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Financial Planning ‘I convinced my client to move from real estate to mutual funds’

‘I convinced my client to move from real estate to mutual funds’

In this series, we feature interesting case studies of advisers’ clients and what role these advisers played in helping their clients achieve financial freedom.
Banali Banerjee Sep 14, 2016

 

Srikanth Matrubai, SriKavi Wealth Advisors

In 2011, an MNC executive sought my advice for parking money for a time horizon of one year. He didn’t want to invest in FDs as they are not tax-friendly. So I advised him to invest in debt funds.

After a year, he redeemed his investments and started investing again in debt funds. Curious to know the purpose behind these investments, I quizzed him. He said he was investing the redeemed money to buy 8 plots of land in different parts of Bengaluru on which he wanted to construct houses and rent them out to fund his retirement.

I convinced him that real estate was not the ideal asset for this purpose and gave him a comparison of the historical performance of mutual funds and real estate. Also, I pointed out these shortcomings:  

  • His money would be blocked without earning any return till the house was built and rented out.
  • He may not get the expected rent; also the rent increase may not match inflation
  • Rents are subject to municipal taxes and hence his net real returns would be lower

I was able to convince him to shift his focus from real estate to mutual funds. Today, he has only one plot on which he has constructed his own house. He is now investing in mutual funds not only for his retirement but also for his grandchildren.

Viral Bhatt, Money Mantra

In 2009, a businessman approached me to review his portfolio which consisted predominantly of insurance policies, endowment plans and ULIPs sold to him by his relationship manager at a private sector bank.

The sad part was that this client did not even realize that he had been mis-sold these products. I explained to the client what was wrong with his investments. They were mostly low return products and not suitable for his long term needs. By restructuring his portfolio based on his needs, I helped him recover losses from his earlier investments.

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