This document discusses strategies for wealth creation and preservation through financial planning and investment advice. It makes the following key points: 1. Saving regularly and financial planning are important for stable living standards and preserving wealth against risks. Professional advice can help enhance returns in both good and bad markets. 2. Equities have potential for high returns but are volatile, while fixed income carries less risk but also lower returns. A diversified portfolio is important. 3. Inflation erodes the real value of money over time, so investments need to beat inflation for true wealth preservation. Equities have historically outperformed inflation where other assets have not. 4. Seeking professional financial advice can help individuals understand investments,

1. 1
Wealth Creation and Preservation
How Professional Advice Makes A Difference
July 2015
test

2. 2
test
 Saving and Financial Planning are Two Pillars of Successful Wealth Preservation
 Saving Enables A Stable Standard of Living Across Economic and Career Cycles
 Financial Planning Can Help to Protect Against Risks and Preserve Real Wealth
 Risks And Rewards In Investments
 Time Value of Money and Erosion of Wealth by Inflation
 Equities Deliver High Returns, But Are Volatility
 How An Advisor Can Help You
 Specialised Knowledge of Different Asset Classes
 Equities Is The Only Asset Class That Appreciates More Than Inflation
 Professional Advice Can Help To Enhance Returns Both In Downturn And Upturn
 Reasons For Optimism On India And On Indian Equities
 Upturn In Macro-Economic Cycle
 Appetite For Equities And Valuations Have Recovered
 Watch Out For
 Rebound In Interest Rates

3. 3
Time Value Of Money – The Power Of Compounding
84,659
6%
405,309
7% 8% 9%
0
136000
272000
408000
25 35 45
Annual Savings Needed To Reach
Target INR1crore At Age 60
 INR12,000/year @ 9% compound interest
 ↑ to INR28.3L at age 60
 If savings begin at age 25
 Starting 10 years later → INR11.2L
 Starting at age 45 → less than INR4L
 Target savings of INR1 Crore at age 60
 INR84k if savings begin at age 25
 INR1.7L if begun at age 35
 INR4L if begun at age 45
 Each decade of delay more than doubles
the required annual savings
Starting at age
25
Starting at Age
35
Starting at Age
45
0
1,000,000
2,000,000
3,000,000
6% 7% 8% 9%
Value Of INR12,000 p.a. At Age 60
4.0 Lakhs

4. 4
Inflation – The Wealth Destroyer
549
444
400
600
800
1000
0 1 2 3 4 5 6 7 8 9 10
Value Of INR1000 After Ten Years
1994 - 04
2004 - 14
1964 - 74
1974 - 84
1984 - 94
-2%
5%
12%
19%
Mar64 Mar74 Mar84 Mar94 Mar04 Mar14
Inflation In India
(measured by GDP deflator)
 Over 50 years of relatively high inflation
 1964 – 2014 mean inflation is 6.9%
 Measured by the GDP deflator
 Consumer prices saw a spurt in 2009 – 13
 Shrinking deficit are now ↓ inflation
 Too early to expect long term low
inflation
 Persistent long term erosion of wealth
 In each of the past five decades
 Real value of money falls to less than half
in a decade
 Worst case erosion of 60% in 1984 - 94

5. 5
Equities Deliver High Returns But, Are Volatile
 A good year or two can deliver high return
 Rs.100 invested at start of 2006 in small-cap stocks rose to Rs.238 in 2 years
 But, a bad year can wipe it all off
 fell to Rs.85 at end of 2008 !
 Large-cap stocks fared badly in 2008 yet, they preserved the capital
 Even as Rs.100 invested in corporate bonds rose to Rs.128 !
128
123
85
91
103
238
235
216
0 80 160 240
AAA bond
Government bond
Small-capstocks
Mid-cap stocks
Large-capstocks
Start-2006
End-2006
End-2007
End-2008

