The Journey of Nation of Saver to the Nation of investor There is the myth that India saves approx.

35% of income but latest statistics confirm that the NET SAVINGS in Financial instruments are approx. 10% of income. Net savings comes after the deducting loans/liabilities of the family. Indian family saves mainly in the post office/banks or keeps cash and above is savings is called parking of the money but not the INVESTMENT. Lets know the key difference between Savings Vs. Investment Savings 1) 2) 3) 4) 5) Mostly short term Low risk & low potential return Not able to beat the inflation Negative inflation adjusted return Money kept Cash or savings A/C, Short term Bank FDs/Post office/ Insurance plans Investment 1) Medium to long term & linked to Goals 2) High risk & high potential return 3) Opportunity to beat the inflation 4) Positive inflation adjusted rate of return 5) Money invested in capital market instruments & real estate etc. Real Case scenario Ex. Mr.Mehta lives in Mumbai with his family and earns the take home monthly income of Rs.50,000/and he has the monthly expenses of 25,000/- & liabilities EMI Rs.20,000/- and saves Rs.5,000/- every month. At present, He keeps most savings in cash/bank savings a/c or FDs and later on mainly used for social purpose or buying consumer goods or holidays or tax savings instruments ex. Insurance plan Right now, Mr.Mehta does not have the adequate emergency fund & insurance and has yield low return portfolio of 3% to 5% and not committed for long term.

Guidelines to become the Investor from Saver. (Mr.Mehtas case)

1) Create an Emergency fund: Keep min. 3 to 6 monthly house hold expenses in cash instruments (Savings A/C, MF liquid fund etc.)- Minimum Rs.2,00,000/2) Buy an adequate insurance: Buy term insurance atleast 10 times of annual income (Rs.60 Lac), Health insurance (Mediclaim-Rs.6 Lac- Floater family plan and Rs.3 Lac Critical illness plan self and spouse and property insurance (House, content, vehicles etc.)-Annual approx expensesRs.50,000/3) Invest min.20% of take home income in financial instrument: Quantify an important financial goals like children higher education/marriage, retirement or buying own house etc.(Rs.10,000/-) 4) Starts SIP in Equity MF: Invest various ELSS/open end Mutual funds large cap equity scheme (30% of savings-Rs.3,000/- pm. Ensure that scheme shall be atleast 5 year old and having successful past performance record) Key benefits: Professional fund management, flexibility to invest in lumpsum/SIP and also in withdrawals (Lumpsum/SWP), Tax benefits: 80C in ELSS scheme and tax free return if invested for more than year. Opportunity to earn good return 12%-15% in long run.

5) Open the PPF A/C: Public provident fund is 15 year central govt scheme and objective is to create the risk free corpus for retirement (30% of savings-Rs.3,000/-)Liquidity option: One can take loan from 3rd year and withdrawals from 7th year onwards. Individual A/c and can invest min.Rs.500/- and max.Rs.1,00,000/- per FY and can open A/C in name of each member of family. Tax benefits: Save tax and get tax free return (revised rate 8.6%) 6) Open the DMAT A/C: A) Starts the SIP in Gold ETF (20% each-Rs.2,000/-)- Gold ETF fund gives an opportunity to create corpus to buy Gold for childrens marriage or jewelry for spouse & also act hedge against inflation. Benefits: Low cost, liquidity any time, only 10% tax if invested more than one year and no storage cost and purity issues. B) SIP NIFTY ETF (20% -Rs.2,000/-): Give the exposure in the Indias top 50 shares and potential to earn 12%-15% tax free return in the long run. 7) Fixed Maturity Plan: FMP is beneficial when someone wants to invest in lumpsum amount & looking for the safety of capital. At present, FMP offers good return up 10%-12% and also have the lower tax bracket of 10% compare to bank FDs (up to 30%)0if invested for more than one year. Now, Mr. Mehta turned from Savers to Investors and created sufficient emergency fund and Insurance protection against various important uncertainties of life. He will earn the good return (10%-15%) on his investment portfolio in the long term and also will create handsome corpus to fulfill familys goals. Wishing you a HAPPY INVESTING!!! Disclaimer: Objective of the above article is to educate & create awareness among the savings family.