EXECUTIVE SUMMARY Financial planning is the process of assessing financial goals of individual, taking an inventory of the money and

other assets which the person have, determine life goals and then take necessary steps to achieve goals in the stipulated period. It is a method of quantifying a persons requirement in terms of money.It was a great opportunity to work with ADA Group, Indias leading usiness group.!eliance "oney a su sidiary of !eliance #apital is among top financial companies. $e will get to know the organisational structure and various usiness models of the company.%he usiness of !eliance "oney can e roadly classified as %rading, Distri ution and &%# 'ervice.Financial services refer to services provided y the finance industry. %he finance industry encompasses a road range of organi(ations that deal with the management of money. Among these organi(ations are anks, credit card companies, insurance companies, consumer finance companies, stock rokerages, investment funds and some government sponsored enterprises. Financial )lanning is one such advisory service, which is yet to get recognition from investors. Although financial planning is not a new concept, it *ust needs to e conducted in organi(ed manner. %oday we avail this service from Insurance agent, "utual fund agents, %a+ consultant, ,quity -rokers, #hartered Accountants, etc. Different agents provide different services and product oriented. Financial )lanner on other hand is a service provider which ena les an individual to select proper product mi+ for achieving their goals.%he ma*or things to e considered in financial planning are time hori(on to achieve life goals, identify risk tolerance of client, their liquidity need, the inflation which would eat up living and decrease standard of living and the need for growth or income. .eeping all this in mind financial planning is done with si+ step process. %his are self assessment of client, identify personal goals and financial goals and o *ective, identify financial pro lems and opportunities, determining recommendations and alternative solutions, implementation

of appropriate strategy to achieve goals and review and update plan periodically. A good financial plan includes #ontingency planning, !isk )lanning /insurance0, %a+ )lanning, !etirement )lanning and Investment and 'aving option. #ontingency planning is the asic of financial planning and also the most ignored. #ontingency planning is to e prepared for ma*or unforeseen event if it occurs. %hese events can e illness, in*ury in family, loss of regular pay due to loss of *o . 'uch events are not certain ut may have financial hardship if they occur. %hus a person should have enough money in liquid form to cover this risk. Iii !isk #overage is done through insurance. !isk can e classified into life risk, health risk and property risk. %oday we have different insurance which covers different risk. ,veryone is e+posed to life risk ut the degree of risk varies. 1ife insurance provides an economical support to the family and dependents. Apart from life risk we are also e+posed to health risk. 2ealth insurance covers health risk y funding medical e+penses and hospital charges.Also we have property insurance to cover risk attached to house property like theft, fire,damage, etc. and various auto insurance.%a+ planning is what every income earner does without fail and this is what financial planning is all to them. A good plan is one which takes the ma+imum advantage of various incentives offered y the income ta+ laws of the country. 2owever, do understand that the ta+ incentives are *ust that, only incentives. Financial planning o *ective should e getting ma+imum advantage of various avenues. It is to e remem ered that ta+ planning is a part and not financial planning itself. %here are many investments which do not offer ta+ shelter that does not mean they are not good investments. %he prudent investment decision made and the returns that accrue will more than offset the ta+ outgo. In any case the primary o *ective of a good financial plan is to ma+imi(e the wealth, not to eat the ta+men. 2owever many investment provides great returns which can offset

the ta+ on it. A detailed study of various investment which provides deduction and e+emption is given in report.!etirement )lanning is also an important aspect of financial planning. %o a greater e+tend most earning people do retirement planning. %here are various schemes in market through which a person can do his retirement planning. %o list a few are Annuity Insurance )lan, ))F and ,)F.In market there are different instruments which can e adapted to fulfill the need of various planning o *ective. %hese instruments are different from each other in terms of returns, risk, fund allocation, charges, investment term, ta+ incentives, etc. A detail description of instruments like 1ife insurance, ,quity, "utual Funds, ))F, Investment in Gold, Investment in !eal ,state, Deposits with -anks and )ost &ffice, etc. are covered in this report. %his will help the investor to make their investment decisions. Chapter 1: Introduction of the Project 3.34 Introduction to Financial )lanning 55555555555. 3.64 'tudy of various factors 55555555555. 3.74 'i+ step process of Financial )lanning 5 3.84 #onstitute of Financial )lanning 55555555555. 3.8.34 #ontingency planning 55555555555. 3.8.64 !isk #overage 55555555555. 3.8.74 %a+ )lanning 55555555555. 3.8.84 !etirement )lanning 55555555555. 3.9.34 #oncept : 'ignificance of the 'tudy 55555555 3.;4 'cope 55555555555. 3.<4 & *ective of the 'tudy 55555555555. 3.=4 1iterature !eview 55555555555. Chapter 2: Introduction to the Indu tr! 55555555555. 38 Chapter ": Introduction to the Co#pan! 7.34 )rofile of !eliance "oney 55555555555. 397.64 !eliance "oney Associates 55555555555. 397.74

