Sample Financial Plan
For
Mr. A*** B***
Name of Advisor :
Contact No. :
Date :
Prepared By :
ContaContactct No. :
ICICI Securities Ltd. Page 1 of 44 Private and Confidential
Contents
Sr. No. Topic Page No.
I Introduction 3
II Stages in your Financial Plan 4
III Recommended Action Plan 5
IV Track progress of Plan – Track & Act 12
V Reviewing the plan regularly 16
VI Annexures: 17
1. Assumptions 18
2. Personal Details 19
3. Current Financials 20
4. Your Risk Profile 24
5. Insurance Planning 25
6. Cash Flow (till retirement) 30
7. Goal Planning 33
8. Retirement Planning 36
9. Summary of Recom. Investments 39
10. Asset Allocation 40
VII Disclosures & Disclaimer 42
ICICI Securities Ltd. Page 2 of 44 Private and Confidential
Introduction Dear Mr. A*** B***,
We congratulate you for taking the first step in achieving your financial goals i.e. charting a customized financial plan for you & your family.
This Financial Plan identifies your present financial condition and what you want to achieve in future. Based on the information we have obtained from you, a comprehensive financial plan has been developed for you which will provide you guidance on your financial objectives.
The scope of your financial plan is as follows:
• Recommended Action Plan providing specific action points on asset allocation, savings target, investment & insurance recommendations • Tool for tracking the progress of your action plan – Track & Act TM – how to use with screenshots • Annexures: Current Financials - this analyses your current income & expenses, your investments and savings Insurance planning identifies your insurance requirement against possible risks Cash flow gives you an understanding of your future cash inflows and outflows at various stages in your life Goal planning identifies and analyses the requirements for your various financial goals including your children goals Retirement planning analyses your post-retirement needs and a suitable solution which addresses those needs Asset Allocation analysis – this is based on the criticality and tenure of your future goals.
We suggest you to implement the Action Plan precisely in order to ensure you are in the right path to achieve all your financial goals.
Regards,
Manager – Investment Advisory Services
ICICI Securities Ltd. Page 3 of 44 Private and Confidential
Stages in your Financial Plan
Subscribe to Financial Planning Service
Provide required data for financial planning
RRReceive financial plan & discuss with advisor
Implement the recommended action plan
Track the progress of the plan through Track & Act TMTMTM
Review the plan regularly / Renew the plan after a year
ICICI Securities Ltd. Page 4 of 44 Private and Confidential
Recommended Action Plan
1) ReRe----structuringstructuring of existing financial assets for futurefuture goals
Recommended Asset CurrCurrentent Asset Allocation Allocation Amount Amount Recommended Action to meet Asset Type (Rs.) held (Rs.) held Total Percentage Amount Percentage Recommended Asset Allocation with outside Amount (%)(%)(%) (Rs.) (%(%(%)(% ))) Self‘s Self’s (Rs.) ICICIdirect ICICIdirect Beyond Corridor Limits, Add and Rebalance from other Equity 335,887 40,000 375,887 48.45% 465,532 60.00% Assets where you are over-exposed.
Beyond Corridor Limits, Sell and Rebalance to other Fixed Income 40,193 359,807 400,000 51.55% 310,355 40.00% Assets where you are under-exposed.
Total 376,080 399,807 775,887 775,887
Advisor’s Comment: Re-balance as per recommendation.
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Recommended Products for rere----structuringstructuring of existing financial assets for goalsgoals::::
Based on the recommended asset allocation in point no.1 in Action Plan, we suggest you to re-structure your existing asset allocation as below:
Exit From Invest Into
Asset Amount (in Rs.) Asset Amount (in Rs.)
Equity Equity 89,645
Fixed IncomeIncome:::: Fixed IncomeIncome::::
Savings Bank Balance 400,000 MF Debt - Mid to Long Term 310,355
Total 400,000 Total 400,000
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Recommended Products BUY): Fund Name Amount (in Rs.) Type Rationale
Fund A 44,645
Equity Fund B 45,000
Fund C 77,000
Fund D 77,000 Fixed Income (>=4 years) Fund E 78,000
Fund F 78,355
Total 400,000
Note: For long-term debt investments, you can also consider investing into tax-free bonds, if there is any issue available with a credit rating of AA or above. If you invest into the same, you have to ensure that you re-invest the interest payouts into MF Debt.
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2) Savings Target for next 1 year for goals
Amount p.m. BreakBreak----upup of Monthly Amount (in Rs.) Particulars Amount (in Rs.) (in Rs.) Equity Fixed Income GoldGoldGold
Savings Target for next 1 year 1,819,000 151,500 121,000 30,500 -
Advisor’s Comments: As per your financial plan, you should target to save Rs. 1,8191,819,000,000,000,000 in next 1 year and allocate in a way that your Asset Allocation after a year is in line with the target asset allocation. For eg., if your target asset allocation after a year has more allocation to equity compared to current recommended asset allocation, then you will have to allocate more savings towards equity. Please refer to the Product Recommendations for the recommended funds in each of the asset classes.
Recommended Products for Savings to be made in next 1 year:year :::
Fund Name Amount (in Rs.) Type Rationale
Fund A 24,000
Equity
Fund B 24,000
ICICI Securities Ltd. Page 8 of 44 Private and Confidential
Fund Name Amount (in Rs.) Type Rationale
Fund G 24,500
Fund H 24,500 Equity
Fund I 24,000
Fund D 10,000
Fixed Fund E 10,000 Income (>=4 years)
Fund F 10,500
Total 151,500 p.m.
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Note: A. Debt Investments: We recommend that you invest in the growth option for debt funds. This ensures that you pay taxes only on capital gains, which are lower as compared to tax paid on distributed income (for short term holdings). It also ensures lower effective tax rates due to indexation benefit for investments held for over 3 years. We also recommend an accrual strategy for your debt investments to provide stability in income with lower interest rate risk.
