DSP BlackRock Investor Pulse Survey

About the Report:
In this week's article, we are sharing the insights from the recently released investor survey by DSP BlackRock. BlackRock conducted the annual survey of 31,139 people this time across 20 markets, in conjunction with Cicero Group, a research agency. India has been included in the survey since 2014 and this year, it was conducted online among 1,500 respondents aged 25-74, who had a role in financial decision making.

Key Findings (India Specific):

Investor Sentiments:
Despite global economic uncertainties, financial sentiment among Indians (84%) is the most positive of all markets surveyed (global 56%).
The confidence of financial decision making (savings & investments) is also very high in India (82%) compared globally (53%).
High cost of living and healthcare costs are prevalent concerns, prompting Indians to make ‘saving money’, ‘growing their wealth’ and ‘long-term healthcare’ some of their top financial priorities.
Most respondents feel that issues such as India’s economic performance, job market and economic reforms have either improved or remained consistent over the past year.
Indian stock market performance, infrastructure development and the government’s economic and development reforms inspire the highest confidence levels, while affordability of real estate is a concern.
Indians associate financial independence to earning own income and never having to ask money from others.

Asset Allocation & Investment Trends:
India has among the highest incidences of savings (97%) and investments (85%) among all global markets surveyed (83% & 53% respectively).
Respondents acknowledge that they are over-exposed to cash (22% of total holdings) and deposits (24%) and believe that they should lower their allocation (to 18% each) in these asset classes.
Respondents acknowledge that equity mutual funds (6%) and debt mutual funds (3%) have a lower exposure which needs to be increased in their total portfolio (to 8% & 5% respectively).
Physical assets such as property and gold are still popular among investors.
Almost half would like to increase their exposure to stocks and equity mutual funds over the next 12 months
Indian respondents appreciate the growth potential and value creation from equities including mutual funds, however, they still like the perceived assurance from traditional asset classes.
Indians are looking to reduce their exposure to idle cash and invest their money in other asset classes. Better knowledge about investing would encourage 41% of respondents to move more of their cash into investments. Guaranteen returns is however a greater motivator with 47% of respondents willing to move cash into investments in response to this factor.

Investment habits & decision making:

  • Over 80% of Indian respondents feel that they take financial planning seriously and that having a financial plan gives them peace of mind.
  • Family plays a major role for Indian respondents in their investment decision making. When it comes to long-term savings and investments, family and friends (49%), banks (46%), online sources (43%) and financial advisors (34%) are the most common sources of information.
  • Retirement (50%), children’s education (46%) and buying a home (33%) are the top three investment goals for Indian respondents.
  • 61% of household financial decision-making is made independently by a single member of the family. When the responsibilities are shared for remaining 39% of times, it is mostly shared with the spouse - for nearly 80% of the time.
  • When household financial decision-making responsibilities are shared, only 31% of women respondents are likely to make the final decision compared to 60% of men.
  • Around 60% of male respondents feel that their spouse knows as much or more than them when it comes to their investments while the corresponding figure for women respondents is over 90%.

Relationship with financial advisor:

  • When asked who is the first person to come to mind when hearing the words 'financial advisor, the top two responses included 'family' (38%) and 'IFAs' (25%) followed by CA (10%). For men respondents, IFAs had the higher mind share (30%) closely followed by family (29%). For women resondents though, family (48%) had the highest mind share followed by IFAs at (20%).
  • 58% of Indian respondents are using financial advice, with a higher percentage of women (65%) taking financial advice as compared to men (52%).
  • 77% of advised Indians use a financial advisor for most or all financial decisions, with a higher percentage of women (79%) again as compared to men (75%).
  • Nearly all advised respondents where found to be satisfied with their financial advisors.
  • 83% of advised Indians pay a fee for financial advice, and 88% of those advised believe they are getting excellent or good value for their money.
  • Of those who do not pay a fee for financial advice, a majority (78%) would still retain their financial advisor if they started charging a fee.
  • Seeking new investment ideas and minimizing risk while investing are the most discussed topics with financial advisors.
  • Women place highest value on the ability of a financial advisor to explain financial matters in a manner that they understand. Men place highest value on the ability of financial advisor to minimise risk when investing followed by the ability to protect savings /investments from inflation.

