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A Study Of Financial PlanningL.J Institute Of Engineering & Technology1 A Study Of Financial Planning Pestel Model There are many factors in the macro-environment that will effect the decisions of the managers of any organization. Tax changes, new laws, trade barriers, demographic change and government policy changes are all examples of macro change. To help analyze these factors managers can categories them using the PESTEL model. This classification distinguishes between: Political Legal PESTEL MODEL Economica l Technologi cal Social L.J Institute Of Engineering & Technology2 A Study Of Financial Planning • Political factors: These refer to government policy such as the degree of intervention in the economy. Political decisions can impact on many vital areas for business such as the education of the workforce, the health of the nation and the quality of the infrastructure of the economy such as the road and rail system. • Economic factors: These include interest rates, taxation changes, economic growth, inflation and exchange rates. As you will see throughout the "Foundations of Economics" book economic change can have a major impact on a firm's behavior. For example: - higher interest rates may deter investment because it costs more to borrow - a strong currency may make exporting more difficult because it may raise the price in terms of foreign currency - inflation may provoke higher wage demands from employees and raise costs. - higher national income growth may boost demand for a firm's products. • Social factors: Changes in social trends can impact on the demand for a firm's products and the availability and willingness of individuals to work. In the UK, for example, the population has been ageing. This has increased the costs for firms who are committed to pension payments for their employees because their staff are living longer. It also means some firms such as Asda have started to recruit older employees to tap into this growing labour pool. The ageing population also has impact on demand: for example, demand for sheltered accommodation and medicines have increased whereas demand for toys is falling. L.J Institute Of Engineering & Technology3 Technology can reduce costs. MP3 players. improve Quality and lead to innovation. an increase in the minimum wage and greater requirements for firms to recycle are examples of relatively recent laws that affect an organization’s actions. L.A Study Of Financial Planning • Technological factors: New technologies create new products and new processes. bar coding and computer aided design are all improvements to the way we do business as a result of better technology. The growing desire to protect the environment is having an impact on many industries such as the travel and transportation industries (for example. online gambling and high definition TVs are all new markets created by technological advances. Online shopping. more taxes being placed on air travel and the success of hybrid cars) and the general move towards more environmentally friendly products and processes is affecting demand patterns and creating business opportunities.J Institute Of Engineering & Technology4 . With major climate changes occurring due to global warming and with greater environmental awareness this external factor is becoming a significant issue for firms to consider. • Environmental factors: Environmental factors include the weather and climate change. computer games. The introduction of age discrimination and disability discrimination legislation. Changes in temperature can impact on many industries including farming. These developments can benefit consumers as well as the organizations providing the products. In recent years in the UK there have been many significant legal changes that have affected firms' behavior. • Legal factors: These are related to the legal environment in which firms operate. tourism and insurance. L.J Institute Of Engineering & Technology5 . the aim is to find a lucrative and defensible niche for the organization.A Study Of Financial Planning Five Force Model Of Michel Porter In porters view. an organizations ability to compete in a given market is determined by that organizations technical and economic resource. each of which threatens the organizations venture into a new market. The strategic manager says porter must analyze these forces and prapose a program for influencing or deducting against them. as well by environmental “forces”. postal service for similar service.  Bargaining power of buyers: Keep prices within x present of UPS and U.  Threats of substitute products: Watch out for MCI and AT&T.  Rivalry among competitors: Watch UPS advertising campaigns and monitor postal service labour contracts.A Study Of Financial Planning  Threats of new competitors: Keep an eye on what American airlines and united airlines might to expand their cargo service into new market.s L. with their global telecommunication presences and newly enhanced network capacities. to get favorable aircraft delivery slots.J Institute Of Engineering & Technology6 .S.  Bargaining power of suppliers: Discuss operating plans for acquiring new jet aircraft with manufacturer such as Boeing. Seek new variations on delivery service “next day” might not suit everyone’s budget. Using these steps you can work out where you are now. Likewise. financial planning is the process of meeting your life goals through proper management of your finances. saving for your children’s education or planning for retirement. Financial planning involves deciding what investments and activities would be most appropriate under both personal and broader economic circumstances. The process of determining a person’s or firm’s financial needs or goals for the future and the means to achieve them. Financial planning is simple mathematics.A Study Of Financial Planning FINANCIAL PLANNING Financial planning is a systematic approach whereby the financial planner helps the customer to maximize his existing financial resources by utilizing financial tools to achieve his financial goals. L. It is a process that consists of specific steps that help you to take a big-picture look at where you are financially. There are 3 major components: • • • Financial Resources (FR) Financial Tools (FT) Financial Goals (FG) When you want to maximize your existing financial resources by using various financial tools to achieve your financial goals that is financial planning. All things being equal. what you may need in the future and what you must do to reach your goals. Financial Planning: FR + FT = FG In other words. short-term financial plans are more easily amendable in case something goes wrong as a result of the short time frame. short-term financial planning involves less uncertainty than long-term financial planning because. generally speaking.J Institute Of Engineering & Technology7 . market trends are more easily predictable in the short term. Life goals can include buying a home. The planner can take a `big picture` view of your financial situation and make financial planning recommendations that are right for you. L. investments. the planner may work with you on a single financial issue but within the context of your overall situation. The financial planner is the best friend you need to advice you on ways of achieving financial goals. He is a client-oriented professional who works in the best interest of customers. A planner is a coordinator who works with others in making the planning process work. insurance and retirement planning. taxes.A Study Of Financial Planning What Does A Financial Planner Do? A financial planner is someone who uses the financial planning process to help you figure out how to meet your life goals. Or. This big picture approach to your financial goals sets a financial planner apart from other financial advisers who may have been trained to focus only on a particular area of your financial life. When you have a professional relation ship with a planner that does not mean that he replaces other professionals such as lawyers or accountants. The planner can look at all of your needs including budgeting and saving.J Institute Of Engineering & Technology8 . Start with a top down approach. buying a house. sets goals for the future and creates a plan to achieve those goals. educating your children Understand the trade offs Lesser money in the short term for clothing. Setting Goals • • Identify your goals Buying a new car. taking a vacation. • • • • • • • Total assets + Total savings – Total debt = Your position Work it down further by doing a cash flow analysis Monthly income – Monthly expenses = Your cash flow Further analyse your expenditure in more detail Where are you spending money? Clothing. Do the following to ascertain your position. eating out Identify opportunities to save money Eg: eating out lesser could save you Rs 1000 per month.A Study Of Financial Planning The concept of financial planning What is Financial Planning? Financial Planning is a process that Reviews your current financial position. entertainment. Reviewing your Finances You should begin with a review of your current financial position. entertainment etc Set clear targets and time frames to achieve your goals Saving Rs 2000 per month will help educate your children L.J Institute Of Engineering & Technology9 etc • • • • . so it is important to review your plan if any of the Your circumstances change Through marriage. Tips To Stay On Track: • • • • • Stay focused on your lifestyle goals Don’t be distracted by fear or greed Diversify your investments according to your risk profile Keep a long term view Review your plan regularly .J Institute Of Engineering & Technology10 . new dependants etc Your rules change Through taxation etc Investment climate changes following • • • • • Through market boom and busts. Creating a Financial Plan • • • • • • • Include a mix of short and long term goals Convert your goals into rupee amount and set a deadline to achieve them Diversify your investments according to your risk profile Look for ways to minimize tax Don’t forget insurance Start retirement planning Get professional advice in required Review your plan • Life is always changing.A Study Of Financial Planning Saving Rs 1000 per month will help fund your vacation. L. Why should you make a financial plan? Financial planning provides direction and meaning to your financial decisions.A Study Of Financial Planning Who requires