PERSONAL FINANCIAL MGT

SCOPE

PART I - IS IT REALLY REQD?

PART II - WHAT EXACTLY IS FINANCIAL PLANNING?

PART III - INVESTMENT OPTIONS – LET’S DISCUSS

PART IV - MANAGING YOUR INVESTMENTS

PART V - EXACT RECIPE

IS FINANCIAL PLG REQD?

Let me try & convince…

YOU
HOW DO YOU DEFINE…

BEING RICH
IT’S A MENTAL FEELING OF ACHIEVEMENT
OF GOALS….

Extravagant
Lifestyle
Mercedes
Harley Davidson
Property
Bungalow
Higher Education
Foreign Vacation
FINANCIAL GOALS
 Majority of us in uniform are
BAD FINANCIAL PLANNERS
Reasons
• Assured Pension
• Overtly busy
• Closed
Environment
• More than ‘Decent
Pay Package’
SHOULD YOU CONTINUE TO BE LIKE THIS??
 PART II
WHAT IS FINANCIAL PLG
BASIC MANTRA OF FINANCIAL PLG
GROW
SAVE SPEND
RICH

TRY TO
SPEND DISASTER
SAVE

Financial discipline leads to RICHES & WEALTH

HOW MUCH SHOULD I SAVE?
• Thumbrule. 25% to 33% of your salary

• Absolutely a personal decision – so DECIDE

THIS FIRST STEP IS

EXTREMELY IMPORTANT

PUT PEN TO PAPER…

 CREDITS DEBITS
Basic Pay 57800 AGIF 5000
DA 8796 Income 10000
Tax
Tpt Allce 4032
Edn Cess 370
MSP 15500
Total 86,128/- Total 15,370/-

Net Salary – Rs 70,000/- per month

Ideal Savings per month –

Rs 17,500 to Rs 23,000 per month
Basic Expenses Rs 20,000/- Mess Bill, petrol, Food, clothing etc
Reserve for additional Rs 10,000/- • Holidays, property items etc
expenses • To be set aside in liquid fund every
month @ 7%.
• Futile to let it lie in the savings
account.
25 – 33% SAVINGS Rs 23,000/-
BALANCE still left Rs 17,000/- • Options. Mid Term goals like Car,
property etc.

 Assured savings for long term - Rs 23,000/-

 Savings for mid term goals with 3-10 years horizon - Rs 17,000/-

This is what you have to decide by putting pen to paper.

BASIC MANTRA OF FINANCIAL PLG
GROW
SAVE SPEND
RICH

TRY TO
SPEND DISASTER
SAVE

Financial discipline leads to RICHES & WEALTH

 PART III
INVESTMENT OPTIONS
DSOPF PPF

7.8% interest 7.8%

Through any
Tax Free
Nationalised Bank
Flexible deposit
Max safety
option
10k to 15k per month Tax Free
15 Yrs + 5 Yrs
Loan after 3 yrs,
partial wdl after 7 yrs
Fixed Deposit Govt Bonds

6% - 7.5% interest 7.5% to 8%

Taxable 5 yrs or 10 yrs tenure

Premature wdl not
0.5% to 0.75% reduction
possible
Penalty on premature
Taxable
wdl
Falling interest rates
• FDs of renowned companies.
• Rate of interest higher than
Bank Fixed Deposits.
• Eg Shriram Transport, Bajaj
Finance, Mahindra etc
• 7.5% to 9.25%
• Good option to invest.
NATIONAL PENSION SCHEME
• Ornamental utilisation
• Luke warm returns as investment
• Do not over purchase

• Days of price escalation are over

• Purchase as per reqmt
• Hassles of handling, renting,
lease etc
 INSURANCE POLICIES

Do not mix insurance and investment.

No Policy will give you more than 7 % returns
• High Risk, High Returns
• Requires professional
knowledge, time and dedicated
efforts
• Eg Reliance Industries
• You hear only profit stories, no
one shares losses experiences
• Not recommended for faujis
MUTUAL FUNDS
 MUTUAL FUNDS
CUSTOMER CUSTOMER CUSTOMER CUSTOMER CUSTOMER

TATA Large Cap Fund

(Lets say 1000 crores)
Debt
Stock Market
Instruments
• Reliance - 3% • Govt Bonds
• HDFC Bank – • Treasury
1% Receipts
• Supreme • Debentures
Industries – 1%
 MUTUAL FUNDS

13 – 15 AMCs are currently into Mutual Fund industry.

