Live Life King Size By Planning Your Personal Finances

The other day, I had an animated discussion with a youngster who is in her final stages of completing her masters and is to commence her work life shortly. The discussion primarily focused on sharing my personal financial knowledge and experience with her, which she very grudgingly tried to accept. I could feel that she was not convinced with my various arguments for the simple reason that her zest to live and enjoy her life through parties, vacations and shopping had obfuscated her financial rationale. Her bewilderment at having to lock-in a sizeable amount of her salary to save taxes, naivety about the fact that wealth creation through compounding needs time and incomprehension that she must plan and start saving for her retirement from now on pushed me into penning down this article for the financial betterment of more youngsters like her.

To make the youngsters understand the financial nuances, I have assumed that they start work at age 24 years in the financial year 2018-19. They get a take-home salary of ₹ 5 Lakh (approximately ₹ 40,000 per month) along with a performance-based variable component of ₹ 1.5 Lakh per annum. Their monthly expense is roughly ₹ 25 to 30,000 that includes their daily necessities, boarding and lodging, and weekend parties. In accordance with these details, I assume that they save and invest the balance money either into high-risk diversified equity mutual fund or tax-saving ELSS mutual fund that generates a modest 10% annualized return over a long-term horizon. To exemplify my subsequent arguments and logic, I have used the undermentioned saving options:

Option 1 – the youngster saves ₹ 10,000 per month (₹ 1.2 Lakh annually) for 37 years till his retirement at the age of 60 years.

Option 2 – the youngster saves ₹ 12,500 per month (₹ 1.5 Lakh annually) for 37 years till his retirement at the age of 60 years.

Option 3 – the youngster saves ₹ 15,000 per month (₹ 1.8 Lakh annually) for 37 years till his retirement at the age of 60 years.

In all three options, the Corpus has grown sizeably after investing regularly for 37 years. As per the table and chart below, in options 1, 2 and 3, the total investment was ₹ 44.4, 55.5 and 66.6 Lakh, whereas, the corpus has grown to 4.18, 5.23 and 6.27 Crore respectively.

Details Option 1 Option 2 Option 3
Investment 44,40,000 55,50,000 66,60,000
Corpus 4,18,16,931 5,22,71,163 6,27,25,396
Growth 3,73,76,931 4,67,21,163 5,60,65,396
No of Years 37 37 37
Starting Age 24 24 24
Maturity Age 60 60 60
Start FY 2019 2019 2019
Maturity FY 2055 2055 2055


Mutual fund in jaipur

Planning and Spending: 

Whenever youngsters set out on their life’s journey, it is important for them to formulate their life’s goals in terms of their career, marriage, and children. Once they have clearly defined this, then they must break down their life’s journey through various stages to formulate their financial goals. These goals will pertain to their own marriage (if the parents are not financially well off), settling down into their post-marriage home to include buying a house and white goods, furniture and other furnishings that go along with it, children education especially higher education, children marriage, and finally their own retirement. These financial goals occur at different stages of life and saving for them is important. Thomas Jefferson had famously remarked, “Never spend your money before you have it.” Saving up to meet these major financial goals will help minimize debt while keeping a budget in line. People simply buy consumer goods on EMI and spend paying it off along with interest. However, if they can delay the purchase and save for it, they will both avoid debt and paying interest.


Save Pennies to Earn Pounds:

Warren Buffet had famously remarked, “Do not save what is left after spending, but spend what is left after saving.” A concerted and conscientious effort by an investor to make small sacrifices will lead to small savings, which over the period will accumulate large wealth and make a huge difference to his lifestyle. The table below exemplifies some common places where youngsters can make small savings

Cigarette Beer Movies & Restaurants
Skip 1 cigarette a day 1 beer over a weekend One movie & dinner in a month
Cost ₹ 15 per cigarette ₹ 200 per pint ₹ 1,500 per movie & dinner
Annual Saving Invested ₹ 5,475 ₹ 10,400 ₹ 18,000
Rate of Return 10% 10% 10%
Corpus after 37 Years ₹ 19.9 Lakh ₹ 37.8 Lakh ₹ 65.3 Lakh
Total Wealth Accumulated                                            ₹ 1.23 Crore

Starting Early:

The aptness of 17th Century adage that ‘the early bird catches the worm’ in financial management is unrivalled. Nevertheless, our youngsters are careless with their savings and investments during the first 8 to 10 years of their careers. It is only after about 30 or 35 years of age that they feel the need to save and invest for their financial goals. By then, it is too late and they have missed the investment bus that would have taken them to their identified financial goals. To explain the loss that one incurs by starting investments late in life, I have considered that an individual start investing ₹ 10,000 per month from the age of 24, 30, 35 and 40 years. The table and chart below clarify that the percentage growth loss is maximum when one starts investment at the age of 40 and reduces as one starts investing early.

