The second day of the two-day Outlook Money 40After40 Retirement Expo got underway in Mumbai on January 24, 2024. This unique event, a first-of-its kind, dwelled on the ever important topic of retirement planning and wealth creation, highlighting on the pitfalls of investing emotionally and without rational thinking.
100 Million Families Heading For Retirement Disaster
Saurabh Mukherjea, Founder of Marcellus Investment Managers, said that 100 million families in India are heading for a retirement disaster because they are not saving enough or don’t have a retirement plan in place.
He gave an example of a family of age 40 years living on a modest income of Rs 25 lakh a year, devoid of luxuries like BMWs or extravagant trips to Dubai. Aiming to work for 20 more years, and envisioning a retirement at 60, assuming they live until 85, if one were to assume a 10 per cent post-tax return on investments and a 6 per cent inflation rate in the cost of living, they would need a financial corpus of Rs 1.1 crore per annum during retirement years, he said.
Translating this into today’s money, the bare minimum financial savings required at retirement amounts to Rs 6 crore, he added.
“If you invest a lump sum of Rs 90 lakh at 40 and compound it at a post-tax rate of 10 per cent per annum for 20 years, you will reach a substantial amount. This straightforward path, as outlined, requires clarity of thought and a disciplined approach. However, despite the simplicity and viability of this path, there’s a twist in the tale. Even within our industry, many individuals have intentionally clouded this clear route. Instead of adhering to the straightforward strategy of steadily compounding at 10 per cent, some opt for shortcuts or speculative moves. They might aim for quick gains, attempting to build a Rs 1 crore lump sum between the ages of 40 and 50, potentially exposing themselves to higher risks,” he said.
Navigate Financial Prosperity Through Disciplined Investing
At a panel discussion titled “The Mantra for Wealth Creation”, speakers highlighted on the importance of understanding the mantra for wealth creation in one’s quest for financial prosperity.
They said this timeless principle revolves around disciplined, long-term investment strategies and in navigating market fluctuations with patience, seizing opportunities during downturns, and avoiding emotional decisions.
Deepak Shenoy, founder and CEO of Capitalmind Financial Services, explained the significance of consistency in wealth creation. He advocated for a disciplined approach, especially as one ages. “It is very difficult to time the markets and predict. The diversification possible in the stock markets is difficult in other asset classes. In a long-term time horizon, every fall is an opportunity,” Shenoy said.
Anshul Arzare, MD and CEO of YES Securities (India), expressed concern over the growing trading trend over investing, particularly in the futures and options (F&O) segment. He urged the younger generation to adopt a more long-term and disciplined approach, emphasising on the importance of value investing. He also cautioned against emotional investing, and encouraged rebalancing, drawing a relatable analogy to maintaining a healthy lifestyle.
Sushant Bhansali, CEO of Ambit Asset Management, stressed on the need to define wealth creation goals. He also highlighted the importance of thorough research and personal viewpoints in addition to financial planners’ advice. Lastly, he cautioned against the inherent risks in equity investments and encouraged proactive retirement planning. “Wealth creation can be for income generation and also for financial freedom. Assets should be working for you. Equity is one of the riskiest asset classes. Invest towards your retirement and proactively do so,” he said.
Vasanth Kamath, Founder and CEO of Smallcase Technologies, brought attention to defining wealth before creating a plan. Kamath stressed on the importance of disciplined investing and simplicity in portfolio management. He encouraged investors to identify good companies for long-term investments and advised against chasing specific sectors or asset classes.
Lack Of Planning A Ticking Bomb
At a panel discussion on the critical subject of post-retirement financial strategies, industry leaders Swarup Mohanty, Vice Chairman & CEO of Mirae Asset Managers (India), Vibha Padalkar, MD & CEO of HDFC Life Insurance, and Kamlesh Rao, MD & CEO of Aditya Birla Sun Life Insurance spoke on the subject of wealth preservation and growth in the post-retirement phase.
Vibha Padalkar said that at a macro level, inflow stops and outflow continues and increases because of inflation, which could pose a problem if one has not adequately planned for it thoughtfully.
Kamlesh Rao spoke on the need to balance one’s corpus and stagger one’s investments over different asset classes, as one cannot and should not time the market.
Swarup Mohanty said that the biggest ticking bomb in India is retirement planning or the lack of it. “Just 6 per cent of Indians have a pension. Right? The rest will create a bunch. That’s the situation we are in. And trust me, we’ve had these very evolved discussions in a fund house like ours; people in Mumbai are clueless about how much money they will need to stay in Mumbai post-retirement!” he said.
Need For Careful Planning And Decision-Making
At a panel discussion on the theme of ‘The Last Milestone’, panellists highlighted on the importance of careful planning and strategic decision-making.
Dhruv Mehta, Chairman of Sapient Wealth Advisors & Brokers, highlighted the significance of a well-established retirement corpus and the challenges one might face without adequate financial planning. He urged individuals to start early in life to secure a comfortable retirement. He also suggested considering options like extending working years or reducing monthly expenses for those without a planned retirement corpus.
Lovaii Navlakhi, MD and CEO of International Money Matters, stressed the importance of accounting for unexpected costs when planning a retirement corpus. He recommended creating an emergency retirement fund to handle unforeseen expenses.
Sadique Neelgund, Founder of Network FP, shared his experience of initiating retirement investments in his early working years. He also highlighted the role of a retirement fund during medical emergencies and cautioned against relying on parents as an emergency fund or children as a retirement plan.
Sandeep Jethwani, Co-Founder of Dezerv, explained the cost considerations in retirement planning. He also advised against risky ventures like trading or entering the F&O segment, while stressing on the importance of consolidating multiple portfolios into a single data sheet for efficient portfolio management. He also warned against overlooking expenses when building an investment portfolio, and emphasised the need for regular portfolio reviews.
Vivek Rege, Founder & CEO of V R Wealth Advisors, said that one should have clarity in managing funds during incapacity or while passing on the corpus to nominees. He highlighted the significance of structuring funds in a single or joint name to avoid confusion during life events, including the need to facilitate the smooth inheritance of the retirement corpus.
Secret Recipe To Invest In A Bull Market
Sankaran Naren, chief investment officer of ICICI Prudential Mutual Fund, underscored the dangers of glossing over the pitfalls in a rising market.
He said investors often make mistakes in a bull market when the stock prices soar, and over-optimism leads them to throw caution out into the wind and overload portfolios with equity to maximise gains.
He explained how the market behaved during a bull and a bear run over the years and advised people to practice asset allocation. “In the 34 years that I’ve seen markets, the biggest mistakes don’t happen when markets are flat; mistakes happen when markets are at extremes, either at very low or high,” he said. He added that in 2020, when the markets were low, people sold their holdings when they shouldn’t have, which was a mistake.
Acclaimed Bollywood actor Manoj Bajpayee, who was one of the special guests at the Outlook Money 40After40 Retirement Expo, spoke of the choices he made in his professional career, highlighting the significance of decision-making that goes towards shaping one’s future.
