Don’t buy on tips, impulse or under influence of ‘left behind’ feeling.
Don’t chase last year topper
Stick to your asset allocation.
Basic aim of Financial planning is to get sufficient fund at specific time for defined financial goal, not to get Super high return .
FINANCIAL PLANNING FOR THE FUTURE ……... Financial Planning and Asset Allocation Birth & Education Earning Years Retirement 35 yrs 25 yrs Over 25 - 30 yrs Housing Child’s Education Child’s Marriage Phase I Dependant Phase Phase III Distribution Phase Phase II Accumulation phase Income Age Marriage Children 22 yrs 60 yrs Age
When interest rates are rising invest in Floating rate schemes & take Fixed rate loans.
When interest rate is falling invest in Long term Income or Gilt funds & take floating rate Loans.
Income Schemes P.P.F. N.S.C. K.V.P. BANK F.D. Floating rate Funds Return % 8% 8% 8% 6-8% 5-6% Tax-free Yes NO NO NO Yes Rebate on Investment Yes Yes NO Yes if >5 year No Liquidity 50% withdrawal after 5 years 6 year lock in 7.5 years lock in Lock in as per term of F.D. No lock in
Type of Fund Floating Rate fund MIP, Fixed maturity funds Balanced schemes Equity schemes Best for Time Horizon <1 year 1-2 years 2-4 years > 5 years Expected return 5 – 6 % 7 – 8 % 10 – 12 % > 15 % Risk of capital loss Zero Almost zero 5 – 10 % up to 2 years. 20 – 30 % in first 3 years.
Model Portfolio Profile Equity Diversified Equity Midcap Sector Balanced Fund MIP, Bond Fund Floating rate Fund Age 20-30 Dependent 1-2 35-40% 35-40% 20% 10% Age 30-40 Children in school 30-35% 20-25% 30% 10% Age 40-50 Children in college 30-35% 10-15% 20-30% 10% 10-20% Age 50-60 Children marriage Higher Education 25-30% 5-10% 20% 20% 10% > 60 years Retirement planning 10-20% 30% 30-40% 20%
Retirement doesn't mean stoppage of work, it means freedom from compulsion to work for money – Financial freedom .
To maintain same life style even after retirement
Life expectancy is increasing. 80+ age not unusual. Female spouse will live 5 years more then male.
Inflation will make difficult to maintain same level of living standard.
You & your spouse may not like to remain dependent on children.
We don’t have govt. social security scheme.
Why retirement planning Financial Planning and Asset Allocation Retirement Plan - An essential need Increasing life expectancy Protect Post- Retirement Lifestyle Increasing Cost of Health Protection for Spouse /Dependents Falling Interest Rate Scenario Breakdown of traditional support systems
FINANCIAL PLANNING FOR THE FUTURE ……... Financial Planning and Asset Allocation Birth & Education Earning Years Retirement 35 yrs 25 yrs Over 25 - 30 yrs Housing Child’s Education Child’s Marriage Phase I Phase III Phase II Income Age Marriage Children 22 yrs 60 yrs Age
Why retirement planning Financial Planning and Asset Allocation
72/ Interest rate = No. of years required to double money.
72/ No. of years required to double money =
% interest return.
If you earn 24% compounded return your money double in 3 years, multiplies 10 times in 10 years, 100 times in 20 years & 1000 times in 30 years.
Average return of diversified mutual fund is >24% in last 14 years.
THE EIGHT WONDER OF THE WORLD... The Power of Compounding 350,000 2,533,529 330,000 2,099,636 300,000 1,572,834 Savings Returns * Saves from age 25 to 60 Saves from age 27 to 60 Saves from age 30 to 60 Assuming an annual savings of Rs. 10,000 in an instrument providing return of 9.5% p.a. Financial Planning and Asset Allocation
Amount required to be saved monthly:- Financial Planning and Asset Allocation Rs. 100 lakhs :-