how to be your own financial planner?

Back to basic……

Plan Today… For Better Tomorrow

My dad had one pair of shoes and used it

for five years. I have five pair of shoes and

use it for one year.

In today’s wired world people connect less

emotionally more electronically.

High stress level.

Life is not easy…..

People change the basic principal

EARN – SAVE = SPEND

and now……

Life is not easy …

EARN – SPEND - EMI = ???

Life is not easy …

Don’t confuse with

“Spending for Life”

Or

“Life for Spending”

Why do we save? • It is important to save from our earnings in order to accomplish

our financial goals.

• Car • Home• Foreign vacation• Children education • Children ‘s Marriage • Retirement corpus • Contingencies

Why Planning

Financial Planning provides you with a blueprint which

helps you realize all your dreams in life in a very

systematic and planned manner without causing you any

sleepless nights.

What comes First ?

Why Protection First ?

• Protection – Non Material and Material Wealth

Non-material wealth consists of you and your near and dear ones.

There could be instances of job loss, migration, illness, disability,

accidents, and death. We need to have a strategy to deal with

these eventualities.

Protecting material wealth is also important. This consists of a

house, an office, a shop, other real estate, a car or other vehicles

of transport, Jewellary etc.

How much cover is enough ?

What are Different types of Cover ?• Life Insurance

• Term Plan• Endowment Plan• ULIP Plans

• Health Insurance

• Mediclaim• Critical Illness Benefit• Permanent Disease

Early you start, less you pay.

INVESTMENT PLANNING

WEALTH ACCUMULATION

• One of the biggest hurdles in wealth accumulation is borrowing.

Further taking a loan on one hand and making an investment on

the other hand is like pouring water into a bottom less jar.

• Therefore, the first step in wealth accumulation is to control

debt.

• After paying off debts the focus then shifts on investments,

based on the financial goals.

Where to Invest First ?

• Mutual Funds SIP

• Real Estate

• Bank Fixed Deposit

• Direct Equity

• Gold

• Govt. Schemes

Confused …

Million Dollar Question

Person

• Amitabh Bacchan

• Lata Mangeshkar

• Sachin Tendulkar

• Saniya Nehwal

Profession

• Cricket

• Badminton

• Actor

• Singer

INVESTMENT PLANNING

Investment Avenues Equity

• Direct Equity• Equity Mutual funds Debt• Debt Mutual Fund• Fixed Deposits• Recurring Deposit• Bonds Alternate• Gold• Property

Asset Classes

23

1.Domestic Bank FD rates for less than 1 crs with SBI for 10 yrs 2. S&P BSE Sensex index data as on 16 May 2014 3. 5 years CAGR returns of Value Research Bond Index as on

16 May 2014 4.Mutual Fund Returns of Large cap (Value research categorization ) category CAGR 10 yrs as on 16 May 2014. 5. Report by global real estate consultancy firm Jones

Lang LaSalle (JLL) 6.Gold returns based on $ value of AM fixation by LMBA, 10 yrs CAGR as on 12 May 2014.

The returns mentioned are of various instruments having different characteristics and risk in 10 years category. Investors should consult their financial

advisors before taking any decision of investment. Past Performance may or may not sustain in future.

Returns (CAGR%)

Asset Returns (as on - 31 Dec 2013)

1 Year 5 years 10 years 15 years

Gold -3.9% 16.8% 15.4% 13.10%

10 Yr treasuries - 4.7% 2.8% 4.9% 7.8%

Bank F D 8.5% 8.3% 7.3% 7.6%

Property assets 7.1% 5.4% 16.0% 11.4%

Equities 10.8% 18.6% 15.3% 15.3%

CAGR in WPI Index

7.0% 7.9% 6.6% 5.9%

Avg inflation 6.3% 7.1% 6.6% 5.9%

Asset Class - Gold

• Gold is wealth preserving asset not a wealth-

accumulating asset. We buy and hold gold

bullion to preserve wealth.

• Gold is not a bad investment, and gold is not

a good investment. Gold is not a investment

at all, Gold is alternate currency.

