Financial planning is the process

of successfully meeting financial

needs of life through the proper
management of finances.

It is your roadmap to Financial

Health, & Sustainable Wealth
creation.
Life without Financial planning is
like Unplanned Vacation.

If you wish to achieve your

financial goals successfully &
peacefully you must plan your
financial life.
Wrong selection – flavor of the
month.

Wrong timing – mostly near top.

Short term investment.

Inadequate investment.
Whatever may be level of
your income or assets , you
need financial planning.

It is myth that only rich

people need financial
planning.
By scientific Asset Allocation.
Investing predefined
percentage of your savings in
different Asset classes.
• Diversification.
• Thumb rule No. 1
Never put all your eggs in one basket.
• Different asset classes give better return for
specific time duration.

• 94% of portfolio return will depend on Asset

allocation only.
Financial planning is the process
of successfully meeting financial
needs of life through the proper
management of finances.

It is your roadmap to Financial

Health, & Sustainable Wealth
creation.
Life without Financial planning is
like Unplanned Vacation.

If you wish to achieve your

financial goals successfully &
peacefully you must plan your
financial life.
Wrong selection – flavor of the
month.

Wrong timing – mostly near top.

Short term investment.

Inadequate investment.
Whatever may be level of
your income or assets , you
need financial planning.

It is myth that only rich

people need financial
planning.
 Financial Planning and Asset
Allocation
Significance of Asset Allocation

Significance Relative to Return

Brinson, Hood
and Beebower :
Determinants of
Portfolio
Performance,
1986, 1991:
“Asset Allocation
helps explain
over 93% of a
portfolio’s
performance”.
 Financial Planning and Asset
Allocation

Asset Classes to Invest

Gold

Art Debt

Mutual Funds
Financial
Planning
Insurance Equity

Commodities Real Estate

 Financial Planning and Asset
Allocation
Significance of Asset Allocation

Significance Relative to Return

Brinson, Hood
and Beebower :
Determinants of
Portfolio
Performance,
1986, 1991:
“Asset Allocation
helps explain
over 93% of a
portfolio’s
performance”.
 Financial Planning and Asset
Allocation

Asset Classes to Invest

Gold

Art Debt

Mutual Funds
Financial
Planning
Insurance Equity

Commodities Real Estate

• Determine the Current financial
situation.

• What you wish to achieve?

Your Financial Goals.

• How much risk you wish to take?

Your Risk Profile.
Find out Net saving available
for Investment.

Wealth accumulated till

today.
What is your intention of
investment?

Simply put, How much money you

need? & When you need the
money? (Time horizon)

Specific financial goals are vital to

financial planning.
 Mandatory Goals:-

(1)Children education
(2)Children marriage
(3)Retirement Planning. Pension.
(4)Purchase of residential premises.
(5)Purchase of vehicle.
(1) Up gradation of Residence.
(2) Luxury Car.
(3) Purchase of Luxury items at Home.
(4) Vacation Abroad.
(5) Wealth creation – Crorepati, Billionaire.
(6) Charity – Religious or Social.
(7) Inheritance – Estate planning.
(8) Early Retirement - Financial freedom.
 Specify amount required & approximate time
period when money required.

 Types of goals.

(1) Short term Goals 1-2 years.

(2) Medium term goals 3-5 years.
(3) Long term goals 5-10 years.
(4) Distant goals > 15-20 years.
• Two types of Risk in any investment.
(1)Risk of Purchasing power loss.
(2)Risk of Capital loss.

Strong correlation between risk &

reward.
Aim of financial planning is to get
maximum return with minimum risk.
 Financial Capacity
(1)Income status, more
important Net Saving status.
(2)Age:- Younger the age higher
is risk taking capacity.
(3)Dependents in family.
(4)Liabilities, Loans taken.
 Mental capacity – Temperament.
How will you react to temporary fall in
value of your investment?

(1)Risk averse , Conservative.

(2)Moderate risk taking personality.
(3)Aggressive investor.
Technical Knowledge.

