UTI Midcap 150 Quality 50 – (XIRR:28.13%). Again, a recent addition. Planning to park my bonus amounts and RSU vested here. The fund has underperformed the benchmark, but I am willing to review it after 5 years. (My expectations from my equity MFs are 10%).
Direct Stocks:
- I am a DIY investor on this front (started mid-2021), predominantly in large cap stocks (XIRR: 19.11%), not a piece of advice to others. My risk profile allows me to explore this, and I personally like doing the analysis, buying a business, and owning it. It could cut both ways, as this is more concentrated than any MF I own. Direct stocks (25) PF has (80:13:7) Large: Mid: Small cap exposure. This risk measure works for me now, as I expect 10% IF the identical transactions were done in the Nifty50 index fund (the XIRR: 16.67%).
Term life Insurance: I have 6 x annual salary covered by my employer. (I need to take a personal cover soon)
Health insurance for self: 5L coverage is provided by the employer. (Need to plan private health coverage having some personal health milestones before it, though)
Emergency fund: Currently, just 1 FD worth 6 months’ exp. With decent liquidity in debt PF, I feel this is fine. My investment in stocks helped me create an annual dividend income. For now, it is hovering around 1.2 months ’ expenses. It is quite little, but I need to build this to cover maybe 3-4 months expense.
Game plan for 2024: Retain the Influx rate (I/E) ratio* if possible & take private health cover. Increase dividend income to 3 months’ expenses (try at least). My expectation from equity is 10%, which helps me to concentrate on the influx rather than the returns. My piece of Gyan is to keep it simple and focus on the cash influx & risk measures instead of concentrating on product returns, as they are secondary and random in nature.
* I/E ratio is the rate at which I influx my investment.\ I- is my investment amount for the calendar year – e.g. rs 5000. E- is the expense incurred in a calendar year 1000 to run my household. (For two ppl)
Reader stories published earlier:
As regular readers may know, we publish a personal financial audit each December – this is the 2022 edition: Portfolio Audit 2022: The Annual Review of My Goal-based Investments. We asked regular readers to share how they review their investments and track financial goals.
- First audit: How Suhas tracks his MF investments and reviews financial goals.
- Second audit: How Avadhoot Joshi evaluates his investment portfolio.
- Third audit: How a single mom is on track to financial freedom
- Fourth audit: How Gowtham started goal-based investing & took control of his money
- Fifth audit: Why my financial independence & early retirement plans were postponed by four years
- Sixth audit: How Abhisek funded his marriage & is on track to financial freedom.
- Seventh audit: How Rohit’s early struggles defined his investment journey
- Eighth audit: Why my investments are still on track despite job loss and lower income.
- Ninth audit: How a retirement planning calculation scared me to take action
- Tenth audit: I made several investment mistakes but have turned my life around.
- Eleventh audit: My net worth doubled in the last financial year, thanks to patient investing!
- Update: How I achieved investing nirvana.
- Twelveth audit: My financial journey: from novice to goal-based investor.
- Thirteenth audit: My journey: from a negative net worth to goal-based investing.
- Fourteenth audit: From Fixed Deposits to Goal-based investing in MFs.
- Fifteenth audit: My 10-year financial journey – mistakes made and lessons learnt.
- Sixteenth audit (part 1): How I achieved financial independence without mutual funds or stocks.
- Sixteenth audit (part 2): Lessons from my financial independence journey and future investment plans.
- Seventeenth audit: How I plan to achieve financial independence and move to my native place
- Eighteenth audit: I used the current bull run to reduce my mutual funds from 14 to 4!
- Nineteenth audit: How a conservative investor created his financial plan
- Twentieth audit: I plan to achieve financial independence by 46; this is my master plan
- Twenty-first audit: I have made many investment mistakes but am on course to financial independence by 45.
- Twenty-second audit: I felt worthless six years ago but have achieved financial stability today
- Twenty-third audit: My financial journey was directionless until age 40: this is how I made up for lost time
- Twenty-fourth audit: Why I increased equity MF investments by 275% and reduced PPF contributions.
- Twenty-fifth audit: How I track financial goals without worrying about returns
- Twenty-sixth audit: I am 24 and started investing 1Y ago, but what am I investing for?
- Twenty-seventh audit: How we plan to achieve a retirement corpus 50 times our annual expenses.
- Twenty-eighth audit: I thought equity investing was a gamble, but now I aim to hold 60% equity for retirement
- Twenty-ninth audit: My journey: From 5 lakhs in debt to building a corpus worth six years in retirement
- Thirtieth audit: My investment journey: From random purchases to a goal-based portfolio
- Thirty-first audit: My investment journey: from product-driven to process-driven
- Thirty-second audit: How a young couple is trying to balance travelling and investing
- Thirty-third audit: My journey: From Rs. 30 bank balance to financial independence
- Thirty-fourth audit: Our journey: From scratch to a net worth of 18 times annual expenses.
- Thirty-fifth audit: From a net worth of Rs. 6000 to auto-pilot goal-based investing
- Thirty-sixth audit: How I retired from corporate bondage at 46, two years ago!
- Thirty-seventh audit: How I learnt to keep it simple and build a net worth 19 times my annual expenses
- Thirty-eighth audit: How Abhineeth plans to achieve financial independence and build a house.
- Thirty-ninth audit: How Sahil plans to achieve financial independence by efficient tracking
- Fortieth audit: My Journey to a Ten Crore Portfolio
- Forty-first audit: Burdened with debt for several years, I am now aggressively investing in equity
- Forty-second audit: From Engineer to Librarian after Financial Independence and Early Retirement (FIRE)
- Forty-third audit: I lost six months’ income in F&O and ditched it for systematic investing
- Forty-fourth audit: My retirement plan to handle the harsh realities of the IT industry
- Forty-fifth audit: My investment journey: mistakes, 10 years of MF investing and recovery
- Forty-sixth audit: My MF portfolio is worth six crores despite multiple mistakes
- Forty-seventh audit: Saving, Investing, and Running Marathons: My 25-year Journey to Financial Independence
- Forty-eighth audit: Never Too Late to start: How I became financially savvy at 40
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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