Retirement:

  • Most Indian respondents recognize the need to plan for retirement and are investing specifically for it (80%).
  • While Indian respondents feel confident that they will achieve their desired annual retirement income (88%), they still express concern (71%) that they won’t be able to live comfortably post retirement.
  • Most Indian respondents who are saving for retirement, mentioned ‘high cost of living’, ‘child’s education’ followed by unplanned expenses as key factors making it difficult to save for retirement.
  • Those respondents who haven’t started saving for retirement mentioned ‘other priorities’ and ‘not earning enough money’ as reasons why they haven’t started yet.
  • Indian respondents seemed to significantly underestimate the corpus they would need for a comfortable retirement

{s}
[[script type="text/javascript"]]
$(document).ready(function(){
new DiscussionBoard("divDiscussionBoard", "133", "http://www.njwebnest.in/esaathi/index.php/discussion").load();
});
[[/script]]
{/s}

 

INDUSTRY PREVIEW

In this week's issue, instead of an article, we have chosen to give you a glimpse of the industry and it's trend ending December 2015. We hope this analysis will help you get some valuable insights into the industry and its' composition.

SCHEME CATEGORY WISE UPDATES

NET INFLOW (OUTFLOW)

INDUSTRY ANALYSIS

INDUSTRY ANALYSIS

Investor Categoy wise Holdings and Average Holding Period

Key Observations:

  • Assets managed by the Indian mutual fund industry has grown from Rs. 10.51 trillion in December 2014 to Rs. 12.75 trillion in December 2015. That represents a 21.26% growth in assets during CY 2015.

  • The Equity asset class registered an impressive growth of nearly 27% during CY2015 in AUM. The composition of Equity oriented schemes have risen during the year and it stood at 31.28% in December 2015.

  • The Debt asset class registered a growth of 12.10% during the year but it's composition fell by nearly 3.68 in absolute terms in the overall assets.

  • As a category, most impressive growth in assets was recorded by the Balanced schemes of over 72%, followed by Liquid Funds at over 30%.

  • There are 45,853,274 folio accounts in the mutual fund industry as at December 2015, of which 99% is accounted for by individual investors.

  • As per AMFI, individual investors now hold almost the same share of industry’s assets, i.e 45.9% in December 2015, compared with 46.0% in December 2014. Institutional investors account for 54.1% of the assets, of which corporates are dominant with 86.5% of assets. The rest are Indian and foreign institutions and banks.

  • The institutional investors have a share of over 92% of assets in Liquid Funds but only 17% in Equity Schemes where individuals are the prominent asset holders. In Debt asset class too, the institutional clients dominate with 61% holding of assets.

  • As per AMFI, 59 % of total individual investor assets are held in equity oriented schemes followed by Debt at over 36%. Individual investors held only 4% in liquid funds and less than 1% in ETFs & FoFs.

  • Nearly 81% of the investor folio accounts are in Equity schemes while 17% folio accounts are in Debt funds. Liquid and money market funds account for less than 1% of folio accounts.

  • Individual investors account for the most of the accounts, across fund types. In liquid and money market funds, they hold the least number, at about 92% of the total accounts. Instituional investors have only 0.8% of folios in Equity funds but have nearly 17% of assets.

  • 37% of the industry assets came directly. A large portion of the direct investments were in non-equity shemes where institutional investors dominate. Only 10% of retail investors assets are invested directly while 15% of HNI investor's assets (ticket size above Rs.5 lakh) were invested directly.

  • Equity assets have a longer average holding period as compared to non-equity assets. 37% of equity assets have been held for periods greater than 24 months. Non-equity assets have been primarily held for periods less than a month (institutional assets in money market) or less than a year (other debt schemes).

Source: Information has been collated from AMFI & SEBI websites.

