Financial Planning and Mutual Funds

Life is a roller coaster ride- full of ups and downs. We all know we have to save for many responsibilities life brings along with it. But no matter how much you save- Its Never Enough!

Why Does One Need To Invest?

Why Invest?

Retirement

Daughters Marriage
Childrens Education Buy House Buy Automobile Marriage Start Career AGE 25 28 30 35 40 50 60

Why Are Investment Decisions Difficult?

Selection of appropriate investments What if I need the money before the targeted date? What paper work is needed? How often do I monitor these investments? How do I ensure safety? Who will inform me on the progress regularly? What are the tax implications - Can I keep the return or will the tax-man keep it? What if I lose the proof of investments?

What Investment Is Appropriate?

Debt: PPF, Post Office Scheme, Fixed Deposits, Debentures, Bonds, Income Funds, Liquid Funds Equity: Individual Stocks, Growth Funds, Sectoral Funds Banks: Bank Deposits

Or a mix of the above!

A good investment is one that helps you maximise your total returns, net of taxes and inflation over the time period you invest for!

When I was young, I used to think that money is everything in life

Now that Im old, I know it is.

Why financial planning?

Did You Know ?

If your current monthly expenses are Rs. 30,000/- per month, then after 20 years you will require Rs. 80,000/- a month to

just maintain the same lifestyle!

An education degree for your child which currently costs Rs. 20 lakh could cost over Rs. 34 lakh after 11 years!

At inflation of 5%

Individual Investor Needs: Investment Goals

All individuals need to save for
Retirement Childs education / marriage Medical emergency Other family obligations

Every individual has one or more of the above goals

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Individual Investor: Life Stages

Earnings (Consumption + Savings) Consumption Savings

22 Young Independent

27 Young Married

40 Middle Age

60 Retirement

All individuals have a finite period to save for their investment goals

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Value Of Money Over Time

Impact of inflation on monthly expenses of Rs. 30,000 today

100,000 79,599 62,368

Value of Rs. 100,000 over time

78,353

48,102 38,288 30,000 37,689

Today

5 years

15 years

20 years

Today

5 years

15 years

20 years

Investors need to beat inflation

All figures in Rs.; At inflation of 5%; The above illustration above is merely indicative in nature and does not in any manner indicate the performance of any of the schemes of DSP BlackRock Mutual Fund. Please read the Scheme Information Document and Statement of Additional Information carefully before investing.

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Performance Of Various Asset Classes

Cumulative annualised returns: 1982 to 2011

16.75%

9.37% 8.96%

6.75% 2.08%

WPI Inflation Growth

Bank FDs* Real Growth

BSE Sensex*

Equities outperform other asset classes over the long term

*Individual real growths for bank FDs & BSE Sensex have been calculated for each year from 1982-2011. Post this calculation a CAGR has been calculated for the same. Hence the real growth of both Bank FDs & Sensex is not equal to the growth minus the WPI Inflation.
Source: IIFL, Internal; *1-3 year deposit rate; ^excluding dividends; data as at end FY2011

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Individual Investors Are Scared Of

The Downside Risk in Equities

The Risk of Market Volatility

The Risk of Market Timing

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What else makes a material impact on investments in equity?

Investing in the BSE Sensex

Returns* are from Jan 1980- Mar 2011

17.39% 16.00%

16.71%

Fixed investment at lowest sensex value every year

Fixed investment at highest sensex value every year

Fixed investment on 1st day of every month

Market timing does not matter over the long term

Source: Internal; *XIRR, time period considered Jan 2, 1980 to Mar 31, 2011

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The Power of Compounding

Saving a small sum of money regularly in equity mutual funds can make your money work with greater power and can have a significant impact on wealth accumulation.
BSE Sensex Scenario A Number of years Monthly investment Total investment Assumed annualised return Final corpus
15 Rs 5000 Rs 9 lakh 18% Rs. 45.96 lakh

BSE Sensex Scenario B

20 Rs 5000 Rs 12 lakh 18% Rs. 1.17 crore

The above illustration is merely indicative in nature and does not in any manner indicate the performance of any of the schemes of DSP BlackRock Mutual Fund. Please read the Scheme Information Document and Statement of Additional Information carefully before investing.

