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Not a winner in finances

He has a knack for winning TV reality shows and recently pocketed Rs 61 lakh. But Ashutosh Big Boss Kaushik is in desperate need of an investment strategy.

Kamya Jaiswal | Print Edition: January 8, 2009

Name: Ashutosh Kaushik
Age: 29 Years
Monthly Income: Rs 20,000 (Post Tax)
Financial Dependants: Two (Mother And Younger Sister)
There are many reasons why The Ashutosh Kaushik Story inspires awe. One is the fact that he is not too familiar with English language. However, it didn’t stop him from winning two TV reality shows, Roadies and Big Boss 2, where his contenders were far more eloquent and suave. So we are betting that language will not stand in the way of Kaushik executing the financial plan that we construct for him. This 29-year-old owner of a dhaba at Saharanpur, a small town in Uttar Pradesh, has not come this far to be hassled by such trifles.

Neither is he fazed by the extreme reactions to his screen persona. There are some who admire his determination, candour and shrewdness. Others see hauteur in his laconic style and deviousness in his sluggishness. Kaushik couldn’t care less. His focus is on building a career for himself donning the grease paint. “But not for the Balaji kind of TV soaps,” he says, adding that he has turned down offers to act in such serials. Incredible as it sounds, the toast of the reality-show circuit, with over Rs 1 crore in his pocket, is without a job. Kaushik is unwilling to compromise on the work he wants to do. This could mean a voluntary sabbatical for many months or even going back to Saharanpur. Not that he is complaining.

“Life was simpler earlier as my aspirations were limited,” he says. If Kaushik makes it big, nothing like it. But even if he doesn’t, it is not merely memories of the 15 minutes of fame that he will take home. Those newly minted aspirations can also be fulfilled, thanks to his prize money.

The catch is that this money alone will not be sufficient. If Kaushik parks the amount in a bank account and continues with his current lifestyle, the stockpile will be exhausted in less than 13 years. So this windfall must be invested intelligently to convert it into a golden goose. Here’s the script to help Kaushik do just that.

After tax deductions, Kaushik will pocket about Rs 61 lakh of the prize money. His dhaba generates a monthly income of Rs 20,000. At Saharanpur, Kaushik’s family used to spend close to Rs 10,000 a month.

Expenses have now swollen to Rs 35,000, as Kaushik spends time in Mumbai and is preparing to work in the movies. Is he dipping into the corpus to fund his current expenditure? No, because the money is yet to reach him. Instead, Kaushik is rapidly depleting his meagre savings. When we asked him about how much he has salted away from his past income, Kaushik said that there was precious little left after meeting the family’s needs.

STRETCHING IT IN TIME

How long will Rs 60 lakh last Kaushik?
The answer depends on where he invests the money and his lifestyle.

IF MONTHLY EXPENSE IS: Rs 35,000
If Rs 60 lakh is kept in a savings account: 12 years & 8 months
If it is invested in an FD that earns 9%: 19 years & 8 months
If it is invested in a mutual fund that gives a 15% annualised
return: 36 years & 10 months

IF MONTHLY EXPENSE IS: Rs 50,000
If Rs 60 lakh is kept in a savings account: 9 years & 3 months
If it is invested in an FD that earns 9%: 12 years & 5 months
If it is invested in a mutual fund that gives a 15% annualised
return: 16 years & 2 months

Annual inflation assumed to be 6%; savings account returns assumed to be 3.5%
But it isn’t as if we are starting from scratch. Kaushik has a house at Saharanpur worth about Rs 8 lakh. So there is no immediate need to save for a home. He also pays a premium of Rs 6,000 for a Jeevan Shree policy though he is clueless about the sum assured. A backward calculation tells us that it should be about Rs 2.4 lakh. Kaushik would have had a high-risk appetite but for his two dependants—his mother and younger sister (he has an elder sister too, but she works).

Nevertheless, he can, and must, invest aggressively. Iris suggests that he allocate about 50% of his prize money in equities, 45% in debt instruments and hold about 5% in cash. Kaushik is wary of stocks as he does not understand the equity market. Though this may seem like a handicap, it is not so. Kaushik is unlike the many investors we have featured in this section who invest in direct equity in the hope of hitting the jackpot and end up losing a lot of money.

For investors like Kaushik, the only way out is mutual funds. Iris recommends DSP Black Rock Balanced Fund, HDFC Prudence and HDFC Balanced Fund for him. These funds invest a significant portion in debt, which will help reduce the risk. For pure debt, Kaushik can invest in fixed deposits. He should choose different time periods for the deposits to stagger their maturity. This will ensure that he is not saddled with a similar lump sum again. For the liquid component of his portfolio, he can park money in the floater and liquid funds from the HDFC or ICICI fund house.

Kaushik requires a life insurance cover of about Rs 25 lakh. The annual premium will be about Rs 7,000. But as Kaushik does not have a regular income, it is unlikely that any insurer will provide him with a cover. Hence, we suggest that he impose a ceiling on the time he spends to find a footing in the movie industry. If he does not succeed within the given time frame, Kaushik must try and consolidate his income from the dhaba.

His career decision will also decide how much he should save for retirement. If he becomes an actor, he should salt away enough to last at least 25 years of no income.

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