Life is like a convolution of waters, the creeks merge into a river, the rivers split into tributaries, but the ultimate destination for all is one, eventually they all merge into the sea. Similarly, all the roads in life ultimately converge towards Retirement.

Retirement is the grand finale of every competition. And almost everyone has some retirement fantasies at the back of their minds. We all have given a thought at some point of time about how our retirement life is going to be. Whether you ask a 50 year old or a 30 year old, both of them will have their retirement fantasies in mind. The 50 year old may have a more realistic response to the question, since his retirement is almost a decade away, he can predict the total resources he will have considering the investments he has made for his Retirement, he can see his goals that are coming in between, and he knows how much he can stretch to contribute to the corpus. The 30 year old's retirement dream may be much more extravagant. He may want to live in a beach villa in Goa, he may want to ride a BMW, he may want to go for foreign trips, he wants spend the last years of his life in utmost luxury.

And you know, the 30 year old can do all of this after his retirement. Because he has 30 most productive years of his life in hand. He has all the time in the world, to work his socks off, save and invest more and more, and live all his whims.

So, the sooner you have the answer to the question, greater are the chances that you will live an affluent post retirement life, you will be able to provide to yourself a better quality of life, just by thinking and acting in time.

If you can visualize and plan for your post retirement life at an early age, you are better of because:

• You have the time & power to take decisions and mould your life the way you want to.
• You have the time to prioritize your goals. You can carve out from your other goals to contribute the maximum to your Retirement goal.
• You have the capacity to work more, earn more, and save and invest more. They say, it's easy to shoot the target, when you have the target. When you can see the mirage of your dream retirement, you will run as fast as you can, to bridge the longest laps.
• Your investments will get the maximum time to illustrate their true potential. If invested in the right asset class, the compounding effect can multiply your principal manifold.

Write the Sketch
Take out your diary, and write all what you want to do in your golden years. Write down every figment of your imagination, no matter how flamboyant or unreal it seems. Whether you want to go for a world tour with your spouse, or you want to go back to where you came from, and settle down with your school friends in your hometown. Whether you want to reside around the serene beaches of the Andamans or you want to pursue your passion of nurturing plants and send fresh organic fruits for your grandkids from the backyard of your house. Whatever whims you have, ink them, you have the ability & most importantly time to personify a lot of those whims that may seem unreal today.

Fill the Colours
Once you have your retirement sketch ready, it's time to get into action. Quantify your wishes in monetary terms, the money you would need to go for the world tour, or to buy a beach villa in the Andamans, the money you would need to survive, to meet your everyday expenses, and to maintain your lifestyle. Let's say, today the cost of doing a 2 year long world tour is Rs 1 Crore for a couple, assuming you will retire after 30 years and assuming an average rate of inflation of 5%, the cost of this world tour will be Rs 4.32 Crore, when you retire. To live your dream, you need to start an SIP of just Rs 14,000 a month in an Equity Mutual Fund, assuming a moderate rate of return of 12%, you will have Rs 4.32 Crore for the World Tour when you retire. The point is, you can actualize your fantasy, something which looks unrealistic today, by investing just Rs 14,000 a month.

You can accomplish all your dreams, it's just that you need to think ahead and plan to live your big dreams. Share the agenda of your dreams with your financial advisor and he will guide you through your journey towards those dreams, he will prepare a step by step plan for you to work towards, save and invest for each of your dreams.

To conclude, dream big, stay focused and believe in yourself, you have the power to win the whole world.

Returns Evaluation activity is done by investors quite often. We want to be aware of the clear position of our investments, what is our portfolio return, which investments are faring better than others, etc. There are various measures of return like Absolute Return, CAGR, Annualized Return, IRR, XIRR, etc. used to compute the performance of investment products. In this passage we will concentrate on the applicability of IRR and XIRR methods.

Performance stats of Mutual Fund schemes are generally expressed in terms of CAGR, i.e. compounded annual growth rate or Absolute Return if the period of investment is less than a year. Absolute Return is simply the difference between the beginning and the ending value of your investment, expressed in percentage terms. For Eg. You invested in a Mutual Fund Scheme on 1 Jan 2017, when the NAV was Rs 10, on 1^st July 2017 it is Rs 12, so the absolute return is 20%. Here, the holding period is not taken into consideration. CAGR will give you the compounded annualized return number on your investment, so continuing the above example, if on 1^st July 2019, the NAV grows to 20, then the CAGR is 41.42% from 01 Jan 2017.

However, these formulas have their limitations, they can be used in measuring point to point returns only. If there is a stream of inflows or outflows, like dividends from shares, or SIP investments, etc., then IRR and XIRR formulas should be used to get annualized return.

