- Date : 16/08/2018
- Read: 5 mins
Saving and investing for the future would be the last thing on your mind when you are young. However, starting early has its own benefits and goes a long way in ensuring financial security.
Getting our finances in order seems to be as painful as going to the dentist. We keep putting it off for as long as we can. But if you start early just as I did, the financial security and peace of mind is worth the effort.
I am 36 years old, working with a leading multinational bank and have been investing for the last 16-odd years.
Coming from a middle-class background, resources have always been frugal and as kids we were always encouraged to save. Stashing the pocket money in a tiffin box was our idea of saving till one day we were asked to read a pink newspaper by our professor in college. She wanted us to stay abreast with current affairs and monitor the economic situation as commerce students.
Through this, luckily, we were exposed to the world of investing and mutual funds. Back then, there weren’t too many fund houses or options like today. However, all these years later even with fancy investment products, Aditya Birla Sun Life Mutual Fund remain my go-to investment tool.
So I started small, by saving about Rs 500 every month, which I invested in a large-cap fund through a monthly SIP.
Twice a year – during my birthday in March and Diwali in October, my investments received a booster shot. I would have a lump sum amount in hand, which I invested in an aggressive mid-cap fund.
My first international trip
By the time I settled into my first job, close to 25% of my monthly salary was being diverted to a portfolio that was a 25:25:50 mix. The old school blue-chip funds and mid-caps got an equal share, while I tried to mitigate some volatility with a debt hybrid fund to offset the over exposure to equity.
I had a much better understanding of the financial markets, the perceived volatility and the prospects of making mini fortune of my investments.
It isn’t an overstatement considering the fact that most large-cap funds in early 2000’s were averaging 18% to 23% returns year-on-year. That means in a 5-year period my investments had doubled!
That is what paid for my first ever international trip to Singapore. All it took was a 15% shave of my portfolio, which grew back like a lizard’s tail in no time.
My parents were not very appreciative of my ‘frivolous’ investment planning in the beginning, but over time the results spoke for themselves. Not to mention I do have a higher risk threshold than most people, and it is important to stay true to yourself if you want to keep the hair on your head.
My first car
The other aspect I actively look for beyond the glitz of the numbers is the profile of the fund manager – the captain of the ship.
Even though I work in banking, managing money is not my core competency. So, I need to trust the fund manager to nurture my hard-earned money.
Someone, who can see ahead of the economic curve, is consistent with his performance, can systematically handle risk and has an investment style that I can identify with.
Another beautiful product that helped me buy my first car is the Equity Linked Savings Scheme (ELSS) option. While most people opt for traditional tax saving instruments, I look forward to invest about 80% of my prescribed funds in an ELSS.
It’s like a gift to yourself! The tax-free yields from my first couple of years as a tax payer were enough to fund a substantial down payment of the car. I barely noticed the minimal EMI which were debited from my account over the three-year loan period.
My first house
Over a period, I have further streamlined my choice of investments. I steer clear of most sector specific and small-cap funds.
I pretty much cover the base across the top 200 companies and Nifty-based funds.
My strategy was clear, #SabseImportantPlan (SIP) was to move to a bigger house with my wife, kids and parents.
The 3-year goal was to generate about 25% of the value of the house for down payment by the time I hit 30.
Even though I was living rent free with my folks, I made it a point to invest Rs 70,000 every month across tried and tested funds like I was already paying for an EMI.
In three years, my corpus grew to Rs 38 lakh, thanks to the power of compounding. I squared off a couple of other investments and finally made a Rs 45 lakh down payment on the new property by the time I was 33.
We have just received possession of the new house last year and my salary will comfortably take care of the future EMI’s.
Setting new goals
I now have different set of investments earmarked for different purposes. While some sponsor our family vacations, others are for my children’s further studies. Treat each financial objective like it’s your #SabseImportantPlan and nurture it accordingly.
At the end of the day, it all boils down to patience and consistency. As long as you see growth prospects for the Indian economy and keep a soft eye on current affairs, your investments will be golden.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or insurance or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.