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1

“AN INVESTMENT IN KNOWLEDGE PAYS

THE BEST INTEREST"

---- Benjamin Franklin Benjamin Franklin Benjamin Franklin Benjamin Franklin

“You work hard for

your money. But does

your money work

equally hard for you?”

� Knowledge about investment options is rather vagueKnowledge about investment options is rather vagueKnowledge about investment options is rather vagueKnowledge about investment options is rather vague

� Rely on Agents / CA’s / Relatives / Friends Rely on Agents / CA’s / Relatives / Friends Rely on Agents / CA’s / Relatives / Friends Rely on Agents / CA’s / Relatives / Friends

� Does not seek advise from professional investment advisorsDoes not seek advise from professional investment advisorsDoes not seek advise from professional investment advisorsDoes not seek advise from professional investment advisors

� Generally not clear about Risk & ReturnsGenerally not clear about Risk & ReturnsGenerally not clear about Risk & ReturnsGenerally not clear about Risk & Returns

� Have developed comfort in Fixed Deposits / Government SavingsHave developed comfort in Fixed Deposits / Government SavingsHave developed comfort in Fixed Deposits / Government SavingsHave developed comfort in Fixed Deposits / Government Savings

� Expectation from Equity are Expectation from Equity are Expectation from Equity are Expectation from Equity are unrealisticunrealisticunrealisticunrealistic

� Nation of Savers, but not InvestorsNation of Savers, but not InvestorsNation of Savers, but not InvestorsNation of Savers, but not Investors

PROFILE OF AN AVERAGE RETAIL INVESTOR

ÉTICA WEALTH MANAGEMENT PVT LTD

Presentation on

Financial Planning

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� MD & CEO, MD & CEO, MD & CEO, MD & CEO, EticaEticaEticaEtica Wealth Management Pvt Ltd.Wealth Management Pvt Ltd.Wealth Management Pvt Ltd.Wealth Management Pvt Ltd.

� ViceViceViceVice----President President President President & Head & Head & Head & Head –––– Products (PMS division), UTI AMC Ltd.Products (PMS division), UTI AMC Ltd.Products (PMS division), UTI AMC Ltd.Products (PMS division), UTI AMC Ltd.

� 8 8 8 8 yrs of work experience in the Financial Services Industryyrs of work experience in the Financial Services Industryyrs of work experience in the Financial Services Industryyrs of work experience in the Financial Services Industry

� Chartered Chartered Chartered Chartered Financial Analyst (CFA) from CFA Institute, USA Financial Analyst (CFA) from CFA Institute, USA Financial Analyst (CFA) from CFA Institute, USA Financial Analyst (CFA) from CFA Institute, USA

Chartered Alternative Investment Analyst (CAIA) from CAIA, MassachusettsChartered Alternative Investment Analyst (CAIA) from CAIA, MassachusettsChartered Alternative Investment Analyst (CAIA) from CAIA, MassachusettsChartered Alternative Investment Analyst (CAIA) from CAIA, Massachusetts

International Certificate in Financial Advice (ICFA), London, UKInternational Certificate in Financial Advice (ICFA), London, UKInternational Certificate in Financial Advice (ICFA), London, UKInternational Certificate in Financial Advice (ICFA), London, UK

� Earlier roles Earlier roles Earlier roles Earlier roles ----

� Institutional Sales (London Institutional Sales (London Institutional Sales (London Institutional Sales (London –––– 3 yrs), 3 yrs), 3 yrs), 3 yrs),

� Institutional Sales (Mumbai Institutional Sales (Mumbai Institutional Sales (Mumbai Institutional Sales (Mumbai –––– 2yrs), 2yrs), 2yrs), 2yrs),

� Retail Sales (Mumbai Retail Sales (Mumbai Retail Sales (Mumbai Retail Sales (Mumbai –––– 2 years)2 years)2 years)2 years)

� Speaker at various investor forums on various personal finance topicsSpeaker at various investor forums on various personal finance topicsSpeaker at various investor forums on various personal finance topicsSpeaker at various investor forums on various personal finance topics

GAJENDRA KOTHARI, CFA, CAIA, ICFA

�Not a Sales talkNot a Sales talkNot a Sales talkNot a Sales talk

�Would request you to participate enthusiasticallyWould request you to participate enthusiasticallyWould request you to participate enthusiasticallyWould request you to participate enthusiastically

�No offence to any particular individualNo offence to any particular individualNo offence to any particular individualNo offence to any particular individual

�Mobile SilentMobile SilentMobile SilentMobile Silent

FEW HOUSEKEEPING REQUESTS…

A COMMAN MAN’S CONCERN

� How can I grow and protect my financial wealth?How can I grow and protect my financial wealth?How can I grow and protect my financial wealth?How can I grow and protect my financial wealth?

� How can I pay and manage my debt / liabilities (Good / Bad / Ugly) (EMIs)?How can I pay and manage my debt / liabilities (Good / Bad / Ugly) (EMIs)?How can I pay and manage my debt / liabilities (Good / Bad / Ugly) (EMIs)?How can I pay and manage my debt / liabilities (Good / Bad / Ugly) (EMIs)?

� How much should I save to be able to pay for my children’s education?How much should I save to be able to pay for my children’s education?How much should I save to be able to pay for my children’s education?How much should I save to be able to pay for my children’s education?

� How can I maximize the tax benefits which can be availed of?How can I maximize the tax benefits which can be availed of?How can I maximize the tax benefits which can be availed of?How can I maximize the tax benefits which can be availed of?

� How can I save enough to be able to retire comfortably and maintain the How can I save enough to be able to retire comfortably and maintain the How can I save enough to be able to retire comfortably and maintain the How can I save enough to be able to retire comfortably and maintain the

current lifestyle?current lifestyle?current lifestyle?current lifestyle?

� How can I meet emergency requirements / contingencies?How can I meet emergency requirements / contingencies?How can I meet emergency requirements / contingencies?How can I meet emergency requirements / contingencies?

� How can I maximize what my heirs will inherit?How can I maximize what my heirs will inherit?How can I maximize what my heirs will inherit?How can I maximize what my heirs will inherit?

LIFE STAGES

� EachEachEachEach individualindividualindividualindividual isisisis uniqueuniqueuniqueunique;;;; sosososo areareareare hishishishis needsneedsneedsneeds andandandand wantswantswantswants;;;; also,also,also,also, throughthroughthroughthrough outoutoutout life,life,life,life,

anananan individual’sindividual’sindividual’sindividual’s needsneedsneedsneeds andandandand wantswantswantswants keepkeepkeepkeep changingchangingchangingchanging....

� Therefore,Therefore,Therefore,Therefore, financialfinancialfinancialfinancial planningplanningplanningplanning processprocessprocessprocess mustmustmustmust firstfirstfirstfirst assessassessassessassess anananan individualindividualindividualindividual atatatat whatwhatwhatwhat

stagestagestagestage ofofofof lifelifelifelife hehehehe //// sheshesheshe isisisis inininin....

� LifeLifeLifeLife stagestagestagestage isisisis notnotnotnot aaaa mechanicalmechanicalmechanicalmechanical processprocessprocessprocess basedbasedbasedbased onononon somesomesomesome ‘age’‘age’‘age’‘age’ criteriacriteriacriteriacriteria butbutbutbut

basedbasedbasedbased onononon aaaa numbernumbernumbernumber ofofofof milestonesmilestonesmilestonesmilestones

� TheseTheseTheseThese milestonesmilestonesmilestonesmilestones couldcouldcouldcould bebebebe completioncompletioncompletioncompletion ofofofof formalformalformalformal education,education,education,education, firstfirstfirstfirst jobjobjobjob andandandand

subsequentsubsequentsubsequentsubsequent majormajormajormajor jobjobjobjob changes,changes,changes,changes, majormajormajormajor lifelifelifelife eventseventseventsevents likelikelikelike marriage,marriage,marriage,marriage, birthbirthbirthbirth ofofofof

child,child,child,child, acquisitionacquisitionacquisitionacquisition ofofofof majormajormajormajor assets,assets,assets,assets, educationeducationeducationeducation ofofofof children,children,children,children, marriages,marriages,marriages,marriages,

separation,separation,separation,separation, deathdeathdeathdeath etcetcetcetc

LIFE STAGES - MILESTONES

� DependentDependentDependentDependent tilltilltilltill earlyearlyearlyearly 20202020ssss ---- EducationEducationEducationEducation &&&& skillskillskillskill acquisitionacquisitionacquisitionacquisition

� CareerCareerCareerCareer beginners,beginners,beginners,beginners, enjoyersenjoyersenjoyersenjoyers inininin 20202020 totototo 30303030 ---- firstfirstfirstfirst jobjobjobjob //// joiningjoiningjoiningjoining business,business,business,business, firstfirstfirstfirst

vehicle,vehicle,vehicle,vehicle, marriagemarriagemarriagemarriage &&&& firstfirstfirstfirst childchildchildchild

� CareerCareerCareerCareer advancersadvancersadvancersadvancers inininin 30303030ssss ---- YoungYoungYoungYoung family,family,family,family, childrenchildrenchildrenchildren inininin school,school,school,school, househousehousehouse purchasepurchasepurchasepurchase

� PeakPeakPeakPeak earners,earners,earners,earners, achieversachieversachieversachievers 40404040ssss ---- childrenchildrenchildrenchildren inininin college,college,college,college, moremoremoremore savingssavingssavingssavings andandandand lesslesslessless

debtsdebtsdebtsdebts

� PrePrePrePre retirees,retirees,retirees,retirees, emptyemptyemptyempty nestersnestersnestersnesters 50505050ssss ---- growngrowngrowngrown children,children,children,children, rererere----arrangearrangearrangearrange financialsfinancialsfinancialsfinancials inininin

preparationpreparationpreparationpreparation forforforfor retirementretirementretirementretirement //// startingstartingstartingstarting onononon ownownownown etcetcetcetc

� RetiredRetiredRetiredRetired 60606060ssss ---- settledsettledsettledsettled children,children,children,children, debtsdebtsdebtsdebts cleared,cleared,cleared,cleared, estateestateestateestate planningplanningplanningplanning........