Start at 24 Start at 30 Start at 35 Start at 40
Investment 44,40,000 37,20,000 31,20,000 25,20,000
Corpus at 60 years 4,18,16,931 2,54,84,721 1,53,43,703 90,46,929
Investment Loss 7,20,000 13,20,000 19,20,000
Growth Loss 1,63,32,210 2,64,73,228 3,27,70,002

mutual fund advisor

mutual fund advisor


For wealth creation, you need to give time to the money to grow through compounding. Einstein, while describing compound interest as the eighth wonder of the world had said, “He who understands it, earns it. He who doesn’t pay it.” Financially, compounding is the process in which one reinvests an asset’s earnings, from either capital gains or interest, to generate additional earnings over time and this makes long-term investing rewarding. If one invested ₹ 10,000 per month in SIP then you will notice in the chart below that the power of compounding grows the wealth exponentially only after about 15 years of regular investment. Therefore, it is imperative to give enough time for wealth creation through compounding.


Save Regularly and Incrementally: A common mistake that people make is to stop the systematic investment in between for a few months or years due to psychological reasons attributable to falling markets or other frivolous reasons attributable to domestic compulsions. The losses incurred by stopping SIP midway and restarting later are dependent on the market situation. One must remember that by continuing the SIP in falling markets, the investor tends to gain due to the purchase of additional units as the NAV is also low. In fact, prudent investment philosophy suggests that the investor should increase his SIP annually to harvest better returns eventually (refer to the table below):

Normal SIP Incremental SIP
Monthly Investment ₹ 10,000 ₹ 10,000 plus an annual increment of 5%
Assumed Rate of Return 10% 10%
Investment Duration 37 years 37 years
Amount Invested ₹ 44,40,000 ₹ 84,36,000
Corpus after 37 Years ₹ 4,67,86,616 ₹ 6,71,84,005
Growth ₹ 4,25,46,616 ₹ 5,87,48,004

Inflation Reduces Purchasing Power: The youngster must understand that inflation eats into your returns and reduces the purchasing power. Therefore, today’s ₹ 100 will become ₹ 11.34 in 30 years at the inflation rate of 7 percent per annum and will not buy the same things tomorrow. The table below enumerates some examples to highlight inflationary pressure on necessities:

Price in 1947 in ₹ Price in 1997 in ₹ Current Price in ₹
Sugar (Kg) 0.4 16 40
Atta (Kg) 0.1 12 38
Rice (Kg) 0.12 20 52
Milk Full Cream (Ltr) 0.12 18 50

Real Rate of Returns: Connected with inflation is the real rate of return. It is important for an investor to understand this aspect of personal finance. Suppose a bank fixed deposit gives an interest of 7.5 percent on your investment. If the prevalent inflation is 4.5 percent and you are in a taxable bracket where you are liable to pay 2.55 percent tax on the interest earned, then the real rate of return on the investment is a meagre 0.45 percent. Therefore, for longer time horizon it is prudent to invest into equity either directly or through the mutual funds since they have the potential to beat inflation and deliver higher returns over long-term.

Taxation: An important aspect of financial planning is the taxation policy of the government. Simply put, an individual pays taxes on multiple counts. First is the GST on purchase of goods; second is the income tax on his total income; third is the tax (short-term and long-term based on the duration of financial instruments) on the capital gains from investments or real estate sale. Capital gains tax is chargeable only on the capital gains made during the financial year as per various capital gains tax rate including indexation benefit for long-term investments. Whereas, income from interest earned on fixed income financial instruments is taxable as per existing IT slab of the individual for the entire interest earned in the financial year. Moreover, there is no tax deduction at source (TDS) applicable to capital gains but the same is applicable to interest income from financial instruments. These tax rates are subject to change as per government decision from time to time. The reckoners below will help you understand the applicable rates for FY 2019-20.

Details Max Tax Relief Amount
Gross Salary ₹ 8.05 Lakh
Various instruments under Sec 80(C) ₹ 1.5 Lakh
Health insurance under Sec 80(D) if self, spouse, and children are less than 60 years and parents are above 60 years ₹ 55,000
NPS (Additional Relief) ₹ 50,000
Standard Deduction for salaried employees ₹ 50,000
Net Taxable Income ₹ 5 Lakh

Note: An individual with taxable income up to ₹ 5 lakh will not pay any taxes. However, if the taxable income is above ₹ 5 Lakh then he will pay taxes as per slab rates are given below. He can avail additional tax benefit from home loans and charitable donations.

