My net worth doubled in the last financial year thanks to patient investing!

Published: May 16, 2021 at 8:44 am

In this episode of reader-story, Mr G (anonymity on request) discusses his personal financial audit. Thanks to disciplined investing for more than a decade, he has seen his net worth double in the last financial year. It is inspiring to see such meticulous tracking of investments with a long term vision on the future corpus required.

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. This time, we asked regular readers to share how they review their investments and track financial goals.

At the beginning of last financial year, on 1st April 2020, if someone had said that Nifty would further crash to lows of 5000, it would not have been considered an April fools joke. On the other hand, if anyone predicted that markets would touch an all-time high within 7 months, then it definitely would have been considered a cruel joke.

But that’s what exactly happened, in a crazy year that has been FY20-21. The financial year dramatically changed my financial situation, with my networth almost doubling. I never thought I would double my networth in a single year after 11 years into my financial journey. That is the power of equity investing. It also helped that I was disciplined in pumping money into Nifty 50 MF when the markets were crashing, keeping my emotions at bay.

I could have invested the money faster. But that is hindsight bias. Who would have thought the market would recover so fast. I also rebalanced my portfolio for the first time, as due to aggressive upward movement in the markets, my equity allocation moved beyond 65%. This year I also set right my asset allocation within equity MF at 70:20:10 for N50:NN50:MidCap Index.


Here is my look back at the year that just went by. For this article, when I say the current year, it means FY20-21 (Apr 2020 to Mar 2021). Next year means FY21-22 (Apr 2021 to Mar 2022), and the previous year means FY19-20 (Apr 2019 to Mar 2020). So let’s begin.

Savings rate month wise
Savings rate month-wise (Year avg – 47.3%

Due to the pandemic and working at home from my hometown, I had a very high savings rate throughout the year. Owing to restrictions, this year, we got a chance to have practical experience in lean living. If not for major house maintenance expenses at the end, average savings would have crossed 50% for the first time. Anyways 47% savings rate is also very good, and I am happy with it.

Month Wise Savings – Plan(green) Vs Actual(orange) as % of yearly target (85% of plan achieved)
Month Wise Savings – Plan(green) Vs Actual(orange) as % of yearly target (85% of plan achieved)

For the past 3 years, I have stopped tracking my expenses and started trying to meet the monthly savings target that I set for myself at the start of the year. I was ahead of the planned savings target till Dec. Though there were significant expenses in the last 3 months, I still managed to achieve 85% of the planned savings.

Total Net Worth vs Total Investment Contribution
Total Net Worth vs Total Investment Contribution

Oh, what a remarkable year this has been. My gains from investment in this single year are multifold of cumulative gains of last one decade. I almost doubled my networth, with 2/3rd of it coming from gains on investments and not fresh additions. Of course, I ended FY19-20 with a loss, as the market hit bottom right on Mar 31st. But since my equity allocation was less than 40% at that time, the amount of loss was relatively less. Now that I have reached 60% equity allocation, I understand that I am now exposed to the full force of markets, both upside and downside. If a similar crash comes in FY21-22, then the net worth graph will come crashing down as fast as it has gone up.

PF score ( ratio of net worth to yearly expense)
PF score ( ratio of net worth to yearly expense)

And finally, the most important metric. My PF (Personal Finance) score, which is my networth divided by yearly expense. What a jump from 3.5 to 7.2 in one year. And this year’s expense includes a significant one-time expense of house maintenance. If I exclude that and count only my regular expenses, then my 

PF score is close to 10. But over the years, I have found that these “one-time” expenses keep coming so regularly that it’s best to always consider the full expense to calculate PF score. 

Portfolio Breakup

So good to see a neat portfolio breakup. The market crash and recovery allowed me fully clean up my  portfolio with the below actions. 

  • In Feb 2020, I liquidated all my debt MFs.
  • From Mar 2020 onwards, I started aggressively investing in the N50 fund to take advantage of the crash. By Sep, I hit my target equity allocation of 60%
  • In Jan 2021, I realized I could rebalance my portfolio, simultaneously getting rid of my active mid cap fund, as well as bring down equity closer to 60% (which had reached 65% due to upward market movement).  
  • In addition, I invested a small amount in the MidCap Index, which set my allocation within the MFs as per my target of 70:20:10 for N50:NN50:MidCap.

