What a fitness trainer learnt on his investment journey

Amit, who lives with his wife, mother and a son, was not sure as to whom he could confide in. “I asked my friends, if it is good to invest in mutual funds? Some said , it’s not a very good idea. Some said you might not be able to make any money, and so on," said Amit.

All this changed soon.

Investment journey: “One day, I met a college friend who introduced me to Rachit Chawla, a Sebi-registered investment advisor and the founder and CEO of Finway FSC," said Amit. “My friend told me that he had helped him with useful investment tips, following which he has been enjoying a lucrative investment portfolio over the years," he added.

During Amit’s first visit to Chawla’s office in 2018, the latter’s first question was, “What do you want to do?" Amit replied that he wanted to invest some money in a safe and rewarding option, but he was unsure where to invest and how much.

 

 

After listening to Amit, Chawla advised him to begin with Systematic Investment Plans (SIPs) for better outcomes. And Chawla emphasized on long-term plans to receive a better return on investment (ROI).

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Investment planning: After giving his consent to Chawla’s suggestion for a long-term SIP, Amit requested Chawla to guide him on which funds would best suit him and how much he should invest in his maiden attempt. Chawla asked Amit to start with a ₹5,000 SIP in the Nifty 50 Index Fund under the direct option with UTI AMC since it had the lowest management fees.

Chawla noted Amit’s long-term goals, including his son’s education, marriage and retirement planning. “ ₹5,000 per month was not a big deal for me, and I could do that quite easily.I started investing in mutual funds as suggested by Chawla," said Amit.

The Covid era: The year 2020 began on promising note; the fund was performing great, and Amit was amazed to see the growth of his investments in just two years. However, after a few weeks in 2020, India was witness to the Covid-19 outbreak. Things turned topsy-turvy, the market went bearish, and stocks started crashing. Investments made by Amit were no exception and they fell drastically.

This was initially shocking for Amit, but he recalled Chawla’s words that he had to wait for at least five years before taking a safer bet in equities. Further, Chawla convinced Amit that instead of worrying about the slump, he should invest more because it was the best time to make some big deals.

“Have you got scared about the market? There is no need to feel anxious. Stay relaxed as you have invested in a balanced plan. Don’t worry at all. Trust me, and don’t even think about it," said Chawla to Amit.

Chawla further said that the SIPs he continued during the pandemic gave returns of more than 100% (UTI Nifty 50 Index Fund Growth invested in 2020 has gone up by 100%).

“In a few months, Amit acknowledged that if the market crashes, he should get the same quality stocks at lower prices. He is confident that in the long run, the fair value of the stocks will be discovered," added Chawla.

Besides, Chawla encouraged him to create an emergency fund to meet future unexpected expenses. He asked Amit to maintain around 12 months‘ expenses in the emergency fund. Chawla further suggested him that any liquid money, he has should be invested immediately (during the pandemic).

So, instead of thinking of closing or breaking the SIPs, Amit followed Chawla’s optimistic advice; this time, he invested in a debt/liquid fund after maintaining his emergency funds. Thus, after a few months in 2020, Amit again inquired about more options that could further increase his passive income. Chawla helped him with a similar kind of SIP of ₹5,000.

While figuring out how Amit can achieve his financial goals for his child, Chawla decided that Amit could do this with a monthly investment of ₹5,000, as this amount invested monthly over 20 years will fetch him around ₹75 lakh if it grows at a rate of 15% per annum.

Chawla further said, “India’s GDP grows at 7% per annum, and inflation at around 6% per annum on an average plus 2% dividends reinvested can fetch a return of 15% over a longer period from Nifty 50 MF."

“I have also suggested that Amit make 50% of his investments in debt funds, including UTI liquid fund or HDFC Liquid. We considered these debt funds as Amit can withdraw them immediately whenever needed," added Chawla.

Current ballpark values: Amit’s portfolio has 50% equity and 50% debt investments. His 2018 SIP has now gone up to ₹3.6 lakh, and the other one, started in 2020, has reached to ₹1.8 lakh.Amit said he is delighted by the current growth in his portfolio and hopes he will comfortably achieve all his financial goals.

Amit also has a traditional life insurance policy which he bought a long time ago. He doesn’t have a term plan. He does have a health insurance policy, though – a family floater policy.

Chalwa says volatility is a part of stock markets, and one should invest with a long-term objective.

Essential suggestions by the planner: You must assess your risk profile and financial needs before investing in mutual funds.

One can take advice from a Sebi-registered financial advisor and benefit from it. Invest for the long term, especially if you are having exposure to equity. Investing through SIPs reduces volatility.

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