basic financial concepts and the need for financial planning
TRANSCRIPT
BASIC FINANCIAL CONCEPTS &
THE NEED FOR FINANCIAL PLANNING
YOU NEED TO KNOW THESE FACTS…
• What ‘inflation’ could do to you..
• Why it pays to start investing early in life …
• Fight with moving Age / Time. How the power of compounding works!
• The difference between ‘income’ and ‘real income’...
• How to prioritize your investments …
• Why ‘equities’ are best in the long run …
Dilshad Billimoria -Certified Financial Planner
10 years 20 years 30 years 40 years
16,300
26,500
44,000
74,000Rs. 10,000 today
INFLATION ROBS YOUR PURCHASING POWER (assuming inflation @6% p.a.)
Dilshad Billimoria -Certified Financial Planner
Dilshad Billimoria - Certified Financial Planner
Source : Bloomberg , MOAMC internal analysis , Data as on 30 th April 2014Note :Past performance may or may not be sustained in future .
KEY OBJECTIVES OF INVESTINGOver FY 1979 – 2014 inflation on an average has been 8.4% , eroding purchasing power of the rupee by 94%
WHERE DO YOU INVEST YOUR MONEY TODAY?
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You have a choice!
Rs. 808
Rs. 237
Rs. 66
Rs. 17Rs. 4
5% 10% 15% 20% 25%
EFFECT OF COMPOUNDING(Re.1 Invested for 30 years)
Dilshad Billimoria -Certified Financial Planner
Dilshad Billimoria - Certified Financial Planner
Source : Bloomberg , MOAMC internal analysis , Data as on 30th April2014Note :The information herein is used for comparison purpose and is illustrative and is not sufficient and shouldn’t be used for the development or implementation of an investment strategy. It should not be construed as investment advice to any party. Past performance may or may not be sustained in future .
KEY OBJECTIVES OF INVESTING
5%
33%
6.36%
InflationTaxReal Income
WHY IS REAL INCOME SO IMPORTANTIf an investment is giving you 10% return…
Focusing on Real Income is important for wealth creation
Dilshad Billimoria -Certified Financial Planner
Data from SBI/RBI and BSE Sensex : 2000-2012
INVESTMENT PERFORMANCE IN VARIOUS ASSET CLASSES
Gold Equity Gilt Bonds FDs02468
10121416
Investment Performance
Investment Per-formance
8%
15.96%
9.58%8.57%
6.30%
Dilshad Billimoria -Certified Financial Planner
Dilshad Billimoria - Certified Financial Planner
SENSEX PERFORMANCE HISTORY- DIVERGENT BUT MOSTLY POSITIVE
Source: MOAMC Internal Analysis. Data as on 29th May, 2014.
However, the Positive Years are Twice the Negative Years
What is Asset AllocationAn investment that provides investors with a portfolio of a fixed or variable mix of the three main asset classes - stocks, bonds and cash equivalents - in a variety of securities.
Diversification is the highest form of Asset Allocation.Asset Allocation helps tide over different market conditions, since, no single asset class, continuously outperforms the other.Therefore, to ensure an above average portfolio return is maintained, asset allocation should be the basis of any and every portfolio!The percentages of allocation among asset classes may differ, according to age profile, income needs, goals, time horizon and risk profile of clients.
Dilshad Billimoria - Certified Financial Planner
ASSET ALLOCATION
Dilshad Billimoria - Certified Financial Planner
DIVERSIFICATION
Sir John Templeton
“The only investors who shouldn’t diversify, are those who are right one hundred percent of the time”
WHAT IS RETIREMENT?
Dilshad Billimoria -Certified Financial Planner
• When a person chooses to leave the workforce. The concept of full retirement – being able to permanently leave the workforce in old age – is relatively new, and for the most part only culturally-widespread in first-world countries. Many developed countries have some type of national pension or benefits system (i.e. the United States' Social Security system) to help supplement retirees' incomes.Investopedia explains 'Retirement‘
• Dramatic advances in healthcare have extended the lives of people in, predominantly, first-world and developed countries. That means that without adequate personal savings and/or pensions, people could easily outlive their retirement funds. In times of economic downturn retirees may choose to "come out of retirement" and re-enter the workforce on a seasonal, part-time or full-time basis to earn income and obtain benefits, especially costly health insurance coverage.
WHAT IS RETIREMENT?
Dilshad Billimoria -Certified Financial Planner
Retirement Calculation
FIND OUT YOUR RETIREMENT CORPUS NEEDED
Dilshad Billimoria -Certified Financial Planner
• Rate of interest.• Rate of inflation.• Any charges in the product.• Any guarantees and if so in writing.• What is the real return.• What is your life expectancy.• Are your savings enough.• How will my portfolio look in 10 years, 20 years..• How to handle the income distribution phase in
Retirement.
