Savings, SIPs, and stocks

Rakesh Punia, in his late forties, is pursuing a PhD in management from G D Goenka University in Gurugram, with his research paper titled "Challenges faced by Indians in managing their personal finances." Born in Behal, a small town in Bhiwani district of Haryana, he grew up in a rural setting, which was bereft of televisions, newspapers and modern facilities. He recalls, "The only mode of entertainment or general awareness was radio. I used to listen to BBC Hindi news and a few other infotainment programmes."

Currently, Rakesh lives in Thane with his wife Nirmal, their daughter Nikita and son Jatin. His father, a retired English teacher, and mother, a retired postmaster, still live at his native place. As his mother was a postmaster, Rakesh was well aware of fixed deposits, recurring deposits, Kisan Vikas Patra (KVP), National Savings Certificate (NSC), etc., since his childhood. "I used to actively help her in her day-to-day work and in the process learnt a lot about savings," says Rakesh.

Setting off on a new journey
Rakesh moved out of his home town early for his higher education. From 1993 onwards, he worked a few corporate stints at leading Indian companies and MNCs in verticals like logistics, supply chain, free trade zones and warehousing across Jaipur, Bangalore and Mumbai. Finally in 2016, he donned the entrepreneurship hat. "As an entrepreneur, I am engaged in a logistics venture and Airbnb hosting. I also run a salon and a citizen-services firm," says an enthusiastic Rakesh.

His logistics business is owned by his wife and two other partners. Rakesh takes care of finance and business development. The Airbnb hosting was started in December 2018 in a one-bedroom apartment owned by him. Rakesh says, "This is an awesome futuristic venture which enables me to meet new people, expand my network and make good money out of it."

His salon venture is a partnership with his old friend, in which Rakesh takes care of finance and marketing. His citizen-services venture helps people avail government services, such as passports, PAN, Aadhaar, voter IDs, etc. "I realised that people in Mumbai have money, but are short of time. Thus, there was a need for such services which would save them from the hassle of running to government offices and fortunately, the venture worked out," says Rakesh.

It's said that life comes easy for some and hard for others. Rakesh falls in the latter category. Although Rakesh was aware of the importance of saving and investing, he never tried to save anything until 2003 because of a lack of surplus. Around the same time, he quit his job to find a new one. In the interim, he had no money to meet even his domestic expenditure. He recalls, "I had to borrow from my friends and relatives. This taught me the value of money the hard way. I then started saving money in my bank account and Public Provident Fund (PPF)."

Saying hello to mutual funds
Rakesh's real investment journey started in 2006 when he landed a job in Mumbai. Rakesh reminisces, "While waiting for a local train at King's Circle station or at the office, I used to hear a lot about money, especially about the stock market. However, not many people used to talk about mutual funds. The situation today is different, thanks to initiatives like 'Mutual Fund Sahi Hai'."

"I lived as a paying guest, while my family was in Bangalore. So I used to get plenty of free time. On my way to the PG, there was a stock broker and I used to pick mutual fund KIMs, IPO forms, etc., from there," he adds.

His first real encounter with mutual funds as well as Value Research was a rather filmy one. "One day, I found Mutual Fund Insight at a kiosk on the station. After reading it, I got valuable insights into mutual funds. To dive deeper, I started browsing Value Research Online (VRO). Around 2007, I made two lump-sum investments of Rs 5,000 each in two funds." But soon he realised that SIPs worked better. Consequently, in 2008, he started his first SIP of Rs 3,000 in IDFC Flexi Cap Fund. Rakesh says, "Within three months, I realised that I could gather more units when the markets were low and therefore added another SIP of Rs 4000 in the same fund."

In his quest for wealth creation, he also opened a demat and trading account in 2009 and started with intra-day trading. Calling it a tempting but a wrong vehicle, Rakesh recalls, "I soon realised my mistake when Rs 50,000 profit made in two months got washed off in the following few weeks. I bought a few RIL stocks for the long term and gave up intra-day trading forever."

