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Financial Planning

Financial planning is the process of managing finances to meet life goals like buying a home or saving for retirement. It involves insurance, investment, tax, retirement, and estate planning. Financial planning is important due to factors like inflation, rising life expectancy, and uncertainty. Insurance planning helps minimize risks to assets and income from early death, disability, or other factors. Investment planning involves evaluating risk tolerance, allocating assets appropriately among short, medium, and long-term holdings, and accumulating wealth through systematic investing and regular portfolio reviews.

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Financial Planning From: PND Mentor Consultants (A Trusted Advisor) PND MENTOR CONSULTANTS Financial Planning From: PND Mentor Consultants (A Trusted Advisor)
What is Financial Planning? • Financial planning is the process of creating, managing & enhancing wealth during the lifetime or we can say it is the process of meeting your life goals through the proper management of your finances. • Life goals can include buying a home, saving for your child's education or planning for retirement. • It includes insurance planning, investment planning, tax planning, retirement planning and estate planning. PND MENTOR CONSULTANTS • Financial planning is the process of creating, managing & enhancing wealth during the lifetime or we can say it is the process of meeting your life goals through the proper management of your finances. • Life goals can include buying a home, saving for your child's education or planning for retirement. • It includes insurance planning, investment planning, tax planning, retirement planning and estate planning.
Why Financial Planning? • Inflation Cost of Education / Medical increasing exponentially • Rising Life expectancy estimated to increase from 75 to 85 in next decade • Protection against the uncertainty Protect lifestyle of family in your absence • Balanced Assets Allocation Allocate your investment in Short Term & Long Term perspective to achieve maximum gain at minimum risk. PND MENTOR CONSULTANTS • Inflation Cost of Education / Medical increasing exponentially • Rising Life expectancy estimated to increase from 75 to 85 in next decade • Protection against the uncertainty Protect lifestyle of family in your absence • Balanced Assets Allocation Allocate your investment in Short Term & Long Term perspective to achieve maximum gain at minimum risk.
Effect of Inflation Value of Rs.1,00,000 after specified periods at specified inflation rates: Years 3% 4% 5% 6% 7% 5 86,261 82,193 78,353 74,726 71,299 10 74,409 67,556 61,391 55,839 50,835 PND MENTOR CONSULTANTS 10 74,409 67,556 61,391 55,839 50,835 15 64,186 55,526 48,102 41,727 36,245 20 55,368 45,639 37,689 31,180 25,842 25 47,761 37,512 29,530 23,300 18,425 Excel
What is Insurance Planning? • Insurance planning is a tool to minimise or to avoid risks. • What type of Risk? 1. Risk of Early Death 2. Risk of Disability 3. Risk of Assets PND MENTOR CONSULTANTS • Insurance planning is a tool to minimise or to avoid risks. • What type of Risk? 1. Risk of Early Death 2. Risk of Disability 3. Risk of Assets
How to Avoid Risk? • Identify your needs • How much insurance do you need? • Which product should you consider? PND MENTOR CONSULTANTS • Identify your needs • How much insurance do you need? • Which product should you consider?
How to Identify your needs? • An individual is single & a married individual who has family members dependent on him both has a different need. • Dependency of your family on your income will help to calculate your need. PND MENTOR CONSULTANTS • An individual is single & a married individual who has family members dependent on him both has a different need. • Dependency of your family on your income will help to calculate your need.
How much insurance do you need? • The concept of human life value (HLV) can help in deciding how much life cover an individual should opt for. • Human Life Value (HLV) is a methodology to determine the appropriate amount of sum assured you need to have at present in case of future loss of income. • In simple words, it is that amount, which can ensure that the standard of living of the family is not affected even if the earning member is not there. PND MENTOR CONSULTANTS • The concept of human life value (HLV) can help in deciding how much life cover an individual should opt for. • Human Life Value (HLV) is a methodology to determine the appropriate amount of sum assured you need to have at present in case of future loss of income. • In simple words, it is that amount, which can ensure that the standard of living of the family is not affected even if the earning member is not there.
How to Calculate HLV Monthly income of a person Rs.10,000 His personal expenses per month Rs.2,000 Monthly income provided to family Rs.8,000 Therefore, annual income provided Rs.96,000 PND MENTOR CONSULTANTS Amount of money to be put in the bank to earn Rs.96,000 pa at 8% interest rate Rs.12,00,000 Hence, HLV is Rs.12 lakhs Please note that however we have not taken into account the future income growth of the person. This is, therefore, not an exact way of calculating the Human Life Value. This is only a representation to give the participants a fair idea of how this works. Excel
Which product should you consider? TERM PLAN (PURE RISK COVER PLANS) • A term plan is a pure risk cover plan wherein the insured pays a lower premium for a higher sum assured. • Term insurance is the cheapest form of insurance and helps the policy holder insure himself for a larger amount at a relatively low premium. • Unfortunately, for the ‘returns sensitive’ investor, term plans do not find favour, as they do not offer a return (although some term plans do return the premiums paid if the individual survives the tenure). PND MENTOR CONSULTANTS TERM PLAN (PURE RISK COVER PLANS) • A term plan is a pure risk cover plan wherein the insured pays a lower premium for a higher sum assured. • Term insurance is the cheapest form of insurance and helps the policy holder insure himself for a larger amount at a relatively low premium. • Unfortunately, for the ‘returns sensitive’ investor, term plans do not find favour, as they do not offer a return (although some term plans do return the premiums paid if the individual survives the tenure).
