Prof.

Rajiv Vohra

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Inadequate comprehension of return and risk Vaguely formulated investment policy Nave extrapolation of the past Cursory decision making Simultaneous switching Misplaced love for cheap stocks Over-diversification and under-diversification Buying shares of familiar companies Wrong attitude towards losses and profits Tendency to speculate

The term wealth management formed with two words wealth & Management. The meaning of wealth is Funds, Assets, investments and cash it means the term wealth management deft with funds Asset, instrument, cash and any other item of similar nature. While defining wealth Management we have to think in planned manner. "Wealth Management is an all inclusive set of strategies that aims to grow, manage, protect and distribute assets in a much planned systematic and integrated manner

Investment planning:
Assists you in investing your money into various investment markets, keeping in mind your investment goals.

Insurance planning:
Assists you in selecting from various types of insurances, self insurance options and captive insurance companies.

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Retirement planning:
It is critical to understand how much funds you require in your old age.

Asset protection:
Begins with your financial advisor trying to understand your preferred lifestyle and then helping you deal with threats, such as taxes, volatility, inflation, creditors and lawsuits, to maintaining this lifestyle.

Tax planning:
Helps in minimizing tax returns. This might include planning for charity, supporting your favorite causes while also receiving tax benefits.

Estate planning:
Helps in protecting you and your estate from creditors, lawsuits and taxes.

Establish Financial Goals

Gather relevant data

Analyze the data

Develop a plan

Implement the plan

Monitor the plan

Investor needs and preferences vary with their age and their specific situation
Younger investors do not seek income, have a long investing horizon and assume higher risks. Older investors seek income, have a shorted investment horizon and assume lower risks.

Life stage of the investor impacts their saving, spending and investing habits. Understanding the life cycle stage is important in drawing out a financial plan.

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Childhood stage
Dependent on parents; gifts can be invested for the long term

Young adult stage

High short-term expenses; limited ability to save

Young married stage

Need to provide for unexpected expenses; joint responsibility to budget for expenses and save

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Young married with children

Expenses are high; limited ability to save; protection needs are high.

Married with older children

Ability to save and invest is high; investment needs higher than protection needs.

Pre-retirement stage
Save to provide for lifestyle after retirement; preference for retirement plans and health insurance.

Retirement stage
Focus on income and protection of wealth.

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Nuclear families Women in workforce Divorce rates Late marriages Younger population Number of children in a family.

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Young single childless people, financially independent. Income and expenses: Almost the same. Ability to save: Low Housing: Rental or staying with family Credit: Credit cards, auto loans, personal or education loans Life insurance: Negligible (when there are no dependents) Liquidity: High as there is no other source of income. Risk Preference: High as there are 40-45 years work life ahead. Tax exposure: Moderate to high. Retirement Planning: Little Interest.

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Young married people, presently no children. Income and expenses: when both working income more than expenses. Ability to save: Lower initially. Housing: lately people have started to buy homes on loans. Credit: Credit cards, auto loans, home or personal loans. Life insurance: Initially lower when both are working and no loans taken. Liquidity: lower than previous stage. Risk Preference: High as there are 40-45 years work life ahead. Tax exposure: fairly higher taxation for the family Retirement Planning: Little Interest.

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This stage starts with the birth of the first child and lasts till the last child is of school going age. Income and expenses: Expenses are more due to birth of the children. Ability to save: drastically reduces. Housing: Rental or staying with family Credit: Loans for furniture etc. Life insurance: High Liquidity: Increases substantially Risk Preference: Reduces drastically. Tax exposure: Low to Medium Retirement Planning: Lower priority given.

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The dependent children are no longer in the school. Income and expenses: Income levels are at the highest and expenses increases due to childrens educational requirements. Ability to save: Low Housing: Credit: Education loans Life insurance: Substantial Liquidity: Moderate. Risk Preference: Moderate Tax exposure: High Retirement Planning: Most Interest.

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The children have entered the job market and the parents are still in the job Income and expenses: Income levels are at the high and expenses reduce dramatically. Ability to save: High Housing: Credit: Low Life insurance: Low Liquidity: Low. Risk Preference: Low to Moderate Tax exposure: High Retirement Planning: Extremely high. Estate Planning: Important.

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Retired from active work. Income and expenses: Income levels are at the low and expenses higher. Ability to save: Limited Housing: Credit: No Life insurance: No Liquidity: High. Risk Preference: Low Tax exposure: Low Retirement Planning: No longer required. Estate Planning: To be in Place.

Accumulation stage
Between the age of 25 years and 55 years. Ability to save for the long term for financial goals and take risks Long term orientation

Transition stage
Between the age group of 55 years and 7 years Need to draw for some goals and save for other goals Medium term orientation

Distribution stage
Failing health, know assets would outlive self. Estate planning is paramount to avoid family disputes.

