Featured in Economic Times on 09/03/2020

Ankit Shinde (40) and Madhumita Shinde (39) met me at one of my seminars in an IT company a few weeks ago. They wanted my help to draw up a comprehensive financial plan for them. They already had various investments, but never did any financial planning.

The good
“We’re mainly looking to build a corpus for our son Rohan’s education and higher education. He is eight years old right now. We also want to seriously start working towards building our retirement portfolio as we are already late,” Ankit Shinde told me when we met a few days later.

The Shindes already had a house and car. Their combined income was roughly Rs 3.5 lakh, and they had invested in multiple life insurance products, fixed deposits, PPF, real estate, and some mutual funds. A large chunk of money was lying in their savings account

The couple’s response to my various questions revealed that they had clarity about their financial goals. They also were acting on them. They had paid off most of their car and home loans and are saving almost Rs 2 lakh every month, after accounting for their current EMIs and expenses from their overall income of around Rs 3.5 lakh.

The Bad

The biggest problem with the Shindes was the absence of the right asset allocation. None of their investments were aligned to their financial goals. They have parked most of the money in the real estate – they owned three flats. They were living in one of the flats, the other two were hardly giving any capital appreciation and the rent was around 2-3% of their overall property valuation.

They also had around 10 life insurance policies. Yes, you read it right, 10 policies. Sadly, the total life insurance cover from all the policies was not even Rs 1 crore. Investments in PPF and FDs were also done in haphazardly.

The Shock
I was in for the biggest shock when the Shindes told me that they had saved approximately Rs 50 lakh in the last few years, but the money was lying in their savings account. The second shock came when Madhumita Shinde said, “We want to start a mutual fund SIP of Rs 10,000 every month.”

I was shocked because she was talking about investing Rs 10,000 out of their overall monthly savings of Rs 2 lakh. They wanted to invest through SIPs, but were not willing to invest more than Rs 10,000 because of the fear of the market risk in mutual Fund investments.

Plan, Protect, Play
The Plan, Protect, Play philosophy that we strive to follow at Money Plant Consultancy, which I have talked about in my book Financial Spirituality as well, was missing. So, we analysed their portfolio to see their scores according to these three parameters.

We advised them to reshuffle their investments and make their planning goal-based rather than product-based. We also suggested a massive increase in their mutual fund investments. This took care of their planning. Along with this, we also advised them to buy a term insurance, after assessing the cover they would need dependent on their financial goals. This was the first step in setting up a plan to eventually enable them to reach the Play stage, where they have the freedom to do what they want  ..

The mutual funds solution
It took a while to convince them about investing in mutual funds. After a detailed discussion, we advised them to invest the money lying in their savings account in a combination of good equity mutual funds schemes via STP route and also to start an SIP for Rs 1 lakh immediately.

We explained that mutual funds are not a risky product, provided you do your homework right and set the correct assumptions. I told them that when you are investing for long term goals, you can’t choose a better product than equity mutual funds. I offered them a few reasons why mutual funds are considered one of the best investment products.

1) Mutual Funds are more tax-efficient investment option than traditional investment tools like fixed deposits.

2) Equity is one of the best asset classes to beat inflation by generating returns of around 10-12% in the long term. In fact, Indian stock market (the Sensex, in particular), has given more than 16% compounding annual growth rate since its inception in the year 1979. You can expect a decent return of around 10-12%, provided you play your cards smartly.

3) Mutual Funds are actually one of the safest investment tools with inbuilt diversification.

If you are yet to invest in mutual Funds, or are sceptical about increasing the amount you invest in mutual funds, think about these points. Like the Shinde couple, you can also come out of your fear zone and make your money work for you.