Comparison B/W Term Plan & Endowment Plan of LIC Details of Term Plan from LIC Age (Yrs) Sum Assured (Rs) Annual Premium (Rs) Tenure (Yrs) Total Premium* (Rs) Maturity amount on survival (Rs) 30 10,00,000 3,820 25 95,500 Nil PND MENTOR CONSULTANTS 30 10,00,000 3,820 25 95,500 Nil Details of Endowment Plan from LIC Age (Yrs) Sum Assured (Rs) Annual Premium (Rs) Tenure (Yrs) Total Premium* (Rs) Maturity amount on survival (Rs) 30 10,00,000 38,820 25 9,70,500 22,57,600 (Approx 6%)
What should be the plan? Case Particulars Age (Yrs) Avenues Tenure (Yrs) Amount (Rs) Return (%) Maturity Amount (Rs) 1 Term plan (10 Lacs + Secured mutual fund (100% Debt) 30 Term plan 25 3,820 * Nil Mutual fund 25 35,000 8 27,63,406 2 Term plan (10 Lacs) + Balanced mutual fund (40% in Equities) 30 Term plan 25 3,820 * Nil PND MENTOR CONSULTANTS Term plan (10 Lacs) + Balanced mutual fund (40% in Equities) 30 25 3,820 * Mutual fund 25 35,000 10 37,86,367 3 Term plan (10 Lacs)+ Diversified equity fund (100% in Equity) 30 Term plan 25 3,820 * Nil Diversified equity fund 25 35,000 15 85,64,937 Investment in mutual funds are subject to market risk. Excel
Investment Planning • What is Investing? Investment refers to a commitment of funds to one or more assets that will be held over some future time period. • What is Investment Planning? Investment Planning means to manage our wealth effectively, obtaining the most from it. • Why Investment Planning? Creating wealth over the long term Acquiring assets like a dream house or a dream car Fulfilling your need for financial security PND MENTOR CONSULTANTS • What is Investing? Investment refers to a commitment of funds to one or more assets that will be held over some future time period. • What is Investment Planning? Investment Planning means to manage our wealth effectively, obtaining the most from it. • Why Investment Planning? Creating wealth over the long term Acquiring assets like a dream house or a dream car Fulfilling your need for financial security
What Investment Planning Includes? • Evaluating Risk • Asset Allocation • Creation and Accumulation of Wealth through Systematic Investment Plans (SIP) • Regular review of progress and Portfolio Rebalancing PND MENTOR CONSULTANTS • Evaluating Risk • Asset Allocation • Creation and Accumulation of Wealth through Systematic Investment Plans (SIP) • Regular review of progress and Portfolio Rebalancing
Evaluating Risk • Thumb rule says you should invest in Equity inverse to your age (means 30 year age person can take risk of investing in equity up to 70%) • Age, personal circumstances & general market conditions is crucial factor while deciding risk. • Right investment is a balance of three things: Liquidity, Safety and Return. PND MENTOR CONSULTANTS • Thumb rule says you should invest in Equity inverse to your age (means 30 year age person can take risk of investing in equity up to 70%) • Age, personal circumstances & general market conditions is crucial factor while deciding risk. • Right investment is a balance of three things: Liquidity, Safety and Return.
Asset Allocation • Assets allocation is the main aspects of the investment planning. • Allocate your investment looking to your future plans. • You should have Cash/Liquid Assts, Short term Assets, Medium Term Assets & Long Term Assts as per your Future Goal. PND MENTOR CONSULTANTS • Assets allocation is the main aspects of the investment planning. • Allocate your investment looking to your future plans. • You should have Cash/Liquid Assts, Short term Assets, Medium Term Assets & Long Term Assts as per your Future Goal.
NO. YEAR END SENSEX ROLLING 1 YEAR GROWTH ROLLING 3 YEAR GROWTH ROLLING 5 YEAR GROWTH ROLLING 7 YEAR GROWTH ROLLING 10 YEAR GROWTH ROLLING 15 YEAR GROWTH 0 Mar-79 100 1 Mar-80 129 28.57% 2 Mar-81 173 34.90% 3 Mar-82 218 25.52% 29.58% 4 Mar-83 212 -2.85% 18.05% 5 Mar-84 245 15.99% 12.24% 19.64% 6 Mar-85 354 44.24% 17.56% 22.43% 7 Mar-86 574 62.24% 39.45% 27.03% 28.33% 8 Mar-87 510 -11.10% 27.66% 18.57% 21.76% 9 Mar-88 398 -21.94% 4.02% 13.48% 12.60% 14 Mar-93 2281 -46.78% 42.88% 41.73% 21.76% 26.82% 15 Mar-94 3779 65.71% 47.85% 39.54% 33.08% 31.43% 27.37% 16 Mar-95 3261 -13.71% -8.70% 33.07% 35.02% 24.85% 24.04% 17 Mar-96 3367 3.24% 13.85% 23.55% 24.79% 19.33% 