B. Equity Investments: We recommend that you choose growth funds for equity mutual funds investments. This would ensure that the funds continue to be invested till they are required for any goal. For your direct equity investments, we recommend that you hold a diversified portfolio with a strict upper limit on single stock (upto 10-15%), sector (upto 20-25%) and small/mid cap stocks (upto 5-10%).
3) Target Asset Allocation by January, 2018 ––– TTToTo be targeted over next 1 year, after shifting fromfrom current asset allocation to recommended asset allocation immediately as per point no.1
Recommended TTTargetTarget Asset Current Asset Asset Type Asset Allocation --- Allocation by Allocation Immediate JanuaryJanuary,, 2012018888
Equity 48.45% 60.00% 73.59%
Fixed Income 51.55% 40.00% 26.41%
Total 775,887 775,887 2,676,836
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Advisor’s Comment: This section gives you the target allocation that you have to keep in mind while investing during this year so that you are as close to this allocation by the end of 1 year from the date of the plan. Rs.Rs.Rs. 2,672,672,676 2,67 666,8,8,8,836363636 comprises accumulation of existing financial assets (which can be liquidated immediately for future goals) after a year, including the savings made during the next 1 year.
Other Recommendations & Comments:
As per your financial plan, the following points have to be acted upon immediately.
• Insure self’s life for an additional amount of Rs.44.72 lakh, through a term insurance.
• Take a personal accident insurance cover for self for an amount of Rs.1.53 crore.
• Take a family floater basic medical insurance cover for your family for Rs.5 lakh.
• Take a family floater top up medical insurance cover for your family for Rs.15 lakh.
• Insure your existing house properties and home contents through home insurance.
• Make nomination in all your existing investments / Draft a WILL to pass on your estate to the desired beneficiaries.
• Review your financial plan after a year from now.
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Track the progress of plan
Track & Act TMTMTM
Once you implement the action plan, you can track the progress of the same everyday through our robo-advisory platform Track & Act TM . Here’s how you can do it:
Where to access? Track & Act TM section can be found once you login to your account > in the ‘Trade and Invest’ tab > last option on the left side is ‘Advisory Services’> Track & Act TM . • Track Your Progress On Plan:
It gives you a gist of current asset allocation, the recommended levels and target asset allocation by the end of subscription period; an overview of savings till date and target savings by the end of subscription period as well as the expected and actual portfolio valuation in graphical and tabular format. Every tab concludes with a note whether you are on track or not; if not, action points which need to be taken in line with the financial plan.
1. Starting Asset Allocation – This gives you a comparison of current asset allocation as on any date against recommended asset allocation, which is based on your goals and as suggested in your financial plan. In case you are in sync with the recommended allocation, the note will show a message ‘You are on track’. If your allocation is beyond corridor limits, the note will reflect ‘Action required’ along with the required action to meet the recommended asset allocation in the last column of the table (in table view of the page).
Graphical representation of Starting asset allocation
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2. Track Your Savings – This gives the status of your net savings done till date against the target savings to be done during the subscription period. In case your savings till date are in line with the proportionate savings target till date, the note will show a message ‘You are on track’. If your savings till date are lesser than the proportionate savings target till date, the note will reflect ‘Action required’ along with Balance Savings to be done from now till the end of the subscription period in the table (in table view of the page).
Note: The data for the same gets picked up from the transactions done through ICICIdirect.com. Hence, if you do any transactions outside, you have to update the same in ‘Portfolio’ section in the respective section (Equity / Mutual Funds/ Bonds) with the details of the transactions, by providing name of investment, exact number of units and date of transaction. If there’s any investment done through Systematic Investment Plan (SIP) outside, then every transaction done through the SIP has to be updated individually.
Graphical representation of status of Savings
3. Track on Target Asset AllocAllocationation – This gives you an outlook of current asset allocation against target asset allocation projected by the end of subscription period. The target allocation gets achieved as you save the required amount, as per point no.2, as your existing portfolio grows and as you fund your immediate & 1-year goals. (There could be a significant difference between the recommended asset allocation as on date of the plan and the target asset allocation at the end of 1 year from the plan, if you have immediate / 1-year goals).
In case you are in sync with the targeted allocation, the note will show a message ‘You are on track’. If your allocation is beyond corridor limits, the note will reflect ‘Action required’ along with the required action to meet the target asset allocation in the last column of the table (in table view of the page).
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Tabular representation of Target Asset Allocation
4. Track Portfolio Value – This section gives you an overview of the growth of your portfolio in comparison with the expected growth by the end of subscription period. The portfolio is expected to grow if you action the first 3 action points properly. The expected portfolio valuation by the end of subscription period is mentioned in both the table & graph views of the section.
GraGraGraphicalGra phical representation of Portfolio Value
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• Have Surplus? Know Where To Invest:
At times, sudden or unexpected inflow of funds arise a question of ‘Where to invest?’ This tab assists you to take the decision and guides you to invest the surplus in such a way that you move towards your target asset allocation at the end of the subscription period; if you have already achieved the target allocation, it will guide you to ensure you stay at the same allocation.
You need to enter the amount of surplus funds available with you for investment and system will suggest an ideal distribution of surplus into different asset classes in accordance with target asset allocation. This ensures your alignment to the target asset allocation. Once you know the asset class in which you have to invest, you can visit the ‘Click here’ link at the bottom of the page to know the exact funds in which you have to invest into. The link provides the mutual funds recommended by our Research under various categories.
• Want to WithdrawWithdraw?? Know Where To Withdraw From:
In case of emergencies, when you need to withdraw money without disturbing the asset allocation to be targeted as per your financial plan, you can use this platform to know where to redeem the funds from.
You need to enter the amount you are in need of and system will show up the most appropriate asset class for withdrawal without disturbing asset allocation levels. You can also view the list of stocks / mutual funds from your portfolio which have completed the required term for ‘short-term’ and are classified as ‘long-term’ capital assets, with respect to capital gains taxation, along with our Research view on each of them. This will guide you in redeeming the appropriate stock / mutual funds and without worrying about taxation on short term capital gains.
