Youth Financial Education (with special reference to mutual funds)

8/11/2019 Youth Financial Education (with special reference to mutual funds)

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STUDENT DEVELOPMENTPROGRAM (S.D.P)

Organized by PGDM 2ndyear Finance Student (2013-15) Presented By: Sushil Kumar, Dipankar Maiti, Ajeet

Malik & Satya Prakash.

Youth Financial Education (with specialRefrence to Mutual Funds

Faculty Mentor:

Prof. Mohit Dhawan


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Differentiating between needs and wants

Setting a series of financial goals

The basics of a financial plan

Compare short and long term savings options and goals

Mutual fund Investment

Understand the purpose of credit and credit cards

Identify the factors to consider when choosing a credit

card or other loan product

ITR-1(Income Tax)

Show Me My Money

Learning Objective:


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Needs & Wants

NEEDSA needis something

you haveto have, something

you can't do without. A good

example is food. If you don't

eat, you won't survive for long.

Many people have gone days

without eating, but they

eventually ate a lot of food. Youmight not need a whole lot of

food, but you do need to eat.

WANTSA wantis something you would

liketo have. It is not absolutely

necessary, but it would be a

good thing to have. A good

example is music. Now, some

people might argue that music

is a needbecause they think

they can't do without it. Butyou don't need music to

survive. You do need to eat.


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How to set your financial goals?

Be specific, realistic, and write down yourgoals. Keep each goal simple and give it atimeframe and a Rs amount.

Set some big goals - like buying a home in thenext five years or saving for your retirement(this could be your biggest goal of all).

Set some smaller goals to help you get therelike saving for a deposit or paying off yourcredit cards.


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Basics of financial plan

Budgeting

An emergency fund

Risk management with insurance Investing

Income tax consideration


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How to set your goals?

1. Tracking your Income and Expenses

Determine your overall income

Identify how you're spending money

Compare your regular expenses with your paycheck amount2. Creating Your Budget

Set budget and financial goals

Make a list of what's absolutely essential that you pay for

Begin budgeting out the rest of your discretionary spending Use software to help you budget


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How to set your goals?

3. Becoming a Budget Pro

Dont go over budget

Keep your journal

Know the difference between luxurious and necessities

Reduce larger expenses

4. Making your budget go further Cut your taxes

Appeal your home assessment

Stay ahead in inflation

Dont count on windfalls

Take your money out for the week at once


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Education Earning Years Post Retirement Years

Phase I Phase II Phase III

Age- 22 yrs Age- 60 yrs

Marriage

Child birth

Childs Education

Childs Marriage

Housing

22 yrs 38 yrs 10- 20 yrs

Human Life Cycle


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Value of Money over time

Impact of inflation on monthly

expenses of Rs. 30,000 today

Value of Rs. 100,000 over time

At inflation of 5%

Investors need to beat inflation

30,000

38,288

62,368

79,599

Today 5 years 15 years 20 years

100,000

78,353

48,102

37,689

Today 5 years 15 years 20 years


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OPTIONS FOR INVESTING

Deposit in BankSB, RD, FDs, Locker ;)

Loan a Friend/Relative on Interest

Property Investments Invest in Bullion - Gold, Silver..

Investment in Capital Markets -

- Direct - Equity Share Markets- Debt & Bonds Market -

Indirect - Mutual Funds


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So what are my alternatives?

Fixed Interest Products

Bank Deposits

Corporate Deposits

RBI Bonds

Corporate Bonds

Rates of Return?

ReturnsNet of tax?

Wont Inflation eat into the return?

Returnsnet of tax/ inflation is poor hedge against inflation

4.54%

1.95%

0.01%

4.54%

2.10%

0.36%

4.54%

2.40%

1.06%

4.54%

2.25%

0.71%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

Bank FD Company FD RBI Bond Co Bonds

Inflation Tax @ 30% Net Returns


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What is Dutch auction?

Ans : An auction where the bid

price falls from high to low

It is for you


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How To Invest In Equities

Direct Equity

High risk, high return category.

Needs a lot of time & expertise.

Substantial initial capital required.

Mutual Funds

One-Time Investment

Systematic Investment Plan (SIP)


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Sushil

What is a Mutual Fund?

A Mutual Fund is a trust that pools the savings of anumber of investors who share a common financialgoal.

The money collected is invested by the fund manager

in different types of securities. These could rangefrom shares to debentures to money marketinstruments, depending upon the schemes statedobjectives.

The income earned through these investments andthe capital appreciation realized by the scheme areshared by its unit holders in proportion to thenumber of units owned by them.


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sushil

Regulations Governed by SEBI (Mutual Fund) Regulation 1996

All MFs registered with it, constituted as trusts ( under Indian TrustsAct, 1882)

Bank operated MFs supervised by RBI too

AMC registered as Companies registered under Companies Act, 1956

SEBI- Very detailed guidelines for disclosures in offer document, offerperiod, investment guidelines etc.

NAV to be declared everyday for open-ended, every week for closedended

Disclose on website, AMFI, newspapers

Half-yearly results, annual reports

Select Benchmark depending on scheme and compare


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Type of

Mutual Fund

Schemes

StructureInvestment

Objective

Special

Schemes

Open Ended

Funds

Close Ended

Funds

Interval Funds

Growth Funds

Income Funds

Balanced Funds

Money Market

Funds

Industry Specific

Schemes

Index

Schemes

Sectoral

Schemes

TYPES OF MUTUAL FUNDS


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Types of Mutual Fund Schemes

By Structure

Open-Endedanytime enter/exit Close-Ended Schemeslisted on exchange, redemption

after period of scheme is over.