21.84% 18 Mar-97 3361 -0.17% -3.83% -4.74% 23.16% 20.72% 20.00% 19 Mar-98 3893 15.82% 6.08% 11.28% 18.75% 25.59% 21.41% 20 Mar-99 3740 -3.92% 3.57% -0.21% -1.92% 18.01% 19.90% 21 Mar-00 5001 33.73% 14.15% 8.92% 11.86% 20.39% 19.30% 22 Mar-01 3604 -27.93% -2.53% 1.37% -0.67% 11.92% 13.02% 23 Mar-02 3469 -3.75% -2.47% 0.64% 0.89% -2.09% 13.62% 24 Mar-03 3049 -12.12% -15.21% -4.77% -1.41% 2.94% 14.52% 25 Mar-04 5591 83.38% 15.74% 8.36% 7.53% 3.99% 14.70% 26 Mar-05 6493 16.14% 23.21% 5.36% 7.58% 7.12% 15.15% 27 Mar-06 11280 73.73% 54.61% 25.61% 17.07% 12.85% 16.31% 28 Mar-07 13072 15.89% 32.73% 30.36% 14.71% 14.54% 7.71% 29 Mar-08 15644 19.68% 34.03% 38.64% 23.31% 14.91% 13.69% 30 Mar-09 9709 -37.94% -4.87% 11.66% 15.82% 10.00% 6.49% 31 Mar-10 17528 80.54% 10.26% 21.96% 28.36% 13.35% 11.86% 32 Mar-11 19445 10.94% 7.52% 11.50% 19.48% 18.35% 12.39% 33 Mar-12 17404 -10.50% 21.46% 5.89% 15.11% 17.49% 11.58% 34 Mar-13 18836 8.23% 2.43% 3.78% 7.59% 19.96% 11.07% 35 Mar-14 22386 18.85% 4.80% 18.18% 7.98% 14.87% 12.66% 36 Mar-15 27957 24.89% 17.12% 9.78% 8.64% 15.71% 12.15% 12/36 6/34 3/32 3/30 1/27 0/22 PERFORMANCE OF BSE SENSEX Probability of Loss PND MENTOR CONSULTANTS NO. YEAR END SENSEX ROLLING 1 YEAR GROWTH ROLLING 3 YEAR GROWTH ROLLING 5 YEAR GROWTH ROLLING 7 YEAR GROWTH ROLLING 10 YEAR GROWTH ROLLING 15 YEAR GROWTH 0 Mar-79 100 1 Mar-80 129 28.57% 2 Mar-81 173 34.90% 3 Mar-82 218 25.52% 29.58% 4 Mar-83 212 -2.85% 18.05% 5 Mar-84 245 15.99% 12.24% 19.64% 6 Mar-85 354 44.24% 17.56% 22.43% 7 Mar-86 574 62.24% 39.45% 27.03% 28.33% 8 Mar-87 510 -11.10% 27.66% 18.57% 21.76% 9 Mar-88 398 -21.94% 4.02% 13.48% 12.60% 14 Mar-93 2281 -46.78% 42.88% 41.73% 21.76% 26.82% 15 Mar-94 3779 65.71% 47.85% 39.54% 33.08% 31.43% 27.37% 16 Mar-95 3261 -13.71% -8.70% 33.07% 35.02% 24.85% 24.04% 17 Mar-96 3367 3.24% 13.85% 23.55% 24.79% 19.33% 21.84% 18 Mar-97 3361 -0.17% -3.83% -4.74% 23.16% 20.72% 20.00% 19 Mar-98 3893 15.82% 6.08% 11.28% 18.75% 25.59% 21.41% 20 Mar-99 3740 -3.92% 3.57% -0.21% -1.92% 18.01% 19.90% 21 Mar-00 5001 33.73% 14.15% 8.92% 11.86% 20.39% 19.30% 22 Mar-01 3604 -27.93% -2.53% 1.37% -0.67% 11.92% 13.02% 23 Mar-02 3469 -3.75% -2.47% 0.64% 0.89% -2.09% 13.62% 24 Mar-03 3049 -12.12% -15.21% -4.77% -1.41% 2.94% 14.52% 25 Mar-04 5591 83.38% 15.74% 8.36% 7.53% 3.99% 14.70% 26 Mar-05 6493 16.14% 23.21% 5.36% 7.58% 7.12% 15.15% 27 Mar-06 11280 73.73% 54.61% 25.61% 17.07% 12.85% 16.31% 28 Mar-07 13072 15.89% 32.73% 30.36% 14.71% 14.54% 7.71% 29 Mar-08 15644 19.68% 34.03% 38.64% 23.31% 14.91% 13.69% 30 Mar-09 9709 -37.94% -4.87% 11.66% 15.82% 10.00% 6.49% 31 Mar-10 17528 80.54% 10.26% 21.96% 28.36% 13.35% 11.86% 32 Mar-11 19445 10.94% 7.52% 11.50% 19.48% 18.35% 12.39% 33 Mar-12 17404 -10.50% 21.46% 5.89% 15.11% 17.49% 11.58% 34 Mar-13 18836 8.23% 2.43% 3.78% 7.59% 19.96% 11.07% 35 Mar-14 22386 18.85% 4.80% 18.18% 7.98% 14.87% 12.66% 36 Mar-15 27957 24.89% 17.12% 9.78% 8.64% 15.71% 12.15% 12/36 6/34 3/32 3/30 1/27 0/22 PERFORMANCE OF BSE SENSEX Probability of Loss
PND MENTOR CONSULTANTS
Power of Compounding • The following table shows how much your money would grow when you invest a fixed amount per month over a period of 5,10, 15, 20, 25, and 30 years at following interest rates: Rs.1,000 Invested Monthly Amount (Rs) Years 8% 10% 15% 20% 25% 5 73,967 78,082 89,682 103,454 119,844 PND MENTOR CONSULTANTS 5 73,967 78,082 89,682 103,454 119,844 10 184,166 206,552 278,657 382,364 532,805 15 348,345 417,924 676,863 1,134,295 1,955,785 20 592,947 765,697 1,515,955 3,161,479 6,859,095 25 957,367 1,337,890 3,284,074 8,626,708 23,754,942 30 1,500,295 2,279,325 7,009,821 23,360,802 81,974,715 Excel
Retirement Planning Why Retirement Planning? • The average life expectancy has expected to risen to 75-85 years. • Inflation is hovering around the 5-7 per cent mark increasing the cost of living. • Children settle abroad or away from home and even the elderly do not want to be dependent on their children anymore. PND MENTOR CONSULTANTS Why Retirement Planning? • The average life expectancy has expected to risen to 75-85 years. • Inflation is hovering around the 5-7 per cent mark increasing the cost of living. • Children settle abroad or away from home and even the elderly do not want to be dependent on their children anymore.