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Reviewing the plan regularly
• Though you can track the progress of the plan yourself through our robo-advisory platform, Track & Act TM , we also review your plan on a monthly basis.
• One of our representatives will review your plan every month and share you the details of the same over mail / phone.
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Annexures
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1. Assumptions
Note: In the entire report ‘Self’ denotes the husband & ‘Spouse’ denotes the wife.
While creating your financial plan we have based our calculations on certain assumptions.
• The financial plan & the various requirements are based on your present financial
condition.
• The average inflation rate assumed for current education expenses of your children is
10% p.a., whereas the average inflation rate assumed for all other expenses is 7% p.a.
till your lifetime.
• Self is expecting a growth in salary at an average rate of 6% p.a.
• Self is expecting a growth in rental income at an average rate of 5% p.a.
• The increase in cost of your goals has been assumed as per the rates mentioned in
page no.6.
• Self has planned to retire at the age of 58 years, but we have considered the retirement
age of self to be 55 years.
• The life expectancy for self & spouse has been taken at the respective age of 70 years.
• The value of your existing financial assets has been considered as on January 10, 2017
in the plan and this date is considered as the date of the plan.
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2. Personal Details
Self Details
Name: Mr. A*** B*** AgeAgeAge: Age : 44 years Occupation: Salaried
Family Details
Name Relationship AgeAgeAge Occupation
Ms. C*** D*** Spouse 41 years Home Maker
X Son 13 years Student
Y Daughter 13 years Student
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3. Current Financials
IIIncomeIncome ––– Expense Analysis
Income (post(post----tax)tax) (for next 12 monthmonths)s)s)s)
Source of Income Amount p.a. (in Rs.)
Salary of Self 2,064,000
Bonus - Self 600,000
Rental Income 114,000
Total 2,778,000
It is advantageous to spread your family’s income through at least 2 or more sources to reduce the risk of relying on only one source.
Expenses (for next 12 months)
Expenses Type Amount p.a. (in Rs.)
Household 400,000
Entertainment 100,000
Medical 50,000
Education 200,000
Traveling 50,000
Vehicle Maintenance 120,000
Home Loan 99,392
General Insurance Premiums 15,000
Term Insurance Premium 20,817
Total 1,055,209
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The next chart gives you a break up of your expenses. This can be used to review your discretionary expenses for any additional saving opportunities.
Expenses Break Up 2% 1% Household 9% Entertainment
Medical 11% 39% Education
Traveling 5% Vehicle Maintenance
Home Loan
General Insurance Premiums 19% Term Insurance 9% Premiums 5%
Insurance & Investments (Outflow for next 12 monthmonths)s)s)s)
The following are your current insurance premium and investment outflows.
Particulars Amount p.a. (in Rs.)
Investments – Chit Fund (Rs. 6,000 p.m. for 4 months 37,000 & Rs. 13,000 p.m. for 1 month) Life Insurance Premiums (except term plan) 118,430
Total 155,430
Savings
Particulars Amount p.a. (in Rs.)
Your Total Savings (Rs.) 1,722,791
The part of savings you are investing currently (Rs.) 155,430
The part of savings available to invest (Rs.) 1,567,361
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Your Networth
Net worth Analysis shows your financial condition as on a specific date. This will help you to monitor your progress as you build your assets.
BreakBreak----upup of Assets Amount (in Rs.)
Home Value 5,500,000
Home Content 100,000
Real Estate Investments 6,260,000
Vehicles 700,000
FixFixFixedFix ed Assets --- Total 12,560,000
PF Accumulation (Self) 1,200,000
Gratuity (Self) 357,000
Encashment of Privileged Leave (Self) 88,400
PPPFPF &F & other retirement benefits ––– Total 1,645,400
Equity 335,887
Mutual Fund Equity & Balanced 40,000
Chit Funds 283,000
Savings Bank Balance 400,000
Other Financial Assets --- Total 1,058,887
Total Assets 15,264,287
BreakBreak----upup of Liabilities Amount (in Rs.)
Home Loan 300,000
Total Liabilities 300,000
Your current Networth 14,964,287
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Key Ratios
1) Savings Ratio
Savings Ratio is the percentage of annual income that you are able to save.
Your Savings Ratio = 62.02%
The above savings ratio has been calculated after taking into account the recommended reduction in your expenses. The average savings of an Indian household is around 30% of the household income.
2) Debt ServicServicinginginging Ratio
Debt Servicing Ratio measures the extent of pressure your existing liabilities can put on your finances. It is calculated as Debt Servicing Commitment ÷ Income.
Your Debt Servicing RaRatiotio = 3.58%
Debt servicing requirements should ideally not be more than 25% of your total income. If you have an existing home loan, then debt servicing ratio should not be more than 40% of your total income. Higher debt servicing ratio multiplies the overall risk during economic downturns specifically if the interest rates increase.
3) Leverage Ratio
This is a measure of the role of debt in your asset build-up. It is calculated as Total Liabilities ÷ Total Assets.
Your Leverage Ratio = 1.97%
Higher the leverage, more risky it is. Further, you need to ensure that a risky investment position is not compounded with high leverage financing it.
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4) Financial Assets Ratio
Your assets can broadly be categorised as financial assets (e.g. shares, debentures, bank deposits, Public Provident Fund, mutual fund investments) and physical assets (e.g. gold, other precious metals, diamonds and real estate). In many ways, financial assets are part of a more transparent and better regulated market. Physical assets suffer risks of loss by fire, theft etc. and also lack transparency in pricing and transactions. Therefore, you should maximise your financial assets ratio viz. financial assets as a percentage of total assets.
Your Financial Assets Ratio = 30.17%
Assets like self-occupied house, home contents & vehicles, which are meant for your regular use, have not been included in total assets for the purpose of calculation of this ratio. You should seek to increase this ratio over a period of time.
5) Liquidity Ratio
The role of liquid assets is to meet your near-term liquidity needs. It is normal to calculate the liquidity needs, as the expenses you need to incur over the next 6 months (including loan repayments). Liquidity Ratio is calculated as Liquid Assets ÷ Liquidity Needs.