-usiness of !eliance "oney 55555555555. 3;7.8 !eliance "oney -usiness "odel 55555555555. 3= Chapter $: In%e t#ent A%enue 8.34 1ife Insurance 55555555555. 3>8.64 ,quity 55555555555. 6;8.74 "utual Fund 55555555555. 6<8.84 #ertificate of Deposits 55555555555. 7=8.94 ))F 55555555555. 7=8.;4 !eal ,state 55555555555. 7>8.<4 Gold 55555555555. 8?8.=4 Investment in -anks 55555555555. 838.>4 Investment through )ost &ffice 55555555555. 87 Chapter &: Re earch Methodo'o(! 9.34 !esearch Design 55555555555. 8=9.64 Data #ollection %echniques and %ools 55555555555. 8>9.74 'ample Design 55555555555. 8>9.84 1imitations 55555555555. 9? Chapter ): *ata Ana'! i and Interpretation 55555555555. 93 Chapter +: Conc'u ion , -i#itation and Su((e tion <.3 #onclusions 55555555555. ;6<.6 1imitations 55555555555. ;;<.7 'uggestions 55555555555. ;= -i liography Chapter 1: Introduction to .inancia' P'annin( 1/1: Introduction to .inancia' P'annin( 1/2: Stud! of %ariou factor 1/": Si0 tep proce of .inancia' P'annin( 1/$: Con titute of .inancia' P'annin( 1/$/1: Contin(enc! p'annin( 1/$/2: Ri 1 Co%era(e 1/$/": Ta0 P'annin( 1/$/$: Retire#ent P'annin( 1/&: Concept 2 Si(nificance of the Stud! 1/): Scope

1/+: 34jecti%e of the Stud! 'tudy of Individual Financial )lanning 3 1/1 Introduction to .inancia' P'annin( Financial )lanning is the process of meeting life goals through the proper management of finances. Financial planning is a process that a person goes through to find out where they are now /financially0, determine where they want to e in the future, and what they are going to do to get there. Financial )lanning provides direction and meaning to persons financial decisions. It allows understanding of how each financial decision a person makes affects other areas of their finances. For e+ample, uying a particular investment product might help to pay off mortgage faster or it might delay the retirement significantly. -y viewing each financial decision as part of the whole, one can consider its short and long@term effects on their life goals. )erson can also adapt more easily to life changes and feel more secure that their goals are on track.In simple Financial )lanning is what a person does with their money. Individuals have een practicing financial planning for centuries. ,very individual who received money had to make a decision a out the est way to use it. %ypically, the decision was either spends it now or save it to spend later. ,veryone have to make the same decision every time they receive money. Does it need should e spend now or to save it to spend it laterA %oday in India financial planning means only investing money in the ta+ saving instruments. %hanks to the plethora of ta+ e+emptions and incentives availa le under various sections and su sections of the Income %a+ Act. %his has led to a situation where people invest money without really understanding the logic or the rationale ehind the investments made. Further the guiding force in investment seems to e the Bre ate they receive from the individual agents and advisors. %he more the re ate an agent gives, the more smug person are in the elief that they have made an intelligent decision of choosing the right agent who has offered them more re ate. In the process what is not

