For A.R. Ganj, 64, retirement is still about a year or two away, but it promises to be truly golden. In the daily din of life, most of us do not get enough time to pursue our hobbies and secretly hope that we would find the time and the opportunity in our retirement years. But to do that, being financially secure at that time is vital. And to achieve that, you would need to work towards that, much in advance. In fact, the sooner you start, the better.
Ganj, too, has plans for his retirement years and the best part is that he is in a position to pursue and fulfil all of them. “I can do what I want to do now.” He plans to make two trips abroad every year. “My aim is to play golf in every country with my friends,” says Ganj; his voice betrays his sense of relief in terms of being in control at his age. A man who worked hard all his life and had the foresight to plan ahead deserves to be worry-free at this age. His two major expenses, children’s education and marriage, “have been well taken care of”, so there is little to worry for him.
“I am just waiting to complete a few projects before I finally retire,” says Ganj.
Ganj started planning about 30 years ago, but he formally took the services of a financial planner only in 2004. Coming from a business family, he always “respected money”. While people who are financially organized aim at saving a maximum of 40-50% of their salary, Ganj went a step further. “My idea was to save as much as I earned by supplementing my income with returns from my investments,” he says. That was a tough call, but he achieved it over the years. “Dividends from equity take care of my household expenses roughly,” says Ganj.
Lull in savings
The biggest problem in the building up of his portfolio, according to Ganj, is the fact that he stopped looking at the market for a decade or so. As his life became busier and his income increased, he focused on his savings.
“In my first job in 1971, I earned Rs100. It’s been a long journey since then,” he says.
Another major problem he lists is this very fact—that his income was very low. “Obviously, my savings were negative in the initial years,” he says.
Exposure to equities
Apart from golf, the 64-year-old has a keen interest in the stock market, but that doesn’t mean he is not invested in safer instruments. He exhausts the investment limit of Rs70,000 in his Public Provident Fund every year.
Once his savings were on track, Ganj invested substantially in the stock market. “My planner made me conservative and more diversified. I have reduced trading and speculation,” he says. However, equities still remain his “first love”. “I still can’t resist some amount of trading as I understand fundamentals as well as charting. Though I don’t make much money from it, I don’t want to forget the art. And, of course, the kick helps,” he chuckles.
Though most in his age group may prefer to exit equities and move completely into safe instruments, Ganj is a firm believer in equities and that’s because he understands the markets well, he says. Also, financial security has given him the strength to take risks. “Financial security helped me taking some risk in life. That worked,” he says.
Besides, he is realistic about his expectations. “A long-term post-tax return of 12-15% is good. By long term, I mean seven to eight years,” he says.
Says his planner, Shankar S.: “I admire his enthusiasm for equities, but I have advised him to diversify to other assets as well, and he has done that to a large extent. Today, his portfolio has all asset classes.”
Wealth creation, goals
“Earlier, my focus was equities and saving taxes, now it is growing wealth for the next generation,” says Ganj. Ask him what he has built for his kids, he turns philosophical and quotes Kabir: “The great poet says that a good son will provide for himself and there is no need to leave anything for the bad one. I want my children to do well, on their own. I have taught them values about money and that, I think, is my biggest contribution.”
He always had informal goals, but they got concretized and specific after he took the plan. “My achievements have been modest,” he says.
One subject that is key to financial planning revolts Ganj—insurance. At his age, he doesn’t need insurance, but the problem is he doesn’t even want his son to buy a risk cover, who has wife and children.
He admits he doesn’t understand the subject, but adds that insurance companies are profit-oriented and their products are very expensive. “My planner is trying to get insurance in my head,” is all he says.
Shankar says: “I try to make him buy at least a term cover for his son. He himself has no financial dependants and has accumulated assets. Insurance, in his case, is at best an investment and not a risk cover. I agree with him that most insurance products are not investor-friendly. At his age, I don’t think he can look at paying premiums for another 10 years or so.”
This is a mistake that most people commit. They treat insurance as an investment tool and don’t understand that from the investment point of view, insurance is a very expensive product and should be taken only as a risk cover. In Ganj’s case, he does understand the fact that insurance is an expensive investment tool, but doesn’t see the risk cover point, probably because it’s not feasible for him any more.
The whole process didn’t cause him any pain as he was always a careful spender. “There is no limit to what I spend on food, but when it comes to clothes or other such items, I limit myself to what I really need,” says Ganj.
“Life has become more disciplined and simple after the plan,” he sums up.
Diversification and asset allocation