Amit & Shalini: A Case Study of Smart Financial Planning

 

Back in 2018, Amit and Shalini, both IT professionals in their early forties, reached out to us through a referral from one of our existing clients. Based in Bangalore, the couple had some investments, but lacked a structured plan for key life goals such as their child’s education, retirement, and health coverage.

The Starting Point

Our initial assessment revealed gaps in their financial safety net and future planning:

• They had no health insurance coverage, leaving them vulnerable to unforeseen medical expenses.
• Their child, who was 10 years old at the time, had no dedicated corpus for higher education.
• Their retirement plan was insufficient, given their lifestyle needs and the uncertainty in the IT sector.

Step 1: Securing Health Coverage

The first step was to protect their family against potential medical emergencies. We helped them secure a ₹25 lakh health insurance policy with an unlimited recharge facility. This ensured that they wouldn’t need to dip into savings or investments for healthcare expenses, creating a crucial financial cushion.

Step 2: Planning for Their Child’s Higher Education

Their son’s higher education was only a decade away, so we designed a focused investment strategy:

• An aggressive SIP portfolio was initiated to maximize growth in the early years.
• We rebalanced the portfolio periodically, transitioning from aggressive funds to hybrid funds as the market reached higher valuations.
• Dynamic Asset Allocation funds were used for lump-sum investments, ensuring stability and alignment with their four-year goal horizon.

By consistently following this approach, we’ve grown the education corpus to nearly ₹60 lakh as of today. This fund will be ready for use within the next year, perfectly aligned with their son’s academic timeline.

Step 3: Building Their Retirement Corpus

While Amit and Shalini had a decent provident fund corpus, it was clear they needed to augment it to avoid a shortfall of ₹4 crore if they retired at 53. This concern was amplified by the volatile nature of IT jobs, where layoffs due to AI advancements and a younger workforce are common.

In 2018, we began a targeted retirement SIP of ₹75,000 per month. Over the years, we’ve gradually increased their contribution to ₹1.5 lakh per month. This disciplined approach, combined with strategic fund selection and periodic reviews, has kept them on track.

By 2028, Amit and Shalini are projected to reach their financial milestone of ₹4 crore in mutual funds. Along with other liquid assets, their total wealth is estimated to hit ₹10 crore, providing them with the security and freedom to enjoy their retirement without compromise.

Lessons from Amit & Shalini’s Journey

1. Start Early and Stay Disciplined: Time and consistency are key to building wealth.
2. Adapt to Life Goals: Financial planning isn’t static—rebalancing and re-evaluation are critical.
3. Health First: Adequate health coverage safeguards your investments from being derailed.
4. Plan for the Unexpected: Industry risks, like those in IT, should be factored into long-term plans.

Amit and Shalini’s story highlights how proactive planning can turn financial uncertainty into confidence and freedom. Their journey is proof that it’s never too late to take charge of your future.

At DhanCreators, we believe in turning aspirations into achievements. Our mission is clear and ambitious—to create 500+ Crorepati families by 2034. This isn’t just about accumulating wealth; it’s about enabling families to live their dreams, secure their futures, and leave lasting legacies.

We understand that every journey is unique. Whether your goal is to fund your child’s education, retire early, build generational wealth, or simply gain financial freedom, we are here to be your Saarthi—your guide and partner in this journey.

All you need to do is share your goals and dreams with us. We’ll work closely with you to create a tailored financial roadmap that aligns with your aspirations. With expertise, discipline, and regular reviews, we’ll ensure you stay on track, no matter the challenges along the way.

Your dream of financial freedom is closer than you think. Let DhanCreators help you turn it into reality.

Reach out to us today and take the first step toward your dream life!

Call us # 9998554836 / 9599956770 for more details.

Visit us www.dhancreators.com

 

Why Asset Allocation is Important?

 

Asset allocation refers to the practice of dividing your investment portfolio among different asset categories such as stocks, bonds and cash, it is like a balanced diet; just as you would not like to survive on only one type of food, so successful investing relies on a variety of assets to achieve desired financial health. Each asset class has different levels of risk and potential return, so finding the right mix is crucial for long-term success.

 

Let's say you’re planning for retirement. If all your money is invested in high-risk stocks, you might enjoy great returns in a booming market, but a sudden downturn could significantly impact your savings. By spreading your investments across various assets, you can manage risks better while positioning yourself for growth.

How Market Fluctuations Affect Asset Allocation Over Time

Market fluctuations are inevitable. Prices rise and fall due to various factors, from economic conditions to geopolitical events. As these fluctuations occur, your asset allocation can shift. For instance, if stocks plummet while bonds remain stable, you may find that your portfolio is now more heavily weighted in bonds than you originally planned.

 

Over time, it's essential to adjust your expectations based on these changes. The goal is to maintain a balance that aligns with your risk tolerance and investment objectives. Keeping a close eye on market trends can help ensure that your asset allocation continues to support your financial goals.

Significance of Maintaining a Target Asset Allocation

Having a target asset allocation is like having a roadmap for your investment journey. It provides guidance on where to invest and helps maintain focus during market turbulence. Sticking to an asset target can lead to better long-term performance because it encourages disciplined investing. When markets are climbing, it might be tempting to chase hot stocks, but sticking to your plan can protect you from overexposure to any one area.

 

Setting and maintaining this target allocation isn’t just for seasoned investors; it’s vital for anyone wanting to navigate the complex world of investing effectively.

When to Rebalance Your Portfolio

Time-based vs. Threshold-based Rebalancing Strategies

Rebalancing your portfolio is crucial for maintaining your target asset allocation. You can adopt two main strategies: time-based and threshold-based rebalancing. Time-based rebalancing involves reviewing your asset allocation at regular intervals—like annually or semi-annually—whether or not your investments have strayed from your target.

 

On the other hand, threshold-based rebalancing comes into play when your investments move beyond a specific percentage from the target allocation. For example, if equities soar and now make up 70% of your portfolio instead of 60%, you’ll consider rebalancing.

Annual or Semi-Annual Rebalancing: Pros and Cons

Choosing how frequently to rebalance your portfolio often depends on your investment strategy and tolerance for risk:

• Annual Rebalancing:
• Pros: Less time-consuming and minimizes transaction costs.
• Cons: May miss opportunities to take advantage of market fluctuations.
• Semi-Annual Rebalancing:
• Pros: Balances the need for discipline with current market conditions.
• Cons: Still may not react quickly enough to sharp market changes.

Identifying Key Market Events Prompting Rebalancing

Market events like economic data releases, earnings reports, or geopolitical instability can signal a time to rebalance. Staying informed about these happenings can help you adjust your portfolio proactively instead of reactively.

Benefits of Portfolio Rebalancing

Risk Management

Rebalancing isn't just about keeping things in order; it's a powerful tool for managing investment risk. Over time, some investments may perform exceptionally well, while others may lag. Without rebalancing, your portfolio could become overly concentrated in one area, increasing overall risk.

 

Historical data shows that investors who don’t rebalance typically experience higher risk levels during volatile markets. Rebalancing often involves selling high-performing assets and buying those that may have underperformed, which may feel counterintuitive. However, it can mitigate losses during downturns by preventing overexposure.

 

In summary, Asset Allocation and Regular Rebalancing are pillars of sound investing. They are important not only for achieving your financial goals but also for managing the risks that come with investing. By taking the time to follow these strategies, you’re not just betting on the market; you’re creating a well-thought-out approach to your financial future.

 

Happy investing!