eing reali(ed is the fact that the financial future is getting compromised. 1/2/ Stud! of %ariou factor %hings to consider while doing financial planning are4 Ti#e 5ori6on and 7oa' 4 It is important to understand what individuals goals are, and over what time period they want to achieve their goals. 'ome goals are short term goals those that people want to achieve within the year. For such goals it is important to e conservative in ones approach and not take on too much risk. For long term goals, however, one can afford to take on more risk and use time to ones advantage. Ri 1 To'erance 4 ,very individual should know what their capacity to take risk is. 'ome investments can e more risky than others. %hese will not e suita le for someone of a low risk profile, or for goals that require eing conservative. #rucially, ones risk profile will change across lifes stages. As a young person with no dependants or financial lia ilities, one might e a le to take on lots of risk. 2owever, if this young person gets married and 'tudy of Individual Financial )lanning 6has a child, person will have dependants and higher fiscal responsi ilities. 'o persons approach to risk and finances cannot e the same as it was when they were single. -i8uidit! 9eed 4 $hen does money is needed to meet the goal and how quickly one can access this money. If investment is made in an asset and e+pects to sell the asset to supply funds to meet a goal, then it needs to e understood how easily one can sell the asset. Csually, money market and stock market related assets are easy to liquidate. &n the other hand, something like real estate might take a long time to sell. Inf'ation 4 Inflation is a fact of the economic life in India. %he ottle of cold drink that is rought today is almost dou le the price of what

would e paid for ten years ago. At inflation or slightly a ove 8D per annum, a packet of iscuits that costs !s 6? today will cost !s. 7? in ten years time. Eust imagine what the cost of uying a car or uying a home might e in ten years timeF %he purchasing power of money is going down every year. %herefore, the cost of achieving goals needs to e seen in what the inflated price will e in the future. 9eed for 7ro:th or Inco#e 4 As person make investments think a out what is required, whether capital appreciation or income. Got all investments satisfy oth requirements. "any people are uying apartments, ut are not renting them out even after they take possession. 'o, this asset is generating no income for them and they are pro a ly e+pecting only capital appreciation from this. A young person should usually consider investing for capital appreciation to take advantage of their young age. An older person however might e more interested in generating income for themselves. 1/"/ Si0 tep proce of .inancia' P'annin( 1/ Se'f a e #ent: #larify present situation, this is a preliminary step someone has to complete prior to planning their finance. Doing a self assessment ena le a person to understand their present wealth status and responsi ilities. 'elf assessment should contain following H )rospective retirement age H "ain source of income H Dependents in family H ,+penses and monthly savings

H #urrent investment status &ne should identify their wealth status prior to move with financial planning. 2/ Identif! financia', per ona' (oa' and o4jecti%e ,ach individual aspires to lead a etter and a happier life. %o lead such a life there are some needs and some wishes that need to e fulfilled. "oney is a medium through which such needs and wishes are fulfilled. 'ome of the common needs that most individuals 'tudy of Individual Financial )lanning 7would have are4 creating enough financial resources to lead a comforta le retired life, providing for a childIs education and marriage, uying a dream home, providing for medical emergencies, etc. &nce the needsJ o *ectives have een identified, they need to e converted into financial goals. %wo components go into converting the needs into financial goals. First is to evaluate and find out when it is needed to make withdrawals from investments for each of the needsJ o *ectives. %hen person should estimate the amount of money needed in current value to meet the o *ectiveJ need today. %hen y using a suita le inflation factor one can pro*ect what would e the amount of money needed to meet the o *ectiveJ need in future. 'imilarly one need to estimate the amount of money needed to meet all such o *ectivesJ needs. &nce person have all the values they need to plot it against a timeline. "/ Identif! financia' pro4'e# or opportunitie : &nce goals and current situation are identified, the short fall to achieve the goal can e assessed. %his short fall need to e covered over a period of time to full fill various need at different life stages. 'ince future cannot e predict, all the contingencies should e considered will doing financial planning. a good financial plan should hedge from various risk. A fle+i le approach

