Building your wealth with wise investing · 2016-12-17 · Asset allocation essentially refers to investing your hard earned money in different asset classes such as equity, debt,

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Building your wealth with wise investing

An Investor Education & Awareness Initiative By Franklin Templeton Mutual Fund


• Wise investing refers to a systematic process-and-prudence-driven approach

• It is not about timing the market and feeling the excitement

• Wise investing is about disciplined investing

Wise Investing


• Investible surplus

• Investment objective

• Risk appetite and Risk Tolerance

• Asset Allocation

• Diversification

• Inflation

• Cost of investing

• Tracking & reviewing investments

• Selecting an unbiased advisor

Facets To Be Looked Into For Wise Investing


• It refers to the amount of money which you are left with after having

defrayed all your expenses & liabilities

• It is imperative to take a good look at your finances to elevate your

investible surplus

• Ideally, invest your money first and spend what you have left

Investible Surplus


• Investment objective refers to the purpose for which one is investing

• Setting an investment objective simply means ascertaining why you would like to invest

• Knowing the investment objective also helps in planning for your financial goals

• It helps you choose suitable investment instruments for your portfolio

Investment Objective


Risk Appetite And Risk Tolerance

• Risk Appetite refers to one’s willingness to take risk

• Risk Tolerance implies ability to actually take risk

which is measured by

• Income

• Expenses

• Financial responsibility you are shouldering

• Nearness to financial goals

• Whether your contingency fund has been built

• Whether you have sufficient insurance coverage


Asset Allocation

Asset allocation essentially refers to investing your hard earned money in different asset classes such as equity, debt, gold and real estate prudently

Allocate your assets based on…

• Risk appetite and risk tolerance;

• Financial goals; and

• Investment horizon


Diversification

Diversification refers to spreading your investment in different baskets

comprising various asset classes and investment instruments

It is one of the basic tenets of investing

Diversification helps to reduce the risk to your investment portfolio

Diversification needs to be done wisely

• Diversifying across asset classes

• Diversifying across investment avenues

• Diversifying across issuer of securities

• Diversifying across countries


Inflation

Investments should always yield positive inflation-adjusted returns

Calculated as:

Inflation refers to the rising cost of living

Inflation Adjusted Returns = Rate of Return on Investment – Rate of Inflation


Cost Of Investing

Cost of investing should always be low

Cost of investing refers to expenses associated with investing and holding the investments in your portfolio


Tracking & Reviewing Investments

The frequency could be once a quarter

Tracking investments refers to monitoring your investments

Reviewing refers to going a step forward and taking an action to make changes to investments held by you


• An unbiased investment advisor can contribute immensely

• Focus on knowing his attitude and rationalisation

• Know his educational qualifications

• Judge his infrastructure and value added services

Selecting An Unbiased Advisor


• Discipline in investment is vital in wise investing

• Systematic Investment Plans (SIPs) can work for you

• SIPs enforce a disciplined approach towards investing

• Aids in maintaining regularity in investing

Role Of Discipline In Wise Investing


• Light on your wallet as it allows you to invest in small specified

denominations regularly

• Makes market timing irrelevant

• Power of compounding

• Rupee cost averaging

Disciplined Investment Via Sips Offer Following Benefits


The Longer You Choose The SIP Tenure The Better It Is

Disclaimer: The figures presented here are for illustration purpose only. The rate of return is assumed at 12% p.a.

5-Year SIP10-Year SIP

15-Year SIP20-Year SIP

82,500 231,079

506,123

993,088

Value of Monthly SIP of Rs.1000 in an Equity Scheme over Time Periods


An Early Bird Gets A Bigger Pie

Particulars Vijay Ajay Sanjay

Present age (years) 25 30 35

Retirement age (years) 60 60 60

Investment tenure (years) 35 30 25

Monthly investment (Rs.) 7,000 7,000 7,000

Returns per annum 10% 10% 10%

Sum accumulated (Rs) Rs.2.66 crore Rs.1.58 crore Rs.92.87 lacs

Disclaimer: The names and figures are fictitious and used for example purpose only.

Also, return per annum mentioned above is for illustration purpose only


• Investing without a plan

• Not Diversifying well

• Ignoring related risk

• Getting married to your investments

• Timing the markets

Investment Mistakes You Should Avoid!


Some key take away points!

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• Do not rush with investing

• Investing is a serious business

• Have an investment objective in place

• Know your risk appetite and risk tolerance and then invest in suitable investment avenues

• Stick to your asset allocation

• Do not speculate or time markets


Some key take away points!

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• Never use contingency funds to invest

• Do not rule out inflation factor while investing

• Never invest with borrowed funds

• Know your investment product well

• Select an unbiased advisor

• Diversify

• Track and review your investments


we now invite you to test your learning by taking up this simple quiz

(and win exciting prizes!)

Lets Do A Short Quiz!

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1) While investing wisely, one should indulge in trading and timing the markets

A. True

B. False

2) Inflation bug should not be ruled out in investment planning

A. True

B. False

3) Which of the following results in rupee-cost averaging?

A. Lump sum investing

B. Systematic Investment Plans

C. Ad-hoc investing

D. All of the above

Quick Quiz

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4) The cost of investing should preferably be:

A. Low

B. High

C. Medium

D. Does not matter

5) Tracking investments refers to:

A. Reviewing your investments

B. Monitoring investments

C. Review and monitoring investments

D. None of the above

Quick Quiz

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6) Risk tolerance is done taking into account which of the following:

A. Income

B. Expenses

C. Nearness to financial goals

D. All of the above

Quick Quiz

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Thank You For Participating!

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