Gautam Singh wanted to hang up his boots by the age of 50 and started planning for his early retirement 10 years ahead. The corporate sector employee set out on his journey towards financial independence with monthly SIP investments of ₹65,000, as he aimed to accumulate ₹1.5 crores over the next 10 years. He also wished to pursue some of his passions after retirement and adjusted the fund requirements accordingly.
The investment portfolio was constructed with mutual fund schemes in the large-cap, large-and mid-cap, multi-cap, and mid-cap categories. Gautam was comfortable with intermittent volatility and aimed at wealth creation towards retirement goals. While he was prepared for the short-term volatility, he was not prepared for the sharp corrections in the equity markets between March and April 2020, after the Covid-19 outbreak.
Panic started gripping the equity markets during the last week of March 2020 in anticipation that the whole economy will come to a standstill. As a result, the investment portfolio was down by around 23 per cent in the first week of April, from around 9 per cent annualized returns for the portfolio till January 2020. The annualized returns for the investment portfolio had fallen sharply by 16 per cent with around three years of investment.
Gautam was not happy with the performance even during the pre-Covid times, with lower than expected returns till January 2020. Further, when the market fell like a deck of cards in the first week of April 2020, he started getting impatient and was on the verge of losing confidence and trust from the equity markets. With the financial goal approaching, he was getting nervous about his aspirational early retirement.
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