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Investments and Growing Wealth
By : Manish Chauhan http://www.jagoinvestor.com
Agenda Importance Some Good Mutual Funds with Example Understanding Inflation and Riskappetite Products Available Advantages of SIP and Why it makes Sense for salaried People Case Study with SBI Magnum Tax Gain (G) Mutual Fund Learnings and Main Points to Remember OBJECTIVE : At the end of the session the main objective is to make people understand 1. How to develop an atitude for long term Wealth Creation.2. Understanding why systematic and desciplined approch towards investing is important and rewarding .
Importance
Retirement
Children Education and Marriage
Other Future Goals
Financial Freedom
Mutual Funds and ReturnsInvestment of Rs 10 lac becomes SBI MAGNUM (93) Since Launch : 15.36 ( 85 Lacs) HDFC Tax Saver (96)Since Launch : 29.32 (2.32 Crores , 1 year back it was 5.22 Crores) Reliance Growth (95) Since Launch (93) : 24.18 (1.67 Crore) DSPBR Top 100 (2003) Since Launch : 29.14 (46 Lacs)
Also , there is no tax on the profits (after 1 year) Top funds at : http://www.valueresearchonline.com/toprated.asp
Understanding Inflation and Riskapetite
Inflation Eats away your Money . Your Bank FD will return around 67% return after tax , Thats equal to average Inflation rate ,which means you dont get "return ON money" , you actually get just "return OF money" , Your Long term Returns Must be atleast 56% above Inflation and tax , else you are not maximising your money , you are just saving it , and people who leave it in the savings account are actually loosing it . Inflation is the termite of Money , You wont see it , and wont feel it , but its eating it away slowly ...
Risk Appetite is the maximum loss , after which your mind , body and your soul says "ooch!! No more" and your Psychological pain is at the maximum . Dont take risk more than that !! .
Longer the time frame , lesser the risk !!
Products AvailableEquity Diversified Mutual Funds : Track Record High Returns over long term , Extremelly tax efficient . Balanced Mutual Funds : For people who want to take less risk than Diversified Mutual Funds .
ULIPs : Only for Long Term investors and smart people who can use switching at right time with discipline and under the importance of Asset Allocation . The best one as per my view is IDBI FORTIS WealthAssurance , Excellent Structure !
PPF : Very Important for long term , 100% secure debt portfolio . Can not be used in Legal proceeding too .
Pension Plans (ULPP's) : Can be used for Retirement . Same structure as ULIPS for Investments .
Jeevan * : Please , I dont like them !!
Advantages of SIP
Disciplined Approach
Friendly with budget . Small money goes each time.
No tension of Market Timing .
Only way of investing in Markets for some one who has no idea "how markets work" .
Case Study with SBI Magnum Tax Gain SIP
SBI Magnum Tax Gain : One of the best and most respected Mutual funds (ELSS) till date . Started in 1993 . Lets look at the NAV for this Mutual fund from Jan 2000 to Mar 2009 for each quarter (Jan , Apr , Jul , Oct for each year) Example (year 2000)
Ajay and Robert wants to Invest Rs 10 lacs in Mutual Fund . Ajay invests Rs 10 Lacs lumpsumin the start.
Robert will invest his money in parts every quarter (3 months) , He is not concerned with the NAV up or Down .
Ajays' Worth : 20 LacsRobert's Worth : 29 lacs
NAV and Percentage Change
Growth of Money from Jan 2000 to Mar 2009
IV Ratio = (Current Value of your Investment)/Investment If 100 invested grows to 150 , IV Ratio = 1.5 , If 100 invested grows to 75 , IV Ratio = 0.75IV Ratio is the measure of how well your investments are Doing.
Learnings and Main Points to Remember
Equity for Long Term and Debt for Short Term . Dont take more Risk than you can Digest , else it will hurt badly someday .
SIP is best in all the markets other than Exploading Markets (which you cant predict and happens very less) .Even while taking your money out from investments ,do it in installments , its called SWP concept, available with Mutual Funds . Have a broad and long term view on any product . (Jeevan Astha) Learn things and take your own decisions . Look for 4 important things in any product : Returns , Risk , Liquidity , Simplicity
Additional Readings 5 Elements : http://www.jagoinvestor.com/2008/10/5elements.html
Pillars of Success : http://www.jagoinvestor.com/2008/10/pillarsofsuccess.html Power of Compounding and Early Investing : http://www.jagoinvestor.com/2008/01/powerofcompoundingandearly.html Creating Long term Wealth : http://www.jagoinvestor.com/2008/08/creatingweatlhwearegoingtodiscuss.html Diversification of Portfolio : http://www.jagoinvestor.com/2008/04/whatisdiversifiedportfolioandhow.html How to do your own Financial Planning : http://www.jagoinvestor.com/2008/05/factorstoconsiderwhiledoing.html Early Investor , Smart Investor : http://www.jagoinvestor.com/2009/02/earlyinvestorsmartinvestor.html How to choose a Mutual Fund :http://www.jagoinvestor.com/2009/01/whattolookforwhilechoosingmutual.html
Portfolio Rebalancing : http://www.jagoinvestor.com/2008/07/portfoliorebalancingtodayiamgoing.html
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