WHY INVEST IN MUTUAL FUNDS : A Case Study of my driver

WHY INVEST IN MUTUAL FUNDS : A Case Study of my driver

My driver Babu has been working with me for the past 16 years. Today, he is around 54 years of age. But when he joined me, he had just learned driving. Despite earning fairly well, he always struggled with finances. He had two little daughters, who were in primary school. Babu wanted to provide them a good education.

So, my family and I had a detailed discussion with him and his wife regarding finances. We ascertained their goals first – children’s education, marriage and retirement. Then, I convinced him to start saving. Considering his persistent cash crunch, that was a tall order. To motivate him, we decided to contribute an amount equal to his savings and build him a corpus. He and his wife both agreed to save ` 500 from their salaries every month. This started 12 years ago. His goal was a long-term one. So, I invested 100% equity allocation in a diversified fund through SIP. The money he received from selling his share of land in his village too was invested through a Systematic Transfer Plan (STP). I also invested a small portion of his annual bonus.

During this investment duration, the market experienced two bear and bull cycles. Yet, his investment grew in value due to the sheer power of time and equity. His monthly SIP as well as sale of land today is valued at ` 27 lakh.

It was only when he needed money for his daughter’s college admission that we showed him his total savings. He was stunned to know the growth. Babu then wished he could have saved more. Today, his children’s education has been taken care of, and he has enough money to pay for their marriage. Only his retirement goal is left. So, we advised that, part of his corpus be shifted to a balanced fund. This is less volatile and allows for SWP during retirement.

 Happy Investing