6. 6
What Do We Say To Young Professionals And, How Can We Help You?
1. SAVE regularly, starting NOW
2. SAVE TAXES LEGALLY
3. DIVERSIFY
4. UNDERSTAND YOUR LIFECYCLE investment needs
5. ASSET ALLOCATION has greater impact on returns than INDIVIDUAL / STOCK PICKING
6. Periodically (but not frequently) REBALANCE
You may more greatly appreciate the:
 Dangerous effects of market noise
 Need for Professional Advice that provides you with “Thorough Analysis”
 Imperative to focus on Capital Preservation with “Safety of Principal” being paramount
 Benefits of realistic expectations and the risks of being greedy . “Adequate Returns” is the
objective
 Rarity of finding a friendly advisor who has no conflicts and maintains “Confidentiality and
Security”
 Enjoyment, but also discipline of keeping a small amount aside for fun

7. 7
Sensible Advice Can Help You To Lessen Risks And To Reap The Rewards
Understand
Objectives
Existing
Portfolio
Fresh Asset
Allocation
Optimization
of Individual
Securities
Regular
Review
• Situation in
personal life
cycle
• Age
• Profession
• Family situation
• Present and
future
requirements
• Check for
mismatch with
objectives
• Asset Allocation
and particular
securities’ risks
• Match with
objectives
• Evaluate classes
o Cash
o Equities, MFs
o Debt, Fixed
Income
o Real Estate
o Other Products
• Concentration
and dispersion
• Sustainability
• Tenor and
maturity
• Liquidity
• Tax
optimization
• Fixed Income
allocation
across yield
curve
• Diversification
• Minimize costs
• Portfolio tracker
• Quarterly or
more frequent
reviews
• Sharp eye on
macro
indicators and
looking beyond
the curve
• Suitable new
products
• One on one meetings
• Assistance in clearly
defining objectives
• Gathering of data
• Research team at
work
• Addressing of queries
and collection of any
missing data
• Research team
completes work
• Dialogue on
recommendations
• One on one meetings
and iteration on
finalizing allocation
• Detailed work on
individual securities,
investment schemes
and products
• Dialogue and
finalization of
investments within
asset classes
• Monitor performance
• Introduction of new
suitable products
• Portfolio tracker and
communication
frequency set by
individual
preferences
Focus
Activities

8. 8
Typical Suggested Portfolio For A Young Professional
Bank & FD
19%
Debt MF - LT
10%
Debt MF - ST
9%
Equity MF
62%

9. 9
Equities Is The Only Asset Class That Appreciates More Than Inflation
 Regular investment in equities has
appreciated more than inflation
 2001 to 2007
 Extraordinary period for equities
 Low inflation (GDP deflator) of 4.7%
 Nifty (monthly) IRR of 36.0%
 Debt returns 7.0% to 10.8%
 2008 to 2014
 Inflation (GDP deflator) ↑ to 8.0%
 Nifty (monthly) IRR ↓ to 14.6% and
yet was above inflation
 Debt returns too ↑ but were below
inflation after tax
 A few other asset classes may, at times,
beat inflation e.g. real estate
 But, may lack liquidity and
transparency of public equities
Nifty(SIP)
GOI 10-year
AAA 3-year
BBB 3-year
Bank
deposit
Inflation
(GDPdeflator)
0% 12% 24% 36%
2008 - 14
2001 - 07
Note: Nifty returns are the IRR of a regular monthly allocation for 7 years

10. 10
Regular Investment Over Reasonably Long Duration Delivers High Returns
14.2%
17.9%
15.2%
13.5%
7.6%
8.7%
7.5%
14.6%
0.0% 12.0% 24.0% 36.0%
2006
2007
2008
2009
2010
2011
2012
2013
2014
IRR For Monthly Investment In Nifty
Index
7 years
10 years
-52%
0%
52%
104%
1996 1999 2002 2005 2008 2011 2014
Change in the Nifty Index (y-o-y) - 1996 to 2014
 6 years from 1996 and 2014 saw Nifty ↓
 But, a regular monthly investment always
delivers positive returns
 7 years : 7.5% to 36.0%
 10 years: 13.5% to 26.3%

