How manage money for salaried professionals, Investment Planning, Tax Planning and Insurance Planning

1. presents
The Journey towards Financial Wellness

2. What does Financial
Planning mean to
you?
We asked over 500 salaried
professionals.

3. We got varied responses
Just buy a
property on
loan and Pay
EMI regularly!
Take a good Child Plan
and Pension Plan i.e.
Insurance, investment
and tax planning, all in
one.
Do some research and
get hold of a STOCK
which can give more
than 100% return.
Just keep earning
more.. life will
take care of
itself…
Come on! - I just
started working.. I will
think about this after
couple of years
I don't know. it is
not for me.. my
husband will take
care of it

4. Financial Planning leads to
1. More Money for Saving every month
2. Continuous improvement in Financial Wellness – there is no end to
it
3. No more falling prey to Marketing Gimmicks, know what works and
what doesn’t
4. Chase Risk and not Returns
5. Whenever you need money you will have it

5. (not exhaustive list)Payments and Transactions
1. Savings Accounts
2. National Electronic Funds Transfer
(NEFT)
3. Immediate Payment System (IMPS)
4. E-Wallet
5. Mobile Wallet
Investment Products
1. Recurring Deposits
2. Fixed Deposits
3. Debt Mutual Funds
4. Public Provident Fund/Sukanya
Samridhi Yojana
5. National Pension system (NPS)
6. Stock Market or Mutual Funds
7. Stocks
8. Gold
9. Real Estate
Insurance Products
1. Life Insurance
2. Accident Insurance
3. Motor Insurance
4. Health Insurance
5. Theft Insurance
6. Critical Insurance
7. Travel Insurance
Loan Products
1. Home Loan
2. Education Loan
3. Credit Card
4. Car Loan
5. Personal Loan
Commonly used Financial Products

6. All Products have a purpose
Payments and Transactions – Money Transfers
Investment Products – Wealth Creation
Insurance Products – Compensate Financial Loss
Loan Products – To meet emergency or for creating
assets

7. First, Let’s Look at Investment Products
• Recurring Deposits
• Fixed Deposits
• Liquid Mutual Funds
• Debt Mutual Funds
• Public Provident Fund/Sukanya Smridhi Yojana
• National Pension System (NPS)
• Stock Market or Mutual Funds
• Stock
• Gold
• Real Estate

8. PPF or FD ? Which is riskier?
 Returns on FD – 8% (but, pre-tax)
 Post Tax return on FD (30% of the return = 2.4% to be paid as
tax, leaving only 5.6% as pre tax return)
 PPF – 8.1% Return and no tax – So net return is 8.1%
Risk – the most important Factor

9. Understanding Investment Risks
• PPF or SSY offers higher returns because of Tax benefits offered
• Is PPF Riskier than FD ?, If so, what are the Risks ?
• Blocked for 15 years or even higher in case of SSY
• Interest Rate not guaranteed during tenure
• Liquidity Risk, Interest Rate Risk
• Higher Return  Higher Risk (It is not possible to get higher return
without taking more risk)
• Higher Risk ≠ Higher Return

10. Investment Fundamentals
• If higher returns promised  It will have higher risk
• Higher Return with Lower Risk  Not possible
• But at the same time – Taking higher risk does not automatically
guarantee higher return
• Investment Risk if ignored – Capital Loss - Gambling
• Investment Risk if avoided - No Real Return for those in 20% Tax
Bracket in Fixed Deposit – No Risk Product
• Investment Risk if Managed – Positive Returns

11. How to measure return?
• A = P(1+r)n
A = Maturity Amount
P = Principal Invested
r= Rate of Interest
n=No of years invested
• There is no other formula in Money
Management
• Why it is important?

12. Why Returns are important?
2016 100000
2024 200000
2032 400000
2040 800000
2016 100000
2022 200000
2028 400000
2034 800000
2040 1600000
Return on Investment – 9%
Years taken to double – 8 years
What happens to Rs.1 lakh investment
In 24 years
Return on Investment – 12%
Years taken to double – 6 years
What happens to Rs 1 lakh investment
In 24 years
The example provided above is only for illustration purpose, it does not represent any real investment products.
The purpose of this illustration is to highlight the fact that even a small difference in Interest can make an
impact

13. Historical Returns of
Various products

14. Liquid Mutual Fund Vs Savings Account Vs Deposits

15. 3030000
3119746
5721943
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
What happened when Rs 1 lakh was
invested every year?
Insurance
PPF
NIFTY
Past performance does not guarantee that it will be repeated in the future and may not be sustained
Data Source : www.nseindia.com, for NIFTY, For ppf http://www.succinctfp.com/, For endowment as recommended by
IRDA for showing benefits for illustration purposes.
CumulativeValue
ofInvestmentin
Rs.