Even if financial & mental

capacity strong, technical
knowledge required to invest in
Shares, Art – Painting, Real
Estate.
Either take professional help or
take Mutual Fund route.
 Don’t buy on tips, impulse or under
influence of ‘left behind’ feeling.
Don’t chase last year topper
Stick to your asset allocation.

Basic aim of Financial planning is to

get sufficient fund at specific time
for defined financial goal, not to get
Super high return.
 Financial Planning and Asset
Allocation

FINANCIAL PLANNING FOR THE FUTURE……...

Phase I Phase II Phase III
Dependant Phase
Accumulation phase Distribution Phase

Child’s Marriage
Child’s Education
Income

Housing

Children
Marriage

25 yrs 35 yrs Over 25 - 30 yrs

Birth & Education Earning Years Retirement Age

22 yrs 60 yrs
Age
• (1)Liquid Assets – Cash, Savings
a\c, Floating rate mutual fund.
Ideal for short term goals.
• (2) Income generating Assets –
Bank F.D.,PPF, NSC, Bonds. Ideal
for medium term goal.
• (3) Capital appreciation Assets –
Equity- Shares, Real Estate, Gold,
Art.
Ideal for long term goal.
• Thumb rule 2

100-Age in years = Maximum

% allocation to Equity.

Equity will give highest return in long run but

Equity is very risky product for < 2 years horizon.

Risk of capital loss in Equity investment almost

zero if invested for > 5 years but as high as 30%
in 3 months.
Before planning new
investment, it is very
important to prepare
emergency kit to Protect your
Current financial status.

Insurance is first & vital step

in any financial planning.
Aim – Financial Compensation
for any unexpected loss. Cover
the Risk.

Personal Risks. Loss of income.

Property Risks. Damage to
property.
Liability Risks. Losses due to
damage to others.
Aim – Financial protection to your
dependents in case of your
premature death. Life of earning
member of family, ONLY, should be
insured.

Insurance should be taken for

financial risk protection only NOT
for Investment or Tax planning.
Insurance is very bad investment
product .
Income – Business Expense
= Take home cash.
Take Home Cash – Home expense
- Taxation
- Interest & Installment
payments on loan taken

= Saving ( cash available for

investment)
(1) Investment in Income
generating assets.

(2) Investment in Expense

generating assets ( ?
Liabilities).
• Regular Income in form of Interest ,
Dividend , or Rent .

• Capital Gain from investment .

• This additional or Alternate income

will supplement your business
income, increase cash available for
investment & when it crosses your
professional income you will achieve
financial freedom.
• Residential home, Vehicles,
Ornaments, Over insurance.

• If your all saving is diverted to these

investments you will have lesser &
lesser cash available for actual
investment.

• When your professional income

decreases you will be in trouble.
Step 1 Asset Allocation

Step 2 Provision for Insurance

Step 3 Cash flow planning

Step 4 Actual investment.

Capital protection + Income generation.

(1) Govt. Assured return schemes.

(2) Bank Deposits.
(3) Bonds.
(4) Company deposit, debentures.
(5) Mutual fund Debt schemes
o Pros.
(1) Safe – Capital protected.
(2) Tax rebate on investment. PPF, NSC.
(3) Tax free return. PPF, Mutual fund.
o Cons.
(1) Low return – difficult to beat Inflation.
(2) Lock in period.
o Tips
PPF is best investment for long term investment.
Floating rate funds best for short term investment.
Senior citizen scheme best for retirement planning.
Always calculate post tax, inflation adjusted return.
Equity shares - Direct, IPO, Mutual
fund, PMS.
Real estate
Gold
Art – paintings

Equity & Real Estate are best long

term Wealth creator & Equity is
most tax efficient investment.
Trading in equity shares.
Derivative trading
Commodity trading

Very risky product. No

speculator has become
Billionaire. Only brokers make
money.
Never trade with borrowed
money.
• What is Mutual fund?
(1) Fund collected from different investors for
common purpose, managed by Professional
manager & Income distributed to investors in
proportion to their investment.

