The case of Rahul Hingmire was the classic example of all the eggs in one basket. It ticked every checkbox on the list of do’s and don’ts for investors- 100% investing in a single asset class, a non-existent one. emergency fundInadequate insurance and zero diversification. Hingmire had an extremely high-risk investment strategy with a non-existent Plan B. In financial terms, a “recipe for disaster”.
Investing your hard earned money in a single asset class that is highly liquid is a huge risk, but investing in it without any financial goals or plans is irreparable.
Hingmire is a lawyer and founding member of a leading law firm in India, and his wife Supriya is the founder and managing director of a recruitment services firm that assists corporates across India. His busy schedule and focus on growing his business had put his investment journey on the side track.
investmeNTS: Although Rahul and Supriya excelled professionally, their personal finances suffered due to lack of attention. Rahul and Supriya set aside their investible surplus as often as possible. Yet, lack of time and lack of knowledge or awareness about financial assets led them to invest in the only asset they really understood, real estate.
Nevertheless, Rahul and Supriya soon realize their failures to manage their investments wisely and decide to reach out to a financial expert for help. They began looking for a fiduciary who could be trusted to handle their assets keeping their best interests in mind. He met financial expert Tarun Birani, Founder and Director, TBNG Capital Advisors Pvt Ltd. Ltd.
Birani is a fee based SEBI-registered investment advisor. He took the time to discuss and understand his financial journey, money habits and investment mantras. The priority was to conduct a thorough financial risk assessment and better calculate their ability to absorb the risks. Relying on Birani’s guidance, the couple shared their complete financial information, allowing Birani to conduct a comprehensive financial assessment.
The findings shocked the couple. They did not understand the risks involved in the single asset investment route. This awareness led him to obtain and need a contingency fund and relevant insurance. The valuation highlighted the positives: they still had a decent time horizon to make up for the time lost in compounding their savings.
Birani said, “Hingmire kept her lifestyle expenses low and had immense potential to save in a family without any dependents. All she needed now was a strategic financial plan that could set her on the right investment track.”
“Rahul and Supriya were extremely open and transparent about their current financial journey and their life plans for the future, which was a ray of hope. This openness gave me the pertinent insight to better understand their precise goals and create a blueprint to plan for each and every financial milestone along the way.”
emergency fund: As a general rule, having a contingency fund is the top priority. The planner explained to the couple that they have to ensure that they have enough liquid savings to meet their contingency fund. An amount equivalent to six months of essential expenses was kept in the fund which could easily be liquidated within a period of 24 hours.
insurance policy: The next step was to make sure they were adequately insured. Through the Human Life Value Calculator, the planner calculates an adequate term cover along with a thorough health checkup to avoid any underlying disease. In this way, the couple analyzed the appropriate duration and health plan that best suited their unique needs.
asset allocation: Birani then helped him focus on investing for the foreseeable future. The planner assisted them in building a sound portfolio of financial assets commensurate with their risk appetite. The corpus accumulated through these investments is commensurate with short and long term goals and retirement needs.
Today, their asset allocation has gone from 100% in real estate to 60% in fixed assets and 40% in financial assets (30% in equity and 10% in debt exclusively). He has also invested in some global assets which provide the needed diversification to his portfolio.
Hingmyers relied on Birani’s financial advice and is now a prudent investor. Based on their financial plan, they are on their way to financial freedom in the next few years. The path to financial freedom doesn’t need to be one of extreme struggles or sacrifices. It starts with simple awareness and an understanding of what you have and how you can make the best use of it.
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