A couple’s story on meeting major financial goals via SIP route

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Mint reached out to the couple and their financial guide—Santosh Joseph, founder & partner at Germinate Investor Services LLP, an AMFI registered mutual fund distributor—to understand their personal finance journey.

Power of SIP

Freddy and Joseph knew each other for a long time as they attended the same church. In 2005-06, on Joseph’s advice to start a SIP (systematic investment plan) in equity mutual funds for long-term savings, Freddy started investing 2,500–3,000 every month.

Freddy realized the power of this SIP when he needed money in 2011 to fund his marriage expenses.

“When I started investing, I didn’t know much about mutual funds or markets. I just took inputs from Joseph and invested the amount. When I was able to meet half of my marriage expenses with my savings, I realized the importance of disciplined saving. The experience also encouraged me to invest more,” added Freddy.

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Post-marriage, Priya R, too, started her SIP investment journey, in 2014. The accumulated corpus of the couple also helped them to make lump sum payments when they were constructing a home, a few years after marriage.

One thing that helped Freddy and Priya R in their investment journey has been their ‘buy and hold’ strategy. “Once the debit happens from the account, it’s like a forgotten investment for us. We never think of withdrawing our investments. Neither do we think about how much the corpus is growing,” added Freddy.

The couple, over the years, has increased their SIP amount with their raising income levels, to fund their future financial goals including their son’s education and retirement planning. The lump sum cash inflow that they get occasionally is either used to purchase gold (jewellery) or invest in mutual funds.

Commenting on this, Joseph said “When they make lump sum investments, we park that amount in either liquid or short-term funds and then initiate an STP (systematic transfer plan) to the equity funds over a period of time to reduce the stress of market volatility”.

In hindsight, Joseph also thinks that their team would have suggested higher equity allocation in the initial years for the couple.

He added “initially, we were very cautious and conservative, though the mandate was for long-term investing. Being well asset-allocated from the beginning would have yielded a higher net worth for them.”

Fear of borrowing

Since the couple’s portfolio is tilted towards the equity asset class, on asking if they ever were perturbed by the volatility in the stock market, the couple said that they were never hampered by it to invest further.

“In 2020, one day the markets fell sharply. I happened to see my portfolio that day and was shocked to see a loss of 3 lakh in just one day. Then, I decided not to look at the app for some time,” said Priya R.

She also recalled advice from her lecturer during her college days when all the students were asked to collectively pool some amount to buy a good stock. “While we were fearful of the stock falling in the market, our lecturer instructed us not to focus on the everyday fluctuation but on the gain in the long-term,” she added.

The key behavioural driver for the couple to invest more is also the fear of taking a loan for meeting their financial needs. “The fear of debt is bigger for us than the fear of losing money in equity; we know that the risk of losing capital in equity markets, in the long run, is lower,” said Priya R.

“We live within our means and never intend to take a personal loan. We maintain a good cash balance over and above our investments, which serves as a good cushion in case of emergencies,” added Freddy.

Teaching their child

The couple is also conscious of teaching their nine-year-old child, Aiden, about the value of money. “Whenever our son asks for something, we ask him questions like – ‘why do you want it?’ and ‘do you know how much it costs?’” they said. “We don’t give him everything that he asks for, but make sure he gets what he needs.”

“When he was born, we did two things as soon as we can – got him a passport and opened a bank account in his name,” said Freddy. He added, “all the money he receives from relatives or friends for events such as Christmas or his birthday goes into his bank account. We do not touch that.”

Priya R strongly thinks that personal finance education must be made mandatory in schools as she believes that saving as a habit must be taught, right from a young age. “In addition to teaching kids about algebra, formulae, geometry, and angles, it is also important to inculcate in them the importance of saving, which is pretty much missing in the education system now,” she added.

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