Thank you and all your inputs are realistic and valuable.
20x and 5% looks sensible for me since you all are saying this from real-time experience.
Between, are you liquidating portfolio systematically for expenses/diversification? will you be able to share what approach/method will you follow to liquidate the fund ( like identifying the sticks to sell/ percentage to be sold etc).
Would be useful please.
Most people claiming 18% CAGR kind of returns are the ones around since 2000. Around this time, 2000 Aug, the bull trend started, which is exhausting about now.
I go back to 1993 and calculate the returns from Nifty 50, they are only around 8%. Assuming, in this 25 year stretch the investor has made zero mistakes.
Therefore, I do not understand how one can lead the entire flock and family based on the stock markets. Astonishing.
My humble view is, not 100% only on markets.
I see few of my friends are doing allied business, taking training on equity investments, AP for a stock broker, running a website on stock market etcā¦donāt surprise, they get sizeable income month on month for the last few yearsā¦
I personally believe in passive income through agri and fixed depositsā¦
Combination of options would work I trustā¦
What I have come up with is to withdraw 2% if the calendar year saw a return of 15% and above. I withdraw another 3% if returns were abnormal (say 30 to 70%) and my reserve cash is low. I prefer to keep reserve cash for years when market is in bear mode with low or negative returns.
Make senseā¦ will note down thanksā¦
Hi Sandeep, Appreciate your thoughts mate! I just have a query and if you can help me understand a bit about it pls. - If my lifestyle have to be supported by passive income, does it mean we are applying zero value to the capital in portfolio and potential profit/loss while evaluating the discussion of financial freedom?
Cashflow is from liquidating investments; usually liquid BeES and/or listed NCDs, unless fully invested in equities, in which case Iād have to sell stocks.
I plan to be at-least 60% invested in equity at any point of time. The rest is either in equity or debt depending on market valuations.
No top up. Portfolio will automatically grow with time (atleast thatās the plan 
)
In my opinion, it depends on several factors such as your familyās current average annual expenditure, your kids higher education/wedding plans and expenditure related to that, your ability to find a day job if things go bad, etc.
In general, if you are able to achieve a 4% IRR (real returns post tax and inflation) on your investible surplus you would require a corpus of 25 times your average annual expenditure. If you are able to achieve a 5% IRR (real returns), you would need a corpus of 20 times annual expenditure.
So far I havenāt had to sell stocks since I havenāt been fully invested in equities. In future, if/when Iām full invested in equities, I plan to liquidate whenever I need money, and I plan to do it by selling a part of my least favorite stock in the portfolio. When, what and how to sell is not really something that Iām too worried about, since this is unlikely to have any significant impact on returns. My focus is on growing my portfolio large enough (> 40x annual expenditure) by achieving a high IRR and reducing expenses in order to provide a sufficient margin of safety during a negative market cycle.
Thank you very much for the reply.
Yes of course. The only reliable income that your equity portfolio can generate is the dividends but then those are also not guaranteed. I wouldnāt rely on dividends to buy me food for the family.
I have a very basic and direct query - I would be grateful, if the boarders can help me.
I am 38, and planning to create a one time retirement corpus. The intent is - To stop working after creating two types of arrangements preferably in a couple of yrs. First arrangement - for the period until I turn 58 & Second arrangement - which would take care of my expenses post 58. In todayās question, I want to focus on the second arrangement(post the age of 58).
I can invest 50 Lakhs. today in a retirement fund & I have 20 lakhs in PPF and PF(together). I already have a house without any loan. Assuming, I would have mine and my wifeās responsibility. My lifestyle is reasonable - About 30-40 thousand expense per month as of today.
Any guidance on this second arrangement and its adequacy would be quite helpful!
Keep investing as second income. Power of compounding needs time. Another concept is trading for living. It requires mastery in price actions with risk: reward ratio. Of minimum 1:2. If valuepickr hv get-together in Mumbai I will share my knowledge about the same with community.
Yes. just sell 0.8% of your portfolio every month. Its that simple. No need to very this % based on market level. This is just opposite of SIP.
You need to know the fair value of each stock in your portfolio. Knowing level of conviction is not enough. Sell stocks that are overvalued or least undervalued. You can sell small lots of each overvalued stock or just 1 or 2 stocks that have given you strong short term returns (as these almost always pull back even if these are undervalued). Either way, use short term returns and fair value to decide which ones to sell.
Having a concentrated portfolio of 5-8 stocks will make this decision easy. Having a diversified portfolio (of more than 20 stocks) will make this decision difficult. Problem with a diversified portfolio is that often you donāt want to sell the stocks because they have gone down or you have high conviction about the stocks that have gone up.
This leads you to a situation where you are unwilling to sell the ones you should sell and unable to sell the ones you want to sell and then end up selling the stocks that you shouldnāt sell. You should try and avoid getting into this kind of situation. One way to do that is to ask yourself if you are likely to question your conviction after a 20% drop in price and sell the stock. If the answer is yes, its better to sell now no matter how much undervalued the stock is (after all your notion of value is greatly influenced by your conviction).
IMO, Month on month is the right way so that your mistakes wonāt hurt your portfolio much.
You will always withdraw from your capital. Donāt consider capital and returns as two separate buckets. Your returns become part of your capital. Your expected return is an important assumption. at 15-18% expected return a 10% withdrawal rate is just about sustainable but if you are not sure about expected return, you should scale it down. I noticed that you have been investing for last 6+ years which hasnāt seen a brutal sell-off so your expectations might be on the higher side.
At 15-18% expected return, you are rating yourself in the above average category (12-14% is the average). I am not saying you donāt belong to this category but you should ask yourself what makes you an above average investor. Stock market returns can be anywhere from 6% to 50% so where you stand in the pecking order is something you need to evaluate carefully before deciding the withdrawal rate. Its better to start low and scale up your expectations rather than the other way.
