Dr Sunil C. Shetty, 46, is a senior dentist in Belgaum, Karnataka. He has been a client of Pradeep Vijay Hosmani, a city-based mutual fund distributor, since 2015. At that time, Sunil was about to enter his 40s but his financial plan was not properly structured. For example, there was a lack of objective in the investments. “His investments were scattered across traditional savings products with no goal-based financial planning,” recalls Pradeep.
Sunil’s overall investment portfolio needed an overhaul. “Most of his investments were in traditional products. They were not beating inflation and were also inefficient when it came to tax planning. Further, they were not goal-oriented, which defeated the basic purpose of investment,”
Sunil was investing but did not realise that effective financial planning can help him reach his various financial goals with ease. When he met Pradeep, who is also a registered insurance consultant, the first thing they discussed was ‘Why investment?’
“We first tried to understand his needs and risk-taking ability. His son was five years old in 2015. Sunil and his wife wanted a bright future for their son. They wanted to secure their son’s higher education in the medical field as well as plan for their own retirement,” says Pradeep. A need-based analysis is important to ascertain the financial planning path and to select various financial products, he adds. Sunil wanted to build a minimum corpus of Rs 1 crore in 14 years, which is when his son would turn 19. The financial goal was set with the amount and tenure parameters in place. Now it was time to plan it out.
Keeping this goal in mind, Pradeep discussed factors such as inflation with Sunil in order to decide the amount of investment required to meet the goal. Sunil’s financial plan was aligned with the goals. Pradeep recommended a systematic investment plan (SIP) of Rs 20,000 per month with a top up of Rs 2,000 per year. Apart from this, a systematic withdrawal plan (SWP) was chosen for the investment corpus, which would be used post-retirement. This would ensure that Sunil and his wife get regular income on a monthly basis to meet their expenses.
Pradeep on-boarded Sunil and the much-needed planned financial journey began. Thanks to the emphasis on client education, Sunil grew more informed and became a mature investor over a period of time.
Pradeep says, “Choosing the right product and asset according to the goal is a vital factor in meeting short-term and long-term goals. This is something we kept educating Dr Shetty about, on a regular basis, since we on-boarded him.”
Sunil was also advised to take adequate insurance cover. “Having adequate insurance greatly helps in keeping your investments on track as unexpected costs during emergencies tend to dent your pocket, and investments, typically, take a back seat,” says Pradeep.
With over seven years of regular investment, Sunil’s total monthly SIP amount has increased to Rs 34,000 as on date, compared with Rs 20,000 he in 2015. His investments have so far grown with a robust compounded annual growth rate (CAGR) of 15 per cent since he started investing.
While there are seven more years left before Sunil can achieve his financial goal, he is confident of being able to do that.
Patience, discipline and regularity are the key parameters to successful financial planning and attaining goals. In the last seven years, Sunil has witnessed the power of systematic investment. His faith and conviction in Pradeep have only increased.
Sunil and his family are satisfied now as they are confident that the dream of their son becoming a medical practitioner will become a reality as he would not run short of funds.
They are also confident of enjoying a peaceful retired life with a large corpus in hand.
Dr Sunil C. Shetty sums up his wealth creation journey over the last seven years with the following investment lessons.
1) Goal-based financial planning is the base of investment: A financial plan without knowing your goals has no meaning. We need to first decide upon our life goals to ascertain the financial path to choose, which then helps us reach goals with ease. Depending on the tenure, we should categorise whether it is a short-term or long-term goal. For the former, one may look at debt products, while for the latter, equity-oriented investments should be given priority.
2) Asset allocation and choosing the right product helps: Asset allocation is the key and one should stick to it irrespective of market movements. With a clear idea about goals and the tenures, it is easier to choose the right asset and the suitable product. “Asset allocation helps balance your portfolio and yields the best possible returns while keeping a check on investment-related risks,” says Sunil.
3) One should go for risk-adjusted and inflation-beating returns: “I believe risk mitigation while generating inflation-beating returns is vital,” explains Sunil. According to him, one must not avoid risks while chasing high yields.
4) Ignore short-term volatility by being focused on goals: Continuous focus on goals is important when it comes to dealing with short-term volatility. “At times, high market volatility gave me shocks. But thanks to Pradeep’s continuous support and advice during such tough times, I became mature with every passing day regarding my investments,” says Sunil. If I know that my goals are still years ahead, why should I worry about day-to-day volatility, he adds.
5) Faith in your financial advisor: “From the day I met Pradeep, I realised that I am in good hands, thanks to the way he approached my financial matters. He changed my entire thinking about investments. He is more like a financial coach for me than just a financial product distributor. The trust and confidence that has got built between us over the years helped me continue for all this time. I want to continue this relationship for as long as I can.”
Pradeep Vijay Hosmani
Registered mutual fund distributor and insurance consultant