Financial Planning? It is useful to everyone. as it will help them in prioritizing their goals so that their limited income can be used more efficiently. There are many instances of highly paid employees who came to financial grief merely because they did not plan for their post-career years. buying a particular investment product might help you save adequately to finance your child's higher education or it may provide enough for a comfortable retirement.J Institute Of Engineering & Technology11 . Similarly even people earning small amounts of income should undertake this process. their present priorities and the products that are most suitable to meet their needs. Very few can consider themselves too rich to engage in Financial Planning. L. It allows you to understand how each financial decision you make affects other areas of your finances. You can also adapt more easily to life changes and feel more secure that your goals are on track. The planner can take a 'big picture' view of your financial situation and make financial planning recommendations that are right for you. The key function of a financial planner is to help people identify their financial planning needs. Who is a financial planner? A financial planner is someone who uses the financial planning process to help you determine how to meet your life goals. For example. A Study Of Financial Planning What should a financial plan include? A financial plan should include a review of your net worth, goals and objectives, investment portfolio, cash flow, investments, retirement planning, tax planning and insurance needs, as well as a plan for implementing your goals. L.J Institute Of Engineering & Technology12 A Study Of Financial Planning THE FINANCIAL PLANNING PROCESS: 1. Setting Financial Goals:  Financial planner informs client on proper financial goals.  Set out goals relevant to the interest of the client. 2. Gathering Relevant Data:  The planner leads the client through the process.  Collect financial information needed to generate a proper financial proposal.  Use the Financial Wizard to enhance the data gathering process. L.J Institute Of Engineering & Technology13 A Study Of Financial Planning 3. Analysis of Data:  The data will tell the financial situation of the client.  Relate the current situation to the financial goals.  Prioritize the financial goals according to current ability and available resources. 4. Recommendation of Financial Plan:  The planner sets out and develops a set of recommendations to help the client Once the client selects the most suitable and agreeable idea, funding will be achieve financial goals.  explored to help implement the financial plan. 5. Implementation of Financial Plan:  tools.  Client must be motivated to be responsible in going ahead with the plan. The planner will help the client to take action through the most appropriate financial 6. Monitoring of Financial Plan:   The financial plan must be constantly reviewed. From time to time, comparisons must be made between the plan objectives and the original financial goals. L.J Institute Of Engineering & Technology14 This allows one to be able to venture into various portfolio investments. With a strong capital base.  Cash flow : To increase cash flow and monitor spending habits and expenses. This will help as part of the cash can be preserved for long term use. part of the earning will go for tax payment. careful budgeting and prudent spending are aspects that need to be paid attention to in generating cash flow. expenditure and what’s left would be the saving. Tax planning. it means an increase in capital base too. proper management of income is necessary in increasing cash flow. Regardless of the amount of income earned.  Capital: To build a long term capital-base and shape your financial future. one can have a wider portfolio of investment. The cash and need analysis and income expenditure budgeting will show the best way possible in managing income.A Study Of Financial Planning The Importance of Financial Planning  Income: To manage income more efficiently. Thus. Financial planning will help in determining what should be done to generate cash flow in order to make investing possible.  Investment: L.J Institute Of Engineering & Technology15 . Once there is an increase in cash flow. A good investment planning can turn goals from dreams into realities. inflation effects must be considered too. This can have a greater effect on investment success. the effect of each financial decision is understood. Financial planning can help in evaluating the best investment opportunities.  Financial understanding: To get a whole new approach to budgeting and gain control over your financial lifestyle. One can evaluate the level of risk in an investment portfolio or adjust a retirement plan due to changing family circumstances for example. One can create a personal and family financial plan so that there are clearly defined goals or targets and there is enough savings to get there. It becomes obvious that financial understanding has been attained when measurable financial goals are set.  Family security To provide for your family’s financial security with proper coverage through right kind of policies. one L. Today.J Institute Of Engineering & Technology16 . How much income should one plan in needing for the family’s financial security? In doing these projections. For example. The good old days when a worker retired with a nice pension seem to be gone now.  Standard of living: To maintain your family’s present standard of living by maximizing the household insurance portfolio.A Study Of Financial Planning To identify investment opportunities relevant to your financial situation. This is where financial planning can be of help. the financial situation is periodically evaluated. it shows how to allocate money among different type of investment. one needs to take charge and plan for the family’s future security. Apart from picking the `right` Investment. financial planning is done as soon as possible with realistic expectations and ultimately when one realizes that only he or she is fully in charge of it. It allows an understanding of how financial decisions made can affect other areas of finances. An emergency fund for example might be be ideal.J Institute Of Engineering & Technology17 . In order to determine the true worth of any asset. But sudden financial changes can still throw one off the track. Financial planning will provide directions and meaning to one’s financial decisions. By viewing each financial decision as part of a whole. many fail to realize that it usually comes with a liability package. Savings bank or money market accounts are examples of investment with high liquidity. be ready for any unexpected occurrences. In the process of accumulating assets. a systematic and organized saving and investment plan can be provided to fund children’s education and secure a comfortable retirement and on top of that. This can ensure that the family remains financially secure if the head of the family or the bread winner dies. Otherwise. It means that it should be very easy to convert that fund into cash. the true value of the assets would be of use and help for the heirs. or cancelled.  Financial security and mastery: To assist you and your family to attain the ultimate objective of financial security and mastery. assets can easily mean unwanted or unexpected financial burden. the liabilities need to be settled. the short and the long L. Thus. This way. Only then.  Savings: It used to be called saving for a rainy day.A Study Of Financial Planning can make sure that there is enough disability coverage to replace any lost income. the family’s standard of living doesn’t suffer and is maintained. It has to be always very liquid.  Assets: To insure assets accumulation and liability cancellation to leave the maximum amount of wealth to your heirs. This will help in adapting more easily to life changes and feel more secure financially.J Institute Of Engineering & Technology18 .A Study Of Financial Planning term effects on one’s life goals can be considered. knowing that financial mastery has been achieved. L. 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non. L. Second Phase . At the end of 1988 UTI had Rs.1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. at the initiative of the Government of India and Reserve Bank the. Indian Bank Mutual Fund (Nov 89).UTI. the mutual fund industry had assets under management of 47000 carores.6.700 crores of assets under management. At the end of 1993. The first scheme launched by UTI was Unit Scheme 1964.J Institute Of Engineering & Technology19 . Bank of India (Jun 90). Bank of Baroda Mutual Fund (Oct 92).UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. Punjab National Bank Mutual Fund (Aug 89). SBI Mutual Fund was the first non. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI.A Study Of Financial Planning MUTUAL FUND History: The mutual fund industry in India started in 1963 with the formation of Unit Trust of India. The history of mutual funds in India can be broadly divided into four distinct phases Phase . public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). 805 crores.541 crores of assets under management was way ahead of other mutual funds. 1993 was the year in which the first Mutual Fund Regulations came into being. the assets of US 64 scheme.835 crores as at the end of January 2003. Fourth Phase . L. As at the end of January 2003. there were 33 mutual funds with total assets of Rs. a new era started in the Indian mutual fund industry.29.1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993. functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs. 1993.A Study Of Financial Planning Third Phase . The Unit Trust of India with Rs. representing broadly. except UTI were to be registered and governed. assured return and certain other schemes.21.The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. giving the Indian investors a wider choice of fund families. with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. The Specified Undertaking of Unit Trust of India. The number of mutual fund houses went on increasing. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July. following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities.J Institute Of Engineering & Technology20 . The industry now functions under the SEBI (Mutual Fund) Regulations 1996.44. Also.since February 2003 In February 2003. 