Retirement Planning Example Case I Case II Case III Aggressive Balanced Secured Current Age 30 30 30 Retirement Age 60 60 60 Time to retirement 30 30 30 Inflation 6% 6% 6% PND MENTOR CONSULTANTS Inflation 6% 6% 6% Rate of return assumed pre-retirement: 15% 10% 8% Rate of return assumed post-retirement: 8% 8% 8% Current Expenditure required at retirement 20,000 20,000 20,000 Monthly Expenditure required at retirement 114,870 114,870 114,870 Table continued………………..
Retirement Planning Example conti…………. Case I Case II Case III Aggressive Balanced Secured Annual Exp. Required at retirement 1,378,438 1,378,438 1,378,438 Other Expenses Required 500,000 500,000 500,000 PND MENTOR CONSULTANTS Total Expenses required at retirement 1,878,438 1,878,438 1,878,438 Money required to meet the above Expenses 23,480,474 23,480,474 23,480,474 Current Investments 100,000 100,000 100,000 Current Investments grown to till retirement 6,621,177 1,744,940 1,006,266 Net Fund required or to be accumulated 16,859,296 21,735,533 22,474,208
Retirement Planning Example Solution: Net Fund required or to be accumulated 16,859,296 21,735,533 22,474,208 Rate of return assumed pre-retirement: 15% 10% 8% Available time for Investment (in years) 30 30 30 PND MENTOR CONSULTANTS Available time for Investment (in years) 30 30 30 Savings required One Time Savings 254,627 1,245,632 2,233,427 Annual Savings 33,721 120,123 183,694 Monthly Savings 2,405 9,536 14,980 Excel
The Importance of Starting Investment Early Case I • Mr. A & Mr. B both aged 30 years wish to make an investment to build a Retirement Fund. • Mr. A starts immediately with annual investment of Rs.10,000/- @ 10% p.a. • While Mr. B starts investing after 10 years but with Rs.25,000/- @ 10% p.a. • Both the Mr. A & Mr. B would like to Retire at Age 60 year PND MENTOR CONSULTANTS Case I • Mr. A & Mr. B both aged 30 years wish to make an investment to build a Retirement Fund. • Mr. A starts immediately with annual investment of Rs.10,000/- @ 10% p.a. • While Mr. B starts investing after 10 years but with Rs.25,000/- @ 10% p.a. • Both the Mr. A & Mr. B would like to Retire at Age 60 year
The Importance of Starting Early Particulars Mr. A Mr. B Amount Invested Per Annum 10000 25000 Tenure of Investment 30 20 PND MENTOR CONSULTANTS Tenure of Investment 30 20 Total Investments 300000 500000 Returns @10% 10% 10% Maturity Amount 1,809,434 1,575,062
The Importance of Starting Early Case II Particulars Mr. A Mr. B Mr. C Age 30 40 50 Retirement Age 60 60 60 Years available for Investment 30 20 10 PND MENTOR CONSULTANTS Years available for Investment 30 20 10 Corpus required at retirement age 2,500,000 2,500,000 2,500,000 Rate of Returns 10% 10% 10% Annual Investment required 13,816 39,681 142,603 Monthly Investment required 1,097 3,265 12,103 Excel
Simple Steps to be a Wealth Creator!!!!! • There is no better time than today to start your investment. • Waiting for the golden moment will not help in any manner. • We all know that tax-planning investments can be done right from the start of the financial year in April, but how many people actually do it? • Transfer all risks such as death, disability, critical illness, accident, health and property to the insurance company. • Understand the consequences of risks more than anything else and do not think of insurance as an expense. PND MENTOR CONSULTANTS • There is no better time than today to start your investment. • Waiting for the golden moment will not help in any manner. • We all know that tax-planning investments can be done right from the start of the financial year in April, but how many people actually do it? • Transfer all risks such as death, disability, critical illness, accident, health and property to the insurance company. • Understand the consequences of risks more than anything else and do not think of insurance as an expense.
Refrain from these 6 mistakes Finally refrain from these 6 mistakes that most equity and mutual fund investors make: • Having irrational expectations. • Selling out in bad markets. • Investing short-term money in equity and long-term money in debt. • Being affected by news, interest rates, oil prices and losing confidence too soon. • Trying to time the market and waiting for the best time to buy or sell. • Getting greedy and opting for spicy derivatives, commodities, trading without understanding the risks associated. PND MENTOR CONSULTANTS Finally refrain from these 6 mistakes that most equity and mutual fund investors make: • Having irrational expectations. • Selling out in bad markets. • Investing short-term money in equity and long-term money in debt. • Being affected by news, interest rates, oil prices and losing confidence too soon. • Trying to time the market and waiting for the best time to buy or sell. • Getting greedy and opting for spicy derivatives, commodities, trading without understanding the risks associated.
Last Thought !!!!!!!!!!! Even if your financial decision is not perfect, it may still leave you in a better position than if you had done nothing. PND MENTOR CONSULTANTS Even if your financial decision is not perfect, it may still leave you in a better position than if you had done nothing.
PROFILE OF ADVISOR CA Nimesh Dedhia is a qualified Chartered Accountant since 1999. He has also cleared examination of Certified Financial Planner. He is also holding degree of DISA (ICAI). He has more than 15 years experience in the field of Tax Planning & Financial Planning. Our ARN is 48678 & advising in the field of Mutual Fund since 2007 and served more than 300 clients. CA Nimesh Dedhia is a qualified Chartered Accountant since 1999. He has also cleared examination of Certified Financial Planner. He is also holding degree of DISA (ICAI). He has more than 15 years experience in the field of Tax Planning & Financial Planning. Our ARN is 48678 & advising in the field of Mutual Fund since 2007 and served more than 300 clients.
Thank you PND MENTOR CONSULTANTS Email: pndmentor@gmail.com Tel: 28284033 / 9820944648 / 49

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Financial Planning

  • 1.