should e taken to cater to changing needs and should e ready to reorgani(e our financial plan from time to time. $/ *eter#ine reco##endation and a'ternati%e o'ution : Gow review various investment options such as stocks, mutual funds, de t instruments such as ))F, onds, fi+ed deposits, gilt funds, etc. and identify which instrument/s0 or a com ination thereof est suits the need. %he time frame for investment must correspond with the time period for goals. &/ I#p'e#ent the appropriate trate(ie to achie%e (oa' : Cntil person put things into action everything is waste. Gecessary steps needs to e taken to achieve financial goals this may include gathering necessary documents, open necessary ank, demat, trading account, liaise with rokers and get started. In simple terms, start investing and stick to the plan. )/ Re%ie: and update p'an periodica''!/ Financial planning is not a one@time activity. A successful plan needs serious commitment and periodical review /once in si+ months, or at a ma*or event such as irth, death, inheritance0. )erson should e prepared to make minor or ma*or revisions to their current financial situation, goals and investment time frame ased on a review of the performance of investments. 'tudy of Individual Financial )lanning 8 1/$ Con titute of .inancia' P'annin( A good financial plan should include the following things H #ontingency planning H !isk )lanning /insurance0 H !etirement )lanning

H %a+ )lanning H Investment and 'avings &ption 1/$/1 Contin(enc! p'annin( #ontingency means any unforeseen event which may or may not occur in future. #ontingency planning is the asic and the very first step to financial planning. It was found that a large num er of people have invested in financial planning instrument ut have ignored their contingency planning. $hy it is more important to have a contingency planA "ay will have planned for their future thats a great thing, this would definitely help in long run. -ut there is always a million dollar question to e asked, $hat a out today, is there a plan in placeA ,veryone would think that they have a secure present with regular salary, ut what if suddenly something happens and it is not possi le to draw that monthly income. %here are many possi ilities that due to illness, in*ury or to care of family mem er a huge amount of money is required. "oreover in this era of pink slip and *o hopping its not assured that the ne+t *o will e availa le at the earliest. %his are temporary situation and for a short phase ut cannot e ignored. If person is not planned for contingencies he will use his long term investment to fund such crises. It is possi le that long term investment may not give enough returns if withdrawn early there is also a possi ility of capital erosion. In such situation all the financial plans made are of waste. $ith long term planning person also need to take care of present situation in order to truly achieve financial goals. It is a thum rule that one should have three times money of monthly salary in liquid form to support contingency. 1/$/2/ Ri 1 Co%era(e

,very individual is e+posed to certain type of risk whether it is due to loss or damage of personal property, loss of pay due to illness or disa ilityK or even due to death. 'uch risk cannot e determined ut on occurrence there may e a financial loss to the individual or their family. )roper personal financial planning should definitely include insurance. &ne main area of the role of personal financial planning is to make sure that one has the a ility to carry on living in case of some unforeseen and unfortunate event. -asically, insurance provides a safety net to provide the necessary funds when one meets with events like accidents, disa ilities or illnesses. &ne main contri ution of insurance is that it helps provides peace of mind, knowing that enough funds are at hand in the event when things 'tudy of Individual Financial )lanning 9do not go the way it should e. %his peace of mind leaves one with the energy and confidence to move forward. 1/$/2/1/ -ife Ri 1 ,very individual is prone to risk of losing life its a naked truth ut what is not certain is the time of death. In this sense everyone is prone to life risk, ut the degree of risk may vary. In terms of financial planning, covering life risk means insuring the life of the person through proper life insurance plan. 1ife insurance, simply put, is the cover for the risks that person run during their lives. Insurance ena les us to live our lives to the fullest, without worrying a out the financial impact of events that could hamper it. In other words, insurance protects us from the contingencies that could affect us. 1ife insurance provides an economical support to the family and dependents. It is e+tremely important that every person, especially the readwinner, covers the risks to his life, so that his familyIs quality of life does not undergo any drastic change in case of an unfortunate eventuality. %here are various plans insurance plan offered y insurance companies that can suite various needs of individual. 1/$/2/2/ 5ea'th Ri 1

