The Palimpsest of Sawbones Surio

Pessimism of the Intellect, Optimism of the Will

Planning early retirement with 1.1 crores corpus fund

with 8 comments

Namaskara, gentle reader. I am still chewing the ends of my pencil-tip :x, trying to write a post that is at least as good as some of the blogs that I frequently visit :-?. So, while my post is still in press, why don’t I share a very instructive article that was published in the Sunday edition of The Hindu BusinessLine (07/02/2009) on this blog.

Small Excerpt:

I am Gulshan, aged 42. My wife, aged 39, is a home-maker. We have two children, aged 12 and seven. I worked abroad for some years and am now settled in India. I decided not to take up employment but lead a retired life with my savings.

Are you interested? I sure was! 🙂 And for those in a hurry, here’s the executive summary of what Suresh Parthasarathy, the newspaper journo recommended.

Gulshan's portfolio at present (L) and BL's recommendation (R). Note: I have increased size of the image to twice the original image size. Image watermarked to indicate correct copyright. Please leave a comment if you feel this is wrong, and I will take it down immediately.

Gulshan's portfolio at present (L) and BL's recommendation (R). Note: I have increased size of the image to twice the original image size. Image watermarked to indicate correct copyright. Please leave a comment if you feel this is wrong, and I will take it down immediately.

The complete article can be accessed from here, and the printer-friendly version (loads quicker) is here. Let me know of your thoughts on this please. One of the things that interested me in the article was the person’s clarity in expecting Rs. 1 lakh returns on the equity market every year based on his portfolio of Rs. 8 lakhs. What are your thoughts on the article in general?


Written by Surio

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8 Responses

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  1. This strategy looks truly insane to my British eyes, though I appreciate that the yield on Indian stocks is poor compared to the high growth. Such a high exposure to fixed interest and cash is remarkable for someone so young. I am older than he is and I have more exposure to the UK stock market. Which bearing in mind that India is a dynamic economy with a young population and good growth prospects seems odd. ndeed when I targeted growth I considered the Indian market in a JP Morgan IT, but balked due to the Wrren Buffett doctrine don’t buy what you don’t understand and the unknown currency risk. For this guy it woudl seem a no-brainer to seek to take part in a rising economy for the forthcoming decade or so, assuming no catastrophic things like peak oil that would decimate his cash holdings anyway.

    Perhaps the Indian stock market behaves in a very different way to the UK one, but passing up 20 years of growth and makign an assumption of low inflation for 40 years seems very strange to me!


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    • Thanks for making me re-visit this old post. Yes, I agree with the “This strategy looks truly insane to my British eyes” point (despite my having brown Indian eyes, guv :-D!!). That’s why I put it up here for a discussion (Pure delusion, if you ask me! As if I had a readership running in the 1000s, Ha! :-P).

      Some other points for you:
      1. Historically Indian banks’ deposit rates have never ever kept pace with inflation. Indeed we finished 2010 with 15% food inflation alone, and here’s bank F.D rates in a nutshell for your perusal! so Mr. Gulshan is probably miffed (with good reason) at the returns, had he followed it to a “T”!
      2. Also, parking money in different deposits is tedious to say the least, and might get him in the taxman’s radar for no reason! The columnist also doesn’t know that if he approached a single bank as a “high-net-individual” he’ll get preferential rates over the F.D.
      3. If he had done some of his own research and invested in the stock market more, he could have ended this year with ~12.5% returns (but with food inflation at 15%!)… Sod you, World! 😡
      4. As an Indian advising another Indian, I also found that Cash flow is completely neglected, whereas knowing our volatility, it ought to have been addressed! When you lock money into these places, how are you going to tackle inflation based rise in expenses?

      So, all in all, I agree with you it was bad advice (to any eyes).
      sorry for the delay in replying to your comment.


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  2. Glad it’s not just me that thinks this is insane. One thing I haven’t got a handle on is what the cost of living is. I take it 1 crore = 100 lakh, though I don’t know how many Rs = 1 lakh 😉

    Expecting a return of over 10% is awesome. In a rapidly growing economy with a young population this might be possible, but it is well over twice the rate of return I would expect. Perhaps I should revisit that JPM Indian IT 😉

    I guess handling the volatility will be a pain, he has to hold in cash several years’ running costs to avoid ending up with a forced sale into a bear market.

    Many people target an emergency fund of a month’s salary – mine on retirement will be about three years in cash, which reduces the return I can get from exposure to the stock market to the same extent. That means I can ride out about a 1.5 year long bear market before gradually starting to sell out, which would work for for my experience of two bear markets so far, though it wouldn’t have worked for the Great Depression.

