Dad has money, I have strategy as well

Young investors not only have high ambitions, they have worked out plans that could fulfil their dreams.

Kamya Jaiswal        Print Edition: March 6, 2008

Rupen Dalal
(with wife), Ahmedabad, branch manager with an NBFC
Age: 27
Income: Rs 50,000 a month
Age at first investment: 23
First investment:
ABN Amro Opportunities Fund
Investing strategy now: Invests everything in equities except the emergency fund. Targets a specific growth in investments every three months
“I invest with a growth target in mind. But as it is not instrument specific, I don’t liquidate my investments frequently”
Manish Singh
, Jaipur, HR manager
Age: 25
Income: Rs 40,000 a month
Age at first investment: 23
First investment: Real estate
Investing strategy now: Building an asset is priority. After property, plans to invest in direct equities for accelerating growth in liquid instruments
“I bought two plots in Bhopal close to an SEZ. I expect their value to appreciate sharply”
L Bhargav Prasad
, Hyderabad, software engineer
Age: 26
Income: Rs 44,000 a month
Age at first investment: 23
First investment: Stocks of Visa Steel
Investing strategy now: Allocates major chunk of savings to equities. Plans to part prepay home loan to reduce tenure to 7-8 years
“I want to build a corpus of Rs 5 crore and am investing towards that goal”

I want to build Rs 5 crore in financial assets when I turn 45. Maybe then I’ll retire early,” says Rupen Dalal, 27. That’s an ambitious goal, but Dalal knows how to get there. “I target a specific growth rate for my investments every three months,” he says. And this is something that most young investors seem to have—an investment strategy.

In most cases the strategy is not a full-blown plan. Young investors know exactly how they want to get rich, but not necessarily why. For instance, few investors in their 20s earmark specific sums that will be required for, say, marriage, children’s education or retirement. But that does not detract from the fact that these investors know how to make money.

Take a look at Lokhindi Bhargav Prasad’s finances. This 26-year-old Hyderabad-based software engineer has taken a home loan to buy an apartment. “It is a 20-year loan. But I have planned my investments in such a way that I can partially prepay the loan and reduce the tenure to seven-eight years,” says Prasad.

Such a long-term perspective is common to most young investors. They plan to hold instruments that are most likely to generate consistently high returns for the longest period. Sumit Hastu, 27, a manager based in Delhi, has identified stocks that he won’t touch in the near future. “I don’t book profits for some prized large-cap stocks in my portfolio. It is only when I anticipate dull prospects for the sector that I back out,” he says.

Apart from investing for the long term, another strategy that unites most youth investors is the aversion to low-risk, low-return instruments. Equity investment is the chosen one, and fixed income is generally given the cold shoulder. Dalal, for instance, does not invest in fixed-income instruments at all. Neither does Manmeet Vyas, 26, (who introduced his parents to equities).

His entire portfolio comprises only stocks and mutual funds. “Out of the Rs 4,000 I invest every month, Rs 2,000 is committed to systematic investment plans (SIPs) and the other half to direct equities,” he says. And what about the high risk? “The rewards are high too. Moreover, I don’t invest blindly. I take calculated risks,” counters Vyas.

Then there’s Panaji-based Sanman Kenkre, 26, who focuses on earning at least 20% returns from his equity investments, irrespective of market conditions. Kenkre is unfazed by the recent market volatility. He says that his investment strategy is unaffected by temporary market swings. These investors also know the virtues of regular investing, and use SIPs to good effect.

Even investors who prefer direct equities have committed some amount to SIPs to outmanoeuvere temptation. Dalal, for instance, invests Rs 8,000 a month in them, while Kasula Mahendra of Bengaluru puts away a hefty Rs 20,000 in SIPs every month. The question most older investors will undoubtedly ask is this: is it not overdoing things to invest 100% in equities? But the youth seem to have an answer to this as well. Those who place their bets solely on equities, diversify investments within this asset class.

So there is a mix of small-, mid- and large-cap stocks and companies from different sectors. Those who diversify across asset classes have a small debt component that usually comprises provident fund contributions and some company fixed deposits. What they do invest more in is, strangely enough, real estate. Buying property at the age of 21 was unthinkable even 10 years ago. But Kenkre had bought a duplex apartment in Panaji when he turned 21.

According to him, nothing beats the security of a real estate investment. The house, originally bought for his family to live in, is today pure investment, since the family does not use it. Then there’s Sumit Goyal, who bought a plot in Faridkot a few months ago for Rs 3 lakh. “I paid the entire amount from my savings and investment.

The land gives me a sense of security and diversifies my investment basket.” Another uniting factor is that few of these young investors have liquidated their investments to fund any big buy. Yes, they might be tempted to shell out many thousands for the latest gizmo or car, but they are disciplined enough to separate their investments from their spending without compromising much on lifestyle. After all, no strategy is successful without discipline.

 

Five fundamentals

Young investors have rewarding financial strategies. Here are 5 questions that should help you build one too

What are my financial goals?
The youth demonstrate that “getting rich” can also be a specific goal

How high should be my risk?
Like the youth, if you take calculated risks, it can be high

How much should i invest?
There is only one ideal answer: everything that you save

How should i match investment and goals?
For short-term goals, invest in debt instruments. For long-term goals, invest in equities

How often should i buy stocks?
Regularly, but with analysis, no matter how much the immediate gain or loss

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