Freefincal Q & A: Tracking financial goals with a single porfolio

Each week I answer generic questions from readers. Here is this weeks edition. The Hindi version You Can Be Rich Too is now available for pre-order at Amazon. Meanwhile, GameChanger has got fantastic reviews. It is now available for Rs. 199 paper or Rs. 99 Kindle at Amazon.

dipak jambusaria:
lot of banks have been put on watch list by rbi specially idbi is in focus. govt holding is 75%. are fd safe or there is a risk of default and should be withdrawn?

Pattu: I don’t think that is an immediate possibility, but if you are worried, you can withdraw or not renew upon maturity.

Darren: Sometimes I wonder if I should give up my job (not right now, maybe a few years later when I have several lakhs in the bank) and use all the time I have to actively invest in value stocks through research. What do you think about this? I just don’t want to have a regular job beyond 40 years of age, and want to retire by 40. What would you do if you were thinking like me?

Pattu: What would I do? I will quit a regular job only if I have fixed income assets that will give me an inflation-protected income for at least next 15 years with enough equity + fixed income assets to grow and provide similar income from year 16 to the rest of my life. If I wanted to invest full time in the stock market, I will do so only with a small portion of my assets. If I lose it all, I will not lose my financial independence and more importantly, I need the discipline and common sense to not touch the rest of the assets after such a failure.

Vandhi: I am investing a monthly sum of all Goals SIP in a single portfolio(4 Equity Funds) for all long-term financial goals. During annual review , How to track each goal progress in terms of % of completion to the respective target goal amount. (For instance Son education goal reached 12% out of 100%.) Please share me any other methods to track individual goals or branch out before each goal.

Pattu: You can usethis Financial Goal Tracker on Google Spreadsheet Version 3

Alternatively, suppose you are investing 1000 for goals (say 250 each). Maintain separate portfolios where for a 1000 investment, you enter 250 with same date and NAV and corresponding units. This way you will know the growth of each goal corpus. Then you track this as one would in a multi-portfolio.

As long as the growth is good and better than expected, there is no issue with the unified portfolio approach. However, if the equity does not grow for a few years, then you may have to dip into another goal when you withdraw for one. This is the main reason I prefer separate asset allocations for each goals.

Related reading: How to track financial goals?

How I Track Financial Goals Plus Two add-ons To the Portfolio Tracker

Mohamed Hi Sir , From your blog we come to know that for long term goal (10+ years) asset allocation can be 60~70% in equity and 30~40% in debt.Within equity how much we should allocate for large cap, multi-cap, balanced, long termmid and small cap. Is it mandatory to invest in balanced/small/mid-cap for long term goal ? Could you please throw some light on (equity)category allocating for long term goals.

Pattu: The simplest is to choose a balanced fund and treat it as an equity fund. Or you can opt for 50-70% large cap and rest in mid/small cap. This will be robust and not too volatile.

Related reading: Using Balanced Mutual Funds As The Core Equity Portfolio Holding

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Thank you for the wonderful reviews of GameChanger!

Thanks to your support, the book hit #49 in the Kindle bestsellers last afternoon. You can check out the review via this link

My second book, Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you want, co-authored with Pranav Surya is now available at Amazon as paperback (₹ 199) and Kindle (free in unlimited or ₹ 99 – you could read with their free app on PC/tablet/mobile, no kindle necessary).

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