Celebrating 5 Years of NJ PMS. Client: Mr. Anil Ghia shared his exp. About DAAP Strategy. !

Client: Dr. Anil Ghia
Investor in DAAP since 21 March 2013
NJ Partner: VA Advisory Services Pvt. Ltd.

1) Please describe your overall experience of investing with NJ PMS provider (NJ Advisory Services Pvt. Ltd.)
Answer: My experience with NJ PMS has been fairly good.

2) What were your objectives at the start when you invested in DAAP? Do you think your objectives have been fulfilled by the portfolio manager?
Answer: My objectives were safety and good returns. They have been fulfilled to a large extent.

3) Do you think the portfolio manager churns the portfolio frequently?
Answer: The portfolio churn mostly depends on markets movements and is done on a need only basis.

4) What is your experience related to reports shown on website of NJ PMS?
Answer: My experience with the reports has been satisfactory. I normally view the reports provided on the Client Desk.

5) What are your suggestions to existing and prospective investors of DAAP?
Answer: I am nobody to advise, that is the job of the advisor.

6) What are your expectations from the portfolio manager?
Answer: My expectations from the portfolio manager are better performance, with timely execution of portfolio changes and asset allocation.

7) What role has your introducer VA Advisory Services Pvt. Ltd. played in helping you to select DAAP for you?
Answer: VA Advisory Services presented this novel idea to me and they were persuasive and convincing in their presentation.

Celebrating 5 Years of NJ PMS. Client: Mr. Prakash Golwala shared his exp. About DAAP Strategy

Client : Mr. Prakash Golwala
Investor in DAAP since 04 Oct. 2010
NJ Partner: VA Advisory Services Pvt. Ltd.

1) Please describe your overall experience of investing with NJ PMS provider (NJ Advisory Services Pvt. Ltd.)
Answer: As a client, I was always confused as to how much Debt and Equity Ishould have in my portfolio at any given time. I am a long-term investor in equity market, and this problem use to constantly puzzle me. I was also looking for a solution, which could help me buy equities when the markets dropped.

I found the answers to my questions in NJ PMS – DAAP Strategy, as it assures an ideal balance between Equity and Debt asset classes. I think this is the best way to invest in long equity mutual funds.

2) What were your objectives at the start when you invested in Dynamic Asset Allocation Portfolio? Do you think your objectives have been fulfilled by the portfolio manager?
Answer: Yes, my objectives have been fulfilled by the portfolio manager. My objectives for investing in DAAP were to manage my portfolio in a proper and disciplined manner. I wanted timely re-balancing and re- structuring of portfolio and schemes and finally risk adjusted returns.

3) Do you think the portfolio manager churns the portfolio frequently?
Answer: No I don't think so. I am aware that the re-balancing is done based on market movements and valuation basis. I am against frequent churning of portfolios.

4) What is your experience related to reports shown on website of NJ PMS?
Answer: The reports are transparent and descriptive. They meet our requirements and being able to see them online, adds to the user experience.

5) What are your suggestions to existing and prospective investors of DAAP?
Answer: For investors, who are looking at investing in equity as a long term asset class, I feel this is the best method and strategy to plan your investments. You will never regret your Equity investments!

6) What are your expectations from the portfolio manager?
Answer: Although I am sure that NJ is doing their due diligence, I want them to keep selecting good equity funds and monitoring them regularly.

7) What role has your introducer VA Advisory Services Pvt. Ltd. played in helping you to select DAAP for you?
Answer: VA Advisory has not sold a product to me. They have sold the logic and science behind investing through the Asset Allocation strategy, which is the core of this PMS. They have given direction to my portfolio and that was the key factor in selecting the DAAP strategy for my investments.

TIME VALUE OF MONEY (TVM) (Part 2) - WHAT FINANCIAL ADVISORS MUST KNOW

Wednesday, September 23 2015, Contributed By: Team NJ Publications

Content: Welcome to the second part of the series on time value of money. Just to rewind, in the last article we had introduced how to calculate the effective rate for any given period given any rate for a different time frame. We had were introduced to the basic terms used in excel /spreadsheet functions which we are again repeating in this piece. We also saw how we could use FV function for calculating future value of lumpsums and this is from were we will pursue our journey further...

