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A slide on personal finance
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Personal Finance- Sarang Anajwala
Agenda
0 Insurance0 Life (Term) Insurance0 Health Insurance
0 Investments0 FD0 Mutual Funds
0Equity0Debt
0 Stocks
Insurance
0Why Insurance? (Insurance is NOT investment)0Who needs Insurance?0Term Insurance
0 “Any insurance policy that gives money back is a BAD policy” – Sarang
0 Alternative to those famous money-back policies0Health Insurance
0 Individual 0 Family Floater
Investments – FD
0Who should NOT invest money in FD?0Tax implications0How safe is FD?0The Greece example!
Investments – MF: Debt Funds
0Why debt funds?0Debt Funds vs FD0Types of Debt Funds
0 Ultra short term / Short term funds0 Long Term Funds0 Gilt funds
0Tax Advantage (f you hold for more than 1yr)0 10% Flat tax or 20% after indexation
0Are Debt funds safe? (compared to FD)
Investments – MF: Debt Funds
0Some good ultra short term/short term debt funds:0 Birla SL FRF-Short Term Plan(G)0 DWS Ultra ST(G)0 Templeton India Ultra Short Bond Fund(G)0 JM Money Mgr-Super(G)0 JM Money Mgr-Reg(G)
Investments – MF: Equity Funds
0Why Equity Funds?0Types of Equity Mutual Funds
0 Large Cap 0 Mid Cap0 Small Cap0 Multi cap 0 Hybrid
0What is SIP?
Investments – MF: Equity Funds (cont.)
0How to choose a good mutual fund?0 Long history0 Consistency of Fund manager0 When was the fund manager changed?0 Type of MF to choose – recommended allocations
0Core vs Satellite approach in fund selection0SIP: Systematic Investment Plan
Investments – MF: Equity Funds (cont.)
0Some good equity MFs:0 Large Cap/Large-Mid Cap
0 ICICI Pru Focused BlueChip Eq Fund (Growth)0HDFC Top 200 Fund (Growth)
0 Mid Cap0 IDFC Premier Equity Fund-Reg(Growth)0HDFC Midcap Opportunities Fund (Growth)
Investments: Stocks
0 Number crunching0 Things to look at to find out good or bad company
0High Promoter’s stake – Is promoter stake pledged?0Debt (Debt/Equity)0What is meant by ‘Shareholder Equity’?0 Long term Revenue growth0 Long term profit growth0 Long term Return on Equity (ROE)0 Long term Return on Capital employed (ROCE)0Valuations
0 EPS (Earning Per Share)0 Price to Earning (P/E)
Investments: Stocks (cont.)
0Beyond Numbers0 Business
0The sector in which business operates (ex. Real Estate )0Future Prospects of the sector0Future Prospects of the company in that sector0Cyclical sectors
0 Corporate Governance: Integrity and track-record of Promoters
0 Is company linked to politics/politicians?0 Valuations
Investments: Stocks (cont.)
0 Conviction vs Hope0 20% return on investment of Rs. 100 is more than 100%
return on investment of Rs 100 Prefer Staggered buying – SIP in stocks0 Do invest in stocks. The outcome is two folds
1. Obvious one is that you gain good returns on your investment
2. Second one, though not-so-obvious but more important one, is that your understanding of 'good or bad business' improves great deal with time!
Example Stock: Astral Poly Technik Ltd (+ve)
0 Looking at numbers0 Things to look at to find out good or bad company
0 Promoter’s stake: 63.82% (0% pledged)0Debt/Equity: 0.26 (Debt: 63Cr vs Cash: 35Cr)0 Shareholder Equity: Rs 241.85Cr0 Sales growth: 41%(3yrs),43% (5Yrs),49%(10yrs)0 Profit growth: 35%(3yrs),30% (5Yrs),41%(10yrs)0Return on Equity (ROE): 26%(3yrs),25% (5Yrs),25%(10yrs)0Return on Capital employed (ROCE): 33%(3yrs),30% (5Yrs),
29%(10yrs)0 Valuations
0 EPS (Earning Per Share): Rs 13.990 Market Price: Rs 4910 Price to Earning (P/E): 35 (costly?)
Example Stock: Astral Poly Technik Ltd (+ve)
Example Stock: Kingfisher Airlines Ltd. (-ve)
0 Looking at numbers0 Things to look at to find out good or bad company
0 Promoter’s stake: 30.14% (71.66% pledged)0Debt/Equity: -0.64 (-ve) (Debt: 8657Cr vs Cash:182Cr)0 Shareholder Equity: Rs -13472.92Cr. (-ve)0 Sales growth: -53%(3yrs),-19% (5Yrs),25%(10yrs)0 Profit growth: None (3yrs, 5Yrs, 10yrs)0Return on Equity (ROE): None (3yrs, 5Yrs, 10yrs)0Return on Capital employed (ROCE): None (3yrs, 5Yrs, 10yrs)0Valuations
0 EPS (Earning Per Share): –Rs 59.91 (-ve)0 Market Price: Rs 3.150 Price to Earning (P/E): None
Example Stock: Kingfisher Airlines Ltd. (-ve)
Thank You