Saving generally means putting money aside. It is the amount left over when the person's consumer expenditure is subtracted from the amount of disposable income that he or she earns in a given period of time.

Saving = Disposable Income – Expenditure

Why Saving is important?We save because we can't predict the future. If we could, we would know precisely how much money we would need for the things that we want and need in the future. But because we can't do this, the need to save money for the future is vital.

Few Reasons for Saving... 1. It acts as an emergency cushion. 2. It provides liquidity.

Who is our worst enemy TO SAVE?

Investment means putting your saving to work to earn more money. Investment is the choice of the individual.

THROUGH PROPER INVESTMENT ONLY, YOU CAN CONVERT YOUR WORST ENEMY INTO YOUR BEST FRIEND.

Why Investment is important?

1. Creating wealth over the long term 2. Acquiring assets like a dream house or a dream car 3. Fulfilling your need for financial security

To fight inflation“You do not have to be wealthy to be an investor but you need to be an investor to become wealthy”

Invest ment Avenues Range of return Taxability Liquidity Tenure Risk FeatureFINANCIAL INVESTMENT AVENUES

Bank Fixed Deposits # 9-10%Interest Taxable Very Low

No of days to yrs Low

Senior Citizen Saving Scheme 9%Interest Taxable Medium 5 yrs ^^^ Low

National Savings Certificate 8%Interest Taxable Medium 6 yrs Very LowInvestment eligible for rebate U/S 80C. Annual acrued interest is also eligible for rebate U/S 80C.

PPF 8%Tax Free Very Low15 yrs Low

Kisan Vikas Patra 8.25%

Interest Taxable, No TDS Medium 8 yrs 7 m Very LowDeposits are exempt from Wealth Tax

Post Office RD 7.50%

Interest Taxable, No TDS Low 5 yrs Very Low

Monthly Income Savings 8%

Interest Taxable, No TDS High 6 yrs Very LowDeposits are exempt from Wealth Tax

Company FD 11-12.5%Interest Taxable Low 3-5 yrs High

Mutual Fund Debt Variable^^10%(20% with Indexation)* Low 1m-5 yrs Low

Mutual Fund Equity 15%Nil High High High

Direct Equity 15%Nil HighVery High

Very High

PHYSICAL INVESTMENT AVENUES

Gold Very High Medium Gold has always proved as a good hedge against inflation

Real Estate

LT Capital Gain Tax applicable on Indexation cost Low Medium

* LT Capital Gain Tax# 5 Yrs Bank FD eligible u/s 80C

^^ Depending on product

^^^ Tenure is extendable by 3 Yrs

COMPARISION OF VARIOUS TYPES OF INVESTMENTS

AFTER GOING THROUGH VARIOUS MEANS OF INVESTMENT IT IS CLEAR THAT MAXIMUM RETURNS CAN ONLY BE GAINED FROM EQUITY MARKET

BUT IN GENERAL WE FEAR TO TAKE THE RISK BURDEN, HOWEVER IF WE ANALYSE THE TRACK RECORD OF STOCK MARKET SINCE ITS INCEPTION WE WILL SURELY GET RID OF THE FEAR FACTOR AND INVEST SMARTLY IN THE EQUITY MARKET.

ACCORDING TO THE WORLDS RICHEST MAN Mr WARREN BUFFET:In the short term the market is a popularity contest; in the long term it is a weighing machine

We should ensure that our investment should be able to earn (CAGR)

CAGR > INFLATION + GDP GrowthFor example :If INFLATION Rate = 6% and the predicted growth of GDP = 9%We should invest in an instrument which gives us a CAGR > 15% (6% + 9%)

EQUITY MARKET IS THE ONLY INSTRUMENT WHICH CAN GIVE A GUARANTEED RETURN (CAGR) OF MORE THAN THE SUMMATION OF

INFLATION AND GDP GROWTH

After studying the last Table we can be well assured that with an investment horizon of 7 years or more the risk factor in investing in EQUITY is almost NIL.

THERE FORE

The ultimate truth is that we should shred our FEAR and start investing in EQUITY.

Wealth can ONLY be created through an EQUITY investment as it can only surpass the inflation index. As the Indian stock market is the only financial instrument which has given 19.86% CAGR since inception in 1979.

Entry to the equity market can be done in the following ways:

1. Direct Equity (Through DEMAT a/c).2. Mutual Fund (Through Equity Fund or ELSS).3. PMS (Through Portfolio Manager).4. ULIP (Through Insurance Companies).

Products ULIP MF DIRECT PMS

% Exposure 70% – 80% 90% - 100% 100% 95% - 100%

Load 25% No 0.5% 1% - 2%

Expense Ratio 5% - 10% 2% -2.5% 0.5% - 0.75% 2% - 3%

Lock in Period 5 yrs No No No

Management Fund Mgr Fund Mgr Self Fund Mgr

Time/ Knowledge Not Req Not Req Req Not Req

COMPARISION AMONGST THE VARIOUS ENTRY PROCEDURE TO THE

EQUITY MARKET

DIRECT INVESTMENT GETS MAXIMUM EXPOSURE, HAS THE LEAST LOAD, LEAST EXPENSE RATIO, NO LOCKING PERIOD BUT THE ADDITIONAL BURDEN OF MANAGEMENT, TIME & KNOWLEDGE IS DIRECTLY IMPOSED ON THE INVESTOR.