I’m looking for some thoughts on my personal finance situation. Would be happy to listen in to your views/ideas. Particularly, I’m keen on knowing what best I can do going forward.
My personal context is that I’m 30 years old and unmarried. I stay with my parents and don’t have any liabilities. I don’t plan to buy a house ever as well.
Have about 8 years of corporate work experience. Have accumulated the savings via my corporate earnings and interest income from my investments.
Current Returns (Weighted)
FD: 7.5% (Paying taxes on it)
MF(Debt): 7% (No redemptions till date)
MF(Equity): 5.5%
MF(Gold): 11%
PF: 7%
I have the following queries:
How best could I restructure my investments? Till date I have tried to play it safe and been reliant on debt categories as I find 6-9% a good rate of interest.
I personally want to retire by 40/45 which could roughly translate to about 3 cr to 5 cr of additional capital that could save over the the coming 10-15 years. This is ofcourse after paying taxes and taking care of my expenses that are largely managed by my parents.
BTW, why restructure? Is your current approach/plan not on-track to achieve any of your goals?
By the way, one possibilty to reduce risk from banks-FDs (and eek out another 1-2% annual-returns),
would be to reduce the amount invested in FD to 5L (insured amount)
and buy 5/10/15 year GSECs with the remaining amount that is no longer in FD. (GSECs = Can currently book 7-8% annual returns, paid out every 6-months till maturity, and taxed at income-tax slab-rate each year.)
Hi AK If I am in your shoes , I would do the following .
Try to exit from FDs which I feel one of the worst financial tools unless you are dependent on monthly interest drawdowns .
Reasons :1. you have to pay taxes every year
2. Will not give stable returns as it is floating interest rate
3. You cant use for anything else
put in mutual funds and gold (SGB) if you want do it passively .
SGBs are one best way of saving taxes as they offer indexation benefit
even mutual are better in saving taxes compared to FDs and always gives better returns.
I am wondering how are you generating 7% in debt funds if thats the case continue for long term.
Try to take 4-6 cr sum assured pure term insurance
You can put close to 2L per year in NPS which again gives better return plus good tax saver
Although I do not have much experience in investments, what I can see is that your whole portfolio is 100% passive. (correct me if I’m wrong).
(By passive I mean that you are not managing your money by yourself, you’re just doing SIPs regularly)
The good thing is that you have:
Large capital
Age
No liabilities
What I suggest is that you should move towards the active form of investment little by little.
Start with like 1% of your total investment and start experimenting with active stock investment and develop a new skill set. Once you learn it, it is up to you, how much capital you want to allocate in Active and Passive forms of investing.
One more thing is that If you are going to consult a CA/Some Expert then make sure that you do not get fooled by them. Many of them will try to sell you some GARBEG scheme and will try to lock your capital for a very long time.
I think you are a smart person. so stay away from such mistakes.
Yeah, even I’m contemplating seeking paid professional advice. However, it’s always best to learn from experience of everyone around rather than 1 professional.
One can make good money in corporate slavery. So yeah, that’s about where I made most of it. Rest is largely gains from equity and interest income.
I’m largely invested across liquid, short term and ultra short term debt funds. Combination of lump sum and SIPs over the years. The lowest return is 6.5 and highest is 7.4 in one of the funds.
Term insurance I don’t find useful one bit. It’s a waste of my capital. Will only accrue to my nominee. However, I’m also thinking about it.
I want to restructure FDs primarily but since it’s giving me consistent interest which I simply invest in equity. For now it’s substantial around 8-9 lacs yearly, so this is the amount I’m also investing in MF Equity and Gold. Which is about 24 lacs yearly currently. So over next 10 years I’d put 2.4 cr in equity. That’s my thought.
I don’t have your background on financial knowledge, but Few pointers from a person having more or less same correlated journey/goals as yours.
