“It is very much possible for a youngster to set aside Rs 10,000 per month for investments. After 30 years, it would be Rs 6.92 crore which would have present value that is purchasing power of Rs 85 lakh. At least Rs 3 crore of purchasing power is essential when you reach the age of 50,” says Dr Sandeep Sahasrabudhe, Chief Financial Planner at Moneywise Wealth Planners.
In an interview with ETMarkets, Sahasrabudhe, said: “For investments to work optimally, exposure to different asset classes based on one’s risk appetite works best. So, health and wealth creation both need regular, consistent doses for optimum functioning” Edited excerpts:
In a fast-paced environment like the one we are in today, most of us have put our health in the back seat and so is our financial planning. However, Covid turned out to be an eye-opener to a certain extent for many. What are your views on that?
The pandemic has turned out to be an eye opener for Indians in terms of financial planning and awareness. A new term has emerged for majority Indians called “financial immunity”.
Financial immunity means being able to maintain security and stability of your family in case something happens to them or being financially prepared for any unforeseen emergencies relating to life and health.
According to a survey conducted by
, 57% of the survey respondents associated financial immunity with maintaining financial security for self and family.
78% of Indians feel that insurance is an extremely important part of financial planning. According to the survey, 56% of Indians have accumulated emergency funds since the pandemic and 53% have insured themselves with life and health insurance.
Prior to the pandemic, less than 30% Indians were having some kind of life insurance policy. During the pandemic, almost everyone has witnessed the passing of someone within their nearby circle.
This, led to an awareness of increasing life insurance coverage just in case something were to happen to the bread earner of the family.
In how many ways one can improve health as well as wealth?
Discipline is common to both health as well as wealth. 1 hour of daily exercise in whichever format (be it cycling /swimming/running or any sport is essential for physical fitness).
Similarly, for wealth creation, the easiest and most proven methodology is long-term wealth creation through a SIP and asset allocation.
Through the SIP route, you are not timing the market and staying invested through the ups and downs of the stock market.
The biggest advantage which SIP brings to the table is the magic of compounding. Let me illustrate the Power of compounding by giving an example:
A Rs 10,000 monthly SIP over a 10-year period has generated a 15% return on investment (ROI), shall create a corpus of Rs 27.5 lakh. Now, suppose you increase the tenure by another 10 years.
Over a period of 10 years, you would have invested an additional Rs 12 lakh. The corpus at the end of 20 years would be Rs 1.49 crore. To conclude, Rs 12 lakh would become Rs 27.5 lakh over 10 years and Rs 24 lakh would become Rs 1.49 crore at the end of 20 years. Those additional 10 years are very much crucial.
Wealth creation as well as significant improvement in health results for both of them shall be visible over a period of time. What’s required is sticking to the routine and consistency.
You should undergo health check-ups once a year above the age of 40. Similarly, you should review your investment portfolio every 3 months for changes if any.
The same rule of starting early is applicable for both health and wealth.
If you develop a habit of exercising regularly or playing a particular sport from your teens and stick to it, you shall not only enjoy the sport throughout your life but also cherish those moments of camaraderie and sportsmanship associated with that sport.
Apart from these traits leadership, presence of mind, faster decision making, improved sleep, greater confidence and reduced risk of obesity are additional benefits associated with exercising/playing a particular sport.
Just like in diet we need proteins, carbs, etc. for creating wealth we need proper asset allocation. What are your views?
Asset allocation depends on several factors such as: the lifestyle with which he/she has been brought up, the investment preferences of his/her parents, and the influence of his spouse.
It also depends on the risk-taking capacity of an individual. It’s inherent for investors to get their risk profile checked before they commence investing.
For those investors who cannot tolerate even a small dip in their equity portfolio its best, they stay away from equity. The problem of staying away from equities is that the entire purpose of having investments beating inflation gets defeated as returns from instruments having fixed returns erode wealth making process and generate a negative real return since post-tax fixed deposit return cannot beat inflation.
It’s best to have a balanced approach with exposure to different asset classes to beat inflation and better your returns to fulfill one’s lifestyle in the later years.
Different varieties of food intakes are required for e.g bodybuilders need protein intake but also a decent amount of carbs, and vitamins are needed since the body needs to have various variants to function optimally.
So, for investments to work optimally exposure to different asset classes based on one’s risk appetite works best. So, health and wealth creation both need regular, consistent doses for optimum functioning.
Can investors who is in their 20s can think of becoming a crorepati say by their 50s and that too in a healthy way which means with a lean diet or a disciplined investment?
It is definitely possible. Let me illustrate with an example: Rs 10,000 invested in a 5-star rated equity mutual fund SIP which generates 15% p.a return on investment over a period of 30 years creates a corpus of 6.92 crores.
Rs 10,000 p.m is very much possible for a youngster to set aside p.m for investments. Rs 6.92 crores after 30 years would have present value I.e having purchasing power worth Rs 85 lakhs. At least 3 crores of purchasing power is essential when you reach the age of 50.
What’s important is a consistent investment over a long term without any interruption. We are living in a materialistic world.
Every now and then there are things youngsters shall buy to impress their peers which may not be necessary. This would lead to redeeming existing investments and using them for buying that product.
It’s very much possible to build a good corpus and retire by 50 through a disciplined monthly investment habit.
Similarly, with respect to food, a controlled diet helps to keep yourself healthy along with adequate daily exercise.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)