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August 26, 2
FV = PV (1 + r)n
FV = Future Value
PV = Present Value
r = Rate of Return/ Coupon Rate
n = No. of compounding periods
August 26, 2
n
n
FV = PV
(1
+
r)
PV
r
The more you
save, makes
a difference
The more
you earn,
makes a
differenc
e
The
sooner
you start,
makes a
difference
August 26, 2
Total Amount
Saved
Value after
20 years
5,000
1,200,000
2,278,225
3,000
720,000
1,366,935
2,000
480,000
911,290
1,000
240,000
455,645
25
420,000
1,380,290
30
360,000
979,250
35
300,000
679,580
40
240,000
455,645
Value after
20 years
Value after
30 years
6%
455,645
979,255
8%
572,660
1,417,610
10%
723,990
2,079,290
12%
919,860
3,080,970
Growth Rate
INVESTMENT PERFORMANCE
(CAGR during 1980-98)
Source :
August 26, 2
10
44%
Stocks
outperformed
56%
1 year
37%
86%
63%
3 year
5 year
August 26, 2
11
Everybody wants to go to
heaven (reward), but nobody
wants to die (risk).
But in order to go to heaven,
one must die
However, death does not
ensure an entry into heaven
August 26, 2
14
Asset Allocation
August 26, 2
16
Markowitz: Portfolio
Selection, 1952:
Dividing a portfolio
over asset classes
that do not move
up/ down at the
same time helps
bring down the risk
of the portfolio.
August 26, 2
17
Markowitz: Portfolio
Selection, 1952:
Dividing a portfolio
over asset classes
that do not move
up/ down at the
same time helps
bring down the risk
of the portfolio.
August 26, 2
18
Markowitz: Portfolio
Selection, 1952:
Dividing a portfolio
over asset classes
that do not move
up/ down at the
same time helps
bring down the risk
of the portfolio.
August 26, 2
19
20
August 26, 2
21
Financial Goals
Planning to purchase a house
in the next ten years
Investment Strategy
Aggressive Growth Portfolio
Short-term
10%
Stocks
75%
Bonds
15%
August 26, 2
22
Financial Goals
Investment Strategy
Balanced Portfolio
Stocks
50%
Short-term
20%
August 26, 2
23
Financial Goals
Planning for retirement
(5 - 10 years)
Investment Strategy
Conservative Portfolio
Stocks
20%
Bank
Deposits
40%
Bonds
40%
August 26, 2
24
Periodic Rebalancing
EXAMPLE
Equity
Funds
Income
Funds
Frozen Allocation
40%
60%
45%
55%
40%
60%
25
Periodic Review
Review of objective - EXAMPLE
Years to goal
Equity Allocation %
TODAY
10
70%
After 5 yrs
60%
After 7 yrs
40%
After 9 yrs
10%
26
Summing Up
Asset Allocation helps:
1. Control Portfolio Risk
2. Increase the predictability of portfolio
returns
3. Steer the portfolio towards ones financial
goals
August 26, 2
27
Risk Factors
Scheme Classification and Objective: Franklin India Prima Plus (FIPP) is an open end growth scheme
with an objective to provide growth of capital plus regular dividend through a diversified portfolio of
equities, fixed income securities and money market instruments. Templeton India Growth Fund (TIGF) is
an open ended growth scheme whose investment objective is to provide long term capital growth.
Franklin India Bluechip Fund (FIBCF) is an open ended growth scheme with an objective to primarily
provide medium to long term capital appreciation. Risk Factors: All investments in mutual funds and
securities are subject to market risks and the NAV of the scheme may go up or down depending upon the
factors and forces affecting the securities market. There can be no assurance that the schemes'
investment objectives will be achieved. The past performance of the mutual funds managed by the
Franklin Templeton Group and its affiliates is not necessarily indicative of future performance of the
schemes. FIPP, TIGF, FIBCF are only the names of the scheme and does not in any manner indicate the
quality of the scheme, its future prospects or returns. The Mutual Fund is not guaranteeing or assuring
any dividend or returns under the scheme. The investments made by the schemes are subject to external
risks on transferring, pricing, trading volumes, settlement risk, currency risk, interest rate risk etc. of
securities and hence redemptions may be delayed inordinately. Please refer to the Offer Document before
investing. Statutory Details: Templeton Mutual Fund in India has been set up as a trust by Templeton
International Inc. (liability restricted to the seed corpus of Rs.1 lac) with Templeton Trust Services Pvt. Ltd.
as the Trustee (Trustee under the Indian Trust Act 1882) and with Templeton Asset Management (India)
Pvt. Ltd. as the Investment Manager. The Fund offers NAVs, purchases and redemptions on all working
days.
August 26, 2
28
Thank You