                                 INCOME TAX SLABS (including 4 percent cess)
Income Slab Individual < 60 years Senior Citizen > 60 years but < 80 years Very Senior Citizen > 80 years
Up to ₹ 2.5 Lakh NIL NIL NIL
₹ 2.5 to 3 Lakh 5.20% NIL NIL
₹ 3 to 5 Lakh 5.20% 5.20% NIL
₹ 5 to 10 Lakh 20.80% 20.80% 20.80%
Above ₹ 10 Lakh 31.20% 31.20% 31.20%
    CAPITAL GAINS TAX (excluding surcharge but including 4 percent cess)
Tax Other than Stocks and Equity Schemes Stocks and Equity MF Schemes
Long-Term Capital Gains (LTCG) 20.80% with indexation benefit if investment held for more than 36 months 10.40% on gains above ₹ 1 Lakh if investment held for more than 12 months
Short-Term Capital Gains (STCG) As per individual’s IT slab if investment held for less than 36 months 15.60% if investment held for less than 12 months

Retirement Goal: Most people do not realize the importance to save for their retirement from the word go and tend to delay this decision for the future. All the financial aspects that we have discussed so far come into play while planning for retirement. An individual must start early, invest regularly and adequately, and allow the power of compounding to grow his wealth to avoid impoverishment during his sunset years. The table below will help you to understand the dynamics of retirement planning:

                                               RETIREMENT PLANNER 
Current Age 24
Retirement Age 60
Life Expectancy 85
Current Monthly Expense ₹ 30,000
Monthly expense after 37 years at 60 years of age at 7% inflation ₹ 3,66,709
Corpus required at 60 years of age to last 25 years of retired life with assumed annual returns of 10 percent and inflation of 7% ₹ 7.32 Crore
Monthly SIP required to build a corpus of ₹ 7.32 Crore over 37 years at 10% annualized rate of return ₹ 15,580
financial advisor in jaipur
financial advisor in Jaipur

Rakesh Jhunjhunwala advised caution ahead of Lok-Sabha elections

Rakesh Kumar Radheyshyam Jhunjhunwala is an Indian Billionaire Investor and Trader. He is a Chartered Accountant. He manages his own portfolio as a partner in his asset management firm, Rare Enterprises. Jhunjhunwala has been described by India Today magazine as the “pin-up boy of the current bull run”[4] and by The Economic Times as “Pied Piper of Indian bourses”.  As per Forbes, he is the 54th richest person in India, with a net worth of USD 3 billion (as of June 1, 2018)


mutual fund in jaipur
Dr. Ramesh Maloo With Mr. Rakesh Jhunjhunwala

 Rakesh Jhunjhunwala, one among India’s biggest securities market investors, suggested caution before Lok Sabha elections when he aforesaid that the ruling government is probably going to come back to power.

He was speaking on each day once the market hit new highs with a touch over a month to go before election results. He was a part of a word marking the launch of the most recent entrant within the mutual fund business — the Sun Pharmaceutical Industries co-promoter Sudhir Valia-backed ITI mutual fund. Others on the panel were Ramesh Damani, member, Bombay securities market (BSE); Nimesh monarch, administrator and chief officer at ICICI prudent quality Management Company; and martyr Heber Joseph, chief officer and chief investment officer at ITI mutual fund.

Both the benchmark indices closed at incomparable highs on Tuesday — the S&P BSE Sensex closed at 39,275.64 whereas the National Stock Exchange’s Nifty 50 terminated at eleven,787.15.

“Today may be a new high within the market however all the bars are empty!” said Jhunjhunwala, suggesting that the market has been driven higher by many stocks, instead of seeing a broad-based rally. However, he remained optimistic on expectations of a pickup within the capex cycle and aforesaid that the section of the dangerous loan crisis has passed.

Jhunjunwala aforesaid he expects the ruling National Democratic Alliance (NDA) to come back to power at the Centre. He adscititious that the Bharatiya Janata Party (BJP) may not win a single-party majority within the Lok Sabha. However, he expects the ruling party to be a dominant partner within the new government.

Ramesh Damani suggested investors against positioning themselves on the understanding of a specific party returning to power. He aforesaid markets have had a nasty record in predicting election outcomes, and investors ought to use caution of being too assured a few given outcome.

