Career planning needs a new Mantra

I had written a post earlier about how we need to look at our lives and take stock of it in the post Covid world. Since then a lot of people have asked me as to how this will apply to career planning. The purpose of this post is to outline my thoughts as to how career planning will have to change in the new times.

What are the changes we are facing today in the business environment with specific focus on jobs and careers? Well, there are many but I can think of the following significant trends :-

• The physical office will become less relevant with time and several companies and job roles will get remote in nature.
• Geography was already history a few years back but the pace will quicken a lot and many more jobs will move across geographies than ever before.
• Technology awareness will become the key component of most job roles and this will put the older workforce at a disadvantage.
• Jobs will increasingly seek younger people to perform them, so what roles used to be performed by people in the 40’s may now well be performed by people in their 30’s now.
• Traditional job contractts will diminish in nature and freelancing for specific assignments can well become the norm in many industries.
• Companies will no longer take people for a long term career and the idea of retirement will take a complete shift.

In the context of the above, what should be the career mantras be for people in the different stages of their careers. Again, there will be many different angles but I will only deal with the purpose of advising people who are from their 20’s to 50’s in different decades of their professional life.

• If you are in your 20’s and are just entering your professional life, or have been there for a few years, focus on building up your skills and aptitude that are valued in your insdustry and outside it too. You cannot depend on your company or industry for long term employment , so it is important that you have career portability within your industry and, ideally, even outside it.
• For those in their 30’s with about a decade of experience, the learning curve needs to be a steeper one. If you do need to change your career direction by going into a new industry then the time is really now. You will not be able to do it after a few years any more. So, if you are stagnating in your current company or even industry, make it a point to actively reinvent yourself and look at things that you can possibly do.
• For those in their 40’s a career switch to a different industry may not be practical any more but you can use your experience to get associated with new age companies starting up in your industry or even connected industries. Your experience will be valued immensely by many startups, especially if you are able to gel well with younger people.
• If you are in your 50’s you are really fortunate as you can look to wind down gracefully without having to think of a new rat race starting with different rules of the game.

How does this change your situation in terms of financial planning? Quite a lot really as you can no longer depend on a 3 decade long time span to build a retirement corpus, that can take care of you for the next 30 years of your life. Financial independence, is now not going to be a buzzword only, it is going to be critical to achieve as early in life as you can.

In my next post I will write about the changes in financial independence imperatives in the present times.

Active equity investing must be the new paradigm

For a long time investors have been told worldwide and especially so in India that it was good to keep investing in equity regularly without worrying about the ups and sowns of the markets. I must say that most of the people who started investing after 2008 had been quite benefited by the same too. The markets generally went up over the years and the MF schemes largely did well, at least till 2017 or so. However, as the last few traumatic months have taught us, investors cannot trust the passive mode of investing any longer.

Let us understand the issue with MF portfolios in light of what happened this year. I will try to illustrate my point with 5 year and 3 year returns of some of the more popular MF schemes :-

• ABSL Frontline Equity has 3 years return of 1.5 % and 5 years return of 5.3 %
• HDFC Top 100 has 3 years return of 1.3 % and 5 years return of 4.7 %
• ICICI Value Discovery has 3.4 % for 3 years and 4.4 % for 5 years

Note that these were the apple’s eye of the finiancial planners 5 years back and they pushed these schemes for most people. These have lost favor now but most of you who are having investments in MF over 7 years or so will be having them. Obviously these have not worked out too well when the average PPF returns were more than 8 % in the corresponding period and even today’s lowly FD rates are more than 5.5 %.

Some people may start wondering whether equity is worth it at all or not but that will be akin to throwing out the baby with the bathwater. What we really need is active investment in equity, the passive investment model of keeping on investing in an SIP mode and having blind trust obviously does not work. Some of the elements of active investing will need to be as follows :-

• Do not have a SIP mechanism like the one you have now. Invest regularly every year or even every month BUT vary your purchases of units based on the market state. This is something I have recommended in the blog for a long time and you can read some of my older posts as to how this can be done.
• If you are investing for a particular goal in your SIP portfolio, have a hybrid fund or a pure debt product such as PPF linked to the goal. Whenever you have a high market gain, redeem some money from your SIP portfolio and put it into the hybrid fund or PPF. This step protects your gain and serves as a hedge against you having to distress sell your SIP portfolio, should the markets tank and your goal is at hand.
• Review your SIP portfolio annually and be ruthless about weeding out the non performing MF schemes. 