1. under which all mutual funds. which manage assets of Rs. PNB. It is registered with SEBI and functions under the Mutual Fund Regulations. As at the end of September.76. BOB and LIC.000 crores of assets under management and with the setting up of a UTI Mutual Fund. conforming to the SEBI Mutual Fund Regulations.J Institute Of Engineering & Technology21 . With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs. sponsored by SBI. 2004. the mutual fund industry has entered its current phase of consolidation and growth. The graph indicates the growth of assets over the years. GROWTH IN ASSETS UNDER MANAGEMENT L. and with recent mergers taking place among different private sector funds.A Study Of Financial Planning The second is the UTI Mutual Fund Ltd.153108 crores under 421 schemes. there were 29 funds. debentures and other securities based on their objective.A Study Of Financial Planning What is a Mutual Fund? A Mutual Fund is a trust that pools together the savings of a number of investors who share a common financial goal.J Institute Of Engineering & Technology22 . L. The money collected is then invested in capital market instruments such as shares. The income earned through these investments and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by the investors. L. Each Mutual Fund scheme has a defined investment objective and strategy.J Institute Of Engineering & Technology23 . If you don’t have the time. with precious little time for a walk in the park or settling down with a good book. derivatives and other assets have become mature and information driven. consider investing in mutual funds. real estate. The income earned through these investments and the capital appreciation realized bu the scheme is shared by its unit holders in proportion to the number of units owned by them (pro rata). Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified. A mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. Further there are different categories of mutual funds to meet your diverse set of financial needs. leave alone taking time from one’s busy life schedule to make and monitor wise personal investment decisions.A Study Of Financial Planning INDUSTRY DETAILS These days life seems to be more complicated than ever. Markets for equity shares. Anybody with an inventible surplus of as little as a few thousand rupees can invest in Mutual Funds. These could range shares to debentures to money market instruments. bonds and other fixed income instruments. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. A Mutual Fund is the ideal investment vehicle for today’s complex and modern financial scenario. the inclination or the expertise to make and manage investments in the complex equity or the debt markets directly. professionally managed portfolio at a relatively low cost. SEBI looks at track records of the sponsor and its financial strengths in grating approval to the fund for commencing operations. A draft offer document is to be prepared at the time of launching the fund. In fact. the costs involved in the process and the broad rules for entry into and exit from the fund and other areas of operation. brokerage dues and bank transactions etc. Mutual Funds gained popularity only after the Second World War. investments. understand their implication and act speedily. It appoints professionally qualified and experienced staff that manages each of these functions on a full time basis. these sponsors need approval from a regulator.J Institute Of Engineering & Technology24 . Typically. it pre specifies the investment objectives of the fund. In effect. skills. as in most countries. the risk associated. inclination and time to keep track of events. L.A Study Of Financial Planning Price changes in these assets are driven by global events occurring in far away places. the Mutual Fund vehicle exploits economies of scale in all three areas – research. Globally. A Mutual Fund is the answer to all these situations. the Mutual Fund in its present form is a 20th century phenomenon. The large pool of money collected in the fund allows it to hire such staff at a very low cost to each investor. investments and transaction processing. A typical individual is unlikely to have the knowledge. While the concept of individuals coming together to invest money collectively is not new. An individual also finds it difficult to keep track of ownership of his assets. In India. there are thousands of firms offering tens of thousands of Mutual Funds collectively manage almost as or more money as compared to banks. In many cases a sponsor can hold a 100% stake in the Asset Management Company (AMC). In the Indian context.A Study Of Financial Planning A sponsor then hires an asset management company to invest the funds according to the investment objective. in which it holds a majority stake..g.J Institute Of Engineering & Technology25 . E. which has floated different Mutual Funds schemes and also acts as an asset manager for the funds collected under the schemes. There are certain Benefits of the mutual fund: Reduction in transaction costs Liquidity Portfolio Diversification Flexibility Benefits Equity Research Stability to the stock market Convenience Tax Benefits L. Birla Global Finance is the sponsor of the Birla Sun Life Asset Management Company Ltd. the sponsors promote the Asset management Company also. It also hires another entity to be the custodian of the assets of the fund and perhaps a third one to handle registry work for the unit holders (subscribers) of the fund. It is advisable that an investor looking to invest in an equity fund should invest for long term i. Debt funds are low risk profile funds that seek to generate fixed current income (and not L. but they also provide higher returns than other funds. financial institutions.) are known as Debt / Income Funds. banks. There are different types of equity funds each falling into different risk bracket. for 3 years or more.J Institute Of Engineering & Technology26 . In the order of decreasing risk level. Equity Funds: Equity Funds are considered to be the more risky funds as compared to other fund types. Debt/Income Funds: Funds that invest in medium to long-term debt instruments issued by private companies.A Study Of Financial Planning Types of Mutual Funds 1. governments and other entities belonging to various sectors (like infrastructure companies etc.e. there are following types of equity funds: a) b) c) d) e) f) g) h) i) j) k) Aggressive Growth Funds Growth Funds Specialty Funds Sector Funds Foreign Securities Funds Mid-Cap or Small-Cap Funds Option Income Funds Diversified Equity Funds Equity Index Funds Value Funds Equity Income or Dividend Yield Funds 2. Guilt Funds: Also known as Government Securities in India.A Study Of Financial Planning capital appreciation) to investors. Although debt securities are generally less risky than equities. a) b) c) d) e) f) Diversified Debt Funds Focused Debt Funds High yield Debt funds Focused Debt Funds Assured Return Funds Fixed Term Plan Series 3. These securities are highly liquid and provide safety of investment. However. However. even money market / liquid funds are exposed to the interest rate risk. In order to ensure regular income to investors. gilt funds too are exposed to interest rate risk. these investments have little credit risk (risk of default) and provide safety of principal to the investors. 4. they are subject to credit risk (risk of default) by the issuer at the time of interest or principal payment. The typical investment options for liquid L. Interest rates and prices of debt securities are inversely related and any change in the interest rates results in a change in the NAV of debt/gilt funds in an opposite direction. Issued by the Government of India. like all debt funds. Gilt Funds invest in government papers (named dated securities) having medium to long term maturity period. thus making money market / liquid funds the safest investment option when compared with other mutual fund types. Money Market / Liquid Funds Money market / liquid funds invest in short-term (maturing within one year) interest bearing debt instruments.J Institute Of Engineering & Technology27 . A Study Of Financial Planning funds include Treasury Bills (issued by governments), Commercial papers (issued by companies) and Certificates of Deposit (issued by banks). 5. Hybrid Funds As the name suggests, hybrid funds are those funds whose portfolio includes a blend of equities, debts and money market securities. Hybrid funds have an equal proportion of debt and equity in their portfolio. There are following types of hybrid funds in India: a) b) c) Balanced Funds Growth-and-Income Funds Asset Allocation Funds 6. Commodity Funds Those funds that focus on investing in different commodities (like metals, food grains, crude oil etc.) or commodity companies or commodity futures contracts are termed as Commodity Funds. A commodity fund that invests in a single commodity or a group of commodities is a specialized commodity fund and a commodity fund that invests in all available commodities is a diversified commodity fund and bears less risk than a specialized commodity fund. “Precious Metals fund” and Gold funds (that invest in gold, gold futures or shares of gold mines) are common examples of commodity funds. 7. Real Estate Funds Funds that invest directly in real estate or lend to real estate developers or invest in shares/securitized assets of housing finance companies, are known as Specialized L.J Institute Of Engineering & Technology28 A Study Of Financial Planning Real Estate Funds. The objective of these funds may be to generate regular income for investors or capital appreciation. 8. Exchange Traded Funds (ETF) Exchange Traded Funds provide investors with combined benefits of a closedend and an open-end mutual fund. Exchange Traded Funds follow stock market includes and are traded on stock exchanges like a single stock at index linked prices. The biggest advantage offered by these funds is that they offer diversification, flexibility of holding a single share (tradable at index linked prices) at the same time. Recently introduced in India, these funds are quite popular abroad. 