How secure is your future?

Invest and save when you start working to achieve all the goals of your life and to move comfortably into a retired life, pursuing interests you never had the time for

Retirement can be a time for travel, golf, spending time with grandchildren or pursuing a hobby. It could also be a time when you anxiously count every penny you spend and worry about your future. What it is going to be like will depend on how well you have planned while you are still working.

“It is never too early or too late to start planning for retirement, “But, the earlier you start, the better. By saving a small amount today and investing it wisely, you can create a corpus that will take care of you in the years in which you are no longer earning. “Not so long ago, one used to think about retirement planning only for his or her post-retirement life, but, the recent layoffs of employees have made people realize the necessity of planning early for retirement.”

Building a corpus

Planning for your retirement is, at its best, an educated guess. The size of your retirement corpus will depend on several factors, including your health and where you want to live. Generally, the rule of thumb is that you will need 75% of what you spent before retirement to maintain the same lifestyle after retirement. But, to get a fair idea of the amount you will need, you have to answer certain questions

  • When do you want to retire?
  • Are you planning to retire early?
  • What kind of lifespan do you expect?
  • Are you planning an estate for your next generation?

If you are planning to retire early, you will have to save more money every month as your accumulation phase (The phase when you are working) will reduce and the distribution phase (when you retire and start withdrawing money) will increase. Then there is inflation which will eat into your capital if the portfolio is not well diversified into different asset classes like, Equity, debt, gold and real estate etc.

Where to invest

This depends on your age and risk-taking appetite. If you are in your 20s and 30s, equity is your best bet. “In the short run, returns from equity are highly volatile. But in the long run, they are mostly positive and likely to beat inflation,” Investing in mutual funds through systematic investment plans (SIPs), which involve setting aside a portion of your monthly disposable income for a particular investment option is recommended option. SIP helps to spread your risks as you buy regularly over a period of time, which averages out your cost of purchase.

For those in their 20s and 30s, with retirement still more than 30 years away, nearly 70% of the total portfolio should be invested in equity and about 30% in fixed-return instruments, such as public provident fund (PPF), employer’s provident fund (EPF) and national savings certificate (NSC), Bank FD etc There is a need to review and revise the portfolios regularly to see that asset allocation is not deviating from the desired level.

Madhu Sinha CFPCM , CIWM
Author (Financial Planning A Ready Reckoner and Retirement Planning A Guide  for Financial Planners)
Campus Director, Former Director, FPSB India 

How do I become an equity research analyst?

Do you have a passion that calls you for studying and analysing financial information and interpreting data? If you feel like doing so, then, it’s time to make a world-class and tip-top career in equity research. It’s high time to make your career flourishing. But be aware that the job of an equity research analyst is not only demanding but challenging too.

The research mountain you should climb

The job of an equity research analyst involves reviewing stocks, bonds, and other financial instruments and making a transparent and impartial report. The past can’t be future, and similarly, the education attained in schools can’t make you an efficient equity research analyst. Now the question arises, “How do you become an equity research analyst”? For this, undoubtedly, you need a degree or diploma in Business management or finance from a respectable and well-thought of college. Not only this, but you should have or develop a deep interest in the finance industry and economy. Additionally, you can also go for some technical courses like the CFA® program so you can make waves in the finance industry as an equity research analyst.

The power to make the best career

You have the power to create a career in your life that has an impressive sense of self-worth. All you need is a rational and analytic mindset, logical thinking and reasonable and interpretive research skills. In any field, both written, as well as verbal communication skills, are required. So, make it your goal to improve them daily, so you don’t feel nervous and insecure while making reports and interpreting them to the senior management. Upscale your current skills by doing professional courses which lead to the augmentation of your technical knowledge.

Are you a career pursuer in equity research?

If you are a dedicated career pursuer in equity research, then, financial training programs from International College of Financial Planning will help you. This will help you in learning and covering programs related to financial markets, investment banking, financial planning, economic analysis, techniques related to equity valuation, stocks reviewing, report writing and more.  Whether you are a teenager or not, you can decide well what are you going to do the rest of your life when you start working as an equity research analyst. The programs will make you interact with industry leaders, portfolio managers, professional investors, and top-notch industry experts. “On the job experience” will make you ahead of your peers. It can be a year from now, you could be the professional equity research analyst, you have liked for the longest time.

