1. Understanding the nature of stock market returns

3. Sensex Total Returns Index: 1979 to 2013

4. Negative returns: 4 periods out of 32 Lowest return: -11% Highest return: 50%

5. Negative returns: 2 periods out of 30 Lowest return: -2% Highest return: 45%

6. Negative returns: 1 periods out of 28 Lowest return: -2% Highest return: 36%

7. Negative returns: 0 periods out of 25 Lowest return: 3% Highest return: 30%

8. Negative returns: 0 periods out of 20 Lowest return: 8% Highest return: 26%

9. Negative returns: 0 periods out of 15 Lowest return: 12% Highest return: 21%

10. Negative returns: 0 periods out of 10 Lowest return: 15% Highest return: 20%

11. Sensex Total Returns Index: 1979 to 2013 5%

12. S&P 500 Total Returns Index: 1871 to 2013 Source: http://www.moneychimp.com/features/market_cagr.htm 12%

13. Sensex Total Returns Index: 1979 to 2013

14. S&P 500 Total Returns Index: 1871 to 2013

15. Normal Distribution Source: http://www.mathsisfun.com/data/standard-normal-distribution.html

16. Mutual Fund Star Ratings Source: MorningStar.com

17. 68% of values are within one standard deviation of the mean

18. Higher risk does not imply higher return! Return Risk Standard Deviation

19. Higher risk does not imply higher return! Return Risk Standard Deviation

20. Return

21. Higher risk does not imply higher return! Return Risk Standard Deviation

22. Increasing Risk (Standard deviation %) 3Y-return/Risk

23. Sensex 1979 to 2013 15 year CAGR Transformed Distribution: Square Root 14% +/- 4%

24. Return expectation Equity allocation  60% Debt allocation  40% Equity expectation  10% (after tax) Debt expectation  6-7% (after tax) Portfolio expectation 10%(60%) + 7%(40%) = 8.8% (approx.) Investments are assumed to start simultaneously

25. Years to goal Present cost Inflation Post-tax rate of return of portfolio8.8.00% Future Cost Amt invested so far Post-tax rate of return on current investment Future value of curr. Inv. Annual increase in monthly invest. % Initial monthly investment required Annual increase in monthly invest. % Initial monthly investment required Goal Planner

26. Asset Allocation Finding the balance between risk and reward How much should my equity exposure be? Should it decrease with age? Farther the goal, higher the equity exposure?

28. Portfolio with 50% equity and 50% debt

29. Asset Allocation

30. Maximum Loss: worst case scenario

32. Asset Allocation Time FrameConservativeModerateRiskyMad-Max < 5 YearsFD/RD~ 10% Eq 30-40% Eq> 60% Eq 7 YearsFD/RD10-20% Eq40-50% Eq>60% Eq 10 yearsFD/RD40% Eq>60% Eq100% Eq 10-15 Years<40% Eq60% Eq80% Eq FD/RD 100% Eq >15 Years< 60% Eq60% Eq80% Eq FD/RD 100% Eq Time FrameConservativeModerateRiskyMad-Max < 5 YearsFD/RD~ 10% Eq 30-40% Eq> 60% Eq 7 YearsFD/RD10-20% Eq40-50% Eq>60% Eq 10 yearsFD/RD40% Eq>60% Eq100% Eq 10-15 Years<40% Eq60% Eq80% Eq FD/RD 100% Eq >15 Years< 60% Eq60% Eq80% Eq FD/RD 100% Eq

33. Essentials of a good portfolio Minimalist : We must be able to justify the presence of each asset class or instrument. Minimum number of asset classes Minimum number of stocks, equity funds or debt products This will typically make the folio diversified among and within asset classes

34. Simple portfolio ideas Equity (60%)  10% return 1.Single Large Cap fund 2.One large cap +one mid/small cap fund 3.Single Large and mid-cap fund 4.Single equity oriented balanced fund Debt (40%)  8% return (pre-tax) PPF for 15+ Y goals for options 1,2 & 3 (do not max!) Ultra-short-term liquid funds for less than 15Y goals Banking debt mutual funds Long-term goals (10+ years)

35. Simple portfolio ideas Equity (0-40%)  8% return 1.Single Large Cap fund 2.One large cap +one mid/small cap fund 3.Single Large and mid-cap fund 4.Single equity oriented balanced fund 5.Single debt oriented balanced fund Debt (100-60%)  8% return (pre-tax) Ultra-short-term liquid funds for less than 15Y goals Banking debt mutual funds Medium-term goals (5-10 years)

36. Simple portfolio ideas Equity (0-10%)  expect nothing! 1.Single Large Cap fund 2.One large cap +one mid/small cap fund 3.Single Large and mid-cap fund 4.Single oriented debt balanced fund (5Y) Debt (100-90%)  6-7% return (pre-tax) FDs, RDs Ultra-short-term liquid funds for less than 15Y goals Banking debt mutual funds Short-term goals (0-5 years)

37. How many funds should I hold? Minimum: 1 fund! (all goals combined into one) Maximum: No of long-term goals (10Y+) x (1 or 2)

38. How Important is Mutual Fund Selection?

39. Large Cap Funds Computed with SIP calculator, thefundoo.com

40. Large Cap & Large/Mid-Cap Funds Computed with SIP calculator, thefundoo.com

41. Large Cap, Large/Mid-Cap & Mid/Small-Cap Funds Computed with SIP calculator, thefundoo.com

42. Lump sum returns

43. Minimalist Portfolios Single Large Cap mutual fund (60%) + PPF (40% only!) Single Equity-oriented balanced mutual fund Single Large Cap or Large and Mid-cap fund with exposure to international stocks. Equity fof + Debt fund of fund Single portfolio fund of fund

44. How to select an equity mutual fund? Decide on the strategy. (1)Why are you investing? (2) What kind of portfolio will you be using?

45. Equity mutual funds: How to select/evaluate

47. Upside Capture ratio: When the benchmark has given a positive return (> 0), has the fund outperformed it? Higher (> 100%) the upside capture ratio, the better. UPC = 120% => 20% out-performance during up-market Downside Capture Ratio: When the benchmark recorded a loss, that is a negative return (< 0), did the fund record a lower or higher loss? Lower the downside ratio (<100%), the better. DCP = 85% => 15% out-performance during down-market

48. Equity mutual funds: How to select/evaluate

49. Rolling returns analysis 3Y Fund (blue) Vs benchmark 5Y

51. Retirement Planning

55. Corpus ~ 300 times current annual expenses Corpus ~ 38 times annual expenses at retirement

58. Invest as much as you spend each month for retirement!

60. Current date Years to retirement24 Age at the end of current year40 Years in retirement26 Total annual expenses520000 Annual expenses when you retire 44,42,903 Corpus required 14,70,12,786 Corpus accumulated so far (updated from mf holdings) 20,82,664 When you retire the corpus from other sources will grow to 98,46,585 When your retire the current mf corpus will grow to 2,05,13,686 If you were to retire today the current corpus will last for (years)6.63 If you were to retire as intended you will be financially independent for (years)6.49 Net corpus required 11,66,52,514.90 investment required each month 41,118 Provided this investment increases each year at the rate of10.00% EPF or NPS divided by investment amount54%

61. Financial Goal Tracking Be obsessed over goal planning entries not over mutual fund corpus

62. Anatomy of a bull market