What about the Stock portfolio then, if you do have one? My belief is you should only get into a stock portfolio if you understand it reasonably well, are willing to learn and can afford to spend time on it. The passive mode of buying some good stocks and forgetting about them will not really work. For every exciting story you read about on the internet, there are hundreds of failures that never get talked about. A stock portfolio will be a great thing to have for people who can manage it actively. If you are one of them go ahead, there will be risks associated but the rewards are great too.

One may ask whether it is possible to do active investing with a full time career and other family responsibilities. If you are finding it tough then engage a financial planner BUT explain to him clearly as to how you want things to be handled. Do not agree to the passive mode of investing, what happened in 2008 and 2020 may well happen again.

On a personal note, I am happy to say that I am starting 2 HELP engagements with this week and both people have been long term readers of my blog 🙂 People interested in knowing more about HELP can search for the posts in the blog. I am looking to sign up 3 more people in August, so write to me at rajshekhar_roy@yahoo.co.uk if you are interested.

Market crashes can derail your financial planning totally

Over the years, I have believed in my 2 asset theory for investments as an ideal combination for financial planning and it has worked out well for me. Several people have asked me at different times, especially when the markets are going gung ho, as to why I am interested in Debt when equity is doing so very well. I am sure the events that unfolded in 2020 have made them much wiser now.

Equity as an asset class will always go through it’s ups and downs and that is really not an issue. Your financial planning framework will normally have a plan for equity over 15-20 years and even more. For such terms it should work out quite well, if your return expectations are modest, let us say in the region of 10-11 % or so. However, what happens when you are close to your goals and you suddenly have a market crash like we had in 2008 and again in 2020 ? Your goal is looming large and your portfolio may have just shrunk by more than 30 % in a matter of days. This is not just a doomsday prediction, it happened for many investors just a few months back. In order to make things clearer, let me take a real life example.

A person who is engaged with me for the HELP program now, had a goal for his daughter’s education in 2022 of an amount 1 crore. This was for an undersgraduate program in an US university. The portfolio of his MF plan had reached about 75 lacs and he was quite confident of getting to that amount. However, the crash got it down to 53 lacs or so and he is now struggling to get back on track. I only wish he had started the HELP engagement earlier in the year, I would have made him aware of the risks.

So what went wrong with his planning that he had done by paying a considerable amount of money to a financial planner? His planner and he had accounted for falls in the equity markets but not for a crash. Most plans can take a 10-15 % cut in portfolio value for a year or so, but not a 40 % crash of the markets. Given time and patience, it is likely the markets will recover but your goals are in real danger if they are close by. The only real solutions are two techniques – firstly, you can provide yourself a backup debt portfolio and secondly, you can use the good times to put money in your goal fund out of the gains you have made. I will discuss both of these in future posts, you can search my blog for earlier posts in these topics also.

Finally, some readers have asked me as to whether I undertake Financial planning and if I can do it for them. My answer as always is the same – I am only having the HELP program to offer people who reach out to me. It is a comprehensive program that looks into life planning and financial planning is a part of it. If you are interested in knowing about it, read my blog posts that talk about it and write to me at rajshekhar_roy@yahoo.co.uk with your details. I will get back to you.

Nifty has revived and so has this blog !!

The situation has been quite dismal this year through the world and I have been rather negligient of writing posts in this blog. In many ways, the crash in the stock market in March caused me to be fairly listless. Even as an experienced investor, it is not easy to see that 1/3 of your equity portfolio has vanished into thin air in just 10 days time !! So, yes, March and April were difficult times and I was fortunately busy with other things such as my B school mentoring and a couple of HELP related assignments.

