2. Welcome!

3. What is this workshop about?

4. Keep it Simple!

6. 1. Term Life
insurance
2. Emergency
insurance
3 Health
insurance
4. Accident
insurance
5. Inflation insurance
6. Action Plan insurance

7. Cannot/ Don’t want to DIY?
Avoid conflict of interest. Avoid anyone who gets a commission
Seek out a SEBI registered investment advisor and invest in commission free products.
Pay a flat fee!
Ignore media reports, amc reports, bloggers AIFW, wealth coaches, wealth doctors etc.
Work with the advisor regularly

8. Solutions for 20-somethings
What % of your take-home pay is left after monthly expenses?
Can you spare 5-10% of your take-home pay for an investment that will not touch?
Save the rest for short-term needs and have fun!

9. Products-last Approach

11. A Personal Timeline ~ 5 years Invest Save Recurring Needs
Non-recurring Needs
~ 5 years
Save
Invest

12. Step 1: Goals are different from dreams!
“Get maximum returns!”
I need something after 10 years.
Today it costs Rs. 5 lakhs.
After 10 years, I expect it to cost ~ Rs. 13 lakhs.
How much should I invest each month
and where should I Invest it, so that
I have at least Rs. 13 lakhs (after tax)
in about 8-9 years.

13. Source: ICICI Bank

14. What is an asset class? Stocks or equity - ownership
Gold/Silver/Oil – commodities
Fixed income: Bonds –deposits or debt
Real Estate
Cash
Forex

15. Asset Allocation When should I invest in what asset class?
What to expect from each asset class?
What is the percentage exposure to each asset class necessary to achieve a certain financial goal?
“Deciding on asset allocation for a financial goal”

16. Asset Allocation: The linchpin of an investment portfolio

17. Incorrect Risk vs Return Relationship!
Standard Deviation

18. All Mutual Funds Debt + Equity

19. Equity: Sensex Annual Returns
Increasing order

20. Higher risk does not imply higher return!
Standard Deviation

21. Higher risk does not imply higher return!
Short-term
debt funds
Gilt funds
Equity mf
Return
Gold
Risk
Standard Deviation

22. ETFs trump active large-cap funds May 11 - HBL

23. The Truth!

24. “The news is completely manipulated
“The news is completely manipulated. Everything you hear, every single day is designed by corporate media to do one thing only. To keep you living in fear.”

25. Sensex Total Returns Index: 1979 to 2017

27. Why not have some equity exposure?
Is not 5 years long-term?!
A primer on volatility
Annual Returns
Year 1
Year 2
Year 3
Year 4
Year 5
10%

28. A lump sum investment in ICICI Top 100
Rs. 10,000 invested on 1st Jan 2003
would have grown to
Rs Lakhs on Dec 31st 2014.
Return = 22.91%

29. Annual Returns of ICICI Top 100

30. Understanding the 22.9%
CAGR
= 22.9%

31. Annual Returns of ICICI Top 100
Average: 29.3% Standard Deviation: 38.6%

32. What can I expect from ICIC Top 100?
Average: 17.5%
Stdev: 13.7%
17.5% +/- 13.7%

33. Illustration: Volatile Compounding
Year 1
Year 2
Year 3
Year 4
year 5
CAGR
10%
10.00%
Year 1
Year 2
Year 3
Year 4
year 5
CAGR
25% 7%
10.05%
Year 1
Year 2
Year 3
Year 4
year 5
CAGR
25%
-25% 7%
2.81%
Year 1
Year 2
Year 3
Year 4
year 5
CAGR
-25%
21%
9.96%
Year 1
Year 2
Year 3
Year 4
year 5
CAGR
-25% 7%
-0.34%

34. Sensex Total Returns Index: 1979 to 20170%
10-30%
50-70%

35. Asset Allocation has to change with time0%
10-30%
50-70%
Financial Goal Planner with Flexible Asset Allocation

36. Sensex Staircase

37. Journey of a Mutual Fund SIP
 Oct 2001, after 6+ years and 74 SIP installments,
FIBCF had an XIRR of …..0%

38. A Mutual Fund SIP is Hope, Not a Strategy!

39. Anatomy of a bull market

40. Risk is inseparable from Returns

41. Asset Allocation When should I invest in what asset class?
0 -5 Years: Equity is too volatile and therefore risky.
100% - fixed income.
0-3 years: RD/FDs
3+ years: debt mutual funds

