‘I didn’t invest in equity as I saw too much risk’

Nawin Chandra, 44, didn’t bother with saving and investing in the initial years of his career. The Mumbai-based HR professional started working right after he finished his education, having been hired as a trainee. “When I started working in 1998, I used to get a stipend. When my income grew, I started investing, but only to save tax,” he said.

In the first decade or so of his career, investing for longterm goals was not an option given the expenses, but it didn’t worry him. “Both my wife and I were working, so we didn’t feel the need to provision for financial goals as such,” he said.

Chandra eventually did invest, but chose “safe” investments. “My father advised me to invest in PPF (Public Provident Fund), bonds and to buy LIC policies, so I did, and I was happy with assured returns of 6-7%,” he said. A few years later, Chandra decided to invest in equities, but the experience put him off. “I decided to invest in a unitlinked insurance plan (Ulip). I put in ₹30,000-40,000, but got back only about half of that amount. So I became more cautious,” he said.

It was only when Chandra and his wife Sunita Rath, 43, decided to buy a house that the Deepali Sen, certified financial planner and founder of Srujan Financial Advisers LLP Mumbai

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ABHIJIT BHATLEKAR/MINTThey also needed to provision for their children’s higher education, especially if they were to go abroad, and started looking for a financial planner. A neighbour told them about Deepali Sen, certified financial planner and founder of Srujan Financial Advisers LLP, and they started a plan with her.

When Sen started planning his finances, Chandra was still servicing his home loan. He hadn’t bothered to close it because he could afford to pay an EMI of around ₹40,000. “I explained to him that a loan was not going to add any value to his corpus, so it was detrimental to keep servicing it,” said Sen. Once the loan was paid off, she channelled the EMI amount into investments.

Sen also stopped the couple from investing in real estate. “They wanted to buy a property as investment, though they already had a home. I explained that it would hit their cash flows for the next 20 years or so, and not give them great returns. As the couple was already in their early 40s, this would have been unwise,” she said. She made it clear that if they wanted to buy a house, they would have to sell the one they owned. “But it wouldn’t make sense to upgrade from a three-bedroom to a four-bedroom house because such needs are unending, and trying to satisfy them would mean ending up in a debt trap or with no savings,” said Sen.

With liabilities out of the way, Sen turned her attention to investing. “When I met him, he only invested in FDs. I told him that if he wanted his money to grow and beat inflation, plans, there are four sum insureds (₹5 lakh, ₹10 lakh, ₹20 lakh and ₹50 lakh) and two age categories—eldest insured is 30 years old or 45 years old. For the first category of eldest person being 30, the cover is for three people, two adults and one child. For the 45-years category, the cover is for two adults and two children. For individual plans, the sum assured are ₹5 lakh, ₹10 lakh, ₹20 lakh and ₹50 lakh. In each of these, the ages are 30, 45, 60 and 75 years.

Waiting too long to invest

Not closing a loan on time

Wanting to invest in real estate

the only way was to invest in equities,” she said.

But given his experience with Ulips, Chandra’s wariness of equities persisted. “I answered his unasked question about volatility, which he was still worried about. I told him that it was bound to happen, and that’s how you make money. One way to control the impact of volatility is to invest in long-term goals, like children’s higher education and retirement,” said Sen.

Now Chandra is attuned to the idea of budgeting and has finally overcome his anxiety about investing in equities. With a little help from Sen, he is investing for his long-term goals through SIPs in mutual funds to beat volatility.