Even a seemingly small 5 year delay can cost you the CROREPATI tag

Time Period of 25 years; Hypothetical numbers meant only for illustration purpose

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Summary
Investors needs to save regularly and invest those savings in higher return assets to create wealth

Long Term Systematic Monthly Investment In equity schemes is ideal for this !

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How Do You Achieve Your Financial Goals?

Retirement Planning
Corpus required per month Rs 83,579

Monthly Household Expenses

Rs 30,000

Inflation 5% 21 Yrs

Retirement corpus required to meet post retirement expenses (if invested at 7%) : Rs 1.4 cr
Monthly investment needed to achieve this corpus in 21 years at 12% at 15% at 18% Rs 12,583 Rs 8,083 Rs 5,090

Today

At the time of retirement

The above illustration is merely indicative in nature and does not in any manner indicate the performance of any of the schemes of DSP BlackRock Mutual Fund. Please read the Scheme Information Document and Statement of Additional Information carefully before investing.

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Retirement Planning

Educational Degree for Child

Corpus required Rs 34,20,000

Rs 20,00,000

Inflation 5% 11 Yrs

Monthly investment needed to achieve this corpus in 11 years at 12% at 15% at 18% Rs 12,456 Rs 10,166 Rs 8,237

Present

When your Child actually goes for this degree

The above illustration is merely indicative in nature and does not in any manner indicate the performance of any of the schemes of DSP BlackRock Mutual Fund. Please read the Scheme Information Document and Statement of Additional Information carefully before investing.

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Retirement Planning

Childs Marriage Corpus required Rs 43,70,000

Rs 20,00,000

Inflation 5%

Monthly investment needed to achieve this corpus in 16 years at 12% at 15% at 18% Rs 7,509 Rs 5,466 Rs 3,925

16 Yrs

Present

When your Child actually gets married

The above illustration is merely indicative in nature and does not in any manner indicate the performance of any of the schemes of DSP BlackRock Mutual Fund. Please read the Scheme Information Document and Statement of Additional Information carefully before investing.

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Introduction to Mutual Funds

What Is A Mutual Fund?

A pool of money, collected from investors, invested according to certain investment objectives Ownership in hands of investors whove pooled in their funds. Managed by a team of investment professionals The pool of funds invested in portfolio of marketable investments. Investors share denominated by Units that have a Net Asset Value (NAV) which changes everyday The portfolio is created according to stated investment objectives Investors make money through Capital appreciation and Income distribution

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What Are The Advantages Of Mutual Funds?

Portfolio diversification Professional Management Reduction in Risk Service Affordability Reduction in Transaction costs Liquidity Convenience and Flexibility Tax Efficiency

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Three Basic Types

Mutual funds come in three basic types

Equity or stock funds Bond or income funds and Money market or cash funds.

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Other Classifications
Growth/ Value/ Income Options- Growth / Dividend /Reinvestment Sectoral Funds Specialty Funds Offshore Funds Open ended/ Close ended Diversified Equity ELSS Funds Index Funds Hybrid/ Balanced Funds

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How To Choose The Right Scheme?

Determine your financial goals and your time horizon Determine your tolerance for risk Study the objectives of the funds available and match them with your need

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Fund Suitability - Risk Versus Return

Sector

Diversified Returns Balanced

Income

Liquid

Risk

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March is a particularly risky month to invest in the stock market, the others are.

July, February, January, April, September, August, May, June, December, October & November.

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When they say time is money, they must mean Systematic Investment Planning

Disclaimer

This presentation shall not constitute any offer to sell or solicitation of an offer to buy units of any of the Schemes of the DSP BlackRock Mutual Fund.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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