Investor’s Success Story

I met Mr V K Dhar about 13 years ago for soliciting some investment in mutual funds. He was then investing primarily in stocks directly on his own. He felt he was doing well with stocks and shifting to mutual funds didn’t attract him. Besides stocks, he had invested in bank FDs, ULIP plans and company fixed deposits also. In many ways, his investments were all over the place. I advised him to consolidate his investments. He agreed to invest a small amount in mutual funds and promised that if he liked the experience, he would increase the investments in them.

He began investing in mutual funds with a small amount of Rs 1 lakh duly allocated to equity and debt funds. In May 2004, during the market fall, his stock portfolio declined by 35% but his mutual fund portfolio fell by only 10%. He thus saw the benefit of mutual funds and started shifting his investments from direct equity to mutual funds. By the end of 2005, he divided his portfolio 50/50 between direct stocks and mutual funds. He realised that without proper knowledge and research, stocks are just like black boxes. He felt that he could simply leave it to the expert and focus on his business.

In 2010, we decided to design his portfolio in the best way possible. First of all we understood what his wealth goals were. He had a total portfolio of about Rs 2 crores. Also with a good business in the paper industry, he wanted to preserve his wealth with a return that beat inflation. We compiled all his investments and analysed his risk tolerance. Subsequently, we set the asset allocation in line with his risk tolerance. This systematic approach worked very well for him and for his portfolio. Today we sit every year to review and rebalance his portfolio and ensure that underperforming funds are replaced with better ones.

As his experience with mutual funds got better and better, he kept increasing his allocation to them. His current portfolio consists of about 90% mutual funds and the remaining 10% in stocks and tax free bonds. He has redeemed his investments in fixed deposits and ULIPS completely. Focussing on mutual funds has not only improved the performance of his portfolio but also provided him much needed peace of mind. Now he focuses more on his own business rather than watching the stock market movements all day long.

Aditya Shrivastava has been investing in mutual funds for the last 12 years. Both he and his wife, Madhuri, are working. Back in 2010, they were investing Rs 10K per month in equity funds. Then they opted for our comprehensive financial planning services. When we set up their goals and found out the quantum of investments they required, we calculated that to achieve their goals, they needed to invest Rs 50K per month. Also the plan required them to increase their savings by at least 10% every year. Their actual investment of Rs 10K per month was quite insufficient.

They then tweaked their budget and committed to maximise their savings. Initially, it was tough for them to settle for a lower monthly expenditure. But the enthusiasm to address their goals made them invest Rs 30K per month. Though that amount was also not sufficient, still tripling their savings from 10K to 30K was highly significant. Just after 6 months, they increased their SIP to 35K per month.

Since then Aditya and Madhuri have been increasing their SIPs regularly. Currently they are investing Rs 50K per month. Their portfolio has grown from Rs 5 Lakhs then to 55 Lakhs now in 5 years.

After the budgeting, Aditya and Madhuri knew

1. How much they could invest
2. How much they could spend

Vijay Singh is a close family friend who now lives in Australia. Many times Financial Planners hesitate to ask for business from family and close friends. Even I have not asked for investments from them for a long time. But when I have seen that they have been sold unsuitable plans without considering their real need, I thought I needed to play my part.

I had observed that most of Vijay’s investments were tied up in LICs, ULIPs and real estate. These investments were not done with adequate planning for future goals. There were few mutual funds, and they were in dividend options without considering the fact that he did not need dividends at his life stage.

We chalked out a plan where we set a goal to take the portfolio to a level where he could become financially free. Besides, he has the responsibility of wedding his two nieces.

First of all we had taken stock of all the previous investments and set the strategy for those investments. For ULIP plans we have paid the required minimum premiums so that the policy does not lapse. But there were a few other policies where premiums have to be paid regularly. He has promised not to buy a single investment which does not fit into his future goals. We have also converted all the mutual funds from dividend to growth options. Subsequently he has started SIPs with a clear plan to accumulate a retirement corpus of approximately Rs 3 Crores in the next 20 years.

Now after about 9 years, his portfolio has touched Rs 50 Lakhs. He has substantial investments in Australia also. So together, he looks to be on a sound wicket. But since the return potential is more in India, I am persuading him to push more of his investments to India.

Right planning, pruning unsuitable investments, and sticking to a regular investment regimen has been the hall mark of success for Vijay.

Jasmeet started investing the day he got his first job, thanks to his father. On receiving his very first pay cheque, he filled up a form for an SIP investment in an equity fund. Since then there has been no looking back. He kept increasing the amount of his SIPs at regular intervals. Since then he has relocated to various places for his career. Also he got married and is now blessed with two beautiful children.

But despite these changes and obviously ever increasing expenses, he not only kept his SIPs going but kept increasing the amount in line with his income. A humble start of Rs 2000 per month has now become Rs 18,500 per month today. This saving has resulted in his portfolio swelling to Rs 25 lakhs now, that too after accounting for the recent correction in the stock market.

Enthused by the success of his investments, Jasmeet now wants to increase his monthly savings by another 15 K. He has also decided to make use of our “Comprehensive Financial Planning” service to address his important financial goals such as

Retirement at the age of 60

Higher Education of his children

Planning for his children’s marriage

All these goals require substantial saving on a regular basis, but Jasmeet looks to be on a firm wicket. The following things are in his favour

1. He started investing early so he already has a good corpus
2. He is still just 33, and has a long earning period before him
3. He has already developed the habit of investing. So continuing and enhancing his savings should not be difficult.
4. Most importantly, he has very clear goals in his mind and is committed to achieving them.