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WE ALL HAVE DREAMS…

Buying your Dream House

Providing a good future for Children

Having a happy Retired life

Investing can help you realize your goals in life!

WHAT IS FINANCIAL PLANNING ?

� FinancialFinancialFinancialFinancial planningplanningplanningplanning isisisis thethethethe processprocessprocessprocess ofofofof successfullysuccessfullysuccessfullysuccessfully meetingmeetingmeetingmeeting financialfinancialfinancialfinancial needsneedsneedsneeds ofofofoflifelifelifelife throughthroughthroughthrough thethethethe properproperproperproper managementmanagementmanagementmanagement ofofofof financesfinancesfinancesfinances....

� “Big“Big“Big“Big picturepicturepicturepicture approach”approach”approach”approach”

� ItItItIt isisisis moremoremoremore thanthanthanthan justjustjustjust investmentinvestmentinvestmentinvestment orororor taxtaxtaxtax orororor estateestateestateestate orororor retirementretirementretirementretirement planningplanningplanningplanning.... ItItItIt isisisis

allallallall thesethesethesethese andandandand moremoremoremore.... ItItItIt isisisis anananan integratedintegratedintegratedintegrated andandandand multimultimultimulti----disciplinarydisciplinarydisciplinarydisciplinary approachapproachapproachapproach

balancingbalancingbalancingbalancing andandandand finefinefinefine tuningtuningtuningtuning eacheacheacheach ofofofof thesethesethesethese componentscomponentscomponentscomponents....

� ItItItIt isisisis alsoalsoalsoalso NOTNOTNOTNOT anananan oneoneoneone timetimetimetime &&&& oneoneoneone sizesizesizesize fitfitfitfit allallallall exerciseexerciseexerciseexercise recognizingrecognizingrecognizingrecognizing eacheacheacheach

individual’sindividual’sindividual’sindividual’s goals,goals,goals,goals, desires,desires,desires,desires, needs,needs,needs,needs, experiencesexperiencesexperiencesexperiences andandandand expectationsexpectationsexpectationsexpectations areareareare

differentdifferentdifferentdifferent

� ItItItIt isisisis youryouryouryour roadmaproadmaproadmaproadmap totototo FinancialFinancialFinancialFinancial Health,Health,Health,Health, &&&& SustainableSustainableSustainableSustainable WealthWealthWealthWealth creationcreationcreationcreation andandandand totototo

achieveachieveachieveachieve FinancialFinancialFinancialFinancial FreedomFreedomFreedomFreedom....

FINANCIAL PLANNING PROCESS

WHY YOU NEED FINANCIAL PLANNING?

�LifeLifeLifeLife withoutwithoutwithoutwithout FinancialFinancialFinancialFinancial planningplanningplanningplanning isisisis likelikelikelike UnplannedUnplannedUnplannedUnplanned

VacationVacationVacationVacation....

�IfIfIfIf youyouyouyou wishwishwishwish totototo achieveachieveachieveachieve youryouryouryour financialfinancialfinancialfinancial goalsgoalsgoalsgoals successfullysuccessfullysuccessfullysuccessfully

&&&& peacefullypeacefullypeacefullypeacefully youyouyouyou mustmustmustmust planplanplanplan youryouryouryour financialfinancialfinancialfinancial lifelifelifelife....

PROBLEMS OF RANDOM INVESTMENT

�Wrong selection Wrong selection Wrong selection Wrong selection ---- flavor of the month.flavor of the month.flavor of the month.flavor of the month.

�Wrong timing Wrong timing Wrong timing Wrong timing ---- mostly near top.mostly near top.mostly near top.mostly near top.

�Short term investment.Short term investment.Short term investment.Short term investment.

�Inadequate investment.Inadequate investment.Inadequate investment.Inadequate investment.

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WHY IS IT IMPORTANT, THE INDIA CONTEXT

� FewFewFewFew majormajormajormajor sociosociosociosocio economiceconomiceconomiceconomic changeschangeschangeschanges whichwhichwhichwhich makemakemakemake personalpersonalpersonalpersonal financialfinancialfinancialfinancial planningplanningplanningplanning

moremoremoremore criticalcriticalcriticalcritical inininin thethethethe IndianIndianIndianIndian contextcontextcontextcontext

� AbsenceAbsenceAbsenceAbsence ofofofof anyanyanyany kindkindkindkind ofofofof socialsocialsocialsocial securitysecuritysecuritysecurity forforforfor vastvastvastvast majoritymajoritymajoritymajority ofofofof peoplepeoplepeoplepeople

� IncreasedIncreasedIncreasedIncreased longevitylongevitylongevitylongevity duedueduedue totototo improvedimprovedimprovedimproved medicalmedicalmedicalmedical carecarecarecare ANDANDANDAND everevereverever increasingincreasingincreasingincreasing

medicalmedicalmedicalmedical costscostscostscosts

� RapidlyRapidlyRapidlyRapidly decreasingdecreasingdecreasingdecreasing careercareercareercareer spanspanspanspan;;;; retirementretirementretirementretirement (voluntary(voluntary(voluntary(voluntary orororor otherwise)otherwise)otherwise)otherwise) ageageageage isisisis

fallingfallingfallingfalling

� GraduallyGraduallyGraduallyGradually (dramatically?)(dramatically?)(dramatically?)(dramatically?) reducingreducingreducingreducing jointjointjointjoint //// extendedextendedextendedextended familyfamilyfamilyfamily systemsystemsystemsystem

� MoreMoreMoreMore marketmarketmarketmarket drivendrivendrivendriven andandandand globalizedglobalizedglobalizedglobalized IndianIndianIndianIndian economyeconomyeconomyeconomy;;;; moremoremoremore choiceschoiceschoiceschoices andandandand moremoremoremore

risksrisksrisksrisks

WHO NEEDS FINANCIAL PLANNING?

�WhateverWhateverWhateverWhatever maymaymaymay bebebebe levellevellevellevel ofofofof youryouryouryour incomeincomeincomeincome orororor assets,assets,assets,assets, youyouyouyou

needneedneedneed financialfinancialfinancialfinancial planningplanningplanningplanning....

�ItItItIt isisisis mythmythmythmyth thatthatthatthat onlyonlyonlyonly richrichrichrich peoplepeoplepeoplepeople needneedneedneed financialfinancialfinancialfinancial

planningplanningplanningplanning....

CURRENT STATUS & GOAL SETTING

� FindFindFindFind outoutoutout thethethethe netnetnetnet savingsavingsavingsaving availableavailableavailableavailable forforforfor investmentinvestmentinvestmentinvestment....

�WealthWealthWealthWealth accumulatedaccumulatedaccumulatedaccumulated tilltilltilltill todaytodaytodaytoday....

�WhatWhatWhatWhat isisisis youryouryouryour intentionintentionintentionintention ofofofof investmentinvestmentinvestmentinvestment (goal(goal(goal(goal setting)?setting)?setting)?setting)?

�SimplySimplySimplySimply put,put,put,put, HowHowHowHow muchmuchmuchmuch moneymoneymoneymoney youyouyouyou need?need?need?need? &&&& WhenWhenWhenWhen youyouyouyou needneedneedneed thethethethe

money?money?money?money? (Time(Time(Time(Time horizon)horizon)horizon)horizon)

�SpecificSpecificSpecificSpecific financialfinancialfinancialfinancial goalsgoalsgoalsgoals areareareare vitalvitalvitalvital totototo financialfinancialfinancialfinancial planningplanningplanningplanning....

FINANCIAL GOALS - EXAMPLES

� Mandatory Goals:Mandatory Goals:Mandatory Goals:Mandatory Goals:

� Children educationChildren educationChildren educationChildren education

� Children marriage Children marriage Children marriage Children marriage –––– Not major in the USANot major in the USANot major in the USANot major in the USA

� Retirement Planning.Retirement Planning.Retirement Planning.Retirement Planning.

� Purchase of residential premises.Purchase of residential premises.Purchase of residential premises.Purchase of residential premises.

� Purchase of vehicle.Purchase of vehicle.Purchase of vehicle.Purchase of vehicle.

