Mandar and Rati Sharma are the talk of the town. To celebrate their 40 years of marriage, Mr. and Mrs. Sharma went to London in December 2017, a cherished dream they had since the early days of their marriage. What was out of the ordinary, and what piqued the interest of neighbours, was the fact that the Sharmas were retirees and neither of them had high-flying jobs! But what they do not know is that the London trip was the fruition of persistent investment planning for retirement.

Neighbours’ envy
So, at a time when the rest of their retired friends are keeping count of their pills at home, the Sharmas seem to be leading quite the high life. Besides going to London, they also opened a small café where people could catch up on their reading or just sip a hot beverage in peace. And when their grandkids come over for their summer vacation, the aged couple would spoil them silly with expensive gifts.

Those who are plain jealous of the Sharmas are wagging their tongues. They are wondering where they got this money from. But people who know the Sharmas better know that Mandar, a retired employee with a well-known oil marketing company, had come to know the benefits of long-term investment through mutual funds nearly two decades back. His friend Raghav, who worked for a bank, had told him about how mutual funds were fast becoming the perfect alternative investment route to fixed deposits.

The merits of beginning early
The mention of mutual funds as an alternative investment route had stuck with Mandar. Initially, he was sceptical about equity funds. He had heard horror stories of people losing their shirts in the stock market. That’s why he did not want to take unnecessary risks, given his middle-class background and financial responsibilities. Plus, he wasn’t sure of investing in a mutual fund. He had already invested in life insurance and health insurance policies to ensure his family would be safe in his absence.

But the talk with his friend kept Mandar thinking. So, one day, he finally decided to speak with his banker-friend Raghav again. Raghav sat him down and explained how mutual funds worked.

This is what he said: The fund house collects money from different people and invests it in securities like stocks, debt, gold etc. Different funds invest in different securities. For instance, if it is an equity fund, the fund house invests your money in company stocks. A debt fund invests in corporate bonds, treasury bills etc. A balanced fund invests both in equity and bonds. There are different funds because each person has different levels of risk-taking ability. So, if you are averse to risk, you should opt for debt fund, whereas equity funds are comparatively risky.

Raghav also said the risks associated with mutual funds were comparatively less when compared to direct equity investments. That’s because a mutual fund spreads your investment across various asset classes like equity, debt, and gold. So, if your gold investment doesn’t do well, your debt and equity investments can compensate for the loss. Therefore, diversifying your funds reduces risk.

But when Mandar said he didn’t have enough money to invest, Raghav introduced him to the world of systematic investment plans (SIPs). A SIP allows you to invest in mutual funds for as little as Rs 500. The investment could be made through SIPs every month, quarter or year.

So, when SIPs made their debut in India through the stable Franklin Templeton Asset Management, Mandar Sharma invested in the company’s Bluechip Fund with a SIP of Rs 5,000 in January 1994.

He was investing this money for his retirement. He remembered his friend Raghav saying that mutual funds gave high returns in the long run.

Since 1994, the Bluechip Fund has provided annualised returns of 21.54%, thus providing Mandar with a neat corpus of over Rs 12 crore at retirement.

His wife Rati also began investing in 2008. She chose to invest Rs 2,500 every month in Franklin India Smaller Companies Fund. That investment reaped dividends too. She doesn’t have to rely on her husband anymore.

To sum up, years of disciplined investing ensured that the Sharmas were finally enjoying their lives. Their daughter Shradhha is also glad to see her parents finally living the life of their dream. Therefore, retirement planning is necessary to ensure you also have a happy retirement life like the Sharmas.