The purpose of this slide deck is to bring and enhance awareness in the area of managing personal finance.
The way awareness about body and life style habits help in keeping good physical health, “financial health” of an individual
needs similar attention for a peaceful and secured life.
Through personal experience, I realised that professionals like us, spend majority part of daily working life in making money,
however the money earned, gets very little proactive mind space, specially in the initial 5-10 years of professional life. Once
the reality of financial responsibility kicks in (around 40s as in my case), the person try to become somewhat active, but
limited knowledge and perceived complexity of finance and investment market bogs him down. The possibilities of facing
retirement with followings are very high in such cases, (the signs of a ‘Passive Saver’),
a. Savings lying in low earning PF, FDs & tax saving instruments
b. Investments in multiple insurance, mfs etc (where the rate of return was never calculated)
c. Blocked money in real state
d. Unsure about what to do with the retirement fund
e. Not sure on how to ensure regular flow of cash to maintain the adopted lifestyle
The situation could be much better with little effort at our part by learning few basics and by taking active care of our hard
This deck is an effort to push a “Passive Saver” and initiate the change into an “Active Investor”
• Why – necessity
• Passive Saver vs Active Investor
• What to do
• The difference compounding make ( and other arithmetic basics)
• Consistency (early and regular)
• Right Product
i. Debt vs Equity
ii. Insurance & Saving
iii. Mutual Fund
iv. Taxation Impact
Why Should I
1. Rising Cost
2. Increase Iin life expectancy
3. Changing Social Scenario
4. Limited social security
Rising Cost of
• Inflation is not the only reason
• Cost of Medical
• Culture of Replacement & Upgrade
• Blurred lined between Rev-exp and Cap-exp
• Cost of travel
Paradox of Development & Individualism
Unlike developed economies, in India, state do
not have enough sources to ensure social
On one hand there is wave of consumption based growth &
development on the lines of developed economies, (at the
cost of constant inflation & fizzling in strong social construct
of the past). Unlike our earlier generation, we do not dislike
We are heading towards “worst of the both worlds” scenario
Passive Saver Active Investor
- Saving to save Tax
- Budgeted Saving
- After analysis of multiple products
- Deducted from Salary
- Year End
- No looking back / portfolio review
- Budgeted regular Saving
- Analysis of risk and rewards together with
comparison of multiple products
- Saving accounts & FD
- Tax Saving Products
- LIC, other insurance
- Retirement ULIP Plans
- Planned distribution in
- i. Equity and Debt
- ii. Fixed & Liquid
- Short need vs Long Run
- Due to limited knowledge approach become
defensive and driven by compulsion.
- Scared and nervous in the matter of finance
- Working towards a plan of achieving short term,
medium term and long term goal
- Confidence in taking risk for higher returns
Author: Atul Joshi Email : email@example.com
Power of Compounding & Regularity
If you start to invest Rs. 1000 per month at the beginning of your job
and continue to do that for 30 years, @8% annual rate of return, you
will end with Rs. 14.68 lacs.
Increase savings 10% every year and you will end with Rs. 47.86 lacs
If you choose your investment little carefully and able to get return
@10% , your corpus will be Rs. 62 lacs
@ 12% rate of return the value will be Rs. 84 lacs
Even a small but “regular” “investment” can make a big difference in “long run”
When do I need money ?
Purpose and Timespan of investment
Short Term (Need money in next 1-2 years)
- Vehicle, Holiday Plans, Social Commitment - FD/RD/Liquid Funds
Medium term (Required in next 3-5 years)
- Home, Child Education - FD, RD, Equity Funds,NSC
Long Term (Not required in next 5 years) - Equity or Eq Funds, PF
- Retirement Fund
Avenues to Invest
Fixed Income Equity
• Low Risk Low Reward
• Period based return
• Can be invested for short/medium term
Bank FD/RD/Corporate FD
Post office savings
• High Risk High Reward
• Market based return
• Invest only for long term *
Direct Share Purchase
Equity Mutual Fund
Mutual Funds De-coded
What is a Mutual Fund :When you invest in a Mutual Fund, you give your money to a fund
manager to invest on your behalf. Fund manager in-turn invest that money in one or many investment
avenues as per the defined fund objectives. Total sum of investment value is divided by no. of units
and that is the Net Asset Value/Unit.
