How I Started My Investment Journey? 2018 - 2019: The Years Of Product Based Approach

In this article, I will tell about the starting of my Investment Journey. Previously we discussed about an accident happened in 2016 that changed my life. I started my journey from zero with a RD, but still had the habit of spending.

I would request the readers to complete the previous articles about my journey, so that you can understand about how my thought process of investing changes overtime.

Part 1: An Accident That Changed My Life: Learnt About Discipline, The Key To Financial Stability

How I started my investment journey? What was my product based approach? So, let’s start.

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In realfinplan, we try to provide realistic, authentic and free educational contents, so that individuals can control their own finance by themselves. I will request the readers

First to Cover Your Basics To Secure Yourself Financially, then to understand Basics of Saving and Investing.
Second to Identify your Goals and understand Why do we need Goal Based Investment Planning? Then move forward.

At that time I was more into fun. Loved to roam about here and there, travel different places by bike, go for vacations with my wife. Never thought about investing and all that. I was living the life of my dream, married my love. So, new life, new wife, new job, new bike, new places. You can understand, I was enjoying my life with full potential.

I couldn’t save much apart from the RD. Still spending was the habit. In the meantime, next year I opened a PPF account with the influence of one my friend cum colleagues. Why?

He told that everyone should open a PPF account at least. The interest is tax free. So, opened it but just kept it alive. I didn’t like the 15 years Lock-in Period concept though.

At that time, some of my friends and colleagues used to do trading in stocks. Some of them were invested in mutual funds. Some of my friends told me to do trading. It’s quick money. But I also heard from some people that it’s too risky and like gambling. Whereas, some told me that if one could understand and invest for a long time, he or she can earn good money.

I was thinking about starting with a mutual funds, watched some videos in youtube too. But I didn’t feel the need of these. Also I was pretty much confused and scared of mutual funds and stocks. So, stayed away.

Investment Journey: The Beginning with Mutual Funds Thanks To 80C

After completing my training period in 2017 I got my final posting. So, I got increment, started getting some extra allowances. There was a healthy raise in my salary. But that also came with higher income tax. But didn’t realised that untill I filed my ITR returns in July 2018.

I realised that I could have save taxes by investing and claiming tax rebate as per section 80C. Now I started to feel the need of saving and investing more. Started thinking about how can I invest, how much to invest. I realised that if one needs to invest more, tracking of expenses is vital. Then only one can understand about how much he can invest for tax saving.

So, I bought a copy and started to track my expenses category wise, note them and analyze them. But I never set a budget. I didn’t want to control my expenses, just wanted to track them and get an idea about the spending habit. By the time, I already built a habit of saving first, then spend and that too with discipline. I was pretty much confident that no matter what, if I save and invest first, I will be in a good position. So, my saving was on track according to me.

Now coming to tax savings. Being a central government employee, I already had NPS. But that wasn’t enough to cover 1.5L cap of 80C. So, I started searching in YouTube and watched many videos. There were a lot of options available.

PPF
LIC Money back POLICY, Endowment Plans
Term Insurance
ELSS (Through the add Mutual Funds Sahi Hai)
TAX Saver FD
NSC
KVP

But I didn’t need all these options. I started to watch various channels but I think “Labour Law Advisor” channel taught me things in an honest way at that time. Mandeep Sir is so good at explaining things in details. I thank this channel from the core of my heart. I learnt a lot of from this channel. I started filtering out which one I need to avoid.

Why I just kept my PPF account alive?

I came to know that PPF is a fantastic instrument. It’s the safest instrument in our country. Even court can’t touch your PPF account. Beside this it also comes with great tax advantages. But again, the lock in period is too high. So, I wasn’t convinced to invest, just kept it alive.

Why I eliminated Insurance Plans from my List?

I eliminated term insurance as it’s an expenditure not an investment. At that point of time, I thought, it’s not my thing, there is no need of any term insurance for me.

I thought of doing a LIC. I had seen, my father, his friends, my friends were into LIC plans. A good friend of mine, he had 4 Insurance Policies. So, I was pretty much convinced and was about to start investing in a LIC plan.

But at that point of time, I watched some videos in Labour Law Advisor channel. All thanks to Mandeep Sir for teaching me about the dark truth of Endowment Plans considering the concept of IRR (Internal Rate of Return). I understood that these kinds of plans have a lot of disadvantages. Those are bogus instruments to invest.

It’s High Cost and with Low Coverage. Premiums are too high and you get such a low coverage with that premiums.
Lock in period is too long resulting lack of Liquidity. I was searching for product that comes with lower lock in period.
Insurance policies come with Low Returns, almost zero to negetive inflation adjusted returns.
These are also Complex Products. Mixing the main two components of financial planning. We should never mix insurance with investments. Insurance is for risk coverage and Investments are for our future needs.
ULIPs come with lower lock in period. But those are also complex products. I tried to understand ULIPs, but I felt that these are complicated products. I always prefer simple things. Also, they come with Market Risk. Which makes it more complex. If I really need to invest in market related products, it’s better to go with mutual funds.

