Quality Investment ! Real Estate | Umit Sarhan - PowerPoint PPT Presentation

Title: Quality Investment ! Real Estate | Umit Sarhan


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Wealth Creation- Asset Management

• By Umit Sarhan

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More foreign investors prepared to invest long
term in IndiaIndia gets more FII funds than
Asian peers
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Financial Goals in life

• Buying a House
• Funding Childrens education
• Funding Childrens marriage
• Planning for retirement

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Investment is a Myth

• Many people think that investing is out of their
  reach
• Not Correct.
• There is an investment out there that can work
  for you, whether you have a couple of thousands
  or more to set aside each month.

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Survey results-Younsters,Age group of 20-30
yrs,employed unmarried
INVESTMENTS

Shares MFs FDs Real estate Gold/ ETFs NIL
Men 12 8 24 13 32 11
Women 6 11 26 3 47 6
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Success is an attitude

• Small steps to accomplish great things!
• It is our attitude at the beginning of a
  difficult task which, more than anything else,
  will affect its successful outcome.
• --An American
  philosopher

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Secrets for Wealth Creation

• Remember the Acronym SPLIT
• S-Savings
• P-Protection
• L-Liquidity
• I-Inflation
• T-Tangible commodities

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How to get started
Write out your Goals
Know the size of your purse
Learn the ropes of Investing
Review Regularly
Plan your invts to match your Goals
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Choosing the right mix

• Risk-Return Paradigm
• What is your Risk Appetite?

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Conservative Type

• Risk/Return Volatility is LOW
• Return Potential is LOW

STOCKS 40
BONDS 35
CASH 25
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MODERATE Type

• Risk/Return Volatility is Moderate
• Return Potential is Moderate

STOCKS 60
BONDS 25
CASH 15
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AGGRESSIVE Type

• Risk/Return Volatility is High
• Return Potential is High

STOCKS 80
BONDS 15
CASH 5
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A very useful behavioral model Helps
investors to understand themselves well.
                                                                                                                                                                                                                                                                                    
The model classifies investors according to 2
personality characteristics 1.Method of action
(careful or impetuous) 2.Level of confidence
(confident or anxious).
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BBK Model-5 Groups

• Individualist - careful and confident, often
  takes a "do-it-yourself" approach
• Adventurer - volatile, entrepreneurial and strong
  willed
• Celebrity - follower of the latest investment
  fads
• Guardian - highly risk averse, wealth preserver
• Straight Arrow - shares the characteristics of
  all of the above equally

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Find the Right Path

• Your
• Level of knowledge
• Personality
• Resources
• should determine the path that you choose.

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Generally, investors adopt one of the following
strategies

• Don't put all of your eggs in one basket. In
  other words, diversify.
• Put all of your eggs in one basket, but watch
  your basket carefully.
• Combine both of these strategies by making
  tactical bets on a core passive portfolio.

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Ropes of Investing

• Start investing early
• Do it regularly
• Give your investments time to grow benefit from
  compounding
• The most powerful force in the universe is
  compound interest.
• 
  Albert Einstein
• 4. Be aware of Risk/Reward relationship your
  risk appetite while making the investments

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Asset Allocation

• Maximise the overall return on your portfolio by
  spreading across a good mix of
• equity instruments,
• Debt instruments,
• Liquid instruments.
• Diversification helps in balancing risk return

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Investment Strategy

• Determined by
• Your Risk tolerance
• Time Horizon
• Current income
• Your wealth
• Number of Working years left
• Dependants you have to provide for.

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Open the Door to Investment opportunities
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Where to Invest

1. Bank Deposits
2. Mutual Funds
3. Shares
4. Bonds
5. Post office schemes
6. Real estate
7. Gold/Silver/Platinum
8. Insurance

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Bank Deposit

• Low risk investment
• Choice of Banks
• Rate of interest
• Duration
• Guarantee upto Rs.1 lakh
• Fixed maturity

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The present scenario for FDs

• It is time to go for Bank FDs
• Rates are going up
• For senior citizens, it is 10
• Corporate FDs too, increasing trend
• Be choosy about the companies

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Mutual Funds

• Collective investment
• Professional Management
• Risk Diversification
• SIP the best
• Different types like equity, debt, Money market
  MFs etc

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Schemes according to Maturity Period

• Open-ended Fund
• available for subscription and repurchase on a
  continuous basis.
• No fixed maturity period
• buy and sell units at Net Asset Value (NAV)
  related prices which are declared on a daily
  basis
• key feature of open-end schemes is liquidity.

• Close-ended Fund
• stipulated maturity period e.g. 5-7 years
• exit routes is provided to the investor i.e.
  either repurchase facility or through listing on
  stock exchanges.
• NAV generally on weekly basis.

