‘Don’t put all your eggs in one basket’

Mark Twain once said, “It’s never a wrong thing to do something right.” One way to do right by somebody in these times is to be financially independent. Not by choosing short cuts, but by setting goals, working towards them over a period of time. Chartered Accountant, Amita Thosar in a chat with Smart Investing India tells us how to go about it

What does financial independence mean? How do we start planning for it?

Financial independence refers to having adequate financial resources at your own disposal to meet your needs, wants, and aspirations—without relying on external assistance or active employment.

Achieving financial independence requires comprehensive financial planning, which typically involves:

1. Defining financial objectives – Identify your essential needs, ongoing responsibilities and aspirational goals. Follow it up with clear short-term and long-term targets.
2. Establishing timelines – Map each goal with an investment horizon. Longer-term investments benefit from the power of compounding, enabling exponential asset growth.
3. Maintaining financial discipline – Prioritise consistent savings and prudent spending habits.
4. Assessing risk tolerance – Understand your capacity and willingness to take risks. Separate essential expenditure from discretionary spending.
5. Portfolio diversification – Allocate savings across multiple asset classes in line with your risk profile, such as fixed-income securities, fixed deposits, mutual funds, and equities—avoiding overconcentration in any one asset. Remember the saying — Don’t put all your eggs in one basket.
6. Periodic portfolio reviews – Regularly evaluate investment performance to ensure alignment with goals.
7. Implementing corrective measures – Be willing to adjust or modify strategies if performance deviates from targets.
8. Contingency planning – Maintain emergency funds and obtain adequate health and term insurance coverage.

What are the common mistakes that people make when it comes to savings and investments?

1. Lack of financial discipline – Overspending and neglecting regular savings.
2. Poor diversification – Concentrating investments in limited asset types.
3. Ignoring inflation – Failing to account for the erosion of purchasing power.
4. Overlooking liquidity – Investing in assets that cannot be easily converted to cash when required.
5. Neglecting portfolio reviews – Not making timely adjustments to address underperformance or changing circumstances.
6. No contingency reserves – Being unprepared for unexpected expenses.
7. Cash flow mismatch – Not aligning investment income with future financial requirements.
8. Ignoring risk assessment – Investing without understanding associated risks.
9. Lack of patience – Expecting wealth creation in the short term. Please remember it requires sustained investment over time.

Does financial independence look different for different age groups? For eg, when you are in yours 20s, what should you aim to achieve? What is the benchmark for those in their 40s?

Absolutely! Financial independence goals evolve with life stages. In your 20s, you have the advantage of time. A longer investment horizon allows you to benefit significantly from compounding returns. This is why early investing—even in riskier assets like equities—can lead to substantial wealth creation.

A simple way to understand compounding is the Rule of 72: divide 72 by the annual rate of return to estimate the number of years it takes for an investment to double in value.

At any age, ensure your post-tax returns exceed the inflation rate to maintain purchasing power. The same principle applies when calculating the corpus required to maintain your lifestyle over time.

What should a retirement kitty look like for those individuals with a monthly salary of Rs 50,000?

Retirement corpus depends upon many variables such as income, risk appetite, financial responsibilities and financial goals. However to give general idea, for someone with a monthly salary of ₹50,000 and spending approximately ₹30,000 per month:

• Current annual expenses = ₹3.6 lakh
• Future annual expenses (25 years later, assuming 4% inflation) = ₹17 lakh
• To generate ₹17 lakh per year at a conservative 6% post-tax return, a corpus of approximately ₹3 crore would be required.

Should Indians prioritise buying house over gold? Or is there a third option?

While opinions may vary, owning a primary residence should generally take priority over gold purchase. Property provides security and potential capital appreciation, whereas gold serves mainly as a hedge against market volatility.

Gold, while a store of value, is a non-productive asset—it does not generate income such as interest or dividends. Ideally, gold should form only 4–5% of a diversified portfolio, preferably in efficient forms such as Gold ETFs or Sovereign Gold Bonds.

Have you seen any changes in the savings/spending pattern of people in their 30s?

Research shows that individuals in their 30s increasingly allocate a larger share of spending toward consumer durables (cars, electronics), lifestyle products (smartphones, laptops) and services (travel, recreation, and skill development/education).

We are headed towards a gig economy, with permanent jobs becoming scarce. In such a scenario, what are the safe bet investments?

With the shift toward a gig-based economy and declining prevalence of permanent jobs, the lack of a stable monthly income necessitates:

• Liquidity-focused investing – Ensure access to funds for regular expenses through systematic withdrawal plans.
• Capital safety – Allocate to low-risk instruments for essential cash flows.
• Contingency reserves – Maintain an emergency fund to cover several months of expenses.
• Insurance protection – Term and health insurance are non-negotiable.
• Diversified portfolio mix – Include a combination of fixed-income securities, short-term debt instruments and moderately risky assets for growth.