How I started my investment journey — Insurance vs Investment

Why I kept NSC in my rader?

Bank Tax saving FD is not tax efficient. Though it has lower lock-in period, the interest you earn is taxable and will be charged as per tax slab.

NSC is a product, which can be good for me. It’s safe, with 5 years of lock in period and the interest is reinvested. And more importantly the interest earned can be claimed in 80C, making it almost tax free.

In the last year, your NSC will be closed and interest earned will not be reinvested, so you can’t claim that in 80C.

But it’s okay, it’s lower lock in period makes a good option for me. Thought when my RD will mature, I will invest that amount in NSC if needed. So, I kept it in my rader.

Why I chose ELSS?

During this time I already started watching a lot of videos on Equity Mutual Funds. Learnt about what are they and how they works, mutual funds types, different caps and about their risk parameters etc.

I began to feel confident that I can invest. Yes, there is risk. But I will be investing much less compared to my RD. Also, ELSS has a Lock-in Period of 3 years which is lowest among tax saving investment products. And these 3 years of Lock-in can be good for me as I will be invested for a long time in equity. So, yes I was ready to take the risk.

I watched various channels to gain knowledge about mutual funds. But at that time, I started to follow Investyadhna channel by Parimal Ade and Gaurav Jain. I felt that they were good at analysis of mutual funds and all that. They used to do some detailed analysis with various parameters.

After watching some videos of them, I felt that a multicap fund can be a good option for me to start investing in equity mutual funds. I can get exposure to all caps of stocks i.e. large cap, midcap, smallcap. And the good thing about ELSS is that it falls under multicap category.

My First Mutual Funds

So, I searched for the best performing ELSS fund. And ultimately after watching some videos on YouTube, I chose ABSL Tax Relief 96 – Direct Growth as my first mutual fund to invest. Started a SIP through AMC website.

I also wanted to invest in one more fund in the same category. Searched about best Multicap fund and chose to invest in the Multicap fund of SBI AMC.

I was also searching for an app from where I can invest in any mutual funds and can monitor all my funds.
I chose ET Money for that and started a SIP in SBI Magnum Multicap Fund – Direct.

What did I learn in this period?

Watched a lot of investment related videos online. Started reading articles, watching a lot of videos related to this. Learnt about the basics of Saving and Investing.

Started following various investor personnels, reading about inflation, what to do to beat inflation, equity investing, how many people achieved a lot of wealth through equity investing, and how many ways to invest in equity. Learnt concepts about assets, liabilities, compounding etc. I can summerise my learning as follows:

Compounding takes time

I learned the concept of compounding and how much it is important to create wealth. Everything takes time and this is true for compounding also. So, I need to give time to my investments to grow.

Discipline is the Key

Discipline is the most important thing for investing, it’s the key to financial stability. And luckily I have it as I started a RD. Will have to work on it a lot more.

Increase in Investment

An increase in investment amount is so important. I need to be consistent about increasing my regular investment each year. This will benefit in the long run. It’s like adding fuel to the fire of compounding.

Why I dropped the idea of getting a Flat and a Car?

I started a RD two years ago. That was about to mature at the ending of 2018. My hand was itching to spend the matured amount.

Me and my wife were thinking about getting a flat as we were on rent. I even gathered money for a downpayment of about. My father was also going to help me with that. Talked with the branch manager for a home loan. We both also wanted a Car and thought about going for a car loan too.

But seeing the EMI amount I was sleepless. More than 60% of my salary would go to EMI. I realised that I won’t be able to invest much. In fact it would have been so hard to invest if I needed to continue my regular lifestyle. And once you maintain a good lifestyle, it’s so hard to go backward.

What I had learnt in this period is that to create wealth, not only investment is important but also I need to increase my Investments as much as possible. So, I dropped the idea.

Thought about applying for quarters from my employer. Later on after saving some money I would buy a flat or land.

This is the best financial decision I took in my life. If I bought the flat at that time, I wouldn’t have been in a position where I am today.

We also decided that it’s not the right time to buy a car and also we don’t “need” it. I don’t wanna take out a loan for a car. It’s a depreciating asset. I would save first, then I would buy. If I had to wait, I would wait. Thought about starting a RD for these purposes.

Being Aggressive: Increasing Investment

Why did I chose NSC?

My RD matured. I invested that in NSC adding the amount of that down payment for my flat.

Save Tax

Simple, I can save tax. During that time, tax saving was the most important thing for me. NSC was already in my radar. If I invest in NSC, I could use both 80C and 80CCD(1B) sections in this year to get more tax benefits.