    Financial Planning From: PND MentorConsultants (A Trusted Advisor) PND MENTOR CONSULTANTS Financial Planning From: PND Mentor Consultants (A Trusted Advisor)
  • 2.
    What is FinancialPlanning? • Financial planning is the process of creating, managing & enhancing wealth during the lifetime or we can say it is the process of meeting your life goals through the proper management of your finances. • Life goals can include buying a home, saving for your child's education or planning for retirement. • It includes insurance planning, investment planning, tax planning, retirement planning and estate planning. PND MENTOR CONSULTANTS • Financial planning is the process of creating, managing & enhancing wealth during the lifetime or we can say it is the process of meeting your life goals through the proper management of your finances. • Life goals can include buying a home, saving for your child's education or planning for retirement. • It includes insurance planning, investment planning, tax planning, retirement planning and estate planning.
  • 3.
    Why Financial Planning? •Inflation Cost of Education / Medical increasing exponentially • Rising Life expectancy estimated to increase from 75 to 85 in next decade • Protection against the uncertainty Protect lifestyle of family in your absence • Balanced Assets Allocation Allocate your investment in Short Term & Long Term perspective to achieve maximum gain at minimum risk. PND MENTOR CONSULTANTS • Inflation Cost of Education / Medical increasing exponentially • Rising Life expectancy estimated to increase from 75 to 85 in next decade • Protection against the uncertainty Protect lifestyle of family in your absence • Balanced Assets Allocation Allocate your investment in Short Term & Long Term perspective to achieve maximum gain at minimum risk.
  • 4.
    Effect of Inflation Valueof Rs.1,00,000 after specified periods at specified inflation rates: Years 3% 4% 5% 6% 7% 5 86,261 82,193 78,353 74,726 71,299 10 74,409 67,556 61,391 55,839 50,835 PND MENTOR CONSULTANTS 10 74,409 67,556 61,391 55,839 50,835 15 64,186 55,526 48,102 41,727 36,245 20 55,368 45,639 37,689 31,180 25,842 25 47,761 37,512 29,530 23,300 18,425 Excel
  • 5.
    What is InsurancePlanning? • Insurance planning is a tool to minimise or to avoid risks. • What type of Risk? 1. Risk of Early Death 2. Risk of Disability 3. Risk of Assets PND MENTOR CONSULTANTS • Insurance planning is a tool to minimise or to avoid risks. • What type of Risk? 1. Risk of Early Death 2. Risk of Disability 3. Risk of Assets
  • 6.
    How to AvoidRisk? • Identify your needs • How much insurance do you need? • Which product should you consider? PND MENTOR CONSULTANTS • Identify your needs • How much insurance do you need? • Which product should you consider?
  • 7.
    How to Identifyyour needs? • An individual is single & a married individual who has family members dependent on him both has a different need. • Dependency of your family on your income will help to calculate your need. PND MENTOR CONSULTANTS • An individual is single & a married individual who has family members dependent on him both has a different need. • Dependency of your family on your income will help to calculate your need.
  • 8.
    How much insurancedo you need? • The concept of human life value (HLV) can help in deciding how much life cover an individual should opt for. • Human Life Value (HLV) is a methodology to determine the appropriate amount of sum assured you need to have at present in case of future loss of income. • In simple words, it is that amount, which can ensure that the standard of living of the family is not affected even if the earning member is not there. PND MENTOR CONSULTANTS • The concept of human life value (HLV) can help in deciding how much life cover an individual should opt for. • Human Life Value (HLV) is a methodology to determine the appropriate amount of sum assured you need to have at present in case of future loss of income. • In simple words, it is that amount, which can ensure that the standard of living of the family is not affected even if the earning member is not there.
  • 9.
    How to CalculateHLV Monthly income of a person Rs.10,000 His personal expenses per month Rs.2,000 Monthly income provided to family Rs.8,000 Therefore, annual income provided Rs.96,000 PND MENTOR CONSULTANTS Amount of money to be put in the bank to earn Rs.96,000 pa at 8% interest rate Rs.12,00,000 Hence, HLV is Rs.12 lakhs Please note that however we have not taken into account the future income growth of the person. This is, therefore, not an exact way of calculating the Human Life Value. This is only a representation to give the participants a fair idea of how this works. Excel
  • 10.
    Which product shouldyou consider? TERM PLAN (PURE RISK COVER PLANS) • A term plan is a pure risk cover plan wherein the insured pays a lower premium for a higher sum assured. • Term insurance is the cheapest form of insurance and helps the policy holder insure himself for a larger amount at a relatively low premium. • Unfortunately, for the ‘returns sensitive’ investor, term plans do not find favour, as they do not offer a return (although some term plans do return the premiums paid if the individual survives the tenure). PND MENTOR CONSULTANTS TERM PLAN (PURE RISK COVER PLANS) • A term plan is a pure risk cover plan wherein the insured pays a lower premium for a higher sum assured. • Term insurance is the cheapest form of insurance and helps the policy holder insure himself for a larger amount at a relatively low premium. • Unfortunately, for the ‘returns sensitive’ investor, term plans do not find favour, as they do not offer a return (although some term plans do return the premiums paid if the individual survives the tenure).
  • 11.
    Comparison B/W TermPlan & Endowment Plan of LIC Details of Term Plan from LIC Age (Yrs) Sum Assured (Rs) Annual Premium (Rs) Tenure (Yrs) Total Premium* (Rs) Maturity amount on survival (Rs) 30 10,00,000 3,820 25 95,500 Nil PND MENTOR CONSULTANTS 30 10,00,000 3,820 25 95,500 Nil Details of Endowment Plan from LIC Age (Yrs) Sum Assured (Rs) Annual Premium (Rs) Tenure (Yrs) Total Premium* (Rs) Maturity amount on survival (Rs) 30 10,00,000 38,820 25 9,70,500 22,57,600 (Approx 6%)
  • 12.
