Kinds of Savings and Investment (1/2)

Amount you saved, if smartly and thoughtfully INVESTED, reap good

returns:
• Savings and Investment should go hand in hand
• Every penny saved need to be invested
Sources of savings
1. From regular Salary or Business income
2. Interest earned from deposits
• Simple Interest and Compound Interest
3. Windfall gains
• Income received from inheritance
• Sale of old/additional immovable properties
• Refund of Income taxes paid/deducted
• Any other
4. Efficient money/finance management
Kinds of Savings and Investment (2/2)

1. Low-interest & High-interest 6. Saving for reducing taxes (an

investments incentive)
2. Low-risk, Medium-risk & High- 7. Impact of Compound Interest
risk investments 8. Invest early keeping in mind
3. Short term & Long term the impact of compound
investments interest over a period of time
4. Monthly investment & Annual
investments
5. Periodic investment & One-
time investment
Types of investments
Fixed
Deposits

Debt
Equity
Mutual
Shares
Funds Types of
Investments

Equity Other –
NSC,
Mutual
Sukanya,
Funds PPF, etc
Certain Thumb rules of Investment (1/2)
1. Savings is MUST, bust Investing should be Thoughtful
2. Invest Early vs Investing Late
• Start investing early
• Start with small step – whatever may be the amount, it must be
v small, but investing will make it big
3. Diversify and Proportion
• Gradually increase the proportion of investments to earnings
• As you progress/promote, increase the proportion of investment
• Diversify your portfolio between
• Fixed return and fluctuating
• Mutual funds vs Equity
• Gold vs immovable property
Certain Thumb rules of Investment (2/2)
4. Understand your risk appetite : Depends on
• Which age bracket you are
• What are your circumstances
• What is your disposable income
5. Avoid being indebted
• Avoid taking Personal loans
• Minimal use of credit cards
• If Home loan is obtained, pre-close through making early
repayments
6. No one gets OR SHOULD GET rich overnight
• Live in reality
• Avoid short cuts to get risk
• Avoid Marketing traps Super Attractive returns
 Example of investing - benefits of COMPOUND INTEREST
Person 1 Person 2 Person 3

Interest Interest Interest

Amount Accrued Cummulative Amount Accrued Cummulative Amount Accrued Cummulative
Year Invested 8% amount Invested 8% amount Invested 8% amount
1 100,000 8,000 108,000 100,000 8,000 108,000 100,000 8,000 108,000
2 100,000 16,640 224,640 100,000 16,640 224,640 100,000 16,640 224,640
3 100,000 25,971 350,611 100,000 25,971 350,611 100,000 25,971 350,611
4 100,000 36,049 486,660 100,000 36,049 486,660 100,000 36,049 486,660
5 100,000 46,933 633,593 100,000 46,933 633,593 100,000 46,933 633,593
6 - 50,687 684,280 100,000 58,687 792,280
7 - 54,742 739,023 100,000 71,382 963,663
8 - 59,122 798,145 100,000 85,093 1,148,756
9 - 63,852 861,996 100,000 99,900 1,348,656
10 - 68,960 930,956 Stopped making investment after 5 100,000 115,892 1,564,549
11 - 74,476 1,005,432 years and Money is withdrawn 125,164 1,689,713
Stopped
12 - 80,435 1,085,867 135,177 1,824,890
investing
13 - 86,869 1,172,736 145,991 1,970,881
but Not
14 - 93,819 1,266,555 157,670 2,128,551
withdrawn
15 - 101,324 1,367,880 170,284 2,298,835
500,000 867,880 1,367,880 500,000 133,593 633,593 1,000,000 1,298,835 2,298,835
Growth in % 174% 27% 130%
Growth in times 2.74 1.27 2.30
Types of Market investments

Debt funds Equity funds Equity shares

 Volatile income
Fixed income
Mutual funds invest Investment through
Low or No risk
in Equity stock market
Mutual funds invest
In short term could Moderate to High
in Government or
be risky, in long risk investment
Private Securities
term is moderate Short term is
which carry
risk definitely more risky
ASSURED RETURNS
NO ASSURED Average return
Average return 7% to
RETURN could be 16% to 24%
9%
 Common modes of Investment and risk/returns around it

AGE RISK DISPOSABLE

APPETITE INCOME
Age
S.NoTypes of Investment Risk Level Average Return Liquidity less than 3030 to 50 50 and above
1 Fixed Deposits No risk 5% to 6.5 % p.a Low Yes Yes Yes
2 Mutual Funds
Debt Mutual funds Low/No risk 7% to 8.5% High 30% Age% 50% to 70%
Equity backed Mutual funds
Moderate to High Risk
12% to 25% High 70% 100-Age% 30% to 50%
High Risk in Short
term
Moderate risk in
3 Shares and Stocks Long term Depends High Depends Depends Avoid
4 Commodities High Risk. Depends High Depends Depends Depends
5 Providend Fund No risk 8.10% Not liquid Yes Yes Avoid
6 Sukanya Samridhi No risk 7.60% Not liquid No Yes N/A
7 Soveriegn Gold Bonds Moderate to High Risk
Value appreciationNot liquid Depends Depends Depends
8 Commodities High Risk. Depends High Depends Avoid Avoid
Types of Common savings under Income tax for Salaried class

80 C Investments
a) LIC premium
b)Tax savings FD’s
Savings,
Investments c) Investment in Provident Fund - 8.1%
and expenses d)NSC – 8% ROI
eligible for
Income tax
e) e) Sukanya Samridhi Yojna
deductions f) Equity Linked Savings Scheme 12% to 14%
g)National Pension Scheme INR 1.5 lacs + 50k
h)Repayment of Home loan, i) Payment of
tuition fees of children, i) Bonds, ULIP’s and
others
Types of Common savings under Income tax for Salaried class

Deductions
a) LTA b) Interest on savings up to 10,000
b) Allowances given by employees
Savings,
Investments c) Donations paid to Political parties,
and expenses charitable institutions and PM/CM fund
eligible for Others
Income tax a) TCS paid at the time of purchase of New
deductions CAR
b) Medical insurance premium paid etc
c) House Rent Allowances