Interest Rate

At that time the interest rate in NSC was a healthy 8%.

Remaining Invested

After learning a lot of things these days, I started to think about remaining invested for a longer time. The RD was my first investment, I wanted to grow this amount. So, I didn’t spend the amount. Rather I chose to invest for a long time. NSC has 5 years of Lock-in Period. So, it would be good for me to get a good chunk of money in the future.

Going for a Lower Home Loan

And I thought it would help me to buy land (my wife wants it but I don’t feel comfortable in buying land) or a flat or build a home. Yes, still I will have to opt for a home loan. But I will save more to make the loan amount lower and the EMI lesser.

Started new RD

So, now that I didn’t take any loan, I had money to invest.

Opened an account and started a RD for 3 years. Thought it would help me to buy a car or buying home.

Also started another RD for emergency purposes like I started my investing journey. Again starting from zero. Why? I wasn’t aware of the concept of Emergency Funds and Covering the Basics.

I always preferred RD for short period of time. It’s the simplest low risk product. I doubled the amount of my RD than my starting RD amount. The idea was simple, save more.

Being Crazy About Mutual Funds

By the time, I watched a lot of videos, read some articles about mutual funds. Completed a lot of playlist too in different YouTube channels.

Now I started to analyze MF in a different way after watching a lot of YouTube videos. I started to pick funds technically, based on

Risk Parameters (Beta, Standard deviation),
Return Parameters (alpha, mean, Sharpe, Sortino),
Rolling returns consistency,
Fund Manager,
Funds consistency,
Turnover ratio etc.

I started to first look at the risk parameters, then start analysing other aspects of a fund.

Again after ITR filing in 2019, I realized if I need to claim tax benefits under 80CCD (1B), I need to invest more in ELSS. I already had two fund, one ELSS and one Multicap Fund.

ABSL Tax Relief 96 fund
SBI Magnum Multicap Fund.

After doing analysis a lot I chose Two more funds and started doing SIPs.

Parag Parikh Long Term Equity Fund
Mirae Asset Tax Saver Fund.
Used Value Research for comparing funds.
Changed my investment platform too. Switched to PaytmMoney from ET MONEY. At last shifted to KUVERA.

Now, I had knowledge about all the types of mutual funds. Be it Equity or Debt or Hybrid. I wanted to taste every kinds of funds and wanted all the best performing funds in my portfolio. I was going aimlessly and running after returns. Where the truth is that we should never run after returns.

I started with two more ELSS funds. Then started doing SIPs with small amounts (some of those SIPs were as low as ₹100/m) in almost each and every category.

I knew was doing the wrong thing, but I wanted to do this. Also I thought that had I enough time to do some mistakes and learn from it. I decided to observe market for two years and get an idea about how these kinds of funds perform. The goal was to invest as much as possible, didn’t care about how I invest.

By the end of December 2019, I had around 22 funds in my portfolio with maximum weightage in ELSS Funds, Parag Parikh Long Term Equity Fund and Axis small cap fund.

Some of the Funds I had in my portfolio:

Axis Midcap
Axis small (ASC)
Canara Robeco Small Cap
Axis Long term equity – ELSS
Parag Parikh Long Term Equity Fund
Parag Parikh Tax saver (PPTS) – fund house bias
Mirae Asset Tax Saver (MATS)
ABSL Tax Relief 96 Fund (Total 4 ELSS)
Nippon India Gold fund
HDFC Sensex Index Fund
Motilal Oswal Nasdaq 100 index fund
ICICI Equity Hybrid Fund
Every kind of hybrid funds, forgot the names
Some debt funds (Liquid, UST, Short terms, Banking & PSU etc.)

Conclusion

I have done many things in this period. Some of them were good and some of them were bad. I did a lot of gymnastics with Investments which were not needed and were counterproductive in the future. There was no plan involved, I was investing aimlessly. This is the main wrong thing was doing. Each of us must have plan for investing. And that investment planning must starts with a purpose. So that we lean towards Goal Based Investing asking the right questions: Why and When?

But one thing I did was great. What I have learnt different stages of my journey, I always try to maintain it. When I found out that I need to increase my investments in a consistent basis, I became so serious about it. I didn’t know about the future, about how much could invest in the I future. So, plan was to invest as much as possible in the present.

In the mid 2018, I was investing ‘X’ per month. But at the ending of 2019, I was investing 3.2X. That’s a huge jump. About 117% yearly increase in this 1.5 years of time period. And if take from 2016, in these 3 years my investing CAGR was about 47%.

Though I realised the concept of investing CAGR a lot later, but I felt proud of myself when I found it. All thanks to Freefincal, and my guru, the calculator baba Pattu Sir.

Read more about Author’s journey here:

How I Started My Investment Journey? 2018 – 2019: The Years Of Product Based Approach

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