I am thankful to my readers that they keep reminding me of writing posts, even though I have not written one for a long time 🙂 Based on this, I have decided to revive the blog and I do intend to be a lot more more frequent with my posts. I feel that I have already written a lot of posts in the blog that explains financial freedom and also my journry in achieving the same. From now, my endeavor will be to write on specific issues and what are my takes on them. It will be more opinion and knowledge sharing mode, rather than the explanation behind it, though I will always be happy to answer questions. As these posts will be on specific topics, they will also be shorter than my earlier posts.

I have also had some queries on the HELP program and wanted to address the general reader community on that issue. This is something I do for specific people and will be relevant for you only if you are willing to take a hard look at your life and finances. It is a serious engagement and therefore takes a lot of my time and I need to charge at a certain level for it. Fortunately, I am today not dependent on getting any active income so I do not need to sell the program, nor do I need to discount it. So, if you are interested, write to me at < rajshekhar_roy@yahoo.co.uk > and I will set up a call with you as a starting point. Note that this is way beyong financial planning, so if you are just looking at which MF to buy then this is definitely not the right program for you 🙂

While the above program will be probably done with 8-10 people this year, depending on my bandwidth, I am quite happy to address a lot more people on specific issues. Feel free to comment on my posts with your queries or even send me a mail. Note that I can answer a specific issue in a one time manner, some people want to make it into a financial planning discussion , which is not possible.

This is a new beginning for my blog and I, for one, am feeling rather excited about it.

Take stock of your life in the post Covid world

From time to time I get people requesting me to help them in Financial planning or to review their existing portfolios. While this is an important exercise by itself, I have always felt that it is a bit analogous to putting the cart before the horse. Finances support your life decisions and activities by allowing you to do the things you want to do in life. They do not, cannot and should not determine how you lead your life. A lot has changed for the world and India in the last 3 months and life, as we know it, will be very different from now on. In the changed context, my suggestion is that you take stock of your life first and then worry about the finances.

So how do you take stock of your life? Well, there can be several ways to do it and I have one which is my favorite. You need to look at a few important dimensions in order to decide how things are going. In each of these dimensions there are some key questions you need to be asking yourself. These questions will differ from one individual to another but I have given some examples that may help you form your questions. So here is how I would take stock of my life in any new year :-

• My work and profession
  • Is my current work aligned to my overall goals in life?
  • Am I happy with work content, work relationships and benefits?
  • Is my work helping me to create value and is intellectually satisfying?
  • Does it help in letting me lead my life well in terms of work-life balance?
  • Do I really grow every year as a professional and as a person with it?
  • Is there a case for considering a change in my current work or profession?
• My family and friends
  • Am I happy with the situation my family is in today?
  • Are all members clear of their goals in life and working towards it?
  • Am I able to influence and add value to their goal achievement?
  • Do I have the financial bandwidth to cater for their goals?
  • Are relationships within my family functional or dysfunctional?
  • Are we able to spend family time in vacations and other activities?
  • Are we able to achieve the difficult balance between space and togetherness?
  • Are all the members clear about important information in family matters?
  • Each year, is there a sense of progress and optimism?
  • If I repeated these above questions for my close friends how will the answers be?
• My contribution to society
  • Do I have intrinsic value that can be contributed in a positive way to society?
  • Am I doing enough to utilize my value proposition above?
  • Do I contribute to some charities to the extent that I can afford?
  • Am I involved in any community activities in a positive way?
  • Do I donate blood every year and have I predged my organs after my death?
  • Am I a role model to my children for them to become responsible citizens?
  • Do I consciously make an effort to vote in every election?
  • Do I use every public space or utility consciously and leave it in better state?
• Me as a person
  • Am I taking care of my health today to avoid problems of the future?
  • Do I exercise regularly and is there a need to make changes in that?
  • Do I strike a balance between work productivity and leisure time?
  • Am I able to spend time on the things I really enjoy doing?
  • Do I have a clear vision of the short term and medium term future?
  • Do I have long term goals and am I working towards them?

When you are doing this, do not attempt to rush through. Sit with a cup of coffee or whichever drink you prefer, think deeply through the questions and be brutally honest. Remember the questions have binary answers and if it is not a convincing YES then it has to be a NO. Give yourself 1 mark for every YES and 0 for every NO. In the end see how much have you scored out of 30?

