investment planning for executives - sushil alewa

7/29/2019 Investment Planning for Executives - Sushil Alewa

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Investment Planning for Executives

An initiative of SEBI & NISM


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Need for financial education

Deterioration of personal finances

Proliferation of new and complex

financial products


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Agenda

Introduction to financial

planning

Basics of savings and

investments

Choosing the rightinvestment options

Asset allocation strategy

Self portrait

Savings and investmentrelated products

Protection related

products

Borrowing related

products

Retirement planning

Planning finances to

become an entrepreneur

Understanding Ponzi

schemes Tax saving options

Purchasing financial

products

Advantages of financialeducation

Investor protection and

grievances redressal

mechanism


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Financial planning


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Basics of Savings and

Investment Savings

Short term

Value remains stable

Lower returns overlong term

Investing Long term

Value moves up and

down in short term

Potentially higher

returns over long

term


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Price of procrastination

Twin brothers: Anil and Sunil

Anil saved from the age 25 years till

35 years. He did not withdraw till 60

Sunil started saving at 35 years, but

continued till 60 years

Both saved Rs. 50,000 per year and

earned 10% p.a. on theirinvestments


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Price of procrastination

Twin brothers: Anil and Sunil

Amount accumulated at 60 years

Rs. 86 lacs

Rs. 49 lacs


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Ask yourself

Can you reduce your spending by10%

Put that money to work to fund your

future financial goals


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BUDGETING


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Benefits of budgeting Checks or balances to prevent

overspending

Unexpected need for funds

Discipline

Helps maintain standard of living


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Steps for budget planning Calculate your income

Determine your bill for essentials

Note down your total debts Determine your bill for non-essentials

Calculate your savings


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WHAT IS INFLATION?


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Effects of Inflation

Item Price in

2001-02

Price in

2009-10

Sugar (1 kg) Rs. 16 Rs. 40

Cooking oil (5 liters) Rs. 290 Rs. 500

Rice (1 kg) Rs. 14 Rs. 35

Petrol ( 1 liter) Rs. 33.46 Rs. 48.83


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Inflation Effects on Investments

InvestmentInitial investment Rs. 1,000

Interest on investment 5% p.a.

Value after a year Rs. 1,050

Inflation 6% p.a.

Your expenses after a year Rs. 1,060


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RISK AND RETURN


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Risk and Return

Risk and investing go hand in hand

Risk increases as the expected

potential return increases

No-risk, whats that?

Manage the risks


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Time Value of Money

The value of the money today is not thesame as it will be in the future


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The eighth wonder -

compounding Rs.1 lac invested @ 10%

Year Simple interest

@ 10% p.a.

Compound interest

@ 10% p.a.

1 1,10,000.00 1,10,000.002 1,20,000.00 1,21,000.00

3 1,30,000.00 1,33,100.00

4 1,40,000.00 1,46,410.00

5 1,50,000.00 1,61,051.00

20 3,00,000.00 6,72,749.99

25 3,50,000.00 10,83,470.59

30 4,00,000.00 17,44,940.23


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THE RULE OF 72


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CHOOSING THE RIGHTINVESTMENT OPTIONS


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Safety

ReturnsLiquidity


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ASSET ALLOCATIONSTRATEGY


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Assetallocation

Time frame

Risk tolerance

Personalcircumstances


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Self portrait

Assetallocation

Financialgoals

Assets

Estimatedfuture

expenses

Estimatedfuture

income

Liabilities


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THE PRODUCTS


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Savings & investment related

products Bank deposits Government schemes

Bonds / debentures

Company fixed deposits Mutual funds

Equity shares

Depository system


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Protection Related Products

Insurance Life insurance

Term life insurance

Endowment policies

Annuities / Pension plans

ULIPs

Health insurance

Comprehensive health insurance

Hospitalisation policy Critical illness plan

Specific condition coverage


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Borrowing Related Products

Personal loans Home loans

Reverse mortgage

Loan against securities

Credit card debt


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Steps to avoid excess debt

Set debt limits

Shop carefully for debts

Dont give into temptation

Automatically have money go towards

your bills


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Retirement Planning

Start early and retire peacefully Plan wisely

Track and review your plan

Dont dip into your retirementsavings


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Investment needed to create

retirement fund


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Finances for entrepreneurs

Understand financial needs of selfand business

Save money in job before jumping in

self employment Borrow from close relatives/ friends

on strict business terms, if required

Start groundwork while still in jobApply for loans from organisations

designed to fund SMEs


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Understanding Ponzi schemes

Ponzi schemes promise high returnsand low risk

Initial investors may get high

promised returns Money from initial investors is given

to new investors thus it is only

rotation of funds, not investment offunds

If its too good to be true its

probably not true. Its a Ponzi!


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Tax Saving Options

Section 80C gives rebate upto Rs.1,00,000 for select investments like

life insurance premiums, housing

loan principal, PPF, ELSS, etc. Long Term Capital Gains are not

taxable for equities

80D (medical insurance), 80G(donations) and 24D (Housing loan

interest repayment) are other

important sections


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Investment philosophies

Evaluate risk of every investment Decide the investment based on needs

Do not invest in any scheme that you do not

understand

Do not invest on trust. Have everything backed up bydocuments

Take into account tax implication of every income

Do not blindly follow market tips and rumours

Anything that appears unnaturally high or low will have

some catch disguised

Do not follow schemes where you may protect the

interest but lose the principal

Invest with knowledge after understanding the product

well


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PURCHASING FINANCIAL

PRODUCTS


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Selection of intermediary

Registration with regulator or a body

approved by regulator, e.g. AMFI or

stock exchange


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Steps to become securities market investor

Know Your Client (KYC) form anddocuments

PAN Card

Personal identification proofAddress proof

Demat accounts & trading accounts

required for equity investing

For investing in MF, demat is

optional

Ad t f Fi i l


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Advantages of Financial

Education

Helps build a secure financial future Prepared for financial emergencies

Protection from marketing gimmicks

Feeling a sense of accomplishment Disciplined approach to money

Awareness of questionable practices

Setting a good example for your family Benefit other aspects of your life


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Regulators

Various regulators in Indian financalmarkets are:

Securities & Exchange Board of India

(SEBI) Reserve Bank of India (RBI)

Forward Markets Commission (FMC)

Insurance Regulatory & Development

Authority (IRDA)

Ministry of Corporate Affairs (MCA)

Ministry of Finance (MoF)


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THANK YOU!

investment planning for executives - sushil alewa

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