Achieve Your Financial Goals Through Mutual Funds

8/9/2019 Achieve Your Financial Goals Through Mutual Funds

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Achieve your financial goals

through


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What are financial goals?

Financial goals are the milestones we hope toreach in life with the help of our financialresources.

If we plan our finances, we should be able toreach these milestones successfully and on time.


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Types of Financial Goals

Short-term goals Medium-term goals Long-term goals

Building a

emergencyfund

Paying of acredit card

Establishing

a holiday tripwith family

buying a

hometheatre

Short-termgoals are those to be reached within a year.


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Down

payment ofHouse

Purchaseof New Car Renovationof House

Payment of

PersonalLoan

Medium-termgoals may be in the one to three year range



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Highereducation

planning ofchild

MarriagePlanning of

Child

Investing for acomfortableretirement

Start a new

business

Long-termgoals may be in the range of five years or more



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Well Set Financial Goals

Specific

Meaningful and measurable

Agreed to an attainable

Reality Based

Time Bound

Goals should be SMART


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Know your Risk ProfileWe think only about RETURN on investments. However, the word RISK is rarelyunderstood. Like fingerprints, investment profiles of people are always unique. Age,Life stage, income, savings, dependents and mindsets are factors that define a

person's attitude towards investments. Risk taking ability and mental frame of mindplays a key role in determining where we ultimately put our money.

The first step in asset allocation is `Risk Profiling'. Risk Profiling combines two key areas -

1) Estimating financial risk-taking capacity and

2) Understanding the (psychological) risk tolerance level of an individual.

Risk Tolerance test helps to make judgments about our financial possibilities.Analysis of risk profiling can generate following risk tolerance level. The range isindicative only.

Conservative = Highly risk averse

Moderately conservative = Risk Averse

Moderate = Risk Neutral

Aggressive = Risk tolerant

Very Aggressive = Risk seeker


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Financial Goal

Education Planning for Child

Cost Now

Years

From

Now

Inflation

RateCost Then

Rate of

Return

Investment

Required Now

Investment

Required Per

Year

Investment

Required Per

Month

1000000 5 5% 1276282 12% 724196 200899 15886

1000000 10 5% 1628895 12% 524460 92821 7340

1000000 15 5% 2078928 12% 379812 55766 4410

1000000 20 5% 2653298 12% 275059 36825 2912

1000000 25 5% 3386355 12% 199197 25398 2008


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What is a Mutual Fund?A mutual fund is a trust that pools the savings of several investors

and then invests these into different kinds of securities (shares,

debentures, money market instruments, or a combination of these)in keeping with a pre-stated investment objective. The income thus

generated and the capital appreciation is distributed among mutual

fund unit holders in proportion to the number of units held by them.


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11

Why Mutual Fund Diversification

Professional Management

Flexibility

Liquidity Cost Effective

Regulated by SEBI Tax benefits


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12

NO ENTRY LOADfrom 1st August, 2009

on all schemes of Mutual Fund

I S l i f M l F d


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Short Term

Liquid Fund

Short TermFund

FixedMaturity Plan(FMP)

MediumTerm

Debt Fund

FixedMaturity Plan

(FMP)

MonthlyIncome Plan

BalancedFund/Hybrid

Fund

Long Term

Debt Fund

MonthlyIncome Plan

BalancedFund/Hybrid

Fund

Equity Fund

Investment Solutions from Mutual Funds

to achieve our financial goals like :


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What are Liquid/Ultra Short Term Funds ?Liquid Funds are known as Money Market Schemes, These funds

provides easy liquidity and preservation of capital.

These schemes invest in short-term instruments like Treasury Bills,inter-bank call money market, CPs and CDs.These funds are appropriate for corporate and individual investors

as a means to park their surplus funds for short periods.These schemes rank low on risk-return matrix and are considered

to be the safest amongst all categories of mutual funds.