On the debt side, this year, I started significantly increasing PF by setting high contribution in salary. PF  comes to around 40% of my target savings. Hence remaining all 60% of savings can go to equity. In case I  am able to save more or I have rebalanced out of equity, then I plan to invest in PPF. Thankfully in the near future, I do not see a need to look at any debt funds, which I find very challenging to invest. PF and PPF  should take care of my debt side. 

Liquid Fund / Cash is a very high percentage of total net worth right now. That is because a lot of “one-time” expenses are lined up in FY21-22 (CRATON corpus required at the time of need). See, as I said, these one time expenses keep coming regularly!! But once those expenses are done with, this category will only be my emergency fund. 

Comparing portfolio breakup with the previous year gives an interesting insight on how my investment journey progressed in the year (Though the graph is in %, we can also easily discern the absolute gain since we can consider the FY21 portfolio double the size of FY20. For example, though %wsie my PF has remained same, in value  terms it has doubled)

Portfolio breakup comparison with previous year
Portfolio breakup comparison with the previous year

The standout gain in the graph is one direct equity stock that I hold. Almost half of the gains in FY20-21  came from this stock alone. It shot up from 4% of the portfolio to 21%, without making any additional investment to it. It was a small speculative investment I had made many years ago. It was languishing at a 40% loss and suddenly jumped up in the last couple of years. Investing in this stock made me realize direct equity is not for me. When the stock was languishing at a 40% loss, I did not have the courage to invest more,  nor I am having the courage now to make an additional investment as I feel the stock may be overvalued, but at the same time, I do not want to sell any shares, due to greed that it might jump up again in few years. 

In contrast, I am comfortable in index investing. Based on asset allocation, I can keep investing whether markets crash or jump up. However, I have given myself leeway to invest max 2 to 3% of my networth in any speculative investment which I find interesting. 

Where do I stand in my Personal Finance Journey?

I had made a financial plan for my whole life back in 2010. How am I faring as compared to the targets I  set for myself each year in the financial plan?

Net Worth Plan (blue) Vs Actuals (orange)
Net Worth Plan (blue) Vs Actuals (orange)

Unbelievably I am well ahead. Back in 2010, seeing the ridiculous numbers 10 years ahead, I never thought I would be comfortably beating them. If there is no major crash in markets and things go as planned, I would be able to keep pace with my planned networth for another 5 years. 

Income Plan(Blue) Vs Actuals(Orange)
Income Plan(Blue) Vs Actuals(Orange)

I had planned for a 9% increase in income. Not able to maintain that, and falling behind. I need a big jump in salary soon to catch up again.

Yearly Expense Plan (Blue) Vs Actuals(Orange)
Yearly Expense Plan (Blue) Vs Actuals(Orange)

My expense graph is almost horizontal for a decade now. Systematically controlling my expenses has been the main pillar of building my net worth. To be fair, till 2014, expenses include my EMI loan payments as well. If I consider only my true expenses without EMIs, then expenses have gone up by 3X in the last decade.  Still, to my credit, I have kept my lifestyle expense in check, as my expenses have remained range-bound since 2015. If I am able to keep my expenses in check for another 5 years, it would be great. 

Yearly Savings Trajectory
Yearly Savings Trajectory

The above graph shows the trajectory of fresh investments I am able to add to grow my portfolio. 2014  is negative since I took out a small portion of my investments to clear all my loans. Once I cleared my debt, my savings jumped up. Then in 2017, I shifted my focus from tracking expenses to having a monthly investment target, as I mentioned earlier. I saw another step-change in my savings due to this new strategy. Hoping to keep on increasing my savings every year as much as possible.

Yearly investment Returns
Yearly investment Returns

And finally, let me end by sharing this amazing graph. Though I knew the numbers, I myself was shocked to see the scale of returns this single year 2020-21 generated. The learnings and patience developed with a decade of equity investing finally have paid off. It also shows the lumpiness of returns that comes with equity investing. I must keep reminding myself that this lumpiness can come in a negative direction as well. 

Hence, I am trying to keep asset allocation as a basis for investing. It has helped me to invest mechanically during Mar-Apr 2020 crash. Now I don’t track returns of my equity MF investments; I just go by asset allocation. I have developed a system to track my networth in real-time by punching few numbers in excel. If the calculation says my equity allocation is below 60% at the end of the month, I will invest in index  MFs. Otherwise, it will go into debt. In FY20-21, I simplified my investment strategy and have put it on autopilot. Focus now is to grow my earnings.

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About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations based on money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements, write to pattu [at] freefincal [dot] com
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