What is the importance of Financial Planning?

Undoubtedly, financial planning involves a lot of hard work and perseverance of first order. It requires a proper estimation of capital necessary to run an enterprise. Not only this but a systematic procurement, investment and administration of funds is essential from time to time.

Why do you need strong financial planning?

At every step of life, you need financial planning. From protecting home to family income to settling debts to children’s education to meet your dream profession and so on, you need financial planning. Systematized financial plan can relieve you from unexpected financial burden and give a promising hope for doing better in a career. Are you ready to bring this hope and peace of mind in your life? If yes, then, guarantee yourself with a secure income-fund to run your business and life that would surely give you pride and independence.

What is the importance of financial planning?

We have tried to bring in together the financial planning pros here. With strong financial planning, you can map out your life’s path easily. Here we go:

  • You can retain your business if you have adequate funds.
  • Financial planning brings stability and balance as it acts as soundness between inflow and outflow of funds.
  • Funds’ suppliers invest comfortably and without trouble which leads to efficient financial planning in return.
  • Proper financial planning leads to employee-benefit funds.
  • There is a secured shareholder-liability fund in the enterprise.
  • Financial planning also leads to immediate cash in situations of emergency and crunch.
  • With organized financial planning, people can invest in long-term investment funds which yield lucrative future returns.
  • With a strong financial plan, there is no need for any business to reduce costs or lay off workforce or reduce someone to the ranks.

What does Financial Planning do?

Financial planning helps in relieving a lot of fears related to running of the business and for securing personal life. With a proper financial plan, an enterprise can determine in advance about the capital requirements. It also helps in calculating the cost of short-term and long-term assets. The capital structure of any enterprise is also identified with the help of financial planning. It helps in knitting together all the monetary policies like cash control, debts, credits and so on.

Start your financial planning today!

We have described all the actionable tips that lead to mapping out of your business and life in the most efficient manner. This is a quick read post to save and reference later, so you have strong opinions about the importance of financial planning.

A secure way to protect your future financially

How secure is your future? Undoubtedly, in today’s world, we all want to be secured. Everyone wants to be secure financially. To achieve this goal we should follow tried and tested practices. Here comes a quick question- What do Mukesh Ambani and you have in common? Can you guess? “The zeal to earn more everyday,” is the answer. But why many of us fail to protect our future? There can be multiple reasons like self-deprecating, lack of financial knowledge, downplaying our abilities, feeling out of place, lack of mental satisfaction, no specified goals in life and so on. We suffer considerably but the major blow comes financially.

Here are some of the best tips you would love to know about protecting your future:

Start making compelling goals: Manage your money wisely, and you will see that you have started moving towards a secure future. Your goals should be specific. For instance, if you want to receive a retirement pension, you would have to plan from today like how much you need to spare every month to get the benefit of pension after 30 years. Similarly, decisions related to buying a property, car, going for some international trips, paying premiums for your insurance require a systematic managing of finance. Map out your goals in advance and start prioritizing them.

Identify between short-term and long-term goals: Debt comes with years of grief and regret. And therefore, it should be considered as a long-term goal. Similarly, purchasing a property or a luxury car and receiving a retirement pension should fall into long-term goal category. Short -term goals should include how to manage your daily budgets, keeping a check on the credit card use and making small fixed deposits every two months.

Spend less. Earn More: Unexpected emergencies come with no news. Does it mean that we have to take loans for meeting them? No. The answer is we should start saving from our fixed income, so, in times of emergencies, we can cope with them with confidence and without fear. Investing in small FDs, RDs, bonds, equities, and commodities can be fruitful, and we can multiply our limited funds.

What’s in the credit score? Let’s recall the famous quote by Tyler Gregory which says, “If you don’t take good care of your credit, then your credit won’t take good care of you.” Make sure that you have a good payment history record because these records are always checked and considered by the Financial Institutions whenever you require a loan. With a good payment history, you might get a new loan at a customized interest rate which is the clasp of peace for many.

