It Is Always Beneficial To Have A Plan In Place!

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It Is Always Beneficial To Have A Plan In Place!
It Is Always Beneficial To Have A Plan In Place!
Sourabh Mahajan - 30 October 2021

Amit Chawla, 38, is running his own IT services company in Mohali. His wife Shuchita Chawla works in the same company as director, human resources. They are blessed with a 10-year-old daughter Aanya. Like many traditional investors, Amit found comfort in investing in real estate instead of new-age financial products, including mutual funds. Although he had started investing in mutual funds a few years back through SIP (systematic investment plan) for a small amount, in the absence of any financial plan and proper guidance, he could not continue his investments for an extended period. When the markets became jittery in 2017, Amit also liquidated his existing mutual fund investments to avoid future capital losses.

Apart from real estate investments, Amit was inclined towards insurance policies as investment. In fact, the first time Amit approached Sourabh Mahajan, founder and financial coach, True Wealth, it was regarding a dilemma he was in for a specific insurance policy. He did not buy that policy after the discussion with Sourabh. In February 2020, they had a second round of discussion, this time focused on chalking out a prudent financial plan. These discussions involved getting information about goal planning and then building a road map to achieve the financial goals. “Even though we wished that Amit had met us a little earlier, in hindsight, his timing seems perfect. Also, had we met a couple of months later, when the Covid-led correction had hit the markets, it would have been difficult to convince Amit,” Sourabh says.

The discussions with Amit led Sourabh to arrive at two primary financial goals—retirement planning and child’s education. “I did not have any financial plan earlier and was saving money randomly. Sourabh and his team brought a lot of clarity into my life goals. Once we decided on our life goals, it became easier to set aside some money every month towards such goals. Sourabh advised me to invest through SIPs instead of investing a lump sum. This advice worked wonders in the first month itself, as we saw Covid-led market correction. Had I invested a lump sum in February 2020, it would have dented my confidence in the markets,” says Amit.

Amit started with an SIP for Rs 40,000 per month in March 2020. While the markets corrected significantly, Amit experienced the benefit of SIP investing as he had just started off and did not have a significant investment portfolio to bear losses. Instead, he could reap the benefits of regular investing at lower valuations when the markets were down. Now, after a sharp rebound and the markets touching all-time highs, Amit is a delighted investor as he is sitting on healthy gains in his investment portfolio. With a pleasant experience in mutual fund investing, Amit’s confidence in investing in the markets has strengthened further and he has invested more money into equity funds through STP (systematic transfer plan).

While his experience in mutual fund investing is less, Amit combines his earlier investing experiences and shares his investing lessons below:

1) Asset allocation always helps: “I had been investing in real estate before meeting Sourabh, as investing in a physical asset always gave some comfort,” says Amit. However, Sourabh and his team explained the importance of maintaining the right asset allocation instead of remaining inclined towards a single asset class. So, from real estate occupying the larger piece of the pie before 2020, the investment portfolio now comprises equity, debt, gold and real estate. Sourabh adds, “A prudent asset allocation strategy aims to balance the risks and rewards by dividing an investment portfolio among different asset classes like equity, debt, cash, real estate, gold etc. It helps the portfolio benefit from the strengths of these asset classes while mitigating the investment risks and protecting returns better.”

2) Proper goal planning is a must before investing: Proper goal planning is always imperative for the success of any investing strategy. Investing without goals in mind is like driving without any destination. It is said, “If you don’t have any destination, any road will take you there.” If there is no goal in sight, any investing strategy will seem to be working. However, if one has a financial goal, it acts as an implied incentive to save and invest regularly.

3) Choose the right investment product for financial goals: It is always advisable that the product choice should be as per the risk profile and goals of the investor. One should not adopt a ‘one size fits all’ investment strategy. The mutual fund schemes should be selected according to the financial goals and investment horizon. While some asset classes may be more suitable for the long term, other asset classes may be more appropriate for short-term goals. For example, equities are volatile over the short term but are advisable for the long term for their wealth creation potential. Similarly, debt may provide portfolio stability over the short term but might be unsuitable for long-term goals.

4) Liquidity of investments is imperative: “Very recently, I needed Rs 2 lakh for some urgent work, so Sourabh helped me redeem money from debt funds which was meant for the short term. And the money came to my account the very next day, that too without any penalty (exit load). It was an amazing experience which I could have never imagined in real estate,” says Amit. An investment portfolio should be available for investors for any financial contingencies. Some asset classes, like real estate, may be less liquid than others. Real estate investments are generally characterised by a high ticket size and low liquidity since such investments are not divisible and need to be disposed of in their entirety. For example, one may own a flat valued at Rs 1 crore but may not want to liquidate it if one needs Rs 10 lakh for any financial goal. Similarly, one may not realize a property’s fair value if one needs to sell the property at short notice. As such, the investor may not be able to utilise such investments for short-term fund requirements.

Sourabh Mahajan, Founder & Financial Coach, True Wealth


Financial Planning of Amit Chawla is based on the “personal opinion and experience” of Sourabh Mahajan, Founder & Financial Coach, True Wealth. It should not be considered professional financial investment advice. No one should make any investment decision without first consulting their advisor and conducting research and due diligence.

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