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Volume - 21 Issue - 01 May 2019

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“It's not your salary that makes you rich, it's your spending

habits.” - Charles A Jaffe – American chess master.

If I must sum the money cycle for most of the people in 3

words then it would be Earn, Spend and Save. Think about

it. You already have spends planned even before that

salary is credited to your account. How would things look if

you could change the cycle to Earn, Save and Spend.

It will not be easy!

But how about inculcating a regular disciplined approach

towards savings and investing. It needs a small step to

work towards building future. To achieve any goal in life,

one needs to be disciplined and patient. It is applicable for

achieving your financial goals as well.

What if you can automate this disciplined habit? How easy

it would be if you don't have to push yourself to save and

invest. What if a fixed sum of money is automatically

deducted from your account when the salary is credited?

Life would be a lot simpler then!

This is where Systematic Investment Plans (SIPs) steps in.

They are one of the simplest and easiest mode of

investments. One can invest a pre-determined sum of

money at regular intervals (can be monthly, quarterly, etc.)

for a specified period keeping in mind the goal to be

achieved.

Investing through SIP is taking the first step towards

potential wealth creation. The second important step is to

ensure that you are regular with your SIP commitments.

Through SIPs you can invest your savings whether small

or big and allow it to grow. As the money is invested

regularly in mutual funds schemes, you automatically

develop a disciplined investing habit.

SIPs involve making regular investments in the mutual

fund scheme of your choice. Units of the mutual funds

schemes are allotted based on the amount invested,

thereby allowing you to ride through the ups and downs of

the markets with great ease. As the markets go up, you

earn fewer units and when there is a decline,

comparatively more units are allocated. As a result, you

continue making investments over a period (regardless of

the market situations), and timing the market becomes

unnecessary. Once you have registered for a SIP, skipping

or missing is not a risk that you run.

And you could achieve all of this if you register for SIP on

the salary day!

Remember – tomorrow never comes – If you wish to

achieve something big in life, do it today – Now is the time.

You can overcome investment challenges by setting your

'Salary Day' as your 'SIP Day'. By doing so, you will neither

miss or skip your SIP investment nor do you run the risk of

having spent your money even before you planned to

save.

One of the biggest advantage is that you are investing in

yourself, investing for your future self through SIPs! (Source: SBI Mutual Fund)

FINANCIAL CONSULTANTS PRIVATE LIMITED

(Source: UTI Mutual Fund)

Mutual Fund investment are subject to market risks, read all scheme related documents carefully.

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Reaching 40? You can still startplanning your retirement

May 2019 (2)

A galaxy of thoughts invades our mind when it comes to retirement planning. The primary thought that dominates our mind is our assumption to work for the lifetime, which actually an excuse to postpone the matter. But when we start realizing the importance of retirement planning, we might have been surviving on the edge.

But still, better late than never, and you are never late for planning your retirement.

A retirement planning is all about taking the right decision at right time by identifying suitable investment opportunities right for decision making, choosing an appropriate platform for execution and monitoring the progress towards the goal.

Set a priority

Never make your retirement planning as an option. Rather make it a priority. Don't forget, your retirement planning ensures the lifestyle you are enjoying now. So, ensure that your retirements are in place to enjoy your lifestyle in your upcoming years of second childhood.

Draw a path

The planning process for a good retired life is not a one-time affair. This goal needs to be upgraded based on your improvised lifestyle, elements of contingencies, consideration of health factor, the expectancy of life etc. Remember that you have to draw a plan not only to your expected life but considering the dependency required by your spouse in your absence. A clearly drawn path will help you understand critical milestones and decide upon the time to retirement, the decision to work after retirement and plan to leave an estate to your dear ones.

Go steady with step-up approach

Time is of the essence when it comes to retirement planning. Define a contribution that you wish to make for your retirement kitty. The end target may be higher than expected catch up rate with your current savings. To overcome this, you may have to increase your contribution significantly to make up for lost time. Also, understand that your savings will keep increasing with the increase in your income. Choose to take a step-up approach where you define a percentage or fixed amount to be increased each year to catch up with the desired corpus for your retirement. This is a disciplined way to cover up for the lost time.

Demanding transparency

Retirement planning seems to be a tedious exercise that demands a lot of transparency in terms of defining the corpus to be accumulated, phases of your investments to be made to achieve this corpus till your earning age, identifying the periodical spends on the retirement, knowing where to invest and monitoring the investments on a continuous basis. It is not a simple plan to be drawn on paper but a serious activity that needs to be done with the help of experts or smartly built systems with appropriate algorithms. Transparency on the numbers and a clear cash flow keeps you control of your entire plan throughout the journey.