    What should bethe plan? Case Particulars Age (Yrs) Avenues Tenure (Yrs) Amount (Rs) Return (%) Maturity Amount (Rs) 1 Term plan (10 Lacs + Secured mutual fund (100% Debt) 30 Term plan 25 3,820 * Nil Mutual fund 25 35,000 8 27,63,406 2 Term plan (10 Lacs) + Balanced mutual fund (40% in Equities) 30 Term plan 25 3,820 * Nil PND MENTOR CONSULTANTS Term plan (10 Lacs) + Balanced mutual fund (40% in Equities) 30 25 3,820 * Mutual fund 25 35,000 10 37,86,367 3 Term plan (10 Lacs)+ Diversified equity fund (100% in Equity) 30 Term plan 25 3,820 * Nil Diversified equity fund 25 35,000 15 85,64,937 Investment in mutual funds are subject to market risk. Excel
  • 13.
    Investment Planning • Whatis Investing? Investment refers to a commitment of funds to one or more assets that will be held over some future time period. • What is Investment Planning? Investment Planning means to manage our wealth effectively, obtaining the most from it. • Why Investment Planning? Creating wealth over the long term Acquiring assets like a dream house or a dream car Fulfilling your need for financial security PND MENTOR CONSULTANTS • What is Investing? Investment refers to a commitment of funds to one or more assets that will be held over some future time period. • What is Investment Planning? Investment Planning means to manage our wealth effectively, obtaining the most from it. • Why Investment Planning? Creating wealth over the long term Acquiring assets like a dream house or a dream car Fulfilling your need for financial security
  • 14.
    What Investment PlanningIncludes? • Evaluating Risk • Asset Allocation • Creation and Accumulation of Wealth through Systematic Investment Plans (SIP) • Regular review of progress and Portfolio Rebalancing PND MENTOR CONSULTANTS • Evaluating Risk • Asset Allocation • Creation and Accumulation of Wealth through Systematic Investment Plans (SIP) • Regular review of progress and Portfolio Rebalancing
  • 15.
    Evaluating Risk • Thumbrule says you should invest in Equity inverse to your age (means 30 year age person can take risk of investing in equity up to 70%) • Age, personal circumstances & general market conditions is crucial factor while deciding risk. • Right investment is a balance of three things: Liquidity, Safety and Return. PND MENTOR CONSULTANTS • Thumb rule says you should invest in Equity inverse to your age (means 30 year age person can take risk of investing in equity up to 70%) • Age, personal circumstances & general market conditions is crucial factor while deciding risk. • Right investment is a balance of three things: Liquidity, Safety and Return.
  • 16.
    Asset Allocation • Assetsallocation is the main aspects of the investment planning. • Allocate your investment looking to your future plans. • You should have Cash/Liquid Assts, Short term Assets, Medium Term Assets & Long Term Assts as per your Future Goal. PND MENTOR CONSULTANTS • Assets allocation is the main aspects of the investment planning. • Allocate your investment looking to your future plans. • You should have Cash/Liquid Assts, Short term Assets, Medium Term Assets & Long Term Assts as per your Future Goal.
  • 17.
    NO. YEAR ENDSENSEX ROLLING 1 YEAR GROWTH ROLLING 3 YEAR GROWTH ROLLING 5 YEAR GROWTH ROLLING 7 YEAR GROWTH ROLLING 10 YEAR GROWTH ROLLING 15 YEAR GROWTH 0 Mar-79 100 1 Mar-80 129 28.57% 2 Mar-81 173 34.90% 3 Mar-82 218 25.52% 29.58% 4 Mar-83 212 -2.85% 18.05% 5 Mar-84 245 15.99% 12.24% 19.64% 6 Mar-85 354 44.24% 17.56% 22.43% 7 Mar-86 574 62.24% 39.45% 27.03% 28.33% 8 Mar-87 510 -11.10% 27.66% 18.57% 21.76% 9 Mar-88 398 -21.94% 4.02% 13.48% 12.60% 14 Mar-93 2281 -46.78% 42.88% 41.73% 21.76% 26.82% 15 Mar-94 3779 65.71% 47.85% 39.54% 33.08% 31.43% 27.37% 16 Mar-95 3261 -13.71% -8.70% 33.07% 35.02% 24.85% 24.04% 17 Mar-96 3367 3.24% 13.85% 23.55% 24.79% 19.33% 21.84% 18 Mar-97 3361 -0.17% -3.83% -4.74% 23.16% 20.72% 20.00% 19 Mar-98 3893 15.82% 6.08% 11.28% 18.75% 25.59% 21.41% 20 Mar-99 3740 -3.92% 3.57% -0.21% -1.92% 18.01% 19.90% 21 Mar-00 5001 33.73% 14.15% 8.92% 11.86% 20.39% 