Retirement Planning
Corpus ~ 300 times current annual expenses
Corpus ~ 38 times annual expenses at retirement
Invest as much as you spend each month for retirement!
Current date
Years to retirement
Age at the end of current year
Years in retirement
Total annual expenses
Annual expenses when you retire
Corpus required
Corpus accumulated so far (updated from mf holdings)
When you retire the corpus from other
sources will grow to
When your retire the current mf corpus will grow to
If you were to retire today the current corpus will last for
(years)
If you were to retire as intended you will be financially
independent for (years)
Net corpus required
investment required each month
Provided this investment increases
each year at the rate of
EPF or NPS divided by investment amount
24
40
26
520000
44,42,903
14,70,12,786
20,82,664
98,46,585
2,05,13,686
6.63
6.49
11,66,52,514.90
41,118
10.00%
54%
Financial Goal Tracking
• Be obsessed over goal planning entries
not over mutual fund corpus
Essentials of a good portfolio
• Minimalist : We must be able to justify
the presence of each asset class or
instrument.
• Minimum number of asset classes
• Minimum number of stocks, equity funds
or debt products
• This will typically make the folio diversified
among and within asset classes
Simple portfolio ideas
Long-term goals (10+ years)
Equity (60%) 10% return
1. Single Large Cap fund
2. One large cap +one mid/small cap fund
3. Single Large and mid-cap fund
4. Single equity oriented balanced fund
Debt (40%)  8% return (pre-tax)
PPF for 15+ Y goals for options 1,2 & 3 (do not max!)
Ultra-short-term liquid funds for less than 15Y goals
Banking debt mutual funds
Simple portfolio ideas
Medium-term goals (5-10 years)
Equity (0-40%)  8% return
1. Single Large Cap fund
2. One large cap +one mid/small cap fund
3. Single Large and mid-cap fund
4. Single equity oriented balanced fund
5. Single debt oriented balanced fund
Debt (100-60%)  8% return (pre-tax)
Ultra-short-term liquid funds for less than 15Y goals
Banking debt mutual funds
Simple portfolio ideas
Short-term goals (0-5 years)
Equity (0-10%)  expect nothing!
1. Single Large Cap fund
2. One large cap +one mid/small cap fund
3. Single Large and mid-cap fund
4. Single oriented debt balanced fund (5Y)
Debt (100-90%)  6-7% return (pre-tax)
FDs, RDs
Ultra-short-term liquid funds for less than 15Y goals
Banking debt mutual funds
How many funds should I hold?
• Minimum:
1 fund! (all goals combined into one)
• Maximum:
No of long-term goals (10Y+) x (1 or 2)
How Important
is
Mutual Fund
Selection?
Large Cap Funds
Computed with SIP calculator, thefundoo.com
Large Cap & Large/Mid-Cap Funds
Computed with SIP calculator, thefundoo.com
Large Cap, Large/Mid-Cap &
Mid/Small-Cap Funds
Computed with SIP calculator, thefundoo.com
Lump sum returns
Minimalist Portfolios
• Single Large Cap mutual fund (60%) +
PPF (40% only!)
• Single Equity-oriented balanced mutual
fund
• Single Large Cap or Large and Mid-cap
fund with exposure to international stocks.
• Equity fof + Debt fund of fund
• Single portfolio fund of fund
How to select an equity mutual fund?
• Decide on the strategy.
(1)Why are you investing?
(2) What kind of portfolio will you be using?
Equity mutual funds: How to select/evaluate
Equity mutual funds: How to select/evaluate
Equity mutual funds: How to select/evaluate
Upside Capture ratio: When the benchmark has given a
positive return (> 0), has the fund outperformed it?
Higher (> 100%) the upside capture ratio, the better.
UPC = 120% => 20% out-performance during up-market
Downside Capture Ratio: When the benchmark recorded a
loss, that is a negative return (< 0), did the fund record a
lower or higher loss?
Lower the downside ratio (<100%), the better.
DCP = 85% => 15% out-performance during down-market
Equity mutual funds: How to select/evaluate
Upside Capture ratio: When the benchmark has given a
positive return (> 0), has the fund outperformed it?
Higher (> 100%) the upside capture ratio, the better.
Downside Capture Ratio: When the benchmark recorded a
loss, that is a negative return (< 0), did the fund record a
lower or higher loss?
Lower the downside ratio (<100%), the better.
Rolling returns analysis
3Y
Fund (blue)
Vs
benchmark
5Y
How to select a debt mutual fund?
Use only if
•your goal is more than 3 years away
•and less than 15 years away
Understand risks
• interest rate risk  capital gain/loss
• credit risk  accrual
How to select a debt mutual fund?
Credit
risk
Interest rate risk
How to select a debt mutual fund?
How to select a debt mutual fund?
How to select a debt mutual fund?
Gold Fever!
Gold Rolling Returns
Gold vs. Stocks
An all-weather portfolio?
33% gold, 33% equity, 33% debt
Source: Value Research
33% gold, 33% equity, 33% debt
Source: Value Research
33% gold, 33% equity, 33% debt
Source: Value Research
Portfolio Rebalancing
Intended Asset allocation: 60% Equity 40% Debt
SIP with annual increase in monthly investment = 10%
Portfolio Rebalancing
Intended Asset allocation: 60% Equity 40% Debt
SIP with annual increase in monthly investment = 10%
Portfolio Rebalancing
Intended Asset allocation: 60% Equity 40% Debt
SIP with annual increase in monthly investment = 10%
Difference between the corpuses ~ 7%
Portfolio Rebalancing
Portfolio Rebalancing
What does it take to do your
own financial planning?
Confidence: to DIY. Doing it yourself, means
doing it yourself.
Inclination: to take control.
Clarity: investing with priorities, something I
would like to call contented investing
Recognition: Portfolio management of long
term financials goal is the most important
task of financial planning.
Keep it Simple
• Discipline!
• Monthly review of investment
schedule
• Annual review of value
• Rebalance periodically after
several years!
• Manage risk close to due date
Winning in personal finance
2
1
3
Retirement Planning:
Inflation-protected Income
Strategies
The Income drawdown strategy
Decreasing Corpus
Drawback: Large initial corpus
Retirement Bucket Strategy
12%
20Y
15Y
10%
8%
10Y
6%
5Y
Real-life Example
• Couple both aged 60
• Monthly expenses 10K
• Both diabetic, no mediclaim
• ~ 35 L corpus
Bucket 1: 5-6L for medical corpus + emergencies
Bucket 2: income ladder for 5Y with 6.5L using FD
Bucket 3: Invest 6.5L in a banking debt fund
Bucket 4: 6.5L in a monthly income plan
Bucket 5: About 9.5L in a balanced fund
Planning for our children’s
future
Freefincal – Child Planner
Freefincal – Child Planner