Your Liquidity Ratio = 0.930.930.93
Liquid assets include all assets which can be liquidated immediatley like shares, open-ended mutual funds, savings balance, fixed deposits, gold etf etc. This ratio should be more than 1. The higher it is, the more is the comfort for you.
44.. Your Risk Profile
Based on your response to the risk analyzer questionnaire, your risk profile is:
Your Risk Profile: MODERATE
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55.. Insurance Planning
Life Insurance --- Self
Being adequately insured is essential to help your family/dependents lead an independent lifestyle in the event something unfortunate was to happen to you. The following have to be considered while evaluating your life insurance needs:
Family's Expenses: This is one of the most important factors when determining your life insurance coverage. If you are the sole earning member of your family, it is crucial to have a policy that can replace your income or take care of your family's expenses. It is important to account for inflation.
Outstanding Debt: All of your debts should be payable in full in case of your demise. Home loans, car loans, credit card and other loans should be paid off in full.
Future Obligations: Your child's future education requirements, spouse's needs etc have to be considered when arriving at an adequate insurance cover. If your child plans to pursue an MBA, he/she should be able to financially achieve the goal even in your absence.
Family's Expenses Annual Amount (in Rs.) Regular Expenses till Lifetime (post deduction of 25%, 551,250 as Self's expenses) Regular Expenses till limited term (Children schooling 250,000 expenses & life insurance premiums of Spouse)
Outstanding Debt Present Value (in Rs.)
Home Loan 300,000
Future Obligations (Goals) Present Value (in Rs.)
X - Graduation 1,200,000
Y - Graduation 1,200,000
X - Post Graduation 1,500,000
Y - Post Graduation 1,500,000
X - Marriage 1,000,000
Y - Marriage 1,000,000
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Annual Family Income
Source Annual Amount (Rs.) Start Year End Year
Rental Income 114,000 2016 2044
Cash flow scenario in case of an unfortunate event
In case of an unfortunate death of the primary income earner of the family, the family should be sufficiently insured to manage the day-to-day expenses and to achieve the future goals. In addition, the surviving family members will have to pay the outstanding liabilities.
The table below will tell you for how many years your family will be able to sustain the above requirements with your existing net worth and insurance cover, in case of an immediate unfortunate death.
Existing Networth --- Age of Family Family Liabilities / Year Insurance Cover Closing spouse Income Expenses Goals & Saleable assets Balance JanJanJan.'1Jan .'1.'1.'17777 41 18,914,287 300,000 18,614,287 2017 42 114,000 801,250 - 19,002,660 2018 43 119,700 859,838 - 19,358,273 2019 44 125,685 1,165,126 - 19,417,962 2020 45 131,969 1,207,705 3,265,174 15,981,676 2021 46 138,568 722,576 - 16,321,528 2022 47 145,496 773,157 - 16,635,499 2023 48 152,771 827,278 - 16,918,652 2024 49 160,409 885,187 5,552,791 11,279,549 2025 50 168,430 947,150 - 11,130,878 2026 51 176,851 1,013,451 - 10,911,936 2027 52 185,694 1,084,392 - 10,614,032 2028 53 790,840 1,160,300 4,504,383 6,084,600 2029 54 204,728 1,241,521 - 5,350,676 2030 55 214,964 1,328,427 - 4,491,445 2031 56 225,712 1,421,417 - 3,493,485 2032 57 236,998 1,520,916 - 2,342,141 2033 58 248,848 1,627,380 - 1,021,425 2032032034203 444 59 261,290 1,741,297 - -486,097
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Note: The maturity proceeds from HDFC SL Classic Assure Insurance policy of spouse have been added into ‘Family Income’ in their respective years of receipt.
Action Plan
As can be seen from the table above, your existing networth & insurance cover will be sufficient to achieve your goals, repay your liabilities and also support your family's expenses till spouse's age of 58 years. However, since you expect the life expectancy of spouse to be 70 years, it is crucial to have adequate insurance to take care of her expenses for the remaining 12 years.
Additional InInsurancesurance Cover --- Self
Ideal Insurance Cover (to cover your family's expenses till spouse's life 23,387,023 expectancy, liabilities & goals)
Less: Existing saleable assets (except assets to be utilized for family's use) 8,064,287
Less: Existing life insurance cover 10,850,000
Additional insurance cover required 4,472,736
Note: Saleable assets include assets which can be sold by the family after the demise of self & does not include value of self-occupied house, home contents, vehicles, physical gold & real estate investments (if assumed to be rented out after the demise of self). It also includes the present value of retirement benefits like PF, Gratuity, Encashment of Privileged Leave, etc. of self.
Life Insurance --- Spouse
Additional Insurance Cover --- Spouse
We do not recommend any additional life insurance cover for spouse, as she does not earn any income currently.
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General Insurance
Apart from protecting your life, there are certain other aspects like health and assets which you need to protect. In this section, we will cover the other insurance covers which you need to have for you & your family.
Personal Accident Insurance
While covering risk of death through life insurance, there is one more risk which every individual carries which is the risk of disability due to accidents. You have to protect the loss of your income due to any disability, just as in case of a death, to ensure you and your family do not suffer financially and have money to spend for regular expenses, to repay liabilities and to achieve your child goals. It is advisable to take a Personal Accident Insurance, which will cover the risk of disability and pay a part amount or full amount of the sum assured, depending on the extent of disability. The ideal amount to be covered should be the same as your life insurance requirement. You can either take a rider of Personal accidental cover with any of your existing policies or else you can take a standalone Personal Accidental Cover.
AdvisoAdvisor’sr’s comments: We recommend you to take a personal accident cover of Rs. 1.53 crore for self.
Medical Insurance ––– Basic
Medical Insurance should be the next thing on your mind. You should always think about medical insurance for you and your family. There may not be sufficient resources to take care of your medical expense in case of any urgent medical treatment. Especially in today's world where cost of medical treatment is soaring, these insurance proceeds will be very much helpful in an emergency. If you are covered under a group medical insurance by your employer, you need to check who all are covered in the plan & how much is the coverage.
