Financial Planning. Rajesh Ladda. Happy Retirement. for. Mobile:

Size: px

Start display at page:

Download "Financial Planning. Rajesh Ladda. Happy Retirement. for. Mobile:"

Carmella McKenzie
6 years ago
Views:

1 Financial Planning for Happy Retirement by Rajesh Ladda retireby49@gmail.com Mobile:

2 Agenda Investment Philosophy Types of Investments Risk Types of Insurance

3 Disclaimer The speaker is NISM-Series-XVII: Retirement Adviser Certified. The topics & the views shared in this presentation are his personal. Please understand the individual goals, risk appetite before investing into any financial products.

4 Investment Philosophy

Investment Philosophy Investment should be as regular as you take lunch &

Maximum 5 instalments every month) The More Conservative You Are In Your

5 Investment Philosophy Investment should be as regular as you take lunch & Dinner Don t try to invest in one go for tax planning i.e. beginning or end of the year Invest on monthly or weekly basis (Minimum 1 and Maximum 5 instalments every month) The More Conservative You Are In Your Investments Choices, The More You Need to Save! Types of Investment Lending money If you lend money little bit above the rate of inflation, you can t make much money Staying Invested For Long Term Can Increase Better Returns Using money to buy ownership in land or businesses / companies (Only ownership helps you to grow your money)

6 Inflation V/s Debt V/s Business (Equity) Rule of 72 How Rule of 72 works? Simple, divide 72 with Inflation or Interest Rate % (e.g. 72 / 6 = 12), amount will be doubled in 12 years! Inflation How Inflation impacts the cost of living? E.g. 1.In 2008, Engineering Fees was ~5 Lakhs 2.In 2018, it is ~10 Lakhs 3.With above equation,in 2028 it will be ~20 Lakhs. It is indicating that fees double every 10 years FD V/s Business income returns 1.Banker will borrow money from customers in the form of Fixed Deposits 7.25% 2.Banker will lend this Avg 11 to 12% to businessman so they can generate profit and return 7.25% back to lenders 3.Business has to generate 11-12% + 4 % (15 16%) to replay loans and generate profit from business, hence business returns will be in range of 15 to 16%

7 Inflation V/s Debt V/s Business (Equity) Below example shows how FD & Business income returns works Bank FD # Years FD Amount Maturity Amount Rate of Interest 7.25% Lakhs 20 Lakhs Education Fees (A) 20 Lakhs Life Style Upgrade from (B) 2 Lakhs Total Requirement (A+B) = C 22 Lakhs Tax out go on FD 3.1 Lakhs Net Amount in Hand (D) Lakhs Total Deficit / Surplus ( D - C) Lakhs Business Income Return % # Years Investment Amount Maturity Amount 14.5% Lakhs 40 Lakhs Education Fees (A) Life Style Upgrade from (B) Total Requirement (A+B) = C Tax out go 10 % (LTCG) from 1 st Apr, 2018 Net Amount in Hand (D) Total Deficit / Surplus (D - C) 20 Lakhs 2 Lakhs 22 Lakhs 3 Lakhs 37 Lakhs 15 Lakhs Moral of the story; FD is safe but it cannot beat the inflation and life style changes Business investments are risky but we can mitigate risk by staying in business investment for 8+ years and beat inflation & life style changes Here, I am not trying to say invest 100% in either option. There are universal formulae for every age group. We will see this in next slide In above case, if we have invested 50% each in FD & Business, still we could have made ~27 Lakhs. That means, we have generated 25% more than required amount (22 Lakhs) by distributing the risk

Investment Rules Formula 100 30 (Assume your Age is 30) = 70% should be invested in

X Age:30 Salary: 48000 including PF, NPS etc Various EMIs (Home, Auto, Personal Loan etc.