Equity is new annuity

Often retirement planning is confused with a goal where one has to invest in conservative instruments like fixed deposits, pension funds etc. It is a trade-off between the risk and returns when it comes to choosing the correct investment vehicle to plan for the retirement goal. Even if you are in your 40's, you still have more than 10 years to retire. This is considerably a long period where you must look forward to reaping the benefits of market upswing and gain superior returns by investing in equity linked instruments.

The question is how do you do it? It is simple!

Phase 1: Keep investing the required amount in few well-diversified portfolio of mutual funds, suitable to your risk appetite, through a systematic investment plan. This will ensure you better returns over any other traditional investments. Keep monitoring your investments on a regular basis to have an optimized portfolio.

Phase 2: On retirement, you may continue your investments in the same set of funds. At the same time identify the funds you require for the expenses each month and initiate a systematic withdrawal plan (SWP) from these investments.

This combination will ensure that the growth of your capital is faster and you have all the flexibility to pull out funds as per your requirement.

Health and contingency

While you secure your lifestyle with investments for your golden years, count on taking a good medical plan that covers all the potential health threats post your retirement. Also provision for contingency fund that can take care of your financial well-being in a case of any extreme events.

You are never late to plan for your golden years and the best time to do so is now!

In your 30s & 40s, but still haven't planned financially for your retirement? You can still begin. Here is how.

8.00% 12.00% 15.00%

Investments are considered to have been made on the First Business day of the month. The above is for illustrative purposes only and does not indicate the performance of any security or investments. Rates of return are assumed for the purpose of illustration and the actual returns will vary based on the nature of instruments/funds and market conditions.

Mutual Fund investment are subject to market risks, read all scheme related documents carefully.

SABAR KA FAL

Be Patient With SIPs

It takes about 5-10

years for a mango

tree to finally bear the

fruit we love so

much. Similarly, the

key to wealth

creation is staying

invested for as long

as possible. While

you can start and

stop your SIP at any

time, you should stay

invested for as long

as you can.

(Source: Money control)

May 2019 (3)

Use goal-based investing to

achieve your lifetime goals

Investors can follow a six-step process for goal-based investing.

Goal investing process

6 5 4321 List financial goals

Classify & prioritise goals on a time horizon

Quantify future cost of each goal & current

fnancial status

Allocate investments & create goal-specific

portfolios

Assess risk profile of each goal

Periodically monitor investments

Step 2 :He must then classify them in terms of the timeframe in which he wishes to achieve them besides identifying which goals are priorities and which, aspirations. Buying an iPhone may be an aspiration but funding a child's education, a priority.

Step 3 : The third step is to quantify the future cost of each goal while evaluating his existing financial status. For instance, a house that costs Rs 50 lakh today may cost the investor Rs 70 lakh after five years (assuming a 7% increase in home values a year). Accordingly, he will have to invest enough money keeping this future cost in mind to build a sufficient corpus for the down payment on a housing loan after five years. The important thing is to never underestimate inflation. By classifying his goals into short-, medium- and long-term ones and by determining their future cost and also preparing a cash flow statement of his income, expenses and savings, the investor can determine how much time he needs to achieve each goal and hence, how much he needs to invest and how much risk he can afford to take.

Step 1 : The first step is to list out all the individual's financial goals.

Every individual has multiple goals that he works towards in life such as taking a vacation abroad, or buying a car or house, or saving for a child's education or building a retirement fund. However, in order to fulfill these needs and aspirations, he needs to make his money work in sync with these goals. This is possible by adopting goal-based investing. Instead of following the traditional approach of first creating an investment portfolio and then using the returns from it to meet goals as they arise, it is more effective to first identify an investor's goals at different stages of his life and to then fund and invest for each goal separately based on the time horizon and risk profile. By setting tangible targets instead of saving blindly, goal-based investing motivates individuals to invest for their goals. It empowers them to realistically assess their current financial situation and plan their investments more precisely so that they start saving early, avoid debt and also match their asset allocation to the goal's time horizon and therefore, take the optimum amount of risk.

