Financial Planning For Young Investors

Spearhead FinServe

Be Financially Wise…

Be Financially Wise …

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How do we manage our personal Finance?

• Traditional Wisdom

• Luck

• Trial and Error

• Depend on property and Gold

• Goal achievement –Random

• Spending and Investments



Guess what is in common?

Agenda...

� Financial Planning Basics

� Need for a Financial Planner

� Six Smart money moves when you are

young



“Financial Planning is not about getting rich and you don’t

have to be rich to do financial planning. It is about doing more

with what you have”



Blue print for management of all financial affairs of entire life

� The best way to manage financial matters

� It is a process not the end

� It answers 3 straight questions:

1. Where am I?

2. Where do I want to go?

3. How do I reach there?



CORPUS REQUIRED FOR CHILDREN'S EDUCATION

Current Age Graduation

Current Expenses

Future Value @

8%Savings per month @

12%

0 18 5,00,000 19,98,010 Rs. 2,600

5 18 5,00,000 13,59,812 Rs. 3,600

10 18 5,00,000 9,25,465 Rs. 5,800

15 18 5,00,000 6,29,856 Rs. 14,600





Life cycle Financial Planning



It is It is It is It is about all about all about all about all of theseof theseof theseof these

Buying Insurance Policies

Portfolio

Management

Asset

Allocatio

n



What to expect from Financial Planning?

� Having accountability for each Rupee you Earn, own and spend

� Exploring possibilities from Limited Resources

� Road Map (vision)

� Achieving goals easily without Compromising & Exposing to

unnecessary risk



Benefit of starting early…


AccumulationAccumulationAccumulationAccumulation----

4.45L4.45L4.45L4.45L

Monthly contribution

Rs.7660

BasicBasicBasicBasic----Rs.31900 Rs.31900 Rs.31900 Rs.31900

Age-30


49.25L49.25L49.25L49.25L

Monthly

ContributionRs.15920

Basic-Rs.66332

Age-45


2.4Crores2.4Crores2.4Crores2.4Crores

Monthly

ContributionRs.33100

Basic-Rs.137900

Age-60



Starts @ 25 years of ageIncrease of salary @12%



5000

per

month

1.08

crores

30

years

@10%

After 5

yearsEarly start

Be Financially Wise……..


Sources Result

� Friends

� Family

� Colleagues

� Banks

� Insurance Agent

� Stock Broker

� Tax consultant/CA

� Several people-Different

views

� Intentions are good

� worked well

� Conflict of interest

� Copy and paste



I don’t have time

� Terribly Busy. Too much work, Everything urgent.

Working overtime. Tired of this.

� Cash lying in bank account without earning. What to

do? Terribly busy… How much I will lose because I

have not invested? May be 30K. Is it OK ?

No Problem I will make it up.





Rs.15000 Rs.15000 Rs.15000 Rs.15000

PMPMPMPM

4% for 20 4% for 20 4% for 20 4% for 20

yearsyearsyearsyears

85.58 Lakh85.58 Lakh85.58 Lakh85.58 Lakh

Rs.15000

pm

50:50 debt

and equity

12%:7% for

20 years

Rs. 1.53

crores

So much information is available on the net and become my own financial advisor

Do you have a fair knowledge of investments?� Do you enjoy reading about investments and doing

research?� Do you have expertise in investments? Do you have the

time to monitor, evaluate them and make periodic changes to your portfolio?

AND do your Regular Job?



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� Savings., investments etc…..

� Boring. Calculations even more boring, advices, excel sheets. No not interested.

“Great match I watched yesterday” How much time I have spent? Just about 5 to 10 hours. What a match!


Investment deficit…Investment deficit…Investment deficit…Investment deficit…

• My finances are simple

• Financial planners help people only with investing

• Financial planners are interested only in making

money

• I like free lunches only

• Have our parents not survived without Financial

Planning?

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� Qualification

� Reputation

� Independent

� Multidimensional Approach

� Strategy over Product

� Research capabilities

� Accessible to you

� Fee



� Step 1 – Assessment

� Step 2 - Identify your goals

� Step 3 - Develop a Plan

� Step 4 - Implement the Plan

� Step 5 - Monitor the Plan & Make Necessary Adjustments as and when required




� Set up an emergency Fund

� Take term cover – Covering life Risk

� Take adequate health cover

� Income loss due to disability-Personal

Accident cover

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Summary of Insurance Premiums for various Age Groups

Annual Premiums (in Rs.)