9. Fund on Funds A scheme that invests primarily in other schemes of the same mutual fund or other mutual funds is known as a FoF scheme. A FoF scheme enables the investors to achieve greater diversification through one scheme. It spreads risks across a greater universe. Loads: • Entry Load/Sale Load It is the charge imposed on the investor at the time his entry into the fund. Thus, the investor has to pay for the value of the units plus an additional charge. This additional charge is called the entry/sale load. • Exit Load/Repurchase Load L.J Institute Of Engineering & Technology29 A Study Of Financial Planning It is the charge imposed on the investor at the time of his exit from the scheme. Operationally, therefore, the mutual fund will pay back to the investor the value of the units reduced by the charge levied on exit. Formation or Organization of Mutual Funds Sponsor ↓ Trusty ↓ Mutual Fund (trust) ↓ Asset Mgt Company ↓ Fund Manager ↓ Mutual fund Agent ↓ Other agencies 1) Custodial (Depository participant) 2) Bankers Etc L.J Institute Of Engineering & Technology30 A Study Of Financial Planning A NUMBER OF MUTUAL FUND HOUSES WORKING IN INDIA L.J Institute Of Engineering & Technology31 . A Study Of Financial Planning L.J Institute Of Engineering & Technology32 . J Institute Of Engineering & Technology33 .A Study Of Financial Planning L. In 1993 the government of republic of India appointed R. Life insurance in India was nationalized by incorporating life insurance corporation (L.I.J Institute Of Engineering & Technology 34 . The event insured against is sure to happen only the time of its happening is not known. N. the payment for life insurance policy is certain. In case of life insurance.A Study Of Financial Planning INSURANCE LIFE INSURANCE Life insurance is the fastest growing sector in India since 2000 as government allowed private players F.D. All private life insurance companies at that time were taken over by LIC.C) in 1956. Concept of Life InsuranceLife insurance is a contract under which the insurer (Insurance Company) in consideration of a premium paid undertakes to pay a fixed sum of money on the death of the insured or on the expiry of a specified period of time whichever is earlier.I up to 26%. Malhotra committee to log down a road map for privatization of the life insurance sector. So L. These plans are covering life insurance as well as investment options. Indian life insurance industry overview:All life insurance companies in India have to follow the strict regulations laid out by insurance regulatory and development authority of India (IRDA).C owned by government is the largest player in the market among the private sector player. ICICI prudential life insurance is the largest followed by Bajaj Allianz life insurance company ltd. L. General Insurance and 3. On death of the person insurance offers protection against loss of income and compensate the titleholders of the policy. Types of Insurance The insurance from business point of view can be categorized into: 1.J Institute Of Engineering & Technology 35 . L.A Study Of Financial Planning life insurance is known as ‘Life Assurance’. Life insurance provides risk coverage to the life of a person.I. The private companies are coming out with more beneficial to the customer such as products like the ULIP’s or the Unit Linked Investment Plans. ICICI prudential is rated by Fitch India at national insurer financial strength rating of AAA (Ind) with stable outlook indicating the highest claims paying ability rating. Social Insurance. Life Insurance 2. The subject matter of insurance is life of human being. Health Insurance Schemes .Annuity policy . The insurer will pay the fixed amount of insurance at the death or at the expiry of certain period.Whole life Policy .Endowment Life Policy .A Study Of Financial Planning (1) Life Insurance:Life Insurance is different from other insurance in the sense that the subject matter of insurance is life of human being. This insurance provides protection to the family at the premature death or gives adequate amount at the old age when earning capacities are reduced.J Institute Of Engineering & Technology 36 .Joint Life Policy .With profit and without profit policy .Double accident benefit policy . life insurance enjoys maximum scope because each and every person requires the insurance. Types of insurance plans offered in our country: Term Policy . At present.Policies for women L. J Institute Of Engineering & Technology 37 . The strictest form of liability insurance is fidelity insurance whereby the insurer compensates the loss to the insured when he is under the liability of payment to the third party. theft.Personal accident policy .Fire insurance policy L. Types of insurance policies available are: .Worker’s compensation .Automobile insurance .A Study Of Financial Planning IMPORTANCE OF LIFE INSURANCE Importance Protection against untimely death Initiates Investments Saving for old age Promotion of savings Credit Worthiness Social Security Tax Benefit (2) General Insurance: The general insurance includes property insurance. liability insurance and other forms of insurance. Fire and marine insurance comes under property insurance.Business insurance . fidelity and machine insurances to a certain extent. Liability insurance includes motor.Medi-claim policy .Aviation insurance .Group insurance policy .Liability insurance .Health insurance . Pension plan. sickness insurance and industrial insurance are the various forms of social insurance. L.J Institute Of Engineering & Technology 38 . 12) AMP Sanmar Assurance Company Ltd. Life Insurance Players in India: 1) Alliance Bajaj Life Insurance Company Limited 2) Birla Sun Life Insurance Company Limited 3) HDFC Standard Life Insurance Company Limited 4) ICICI Prudential Life Insurance Company Limited 5) Life Insurance Corporation of India Limited 6) Tata AIG Life Insurance Company Limited 7) SBI Life Insurance Company Limited 8) OM Kotak Mahindra Insurance Company Limited 9) Max New York Life Insurance Company Limited 10) ING Vyasya Life Insurance Company Ltd.A Study Of Financial Planning (3) Social Insurance: The social insurance is to provide protection to the weaker sections of the society who is unable to pay the premium for adequate insurance. 11) Aviva Life Insurance Company Ltd. unemployment benefits. disability benefits. A Study Of Financial Planning Non .Life Insurance Players in India: 1) Bajaj Allianz General Insurance Company Limited 2) ICICI Lombard General Insurance Company Limited 3) IFFCO-TOKIO General Insurance Company Limited 4) National Insurance Company Limited 5) New India Assurance Company Limited 6) Oriental Insurance Company Limited 7) United India Insurance Company Limited 8) Tata AIG General Insurance Company Limited 9) Royal Sundaram General Insurance Company Limited 10) Cholamandalam General Insurance Company Limited 11) Reliance General Insurance Company Limited 12) HDFC ERGO General Insurance Limited L.J Institute Of Engineering & Technology 39 . and lower-income groups.J Institute Of Engineering & Technology 40 . In the next five years. According to the Tenth Five-Year-Plan. the rest comprising of offices. Almost five per cent of the country's GDP is contributed to by the housing sector. Thus. this contribution to the GDP is expected to rise to 6 per cent. shopping malls. L. there is a shortage of 22. The real estate sector is second only to agriculture in terms of employment generation and contributes heavily towards the gross domestic product (GDP). Almost 80 per cent of real estate developed in India is residential space.4 million dwelling units. 80 to 90 million housing dwelling units will have to be constructed with a majority of them catering to middle. over the next 10 to 15 years.A Study Of Financial Planning REAL ESTATES Structure  Fragmented sector with relatively few organized players of scale.  Large corporations beginning to show active interest  Active participation of finance institutional in real estate Indian Real Estate Sector: Beyond an Asset Class:The Indian real estate sector plays a significant role in the country's economy. hotels and hospitals. L. the price risk associated with real estate tends to be lower than that for equity. Greater transparency. Also if chosen carefully.A Study Of Financial Planning Importance of Real Estate as an Investment Option:Real estate has emerged as an important asset class in recent years in India. lower liquidity and greater information asymmetry. greater transaction cost. Hence it offers income as well as growth as an asset.J Institute Of Engineering & Technology 41 . emergence of large national players and entry of organized finance have worked together to make real estate an avenue retail investors can think as an asset class. The downside to a real estate investment is larger investment size. In most cases it is a dividend paying asset with good appreciation potential. Real estate offers valuable diversification to an investment portfolio. which are called shares. a stock is a representation of the amount of a company that you own. In essence. you are paying for a small percentage of everything that the company owns buildings. stock or again equity.A Study Of Financial Planning EQUITY MARKET A concept of Equity Market What is equity? A company organises money to do business with through borrowings and owners contribution. both of these are securities listed on a stock exchange as well as those only traded privately. Stock Market: It is a private or public market for the trading of company stock and derivatives of company stock at an agreed price. chairs. when you own a stock. equal amounts against which the company issues certificates. When you buy a stock. etc. and no guaranteed return. Equity is accumulation of small. The owners contribution is called equity capital or simply equity. L. What is a Stock? A stock is a certificate that shows that you own a small fraction of corporation.J Institute Of Engineering & Technology 42 . computers. which can be changed if the shareholders decide. you are referred to as a share holder or a stock holder. Shares have indefinite life with a face value. and publicity.J Institute Of Engineering & Technology 43 . There are many factors that affect the value of stocks. stock price generally go down. If interest rates are high. but it is much more involved than that. meaning they do well during certain parts of the year. the ones that package ice that you buy at the supermarket. their product sell well. and thus their stock price goes up. their price goes down. the state of the economy. During the summer. Usually. if a company makes a lot of money. they feel like they should not take the risk in the stock market.A Study Of Financial Planning Why does the stock market go up and down? These fluctuations