This document provides an introduction to various concepts in personal finance including time value of money, net present value, methods for investing like stocks, mutual funds, real estate and gold. It discusses tools for financial planning like calculating how much to save for retirement. It also covers different types of insurance like term, health and critical illness insurance. The document aims to educate about financial concepts and recommend strategies for investing, tax savings, and risk management.

1. Introduction to Finance

2. Expectation

3.  Time value of money
 PV, FV
 Power of compounding
 NPV ( Net Present Value )
 Planning retrials
 Comparing projects
 Short term investment plan
 Invest in stock
 SIP
 Tips on saving on Tax
 Invest in Gold and option
 Buying home vs renting
 Insurance
 Term insurance
 Health insurance
 Top up plans
 Critical illness insurance
Agenda

4. Time Value of Money

5. SMS Hangama
Get a Rs. 60 lacs on your retirement by investing 3000
per month
What does 60 lacs mean for you after 30 years ?
Is 3000 per month reasonable ?

6. PV, helps us to answer those questions.
PV gives us the present value of the future money.
[ To Excel ]
Present Value (PV)

7. Opposite of PV
FV helps us understand what will be present money will be worth in
the future.
Problem:
“Pay 50000 now and get 500000 after 20 years”
What should be the return if your rate of return is 12% ?
[ Excel ]
Future Value (FV)

8. Compounding

9. Difference in return rate
“Imagine if you have two investment option, one earns
8% and the other one earns 9%. Let us say you put 1
lakh”
What would be the return in actual at the end of 20
years ?

10. Net Present Value (NPV)

11. NPV helps solving these problems
“Does going for refinancing of your existing loan benefits
you”
“Should you go for investing on land or apartment”
“Should you go for Used car vs New car”
Any two options can be compared from financial perspective
using NPV

12. What is NPV
Ct = net cash inflow during the period
Co= initial investment
r = discount rate, and
t = number of time periods
C0

13. Problem
“A sales rep visits you and proposes to replace all of your
fluorescent lamps with LEDs. The replacement costs you
10000. She claims that it will save you 50% of lighting
electricity cost. Your lighting electricity cost as of now is Rs.
600 per month. The life of the lamp is 3 years and covered
under warranty. Should you buy this or not.”
Assumptions:
1. Your electricity bill gives spit of lighting usage and other
usage ( for ease of calculation )
2. The electricity cost does not change over next 3 years

14. Comparing Projects

15. Comparing Using NPV
Calculate the NPV of each of the affordable investment
option and chose the one with Highest NPV.
[ Housing calculation example ]

16. Buying vs Renting
[Go to excel ]

17. Evaluating Worth of Asset

18. Problem
“You are planning to buy a property which is earning a
rent of 20000 per month. The expected rental growth is
5% per year. The life of the property is 50 years. The land
cost in the area is 18 lakhs, the land cost is expected to
grow at 9% every year.”

19. Planning Retire

20. Key Questions
1. When do you want to retire?
2. How much money you may needed to lead retired
life?
3. How much money I should start saving to get the
corpus
[ To Excel ]

21. How and where to Invest

22. Real Estate
1. The asset is constant
2. Demand increases as the population grows.
3. Nothing can beat Real-Estate.

23. Stock Market
1. Stocks are considered as the next best alternative
2. Assuming you cannot invest your own business directly
3. Risk is higher especially if you fail to pick the right stock.
4. Stock market has generated more than 12% of returns
which can beat the inflation
5. Trust worthy advisors can be hired for a fee to pick stocks
6. It is very similar to Real-estate investment, you should
hold for long term and not should not be panic for
general market variations
7. Registering for SIP would give levy from market variance

24. Small Caps, Mid Caps, Large Caps
1. Small Caps gives higher return and imposes higher
risk
2. Large Caps gives lower returns and are less risk
3. Investment can be made splitting in these segments
– 20%, 50%, 30% respectively.
4. As you grow older, reduce small cap and invest in
large caps

25. Equity Mutual Funds
1. This is to reduce the risk of wrong stock picking.
2. Fund managers will manage the fund.
3. A fund management fee will be there which is
typically 0.5 – 2 % of the invested amount.

26. Liquid Mutual Funds
1. This is carefully managed fund for protecting the
capital.
2. So, this can be treated as short term investment
3. Most % of investment would go to bond.
4. Returns are less
5. Better than FD as it can be withdrawn anytime
whereas FD has fine involved for pre-matured
withdrawal

27. Invest in Gold
1. Gold should not be treated as primary investment
instrument
2. It helps at the time of higher inflation
3. 5% of your overall investment can be invested in
Gold
4. Gold ETF or Gold Funds can be purchased.
5. Directly buying good is not a good option as it
involves protecting the asset

28. Choosing Mutual Funds
1. Find the Expense Ratio. It should be lesser
2. Find the track record of fund managers
3. Find Entry/Exit load

29. Diversify
1. Split your investment into different instruments
2. An example split for Mid Age would be like this
Equity - 65%
Debt Fund - 30%
Gold - 05%

30. Tips on Saving Tax
1. You can pay rent to your Father/Mother if staying
together
2. Buying house helps in saving tax.
3. Let out property would save more tax at the initial years
4. Interest paid when house is under construction can be
claimed as loss for 5 consecutive years split equally
5. Long term gains in stock market ( 3 years ) does not incur
any income-tax

31. Insurance

32. Term Insurance
1. Buy pure term insurance to at least cover your
liabilities
2. Do not club insurance and investments. Keep them
separate
3. At least 5 times your annual income + your liabilities
should be your cover

33. Other Insurance
 Health insurance
 Top up plans
 Critical illness insurance