Source: https://economictimes.indiatimes.com/mf/analysis/they-had-rs-50-lakh-in-fd-but-didnt-want-to-invest-more-rs-10000-per-month-in-mutual-funds/articleshow/74504935.cms

Featured in Economic Times on 09/03/2020

Ankit Shinde (40) and Madhumita Shinde (39) met me at one of my seminars in an IT company a few weeks ago. They wanted my help to draw up a comprehensive financial plan for them. They already had various investments, but never did any financial planning.

The good
“We’re mainly looking to build a corpus for our son Rohan’s education and higher education. He is eight years old right now. We also want to seriously start working towards building our retirement portfolio as we are already late,” Ankit Shinde told me when we met a few days later.

The Shindes already had a house and car. Their combined income was roughly Rs 3.5 lakh, and they had invested in multiple life insurance products, fixed deposits, PPF, real estate, and some mutual funds. A large chunk of money was lying in their savings account

The couple’s response to my various questions revealed that they had clarity about their financial goals. They also were acting on them. They had paid off most of their car and home loans and are saving almost Rs 2 lakh every month, after accounting for their current EMIs and expenses from their overall income of around Rs 3.5 lakh.

The Bad

The biggest problem with the Shindes was the absence of the right asset allocation. None of their investments were aligned to their financial goals. They have parked most of the money in the real estate – they owned three flats. They were living in one of the flats, the other two were hardly giving any capital appreciation and the rent was around 2-3% of their overall property valuation.

They also had around 10 life insurance policies. Yes, you read it right, 10 policies. Sadly, the total life insurance cover from all the policies was not even Rs 1 crore. Investments in PPF and FDs were also done in haphazardly.

The Shock
I was in for the biggest shock when the Shindes told me that they had saved approximately Rs 50 lakh in the last few years, but the money was lying in their savings account. The second shock came when Madhumita Shinde said, “We want to start a mutual fund SIP of Rs 10,000 every month.”

I was shocked because she was talking about investing Rs 10,000 out of their overall monthly savings of Rs 2 lakh. They wanted to invest through SIPs, but were not willing to invest more than Rs 10,000 because of the fear of the market risk in mutual Fund investments.

Plan, Protect, Play
The Plan, Protect, Play philosophy that we strive to follow at Money Plant Consultancy, which I have talked about in my book Financial Spirituality as well, was missing. So, we analysed their portfolio to see their scores according to these three parameters.

We advised them to reshuffle their investments and make their planning goal-based rather than product-based. We also suggested a massive increase in their mutual fund investments. This took care of their planning. Along with this, we also advised them to buy a term insurance, after assessing the cover they would need dependent on their financial goals. This was the first step in setting up a plan to eventually enable them to reach the Play stage, where they have the freedom to do what they want  ..

The mutual funds solution
It took a while to convince them about investing in mutual funds. After a detailed discussion, we advised them to invest the money lying in their savings account in a combination of good equity mutual funds schemes via STP route and also to start an SIP for Rs 1 lakh immediately.

We explained that mutual funds are not a risky product, provided you do your homework right and set the correct assumptions. I told them that when you are investing for long term goals, you can’t choose a better product than equity mutual funds. I offered them a few reasons why mutual funds are considered one of the best investment products.

1) Mutual Funds are more tax-efficient investment option than traditional investment tools like fixed deposits.

2) Equity is one of the best asset classes to beat inflation by generating returns of around 10-12% in the long term. In fact, Indian stock market (the Sensex, in particular), has given more than 16% compounding annual growth rate since its inception in the year 1979. You can expect a decent return of around 10-12%, provided you play your cards smartly.

3) Mutual Funds are actually one of the safest investment tools with inbuilt diversification.

If you are yet to invest in mutual Funds, or are sceptical about increasing the amount you invest in mutual funds, think about these points. Like the Shinde couple, you can also come out of your fear zone and make your money work for you.

