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Investing early
 

Investing early

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    Investing early Investing early Presentation Transcript

    • Financial Planning
    • Fundamentals don’t change
    • Being rich = Money + time
    • Salary 50000Investment 5000Rate of return 14%Years 30Total investment 18,00,000Portfolio value 27,785,278
    • 0 Graph 0 000 0₹  30 0 0 000 0₹  20 000 0 00₹  10 ₹ 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
    • Year Your age Total saved excluding interest Interest earned Total saved including interest 0 25 INR 0 INR 0 INR 0 1 26 INR 60,000 INR 4,550 INR 64,550 2 27 INR 120,000 INR 18,137 INR 138,137 3 28 INR 180,000 INR 42,026 INR 222,026 4 29 INR 240,000 INR 77,660 INR 317,660 5 30 INR 300,000 INR 126,682 INR 426,682 6 31 INR 360,000 INR 190,968 INR 550,968 7 32 INR 420,000 INR 272,653 INR 692,653 8 33 INR 480,000 INR 374,175 INR 854,175 9 34 INR 540,000 INR 498,309 INR 1,038,309 10 35 INR 600,000 INR 648,222 INR 1,248,222 11 36 INR 660,000 INR 827,524 INR 1,487,524 12 37 INR 720,000 INR 1,040,327 INR 1,760,327 13 38 INR 780,000 INR 1,291,323 INR 2,071,323 14 39 INR 840,000 INR 1,585,858 INR 2,425,858 15 40 INR 900,000 INR 1,930,028 INR 2,830,028 16 41 INR 960,000 INR 2,330,782 INR 3,290,782 17 42 INR 1,020,000 INR 2,796,041 INR 3,816,041 18 43 INR 1,080,000 INR 3,334,837 INR 4,414,837 19 44 INR 1,140,000 INR 3,957,464 INR 5,097,464 20 45 INR 1,200,000 INR 4,675,659 INR 5,875,659 21 46 INR 1,260,000 INR 5,502,801 INR 6,762,801 22 47 INR 1,320,000 INR 6,454,143 INR 7,774,143 23 48 INR 1,380,000 INR 7,547,073 INR 8,927,073 24 49 INR 1,440,000 INR 8,801,414 INR 10,241,414 25 50 INR 1,500,000 INR 10,239,762 INR 11,739,762 26 51 INR 1,560,000 INR 11,887,878 INR 13,447,878 27 52 INR 1,620,000 INR 13,775,131 INR 15,395,131 28 53 INR 1,680,000 INR 15,935,000 INR 17,615,000 29 54 INR 1,740,000 INR 18,405,649 INR 20,145,649 30 55 INR 1,800,000 INR 21,230,590 INR 23,030,590
    • “Compound interest is the 8th wonder of the world” “He who understands it, earns it ... he who doesnt ... pays it.”
    • Salary 50000Investment 5000Rate of return 14%Years 20Total investment 12,00,000Portfolio value 65,81,731
    • Salary 50000Investment 5000Rate of return 14%Years 10Total investment 6,00,000Portfolio value 13,10,456
    • Investing Early - example 1 Rs. 3246 p.m. @ 12% vijay 1 crore 30 yrs 11.7 lacs Rs. 10871 p.m. @ 12% Ajay 1 crore Its way too early 20 yrs 26 lacs for me to save Rs. 44636 p.m. @ 12%Sanjay 1 crore Its way too early I will save when 10 yrs 26 lacs for me to save I have less expenses
    • Investing Early - example 2 Rs. 1000 @ 12%vijay 36 lacs 30 yrs 3.6 lacs Rs. 1500 @ 12%Ajay 54 lacs 10 yrs 20 yrs 1.8 lacs
    • Investing Early - example 3 Rs. X for 30 years at 12% 86%15yrs 14%
    • Investing early lowers your burden later
    • Investing EarlyNo. of years ofcontribution at the end % of corpus generated Total corpusof 30 yr. period 0 100.0% 1.76 crores 5 97.6% 1.72 crores 10 93.4% 1.65 crores 15 85.7% 1.51 crores 20 71.7% 1.26 crores 25 46.2% 0.81 crores Rs. 5000 @ 12% It doesn’t matter much if you don’t invest in later years
    • Investing Early - example 4 26 yrs old 30 yrs 3.5 crore 500001 5000 15000 10 yrs 10 yrs 10 yrs 100002 30 yrs 14000 no investment3 10 yrs 20 yrs
    • Investing Earlyinvestments made in early years contribute themost
    • Investing EarlyYears without Amount required per % increase in investmentcontribution at the end month to reach the same corpusof tenure 0 5000 0.00% 5 5120 2.41% 10 5350 7.01% 15 5830 16.6% 20 6980 39.6% 25 10830 116% 29 43100 762% Save a few more bucks early
    • SIP of Rs. 1000 p.m.Last few years contribute the mostChoice of investment asset matters a lot
    • How to start investing?
    • life insurance≠investment
    • ISSUES WITH ULIPs
    • AVOID THESEULIPsWhole life insurance plansMoney back insurance plansPension/retirement plansChild future plansAny insurance cum investment product
    • online term insurance
    • Things to considerCurrent liabilitiesFuture goals of your dependentsprovide regular day-to-day expenses
    • tips while buyingbuy before your next birthdaytry to diversifybuy early in life for longer tenure
    • BEST ASSET CLASS?