Manage money yourself : In todays world knowledge is so abundance that its best to learn and plan yourself rather than relying on CA, Consultants etc. Trust me even more or less everything can be automated.
Low beta option Selling Strategies: It may take 2- 3 years to master the art but its worth the life time and quite satisfying. All your capital can be pledge in GSEC, Debt mF or equity and can be used to generate small consistent income. Mind you , your Bank may fail but money in GSEC/Debt mutual funds and diversification it offers is quite good.
Looks for other avenues like franchises or other boring business it brings consistent cash flows and mind you it may take 3-6 months to set up but once your set it all automated.
Youtube, Podcast, AI converstions may give you other ideas.
Well that’s the point, I don’t have any goals per se financially. Atleast right now that’s the case.
All I have been doing is simply doing monthly investments across FDs, MFs etc. barring some expenses, my salary + interest income is simply invested y.o.y. For eg last year I did about 37 lacs of principle investment across FD and MF.
I recently started realising that one should have financial goals. So I largely have the following aspects going on right now:
Reduce income tax payments y.o.y. Primarily wanting to restructure FDs. Not very sure though…
invest in a few stocks maybe and hope ki 20 years later they make me rich…I’d just be deploying capital here on hope…hence unsure…don’t want to really wreck my brains on researching much.
would want to get out of corporate in another 10 years. Say by 40. I’m not very sure what I’d be doing then. But this is the only goal I have that I’m reasonably sure about…
Its better to invest in some theme(small case) or best is Index . Can create GTTS on levels for buy and sell.
Investing randomly is foolish and in todays world of disruptions market cycle has really been very small so SIP or investing luck based without any theme that too 10 years is waste of time and resource in my sense.
In stocks ,Exit is equally important than Entry. Don’t get carried away by HODL things , even Warren buffets 90% stocks portfolios gets churn within 3 years. And few stocks he hold for long didn’t even beat S&P 500 returns
Instead of focussing on accumulating more,
one would rather focus on diversifying and capital preservation
to ensure one is financial comfortable, no matter what happens in the future.
Personally, for the finanical situation described in this topic-thread, i do not see a need to speculate with stocks. (if you have a fear of losing out on any growth over the next few decades, maybe have a small but significant percentage in some ETFs/MFs.)
Accept that passive / boring is good. Get used to it.
Hmmm…
In case you haven’t read it already, this should help you get started.
Would agree with you , I also on similar opinion that capital preservation(particularly large sum)>>> than capital earnings. India is still a capital deprived country so cash is King!. There will be so many opportunities where you could deploy your capital and get safe returns than investing all in Equities thinking of multi baggers.
I am not in opinion of deploying large concentrated capital in Equities over very long time( If your churing or theame based or index thats different scenario). Equites( single stock/company) are more though than any other instument in long term
See , Equities have been glorified much but its one of many investment instuments. Explore REITS,Invits, Contra funds, Index ETFs as well.
Things with equity is profit booking as well or rotating which requires some experience as well.
If you really don’t have interest or time to read than Above way is also fine but do remember that markets can fall upto 50% any time so downside have to be noted as well.
With some knowledge and reading All above can be rotatted into ETFS.
But above is fine if no one has time or energy to learn for them MF is fine but they have 1-2% Yearly fess which can be saved in ETFs
I agree on the FD part. I like them simply because there’s certainty and guarantee. I have FD/RD operating at a high rate of 9% and the lowest is at 5.5%. Overall, average would be 7.5% and post taxes would be around 5%.
FD is plain simple vanilla.
But on another note, specifically about my returns from all investments they are in the range of 6-7.5%.
37 lacs is the fresh principal I injected last year largely from salary and FD interest.
Baaki to I’m only thinkin if I can increase my returns. Gold has performed the best for me though that too physical gold.
I bought about 10 lacs ka hold from Tanishq had all the making charges and all but it was around 32k average. Abhi dekho I guess 60k ha
what Neha1101 said above.
that too physical gold.