What is a good score in this? Well an overall score of 25 or so will indicate that you are doing great in life and things can hardly be better, 20 will mean that there are several areas you need to improve and less than that will mean you have real issues and need to look at serious changes in 2020 and beyond. While you may want to deal with it yourself and many do have the ability, there is no reason to feel awkward about getting support from your family, friends, boss at work etc to make some important changes.

How can I help in this? Well this is an area where I can add value as an individual and have already done it for some people. I do a program called HELP ( Holistic Engagement for Life Planning ) that looks into life situation, changes envisaged and a way to go for them. It does have a financial planning component to ensure that such life choices can be sustainable. In case you are interested, reach out to me. I hope you understand this is a serious and time consuming exercise and is obviously a paid one 🙂

Wishing all my readers a stable 2020, where you must look to survive and sustain. Growth and thriving can honestly wait for another day!!

How the financial planners got it wrong for you?

Over the last one month I have got several messages from readers of this blog and people I know otherwise as to how their financial plan have gone totally wrong just in the space of a few trading sessions. Most people are shell shocked and are wondering how the basic strategy of SIP which was seemingly invincible has shattered so completely. While I agree that the current sell off is something no one could possibly have anticipated, the seeds of such a risky financial planning was sown much earlier through the SIP route.

The last time the stock markets in India went for a roller coaster ride was in the years 2008 through 2010 but not too many of the current investors were investing then. The whole idea of financial planning through SIP was started in full force after the 2008 January market crash. Investment in MF through SIP was touted as a big thing for planning your finances in order to meet long term goals of individuals. In the initial days SIP was promoted by many financial planners as a reverse EMI, only something that helped you build a financial asset as opposed to a home etc. The reason it became a huge success was the secular bull run that our markets had till very recently. Yes, there were many times when short term corrections were there but these were seen as opportunities to invest more in the markets.

Once the markets kept rising after 2010, the early adaptors of SIP saw great gains on their early investments and word of mouth advertisement along with the proliferation of MF agents with aggressive sales tactics ensured that it became the default choice of all the people coming into the workforce. Over the years the myth got propagated that SIP was almost like an investment in a bank FD only with a return of 12 % or more !! The investors lost sight of the risks that are part and parcel of every market. This was almost like an accident waiting to happen and it did, only the scale of it was swift and brutal. The plan of the financial planners was quite a good one, insomuch as investment in equity as an asset class for the long term is quite inevitable in a high inflation economy that we are. The error of judgement on their part is to get overly greedy and recommend that almost all investible surplus be put into equity. Investors not only kept increasing their SIP amounts but some also went into direct equity without knowing a great deal about the market and not having enough time to do adequate research.

The situation could have had a much better outcome had asset allocation been followed properly and people had 40 % of their assets in various debt instruments. Sadly, PPF and other small savings schemes were seen as stodgy and boring and even if some investors did go for debt, their choices were types such as the Credit risk funds etc which had their own problems too. The overall impact today is that the XIRR of a 10 year SIP is lower than those of PPF returns. Yes, this will become better over a period of time but a lot of the gains over the last few years have now been frittered away.

A lot of people who are readers of the blog have wanted me to advice them as to what they should do now? I am happy to answer any specific queries that you have, feel free to send it to me here or in the Facebook group. Some of you have also wanted to know if I can provide my HELP services to them. As I have said before, I do this only for a few people but in the current situation I am happy to take on a few more people. You can read about HELP program here and understand about the work I have done so far here. The people wanting to interact with me can mail me at rajshekhar_roy@yahoo.co.uk

Watch out this space for my next posts which will contain more action plans as to how you can deal with your personal finance issues now.

Personal finance has not seen such tough times before in India

These are very tough times for the whole world and especially for India. Over the last 5 weeks or so, I have been putting off writing any blog posts as I was waiting for the market to stabilize. However, the way things have been going on, that does not look to be anywhere in sight. I have also got several requests from people wanting me to write a few posts and have therefore decided to honor those requests.

