Have you wondered who will manage your portfolio when one day (eventually) you are unable to do so?
Normally in Indian marriages the man does all the banking related work. So investing, paying the bills, bank pass book updating, and such work is done by the husband and the other domestic work is done by the wife. Nothing right or wrong about this – but at some stage if you are going to be alone men have to learn cooking and women have to learn investing.
Let me tell you what I have seen a few people do. At the age of 73 years one investor has done the following things:
Dramatically reduced the number of mutual funds: He has about Rs. 3.5 million in 2 balanced funds. No more equity funds, these are funds meant to take care of inflation over say next 15 years.
Bought an annuity at age 65: When his wife was 65 (and he was 72) he bought an annuity policy in her name – if she died he would still get a lower sum, but she is the primary holder. This annuity though not well priced should take care of her monthly expenses till she is about 80 years of age.
Other than the balanced funds he has one short term bond fund. That completes his mutual fund portfolio. No equity funds, nothing else. He has moved a small amount into 2 banks – in either or survivor mode with his daughter as a nominee. Operationally he has given a full power of attorney to his daughter – just in case. He had the PA drawn up by a lawyer and confirmed with the bank and mutual funds that it will work. He has also made a will dividing the money between the son and daughter. Both his children do not need the money and the son is clear that he will give it to his sister because he is a US green card holder and has no intention of coming to India.
So he wanted to know how to simplify and consolidate further. I said as long as your 66 year old wife knows how to remove money from each of these places you need not worry about simplifying further. It is nice to simplify and consolidate but you cannot really mix a balanced fund with a liquid fund. I then got him to put a deposit of Rs. 20,000 in Mahanagar Telephone, Mahanagar gas, and Reliance Infra. This meant he had reduced 36 transactions in a year to just 3 transactions. A quick reading of his pass book showed many small cash withdrawals. I realized that his grocer would happily accept a bearer cheque. I stuck a deal with the grocer – he would get a cheque of Rs. 10,000. He would take his bill (about Rs. 1500 say) and give Rs. 8500 to this couple. He was happy to do this – and it was a 40 year relationship and we toyed with the risk and said ‘can live with a 10k risk’. I FORCED them to use the debit card as well as travel with one/ two cheques even when travelling locally. Servants salary : RGTS (vow!!). Dramatically reduced transactions and almost eliminated cash. If he uses Uber – we will see a further reduction in cash requirements!!
He has created an “Instruction Book” for his wife (she does all the computer work and he does the vegetable cutting). He has taken her to the bank, mutual fund and made sure that the LiC agent (annuity) knows her well enough. Nominations are in place, and in the instructions book he has said “when YOU are 77 put the balanced fund into the short term debt fund – BUT ASK SUBRA what to do”. I laughed and said ‘what about a senile Subra…you have 14 years to go!!”.
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