Make sure you work for self-improvement and start investing small every month. Year by year, you will see the large pool of money in your account. Just think about the palm trees on the horizon of future which always strives upwards.

The Little Book That Beats The Market

Abstract: 

In this book, the author wants to teach us how to pick our assets or securities for investment in the long term. This book mainly described Magic formula which gives Benjamin Graham’s idea of picking stocks at cheap rate with a margin of safety. It also explains a concept that when we are buying the stock we should consider it as we are buying a business and we should be aware of their financial and operational stability. In the end, this book summarizes us that exactly how we can apply the magic formula.

Briefing of All Chapters: 

The author has tried to take the path of Lehman’s technique and approached to deep technical methods for buying the stocks and understanding the business of any industry or country.

In the 1st and 2nd chapter, the author wants us to know how to analyze different types of risk taken to generate return. Some avenues to be mentioned are G-secs, corporate bonds and other different businesses to generate returns by investing in them rather than keeping the money in piggybank.

In the 3rd, 4th & 5th chapter, author explains us that buying a stock means we are buying a portion of business and we should first be aware of its worthiness and future earnings so that we can generate return on our investment as per the risk. Then he talks about wide price movement due to crazy guy called Mr. Market. He tells us that we should buy the business on discount with margin of safety which can lead us to safe and profitable investments and that we should buy good business at bargained prices with high return on capital. Then in further chapters author has explained the MAGIC FORMULA by BEN GRAHAM with an example which shows that the return from 1988 to 2004 was 30.8% annually whereas of S&P 500 was 12.4%. This formula has worked for both large and small companies and has been incredibly accurate of how a group of stocks will perform in the future. But, we should know that according to the formula we should pick the stocks with higher return on capital and has the ability to earn above average profits. In simple terms Mr. Market may price stocks based on emotions in short term but in long term, it’s all based on value.

Magic Formula:

It ranks the companies based on two factors, return on capital which is given by EBIT/(Net working capital + Net fixed assets) and earnings yield which is given by EBIT/(market value of equity + net interest bearing debt). We then rank all the stocks according to their highest to lowest return on capital and then with highest to lowest earnings yield, then we have to choose our group of stocks according to their rank and group them but we should also consider its future earnings sustainability.

Conclusion:

By choosing any asset or securities for investment, we should understand the business and then apply the magic formula but we should also consider its earnings sustainability. We should trust the magic formula for long term and be sure with our decisions on buying a good business.

Ayush Mazumdar

MBA-FA(2018-20)

The Dhandho Investor

The book “The Dhandho Investor” is written by Monish Pabrai. He is managing a hedge fund called Pabrai investment fund. Since its inception, Pabrai fund has delivered an annualized return of over 28%. He has been favorably profiled by Forbes and Barron’s and has made guest appearances on CNBC, Bloomberg TV and radio.

Dhandho is a Gujarati word. “Dhan” is from Sanskrit word “Dhana” meaning wealth and “Dhandho” literally means “endeavors that create wealth”

At the beginning of the book, you will find successful business stories of Papa Patel, Mani Lal Chaudhari, Richard Branson, and Lakshmi Mittal. The author has also quoted a few incidents from his life to make a connection with the reader.

After the initial chapters of successful stories, you will find the book into Dhandho Framework, which is nothing but the principles that have made the journeys of above mentioned gentlemen successful.

The principles mentioned are

1) Focus on buying an existing business: It is always better to buy a fraction of an existing business.  Because it is less risky than starting a new business and fraction of a business can be brought through a stock market which clearly gives many advantages.

2) Buy a simple business in industries with an ultra-slow rate of change: Invest in the business which is simple to understand and whose cash flows are easy to measure.

3) Buy distressed businesses in distressed industries: Some assets are sold at discount because of their wretched near term prospects which can otherwise have a brilliant future, if worked upon in the right direction. Here, the author is saying that the purchase price should also be attractive.