To begin with it is important to understand that the situation we see today is unprecedented in the personal finance space. I have been investing for myself over 3 decades now, having started in 1988 when I joined my first job after having finished my MBA from IIM Calcutta. In this long journey there have been several ups and downs that have taken place including years such as 1990, 2001, 2008 – 2010 where the stock markets have gone through a roller coaster ride. In most of the cases the markets have bounced back over a period of time and the maxim that over a medium or long term the markets will mitigate the risks have always worked out well. Even this time many financial planners and MF houses are trying to assure investors with these same words. I am sorry to say otherwise, but the current situation will not see any quick turnaround and people thinking it will be business as usual soon, are clearly not understanding the impact.

Let me try and explain in a few points why I think so :-

• The Covid-19 impact is worldwide and it is long term. Given the current context of losses of lives throughout the globe, the last thing countries are thinking of is business. Any return to normalcy cannot be expected unless the infections cease to occur and that seems to be 3-6 months away even as per the optimistic estimates.
• The current problem in India is on all fronts – with MSME companies, with larger units, with migrant laborers, with exports, with manufacturing, with services etc. In short all aspects of demand and supply are affected adversely in the current situation. Also remember that we were hardly doing very well prior to the lockdown.
• The deep cuts suffered by the indices and all kinds of stocks are actually just the tip of the iceberg. I am convinced there is more pain left in the markets yet and, what is more, I see no real possibility of the markets coming back to February 2020 levels in the next 2 years or so. It will be nice if it happens but chances are remote.
• India will need to spend significantly to counter the effects of the virus, in supporting the jobless people through cash and kind, in providing incentives and support to the industry to be back on its feet. Our production capacity as well as demand has been seriously compromised and even if the virus goes away in the next month, it will take us more than a year to get back where we were. So in effect, the whole financial year is kind of lost to the virus if we are lucky. If we are not lucky then it can well be one more year or even worse.
• I will specifically write about personal finance investments in terms of equity and debt asset classes, but I hope the above has given you an idea about why I feel the situation will not improve in the short run.

A lot of people who are readers of the blog have wanted me to advice them as to what they should do now? I am happy to answer any specific queries that you have, feel free to send it to me here or in the Facebook group. Some of you have also wanted to know if I can provide my HELP services to them. As I have said before, I do this only for a few people but in the current situation I am happy to take on a few more people. You can read about HELP program here and understand about the work I have done so far here. The people wanting to interact with me can mail me at rajshekhar_roy@yahoo.co.uk

Watch out this space for my next posts which will contain more action plans as to how you can deal with your personal finance issues now.

An update on HELP

Over the last two weeks, I have been approached by many people who are interested in the HELP program and want to engage with me. For those of you who are wondering what HELP is, you will need to read my earlier post in the blog. I thought of doing this post to give my readers some idea about what kind of people have approached me, what exactly does HELP cover and finally how you can request an engagement with me.

First things first – while it will not be possible to give the profiles of everyone who has approached me, I am sharing a few of them below. Note that, for reasons of confidentiality, I am only going to use generic terms, avoiding names altogether. Here are 5 of the profiles I found most interesting:-

1. A young professional from an US MNC, earning significantly and wanting to map out his life goals and financial support needed for the same.
2. A mid career software professional currently working in Germany, wanting to take stock of his finances to see if he can indulge in some other options.
3. A mid life professional currently in Sales but finding it difficult to reach management levels, wants to know if there is a possibility of doing things to reach his goal.
4. A software product management professional who is good at this job but wants to explore what else he could possibly be doing.
5. An entrepreneur with a consulting company who is unclear about his life direction and relationships and needs help in sorting some of those out.

While I cannot share any more details, I am working with 2 of these and hope to get engaged with the others by the end of the month. HELP is a very intensive engagement so I can only do it 5 – 7 at a time and each engagement takes about 2 months. It is also unique to each individual so it is not easy to explain what exactly will be covered. To have an overall idea about what each engagement may deal with, see below:-

1. 2-3 discussions to clarify and crystallize your goals in life and the timeline for them. This will include life strategies for achieving them, apart from the financial strategies.
2. A one time critical review of your portfolio in order to see if there are any changes required in the structure as well as the financial instruments that you are invested in currently.
3. Arrive at a clear investment program for the future that are aligned to your goals.
4. Establish future yearly cash flows from now till your expected life duration.
5. Discussions on any critical areas such as career, relationships, health, family where you may need some advice to handle things in a better manner.
6. Decide on a roadmap and plan to effect suitable changes in these areas.
7. Set up a quarterly review for 2020 to see how the plan is progressing. We can extend this further for future years if it is mutually decided to do so.