16. What is the risk in NIFTY?
Investment Fundamental - High Return cannot happen with
out High Risk ?
What is the risk in NIFTY ?
PPF has Liquidity Risk and Interest Rate Risk

17. Let’s understand risk in
NIFTY by looking at how
Gold or Stock Market have
performed in last 20 years

18. GOLD Performance
45984680516047254045423444004300499056005850700058507000
8400
10800
12500
14500
18500
26400
31799
30221
28650
24080
0
5000
10000
15000
20000
25000
30000
35000
94-04
95-05
96-06
97-07
98-08
99-09
00-10
01-11
02-12
03-13
04-14
05-15
GOLDPer10Units
Decade
Source : www.goldprice.org
Note : Brown Bar represents value of investments after 10 years, as compared to the original investment
value Which is represented in BLUE.

19. Stock Market (NIFTY) Performance
1226 938 10091200 942 11831495
110010681100
1537
2211
1537
2211
3150
4313
3896
4340
5251
5627
5278
5950
7637
8125
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
94-04
95-05
96-06
97-07
98-08
99-09
00-10
01-11
02-12
03-13
04-14
05-15
NIFTY
Decade
Source : www.nseindia.co.in
Note : Brown Bar represents value of investments after 10 years, as compared to the original investment value
Which is represented in BLUE.

20. The risk is “Market Risk”. We don’t know
when market can go up or down,
But what we can see from these 2 charts for the period
1994-2015 (21 years) whenever investment was done
(Blue bar), 10 years later Stock Market or Gold Prices was
higher (Green Bar)
Note : Past performance may not be sustained in the future

21. Understanding and
Managing Market Risk
is key to Financial
Success
How to manage market risk ?

22. Stock Market goes up and down, what happens if invested
only once
Let’s assume Stock Market is
varying like this
Year 1 – 10
Year 2 - 8
Year 3 - 5
Year 4 – 2
Year 5 – 1
Year 6 – 2
Year 7 – 5
Year 8 – 8
Year 9 – 10
Year 10 - 12
Buy Stock Market for Rs 100000 in
Year 1
How many units will I get ? - 10000
Stock Market becomes 12 after 10
years, my 10000 units will become
Rs 1,20,000
Note : The example provided in this slide is for illustration purpose only.

23. What happens if same amount is invested in parts every year ?
Let’s assume Stock Market is
varying like this
Year 1 – 10
Year 2 - 8
Year 3 - 5
Year 4 – 2
Year 5 – 1
Year 6 – 2
Year 7 – 5
Year 8 – 8
Year 9 – 10
Year 10 – 12
This example is only for
illustration and not to be
compared with any real products
Suppose I buy stock market for Rs 100000,
but I buy only Rs 10000 every year, then
what will happen
Year 1 - For Rs 10000 – I will get : 1000 Units
Year 2 – For Rs 10000 – I will get : 1250 Units
Year 3 – For Rs 10000 – I will get : 2000 Units
Year 4 – For Rs 10000 – I will get : 5000 Units
Year 5 – For Rs 10000 – I will get : 10000 Units
Year 6 – For Rs 10000 – I will get : 5000 Units
Year 7 – For Rs 10000 – I will get : 2000 Units
Year 8 – For Rs 10000 – I will get : 1250 Units
Year 9 – For Rs 10000 – I will get : 1000 Units
Year 10 – For Rs 10000 – I will get 830 Units
In ten years I will get 29330 Units – Value of
each unit is Rs 12 – Total Value : Rs
3,51,960

24. Sensex Analysis
• It did not matter which
year investment was
started
• If Investments were
done regularly and
held for more than 12
years returns were
similar

25. Real Estate – Risks and Returns
5L’s of Real Estate
 Location
 Lettability
 Loan
 Legal
 Liquid
 Returns depends on how these risks are managed
Real Estate returns and risks

