Even as a quick Google search on ‘how to retire early’ returns over 89,00,00,000 results, it is hard to find a convincing plan of action, or a well-explained investing idea online, that can actually help you retire early with a decent monthly pension in India. Also, most of the writings on savings and investments available online appear to be meant for other financial experts to understand. However, an upcoming book – ‘SimplyMutual: the 1% formula to gain your financial freedom’ – by Deepak Mullick aims to change that for the benefit of common investors.
In the book, Mullick has shared a simple Equity Mutual Fund investment trick that can be used to retire early with a decent monthly cash flow, or ‘salary pension’ in the words of the author.
Mullick says currently there is a huge opportunity for lay investors in the Indian equity markets. And his book explains how to grab this opportunity and attain financial freedom by investing in equity mutual funds.
“The only way to let your money grow, even when you are not working for it, is by investing in the India opportunity, or by participating in the India growth story,” Mullick said during an interaction with FE Online.
“This is a fantastic time for being an investor in India. However, because of the antiquated belief about the stock market and money, people are not able to leverage it. The 1% formula helps people understand this opportunity and take a disciplined approach to invest in equity mutual funds and build a corpus that will help them retire early, or break free from financial anxiety. So they can just pursue their interests without worrying about how to pay their bills,” he added.
What is 1% formula?
Mullick says in the book that the 1% formula is “an approach to build a corpus over 15 years that would give you a sustained ‘salary pension’ after this time period that amounts to 1% of the original corpus.”
Following this 1% formula, if a person wants a salary pension of Rs 1 lakh per month after attaining 45 years of age, he would need to build a corpus of Rs 1 crore by the age of 42. The author has added extra three years as a cushion for market uncertainties.
Over the time, the returns delivered by Equity Mutual Funds will exceed the percentage of withdrawals. So if you manage to accumulate a corpus of Rs 1 crore in 15 years, and start withdrawing Rs 1 lakh per month, even then the remaining of the corpus would continue to grow if you remain invested.
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Why 15 years?
Mullick writes that a person may build a corpus of Rs 1 crore even earlier, but he has deliberately suggested a 15-year time frame for investing to take into account regular ups and downs in the market, or market cycles.
“In a 15-year period, you would have experienced one-to-two market cycles…witnessing a market bounce back after a crash will give you the resilience required to stay invested,” he writes in the book.
Invest, not just save
Mullick said what most of people basically do is that they save money. They actually don’t understand investing. Also, almost 90 percent of their assets go towards some “safe instruments”, where the returns calculated post-tax and post-inflation are actually negative.
“I would say the 1% formula is an approach to attain financial freedom. It is a step-by-step guide to invest in Equity Mutual Funds without the fear and overwhelm of losing money. It helps people for investing in a more disciplined approach,” Mullick said.