AdvisoAdvisor’sr’s comments: In your case, you do not have a separate medical insurance cover. Hence, we recommend you to take a family floater medical cover of Rs.5 lakh.
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Medical Insurance ––– Top up
Top up health insurance plans are a unique type of health cover policies that offer the insured with an additional coverage, which goes beyond the maximum limit of the existing health insurance policies. Such plans come handy when the threshold of the existing health cover is already used or exhausted and there are some medical costs left to deal with, which would otherwise exert pressure on the savings. The top up plans normally work on the basis of a cost-sharing model, wherein the medical expenses up to the deductible limit have to be borne by the insured. They are the most affordable means of extending the health cover, through a perfect combination of a basic policy and an ideal medical top-up.
AdvisoAdvisor’sr’s comcomments:ments: We recommend you to opt for a top up medical cover of Rs.15 lakh for your family. Also, we recommend you to create a medical contingency fund of Rs.10 lakh (in today’s value), by the time self retires.
Home Insurance
It is prudent on your part to cover your physical assets. The vehicles you drive are covered through motor insurance, and the same is also mandatory by law. While vehicles are movable and the probability of damage / theft is higher, the same is much lower in case of a physical asset like house. But the extent of damage might be much higher in a house. Hence, it is essential to take a home insurance, which will cover any loss to structure and contents due to both natural and man made calamities including fire, earthquake, explosion, lightning, storms, floods, riots, strikes, landslide, missile testing operations, impact damage, aircraft damage, bush fire, leakage from overhead tanks, etc.
The contents are also covered against the risk of burglary. Ideally, the structure of a house needs to be covered for the re-construction cost. Reconstruction cost is defined as the cost incurred to reconstruct the house if it is damaged. The ideal cover can be arrived at by multiplying the built up square feet area and the construction rate per square feet.
AdvisoAdvisor’sr’s comments: We recommend you to get all your existing house properties insured. We also recommend you to insure your home contents.
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66.. Cash Flow (till retirement)
EMI's + Maturity Surplus Recom. Total Existing Recom. Recom. PPPayoutsPayouts proceeds available for Age Total Existing Health / Age of Living Life Life Home from LIC from further Year of Income Invsts. Accident Spouse EEExpenses Insurance Insurance Insurance Money exisexisexistingexis ting invsts. (A(A---- SelfSelfSelf ( A )( ) ( D )( ) Insurance ( B )( ) Premiums ( E )( ) ( G ) Back. ( H )( ) Invsts. BBB-B---CCCC----DDDD----EEEE----FFFF---- ( F )( ) ( C )( ) ( I )( ) G+H+I) JanJanJan.'1Jan .'1.'1.'17777 44 41 775,887 775,887 2017 45 42 2,778,000 935,000 238,639 37,000 13,000 50,800 5,100 - 320,000 1,818,461 2018 46 43 2,943,540 1,006,450 238,639 - 13,000 53,340 5,457 - 2,100,000 3,726,654 2019 47 44 3,118,955 1,325,502 226,025 - 13,000 56,007 5,839 - 220,000 1,712,583 2020 48 45 3,304,836 1,432,807 102,230 - 13,000 58,807 6,248 - 275,000 1,966,744 2021 49 46 3,501,806 963,435 60,817 - 13,000 61,748 6,685 30,000 - 2,426,121 2022 50 47 3,710,529 1,030,876 60,817 - 13,000 64,835 7,153 - - 2,533,848 2023 51 48 3,931,706 1,103,037 60,817 - 13,000 68,077 7,654 - - 2,679,121 2024 52 49 4,166,080 1,180,249 60,817 - 13,000 71,481 8,189 - - 2,832,344 2025 53 50 4,414,441 1,262,867 60,817 - 13,000 75,055 8,763 - - 2,993,940 2026 54 51 4,677,623 1,351,268 20,817 - 13,000 78,807 9,376 - 773,451 3,977,806 2022022027202 777 55 52 4,956,512 1,445,856 20,817 - 13,000 82,748 10,032 - 10,454,638 13,838,697
Notes for CCashash Flow
• Total Income
This includes income from self’s salary, which has been inflated at an average rate of 6% p.a.
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This also includes rental income, which has been inflated at an average rate of 5% p.a.
• Total Living Expenses
This includes all your living expenses, which have been inflated by 7% p.a. and schooling expenses of your children.
From 2019, additional amount of Rs. 100,000 p.a. (in today’s cost) has been added towards X’s & Y’s schooling expenses
respectively.
From 2021, schooling expenses of X & Y has been reduced, as they move in their higher education.
The schooling expenses of your children have been inflated at 10% p.a.
• EMIs + Existing Life Insurance premiums
From 2021, EMI paid towards your existing home loan would stop, as the loan tenure gets completed.
The life insurance premiums have been reduced after the payment term gets complete for the respective policies.
• Existing Investments
This includes your existing investments being made into Chit Funds.
• Recommended Life Insurance
From 2017 till retirement, premium has been provided for the recommended addl. life insurance cover (term insurance).
• Recommended Health / Accident Insurance
From 2017, premium has been provided for recommended additional personal accident cover.
From 2017, premium has been provided for recommended medical cover – basic & top up.
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• Recommended Home Insurance
From 2017, premium has been provided for insuring your existing house properties and home contents.
• Maturity proceeds from existing investments
Year Particulars AAAmountAmount (((in(in Rs.)Rs.)Rs.)
