AUGUST 2022 | VOL.

15

THE
ORANGE
BOOK
Leverage your FINANCIAL QUOTIENT
Attaining the elusive financial freedom!
We all crave for financial freedom, the
liberty to spend our time as we wish and
to do things we love!

While there can be different paths to

financial freedom, the basic mantra of
Financial Independence to Retire Early
(F.I.R.E.) remains same:

Earn more, spend less, invest the

surplus and build a perpetual passive
source of income so that you need not
work a job just to earn money!

NORMAL LIFE

0 20 40 60 80
Education Finally retire!
Childhood Work a job

F.I.R.E. LIFE

0 20 50 60 80
Education Live your best life!
Childhood Love your job, save & invest

Financial freedom is IMPORTANT because…

…. it gives you back

CONTROL OF YOUR TIME
the most precious thing in the world!

AUGUST 2022 | VOL.15

The 3 key principles that can help you attain financial freedom are:

You should always aim to increase your income

and savings because more the savings, greater is
the freedom! So start saving early to retire early!

How you invest your savings is as important as

saving money itself! Buying the right income
generating instruments and appreciating assets
is crucial to having a steady passive income!

Financial discipline enables you to utilise your

money efficiently and spend it only when
necessary. While it is important to cut costs, do
not forget to enjoy the journey towards financial
freedom, not just the destination!

Which stage of Financial Freedom are you at?

Stage Condition Borrowings Key Ratios to monitor
I Income < Expense 0
II Income > Expense 0 Total Savings
Savings Ratio = > =30%
Total Income
Emergency Fund = 6 -12 months of expenses
Life Insurance cover
Insurance coverage Ratio = >10
Gross Salary
III Income > > >0 Total Liability
Solvency Ratio = < 50%
Expense Total Asset
EMI
Debt Servicing Ratio = < 40%
Total income
IV Income >>>>> 0
Expense FINANCIAL FREEDOM

To know more about Financial Freedom,

Call your RM at 022 4440 0000 (Express Relationship Banking No.)

AUGUST 2022 | VOL.15

 Helping YOUth manage money!
This International Youth Day (August 12) be well informed
Hey Aria! Salary is here!
What plans?
A big fat NOTHING.
Almost my entire salary
gets eaten up by rent,
house help, ordering in
food, shopping and
subscriptions.

Ouch! But I can understand. I live with my parents,

so I don’t have as many expenses as yours. Thus,
a chunk of my salary stays in my Savings Account. That’s awesome! I feel very
guilty about some of
my…ahem…indulgences now.

You know what? I feel guilty too.

I feel like I shouldn’t be letting my
savings sit idle, you know? I should
inculcate a habit of investing and
increasing my savings.

AUGUST 2022 | VOL.15

 Hey Sid, Aria. Sorry, but I couldn’t
help overhearing what you guys were talking Of course, Reyaan! Once a senior, always a senior,
about. May I interrupt with some advice? right? You’d always helped us back in college too.

Haahahaha Sid’s right! So tell

us - I can hardly save any
money while Sid doesn’t know
how and where to invest his
savings. Two completely
opposite problems,
am I right?

No worries – both your problems can

be solved by something I call LEAD.

L Learn the difference between expenses and investments

For example, buying a car might sound like an investment, but being
a depreciating asset, a car is actually an expense.

E Ensure expenses are kept under control

Make a monthly budget and use budget tracking apps.

A
Assign priorities and the funds required to your life goals
Do you want to bootstrap your own startup in 2 years? Fund your
own destination wedding? Or save funds for your MBA abroad by
age 28?

D
Discuss with your family members, friends or even your
bank to help you achieve your life goals
Family and friends who are 8-10 years older than you can be a
great source of practical advice. You can also approach your bank
and take help of a Relationship Manager to design a portfolio that
suits your goals and your risk appetite.

For any assistance with your Banking needs

Call your RM at 022 4440 0000 WhatsApp ‘Start’ to us on
(Express Relationship Banking No.) 86400 86400
Call us at 1860 120 7777
AUGUST 2022 | VOL.15
Is your retirement pizza well
rounded?
Get the recipe right!
So, what is common between a pizza and retirement planning? They both need a perfect recipe, a
blend of ingredients and right timing. Let’s get ready to make one.