occur partly because companies make money. there is more flow into companies making their prices rise. A stock is only worth what some will pay for it. when people are not as an interested in a picnic with below 20 temperatures. by keeping their money in banks. L. and sweltering heat. and worse during others. or buying bonds. or how much it has to pay you to keep your money in their bank. Many stocks are seasonal. Many other factors have an effect on the stock market – for example. An example is Ice Company. but during the winter. its value rises. or lose money. Yet another factor is time of year. because if people can make a decent amount of money. with picnic. If there is more money floating around. Publicity has an effect on stock prices. or the amount of money you have to pay a bank to loan money. One example is interest rates. because people are willing to pay more for a company’s stock if the company is doing well. In total 24 stock exchanges are listed in India. Indian Stock Market  Indian stock market includes BSE . • Medium Cap: Companies with the market capitalization of 100–1000 cr.A Study Of Financial Planning • Following are the three categories that market uses to categorize publicly traded companies: • Large Cap: A company with the market capitalization of 1000 cr or above. etc. Large Cap companies are generally considered low risk low return because generally their earnings as well as assets grow slow and steady. The major segments of market in India include: • • • Equity Future & option Retail Debt Market L. They are also usually overvalued because of there stability. Small companies are considered high risk-high return due to the upside potential they carry and downside risks that comes with it. • Small Cap: A company with the market capitalization of 100 cr or less. NSE . Medium Cap companies are generally considered medium risk and medium return because they are in their growth stage facing heavy competition in addition to other market forces like supply. Also. interest rate etc.Sensex. economy.J Institute Of Engineering & Technology 44 . demand.Nifty. their stock is traded less often that medium and large cap creating a liquidity issue. J Institute Of Engineering & Technology 45 . of trades both in equity & derivatives. banks. L. 2) Bombay Stock Exchange (BSE): BSE has greatest no. It is the 10th largest market in the world. Nifty (NSE): It is the largest stock exchange in India in teams of daily turnover & no. It was established in 1875.A Study Of Financial Planning • • Wholesale Debt Market Currency futures The major two markets in India are: 1) National stock exchange of India ltd. It is located in Mumbai. insurance companies & other financial intermediaries. of listed companies in the world with 4700 companies. NSE is mutually owned by a set of leading financial institution. have some distinct disadvantages which investors must remain aware of: L. the share holders. unlike bonds. This appreciation of stock’s value is known as a capital gain. or some other alternatives.  Most stocks are very liquid. stocks have historically offered very high returns in relation to other investments.  The potential loss from stock purchased with cash is limited to the total amount of the initial investment. they can be bought and sold quickly at a fair price. if the company earns more profits than it needs to support its maintenance and growth. by capital gains and with dividends. it may elect to distribute the excess to its owners. As previously stated. like all investments. certificate of deposit. This is considerably better than that of some leveraged transactions.A Study Of Financial Planning Benefits of investment in stock market • Common stock has a number of advantages which make it a desirable investment vehicle.  While there are numerous advantages. so will the ownership interest represented by each share of stock. If the company becomes more valuable. each share of stock represents partial ownership in a company.  Although past performance is not a guarantee of future performance. where the maximum loss can well exceed the total of the funds invested. in other words. In addition. some of which are listed below:  Stock market has the potential for delivering very large gains. The periodic distributions of profits are called dividend payments.J Institute Of Engineering & Technology 46 .  Stocks offer two ways for their owners to benefits. Annual returns on investment (ROI) of over 100% have occurred on somewhat regular basis. stock market. Prices can be erratic.A Study Of Financial Planning  Since stock represents ownership of a business.  Stock prices tend to volatile.  Investors in a company may not know all that there is to know about the company. which actually only serves to lock in their losses. L. A company must first pay its employees. like all other owners. stock holders are the last to get paid. Such declines often cause investors to panic and sell. maintain its facilities. rising and declining quickly.J Institute Of Engineering & Technology 47 . This limited information can sometimes cause investment decision making to be difficult. Any money left can then be distributed among its owners. and pay its taxes. creditors. suppliers. A Study Of Financial Planning L.J Institute Of Engineering & Technology 48 . Our experts assess the investors' need and their risk profile.J Institute Of Engineering & Technology 49 . Prudent believes in understanding the customer needs and offering the product that can match his requirement (marketing) as against just selling what product is already available. Then we can determine an investing strategy that helps you achieve your full potential. The best possible option provides the proper asset allocation to various asset classes and also the estimated risk involved.A Study Of Financial Planning Company Information Prudent CAS Ltd. What are your goals and aspirations? We'd like to know. build investment strategies tailored to specific client needs. This helps us to provide our clients an optional basket of funds rather than selling the typical available funds. This approach lets us set our focus on the quality work rather than the just the quantity. Here it is worth mentioning that L.The difference between selling and marketing. and regularly review those strategies to increase the likelihood of success. We Understand . historically known as Prudent Fund Manager established in 2000 is a registered investment company offering fee-based money management. Once the entire comparative analysis is done then the best possible option is advised to the investors. and investment advisory services. Owing to the inherent professional expertise we first study and understand the investment requirements and circumstances. We focus on each client. financial planning. We help you build a personalized investment strategy to ensure your financial goals are met. Ltd. Prudent Corporate Advisory Services remains the primary arm of the Prudent Group. operations. Besides having a large pool of their own clients. Prudent Insurance Services Pvt. Company is in the process of creating its national presence by opening offices in various parts of the country. Looking at the immense growth potential of the insurance sector in India. Prudent Broking Services Pvt. was incorporated in 2008. back.com/ Prudent Corporate Advisory Services Ltd. training & consultation. Prudent Insurance Services Pvt.prudentcorporate. our clients enjoy multiple L.office support. Ltd is a Stock Broking and Depository Participant service provider. As the flagship company. if ever it comes to a choice Prudent CAS always prefers to be the best rather then being the biggest. It offers specialized services in the area of Personal and Corporate Investment Planning through Mutual Funds. http://www. Prudent Broking Services Pvt. technology. Incorporated in 2004. the company also manages its geographically-spread business operations through a unique platform for independent financial advisors(IFA) which helps them to grow and expand their services & support through sales and marketing. Company is a member with Bombay Stock Exchange (BSE) and it applied for membership of National Stock exchange (NSE) & Central depository services (India) Limited (CDSL). Ltd. Debt and Third party products.A Study Of Financial Planning though we are involved in wide spectrum and heavy quantum of activities but.J Institute Of Engineering & Technology 50 . Ltd. Today. but the effort and paperwork involved in purchasing the same can be intimidating. whether it be homes or offices.J Institute Of Engineering & Technology 51 .A Study Of Financial Planning options of life and general insurance based products through our strategic tie-ups with the best insurance companies in India. Prudent Properties. PRUDENT CHANNEL PARTNER PRUDENT CHANNEL DIRECT CHANNEL INDIRECT CHANNEL L. The Property sector is an important part of the asset class. Prudent Property provides real estate solutions not only in creating an asset class but is also helping the customers in buying their dream realty. There are so many employees are working under direct channel with different department. The Direct and Indirect channel are also provide training to the management student. or anything else.J Institute Of Engineering & Technology 52 . success can only be achieved when all of a client's goals are met whether the goals are related to family. This is very easy to the advisor to provide all the investment details to their clients. our definition of success is not just financial. In the indirect channel selling is done through the advisor. civic organization. Prudent Channel since its inception has a strong hold in the market through its Direct Force. L. INDIRECT CHANNEL: The prudent indirect channel can start in the year 2000 in Ahmedabad head quarter. To us.A Study Of Financial Planning DIRECT CHANNEL: The prudent is start with the direct channel. Though attaining your financial goals can never be guaranteed. It also has strong hold on the corporate channel . It also provides different free Internet services like partner desk in that advisor get all the information related to their client. marriage. charity. But unlike most financial advisors. Prudent Channel Partners offers comprehensive financial planning services to help you answer the toughest questions about your financial future. Prudent Channel Partner strives to help each client succeed. proper planning can greatly increase your odds of success. On