Retire Rich Retire Young

- An effort to make your money work harder

Presented by:-

Vishal Thakkar
M.Com, CA, MBA(fin)

Managing Director

Brianna Knowledge Resources Pvt. Ltd.

Time & Money

Lets begin with a story! There was a village with a drought. The Chief of the village found the two smartest men he could find and gave them each Rs.10,000. Their mission..bring water to the people. The 1st man was a hard worker and started a business. The 2nd man was an investor and built a pipeline.

And the winner is

Not only did the second man win the contest, but he found a way to have water (money) come in even when he wasnt working.

Both men started from the same background, with the same experience, and the same amount of money. The only difference was that the 1st man worked hard for his money and the second man had his money work hard for him.
The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow. Rupert Murdoch

Retire Rich & YoungWhat?

Different People have different meanings
Some say good lifestyle, no pressure to earn money etc. While others say pursuing hobby, not going to work. Retire Rich & Young, to us, means, subscribing to an increasing standard of living, without having increasing effort to maintain it.

Retire Rich & YoungWhy?

To do what I like to do & not just work for money. To pursue my hobbies, interests which were left behind in Rat Race. To spend more times with Loved ones, family & friends To help people, take up a social cause & to make this world a better place.
Whatever be the objective, we all agree that there is a need.

Savers Are Losers

How many of you have a Savings Account? What is the Rate of Interest that you get on your Savings Account? What about the average Inflation Rate? Do You recommend Fixed Deposits? If Savers are Losers, Borrowers would Win
Lets Look at borrowing

 Your Re.1 at work at the bank. Rs.10 for every Re.1. By RBI Rules, banks can lend out Rs.10 for every Re.1 that you give them. Meaning they have made up Rs.9 of borrow able money out of thin air. Where do I get some of that? They say open an account with us and well give you anywhere from 1% to 5% interest. Well even give you stuff! Then they then turn around and lend you the money right back saying borrow money from us and well only charge you 10% to 27% interest. And that is why banks have beautiful fountains, golden chandeliers, and marble floors. Your money paid for it!

Arbitrage

Your Expense, Banks Income

YOU THE BANK

INCOME

INCOME

EXPENSE

EXPENSE

ASSETS

LIABILITIES
Your Mortgage

ASSETS
Your Mortgage

LIABILITIES

Top Two Money Eaters

TAXES & Death are the two things which we cannot avoid, so we defer them ALAP.

INFLATION is number two evil that eats away our money like a rodent

Why do we follow the crowd?

We are going to read your mind. Thats right read your mind! Ready.. 1. 2. 3. 4. 5. 6. 7. Pick a # between 1 and 10. Now multiply that # by 2. Add eight to that #. Divide that # by 2. Now subtract the # you started with from that #. Now what ever # you have in your mind, match it up with its corresponding letter in the alphabet. i.e. 1=a, 2=b, 3=c, d=4, etc. O.K., Now think of a country that starts with that letter. Ill give you a second.

Having a hard time.think Europe.how about Denmark? Youre thinking of D right, you did get 4? At least you should have if you did the math right. How did we do that?

We follow the crowd because its easy and because we are just good at it!
No matter what number you were thinking of the equation would have led you to the number 4. When we invest, we are doing the same. The numbers start out differently, FDs, Post Office, PPF, KVP, IVP, NSC, Mutual Funds, yet your results are the same...dismal.

Time Is Your Friend

Time: a young persons biggest asset Compound interest is awesome For every decade that savings is delayed, the required investment triples Example: Rs.500,000 at 65; 10% yield
Age 25: Rs. 79 per month Age 35: Rs. 219 per month Age 45: Rs. 653 per month Age 55: Rs. 2,141 per month

Power of Compounding
3500 2800 2100 1400 10% 700 0 0
Growth of Rs. 100/Difference is quiet significant in long run.

