Their financial resolutions for the New Year :: Business Line

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Three savvy investors talk about their top financial priorities for 2015, the mistakes they made in the past and how they remedied them

For most people, New Year resolutions are all about physical fitness, relationships and career. So you may have resolved to swear off pizzas, spend less time on Facebook or even make that job change that you have been putting off.

But have you made financial resolutions for the New Year? If not, here’s what we learnt from chats with three financially savvy people who are meticulous about money, have learnt from their past mistakes and have their financial resolutions for 2015 all mapped out. We hope that’ll offer inspiration for some resolutions of your own.

I resolve to…

Reducing the leverage on his personal balance sheet and re-building his investment portfolio from scratch is the primary financial goal in 2015 for Srivatsan Sridhar, who heads automotive firm Globe Components. Formerly a consultant with McKinsey & Co, Srivatsan decided to quit his job to lend a hand at his father’s firm a couple of years ago. The move, combined with the decision to take a large loan to purchase a family home, has left his finances in a not-so-comfortable state, he believes.

“I am not over-leveraged by normal standards. The value of my property is much higher than the loan against it. But I am conscious that I have put all my eggs in one basket. To meet the down-payment, I liquidated all my mutual fund and other financial investments. Though my friends often kid me about it, having my own business and all, I am personally very uncomfortable with any loan.” To reduce it and get his portfolio on a more even keel, Srivatsan has two plans in mind for 2015. He would like to pick two-three good equity funds and start SIPs in them. He will also be using any surplus cash to pre-pay the 20-year loan, so it can be closed in five-six years.

Buying his first home is Lakshmi Shankar’s top priority for 2015. The chartered accountant, who is in his twenties, has been working for the last seven years in a leading tax consulting firm. “If real estate prices go up further, the goal post will shift. But I hope to be able to save enough in the next six months for the down- payment,” he says. With an eye on those soaring real estate prices, Lakshmi will continue investing in small plots of land outside urban areas, which he says offer good appreciation.

Also on his mind is the fact that his living expenses may rise if he gives up his bachelor status. “I will need to budget for higher household needs and also a cushion for medical emergencies,” he says. He has already invested in gold with the wedding bells in mind.

If there’s one finance-related goal for Shobana Arputharaj, who works at an audit firm, it is to get her asset allocation in order in 2015.

An avid long-term investor in equities since 2000, Shobana says her investments in diversified equity funds and banking sector funds paid off well in 2014. She’s also happy with debt funds, which “have been quite superior to bank FDs.”

While she absorbs investment information from the media and other sources and does her own homework, she has so far resisted putting her investment details into any online portfolio tracking tool.

“I worry that if I monitor my portfolio too often, I may get tempted to withdraw the returns and spend it,” she says. But in 2015, she plans to take up this task of using tech tools to maintain a proper asset allocation.

Learning from mistakes

Given that these people have their financial goals all mapped out, have they made any mistakes in the past? They all admitted they had. But they seem to have taken quick action to remedy it. Srivatsan doesn’t even hesitate a minute when we ask him which investment move he most regrets — it was signing up for two traditional insurance policies with premiums of ₹2 lakh each, for his children two years ago. “It was sold to me by a very persuasive agent. I realised that the IRR (internal rate of return) wasn’t more than 3 or 4 per cent. As soon as I paid my first premium, I realised it was a big mistake.” He decided not to “throw good money after bad” and stopped paying premiums. He’s quite happy with that decision. “The ₹4 lakh I invested went waste, but I saved a lot on further premiums which I used to prepay my home loan,” he says.

The other decision that has saved him a packet was to transfer his home loan from LIC Housing Finance to SBI last year, which immediately trimmed his annual interest payouts from 12.5 per cent to 10.25 per cent.

Recalls Srivatsan, “They made it a nightmare for me to close my loan. They had a million procedures that entailed visiting their branches, taking DDs and so on. I could do it only because I have the luxury of using my time as I like”. But three months of running around was worth it, because he ended up saving a substantial sum on EMIs.

The move that Lakshmi Shankar regrets the most is dabbling in stock futures and options.

“I didn’t really know very well how it worked. But brokers send you trading tips through SMS and I decided to try them out. I burnt my fingers.”

“I didn’t make a huge loss on it, but it wasn’t a great experience,” he recalls, vowing he will now stay off derivatives.

The investment that really paid off for him was SIPs in equity mid-cap funds since 2012 and 2013. “I have already taken my money out of them, when the Sensex crossed 28,000, and switched to debt funds,” he says.

So are there any lessons learnt, that can help readers frame their own resolutions for 2015?

“I think the one thing that people should do, if they have locked into a high-interest home loan, is to get it reset at lower rates. Most people are put off by the paperwork but it is really worth it,” says Srivatsan.

Both Lakshmi Shankar and Shobana feel that doing your own reading and research, rather than relying blindly on other people’s advice, is the way to get your investments right.