Financial Planning & Mutual Funds

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Financial Planning and Mutual Funds
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Life is a roller coaster ride- full of upsand
downs. We all know we have to savefor many
responsibilities life brings alongwith it.
But no matter how much you save- ItsNever
Enough!
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Why Does One Need To Invest?
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Why Invest?
Retirement
DaughtersMarriage
ChildrensEducation
Buy
House
Buy
Automobile
Marriage
Start
Career
AGE
25
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30
35
40
50
60
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Why Are Investment Decisions Difficult?

Selection of appropriate investments

What if I need the money before the targeted
date?

What paper work is needed?

How often do I monitor these investments?

How do I ensure safety?

Who will inform me on the progress regularly?

What are the tax implications - Can I keep the
return or will the tax-man keep it?

What if I lose the proof of investments?
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What Investment Is Appropriate?

Debt PPF, Post Office Scheme, Fixed Deposits,
Debentures, Bonds, Income Funds, Liquid Funds

Equity Individual Stocks, Growth Funds, Sectoral
Funds

Banks Bank Deposits
Or a mix of the above!
A good investment is one that helps you maximise
your total returns, net of taxes and inflation
over the time period you invest for!
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When I was young, I used to thinkthat money is
everything in life
Now that Im old, I know it is.
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Why financial planning?
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Did You Know ?
If your current monthly expenses are Rs.
30,000/- per month, then after 20 years you will
require Rs. 80,000/- a month tojust maintain the
same lifestyle!
An education degree for your child which
currently costs Rs. 20 lakh could cost over Rs.
34 lakh after 11 years!
At inflation of 5
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Individual Investor Needs Investment Goals
All individuals need to save for
Retirement
Childs education / marriage
Medical emergency
Other family obligations
Every individual has one or more of the above
goals
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Individual Investor Life Stages
Earnings (Consumption Savings)
Consumption
Savings
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40
60
Young Independent
Young Married
Middle Age
Retirement
All individuals have a finite period to save for
their investment goals
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Value Of Money Over Time
Impact of inflation on monthlyexpenses of Rs.
30,000 today
Value of Rs. 100,000 over time
100,000
79,599
78,353
62,368
48,102
38,288
37,689
30,000
Today
5 years
15 years
20 years
Today
5 years
15 years
20 years
Investors need to beat inflation
All figures in Rs. At inflation of 5 The above
illustration above is merely indicative in nature
and does not in any manner indicate the
performance of any of the schemes of
DSPBlackRock Mutual Fund. Please read the Scheme
Information Document and Statement of Additional
Information carefully before investing.
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Performance Of Various Asset Classes
Cumulative annualised returns1982 to 2011
16.75
9.37
8.96
6.75
2.08
WPI Inflation
Bank FDs
BSE Sensex
Growth
Real Growth
Equities outperform other asset classes over the
long term
Individual real growths for bank FDs BSE
Sensex have been calculated for each year from
1982-2011. Post this calculation a CAGRhas been
calculated for the same. Hence the real growth
of both Bank FDs Sensex is not equal to the
growth minus the WPI Inflation.
Source IIFL, Internal 1-3 year deposit rate
excluding dividends data as at end FY2011
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Individual Investors Are Scared Of
The Downside Risk in Equities
The Risk of Market Volatility
The Risk of Market Timing
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What else makes a material impact oninvestments
in equity?
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Investing in the BSE Sensex
Returns are from Jan 1980- Mar 2011
17.39
16.71
16.00
Fixed investment at Fixed investment at
Fixed investment on1st day of every month
lowest sensex value highest sensex value
every year every year
Market timing does not matter over the long term
Source Internal XIRR, time period considered
Jan 2, 1980 to Mar 31, 2011
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The Power of Compounding
Saving a small sum of money regularly in equity
mutual funds can make your money work with
greater power and can have asignificant impact
on wealth accumulation.
BSE Sensex
BSE Sensex
Scenario A
Scenario B
Number of years
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Monthly investment
Rs 5000
Rs 5000
Total investment
Rs 9 lakh
Rs 12 lakh
Assumed annualised return
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Final corpus
Rs. 45.96 lakh
Rs. 1.17 crore
The above illustration is merely indicative in
nature and does not in any manner indicate the
performance of any of the schemes of DSP
BlackRock Mutual Fund. Pleaseread the Scheme
Information Document and Statement of Additional
Information carefully before investing.
Even a seemingly small 5 year delay can cost you
the CROREPATI tag
Time Period of 25 years Hypothetical numbers
meant only for illustration purpose
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Summary
Investors needs to save regularlyand invest
those savings in higher return assets to create
wealth
Long Term Systematic MonthlyInvestment In equity
schemes is ideal for this !
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How Do You Achieve Your FinancialGoals?
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Retirement Planning
Corpus required per month
Monthly HouseholdExpenses
Rs 83,579
Rs 30,000
Inflation 5
Retirement corpus required to meet post
retirementexpenses (if invested at 7) Rs 1.4
cr
21 Yrs
Monthly investment needed to achieve this corpus
in 21 years
at 12 Rs 12,583
at 15 Rs 8,083
at 18 Rs 5,090
Today
At the timeof retirement
The above illustration is merely indicative in
nature and does not in any manner indicate the
performance of any of the schemes of DSP
BlackRock Mutual Fund. Pleaseread the Scheme
Information Document and Statement of Additional
Information carefully before investing.
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Retirement Planning
Educational Degree
for Child
Corpus requiredRs 34,20,000
Rs 20,00,000
Inflation 5
Monthly investment needed to achieve this corpus
in 11 years
11 Yrs
at 12
Rs 12,456
at 15
Rs 10,166
at 18
Rs 8,237
Present
When your Child actually
goes for this degree
The above illustration is merely indicative in
nature and does not in any manner indicate the
performance of any of the schemes of DSP
BlackRock Mutual Fund. Pleaseread the Scheme
Information Document and Statement of Additional
Information carefully before investing.
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Retirement Planning
Childs Marriage
Corpus requiredRs 43,70,000
Rs 20,00,000
Inflation 5
Monthly investment needed to achieve this corpus
in 16 years
16 Yrs
at 12
Rs 7,509
at 15
Rs 5,466
at 18
Rs 3,925
When your Child actually
Present
gets married
The above illustration is merely indicative in
nature and does not in any manner indicate the
performance of any of the schemes of DSP
BlackRock Mutual Fund. Pleaseread the Scheme
Information Document and Statement of Additional
Information carefully before investing.
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Introduction to Mutual Funds
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What Is A Mutual Fund?

