Islamic Financial Planning
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Transcript of Islamic Financial Planning
www.khabeer.com.pk
Islamic Financial PlanningJune 2013
Presentation on:
Second Islamic Finance Expo & Conference 2013
Contents What is Islamic Financial Planning Riba-free investment products in Pakistan Who are you? Earners considerations Earners financial planning process Retiree considerations Retiree financial planning process High Net Worth considerations Corporates, endowments & funds
Slide # 2 June 2013
What is Islamic Financial Planning?
Planning your savings and investments
to achieve your financial goals
using riba-free financial products
of the appropriate risk.
Slide # 3 June 2013
Riba-free Investment Products Islamic banks and Islamic windows of :
Saving accounts (~6%)
Deposit / investment accounts of various tenures (6-9.5%)
Riba-free mutual funds:
Fixed Income – Government and Bank (~7.5%)
Fixed Income – Moderate Risk (~7.6%)
Fixed Income – Corporate Risk (~10% - somewhat variable)
Asset Allocation / Balanced (~20% over past 3 years - very variable)
Equity (~30% over past 3 years – very variable)
Voluntary pension schemesSlide # 4 June 2013
Riba-free Investment Products (Continued)
Takaful (Islamic Insurance):
Whole life policy (risk protection + investment)
Term life policy
Accidental death & disability
Hospitalization and health policy
Car policy
House content and house policy
Real Estate
Commodities & other complex productsSlide # 5 June 2013
Who are you? An Earner
Building up equity through savings
Early, middle and late stage earners
A Retiree
Have retired and want to earn an income on your savings
A High Net-Worth Individual
Substantial wealth - may want to earn income for
financial independence or provide for future generations
Slide # 6 June 2013
Earner Considerations
Slide # 7 June 2013
Income going to:
Consumption
Non-financial investment
Savings to achieve financial goals
Risk consideration in investments:
Time horizon of goal
Inflation vs risk
Risk tolerance
Earner Financial Planning Process
Slide # 8 June 2013
Eliminate debt – especially high cost debt
Protection against emergencies
Save for an emergency fund – very low risk investments
Appropriate takaful plans
Short term goals
Time horizon of up to 3 years
Save for car, umrah, house renovation, etc.
Safe investments such as 1 year bank deposits and riba-free
income mutual funds
Earner Financial Planning Process (Continued)
Slide # 9 June 2013
Long term goals
Time horizon of 4 to 30+ years
Save for house purchase, retirement, capital for own
business, etc.
Inflation is a greater risk than financial volatility
Risky, long horizon investments
Equity and real estate are the only investments in Pakistan
that protect against inflation over the long run
Retiree Considerations At least a basic income
Based on your lifestyle
Income growing with inflation Although current inflation is around 8% it has touched 20% in the
past
Income for life Income should last at least till the life of the retiree and spouse
Risk appetite How much risk the retiree is comfortable bearing
Slide # 10 June 2013
Retiree Financial Planning Process Prepare for Retirement
Start saving early for retirement
Ensure that all debts are paid-off by retirement date
If possible, have your own dwelling – optimize house size for retirement
Gradual changes in lifestyle so that it is compatible with your expected
income
Look around for income opportunities during retirement to live an active life
The 70:30 investment plan Invest 70% in low risk plans and funds with a view to consume them during
the next 15 years – best would be a 80% riba-free income and 20% equity
mutual fund plan
Invest the remaining in equity heavy plans or equity fundsSlide # 11 June 2013
High Net-Worth Considerations
Slide # 12 June 2013
Income for financial independence A separate trust of income vehicle that would give enough income
indefinitely to maintain your lifestyle
Financial Independence for Future Generation Set-aside of enough money so that your children, grand-children
and future generations
Separate investment accounts for each family member
Trust funds with indefinite life
Corporates, Endowments & Funds
Slide # 13 June 2013
Corporations / businesses Invest surplus funds in low risk riba free products (bank deposits & mutual
funds) for extra income
Endowments / NGOs Funds for current and near-term spending in low risk riba-free products
(bank deposits & mutual funds).
Long-term and permanent funds in inflation protected investments such as
equities & real estate
Provident / Retirement Funds Balanced asset allocation with equities between 10%-30% based on age
profile of members. Some equity needed to combat inflation. Remaining
in riba-free income products.
THANK YOU FOR YOUR ATTENTIONPLEASE VISIT WWW.KHABEER.COM.PK TO LEARN MORE ABOUT RIBA-FREE INVESTMENTS
We at Khabeer Financial Services pray to Allah the Al-Khabeer (the all-knowing, the expert) that
we are able to provide wise advice and correct information that acts to the benefit to our clients
and that we are able to improve and extend the Shariah Compliant financial industry in Pakistan.
Slide # 14 June 2013