If the previous generation suffered from lack of choice, today’s investors suffer from a problem of plenty. Understanding so many types of investment products can be time consuming. Gurgaon-based Rajat Jain and Smriti Handa, both in their mid-30s, understood that their investments in real estate and fixed deposits (FDs) were not ideal, but they didn’t “have the time or the expertise" to investigate other avenues, said Rajat, an FMCG marketing professional. “We tried to do on our own, but it takes a lot of effort and time," said Smriti, who is an HR professional in the healthcare sector. 

A weighed down portfolio

A few important things soon became clear to them when they started consulting with their financial planner, Amit Kukreja. One of the first was the need to know what they were investing for. “We had some goals but needed clarity," said Rajat. The couple narrowed down to a few goals and when these would be due. In the short term, they wanted to buy a bigger house, and in the long term, they wanted to build a corpus by age 60; and invest for the education needs of their 8-year-old daughter Svasti.  

“Especially, when you have kids, you have to plan more. People told us that we would have to spend much more on our daughter’s education than what our parents spent on us. Someone also gave an estimate of how much it would cost to send her abroad," said Smriti. 

The couple had bought a house but after living in it for about 3 years, during which their daughter was born, they felt they needed a bigger house. 

With targets set up, the plan moved ahead. Life insurance was inadequate—Rajat already had a term plan, which was enhanced and Smriti bought a new one. They also bought a critical illness cover. 

A look at investments revealed a heavy tilt towards traditional products. “Our asset base was largely real estate and some FDs; nothing was in the markets," said Rajat. Their financial planner explained that they were under-utilising their money. “Even if FDs gave 6% or 6.5%, there are options that could give, say, 11%," said Smriti. They realised they needed to keep inflation in mind. “I realised the value of money will go down over time," she said.

Large real estate investment was another problem. “It (realty) was not mindless investment. There is mental security," said Rajat. But when they saw the returns these would generate, they decided to reconsider. “When you do the math, you see that it’s not worthwhile," said Smriti. The couple has decided to sell some of their holding when the time is right. “We will sell something but there’s no urgency," said Rajat. 

Corrective measures

After risk analysis and asset re-allocation, the couple got a clearer view of what’s possible and what’s not. Being overly concentrated into debt instruments and real estate would not have worked in the long term. So some investments were shifted to mutual funds—equity, debt and hybrid funds.

For their daughter’s education, they now invest through SIPs. “We have about 10 SIPs for mid- and long-term," said Rajat. Some of the money from FDs has been moved to debt funds. Mutual funds give them the confidence that they are investing enough and will be able to reach their goal of building a retirement corpus.

A process that allows them to invest systematically puts Smriti and Rajat in a stronger position for their finances. Seeing the money work in real numbers rather than estimates has given them a firm footing.

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