� Optional Goals:Optional Goals:Optional Goals:Optional Goals:

� Up gradation of Residence.Up gradation of Residence.Up gradation of Residence.Up gradation of Residence.

� Luxury Car.Luxury Car.Luxury Car.Luxury Car.

� Purchase of Luxury items at Home.Purchase of Luxury items at Home.Purchase of Luxury items at Home.Purchase of Luxury items at Home.

� Vacation Abroad.Vacation Abroad.Vacation Abroad.Vacation Abroad.

� Charity Charity Charity Charity ---- Religious or Social.Religious or Social.Religious or Social.Religious or Social.

� Inheritance Inheritance Inheritance Inheritance ---- Estate planning.Estate planning.Estate planning.Estate planning.

� Early Retirement Early Retirement Early Retirement Early Retirement ---- Financial freedom.Financial freedom.Financial freedom.Financial freedom.

Short term Goals : 1Short term Goals : 1Short term Goals : 1Short term Goals : 1----2 years.2 years.2 years.2 years.

Medium term goals : 3Medium term goals : 3Medium term goals : 3Medium term goals : 3----5 years.5 years.5 years.5 years.

Long term goals : 5Long term goals : 5Long term goals : 5Long term goals : 5----10 years.10 years.10 years.10 years.

Distant goals : 15Distant goals : 15Distant goals : 15Distant goals : 15----20 years.20 years.20 years.20 years.

BE SMART BEST PRACTICES

� SetSetSetSet measurablemeasurablemeasurablemeasurable goalsgoalsgoalsgoals....

� UnderstandUnderstandUnderstandUnderstand thethethethe effecteffecteffecteffect youryouryouryour financialfinancialfinancialfinancial decisionsdecisionsdecisionsdecisions havehavehavehave onononon otherotherotherother financialfinancialfinancialfinancial issuesissuesissuesissues....

� RevaluateRevaluateRevaluateRevaluate youryouryouryour financialfinancialfinancialfinancial planplanplanplan periodicallyperiodicallyperiodicallyperiodically....

� StartStartStartStart nownownownow.... DoDoDoDo notnotnotnot assumeassumeassumeassume thatthatthatthat financialfinancialfinancialfinancial planningplanningplanningplanning isisisis forforforfor whenwhenwhenwhen youyouyouyou areareareare olderolderolderolder....

� StartStartStartStart withwithwithwith whatwhatwhatwhat youyouyouyou havehavehavehave gotgotgotgot.... DoDoDoDo notnotnotnot assumeassumeassumeassume thatthatthatthat financialfinancialfinancialfinancial planningplanningplanningplanning isisisis forforforfor thethethethe

wealthywealthywealthywealthy....

� TakeTakeTakeTake chargechargechargecharge.... YouYouYouYou shouldshouldshouldshould bebebebe inininin controlcontrolcontrolcontrol ofofofof thethethethe financialfinancialfinancialfinancial planningplanningplanningplanning processprocessprocessprocess....

� LookLookLookLook atatatat thethethethe biggerbiggerbiggerbigger picturepicturepicturepicture.... FinancialFinancialFinancialFinancial planningplanningplanningplanning isisisis moremoremoremore thanthanthanthan retirementretirementretirementretirement planningplanningplanningplanning orororor taxtaxtaxtax

planningplanningplanningplanning....

� DoDoDoDo notnotnotnot confuseconfuseconfuseconfuse financialfinancialfinancialfinancial planningplanningplanningplanning withwithwithwith investinginvestinginvestinginvesting....

� DoDoDoDo notnotnotnot waitwaitwaitwait forforforfor aaaa moneymoneymoneymoney crisiscrisiscrisiscrisis totototo beginbeginbeginbegin financialfinancialfinancialfinancial planningplanningplanningplanning....

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WHAT IS COMPREHENSIVE FINANCIAL PLANNING ?

Comprehensive financial planning uses an integrated

approach to monitor all aspects of someone’s financial

situation:

- Insurance & Risk Planning

- Retirement Planning

- Goal Based Investment Planning

- Tax Planning

- Estate Planning

COMPONENTS OF FINANCIAL PLANNING

Protection

� Life Insurance

� Health insurance

� Home, Motor Insurance

Savings

� Emergency requirements

� Short Term Goals - Vacation Planning

Growth

� Retirement Planning

� Children Education

� House Purchase

Investment Planning

SAVING AND INVESTMENT

�EveryoneEveryoneEveryoneEveryone needsneedsneedsneeds totototo savesavesavesave forforforfor aaaa rainyrainyrainyrainy daydaydayday.... OnceOnceOnceOnce youyouyouyou havehavehavehave savedsavedsavedsaved

enoughenoughenoughenough totototo taketaketaketake carecarecarecare ofofofof emergencies,emergencies,emergencies,emergencies, youyouyouyou shouldshouldshouldshould startstartstartstart thinkingthinkingthinkingthinking

aboutaboutaboutabout investinginvestinginvestinginvesting andandandand totototo makemakemakemake youryouryouryour moneymoneymoneymoney growgrowgrowgrow....

� InvestmentInvestmentInvestmentInvestment planningplanningplanningplanning focusesfocusesfocusesfocuses onononon identifyingidentifyingidentifyingidentifying effectiveeffectiveeffectiveeffective investmentinvestmentinvestmentinvestment

strategiesstrategiesstrategiesstrategies accordingaccordingaccordingaccording totototo anananan investor’sinvestor’sinvestor’sinvestor’s riskriskriskrisk appetiteappetiteappetiteappetite andandandand financialfinancialfinancialfinancial

goalsgoalsgoalsgoals....

� ThereThereThereThere isisisis aaaa widewidewidewide varietyvarietyvarietyvariety ofofofof investmentinvestmentinvestmentinvestment options,options,options,options, includingincludingincludingincluding

Equities,Equities,Equities,Equities, Bonds,Bonds,Bonds,Bonds, Gold,Gold,Gold,Gold, MutualMutualMutualMutual funds,funds,funds,funds, BankBankBankBank Deposits,Deposits,Deposits,Deposits, RealRealRealReal

Estate,Estate,Estate,Estate, CommoditiesCommoditiesCommoditiesCommodities andandandand DerivativesDerivativesDerivativesDerivatives....

WHY INVESTMENT PLANNING

� InvestmentInvestmentInvestmentInvestment PlanningPlanningPlanningPlanning isisisis importantimportantimportantimportant becausebecausebecausebecause itititit helpshelpshelpshelps youyouyouyou totototo derivederivederivederive

thethethethe maximummaximummaximummaximum benefitbenefitbenefitbenefit fromfromfromfrom youryouryouryour investmentsinvestmentsinvestmentsinvestments....

� YourYourYourYour successsuccesssuccesssuccess asasasas anananan investorinvestorinvestorinvestor dependsdependsdependsdepends uponuponuponupon youryouryouryour abilityabilityabilityability totototo

choosechoosechoosechoose thethethethe rightrightrightright investmentinvestmentinvestmentinvestment optionsoptionsoptionsoptions.... This,This,This,This, inininin turn,turn,turn,turn, dependsdependsdependsdepends onononon

youryouryouryour requirements,requirements,requirements,requirements, needsneedsneedsneeds andandandand goalsgoalsgoalsgoals....

� InvestmentInvestmentInvestmentInvestment PlanningPlanningPlanningPlanning alsoalsoalsoalso helpshelpshelpshelps youyouyouyou totototo decidedecidedecidedecide uponuponuponupon thethethethe rightrightrightright

investmentinvestmentinvestmentinvestment strategystrategystrategystrategy.... BesidesBesidesBesidesBesides youryouryouryour individualindividualindividualindividual requirement,requirement,requirement,requirement, youryouryouryour

investmentinvestmentinvestmentinvestment strategystrategystrategystrategy wouldwouldwouldwould alsoalsoalsoalso dependdependdependdepend uponuponuponupon youryouryouryour age,age,age,age,

personalpersonalpersonalpersonal circumstancescircumstancescircumstancescircumstances andandandand youryouryouryour riskriskriskrisk appetiteappetiteappetiteappetite....

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BASICS OF INVESTMENT PLANNING

LET TIME AND COMPOUNDING WORK FOR YOU...

Growth Rate assumed at 15%

Cost of Delay Cost of Delay Cost of Delay Cost of Delay

can be can be can be can be

Devastating !!!Devastating !!!Devastating !!!Devastating !!!

STARTING EARLY & INVESTING REGULARLY

Source: Sundaram BNP Paribas AMC

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POWER OF COMPOUNDING?

Which option will you chose from below?Which option will you chose from below?Which option will you chose from below?Which option will you chose from below?

1. Receiving Rs 1,00,00,000.00

2. Receiving double the money than previous day i.e Rs

1,2,4,8,16,32……so on for a month

POWER OF COMPOUNDING?

How much will you get at the end of month?How much will you get at the end of month?How much will you get at the end of month?How much will you get at the end of month?

1. Rs 30,00,00,000.00

2. Rs 1,07,37,41,823.00

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IS THERE ANY SOLUTION TO OVERCOME THIS PROBLEM?

EVEN LOW INFLATION WILL TREBLE COST OF LIVING

Inflation rate assumed is 4.5% per annum in line with RBI’s comfort range.