Age (in years)

Particulars 30 35 40 45 50 55

Life Insurance Cover of

Rs.1 crore (Pure Term Cover) 15,600 22,800 35,500 47,200 63,700 86,200

Health Insurance Cover of

Rs.5 lakh (2A+1C)8,700 8,700 9,800 9,800 17,300 22,800

Personal Accident Insurance Cover of

Rs. 25 lakh 3,000 3,000 3,000 3,000 3,000 3,000

Total Annual Premium 27,330 34,535 48,340 60,045 84,050 112,055

Monthly Premium 2,278 2,878 4,028 5,004 7,004 9,338

Striking a balance between life today and a secured tomorrow


House

hold

Expenses

, 35%

EMI, 25%

Risk ,

10%

Savings,

30%



Top RulesTop RulesTop RulesTop Rules

• Balance what you spend today vs need for tomorrow

• Make Sure Your Lifestyle Costs Lag Your Income Growth


Liquidity

ReturnSafety


Investment opportunities

� Real Estate

� Equity

� Bank deposits

� Post office instruments

� Mutual Funds

� Gold

� Bonds


Ability to take Risk Return

� Age

� Liabilities

� Past Investments

� Dependents

� Industry you work in

� Time left to achieve the

goal

� Risk profiling

� Higher the risk, higher

the return

� Diversification

� Asset allocation


Savings

FD

Mutual Funds

Property

Stocks

CareerInvest in yourselfInvest in yourselfInvest in yourselfInvest in yourself


�875% more is the earning of high performer vs

underperformer over 35 years

� Returns from career – Poor -5%, average-8%, good-12%,

High- 15%

� Update skills, make smart choices….

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� Know how much you need when you Retire

� Decide on how is it going to be Accumulated

� Decide on asset allocation

� Choose appropriate products

� What if I Retire Early?



CORPUS REQUIRED

Current

Age

Retirement

Age

Current

Expenses

Future Value

of Expenses at

Retirement

@8% inflation

Required amount

at Retirement

Investment per

month @ 12%

25 60 30,000 4,43,560 Rs. 8,76,80,359 Rs. 13,634

30 60 30,000 3,01,880 Rs. 5,96,73,779 Rs. 17,074

40 60 30,000 1,39,829 Rs. 2,76,40,506 Rs. 27,940

50 60 30,000 64,768 Rs. 1,28,02,902 Rs. 55,655



� Save 10% of your income for

retirement

� Open a PPF account

� Increase investment as your

income grows

� Don’t dip into corpus before you

retire

� Borrow for kid’s education, but

save for retirement



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� In time Income Tax Return Filing

� Using all benefits of exemptions/deductions

- 80C: Insurance/EPF/PPF/Housing Loan/ELSS etc.

� Using best tax saving instruments to save tax

Tax Saving Investments

TAX SAVING INVESTMENT PRODUCTS

SchemeMax Amount

(Rs.)Tenure Returns TaxabilityRemarks

Rajiv Gandhi Equity Savings

Scheme (RGESS) 50,000 3 yrs 10-12% NO

Only first time

equity investors

Employee Provident Fund (EPF) No Limit 8.75% NO Only employees

Public Provident Fund (PPF)1,50,000

15 yrs 8.70% NO All Individuals

NSC 5 yrs or 10 yrs 8.5% -

8.8%YES All Individuals

NPS 50000 8 -12% YES All Individuals

Fixed Deposits 5 yrs 8.5 - 9.5% YES All Individuals

Equity linked savings schemes

(ELSS)3 yrs 8 -10% NO All Individuals

SCSS 5 yrs 9% YESIndividuals above

60 yrs

Insurance 3 Yrs 5 - 6% NO All Individuals



� Have a Financial Plan

� Do not hesitate to take professional help

� Start early

� Be proactive in managing your personal finance

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Points to remember...

Be Financially Wise…..

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We don’t have to be smarter than the rest, we have to be more disciplined than the rest



Be a Financially Smart Youth


“We listen Half

Understand Quarter

Think Zero

React Double”

� Emotional Decisions… Buying Emotional Products Example

: Child Policies, Retirement Plans

� Delaying Investments… There is/are not enough savings now…will

start investments once I have substantial savings

� Creating an ADHOC Portfolio of Insurance policies, Mutual Funds,

Fixed Deposits, Shares, Debentures etc.



�Investing heavily in Land or property and completely Ignoring

Liquidity.

�Managing Home Loans… a loyal partner till your Retirement

�Impulsive Buying… getting trapped into Multiple Loans, Credit

Card Spending, messing up Credit Records

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Financial Mistakes



Basic nature Top rules

� Sense of security

� Simple to understand

� Tangible

� Low volatility

� Returns to the portfolio

� Study stream of Income

� Professional help

� Workout a budget

� Select Carefully





� Outperformed every other asset class in long run

� Best Hedge to Inflation

� Returns ranging between 15% to 25% annually

� Tax Advantage

� India Considered as an Emerging Market

� Volatile and Uncertain Market

� Government Policies

� Lack of Professional Guidance

� Close Supervision of the performance of the market

� Element of Inevitable Risk.



Top Rules

• Invest for long term• Take experts help• First time Investors-

Through SIP in Mutual Funds

• Try with the money what you can afford to lose

“Teaching kids to count is fine but teaching them what counts is best”



� Simple concepts of money relevant for their age

� Talk to the child about money

� Help children learn the differences between Needs, Wants

and Wishes

� Include in the Process of Making a Family Monthly Budget

� Give your child the Opportunity to Handle Money

� Give your child a Personal Allowance every month

� Give your children advice, but allow them to make their own

decisions—Good or Bad

� Learn and brush up your money Management Skills before

teaching. Kids Will Observe You and Learn



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Financial Planning For Young Investors