Primary Sources of Change:

Basic Excel Function Terms: FV = Future value. PV = Present value. Rate = Interest rate per period. NPer = Number of periods (payment period). Pmt = Regular Payment made “per period”. Type = Due date for payments where '1' means due at the beginning of a period and '0' (default) means due at the end of the period.

<p">The PV Calculations (Lumpsum)

The present value calculations are important when you want to know the value of any future amount (either lumpsum or annuity) in today terms.

Client question 1: I want to become a crorepati in 10 years. How much should I save today?
Excel Function: PV(rate,nper,pmt,fv,type) since we want to know the investment needed today.
Inputs: Investments returns or rate is assumed at 15%. We will be using the fv value here since the future value is already known. Since it is already a yearly problem, we will go ahead with nper as 10 and rate as 15%.
Solving Function: PV(rate,nper,pmt,fv,type) = PV(15%,10,0,-10000000,1) = Rs.24,71,847/-
Formula: I = FV / (1+r)^ n where I is the lumpsum investment needed today, n is the number of periods and r is the rate of returns = 10000000 / (1+15%) ^ 10 = 24,71,847

The Rate Calculations (Lumpsum)

Rate can mean any rate of increase or decrease in a problem. It can be investment returns, interest rates, inflation or deflation. We need to find ates in circumstances were we are aware of an required amount and period but do not know the rate which will be required to bridge the gag.

Client question 1: I have Rs.500,000 today which I wish to double in 5 years. How much returns should I earn to make this happen?
Excel Function: Rate (nper,pmt,pv,fv,type,guess) since we the period and the starting and end amounts but not the rate.
Inputs: pv = -500,000 since it will be an outflow and fv = 10,00,000 after 5 years. There is no recurring payment so pmt is '0' and type we assume to be 1 for beginning period calculations. Guess of '0' works very often and even if we leave it blank, the excel will take it as '0' default.
Solving Function: Rate (nper,pmt,pv,fv,type,guess) = Rate(5,0,-500000,1000000,1) = 14.87%. The client will have to invest in an asset class that will possibly give Rs.14.87% returns in 5 years. We skipped writing guess as excel assumes it as '0'.

Annuities:

Let us first understand what an annuity is. An annuity is simply a series of payments occurring for a defined period. There are many applications of annuities for financial advisors and it is something very commonly found while planning investments and withdrawals which do not happen in lumpsums but installments. Yes, you guessed it right. An SIP is an annuity that you are saving while a pension is an annuity that you are withdrawing.

When while with annuities or in other words, series of payments, we will enter the annuity value as “pmt” in our excel functions. Note that for lumpsum or one time calculations, we were entering values as pv or fv. Calculating for annuities in formulas is not simple so we deliberately intend to skip them since excel functions can easily do that boring job for us.

The FV calculations (Annuity)

This function is most commonly used find the future value of annuities with or without beginning investment. It can be effectively used to choose between different annuity options or between a lumpsum or an annuity payment option for a defined period and rate.

Client question: I plan to save Rs.5,000 p.m. in an equity SIP. How much will I get after 5 years? Excel Function: FV(rate,nper,pmt,pv,type) since we want to know the end value in future. Inputs: Investments returns or rate is assumed at 12% conservatively and the SIP is beginning today (annuity due = type 1). Since, it is a monthly investment, we will calculate monthly figures for period and rate. Thus, nper of 5 years is 60 months and we now we need to change the 12% effective annual returns to monthly effective returns. It is not 12% /12 as we read in last article. Try to find that yourself before you read ahead.
Note that we also have to use pmt here since it is periodic payment talking here. We will not use any value for pv since there is no accumulated wealth /lumpsum amount given here. Had it been a lumpsum problem or any starting amount was given, we would have used that figure in pv.
Solving Function: FV(rate,nper,pmt,pv,type) = FV(0.949%,60,-5000,,1) = Rs.4,05,518/-

The PV Calculations (Annuity)

This function can be effectively used to find money needed to fund an annuity in future or to basically decide between multiple annuity options with differing periods and/or annuity amounts. This function can be also effectively used to decide between a lumpsum today or an annuity in future. This decision can be very important as your client can potentially make more money with a lumpsum today than a deferred payments in future.