Goal based investing

Most of us make investments with a single-minded focus on maximising returns. This often leads to investment mistakes like trying to time the market. Fear and greed become the driving forces so that when markets turn volatile, investors tend to pull out their money or they typically increase their investments when the markets are already over-heated. This results in ill-planned and directionless investing. Investors should, instead, follow the path of goal-based investing by first identifying and quantifying their short-, medium- and long-term financial goals and then tailoring their investments to meet these goals, based on their risk appetite and asset allocation.

Arun is 30 years old and works in a manufacturing company. He has identified his goals (see below) and has a monthly savings of Rs ~ 36000 today which he is planning to invest to achieve those goals. He can accordingly bucket his savings into four goal-specific portfolios based on his time horizon and risk appetite, as below.

Case study

Goal Time period toachieve the goal

Amount required atend of the period

Action plan

Car3 years

Short-term` 5 lakhs

Monthly SIP of ~` 11200 withannual top-up of 10%

Foreignvacation

7 yearsMedium-term

` 10 lakhsMonthly SIP of ~` 6300 with

annual top-up of 10%

Home12 years

Medum to long term ` 75 lakhsMonthly SIP of ~` 15500 with

annual top-up of 10%

Retirement30 years

Long-term` 3 crore

Monthly SIP of ~` 2750 withannual top-up of 10%

For illustration purposes only.100% debt represented by CRISIL Short-Term Debt Fund Index. 75% debt and 25% equity represented by CRISIL Hybrid 75+25-Conservative Index. 50% debt and 50% equity represented by CRISIL Hybrid 50+50-Moderate Index. 25% debt & 75% equity represented by CRISIL Hybrid 25+75-Aggressive Index. Returns considered for the above calculation are based on five year returns as of January 2018 of all the above indices; CRISIL Short-Term Debt Fund Index (8.50% CAGR), CRISIL Hybrid 75+25-Conservative

Index (10.50% CAGR), CRISIL Hybrid 50+50-Moderate Index (12% CAGR) & CRISIL Hybrid 75+25-Aggressive Index (14% CAGR).

Asset allocationDebt Equity

100%

25%

75%

25%

75%

50%50%

Step 4 : This takes him to the fourth step of measuring his risk profile, which will vary based on each goal. For instance, if a young marketing executive needs to save money to fund an MBA degree after two years, he will follow a conservative approach. His priority will be to ensure the safety of his capital by investing into the debt asset class and not take undue risks. On the other hand, if a worker only retires after 30 years, he can afford to take some risks by investing in equities for the long-term to build his retirement kitty. In addition, his risk-taking capacity will also depend on factors like his age, income, expenses and financial responsibilities.

Step 5 : Based on his risk profile comes the fifth step or action plan of identifying the investment avenues and allocating his disposable income to different asset classes. Investors can turn to mutual funds here and choose from a variety of debt, equity and hybrid mutual fund options to create goal-specific portfolios with appropriately conservative, moderately conservative, moderate, moderately aggressive or aggressive investment styles. They must take a realistic view on the returns expectation from each asset class. And they can also step-up their investments each year in line with the growth in their income.

Step 6 :As a sixth step, the investor must also regularly monitor his investments to ensure he is on track to achieve his financial goals. This will also help him make any corrections, if required. He must also realise that just beating the benchmark on returns will not ensure he meets his goals but that he has to invest the right amount and ensure it makes appropriate returns to reach his target.

Common mistakes in goal planning

There's many a slip between the cup and lip, and Arun must also beware of some common mistakes. For instance, it would be risky for Arun to pick the wrong asset class and invest in equities to buy his car

since the market may be in a bear phase after three years. In this case, he may have to forego or postpone his goal. On the other hand, he has 30 years to build his retirement fund. So, he can take significant risks

as the portfolio above shows. Had he picked the wrong asset class and conservatively invested in only, say, debt funds, his retirement corpus would have only grown to Rs 1.35 crore in 30 years instead of Rs 3

crore with an aggressive portfolio (equity 75% and debt 25%). Arun may also think he has enough time to retire and postpone his retirement planning. But this will reduce the power of compounding. A delay of

even five years means that he will have to start with a monthly SIP of Rs 6,000 five year later as compared with an SIP of Rs 2,750 a month today (assuming an annual top-up of 10% with the rise in income).

He also needs to continuously monitor his progress to ensure he reaches his target. This also means following a glide path towards his target. So, as he nears retirement, he should ensure the safety of his corpus

by switching his investments to safer assets.