How much does it cost? Well that depends on which stage of life you are at, what assets do you have and how much thought process and effort need to go in restructuring the same. Again to give you an idea it is likely to be in the range of 40000 to 50000 for the entire program which includes quarterly reviews for the first year.

In case you want to discuss this with me, send a mail expressing your interest to rajshekhar_roy@yahoo.co.uk, we will then have an initial call to discuss further. As I said, I cannot take on too many people so if you are really interested get back to me quickly.

Do you need HELP ?

I have been writing this blog for over 4 years now and one of the most common queries that I get from readers is whether I provide any Financial Planning services. Let me be upfront about this at the start – I do not provide such services in the way they are normally understood, nor am I a SEBI registered Financial Planner. In fact, I have absolutely no intention of being one too as I do not see this as my profession.

However, I do provide a service to select people who approach me directly. I have given the acronym of HELP to it. The expanded form is Holistic Engagement in Life Planning. In this post I will explain about this service and explain as to how interested people can avail of my services for this. As I have explained in several posts of my blog, life planning must precede financial planning. As an individual or as someone responsible for your family well being, you will need to plan the important life events as well as the lifestyle choices you want to maintain. Note that the typical financial planning process assumes that people will by and large plan for typical goals such as children’s education, marriage, own retirement etc. I find this a completely unsuitable way of doing things as the life of each individual is unique and needs to be catered as such.

So what is HELP then? As I said, the starting point is to take stock of your life in terms of where you are today and what are your dreams as a family – individually and collectively. So if you are a family of 4 with two teenaged son and daughter, your dreams could look like this when you are 42 years old :-

• Son wants to take up a career in Bio technology, daughter wants to be a film maker.
• Your wife is 38 and gave up her career for her kids 10 years back – she now wants to open up a boutique of her own in the next 3 years.
• You are interested in starting your Consultancy practice by the time you are 50 and for that you need to be financially independent.
• All of you like travelling and want to take a domestic vacation every year apart from short trips and also an international vacation every alternate year.

The idea of HELP is to bring out these life goals and lifestyle choices clearly, so that it can be determined what kind of financial support these would require and how can that be organized. Yes, the last part will involve financial planning but it will be in a very different way than just how to buy MF through SIP etc. 

As I said, I have provided HELP to several people and all these were people who have approached me after reading my blog. Some examples will make interesting reading:-

• Advised a Colonel in Indian army as to how he could fulfill his dream of migrating to Canada in a teaching role.
• A software professional in Kolkata was worried about longevity of job and worked out an alternate plan should such an event occur.
• Got several people started on building a stock portfolio from scratch.
• Helped a mid career software professional to join a startup as it was more aligned to what he wanted to do in life.
• Motivated a frustrated career CEO to organize his money to become financially free and move on to training people, something he really enjoyed.

Note that in all of these cases, the people already had a financial plan made through a SEBI accredited Financial planner but they were not happy with their life and lifestyle.

The question that will definitely be asked is why am I the right person to do this? Let me start by giving some background of myself :-

• BE in Computer Science & Engg from Jadavpur university, Kolkata in 1986.
• PGDM from IIM Calcutta in 1988, with major in Marketing and Systems.
• Overall experience of 31 years plus, 27 years in regular corporate roles and nearly 4 years now in my Consultancy practice.
• I have worked almost entirely in the software services and BPO space.
• Have worked as a CXO for 15 years plus, nearly half of this in 2 publicly listed companies.
• Lived in Kolkata, Delhi, Chennai and Hyderabad besides having travelled widely all through the world for my work.
• Have been financially independent since 2014 and writing a blog since 2015 June. The blog has had views in excess of 4 lacs till date.
• My daughter is BE from BITS, PGDBM from XLRI and working in a Consultancy firm now. My son is from BITS with  a dual degree – Msc Maths + BE in Computer Science. He is now working in an MNC in Bangalore.
• I am associated with helping students in career counselling for Engineering / MBA.
• Am in the Hyderabad panel for IIMC admissions.

