Maheshwari is very hands-on with his investing. He prefers monthly lumpsum investments in mutual funds to systematic investment plans (SIPs).
He is also very conscious of the cost of investing. He aims to bring this down by making all his fresh investments in direct plans of mutual funds. He also wants to increase his exposure to low-cost passive funds.
Asset mix
Maheshwari’s portfolio is currently split 50:50 between equity and debt, which he plans to shift to a 70:30 ratio.
Most of Maheshwari’s equity portfolio is invested in mutual funds, with 15% allocated to direct stock holdings.
Maheshwari holds 20 mutual fund schemes in his portfolio, with 10 core schemes accounting for 80% of his mutual fund investments. “The numbers appear larger because I invested in a few debt funds before the March 31, 2023 deadline for taking the indexation benefit,” he said.
Going direct
“I have realized that even saving a few percentage points over the years can make a significant difference due to the compounding effect,” Maheshwari said.
He plans to make his fresh MF investments through direct plans to save on distributor commissions. Unlike regular plans that also include commissions, direct plans only include the asset management fee.
Passive play
Maheshwari intends to invest more in passive funds like ETFs and index funds, which have lower total expense ratios.
TERs are the fees charged by the fund house for managing the fund. Because passive funds track an index and are not actively managed, their fees tend to be lower.
Within passives, Maheshwari doesn’t want to add plain-vanilla passive funds that just track frontline market indices. Instead, he prefers factor-based passive funds that use quantitative and qualitative filters like momentum, value, and growth for portfolio creation.
These portfolios are automatically rebalanced at regular intervals. To be sure, Maheshwari also has investments in actively-managed funds, but aims to increase the passive portion of his portfolio.
Currently, his equity mutual fund portfolio is split 75:25 between active and passive funds. He plans to shift this to a 65:35 ratio.
Maheshwari said momentum strategy and value strategy have worked well for him in recent years. But momentum strategy or value strategy may not do well in all phases of the market.
“For instance, momentum works in rising markets but not in falling ones,” he said. He views corrections in such funds as buying opportunities, deploying more investments during these times.
Stock pickings
Maheshwari keeps his stock picking approach simple.
“I usually keep track of the top holdings of my watch-listed mutual funds. There could be situations where a scheme I’m monitoring has 10-15% exposure to a certain business group or stock. In such cases, I prefer buying the stocks directly and keeping a close watch on them,” he said. “My direct stock picks are limited to large-caps or large-sized mid-caps. As far as small-caps are concerned, I don’t venture direct stock buying there.”
This approach helps Maheshwari save on mutual fund TERs.
“TER would be an annual recurring cost if I invested in these mutual funds. TERs of these funds are usually higher as these are actively-managed schemes. Many active schemes have blue-chip heavyweights anyway,” he noted. “Hence, I prefer to buy these directly. As there is a lot of information available about such stocks, I can also analyze and track them.”
“I don’t intend to unnecessarily churn my stock portfolio, hence the cost of brokerage is likely to be lower for me over time.”
Lumpsum investing
Maheshwari prefers lumpsum investing, but with a disciplined approach. “When there’s a correction or dip in one of my funds, I invest there. Otherwise, I distribute my investments across funds. I invest every month as soon as my salary hits my account,” he explained.
Investing via SIPs automates a fixed investment on a monthly basis, while lumpsum investing involves manually making the investments. The investor, however, can do his lumpsum investment every month, just like a SIP.
Lumpsum investing gives more flexibility to an investor to take tactical calls on how he wants to allocate his funds across his schemes.
Maheshwari maintains a savings rate of 45-50%, enabling him to make substantial monthly investments.
Living in a joint family with his parents and his brother’s family helps Maheshwari share many costs, keeping their overall expenses low.
FIRE for passions
For Maheshwari, achieving FIRE doesn’t equate to quitting work altogether; instead, it means having the freedom to pursue one’s passions.
Currently, Maheshwari works as director-accounts at a publishing company, while his wife is a teacher in a government-aided school. Their son is 13 years old.
Apart from day-to-day expenses, Maheshwari wants his FIRE corpus to take care of his son’s higher education, as well as his marriage costs.
Travel is another priority for Maheshwari.
“We want to travel more while we’re still healthy. We’ve explored almost all of India and now aim to visit international destinations. I want to cover as many countries as I can, so starting sooner is better,” he says.
Maheshwari is also provisioning for any emergency or medical needs.
He is factoring in conservative 10% annualized returns from the equity part of his portfolio, while 7% post-tax from the debt part (PPF, post office, EPFO investments) of his portfolio, giving him blended portfolio returns of 8.5%. On the other hand, he is considering 6% inflation for his expenses.
However, this is a conservative estimate based on a 50:50 equity-to-debt portfolio. “With my target mix of 70:30 equity-to-debt, my blended return would be slightly above 10%,” Maheshwari said.
Insurance cover
Maheshwari has a substantial medical cover, including a ₹15 lakh base cover and a ₹1 crore super top-up, along with a life cover of ₹1.5 crore.
Maheshwari has no outstanding loans but has funds stuck in a real estate investment gone bad. While he doesn’t plan to buy more real estate immediately, he might consider a larger family home in the future. For now, he is investing in repairs of their existing home, ensuring it remains comfortable for the family.
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Published: 02 Jun 2024, 01:08 PM IST