Introduction & concept of Wealth management

'Wealth' is not a term associated with only the super-rich. This personalised service is also available for those with assets and little income, those with income and few assets, or those with both assets and income. Wealth management planning is about having the insight, knowledge, experience and skill to fully understand your current financial situation and then working out the best financial strategy to improve that situation.

Investments and Investment

anagers

Lets have a discussion on these:

!asic "ersonal #inance
!uy $ow %ell &igh' (iversify) &ealth care and life insurance !uy a home or invest) *efinance) I*+s and saving for college ,needs work-

Investments and investment managers

. things to consider "icking an investment manager

Investing methods ,needs workWork with smart people/

Health Insurance
When I was young, I didn0t care about health insurance' nothing could stop me, I was indestructible. 1et a good 2ob that has health benefits. When changing 2obs, make certain that the time period between 2obs has health coverage. If you are laid-off, make certain you understand the health coverage.

Life Insurance
In case you die, life insurance allows your family to live without having to sell everything. $ife insurance avoids the double whammy of family dealing with your death and loss of income hence loss of home. &ow much life insurance do you need) (epends on income. If spouse earns significant more than the other, then might need differing amounts of insurance. $ife insurance is cheap when you0re young but when you0re old, you should have a savings thus don0t need life insurance.

Picking an Investment Manager

&ere0s . things to consider when picking an investment manager "ay attention to taxes "ay attention to fees 3uantify their past performance (o they give pro and con advice) Timing the market and cashing out at the highs (o investment advisors buy stocks) !ig vs. %mall funds

Picking an Investment Manager

"eople work well in their comfort 4one and some will tell
you anything in order to get your money. %o, how to determine an investment manager0s capabilities) Two types of investment managers5
6onservative5 !alances your entire portfolio of 7T#s, mutual funds, mortgage, I*+s, kids college, etc. and wants to get you ready for retirement +ggressive5 wants 2ust some pile of your cash to invest in e8uities, hedge funds, etc.

%tick with the comfort 4one

9our expectations should match the investment manager0s capabilities ,e.g., conservatives never buy stocks (o not expect a conservative investment manager to perform aggressively ,vice:versa too-.

Portfolio management & Wealth management

"ortfolio anagement is management of your investment portfolio. 1enerally this consists of securities ; bonds < maybe some options, futures, hedge-funds, etfs, mutual funds as well. Wealth anagement takes a more holistic approach with "ortfolio anagement being only a segment or piece of the pie.

Portfolio management example

"ortfolio anagement looks only at your investment ob2ectives and factors such as your appetite for risk, age to retirement, income, net-worth, to build a portfolio of investment vehicles.

Wealth management example

Wealth anagement generally looks at your entire financial picture including your investments, minimi4ing your taxes, risk analysis and insurance ,life, disability, etc-, retirement, estate planning, budgeting ; saving, life goals, and more. Wealth managers usually work with other professionals and specialists to provide the appropriate advice.

6 tep Wealth Management Planning Process

=>. (ata 1athering 7stablishing details about your assets and liabilities, income and expenditure. ?nderstanding arrangements already in place and attitude to investment risk. =@. 1oal %etting 7stablishing your goals and aspirations for the short and long term. ?nderstanding your commitment to meeting your ob2ectives. =A. Identification of Beeds We will analy4e your current position and assess any gaps in your situation. Bext we will identify what needs to be done to meet your ob2ectives. =C. *eport "reparation Dur analysis and recommendations are presented in a written report. This forms the basis of a formal review at which we agree on an action plan. =E. Implementation 7ffecting the plan will invariably involve new and changed arrangements. We liaise with providers and other professionals to implement the agreed plan. =F. *eview and *evision Wealth management is a long term plan that re8uires regular annual review. 6hanges in your circumstances are considered as well as fund performance.

What is personal !ealth management" "ersonal wealth management is a conscious decision in life to manage our wealth which includes financial planning and money management. It is nothing but creation and growth of wealth and sustaining this wealth.

What is financial planning"

It is like any other planning for e.g. career planning, holiday planning, etc. It is nothing but planning for the future, at present, based on knowledge and experience of the past. It is to fulfill our dreams and ambitions in life. It should include proper asset allocation, our risk profile, future re8uirements, tax consideration and influence of inflation.

What is mone# management" oney management is to find out what our sources of income are, how this is spent and what is the surplus) It is also to remain positive and have financial freedom with no debts or manageable debts.

