Basic financial concepts and the need for financial planning

BASIC FINANCIAL CONCEPTS &

THE NEED FOR FINANCIAL PLANNING

YOU NEED TO KNOW THESE FACTS…

• What ‘inflation’ could do to you..

• Why it pays to start investing early in life …

• Fight with moving Age / Time. How the power of compounding works!

• The difference between ‘income’ and ‘real income’...

• How to prioritize your investments …

• Why ‘equities’ are best in the long run …

Dilshad Billimoria -Certified Financial Planner

10 years 20 years 30 years 40 years

16,300

26,500

44,000

74,000Rs. 10,000 today

INFLATION ROBS YOUR PURCHASING POWER (assuming inflation @6% p.a.)


Dilshad Billimoria - Certified Financial Planner

Source : Bloomberg , MOAMC internal analysis , Data as on 30 th April 2014Note :Past performance may or may not be sustained in future .

KEY OBJECTIVES OF INVESTINGOver FY 1979 – 2014 inflation on an average has been 8.4% , eroding purchasing power of the rupee by 94%

WHERE DO YOU INVEST YOUR MONEY TODAY?


You have a choice!

Rs. 808

Rs. 237

Rs. 66

Rs. 17Rs. 4

5% 10% 15% 20% 25%

EFFECT OF COMPOUNDING(Re.1 Invested for 30 years)



Source : Bloomberg , MOAMC internal analysis , Data as on 30th April2014Note :The information herein is used for comparison purpose and is illustrative and is not sufficient and shouldn’t be used for the development or implementation of an investment strategy. It should not be construed as investment advice to any party. Past performance may or may not be sustained in future .

KEY OBJECTIVES OF INVESTING

5%

33%

6.36%

InflationTaxReal Income

WHY IS REAL INCOME SO IMPORTANTIf an investment is giving you 10% return…

Focusing on Real Income is important for wealth creation


Data from SBI/RBI and BSE Sensex : 2000-2012

INVESTMENT PERFORMANCE IN VARIOUS ASSET CLASSES

Gold Equity Gilt Bonds FDs02468

10121416

Investment Performance

Investment Per-formance

8%

15.96%

9.58%8.57%

6.30%



SENSEX PERFORMANCE HISTORY- DIVERGENT BUT MOSTLY POSITIVE

Source: MOAMC Internal Analysis. Data as on 29th May, 2014.

However, the Positive Years are Twice the Negative Years

What is Asset AllocationAn investment that provides investors with a portfolio of a fixed or variable mix of the three main asset classes - stocks, bonds and cash equivalents - in a variety of securities.

Diversification is the highest form of Asset Allocation.Asset Allocation helps tide over different market conditions, since, no single asset class, continuously outperforms the other.Therefore, to ensure an above average portfolio return is maintained, asset allocation should be the basis of any and every portfolio!The percentages of allocation among asset classes may differ, according to age profile, income needs, goals, time horizon and risk profile of clients.


ASSET ALLOCATION


DIVERSIFICATION

Sir John Templeton

“The only investors who shouldn’t diversify, are those who are right one hundred percent of the time”

WHAT IS RETIREMENT?


• When a person chooses to leave the workforce. The concept of full retirement – being able to permanently leave the workforce in old age – is relatively new, and for the most part only culturally-widespread in first-world countries. Many developed countries have some type of national pension or benefits system (i.e. the United States' Social Security system) to help supplement retirees' incomes.Investopedia explains 'Retirement‘

• Dramatic advances in healthcare have extended the lives of people in, predominantly, first-world and developed countries. That means that without adequate personal savings and/or pensions, people could easily outlive their retirement funds. In times of economic downturn retirees may choose to "come out of retirement" and re-enter the workforce on a seasonal, part-time or full-time basis to earn income and obtain benefits, especially costly health insurance coverage.

WHAT IS RETIREMENT?


Retirement Calculation

FIND OUT YOUR RETIREMENT CORPUS NEEDED


• Rate of interest.• Rate of inflation.• Any charges in the product.• Any guarantees and if so in writing.• What is the real return.• What is your life expectancy.• Are your savings enough.• How will my portfolio look in 10 years, 20 years..• How to handle the income distribution phase in

Retirement.