What is IRR?

IRR or Internal Rate of Return is a method for calculating returns from an investment, where the number of inflows or outflows are multiple. For Example, if you want to calculate the returns from your SIP investment of Rs 5,000 a month which you did for 3 years, it will be cumbersome to calculate the CAGR for each SIP installment, the first installment for 36 months, then 35 months, and so on until 1 month. IRR is a simple formula in excel which you can use to find out the cumulative return on your investment. Or, if you want to compare your SIP investment with any other periodic investment of yours like if you have also been investing in a Recurring Deposit over the same period, you can use the IRR formula to compare the returns from your investments. Your advisor can help you in applying the formula and analyze various returns. If you are an investor with NJ, you don't have to worry about using IRR either for your SIP investment, you can get the IRR number anytime on your investment from your Client Desk.

However, the IRR method can be used only when the inflows or outflows are regular, for irregular cashflows, there is an extension to the IRR formula, called the Extended Internal Rate of Return or XIRR. XIRR can be used in both scenarios, i.e. when the cash flows are regular or whether they are irregular. Now for instance, over these three years you have also invested in gold, lets say you bought Rs 20,000 worth of gold twice and Rs 30,000 worth of gold thrice, and all these investments were done at different time intervals. If you want to evaluate the overall return from your gold investment, then you can use the XIRR formula in excel to arrive at the same. You can also compare the performance of your SIP investment with the gold investment over the same time period, with the XIRR formula.

XIRR for analyzing Portfolio Returns. Investors generally invest in a number of investment products belonging to different asset classes over different time periods. If an investor has a portfolio of Mutual Funds, Bonds, Real Estate, Gold and PPF, and this investor wants to have a holistic picture of the Portfolio performance, so he must analyze his total Portfolio Return. The investor has to enter the purchase prices, the dates of purchase and the present value of all these investments in excel, with the help of the XIRR formula, the investor will have his Portfolio returns number. You can also compare the different investments in the Portfolio with the XIRR formula.

There are various return measures used to depict the performance of different investment products by the investment product providers. But for analyzing and comparing returns on a personal level, the IRR and XIRR formulas come in handy. You can seek help from your financial advisor for using these formulas and evaluating your investments individually, make comparisons or for getting a comprehensive view of your Portfolio.

The first step in financial planning is setting your goals. In fact, the goals serve as the base to any financial plan. Hence one must be extremely careful in setting his/her goals, because it's only when the foundation is strong, the building stands undaunted to the test of time. Hence you must have definite goals which are free from errors.

The subsequent paragraphs will throw light on how you should go about setting your goals, the points you should keep in mind in order to avoid mistakes.

Difference between a Goal and a Financial Goal: The first thing that you must know before goal setting is, understanding the difference between a goal and a financial goal. A goal when quantified in terms of value as well as number of years, becomes a financial goal. Say for instance, you want your daughter to do her masters from Harvards. This is your goal. But when you say, 15 years from now, you need Rs 1 Crore to let your daughter do her masters from Harvards, this is your financial goal. Here, you must be careful in estimating the future cost of the goal, since you need to take into account an appropriate inflation rate. It is advisable that you seek help from a financial advisor for the goal setting process, so that you don't under or over invest for the goal.

Your goals are interdependent: Your goals are separate but not solitary, each goal exercises some impact on another. And putting all your goals together on one excel sheet or a diary, will give you a broad view and will help you prioritize. You may not start investing for all the goals with immediate effect, but at least you have all of them on your to-do list, so that you can take them up gradually. For instance, your near term goal of paying off your credit card outstanding may push your vacation goal from next year to a year ahead. So, after your credit card debt, you can start saving for the vacation.

Not just other goals, your goals are also dependent upon various financial and personal factors like income, expenses, savings, budget, assets, liabilities, number of dependents, etc. For instance, if currently your income is low due to a market slump, and expenses are high as usual, your goal for buying an expensive sedan in two years time may not be realistic. So, either you have to modify the goal to a mediocre hatchback or maybe push the goal horizon from 2 to 5 years. So, your other goals and your personal and financial factors put together will determine your goal realization and will also help you set the horizon.

Goal Horizon and Investment: The horizon of your goal largely determines the investments you choose. There are other factors playing a role too, like your age, income, risk appetite, risk tolerance, etc., but the inverse relation between horizon and risk associated with the investment plays as the thumb rule. For near term goals, it is not apt to invest in risky products, as it may hamper your goal achievement. For long term goals, you can venture into riskier options, with a greater return potential, since you have the leverage of time in hand.

