Manoj Joshi, 51, provides information systems to pharmaceutical companies. He lives with his wife, Mrunalini and daughter, Vallari, who is a lawyer-in-making. His desire for financial planning found its roots when he decided to accumulate funds for Vallari’s higher education. To align his financial interest, he came in touch with Kapil Jain, Founder of Enrichwise Consultancy Services, Thane.
Kapil Jain is a gold medallist from IIM Indore and has experience of over two decades in the financial markets and advisory. He practices what he preaches, as he is a value investor and a firm believer in asset allocation principles.
When Manoj discussed his aspirations and financial goals, it turned out that retirement planning had not yet found a place in his wish list. While discussing, he informed him that his retirement was still around 15 years away, and presently, his prime focus is his daughter’s educational expenses. However, his thoughts changed for good once he was made to understand the importance of time for his investments to grow. Time lost is contemplating could be covered with quick action.
He immediately started an SIP (Systematic Investment Plan) for Rs 30,000 per month towards his financial goals in February 2013. Vallari was 14 yea at that time, and Manoj estimated that he had to accumulate around Rs 10 lakh for her education five years later. While his investment horizon was fairly extended, the initial investments were made in large-cap funds to have a smooth investment journey for him and to build his confidence in the markets. However, as luck would have it, the equity markets were stagnant for the next three years. As such, the SIP returns in February 2016 were closer to around 5 per cent per annum. As the SIP was not yielding the desired results for the first few years, Manoj would often be at his wits’ end regarding his financial plans. He would compare such returns with traditional investment avenues and trap himself in a dilemma while deciding whether to continue his SIP investments.
At this point, it was crucial to reinforce Manoj’s trust and confidence in investing in mutual funds. He was repeatedly reminded about his primary goal for starting the SIP. Being concerned about Vallari’s graduation, he felt incentivized to continue accumulating the desired investment corpus. The regular guidance and handholding played an essential role in the continuation of Manoj’s financial plans during the turbulent times. It was this persistence and conviction into the financial plans, which helped Manoj recover the lost returns during the market rebound. It is said, “Storms are often preceded by silence”. The subsequent year post three years of stagnant returns helped the investment portfolio reflect 20 per cent annualized returns by February 2017.
Manoj was delighted as his efforts bore fruits and he could accomplish his desired corpus for Vallari’s education. He further decided to continue saving towards his retirement corpus. With seven years of investment experience, Manoj shares, “The ongoing COVID-19 crisis has eroded returns significantly for investors, and the portfolio was not left untouched. However, despite the corrections in equity markets, our portfolio continues to reflect around 11 per cent annualised returns over the entire SIP duration, culminating into 120 per cent absolute returns on the initial investments.”
Manoj believes that besides periodic review, placing trust in your financial advisor is important.
A financial advisor can be one’s guide in the investment journey. Not only does he help chalk out the investment strategy, but also helps the investors stay focused and guide them periodically in reviewing the investment portfolio to measure the achievement of the financial goals objectively. This also keeps the portfolio healthy as the investors can identify the underperformers pulling the portfolio returns down and take further steps to replace such schemes.
While Manoj continues to stay on course to accumulate a healthy retirement corpus, it is crucial for other investors as well to incorporate his lessons into their investment strategies and make well-informed decisions towards long-term wealth creation.
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Kapil Jain shares some of the lessons from the success of Manoj’s investment journey
One must start investing early
The lost time is one significant financial mistake that cannot be undone, as time waits for no one. Early investments will help you achieve the desired financial goals effortlessly. When one gives more time for the investments to grow and prosper, the power of compounding does great wonders. This also helps the investors to accumulate higher corpus with lower investments, as the portfolio continues to generate returns and grow within itself. However, even if one has delayed investing and made certain financial mistakes, the key is to correct that mistake, instead of repenting over the lost opportunity.
Link your investment in mutual funds to your goals
It is often helpful when one links his/ her financial plans with specific financial goals. With a focused investment approach and spelled-out investment horizon, one can choose the mutual fund schemes best suiting the circumstances. For example, short-term goals may require more allocation towards debt for reasonable stability. In comparison, one may choose to have a higher allocation in equities while saving for long term financial goals. The linked goals often act as a hidden motivation for investors.
Have patience while investing
The investors need to stay patient in their investment journey. While there may be periods of insignificant returns, a single market rally may compensate for all such periods. However, timing such market movements is challenging and almost impractical to be achieved consistently by the retail investors. Instead, staying invested across the market cycles can be a more prudent and balanced investing strategy. This allows the investors to benefit from the market rallies as and when they happen. The investors need to ignore short-term volatility and instead focus on the financial goals when the storm is brewing.
Kapil Jain, Director, Enrichwise Consultancy Services