Now an avid reader of VRO, Rakesh has subscribed to all Value Research publications. He says, "Mr Dhirendra Kumar is my guru. His views are balanced and unbiased. Had there been no Value Research, either my investment journey would not have started or it would have been late."

Rakesh's asset allocation
His asset allocation is 96 per cent equity, which is divided between stock investments and equity mutual funds. About 4 per cent of his corpus is in FDs for emergency purposes. As for insurance, Rakesh feels that traditional insurance products and ULIPs are a waste. "I have a pure term cover of Rs 1 crore and a mediclaim policy of Rs 90 lakh, covering all four of us," he says.

His key mutual fund holdings include Franklin India Smaller Companies, DSP Midcap, DSP Small Cap, SBI Small Cap, IDFC Flexi Cap and L&T Tax Advantage. His current equity portfolio (both stocks and funds) is around Rs 89 lakh.

Disciplined investing has helped Rakesh accumulate this sum. He made sure to increase his SIP contributions over the years. While he started with just Rs 3,000 in 2008, his current SIPs across all funds now are Rs 1,37,500. He continued his SIPs even when he was unemployed for a brief period in 2014. "I treat my SIPs as EMIs and an unavoidable expense, and hence I have never felt like stopping them," says the learner in him.

He further adds, "When the markets are substantially high, it feels great to see my portfolio on the Value Research website. But I never feel bad when the opposite happens. If one has a sound understanding of the market, patience flows in automatically."

With a long-term view, Rakesh chooses funds based on the investment style, historical returns, fund's history, AMC age, Value Research ratings, etc., among others. He keeps an eye on the performances of all his funds. If there are fundamental changes in the parameters of some scheme, he waits to review its performance. If the performance suffers, he considers switching to a better scheme in the same category.

Rakesh is an ardent fan of Warren Buffet and his theory of value investing, which he feels is explained in greater detail by Dhirendra Kumar. He puts roughly Rs 1-2 lakh in stocks every month. While investing in a stock, he looks at the company's fundamentals - competitive advantage, management, consistency of growth in earnings and bottom-line, dividend payout history, future of business, etc. He has been picking 'All-Weather stocks' based on Value Research's Stock Advisory Service. "I keep a long-term view and plan to create a corpus in such a way that I need not sell any of my quality stocks. This should enable me to have sufficient dividend income to support my regular expenses 10 years from now and leave a large corpus for the next generation," says Rakesh.

Rakesh's financial goals
Rakesh is able to fund his children's education from his current income. For his daughter's PhD in Germany, starting two years from now, he has already built an adequate corpus and planned an education loan in her name (with him paying 20 per cent margin) so that she can repay it once she gets employed. He plans to do the same for his son.

He says his children's weddings will be taken care of by his current SIPs. Further, he is on track with building a retirement corpus of Rs 4 crore.

After getting into business in 2016 and the subsequent increase in income, he was able to prepay his home loan in a short period. "Being debt-free gives me greater flexibility to save and invest more. As a result, I have been able to increase my SIPs and also direct more money to stocks. This has enabled me to get closer to my first target of Rs 1 crore," says Rakesh.

He feels that his real success with wealth creation is yet to come. "I'm optimistic that once the markets improve, my success story will take off. I had set the target of accumulating Rs 1 crore after I read Value Research's e-book How to Grow Your Small Savings to Rs 1 Crore in early 2018. I had estimated to touch this milestone by September 2019, but that could not happen owing to the poor markets. I believe the initial Rs 1 crore is a challenge, but once it is attained, the second, third and subsequent crores may not be as tough," signs off the ardent believer.

What we can learn from Rakesh Punia

• While investing in equity funds, go for SIPs rather than lump sums.
• Build an emergency corpus.
• Avoid unit-linked insurance. Go for term insurance.
• Regularly monitor your investments.

This story first appeared in the February 2020 issue of Mutual Fund Insight.

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