Pandey, who retired more than two decades ago and now relies on his pension and mutual fund (MF) systematic withdrawal plans (SWPs), admits that he did not feel the need to commit to any serious investments for a long time after retirement.

Retirement

Using his retirement benefits, a significant contribution from his son who was working abroad and a small loan, Pandey bought a large house in Banaras in 2000. He retired from BHU the same year but continued to live in a rented accommodation on the campus for two more years until his house was ready to move in. That house, built on a sprawling 5,000 sq. ft plot of land, formed a major chunk of his net worth then.

Pandey says that instead of receiving a large provident fund corpus, he secured a good pension upon retirement. The pension provided a steady and reliable income stream, helping him meet household expenses. Additionally, the produce from Pandey’s ancestral land took care of most of the family’s food expenses. Local farmers manage this land and in return share their harvest with him.

 

Road to investment

Pandey’s investment journey began only after he sold off his house in 2019. The reason for selling this property was practical—both his daughters were married, and the house had become difficult to maintain. Since Pandey and his wife spent 6-7 months each year visiting their daughters in Mumbai, the upkeep of such a large property impractical. “It was also not sensible to rent out the house as you are not sure about your tenants and we didn’t want to take that sort of stress at our age,” Pandey explains.

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(Graphic: Mint)

Building investments

After selling the house, Pandey received calls from bank relationship managers who wanted him to invest in fixed deposits, but he resisted. His son-in-law then introduced him to Deepali Sen, managing partner at Srujan Financial Services, a Mumbai-based MF distributor.

Pandey and his wife invested the proceeds from the house in MFs. Initially, Pandey invested some funds in portfolio management services (PMS) but soon realized that it was not favorable. “We didn’t incur any losses, but we weren’t making any gains either,” he says. He quickly withdrew that money and moved it entirely into MFs.

Investing in MFs, especially equities, was new to Pandey. Sen recalls that their initial meetings involved extensive financial counseling. “We had to reassure him that MFs were suitable for him. We explained that, unlike bank fixed deposits, MFs don’t guarantee returns but equity MFs are linked to India’s economic growth and can offer better returns over the long term. We showed him historical performance and told him that he could expect 12% annualized returns over time,” Sen says.

 

Pandey felt more comfortable with Sen as she knew his son-in-law from their school days. “She told us to be patient for three to four years, and it has worked well for us,” he says.

Pandey’s equity investments were made through systematic transfer plans (STPs) to gradually build his portfolio and mitigate the risk of stock market volatility. STPs allow investors to regularly transfer a fixed amount from one mutual fund, typically a liquid fund, to another that is designated for investments.

Sen distributed the family’s corpus equally in equity and debt. Pandey had indicated his intention to buy a smaller house in Banaras, and half of the investment corpus was allocated to debt initially. The couple bought a suitable flat in 2019 but retained 80-85% of the proceeds from the previous property’s sale, keeping the amount invested in MFs.

At present, Pandey’s investment mix stands at 62% in equities and 38% in debt. He has also been using SWPs to manage a part of his household expenses, which account for 4% of his investment corpus. His pension takes care of the remaining household expenses. Of his corpus, 7% is marked out for charity. He also uses his pension to donate to charity and to fund his pilgrimages.

Medical care

Despite the comprehensive medical coverage provided by BHU for the couple, Pandey maintains a separate health care corpus. He prefers to be in Mumbai during the winters as his wife is asthmatic. “Every year, we are in Mumbai for 6-7 months. If there is any medical emergency, my daughters there look after us. Here in Banaras, we don’t have anyone right now in case of an emergency,” he says. “Although BHU covers all our medical needs, it requires a fair bit of paperwork, and I don’t feel right about using BHU funds after retirement. Also, the BHU hospital’s doctors who knew us are no longer there,” he says.

 

Re-balancing

Pandey’s investment portfolio comprises a mix of equity and debt in the ratio of 60:40. Every two years, funds from the oldest equity investments are moved to his debt corpus to cover SWPs for the next two years. In case of a significant emergency or medical need, this shifting is done sooner to replenish the debt corpus. However, such large withdrawals have not been necessary in the last five years since the couple began their MF investment journey.

Pandey’s withdrawal rate for household expenses remains low, thanks to his significant pension funds and lower cost of living. This should ensure that he and his wife can comfortably sustain their investment portfolio throughout their lifetime. Pandey has informed his children not to expect his entire corpus to be left to them. “I tell them that if I give to charity, then all this is ours. If not, what remains is theirs,” he says.