that sale the advisors get the commission.it now wants to have a greater reach to its clients which it has already developed through its brokers. In order to build successful client relationships. Here the employees are meeting directly to the clients not through the advisors for their selling. nor clothing. For the more technical. Of course. It is about determining short – term and long – term objectives. • If financial models were food. If financial models were clothing. Prudent CAS Ltd serves you with array of financial planning. from soup to steak to nuts. we could help produce any outfit. • Know more than how much money you need to retire – or how much you should save for your future expenses. in a typical assignment. then we could cook up anything nourishing on the menu.J Institute Of Engineering & Technology 53 .A Study Of Financial Planning Prudent Products • Prudent channel since its inception has a strong hold in the market through its direct forces. from making original sketches to stitching together skirts to inventorying racks of grown. the group might do any or all of the following: • • • • • Mutual Fund Investment Consultancy Equity and Derivatives broking RBI Relief funds and Infrastructure Bonds Life Insurance L. financial models are neither food. It also has strong hold on the corporate channel – it now wants to have a great reach to its clients which it has already developed through its 150 certified brokers just the beginning of the forces that will grow in leaps and bounds. investment. by providing an "all-in-one approach”. Direct Equity. debt management and cash flow. Derivative Strategies. Portfolio Management. Insurance. or corporates. Prudent Wealth Management :A One-Stop Solution We offer advisory services on Structured Products. HNWIs. NRIs.A Study Of Financial Planning Prudent Wealth Management Services Wealth management is an integrated process for helping clients manages their wealth. Real Estate and Art Funds. families. family offices. financial planning. A Dedicated Prudent Wealth Manager working for you: L.J Institute Of Engineering & Technology 54 . Trusts and Corporates. and financial management needs of individuals. tax planning. Estate planning. Real Estate Funds. Mutual Funds. About Prudent Wealth Management Services it is a specialized profession where our experts combine their efforts to meet the wealth planning. Wealth Management: It is more than just Financial Services Prudent Wealth Management takes one step closer to you. IPOs. Customized Financial Solutions Advice on asset allocation and thereby creating customized financial solutions for Individuals. retirement. It involves huge a wide range of services which includes investment management. 4) The Follow-ups .A Study Of Financial Planning 1) Our Approach to Wealth Management the Diagnosis. 3) The Assessment . Ensuring that you maximize returns while minimizing potential risks.Asset Allocation: Keeping your risk profile in mind. This regular 'Wealth Check-Up' helps you to assess portfolio performance on an ongoing basis. allocating products based on your needs and expectations. we draw up a personalized. L. practical financial plan.J Institute Of Engineering & Technology 55 . Thereby.Investment Monitoring: With regular and timely updates. Thus providing you with options that are best suited for you. we keep you informed of the developments in your portfolio. our experts help you rebalance your portfolio.Risk Profiling: We assess your investment goals and future requirements and also determine your propensity for risk. 2) The Prescription .Portfolio Rebalancing: Keeping track of the latest market trends and information. A Study Of Financial Planning PRUDENT REPORTS • The reports listed below are served by Prudent: Your investment related report: Valuation report Investment snap shot report Valuation summary report • Tax related report for any of your investments: Capital gain report Capital loss report Portfolio analysis report: Sector/ Asset allocation report Mf/ Company wise allocation report Mutual fund related reports: Fund performance report Fund comparison reports Market wrap Risk measurement report Fund fact sheets NAVs and dividends history • • • • • • • • • • • • • • • • L.J Institute Of Engineering & Technology 56 . Ahmedabad – 380006 MANAGING BODY Managing director: CEO: Director: Mr. Satyesh Deasai (south Gujarat region) Indirect Sales: Mr. Rohit Patel (Baroda) Mr. Chirag Kothari Mr. Jigar Parekh (North & West India) Mr. C. Shirish Patel Mr. Deven Shah : Mr.Dashrathsinh L.A Study Of Financial Planning Company at Glance HEAD OFFICE Prudent corporate advisory services ltd. Bhanu P Stomar (Pune territory) MR. Sanjay Shah Mr.G road. Off. Yogi Kanani Mr. Head offices address 701 sears tower.J Institute Of Engineering & Technology 57 . Gulbai Tekra. Chirag Shah HOD Details IT Head: Accounts Head HR Head : Chudawat Direct Sale: (Ahmedabad & North Gujarat Region) Mr. Manoj Singh (Mumbai region) Mr. Shirish Patel C. Chirag Shah Director Indirect Sales IT Back Office Direct Sales Accounts HR Customer Care Brokerage Income Transaction L.A Study Of Financial Planning Organization Structure Mr.D.E.O Mr. Mr.J Institute Of Engineering & Technology 58 . Sanjay Shah M.  To gain the knowledge about the various financial products of the Prudent Corporate Advisory Services Ltd. Research objectives are the basis for judging the research process. and achievable goals. concrete. Objective of the Project  To know the How the systematic financial planning is the benefited to the Persons for fulfill their future requirement. The objectives flows naturally from the problem statement.  To understand the different investment behavior of the customers and analyze the factors responsible for such investments. moving to specific terms.A Study Of Financial Planning RESEARCH OBJECTIVE Here that you layout exactly what is being planned by the proposed research. L. It is the final step giving exact definition of problem. giving the sponsor specific. It is best to list the objectives either in order of importance or in general terms first.J Institute Of Engineering & Technology 59 . Descriptive  SOURCES OF INFORMATION a) Primary Data: Research Instrument – Questionnaire  Method – one – to – one interview  Sampling Method – Convenience sampling and Quota sampling  Population size L.Area -.  TYPE OF RESEARCH -.J Institute Of Engineering & Technology 60 .Income.Occupation -.A Study Of Financial Planning RESEARCH METHODOLOGY  STUDY OBJECTIVE A one-to-one interview of people different groups in Ahmedabad based on their -.Age group -.Gender -. etc To know their patterns of investment. k. bhalla Research Methodology . bhalla Investment management – v. in  Magazines • • • Business world Business India Outlook  Newspapers • • Economic times Business standard L. com Anz. k.A Study Of Financial Planning  Sample size – 200 b) Secondary Data: Web • • •  Books • • • Investment & portfolio management by v.J Institute Of Engineering & Technology 61 . Co. Com Google.Naresh Malohotra Wikipedia. A Study Of Financial Planning LIMITATIONS OF STUDY The study for this project also has its own limitation. • Prevalent biases in the respondent replies: Respondent’s replies might be biased and so it would affect the accuracy of results. • Limited area & sample size:We can’t cover all the areas of Ahemedabad with the limited sample size of 200. which is also a limiting factor to come to the rational & proper conclusion. L.J Institute Of Engineering & Technology 62 . which are as follows: • Limitation of the time resources: The time provided was not sufficient to study and analyze the whole population. there might be some flaws in the research. • Limitation of skills: As practical knowledge of this type was experienced first time. • Limitation of the company: The company had its own limitation in this fast growing market. all data and document could not be provided by the company. Also. A Study Of Financial Planning L.J Institute Of Engineering & Technology 63 . L.A Study Of Financial Planning Survey Analysis  Gender: GENDER MALE FEMALE TOTAL FREQUENCY 167 33 200 PERCENTAGE 83.5% and Female are 16.5 100 Interpretation: The above graph shows that the financial planning of Male and Female in which Male are 83. so it shows that Male are awake about financial planning more than to Female.J Institute Of Engineering & Technology 64 .5 16.5 %. A Study Of Financial Planning  Age Group: Age group <20 20 to 30 30 to 50 above 50 TOTAL FREQUENCY PERCENTAGE 6 3 104 52 51 25.5 39 19.5 200 100 Interpretation: L.J Institute Of Engineering & Technology 65 . we can say that the categories “between” 20 to 30 are clearer about their investment Pattern. 30 to 50 is 25.5%.A Study Of Financial Planning According to the population.5% and above 50 is 19. the age group divided in four Categories in which below 20 is 3%. 20 to 30 is 52%. Therefore.J Institute Of Engineering & Technology 66 .  Occupation: OCCUPATION SERVICE BUSINRSS PROFFESSION STUDENT TOTAL FREQUENCY PERCENTAGE 138 69 42 21 8 4 12 6 200 100 L. A Study Of Financial Planning Interpretation: There are major four class of Occupation in which salaried persons are 69%.J Institute Of Engineering & Technology 67 .5 5 100 L.  Educational Qualification: EDUCATION QUALIFICATION SSC HSC GRADUATE POST GRADUATE OTHERS TOTAL FREQUENCY 16 15 84 75 10 200 PERCENTAGE 8 7. Professionals are 4% and Students are 6%.5 42 37. So above chart shows that salaried person is more conscious about their investment pattern. Businessmen are 21%. 