Case Study 2- Financial Planning
Printed From: The Equity Desk
Category: Personal Finance & Lifestyle-Strategies & problems
Forum Name: Personal Finance - Startegies
Forum Discription: Discuss startegies for tax planning, insurance coverage, Retirement planning, Home loans car purchases or any thing that affects personal finance.
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=865
Printed Date: 25/Jun/2024 at 11:20am
Topic: Case Study 2- Financial Planning
Posted By: omshivaya
Subject: Case Study 2- Financial Planning
Date Posted: 22/Apr/2007 at 4:18am
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Here is another case study for you Basant sir. Someone some years back had this puzzle to solve. I shall pass your plan to her and hopefully it shall help her in someway
Her situation is as follows:
1) She is 35 years old.
2) She is non-working and housewife and is pretty busy to find time to get a job etc.
3) She has monthly expenses of around 3,500 rupees.
4) She has a lumpsum amount of 20 lac rupees.
Now, what she wants is this:
a) Manage her expenses and have some cash for urgency, something like 1-2K per month maybe. This 3500+ monthly that she would earn, should obviously grow each year with a 7% inflation rate.
b) Let us assume life expectancy of 100 years as in all our cases. She is 35 now.
c) She wants her 20 lacs to do (a) and (b), and also this 20 lac should grow over time. Since this is her only savings, she could be called a low to medium risk-taker.
Now, how does this situation feel to you(financial health) and what is a possible plan.
PS: I shall add many more such cases(find on the internet) so that we can try crunching the solutions at TED. ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Replies:
Posted By: kaushalchawla
Date Posted: 22/Apr/2007 at 6:51am
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Hi, I would like to contribute here. One very conservative (mixed with a bit of aggressive case) could be this.
Let her invest 20Lakhs in debt at 8.5-9%. whatever interest money she gets out of it, extract around 3.5-4 k for home expenses and invest the rest in equity. This way her 20Lakhs is safe. And she can get a taste of equity as well.
Comments invited. ------------- Warm Regards, Kaushal |
Posted By: basant
Date Posted: 22/Apr/2007 at 9:02am
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We need to assume that inlfation of 7% so the incremental real interest rate at 8.5% fixed deposit is only 1.5% interest rate => That means the net interest amount will be Rs 30k per month whereas she needs Rs 42k as per inflation adjusted amounts.
Problem is longer she lives greater the problem becomes because expenditure rises faster in the later years so tyhe best option is to start a equity SIP with the difference amount in the initial years and use that equity money in the later years as that SIP increases in value.
What does our Financial Planner (Om) say? ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 23/Apr/2007 at 1:22pm
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I would say she needs to have a decent exposure to equity, maybe 50%-50% in equity and MIP(debt) respectively. She can invest the whole sum in a lumpsum, so what seems to be the best idea dunno. Maybe Basant sir can help here with a detailed outlook like in Kaushal jee's case. ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: pramodjain
Date Posted: 23/Apr/2007 at 8:46pm
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I think she should put all her money in equity and keep cash equivalent to expenses of six month in a liquid or a short term debt fund on a consistent basis. . She may use Equity mutual fund as she is a housewife. My choice in MF is HDFC equity. Direct stock portfolio is not suitable for her . |
Posted By: smithbell81
Date Posted: 18/Oct/2011 at 4:03pm
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Posted By: LearningToFly
Date Posted: 18/Oct/2011 at 5:40pm
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In the meantime, why can't she take tuition and earn some money. I can understand that she may not take full time job, but she can certainly do it and earn some extra cash.
------------- Success... at all cost. |
Posted By: somu0915
Date Posted: 18/Oct/2011 at 8:45pm
| you just woke up a four year sleeping thread. |