Vijai Mantri: So, before we come to that conclusion or whatever alternative we offer, I think it’s very important to understand why it happened. People say buy and hold is the best strategy, but when you’re taking money out, there are some periods which are as high as one-third where the buy and hold has not worked. Why did it happen? It happens when you start your corpus when the market is peaking and you start taking money out when the market is in a bearish space. So your withdrawal happens, and the bearish phase hits you in the beginning of the corpus withdrawal. What happens is the reverse of SIP. SIP does very well in bearish markets where what happens when the prices are low, you buy more and more units. What happens when you take money out? Suppose during that time the market is in a bearish phase, then what happens that whatever amount you take out, it ends up in consuming lots of your units. So, the period which we have seen 1992, 1993, 1994, 1995, that was a period when the market in 1992 hit a very high level and then for next 10-11 years the same prices did not come. We have seen a similar kind of situation in 2006, 2007 and 2008, when the market had hit a very high number and then went into a bearish phase. SIP is great to accumulate assets when the market is in a bearish phase. The reverse of this—you have to take money out and unfortunately at that time the market is in a bearish phase, then you have a struggle. So, what we are trying to say is that the future is an uncharted territory, a random walk. We do not know when you start withdrawing whether the market will enter bearish space or bullish space… So, what is the solution available if you don’t know what will happen in the future? The only source of information we have is the past data. In India, we have a 40-year data, I think it’s a long enough time period—post-independence, post economic reform, we have seen all kinds of scandals, scams, whatever possible thing could happen has happened in the market. We looked at this historical data and came to a conclusion… One, investors need to have one very good financial adviser available to them at all points of time. DIY may sound very good and may sound cheaper, but the cost is very high. So, you need to have a very good adviser. Two, asset allocation. Don’t get carried away with equity doing very well because no asset category does very well at all points of time. So, do your portfolio review periodically, more particularly when the asset category is doing too well, at that time you’ll need to be more careful. Third, what are the other alternatives available to save more or take less money out. So, in the given illustration what we have done is instead of putting everything 100% into equity, we have split the corpus—I did a 10% debt-90% equity, 20% debt-80% equity, 30% debt-70% equity, 40% debt-60% equity. I did all the permutations and combinations, but nothing worked. Finally, what has worked is that I did a 50% allocation in equity and 50% allocation into debt. The equity allocation goes into equity over a 60-month systematic transfer plan. So, we are not doing allocation into equity at one time—the entire Rs 1 crore gets invested into debt, Rs 50 lakh is earmarked to be transferred to equity for the next 60 months and the balance Rs 50 lakh which is there in the debt, you take money out on a regular basis, same logic, but instead of 8%, we reduced that to 6%… otherwise the corpus will not last at all.
So, what we have done is that suppose you take Rs 6 lakh in first year in equal monthly installments of Rs 50,000 per month, and then you increase this yearly withdrawal by 6% per annum, the way we have done in the past illustration, then your corpus lasts even in those 14 years in which in earlier illustration the corpus lasted seven to 18 years. The moment you tweak it to 50-50 allocation, equity a location doesn’t go at one time, it goes into 60 installments and you reduce your takeout from 8% to 6%, then in every given condition in the last 41 years, the corpus has lasted more than 20 years. In some of the cases 30 years, 35 years and the corpus is available even today. It can fund for the next 10-20 years.