Your withdrawal rate depends mainly on 5 factors
At 10% withdrawal rate, your expected return should be around 18%, your remaining life expectancy (in terms of how meany years you are expected to live into retirement) should be less than 40 years, you most likely will not be able to leave much for your hairs (and implications of that on your relationship with them), and your price inflation plus lifestyle inflation cannot exceed 8%. You will also feel anxiety about shortfall in your portfolio during bear markets.
This is assuming equity is your only portfolio. If you have other sources of income, you should consider that while calculating withdrawal rate from equity portfolio.
I am managing my parentās portfolio with 12% withdrawal rate but please note that circumstances are different so this is not a recommended withdrawal rate.
I think you need to work for some more time to a) increase your corpus - while 30-40k expense per month is pretty low I think these numbers can multiple rapidly during any crisis along with parallel erosion of your 70 lakh corpus - what if some medical emergency means that your annual health expense rises to 10 lakhs a year, what if we see a period of hyper inflation for a decade etc. are scenarios for which these numbers are indequately stacked and b) to develop greater expertise on what you plan to do post you are 40 - since you havenāt written the same, you need to be very clear about the same. Part b is as important as part a.
Letās make some basic assumptions and do a simple calculation.
Average Inflation for next 20 years: 6%
EPF + PPF returns: 7.5% (1.5% above inflation)
Equity / MF returns: 10% (4% above inflation)
If you invest 50L in equity and equity MF the corpus would be 3.36 Cr
20L of EPF/PPF after 20 years would be 85L.
Total corpus after 20 years = 4.21 Cr
Monthly expenses (40 *12) = 4.8L today, 15.4L after 20 years
If you assume 40L as medical emergency fund today, itāll have to be 1.28 Cr after 20 years.
For 4% withdrawal rate, your corpus should be (15.4 * 25) + 128 = 5.13 Cr
I think your corpus at 58 will fall short. Plus assuming variable equity returns, market conditions etc. make things complicated.
If you can contribute more towards retirement goals in coming years, things will be good. Alternately if you manage to get higher rate of return in equity, that will solve the problem.
Many thanks Sir for taking time to respond each and every query.
My plan is still a plan and closely working towards to execute it.
Planning to have 15x of annual income as equity portfolio, 5x into FDās or equivalent and another 5x as cash (Cash should be ideally in the form of short term FDās/leveraged for equity trading/emergency fund /lending business which my family manages etc). Apart from this i have a flat and sizable agriculture property from where i am getting some income.
Mine is slightly a diversified portfolio of around 18-21 stocks, with 40% of them into top 7 scripts. My expectation is to have 15-18% return and planning to withdraw 2% of portfolio for every 10% of annual appreciation (Roughly i would be withdrawing 3% from my portfolio for every 15% appreciation, which constitutes 50% of my current annual income) Remaining 50%, i would be comfortably making it from FDās and lending business. This also gives me a leverage to continue with my current savings plan for my kids education/marriage etc.
My initial plan of withdrawing 10% annually was slightly aggressive considering my age of 37, So decided to have comfortable corpus and reduce the withdrawal to lesser percentage. Also dividend/agri incomes are not considered on returns.
As of now everything is on plan, hope to make it through 
Thanks Sarvesh for sharing your views! Truly appreciate it!
This 50+20 L corpus would be locked and would not be allowed to be withdrawn. So in the journey towards 58 from now, there is a need of arrangement -1, thru FD and other sources. I would also require to take the insurances to cover for health related expenses and other emergencies. Hence, as you suggested, I would need to increase my initial corpus. As @nikrod12 (thanks to you as well Nikhil) suggested, 5.13 Cr is something I should be looking for at 58 at the minimum. I feel increasing this initial corpus by at least 25% would be needed. Also, I just remebered, I would have a rental income from second 2 bed room flat that would definitely be of help.
Part - b- I intend to do - Yoga, Exercise, Travelling for Leisure, Reading books, Watching movies(which I could not watch until now), Spending more time with friends & family without having restrictions around work, Focus on my equity portfolio with the learnings I have collected till now and what I would keep on collecting in future thru this forum and other means.These might sound like the things I should be able to do while working, which is partially true. However, having a dedicated time for each of this without any obligations to employer would be a different feeling(I guess)
I truly believe you can still do all these things along with your current job and there will be nothing different or liberating about doing these things without your job except for say travel. I really believe full time investing should be coupled with some challenging project or side passion from which you derive income (secondary factor) as well as satisfaction of spending your efforts on something giving meaning to your life. It is very essential and cannot underscore its importance any less. Yoga, Exercise, reading books, travel and watching movies though can be a lot of fun and also intellectually stimulating and keeping one fit, one must do something which gives us a reason to wake up and go for the extra push which is required for achieving anything significant. Just try taking a break from work for a month and doing all these things for 30 days. Would you remain excited, motivated and in pursuit of excellence and jest for life watching movies, reading books?
Assuming you want to quit your job before the usual retirement age though I believe even post retirement I would want to do something meaningful and giving some value back to society.
@rahulshares - Thanks for inspiring to have a āpurposeā in life post quitting the job which would help me remain motivated, excited and keep jest for lifeā¦
Dear @manoopatil,
Sir, Iād like to wish you the best for your path to retirement. It sure is an inspiration for people like me who are about to start their careers soon.
Regarding the purpose of life post retirement, I find myself to be inclined towards the existentialist school of thought. Anything could provide meaning to your life as long as you choose to permeate meaning to it. It could even be doing nothing at all, if you so choose.
Itās just that most of us value action over inaction, donāt know why. I wonāt digress, best wishes for your journey.
why you withdrawn the post, I completely agreed to it.