Wh# is !ealth management re$uired"

Beed to earn, save, invest, grow, manage and preserve. To secure ourselves and our family against all possible and unknown financial risks. To maintain our existing life style and standard of living at all times which can include having a vehicle, consumer durables, holiday planning, etc. To give our children the best education and to secure their career. To get our children happily married.

Wh# is !ealth management re$uired"

To buy:own our dream house which should be comfortable. To build a well planned corpus fund to tale care of us including our spouse after our retirement. To look back at life with pride and satisfaction having accomplished our dreams, goals and aspirations. To remember always that we are living in a competitive world with complex situations.

What is the right time to start %P & WM " +s early as possible in life and soon after starting to earn income. + closer look and review is re8uired after marriage. To start early is to take advantage of the power of compounding. %mall drops make an ocean.

What is &sset allocation"

+sset allocation has a great impact on return on investment. The doctrine is to not put all eggs in one basket. To invest in such a way so as to reduce risk through less exposure to risky and volatile investments such as stocks. !alancing investments with proper diversification from lower returns and lower risk assets to higher returns and higher risk assets. %preading the risks in all asset classes. To achieve the desired and expected rate of return on Investments over long term.

What are &sset classes"

It comprises of all assets which you own on a long term basis and includes cash on hand. *eal estate < "lot of land : a home. ovable properties < Gehicles, consumer durables at home

(ebt funds < 1overnment bonds, ""#, !ank #(s, corporate #(s, I"s in mutual funds, etc. +ny investment which gives you constant income: return. utual funds < e8uity:balanced %tocks and shares 1old, silver, precious stones

What is a 'isk Profile"

!asically it depends on your natural characteristics. We can divide them in to5 6onservative:moderate:aggressive individual %hort:medium:long term investor (ynamic:strategic:speculative:balanced approach Investors should select appropriate investments which suit their profile.

What is risk management"

+bility to spot risks and knowing how to handle them in time. aking strategic investment decisions. "roper diversification between different asset classes. +voiding scams, greed for money and short cuts to create wealth. &aving the biggest asset of contentment by understanding our capacity and capabilities.

hould I (u# a house as m# top priorit#" If so) !hat precaution should I take"

9es, at the start of your wealth management, buying a home should be the top priority and first in the agenda. !ut it also depends upon the prevailing market price in your city, area and the state, marital status, spouse income details, etc. !efore buying or constructing a home of your own, 2ust be cautious on various legal and physical matters such as land title and conveyance, the track record of the developer or builder, etc.

hould I (u# a house as m# top priorit#" If so) !hat precaution should I take"

If you are constructing then consider the reputation of the construction agency and the architect, approval of the pro2ect by the government and other agencies, location, !ank attached to the builder, "ayment terms, monthly maintenance charges expected, etc. To summari4e, make an exhaustive check list and do not hesitate to do due diligence of every important matter pertaining to buying a home. 9ou should buy peace of mind too while buying a home.

*an I get a (ank loan to (u# a propert#"

+ny income earning person can get a bank loan to buy property. &owever, the 8uantum depends upon the repayment capacity. While considering the repayment capacity, the bank or the financial institution takes into account age, 8ualifications, present income, spouse0s income, credit rating, etc. The maximum loan amount disbursed could be anywhere between H= to HEI of the total cost of the property.

*an I have a credit card" If #es) !hat care should I take"

"resently, credit cards have replaced cash and che8ues to a large extent. "eople find it easy to use and handle. !ut few important points to be take care of are5 1et a credit card to suit your financial credibility. (on0t opt for an unlimited credit limit even if this is offered. (on0t have multiple credit cards, certainly not more than two with reasonable credit limits. +void paying unnecessary fees and interest.

*an I get home loan for other purposes other than (u#ing a home"

9es, you can get loan for the construction, Improvement or renovation of your existing house, to purchase a land, etc.

What are a fixed interest rate and a floating interest rate"

+ fixed interest rate is the one where the interest rate remains fixed over the tenure of the loan. + floating interest rate is one where the interest rate is linked to the market and the rate will fluctuate periodically as per the guidelines issued by *!I as an economic policy decision. "resently the bank offers a combo of both, where your options and choices get limited.

What do #ou mean (# +MI"

+n 7 I means e8uated monthly installments. 9ou pay a fixed sum every month against your loan throughout the term of the loan. The 7 I has two components namely the interest and the principal and initially the interest component is more and later the principal component is higher. The 7 I is an arithmetical calculation based on the loan amount, the interest rate and the term of the loan.

,o I get tax (enefits on the home loan"

9es, the 1DI encourages home loans since it contributes towards the economic growth of the country in many ways. The benefits are under income tax and they are in the form of deductions from your income. The proposed (T6,(irect Tax 6odegives higher tax benefits on the interest component of your loan and 7 I.

