Investment Planning and Strategy -

Role of Professionals

CA K.RaghuCentral Council Member

Investment Scenario

Investment Scenario (2010-2011)

300 million plus middle class - growing to 580 million plus in 2025

Large English-speaking population by 2011, will be the largest English-speaking country

Largest democracy in the World (1.1 billion strong)

Favorable Demographics (54% 0-25 years) Free and Lively media, well-established

independent legal system, and free fair elections Investment-friendly, liberalized economy

Value Add Services – By practicing professionals in Investment Planning CA’s have intimate knowledge of clients

financial transactions Opportunity to provide value-added services

in Investment Planning and Strategy Personalised wealth mapping services Assist in meeting clients shor term/medium

term /long term investment goals

What you need to do ?

Evaluate various investment options like Insurance, Mutual Funds, Equity Shares,

Bonds, Debentures Knowledge of the Capital Markets

Is there such a thing like a perfect investment? 

What the best investment is that will maximise returns or

What is the best mutual fund or What is the best stock portfolio?

In other words there is a perpetual search for the most perfect investment.

India”s Growth Story

India – Most favoured destination for overseas companies

$ 1 trillion economy – Taken 60 yrs Next one trillion will take only 6 years Provides tremendous prosperity amongst

Indians Urgent need for professionals to capture this

rapid growth

Essential requirements for a Good Investment

Complete Safety

The original investment must remain intact. Bank fixed deposits (FD), Government bonds, other bonds and similar fixed interest type investments offer this benefit .

Essential requirements for a Good Investment

High rate of return

The returns on the investment should be such that it beats inflation by at least 5 to 10% and thus we are able to create real wealth for ourselves. it is real estate, stocks, equity mutual funds that qualify in this category but then safety of capital is compromised.

Essential requirements for a Good Investment

High Liquidity

The investment must be such that we can exit anytime we like without having to worry about associated penalties.

Essential requirements for a Good Investment

No or minimal transaction costs

An investment that does not have entry cost or has minimal associated transaction costs can have a huge impact on the ongoing profitability of that investment.

No taxes or minimal taxes Ideally the returns from our investments

must be completely free of any tax liability.

No need for knowledge The investment must be completely easy to

understand and should not require special knowledge.

Essential requirements for a Good Investment

Essential requirements for a Good Investment

Completely passive

The investment does not need active management. Real estate qualifies here but then liquidity has to be compromised with and transactions cost can be exceedingly high.

Essential requirements for a Good Investment

Shortest time frame

An investment that moves like a rocket and makes you rich really fast like ‘a double in a year’ type. You could be a trader in derivatives but then safety of capital is out of question.

Investment Strategy

Develop a habit of small savings Save for a rainy day since future is uncertain Pay your liabilities as soon as possible Plan for your retirement Create a source for Passive Income eg.Rental

Income and Dividend income Invest in Tax Saving Investment schemes Spend less than what you earn Take person interest in Investment decisions

Investment Mix

Your investment portfolio should take care of

your : Current needs of your family Children educational needs Children’s Marriage Buying a House Pension during retirement.

Tips for Investing Safely and Rightly

Don’t make your investment decisions on hear say.

Understand risk factors linked to investments Review and track your investments

periodically. Buy Insurance for coverage and not tax

purposes. Take the help of an Investment Consultant

Investment Tips for Beginners

Start saving and investing early in life. Prepare an investment roadmap. Invest in a diversified portfolio. Buy insurance for coverage and not tax purposes. Invest in Stocks if you are prepared to take risks. Invest in Mutual Funds if you are prepared to take

moderate risks. Have an investment discipline.

Investment Options

Life Insurance Post Office Schemes Equity Shares Mutual Funds Company Deposits Bank Deposits Real Estate Gold and Silver

Equity Shares

Capital Appreciation Bonus Shares Annual Dividend Right Shares Can be pledged as a security Easy liquidity

Equity Shares - Problems

Changing Market Value. Uncertain government policies. No guarantee of profits. Need for constant monitoring Oversubscription of IPO’s Professional Guidance required for making

right investment in shares.

Life Insurance

Protects you and your family Promotes regular savings Tax Benefits Earn attractive bonus

Insurance – Do’s and Don'ts Keep your premiums affordable Choose a right plan Don’t over /under insure Pay premiums on time since partly paid policies are

not eligible for bonuses. Revive Lapsed policies Keep your spouse informed about your Insurance

coverage. File all the insurance receipts. Ensure you nominate your spouse. Consult a good insurance advisor.

Post Office Schemes - Options

Post Office Monthly Income Scheme National Savings Certificate Kisan Vikas Patra Public Provident Fund Senior Citizens Saving Schemes 5 year Recurring Deposit Time Deposits

Post Office Schemes – Features Backed by Government of India Tax Benefits Suitable for small investors Attractive rate of interest Liquidity

Mutual Funds

Professionally managed Diversification of risk Daily NAV High Liquidity Tax Concessions Freedom of Emotional attachment Automatic re-investment of Dividend Freedom from Monitoring and housekeeping

Bank Deposits

High Safety Low Interest High Liquidity Easy to manage

Bank Deposits - Suggestions

Keep Small Deposits – Less than One lakh Deposits should be in Joint names Renew Matured Deposits New Tax benefits from FY 2006-2007 –

Rs.1,00,000 under Section 80 C

Mutual Funds - Options

Equity Funds Bond Funds Balanced Funds Tax Exemption Funds Liquidity Funds

Mutual Funds - Dangers

No guaranteed return Risk of inefficient management

Real Estate

Agricultural Land Farmhouses Urban Land Residential Property

Real Estate -Advantages

Emotional Satisfaction Savings of Rent Huge Capital Appreciation Tax Incentives Easy availability of Home Loans

Tax Benefits for InvestmentsUnder Section 80 C – Rs.1,00,000

Provident Fund Public Provident Fund Life Insurance Pension Funds Infrastructure Bonds National Savings Certificate Kisan Vikas Patra Equity Linked Savings Scheme

A 5-point Investment Strategy

We present a 5-step investment strategy for the present scenario.

1. Invest in tax-saving funds

Tax-saving funds in their new (as a part of Section 80C) avatar have emerged as strong contenders from the equity-oriented funds segment.

A 5-point investment strategy

2. Invest in large cap funds

It would be a good time to get invested in funds of the large cap variety; maybe in small amounts and in select schemes but in line with your overall risk profile.

A 5-point investment strategy

3. Restructure your portfolio

Another opportunity such a scenario throws up is to dispose off poor quality investments. This would be a right time to realign the portfolio in sync with your risk-appetite. Booking a part of profits would also be a good idea if investment objectives have been achieved.

A 5-point investment strategy

4. Curb your enthusiasm

All the excitement emanating from the markets notwithstanding, investors must curb their enthusiasm. They should resist the temptation to make a quick buck and continue to invest in line with their risk profile.

A 5-point investment strategy

5. Get sound advice

Getting sound investment advice is pertinent especially in times like we are in today. A good investment advisor will help you successfully ride the surge in markets and emerge winner.

Conclusion

World of investments becoming more interesting, exciting and complicated.

Proliferation of various Investment schemes Investment Planning is a must for every

person.. Investment Planning thus involves Intelligent

analysis, judicious decision making and a strong sense of visualisation.