Financial planning: Curious case of Murli’s free-for-all purchase plan

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SummaryFinancial planning is an amazing profession because you seldom have a similar situation repeating.

Rs 8,000. He expects to earn between 8 per cent to 15 per cent p.a. on this Rs 8,000 which is quite reasonable.

He will invest this money with a time horizon of minimum 20 to 30 years. He expects to recover full value of his expense i.e. Rs 80,000 plus his 10 per cent investment in approximately 20 years if he is able to make 12 per cent or more returns on his investments. Depending on market situation, if returns are better he recovers his expense value faster. In the worst-case scenario, if he is gets an average 8 per cent returns he will recover his expense plus his 10 per cent investment in about 30 years. A good part of this money will help him during his retirement years — that’s how he is partially planning his retirement.

His choice of products depends on the market conditions — if the rate of return on fixed instruments is high i.e. above 9 per cent he will invest there and when they are low, he will go for equity mutual funds. This is his style and method of financial planning.

Towards the end of each financial year he would invest the said surplus in lump sum for his financial goals and also complete his little bit of tax planning investment if necessary.

What a strategy! Whatever you spend you get it back in 20-30 years or even earlier. Sounds unreal but is quite logical and possible.

If you do not live to that point of time, you simply leave it as inheritance to your children. Over time, if you feel your children don’t need that inheritance you spend whatever has accrued and do what you like whenever you like. Take a three month holiday hopping around the world if you please.

You could fulfil shortfall in any financial goal in future. You can use the accrued money now or during retirement. It is all extra money anyways.

Like I mentioned earlier, I am not commenting on what Mr. Murli does is right or wrong or how effective his method is or the impact of inflation, etc. Each person has his own style which I respect. It is the approach and philosophy that is intriguing.

—Author is Director – Transcend Consultingkartik@trancend-india.com

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