“I think the market is pricing another comfortable majority for the NDA, which may not happen,” he said.

Nimesh monarch aforesaid sure government-owned firms with smart returns on equity and banks with {a smart|an honest|a decent} liability franchise look good. He was additionally optimistic about pharmaceutical and care segments.

George Heber Joseph, chief officer and chief investment officer at ITI mutual fund, too was optimistic on the company and care phase, declaring that the share of the case for these segments is probably going to extend.

Jhunjhunwala additionally measured another note of caution on the character of the most recent bull-run. He aforesaid it’s didn’t profit the bulk of individuals, that may lead to the imposition of taxes for redistribution.


Team Maloo Investwise Met With Mr Prashant Jain

Team Maloo Investwise Dr Ramesh Maloo, CA Kamal Maloo and Kailash Maloo met with  Mr. Prashant Jain ED and CIO, HDFC AMC during a visit to Jaipur on 12 April 2019 at the Hotel Rambagh Palace.

Team Maloo With Mr Prashant Jain
Team Maloo With Mr Prashant Jain

Now you are thinking that who is Mr Prashant Jain, Here is basic information about him:

Mr Prashant Jain, CFA is the Chief Investment Officer, Executive Director, and Fund Manager at HDFC Asset Management Company Ltd. and previously, from June 20, 2003, to June 30, 2004, served as the Head of Equities. Mr Jain joined the firm on June 20, 2003. Prior to this, he was the Chief Investment Officer, Head of Funds Management, and Fund Manager at Zurich Asset Management Company (India) Private Limited from July 1993 till June 19, 2003. Before that, Mr Jain worked at SBI Mutual Fund as Fund In-Charge from 1991 to 1993. He is a Chartered Financial Analyst from AIMR. Mr Jain has extensive experience in fund management and research. He received a PGDM from the Indian Institute of Management Bangalore and a B. Tech degree from the Indian Institute of Technology, Kanpur.

Source: Bloomberg

Mr Prashant Jain who is managing 3 lakh crore has become the first Indian fund manager to complete 25 years managing a single fund.

Mr Prashant Jain has become the first Indian Fund manager who is completed 25 years to managing a single fund.  He achieved this in 2019 with balanced advantage fund of HDFC which has generated an alpha of 9.54 percent over the Sensex since 1994, Morningstar Direct data show.

HDFC Balanced Advantage Fund (the erstwhile HDFC Prudence Fund), launched in February 1994, is that the largest equity-oriented fund in India with assets of Rs 37,395 crore as of February 2019. The fund, now categorized as dynamic plus allocation (equity will be zero per cent to a hundred per cent), in its earlier avatar as HDFC Prudence Fund (a balanced fund). Information from Morningstar Direct show that when put next to alternative international funds managed by one fund manager for twenty-five years and higher than, Jain’s fund has generated an alpha of nine.54 per cent over the Sensex, second solely to legendary Peter kill who managed Fidelity Magellan until 1977, generating an alpha of 10.92 per cent.

Anthony Bolton managed Fidelity Special things from Dec 17, 1979, to December 31, 2007, and generated an alpha of 9.2 per cent. HDFC Balanced has come to an annualized 18.48 per cent since origination.

Financial planners suggest that one among the most reason for Jain’s success is his ability to spot market cycles before time and ride through cycles. as an example, he created the foremost of the IT-driven rally between 1995 and 2000 by shopping for Infosys NSE 0.68 you’re thinking that increased 113times. Between Dec 2000 and Dec 2017, religion was fast to identify the capex/banking and artefact stock rally distinguishing stocks like BHEL that rose 35x, L&T 33x, Reliance 19x and Tata Steel 16x and SBI 14x. within the next cycle between Dec 2007 and Dec 2017, wherever FMCG and pharmaceutical company stocks rallied he bought HUL that rose 8x, ITC 5x, ligneous plant 8x and HDFC Bank 6x.

“Jain has a sharp ability to spot cycles ahead of time. He adopts a long-term approach to stock picking, sticks to his investment mandate and is not worried about underperformance in the short term,” says Himanshu Srivastava, senior research analyst at Morningstar India.

While Jain’s strategy has worked in the long term, it has also tested investor patience in the short term. “The transition years, where he books profits and identifies stocks to ride the next cycle have been the most difficult for Jain, as returns lag those of peers in the short term. However, if you consider the block of 3 or 5 years the returns are good,” says Deepak Chhabria, CEO, Axiom Financial Services.

Economic Times at dated 14-March-2019