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Financial Planning

Vikas Agrawal Zonal


Head
Motilal Oswal AMC

COMMON ISSUES WITH EQUITY


INVESTORS

http://getricher.in/2014/investment-of-rs-10000-to-rs-535-crores-in34-years/

Contents
Introduction
Planning
Financial Planning (FP)
FP Pyramid

Introduction
Planning

Introduction
Planning
Planning means looking ahead and chalking
out future courses of action to be followed
Examples:
- Preparation for competitive exams
- Planning a vacation

Introduction
Financial Planning
Financial Planning is the process of meeting
your life goals through the proper management of
your finances.
Examples of goals:
- Buying a house
- Higher Education

Introduction
Financial Planning Pyramid
Wealth
Distribution
(Transfer what you have)

Wealth Creation
(Accumulate)
Wealth Protection
(Protect what you have)

Investment Experience
Indian benchmark indices rise 100x in
30 years

Investment Experience
47 enduring 100x stocks over 1994-2014

Note: Multiples are based on stocks being bought at the low price for the respective
year, and held on to Mar-2014.

What we learn from history is that


people dont learn from history!!!

Powerful mantra for big Wealth Creation


To make money in stocks you must have
the Vision to see them
the Courage to buy them and
the Patience to hold them
Patience is the rarest of the
three

Know this man?...


He would have slept in 1989

this is how he would


wake up today

Few disclaimers and clarifications


Long term prospects of equity as an asset class
Improving macros local and global
Mean reversion for equity

We are concerned because of


Investor behavior
Industry behavior
Old habits die hardreverting to old habits

Road to Wealth Creation


Equity
Why?

Equity
Why now?

Equity
How?

Equity
How much?

Equity
Kitna degi?

Why Equities is necessary


Evil?
Investing is foregoing current purchasing
power now for a greater purchasing power in
future.
- Warren Buffett

Key Objective of Investing


Enhancing Purchasing Power
Over FY7913 CPI inflation has been 8.6%, eroding purchasing
power of Rupee by 94%
Inflation erodes purchasing power of money

CPI = Consumer
Price Index

Source: Centre for Monitoring Indian Economy (CMIE), Motilal Oswal Financial Services Ltd (MOFSL), Bloomberg, Motilal Oswal
Asset Management Company (MOAMC) Internal Analysis.

Key Objective of Investing:


Enhancing Purchasing Power

Source: Bloomberg, MOAMC Internal Analysis. .

Key Objective of Investing:


Enhancing Purchasing Power
Equities significantly enhance purchasing power of portfolios
3,000

Inflation-adjusted returns of different


assets
Sensex

2,500

Sensex cum Dividend

If you had invested


Rs. 100...

2,000

Gold

Fixed Deposit
2,175

1,300

1,500

Purchasing Power
1,000
500 10

0
-

Source: Bloomberg, MOAMC Internal Analysis.

25
1
99

Market has gone Up - Why


Invest NOW
Depends what you are
buying
Market has gone up does
not apply to all stocks!!!

Im not afraid of being in the next 25% downtick. Im afraid


of MISSING the next 100% uptick- One cannot time the
market.
The great long-term risk of stocks is not owning them!

Quality vs. Valuation:


What should we Buy?
Quality
Low

Valuation

Low

High

High

Quality Stocks :
downs are temporary; ups are permanent
1,000
800
600
400

HDFC
Bank

200
0

2,500
2,000
1,500
1,000
500
0

TCS

Corrections

Quality Stocks :
downs are temporary; ups are permanent

8000
7000
6000
5000
4000
3000
2000
1000
0

More pronounced in the Index


Nif
ty

Corrections

Thank You