Establish the Client Wealth Manager Relationship

Explain the services being offered. Process of planning and documentation required. The fee or commission structure to be followed.

Gather data and determine the goals

Financial resources and obligations. Time horizon and risk tolerance. Personal and financial goals and there preferences. Assess clients values, attitudes and expectations.

Analysing and evaluating clients position

Asset and liability status Cash flow and debt management Investment planning Risk Management & Retirement planning Taxation and Estate Planning

Developing and Presenting the Plan

Meet the clients goals and objectives Explain the underlying assumptions

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Implementing the plan Monitoring the plan

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Avoid presenting self opinion as a fact. The goals should be as specific as possible. Identification of issues and problems. Cash Flow Management Risk Management Written Plans

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Power of compounding Choose a strategy to Maximise the Results

Buy & Hold Rupee Cost Averaging Value Averaging Jacobs Recommendation of both.

Right Wealth Management Strategies

When to Invest When to Cash Out
x When the goal for which the investment is done is nearing. x When the markets seem over valued in terms of fundamentals and historical valuations.

Start Planning and Investing Early Have realistic Expectations Invest Regularly

This determines the percentage of my clients investments to be held in equities, bonds, cash and cash equivalent. Benjamin Grahams 50/50 Balance
Basic defensive or conservative approach. When equities move up liquidate the excess returns and put the money in debt instruments & vice versa. A Basic Managed Portfolio
x 50% in diversified equity funds x 25% in Gilt Funds x 25% in High Grade Corporate Bond Funds

A Basic Indexed Portfolio

x 50% in Total stock Market/Index Funds x 50% in Total Bond Portfolio

A Simple Managed Portfolio

x 85% in a Balanced Fund (Equity 60% & Debt 40%) x 15% medium term bond funds

A Complex Managed Fund

x x x x x 20% in diversified equity fund 20% in aggressive growth funds 10% specialty funds 30% Long Term Bond Funds 20% in Short Term Bond Funds

Ready Made Portfolio

x Single Index Balance Fund.
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Boogles Strategic Asset Allocation

Older Investors in Distribution Phase : 50 E - 50 D Younger Investor in Distribution Phase : 60 E 40 D Older Investor in Accumulation Phase : 70 E 30 D Older Investor in Accumulation Phase : 80 E 20 D debt portion of an investors portfolio should be equal to the age of the person

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Fixed Versus Flexible Allocation Tactical Asset Allocation Increased Return without Increased Risks

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Accord top priority to a Residential House. Integrate Life Insurance in Investment Planning Choose risk exposure consistent with your stage in Investment Life Cycle Include Gold in your Portfolio. Avail Tax Shelters Select fixed income securities judiciously Focus on fundamentals but keep an eye on technical Diversify Moderately Periodically review the Portfolio.

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Focus on investments, understand and play well. Monitor the environment with keenness. Scout for special situations in secondary markets. Pay heed to growth shares. Beware of games which the brokers play. Anticipate the earnings ahead of the market. Leverage the portfolio when bullish. Take swift corrective action.

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Avoid certain kinds of stocks. Apply stiff screening criteria. Look for relatively safe opportunities in Primary Market. Participate in Schemes of Mutual Funds. Join Suitable Portfolio Management Schemes Consult an Investment Advisor. Refrain from Short Term Switching

Warren Buffet ` Turn off the Stock Market. ` Dont worry about the economy. ` Buy a business and not a stock.
Business Tenets
x Simplicity and Understanding x Consistent History x Franchise

Management Tenets
x Management Rationality x Management Candour x Resistant to Institutional Imperative

Financial Tenets
x RoE x Profit Margins

Market Tenets
x Value of the Business x Purchase at a significant discount
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Manage a portfolio of business.

John Templeton
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If you begin with a prayer, you can think clearly and make fewer mistakes. Outperforming the market is a difficult task. Invest and don't trade or speculate. Buy value not market trends or economic outlook. When buying stocks search for bargain among quality stocks. Buy low (simple in concept difficult in execution) Never invest on sentiments. Do your homework or hire an expert. Diversify by company and industry. Invest for maximum total return. Learn from self mistakes. Aggressively monitor your portfolio. An investor who has all the answers doesnt even understand all the questions. Remain flexible and open minded about types of investments Dont panic. Dont be fearful or negative too often.

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Address basic personal issues before buying shares. Devote time and effort. Try going alone. Invest in something that you can understand. Look for companies that are off the radar scope of the market Apply simple fundamental criteria. Dont try to predict the market. Avoid market timing Avoid generic formulae Diversify flexibly Be patient Carefully prune and rotate based on fundamentals. Eschew financial derivatives.