11. 11
How Can Professional Advice Help To Enhance Portfolio Returns?
Recognise the mistakes of the past and follow a discipline while managing your portfolio
A. A few common mistakes in the years preceding the great recession
 Failure to monitor allocation across asset classes
 Excessive allocation to riskier segments
 Mistaken comfort from high returns
B. And, a few other mistakes in the years after 2008
• Excessive aversion to risk
• Late allocation to equities
C. A few disciplines that have proven their value
• Measure performance and monitor allocations
• Anticipative allocation based on macro and global drivers
Portfolio returns can be highly sensitive to allocations and revisions
A. 2006 – 2008: Allocations alone could lift total return in 3 years from 5% to 28%
B. 2009 – 2014: Allocations could lift total return in 6 years from 68% to 99%

12. 12
How Advice Could Have Helped ↑Returns In 2006-08 From 5% To 28%
Scenario A
 Jan06 - equities are allocated 80% of total value
 Jan07 - funds transferred from equities to debt
to preserve original allocation
 Jan08 - more funds transferred out of equities
after valuations near the peak
 Dec08 - fall in equity prices pulls down allocation
even lower
Portfolio returns
2006 30%
2007 55%
2008 -36%
Total return in 3 years 28%
Scenario B
 Jan06 - equities are allocated 80% of total value
 Jan07 - allocation to equities ↑ to 84%
 Jan08 - allocation to equities ↑ to 89%
 Dec08 - fall in equity prices ↓ allocation to 76%
Portfolio returns
2006 30%
2007 57%
2008 -48%
Total return in 3 years 5%
The years running up to the onset of the great global recession in 2008
What made the difference? Overcome the temptation to stay invested in equities after the
great rally of 2005 – 2007 and, re-allocate a part of the portfolio to the lower risk debt
asset class.

13. 13
Experienced Advice Overcoming Extreme Pessimism: 2009-14
Scenario C
 Jan09 - equities are allocated 10% of total value
 Jan12 - equities share ↑ rises to 12%; allocation
↑ to 30% by transferring funds from debt
 Jan14 - equities share ↑ to 33%; allocation ↑ to
65% by transferring funds from debt
 Dec14 - equities share ↑ to 70% after rally in
2014
Portfolio returns
2009 - 2011 25%
2012 - 2013 24%
2014 29%
Total return in 6 years 99%
Scenario D
 Jan09 - equities are allocated 10% of total value
 Jan12 - equities share ↑ rises to 12%; allocation
held unchanged
 Jan14 - equities share ↑ to 13%; allocation ↔
 Dec14 - equities share ↑ to 15%
Portfolio returns
2009 - 2011 25%
2012 - 2013 19%
2014 13%
Total return in 6 years 68%
The years during the recession and through the recovery
What made the difference? Overcome the fear of equities and gradually raise allocations
during the early years of the recovery in the economic cycle.

14. 14
What Attracts Foreign Portfolio Investors To India?
181,052
132,572
144,679
147,641
187,020
- 50,000 100,000 150,000 200,000
DJIA, 8.0%
FTSE 100, 2.0%
NIKKEI 225, 3.7%
Hang Seng, 4.1%
Sensex (USD), 8.6%
USD1000 /month invested for 10 years ended December 2014

15. 15
GDP acceleration poised to make India fastest growing USDtrillion+ region
 International Monetary Fund forecasts India’s
real GDP growth at 7.5% for 2015-2020
 The fastest growth in the USDtrillion+ league
 India’s GDP may exceed USD3trillion in 2018
India
China
Japan
Germany
USA
-1.0
3.0
7.0
11.0
2010 2013 2016 2019
Real GDP growth (y-o-y %)
 Share in global GDP steadily inching up
 Share in incremental GDP is near 6%
3.7
6.0
-1.0
2.5
6.0
9.5
2010 2013 2016 2019
Share in global GDP (%)
India's GDP/ WorldGDP
Change inIndia's GDP/
Change inWorldGDP

