This document provides an overview of financial goal planning in 3 steps: 1) Identify and prioritize goals like retirement, education, marriage and calculate costs, 2) Allocate resources to each goal based on risk tolerance and choose appropriate instruments, 3) Monitor performance against expectations and update strategies. Typical financial goals are discussed along with analysis of instruments like mutual funds, EPF, NPS and their returns. The importance of starting early with regular investments tailored to each goal and risk profile is emphasized.

1. An overview of Financial Goal Planning
By
Sourabh Sharma & Binay Raina

2. Contents
1 Introduction
2 Steps of Financial Goal Planning
3 Typical Financial Goals
4 Analysis of few Financial Instruments
5 Q&A

3. Introduction
Income – Expenses = Saving
Income – Saving = Expenses
Saving ≠ Investing

4. Time Value of Money
 If you had Rs.1 Lakh in 1978 and had :
 Bought Gold : Current* worth would be Rs. 37.17 lakhs
 Left as cash : Current* worth would be Rs. 7k in terms of PPP
 Invested in Sensex: Current* worth would be Rs. 1.88 crores
*- As of March 31st
2012

5. Goal Planning – Step 1
 Identify and prioritize specific life goals
 Calculate what you need to achieve each goal
 Determine your risk tolerance
1.EstablishYour Goals and Expectations

6. Typical Goals
Kid’s Marriage
A goal without a plan is just aWish

7. Goal Planning– Step 2
 Allocate resources to each goals
 Choose instruments aligning with the risk appetite
 Invest regularly and systematically
2. Make Investments

8.  Best time to start saving for retirement is the day you start earning
 Save at least 10% of income for retirement
 At the peak of earnings save 40-50% of income
Retirement
Graph source : Internet -

9.  Prepare for the costliest education (Medical, Graduation/Masters Overseas etc.)
 MBA that costs 10L today would cost 67L in 20 years at 10% education cost inflation
 Diversify your investments across geographies to factor in overseas education
Education
Graph source : Internet -

10.  Above cost is derived by factoring in 10% marriage cost inflation
 Above cost is excluding the gold cost
 Buy gold regularly via ETF , GSBs ( a gram/month or quarterly)
Kid’s Marriage
Kid’s
Marriage
Graph source : Internet -

11.  Time not timing is the key to investment success
 The best time to invest is whenever you have money
Wealth Creation
Graph source : Internet -

12. Goal Planning – Step 3
 Establish benchmarks
 Compare performance to expectations
 Be vigilant and update your expectations/strategies
3. Monitor and MaintainYour Portfolio

13. Sample Instruments

14. Survey 1 - Indian Household Assets Breakup

15. Survey 2- Retirement Products held by Indians

16. Employee Provident Fund
Real return has been calculated after adjusting for retail inflation

17.  Defined Contribution Pension system open for all citizens of India
 Tax exemption of upto 2 lacs + 10% of basic salary
 Mandatory annuity purchase of atleast 40% of accumulated pension wealth
National Pension System

18.  Defined Contribution Pension system open for all citizens of India
 Tax exemption of upto 2 lacs + 10% of basic salary
 Mandatory annuity purchase of atleast 40% of accumulated pension wealth
National Pension System

19. Mutual Funds
 Professionally managed investment fund with Products for all risk appetite
 No tax on long term capital gain
 ELSS is a very good tax saving instrument

20. Franklin India Smaller Companies Fund
CAGR Return since Inception : 17.89%
Small Cap Fund

21. ICICI Prudential FMCG Fund
CAGR Return since Inception : 17.7%
Sectorial Fund

22. Axis Long term Equity Fund
CAGR Return since Inception : 19.19%
ELSS

23. Birla Sun Life Tax Plan
CAGR Return since Inception : 20.59%
ELSS

24. EPF vs. Large Cap Fund

25. Recap

26. 1. Establish Your Goals and Expectations
ShortTerm
• Emergency fund
• School/College fees
• Premium payments
MediumTerm
• New Car
• Downpayment for House
• ForeignVacation
LongTerm
• Child’s Education
• Child’s Marriage
• Retirements
Goals Years to Achieve Risk Appetite
<< 1Year
1Year – 5Year
5Year – 25Years
No Risk
Low Risk
Medium to High Risk

27. 2. Making Your Investments
ShortTerm
• Emergency fund
• School/College fees
• Premium payments
MediumTerm
• New Car
• BookingAmount for House
• ForeignVacation
LongTerm
• Child’s Education
• Child’s Marriage
• Retirements
Goals Investment
Options
Expected Rate of
Return
Recurring Deposits
Liquid Funds
8%
8-10%
9-12%
9-15%
11%
12-20%
>>16%
Debt Funds
Balanced Funds
Gold
Equity Funds
Stocks

28. 3. Monitor and Maintain Your Portfolio
Equity
• Stocks
• Mutual Funds
Debt
• FD/ RD
• Liquid Funds
• Debt Funds
Real Estate
• Residential
• Commercial
Portfolio Mix Age Percentage ofTotal
20 - 45
45 - 55
55 - 60
>> 60
50 - 80%
40 - 50%
10-30%
0 - 10%
Gold
• Physical
• ETF/Gold Funds
20 - 45
45 - 55
55 - 60
>> 60
20 - 45
45 - 55
55 - 60
>> 60
20 - 45
45 - 55
55 - 60
>> 60
10 - 20%
20 - 40%
40 - 60%
60 - 100%
20%
10%

29. Thanks