More than 1000 MFs , broadly in 4 Types.
Performance varies ….. Depends on the Fund Manager.
NAV (Net Asset Value)
Open Ended Funds / Close Ended Funds (3 years)
Exit Load (within 1 year of redemption less Liquid Funds)
Role of SEBI
 TYPES OF MUTUAL FUNDS
Type of Mutual Funds Ratio in… Returns
Equity Debt ( > 3 yrs)
Equity Mutual Funds > 85% < 10% 5% to 15%
(Large / Mid /Small Cap)
Balanced Mutual Funds 65-75% 25 – 35% 7% to 11%

Hybrid Mutual Funds 65 – 75% 25 – 35% 7% to 11%

Corporate Bond / Debt < 15% 8% to 10%

Mutual Funds
Liquid Mutual Funds Nil 100% 6.5% - 7%
RECOMMENDED READING…
RECOMMENDED READING…
 PRACTICAL BALANCED MF INVESTING
Lets say, you start an SIP of 20k per month. It should be invested approx as below….

SIP 20K SIP 5K/10K

- Rs6000-10000 : Equity MF (Large Cap / - Purely Liquid Fund SIP.

Diversified / Multicap funds)

- Rs
2000 – 6000 : Balanced Advantage / - Acts as an Emergency Corpus for
Hybrid / Dynamic funds emergent / unplanned expenditure.
- Also utilized during Sensex Fall to invest
in Blue Chip Stocks / MFs for higher gains
- Rs 8000 : Corporate Bond / Debt Funds

Notes : Above strategy ensures a balanced portfolio.

Even if stock market falls, even then returns over 3 year period will not be less than atleast 8 -9%.
If sensex does well or soars high, returns more than 11 – 12% can also be expected.
WHY SHOULD I WORK HARD FOR 2-3% EXTRA??
 BEATING INFLATION

• Need to think beyond Fixed Deposits, policies

and savings account.

• Diversified Portfolio ensures growth of 10%

or more in the long run.
 POWER OF COMPOUNDING

• Why work hard for 1-2 % extra returns???

 FD OF RS 20,000/-
3 Years 5 Years
Amount Increase Amount Increase

7% 24,628/- 4628 28,295/- 8295

700 extra 1500 extra

8% 25,365/- 29,720/-
(15% extra) (18% extra)

2300 extra 4500 extra

10% 26,900/- 32,800/-
(50% extra) (54% extra)
 SIP OF RS 3000/-
3 Yr 5 Yr 7 Yr
3000 (1,08,000) (1,80,000) (2,52,000)
2,16,031
7% 1,20,490 3,25,887

2,34,247
10% 1,26,390 (50% extra) 3,65,875

2,47,459
12% 1,30523 (87% extra) 3,95,937

2,69,045
15% 1,37,038 4,46,904

2,92,973
18% 1,43,955 5,05,995

3,10,362
20% 1,48,803 5,50,588
 BENEFIT OF MFs / SIPs
 High liquidity, no lock-in period (exit load of 1%, < 1 yr).

 Easy to manage.

 Least TDS/tax. (10% on earnings more than 1 lakh per year)

 Can stop SIP anytime, switch to better performing funds.

 Everything is electronic….. Just save the monthly transaction
statements for offline records.
 With little experience & plg, property investment gains can be
beaten.
 MAXIMISING RETURNS
Lets say, you start an SIP of 20k per month. It should be invested approx as below….

Category of Fund Jan 2020 Jan 2021 Jan 2022

(after review) (after review)
Rs 8000 SBI Large Cap Fund (eg) SBI Large Cap Fund
(Equity Large Cap Fund) (Continue) Fund Selection
Rs 8000 ICICI Balanced Advantage HDFC Balanced Fund • Refer
(Balanced Fund) Fund (eg) (Switch to better
performer) moneycontrol.com
Rs 4000 HDFC Corporate Bond IDFC Banking and PSU • AUM. > 1000 crores
(Debt / Corporate Bond Fund (eg) Debt Fund
• Performance in its
Fund) (Switch to better
performer) category

By switching to a better performer every yr or so, you ensure that returns are maximised.
Substitute to….