16. 16
USD1.3 trillion incremental GDP 2014 – 2019f, next only to China and USA
2050
0 6000 12000 18000
Russia
India
Brazil
France
UK
Germany
Japan
China
USA
2014 GDP, USD billion
Source:IMF
1262
0 1600 3200 4800
Brazil
France
Russia
Germany
Japan
UK
India
USA
China
Incremental GDP, 2014 - 2019, USD billion
Source:IMF

17. 17
Upturn in cycle began in 2014, could extend into 2016-17
 Equities share of wealth ↑ 1% in 12 mths to 3.5%
 Peak at 6% (2000) and 7.5% (2008)
 Prolonged downturn after last peak in 2008
 Upturn began in March 2014; could extend for 3
years or more
 Evolving mindset may transform investors’ habits
 ↑ diligence before stock selection
 Larger allocation to specialised portfolio
managers
 ↑ stability of trading volumes
0%
2%
4%
6%
8%
Jan00 Dec01 Nov03 Oct05 Sep07 Aug09 Jul11 Jun13 May15
Proportion of equityassets to bank deposits

18. 18
Inflation Is In Long-term Decline
WPI
Food
-3
5
13
21
Oct07 Apr09 Oct10 Apr12 Oct13 Apr15
WholesaleInflation
CPI
Food
3
7
11
15
Jan12 Feb13 Mar14 Apr15
ConsumerInflation
-4.0
2.0
8.0
14.0
2005-06 2008-09 2011-12 2014-15
Average Food inflation for 8 months,
October to May (annualised, %)
WPI-Food CPI-Food
-2.0
1.5
5.0
8.5
Oct07 Apr09 Oct10 Apr12 Oct13 Apr15
Manufactured Products Inflation

19. 19
Could The Rate Cycle Turn Up in 2016?
Repo
0.0
3.4
6.8
10.2
Jun02 Sep05 Dec08 Mar12 Jun15
Rolling 4-quarter GDP growth (y-o-y)

20. 20
Starting Steps On The Path To Wealth Creation And Preservation
 Define a monthly savings target amount
 Essential documents such as PAN, proof of address, bank account, demat account etc.
 Consult a wealth advisor on the available options and select an allocation plan
 Monthly allocation across asset classes as per the plan
 Monitor performance and review allocation at quarterly or annual intervals

21. 21
The Income Tax Act allows saving on income tax if we contribute to
 Under sec 80 C upto Rs 150000
 Employee Provident Fund (EPF)
 Public Provident Fund (PPF)
 Life Insurance
 Children’s school/college fees
 Equity Linked Saving Scheme (ELSS)
 Repayment of principal amount of home loan
 Pension schemes as specified under the act
 Fixed Deposit with a scheduled bank for 60 months
 NSC VIII
 Under sec 80 D upto Rs 25000
 Mediclaim for self, spouse, children and dependent parents

22. 22
Starting Steps
 Segregate amount to be saved of total income
 Approach an advisor who can analyse your risk profile
 Identify the investments for tax saving of the segregated amount
 Balance amount to be identified for investing based on
 Risk-thereby creating an asset allocation
 Future needs-could be for own marriage or buying of house
 Mode of investment SIP or lump sum but has to be regularly

23. 23
Starting Steps
 What is required
 For most investments a Know Your Customer (KYC) needs to be done thus the most common documents required
are……
 Your PAN card copy
 Your address proof
 For opening a demat and trading account for secondary market trading (shares) there would be additional
documents required as per SEBI rules.
 Way forward
 Monitor the investments at periodic intervals with the advisor
 Monitor the asset allocations as they will change with changing times and life cycles