Client question 1: I have just retired and I wish plan for a monthly withdrawal of Rs.5,000 every month from my investments for the next 20 years. How much should I invest?
Excel Function: PV(rate,nper,pmt,fv,type) since we want to know the investment needed today for an annuity.
Inputs: Investments returns or rate is assumed at 8% for a conservative investment. Since the time period is considered as monthly, we will take the monthly effective rate of 8% which is 0.64%; nper is 20*12 and pmt is -5000 since it is an annuity withdrawal, fv is '0' and we will assume it to be ordinary annuity (withdrawals at each period end).
Solving Function: PV(rate,nper,pmt,fv,type) = PV(0.64%,240,-5000) = Rs.6,10,389/- is the investment required to made today in an asset class with returns of 8% p.a. Note, we skipped entering values for fv and type as they are '0' and excel considers them as default '0' when missing.

The Rate Calculations (Annuity)

Rate function is also most commonly used for loans where we need to find the effective rate of interest with an EMI. It can also be effectively applied to choose between different investment or loan repayment options. For rate calculations, one needs to be careful as the results are for the 'period' considered and we may need to convert it into annual rate if the used period in the function differs.

Client question 2: I have borrowed Rs.1,0,000 today from my bank for purchase of a bike. The loan is for 1 year and I need to pay an EMIs Rs.9,000. What is the interest rate charged?
Solving Function: Rate (nper,pmt,pv,fv,type,guess) = Rate (12,-9000,100000,0,1,0) = 1.43% monthly. Converting this to annual will give us 18.59% as the effective annual interest rate charged by the bank.

We can also use Rate to find the required returns on an SIP, just like lumpsum, for a target value. Client question 2: I wish to accumulate Rs.10 lakhs in 5 years by saving Rs.10,000 monthly. What will be estimated returns required on this?
Inputs: We are quoting all figures in monthly standard here. SIP = Pmt = -10,000. FV = 10,00,000, Nper = 60 months.
Solving Function: Rate (nper,pmt,pv,fv,type,guess) = Rate(60,-10000,0,1000000,1,0) = 1.57%. Since we were talking of monthly standard, converting this to effective annual rate will give us the figure of (1+1.57%)^12 -1 = 20.54% required annual returns.

Friends, we started this series in order to help you get more familiar with the excel functions which can be effectively used in our day-to-day practice. We have assumed that you are familiar with the basics of excel and if not, we urge you to get familiar as it is something basic to being a financial advisor. We will continue this series with the hope and belief that you are practicing these problems yourself and getting better and better at it each day.

Functions covered till now...

Problem Excel Function
Find the future value of an amount (pv) or annuity (pmt) or both FV(rate,nper,pmt,pv,type)
Find the present value of an amount (fv) or annuity (pmt) or both PV(rate,nper,pmt,fv,type)
Find the periodic required rate for an amount (pv and/or fv) or annuity (pmt) or both Rate(nper,pmt,pv,fv,type,guess)

{s}
[[script type="text/javascript"]]
$(document).ready(function(){
new DiscussionBoard("divDiscussionBoard", "98", "http://www.njwebnest.in/esaathi/index.php/discussion").load();
});
[[/script]]
{/s}

 
Image
At Soni Global Finance, our mission is to provide our clients with the best wealth creation and management solutions. We are driven to provide clients with simple, unbiased, and uncluttered professional advice that adds value to their quality of life and results in actionable solutions.

Contact Us

311, Siddharth Complex
Besides Hotel Express Tower
Alkapuri, Vadodara-390007

Contact Details:
Mobile: 9825541426
e-wealth-reg
e-wealth-reg