Shares Equity Mutual Funds

Fixed Deposits Debt / Corporate Bond Mutual
Funds
Savings Account Liquid Funds
PPF, NPS Debt / Balanced Mutual Funds
 PART IV
MANAGING YOUR INVESTMENTS
Property - Plan Home Loan within first few yrs

DSOPF - through Payslip

PPF - through online portal

Corporate Fixed Deposits

Stocks

Mutual Funds

Bonds

NPS
 DEMAT ACCOUNT

• What is Demat account ?

Share Market
SAVINGS DEMAT Mutual Funds
ACCOUNT ACCOUNT
Fixed Deposit
Bonds, NPS
• One stop solution to ALL INVESTMENTS.
• No need to approach any other agency for any
investments.
• A perfect electronic MANAGER.
• Must for everybody.
 WHY
CHOICE OFICICIDIRECT
DEMAT ACCOUNT

 Prominent players are :-

 ICICI Securities
 HDFC
 Angel Broking
 SBI
 Choose from above. Should offer max flexibility, control and
investment options.
 ICICI Securities. Oldest, 75% market share, max options.
 HDFC. 15% market share. Not very user friendly.
 Angel Broking. Good customer support, but tilted towards
share trading.
 SBI. Customer support unsatisfactory.
 WHY ICICIDIRECT
ICICI SECURITIES DEMAT ACCOUNT

 75% market share held, pioneer and industry standard.

 Most secure, user friendly.
 Most lightweight for mobile.
 Investments Possible. FDs, Shares, Mutual Funds, Govt
Bonds, NPS.
 No annual charges.
 Linked to your ICICI Bank Savings account.
 Customer Services are the best. All possible features
incorporated.
 DEMAT ACCOUNT
(max 3 bank accounts can be linked)
ICICI SAVINGS ACCOUNT
PRODUCTS
Fixed Deposit
Mutual Funds – all types
Govt Bonds
DEMAT ACCOUNT APPLICATION NCDs
Gold

OTHER SAVINGS ACCOUNT

(SBI / HDFC / AXIS etc)
PRODUCTS
Mutual Funds – all types
DEMAT ACCOUNT APPLICATION
FDs, Bonds, NPS options
are not available with non
ICICI Bank
HOW DOES DEMAT ACCOUNT OPERATE?
RESEARCH TOOLS INCORPORATED
 PART V
EXACT RECIPE
 STEP BY STEP GUIDE
• Arrears / Stipend. 50% in Corporate FDs, 50% in Liquid & Debt Funds.
• Decide DSOPF . 10k to 15k is recommended. Addl 5k can be in a good
debt mutual fund.
• Open PPF Account. Contact nearest Nationalised Bank.
• Decide your Monthly Saving. Put pen to Paper. Invest in Mutual
Funds. (combination of 3 categories)
• Increase it every year when salary increment is effective.
• Open Demat Account Immediately. Control your investments yourself.
 STEP BY STEP GUIDE

• Invest your Arrears / allces whenever received from CDA.

FDs / Corporate FDs.

• Plan Self EMIs for mid term goals.

• Exploit Liquid Funds (investments less than one year)

• Review your Mutual Funds every year and switch funds if necessary.

• Review your Overall Portfolio every year. 60:40 rule ie not more than
40% in equity Mutual Funds.
OVERALL PORTFOLIO SNAP SHOT : YEARLY

You are doing good as a SMART INVESTOR

Rs 20k saved monthly,
increased by 3k every year.
After 10 years…….

Fixed Deposit 49,32,072/-

Guy has… (@7%)

Smart Guy 63,89,529/-

has… (@10%)
 YOUR CALENDAR
Trigger Your Action
JAN every year Review your portfolio
When arrears / allces recd Invest suitably
When Increment comes Increase your SIP
THANK YOU

Presentation Created by…

Amit Singh Tomar, 9950558352