Source: Sundaram BNP Paribas AMC

ARE YOU PREPARED FOR THIS !!!

Inflation rate assumed is 4.5% per annum in line with RBI’s comfort range.

1 Liter Milk

Rs. 652020*

Rs. 402010

Rs. 252000

AmountYear

Rs. 1062030*

Amount

A Loaf of Bread

Rs. 262020*

Rs. 162010

Rs. 102000

Year

Rs. 422030*

1 Kg Apples

Rs. 1302020*

Rs. 802010

Rs. 252000

AmountYear

Rs. 2122030*

LIFESTYLE INFLATION – A TIME BOMB

5555 years backyears backyears backyears back TodayTodayTodayToday % increase% increase% increase% increase

OrdinaryOrdinaryOrdinaryOrdinary Shoes Shoes Shoes Shoes –––– Rs 500Rs 500Rs 500Rs 500 Red Tape shoes Red Tape shoes Red Tape shoes Red Tape shoes –––– Rs 3000Rs 3000Rs 3000Rs 3000 500%500%500%500%

TitanTitanTitanTitan Watch Watch Watch Watch –––– Rs 1500Rs 1500Rs 1500Rs 1500 Tommy Tommy Tommy Tommy HilfilgerHilfilgerHilfilgerHilfilger –––– Rs 7500Rs 7500Rs 7500Rs 7500 400%400%400%400%

Restaurant Restaurant Restaurant Restaurant –––– Rs 1000Rs 1000Rs 1000Rs 1000 Fine Dining Fine Dining Fine Dining Fine Dining –––– Rs 5000 Rs 5000 Rs 5000 Rs 5000 400%400%400%400%

Medicine Medicine Medicine Medicine –––– Rs 500Rs 500Rs 500Rs 500 No LimitNo LimitNo LimitNo Limit ----------------

School fees School fees School fees School fees –––– Rs 5000Rs 5000Rs 5000Rs 5000 DPS fees DPS fees DPS fees DPS fees –––– Rs 1,00,000Rs 1,00,000Rs 1,00,000Rs 1,00,000 1800%1800%1800%1800%

Didn’tDidn’tDidn’tDidn’t existexistexistexist I Pod I Pod I Pod I Pod –––– Rs 15,000Rs 15,000Rs 15,000Rs 15,000 ----------------

Normal mobile Normal mobile Normal mobile Normal mobile –––– RsRsRsRs 3,0003,0003,0003,000 IIII----phone phone phone phone –––– Rs 30,000Rs 30,000Rs 30,000Rs 30,000 900%900%900%900%

Scooter /Scooter /Scooter /Scooter / MC MC MC MC –––– Rs 50,000Rs 50,000Rs 50,000Rs 50,000 Sedan Car Sedan Car Sedan Car Sedan Car –––– Rs 8,00,000Rs 8,00,000Rs 8,00,000Rs 8,00,000 1500%1500%1500%1500%

2 BHK2 BHK2 BHK2 BHK 3 BHK with SP, Club etc3 BHK with SP, Club etc3 BHK with SP, Club etc3 BHK with SP, Club etc No ComparisonNo ComparisonNo ComparisonNo Comparison

Inflation X Multiply by 5 members - !!!!!!!!!!!

Marriage, Foreign vacation & more…….

Maid - Washing Machine, Driver - Tata NanoNarayana Murthy Driver

WEALTH CREATION IN DIFFERENT ASSET CLASSES

Rs 1000-a-month invested in Equity is an investment made in Sensex

Figures as of April 2010

Source: Sundaram BNP Paribas AMCc

Today not investing in Equity is Risky

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WHO’S THE BEST ???

Asset Class 1 Year 3 Year 5 Year 10 Year 15 Year 20 Year 30 Year

Silver 115.54% 29.77% 48.49% 24.24% 13.63% 12.11% 3.79%

Gold 36.82% 14.46% 38.25% 13.98% 9.06% 6.97% 0.35%

Sensex 10.94% 7.52% 11.51% 18.36% 12.40% 15.10% 17.04%

Bonds 6.00% 8.00% 8.00% 10.00% 12.00% - -

Figures as of March 31, 2011

ALL THAT GLITTERS IS NOT GOLD!!!

COMPARISON OF GOLD FUND WITH OTHER GOLD INSTRUMENTS COMPARISON OF GOLD FUND WITH OTHER GOLD INSTRUMENTS

ASSET ALLOCATION IS THE KEY

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TIME MATTERS, NOT TIMING

Source: Sundaram BNP Paribas AMC

28-05-2012

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ARE YOU CONFUSED???

INVESTMENT OPTIONS

Real Returns(-) = Returns (9%) - Tax (20%) - Inflation (8-9%)

BANK DEPOSITS

� Deposits in scheduled banks are regulated by RBI and guarantee provided by Deposit Insurance and Credit Guarantee Corporation (DICGC) - upto Rs 100,000 per depositor per bank.

� There is no ceiling on interest rates payable on deposits in savings account (currently minimum is 4% calculated daily)

� Interest rate on Fixed deposits varies with term of deposit.

� Bank deposits enjoy high liquidity. Withdraw prematurely a portion or whole of FD’s, with interest rate corresponding to periods of deposit with some penalty. Also we have flexi accounts (FDs with ATM facility)

� Loans can be raised against bank deposits

SBI – FIXED DEPOSIT RATES POST OFFICE MONTHLY INCOME SCHEME

� Provide regular monthly income

� Specially suited for retired employees / Senior Citizens

� Rate of interest 8.50%

� Interest is taxable at the applicable slab rate

� Maturity Period - Five Years.

� No Bonus on Maturity w.e.f. 01.12.2011.

� Auto credit facility to SB Account

Type of AccountType of AccountType of AccountType of Account MinimumMinimumMinimumMinimum LimitLimitLimitLimit Maximum LimitMaximum LimitMaximum LimitMaximum Limit

Single INR 1500 INR 4.5 lakhs

Joint INR 1500 INR 9.0 lakhs

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12

NATIONAL SAVING CERTIFICATES (VIII AND IX ISSUE)

� Scheme specially designed for Government employees, Businessmen and

other salaried classes. Trust and HUF cannot invest.

� No maximum limit for investment.

� No Tax deduction at source

� Certificates can be kept as collateral security to get loan from banks

� Investment up to INR 1,00,000/- per annum qualifies for IT Rebate under

section 80C of Income Tax Act.

� Maturity period 5 years and 10 years

� Rate of interest 8.60% for 5 years and 8.90% for 10 years.Rate of interest 8.60% for 5 years and 8.90% for 10 years.Rate of interest 8.60% for 5 years and 8.90% for 10 years.Rate of interest 8.60% for 5 years and 8.90% for 10 years.

� Minimum INR. 100/- No maximum limit available in denominations of

INR. 100/-, 500/-, 1000/-, 5000/- & INR. 10,000/-

SENIOR CITIZEN SAVING SCHEME

� The account may be opened inThe account may be opened inThe account may be opened inThe account may be opened in individual capacity or jointly with spouse.individual capacity or jointly with spouse.individual capacity or jointly with spouse.individual capacity or jointly with spouse.

� The account may be opened by an individual:The account may be opened by an individual:The account may be opened by an individual:The account may be opened by an individual:

� Who has attained age ofWho has attained age ofWho has attained age ofWho has attained age of 60 years60 years60 years60 years

� Who has attained the ageWho has attained the ageWho has attained the ageWho has attained the age 55 years55 years55 years55 years or more but less thanor more but less thanor more but less thanor more but less than 60 years60 years60 years60 years and has retired under and has retired under and has retired under and has retired under

aaaa Voluntary Retirement Scheme or a Special Voluntary Retirement SchemeVoluntary Retirement Scheme or a Special Voluntary Retirement SchemeVoluntary Retirement Scheme or a Special Voluntary Retirement SchemeVoluntary Retirement Scheme or a Special Voluntary Retirement Scheme on the date of on the date of on the date of on the date of

opening of the accountopening of the accountopening of the accountopening of the account within three months from the date of retirement.within three months from the date of retirement.within three months from the date of retirement.within three months from the date of retirement.

� No age limit for the retired personnel of No age limit for the retired personnel of No age limit for the retired personnel of No age limit for the retired personnel of DefenceDefenceDefenceDefence services provided they fulfill other specified services provided they fulfill other specified services provided they fulfill other specified services provided they fulfill other specified

conditions.conditions.conditions.conditions.

� The individual may open one or more account in theThe individual may open one or more account in theThe individual may open one or more account in theThe individual may open one or more account in the multiple of INR1000/multiple of INR1000/multiple of INR1000/multiple of INR1000/---- subject to a maximum subject to a maximum subject to a maximum subject to a maximum

limit oflimit oflimit oflimit of INR15 INR15 INR15 INR15 lakhlakhlakhlakh....

� Premature closure of account is permitted Premature closure of account is permitted Premature closure of account is permitted Premature closure of account is permitted ---- After one year but before 2 years on deduction of 1 ½ % After one year but before 2 years on deduction of 1 ½ % After one year but before 2 years on deduction of 1 ½ % After one year but before 2 years on deduction of 1 ½ %

of the deposit. After 2 years but before date of maturity on deduction of 1% of the deposit.of the deposit. After 2 years but before date of maturity on deduction of 1% of the deposit.of the deposit. After 2 years but before date of maturity on deduction of 1% of the deposit.of the deposit. After 2 years but before date of maturity on deduction of 1% of the deposit.