WHAT ARE THE FACTORS TO CONSIDER WHILE CHOOSING INVESTMENT OPTIONS: BE AN INFORMED INVESTOR
YOU NEED A TRUSTED CERTIFIED FINANCIAL PLANNERDilshad Billimoria -Certified Financial Planner
Dilshad Billimoria - Certified Financial Planner
ROAD TO FINANCIAL SECURITY
“ Planning the future into the present, so that you can do something about it now” - Alan Lakein
Financial Planning is a process of meeting your life goals through the proper management of your finances
Dilshad Billimoria - Certified Financial Planner
WHAT IS FINANCIAL PLANNING?
Dilshad Billimoria - Certified Financial Planner
WHY FINANCIAL PLANNING?
The risk in old age is not of premature death.
The risk is that you will live too long and outlive your assets.
- Burton Malkiel
A Process that helps Answer
• Where you are now? • What is you need in the future?, and • How you will achieve your ‘Financial Goals’
Dilshad Billimoria - Certified Financial Planner
HOW DOES IT WORK?
Gathering Client Date including Financial Goals
Analyzing and Evaluating your financial status
Developing and presenting Financial
Plan
Implementing your Financial PlanningRecommendations
Monitoring and review of Financial
Plan
Dilshad Billimoria - Certified Financial Planner
FINANCIAL PLANNING PROCESS
OUR PROCESS
• Specialist – Certified Financial Planner® recognized the world over as Professional for personal financial management. It is a Gold Standard.
• Process Orientation – End objective is to Plan for achievement of Client Goals– Specific– Measurable & Meaningful– Agreed to and Attainable– Reality-based– Time-bound
• Long Term – Works by establishing trust and building long term relationship with Clients– We are there for you both in Good Times & Bad Times
• Client Centric Advice– No Hidden Agenda - Objective Advice free from conflict of interest
Dilshad Billimoria - Certified Financial Planner
HOW IS A FINANCIAL PLANNER DIFFERENT?
Dilshad Billimoria - Certified Financial Planner
THE DISTINCTION
FINANCIAL PRODUCT SALESMEN• Product Centered• Sell what he will benefit from• Transactional relation.• Commission based.• Short-term Focus
FINANCIAL PLANNER• Client Centric• No conflict of interest.• Continuing Relationship.• Long-term Focus• Financial Product/Vendor neutral• Not driven by AUM Targets
Dilshad Billimoria - Certified Financial Planner
FUNDAMENTAL PRINCIPLES OF SOUND FINANCIAL PLANNING
• Flexibility• Liquidity• Realistic• Time-Bound• Protection• Tax Optimization• Monitor and Review
Dilshad Billimoria - Certified Financial Planner
INVESTMENT V/S SPECULATION
Speculation is the purchase of an asset for the conservation of wealth and the increase of wealth, with the emphasis on the increase of wealth
Investment is the purchase of an asset for the conservation of wealth and the increase of wealth, with the emphasis on the conservation of wealth
“A trader reacts to price. An investor, to fundamentals”
Dilshad Billimoria - Certified Financial Planner
SUCCESSFUL INVESTING
• DISCIPLINE and REGULAR investing are the keys to successful investing, especially in volatile markets.
• HYPE, FEAR, IRRATIONAL DECISION MAKING, EXCITEMENT and INDISCIPLINE are the worst enemies of successful investing, especially in volatile markets.
Dilshad Billimoria - Certified Financial Planner
INVESTING TO WIN
Many also believe that to get higher returns, means you have to take on greater risk. Nothing could be further from the truth.”
- Robert Kiyosaki
“ I realized the reason most people invest not to lose, is because most people think investing is risky or that investing is gambling.
Dilshad Billimoria - Certified Financial Planner
WHY US! WHY DILZER
Dilshad Billimoria - Certified Financial Planner
3 PILLARS OF STRENGTH & STABILITY
Dilshad Billimoria - Certified Financial Planner
Trust
Fiduciary Responsibility
Integrity
Walk our Talk
Dilshad Billimoria - Certified Financial Planner
Competence
Beat Benchmark Returns
Deliver Bottom Lines
Tactical Asset Allocation to meet Strategic Goals (monitor portfolios closely with Trigger points)
Research Reports.
Risk Tolerance
Technology driven Process & Systems
HOW
Dilshad Billimoria - Certified Financial Planner
Credibility
ISO 9001 Certification
Panel of outlook Money advisor
CNBC TV18 2008 Nominee
Media Advice
MDRT/COT Awards
HOW
Website: www.dilzer.netEmail: [email protected]: 91.80. 41512337 / 91.80. 41136147
Linkedin: in.linkedin.com/in/dilshadbillimoria
Dilshad Billimoria.FOUNDER AND CERTIFIED FINANCIAL PLANNER.DILZER CONSULTANTS PVT LIMITED.
Thank you for your time!
Dilshad Billimoria -Certified Financial Planner