JanJanJan.'1Jan .'1.'1.'17777 Financial assets available currently which can be utilized towards goals 775,887
Maturity proceeds from Chit Funds (Rs. 6,000 p.m. for 10 months) Rs. 60,000 & Chit Fund (Rs. 13,000 p.m. for 20 2012012017201 777 320,000 months) Rs. 260,000
2012012018201 888 Future Value of ESOP's 2,100,000
2012012019201 999 Maturity proceeds from LIC Money Back (Premium Rs. 12,614 p.a.) 220,000
202020 202020 Maturity proceeds from LIC Money Back (Premium Rs. 15,816 p.a.) 275,000
2022022026202 666 Maturity proceeds from LIC Money Back (Premium Rs. 20,000 p.a.) Rs. 280,000 & HDFC Young Star Rs. 493,451 773,451
2022022027202 777 Self’s Retirement benefits: PF Rs. 8,851,324, Gratuity Rs. 1,445,003 & Encashment of Privileged Leave Rs. 158,311 10,454,638
Returns assumedassumed: ULIPs – 6% p.a. & PF – 8.50% p.a.
• Surplus available for further investments
This shows the surplus of your income (including payout & maturity proceeds of existing investments) every year over your
expenses, existing investments, recommended premiums, which is available for further investments.
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77.. Goal PPlanninglanning
Classification of Goals
Your goals have been classified into 3 types – Critical, Important and Discretionary – based on your priorities & tenure of goals.
Critical Goals
These are commitments that are largely non discretionary and where you do not want to take any risk of non-fulfillment. These goals cannot be postponed and little or no deviation is acceptable in the expected corpus. Therefore, allocation with a tight shortfall risk is done for these goals.
Based on the tenure of each of these goals, the expected return of each asset class and risk levels of each asset class, we suggest you a specific asset allocation every year for each of the above goals till their occurrence.
Important Goals
These are goals which are beyond your Critical Goals and where you are willing to take some risk in anticipation of higher returns. For these goals, some deviation from expected corpus should be acceptable. Allocation with a moderate shortfall risk is done for these goals.
Based on the tenure of each of these goals, the expected return of each asset class and risk levels of each asset class, we suggest you a specific asset allocation every year for each of the above goals till their occurrence.
Discretionary Goals
These are lifestyle goals which are beyond the Critical and Important goals. These are discretionary in nature and can be postponed or modified based on the performance of the portfolio. Allocation with a median shortfall risk is done for these goals. This strategy is a higher risk strategy, but also gives higher expected returns.
Based on the tenure of each of these goals, the expected return of each asset class and risk levels of each asset class, we suggest you a specific asset allocation every year for each of the above goals till their occurrence.
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Future Value of Goals
Based on your assumption of the present cost of your goals and considering the rise in the cost of these goals, you will need more amount at the time of goal realization.
The table below gives you the amount you will need in future for your goals.
Year ofofof Years to Present Future Goal Name Type of Goal Goal Goal Value Value
X - Graduation 2021 4 1,200,000 1,632,587 Critical Y - Graduation 2021 4 1,200,000 1,632,587
Buying Plot 2022 5 2,500,000 3,190,704 Discretionary
X - Post Graduation 2025 8 1,500,000 2,776,395 Important Y - Post Graduation 2025 8 1,500,000 2,776,395
X - Marriage 2029 12 1,000,000 2,252,192 Critical Y - Marriage 2029 12 1,000,000 2,252,192
Financial Assets available for immediate allocatiallocationon for goals:
The below financial assets are currently available with you to utilize for your goals:
Financial Assets ––– Total (refer ‘Networth’ section for details) 1,058,887
Less: Chit Funds 283,000
Financial Assets to be utilized for goals 775,887
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Recommended Investments for goals
Type of Critical Discretionary Important Critical Goal Goal XXX --- YYY ––– XXX --- Post YYY --- Post XXX --- YYY --- Buying PlotPlotPlot Name Graduation Graduation Graduation Graduation Marriage Marriage Years 444 444 555 888 888 121212 121212 to Goal Year of 2020 2020 2021 2024 2024 2028 2028 GoGoGoalGo alalal Year Existing Financial Assets to be utilized (in Rs.)
JanJanJan.'1Jan .'1.'1.'17777 - - 775,887 - - - -
Year Recommended Investments to be done from surplus & inflow from existing invsts. (in Rs.)
2017 ------
2018 661,000 661,000 - - - - -
2019 856,000 856,000 - - - - -
2020 - - 1,770,000 - - - -
2021 ------
2022 - - - 1,234,000 1,234,000 - -
2023 - - - 1,340,000 1,340,000 - -
2024 ------
2025 ------
2026 ------
2027 - - - - - 2,143,000 2,143,000
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88.. Retirement Planning
The tables below brief your requirement for your life after retirement.
PostPost----retirementretirement Life
Particulars SelfSelfSelf Spouse
Planned Retirement Age 55-58 -
Recommended Retirement Age 555555 ---
Life Expectancy (Age) 70 70
ExpenseExpensess postpost----retirementretirement
Lifetime Expenses postpost----retirementretirement Annual Amount (in Expenses Type Rs.) in today's value Household 500,000
Entertainment 20,000
Medical 120,000
Vehicle Maintenance 60,000
Holiday 100,000
Car Insurance Premium 15,000
Others 100,000
Home Insurance Premiums - Recommended 5,100
Medical Insurance Premiums - Recommended 26,800
Total Expenses (Present Value) 946,900
Total Expenses (Future Value) 1,993,084
% of Expenses required for spouse after self's lifetime 60%60%60%
Note: Apart from the above expenses, life insurance premiums of self continuing post self’s retirement have been considered till their respective years of payment.
Recommendation – We recommend you to create a medical contingency fund of Rs. 10 lakh (in today’s value), by the time self retires.
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OneOneOne-One ---TimeTime Expenses postpost----retirementretirement
Present Value Future Value Required at Expenses Type (in Rs.) (in Rs.) ageageage
Medical Contingency Fund 1,000,000 2,104,852 55 of Self
Annual Income planned postpost----retirementretirement
Value at Retirement / Retirement Year Inflation (%) Income Type End Year Start Year (in Rs.) / Start Year post that Rental Income – PV 194,979 2027 5% 2044 Rs. 1.44 lakh p.a.
Recommended Investments --- Retirement
The table below provides the recommended amount to be invested every year from your pre- retirement income, your retirement benefits, inflow from existing investments & post- retirement income to fund your post-retirement expenses.
Year Existing Financial Assets to be utilized (in Rs.)
