financialplanning & mutualfunds

7/31/2019 FinancialPlanning & MutualFunds

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Financial Planning and Mutual Funds


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Life is a roller coaster ride- full of ups and downs. We all know we have to save for many responsibilities life brings along with it.But no matter how much you save- Its Never Enough!

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Why Does One Need To Invest?


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Why Invest?

Retirement

Daughters Marriage

Childrens Education

BuyHouse

Buy Automobile

Marriage

StartCareer

AGE 25 28 30 35 40 50 60

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Why Are Investment Decisions Difficult?

Selection of appropriate investments

What if I need the money before the targeted date?

What paper work is needed?

How often do I monitor these investments?

How do I ensure safety?

Who will inform me on the progress regularly?

What are the tax implications - Can I keep the return or will the tax-man keep it?

What if I lose the proof of investments?

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What Investment Is Appropriate?

Debt: PPF, Post Office Scheme, Fixed Deposits, Debentures, Bonds, Income Funds, Liquid Funds

Equity: Individual Stocks, Growth Funds, Sectoral Funds

Banks: Bank Deposits

Or a mix of the above!

A good investment is one that helps you maximise your total returns, net of taxes and inflation over the time period you invest for!

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When I was young, I used to think

that money is everything in life

Now that Im old, I know it is.

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Why financial planning?


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Did You Know ?

If your current monthly expenses are Rs. 30,000/- per month, then after 20 years you will require Rs. 80,000/- a month to

just maintain the same lifestyle!

An education degree for your child which currently costs Rs. 20 lakh could cost over Rs. 34 lakh after 11 years!

At inflation of 5%

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Individual Investor Needs: Investment Goals

All individuals need to save for Retirement

Childs education / marriage

Medical emergency

Other family obligations

Every individual has one or more of the above goals

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Individual Investor: Life Stages

Earnings (Consumption + Savings)

Consumption

Savings

22 27 40 60Young Independent Young Married Middle Age Retirement

All individuals have a finite period to save for their investment goals

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Performance Of Various Asset Classes

Cumulative annualised returns: 1982 to 2011

8.96%

6.75%

2.08%

16.75%

9.37%

WPI Inflation Bank FDs* BSE Sensex*

Growth Real Growth

Equities outperform other asset classes over the long term

*Individual real growths for bank FDs & BSE Sensex have been calculated for each year from 1982 -2011. Post this calculation a CAGR has been calculated for the same. Hence the real growth of both Bank FDs & Sensex is not equal to the growth minus the WPI Inflation.Source: IIFL, Internal; *1-3 year deposit rate; ^excluding dividends; data as at end FY2011

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Individual Investors Are Scared Of

The Downside Risk in Equities The Risk of Market Volatility The Risk of Market Timing

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What else makes a material impact on investments in equity?


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Investing in the BSE Sensex

Returns* are from Jan 1980- Mar 2011

17.39% 16.71%

16.00%

Fixed investment at Fixed investment atlowest sensex value highest sensex value

every year every year Fixed investment on 1 st day of every month

Market timing does not matter over the long term

Source: Internal; *XIRR, time period considered Jan 2, 1980 to Mar 31, 2011

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The Power of Compounding

Saving a small sum of money regularly in equity mutual funds can make your money work with greater power and can have a significant impact on wealth accumulation.

BSE Sensex BSE SensexScenario A Scenario B

Number of years 15 20

Monthly investment Rs 5000 Rs 5000

Total investment Rs 9 lakh Rs 12 lakh

Assumed annualised return 18% 18%

Final corpus Rs. 45.96 lakh Rs. 1.17 crore

The above illustration is merely indicative in nature and does not in any manner indicate the performance of any of the schemes of DSP BlackRock Mutual Fund. Please read the Scheme Information Document and Statement of Additional Information carefully before investing.

Even a seemingly small 5 year delay can cost you the CROREPATI tag

Time Period of 25 years; Hypothetical numbers meant only for illustration purpose

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Summary

Investors needs to save regularly

and invest those savings in higher return assets to create wealth

Long Term Systematic Monthly Investment In equity schemes

is ideal for this !

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How Do You Achieve Your Financial Goals?


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Retirement Planning

Monthly Household Expenses

Rs 30,000

Inflation 5%21 Yrs

Today

Corpus required

per month

Rs 83,579

Retirement corpus required to meet post retirement expenses (if invested at 7%) : Rs 1.4 cr

Monthly investment needed to achieve this corpus in 21 years

at 12% Rs 12,583

at 15% Rs 8,083

at 18% Rs 5,090

At the time of retirement


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Retirement Planning

Educational Degreefor Child

Corpus required

Rs 34,20,000

Rs 20,00,000

Inflation 5% Monthly investment needed to achieve this corpus in 11 years11 Yrs at 12% Rs 12,456

at 15% Rs 10,166

at 18% Rs 8,237

Present When your Child actuallygoes for this degree


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Retirement Planning

Childs Marriage

Corpus required

Rs 43,70,000

Rs 20,00,000

Inflation 5% Monthly investment needed to achieve this corpus in 16 years

16 Yrs at 12% Rs 7,509at 15% Rs 5,466

at 18% Rs 3,925

Present When your Child actuallygets married


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Introduction to Mutual Funds


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What Is A Mutual Fund?

A pool of money, collected from investors, invested according to certain investment objectives

Ownership in hands of investors whove pooled in their funds.

Managed by a team of investment professionals

The pool of funds invested in portfolio of marketable investments.

Investors share denominated by Units that have a Net Asset Value ( NAV) which changes everyday

The portfolio is created according to stated investment objectives

Investors make money through Capital appreciation and Income distribution

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What Are The Advantages Of Mutual Funds?

Portfolio diversification

Professional Management

Reduction in Risk

Service

Affordability

Reduction in Transaction costs

Liquidity

Convenience and Flexibility

Tax Efficiency

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Three Basic Types

Mutual funds come in three basic types

Equity or stock funds

Bond or income funds and

Money market or cash funds.

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Other Classifications

Growth/ Value/ Income

Options- Growth / Dividend /Reinvestment

Sectoral Funds

Specialty Funds

Offshore Funds

Open ended/ Close ended

Diversified Equity

ELSS Funds

Index Funds

Hybrid/ Balanced Funds

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How To Choose The Right Scheme?

Determine your financial goals and your time horizon

Determine your tolerance for risk

Study the objectives of the funds available and match them with your need

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Fund Suitability - Risk Versus Return

Sector

Diversified

Returns

Balanced

Income

Liquid

Risk

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March is a particularly risky month to invest in the stock market, the others are.

July, February, January, April, September, August, May, June,

December, October & November.

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When they say time is money, they must mean Systematic Investment Planning


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Disclaimer

This presentation shall not constitute any offer to sell or solicitation of an offer to buy units of any of the Schemes of the DSP BlackRock Mutual Fund .

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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