In 2013, Siddharth Jain, a senior executive of a multinational, invested in an apartment in Gurugram, hoping to sell it at a higher price to buy a larger apartment later. However, much to his disappointment, the real estate industry took a hit soon after; currently, the value of his property is down by up to 15%. He kept the property in hopes of reclaiming his capital, but also began investing in mutual funds using financial planning blogs. He reached out to a financial planner a few months ago to get a feel for his large portfolio of mutual funds.
Jain had invested in around 14 funds through commission-based portals. His planner, Basavaraj Tonagatti, a financial advisor registered with Sebi, helped him reduce the number to six. It also converted all of its systematic investment plans (SIPs) into direct funds.
Discussing the pros and cons of their investments has helped Jain and his wife Vidhi make informed decisions about their money. “At one point, I had extra cash and wanted to know whether I should pay off my mortgage principal and reduce IMEs or invest in a mutual fund to get good returns. Having a financial planner helped me, ”Jain said.
Before the Jains met Tonagatti, their investments in mutual funds were all geared towards equities and a large portion of these were in high risk schemes like small cap funds and sector funds. “Tying the current portfolio to their goals and allocating their assets according to the time horizon was a priority when I started working with them,” said Tonagatti. Previously, the couple had high exposure to real estate (almost 76%), followed by debt. employee provident fund and public provident fund and the rest in equity mutual funds. However, given their two major goals, Tonagatti had to rework their asset allocation. The couple want to accumulate ??1 crore over the next 15 years for their daughter’s graduate education and ??2 crore over the next 20 years for their retirement. They also want to take an extended vacation to the United States in a few years and want to save ??15 lakh for the same.
“The two main goals, retirement and raising the kids, are long term, so I suggested they have a 60:40 split of equity over debt. This is in addition to their real estate investments, ”said Tonagatti. For their vacation in the United States, which is a short-term goal, the organizer advised them to invest in a liquid fund.
Jain said retirement planning is essential as life expectancy has increased and serious illnesses such as cancer have become common. “We have a realistic number for our retirement and we are on track to achieve it,” Jain said. The planner also noticed that although both spouses were working, they were underinsured. In fact, Vidhi had no life coverage. So they had to work on that as well.
The couple have an emergency fund worth three months of spending and are working to increase this body of work. They have now completely stopped investing in the DF and gold. They also ditched the three traditional endowment policies they had purchased after their bank’s relationship manager urged them to buy it in exchange for a locker.
Jain regrets the decision to try to time the market and invest in real estate in 2013. Like most people, Jain also regrets starting late. He only started investing five years after he started making money. He started by investing directly in the stock market and recorded some losses. He then turned to term deposits and gold exchange traded funds (ETFs) and bought endowment policies to save tax. However, he finally understood that investing requires staying put and wants to stick with mutual funds for the long term in order to achieve his goals on time. “I’m going to allow the power of composition to help me,” Jain said.
Tonagatti said that for young couples it’s important to stick to the basics, start early, and be patient.
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