4) Buy business with a durable competitive advantage-Moat: Invest in the business which has product differentiation and cost advantage that is durable. The author also says that businesses with durable moat even don’t last forever. All businesses have a time frame within which it prospers.

5) Bet heavily when the odds are overwhelmingly in your favor: Investing is all about looking for misprices business opportunity and betting heavily when the odds are in our favor.

6) Focus on Arbitrage: They allow us to earn high return with no risk. Invest in the business that is successful in bridging the product and service gap in the existing world.

7) Buy business at big discounts to their underlying intrinsic value: Invest only when the market value of the asset is significantly below the intrinsic value. It is also known as margin of safety.

8) Look for low risk, High uncertainty business: Low risk and high uncertainty is a wonderful combination because high uncertainty in business will lead to low price and low risk means minimum downside risk. Downside risk can be reduced by buying the asset or share at low depressed price.

 9) It’s better to be a copycat than an innovator: Here, the author is saying Innovation is a crap-shoot but good cloners are a great business to invest. It is not only cloning others’ idea but also lifting and scaling it up. Good cloners will essentially improve upon the ideas of innovators.

Moving forward, you will find the author to be giving a lot of examples of the businesses which have created an extra ordinary wealth through their endeavors. The author always emphasizes on his rule: Heads, I win; tails, I don’t lose much! This essentially means taking bets which have very low risk but high return.

There will also be a mention of finance concepts like DCF analysis, Fortune formula by William Poundstone, margin of safety, Greenbatt’s magic formula etc.

You will also able to find the quotes of Warren Buffet and Charlie Munger throughout the chapters. Numerous case studies of McDonald’s, Microsoft, Frontline, GEICO, Stelwart Enterprises, American express, Universal stainless and alloy products etc. can be found throughout the book.

The beginning few chapters focus on various criterion that help us choose the investments which could be great to invest in. The Concluding chapters of the book Abhimanyu’s Dilemma- The art of selling, to index or not to index-This is the question and Arjuna’s focus: Investing lessons from a great warrior are very enriching because it says how to exit our investment.

Abhimanyu’s Dilemma-The art of Selling: Making an investment is only half of the battle. We also need a vigorous strategy to sell. A Dhandho investor should try to sell when the market price exceeds the intrinsic value.

To Index or Not to index- That is the question: Only handful of money managers are successful in besting the index. He says that most of the investors should consider buying an index to be a good option. One can also incorporate some of the index like traits in the portfolio and also manage some of the assets actively.

Arjuna’s Focus, Investing lesson from a great warrior: Dhandho investor only invests in simple and well understood business. This is to eliminate 99% of possible investment alternatives.

He concludes the book by saying that “Life focused purely on maximization of wealth or creature of comfort for self and family is a sub-optimal approach to living”. He also says that “We cannot change the world, but we can improve this world for one person, ten people, a hundred people, and maybe even a few thousand people”. The stories inside the books are real and teach us important investing lesson that is really inspirational.

K Poonkundran

MBA-FA(2017-19)

WORLD FINANCIAL PLANNING DAY-2018

World Financial Planning Day (Oct 3, 2018) is a way to move forward towards the vision of everyone having access to advice from competent and ethical financial planners and resources to plan well to live well. It’s a great time to remind consumers across the world about the value of partnering with a CFPCM professional.

On the occasion of #WFPD, ICoFP hosted a seminar at its Delhi Campus where senior leaders from the Financial Services Industry were invited to share insights about Financial Planning and how it is has become need of the hour for each individual.

‘Financial Planning is not a profession, it’s a religion. We must embrace it’, said Mr. Anil Chopra, Group Director-Corporate Affairs, Bajaj Capital Limited.

