Retirement Portfolio of a 24 Year old


(MvmDileep) #21

Hi AVB,

First of all I wanted to “Congratulate” you for thinking about retirement at early stage.

It would be great if we start investing in equities directly. Having said that gain knowledge in screening stocks . There are N number of blogs and forums which will help us gain the knowledge.

Safe investments include PPF,VPF . We would be getting EPF contribution from employer for this purpose but most of us forget that we can increase that contribution through VPF which will earn interest above 8%. 8% may look small at this moment but considering 20 years above horizon will generate good amount.

Coming to your 20-30% CAGR , In healthy times like current scenario known stocks would generate returns above 14% -20% when entry point is favorable.

Caution : Enthusiasm will be there during initial months where people follow stock recommendations blindly . So even if anyone recommends a stock we should be in a position to do our own research and come to a conclusion that the recommendation is correct. Most of the recommendations in websites or TV channels will only talk about short term so don’t fall in that trap .

For first 6 months at least pick few stocks(4 to 5 from different segments) where you wanted to invest ,
Assume as if you have invested in them virtually or own few shares say 500 for each segment and observe the stock prices for next 6 months with respect to the market changes and macro economic conditions . This will let us know our reaction towards the market and holding mentality.

Happy investing .


(Arnab) #22

Thanks for your advice @MvmDileep and the kind words, appreciate it!

Yea EPF is an option and my employer has a fixed contribution towards that, an amount which I am content with at the moment.

As for the ‘Pundit advice’ that we often see on TV and websites, I don’t follow them, though newbies often tend to. Ever since I started to take active interest in the stock market from last year January, I have understood one thing that there is no substitution of one’s own research, because at the end it’s you who’s money is on the line and it’s you who loses sleep when it goes down the drain, so the fact that one should only invest in a stock if he or she has enough confidence in it is ingrained pretty well in my brain.

Cheers!


(Changu Mangu) #23

Dear AVB. I meant the service charges and taxes on purchase of stocks. This is not something that is a major thing for many, but I stay away from zerodha and other discount brokers. They are mostly for traders who are looking for the least possible shave off every trade. These brokers also use your stocks for lending to give delivery for those who may have shorted or been on the wrong side of a trade without your knowledge or permission to the best of my knowledge. They do have the ability contrary to any public opinion to sell your stocks. It’s best to stick with large brokerages attached to banks like ICICI or Standard Chartered etc.
It’s a simple test; would you make a 1 crore FD with zerodha? Thats the logic to use because they have your money. Initially it’s nothing major but in time is that a chance to take?
You are on the right track mostly, just as a last note, don’t do mutual funds so early :slight_smile: Invest directly. In reality with fees you will find it difficult to see any return in a mutual fund (if it performs) for at-least three years or so… but do try out stuff to see what works for you.
Best.


(cigarshop) #24

Sometimes its best to keep simple thinking in investing.Don’t waste time on technicals or complicated assumptions.Asian paints has given appx 20% return for last 40 years why not next 40.Aurobindo has highest number of approvals from US FDA.


(bbbhutra) #25

My few suggestions -

  1. Invest in 10-15-20 stocks which has equal potential for gains. In India, where policies change abruptly and most promoters are not the very best when it comes to ethics, businesses are never safe proof.

  2. I personally believe BJP should continue to rule India for the next 10-15 years at least. Now at this, one should ask do they believe India will come out more stronger ? I personally believe it should and hence I advocate below stocks/sectors where once should concentrate more especially for ones whose investment horizon are 10 years plus.

Construction Sector - Lots of investment will be deployed in building better roads, highways, buildings, waste management etc. L&T is one shop all. Va Tech Wabag is another unique company which is into waste management, should gain a lot from river cleaning projects where most of them are just way too polluted. You can also include one of the major cement companies or maybe Asian Paints at reasonable valuation.

Defence Industry - The way world is built by Humans, this industry will just grow. And now with focus from the Government, L&T, Tata Motors, Bharat Forge, Bharat Electronics should do well if government delivers on its intent to make more and cut on imports.

Automobiles - Tata Motors, Balkrishna Industries, Amara Raja Batteries, Bajaj Auto might ride out all tides come what may.

Banking - HDFC, Ratnakar, SBI, Edelweiss, PFC/REC, Lakshmi Vilas

Pharma - Aurobindo Pharma, Alembic Pharma, Granules, Sun Pharma

Annual Return of 15-20% is more realistic to expect.