� Interest @ 9.30% per annum (compounded Quarterly, Payable 31st March, 30th June, 30th Sept and Interest @ 9.30% per annum (compounded Quarterly, Payable 31st March, 30th June, 30th Sept and Interest @ 9.30% per annum (compounded Quarterly, Payable 31st March, 30th June, 30th Sept and Interest @ 9.30% per annum (compounded Quarterly, Payable 31st March, 30th June, 30th Sept and

31st December.)31st December.)31st December.)31st December.)

� The The The The investment under this scheme qualify for the benefit of Section 80C of the Income Tax Act, 1961 investment under this scheme qualify for the benefit of Section 80C of the Income Tax Act, 1961 investment under this scheme qualify for the benefit of Section 80C of the Income Tax Act, 1961 investment under this scheme qualify for the benefit of Section 80C of the Income Tax Act, 1961

from from from from 1.4.20071.4.20071.4.20071.4.2007

COMPANY DEPOSITS

� Companies solicit fixed deposits from public

� Fixed deposits mobilized by manufacturing companies regulated by

Company law board (deposit term is 1 to 3 years)

� Fixed deposits mobilized by finance companies regulated by RBI (deposit

term is 25 months to 5 years)

� Interest rates on company deposits are higher than bank fixed deposits

� No tax benefit for depositors on company deposits

� No TDS upto Rs. 5000 interest income in a financial year

� Risk is also high compared to Bank Deposits

� HDFC Deposits, Mahindra Finance, TATA Motors, Muthoot Finance

PUBLIC PROVIDENT FUND (PPF)

� Ideal investment option for both salaried as well as self employed classes.

� Non-Resident Indians (NRIs) are not eligible

� Investment up to INR. 1,00,000 p.a. qualifies for IT Rebate under Sec 80 C of IT Act.

� 15 year investment scheme, can be extended by 5 years.

� Minimum amount Rs. 500/- per year, Maximum amount Rs. 1,00,000/- per year.

� EEE status: No tax on interest and on withdrawal.

� Present Interest rate is 8.80% p.a. The rate will now vary every Financial Year.Present Interest rate is 8.80% p.a. The rate will now vary every Financial Year.Present Interest rate is 8.80% p.a. The rate will now vary every Financial Year.Present Interest rate is 8.80% p.a. The rate will now vary every Financial Year.

� Loan facility available from 3rd financial year upto 5th financial year.

� Withdrawal permitted from 6th financial year

� Free from court attachment.

EMPLOYEE PROVIDENT FUND

� Employer and employee contributes certain minimum amount on monthly basis to

the provident fund account

� Employee can choose to contribute additional amounts

� Contribution by employer is fully tax exempt (from the view of employee), contribution

by employee is given 80C tax benefit.

� Contributions earn an compound interest rate of 8.5% which is totally exempt from

taxes. Interest is accumulated in the account and not paid to employee.

� Employee can take loan against provident fund subject to conditions

� Contribution: 12% of Basic + DA

� Pension Fund : 8.33%

Provident Fund : 3.67%

Employee Deposit Linked Insurance : 0.5%

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EPF ALLOCATION PSU BONDS

� Public sector undertaking issue debentures known as

PSU bonds

� PSU bonds can be tax free or taxable

� PSUs can set the interest rate on these bonds subject

to limit fixed by Ministry of Finance

� Tax free bonds can be issued by prior approval of MoF

� No deduction of TDS, transferable by endorsement, no

stamp duty on transfer, traded on stock exchanges

� NABARD, NHAI, REC

TAX FREE BONDS

� Tax-free bond target for infrastructure projects at Rs 60,000

crore

� Companies – NHAI, IRFC, IIFCL, HUDCO, SIDBI

� Interest income is tax free

� Interest rate (adjust as per 10 year G-Sec)

� Tenure – 10 years and 15 years

� Very suitable for people in highest tax bracket

� Safe investment

NON-CONVERTIBLE DEBENTURES (NCDS)

� Similar to promissory notes, debentures are used to raise long term debt by

companies

� When debentures are offered to retail investors, a trustee is setup for protecting the

interest of debenture holders

� Company has obligation to pay interest and principal to debenture holders at

specified times

� Typically debentures are secured by a charge on immovable properties

� Companies are free to select the coupon rate and redemption period

� Debentures can carry call or put features

� Debentures may have a convertible clause

DO YOU HAVE ANY ANSWER ?

� Do you think these investments are safe?

� The day you have parted with your money, you have

taken risk

� European countries defaulting ???

� Corruption / Scams / Swiss Accounts

� Remember UTI-64 fiasco….

� Bank Fixed Deposits Guarantee – Rs 1 lakh

� LIC Guarantee – Talks are going on to remove

sovereign guarantee

REAL ESTATE

� Very illiquid investment

� Requires very high amount of corpus. You need to be a super HNI to invest in real

estate properties.

� Requires a much longer time horizon compared to Equity investment

� Home work required in Real Estate is very high (Due diligence on builders / lengthy

documentation / Clear title etc ). At times, it takes a year to decide and close the

investment while Equity investment can be done in just a few mouse clicks

� Not comparable (i.e the return on one property cannot be compared to another

property) and also there is no authentic data available. On the other hand, Equity

investment data is very much comparable and has a long term track record.

� Transaction costs (Stamp Duty, Broker fees, Legal Charges etc) on Real Estate is very

high compared to Equity investment.

� When it comes to Taxation, Equity investment scores quite favourably compared

to Real Estate investment)

� Transparency missing / Unaccounted money

� Politicians influence

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EQUITY VS REAL ESTATE

� BSE Sensex Return from Jan 01, 1980 – Oct 03, 2011 – 16.72% annually

(with considering dividend reinvestment)

� Flat in Samudra Mahal Worli was sold at Rs 700 per sq ft in the 70’s and

was last transacted at Rs 107,000 per sq ft – Rate of Return p.a – 12.79%

(without considering transaction costs and maintenance charges)

� Sensex is up 136 times while the flat in Samudra Mahal is up 46 times

(more than 3 times)

I buy on the assumption that they could close the market the next

day and not reopen it for ten years – Warren Buffet

Date Sensex 1 Year 2 Years 3 Years 5 Years 10 Years 15 Years

Dec-79 118.76

Dec-80 148.25 24.83

Dec-81 227.72 53.61 38.47

Dec-82 235.83 3.56 26.13 40.92

Dec-83 252.92 7.25 5.39 30.62

Dec-84 271.87 7.49 7.37 9.26 18.02

Dec-85 527.36 93.98 44.40 49.54 28.89

Dec-86 524.45 -0.55 38.89 44.00 18.16

Dec-87 442.17 -15.69 -8.43 27.53 13.40

Dec-88 666.26 50.68 12.71 12.40 21.38

Dec-89 778.64 16.87 32.70 21.85 23.42 20.69

Dec-90 1048.29 34.63 25.44 53.97 14.73 21.60

Dec-91 1908.85 82.09 56.57 69.26 29.48 23.69

Dec-92 2615.37 37.01 57.95 83.27 42.69 27.20

Dec-93 3346.06 27.94 32.40 78.66 38.10 29.47

Dec-94 3926.9 17.36 22.53 43.43 38.21 30.61 26.27

Dec-95 3110.49 -20.79 -3.58 9.06 24.30 19.42 22.50

Dec-96 3085.2 -0.81 -11.36 -3.98 10.08 19.39 18.98

Dec-97 3658.98 18.60 8.46 -3.47 6.95 23.53 20.06

Dec-98 3055.41 -16.50 -0.48 -0.89 -1.80 16.45 18.07

Dec-99 5005.82 63.83 16.97 27.38 4.97 20.45 21.43

Dec-00 3972.12 -20.65 14.02 4.19 5.01 14.25 14.41

Dec-01 3262.33 -17.87 -19.27 3.33 1.12 5.51 12.96

Dec-02 3377.28 3.52 -7.79 -17.86 -1.59 2.59 14.52

Dec-03 5838.96 72.89 33.78 21.24 13.83 5.73 15.57

Dec-04 6602.69 13.08 39.82 42.26 5.69 5.33 15.32

Dec-05 9397.93 42.33 26.87 66.81 18.80 11.69 15.75

Dec-06 13786.91 46.70 44.50 53.66 33.41 16.15 14.09

Dec-07 20286.99 47.15 46.92 75.29 43.13 18.68 14.63

Dec-08 9647.31 -52.45 -16.35 1.32 10.56 12.18 7.31

Dec-09 17464.81 81.03 -7.22 12.55 21.48 13.31 10.46

Dec-10 20509.09 17.43 45.80 0.36 16.89 17.84 13.40

Yearly Rolling Returns 31 30 29 27 22 17

Positive Returns 23 22 25 25 22 17

Negative Returns 8 8 4 2 0 0

ROLLING RETURN OF SENSEX

SENSEX RETURNS - 17.06% P.A

SMALL VS MID VS LARGE AXIS BANK - 47.45% P.A

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SBI BANK - 27.06% P.A

" A SBI Fixed Deposit doubles your money in 10 years. Had you invested

the same money in SBI stock, it would have given you 1800% returns"