19.30% 22 Mar-01 3604 -27.93% -2.53% 1.37% -0.67% 11.92% 13.02% 23 Mar-02 3469 -3.75% -2.47% 0.64% 0.89% -2.09% 13.62% 24 Mar-03 3049 -12.12% -15.21% -4.77% -1.41% 2.94% 14.52% 25 Mar-04 5591 83.38% 15.74% 8.36% 7.53% 3.99% 14.70% 26 Mar-05 6493 16.14% 23.21% 5.36% 7.58% 7.12% 15.15% 27 Mar-06 11280 73.73% 54.61% 25.61% 17.07% 12.85% 16.31% 28 Mar-07 13072 15.89% 32.73% 30.36% 14.71% 14.54% 7.71% 29 Mar-08 15644 19.68% 34.03% 38.64% 23.31% 14.91% 13.69% 30 Mar-09 9709 -37.94% -4.87% 11.66% 15.82% 10.00% 6.49% 31 Mar-10 17528 80.54% 10.26% 21.96% 28.36% 13.35% 11.86% 32 Mar-11 19445 10.94% 7.52% 11.50% 19.48% 18.35% 12.39% 33 Mar-12 17404 -10.50% 21.46% 5.89% 15.11% 17.49% 11.58% 34 Mar-13 18836 8.23% 2.43% 3.78% 7.59% 19.96% 11.07% 35 Mar-14 22386 18.85% 4.80% 18.18% 7.98% 14.87% 12.66% 36 Mar-15 27957 24.89% 17.12% 9.78% 8.64% 15.71% 12.15% 12/36 6/34 3/32 3/30 1/27 0/22 PERFORMANCE OF BSE SENSEX Probability of Loss PND MENTOR CONSULTANTS NO. YEAR END SENSEX ROLLING 1 YEAR GROWTH ROLLING 3 YEAR GROWTH ROLLING 5 YEAR GROWTH ROLLING 7 YEAR GROWTH ROLLING 10 YEAR GROWTH ROLLING 15 YEAR GROWTH 0 Mar-79 100 1 Mar-80 129 28.57% 2 Mar-81 173 34.90% 3 Mar-82 218 25.52% 29.58% 4 Mar-83 212 -2.85% 18.05% 5 Mar-84 245 15.99% 12.24% 19.64% 6 Mar-85 354 44.24% 17.56% 22.43% 7 Mar-86 574 62.24% 39.45% 27.03% 28.33% 8 Mar-87 510 -11.10% 27.66% 18.57% 21.76% 9 Mar-88 398 -21.94% 4.02% 13.48% 12.60% 14 Mar-93 2281 -46.78% 42.88% 41.73% 21.76% 26.82% 15 Mar-94 3779 65.71% 47.85% 39.54% 33.08% 31.43% 27.37% 16 Mar-95 3261 -13.71% -8.70% 33.07% 35.02% 24.85% 24.04% 17 Mar-96 3367 3.24% 13.85% 23.55% 24.79% 19.33% 21.84% 18 Mar-97 3361 -0.17% -3.83% -4.74% 23.16% 20.72% 20.00% 19 Mar-98 3893 15.82% 6.08% 11.28% 18.75% 25.59% 21.41% 20 Mar-99 3740 -3.92% 3.57% -0.21% -1.92% 18.01% 19.90% 21 Mar-00 5001 33.73% 14.15% 8.92% 11.86% 20.39% 19.30% 22 Mar-01 3604 -27.93% -2.53% 1.37% -0.67% 11.92% 13.02% 23 Mar-02 3469 -3.75% -2.47% 0.64% 0.89% -2.09% 13.62% 24 Mar-03 3049 -12.12% -15.21% -4.77% -1.41% 2.94% 14.52% 25 Mar-04 5591 83.38% 15.74% 8.36% 7.53% 3.99% 14.70% 26 Mar-05 6493 16.14% 23.21% 5.36% 7.58% 7.12% 15.15% 27 Mar-06 11280 73.73% 54.61% 25.61% 17.07% 12.85% 16.31% 28 Mar-07 13072 15.89% 32.73% 30.36% 14.71% 14.54% 7.71% 29 Mar-08 15644 19.68% 34.03% 38.64% 23.31% 14.91% 13.69% 30 Mar-09 9709 -37.94% -4.87% 11.66% 15.82% 10.00% 6.49% 31 Mar-10 17528 80.54% 10.26% 21.96% 28.36% 13.35% 11.86% 32 Mar-11 19445 10.94% 7.52% 11.50% 19.48% 18.35% 12.39% 33 Mar-12 17404 -10.50% 21.46% 5.89% 15.11% 17.49% 11.58% 34 Mar-13 18836 8.23% 2.43% 3.78% 7.59% 19.96% 11.07% 35 Mar-14 22386 18.85% 4.80% 18.18% 7.98% 14.87% 12.66% 36 Mar-15 27957 24.89% 17.12% 9.78% 8.64% 15.71% 12.15% 12/36 6/34 3/32 3/30 1/27 0/22 PERFORMANCE OF BSE SENSEX Probability of Loss
  • 18.
  • 19.
    Power of Compounding •The following table shows how much your money would grow when you invest a fixed amount per month over a period of 5,10, 15, 20, 25, and 30 years at following interest rates: Rs.1,000 Invested Monthly Amount (Rs) Years 8% 10% 15% 20% 25% 5 73,967 78,082 89,682 103,454 119,844 PND MENTOR CONSULTANTS 5 73,967 78,082 89,682 103,454 119,844 10 184,166 206,552 278,657 382,364 532,805 15 348,345 417,924 676,863 1,134,295 1,955,785 20 592,947 765,697 1,515,955 3,161,479 6,859,095 25 957,367 1,337,890 3,284,074 8,626,708 23,754,942 30 1,500,295 2,279,325 7,009,821 23,360,802 81,974,715 Excel
  • 20.
    Retirement Planning Why RetirementPlanning? • The average life expectancy has expected to risen to 75-85 years. • Inflation is hovering around the 5-7 per cent mark increasing the cost of living. • Children settle abroad or away from home and even the elderly do not want to be dependent on their children anymore. PND MENTOR CONSULTANTS Why Retirement Planning? • The average life expectancy has expected to risen to 75-85 years. • Inflation is hovering around the 5-7 per cent mark increasing the cost of living. • Children settle abroad or away from home and even the elderly do not want to be dependent on their children anymore.
  • 21.