Average Returns of Ultra Short Term Funds as on 12/03/2010

1 Month 3 Months 6 Months 1 Year

Peer Group Average 4.00 4.12 4.17 4.66

Highest Return 4.78 4.8 4.94 5.64

Lowest Return 3.87 3.91 3.9 4.35


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What are Monthly Income Plans?Invests maximum of their total corpus in debt instruments while

they take minimum exposure in equities.

It gets benefit of both equity and debt marketThese scheme ranks slightly high on the risk-return matrix when

compared with other debt schemes.

Different flavor available according to risk profile of

investor :

Conservative

Equity 0-10 Debt 0-100

Moderate


Aggressive


F t f M thl I Pl


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Investment in safe debt instruments like government bonds, highly ratedbonds of reputed companies to generate regular income for you.

Some part in shares of reputed companies, so that your investment growsand beats inflation.

Earn Extra every month (Can be an add-on to your current income or incomeafter retirement).

Monthly Income in form of Dividend, hence tax free in your hand).

Features of Monthly Income Plans :

Average Returns of Monthly Income Plans as on 12/03/2010

1 Month 3 Months 6 Months 1 Year 2 Years 3 Years 5 Years

Peer Group

Average 0.92 1.02 3.81 18.94 7.63 8.74 8.77


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What are Equity Funds?These funds invest a maximum part of their corpus into equities holdings. The

structure of the fund may vary different for different schemes and the fund managers

outlook on different stocks. The Equity Funds are sub-classified depending upon theirinvestment objective, as follows:

Diversified Equity Funds

Mid-Cap Funds

Sector Specific Funds

They invest in both equities and fixed income securities, which are in line withpre-defined investment objective of the scheme.

These schemes aim to provide investors with the best of both the worlds. Equitypart provides growth and the debt part provides stability in returns.They generally invest 40-60% in equity and debt instruments.

These funds are also affected because of fluctuations in share prices in the stockmarkets. However, NAVs of such funds are likely to be less volatile compared to

pure equity funds.

What are Balanced Funds?

B fit f i ti i E it F d ?


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Equity is known to give attractive long -term returns and hence may be used forfunding long term needs (like child education, buying a home etc.).

Save taxes : No capital gains tax (on withdrawal/redemption) if you stay investedfor over a year.

Invest in the long-term to short-term ups and downs.

Risk is lowered : Mutual Funds invest in many companies and funds are managedby experts; safer than direct investing in shares. .

Benefits of investing in Equity Funds?

Returns of Large Cap Diversified as on 12/03/2010

1 Year 2 Years 3 Years 5 Years

Peer Group Average (Nos of

funds 18) 104.71 5.28 13.8 20.82

Highest Return 105.92 11.52 19.9 27.22

Lowest Return 97.51 -5.74 3.11 11.6

BSE Sensex 105.74 3.17 9.99 20.16

M k E P C t


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Make Every Penny Count

Every SIP goes to Build a Secure Future

Small investments made regularlycan become BIG SUMSover a period of years.

You can invest as little as Rs. 500/- p.m.

START A SIP TODAY.THE SMART WAY TO INVEST

IN STOCK MARKETS

No need to time the market Get better rupee cost averaging Lower Risk and Better Returns Instills Discipline in Investing

Benefit from power of compounding

SIP h l t


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Month NAV

Mr. SIP investor Mr. One Time Investor

Amount

invested

Units

accumulated

Amount

invested

Units

accumulated

1 10 1000 100.00 6000 600

2 11 1000 90.91 0 0

3 9 1000 111.11 0 0

4 8 1000 125.00 0 05 8 1000 125.00 0 0

6 11 1000 90.91 0 0

Total units accumulated 642.93 600

Value of Investment (Rs.) 7072.22 6600

Average Price 9.33 10

The above example is merely an illustration of Rupee Cost Averaging. The NAV and returnsgenerated are purely indicative and do not depict the performance of any mutual fund scheme.