,o I re$uire a house o!ners insurance polic#"

9es, even though there is no statutory re8uirement. The insurance policy protects your home against unforeseen damages like fire or any other causes and possible legal liability too. &owever, it becomes compulsory if you borrow money to purchase a house from bank or financial institution, since they insist for the ade8uate insurance policy until the loan is repaid in full.

If I am living in a flat or an apartment in a cooperative societ# and do not o!n the (uilding as such) do I still re$uire a polic#"

Why not) 7ven if you do not own the building and only own the flat or an apartment, still the insurance policy can protect your house against perils of nature and possible legal liability.

What is 'ealt# " *ealty is real estate. It refers to land and buildings, houses and other improvements owned by you.

What are mova(le properties" + movable property includes all household items and consumer durables like furniture and fixtures, electronic items, computers and their peripherals, etc.

Wh# are mova(le properties also considered an asset class"

&ousehold items and consumer durables generally last more than a year and re8uire a considerable investment. It can cost between >EI and @EI of the total property cost depending on your taste and lifestyle. %o, such investments re8uire a budget as part of your total financial planning.

What should I follo! !hen (u#ing household items and consumer dura(les"
+pply the principle of less luggage, more comfort. (on0t dump < your house is not a warehouse. !uy in the order of necessity. $earn to buy within the budget and be prudent and smart. (on0t get trapped by schemes, =I interest, goodies given along with the main product, unless they are genuinely consumer friendly. !uy, if possible, eco friendly and light weight items. 1o green and support the world. The goods should be comfortable and easy to move.

*an I get a consumer dura(les loan from the (ank"

9es. !ut there are certain terms ; conditions and criteria which you have to fulfill like your gross monthly income. Bormally, the banks finance H=I to HEI of the value of the product.

,o !e re$uire householders insurance polic#"

9es. +n insurance policy is meant to cover any possible risks and unforeseen contingencies in the future. If you have an insurance policy, then it gives protection, comfort and peace of mind. We should take a comprehensive householder0s insurance policy to cover all the items in the house with no exception and exclusions.

What are the merits and demerits of investing in government (onds) PP% account and post office account"

erits 5 The single big-advantage is the safety and security of the principal amount invested since these are government schemes. 9ou get the fixed rate of return for a certain period of time irrespective of the economic scenario and market conditions. It is extremely suitable for those people who have no risk tolerance. They en2oy income tax benefits such as exemptions or no T(% being deducted. 7asy to invest and invariably the minimum re8uired amount for the investment is very low. %o, anybody can afford to save and start financial planning.

What are the merits and demerits of investing in government (onds) PP% account and post office account"

(emerits5 Invariably, tax is deducted at the source. 9ield is less. &ence, the return on investment does not discount inflation causing

*an I have a credit card" If #es) !hat care should I take"

!e aware of the benefits as well as obligations. It is for your own betterment. "lan to make full payments of outstanding amount on a monthly basis and do not make payment of the minimum balance only. (o not become a victim of credit card scams and frauds. (o not give your personal credit card details to anybody' especially over the telephone and web sites. %ign on the back of your credit card as soon as you receive it.

*an I have a credit card" If #es) !hat care should I take"

Jeep the transactions history and record and verify with the accounts statement. In case you have lost the card or it is stolen, immediately inform the credit card provider or the bank who issued the card. +sk them to cancel it immediately.
6ertainly, a credit card is a useful tool in many ways. It gives you instant purchasing power, flexibility in spending, online transactions can be carried out, etc. !ut it should be used wisely with care and responsibility. Then you en2oy all the benefits without falling into a debt trap.

What is a de(it card then"

+ debit card is issued by the bank. It is nothing but carrying a bank passbook with you. +s soon as you transact with the debit card, the amount is deducted from your account instantly. 9ou can not use the debit card if you have no balance in the bank account. The main advantage is that you do not end up borrowing the money and fall into a debt trap.

,o I need life insurance"

We have financial obligations and commitments on a regular basis due to our family. In case a sudden and premature death occurs our dependents should continue to live with the same lifestyle without any financial hardships. %o, a life insurance becomes an insulation and protection against such unforeseen circumstances. It is not an insurance against death but an insurance against livelihood.

What are the points to (e remem(ered !hen opting for a life insurance "

9our age %um assured based on present earnings and future earning capacity. Type of policy re8uired. %pouse details < including their income if he:she is also an earning member Term of the policy with any clauses "remium and fre8uency of payments and capacity to pay them regularly.