Other dignitaries included Mr. Sanjiv Bajaj, CFPCM, Vice Chairman, Bajaj Capital Limited; Mr. Sameer Mittal, Sr. Director, Ameriprise; Mr. Anil Chopra, CFPCM, Group Director-Corporate Affairs, Bajaj Capital Limited; Ms. Shilpi Johri, CFPCM, Financial Planner & Author; Mr. Atin Khanna, CFPCM , Associate Vice President – Area Manager – Priority Banking, Kotak Mahindra Bank Ltd.; Mr. Devinder Singh, CFPCM , Senior Vice President and Chief Manager, UTI Asset Management Company Limited

The event started with offering prayers to Maa Saraswati with lamp lighting ceremony and welcome address by our Chief mentor Ms. Jai Vani Bajaj. The event witnessed participation from industry, colleges as well as budding student aspirants.

Mr. Sanjiv Bajaj addressed the audience with how to have a positive approach being a Financial Planner at all times. He also talked about Behavioural Finance wherein he stated the fact that about 87% of people still do not follow behavioural finance but how important it is to be followed in the market. ‘A financial planner is someone who prevents their clients from taking stupid decisions’, he said.

Mr. Sameer Mittal, who was the keynote speaker for the day, explained the golden principles to follow in order to become and remain a successful Financial Planner.

Mr. Anil Chopra delivered an inspirational talk on how Bajaj Capital brought the concept of Financial Planning in India. He also explained the 5 important Es for Financial Planners i.e. Education, Examination, Experience, Ethics, Engagement. At the end, he touched upon a vital topic Asset Allocation, explaining in gist about all asset classes.

Ms. Shilpi Jhori explained the Role & Use of Social Media in Financial Planning and Mr. Atin Khanna talked about the Ethical issues in Financial Planning.

Keeping up the curiosity, Mr. Devendra Singh explained the Future of Financial Planning Profession in India and how huge an investment corpus the country potentially has. He well managed to explain the students the future aspects with a few facts.

The event was gracefully ended with the felicitation ceremony wherein we honoured ICoFP students who have successfully cleared their CFPCM Certification over the past one year.

At ICoFP, we are committed to FPSB’s vision to establish financial planning as a global profession and the CFP marks as a global symbol of excellence in financial planning.

Manya Kakkar

Academic Associate

ICoFP, New Delhi

China the Economic game player?

There’s a new highway in Pakistan, new rail terminal in Kazakhstan, sea port in Sri Lanka and a bridge in Laos. What is common between all these is that these are all part of China’s project called the Belt Road Initiative.

The BRI is a $4-8 trillion infrastructure project spreading over 3 continents and almost 60 countries. It is planned to create new routes in and out of China for trade.

Most countries China has invested in have high risk of not being able to pay back but China still continues to give out loan to them. So WHY does China give loan to economically unstable countries?

The answer to this is simple; China wants to become the Economic Superpower of the world beating USA, the current holder of this position and BRI is a perfect plan to make it possible. Most countries are vulnerable to pay back the debts. Take for example Sri Lanka, China gave $1.5 billion to build a deep sea port and Sri Lanka couldn’t pay off so, in return, China took the port on a 99 years lease taking full control of the port. China also has a 40 year lease of strategic port in Pakistan, Chinese naval base in Djibouti and is now going for a similar deal in Myanmar.

Seeing the pattern, why do these countries get into a contract like this? Its because China presents it as a win-win situation for both sides and offer loans without many conditions unlike other countries or financial institutions. Belarus, Hungary, Mongolia, Kenya, Cambodia, Indonesia, Greece, Malaysia, Kyrgyzstan, Poland and many more have all signed a deal with China.

This mostly benefits China in occupying the world a modern day colonization. Like, there is a railroad network connecting China and London, gas pipelines connecting China through Caspian Sea and a speed train network in South East Asia.

China might not be getting back the debts but it sure is achieving some economic goals. Figures show that 7 out of 10 largest contract companies are Chinese. Chinese people are employees as labour force.

China has taken some serious steps and is sure not far away from dominating the world economy.

Udit Adlakha
MBA-FA(2018-20)

CALLING OUT FINANCIAL PLANNING COMMUNITY

While man stands at a transformational evolutionary stage in terms of technology, we in India still remain in the medieval age when it comes to finances. A comparison between the numbers of financial planners in India as against USA gives a very dismal picture.

  • 2000 registered CFP’s in India Vs. 80,000 in USA.
  • India currently contributes to only 1% of the world’s CFP population.