Where will he invest : Every Fund has a defined objective, risk category and benchmark. Types
are, Equity Fund, Balanced Fund, Blue Chip Equity, Mid Cap, Micro Cap, Liquid Fund, Debt Fund,
Gold Fund etc. Fund manager purchase and sale these instruments from the market based on his/her
When Can I invest : Open Ended, Close Fund. (Entry Load)
How will get my return : Dividend, Growth (Exit Load)
How Can I invest : Direct Fund, Indirect Fund
Mutual Funds Investment
• Investing in (through) Mutual Fund is the most convenient way for common man for building
wealth in longer run or saving for specific purpose.
• All the insurance companies who offers ULIPs/Retirement plans etc, they too invest our money
in some or other mutual fund.
What happens if you skip one instalment of SIP ?
How Tax affects saving & investment
Tax treatment can drastically change your real return on investment.
Know before you invest that whether the return will be treated as “other income” or
“capital gain” ?
- Mostly return from fixed income product like Interest is treated as other income
which is added to your total taxable income. (e.g. if your taxable Salary income is Rs. 7 lac
on which you are paying tax and over and above that if you receive Rs. 20000 as interest on FD, it will
be added to your taxable income of Rs. 7 lac and tax will be calculated on Rs. 7.20 lacs)
- Income from capital investment e.g. Shares or Mutual Fund are treated as Capital
Gain. Capital Gain is taxed at different rate (which is lesser than normal highest
Remember the difference between ‘investing for tax saving’ vs ‘spending for tax saving’
Mistry of Financial Terms
• Capital Gain
• Market Cap
How to calculate return on investment
1. How much are you putting in total
2. When are you paying
3. When will you receive the return
4. How much net will you receive in total (after tax)
5. Consider the risk involved
Comparing Financial Product or
Points to ponder before investing
1. How much is the total commitment ?
2. For how much time ?
3. For how much time my money is blocked ?
4. What if I withdraw in-between ?
5. Tax implication
6. Expected net XIRR
7. Risk involved
Risk – Is it worth taking ?
• Risk is inherent part of every investment product. There are no zero risk
• Risk can be rewarding when taken for longer run. Taking risk in short run is for
professionals not for lay investors.
• Conservative investment approach will yield low return.
• Balance must be found between being greedy in short term and being too
defensive and not taking risk at all.
• Apportion your savings between Fixed and Equity income
Moderate Risk – How ?
Invest portion of your savings in stock
market directly or indirectly (Equity based
Select top performing companies in it’s
sector if you chose to invest directly
Keep the money invested for > than 5
Read and understand related information
• Trade in stocks (it is as good as gamble)
• Investing based on tips
• FD in small cooperative banks or companies
offering higher interest
• Sale your invested stock in panic
• Invest if you do not understand the product
Remember ULIP is a moderate to high risk product
Life Insurance is cost (not saving)
• The purpose of insurance is to cover some type of risk while investment is made
to expect return.
• An insurance company covers your risk at a pre calculated premium.
• When we erroneously assume that an insurance is also an investment it creates
• The risk is not covered fully (because part of your premium is towards investment)
• Low return on investment (for managing investment on your behalf insurance company apply
hefty charges, hence net money invested itself is less)
Avoid ULIP and traditional insurance plans
• Investing online is as safe or risky as doing normal banking transaction
• It is possible to do almost all kind of investment transactions from your desktop
(specially Mutual Fund & Stock transaction)
• A Dmat account is required to invest in stock market directly (no Dmat account
needed for Mutual Fund investment)
• When investing for the first time, physical KYC documents are mandatory, after
that nothing required.
• No further KYC required by other MF once approved by one Mutual Fund
DIY is Possible
Some Golden Rules
• Save first (spend remaining)
• Invest regularly/consistently
• Know where are you investing
• Invest towards a purpose (Short, Medium Long ?)
• Check your portfolio regularly
• Be properly insured (Insurance is not investment)
• Do it yourself (as far as possible)
It pays to pay some attention to your hard earned money
Consciously Invest (not just save) regularly
Learn and use Excel
Stay invested for long term
Take moderate risk but avoid temptation of making quick money
Treat insurance as cost not saving
Understand net of tax return
It is easy to do transactions online
There are many online resources to help
Just like physical health, be aware and take active care of financial health !!
Further pointers (for next deck)
• Financial Planning
• How much to save ?
• How to spend?
• Investment Product Selection
• Where to invest
29Atul Joshi email: Saver2Investor@gmail.com