JanJanJan.’Jan .’.’.’11117777 ---
RecommendRecommendeded Investments to be done from Year income & inflow from existing invsts. (in Rs.)
2017 1,819,000
2018 2,404,000
2019 -
2020 197,000
2021 2,425,000
2022 65,000
2023 -
2024 2,833,000
2025 2,994,000
2026 3,977,000
2027 4,537,000
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PostPost----retirementretirement CashFCashFlowlowlowlow
Outflow Planned towards CorCorCorpusCor pus to be Annual OneOneOne-One ---timetime Annual OneOneOne-One ---timetime goals utilized for Age of Age of Deficit Year expenses expense Regular income occurring retirement (incl. selfselfself spouse (C+D(C+D----AAAA----BBBB)))) ( A )( ) ( B )( ) Income ( DDD ))) postpost---- goals occurring ( C )( ) retirement postpost----retirement)retirement) from corpus 31,865,594 2028 56 53 2,013,901 2,104,852 194,979 595,861 -3,327,913 - 30,298,387 2029 57 54 2,153,417 - 204,728 - -1,948,690 4,504,383 26,042,358 2030 58 55 2,302,699 - 214,964 - -2,087,735 - 25,988,387 2031 59 56 2,462,431 - 225,712 - -2,236,719 - 25,835,864 2032 60 57 2,633,344 - 236,998 - -2,396,346 - 25,538,168 2033 61 58 2,795,404 - 248,848 - -2,546,556 - 25,095,350 2034 62 59 2,991,082 - 261,290 - -2,729,792 - 24,464,914 2035 63 60 3,200,458 - 274,355 - -2,926,103 - 23,621,691 2036 64 61 3,424,490 - 288,072 - -3,136,418 - 22,517,297 2037 65 62 3,664,204 - 302,476 - -3,361,728 - 21,123,585 2038 66 63 3,920,699 - 317,600 - -3,603,099 - 19,389,958 2032032039203 999 67 64 4,195,147 - 333,480 - -3,861,668 - 17,251,273 2040 68 65 4,488,808 - 350,154 - -4,138,654 - 14,652,479 2041 69 66 4,803,024 - 367,661 - -4,435,363 - 11,533,277 2042 70 67 5,139,236 - 386,044 - -4,753,192 - 7,819,376 2043 - 68 3,299,389 - 405,347 - -2,894,043 - 5,637,211 2044 - 69 3,530,347 - 425,614 - -3,104,733 - 3,046,174 2042042045204 555 - 70 3,777,471 - 446,895 - -3,330,576 - -
Note: Annual/one-time post-retirement income has to be utilized to fund the expenses in the respective years of income. Deficit has to be funded through the corpus built.
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99.. Summary of Recommended Investments
Existing financial assets to be utilized for Year goals & retirement (in Rs.)
JanJanJan.'1Jan .'1.'1.'17777 775,887 Surplus left over (in Rs.)
Recommended investments from future Year surplus for goals & retirement (in Rs.)
2017 1,819,000 -
2018 3,726,000 -
2019 1,712,000 -
2020 1,967,000 -
2021 2,425,000 -
2022 2,533,000 -
2023 2,680,000 -
2024 2,833,000 -
2025 2,994,000 -
2026 3,977,000 -
2022022027202 777 8,823,000 5,015,000
Note: Assuming the left over surplus also gets invested, you will be able to create an additional wealth of Rs. 21,336,958 at the end of spouse’s expected lifetime over and above the requirement for goals & retirement, and the same can be passed on as an estate.
ICICI Securities Ltd. Page 39 of 44 Private and Confidential
10. Asset Allocation
Current Asset Allocation vsvs.... Recommended Asset Allocation
One of the most important stages in analyzing your investments is to understand your asset allocation. Asset allocation represents the mix of stocks, bonds and cash that you own. It is important to have a right asset mix based on the tenure and criticality of all your goals.
Your Current Asset Allocation ***
Current Asset Allocation - Financial Assets available for immediate allocation for goals
51.55%
Equity
Fixed Income
48.45%
* excluding life insurance policies, PPF & retirement benefits
Based on all your goals, our recommended asset allocaallocationalloca tiontiontion for this year
Recommended Asset Allocation - Financial Assets available for immediate allocation for goals
40.00%
Equity
Fixed Income
60.00%
ICICI Securities Ltd. Page 40 of 44 Private and Confidential
Based on all your goals, ourourour yearyear----wisewisewisewise recommended asset allocation for next 5 years isis::::
Recommended Allocation (in %) Expected Value No. of Year of total assets years Fixed (in Rs.) Equity GoldGoldGold Income
JanJanJan.'1Jan .'1.'1.'17777 60.00% 40.00% - 775,887
2017 111 73.59% 26.41% - 2,676,836
2018 222 61.46% 38.54% - 6,654,471
2019 333 49.98% 50.02% - 8,924,648
2020 444 61.90% 38.10% - 8,320,800
2022022021202 111 555 73.03% 26.97% - 8,293,485
Note:
Expected value of total assets is as at the end of every year, as reduced by the outflow
towards goals & postpost--retirement--retirement expenses in the respective yearyear,,,, from the accumulation
from recommended investments. This also includes thethe accumulation from the left overover
surplus, iiff any, assuming the same also gets investeinvested.d.d.d.
The above yearyear--wise--wise asset allocation is based only on the current outlook on the asset
classes. The plan has to be reviewed every year to know the changes required in your
asset allocation every year.
ICICI Securities Ltd. Page 41 of 44 Private and Confidential
DDDisclosuresDisclosures and Disclaimer
ICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No: 022 - 2288 2460, 022 - 2288 2470. I-Sec is a SEBI registered Investment Adviser., Registration no. INA000000094. I-Sec is a SEBI registered Research Analyst having registration no. INH000000990. I-Sec is a Member of National Stock Exchange of India Ltd., SEBI Regn. No. INB 230773037 (CM), SEBI Regn. No. INF 230773037 (F&O), SEBI Regn No. INE230773037 (CD), Bombay Stock Exchange Ltd., SEBI Regn. No. INB011286854 (CM), SEBI Regn No. INF010773035 (F&O). AMFI Regn. No.: ARN- 0845, Name of the Compliance officer: Mr. Anoop Goyal, Contact number: 022-40701000, E- mail address: [email protected].