5 1 0.5 200 100 L.5 60 30 74 37 15 7. Therefore.5% and 42% accordingly.J Institute Of Engineering & Technology 68 .A Study Of Financial Planning Interpretation: Here we can see that the literacy level of the Post Graduate and Graduate are very much higher than others. that is 37. Monthly Income: MONTHLY INCOME UPTO 5000 5000 TO 10000 10000 TO 20000 20000 TO 50000 50000 TO 100000 ABOVE 100000 TOTAL FREQUENCY PERCENTAGE 21 10. we can say that the financial planning is more dependent on the literacy level.5 29 14. A Study Of Financial Planning Interpretation: Income is essential part of the Financial Planning in which income “between” 10.J Institute Of Engineering & Technology 69 .000 to 20.000 is 30% and 20.000 is 37% that shows that these income groups are more interested in financial planning. L.000 to 30. J Institute Of Engineering & Technology 70 .A Study Of Financial Planning 1) Are you aware about investment opportunities available in the market? PARTICULARS YES NO TOTAL FREQUENCY 200 0 200 PERCENTAGE 100 0 100 Interpretation: The above chart shows that total 100% persons are aware about an investment opportunity available in the market. L. J Institute Of Engineering & Technology 71 .5 24 27 11.A Study Of Financial Planning 2) How do you come to know about investment opportunities? PARTICULARS FRIENDS FAMILY PROFESSIONALS NEWS PAPERS ADVERTISEMENTS TOTAL FREQUENCY 61 48 54 23 14 200 PERCENTAGE 30.5 7 100 L. A Study Of Financial Planning Interpretation: After analyzing the chart.J Institute Of Engineering & Technology 72 . Professionals and Family that is 81. we can interpret that most of the people who come to known about financial planning through Friends.5%. L. J Institute Of Engineering & Technology 73 . L.5 9.A Study Of Financial Planning 3) Do you invest accordingly your future requirement? PARTICULARS YES NO TOTAL FREQUENCY 181 19 200 PERCENTAGE 90.5 100 Interpretation: The above chart shows that 94% of people are doing the financial planning accordingly their future requirement. 2 RANK .3 RANK .4 RANK .A Study Of Financial Planning 4) Out of the following option.9 RANK .5 RANK .J Institute Of Engineering & Technology 74 .7 RANK .8 RANK . which investment option would you prefer? (RANK 1 TO 10) RANK OPTIONS EQUITY MARKET MUTUAL FUND GOVERNMENT SECURITY LIFE INSURANCE FOREX MARKET COMPANY DEBENTURE BANK FIXED DEPOSIT POST OFFICE SAVING REAL ESTATE BULLION MARKET TOTAL 1 24 27 21 34 0 0 30 39 19 6 200 2 16 20 22 25 0 3 44 35 19 16 200 3 18 17 41 25 0 12 25 38 18 6 200 4 13 14 35 42 0 14 38 23 15 6 200 5 19 28 18 11 6 38 25 9 38 8 200 6 32 28 22 22 17 22 13 18 14 12 200 7 30 34 15 11 21 24 12 15 26 12 200 8 24 12 9 17 21 54 7 4 25 27 200 9 15 14 9 9 87 11 2 7 17 29 200 10 9 6 8 4 48 22 4 12 9 78 200 TOTAL 200 200 200 200 200 200 200 200 200 200 2000 RANK RANK .10 S INVESTMENT OPTION POST OFFICE SAVING BANK FIXED DEPOSIT GOVERNMENT SECURITY LIFE INSURANCE REAL ESTATE EQUITY MARKET MUTUAL FUND COMPANY DEBENTURE FOREX MARKET BULLION MARKET L.1 RANK .6 RANK . These risks can vary dramatically. for example.) Life Insurance is on 4th rank because it capturing the market day by day and people are also aware and conscious about their health and life security. 2. So the second rank acquired by Bank Fix Deposit.)The above chart shows that the relationship between the different investment options with the use of ranking scale method in which the first rank goes to the post office saving because people are believe in avoid the risk and to get the fix return. So. 3.and they will certainly be more uncertain than food retailers. we can expect that all stocks in the technology sector will offer higher returns than stocks in food retailing – but those returns are less likely to appear than the lower. As investors need rewarding for taking on higher risk.J Institute Of Engineering & Technology 75 .A Study Of Financial Planning Interpretation: 1. 6) The above graph shows that an Equity risk relates to uncertainties caused by particular features of the industry sector in which a company operates.) Bank Fix Deposit is also similar kind of an Investment option in terms of risk and return likewise post office saving. more certain returns in foods. people believed that invest their money in government Security.) Government Security is on 3rd rank since long time government security is best option because of low risk and fix return at the Maturity Time. So these risks can be identified and differentiated on a scale from low to high. relative to the market average. are always going to expose investors to higher uncertainty of future returns than the market average – because of the inherent uncertainty of their new products and new markets . 4. New technologies. (Food will never go out of fashion). So that’s why people prefer less risk and Respondents gave the rank to equity on 6th.S L. and market psychology. the Canadian dollar. the Swiss franc. The higher the volatility. 8) The above graph shows that a debenture is regarded as an unsecured investment because there are no pledges (guarantee) or liens available on particular assets. L. this is an adequate (even if not ideal) approximation. a Debenture is backed by all the assets which have not been pledged otherwise. what is actually being talked about is volatility. Some of the most traded currencies in the foreign exchange market are the US dollar. So the people prefer debenture less and it’s on 8th rank. Nonetheless. the greater the fluctuations of the NAV. the Australian dollar. The monetary value of a currency is another major determinant of the exchange rate. But when anyone analyzing mutual funds uses this term. So the awareness of the people is very less and that’s they people less the forex market. the Euro. 9) The graph shows that the exchange rate of a currency in the foreign exchange market depends on various factors. past volatility is taken as an indicator of future risk and for the task of evaluating a mutual fund.J Institute Of Engineering & Technology 76 .A Study Of Financial Planning 7) The above graph shows that the Risk in mutual fund can be defined as the potential for harm. Generally. Some of the major factors that affect the exchange rate are: economic factors. political conditions of the corresponding countries. the Norwegian Krone. the Japanese yen. and the Hong Kong dollar. Volatility is nothing but the fluctuation of the Net Asset Value (price of a unit of a fund). the Swedish Krona. the British pound sterling. So the mutual fund is on the 6th rank. L.A Study Of Financial Planning 5.) Which kind of investment do you prefer? PARTICULAR LONG TERM SHORT TERM BOTH TOTAL FREQUENCY PERCENTAGE 108 54 44 22 48 24 200 100 Interpretation: The maximum numbers of people are investing in long term which is 54% because long term investment plans have low probability of negative return and in the short term there are 22% of people are investing because In short term returns are unexpected and could not getting wealth maximization. For the more security. 24% of people are interested to invest their money in a long term as well as short term.J Institute Of Engineering & Technology 77 . As we know an inflation which is harmful to an overall economy.5 51 25.5 12 6 200 100 Interpretation: Here we can see that 68.5% of the people are consider an inflation while investing and 25.J Institute Of Engineering & Technology 78 . It can act as disturbance factor of production.5% of the people are not consider while investing and rest of the people are not say anything about inflation.A Study Of Financial Planning 6. L.) Do you consider inflation while investing? PARTICULAR YES NO CAN'T SAY TOTAL FREQUENCY PERCENTAGE 137 68. 5% of people are likely to invest 20% from their saving.5 2 8 7.J Institute Of Engineering & Technology 79 .5 2 12.) What part of money do you spend in investment of your saving? PARTICULAR 10% 20% 25% 30% 35% 40% 50% 55% 60% 70% 80% 90% 100% TOTAL FREQUENCY 59 73 4 25 4 16 15 2 0 2 0 0 0 200 PERCENTAGE 29.A Study Of Financial Planning 7. L.5 36.5 1 0 1 0 0 0 100 Interpretation: As per the earning power of the people 36. 42.J Institute Of Engineering & Technology 80 . L.5 37 18.A Study Of Financial Planning 8.) Since how many years are you investing? PARTICULAR JUST STARTED 1 TO 5 5 TO 10 ABOVE 10 TOTAL FREQUENCY PERCENTAGE 40 20 85 42.5% of people have invested their money since last 5 years.5 38 19 200 100 Interpretation: Out of the above sample size of the people. J Institute Of Engineering & Technology 81 . that's impossible. you need to assume certain risks and avoid others. To achieve your objectives.A Study Of Financial Planning 9. So that’s why return on 1st rank. L. you consider for investment: (From 1 to 5) RANK CRIETERIA RISK RETURN LIQUIDITY SECURITY TAX BENEFIT TOTAL 1 41 70 23 43 23 200 2 54 42 28 40 36 200 3 36 41 33 52 38 200 4 38 24 49 26 63 200 5 31 23 67 39 40 200 TOTAL 200 200 200 200 200 1000 Interpretation: 1) RETURN The above graph shows that every People prefer return so sometimes think that a good return can be achieved with little or no risk.) Please rank the following criteria. Unfortunately. So that’s why its on the 5th rank. Every businessman has to pay the tax so they are also try to invest in the different investment instruments and save their tax with the help of the investments. 3) SECURITY Securities are traded on markets. Without liquidity people can’t investments. but not all. L. 4) TAX BENEFIT The businessman which are more interested to get the tax benefit than the other people. These trading markets are susceptible to manipulative and deceptive practices. The essence of a securities market is its formal or informal communications systems whereby buyers and sellers make their interests known and execute transactions." that is. But there's more to risk than volatility. The return is depends on the liquidity that you have invest in the different investment instruments. To prevent such fraudulent practices. Risk is the chance that your actual return will be less than you expected.J Institute Of Engineering & Technology 82 . So it’s on the 4th rank. all securities laws contain general antifraud provisions. such as manipulation of prices or "insider trading. Some. So the risk on the 2nd rank. markets have a physical location. Risk and long-term reward are generally related. or the degree of ups and downs of returns. gaining an advantage on the basis of nonpublic information.A Study Of Financial Planning 2) RISK The above graph shows that the Risk is generally defined as return volatility. 5) LIQUIDITY The liquidity has plays the important role for the investment purpose. The more you invest liquidity also you get more return. J Institute Of Engineering & Technology 83 .A Study Of Financial Planning 10.) What percentage of return.5 40.5 26. you get from your investment? PARTICULARS <10% 10 TO 15% 15 TO 20% 20 TO 25% >25% TOTAL FREQUENCY 31 81 53 31 4 200 PERCENTAGE 15.5 15.5 2 100 Interpretation: L. 5 100 L.5% people are get their return between 15 to 20%. 11.5 38 7. Post Office savings.) Are you satisfied with your return? PARTICULARS SATISFIED FAIRLY SATISFIED DISSATISFIED TOTAL FREQUENCY 109 76 15 200 PERCENTAGE 54. Bank fix Deposit and Government Security and in Equity Market and Mutual Fund that gives the return between 15 to 20% so here we see that 26.5% of the people get the return between 10 to 15% because they are invest their money.J Institute Of Engineering & Technology 84 .A Study Of Financial Planning Return is essential part of the financial planning so we see that 40. 