By Investment Objective

Equity (Growth)only in StocksLong Term (3 years ormore)

Debt (Income)only in Fixed Income Securities (3-10months)

Liquid/Money Market (including gilt)Short-term MoneyMarket (Govt.)

Balanced/HybridStocks + Fixed Income Securities (1-3years)


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sushil

10 REASONS TO INVEST IN MUTUAL

FUNDS

Expert on your side:

Limited risk:

More for less:

Easy investing: Convenience:

Investor protection:

Quick access to your money

Transparency

Low transaction costs

Tax benefits


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Sushil

TAXATION

All dividends declared by debt / equity

oriented schemes are tax free in the hands ofthe investor

Long term capital gain in equity schemes

exempt from tax

Indexation benefit available for long term non

equity schemes

Equity short term capital gain @10%

STCG in Debt funds Rates applicable for the

investor


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sushil


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What is a Systematic Investment Plan?

An investment plan to invest a

fixed amount regularly at a

specified frequency say, monthly

or quarterly.

SIP is a simple method of investing used

across the world as a means to creating wealth


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Benefits of SIP

Regular

Investments happen every month unfailingly

Power Of Compounding

Rupee Cost Averaging

Forced saving

Helps you overpower the temptation to spend fully Helps you build for the future

Automated

Completely automated process

No hassles of writing cheque every month

Light on the wallet

Investment amount can be so small that you do not even feel the pinchof it being directly deducted, yet the small amount is powerfully workingtowards your financial security


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sushil

Systematic Investing, An Example

9.40

6.936.46

7.578.31

9.108.938.018.12

8.759.35

7.60

23

4567

89

10

Jan-04 Feb -04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug -04 Sep -04 Oct -04 Nov-04 Dec-04

106.39units

154.75units

When the price is highest,you buy the least number of units

When the price is lowest,you buy the highest number of units


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Guess the word?

A Latin word which is a combination of

merx which means goods, and com

means trade.

COMMERCE


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IS NAV CHANGE YOUR INVESTMENT

DECISION?

SCHEME A SCHEME B

NAV= RS 15 NAV=RS 90

INVESTMENT=RS 9000 INVESTMENT=RS 9000

UNITS= 600 UNITS=100

NAV = 16.5 NAV= 99

9900 9900


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CHOSSE PLAN FOR LONG DURATION

SCHEME A SCHEME B

5000 PER MONTH 5000 PER MONTH

15 YEARS 20 YEARS

9 LACS 12 LACS

18% 18%

45,17,457 1.17 CRORE


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What ELSS stand for?

Equity linked saving

scheme

It is for you


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What is plutocracy?

A wealthy class that controls agovernment


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Which Indian surname means DistrictAccountant in native language?

HSDENAPDE

DESHPANDE


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Sushil

Checklist Contd

Think hard about investing in sector funds For relatively aggressive investors Close touch with developments in sector, review portfolio regularly

Look for `load' costs Management fees, annual expenses of the fund and sales loads

Does the fund change fund managers often?

Look for size and credentials Asset size less than Rs. 25 Crores

Diversify, but not too much

Invest regularly, choose the S-I-P

MF- an integral part of your savings and wealth-building plan.


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sushil

Buying Mutual Funds

Contacting the Asset Management Company directly

Web Site Request for agent

Agents/Brokers Locate one on AMFI site

Financial planners Bajaj Capital etc.

Insurance agents Banks

Net-Banking

Phone-Banking

ATMs

Online Trading Account

ICICI Direct Motilal Oswal, Indiabulls- Send agents


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Person should have a savings/current account

in the bank.

He/ She should present his/ her assets andliabilities on a particular date in the bank.

A statement of annual or monthly income.

He/ She is considered credit worthy up tocertain limit depending upon his/ her income,

assets and expenditure.

Eligibility For Getting The Card


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Types of the credit cards

Standard Card- It is issued for the generalconsumers of the bank.

Business Card/Executive Card- It is issued to

small partnership firms , solicitors, tax-consultants ,for use by executives on their

business trips.

Gold Card- A credit card issued by credit-cardcompanies to favoured clients, entitling them to

high unsecured overdrafts, some insurance

cover, etc.


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What does 16 digit means?


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Name of the customer

16-digit card number

Validity date

The VISA hologram and the VISA logo Name of the issuing bank

Signature period

Magnetic strip CVV/ CAV/ CVC

Magnetic Chip

Particulars Displayed On Credit Cards


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Domestic card- Cards that are valid only in India

and Nepal are called domestic cards.

International Card- credit Cards that are validinternationally are called international cards.

Credit cards on the basis ofgeographically


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Credit purchase

Purchase of goods andservice on card

Credit card processing

merchant delivers goods after taking an authenticated credit cardand noting the number and taking signature on certain forms.

Bill raising

Merchant raises the bill for the purchase and sends it tothe credit card issuing bank for payment

payment

Issuing bank pays amount to the merchantestablishment

Bill to card holder

Issuing bank raises bill on the credit cardholder andsends it for payment

Card payment

Credit card holder makes the payment tothe issuing bank

Credit card cycle


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Disadvantages of a credit card

Overuse

Credit card charges

High interest rates

Stolen


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Keep card with your signature.

Do not leave cards lying around.

Report lost or stolen cards promptly.

Do not give out account number unless

making purchases.

Keep a list of all cards, account numbers, and

phone numbers separate from cards.

Close unused accounts in writing and by

phone, then cut up the card.

Safety Tips


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Youth Financial Education (with special reference to mutual funds)

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