Slow and steady: How a passive approach to investing secured this Mumbai-based CEO’s retirement future

Sharma, 52, who works as group CEO of a global media company, is eight years away from retirement. He has achieved his goals by putting in a large allocation to equity and letting his investments compound over the years. His asset mix has a 74% allocation to equities and a balance of 26% to debt.

“In the past 17 years of my financial planning journey, which has been orchestrated by my financial advisor, I have witnessed the power of compounding,” says Sharma. He has been almost passive with his investments and avoided tampering and tinkering with them too much, he added.

Portfolio mix

Sharma and his wife have 34 mutual funds in all. While Sharma’s investments are spread across 24 funds, ten funds are in his wife’s name.

The family’s equity mutual fund portfolio is diversified as follows

• 35% in large-cap funds
• 23% in flexi cap funds
• 14% in large & mid-cap funds
• 16% in international funds
• The balance is in aggressive hybrid funds.

Meanwhile, the 26% debt allocation is split evenly, with 13% in liquid debt and 13% in illiquid debt. The liquid debt comprises a mix of arbitrage and debt schemes, while the illiquid portion is in the employee provident fund. The liquid debt is reserved for annual family travel, typically twice a year, and any contingency requirements. The equity investments are dedicated to long-term goals such as retirement and his son’s education.

Sharma doesn’t like real estate as an investment, as he says it is an illiquid asset. His own house is loan-free, but he says he doesn’t look at it as an investment as it is for residential purposes.

Goals

He says he has already reached 100% of his corpus target for his son’s education.

Apart from this, the family has goals for upgrading their car and planning annual vacations, in India or abroad.

The funds for vacation goals are withdrawn from the debt portion of Sharma’s portfolio.

In the post-retirement phase, Sharma would continue to travel with his family. He says he doesn’t plan to necessarily stop working fully after turning 60. “If there are opportunities to consult, work in an advisory role, or even teach—as I enjoy teaching—I would be open to such roles,” he says.

High savings rate

Sharma has a high savings rate of 70%, which he has maintained for the past seven to eight years. 

He invests 70% of his income in mutual funds through monthly systematic investment plans (SIPs), with the remaining 30% for household expenses.

He doesn’t have any outstanding loans. “I had a home loan, but I retired it quickly within three years of it getting disbursed with the help of my bonuses,” he says.

“As a South Indian, the idea that loans are bad for you gets ingrained at a very young age,” he adds. While he is born and brought up in Mumbai, his parents originally hail from Trichy, a city in Tamil Nadu.

Sharma doesn’t have any credit cards either. He keeps just one bank account to maintain a simple and easy-to-track financial life.

The other idea is being disciplined with spending, which Sharma says has helped him boost his savings a lot. He adds that he avoids unnecessary spending while he doesn’t compromise on clothing, food, and commuting comfort.

Over the years, he has realized that getting more material things doesn’t necessarily add to more happiness.

Sharma says growing up in the pre-liberalization era has also significantly shaped his thinking. “Back then, life was simple, and you had to work really hard just to get opportunities, unlike today,” he points out.

First brush

Sharma recalls that there weren’t many investment options in the early days. “In fact, I had invested in some insurance products that were sold to me as attractive investment propositions. Later, I realized these were mis-sold to me, and I ended up surrendering couple of them,” he says.

Today, nearly all of Sharma’s investments are through mutual funds. However, when he was first exposed to the stock markets in the early 2000s, he began with direct stock investing and also dabbled in intraday trading.

“Back then, you’d get a tip from a friend or relative and buy a stock. I even dabbled in intraday trading—not in futures & options, but by buying a stock in the morning and selling it the same day to make a quick profit,” Sharma recalls.

But Sharma says these activities neither fetched him much profit nor led to significant gains. “I hadn’t invested much money in these experiments, so they didn’t significantly impact my finances or contribute meaningfully,” Sharma says.

Financial planning was a relatively new concept in the early 2000s. Up until then, Sharma’s investments were sporadic, without any clear financial goals or planning behind them. When he sought a more disciplined approach, his sister-in-law recommended Ladder7 Wealth Planners in 2007. He has stuck with the Sebi-registered investment adviser (RIA) since then.

Life, health cover

Sharma has a sizeable life insurance cover from his employer, which he believes is more than adequate, especially now that he has accumulated sufficient assets on his own. He also has health cover in the form of family floater of ₹20 lakh, which covers him, his wife and son.

By adhering to a disciplined approach, Sharma is successfully navigating his retirement planning journey and is well on track to achieving his goals.