FINANCE

MASTERCLASS
For people in their 20’s & 30’s

By Aman Dhattarwal
 * Inflation : eats your savings
Enemy of compounding & savings

Govt says it eats 4% each year

Fact : Last 60 years average inflation rate = 7.5%
Reality : it eats 8% to 10% each year from most of us!

Inflation rate in Big spends :

Education Healthcare. House Gold
10% 13-14%. 10% 10%

Additionally we have Lifestyle inflation - new generation in a capitalist society

will always want a better life i.e more consumption.

* What happens to Rs 1Crore if kept in different instruments ?

Bank Savings. Bank FD. Nifty 50 Index Fund Real Estate

Initial Amt. 1Cr. 1Cr. 1Cr. 1.07Cr

Interest 3.5%. 7.4%. 13.5%. Varies

rate (2000 to 2024)

Tax Rate 30% each year 30% each year 12.5% on 12.5% on
income slab redemption redemption

Net Interest 2.45%. 5.18%. - -

rate

Subtract 2.45%-8% -3% 5.5% -

Infaltion = -5.55%
This is a major reason why it is difficult for people to stop earning.

Solution : Earn more

Invest wisely* for long period i.e 10+ years
Track your portfolio time to time

Remember : what compounding creates, inflation eats!

 - -

Real Compounding Maths for (10 years) 3 %

*
-

1 %
-
67.
-

7%
-
I
-

&
2Cr
Rs x ———————————————> 2x
-

]
&

1Cr
-
-
-

A
-

>
-
-

% 3x

15 %
4x

17 5 %
.

Sx
-

20 % ·

Ga

25 % 92

* Rule of 72 >
- double in how
many years

E
%
7
loyears
=

10 %
=
7 2
years
.

15 % 5

E
=
=

years

Earn more and spend less

 Strategy se zyada Captial matter karta hai

* How to Earn More (in long run) ?

Neighbourhood matters a lot

1. Improve your Job Address zu

- rich kids going abroad for UG & PG

- IIT/NIT & best talent goes abroad
- rich nation/people pay more
- increase child income by 25%
Create a specialization for you
2. Get very good in ONE domain
- people pay more for specialisation
- niche
- A players are better entrepreneurs

3. Marriage & Spouse

- working spouse
- spending habits
- growth mindset & priorities

4. Be a constant learner
- self development
- communication & socialisation
- improve neighbourhood

Competition decreases with top

* How to spend less ?
Write down your top 10 contacts - VERY IMPORTANT
1. Avoid school,college Friend circle!
- brings insecurity
- brings jealousness & envy
- WhatsApp & IG status brings fomo
- solution ?

2. Big expenses
- vehicle : 8-10
- marriage : rising, house & gold
- house (for most, after marriage, 30s or 40s)
Identify where you want your Kids to grow and then take decisions like House

3. Don’t compete with UHNIs & HNIs in spending

- most are living easily on interest of interest
- even on 10% interest they earn 25Cr interest each year
- 10% of 25Cr is 2.5Cr their annual expense & someone’s life savings
- & additionally they also have active income
4. Parents
- if parents living in Tier 1 cities
- rent, food, marriage, house, vehicle, house help
5. Loans Credit Card Trap se bacho
- we never take personal loan
- loan only helps in Real estate background check or business loan
- loan is for the rich, who don’t need it
- No to credit cards, if imp then set on auto payment

You can go Goa in Rs 30K

OR you can go with your family in Rs 5 lakhs.
So, focus on growing & not on fear of missing out.
always follow value margin

Equity : we invest the money which we don’t need for next 10 years

Who wins in Equity :

1. Invest for long period over 10 years
2. Buy low (on value margin) and sell high
3. Do SIPs each month & lumpsum when market on margin
4. brokers & “influencers :p

Diversification if always great

5 Major Don’t -
1. Never lose money. We never invest where there is a
risk of principal value becoming Zero i.e check
fundamentals
2. Making lumpsum when market high, investing all at Top
Ex: China Hang Seng Index
Japan Stock Index
India : 1979 to 1992 & 1992 to 2000
30 %
%
3. Nobody can predict or time the market : everyone is lying!

4. Check expense ratio : brokers are eating your money

Ex: Discuss platforms & affiliate links
5. Unemployment breeds F&O trading : more money for
govt, brokers, trading courses & big fishes.
 Equity

Stocks. Index [Link]. Active Equity M.F

Reliance Nifty 50 Large Cap

Asian Paints Nifty Next 50 Mid Cap
ONGC Small Cap

More growth Low expense ratio: 0.18 High expense ratio

More risk Less volatile Fund manager
Intelligent Good for No Knowledge Investor
investor only

Expense ratio Calculation

Calculation of expense ratio on 1Cr investment

HDFC short term debt fund

0.4 0.71
1st year 43,000 76,000
2 years 92,500 1,64,000
3 years 1,50,000 2,66,000
5 years 2,93,000 5,16,000

Groww, Zerodha Kotak Neo

 Why Mutual Funds ?