Link your Goals: Once you have set your goals, link your investments to these goals. Goal linking is crucial because it gives you a clear picture of the needs and the gaps, and the investment product you should choose keeping in mind the amount required and the horizon of the goal. Each of your goals must be linked to a fitting investment, your financial advisor will help you in selecting the right product for each goal, which is capable of producing the required amount when the goal arrives.

Review: Like life, relationships, job, health, and a lot of other things, goals are also not static. A lot of factors can result in a change in your goal, your incomes or expense commitments, your preferences may change over time, some goals may no longer remain applicable beyond a point, and some new goals may take over, etc. Also, your long term term goals will eventually become short term goals and you must take the necessary steps to provide for the transition. For Example, your retirement goal which was 15 years away 12 years earlier, is only 3 years hence, so you need to shift your investments into less riskier options to avoid the impact of short term volatility. So, the bottomline is, goals are dynamic and investments must be restructured & realigned to the goals from time to time.

So, the above were few key points which the investors must be mindful of while setting their financial goals.

To conclude, define your goals prudently, and let your goals keep you going!

We are carefree when we have a regular income coming in which is enough to provide for a quality of life that we wish to live. While living in the present attitude is perfect for living a peaceful and positive life, but it helps only until the times are good, when the good times take a U-turn, it hits real hard. Therefore, it makes a lot of sense to be prepared for the worst. According to Warren Buffet, “If you don't find a way to make money while you sleep, you will work until you die.”

This passage focuses on the need to create a source of secondary income, also known as Passive Income, and also highlights the products which you can invest in for generating an extra monthly income for yourself.

Need to Create Passive Income

Emergencies: We generally face financial difficulties in times like Job Loss, Medical or Family Emergencies, Reduction in income due to change in government policies, cyclical fluctuations, etc. Many of us have our Emergency Funds prepared for such untoward situations. But the no or low income period may stretch beyond the Emergency Fund. If you have a source of passive income, it can take care of your survival until you are engrossed with the emergency.

Financial Freedom: Having a source of fixed passive income imparts mental peace and Financial Freedom. Financial Freedom is a state when your expenses are taken care of irrespective of whether you are bringing any new money in the house or not. It's like come what may, no income low income, you will still have money for your daily bread, your kids will still go to school, your normal life will not be interrupted for lack of money. Being financially free let's you live peacefully and positively in real sense and not just a live in the moment attitude.

Post-Retirement: You may or may not need your passive income over your life, you may be lucky and not face any major financial hiccup, but after retirement, passive income becomes a must. You need money:

> To provide for your routine expenses. Regular income is over now.

> To provide for increased healthcare needs. Although, many of us might have insurance covers, the insurance policies will cover treatment for diseases and hospitalization. But the actual medical costs are much higher during old age. There are routine check-ups, medicines, physiotherapy sessions, tests, etc., which are mostly not covered by insurance and are expensive, an MRI alone costs anywhere between 6 -10K. Your passive income will be your best friend after your retirement.

Accelerate your income: Further it's not just about emergencies or extreme situations, having extra money is always nice. It's helps in advancing your standard of living, and lets you spend on stuff which you otherwise might have sacrificed.

How to Create Passive Income

Basically, you need to squeeze more money from your money. You create a portfolio of assets which are capable of generating income for you. It's like a chain, your money works to earn more money for you.

And the concept is not new. One of the primary reasons behind investing in India is generating a source of passive monthly income. We have traditionally been investing in Real Estate, with a view to get a regular rental income, or in Fixed Deposits/Post Office Monthly income schemes, with interest payout options. The interest payout becomes the source of monthly income in this case. But these conventional options have their own set of flaws. In Real Estate, there are hassles like maintenance charges, you may not find a tenant immediately after one leaves so there can be gaps in rental income, rental yields are also low. In case of Fixed Deposits, the interest rates are very low in the range of 6-7%, and that too taxable, so the monthly income will also be low.

There are monthly income options offered by Mutual Funds, like the Dividend Payout option of Mutual Funds and SWP option in balanced funds. These methods are more convenient and than the traditional options, investing is completely hassle free. And the return prospects in Mutual Funds are higher, the last 5 and 10 year returns from the average of balanced Mutual Fund schemes are 15.55% and 11.27% (As on June 30, 2018; Average of 17 schemes). So, even if your SWP is 8% of the principal amount, the extra return gives your investment a chance to grow after you meet your monthly income needs. You can seek help from your financial advisor for guidance on which scheme you should invest in and how much you should invest for your monthly income requirements.