WEALTH MANAGEMENT

Three Stages in lIfe

1. You are working for your Money

2. Others are working for your money
3. Your money working for you

WM Process: Financial Planning (Goal Setting, Risk appetite, Financials, projections, forecasting) ----
Asset Allocation--- Portfolio Tracking & Rebalancing (SWOT)-- Revisit Financial Plan every 6 months
or annually (Based on client requirement, changes in goals etc)

ASSET CLASSES

1. FINANCIAL ASSETS: Equities | DVR-Differential Voting Rights(Eg.Tata Motors DVR) | Preference

Shares- Cumulative , Non Cumulative, Perpetual, Convertible etc | Bonds- Fixed income
instruments, convertible bonds, Non Convertible Debentures, FCCB-Foreign currency convertible
bonds, Masala Bonds | NSC | PPF |Bank Fixed Deposits | Corporate Deposits-Bajaj Finance,
HDFC Ltd, Mahindra Finance | Currencies | Insurance plans | CDO-Collateralized Debt
Obligations | Mortgage Backed securities | Asset Backed securities |VIX- Volatility Index | F&O-
Derivatives | SGB-Sovereign Gold Bond (listed, After 8 years on maturity- zero capital gains tax
on appreciation, also 2.5% interest paid out p.a on a semi annual basis is on the original
investment amount) | PMS products
Small savings schemes:
2. TANGIBLE ASSETS: Bullion- Gold (Price making: Comex NY) | Bullion-Silver- London Metal
Exchange | Precious Metals- Platinum & Palladium | Rare Earths | Base Metals- Copper, Zinc,
Aluminium, Steel, Nickel- Price making LME | Energy: Brent Crude- London Intercontinental
Exchange , Crude Oil- WTI West Texas Intermediate- NYMEX |Natural Gas | Coal | Lead |
Agricultural commodities- Rubber: TOCOM , Palm Oil- Bursa Malaysia, Guar & Gum Seed
3. ALTERNATE ASSET:
Structured Products: Equity Linked Notes/ Equity Linked Debentures
 Leverage- Derivative products- Smaller margin & larger investment exposure
PR-Participation ratio: Nifty up 30% PR=150% , Within the barrier, Structured product return-
45%,
Nifty up 50%, Barrier broken, Knock out, PR 100%, SP return - Return 50%,
Nifty up 20%, Product returns-30% (PR 150% since within barrier)
Nifty flat- product returns 7% | Nifty falls by 20%, PR +70%, SP returns = +21%
Nifty fall by 40%, Barrier crossed, knock out, Flat return of 7%

4. INTANGIBLE ASSETS: Carbon Credits- CER -1 metric tonne of Co2, UNFCC, London ICE |
Weather | Rainfall | Snow fall (CME-Chicago Mercantile Exchange)

Masala Bonds explanation:

Wealth Management is not the same as Asset management

FINANCIAL PLANNING

4 main goals:

1. Identify the Needs

2. Differentiate between Real Needs and Perceived needs
3. Prioritize the Needs
4. Quantify the needs

HUMAN LIFECYCLE
 Asset Allocation RULE OF 100: 100 – Age is the Equity Exposure, remaining in debt and safe products

Age 35: Equity Exposure 100-35= 65%, 35% is Debt (Debt Funds, Bonds, Deposits, PPF, EPF, NSC) –
Moderately aggressive (70-75% Equity, 30-35% Debt)

Age is 70 : 100-70= 30% Equity, 70% Debt (Debt funds, Deposits, Bonds etc)- Moderately Conservative

Wealth Management Pyramid

 Methods of investing

LumpSum- From the bank account to the fund scheme

SIP- Systematic Investment plan: From the account to fund a specific amount weekly/monthly/quarterly

STP- Systematic Transfer plan: From one fund to another fund a specific amount
weekly/monthly/quarterly within the same fund house (Eq HDFC Liquid fund to HDFC small cap fund)

SWP- Systematic Withdrawal plan: From the MF scheme redeemed and credited to account a specific
amount weekly/monthly/quarterly

Switch: Lumpsum switch from One scheme to another scheme(Equity to Debt or vice versa, Equity to
Equity say small cap to large cap) within the same fund house