Disclosure - I hold all the above mentioned stocks.


(KODURI APPA RAO) #26

This is a very simple post. It just lists the risks that exist during retirement! I went to the American college which had designed Risk list for the Retirement Income Certified Professional. It is a very long list -AND THE LIST IS NOT complete. Scary is it not? Well with longevity to worry about, as a fund manager there are many times that you have to behave like an endowment fund of a college rather than an individual. Remember for about 40 years YOU are going to ONLY WITHDRAW from a fund!
Here is the list:
Longevity
Inflation
Excess withdrawal at a younger age (young part of the retired life)
Health care shooting through the roof
Excessively aggressive a portfolio
Excessively conservative a portfolio
Frailty
Financial / Physical Elder abuse
Market risk
Liquidity risk
Sequence of returns
Forced retirement
Interest rate risk
Re-employment may not happen at all
Losing of spouse
Unexpected financial responsibility
Retirement timing risk


(nikhilnik1234) #27

Hi @bbbhutra,

Now, what’s your view on Lakshmi Vilas bank since they are planning to raise capital from foriegn investors through ADRs etc.

Also, the results have been quite bad. Around 622 cr loss in Q4 FY18. Waiting for Q1 FY19 results.

I am holding this stock for last two years.


(Arnab) #28

Oct 2018 (1.5 Years after I created this thread)

25 Year old now. This month I have completed my second anniversary in the IT industry too.

I do have a investment corpus now but I did not design it the way I outlined in the very first post in this thread. Instead I opted to to invest 50% of my in-hand salary into three mutual funds (SIP Mode) starting from Jan this year and I saw that corpus currently is 13% down, OMG!

I also subscribed for a health insurance for my mom worth Rs 5 Lac and have a little LIC which I did during my college days itself. That is it!

Now here are the mutual funds I have opted for,

Fund Name | Class | Risk Grade | Return Grade

L&T EMERGING BUSINESSES FUND | SMALL CAP | BELOW AVERAGE | HIGH
ABSL SMALL AND MIDCAP FUND | SMALL CAP | AVERAGE | ABOVE AVERAGE
PRINCIPAL EMERGING BLUECHIP FUND | LARGE & MID CAP | AVERAGE | ABOVE AVG

Source : ValueResearchOnline

Honestly, I am not really fazed by the bloodbath in my corpus (it hurts a little though). I do understand that a correction was due anyway. Now my question is,

Do you think I need to restructure my portfolio’s risk grade by anyway ?
I would say I am a little above average in terms of risk tolerance.

Or maybe some other funds I should opt for ?


(Sidz) #29

The very fact that you are looking at your portfolio in a span of several month’s time is not at all appropriate, since this is contradicting with your subject name of “retirement” portfolio.

In case patience is your forte, diversify your mutual funds as well. Keep adding more when there is blood on the streets and don’t look back. The same hurt turns will turn into a greed, at which point you shouldn’t look at your portfolio either. Only then retirement portfolio’s are made.


(Arnab) #30

Hi Sidz,

Really appreciate your advice.

I am also thinking about diversification in terms of the type of the mutual funds I am invested into, at the moment my corpus of funds is almost entirely inclined towards small caps which is something that I did deliberately at the start of the year.

The rationale behind it was, since this is a long term portfolio I should focus on small businesses and give them the time to grow (which I can afford to) and not be bothered about the small to medium terms hiccups. I believe we do agree that small and mid caps generally give more return than large caps on the long run.

I still hold on to the rationale, even though my portfolio is pretty red at this time. But maybe I am wrong in my thinking, so feel free to be critical of my views.


(Arnab) #31

I was going through the 1-Year and 3-Year returns of the funds I have with respect to their respective benchmarks and the Nifty 50 Index.

To my surprise, I found that for each of the funds the Nifty 50 index has comfortably outperformed the fund and it’s benchmark in both 1-Year and 3-Year period.

It kind of reminded me of Warren Buffet and his famous challenge with the fund houses in US.

While I do understand the last 1 year has been tumultuous especially for the mid and small cap sector, but these funds getting outperformed by the Nifty 50 index even in the 3-Year timeframe was pretty surprising to me.


(vij) #32

I see the top funds beating their benchmarks for 3 year period in the small cap, midcap and multicap funds category. Data from valueresearchonline.


(Arnab) #33

Are they also beating Nifty 50 ?


(vij) #34

Yes. October 2015, nifty was around 8200. Cagr of 8.x % only.