15%

8% 5 10 15 20 25

Years

YEAR END SENSEX level

1 year 28.57% 34.90% 25.52% -2.85% 15.99% 44.24% 62.24% -11.10% -21.94% 79.13% 9.45% 49.54% 266.88% -46.78% 65.71% -13.71% 3.24% -0.17% 15.82% -3.92% 33.73% -27.93% -3.75% -12.12% 83.38% 16.14% 73.73% 15.89% 10/28 27.85% 35.71%

3 years

5 years

7 years

10 years

12 years

15 years 31-Mar-79 100.00

1 31-Mar-80 128.57 2 31-Mar-81 173.44 3 31-Mar-82 217.71 4 31-Mar-83 211.51 5 31-Mar-84 245.33 6 31-Mar-85 353.86 7 31-Mar-86 574.11 8 31-Mar-87 510.36 9 31-Mar-88 398.37 10 31-Mar-89 713.60 11 31-Mar-90 781.05 12 31-Mar-91 1167.97 13 31-Mar-92 4285.00 14 31-Mar-93 2280.52 Harshad Mehta 4,285 15 31-Mar-94 3778.99 16 31-Mar-95 3260.96 17 31-Mar-96 3366.61 18 31-Mar-97 3360.89 19 31-Mar-98 3892.75 20 31-Mar-99 3739.96 21Tech31-Mar-00 5001.28 Boom 5,001 22 31-Mar-01 3604.38 22 31-Mar-02 3469.35 22 31-Mar-03 3048.72 23 31-Mar-04 5590.60 24 31-Mar-05 6492.82 25 31-Mar-06 11279.96 26 31-Mar-07 13,072.10 Probability of Loss Average Returns Probability of Loss (%)

Performance of BSE Sensex 29.61% 18.05% 12.25% 17.58% 39.49% 27.66% 4.03% 7.52% 15.24% 43.12% 81.76% 42.93% 47.90% -8.70% 13.86% -3.83% 6.08% 3.57% 14.17% -2.53% -2.47% -15.21% 15.76% 23.23% 54.67% 32.73% 5/26 19.94% 19.23%

Equities not risky in long run

19.66% 22.44% 27.05% 18.58% 13.50% 23.81% 17.16% 15.26% 53.04% 41.76% 39.57% 33.09% 23.58% -4.74% 11.29% -0.21% 8.93% 1.37% 0.64% -4.77% 8.37% 5.36% 25.63% 30.38% 3/24 17.95% 12.50%

28.36% 21.77% 12.61% 18.48% 20.52% 24.97% 42.80% 21.78% 33.11% 35.03% 24.81% 23.18% 18.77% -1.92% 11.87% -0.67% 0.89% -1.41% 7.54% 7.58% 17.08% 14.71% 3/22 17.36% 13.64%

As Time Increases Volatility & Range Decreases

21.72% 19.77% 21.01% 34.71% 26.84% 31.45% 24.87% 19.35% 20.74% 25.60% 18.02% 20.40% 11.93% -2.09% 2.95% 3.99% 7.13% 12.85% 14.55% 1/19 17.67% 5.26%

22.73% 33.94% 23.95% 26.85% 25.60% 24.39% 20.63% 17.29% 18.05% 23.47% 14.45% 13.23% 8.32% 2.24% 9.11% 9.54% 12.27% 0/17 18.00% 0.00%

27.40% 24.05% 21.86% 20.02% 21.43% 19.92% 19.31% 13.03% 13.63% 14.53% 14.71% 15.16% 16.32% 7.72% 0/14 17.79% 0.00%

Sensex Growth from 1979 - 2007

After all, in the last 25 years, weve seen . Two wars At least three major financial scandals Assassination of 2 prime ministers At least 3 recessionary periods 10 different governments and An unfair share of natural disasters, yet However had one invested in the Sensex Rs 1 lacs in 1979 it has grown to 1.30 crs earning a return of 19% compounded annualized return.

More About Time

Time diversification reduces investment volatility
The Rule of 72
72/interest rate = doubling period
72/doubling period = interest rate

Rule of 72
If you Put your Money at X % then your Money is double in (72/X) years. For Eg: 1 Lac Invested for 36 Yrs Rate of Yrs to After 36 Interest Double Yrs 6 12 Yrs 8 Lacs

8 24

9 Yrs 3 Yrs

16 Lacs 40 Crs

Financial Status of Rich Person

INCOME

EXPENSE
ASSET

LIABILITY

So what do we recommend
Take the Steering Wheel in your hand
Invest In Yourself First Learn the Language of Money Climb the Seven Steps of Retiring Rich & Young Make an Action Plan to religiously follow them

Review your progress at reasonable intervals

Starting Early
Ram
Savings Starting Age 25

Shyam
40

27 Crores*

Savings - Monthly SIP

Rs.5,000/-

Rs.15,000/-

Saving Years till age 60

Total Amount Saved (appx.)

