From having only fixed deposits, we have moved to equity and debt funds
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Prashant Bhagat has been consulting a financial planner for almost 4 years. “I was only investing in fixed deposits (FDs) and recurring deposits. I knew I was saving but I never felt that was enough. I knew people were making a lot more money by investing in equities but I lacked the knowledge and confidence,” said Prashant.
He sought professional advice as he had limited knowledge of equities. “I wanted someone who could explain about equities and also help me invest. A friend suggested a financial planner and that’s how I began consulting Pankaj Mathpal,” Prashant added.
Prashant went to meet the planner with his 56-year-old father who works for Mumbai Police. “My father is also very conservative, so he also had only FDs for investments. It was important to meet a planner to know if we were doing the right things,” added Prashant.
Meeting the planner made him realise his mistakes. “The only equity investment I had was a unit-linked insurance policy (Ulip). I had bought it on the advice of an insurance adviser who told me that I would get stock market returns but didn’t really explain the charges.... I realised I was paying a lot in terms of charges,” he said. On Mathpal’s suggestion, he surrendered the Ulip. “My policy was not performing. I used to pay Rs50,000 every year and at the end of 5 years, when I surrendered, I got only Rs2.30 lakh. I won’t be buying Ulips anymore but I have a term plan now, which I should have bought in the first place,” he said.
Getting his plan right
In the first meeting, Mathpal tried to understand Prashant’s job profile, existing investments, financial goals and his risk profile, to assess how comfortable he was with equity. “My planner further explained things like equity portfolio, large-cap and mid-cap mutual funds and how I could diversify my portfolio to minimise risks,” he added. Prashant now has a portfolio of five mutual funds. “I also keep some emergency money—about 2-3 months' of income—in a liquid fund,” he added.
His wife Komal also consults Mathpal and has begun investing in equities. However, a small part of her salary is still in recurring deposits. “After getting married, I began consulting my husband’s planner...I wasn’t much aware of financial products as I come from a family that invests in traditional products only,” she said. “I now invest in mutual funds through SIPs (systematic investment plans) but I continue with recurring deposits as I am comfortable doing that,” she added.
Prashant’s father has also changed his financial portfolio. “My father always parked money in the bank but now that’s changed. He now has equity investments, though a big chunk is parked in debt funds. Also, he now puts money in liquid funds instead of in the bank,” added Prashant.
“One of my mistakes was to mix insurance and investment. I won’t be repeating that,” Prashant said. He now has a term plan and health insurance for the family and believes firmly in asset allocation. “I don’t maximise my Public Provident Fund (PPF).... My money in PPF and EPF takes care of my debt portfolio. I am invested mainly in equities now,” he said. In fact, the couple also plans to wait before buying their house. Prashant, who currently lives with his parents, said, “We wanted to buy a second house but our planner dissuaded us. He explained that real estate is not an ideal investment and that we should focus on equities. So now we will wait for the real estate market to correct,before buying a second house,” he added.
Their long-term goals are retirement and their 6-month-old son’s education. “We started investing for our son right from his birth,” said Prashant. The focus points of their short-term goals are buying a house and their son’s school admission. “We now have a comprehensive financial plan and our planner reviews our portfolio periodically,” he added.
Name: Prashant Bhagat
Profession: Research analyst with an IT firm
Name: Komal Bhagat
Profession: Company secretary
Financial planner: Pankaj Mathpal, certified financial planner and MD, Optima Money Manager Pvt. Ltd