How a Delhi-based businessman went gung-ho on mutual funds in his 50s

Arvinder Singh (56), who runs a retail business (telecom equipment and electric two-wheelers) in Delhi, faced the same dilemma. A chance meeting with a financial professional at a get-together influenced him deeply. He decided to test the waters, that too when he was just turning 50.

He started investing in equity via mutual funds in 2018 and has not looked back since. His mutual fund portfolio has maintained a compounded annual growth rate (CAGR) of 18% since then.

“I started small with a systematic investment plan (SIP) of ₹25,000 per month. I could see early signs of the portfolio growing within a year, but the real magic happened in 2021 onwards. While margins in my business were much better than mutual funds could offer, these dwindled after the covid outbreak. “There was a need to make up for the drop in business margins,” Singh said.

The mutual fund magic

Manmeet Singh Khurana, a certified financial planner and founder of Wealth Dopes, was working as a product head at ICICI Securities when he got Singh to invest in mutual funds.

Singh asked him to analyze his overall financial planning when he started his own venture. Year one after 2018 was lucrative for his mutual fund portfolio, but year two brought along the covid-19 shocker when the markets tanked nearly 30% in March 2020. It turned out to be a positive learning experience.

“I was more concerned about my primary business when covid-19 happened. My mutual fund investments incurred losses, but it did not bother me because only profits were gone. The principal was safe. When markets revived in 2021, I could see first hand consistently investing through SIPs had helped. Now, I invest some lumpsum amount whenever markets show some weakness. I did that just last week, too,” Singh said.

In his six-year mutual fund journey, he has already realized a major financial goal. In 2022, when his son decided to study in Canada, Singh relied on his mutual fund investments to fund a larger chunk of the higher education cost. He did not have to take a loan.

“While his mutual fund portfolio shrank after withdrawing a significant amount in 2022, he was determined to build it back faster. Whatever surplus he would get, he would invest in mutual funds. If fixed deposits or old insurance policies would mature, the proceeds would go into mutual funds,” Khurana said.

At times, Singh regrets having started his equity journey late in life. But he made sure that his three children make the most of what mutual funds can offer. “All my children are in touch with Khurana and invest in equity mutual funds. My wife does it, too,” Singh said.

Businesses are in perpetual need of liquidity for varied reasons. For Singh, mutual funds also serve that purpose. Khurana explained to him the advantage arbitrage funds hold over idle money lying in the current account that doesn’t earn any interest.

“A part of my company’s idle funds goes into arbitrage funds that earn reasonable returns and are also a tax-efficient option when compared with short-term or sweep-in FDs. We can have crores of assets, but liquidating these for even a few lakhs in a short time is a challenge. Mutual fund investments give me a sense of relief that I can withdraw it whenever I want,” Singh said.

Before meeting Khurana, Singh mostly invested in real estate, FDs, and insurance policies. While real estate still holds the largest share in percentage terms, incremental mutual fund investments have been growing the fastest. “I have decided to let go of some of my commercial properties to invest the proceeds in mutual funds,” he said.

He has been investing 30-40% of his net earnings every month in mutual funds. “The plan is to take it to 60%. I want to make up for the lost time with the quantum of investment.”

Khurana has given him access to track his investments via the app FundzBazar.

Insurance protection

Singh had neither health nor term insurance when he met Khurana. While people often approached him to buy it, he couldn’t trust them. His insurance portfolio contained investment-linked insurance policies of Life Insurance Corp. of India (LIC).

“My father would often buy LIC policies in our name. I also bought some,” Singh said.

Khurana made him surrender a few policies whose maturity was years away. The ones closer to maturity are continuing. Once a policy matures, we deploy the maturity in mutual funds,” Khurana said.

Khurana applied for term and health insurance policies. “The trouble in term insurance was that Singh had a good amount of rental income in addition to business income. Rental income is not considered when calculating human life value in term insurance. We somehow managed to get him coverage of ₹1 crore at a premium of ₹66,518 because he had no health issues. His wife could get ₹2 crore coverage at a premium of ₹77,806,” Khurana said.

Singh bought a comprehensive health insurance plan at a premium of ₹26,426 for ₹10 lakh sum assured, along with a super top-up cover of ₹25 lakh at a premium of ₹5,222. The base policy and super top-up both are from Star Health Insurance. His wife already had a health plan from HDFC Ergo.

Singh also bought two other policies: Young Star, for his twins, along with super top-up plans.

What about direct stock investment? The frenzy gets to people. Singh is no different. He often discusses stocks with Khurana, but he has made it clear that he does not recommend investing in stocks. “I had invested in Zomato at a level of ₹120, which gave me good returns. I do have a couple of other stocks, but I do not track them actively. It requires a great deal of self-control, but I manage it,” he said.

Singh’s major focus right now is to accumulate enough retirement corpus so that he can maintain his lifestyle without working much. Succession planning comes next. “I first plan to transfer my properties to children via gift deeds. Once that happens, I will come to the modalities of succession planning because it will involve the succession of business operations as well,” he said.