Source: https://economictimes.indiatimes.com/mf/analysis/they-had-rs-50-lakh-in-fd-but-didnt-want-to-invest-more-rs-10000-per-month-in-mutual-funds/articleshow/74504935.cms

Featured in Economic Times on 09/03/2020

Ankit Shinde (40) and Madhumita Shinde (39) met me at one of my seminars in an IT company a few weeks ago. They wanted my help to draw up a comprehensive financial plan for them. They already had various investments, but never did any financial planning.

The good
“We’re mainly looking to build a corpus for our son Rohan’s education and higher education. He is eight years old right now. We also want to seriously start working towards building our retirement portfolio as we are already late,” Ankit Shinde told me when we met a few days later.

The Shindes already had a house and car. Their combined income was roughly Rs 3.5 lakh, and they had invested in multiple life insurance products, fixed deposits, PPF, real estate, and some mutual funds. A large chunk of money was lying in their savings account

The couple’s response to my various questions revealed that they had clarity about their financial goals. They also were acting on them. They had paid off most of their car and home loans and are saving almost Rs 2 lakh every month, after accounting for their current EMIs and expenses from their overall income of around Rs 3.5 lakh.

The Bad

The biggest problem with the Shindes was the absence of the right asset allocation. None of their investments were aligned to their financial goals. They have parked most of the money in the real estate – they owned three flats. They were living in one of the flats, the other two were hardly giving any capital appreciation and the rent was around 2-3% of their overall property valuation.

They also had around 10 life insurance policies. Yes, you read it right, 10 policies. Sadly, the total life insurance cover from all the policies was not even Rs 1 crore. Investments in PPF and FDs were also done in haphazardly.

The Shock
I was in for the biggest shock when the Shindes told me that they had saved approximately Rs 50 lakh in the last few years, but the money was lying in their savings account. The second shock came when Madhumita Shinde said, “We want to start a mutual fund SIP of Rs 10,000 every month.”

I was shocked because she was talking about investing Rs 10,000 out of their overall monthly savings of Rs 2 lakh. They wanted to invest through SIPs, but were not willing to invest more than Rs 10,000 because of the fear of the market risk in mutual Fund investments.

Plan, Protect, Play
The Plan, Protect, Play philosophy that we strive to follow at Money Plant Consultancy, which I have talked about in my book Financial Spirituality as well, was missing. So, we analysed their portfolio to see their scores according to these three parameters.

We advised them to reshuffle their investments and make their planning goal-based rather than product-based. We also suggested a massive increase in their mutual fund investments. This took care of their planning. Along with this, we also advised them to buy a term insurance, after assessing the cover they would need dependent on their financial goals. This was the first step in setting up a plan to eventually enable them to reach the Play stage, where they have the freedom to do what they want  ..

The mutual funds solution
It took a while to convince them about investing in mutual funds. After a detailed discussion, we advised them to invest the money lying in their savings account in a combination of good equity mutual funds schemes via STP route and also to start an SIP for Rs 1 lakh immediately.

We explained that mutual funds are not a risky product, provided you do your homework right and set the correct assumptions. I told them that when you are investing for long term goals, you can’t choose a better product than equity mutual funds. I offered them a few reasons why mutual funds are considered one of the best investment products.

1) Mutual Funds are more tax-efficient investment option than traditional investment tools like fixed deposits.

2) Equity is one of the best asset classes to beat inflation by generating returns of around 10-12% in the long term. In fact, Indian stock market (the Sensex, in particular), has given more than 16% compounding annual growth rate since its inception in the year 1979. You can expect a decent return of around 10-12%, provided you play your cards smartly.

3) Mutual Funds are actually one of the safest investment tools with inbuilt diversification.

If you are yet to invest in mutual Funds, or are sceptical about increasing the amount you invest in mutual funds, think about these points. Like the Shinde couple, you can also come out of your fear zone and make your money work for you.

Source: https://economictimes.indiatimes.com/mf/analysis/they-had-rs-50-lakh-in-fd-but-didnt-want-to-invest-more-rs-10000-per-month-in-mutual-funds/articleshow/74504935.cms