WHAT ARE THE FACTORS TO CONSIDER WHILE CHOOSING INVESTMENT OPTIONS: BE AN INFORMED INVESTOR

YOU NEED A TRUSTED CERTIFIED FINANCIAL PLANNERDilshad Billimoria -Certified Financial Planner


ROAD TO FINANCIAL SECURITY

“ Planning the future into the present, so that you can do something about it now” - Alan Lakein

Financial Planning is a process of meeting your life goals through the proper management of your finances


WHAT IS FINANCIAL PLANNING?


WHY FINANCIAL PLANNING?

The risk in old age is not of premature death.

The risk is that you will live too long and outlive your assets.

- Burton Malkiel

A Process that helps Answer

• Where you are now? • What is you need in the future?, and • How you will achieve your ‘Financial Goals’


HOW DOES IT WORK?

Gathering Client Date including Financial Goals

Analyzing and Evaluating your financial status

Developing and presenting Financial

Plan

Implementing your Financial PlanningRecommendations

Monitoring and review of Financial

Plan


FINANCIAL PLANNING PROCESS

OUR PROCESS

• Specialist – Certified Financial Planner® recognized the world over as Professional for personal financial management. It is a Gold Standard.

• Process Orientation – End objective is to Plan for achievement of Client Goals– Specific– Measurable & Meaningful– Agreed to and Attainable– Reality-based– Time-bound

• Long Term – Works by establishing trust and building long term relationship with Clients– We are there for you both in Good Times & Bad Times

• Client Centric Advice– No Hidden Agenda - Objective Advice free from conflict of interest


HOW IS A FINANCIAL PLANNER DIFFERENT?


THE DISTINCTION

FINANCIAL PRODUCT SALESMEN• Product Centered• Sell what he will benefit from• Transactional relation.• Commission based.• Short-term Focus

FINANCIAL PLANNER• Client Centric• No conflict of interest.• Continuing Relationship.• Long-term Focus• Financial Product/Vendor neutral• Not driven by AUM Targets


FUNDAMENTAL PRINCIPLES OF SOUND FINANCIAL PLANNING

• Flexibility• Liquidity• Realistic• Time-Bound• Protection• Tax Optimization• Monitor and Review


INVESTMENT V/S SPECULATION

Speculation is the purchase of an asset for the conservation of wealth and the increase of wealth, with the emphasis on the increase of wealth

Investment is the purchase of an asset for the conservation of wealth and the increase of wealth, with the emphasis on the conservation of wealth

“A trader reacts to price. An investor, to fundamentals”


SUCCESSFUL INVESTING

• DISCIPLINE and REGULAR investing are the keys to successful investing, especially in volatile markets.

• HYPE, FEAR, IRRATIONAL DECISION MAKING, EXCITEMENT and INDISCIPLINE are the worst enemies of successful investing, especially in volatile markets.


INVESTING TO WIN

Many also believe that to get higher returns, means you have to take on greater risk. Nothing could be further from the truth.”

- Robert Kiyosaki

“ I realized the reason most people invest not to lose, is because most people think investing is risky or that investing is gambling.


WHY US! WHY DILZER


3 PILLARS OF STRENGTH & STABILITY


Trust

Fiduciary Responsibility

Integrity

Walk our Talk


Competence

Beat Benchmark Returns

Deliver Bottom Lines

Tactical Asset Allocation to meet Strategic Goals (monitor portfolios closely with Trigger points)

Research Reports.

Risk Tolerance

Technology driven Process & Systems

HOW


Credibility

ISO 9001 Certification

Panel of outlook Money advisor

CNBC TV18 2008 Nominee

Media Advice

MDRT/COT Awards

HOW

Website: www.dilzer.netEmail: [email protected]: 91.80. 41512337 / 91.80. 41136147

Linkedin: in.linkedin.com/in/dilshadbillimoria

Dilshad Billimoria.FOUNDER AND CERTIFIED FINANCIAL PLANNER.DILZER CONSULTANTS PVT LIMITED.

Thank you for your time!


mailto:[email protected]

Basic financial concepts and the need for financial planning

Economy & Finance

Transcript of Basic financial concepts and the need for financial planning