    So Gulshan needs some cash holdings, sure, just not so much. But if he needs a 8% rate of return he can’t afford to retire at 42. No economy in the world has grown at that rate for 30 years (he will be 70 then, after which he can start to run down his capital over 20 years)


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    • ermine,

      :-D! Welcome to my DW’s world. 3+ years and she still needs to think before getting it right. So, here we go:
      100,000 quid = 1 lakh
      10,00,000 quid = 10 lakh = 1 million
      100 lakhs = 1 crore = 10 million

      > One thing I haven’t got a handle on is what the cost of living is”
      Good question.
      If you asked that to your temping lads from yonder, you might get anywhere from 8 lakhs to 12 lakhs per annum.
      But if that was true, then the food riots and revolution would be here, not in the middle east. 😉 I am working towards ERE from 2008, and over the last three years, I’ve grown a little bit of brain from being very dumb! ;-). So, realistically:
      1. 72,000 – 85,000 p.a: Shop assistants, factory workers, odd jobbers, so on
      This is not bleak. They tend to get their staples and kerosene under the public distribution scheme under heavy subsidy. All those PDS scams and poor quality notwithstanding they get a good deal and reasonably nutritious food. They invariably live in clusters of thatched houses with their own strata, they share a vegetable patch, they also shop in farmers markets where prices are much lower than the retail. Not as bleak as you’d think it is. They don’t get to see Kulu Manali in Summer and their children go to State schools very similar to UK. Education is given in mother tongue and it means they are all ready for Government careers by the time they are out.

      2. 200,000 – 350,000 p.a: An average monthly salary of 30,000 here. This gives you access to the middle class. If you are judicious enough, and grow some of your own food, this is “ERE” already. Usually children go to some private school (***-star class) and there’s a lot of angst about children ought to be in “another better/more expensive school” otherwise they’ll become plantation/galley slaves :cry:, and there’s no dependency on the PDS. Also, here LPG is the cooking medium, as opposed to kerosene.

      3. 450,000 – above. This is definitely a grand salary, in my opinion.

      Usually, at level 3, people (me included) get conned into a mortgage these days, which is an eye watering 10.75% as we write. Also, these days most people are carried away by TV rhetoric and shop in retail “chains” which also pumps up their budget. Then there’s the “mandatory” dish TV on every roof. Well, these eat a chunk of your money. Thanks to rampant Chinese piracy and invasion, most of these houses WILL have mobiles, DVD player, TVs at 1/3rd what the retail market will charge. I’ll still say, good on them Chinese, for it provides everyone a glimpse of the so called “middle-class” life. Petrol/Diesel and LPG are big drains, luckily we don’t need indoor heating. Govt. releases potable water twice a week. Practically everyone has a “tubewell”. This means, our water levels are severely depleted and water wars will come before oil wars here. If one prescribes moderation, then one is looked upon like a prize idiot!

      All in all, it can be a good life for a lot less money than the average member of the Indian public think they need, only if you can decide what’s the right thing you need in your life. Also, I’ve practically stopped visiting the retail chains, and all my needs come from the wholesale market which has resulted in massive savings! Touch wood. No TV, no dish, no cable, mostly moped/public transport, the car gets a very rare spin so she’s doesn’t rust! ….

      Most Indians I’ve interacted actually do live paycheck to paycheck (Yours truly was once part of that s**te life). Very rarely do people realise the emergency fund in practice. Also, lay-offs of the type the West’s seen should likely make an entry in a few years’ time. Then the dance will remain to be seen. Thanks, you’ve given me a thought of how much cashflow is optimal (1.5 years emergency fund).

      Back to our friend Gulshan

      Many private as well as international banks offer high rates for “high-net-individuals”. For example, Gulshan could have opted to go for a monthly high-net deposit where 15 lakhs earns him Rs. 7400 – 9500 after tax every month, at 7-9%. There are also “Gold loan” banks that offer a “inflation tracking” interest, but you’ve got to park your money for a year at least! This are not so risky options, but for some strange reason, the journo did not recommend.

      And yes on your remark “But if he needs a 8% rate of return he can’t afford to retire at 42. No economy in the world has grown at that rate for 30 years”! According to my own calculations, if he was holding close to 2 Crores, then he is ER already. So, I agree with you that Gulshan definitely needs to be more creative with his money to last him all that while. He is holding on a piece of land, which in today’s scenario here is gold-dust :-D!

      Maybe that JPM is not a bad idea at all, I would say. 🙂 And since I can invest in DW’s name with that JPM, I am going to take a close look at that too. Cheers for the tip, guv! 🙂


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  3. investing in share or equity is totally bull shit. i hv lost lot of money in equity and i know the pain. If God also comes and suggest to invest i ll not invest. So please suggest me better investment plan for early retirement as i dont want to work for long


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    • akshay,
      My blog is not a “tactics” provider but more of a “strategy” pointer. Myself and many others (csm-fanaa, ERE forums/goals and plans) on the right side are also following this philosophy of leading by example, or simply pointing to the strategy they adopt. You will also find an eclectic bunch of PF writers that delve into tactics also. OneMint covers non-equity based instruments. While I am not sure what your risk appetite is, it is definitely not equities by your comment. My latest post is ‘strategy’ based, and I hope it gives you enough ideas to sit down and work your own retirement plan.


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  4. […] planning steps and their dreams about early retirement. Readers might recall that I had carried a one such story on the blog from the same newspaper on an earlier […]

    • Hi,
      I am a compulsive reader of all of Ermine’s articles and in the process get to visit your site occasionally. As a typical Indian software guy I have got into all the things that the early retirees ask us not to get into (Mortgage, Car loan, Personal Loan) and somehow getting myself extricated from these.
      I always wonder what is the decent amount that one can live with in India (Hyderabad, South India).
      1. The amount I feel I need increases every time I visit India post my posting abroad.
      2. There is no single investment avenue which will provide a cashflow which is inflation+something and where I don’t eat into my Capital.
      Anyway not looking for a specific answer but thinking aloud and wondering if I may get the answer :).

      Surender Reddy

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