The Get your dough right for that perfect pizza base and
Do u g h estimate your retirement corpus required accurately,
to give a perfect base to your retirement plan.
1 Tips to estimate the required retirement corpus:
Calculate your post Identify your and Don’t forget the
retirement expenses your family’s emergency funds
based on your lifestyle retirement goals needed for
and inflation contingencies

Spin the dough in air for that perfectly rounded pizza base. Do a The
well-rounded 360-degree assessment of your assets and liabilities. Round
Tips to assess your finances: Base
Tag your current investments, Estimate your employer 2
for retirement and other goals retirement corpus
Calculate your current
and future liabilities

The strongest flavour coming out of your pizza is the sauce! Preparing your
The own sauce will give you control on the aroma you desire. Likewise,
Sauce customising your retirement plan will give you the control over your
retirement life.
3 Tips to customise your plan:
Assess the gap in the Optimise your Do goal-based
retirement corpus EMIs and spends investments
Get an optimum Increase your contribution to the
insurance cover Voluntary Provident Fund (VPF)

AUGUST 2022 | VOL.15

 As you choose toppings as per your taste, choose your Add The
investments as per your investment personality, and Toppings
re-balance them periodically.
4

Cheese is the glue that holds the pizza together. To get hold of your
The retirement plan, don’t forget to consolidate your finances.
Cheese
Tips to consolidate:
5 Consolidate your investments, Limit your card usage to
transactions and spends with the top 2 Credit Cards
one bank that align with your post
retirement lifestyle
Get one-view statement Regularly track how
of your finances you are progressing

Whether it’s the spicy chilli flakes or a hint of oregano, these will The Season
in
elevate the taste of your pizza. Makes All g
The Differe
So here are some seasoning tips:
nce
Add nominees, Make your spouse/ family 6
wherever required member, a second holder
Choose ICICI Bank’s iLocker –
to store all your financial details

And with that, you’ve got all the ingredients to ensure that
you enjoy good taste, in your golden years.

AUGUST 2022 | VOL.15

Let’s meet Mr. Sharma & his retirement goals!

Age: 45 years Married with 2 teenage kids

Has a corporate job and lives Owns a car and annually takes
in a 3 BHK house in Mumbai vacations with his family

Mr. Sharma’s retirement goals & objectives:

Kids’ education Stay healthy
Be able to give gifts
Kids’ wedding
to grandchildren
Sustain his current
Give back to society
lifestyle post retirement
Continue travelling Align investments to
with wife generate a steady income
after retirement

What Mr. Sharma has done for his retirement planning:

Consolidated his assets and investments with the help of a financial advisor

Kept his retirement corpus intact

Realigned the portfolio

Prepared a will and ensured nominee registration in all assets and investments

Planned cash flows post retirement with the help of his financial advisor

Like Mr. Sharma you can also start planning your retirement!

START YOUR RETIREMENT PLANNING HERE

AUGUST 2022 | VOL.15

 Passive Investing: A long term bet?
Investors have two main investment strategies to generate returns on their investment, passive
investing and active investing.

Passive Active
Passive investing minimises Active investing requires
buying and selling activity and frequent buying and selling
replicates a specific benchmark Investment Strategy
or index (like the Nifty 50 index)

Actively managed fund

Passive funds are cheaper
have higher expense ratio
and have lower expense
Cost compared to passive funds
ratio

Replicating benchmark/ Outperform benchmark/

Objective
index returns index returns

Why passive investing is on the rise?

Significant reforms on information
disclosure by companies
Improved trading SEBI categorisation of
infrastructure Mutual Fund Schemes
Decrease in
Information
Asymmetry
Better research Strong guidelines
coverage around FIIs and FPIs#

Increase in
Stock market
Higher participation from Price discovery much
efficiency
retail, domestic institutional more efficient
and foreign portfolio investors
Indices are expected
to become liquid #
FIIs - Foreign Institutional Investors
FPIs - Foreign Portfolio Investors

*ICICI Bank Limited is a AMFI Registered Mutual Fund Distributor. Mutual Fund investments are subject to market risk. Read all scheme related
documents carefully. T&C Apply.
AUGUST 2022 | VOL.15
 Growth in Passive Investing
100 70,000
90
60,000
80
70 50,000
60 40,000
50
40 30,000
30 20,000
20
10,000
10
0 0
Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22

No. of Schemes Available AUM (Rs. Cr)

Source: This data has been derived and compiled from ACE MF.
AUM and scheme count does not include ETFs.

`
Mid-Cap Index Funds
Midcaps can be volatile but can also give
higher returns in the longer run. The options
` here are Nifty Midcap 150 and Nifty Midcap 50 `

Large Cap Index Funds International Index Funds

These would include For most investors, having
Nifty 50, Sensex a US-based S&P500 index
fund (or NASDAQ-based if
Passive you are willing to accept more
Fund risk and volatility) is sufficient
and offers good exposure to
`
options developed markets
`
Sectoral Funds & Gold
Nifty IT, Nifty Bank, Nifty Healthcare,
Nifty Auto, Nifty CPSE, Bharat 22 Smart beta Strategies
and Gold Funds are some of the Nifty Alpha Low Volatility,
thematic Funds Nifty Equal Weight

*ICICI Bank Limited is a AMFI Registered Mutual Fund Distributor. Mutual Fund investments are subject to market risk. Read all scheme related
documents carefully. T&C Apply.
AUGUST 2022 | VOL.15
 Advantages of Passive Investing

