Wealth management session 1


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Session 1 of the course on Wealth management in Christ University Institute of MBA -2010

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Wealth management session 1

  1. 1. Welcome to the Wealth management course <br />S G Raja Sekharan<br />
  2. 2.
  3. 3. Overview of Financial planning and Wealth management<br />Session 1<br />
  4. 4. You must learn from experience, <br />
  5. 5. You must learn from experience, but you must learn from other people’s experience when you can –warren buffet.<br />
  6. 6.
  7. 7. 7<br />A few financial terms redefined<br />Assets<br />Accounting definition -A resource having economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit. <br />Our definition – Any item that produces an income ( rental property, stocks, bond etc)<br />Liability<br />Accounting definition – A company's legal debts or obligations that arise during the course of business operations. These are settled over time through the transfer of economic benefits including money, goods or services. <br />Our definition – Any item that produces expense ( ones own house or car)<br />
  8. 8. 8<br />Definition of being financially independent<br />Savings = Assets<br />Returnsfrom assets<br />You<br />Cash outflow /<br />Monthly expenses<br />Monthly Cash Inflow<br />Financial independence is achieved when your monthly income from assets <br />exceeds your monthly expenses<br />Once you reach this – your trajectory is on the way up – beyond your imagination<br />
  9. 9. 9<br />Steps to become financially independent<br />Know your Cash outflows<br />Know your cash inflows<br />Have a plan for building assets that yield a high income<br />Monitor the situation monthly<br />It is important how much you make and how much you save – but more important is what is the rate of return on your savings.<br />
  10. 10. 10<br />what is the rate of return on your savings<br />Savings = Assets<br />Returnsfrom assets<br />You<br />Cash outflow /<br />Monthly expenses<br />Monthly Cash Inflow<br />Returns from assets >= Monthly expenses <br />
  11. 11. Let us start with RAJ and PREETI<br />Raj is 25 years old – he is an MBA from CUIM<br />He has a salary of 6 lacs per annum<br />He is getting married next year and his fiancé Preeti too has a salary of Rs 6 lacs per annum<br />They would be a DINK family and plan to be one for few years<br />They plan to have two kids post that period<br />She believes that kids are more important than career and hence will leave her career when she has kids.<br />
  12. 12. Let us start with RAJ and PREETI<br />But she plans to come back to contribute to society later when kids are in college<br />Both of them love to travel and want to see and experience the world <br />They want become financially independent as early as possible<br />Let us make a financial plan for them<br />
  13. 13. Cash flow plan<br />Cash inflows –<br />Cash outflows - <br />
  14. 14. Cash flow plan<br />Cash inflows –<br />Salary<br />Bonus /commissions<br />Investment income<br />Other income<br />Cash outflows - <br />
  15. 15. Cash flow plan<br />Cash inflows –<br />Cash outflows – <br />House running (food and utilities)<br />House rent<br />Transportation<br />Medical<br />Clothing<br />Education<br />Recreation<br />Outstation holidays<br />Household assets<br />Maintenance expenses<br />Other expenses<br /><ul><li>Large assets
  16. 16. EMI’s</li></li></ul><li>Cash flow plan<br />Based on current cash inflows and outflows -we can see the current savings <br />For coming years, we will assume inflation % and salary hike % and use the same logic for seeing the savings<br />Based on these assumptions, we will create a cash flow for the next 50 years for this couple<br />
  17. 17. It is not necessary to do extraordinary things to get extraordinary results.<br />
  18. 18. Learnings from the cash flow plan<br />It is not very difficult to make a financial plan – it is common sense<br />We have only three main variables - salary, expenses and % returns on investments <br />The earlier we start planning our cash flows – the earlier we will reach financial independence<br />Value of money is linked to time and inflation<br />
  19. 19. Various investment options<br />Equity<br />Fixed income securities<br />Mutual funds<br />Derivatives<br />Gold, silver etc<br />Commodities<br />Real estate<br />Private equity<br />Venture capital<br />
  20. 20. Team presentations<br />Team 1 – make a 10 minute presentation on New York Stock exchange, NASDAQ and London Stock Exchange – the history and how it has grown over the years<br />Team 2 – make a 10 minute presentation on Bombay Stock Exchange and NSE – also include the history and the various stock exchanges we have in India <br />
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  22. 22. Thank you<br />