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Fund according to Investment Objective

• Growth / Equity Oriented Scheme
• Income / Debt Oriented Scheme
• Balanced Fund
• Money Market or Liquid Fund
• Gilt Fund
• Index Funds
• Gold ETF

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Where do the Mutual Funds Invest ?

• MFs are required to disclose full portfolios of
  all their schemes on half-yearly basis which are
  published in the newspapers.
• Some MFs send the portfolios to their
  unitholders.
• The scheme portfolio shows investment made in
  each security i.e. equity, debentures, money
  market instruments, government securities, etc.
  and their quantity, market value and to NAV.
  These portfolio statements also required to
  disclose illiquid securities in the portfolio,
  investment made in rated and unrated debt
  securities, non-performing assets ( NPAs), etc.
• Some of the mutual funds send newsletters to the
  unitholders on quarterly basis which also contain
  portfolios of the schemes.

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Know about SIP

1. Keep sufficient balance in your Bank account
2. Invest in SIP in all asset classes, including
   Gold
3. Each SIP is an individual investment
4. Monthly option is best
5. Choose the right amount

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Exchange Traded Fund (Gold ETF)

• Gold ETFs invest your money in physical gold.
• Gold ETFs buy gold from very reliable sources on
  your behalf, and take care of its safekeeping. In
  return, they issue units of the ETF, each unit
  representing roughly 1 gram of gold. These units
  are traded on the stock market, and can be bought
  like ordinary shares.
• The NAV of these units usually mirrors the price
  movement of physical Gold. The charges for
  storage and safekeeping of physical gold
  purchased are deducted from the NAV of the units.

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Advantages of Gold ETF

• Ease If you want to invest in gold, you just
  purchase the units of the ETF. You just sit back
  and relax! And if you want to sell, no need to go
  to the market to a jeweler - just sell the units
  like ordinary shares.
• Safety Since gold is not physically held by you,
  you don't have to worry about its safekeeping!
  That's a big relief!
• Quality If you are buying physical gold, your
  first concern would be to be sure about the
  quality of gold. With ETFs, that worry is gone
  too - the ETFs buy only from the most reliable
  sellers, and so, you are in safe hands!
• Small Investments With Gold ETFs, you can invest
  in as less as 1 gram of gold. You can make
  regular (maybe monthly) investments in gold, just
  like Systematic Investment Plans (SIPs) of MFs.
• No Wealth Tax There is no wealth tax on gold
  held in the form of Gold ETFs.
• Liquidity Gold ETFs are traded in open markets
  in a transparent manner, and they have ample
  liquidity.

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What is NET ASSET VALUE ?

• Take the current market value of the fund's net
  assets (securities held by the fund minus any
  liabilities) and divide by the number of shares
  outstanding.
• If a fund had net assets of Rs.50 lakh and there
  are one lakh shares of the fund, then the NAV is
  Rs.50.00.

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Shares

• Right broker after conducting basic research
• Invest for 3-5 years based on fundamentals of the
  companies
• Track your portfolio-Cos financials
  performance regularly
• Understand the basics EPS,NP,PE,DIV. Pay out
• Do not overexpose to one stock
• Keep investments small simple
• Have courage to buy on lows sell when high.
• Fix an upward target price stop loss before
  buying the stock

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Some tips

• Do not put more than 10 of your money into any
  one stock Do not own more than 2-3 stocks in
  any industry Buy your stocks over time, not all
  at once Buy stocks with consistent and
  predictable earnings growth Buy stocks with
  growth rates greater than the total of inflation
  and interest rates.
• Follow company specific news
• Check the websites of stock exchanges SEBI

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Mistakes to be avoided

• Lack of Knowledge and No Plan
• Unrealistic Expectations
• Listening to Others
• Getting in the Way emotionally
• Poor Money Management
• Only Trading Market in One Direction
• Overtrading

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Initial Public Offering (IPO )

• New shares Offered to the public in the Primary
  Market
• IPO is a company's first sale of stock to the
  public.
• Public issue should be kept open for a minimum of
  3days and a maximum of 21 days.
• For issues, which are underwritten by FIs, the
  offer should be kept open for a min of 3 days and
  a max of 21 days.
• For issues, underwritten by all India financial
  institutions, the offer should be kept open for a
  maximum of 10 days.
• Generally, issues are kept open for only 3 to 4
  days.