1ifespan of Indian is known to have increased nowadays, and senior citi(ens strive to stay healthy and active as they age. 2owever, the older person gets the more e+tensive healthcare is needed. %hough staying forever young remains a dream unattaina le, living a long and safe quality life at peace is quite an achieva le goal. 2ealth insurance is an insurance )olicy that insures against any medical e+penses. Insured medical e+penses will e taken care of y the insurance company provided person pays their premium regularly. #over e+tends to pre@hospitalisation and post@hospitalisation for periods of 7?days and ;? days respectively. Domiciliary hospitalisation is also covered. %here are various type of health insurance. Disa ility insurance can protect against the loss of a personIs a ility to earn a living. #ritical illness insurance can afford some protection from e+pending reserved financial resources due to an unforeseen ma*or illness. 1/$/2/"/ Propert! Co%era(e )roperty #overage insures personal property from damage, destroy or stolen. Dwelling coverage also known as 2omeowners Insurance offers protection against direct physical damage caused to the dwelling, including rooms, fireplaces, carpeting, tile floors and elements of decor. 'tructures, which are attached to the insured dwelling on the same foundation, such as a garage, are also lia le to coverage under this section of 2omeowners Insurance. -esides, this section of policy covers materials and supplies necessary to re uild or repair home. )erson )roperty #overage can insure the contents of home, i.e. the items person regularly use which are not a permanent part of their houseIs or apartmentIs structure, such as furniture, television sets, ikes, clothing, appliances, utensils and tools. )ersonal )roperty #overage can e used in appliance to valua le information saved in a hard@copy form or as 'tudy of Individual Financial )lanning ; electronic data. Auto insurance is compulsory in most states, and the insurance has different types of enefits or coverage.

1/$/"/ Ta0 P'annin( A good plan is one which takes the ma+imum advantage of various incentives offered y the income ta+ laws of the country. 2owever, do understand that the ta+ incentives are *ust that, only incentives. Financial planning o *ective should e getting ma+imum advantage of various avenues. It is to e remem ered that ta+ planning is a part and not financial planning itself. %here are many investments which do not offer ta+ shelter that does not mean they are not good investments. %he prudent investment decision made and the returns that accrue will more than offset the ta+ outgo. In any case the primary o *ective of a good financial plan is to ma+imi(e the wealth, not to eat the ta+men. 2owever many investment provides great returns which can offset the ta+ on it. -ut with the knowledge of the Income %a+ /I%0 Act one can reduce income ta+ lia ility. It also helps to decide, where to invest and to claim deductions under various sections. %he income earned is su *ect to income ta+ y the government. %he rate of income ta+ is different for different income levels, and thus, the income ta+ paya le depends on the total earnings in a given year.India income ta+ sla s for the financial year 6??>@6?3? as per udget 6??> are as elow4

%he surcharge on the ta+ for income a ove !s 3? lakh is removed. 1/$/"/1/ Section ;<C %he government encourages certain types of savings L mostly, long term savings for retirement L and therefore, offers ta+ reaks on such savings. 'ec =?# of the Income %a+ Act is the section that deals with these ta+ reaks. It states that qualifying investments, up to a ma+imum of !s. 3 1akh, are deducti le from income. %his means that income gets reduced y this investment amount /up to !s. 3 1akh0.Mualified investment under 'ection =?# are4 Pro%ident .und =P.>: %he payment that is made to )F is counted towards 'ec =?#investments. For most persons who are salaried, this amount gets automatically deducted from their salary every month. %hus, its not *ust compulsory savings for future, ut also immediate ta+ savings. Vo'untar! Pro%ident .und =VP.>:

If person increase )F contri ution over and a ove the statutory limit /as deducted compulsorily y employer0, even this amount qualifies for deduction under section =?#. Pu4'ic Pro%ident .und =PP.>: If person have a ))F account, and invest in it, that amount can e included in 'ec =?# deduction. %he minimum and ma+imum allowed investments in ))F are !s. 9?? and !s. <?,??? per year respectively. -ife In urance Pre#iu# : Any amount that person pay towards life insurance premium for self, spouse or children can also e included in 'ection =?# deduction. )lease note that life insurance premium paid y person for their parents /father J mother J oth0 or in@laws is not eligi le for deduction under section =?#. If premium are paid for more than one insurance policy, all the premiums can e included. It is not necessary to have the insurance policy from 1ife Insurance #orporation /1I#0 L even insurance ought from private players can e considered here. E8uit! -in1ed Sa%in( Sche#e =E-SS> 4 %here are some mutual fund /"F0 schemes specially created for offering ta+ savings, and these are called ,quity 1inked 'avings 'cheme, or ,1''. %he investments that are made in ,1'' are eligi le for deduction under 'ec =?#. 5o#e -oan Principa' Repa!#ent: %he ,quated "onthly Installment /,"I0 that is paid every month to repay home loan consists of two components L )rincipal and Interest. %he principal component of the ,"I qualifies for deduction under 'ec =?#. ,ven the interest component can save significant income ta+ L ut that would e under 'ection 68 of the Income %a+ Act. 'tudy of Individual Financial )lanning = Sta#p *ut! and Re(i tration Char(e for a ho#e: %he amount paid as stamp duty while uying a house and the amount paid for the registration of the documents of the house

