Once upon a time, there was a diligent individual named Mr. Deshpande who stumbled upon the world of mutual funds in 2007-2008, thanks to their LIC agent who had recently started selling them. Mr. Deshpande had no prior knowledge of mutual funds, but their curiosity was piqued by the agent's claim of good returns. Without fully understanding the intricacies of mutual fund investments, Mr. Deshpande took a leap of faith and invested approximately 1.5 lakhs in 5-8 equity funds based on the agent's recommendations.
However, fate had something unexpected in store for Mr. Deshpande. The market crash of 2008 swiftly followed their entry into the mutual fund world, presenting them with a stark lesson on the risks associated with such investments. Fortunately, Mr. Deshpande's family had instilled in them the value of patience and letting things settle. Despite witnessing a significant downturn in their investments, XYZ chose not to panic and sell at a loss, realizing that they did not require that money immediately.
Forced to hold onto two of the funds due to their ten-year close-ended nature, Mr. Deshpande decided to wait it out. They exercised patience, trusting that the market would eventually recover. It took several years, around 5-10 to be precise, for most of the funds to bounce back, and some even doubled the initial investment. This experience served as a valuable lesson for Mr. Deshpande, emphasizing the importance of gaining knowledge and understanding before venturing into any financial instrument.
Around 2012, Mr. Deshpande found themselves growing increasingly interested in the world of mutual funds and other investment avenues. Inspired by the stories of financial freedom and early retirement, Mr. Deshpande embarked on a quest for financial independence. They delved into books and resources, seeking wisdom and strategies to enhance their investment journey.
The concept of the Permanent Portfolio resonated deeply with Mr. Deshpande, and they began implementing a similar approach to their mutual fund investments. Each month, Mr. Deshpande allocated 25% of their savings to an equity fund, a debt (gilt) fund, a gold fund, and a cash (short-term debt) fund. Alongside their regular job, Mr. Deshpande had the opportunity to work onsite, which bolstered their savings. They diligently invested most of their additional income into the Permanent Portfolio funds.
However, Mr. Deshpande realized that merely earning higher income or seizing onsite opportunities would not lead to true financial independence. They understood that disciplined investing and maintaining composure during turbulent times were the keys to achieving their goals.
During this period, Mr. Deshpande made a shift from the Permanent Portfolio to a more conventional 60:40 equity/debt portfolio. Mr. Deshpande's commitment to saving and investing remained unwavering, with a monthly savings rate of around 50-75% of their income.
With discipline as their guiding principle, Mr. Deshpande managed to accumulate a net worth approximately 33 times their annual expenses. They have started following a step-down strategy from the 60:40 allocation each year, further fine-tuning their investment approach.
Currently, Mr. Deshpande maintains a portfolio consisting of four mutual funds, but they intend to eventually consolidate it to 2-3 funds. Their sole objective for these funds is to secure a comfortable retirement, as they have no plans to retire entirely. Instead, Mr. Deshpande aspires to build a business that will eventually replace their job income.
Considering their retirement funds to be adequately funded, Mr. Deshpande contemplates ceasing further investments in these funds. Instead, they aim to divert new investments towards "safer" instruments or funds that align with their reduced risk appetite. Mr. Deshpande recognizes the importance of diversification and plans to allocate their assets across different investment avenues to manage risk effectively.
Mr. Deshpande understands the significance of regularly reviewing their investment strategy, staying informed about market trends, and seeking guidance from a financial advisor when necessary. With their relentless dedication and unwavering commitment, XYZ remains on a unique and realistic path toward financial independence, ready to seize opportunities and create a fulfilling future.