Fourteen Years of Mutual Fund Investing: My Journey and lessons learned

On 19th June 2008, I started investing in mutual funds. These 14 years have changed my view of risk and day-to-day money management. This is my story and the lessons I have learned. The broad trajectory should be well known to regular/old readers. This is an account of how I went from spendthrift to debt-bearer to financial independence: The Financial Arrow of Time and My journey: driven by the fear of making the same mistakes again. My story was featured in Livemint.

I had already shared my lessons from mutual fund investing – this was specific to mutual funds. This post discusses other aspects of portfolio management and outlook on money growth. First of all, let me make it clear that 14 years is not a big deal. I know many investors who have been investing in the markets for much longer, but they are too private to discuss their journey.

This is only a personal milestone. There is so much to learn. Be it the stock market or life, the moment you sound like you have some experience, you will get kicked to the ground. The simple truth is that life selected one for me out of a million ways to go from point A to point B in ten years. This does not mean this is the only way to success (or failure).

How it all began

It was late 2007. My father had passed after an 18-month bed-ridden battle against multiple myeloma. We were all emotionally exhausted. Two months after he passed, my mother was diagnosed with Parkinson’s disease – there is nothing fair or unfair about life; it is just a potluck.

Finally, I had some time to take stock of my life. Since I had a hospital expense debt of about 3 lakh (thankfully interest-free as it was from my brother-in-law), I swore that I should never put my family in such a money situation again.

I started reading news articles, and the idea of beating inflation with equity caught my eye. So I asked my health insurance agent about investing in mutual funds. Like many, my first mutual fund was an ELSS fund (in hindsight, this is an unnecessary mistake, but that is life).

So my first fund was Sundaram Tax Saver Dividend Option. I had no idea what that meant or how it differed from the growth option. This fund and this option were selected by him, and since my investment was small, I did not mind. So I started with a SIP of Rs. 1500.

When I started, the stock markets all over the world were in chaos thanks to the Lehmann crisis – but I had no idea (thankfully). About a year or so later, I called my agent again and wanted to start another SIP. He said he would send someone home – but no one came. Why?

From Aug 1st 2009, SEBI banned entry load in mutual funds. This meant that sales guys would only get commissions from the investment value, not the investment amount. Perhaps because of the climate then (post-crash), perhaps because of innumeracy, I was told many distributors quit over this ban. They perhaps did not realize that commission taken out of the investment value would grow at the same rate as the investment.

Whatever the reason, this forced me to DIY. If no one would come home to set up a SIP for me, I decided to go “directly” to the AMC. Perhaps it is a generation thing – I did not look for the next easy option – “invest via the bank”.

So I became a direct investor almost three years before the introduction of direct plans. So for three years, AMCs were gobbling up the commission money as there was no distributor. If I wanted a Sundaram Fund, I went to their office. If I wanted an HDFC fund, I went to their office. I had no idea who or what CAMS was.

Around this time, AMCs started opening up proper investing portals. It was possible to buy and sell units online. Then on Jan 1st 2013, the no of funds that I held doubled. All my funds had a regular plan and a direct plan. The new SIPs were automatically routed direct.

By this time, I had stopped my SIP gradually as the amount I was trying to invest each month became higher and higher, and I could not lock that much into a SIP as it may affect expenses. So I began buying units manually each month. The first time I did that, I realised a SIP = monthly lump sum. This was about 5-6 years ago.

Initially, I used to invest manually at the start of the month. Then to get used to the volatility, I used to wait for a “dip” within a month and invest then (the stupid things we do!). Then I did not care. I just invested when I could. Sometimes they were more than a month apart if expenses became high. I religiously started to track investments from 2010 or so in this excel sheet: Using Excel to track investments. I still use it.

By this time, I was also making calculators for retirement and other needs (these seeds of freefincal were sown in late 2010ish). I made a financial plan template projecting future needs. This latter became the Robo Advisory Software Tool to build a complete financial plan!

Once I realised the power of tracking investing after setting clear goals, I stopped tracking expenses: How tracking investments instead of expenses changed my life! From that point on, it was all about reviewing portfolio growth (not individual funds) based on goals and periodic rebalancing.

My Portfolio

This is my retirement portfolio (as of 24th July 2022). Details of my child’s future portfolio can be found here: Lessons from investing for my son’s future for the last 12+ years.

The weights listed below are within each asset class. That is, Parag Parikh FlexiCap has a weight of 55% in my equity MF portfolio. ICICI Gilt has a weight of 20% among debt instruments.

The asset allocation is 55% equity and 45% debt.

