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Striking A Fine Balance

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Striking A Fine Balance
Jimson David - 03 July 2021

CS Jayan K, 47 years, is a partner in SVJS & Associates, a leading Practising Company Secretary firm based in Kochi, Kerala. His wife Jayaprabha is a school teacher, while their son, Nandagopal (13), studies in the 7th Standard. He met Jimson David of Navion Wealth Solutions in 2007 when he had just started in the profession. The discussion before the investment was centred on a plan to help him achieve the major life goals and suitable asset allocation. He started with a small Systematic Investment Plan (SIP) amount and promised to increase it later on when his professional firm stabilises and his needs for reinvesting into his practice reduce.

His initial investments were focused on higher equity allocation, as he could afford to go aggressive in his investment strategy being a young professional. He had the liberty of time in hand to adopt a long-term investment strategy. However, he also had to fight pressure from his family and friends to buy his property at an early stage of life. Traditionally, physical assets have been finding favour amongst the savers and investors, but financial assets have been gaining preference amongst the new-age investors with the evolution of financial markets. As such, it was easier for Jimson to convince Jayan and Jayaprabha that this could have wrecked his financial plan at that point as most of the savings could have then gone towards servicing the loan only. The timely financial advice helped CS Jayan see this, and he decided to postpone it until the financial situation was comfortable. He and Jayaprabha also valued the freedom and flexibility to change plans on housing as their careers progressed.

As time passed, Jayan continued with his SIP investments and continued to increase the amounts regularly. Such SIP top-ups have been instrumental in pushing the overall investment portfolio higher through a higher accumulation of savings and further compounding benefits from the accumulated savings. Further, as a regular practice, Jimson and Jayan met at least once a year for periodic portfolio review and subsequent rebalancing. Jimson recalls, “I made a point to interact with my clients more often during the severe market correction in March-April 2020 due to Covid-19 situation. This was important as many of my clients were keen to discontinue their SIPs and redeem their investments to prevent future losses in equity markets. However, it was not much of a problem with Jayan, for he continued his confidence in me. Continuing to invest across the market corrections has helped gain higher benefits since the investments during such times result in higher units allotted at lower costs per SIP investment.” The immediate financial goal in front of Jayan is to fund Nandagopal’s education in a good college, and he does not seem to worry about that, as the financial requirements have already been factored in the investment plan.

Jayan and Jayaprabha witnessed several market movements, including the Global Financial Crisis in 2008, Mumbai terror attacks in 2008, Eurozone Crisis in 2013, Covid-19 pandemic outbreak in 2020, among the others. But in spite of all the adverse events, they have been keen to achieve their financial goals effortlessly and continued to invest across market ups and downs.

Sticking to a solid financial plan based on asset allocation helped them progress well towards their financial goals. They portray an ideal investor couple and personify how investing emotions should be handled. Therefore, the investors must stay balanced in their investment plans.

Happy investing!

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Jayan sums up his investing journey

Stay Balanced in Investment Strategy: Like all equity SIP investors, big tests of character happened in the bull years to go overboard and bearish years to be more conservative. Therefore, one should stay balanced in the investment strategy and choose mutual fund schemes that best fit the financial goals and investment horizon.

Asset Allocation is the Key: Jimson has continued to guide Jayan to stick with the asset allocation plan. This helped to go easy on equity when the allocation went up due to valuations and added equity when it was available at better valuations. Earlier it was done by rebalancing the investment portfolio periodically, but with Jimson’s guidance, he is now using balanced advantage funds/ asset allocation funds for their discipline and tax efficiency.

Emergency Fund for a Rainy Day: It is always advisable to have an emergency fund corpus of at least six months’ expenses to take care of any future contingencies. Jayan delightfully shares, “Had Jimson not been at our sides, we would have found our way into a residential property with a home loan. That could have led us into the vicious circle of EMI payments. Most of my batchmates went that route, but Jimson persuaded us to move in the opposite direction and have an emergency fund right from the beginning.” The recent Covid-19 situation wonderfully highlighted its utility to the core. When you are a professional in practice, the uncertainty of cash flows is another major factor to keep yourself debt-free and EMI-light. With a financial plan and emergency fund corpus already in place, we, as a family, were less stressed during the Covid-19 lockdown situation, he added.

Starting Investment Benefits: Jimson was able to convince Jayan and Jayaprabha to invest in mutual funds and start working on their financial plan early. This eventually helped his savings and investments to grow steadily over the last 14 years. In addition, this has allowed Jayan and his family to now have the flexibility to take care of their different financial goals and even consider upgrading such goals with the comfort of a larger investment corpus.

Trust Your Financial Advisor: Investing consistently is the key to financial prosperity. A volatile market may shake one’s confidence, but one should continue to trust his/ her financial advisor during such times. Your financial advisor is likely to have experienced market turbulence even before and can be expected to act in a balanced and logical manner. Further, while one may get biased towards a specific asset class in search of quick returns, a financial advisor can play an important role in balancing the investment strategy.


Disclaimer

Financial Planning of CS Jayan K is based on the “personal opinion and experience” of Jimson David, Managing Partner, Navion Wealth. It should not be considered professional financial investment advice. No one should make any investment decision without first consulting their advisor and conducting research and due diligence.

Jimson David, Managing Partner, Navion Wealth

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