2. What is Financial Planning?
• Financial planning is the process of creating,
managing & enhancing wealth during the lifetime or
we can say it is the process of meeting your life goals
through the proper management of your finances.
• Life goals can include buying a home, saving for your
child's education or planning for retirement.
• It includes insurance planning, investment planning,
tax planning, retirement planning and estate planning.
PND MENTOR CONSULTANTS
• Financial planning is the process of creating,
managing & enhancing wealth during the lifetime or
we can say it is the process of meeting your life goals
through the proper management of your finances.
• Life goals can include buying a home, saving for your
child's education or planning for retirement.
• It includes insurance planning, investment planning,
tax planning, retirement planning and estate planning.
3. Why Financial Planning?
• Inflation
Cost of Education / Medical increasing exponentially
• Rising Life expectancy
estimated to increase from 75 to 85 in next decade
• Protection against the uncertainty
Protect lifestyle of family in your absence
• Balanced Assets Allocation
Allocate your investment in Short Term & Long Term
perspective to achieve maximum gain at minimum
risk.
PND MENTOR CONSULTANTS
• Inflation
Cost of Education / Medical increasing exponentially
• Rising Life expectancy
estimated to increase from 75 to 85 in next decade
• Protection against the uncertainty
Protect lifestyle of family in your absence
• Balanced Assets Allocation
Allocate your investment in Short Term & Long Term
perspective to achieve maximum gain at minimum
risk.
4. Effect of Inflation
Value of Rs.1,00,000 after specified periods at specified inflation
rates:
Years 3% 4% 5% 6% 7%
5 86,261 82,193 78,353 74,726 71,299
10 74,409 67,556 61,391 55,839 50,835
PND MENTOR CONSULTANTS
10 74,409 67,556 61,391 55,839 50,835
15 64,186 55,526 48,102 41,727 36,245
20 55,368 45,639 37,689 31,180 25,842
25 47,761 37,512 29,530 23,300 18,425
Excel
5. What is Insurance Planning?
• Insurance planning is a tool to minimise
or to avoid risks.
• What type of Risk?
1. Risk of Early Death
2. Risk of Disability
3. Risk of Assets
PND MENTOR CONSULTANTS
• Insurance planning is a tool to minimise
or to avoid risks.
• What type of Risk?
1. Risk of Early Death
2. Risk of Disability
3. Risk of Assets
6. How to Avoid Risk?
• Identify your needs
• How much insurance do you need?
• Which product should you consider?
PND MENTOR CONSULTANTS
• Identify your needs
• How much insurance do you need?
• Which product should you consider?
7. How to Identify your needs?
• An individual is single & a married
individual who has family members
dependent on him both has a different
need.
• Dependency of your family on your income
will help to calculate your need.
PND MENTOR CONSULTANTS
• An individual is single & a married
individual who has family members
dependent on him both has a different
need.
• Dependency of your family on your income
will help to calculate your need.
8. How much insurance do you need?
• The concept of human life value (HLV) can help in
deciding how much life cover an individual should opt
for.
• Human Life Value (HLV) is a methodology to determine
the appropriate amount of sum assured you need to
have at present in case of future loss of income.
• In simple words, it is that amount, which can ensure that
the standard of living of the family is not affected even if
the earning member is not there.
PND MENTOR CONSULTANTS
• The concept of human life value (HLV) can help in
deciding how much life cover an individual should opt
for.
• Human Life Value (HLV) is a methodology to determine
the appropriate amount of sum assured you need to
have at present in case of future loss of income.
• In simple words, it is that amount, which can ensure that
the standard of living of the family is not affected even if
the earning member is not there.
9. How to Calculate HLV
Monthly income of a person Rs.10,000
His personal expenses per month Rs.2,000
Monthly income provided to family Rs.8,000
Therefore, annual income provided Rs.96,000
PND MENTOR CONSULTANTS
Amount of money to be put in the bank
to earn Rs.96,000 pa at 8% interest rate
Rs.12,00,000
Hence, HLV is Rs.12 lakhs
Please note that however we have not taken into account the future income growth of the
person. This is, therefore, not an exact way of calculating the Human Life Value. This is only a
representation to give the participants a fair idea of how this works.