BHARTI AIRTEL - 37.07% P.A

BHEL - 21.61% P.A ONGC - 13.83% P.A

INFOSYS - 57.36% P.A

MUTUAL FUND AS AN INVESTMENT VEHICLE

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INDEX

1.1.1.1. Mutual Fund ConceptMutual Fund ConceptMutual Fund ConceptMutual Fund Concept

2.2.2.2. Organization of a Mutual FundOrganization of a Mutual FundOrganization of a Mutual FundOrganization of a Mutual Fund

3.3.3.3. Advantages / Disadvantages of Mutual FundsAdvantages / Disadvantages of Mutual FundsAdvantages / Disadvantages of Mutual FundsAdvantages / Disadvantages of Mutual Funds

4.4.4.4. Types of Mutual Fund SchemesTypes of Mutual Fund SchemesTypes of Mutual Fund SchemesTypes of Mutual Fund Schemes

5.5.5.5. Mutual Fund Investment StrategiesMutual Fund Investment StrategiesMutual Fund Investment StrategiesMutual Fund Investment Strategies

6.6.6.6. Mutual Funds Vs. Direct Equity InvestmentsMutual Funds Vs. Direct Equity InvestmentsMutual Funds Vs. Direct Equity InvestmentsMutual Funds Vs. Direct Equity Investments

7.7.7.7. Worldwide MF IndustryWorldwide MF IndustryWorldwide MF IndustryWorldwide MF Industry

8.8.8.8. Mutual Funds Mutual Funds Mutual Funds Mutual Funds ---- PerformancePerformancePerformancePerformance

9.9.9.9. Mutual Fund Investment BlundersMutual Fund Investment BlundersMutual Fund Investment BlundersMutual Fund Investment Blunders

10.10.10.10. Mutual Funds TaxationMutual Funds TaxationMutual Funds TaxationMutual Funds Taxation

MUTUAL FUND OPERATION FLOW CHART

CONCEPT

� AAAA MutualMutualMutualMutual FundFundFundFund isisisis aaaa trusttrusttrusttrust thatthatthatthat poolspoolspoolspools thethethethe savingssavingssavingssavings ofofofof aaaa numbernumbernumbernumber ofofofof investorsinvestorsinvestorsinvestors whowhowhowho

shareshareshareshare aaaa commoncommoncommoncommon financialfinancialfinancialfinancial goalgoalgoalgoal....

� TheTheTheThe moneymoneymoneymoney thusthusthusthus collectedcollectedcollectedcollected isisisis thenthenthenthen investedinvestedinvestedinvested inininin capitalcapitalcapitalcapital marketmarketmarketmarket instrumentsinstrumentsinstrumentsinstruments

suchsuchsuchsuch asasasas shares,shares,shares,shares, debenturesdebenturesdebenturesdebentures andandandand otherotherotherother securitiessecuritiessecuritiessecurities....

� TheTheTheThe incomeincomeincomeincome earnedearnedearnedearned throughthroughthroughthrough thesethesethesethese investmentsinvestmentsinvestmentsinvestments andandandand thethethethe capitalcapitalcapitalcapital appreciationappreciationappreciationappreciation

realizedrealizedrealizedrealized areareareare sharedsharedsharedshared bybybyby itsitsitsits unitunitunitunit holdersholdersholdersholders inininin proportionproportionproportionproportion totototo thethethethe numbernumbernumbernumber ofofofof unitsunitsunitsunits

ownedownedownedowned bybybyby themthemthemthem....

� ThusThusThusThus aaaa MutualMutualMutualMutual FundFundFundFund isisisis thethethethe mostmostmostmost suitablesuitablesuitablesuitable investmentinvestmentinvestmentinvestment forforforfor thethethethe commoncommoncommoncommon manmanmanman asasasas

itititit offersoffersoffersoffers anananan opportunityopportunityopportunityopportunity totototo investinvestinvestinvest inininin aaaa diversified,diversified,diversified,diversified, professionallyprofessionallyprofessionallyprofessionally managedmanagedmanagedmanaged

basketbasketbasketbasket ofofofof securitiessecuritiessecuritiessecurities atatatat aaaa relativelyrelativelyrelativelyrelatively lowlowlowlow costcostcostcost....

MUTUAL FUNDS = PACKAGED ATTA

or

FUND STRUCTURE

Fund Sponsor

Trustees

Asset Management Company

Custodian

R & T

Agent

SBI MUTUAL FUND

Mutual Fund TrustMutual Fund TrustMutual Fund TrustMutual Fund Trust SBI Mutual FundSBI Mutual FundSBI Mutual FundSBI Mutual Fund

SponsorSponsorSponsorSponsor State Bank of India

TrusteeTrusteeTrusteeTrustee SBI Mutual Fund Trustee Company

Private Limited

AMCAMCAMCAMC SBI Funds Management Private Limited

CustodianCustodianCustodianCustodian HDFC Bank Limited, Mumbai

Citibank N.A., Mumbai

Stock Holding Corporation of India Ltd., Mumbai

Bank of Nova Scotia (custodian for Gold)

RTARTARTARTA Computer Age Management Services Pvt. Ltd

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ADVANTAGES OF MUTUAL FUNDS

� Professional Management Professional Management Professional Management Professional Management

� Diversification Diversification Diversification Diversification

� Potential Higher Return Vs other AvenuesPotential Higher Return Vs other AvenuesPotential Higher Return Vs other AvenuesPotential Higher Return Vs other Avenues

� Low Costs Low Costs Low Costs Low Costs

� Liquidity Liquidity Liquidity Liquidity

� Transparency Transparency Transparency Transparency

� Flexibility Flexibility Flexibility Flexibility

� Choice of schemes Choice of schemes Choice of schemes Choice of schemes

� Tax benefits Tax benefits Tax benefits Tax benefits

� Well regulated Well regulated Well regulated Well regulated

DISADVANTAGES OF MUTUAL FUNDS

� Management feesManagement feesManagement feesManagement fees

� Exit CostsExit CostsExit CostsExit Costs

� Potential poor performancePotential poor performancePotential poor performancePotential poor performance

� Complicated tax reporting issuesComplicated tax reporting issuesComplicated tax reporting issuesComplicated tax reporting issues

� Potential market risk with all investmentsPotential market risk with all investmentsPotential market risk with all investmentsPotential market risk with all investments

� Aggressive or unethical sales personnel / practices Aggressive or unethical sales personnel / practices Aggressive or unethical sales personnel / practices Aggressive or unethical sales personnel / practices ----

90% of the reason why investors stay away from Mutual 90% of the reason why investors stay away from Mutual 90% of the reason why investors stay away from Mutual 90% of the reason why investors stay away from Mutual

FundsFundsFundsFunds

REALITY CHECK….

In a country with a population of close to 120 crores, we at best

have about 1 crore investors – less than 1% ! (even that is

suspect)

4-5 crore mutual funds investors a myth; these are folios that

belong to about 60-70 lakh active unique investors

Households’ investments in capital market have fallen from a

high 23.3% of gross financial savings in 1991-92 to a meagre

2.6% in 2008-09!

HOUSEHOLD SAVINGS - WHERE’S THE MONEY PARKED? DECLINING INVESTMENTS IN CAPITAL MARKET

INVESTMENTS / SAVINGS OF THE HOUSEHOLD SECTOR (GROSS) IN CAPITAL MARKET(Per cent)

# Preliminary P Provisional

Source: SEBI HANDBOOK OF STATISTICS ON THE INDIAN SECURITIES MARKET 2009

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THANKS TO MR C B BHAVE

Mr U K Sinha, SEBI Chairman

MUTUAL FUNDS AUM

AMC WISE AUM

� By StructureBy StructureBy StructureBy Structure

� Open Ended SchemesOpen Ended SchemesOpen Ended SchemesOpen Ended Schemes

� Close Ended SchemesClose Ended SchemesClose Ended SchemesClose Ended Schemes

� By Investment ObjectivesBy Investment ObjectivesBy Investment ObjectivesBy Investment Objectives

� Growth SchemesGrowth SchemesGrowth SchemesGrowth Schemes

� Income SchemesIncome SchemesIncome SchemesIncome Schemes

� Balanced SchemesBalanced SchemesBalanced SchemesBalanced Schemes

� Money Market SchemesMoney Market SchemesMoney Market SchemesMoney Market Schemes

� Other SchemesOther SchemesOther SchemesOther Schemes

� Tax Saving SchemesTax Saving SchemesTax Saving SchemesTax Saving Schemes

� Special SchemesSpecial SchemesSpecial SchemesSpecial Schemes

� Index SchemesIndex SchemesIndex SchemesIndex Schemes

� Sector Specific SchemesSector Specific SchemesSector Specific SchemesSector Specific Schemes

� ETFs (including gold ETFs)ETFs (including gold ETFs)ETFs (including gold ETFs)ETFs (including gold ETFs)

� Fund of FundsFund of FundsFund of FundsFund of Funds

TYPES OF SCHEMES

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RISK-RETURN TRADEOFF

Siamese Twins

EQUITY

Scoreboard – Hybrid & Debt schemes

MF ASSETS BREAK UP

MF ASSETS BREAK UP MF RETAIL ASSETS BREAK UP

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HOW DO MUTUAL FUNDS HELP YOU ?HOW DO MUTUAL FUNDS HELP YOU ?HOW DO MUTUAL FUNDS HELP YOU ?HOW DO MUTUAL FUNDS HELP YOU ?