I believe in the Indian context, I am one of the few people who are able to deliver a service such as HELP. This has been proven by the 10 situations where this is done.

So if you are interested in knowing more about this, how do you get started? Well, the first step will be to write to me at rajshekhar_roy@yahoo.co.uk expressing your interest to avail of this. I will then ask a few questions over mail to assess your current situation and then we can have an introductory call. After this I will let you know if I can do this for you and what will it cost.

Typical duration for the complete exercise is 1 month, with 2 interactions over phone per week and costs depend on the individual situation, there is a one time fee for the first year. Yearly reviews after first year will be 25 % of the year 1 costs.

If you reach out to me, do not get offended on my inability to take you up ( if that happens ). I am doing this to add real value to the lives of the people and therefore cannot spread myself too thin.

Look forward to hearing from some of you – believe me, your life will undergo a serious transformation once you go through this exercise.

My cash flows and investment plans for 2020

The start of a new year is always full of excitement and hope. There are new opportunities to explore and you hope for a lot of significant events to take place in the year, irrespective of what may have happened in the earlier one. In my previous posts I had outlined how 2019 was a fairly poor one both for my own active income generation as well as for the markets. In this post let me talk about my plans for 2020.

One must always start with the cash flow outlook for the year. Fortunately, with both my children becoming financially independent of me now, courtesy their careers, my major head of cash outflow is gone now. Currently their college education fees are all done and even though Ronju may get into a B school sometime in the future, we can always look at it through Education loans. On the flip side our expenses on travel are ever increasing due to the number of trips as well as the way we travel. Last year we had 3 vacations outside India, 2 full vacations in India as well as several shorter trips for leisure or family issues. 2020 looks similar as we already have a planned to visit somewhere out of India in March. Our daughter is fortunately staying with us now and our son is closeby in Bangalore. Based on all these I am looking at cash outflow in these terms :-

• Regular household expenditure likely to be in the range of 6 lacs
• Travel expenses can be estimated at 6 lacs to be on the safe side.
• Family support will be in the region of 2 lacs.
• Rent for our Hyderabad apartment is around 3.5 lacs.
• So overall cash flows required will be in the range of 17.5 lacs

Against these the cash inflows I am expecting in 2019 are as follows :-

• Interest from Tax free bonds, InvIT funds and POMIS will be about 4 lacs
• Dividends from Stocks and Equity MF schemes will be about 3 lacs
• Capital gains from FMP redemption will be about 2 lacs
• Rental income from our Chennai apartment  will be about 4 lacs
• Income from Debt funds and stock trading will be about 1 lac
• Repayment of an earlier loan will be about 3.5 lacs

The above looks good but what if the markets continue to do badly and the dividends dry up? The first line of defense will of course be my active income generation through my Consulting practice and Mentoring services. Additionally, as a backup plan I have the PPF accounts of both me and my wife. At present it earns about 5 lacs in interest per year and I can dip into it if needed. Another way could be to redeem some of my Debt MF schemes, to the extent I need the money. A final option will be to sell some stock that is doing really well but I do not feel this will be needed.

What about investments then? Well, in my present stage of life I am not looking at too much investment obviously. Even then, I had started a secondary stock portfolio in 2018 and have invested about 11 lacs in it so far. My idea is to let this portfolio grow and also do selective trading in it, something I have wanted to do for a long time. I do not want to do this on my primary stock portfolio where the plan is to have it for the really long term. Based on all of these the new investments I plan to do in 2020 are as follows :-

• 3 lacs in the two PPF accounts that we have.
• Put all FMP redemption money in Hybrid funds – this will be about 10 lacs in the year 2019. Part of this may also be used in my secondary stock portfolio.
• Build the Secondary stock portfolio to at least 14 lacs by putting in a minimum of 3 lacs in this year.
• Look at any interesting NFO themes as they become available.
• Keep adding to my Primary stock portfolio based on available money.

Where will the money for this come from? Well, what ever income I have from my Consultancy practice and Mentoring services will all be invested in above avenues as my passive income is adequate to take care of my cash flow needs.

So things look rather good right now, hoping that the markets will recover this year !!