SIP helps you to

Beat market volatility, reduce risk

Return of SIP in Large Cap Diversified Equity Fund as on 12/03/20103 Years

Bse Sensex 15%

Large Cap Diversified Mutual Fund Return 18-20%

SIP h l t


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Benefit from power of compounding

SIP helps you to

SIP h l t


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Start Early

SIP helps you to

S t ti T f Pl (STP)


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Systematic Transfer Plan (STP)

Ideal for

Investors who want to invest lump sum money in schemes with stable returns and ensure small exposure toequity schemes in order to avail of the potential for higher growth through equities.

Invest a lump sum amount in a debt-oriented scheme (Debt schemes can be either 100% debt or High Debt andLow equity). Specify a desired amount to be transferred to any equity schemes of the same AMC . This works

like a SIP (Systematic Investment Plan). Lowering Risk and increasing returns. This is best suited when marketshave peaked or the investor is unsure of the further uptrend in the market

OptionsInvestor has the option of :

Daily STP Weekly STP Fortnightly STP Monthly STP Quarterly STP

While investing in a debt fund normally assures you of fairly consistent returns, equities have thepotential to create wealth. But the unpredictability in equity funds can be quite a deterrent whenyou make a choice. To combine the best of both worlds, there is Systematic Transfer plan.


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STP in Equity Fund From MIP

Total Investment 100000

Monthly STP 2000

Maturity Amount 186806

Total Return 86806

Return on Investment 13.31%p.a.

Expected Expected

Return on MIP Return on Equity Fund through STP

10% 15%

Total

Maturity

AmountYearOp

BalanceInvestment Total Return Total

TRF to

Equity

Fund

Balance Op STPTRF from

MIP

STP

ReturnCl STP

1 0 100000 100000 9340 109340 24000 85340 0 24000 1721 25721

2 85340 0 85340 7805 93145 24000 69145 25721 24000 5855 55576

3 69145 0 69145 6109 75255 24000 51255 55576 24000 10655 90231

4 51255 0 51255 4236 55490 24000 31490 90231 24000 16226 130457

5 31490 0 31490 2166 33657 24000 9657 130457 24000 22692 177149 186806


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Assets Allocation & Rebalancing

Start 6 Months 12 Months 18 Months

Fair Market

After 6 Months Market

goes up but still in FairRange


goes up to ExpensiveZone


lands in DiscountedZone

%

Value in

Rs. %

Value in

Rs. %

Value in

Rs. %

Value in

Rs.

Equity 60 60000 Equity 65 77400 Equity 75 150444 Equity 35 57169

Debt 40 40000 Debt 35 41600 Debt 25 49504 Debt 65 103973

Total Wealth 100000 Total Wealth 119000 Total Wealth 199948 Total Wealth 161142

Action Action Action

Bring Back allocation as

per suggested grid

Reduce allocation to

Equity as per suggested

grid

Increase allocation to

Equity as per suggested

grid

%

Value in

Rs. %

Value in

Rs. %

Value in

Rs.

Equity 60 71400 Equity 50 99974 Equity 70 112799

Debt 40 47600 Debt 50 99974 Debt 30 48343

Total Wealth 119000 Total Wealth 199948 Total Wealth 161142

Note

Debt Returnassumed 8%p.a


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CA. Ravi MalhoraB.Com. FCA, DISA(ICA), CERTIFIED FINANCIAL PLANNERCM

CFPCM , CERTIFIED FINANCIAL PLANNERCM and are certification marks owned outside the U.S. by Financial Planning Standards Board

Ltd. (FPSB). Financial Planning Standards Board India is the marks licensing authority for the CFP

CM

marks in India, through agreement with

Mobile : 9896155000email : [email protected]

Disclaimer

The information contained here is for education purpose only. Recommendations, opinions orsuggestions are given with the understanding that readers acting on this information assume all risks

involved. I do not assume any responsibility or liability resulting from the use of such information,

judgment and opinions for Trading or Investment purposes.

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Achieve Your Financial Goals Through Mutual Funds