    • INVESTINGUltra-short Time Horizon (< 1 Year)- Cash on Hand- Bank Savings Accounts- Liquid & Ultra-short term debt fundsShort Time Horizon ( 1- 3 Years)- Short term Debt Mutual Funds- Bank Fixed DepositsMedium Time Horizon (3-5 Years)- Bank Fixed Deposits- Debt Mutual Funds- Medium term Gilt FundsLong Time Horizon (> 5 Years)- Gold- Equity (Stocks)- Equity Mutual Funds- Real Estate
    • Different Asset Classes Asset type Returns post inflation Taxable Pros ConsCash -6% No Liquid. Safe No growthSaving a/c -2 to 0% Above 10,000 Liquid. Safe. No growth. TaxableFixed deposit 1 - 3% Above 10,000 Hedge against inflation. Safe Lock-in. Taxable 7 years lock-in, partialPPF 2.6% No Extremely safe withdrawal 8.7 or 6 years lock-in.KVP or NSC 2.16% No Safe OfflineDebt MFs 1-3% Yes Liquid. Better than FD. No growth. Taxable As good as liquid. Safe. Non Returns only in longGold -1 to 4% No. Gold ETF - Yes taxable. term Non-liquid. Fixed.Real estate 6-9% Yes High returns. Maintenance costs. Taxes. Liquid. Best for long termEquity 8-9% > 1 yr. - No wealth creation. Unsafe in short run
    • Is Equity really risky?
    • When you invest in Equity, you are a partner
    • Learning from history
    • Learning from history
    • Learning from history
    • Learning from historyInvestment 1 yr 2 yrs 3 yrs 5 yrs 7 yrs 10 yrs 15 yrstenureTotal positive 22 20 24 23 23 21 16instancesTotal 30 29 28 26 24 21 16instance% positive 73% 69% 86% 88% 96% 100% 100%instance
    • Learning from history100.00%75.00%50.00%25.00% 0% 1 yr 2 yrs 3 yrs 5 yrs 7 yrs 10 yrs 15 yrs % positive instance
    • Learning from history
    • Learning from historyInvestment 1 yr 2 yrs 3 yrs 5 yrs 7 yrs 10 yrs 15 yrstenureBest return 101% 59% 51% 43% 37% 31% 26%Worst return -51% -22% -14% -2% -3% 3% 7%
    • Learning from history150.0%112.5%75.0%37.5% 0%-37.5%-75.0% 1 yr 2 yrs 3 yrs 5 yrs 7 yrs 10 yrs 15 yrs Best return Worst return
    • Learning from historyTenure 1 yr 2 yrs 3 yrs 5 yrs 7 yrs 10 yrs 15 yrsBest return 101% 59% 51% 43% 37% 31% 26%Average of 5 best 85% 52% 46% 39% 30% 27% 22%Worst return -51% -22% -14% -2% -3% 3% 7%Average of 5 worst -27% -13% -3% 1% 3% 6% 12%
    • Equity is risky in the short run and quite safe in the long run
    • Debt is safe in the short run and quite risky in the long run
    • Real estate vs. Equity
    • Misconceptions related to Real estateReal estate prices always riseIt gives better returns than any other form of asset
    • Reality vs. EquityLong term real estate returns are 14% CAGR(valid for Mumbai).If you add rental yield of 2-3%, then the total returns are 16-17% CAGR. 20% tax after indexationThe Sensex returned 18% from base 100 in 1978.If you add dividend yield of 1.5%, then you get 19.5% CAGR 5000 p.m. 17% 19.5% 20 yrs 84 lacs 1.44 cr 30 yrs 4.2 cr 10.2 cr
    • Investing in equity
    • Should you invest in stocks directly?
    • How to go about investing in equity?Invest in Equity MFsInvest via SIPDon’t be a MF collector
    • Investing in MFs 2 Large cap funds 1 Large + Mid cap fund 1 Equity tax planning 1 debt fund Top stock Top sector Top 3 sector Large cap + Funds Top 10 stocks Large Cap exposure exposure exposure Mid cap 96% money in 85% in 492 funds 5.52% 24.5% 52.8% 37% 74 stocks stocks 97% money in 81% in 595 funds 4.67% 21.07% 46% 34% 111 stocks stocks 98% money in 80% in 6010 funds 5.7% 21% 46.5% 37% 131 stocks stocks
    • Choosing an MFvalueresearchonline.com
    • Expense ratio is important in long run Rs. 100,000 at 12%
    • Buying an MF- KYC compliance (PAN, POI, POA)- fundsindia.com- Approach the AMC- Open a Demat account
    • Few tips about saving and investingStart with goals in mind Short term - upgrade to sedan in 2 years Long term - start a restaurant after 20 yearsSave first spend laterAutomate
    • Automate 30% 10% Future goals Salary account Retirement Setup SIP in mutual fundGoal 1 Goal 2 60% Goal 3 Expense account All your regular expenses
    • Don’tsGet into wrong products for Tax savingKeep paying for endowment/ULIPsNot have emergency fundsBuy stocks on the basis of tips given by othersShop for things you don’t need
    • If you were to take away single thing from this presentationStart investing early
    • Two sites you should refer to:www.jagoinvestor.com/archiveswww.investmentyogi.comExample taken from this bookJagoinvestor - Changing your relationship with money