FIXED DEPOSITSFIXED DEPOSITSFIXED DEPOSITSFIXED DEPOSITS

SAVINGS ACCOUNTSAVINGS ACCOUNTSAVINGS ACCOUNTSAVINGS ACCOUNT

CURRENT ACCOUNT CURRENT ACCOUNT CURRENT ACCOUNT CURRENT ACCOUNT

RECURRING DEPOSITSRECURRING DEPOSITSRECURRING DEPOSITSRECURRING DEPOSITS

Mutual

Funds

SHORT TERM DEBT FUNDSSHORT TERM DEBT FUNDSSHORT TERM DEBT FUNDSSHORT TERM DEBT FUNDS

FMPFMPFMPFMPSSSS

SIPSIPSIPSIPSSSS

LIQUID FUNDSLIQUID FUNDSLIQUID FUNDSLIQUID FUNDS Banks

LIQUID FUNDS VS SAVINGS DEPOSITS

Savings / Current AccountSavings / Current AccountSavings / Current AccountSavings / Current Account Liquid Liquid Liquid Liquid / Ultra Short Term Funds / Ultra Short Term Funds / Ultra Short Term Funds / Ultra Short Term Funds

Returns on investments range between 0 -

6%

Returns on investments range between 8 -

9% currently

Interest Taxable If you opt for a dividend option the dividend

is tax free in the hands of the investor

1 day – 1 yr 1 day – 1 yr

Returns are fixed Returns are very much predictable

Same day withdrawal 1 day notice

Current A/cCurrent A/cCurrent A/cCurrent A/c Saving A/cSaving A/cSaving A/cSaving A/c Liquid FundLiquid FundLiquid FundLiquid Fund

Amount - Rs 1,00,000 Rs 1,00,000 Rs 1,00,000

Interest - 0% 4% Return - 8.5%

Time - 1 month 1 month 1 month

Pre-tax – Rs 0 Pre-tax – Rs 333 Pre-tax – Rs 708

Post-tax – Rs 0 Post-tax – Rs 333 Post-tax – Rs 616

Difference – Rs 616 Difference – Rs 283

LIQUID FUNDS VS SAVINGS DEPOSITS

Current A/cCurrent A/cCurrent A/cCurrent A/c Saving A/cSaving A/cSaving A/cSaving A/c Liquid FundLiquid FundLiquid FundLiquid Fund

Amount - Rs 1,00,000 Rs 1,00,000 Rs 1,00,000

Interest - 0% 4% Return - 8.5%

Time - 1 month 1 month 1 month

Pre-tax – Rs 0 Pre-tax – Rs 333 Pre-tax – Rs 708

Post-tax – Rs 0 Post-tax – Rs 333 Post-tax – Rs 616

Difference – Rs 616 Difference – Rs 283

SEBI COMMENT ON LIQUID FUNDS

“It amazes me the least risk product in the “It amazes me the least risk product in the “It amazes me the least risk product in the “It amazes me the least risk product in the

country, which is liquid funds, is not sold to country, which is liquid funds, is not sold to country, which is liquid funds, is not sold to country, which is liquid funds, is not sold to

retail investors”retail investors”retail investors”retail investors”

K N K N K N K N VaidyanathanVaidyanathanVaidyanathanVaidyanathan, Former ED, SEBI, Former ED, SEBI, Former ED, SEBI, Former ED, SEBI

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Tax-free Return of 7.3% Transact on the Go……

FMPS VS FIXED DEPOSITS

FMP FMP FMP FMP –––– TAX TAX TAX TAX @ @ @ @

20202020% With % With % With % With

IndexationIndexationIndexationIndexation

FMP FMP FMP FMP –––– TAX TAX TAX TAX @ @ @ @

10101010% Without % Without % Without % Without

IndexationIndexationIndexationIndexation

TAX on FD’s__________________ TAX on FD’s__________________ TAX on FD’s__________________ TAX on FD’s__________________

@ 30.9% @ 30.9% @ 30.9% @ 30.9% @ 20.6%@ 20.6%@ 20.6%@ 20.6% @ 10.3%@ 10.3%@ 10.3%@ 10.3%

Investment Investment Investment Investment

AmountAmountAmountAmount

1,00,000 1,00,000 1,00,000 1,00,000 1,00,000

ReturnReturnReturnReturn 9.60% 9.60% 9.60% 9.60% 9.60%

Maturity ValueMaturity ValueMaturity ValueMaturity Value 1,09,600 1,09,600 1,09,600 1,09,600 1,09,600

GainGainGainGain 9,600 9,600 9,600 9,600 9,600

Inflation Rate Inflation Rate Inflation Rate Inflation Rate

of indexationof indexationof indexationof indexation

8% NA NA NA NA

Cost after Cost after Cost after Cost after

inflationinflationinflationinflation

1,08,000 NA NA NA NA

Capital GainCapital GainCapital GainCapital Gain 1,600 9,600 NA NA NA

Tax RateTax RateTax RateTax Rate 20.60% 10.30% 30.9% 20.6% 10.3%

TaxTaxTaxTax 329.6 988.8 2966.4 1977.6 988.8

Post Tax GainsPost Tax GainsPost Tax GainsPost Tax Gains 9,270 8,611 6,634 7,622 8,611

Post Tax Post Tax Post Tax Post Tax

ReturnsReturnsReturnsReturns

9.27%9.27%9.27%9.27% 8.61%8.61%8.61%8.61% 6.63%6.63%6.63%6.63% 7.62%7.62%7.62%7.62% 8.61%8.61%8.61%8.61%

FMPS GAINING GROUND

� Choose in funds consistent with your objectives, constraints, and Choose in funds consistent with your objectives, constraints, and Choose in funds consistent with your objectives, constraints, and Choose in funds consistent with your objectives, constraints, and

tax situationtax situationtax situationtax situation

� Invest. Don’t speculate. (Stock market is not a casino)Invest. Don’t speculate. (Stock market is not a casino)Invest. Don’t speculate. (Stock market is not a casino)Invest. Don’t speculate. (Stock market is not a casino)

� Be regularBe regularBe regularBe regular

� Own funds in different asset classes Own funds in different asset classes Own funds in different asset classes Own funds in different asset classes

� Do your homework or hire wise experts to help you.Do your homework or hire wise experts to help you.Do your homework or hire wise experts to help you.Do your homework or hire wise experts to help you.

� Monitor your investments at a regular interval. Remember, no investment Monitor your investments at a regular interval. Remember, no investment Monitor your investments at a regular interval. Remember, no investment Monitor your investments at a regular interval. Remember, no investment

is forever.is forever.is forever.is forever.

� Don’t panic.Don’t panic.Don’t panic.Don’t panic.

MUTUAL FUND INVESTMENT STRATEGIES DIRECT EQUITY VS MUTUAL FUNDS

� Diversification

� Professional Management

� Transaction costs

� Convenience / No demat account required

� Blue Chip portfolio for as low as Rs. 500

� High Service Standards

� Transparency

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Worldwide MF Assets in Rs 1,097,00,000 crs (31st Dec’10)

India MF Assets in Rs. 7,00,538 crs (31st Mar’11)

0.63% of the worldwide MF assets

Source: Investment Company Institute1 USD = Rs 44.40 as at Mar 31, 2011

WORLDWIDE MUTUAL FUND ASSETS

(trillions of U.S. dollars, end of Dec 2010)

US LEADS THE WORLD MUTUAL FUND MARKET

WORLDWIDE MF ASSETS BY TYPE OF FUND

Data as of Dec 2010 Source: Investment Company Institute

FACTORS TO CONSIDER FOR CHOOSING A FUND

� Track record / experience of the fund houseTrack record / experience of the fund houseTrack record / experience of the fund houseTrack record / experience of the fund house

� Stability of the investment team / adherence to an investment processStability of the investment team / adherence to an investment processStability of the investment team / adherence to an investment processStability of the investment team / adherence to an investment process

� Consistent performance of the fund across market cyclesConsistent performance of the fund across market cyclesConsistent performance of the fund across market cyclesConsistent performance of the fund across market cycles

� Disclosure and service levels offered by the fund houseDisclosure and service levels offered by the fund houseDisclosure and service levels offered by the fund houseDisclosure and service levels offered by the fund house

� Relative performance among its peer group (across time periods)Relative performance among its peer group (across time periods)Relative performance among its peer group (across time periods)Relative performance among its peer group (across time periods)

� Investment style (whether it suits your risk profile)Investment style (whether it suits your risk profile)Investment style (whether it suits your risk profile)Investment style (whether it suits your risk profile)

� Look for Expense Ratio, Exit load etcLook for Expense Ratio, Exit load etcLook for Expense Ratio, Exit load etcLook for Expense Ratio, Exit load etc

PERFORMANCE OF DIVERSIFIED EQUITY FUNDS

Performance as at March 31, 2011

SensexSensexSensexSensex 9.779.779.779.77 32323232 7.517.517.517.51 22222222 11.4711.4711.4711.47 16161616

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PERFORMANCE OF TAX-SAVING EQUITY FUNDS

SensexSensexSensexSensex 9.779.779.779.77 16161616 7.517.517.517.51 14141414 11.4711.4711.4711.47 8888

Performance as at March 31, 2011

PERFORMANCE OF BALANCED FUNDS

Performance as at March 31, 2011

INVESTMENT MODES

� Systematic Investment Plan (SIP)

� Invest a fixed sum every month. (6 months to 10 years-through post-dated cheques or Direct Debit facilities)

� Fewer units when the share prices are high, and more units when the share prices are low. Average cost price tends to fall below the average NAV.

