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