Arvinder Singh (56), who runs a retail business (telecom equipment and electric two-wheelers) in Delhi, faced the same dilemma. A chance meeting with a financial professional at a meeting deeply influenced him. He decided to test the waters, that too when he just turned 50.
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He started investing in stocks through mutual funds in 2018 and hasn’t looked back since. His mutual fund portfolio has since maintained a compound annual growth rate (CAGR) of 18%.
“I started small with a systematic investment plan (SIP). ₹25,000 per month. I saw the first signs of the portfolio growing within a year, but the real magic happened from 2021 onwards. Although margins in my business were much better than mutual funds could offer, they declined after the Covid outbreak. “There was a need to make up for the decline in operating margins,” Singh said.
The magic of investment funds
Manmeet Singh Khurana, a certified financial planner and founder of Wealth Dopes, was working as a product head at ICICI Securities when he got Singh to invest in mutual funds.
Singh asked him to analyze his overall financial planning when he started his own business. The first year after 2018 was lucrative for his mutual fund portfolio, but the second year brought the Covid-19 shock as markets plunged by almost 30% in March 2020. It turned out to be a positive learning experience.
“I became more concerned about my primary activities as Covid-19 spread. My mutual fund investments suffered losses, but that didn’t bother me as only profits were lost. The principal was safe. When the markets came back to life in 2021 , I could see first hand Investing consistently through SIPs had helped. Now I invest a lump sum whenever the markets show any weakness.
During his six-year investment fund journey, he has already achieved an important financial goal. In 2022, when his son decided to study in Canada, Singh relied on his mutual fund investments to finance a larger portion of higher education costs. He didn’t have to take out a loan.
“While his mutual fund portfolio shrank after he withdrew a significant amount in 2022, he was determined to rebuild it faster. Whatever surplus he would get, he would invest in mutual funds. If fixed deposits or old insurance policies were to lapse, the proceeds would go to mutual funds,” Khurana said.
Sometimes Singh regrets starting his equity journey later in life. But he made sure his three children could make the most of what investment funds have to offer. “All my children are in touch with Khurana and invest in equity funds. My wife does it too,” Singh said.
Companies are in constant need of liquidity for a variety of reasons. For Singh, investment funds also serve that purpose. Khurana explained to him the advantage arbitrage funds have over unused money sitting in the current account and not earning interest.
“Some of my company’s idle funds go into arbitrage funds which provide reasonable returns and are also a tax-efficient option compared to short-term or sweep-in FDs. We can have millions in assets, but liquidating them for even a few dollars in lakhs in a short period of time is a challenge. Mutual fund investments give me a sense of relief that I can withdraw it whenever I want,” Singh said.
Before meeting Khurana, Singh mainly invested in real estate, FDs and insurance policies. Although real estate still has the largest share in percentage terms, incremental investments in investment funds have grown the fastest. “I have decided to let go of some of my commercial properties to invest the proceeds in mutual funds,” he said.
He invests 30-40% of his net profit in mutual funds every month. “The plan is to bring this to 60%. I want to make up for lost time with a huge investment.”
Khurana has given him access to track his investments through the app FundzBazar.
Insurance protection
Singh had no health or life insurance when he met Khurana. Although people often approached him to buy it, he could not trust them. His insurance portfolio included investment policies from Life Insurance Corp. of India (LIC).
“My father often bought LIC policies in our name. I also bought a few,” Singh said.
Khurana forced him to give up a number of policies whose terms would last for years. Those closer to adulthood continue on. Once a policy is mature, we deploy the maturity in mutual funds,” said Khurana.
Khurana has applied for life and health insurance. ‘The problem with term life insurance was that in addition to his business income, Singh also had a significant amount of rental income. Rental income is not included when calculating the value of human lives in term life insurance. Somehow we managed to get him cover from ₹1 crore at a premium of ₹66,518 because he had no health problems. His wife could get it ₹2 crore coverage at a premium of ₹77,806,” Khurana said.
Singh purchased a comprehensive health insurance policy for a premium of ₹26,426 for ₹10 lakh sum assured along with super top-up cover of ₹25 lakh with a premium of ₹5,222. The basic policy and the super top-up are both from Star Health Insurance. His wife already had health insurance from HDFC Ergo.
Singh also bought two other policies – Young Star, for his twins, along with super top-up plans.
What about direct equity investments? The madness affects the people. Singh is no different. He often discusses stocks with Khurana, but he has made it clear that he does not recommend investing in stocks. “I had invested in Zomato at a level of ₹120, which gave me a good return. I have a few other stocks, but I don’t actively follow them. It takes a lot of self-control, but I can do it,” he said.
Singh’s main focus right now is building a sufficient retirement corpus so that he can maintain his lifestyle without working much. Succession planning comes next. “I first plan to transfer my properties to children through gift deeds. Once that happens, I will go into the modalities of succession planning as this will also entail succession of business activities,” he said.
