How a 46 year old woman took rest after arranging money

But back in 2016, Mittal realized that his return on investment after taxation was not even beating inflation. Mittal said, “I was not married then, was doing well in my career and did not have many EMI obligations, at that time most of my investments were in tax benefiting products/policies but were not efficient in terms of returns.”

This was when he a. decided to seek the help of financial planner And contacted Anupama Agarwal, Senior Vice President – Consultant at International Money Matters Pvt Ltd.

Based on this risk profiling, it was decided that Mittal was a moderate investor and could have around 45% portfolio exposure in growth assets (with relatively high risk with scope for capital appreciation).

Financial Planning

Mittal’s financial goals included retirement/financial independence at age 50, an annual vacation and buying a car every five years.

Earlier, 50 per cent of Mittal’s assets were in real estate. And, most of the financial assets were in fixed assets (no risk of capital loss) such as Employees’ Provident Fund (EPF), Public Provident Fund (PPF), Fixed Deposits (FD), and bank balances. He had also taken home loan against some properties.

For contingency fund and insurance, Agarwal suggests Mittal to maintain a contingency fund (equivalent to 6 months’ expenses) and sufficient liquidity for short-term immediate goals. In terms of life insurance, Agarwal felt Mittal needed none as his mother (then only family members) was financially comfortable. However, Agarwal asked Mittal to take health insurance cover. 10 lakh at the earliest, in addition to the health coverage provided by the company Mittal was working earlier. Over time, the sum insured has been increased to 15 Lakh with HDFC Ergo Optima Restore with Improved Features.

portfolio regio

Agarwal suggested diversification of assets to reduce exposure to the real asset class.

“We recommended that he leave the idle assets to be income-generating and lighten his immovable asset base by selling some of the land properties, which he had no intention of in the future,” Agarwal said. Accordingly, in 2018, a property was sold and the proceeds were reinvested.

Aggarwal said, “Proceeds from liquidation of certain low return fixed deposits and surrender of certain insurance policies were reinvested in equity mutual funds to create exposure to growth assets and start monthly SIPs towards long term growth could.” Restricted stock units (RSUs) issued by Mittal as part of the salary held were also made part of the development assets, according to Agarwal.

change of plans

The financial plan should be reviewed from time to time to reflect the changing needs.

Accordingly, after working for 21 years, Mittal decided to take a break from work in 2019. “I checked with my advisor to see if I could actually stay on break without knocking out my financial goals, including retirement,” Mittal said. He told me that I can take a break from work for two years and still achieve my long-term financial goals, with some delay in near-term milestones,” Mittal said.

At that time, Agarwal suggested Mittal to discontinue his SIP as it was from his monthly salary; Created a Systematic Withdrawal Plan (SWP) for monthly withdrawals against his salary to ensure he is comfortable during sabbaticals.

Mittal joined work after a break of three months. “Knowing that I have been covered for two years, it was a well-planned decision,” Mittal said.

Mittal recently married, quit her job and joined Burt Labs, an early-stage company, as an executive director and chief development officer, which was founded by her husband.

“Since his financial priorities may change now, we are maintaining the status quo and giving him time to explore his priorities, including retirement,” Agarwal said.

Agarwal says Mittal’s portfolio now has a lot of diversification. “Financial assets comprise 50% of development assets (mutual funds) at the market place. This includes international funds in his portfolio for dollar exposure – 4%. Index funds – Nifty Next 50 and Midcap 150 – along with other active funds were also considered. Hybrid allocation from 10% to 18% of the portfolio. Debt MF investments are mostly in both long term and short term funds of more than 3 years but only with high paper quality,” according to Agarwal.

room for error

Good financial planning helps in building long term wealth and attaining financial independence. But, due to market conditions or errors in human judgment, the investments made may not yield the desired returns.

For example, it was a mutual decision of Mittal and Agarwal to invest in Franklin Templeton Credit Risk Fund. But, the scheme was put on hold for encashment from April 2020. “The money invested was recovered during the year and when the scheme was paid off,” Agarwal said.

Further, investments made by Mittal in Debt Arbitrage Fund under Portfolio Management Services (PMS) did not yield expected returns. So, he decided to opt out of PMS.

Thus, there is a need to maintain adequate buffer and diversify the portfolio to minimize financial losses.