Instrument Weight XIRR
Parag Parikh FlexiCap 55% 18.47%
HDFC Hybrid Balanced 25% 13.53%
Quantum Long Term Equity 17% 10.87%
UTI Low Volatility Index Fund 3% 16.88% Too recent to be taken seriously
ICICI Gilt Fund 20% 1.94%
Parag Parikh Conservative Hybrid Fund 0.4% Too recent to be measured
NPS 76% 8.74%
PPF 17%
Cash (Quantum Liquid fund) 6%

In addition, I have a stock portfolio worth about 22% of my equity MF retirement portfolio and about 11% of my total retirement portfolio. Details are here: Stock Portfolio Analysis: July 2022.

This is the growth of the equity MF retirement portfolio from June 2008 to July 2022. The last few transactions are missing, but this will not change the overall evolution.

Growth of mutual fund portfolio from June 2008 to July 2022

The gain or loss in my equity mutual fund retirement portfolio up to Dec 2019 is shown below. I cannot update this graph as I have rebalanced the portfolio.

Notice for the first five years and three months, returns were zero. In hindsight, I am thankful I did not quit during those years; otherwise, I would never have achieved financial independence. You see the gains suddenly shoot up due to this graph.

The gain or loss is again plotted (green). The yellow dots represent the annual increase in investment amount. Or What I refer to as the investing CAGR (not investment CAGR). Notice the huge year-on-year increase in the amount invested in equity MFs in 2010, 2011, and 2012. When you dump in money when the market moves sideways, you reap the gains when the tide turns – in my case, around the time when economic conditions were favourable, and NaMo was announced as the PM candidate  -sheer coincidence.

Please note the above does not mean I invested more in 2010,11,12 than now. That is not possible as I am salaried. What you see above is merely big jumps in equity investment. This was possible because I already had some NPS and PPF investments. So equity had some catching up to do in order to get to 60% in the portfolio. Today my investing CAGR has stabilised (it has too!)

I am pointing this out to show I am an unintelligent brute force investor who was lucky enough to invest more. My investing rate is higher than my investment return: Why increasing investments each year is crucial for financial freedom.

Lessons learnt

If I can call myself successful, it is only because of three aspects

  • luck
  • discipline
  • prioritized emotions. I was more emotional about the lack of financial independence after retirement than seeing my portfolio in “red”. Therefore I did not monitor my portfolio daily. I did not seek information every day and worry about it. I let my money grow peacefully with occasional gardening.

My portfolio growth has nothing to do with my ability to choose “good funds” or my education or training. By nature, I am disciplined and hate information.

If I had to list my lessons (even if no one is asking me to!), they would be:

1: Get a life! Identify your goal, invest in them and leave them alone until it is time for your annual review.

2: Get rid of Financial contacts or groups on WhatsApp, Twitter and Facebook.  An investor is defined by her ability to process information – and the best way to do that is to avoid information. Just like the best way to manage time is to avoid work (or learn to say ‘no’).

3: Invest like your rear end is on fire, or life will light it up for you later.

4: If your needs are far away and you see a sideways market, pump in money. That is the best time to invest. Of course, not many can do this.

5: Never forget that these gains are notional. A single event can decrease your holdings by half. Mountaineers believe that they can climb a peak “if the mountain lets them”. Markets are not different. Remember, notional losses are real losses. Only notional gains are notional. A goal-based systematic risk management strategy is essential.

6: Your attitude towards money itself and towards profit and loss depends on how much money you have. I have seen my portfolio gain or lose 10s of Rs, 100s –> 1000s —> ….. And along the way, I realised that to be successful, we need to not only learn to lose/gain lakhs every day but not also yearn for it.

7: Money is a drug. The more you have, the more you want to have. So at some stage, you will have to draw the line. Increasing the amount you give away to help others at the same rate at which your portfolio grows will keep us grounded.

8: To be rich, we must first think like a rich person. Have a 10Y, 25Y or  35Y year view of your life. Want To Get Rich? Write Yourself A One Crore Cheque!

9: We cannot buy stuff with returns. Having enough money is more important than getting high returns; they are not the same. The 2016 Personal Finance Audit: Returns do not matter!

10: Concentrate on the portfolio return the most. Individual funds will have up and down ride. It is fine as long as the portfolio moves along at a healthy pace. This is the main reason for developing the freefincal mutual fund and financial goal tracker This is the only sheet I use to track my goals and investments.

11: To make money, two things are necessary: money and time. Returns are not in our control. Those who want to become financially free much invest like their lives depend on it. For all others, try to invest for retirement at least as much as you spend or as close to it as possible. So ask yourself: What is your investing growth rate (CAGR)?

12: Get a proper hobby so that you forget about money. Freefincal is, unfortunately, my hobby. Just because I write about investing does not mean I look at my portfolio daily and tinker with it. Every statue was once a rock. It will become a rock again if we do not know when to stop sculpting.

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About The Author

Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation for promoting unbiased, commission-free investment advice.


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