26. Returns – A Summary
Zero Risk – Zero Return
• Recurring Deposits – Returns 7.5% - 8%
• Fixed Deposits – 8%
Low Risk – Low Return
• Liquid Mutual Funds – 7.5% -8%
Medium Risk – Medium Return
• Debt Mutual Funds – 8% - 10%
• Public Provident Fund/Sukanya Smridhi Yojana – 8% - 9%
High Risk – High Return
• National Pension System (NPS) – 10%+
• Stock Market or Mutual Funds – 15%
• Gold – Similar to Stock Index
Very High Risk – Very High Return
• Stocks – Not sure
• Real Estate – Difficult to estimate

27. Ideal Investment Products
Zero Risk – Zero Return
• Recurring Deposits – Returns 7.5% - 8%
• Fixed Deposits – 8%
Low Risk – Low Return
• Liquid Mutual Funds – 7.5% -8%
Medium Risk – Medium Return
• Debt Mutual Funds – 8% - 10%
• Public Provident Fund/Sukanya Smridhi Yojana – 8% - 9%
High Risk – High Return
• National Pension System (NPS) – 10%+
• Equity or ELSS Mutual Funds – 15%
• Gold – Similar to Stock Index
Very High Risk – Very High Return
• Stocks – Not sure
• Real Estate – Difficult to estimate

28. Suggested/Probable Solution to manage market
risk
Invest every month in small amount – SIP
Wait for minimum 10 years from 1st Month Investment

29. Financial Plan?
 Have a Goal – Goal to increase
Networth Every year
 What is Networth?
 What you own – What you owe =
Investments – Loans
 Why only one Goal ?
 Networth Goal is the most realistic goal
 Invest in 3 Buckets
 Short term
 Medium Term
 Long Term

30. Investing with Purpose
Purpose in the order of
Priority
When Funds are
required?
How much Risk
can be taken?
Which products
may be
considered?
How much to
invest?
Long Term Mostly after 15 years High Risk EQUITY Mutual
Funds, NATIONAL
PENSION
SYSTEM (NPS
10% of salary after tax
or Rs 16000 p.m.
whichever is higher
Short Term Anytime Low Risk Liquid Mutual Funds Park atleast 50% of
Monthly salary year
and withdraw from this
for spending,
Mid Term (3-10 years) Family
Functions, Vacations, Down
Payment of home, Car, Home
renovation etc.
Expected with in 5
years
Possibly Medium Debt Mutual Funds,
PPF
If Liquid Mutual funds
balance crosses more
than 1 year income –
transfer here

31. What prevent us from enhancing our
financial wellness?
Temptation
Fear

32. More than 80%* of us are not
happy with our monthly savings ?
Why ? Where is our money going ?
Marshmallow Test – Research Conducted by Stanford
University professors in late 1960’s
* Independent survey conducted by Dyota Solutions from 10000 participants who have attended Investor
Awareness program till date

33. Marshmallow
No end to discretionary spending
 Mobiles, Tablets & Other Gadgets
 Apparels
 Vacations
 Eating Out
 Sale Offers
 Cars, Bikes
 Impulse buys

34. Most of us give up in the first 5 years First 5 years of SIP investment is
likely be a loss
Mostly the SIP starts performing
after 5th year
But, many of us give up in the 5th
year and will not be able to enjoy
the benefits in the 15th year
Past performance does not guarantee that it will be repeated in the future and may not be sustained
Data Source : www.nseindia.com, for NIFTY, For ppf http://www.succinctfp.com/, For endowment as
recommended by IRDA for showing benefits for illustration purposes.

35. Any Questions?

36. Insurance and Loans
Payments and Transactions
1. Savings Accounts
2. National Electronic Funds Transfer
(NEFT)
3. Immediate Payment System (IMPS)
4. E-Wallet
5. Mobile Wallet
Investment Products
1. Recurring Deposits
2. Fixed Deposits
3. Debt Mutual Funds
4. Public Provident Fund/Sukanya
Samridhi Yojana
5. National Pension system (NPS)
6. Stock Market or Mutual Funds
7. Stocks
8. Gold
9. Real Estate
Insurance Products
1. Life Insurance
2. Accident Insurance
3. Motor Insurance
4. Health Insurance
5. Theft Insurance
6. Critical Insurance
7. Travel Insurance
Loan Products
1. Home Loan
2. Education Loan
3. Credit Card
4. Car Loan
5. Personal Loan

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