In this edition of the reader story, a young earner shares his investment journey.
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.
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.
The first part of my story might sound rather familiar to you all since it’s a somewhat recurring theme in these user stories. I graduated in 2019 from an Engineering college, got a decent paying job in IT, knew only about FDs and LIC due to my parents being conservative investors, and invested in ELSS for tax saving purposes in early 2020 (before Covid). Until now, it’s all the same as other stories, but I believe my path diverged a bit after this.
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I saw the markets fall and then rise, but given my risk averse nature at the time, I simply let it go without investing any further, and put all my money in FDs. It was only around 2021 that I decided that I should invest more, seeing the enormous growth that my ELSS funds had gotten over the past year.
However, instead of learning about the market and investing carefully, I just bought whatever had good returns, regardless of what sort of fund it was. This led to a very messy portfolio, containing a total of 15-16 funds, all equity funds with no debt, including Sectoral funds, random Hybrid funds that I didn’t really understand, multiple Flexi-caps, and a lot of Small cap.
I just invested in them via random lump-sums, without any sort of disciplined approach. Additionally, I also tried my hand at direct equity, where I managed to make some good profits with the small amounts that I messed around with. I was quite happy with this, since the market was continuously going up at the time, so it was all profits no matter what I invested in – and then the post lockdown bull market came to an end near the end of 2021, and things started going downhill.
It was around this time that I discovered Freefincal from my Google feed, and the articles from here are what helped me understand how little I truly knew. It was after reading through many articles on the page that I understood that my portfolio was a mess, and that it desperately needed consolidation – so that’s exactly what I did next. I created an Excel sheet with all my funds, compared the overlap, grouped them by this overlap, and selected one fund from each group. I also made sure to exit all Sectoral funds (like ICICI Tech fund, which had done extremely well in 2021, but then crashed and burned in 2022), and actually bring an asset allocation into place.
It was around here that I changed my investments to an SIP approach, with a fixed part of my salary being invested each month. I also stopped putting money into direct equity (where my portfolio was pretty deep in red after I had pulled out all the greens). Of course, I did make some sub-optimal choices even after that, such as chase returns on the debt portion and use conservative hybrid funds for that, but at least I was improving there. I did eventually decide to go for Arbitrage funds for my fixed income category, given the favourable tax treatment and stable returns.
Finally, at 27 years old, my present portfolio looks like this:
- Parag Parikh Flexi Cap – 22%
- Quant Flexi Cap – 22%
- Quant Multi Asset – 18%
- Kotak Emerging Equity (Mid-cap) – 11%
- Quant Small Cap – 11%
- Invesco India Arbitrage – 8%
- Edelweiss Arbitrage – 8%
This puts my equity exposure to 65%, fixed income to 32% and gold to 3% (The gold is mostly pointless in such small quantities, I understand). Additionally, the equity portion is 60% large cap, 26% mid cap and 14% small cap. However, this is by no means the final form of my portfolio, since there are still some points to address.
For example, I mean to remove Quant Multi Asset, since the only real reason I had it was because it gives (an admittedly small) gold exposure – I’ll replace it with a gold MF (for consistency with the rest of my portfolio), and bring the asset allocation to 60% equity, 30% fixed income and 10% gold.
However, I’ll retain two separate flexi cap funds, since they are the core of my portfolio, and I’m not comfortable with putting 43-44% in a single fund. This entire effort was DIY, and while I did consider consulting a fee-only advisor, I figured that my goal and portfolio are quite simple, and decided against it.
Of course, the above portfolio is for my retirement goal, which I intend to do rather early. I don’t have any other goals at present, since I’m unmarried, not keen on real estate, and have no real need of a car. I also switched over to freelancing for a pretty significant rise in income, which is the main thing that is sustaining the early retirement goal. Alongside all this, I have adequate insurance cover for Term, Health, Critical Illness and Accident (all separate policies), and a pretty sizeable emergency fund in FDs.
All this considered, I believe I am now on the right track in moving towards my goal, and if everything goes well, I should be able to achieve it too. This is all thanks to financial literacy, without which I would probably be putting all my money into FDs even now.
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
- Forty-ninth audit: My Investment Journey to a net worth 29 times my annual expenses
- Fiftieth audit: How I audit my portfolio without tracking returns
- Fifty-first audit: Financial Lessons Learned During and After a PhD
- Fifty-second audit: Investment & Financial journey of a 23 year old
- Fifty-third audit: The system I use to draw income and spend after retirement securely
- Fifty-fourth audit: From Start-Up Employee to Millionaire: A Success Story of Resilience and Smart Investing
- Fifty-fifth audit: 25-Year-Old Software Engineer’s Investment Journey: From Stocks to Mutual Funds and Beyond
- Fifty-sixth audit: Crossing the Million Mark: Our Journey to the First Crore
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.