� Systematic Transfer Plan (STP)

� Invest in debt oriented fund and give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund.

� Systematic Withdrawal Plan (SWP)

PATH TO BUILDING YOUR PORTFOLIO

SYSTEMATIC INVESTMENT PLANNING (SIP)

A long journey begins with a small step

DIFFERENCE IN APPROACH

Earn (Rs 1 lakh)

Spend (???)

Save (???)

Earn (Rs 1 lakh)

Save (Rs 20,000)

Spend (Rs 80,000)

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POWER OF AN SIP

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Rs 18 lakhs investment in

SENSEX growing to

Rs 3.46 crores in 30 years

My

retirementportfolio at

the end of my

50th Birthday

Atleast

15 crores

Monthly

pension

Rs 12 lakhs

SIP CALCULATIONS

My

retirementportfolio at

the end of my

55th Birthday

Atleast

85 crores

Monthly Amount Rs 50,000 Rs 1,00,000

Period 10 years 10 yearsTotal Investment Rs 60,00,000 Rs 1,20,00,000Return @15% Rs 1,37,60,852 Rs 2,75,21,705

Return @20% Rs 1,88,04,764 Rs 3,76,09,529

Period 25 years 25 years

Total Investment Rs 1,50,00,000 Rs 3,00,00,000Return @15% Rs 16,21,76,480 Rs 32,43,52,961Return @20% Rs 42,42,64,335 Rs 84,85,28,670

SIP CALCULATIONS

You earn regularly,

You spend regularly,

Why not invest regularly?

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Focus on Goals not Market…..

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GOAL - ADITI’S EDUCATION

� Current investment – Rs 10,000 p.m

� Tenure – 25 years

� Expected Rate of return – 18%

� Aditi’s estimated wealth on her 25th Bday – Rs 5,82,33,121Rs 5,82,33,121Rs 5,82,33,121Rs 5,82,33,121

GOAL - ADITI’S MARRIAGE

� Current investment – Rs 10,000 p.m

� Tenure – 30 years

� Expected Rate of return – 18%

� Aditi’s estimated wealth on her 30th Bday – Rs 14,32,52,892Rs 14,32,52,892Rs 14,32,52,892Rs 14,32,52,892

SIP VS STP TWO GREATEST INVESTMENT BLUNDERS

1. Investing in the NFOs

2. Investing in the schemes which

gives high dividends

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INVESTING IN NFOS

� Its new (Old wine in a new bottle, participate in India’s growth potential)

� Its at Rs 10 i.e its cheaper than a existing fund whose NAV is Rs.110

� My friend / relative is buying it

� My distributor / agent has strongly recommended it.

� I can make good profit in the short term

NFO MANIA – NOW HISTORY….

RS.10 OR RS.100 - NAV MAKES NO DIFFERENCE DOES NAV MATTER?

DON'T FALL FOR THE DIVIDEND BAIT

� The NAV falls to the extent of dividend payout

� Expense incurredExpense incurredExpense incurredExpense incurred on advertisement campaigns for spreading the word goes from your fund

� If the basis of investing in a scheme is flawed, so is the investment

MF EXPENSES

�Initial Issue Expenses : Initial Issue Expenses : Initial Issue Expenses : Initial Issue Expenses :

�One time expense

�Born by the AMC

�Earlier 6% charged to the scheme

�Recurring Expenses : Recurring Expenses : Recurring Expenses : Recurring Expenses :

�These can be charged to the scheme.

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FEES

AvgAvgAvgAvg weekly New asset weekly New asset weekly New asset weekly New asset

(Rs(Rs(Rs(Rs CroreCroreCroreCrore))))

MaxMaxMaxMax Expenses for Expenses for Expenses for Expenses for

Equity SchemeEquity SchemeEquity SchemeEquity Scheme

MaxMaxMaxMax Expenses for Expenses for Expenses for Expenses for

Debt SchemeDebt SchemeDebt SchemeDebt Scheme

First 100 2.5% 2.25%

Next 300 2.25% 2%

Next 300 2% 1.75%

Above 700 1.75% 1.5%

SEBI has stipulated the following annual limits on recurring

expenses (including management fees) for schemes other than

index schemes:

The management fees cannot exceed :

1.25% on the first Rs 100 crore of net assets of a scheme

1.00% on the balance net assets

AMCS PROFIT AFTER TAX

FEES BREAK-UP

� Fees of various service providers, such as Trustees, AMC, Registrar &

Transfer Agents, Custodian, & Auditor fees

� Selling expenses including scheme advertising and commission to the

distributors

� Expenses on investor communication, account statements, dividend /

redemption cheques / warrants

� Listing fees and Depository fees

� Service tax

Expenses cannot be charged to the scheme

� Penalties and fines for infraction of laws.

� Interest on delayed payment to the unit holders.

� Legal, marketing, publication and other general expenses not attributable to

any scheme(s).

� Expenses on general administration, corporate advertising and

infrastructure costs.

MF TAXATION

MutualMutualMutualMutual FundsFundsFundsFunds

ShortShortShortShort Term Capital Term Capital Term Capital Term Capital

Gain Tax Gain Tax Gain Tax Gain Tax

(holding period(holding period(holding period(holding period

< 12 months)< 12 months)< 12 months)< 12 months)

LongLongLongLong Term Capital Term Capital Term Capital Term Capital

Gain Tax Gain Tax Gain Tax Gain Tax

(holding period (holding period (holding period (holding period > > > >

12months)12months)12months)12months)

EquityEquityEquityEquity 15%* Nil

DebtDebtDebtDebtAs per your tax slab 10% / 20%*

*Additional education *Additional education *Additional education *Additional education cesscesscesscess of 3% on the amount of taxof 3% on the amount of taxof 3% on the amount of taxof 3% on the amount of tax

$ Additional surcharge of $ Additional surcharge of $ Additional surcharge of $ Additional surcharge of 5% and an education % and an education % and an education % and an education cesscesscesscess of 3% on the amount of taxof 3% on the amount of taxof 3% on the amount of taxof 3% on the amount of tax

�Fund's management changes

�Performance slips compared to similar funds.

�Fund's expense ratios climb

�Independent rating services reduce their ratings of the

fund.

�Change in management style or a change in the

objective of the fund / Scheme Mergers.

WARNING SIGNALS� Contacting the Asset Management Company directly

� Web Site

� Branch Offices

� Mutual Fund Agents / IFAs� Locate one on AMFI site

� Financial Planners� ASK Wealth

� Sykes & Ray FP, IMM, Parag Parikh FAS

� National Distributors� Birla Sunlife, Bajaj Capital, India Infoline

� Banks� Net-Banking

� Branch Banking / Relationship Managers

� ATMs

� Online Platform� Fund Supermart, ICICI Direct, Motilal Oswal, Indiabulls

BUYING MUTUAL FUNDS

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�Filling up an application form and writing out a

cheque = end of the story… NO!

�Periodically evaluate performance of your funds

�Fact sheets and Newsletters

�Websites

�Newspapers

�Professional advisor

KEEPING TRACK…

Mutual Fund investments are subject to market risks. Please read the SID and SAI carefully

and consult your financial advisor before investing.

SOURCE

� Sundaram BNP Paribas Mutual FundSundaram BNP Paribas Mutual FundSundaram BNP Paribas Mutual FundSundaram BNP Paribas Mutual Fund

� Religare Mutual FundReligare Mutual FundReligare Mutual FundReligare Mutual Fund

� UTI Mutual FundUTI Mutual FundUTI Mutual FundUTI Mutual Fund

� ICICI Prudential Mutual fund ICICI Prudential Mutual fund ICICI Prudential Mutual fund ICICI Prudential Mutual fund

� www.valueresearchonline.comwww.valueresearchonline.comwww.valueresearchonline.comwww.valueresearchonline.com

� www.outlookmoney.comwww.outlookmoney.comwww.outlookmoney.comwww.outlookmoney.com

� Fidelity Mutual FundFidelity Mutual FundFidelity Mutual FundFidelity Mutual Fund

� The Finance Literates blogThe Finance Literates blogThe Finance Literates blogThe Finance Literates blog

� BloombergBloombergBloombergBloomberg