Akshay’s primary goal should be to shield his family from the risks of his new venture. He needs to organise his investment portfolio in such a way that it generates a regular income. An income that can take care of all the mandatory and some of the discretionary expenses of his household. He needs to modify the mix to ensure that the corpus also features some growth to take care of future inflation. He should desist from risking his corpus in speculative investments. Since the risk of a new business is already high, he should keep the accumulated wealth in low-risk investments. Akshay should fund his new enterprise without staking too much of his corpus, to begin with. He may find his venture coming under pressure to generate revenue if he seeks outside equity capital too early on. He may find it tough to meet fixed interest expense in the initial years if he takes a large loan.
He should consider creating a core team of promoters, who will pool in the initial capital for the business. Patient startup capital provides a new business with initial stability. If he has to use borrowed funds, he can consider taking a home equity loan against his second rented house, at favourable terms with his bank. Any large financial goal, such as higher education of children, may require him to redeem some of the accumulated investments. He needs to find alternate funding for such large goals as liquidating the investments would reduce the corpus and therefore the income that his present corpus generates. He needs to ensure a higher flexibility in his portfolio, to be able to juggle his corpus between regular needs, needs of the business and special needs for financial goals.
Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.