ICICI Securities is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock broking and distribution of financial products. ICICI Securities is a subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, distribution of financial products etc. (“associates”), the details in respect of which are available on www.icicibank.com .
ICICI Securities is one of the leading distributors of Mutual Funds and participate in distribution of Mutual Fund Schemes of almost all AMCs in India. ICICI Securities and/or its associates receive compensation/ commission for distribution of Mutual Funds from various Asset Management Companies (AMCs). ICICI Securities hosts the details of the commission rates earned by ICICI Securities from Mutual Fund houses on our website www.icicidirect.com . ICICI Securities or its associates may have received compensation from AMCs whose funds are mentioned in the report during the period preceding twelve months from the date of this report for distribution of Mutual Funds or for providing marketing advertising support to these AMCs. ICICI Securities also provides stock broking services to institutional clients including AMCs. Hence, ICICI Securities may have received brokerage for securities transactions done by any of the above AMCs during the period preceding twelve months from the date of this report.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation or other benefits from the AMCs whose funds are mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of interest at the time of publication of this report.
The Mutual Fund Schemes recommended above are based on last issued ICICI Securities’ Research Reports for Mutual Fund products from time to time. Mutual Fund related research reports are prepared by Research Analysts - Sachin Jain, CA and Jaimin Desai, CA. Any reference to the words “Research Report” herein would imply Mutual Fund Research Reports issued by these Analysts. Investors can refer these Research Reports on www.icicidirect.com . If any investor is not able to access the Research Report on our website then such investor can obtain a copy of the same from his/her Relationship Manager/ Advisor.
It is confirmed that Research Analysts have not received any compensation from the Mutual Funds house whose funds are mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
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ICICI Securities or its associates may own 1% or more of the units of the Mutual Funds mentioned in the report as of the last day of the month preceding the publication of the research report. Research Analysts do not own 1% or more of the units of the Mutual Funds mentioned in the report as of the last day of the month preceding the publication of the research report.
Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies / AMCs including the AMCs whose funds are mentioned in this report or may have invested in the funds mentioned in this report.
Please note that as a part of Treasury Management, ICICI Securities may be holding units of Mutual Funds including Liquid Mutual Funds, Money market instruments, and Debt Securities which are advised to clients.
ICICI Securities also distributes Mutual Fund Schemes of ICICI Prudential Asset Management Company which is an ICICI Group Company, scheme details of which might also be appearing in the report above. However, the transactions are executed at Client's sole discretion and Clients make their own investment decisions, based on their own investment objectives, financial positions and needs.
It is confirmed that Research Analysts or any of their family members do not serve as an officer, director or employee of the AMCs whose funds mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies/funds mentioned in the report. We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Research Analysis activities.
You acknowledge that the Risk Profile Report and financial plan suggested to you is based on the information provided by you to I-Sec and on certain assumptions as stated in the Report. The suggested financial plan to achieve your financial goals may not be accurate or yield expected results if the information provided by you is incorrect or any of the assumptions made are rendered invalid due to uncontrollable external forces like change in interest rates, change in government policies, etc.
You acknowledge that you will exercise your own independent judgment and discretion in using any of the information and reports provided by I-Sec and that you will conduct separate research into the suitability of the Product for a particular financial situation, circumstances, attitudes, motivations and preferences.
I-Sec does not guarantee or represent that the Product assesses a client’s current state of mind or will predict a client’s future state of mind or behaviour. You have not relied on any representation made by I-Sec which has not been expressly stated herein or upon any descriptions or illustrations or specifications contained in any document including catalogues or publicity material provided by I-Sec. I Sec forms its views and expectations on the asset classes and their behavior that is based on various analysis, trends and historical data. I Sec does not guarantee their performance and hence the actual performance of the asset classes can differ and may require you to make adjustments in the asset allocation strategy as well as saving rates. The plan is based on the current view of the long term expectations and may not hold good at all points of time in the future. You are therefore required to review the assumptions regularly. You agree to generally comply with the instructions and materials
ICICI Securities Ltd. Page 43 of 44 Private and Confidential provided by I-Sec for the use of the Product / Report. The factors, other than personality, which influence risk tolerance include financial know how and experience, as well as personal, family and work situations and aspirations. If there is a significant change in any of these, risk tolerance should be re-tested. This re-testing is not only for your subsequent decision-making but also for review of decisions made before the change. It is advisable your risk tolerance should be retested every two or three years as it may change slowly with age. I-Sec cannot endorse or support any specific decision you may make because we are not privy to all the other information that effective financial decision making requires.
I-Sec may advise clients on debt securities but does not enter into principal to principal transactions with its advisory clients for such debt securities. Other clients (non investment advisory) may enter into Principal to Principal transactions with I-Sec in the normal course of its business for transacting in select debt securities, where I-Sec would act as a seller or a buyer of the security. The transactions are reported to the Exchange and settled vide the exchange prescribed settlement mechanism. However, I-Sec advises various products and services to its clients based on independent objective criteria and sound principles of financial planning based on customer’s financial goals.
Kindly read the Risk Disclosure Documents carefully before investing in Equity Shares, Derivatives or other instruments traded on the Stock Exchanges. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. Mutual Funds investments are subject to market risk, read the scheme related documents carefully before investing for full understanding and detail.
All investments are subject to market risks and there is no assurance or guarantee that the investment objectives shall be achieved. Investment involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including the possible loss of principal.
Investors should make independent judgment with regard suitability, profitability, and fitness of any product or service offered herein above. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents mentioned herein above may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments.
The contents of the report are based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. The contents mentioned herein are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. Please note ICICI Securities Limited is not providing the service of Portfolio Management Services (Discretionary or Non Discretionary) to its clients.
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