5% of the people are getting less than 10% return who are dissatisfied and rest of the people are fairly satisfied.A Study Of Financial Planning Interpretation: The above chart shows that 54.J Institute Of Engineering & Technology 85 .5% of the people are getting the return between 10 to 20% which are satisfied and the 7. 12.) Are you getting any Tax benefit from your investment? PARTICULARS YES NO TOTAL FREQUENCY 112 88 200 PERCENTAGE 56 44 100 L. Majority of the people are aware of section 80C and they know the fact they can save tax up to an amount of 1 lakh rupees.5 72. which help them in saving tax.) Do you prefer shifting of investment pattern? PARTICULARS YES NO TOTAL FREQUENCY 55 145 200 PERCENTAGE 27.5 100 L.J Institute Of Engineering & Technology 86 . these people can easily be persuaded about those schemes. 13. as they are aware of section 80C and therefore are not worried for an investment schemes.A Study Of Financial Planning Interpretation: Around 56% of the respondents say that they are aware of section 80C and 44% says that they are not aware of section 80C. These people can easily understand the features of the schemes. Therefore. L.A Study Of Financial Planning Interpretation: The above graph shows that. 72% of the people believe in stay in current Investment Pattern and 28% the people who want change their Investment Pattern due to they are not satisfied with their return.J Institute Of Engineering & Technology 87 . A Study Of Financial Planning L.J Institute Of Engineering & Technology 88 . far as the analysis concern people are likely to invest in post office savings. bank fix deposit.J Institute Of Engineering & Technology 89 . insurance. I take a survey of 200 people out of 188 investor investing in various instruments. So. L. As per company feedback.  To Made clients  To take work form Advisors  To make financial planning of the people  To divert competitor clients  Some basic knowledge of Insurance field etc…. real estate and even substitute fields like. And in forex and bullion market awareness in the mind of investor are low so less investor are likely to invest in these two options.A Study Of Financial Planning FINDINGS So Far as The Prudent Corporate Advisory Concern They Provide the core product “SIP” and the rest of the product are broking.  Tele Marketing. life insurance & real estate due to low risk and fix return. So Far as The Topic on Investor Perception regarding financial Planning has been concern.  Product Marketing. government securities. J Institute Of Engineering & Technology 90 . GPF for tax Planning. So all employees can easily co-ordinate with each other. Ahemedabad. Investor should measure the performance of every Investment Instruments. A good historical record could be a better horse to be on than new funds.A Study Of Financial Planning Recommendation • • • • • • There is no any advertise of the company in the market so company has to give A company has to make own “PRUDENT HOUSE” in place of small offices in Company Should Target Government employees because they invest huge Investor must see the objective of the different Investment Instruments. the advertising for better growth. L. Amount in insurance. PPF. Sometimes it happened that were not interested to give detail answer.G.A Study Of Financial Planning OBSERVATION The awareness about the Financial Planning is more in the current time. It happened sometimes that responder had wrong impression about the questionnaire filling.: .Calculation of correct return which they originally get. That means they were try to hide their original income. Sometimes people do not have time to give answer of the question. E. Some people were not taken the process seriously. As we observe that many people were not comfortable to give the fact answer of the questions. We observe that people were not able to give the answer because lack of correct information about the return. L.J Institute Of Engineering & Technology 91 . L. POS etc are gaining more and more popularity. real estate and fixed deposit and other securities keeping in mind their future necessities and contingencies. Our analysis denotes that people of Ahmedabad prefers to invest maximum of in their money equity market even if it is high risk investment for a more secured investment people refers life insurance and real estate & fixed deposit. FD. life insurance. whole as they invest in equity market keeping in mind the of return. The reason behind investing money in equity market is because of the scenario of stock exchange since the last two years. GS. MF.J Institute Of Engineering & Technology 92 .A Study Of Financial Planning CONCLUSION I have conducted a descriptive research with a sample size of 200 samples from the population of the sample covers units across all age groups from 18 to 75 years across different occupation and areas. In 2007 the equity market touch 21000 and people got high returns. But analyzing the present and future scenario of stock market and recession in global market people have started switching over to a more secured investment that is mutual funds. The reason behind people not investing in art and antique and bullion market is mostly due to lack of awareness about those options and lack of knowledge in the field. In short now even thought people get moderate returns they demand high security for their money. Thus the trend shows that equity market is loosing it’s importance and other secured investment options like LIC. The last investment goes to bullion market and art and antiques. J Institute Of Engineering & Technology 93 . only our group of three people completes the task and no one else got the response as we got from the broking companies. HR & Admin Officer who helped me sail through Finance Department workings very smoothly. she constantly insisted and helped me in learning new things. Hemali Joshi. In my two months’ experience of doing project. This training has given us a practical knowledge thoroughly of how actually an organization works in a corporate world. I found considerable increase in my knowledge level and understanding in the area of mutual fund. but in the task of HR.A Study Of Financial Planning EXPERIENCE I have learned many new things from two months’ training. We were given tasks of HR and of the mutual fund in which a company mainly deals. L. I am grateful to Ms. But it is like a drop of water in a vast sea like field of finance. Many aspects are there which could have been studied but the time limit is a big constraint. com/insurance/types-of-insurance.Investment & portfolio management v.nrimutualfunds.html http://en.freemancapital. k.html http://finance.J Institute Of Engineering & Technology 94 .com/2009/08/financial-planning-processchart.com/what_is_mf_frame.org/wiki/Financial_planner http://www.com/importance-of-financialplanning.com/articles/the-financial-planning-process. bhalla .theloanbazaar. com Anz. Com Google.toolkit.buzzle. bhalla -Investment management Naresh Malhotra -Research Methodology  Web • • • • • • • • • • • • Wikipedia.indiamart. in http://www. k.html http://www.htm#Organizatio n%20of%20Mutual%20Fund http://www. Co.wikipedia.html L.investinternals.A Study Of Financial Planning Bibliography  Books • • • v.net/financial-planning/ http://finance.career-success-for-newbies.com/planning_tools/ http://www.com/markets/mutual_funds/ http://www. html http://business.mapsofindia.theloanbazaar.com/india-market/equity.J Institute Of Engineering & Technology 95 .A Study Of Financial Planning • • http://www.html  Magazines • • • Business world Business India Outlook  Newspapers • • Economic times Business standard L.com/insurance/types-of-insurance. Name Address: : ___________________________ ____________________________ ____________________________ ____________________________ Sex: Male Age Group: Female Below 20 20 To 30 Occupation: 30 To 50 Above 50 ____________________________ L. doing summer project on Financial Planning. All the information provided by you would be taken for the data of the project and would be kept confidential and will be kept by us for academic purpose only and will not be disclosed to anybody in whole or in part.J Institute Of Engineering & Technology 96 . the project would achieve its aimed objective if you kindly provide the true information.A Study Of Financial Planning ANNEXURE Dear Sir/Madam I am a management student. Security Company Debenture Bank Fix Deposit Post Office Saving 97 L.J Institute Of Engineering & Technology .A Study Of Financial Planning Educational Qualification: Family Members: _____ Number of Earning Members in Family: _____ Monthly income of family: Up to 5000 10000 To 20000 50000 To 100000 5000 To 10000 20000 To 50000 Above 100000 _____________________ 1) Do you invest accordingly your future requirement? Yes No 2) How do you know about investment? Friends Professional Advertisements Family News Papers/Magazines If Other Specify _____________________ 3) Are you aware about investment opportunities available in the market? Yes No 4) Out of the following option which investment option would you prefer? (RANK 1 TO 10) Equity Market Mutual Fund Gov. A Study Of Financial Planning Life Insurance Forex Market Real Estates Bullion Market If Other Specify _________________ 5) According to time which kind of investment do you prefer? Long Term Short Term Both 6) Do you consider inflation while investing? Yes No Can’t say 7) What part of money do you spend in investment of your saving? 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 8) Since how many years are you investing? Just Started 5 To 10 1 To 5 Above 10 9) How do you manage your portfolio? Your Self Experts Broking Agencies Through Agents L.J Institute Of Engineering & Technology 98 . A Study Of Financial Planning If Other Specify _______________ 10) Please rank the following criteria.J Institute Of Engineering & Technology 99 . you consider for investment ( From 1 to 5) Risk Liquidity Tax Benefit Return Security 11) How many % of your investment do you get in return? <10% 15 To 20% >25% 10 To 15% 20 To 25% 12) Are you satisfied with your return? Satisfied Fairly Satisfied Dissatisfied 13) Are you getting any Tax benefit from your investment? Yes No 14) Do you prefer shifting of investment pattern? L. L.A Study Of Financial Planning Yes No __________________________________ THANK YOU FOR YOUR RESPONSE.J Institute Of Engineering & Technology 100 .