Excel
10. Which product should you consider?
TERM PLAN (PURE RISK COVER PLANS)
• A term plan is a pure risk cover plan wherein the insured
pays a lower premium for a higher sum assured.
• Term insurance is the cheapest form of insurance and
helps the policy holder insure himself for a larger amount
at a relatively low premium.
• Unfortunately, for the ‘returns sensitive’ investor, term
plans do not find favour, as they do not offer a return
(although some term plans do return the premiums paid
if the individual survives the tenure).
PND MENTOR CONSULTANTS
TERM PLAN (PURE RISK COVER PLANS)
• A term plan is a pure risk cover plan wherein the insured
pays a lower premium for a higher sum assured.
• Term insurance is the cheapest form of insurance and
helps the policy holder insure himself for a larger amount
at a relatively low premium.
• Unfortunately, for the ‘returns sensitive’ investor, term
plans do not find favour, as they do not offer a return
(although some term plans do return the premiums paid
if the individual survives the tenure).
11. Comparison B/W Term Plan &
Endowment Plan of LIC
Details of Term Plan from LIC
Age
(Yrs)
Sum
Assured (Rs)
Annual
Premium
(Rs)
Tenure
(Yrs)
Total
Premium*
(Rs)
Maturity
amount on
survival (Rs)
30 10,00,000 3,820 25 95,500 Nil
PND MENTOR CONSULTANTS
30 10,00,000 3,820 25 95,500 Nil
Details of Endowment Plan from LIC
Age
(Yrs)
Sum
Assured (Rs)
Annual
Premium
(Rs)
Tenure
(Yrs)
Total
Premium*
(Rs)
Maturity
amount on
survival (Rs)
30 10,00,000 38,820 25 9,70,500 22,57,600
(Approx 6%)
12. What should be the plan?
Case Particulars Age
(Yrs)
Avenues Tenure
(Yrs)
Amount
(Rs)
Return
(%)
Maturity
Amount
(Rs)
1 Term plan (10 Lacs
+
Secured mutual
fund
(100% Debt)
30 Term plan 25 3,820 * Nil
Mutual fund 25 35,000 8 27,63,406
2 Term plan (10
Lacs) +
Balanced mutual
fund
(40% in Equities)
30 Term plan 25 3,820 * Nil
PND MENTOR CONSULTANTS
Term plan (10
Lacs) +
Balanced mutual
fund
(40% in Equities)
30 25 3,820 *
Mutual fund 25 35,000 10 37,86,367
3 Term plan (10
Lacs)+
Diversified equity
fund
(100% in Equity)
30 Term plan 25 3,820 * Nil
Diversified
equity
fund
25 35,000 15 85,64,937
Investment in mutual funds are subject to market risk. Excel
13. Investment Planning
• What is Investing?
Investment refers to a commitment of funds to one or
more assets that will be held over some future time
period.
• What is Investment Planning?
Investment Planning means to manage our wealth
effectively, obtaining the most from it.
• Why Investment Planning?
Creating wealth over the long term
Acquiring assets like a dream house or a dream car
Fulfilling your need for financial security
PND MENTOR CONSULTANTS
• What is Investing?
Investment refers to a commitment of funds to one or
more assets that will be held over some future time
period.
• What is Investment Planning?
Investment Planning means to manage our wealth
effectively, obtaining the most from it.
• Why Investment Planning?
Creating wealth over the long term
Acquiring assets like a dream house or a dream car
Fulfilling your need for financial security
14. What Investment Planning Includes?
• Evaluating Risk
• Asset Allocation
• Creation and Accumulation of Wealth through
Systematic Investment Plans (SIP)
• Regular review of progress and Portfolio
Rebalancing
PND MENTOR CONSULTANTS
• Evaluating Risk
• Asset Allocation
• Creation and Accumulation of Wealth through
Systematic Investment Plans (SIP)
• Regular review of progress and Portfolio
Rebalancing
15. Evaluating Risk
• Thumb rule says you should invest in Equity
inverse to your age (means 30 year age person
can take risk of investing in equity up to 70%)
• Age, personal circumstances & general market
conditions is crucial factor while deciding risk.
• Right investment is a balance of three things:
Liquidity, Safety and Return.