A pool of money, collected from investors,
invested according to certain investment
objectives

Ownership in hands of investors whove pooled in
their funds.

Managed by a team of investment professionals

The pool of funds invested in portfolio of
marketable investments.

Investors share denominated by Units that have
a Net Asset Value (NAV) which changes everyday

The portfolio is created according to stated
investment objectives

Investors make money through Capital appreciation
and Income distribution
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What Are The Advantages Of Mutual Funds?

Portfolio diversification

Professional Management

Reduction in Risk

Service

Affordability

Reduction in Transaction costs

Liquidity

Convenience and Flexibility

Tax Efficiency
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Three Basic Types
Mutual funds come in three basic types

Equity or stock funds

Bond or income funds and

Money market or cash funds.
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Other Classifications

Growth/ Value/ Income
Options- Growth / Dividend /Reinvestment

Sectoral Funds

Specialty Funds

Offshore Funds

Open ended/ Close ended

Diversified Equity

ELSS Funds

Index Funds

Hybrid/ Balanced Funds
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How To Choose The Right Scheme?

Determine your financial goals and your time
horizon

Determine your tolerance for risk

Study the objectives of the funds available and
match them with your need
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Fund Suitability - Risk Versus Return
Sector
Diversified
Returns
Balanced
Income
Liquid
Risk
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March is a particularly risky month to invest in
the stock market, the others are.
July, February, January, April, September,
August, May, June, December, October November.
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When they say time is money, they mustmean
Systematic Investment Planning
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Disclaimer
This presentation shall not constitute any offer
to sell or solicitation of an offerto buy units
of any of the Schemes of the DSP BlackRock Mutual
Fund.
Mutual Fund investments are subject to market
risks, read all schemerelated documents
carefully.
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