8 Investment Rules Formula (Assume your Age is 30) = 70% should be invested in Equity & rest 30% in Debt Case Study Mr. X Age:30 Salary: including PF, NPS etc Various EMIs (Home, Auto, Personal Loan etc..) Money Out flow of MR X should be EMI 40% In the form of various EMIs (Housing loan, Car loan etc.) Saving 30% Debt + Equity Day to Day Expenses Saving Distribution 30% Age = 30 Debt = 30% = 70 Equity = 70% Regular Expenses which you spend every month Day-to -- day expenses 30% 40% 30% Savings

9 Types of Investments

10 Types of Investments Debt Equity (Bonds) (Stocks / Mutual Funds )

11 What is a Bond (Debt)? Bonds are nothing but giving loans to a company You loan your money, and you get some interest paid You get back the principal with interest sometime in the future The risk is very low hence, the money you make is very little This is how bond works and you act as a Banker

Debt Investments Options If horizon is of 3 years and requirement is for

avoid as Interest earned is taxed FD Investment in Insurance Products

period), Interest earned is tax free Debt Mutual Funds / FMP Good for

Need to invest for 1-2 years Liquid Funds If time frame is not known / <

12 Debt Investments Options If horizon is of 3 years and requirement is for specific cause (To Buy home, car) RD One time Investment If possible avoid as Interest earned is taxed FD Investment in Insurance Products Try to Avoid EPF / VPF / PPF If horizon is long term (Longer lock in period), Interest earned is tax free Debt Mutual Funds / FMP Good for one time investment. Need to invest for 1-2 years Liquid Funds If time frame is not known / < 6 months / emergency corpus Gold / Gold ETF / Gold Bonds If required in future to convert to Jewelry else invest only 10% of total savings

13 Personal View If you are not very good at equity analysis, Mutual funds are safer than owning shares (stocks) of individual companies because here not all your eggs are in one basket and managed by Financial experts and professionals Equity Investment Options You have the opportunity to make more money if you are very good at stock analysis 6 Expense ratio is less than 1% The risk is higher If shares are sold after 366 days, the total profit is tax ed at 10% else 15% Stocks 4 If the company is underperforming and you sell your shares, you will be at loss Stocks are nothing but buying parts of the company 2 You become a silent owner of a company. 3 If the company makes money (a profit) and you sell your shares at higher than your purchase cost, you make money Exit and entry loads are applicable from case to case ( 1-4 %) 6 Expense ratio is between 2-3% per annum You have the opportunity to make more money Taxation rule is same as equity for equity based mutual funds Equity Diversified Mutual Funds 4 The risk is higher Equity based mutual funds are also buying parts of the companies 2 You become a silent owner of many companies 3 Stocks are picked by financial professionals based on the research, experience and under guidelines of SEBI

14 MutualFunds Types of Mutual funds Monthlyincome plan(mip) - Low Risk/Low Returns Fixed Maturity Plan (FMP) - Low Risk/Low Returns Equity Diversified - High Risk/ High Returns (Large Cap, Blue Chip, Small & Medium) ELSS - Invest only if require for 80C (Tax Saving Purpose) else avoid Thematic Funds - High Risk/ Avg Returns - Avoid Gold Mutual Funds - Low Risk/Low Returns Not More than 10-12% of Total Portfolio New Fund Offer (NFO) - Low Risk/Low Returns- Avoid Hybrid/Balanced Funds - Avg Risk/Avg - Above Avg Returns Debt Funds - Low Risk/Low Returns Debt Fund : Gilt Short Term - Low Risk/Low Returns Index Fund - Avg Risk / High to Avg Returns Funds Of Funds - Avoid Dividend Options Dividend Payout- Avoid Dividend Re-Investment - Avoid Growth Plan & Direct Plan

15 National Pension System (NPS) Pros 80CCD (2) - Only Product to save 50,000/- Eligible for both Tier 1 or Tier 2 account holders For Tier 1 account holders additional tax benefits of 10% of basic pay (e.g. If basic is 500,000/-, additional 50,000/- amount is eligible for Tax rebate Cons Investment Flexibility Maximum 50% is allowed in equity and only in Large caps (Top 200 companies) Entire amount is not Tax Free 20% of withdrawal is taxed as per individual tax bracket Annuity 40% of corpus need to be reserved to buy annuity, in general annuity returns are less than Fixed Deposits No assured Guaranteed returns