`
`

Lower fees and operating Passive investing via indexing

expenses than actively is an excellent way to achieve
managed funds diversification

Passive investing is subject Simplicity: Owning an index, or

to total market risk Vs an group of indices is far easier to
individual portfolio manager risk implement and comprehend than
a dynamic strategy that requires
regular monitoring and rebalancing

A little variation from traditional passive investing

(Smart Beta Strategies) adds a pinch of active
management in passive funds while keeping all
advantages of passive funds intact

Disadvantages of Passive Investing

Fully invested all the There is no possibility

Lack of flexibility
times (No cash calls) of any alpha generation

*ICICI Bank Limited is a AMFI Registered Mutual Fund Distributor. Mutual Fund investments are subject to market risk. Read all scheme related
documents carefully. T&C Apply.
AUGUST 2022 | VOL.15
 Active vs. Passive Funds – Experience of last ten years
Annualised return for last ten years for Actively Managed Mutual Funds (Blended) is 13.73%
while for Passively Managed Nifty 50 Index Fund (representative of Passive Funds) is 12.36% p.a.

However, each year, the experience can be different. Thus, Active Funds outperformed Passive
Funds (Nifty 50 in this case) from 2012 to 2017 and then in last two years. But between mid
2017 to mid 2020, Active Funds underperformed Passive Funds. In last five years, on an overall
basis, Passive Funds have marginally outperformed Active Funds.
Source: This data has been derived and compiled from ACE MF.

All returns are absolute. Actively Managed Mutual Funds (Blended) is an equal weight average of 10 Largecap MF Schemes and
passive is a Passively Managed Nifty 50 Index Fund.

It is suffice to conclude that there are times when Passive Funds have outperformed actively
managed funds and vice-a-versa. Hence, it needs to be carefully decided when and how much to
invest in Passive Funds for which your investment advisor can help.

For any assistance with your Banking needs

Call your RM at 022 4440 0000 WhatsApp ‘Start’ to us on
(Express Relationship Banking No.) 86400 86400
Call us at 1860 120 7777

*ICICI Bank Limited is a AMFI Registered Mutual Fund Distributor. Mutual Fund investments are subject to market risk. Read all scheme related
documents carefully. T&C Apply.

ICICI Bank is not acting as your financial adviser or in a fiduciary capacity in respect of this proposed transaction with you unless otherwise expressly
agreed by us in writing. The contents of this document do not take into account your personal circumstances. Before entering into any transaction you
should take steps to ensure that you understand the transaction and have made an independent assessment of the appropriateness of the transaction
in the light of your own objectives and circumstances, including the possible risks and benefits of entering into such transaction.

The material in this document is derived from sources ICICI Bank believes to be reliable but which have not been independently verified. In preparing
this document, ICICI Bank has relied upon and assumed, the accuracy and completeness of all information available from public sources and claims no
ownership of the same. ICICI Bank makes no guarantee of the accuracy and completeness of factual or analytical data and is not responsible for errors
of transmission or reception and hereby disclaim any liability with regard to the same.

AUGUST 2022 | VOL.15

When you SAVE, you EARN
Earning is usually referred to income whether from salary or business profit. Of that money, we
spend some and save some. While the money saved is invested in a diverse portfolio, spending is
pure expense. What if we could save while spending, wouldn’t that be equal to earning as the
amount was earmarked for expense!

The way to save while spending is looking for offers in the market. There are two kinds
of offers:
Product Offers
Where merchants present offers on products sold during different seasons.

Bank Offers
Banks give additional offers on payment channels such as Credit Card/ Debit Card
and Internet Banking.

Illustration*:
A 3 night stay at a 4 star hotel in Goa for the Independence Day weekend
Price: `35,000 on MakeMyTrip
Offer: Flat 15% off up to `5,000 on using ICICI Bank Credit Card and
promo code : ICICILUXURY
Savings: `5,000 = Interest on maintaining a balance of `1.43 lakh for
a year in Savings Account
OR
Interest on an FD of `2.66 lakh maintained for 6 months

Now check out all Monsoon Bonanza offers to see how much of Fixed Deposit earnings you will
end up saving in a month.

CHECK OFFERS TO SAVE

*Hotel price is indicative. Rate of interest taken for Savings Account is 3.5%. Rate of Interest taken for Fixed Deposit is 3.75%. Interest
rates are subject to change. Offers T&C Apply.
AUGUST 2022 | VOL.15
 Quiz
It’s time to test your knowledge now. Take a
short and simple quiz based on what we have
covered in The Orange Book, so far.

TEST YOUR KNOWLEDGE

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Connect with us for banking solutions:

: Call us on 1860 120 7777

: WhatsApp ‘Start’ to
86400 86400

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AUGUST 2022 | VOL.15