retirement planning. corpus ~ 300 times current annual expenses corpus ~ 38 times annual expenses at...

Retirement Planning

Corpus ~ 300 times current annual expensesCorpus ~ 38 times annual expenses at retirement

Invest as much as you spend each month for retirement!

Current dateYears to retirement 24Age at the end of current year 40Years in retirement 26Total annual expenses 520000Annual expenses when you retire 44,42,903 Corpus required 14,70,12,786 Corpus accumulated so far (updated from mf holdings) 20,82,664 When you retire the corpus from other sources will grow to 98,46,585 When your retire the current mf corpus will grow to 2,05,13,686 If you were to retire today the current corpus will last for (years) 6.63If you were to retire as intended you will be financially independent for (years) 6.49Net corpus required 11,66,52,514.90 investment required each month 41,118 Provided this investment increases each year at the rate of 10.00%EPF or NPS divided by investment amount 54%

Financial Goal Tracking

• Be obsessed over goal planning entries not over mutual fund corpus

Essentials of a good portfolio

• Minimalist : We must be able to justify the presence of each asset class or instrument.

• Minimum number of asset classes

• Minimum number of stocks, equity funds or debt products

• This will typically make the folio diversified among and within asset classes

Simple portfolio ideas

Equity (60%) 10% return

1. Single Large Cap fund

2. One large cap +one mid/small cap fund

3. Single Large and mid-cap fund

4. Single equity oriented balanced fund

Debt (40%) 8% return (pre-tax)PPF for 15+ Y goals for options 1,2 & 3 (do not max!)

Ultra-short-term liquid funds for less than 15Y goalsBanking debt mutual funds

Long-term goals (10+ years)


Equity (0-40%) 8% return




4. Single equity oriented balanced fund

5. Single debt oriented balanced fund

Debt (100-60%) 8% return (pre-tax)Ultra-short-term liquid funds for less than 15Y goalsBanking debt mutual funds

Medium-term goals (5-10 years)


Equity (0-10%) expect nothing!




4. Single oriented debt balanced fund (5Y)

Debt (100-90%) 6-7% return (pre-tax)FDs, RDsUltra-short-term liquid funds for less than 15Y goalsBanking debt mutual funds

Short-term goals (0-5 years)

How many funds should I hold?

• Minimum:

1 fund! (all goals combined into one)

• Maximum:

No of long-term goals (10Y+) x (1 or 2)

How Important is

Mutual Fund Selection?

Large Cap Funds

Computed with SIP calculator, thefundoo.com

Large Cap & Large/Mid-Cap Funds


Large Cap, Large/Mid-Cap & Mid/Small-Cap Funds


Lump sum returns

Minimalist Portfolios

• Single Large Cap mutual fund (60%) + PPF (40% only!)

• Single Equity-oriented balanced mutual fund

• Single Large Cap or Large and Mid-cap fund with exposure to international stocks.

• Equity fof + Debt fund of fund

• Single portfolio fund of fund

How to select an equity mutual fund?

• Decide on the strategy.

(1)Why are you investing?

(2) What kind of portfolio will you be using?

Equity mutual funds: How to select/evaluate


Upside Capture ratio: When the benchmark has given a positive return (> 0), has the fund outperformed it?Higher (> 100%) the upside capture ratio, the better.

UPC = 120% => 20% out-performance during up-market

Downside Capture Ratio: When the benchmark recorded a loss, that is a negative return (< 0), did the fund record a lower or higher loss?Lower the downside ratio (<100%), the better.

DCP = 85% => 15% out-performance during down-market

Upside Capture ratio: When the benchmark has given a positive return (> 0), has the fund outperformed it?Higher (> 100%) the upside capture ratio, the better.

Downside Capture Ratio: When the benchmark recorded a loss, that is a negative return (< 0), did the fund record a lower or higher loss?Lower the downside ratio (<100%), the better.


Rolling returns analysis

3YFund (blue)

Vs benchmark

5Y

How to select a debt mutual fund?

Use only if •your goal is more than 3 years away •and less than 15 years away

Understand risks• interest rate risk capital gain/loss• credit risk accrual


Interest rate risk

Creditrisk

Gold Fever!

Gold Rolling Returns

Gold vs. Stocks

An all-weather portfolio?

33% gold, 33% equity, 33% debt

Source: Value Research

Portfolio RebalancingIntended Asset allocation: 60% Equity 40% DebtSIP with annual increase in monthly investment = 10%

Portfolio RebalancingIntended Asset allocation: 60% Equity 40% DebtSIP with annual increase in monthly investment = 10%Difference between the corpuses ~ 7%

Portfolio Rebalancing

What does it take to do your own financial planning?

Confidence: to DIY. Doing it yourself, means

doing it yourself.

Inclination: to take control.

Clarity: investing with priorities, something I would like to call contented investing

Recognition: Portfolio management of long term financials goal is the most important task of financial planning.

Keep it Simple• Discipline!

• Monthly review of investment schedule

• Annual review of value

• Rebalance periodically after several years!

• Manage risk close to due date

Winning in personal finance

123

Retirement Planning:Inflation-protected Income

Strategies

The Income drawdown strategy

Decreasing CorpusDrawback: Large initial corpus

Retirement Bucket Strategy

5Y

10Y

15Y

20Y

6%

8%

10%

12%

Real-life Example• Couple both aged 60• Monthly expenses 10K• Both diabetic, no mediclaim• ~ 35 L corpus

Bucket 1: 5-6L for medical corpus + emergencies

Bucket 2: income ladder for 5Y with 6.5L using FD

Bucket 3: Invest 6.5L in a banking debt fund

Bucket 4: 6.5L in a monthly income plan

Bucket 5: About 9.5L in a balanced fund

Planning for our children’s future

Freefincal – Child Planner

retirement planning. corpus ~ 300 times current annual expenses corpus ~ 38 times annual expenses at...

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