PND MENTOR CONSULTANTS
• Thumb rule says you should invest in Equity
inverse to your age (means 30 year age person
can take risk of investing in equity up to 70%)
• Age, personal circumstances & general market
conditions is crucial factor while deciding risk.
• Right investment is a balance of three things:
Liquidity, Safety and Return.
16. Asset Allocation
• Assets allocation is the main aspects of
the investment planning.
• Allocate your investment looking to your
future plans.
• You should have Cash/Liquid Assts, Short
term Assets, Medium Term Assets & Long
Term Assts as per your Future Goal.
PND MENTOR CONSULTANTS
• Assets allocation is the main aspects of
the investment planning.
• Allocate your investment looking to your
future plans.
• You should have Cash/Liquid Assts, Short
term Assets, Medium Term Assets & Long
Term Assts as per your Future Goal.
19. Power of Compounding
• The following table shows how much your money would grow when
you invest a fixed amount per month over a period of 5,10, 15, 20, 25,
and 30 years at following interest rates:
Rs.1,000 Invested Monthly Amount (Rs)
Years 8% 10% 15% 20% 25%
5 73,967 78,082 89,682 103,454 119,844
PND MENTOR CONSULTANTS
5 73,967 78,082 89,682 103,454 119,844
10 184,166 206,552 278,657 382,364 532,805
15 348,345 417,924 676,863 1,134,295 1,955,785
20 592,947 765,697 1,515,955 3,161,479 6,859,095
25 957,367 1,337,890 3,284,074 8,626,708 23,754,942
30 1,500,295 2,279,325 7,009,821 23,360,802 81,974,715
Excel
20. Retirement Planning
Why Retirement Planning?
• The average life expectancy has expected to
risen to 75-85 years.
• Inflation is hovering around the 5-7 per cent
mark increasing the cost of living.
• Children settle abroad or away from home and
even the elderly do not want to be dependent on
their children anymore.
PND MENTOR CONSULTANTS
Why Retirement Planning?
• The average life expectancy has expected to
risen to 75-85 years.
• Inflation is hovering around the 5-7 per cent
mark increasing the cost of living.
• Children settle abroad or away from home and
even the elderly do not want to be dependent on
their children anymore.
21. Retirement Planning Example
Case I Case II Case III
Aggressive Balanced Secured
Current Age 30 30 30
Retirement Age 60 60 60
Time to retirement 30 30 30
Inflation 6% 6% 6%
PND MENTOR CONSULTANTS
Inflation 6% 6% 6%
Rate of return assumed pre-retirement: 15% 10% 8%
Rate of return assumed post-retirement: 8% 8% 8%
Current Expenditure required at
retirement 20,000 20,000 20,000
Monthly Expenditure required at
retirement 114,870 114,870 114,870
Table continued………………..
22. Retirement Planning Example
conti………….
Case I Case II Case III
Aggressive Balanced Secured
Annual Exp. Required at retirement 1,378,438 1,378,438 1,378,438
Other Expenses Required 500,000 500,000 500,000
PND MENTOR CONSULTANTS
Total Expenses required at retirement 1,878,438 1,878,438 1,878,438
Money required to meet the above
Expenses 23,480,474 23,480,474 23,480,474
Current Investments 100,000 100,000 100,000
Current Investments grown to till
retirement 6,621,177 1,744,940 1,006,266
Net Fund required or to be
accumulated 16,859,296 21,735,533 22,474,208
23. Retirement Planning Example
Solution:
Net Fund required or to be
accumulated 16,859,296 21,735,533 22,474,208
Rate of return assumed pre-retirement: 15% 10% 8%
Available time for Investment (in years) 30 30 30
PND MENTOR CONSULTANTS
Available time for Investment (in years) 30 30 30
Savings required
One Time Savings 254,627 1,245,632 2,233,427
Annual Savings 33,721 120,123 183,694
Monthly Savings 2,405 9,536 14,980
Excel
24. The Importance of Starting
Investment Early
Case I
• Mr. A & Mr. B both aged 30 years wish to make an
investment to build a Retirement Fund.
• Mr. A starts immediately with annual investment of
Rs.10,000/- @ 10% p.a.