35 years
Rs.57 lacs

20 years
Rs.62 lacs

Give time to your investments rather than timing

4.90 Crores*

25 years

40 years

60 years

Assumptions: (a) Savings grows at 5% annually (b) Returns assumed at 20% CAGR

Investment Avenues
I know all of you have been waiting for this one But not too soon

Let us first understand the difference between good Loan & Bad Loan

Here are 5 great reasons to carry a big, long mortgage and never pay it off. - Ric Edelman, Author of The Truth About Money (1997 Book of the Year).

1.

Mortgages Dont Affect Home Value The value of your property is going to rise or fall regardless of whether or not you have a mortgage. You wouldnt keep Rs.100,000 between the mattresses, why would you keep it in your house?
Your Mortgage Is The Cheapest Money Youll Every Buy People have a ton of debt, i.e. credit cards, auto loans, student loans, etc. By far, the cheapest loan you can get is a mortgage loan. Why wouldnt you borrow against your house at 6% acquiring more assets to increase your R.O.I., instead of borrowing with a 18% credit card.

2.

3.

You Might Need The Cash Financial Troubles? i.e. retirement, job loss, medical, family, marital, college, etc. Banks only like to lend money when they know it can be paid back. Tax Law Encourages You To Have A Mortgage. Mortgage insurance and interest is tax deductible whereas interest on other loans are not. In essence the government rewards you with cash back for paying interest on your mortgage. Mortgages Become Cheaper Over Time Depending on the loan you choose, your mortgage payment stays the same over time. However your income increases making the payments easier to make.

4.

5.

Investment Avenues
Real Assets
Real Estate Commodities Oil, Gold and Silver

Paper Assets
Stocks and Shares Certificate of Deposits Government and RBI Bonds Foreign Exchange Mutual Funds Public Provident Fund

The Beauty of Real Estate!

1. Phantom Cash Flow (Depreciation) Make money and count it as a loss 2. Banks Lend You Money Try that with stocks 3. Leverage Get more for your money 4. Sec - 54 Tax Deferred Exchange No capital gains tax 5. The Bigger the Better 6. Negotiations Something is worth only what someone else will pay for it 7. Appreciation

Dolf De Rooss Four Questions

1. Q: How many Rupees worth of stock/property can you buy with Rs.10,00,000? A: Rs.10,00,000 with stocks, but with real estate a whole lot more! Q: The moment you buy your Rs.10,00,000 worth of stock/property, how much is it worth? A: Rs.10,00,000 with stocks, but with real estate it could be a whole lot more! 2.

3.

Q: When you buy your Rs.10,00,000 worth of stock/property what can you personally do to increase the value? A: With stocks pray or write the C.E.O. of the company and ask him to ease up on the private jet trips. But with real estate you can paint, put in new flooring, landscape, or even add a room.
Q: Once you have bought Rs.10,00,000 worth of stock/property and it has doubled in value what must you do to enjoy the gain? A: With stocks sell them and pay capital gains, but with real estate you can sell, trade, refinance and enjoy limited and even sometimes no tax.

4.

 Step 1:

Seven Steps To Retire Rich & Young

Decide your Age of Financial Retirement Now.

 Step 2:

Seven Steps To Retire Rich & Young

Buy Liabilities to the Extent of Need and Not Desire.

 Step 3:

Seven Steps To Retire Rich & Young

Link Liability Targets to Asset Targets.

Seven Steps To Retire Rich & Young

Step 4: Plan Liability Acquisitions at least a Year in Advance.

Seven Steps To Retire Rich & Young

Step 5: Increase CASH by Increasing K.A.S.H. K = Knowledge A = Attitude S = Skills H = Habits

Seven Steps To Retire Rich & Young

Step 6: Work Smarter, Make your Money Work Harder.

Seven Steps To Retire Rich & Young

Step 7: Have Targets for Job Earnings and Freedom Ratio. Freedom Ratio = Other Income Monthly Expense

Action Plan

Conclusion
So the question is.
What are you going to do with your time and your money?

Only a fool does the same thing over and over again and expect a different result. Albert Einstein

Questions

FAQs

Thank You

Wish you good luck.