• Traditional means of storing wealth in India

Asset Class – Gold Monetization Scheme

• Good investment option for Gold Investor

and a perfect alternate of Gold ETF.

• Earn 1% guaranteed return TAX FREE.

• Option to take maturity in any form –

Physical Gold or Value.

• Will not ask for Source of Funds

Asset Class - Real Estate • Sense of security

• High returns

• Legal & Title Issue

• Illiquid

• Rental (sometimes) yield is low - 2% - 3%

• Small amounts cannot be invested

• Return diminishes with estate taken on loan

• Ancillary transactional costs range from 10–13 %

Asset Class – Debt

• Fixed Deposits, Bonds, Debentures etc.

• Debt Mutual Fund

• Fixed Returns, Secured feeling

• Net of Tax Returns 6-7%

• Never creates wealth in longer run

• Good for Capital Preservation and not for Wealth Creation

Govt. Schemes and Returns

For all Bank Account Holders aged between 18 and 40 years

Monthly pension will be based on the contribution, when one joins at the age of 18 by contributors.

One can avail life long pension of

Rs. 42 to Rs. 210 per month

Rs. 1,000 to Rs. 5000 from the age of 60 years

Atal Pension Yojna-Advantages

Subscribers of APY will get monthly pension at the age of 60 years. If someone joins at the age of 18 years and contributes Rs.42 till he reaches 60 years, then monthly pension received would be Rs. 1,000.

Pension amount will range from Rs.1,000 – Rs. 5,000.

Auto-debit facility will also be provided. With this monthly contribution would be automatically debited from the subscriber’s account.

In case of death of the pensioner (father), the monthly pension would continue to be paid to the wife. And to the child (if both father and mother die).

Asset class - Equity

• To earn higher returns - Slowly

• Tax efficient

• Only asset class that can beat inflation in long term

• Wealth creator

• Principal not protected or guaranteed

• Volatile in nature

• Investors loose money only due to two reasons – Greed & Fear

Importance of Equity allocation- A HEDGE AGAINST INFLATION

Source: Bloomberg; Returns are CAGR. Past Performance may or may not sustain in future

10 year returns of various asset shows that equity, in the long term, has outperformed other assets.

37

CAGR % returns (as on 18th Oct 13)

35 year - 16.28 % CAGR

Apr 14

CAGR % returns (as on 21th May 14)

Equity Investment through Mutual Fund

• Professional Management• Diversification• Return Potential• Low cost • Liquidity• Transparency • Tax efficient• Flexibility

Systematic Investment Plan (SIP)

SIP is investment of a fixed sum at periodic intervals for a particular period .

Advantages of SIP

• Eliminating the need of timing the markets

• Rupee cost averaging

• Benefits of power of compounding

• Inculcates disciplined habit of saving

Need of SIP

• To maintain discipline investments.

• To facilitate planning for accumulation of a corpus.

39

Monthly transfers

Monthly/Quarterly/weekly transfers

A SIP of Rs. 5,000 invested per month @8% expected return till the age of 60.

The Advantage of starting early. And investing regularly

Assuming returns of 12% p.a. for illustration purpose only

Essentials of Financial planning

• Don’t keep any funds idle

• Plan for goals and start saving towards your goal.

• If you are not working for your goals you are working for some one else goals

• Look for tax efficiency while investing

• Don’t collect wrong assets

• As you eat regularly, work regularly, so you need to invest regularly also.

• Review your investment plans at least annually to keep in sync with your changing needs & incomes.

While Investing

Focus on goals and not on market

Focus on Time in and not Timing

Don’t blame your wealth level to destiny if you do not nurture , it will not grow.

Equity market is place to earn higher returns- Slowly

Ensure your lifestyle should not your biggest liability.

Basic is beautiful.

Saving and splurging gives you same pleasure only the order changes.

Donate generously

Just for you….

“Investment is a boring activity . It

is better to get bored and be

wealthy than to get excited and

end poorly. “

Your opinion ?

Manish P.

manish@financialhospital.in

Keep Smiling….

Its make you more beautiful.