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9-Point Investment Plan + 209 words Financial Plan

by 8 Comments

Short Financial Plan

Do you want a simple investment plan?

Here is a rock solid 9-point plan suggested by Scott Adams, the creator of Dilbert comic series (source). It’s written for US investors. But it’s still good to read.

Inspired by this, I will share my own’ short plan’ later in this post.So read this one first:

So read this one first:

Dilbert 9 Point Investment Plan

Now let me get inspired… 🙂

Here is a 209-word financial plan that is more relevant in the Indian context.

209 Word Financial Plan

  1. Buy term insurance. Never buy endowment / moneyback policies.
  2. Buy health insurance for you & family; even if employer-provided. Or atleast get a top-up cover.
  3. Build up an emergency fund equal to 3-6 months’ expenses. Use savings account, liquid funds and FDs.
  4. Buy a house if staying for long and affordable. Don’t go overboard with loan. Keep regular EMIs below 30% of your income.
  5. Prepay the loan as soon as you can.
  6. Make a will.
  7. Don’t delay retirement savings. Divide your periodic investments 70% equity and 30% debt.
  8. If mandatory debt investment like EPF doesn’t amount to 30%, use PPF and debt funds.
  9. Rebalance annually to keep allocation at 70-30 (Equity-Debt).
  10. Use major chunk of annual incentives to prepay loans.
  11. Increase investments with salary hikes.
  12. Keep a credit card. Pay it on time and in full. If you can’t, then dump it.
  13. Teach your dependents about money and how insurance works and who to contact if need be.
  14. If you have special goals (retirement, children’s education planning, etc.) or all this confuses you, hire a trustworthy + competent financial advisor. Few important pieces of financial advice can offset many years of fee charged by advisors.

That’s not as concise as Scott Adams’ plan but I think it covers most of the important aspects.

Hopefully, it was helpful. 🙂

And here are links to other articles that address few of the above-mentioned points:

Life Insurance:

Health insurance:

House Buying:

Home Loans:

Retirement Savings:

Finance Advice:

8 comments

  1. I want to just understand that every time financial planners are advising to buy mutual fund and they are calculating the interest from 22 % to 12 % min. But I have never seen any of my friends or myself had earned more than 7 % to 8% return in mutual fund ever.when you buy mutual fund it is shown that this mutual fund historical figure is 21 % or 20% etc etc but when it comes to actual realisation i hardly get more than 8%.so what is the reason for it.

    Reply

    2. Dear Dharmendra,
      The historical returns of every given schemes are correct. Now why you or your friend got only 7-8% returns can be attributed to emotions…like fear or greed, trying to time the market, etc.
      By nature equity investment is volatile. So in short term it invokes such emotions. But if you resist the temptation and stay invested for longer period, say 10-15 years, you are sure to get 13% + returns. The logic behind this 13% is that equity is expected to give returns in line with prevelent inflation plus GDP Growth Rate of the country over a period of time. So, invest in equity mutual fund and stay invested for 10-15+ years to attain desired result.

      Reply

    3. calculating the interest from 22 % to 12 % min. But I have never seen any of my friends or myself had earned more than 7 % to 8% return in mutual fund .

      Simple.

      You are in a debt fund and others are in equity.

      Reply

  2. Hello

    I just wanted to understand the portfolio turnover ratio. I see that most equity funds have portfolio ratio well in excess of 50%. Does it mean the sell and buy half of their portfolio every year.

    Would that not lead to huge short term capital gains tax on the mutual fund in case the stocks did well.

    Thanks

    Reply

  3. Hi Dev,

    On point 9, is it advisable to use a dynamic scheme to allocate the funds? For eg.

    PE below 12: 90% in equities and 10% in FD
    PE between 12-15: 70% in equities and 30% in FD
    PE between 15-18: 50% in equities and 50% in FD
    PE between 18-24: 30% in equities and 70% in FD
    PE above 24: 10% in equities and 90% in FD

    I have used FD. (FD could mean Fixed deposits bonds or any debt fund or liquid instruments in money markets) For example, if a person has 100 Rs in bank FD as his total savings, is it advisable to do Rs 70 in equity & Rs 30 in FD at this point ?

    However, Market has not given a break for 8 years. So that supports your point 9. What are your thoughts on this ?

    Reply

  4. Hi Dev Ashish….nicely brifed and explained all the essential expects of financial planning…
    I have only 1 doubt, as you are asking 70:30 ratio for equity and debt…is it should be same all the time? Or it should be changed according to market condition (p/e ratio and other aspects).

    Reply

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