Everyone has financial goals but rarely do they spend time planning for them. Ambika N Menon became an exception to this once she realised the importance of first understanding an investment alternative before committing money to it. From a first-time investor blindly following the herd to an AMFI enrolled advisor helping others achieve their financial aspirations, Ambika N Menon shares her investment journey in this letter. Here we have reproduced a copy of the same. Read on.
"Being a native of Kerala, most of my relatives were either engineers or doctors. My parents, on the other hand ran a small business in manufacturing solvent cements. While growing up, I had always taken interest in the business as there were a lot of discussions about it at home. I decided to become a Chartered Accountant to reduce our dependence on outsiders for tax planning and accounting. After completing my CA, I started working for a foreign bank in 2004.
To confess, in spite of having an educational background in finance, I didn't know much about mutual funds. I made my first investment in 2005 in Reliance Equity scheme, only because all of my colleagues were investing in it. By 2008 I had invested in 6 schemes with various AMCs. That was the year when global recession hit and my investments became half. Everybody, including people with sound financial knowledge, advised me to redeem my investments before I end up losing more. They said, "you don't need to invest in equities right now and as long as you are not keeping the money idle you will earn good returns in the long run". It all made sense then and the thought of starting a recurring deposit crossed my mind. I panicked and decided to withdraw all my money from mutual funds and only invest in FDs. That was when my father, based on his experience, advised me to stay invested. Today, I am glad I listened to him.
My husband who is also an avid investor in mutual funds persuaded me to follow Value Research. I quit my job in 2014 and it was only then that I regularly started following Value Research. But better late than never, it was an eye opener. What I like about Value Research is that the language used is very simple. I learnt more about asset allocation, different available alternatives and the benefits of investing in debt mutual funds over fixed deposits. With time I gradually shifted my FDs to debt funds and started planning more tax efficiently for my family.
Today, my holdings consist of a mix of funds from large caps and mid caps to value funds and debt funds. My current holdings are - ABSL Tax Relief 96, ABSL Pure Value, Reliance Focused Equity, UTI Mastershare, Mirae Asset Emerging Bluechip, SBI Consumption Opportunities, ABSL Credit Risk Fund and UTI Credit Risk Fund.
I have to admit that its tempting to have an expensive phone, car or to go on a vacation more often. But managing your expenses effectively and sticking to your investments is what financial planning is all about. When I see my seniors who've been working for a while, struggling to be financially stable, I realize the importance of proper planning and where the power of compounding can take you in the long run. There is still a genre of people who consider real estate as an important investment option to create wealth. They don't even mind taking a loan to invest in property. Apart from the practical difficulties of acquiring and managing the property, they fail to realize that the main drawback is lack of liquidity. In my view it is more prudent and easy to build a corpus and also avail easy withdrawals via SIPs and SWPs respectively.
A lot of my peers and relatives never invested in mutual funds and equities for the lack of knowledge and confidence to start investing. They used to request me for advice on investing in mutual funds. So last year I cleared NISM exams and enrolled myself with AMFI. And now when I meet my clients, the one thing that accompanies me is the latest edition of Mutual Fund Insight. It helps me explain to my clients the various schemes in different categories along with their returns.
With so many schemes in the market it becomes difficult to select a few and remain invested. It's very tempting to switch from one fund to another based on short-term performance. But when you keep reading about the importance of taking a long-term perspective and sticking to your investments, it is very reassuring and gives a lot of confidence."
Being disciplined is perhaps the single most important lesson to learn from Ambika's investment journey. Like thousands of other investors, she could have quit equity markets after getting disappointed with a sharp market decline. But she decided to remain invested to reap the rewards of her perseverance.
This story was first published in December 2018.