What are the (enefits of life insurance other than financial securit#"

It can be used as a collateral security for loans. Tax benefits If you outlive the policy term, it builds a reasonable corpus fund "eace of mind

When should I get life insurance"

9ou should get life insurance as soon as you start earning. It does not matter whether you are single or married. If you start early then age is on your side, premium will be low and tenure of the policy can be long.

,o I need life insurance for m# children also"

Bo, it is myth that life insurance for children will be beneficial for their education or marriage. There are many other investment products for this purpose.

,o I need life insurance for m# children also"

Bo, it is myth that life insurance for children will be beneficial for their education or marriage. There are many other investment products for this purpose.

Is it useful for post retirement"

9es, to some extent if you outlive the policy term. The corpus fund so built will be useful for your post retirement needs. !ut do not depend on life insurance completely since it is not a >==I pension plan.

,o !e re$uire a general insurance"

9es, any insurance is a protection against unforeseen circumstances and contingencies for e.g. sudden illness, accidents, fire, theft, natural calamities, etc. It is not an investment product but returns are reali4ed when unforeseen circumstances occur.

What are the ma-or insurance products availa(le under general insurance"

&ealth Insurance < To protect you against unforeseen ailments or critical or terminal illnesses. "resently, the cost of hospitali4ation and other related costs have become exorbitant. &ence, have a comprehensive health insurance policy for you and your family. otor : auto insurance < +ccidents no more happens accidently but have become order of the day due to poor infrastructure, lack of traffic sense and bad driving skills. otor insurance has become mandatory and obligatory. Take car or two wheeler insurance as per your needs.

What are the ma-or insurance products availa(le under general insurance"

&ome : house holders insurance < 9ou have to protect your dream home and its belongings against natural calamities and man0s dishonesty such as theft, burglary, etc. %o, take a home insurance policy which covers building: structures and the contents in your home. Travel insurance < Travel is no more a luxury. 9ou end up travelling fre8uently on business or pleasure. + comprehensive travel insurance policy will cover unforeseen medical and non medical expenses.

What are the ma-or insurance products availa(le under general insurance"

"ersonal accident insurance < +n accident can occur and create serious health and financial problems for you and your family. %o, a death or disability is covered under personal accident policy. It is a low cost insurance.

What are IP) .P and WP"

IP: / #stematic Investment Plan0 1ou invest a fixed amount from ver# small amount to a large amount at a predetermined date as an installment 2sa# monthl#3$uarterl#4 in mutual fund scheme0 .his is like a post office3 (ank recurring deposit schemes0 .P: / #stematic .ransfer Plan0 It is a transfer of a fixed amount at regular intervals from one scheme of the same mutual fund house0 5ormall# the transfer is from a li$uid fund 2initial capital put in4 to an# other scheme0 .his is one !a# to take care of capital appreciation in a particular scheme0

What are IP) .P and WP"

WP: / #stematic !ithdra!al plan0 1ou can !ithdra! a fixed amount at regular intervals from a scheme or #ou can !ithdra! all or part of the capital appreciation in a scheme0 .he method is extremel# suita(le for senior citi6ens or those !ho !ant to have regular cash inflo! to meet expense0 If emplo#ed cleverl#) can get regular cash flo! like a return and also en-o# capital appreciation0

What is 5P " 5e! pension scheme is a scheme reintroduced (# the government in Ma#) 78890
It is a social securit# scheme at a reasona(le cost0 It is no! open to all individuals (et!een :; and << #ears0 It is a scheme to contri(ute a pension fund at regular intervals during the !orking life to secure a pension from the age of 68 or !hen #ou retire0

=ilt +dged ecurities

=overnment 2*entral and tates4 securities and securities issued (# financial institutions such as I,>I) I*I*I) etc0 are called gilt edged securities0 .hese are de(t securities issued (# the *entral =overnment) tate =overnment and emi ? government agencies0 .he market for such securities is called gilt/edged market0 ecurities issued (# port trusts) pu(lic sector enterprises) electricit# (oards are also called gilt/ edged securities0 uch securities are in the form of (onds and credit notes0

=ilt +dged ecurities

Institutional agencies such as (anks) insurance companies) emplo#ees provident funds are the (u#ers of such securities0 uch securities are full# secured as the# have government (acking0

.he maturit# period is var#ing generall# upto :8 to 78 #ears0 =ilt/edged securities market constitutes the largest segment of the Indian capital market0 .his market is expanding rapidl# in recent #ears0 =ilt ? edged securit# is highl# li$uid asset as it can (e sold easil#0 .ax (enefits are availa(le to gilt/edged securities0