can e claimed as deduction under section =?# in the year of purchase of the house. 9ationa' Sa%in( Certificate =9SC> 4 %he amount that is invested in Gational 'avings #ertificate /G'#0 can e included in 'ec =?# deductions. Infra tructure ?ond : %hese are also popularly called Infra -onds. %hese are issued y infrastructure companies, and not the government. %he amount invested in these onds can also e included in 'ec =?# deductions. Pen ion .und @ Section ;<CCC: %his section L 'ec =?### L stipulates that an investment in pension funds is eligi le for deduction from income. 'ection =?###investment limit is clu ed with the limit of 'ection =?# @ it means that the total deduction availa le for =?### and =?# is !s. 3 1akh. %his also means that investment in pension funds upto !s. 3 1akh can e claimed as deduction uJs =?###. 2owever, as mentioned earlier, the total deduction uJs =?# and =?### cannot e+ceed !s. 3 1akh. ?an1 .i0ed *epo it 4 %his is a newly introduced investment class under 'ection =?#.-ank fi+ed deposits /also called term deposits0 having a maturity of 9 years or more can e included in 'ec =?# investment. 3ther : Apart form the ma*or avenues listed a ove, there are some other things, like childrens education e+pense /for which receipts are need0, that can e claimed as deductions under 'ec =?#. 1/$/"/2/ Medic'ai# =Sec ;<*> Individual and 2indu Cnified Families /2CF0 are eligi le for deduction under 'ection =?Dfor mediclaim premium paid. Deduction can e claimed on premium paid for assessee, spouse, dependent children and dependent parents. %he criteria of dependency isnt applica le in case of a spouse /i.e. sheJhe may

even e independent, ut the assessee can still pay the premium on hisJher life to get ta+ enefits for the same0. *eduction For non@senior citi(ens4 %he amount of mediclaim insurance premium paid or !s. 39???,whichever is less For senior citi(ens4 %he amount of mediclaim insurance premium paid or !s. 6????,whichever is less. 1/$/"/"/ Intere t and *i%idend Recei%ed = ec ;<-> Deduction upto a ma+imum of !s. 39,??? /out of which !s. 7,??? is specially dedicated to government securities0 is allowed from the ta+a le income in respect of aggregate earnings from some specified sources. %he schemes are 4Deposits with -anking #ompany, #o@operative -anks : #o@operative 'ocieties. 'tudy of Individual Financial )lanning >Approved financial corporations or pu lic companies to provide long@term finance for industrial or agricultural development or for construction of purchase of residential housesK it may e noted that the I2ome 1oan Account 'chemeI of Gational 2ousing -ank is not covered y 'ec. =?1 ut it en*oys the enefit of ta+ re ate uJs ==. H 2ousing -oards H 'mall 'avings 'chemes H Gational 'avings #ertificates H )ost &ffice %ime and !ecurring Deposits H Gational 'avings 'cheme, 3>>6

H )ost &ffice "onthly Income 'cheme H Gotified de entures of co@operative societies or institutions or pu lic sector companies H Government 'ecurities Ta0 p'annin( :ith ection ;<C A An a(e :i e trate(! %ypically, most people invest a large part of the money in )u lic )rovident Fund /))F0and the rest is taken care of y life insurance premiums and so on. 2owever, investing this amount lindly is not the est way to go a out it. 2eres some help on how to go a out allocating this =?# limit depending upon age. A(e 21A"<: In the initial phase of si+@seven years of this age racket, most people are single and little or no dependents. If there are no dependents, its not necessary to have a large life insurance. Instead focus on returns. #onsidering the state of the equity markets today, a su stantial portion L around <? per cent to =? per cent of the =?# contri ution can e made in ,1'', which invests primarily in stocks. %his will ensure that the process of investing for the long term has een started. Also, since there is a lock@in of three years for these schemes, it will lead to a forced savings. $hen choosing an ,1'' investment, look at consistency rather than a one@off performance. Go for fund houses that have a good track record over a long time period. %he alance can go into G)F or ,)F A(e "1A$&: -y this time, person is e+pected to e married with small children. Also, there could e additional lia ilities like uying a house or car. %he first step that must e taken is to get adequate life insurance, for dependents and lia ilities. "ake sure to cover all