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Analysing an IPO

• 1. Who are the Promoters ? What is their
  credibility and track record ?
• 2. What is the company manufacturing or providing
  services - Product, its potential
• 3. Does the Company have any Technology tie-up ?
  if yes , What is the reputation of the
  collaborators
• 4. What has been the past performance of the
  Company offering the IPO ?
• 5. What is the Project cost, What are the means
  of financing and profitability projections ?
• 6. What are the Risk factors involved ?
• 7. Who has appraised the Project ? In India
  Projects apprised by IDBI and ICICI have more
  credibility than small Merchant Bankers

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He is tagged by the best realtor in New Jersey
Do short-sales. Also help home-owners.
Umit Sarhan, NJ (US)
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INVESTMENT STRATEGY OF UMIT SARHAN

• Invest in good, scalable businesses / companies
• Invest across diverse sectors
• Select India-linked stories which participate in
  Indias growth story
• Stick with good investments
• Increasing exposure as uncertainty reduces

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INVESTMENT BELIEF OF UMIT SARHAN
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INVESTMENT BELIEF OF UMIT SARHAN

• RIGIDITY - A TABOO
• Do not have fixed rules in investment
• Investment is both a science and an art
• Use periods of extreme optimism to exit and
  extreme pessimism as an opportunity to buy

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LEARNINGS OF UMIT SARHAN

• Invest in the realms of possibilities.
• Pursue opportunity wherever visible.
• Return dependent on the efforts of the
  management.
• Valuation Longevity Growth Efficiency.
• Consistent Review. Discipline in Rectifying
  Mistakes.
• Patience, driven by Conviction, to Buy and Hold.

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ADVICE OF UMIT SARHAN

1. Be an optimist! The necessary quality for success
   in Investment.
2. Expect a realistic return. Balance fear and
   greed.
3. Invest on broad parameters and the larger
   picture. Make it an act of wisdom, not
   intelligence.
4. Caveat emptor. Never forget this four-letter
   word - R-I-S-K.
5. Be disciplined. Have a game plan.

..contd
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ADVICE contd..

1. Be flexible. For Investing is always in the
   realms of possibilities.
2. Contrarian investing. Not a rule, not ruled out.
3. It is important what you buy. Its more important
   at what price you buy.
4. Have conviction. Be patient. Your patience may be
   tested, but your conviction will be rewarded.
5. Make exit an independent decision, not driven by
   profit or loss.

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Follow these Basic Rules while Investing

• Rule 1  Dont buy unlisted shares
• Rule 2 Dont buy inactive shares Rule 3 Dont
  buy shares in closely held companies

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EQUITIES A TAX PARADISE

• If you sell your investment in less than 12
  months (short term), you pay 10 tax!
• If you sell your investment in more than 12
  months (long term), you pay NO tax!
• And even the Dividends are TAX FREE!

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What does the term Margin Trading mean ?

• Margin means borrowing money from your broker
  to buy a stock. Investors generally go for
  trading on margin so to increase their purchasing
  power so that they can own more stock without
  fully paying for it. That means you will pay a
  part of the buy price and the broker will lend
  you the difference.
• For the loan you have taken -
• You will pay interest in addition to the usual
  fees.
• Broker will hold the stocks as collateral and has
  the right to sell that as well in case buyer
  doesnt meet certain obligations as per margin
  rules and agreements.

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Real Estate

• Land Plots or Farmland
• Independent House
• Flat
• Commercial space

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Advantages/Disadvantages

• Land/Plot
• No Liquidity/Returns
• Authenticity of Documents
• Capital Appreciation in 5-10 yrs
• Low maintenance
• No tax benefit
• Land grabbing-Go for gated community

• Flat
• Regular cash flow
• High maintenance charges
• Tax benefits

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Simple ways to minimize risk

• Diversification
• Asset allocation
• Rebalancing

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Simple ways to minimize risk

• Diversification

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Simple ways to minimize risk

• Asset allocation

Younger investor Older investor
10
10
10
20
40
40
80
50
40
.
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Simple ways to minimize risk

• Rebalancing

after one year
rebalanced
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Ramans portfolioMr.Raman is 45 yrs old.He has a
flat of his own in Chennai and works at a MNC
co.He has a 15 year old son.His financial Goals
are1.Sons higher education in 3
yrs2.Retirement in 15 yrs time.Please draw up
his investment portfolio.
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Ramans suggested portfolio

• 1.Expenses Cash in Bank, FDs,Fixed Maturity
  plan schemes.
• 2.Sons higher education
• Equity 40 Fixed income 55 Gold 5
• 3. Retirement
• Equity 75 Fixed income 20 Gold 5
• 4. After allocation for individual financial
  goals, remaining corpus to be used for further
  wealth creation.

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Tax Deductions
Sec/IT Act Areas Amount eligible Rs.
80C PPF,NSC,Int in NSC,LIC pre paid,School fees paid for children, HL-Princial, Invt.in ELSS, 5Yr FD 1,00,000
24 HL interest 1,50,000
80D Med claim insurance prem paid- Husband wife Med claim insurance prem paid- Father Mother 15000 15000
80CC F Investment in Infrastructure Bonds 20000
Sodexo Pass 30000
Base deduction 1,50,000
Total 4,80,000
80G 80E Donation Interest on EL 50 100
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Savings Instruments in Financial Markets

• Treasury Bills
• (14/91/182/364 days Maturity)
• Certificate of Deposits
• Commercial Paper

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Wish You All the Best