• While Mr. B starts investing after 10 years but with
Rs.25,000/- @ 10% p.a.
• Both the Mr. A & Mr. B would like to Retire at Age 60
year
PND MENTOR CONSULTANTS
Case I
• Mr. A & Mr. B both aged 30 years wish to make an
investment to build a Retirement Fund.
• Mr. A starts immediately with annual investment of
Rs.10,000/- @ 10% p.a.
• While Mr. B starts investing after 10 years but with
Rs.25,000/- @ 10% p.a.
• Both the Mr. A & Mr. B would like to Retire at Age 60
year
25. The Importance of Starting Early
Particulars Mr. A Mr. B
Amount Invested Per Annum 10000 25000
Tenure of Investment 30 20
PND MENTOR CONSULTANTS
Tenure of Investment 30 20
Total Investments 300000 500000
Returns @10% 10% 10%
Maturity Amount 1,809,434 1,575,062
26. The Importance of Starting Early
Case II
Particulars Mr. A Mr. B Mr. C
Age 30 40 50
Retirement Age 60 60 60
Years available for Investment 30 20 10
PND MENTOR CONSULTANTS
Years available for Investment 30 20 10
Corpus required at retirement age 2,500,000 2,500,000 2,500,000
Rate of Returns 10% 10% 10%
Annual Investment required 13,816 39,681 142,603
Monthly Investment required 1,097 3,265 12,103
Excel
27. Simple Steps to be a Wealth
Creator!!!!!
• There is no better time than today to start your
investment.
• Waiting for the golden moment will not help in any manner.
• We all know that tax-planning investments can be done
right from the start of the financial year in April, but how
many people actually do it?
• Transfer all risks such as death, disability, critical illness,
accident, health and property to the insurance company.
• Understand the consequences of risks more than anything
else and do not think of insurance as an expense.
PND MENTOR CONSULTANTS
• There is no better time than today to start your
investment.
• Waiting for the golden moment will not help in any manner.
• We all know that tax-planning investments can be done
right from the start of the financial year in April, but how
many people actually do it?
• Transfer all risks such as death, disability, critical illness,
accident, health and property to the insurance company.
• Understand the consequences of risks more than anything
else and do not think of insurance as an expense.
28. Refrain from these 6 mistakes
Finally refrain from these 6 mistakes that most equity and
mutual fund investors make:
• Having irrational expectations.
• Selling out in bad markets.
• Investing short-term money in equity and long-term
money in debt.
• Being affected by news, interest rates, oil prices and
losing confidence too soon.
• Trying to time the market and waiting for the best time to
buy or sell.
• Getting greedy and opting for spicy derivatives,
commodities, trading without understanding the risks
associated.
PND MENTOR CONSULTANTS
Finally refrain from these 6 mistakes that most equity and
mutual fund investors make:
• Having irrational expectations.
• Selling out in bad markets.
• Investing short-term money in equity and long-term
money in debt.
• Being affected by news, interest rates, oil prices and
losing confidence too soon.
• Trying to time the market and waiting for the best time to
buy or sell.
• Getting greedy and opting for spicy derivatives,
commodities, trading without understanding the risks
associated.
29. Last Thought !!!!!!!!!!!
Even if your financial decision is
not perfect, it may still leave you
in a better position than if you had
done nothing.
PND MENTOR CONSULTANTS
Even if your financial decision is
not perfect, it may still leave you
in a better position than if you had
done nothing.
30. PROFILE OF ADVISOR
CA Nimesh Dedhia is a qualified Chartered
Accountant since 1999. He has also cleared
examination of Certified Financial Planner. He is
also holding degree of DISA (ICAI).
He has more than 15 years experience in the field
of Tax Planning & Financial Planning.
Our ARN is 48678 & advising in the field of Mutual
Fund since 2007 and served more than 300 clients.
CA Nimesh Dedhia is a qualified Chartered
Accountant since 1999. He has also cleared
examination of Certified Financial Planner. He is
also holding degree of DISA (ICAI).
He has more than 15 years experience in the field
of Tax Planning & Financial Planning.
Our ARN is 48678 & advising in the field of Mutual
Fund since 2007 and served more than 300 clients.