6 Key benefits :

1. Good for no knowledge investors, specially index MF

2. You minimise risk by diversifying through MF
3. Allow you to invest overseas without need of abroad
Demat account
eg: S&P 500 or Hangseng bees
4. Tax benefit in Hybrid Equity & Debt funds, MF don’t need
to pay capital gain taxes when they shift money from equity
to debt. Individuals have to book profits and pay taxes.
deffered tax k faida hota hai
5. Government bonds & treasury bills are mostly only
available through debt funds (we will learn later).

6. Business owners don’t get any interest on current

accounts (except Kotak bank for now). They can park
their money in Liquid or overnight debt mutual
funds to get FD equivalent interest rates.
 How to know if Stock market Cheap or High?

[Link] stocks are volatile, therefore we will check Nifty 50.

[Link]/GDP ratio

3.P/E ratio of Nifty 50 : Low range, Fair range & Expensive range
(Price/Earning ratio)

[Link] of Nifty 50 companies of last 5 years

[Link] of euphoria, optimism in media & IPO launches are indicator of

Greedy (expensive) market

[Link], people crying that they lost money in stock market : good
indicator that market is cheap

* P/E ratio of Nifty 50

If 7% risk
free rate
14/1 to 19/1 19/1 to 22.5/1 22.5/1 & onwards

Cheap Fair value Expensive

Good time to buy Small SIPs
People are scared Market Greedy

If 8% risk
free rate
12.5/1 to 17.5/1 17.5 to 22/1 22/1 & onwards

If 6% risk
free rate 16.5/1 to 21 21/1 to 24.5/1 24.5 & onwards

Note: P/E alone is not best measure, so we also check earnings of Nifty 50 of
last 5 years.
 Interest rate increase, loan difficult

Some basic fundamentals

Repo rate : risk free rate given by RBI

Return on government bonds
Easy explanation : slightly less than FD rate -
TRI

Price/Earning ratio

Bank FD Nifty 50 House

7% earning Check 2.5% earning

100/7 [Link] 100/2.5
=14/1 = 22/1 =40/1

In order to earn
Rs1, we have to
-L In order to earn
Rs1, we have to
invest Rs14 in FD Earnings Appreciation invest Rs40
Total Return Index
1Cr I(r

1 .
07Cv Earning z . Stake
T . 2scr

↓ 1 . 275
(v)
Earn Appreciation
In long run, stock prices will follow earnings.
All businesses are in the business of earning money.
So, if business earnings are increasing, then stock price will also increase
with time.

For investing in Individual Stocks we must understand Fundamental Analysis

Top line/ Revenue / Sales

Gross Profit margin (GPM)
Operating profit margin (OPM)
Net Profit / Bottom line
Free cash flow (cash is king)
Debt/Equity ratio
Loan Interests
MOAT : competitive edge
PnL & Balance sheets
P/E ratio, Average P/E ratio
P/B ratio
Calculating fair valuation
Management ethics & i
Fair trade practices
Depreciation
Amortisation
EBIT, EBITDA
 Why Debt Mutual Funds ?

1. Give similar & slightly more returns than [Link]

2. No penalty on early withdrawals like [Link]
3. Benefit of deferred tax
4. More liquid than F.D
5. Very low risk as compared to equity

People invest in Debt funds when

1. Equity markets are expensive & expecting fall
2. You need money in next 1 day to 5 years, so
need less volatile instrument
3. Interest rates are High! High Repo Rate = Debt Fund Purchase
Low Repo = Sell

Risks Involved
1. Interest rate risk
2. Capital default risk
3. Cannot beat inflation

Debt [Link]
Invest your
money in

Bonds

Government Corporate

Treasury Fixed rate bonds

bills SGB Commercial Debentures Convertible
Long term bonds paper Debentures

No default risk More returns

Default risk
 Types of Debt Funds

2-3 month 2-3 year

Overnight Liquid Ultra short Short term Long term
Funds funds funds funds funds

Few days Upto 1 month 6month to 2-3 years 3+ years

1 year

6% 6.2% 6.5% 7% 7.5%

Note : in each type you can invest for as long as you want

Interest rate increases

Default rate risk increases
Interest rate sensitivity risk increases

More types : Gilt Debt funds, money market funds, dynamic bond funds

Steps to select a Debt fund :

1. Check ratings of debts funds on
- Value research
- Morning star india
- Crisil
2. Asset under management (AUM) : higher is good
3. Past performance
4. Fund manager Purana rahe to best hai
5. Risk matrix : well diversified (not over 4-5% in 1 company)
 Real Estate & House

First increase income, savings & then you can go for this.
Family, job & future

Who wins in Real estate ?

