When Sriram Jatla first started working in his early 20s, investments were not really a priority. Five years later when he tied the knot, his wife, a cost accountant by profession and an avid investor, introduced him to the concept of planning, budgeting and managing finances. Since then there has been no looking back.
“I started taking a keen interest in everything to do with money, from tracking my expenses to putting in enough time and study before allotting money to any investment avenue,” he says. It wasn’t a surprise that the planner was pleased with the corpus Jatla and his wife had built.
Although lack of time was the main factor that drove Jatla to see a planner, there were other benefits too. Says Jatla, “The planner fine-tuned my portfolio and infused it with fresh strategies and ideas, making it look a lot better. Besides, he also gave me immense confidence that I was on the right track and will continue to be.”
Problems and solutions
No liquid reserve: Although his investments were in place, all the money was parked in illiquid and long-term avenues, such as real estate. Thus in case of an emergency, there was no pool or resource he could turn to. He says, “If I ever needed cash urgently, then I would either break a fixed deposit (FD) or take a loan against it.”
The planner set this right by initiating regular investment in liquid funds to carve out an emergency pool. The liquidity also enabled him to fulfil his goal of buying a car earlier.
Too many bank FDs: Though he did not shy away from equities and markets, he also parked a larger proportion of funds than required in bank FDs. Says Jatla, “Earlier, too, equity-oriented mutual funds were my favourites but still a substantial amount went into FDs.” The planner got him to liquidate some of the FDs and channelized the proceeds into other accounts and avenues, which made a substantial difference to his returns.
No classification of long-term goals: Jatla had beautifully managed all his short-term goals in a debt-free and efficient manner. “Right from the beginning, I have been averse to debt, so I would accumulate money and then make any purchases.”
However, his long-term goals needed work. He says, “I did set aside money for long-term goals and I knew what they were, but while investing I didn’t really distinguish between them.”
Photo: Aniruddha Chowdhury/Mint
The planner helped him chalk out each goal in detail and classify them with clear timelines and corpus sizes. For instance, earlier all his long-term goals such as future expenses related to his daughter and their retirement were blanketed under one umbrella. The planner helped him strategize and quantify these and changed his approach when it came to long-term investing.
No Public Provident Fund (PPF) account: Though they had an Employees’ Provident Fund (EPF), the Jatla family missed PPF. “Somehow, opening a PPF account never crossed our minds,” says Jatla. With an 8% return and backed by government security, this is one of the best investment avenues for a long-term investor.
The planner advised them to open a PPF account in their daughter’s name. They exhaust the limit every year. This was tailored to the goal he was saving for as well. “Given that we are currently focusing on long-term goals, this choice of avenue is perfect.” The account will mature in time for their daughter’s higher education and hence the planner advised him to earmark this pool for the purpose.
Jatla wants to retire early. Therefore, the planner has directed a large stream there.