Research, however indicates that we need 1.75 Lakh financial planners by the year 2022. This shows the huge amount of growth opportunities available.

Earning is the major source of everyone’s happiness and peace. All that we do in our lives is directed towards building wealth not only to sustain family and ourselves, but also live a dignified lifestyle. If we are so dependent on money, then why aren’t we planning it better?  Doesn’t it become the responsibility of the 2000 strong community of CFP’s in India to spread this revolution? A revolution, that could change the lives of many. It is the financial planners who have the gift of knowledge and the tools to make an ordinary person into a millionaire. There are many who don’t know about this profession, yet many who do. Is it not the duty as a community to create awareness and stand for the ideology that we believe in?

Is it not right, that Financial Planners participate in the economic up liftmen of our Country through intelligent investing?

According to the ancient Indian scriptures, human being involved in the achievement of a higher purpose shall attain ultimate joy. If we, undertake a promise as a community of financial planners, educators and subject matter experts, that we shall become involved in-

  • Creating awareness of the concept of financial planning
  • Inculcate more financial planners
  • Ethically impart 360 degree financial planning to our clients

We will see that we not only bring wealth to many but attract wealth for ourselves.

We need to realize our potential as a community and use it for the greater good. lets look at the top three countries with the highest numbers of CFP’s – USA, China and Japan and emulate their best practices.

Lets enrich our country with financially smart individuals who are economically prepared for the future.

In order to take this step forward, International College of Financial Planning successfully organised a seminar on the World Financial Planning Day, 3rd October 2018. It was a great day not only for ICOFP but also for the financial planning fraternity. Eminent personalities from the finance Industry like Mr. Sanjiv Bajaj, CFPCM, Vice Chairman, Bajaj Capital Limited; Mr. Sameer Mittal, Sr. Director, Ameriprise; Mr. Anil Chopra, CFPCM, Group Director-Corporate Affairs, Bajaj Capital Limited; Ms. Shilpi Johri, CFPCM, Financial Planner & Author; Mr. Atin Khanna, CFPCM , Associate Vice President – Area Manager – Priority Banking, Kotak Mahindra Bank Ltd.; Mr. Devinder Singh, CFPCM , Senior Vice President and Chief Manager, UTI Asset Management Company Limited were invited to impart their experiences to the guests who comprised of students, CFP’s and aspiring financial planners.

Vani Bajaj

Chief Mentor, ICoFP

ARTIFICIAL INTELLIGENCE AND FINANCIAL STATEMENTS

We were living in the world of tallying our account registers with the bank registers. We are still in the same world but the style of living has changed like a revolution. The style of living became very much at ease and comfortable when we went digital. The digital transformation come at the right time when we were on a go in making money but wasted our time like a boss on maintaining our registers.

The storage and access to financial information combined with the maturity of technology capabilities has given the perfect acceleration to digital transformation. The professionals may now focus at a higher level and lucrative analysis and counselling of their clients. Let’s take a brief overview on the opportunities available by this digital transformation.

  1. MACHINES COMPLIMENT HUMAN BRAIN POWER

Artificial intelligence is becoming a part of regular learning. Many colleges and universities are also providing the E-Learning courses, which again is a part of machine intelligence, besides the regular course structure. These learning are impacting the finance responsibilities by releasing the rigorous pressure on professionals to make their work efficient and presentable. It makes them understand the volatility level more accurately.

  1. ACCOUNTING TASKS MACHINE CAN DO

AI not only makes the human work efficient but also improves and reduces the operational costs. For example, the account receivables and account payables process has become a much easier task with AI as it manages the invoice numbers with the touch of a button.

  1. MATCHING THE CLIENTS’ NEEDS

The whole fund can be managed effectively by keeping the clients’ needs and desire with future references with the help of Artificial Intelligence. There are various platforms which allows the client to know how much does he/she need to save by only providing the software with their purpose and duration of savings.

Artificial Intelligence is therefore not only helping humans to become at ease but is also taking over the world.

Akansh Kumar Arora

MBA-FA(2018-20)