42. Asset Allocation When should I invest in what asset class?
5 -10 Years: Equity is still too volatile and therefore still too risky.
100% - fixed income.
30% Equity, 70% fixed income
40%+ Equity, rest fixed income

43. Asset Allocation When should I invest in what asset class?
10 Years +: Equity will always be volatile but risk can be managed with minimal effort.
100% - fixed income.
60% -70 Equity, 40%-30 fixed income.
100% equity

44. Asset Allocation What to expect from each asset class?
Equity: 10% -12%. Max 14% +/- 4% (15Y +)
Fixed income: 6-8% (post tax)
Gold: 6-8% (post tax) (10Y +)

45. Expected Portfolio Return
60% Equity (12% return), 40% fixed income (7% return) (12% x 60%) +(7% x40%) =10% (post tax) … for a 10Y+ goal
“Deciding on asset allocation for a financial goal”

46. A minimalist portfolio

47. Minimalist equity portfolios
1 large cap mutual fund + 1 mid/small cap fund
1 large and mid-cap fund
1 equity-oriented balanced fund

48. You cannot choose the right mutual fund!
Do we have a review strategy in place?

49. Portfolio Management 101

50. Portfolio Management 201

51. Eight Steps to a healthy portfolio

52. Suggestion to 20-somethings
Do not check your portfolio for first 3-5 years. Invest systematically and leave it be

53. It takes time!!

54. Check your portfolio only once a year!
Get rid of that Moneycontrol app. It is evil!
Avoid star ratings
Avoid peer comparison

55. Review your portfolio once a year
What is the net return of your portfolio?
What is the net return of each asset class in the portfolio?
What is the accumulated corpus worth?
Are course corrections necessary?
After a while returns do not matter!

56. Star Ratings

57. How to review a mutual fund SIP?
XIRR Tracker

58. How to review a mutual fund SIP?

59. Have a de-risking strategy in place
1: Correct significant deviations from asset allocation once a year initially and then twice a year: Rebalancing

60. Annual Returns of ICICI Top 100

61. Rebalancing

62. Rebalancing

63. Asset Allocation Time Frame Conservative Moderate Risky Mad-Max
< 5 Years
FD/RD
~ 10% Eq
30-40% Eq
> 60% Eq
7 Years
10-20% Eq
40-50% Eq
>60% Eq
10 years
40% Eq
100% Eq
Time Frame
Conservative
Moderate
Risky
Mad-Max
< 5 Years
FD/RD
~ 10% Eq
30-40% Eq
> 60% Eq
7 Years
10-20% Eq
40-50% Eq
>60% Eq
10 years
40% Eq
100% Eq
10-15 Years
<40% Eq
60% Eq
80% Eq
FD/RD 100% Eq
>15 Years
< 60% Eq
10-15 Years
<40% Eq
60% Eq
80% Eq
FD/RD 100% Eq
>15 Years
< 60% Eq

64. 2 Asset Allocation has to change with time
Financial Goal Planner with Flexible Asset Allocation

65. 15 Years 40% Equity + 60% Fixed income 60% Equity + 40% Fixed income
1.5
years
5% Equity + 95% Fixed income
1.5
years 3
years
15 Years

66. Cannot/ Don’t want to DIY?
Avoid conflict of interest. Avoid anyone who gets a commission
Seek out a SEBI registered investment advisor and invest in commission free products.
Pay a flat fee!
Ignore media reports, amc reports, bloggers AIFW, wealth coaches, wealth doctors etc.
Work with the advisor regularly

68. All that Glitters is not Gold!

69. View all price charts in log scale

70. Gold is extremely volatile!

71. Gold Bonds: 8-year rolling returns

72. Gold INR = Gold USD + Ex-rate