16 Real Estate Investment Option

17 Portfolio Vision (Age of 30) For 30 year old with standard risk

18 Avg. Annual Returns -Various Categories Years compared are from 1995 till 2015 Taxation is considered at 30% Values are rounded to the nearest Integer

19 Still Confused?

20 Where should I invest and how? Pre requisite to Invest into Mutual Funds? o Know Your Customer (KYC) should be verified and Savings bank account along with Pan card Systematic Investment plan (SIP) What is SIP? o SIP is route to invest into Mutual Funds & Equity on regular defined interval How does SIP help? o It helps in mitigating risk and ensure good returns in long term (7-10 years) What is right amount to invest in SIP? o You can invest small amount, plan and decide how much you need for your future needs How many SIP s I should take? o Maximum 5, more than that may be difficult to mange and not good for long term What should be the period? o More than 5 years, but review it after every year for performance Can I select all funds from same Fund House o No, Minimum 3 and maximum 5 Fund houses

21 When to Withdraw 01 If the target is achieved: withdraw and move the proceeds to debt / safe funds 02 For long term goals: withdraw 2-3 years prior to the targeted withdrawal point if invested in equities 03 Withdraw through Systematic Withdrawal Plan (SWP) and move to debt funds

22 Types of Insurance

23 Insurance : Term Insurance What is term Insurance? Why should I cover? How much cover should I take? Zero returns with Good amount of life cover If you are 30 Years old - You can get a life cover worth 1 Crore for less than 12,000/- per annum for 30 years. Cover your family from loss of Income caused due to loss of earning member Liabilities (Home Loan, Personal Loan ) times of your Annual Income

Insurance : Health Insurance Check some of questions before you take any policy I am covered : through my

Either they are not sufficient and it is difficult to get Health cover after certain age What all critical

? If I already have a claim, will my premium get increased? Does I will be co-payer after certain age?

24 Insurance : Health Insurance Check some of questions before you take any policy I am covered : through my employer still why should I get health cover? Either they are not sufficient and it is difficult to get Health cover after certain age What all critical diseases are excluded? Is there any Cap on Room / surgery etc.? If I already have a claim, will my premium get increased? Does I will be co-payer after certain age? After how many years critical diseases will be covered? Existing diseases will be covered after how many years? Is it mandatory to be hospitalized for 24hours for claims? For family floater policy, in case of demise of proposer, will policy remain active?

25 Our Services Services Description Duration Fees Personal Financial Counselling/ Planning# Existing Financial Portfolio Review Personal Tax Planning Personal counselling to help individuals to plan their retirement. We recommend right mix of financial products to meet individuals needs in creating right portfolio Review of existing financial products (e.g. Mutual Funds, Debt products, Insurance policies, real estate and other financial products) and provide alternatives if required. Personal tax planning to help reduce tax burden and convert the savings to grow portfolio with low risk. 2 Hours 2500/- 1 Hour 1500/- 1 Hour 1500/- Fundamental Analysis# A detailed session on fundamental Analysis of stocks/stock market 1 Hour 1500/- Weekend Investing# A detailed session on technical Analysis of stocks/stock market to generate regular monthly income 1 Hour 2000/- # This can be arranged as a group session or one-on-one session (For group session minimum 10 and maximum 40 participants)

26 Investment Tips by Great WB

27 Let s Plan Rajesh Ladda retireby49@gmail.com Mobile:

The ABC of Mutual Funds Know the basics of Mutual Funds for long term wealth creation. #WisewithEdelweiss An investor education initiative

The ABC of Mutual Funds Know the basics of Mutual Funds for long term wealth creation Why does one need to invest Life s uncertainties Fulfill aspirations Beat Inflation Family welfare Raise standard of