(2)Investors allotted Units for investment. Initial price

is always Rs. 10 per unit.

(3) Market price of unit is called NAV.

Market value of investment / Units allotted = NAV
Diversification

Professional management

Income tax benefits.

Liquidity.

Systematic regular investment of

small amount possible.
• Lump sum investment.

• S.I.P. Systematic Investment Plan

• S.T.P. Systematic Transfer plan

• If you invest directly at fund office

or online there is no entry load.
• Tax planning is legal.
• Purchasing power of Unaccounted money
will slowly go down.
• No cash transaction possible in Mutual
fund.PAN card copy required.
• Make maximum use of tax free income
limit
• Create multiple heads of income tax payer.
• ELSS investment can be used for income
tax planning & wealth creation.
Retirement doesn't mean stoppage of work, it
means freedom from compulsion to work for money
– Financial freedom.
Why?
To maintain same life style even after retirement
Life expectancy is increasing. 80+ age not unusual.
Female spouse will live 5 years more then male.
Inflation will make difficult to maintain same level
of living standard.
You & your spouse may not like to remain
dependent on children.
We don’t have govt. social security scheme.
 Financial Planning and Asset
Allocation

Protect Post-
Increasing life Retirement
expectancy Lifestyle

Retirement Plan -
Protection for An essential Increasing
Spouse Cost of
/Dependents need Health

Breakdown
Falling Interest of traditional
Rate Scenario support systems
 Financial Planning and Asset
Allocation

If Inflation is 5%, then the amount required to meet expenses……

Amount in Rs. Today In 10 years In 15 years In 20 years

Monthly expenses 30000 49000 62000 80000

Medial costs 500000 800000 1000000 1300000
Marriaage 1000000 1600000 2100000 2700000

Pa rticula rs 20 ye a rs 15 ye a rs
M onthly expenses 80000 62000
Rate of return 7% 7%
Investment corpus required 1.40 crore 1.06 crore
• Start early
Retirement planning starts the day you get
your first income.
• Invest regularly
Small amount invested regularly.
• Stay invested.
Power of compounding.
• Best options are P.P.F., Pension schemes of
insurance co., Equity mutual fund & Real
estate.
 Financial Planning and Asset
Allocation

THE EIGHT WONDER OF THE WORLD...

The Power of Compounding
2,533,529

2,099,636
Savings Returns *

1,572,834

350,000 330,000 300,000

Saves from Saves from Saves from

age age age
Assuming an annual savings of Rs. 10,000 in an instrument providing
25 to 60
return of 9.5% p.a.
27 to 60 30 to 60
 Financial Planning and Asset
Allocation

Amount required to be saved monthly:-

Rs. 100 lakhs :-

 Financial Planning and Asset
Allocation

Start Early

You Your Twin

 Age : 25 years ❚ Age : 25 years
 Start : Today
❚ Start : at age 30
 Invest : 5 years
❚ Invest : 30 years
 Amount : Rs 10,000 p.a.
❚ Amount : Rs 10,000 p.a.
 Redemption on
retirement (age 60) ❚ Redemption on
 Value at 60 - 51 retirement (age 60)
lakhs. ❚ Value at 60 – 50 lakhs.
 Financial Planning and Asset
Allocation

INFLATION ROBS YOUR PURCHASING POWER

543,113
40 YRS.
(Assuming inflation @ 8% p.a.)

Rs. 25,000 today 251,568

30 YRS.

116,52
5
53,973
20
10
10 yrs 20 yrsYRS. 30 yrs 40 yrs
YRS.
Investing is not Rocket Science. Keep it simple.
Start investing early in life.
Save & invest regularly, systematically.
Stay invested for long term till your goal
achieved.
Stick to asset allocation.
Monitor 3-6 monthly.
If necessary take expert help.
You have worked hard to earn money, now make
the money work hard for you.
Thank You