1. Real estate brokers

2. People with land bank
3. Black to white economy Land and Builder Floors
4. Upfront ready cash
5. Strong understanding of a locality

Rent. vs Owning house

Good in our 20’s, 30s Sense of security

Frequent location changes No forceful change
Low investment portfolio You can invest on decor
Hate real estate hassle Memories
11 months agreement Marriage market
Black money

Major Do’s & Don’t

Bank loan hi ni dega agar property bekaar hogi

1. Use bank loans for background check
2. Check Registry & GPA
3. Possession of land
4. Land under your chest
5. Weak paper work
6. Land use & upcoming government projects Circle Rate
* Buying real estate is easy but selling it is NOT.
Make sure you buy a Hot property
Real estate is a game of demand and supply.
Real Estate mei lagaane k liye ye dekho k kya furture mei bhi
iss land ki value rahegi kya?
Jaise kya ye hospital, airport k pass hai ya nahi
* Apartments :
Already build - check age & build quality
Before construction - only big builders, avoid small
Eg : DLF, Godrej, Emaar

Newspaper laga lein - financial express, business time

* How to get a real estate at good price ?

1. Government lottery system ex: Noida

2. Upfront cash discount
3. Seller is desperate
4. New upcoming government projects
5. Research
6. 3-4% rental yield + 8-9%
appreciation = 12% total
7. ROE & Loan
8. Larger the land size, cheaper it gets
 Where to keep your money?

* Avoid keeping over 1lakh to 4lakhs* in bank savings account :

-
* Liquid Debt funds or Auto Sweep [Link] : for next 2-3 month expense
FD’s for 6 month to 3 year goals
Ultra Short + Short term : 6 month to 2 years expense

* Equity & real estate* for long term investment

 -
---
Income

6 month to
2-4 month 3 years Long term
expense expense Wealth

Bucket 1 Bucket 2 Bucket 3

Bank account Ultra short + Equity

with automatic Short term or Real Estate*
sweep FD Fixed FD

1-4lakhs 10lakhs to 36 lakhs Check market &

(3 year expense) invest accordingly

For Big Expenses like marriage, car coming in 3-5 years we can use bucket 2
or we can take help of other instruments i.e Equity + Debt (or hybrid funds)

Remember : Best investment is YOU!

* Major Do’s & Don’t

1. Get a term insurance if people are dependent on you.

2. Get a health insurance for yourself & your parents.
3. No to F&O trading & fast money schemes

Employee No 1 —> Self Employed —> Business —> Investor

* Major Warren Buffett’s learnings

1. Never lose money

2. We cannot time the market, but we can value the market.
3. Be fearful when others are greedy & be greedy when others are fearful
4. Margin of Safety
5. We buy great businesses at margin of safety i.e we buy at a discount.
6. Figure out your edge over others
7. When we buy something we assume that the markets are closed for the
next 5 years.
8. Don’t track the price, look at stocks as businesses to own.

Aman Dhattarwal’s learnings

Spend Wisely
1. First earn money then earn more & then become investor.
2. Investment is not our full time job (until you are an HNI or UHNI)
3. Scale & size of investment matters the most ex: Paytm
4. Do your own research, don’t blindly trust media.
5. Real investors won’t broadcast their strategy & A cards.
6. Real estate costs 20% extra when you switch.
7. Businessman are better investors.
8. 100 ways to earn or invest money, pick your few.
9. Few ways to lose money, avoid them.
 Understanding Taxes

* Individual Tax Company Tax (Pvt. Ltd)

Old regime New regime

25% + cess
Complex No 80C hassle On Profits only
No tax till 7lakh
Upto 20% till 15 lakhs
30% above 15 lakhs

* Parents, siblings & in-laws can gift you money & no tax implications.
So, many give salary to mother upto 15 lakhs to avoid 30% tax bracket.

* Capital gains tax on Investments : STCG (short term) : 20%*

LTCG (long term) : 12.5%*
t
* [Link] & bank savings taxed each year
Equity, debt & real estate are taxed on redemption

* [Link], Debt MF are taxed as per income tax slab!

Equity & real estate are taxed as per STCG & LTCG

* 6% to 7% registry tax on purchasing real estate.

* F&O is tax heaven for government &

brokers : very high charges
 Bonus Learnings : via case studies

1. Camellias DLF
2. Upto 10Cr : tax benefit on selling shares/company or house
for reinvestment in residential property. Some term and conditions
3. NRI’s take global health insurance from India
4. No tax on agricultural income
5. Work with the government : future policies
6. Start up India tax benefits
7. A+ employees have more chances to become good businessman

In very long period : 10-40 years

Equity > Real Estate > Gold > Debt MF > FD’s > Bank savings

In shorter period : 1-10 years

Real estate = Equity > Gold > Debt MF > FD’s > Bank savings

Localisation edge
Anticipation edge
No finance education
background required