To sum up

Goal-based investing helps investors to achieve their financial goals by mapping their investments to their goals keeping in mind their time horizon, risk profile, inflation and other factors such as their income,

age and financial responsibilities. Investors can bucket their savings in goal-specific portfolios and regularly monitor their progress to ensure they meet their ?nancial targets and fulfill their needs and

aspirations. Mutual funds offer a variety of funds across asset classes that investors can use to achieve their financial goals.

Mutual Fund investment are subject to market risks, read all scheme related documents carefully. (Source: Mirae Asset Mutual Fund)

May 2019 (4)

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(Source: Edelweiss Mutual Fund)

Vijay Financial Introducing New Mobile App

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Do you want to leave your wealth and let your loved one’s fight with each other to get their shares? Nobody wants! A WILL is a very sensitive topic to discuss with someone. We are not very comfortable in discussing a WILL. We normally misunderstand that if someone tells us to make a will, we think that indirectly that our end is nearing or someone is looking our property or our assets. Normally we think that all our investments are

nominated and it will be passed to them legally without any problems then it is very wrong. We need to create a WILL to distribute our wealth the way we want to distribute. Nomination is not the final answer to this.Why is it so important to make a Will?WILL should be your first step in your financial plan. If you want to leave your wealth to different members of your family then you should prepare your WILL today, not later. If you die without preparing a WILL, then your wealth will be distributed as per rules. Common misunderstanding is the assets are automatically passed on to the spouse after our death, but children and sometimes even relatives can stake a claim to the property. Laws of inheritance and succession are complicated in nature.You have to consider one important thing is the inconvenience caused to your family members. In case of any dispute, then your family members have to produce the proof of their relationship and have to go to lawyers and spend money, energy, and time. If you have your WILL then this will save them a lot of problems.How to make a WILL.First you have to declare that you are making this WILL in your full sense and without any kind of pressure.A person can prepare a WILL in any language. He can write the same in his handwriting and it is not necessary that the same should be typewritten. On the question of witness, one may obtain the signature of his neighbor, or his bankers or the lawyer who has prepared the WILL at his instructions. A distant relation can also witness the same. It is not necessary that it should be signed in a court of law or before any government officer. However, it is better that a government official witnesses the execution of the WILL.The next step is to provide list of items and their current values, like house, land, bank fixed deposits, postal investments, mutual funds, share certificates owned by you. Also please remember to mention who should get what assets and in what proportion after your death. In case if you are giving your assets to a minor (grandson / granddaughter) make sure you appoint a custodian of your assets till the minor reaches an adult age. You also mention where all these documents are stored by you. In all probability, these are in your bank safe deposit locker. Make sure you communicate it to the executor of the Will or your family members.When you complete writing your will, you must sign the WILL very carefully in presence of at least two independent witnesses, who have to sign after your signature, certifying that you have signed the WILL in their presence. The date and place also must be indicated clearly at the bottom of the WILL. Make sure you and the witnesses sign all the pages of the will.

They only certify that you yourself have signed the will in their presence and are not a party in making the

WILL. The envelope has to be sealed after completing all the formalities and the seal must bear your

signature and the date of sealing. A Person who has prepared the WILL can change it at any time during his life time. However, make sure

to mention that this WILL is the latest and supersedes all earlier WILLS. The person, who makes a WILL, is known as “Testator” and continues to remain the absolute owner of

the property and assets during his life time. It is only after his death does the transfer of assets take place.

No person named in the WILL can acquire any right, title, or interest in the property during the life-time of

the Testator. The registration is not compulsory. It is totally optional. But the document, if registered with

the appropriate authority shall have a better evidentiary value.No Gift Tax is attracted on the properties passing under a WILL, irrespective of the value. No. Stamp duty

is payable irrespective of the value of the property. Stamp duty is attracted on the transfer of the property

but not on the inheritance of property. No Stamp duty is payable on the WILL executed irrespective of the

value of the property. Stamp duty is only attracted on the probate proceedings or on proceedings for

letters of Administration for obtaining judicial proof of such WILL but not on the inheritance of the property

there under.It is not legally required to get the WILL executed in a court of law in presence of a judicial magistrate in

India. However, if you wish, the will can be executed in presence of magistrate or the public notary.

YOU AND YOUR WILL

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The LARGEST RETAIL FINANCIAL PRODUCTS DISTRIBUTORS IN PUNE. We will come to your house with a world of financial products, give ourunbiased

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