    Retirement Planning Example CaseI Case II Case III Aggressive Balanced Secured Current Age 30 30 30 Retirement Age 60 60 60 Time to retirement 30 30 30 Inflation 6% 6% 6% PND MENTOR CONSULTANTS Inflation 6% 6% 6% Rate of return assumed pre-retirement: 15% 10% 8% Rate of return assumed post-retirement: 8% 8% 8% Current Expenditure required at retirement 20,000 20,000 20,000 Monthly Expenditure required at retirement 114,870 114,870 114,870 Table continued………………..
  • 22.
    Retirement Planning Example conti…………. CaseI Case II Case III Aggressive Balanced Secured Annual Exp. Required at retirement 1,378,438 1,378,438 1,378,438 Other Expenses Required 500,000 500,000 500,000 PND MENTOR CONSULTANTS Total Expenses required at retirement 1,878,438 1,878,438 1,878,438 Money required to meet the above Expenses 23,480,474 23,480,474 23,480,474 Current Investments 100,000 100,000 100,000 Current Investments grown to till retirement 6,621,177 1,744,940 1,006,266 Net Fund required or to be accumulated 16,859,296 21,735,533 22,474,208
  • 23.
    Retirement Planning Example Solution: NetFund required or to be accumulated 16,859,296 21,735,533 22,474,208 Rate of return assumed pre-retirement: 15% 10% 8% Available time for Investment (in years) 30 30 30 PND MENTOR CONSULTANTS Available time for Investment (in years) 30 30 30 Savings required One Time Savings 254,627 1,245,632 2,233,427 Annual Savings 33,721 120,123 183,694 Monthly Savings 2,405 9,536 14,980 Excel
  • 24.
    The Importance ofStarting Investment Early Case I • Mr. A & Mr. B both aged 30 years wish to make an investment to build a Retirement Fund. • Mr. A starts immediately with annual investment of Rs.10,000/- @ 10% p.a. • While Mr. B starts investing after 10 years but with Rs.25,000/- @ 10% p.a. • Both the Mr. A & Mr. B would like to Retire at Age 60 year PND MENTOR CONSULTANTS Case I • Mr. A & Mr. B both aged 30 years wish to make an investment to build a Retirement Fund. • Mr. A starts immediately with annual investment of Rs.10,000/- @ 10% p.a. • While Mr. B starts investing after 10 years but with Rs.25,000/- @ 10% p.a. • Both the Mr. A & Mr. B would like to Retire at Age 60 year
  • 25.
    The Importance ofStarting Early Particulars Mr. A Mr. B Amount Invested Per Annum 10000 25000 Tenure of Investment 30 20 PND MENTOR CONSULTANTS Tenure of Investment 30 20 Total Investments 300000 500000 Returns @10% 10% 10% Maturity Amount 1,809,434 1,575,062
  • 26.
    The Importance ofStarting Early Case II Particulars Mr. A Mr. B Mr. C Age 30 40 50 Retirement Age 60 60 60 Years available for Investment 30 20 10 PND MENTOR CONSULTANTS Years available for Investment 30 20 10 Corpus required at retirement age 2,500,000 2,500,000 2,500,000 Rate of Returns 10% 10% 10% Annual Investment required 13,816 39,681 142,603 Monthly Investment required 1,097 3,265 12,103 Excel
  • 27.
    Simple Steps tobe a Wealth Creator!!!!! • There is no better time than today to start your investment. • Waiting for the golden moment will not help in any manner. • We all know that tax-planning investments can be done right from the start of the financial year in April, but how many people actually do it? • Transfer all risks such as death, disability, critical illness, accident, health and property to the insurance company. • Understand the consequences of risks more than anything else and do not think of insurance as an expense. PND MENTOR CONSULTANTS • There is no better time than today to start your investment. • Waiting for the golden moment will not help in any manner. • We all know that tax-planning investments can be done right from the start of the financial year in April, but how many people actually do it? • Transfer all risks such as death, disability, critical illness, accident, health and property to the insurance company. • Understand the consequences of risks more than anything else and do not think of insurance as an expense.
  • 28.
    Refrain from these6 mistakes Finally refrain from these 6 mistakes that most equity and mutual fund investors make: • Having irrational expectations. • Selling out in bad markets. • Investing short-term money in equity and long-term money in debt. • Being affected by news, interest rates, oil prices and losing confidence too soon. • Trying to time the market and waiting for the best time to buy or sell. • Getting greedy and opting for spicy derivatives, commodities, trading without understanding the risks associated. PND MENTOR CONSULTANTS Finally refrain from these 6 mistakes that most equity and mutual fund investors make: • Having irrational expectations. • Selling out in bad markets. • Investing short-term money in equity and long-term money in debt. • Being affected by news, interest rates, oil prices and losing confidence too soon. • Trying to time the market and waiting for the best time to buy or sell. • Getting greedy and opting for spicy derivatives, commodities, trading without understanding the risks associated.
  • 29.
    Last Thought !!!!!!!!!!! Evenif your financial decision is not perfect, it may still leave you in a better position than if you had done nothing. PND MENTOR CONSULTANTS Even if your financial decision is not perfect, it may still leave you in a better position than if you had done nothing.
  • 30.
    PROFILE OF ADVISOR CANimesh Dedhia is a qualified Chartered Accountant since 1999. He has also cleared examination of Certified Financial Planner. He is also holding degree of DISA (ICAI). He has more than 15 years experience in the field of Tax Planning & Financial Planning. Our ARN is 48678 & advising in the field of Mutual Fund since 2007 and served more than 300 clients. CA Nimesh Dedhia is a qualified Chartered Accountant since 1999. He has also cleared examination of Certified Financial Planner. He is also holding degree of DISA (ICAI). He has more than 15 years experience in the field of Tax Planning & Financial Planning. Our ARN is 48678 & advising in the field of Mutual Fund since 2007 and served more than 300 clients.
  • 31.
    Thank you PND MENTORCONSULTANTS Email: pndmentor@gmail.com Tel: 28284033 / 9820944648 / 49