the lia ilities so that dependents are not under any financial pressure, in case of an unfortunate mishap. Cse a term plan to get the highest possi le cover at a low cost. #hildren college fees can e included as a part of the =?# enefits. %he home loan principal payout can form the second leg of the contri ution for this age group. 'o, esides ,)F contri ution, life Insurance premiums and home loan principal should e sufficient to take care of the entire !s 3 lakh requirement. If there is still any shortfall, look at ,1'' investments and )rovident Fund. 'tudy of Individual Financial )lanning 3? A(e $)A)<: )erson is pro a ly at the peak of the career or moving towards it. %his is most likely the final phase of earning a regular income. %here is a good chance that loans have een paid@off y now and children are in the stage of ecoming independent. %he last few years of this phase is when a lot of families plan and should retire their loans. It is also an age where life insurance is of e+treme importance. !e@evaluate need for life cover at this point of time. If life cover is needed more, increase it su stantially. 2ealth insurance need to e included due to various diseases and illness taking toll with growing age. 2ence, risk management is of e+treme importance here. &nce again after person is well@ insured, they must contri ute as much as they can towards )rovident Fund. %his is ecause it has ma+imum liquidity and could withdraw these ta+@free funds /as would have completed the mandated 9 years0. &ne can also go for ))F first and then invest the alance in ,1''. Senior citi6en : In this age group, capital protection and need for regular income are two most important needs. &ne must first opt for a 'enior #iti(ens 'avings 'cheme that will give ta+ enefit. 'ince '#'' is generally parked in a lump sum, look at fi+ed deposits only if they are giving high interest rates. If interest rates are low, then person should opt for ))F, if person is in the highest ta+ racket as

liquidity is still the est /account should have completed 39 years a long time ago0 and can withdraw ta+@free amounts comforta ly. A minor portion, around 3?@39 per cent, of investments can go into ,1'', as it has the a ility to eat inflation and give growth in funds. 2owever, do this only after income needs are secured. 1/$/$/ Retire#ent P'annin( A retirement plan is an assurance that person will continue to earn a satisfying income and en*oy a comforta le lifestyle, even when they are no longer working. Due to the improved living conditions and access to etter medical facilities, the life e+pectancy of people is increasing. %his has led to a situation where people will e spending appro+imately the same num er of years in retirement what they have spent in their active working life. %hus it has ecome imperative to ensure that the golden years of the life are not spent worrying a out financial hardships. A proper retirement planning, to a very large e+tent, will ensure this. )lanning ahead will let en*oy the retirement that is deserve. %he retirement strategies decide upon now makes a fundamental difference to the degree of financial freedom one will e+perience when they do decide to take their pension. )lanning for retirement and choosing a pension strategy to safeguard financial security can e a minefield. In the last few years, there have een many changesK the volatility of the stock market, reduction of final@salary pension schemes, the rise of uy@to@let property portfolios and changes in ta+ation and pension legislation. %hese changes underline the importance of oth setting a retirement plan in place and of keeping it up@to@date. 'tudy of Individual Financial )lanning 33!easons for doing !etirement planning can e understood with the following4 -ife e0pectanc! $ith advancement in technology life e+pectancy is likely to increase.

$hich means a person would e spending a large amount of time in his post retirement period.%hus one needs to have a regular income to sustain living which is only possi le if prepared for it when earning. Medica' e#er(encie $ith age come health pro lems. $ith health pro lems, come medical e+penditure which may make a huge dent in post retirement income. Failure here could lead to liquidate /sell0assets in order to meet such e+penses. !emem er mediclaims do not always suffice. 9uc'ear fa#i'ie Independence is the new way of life, gone are the days when people use to have an entire cricket team making a family. %odayIs youth prefer not more than two children. $ith westernisation coming in, the culture of *oint family is changing. "ost prefer independence and stay away from their family. 2ence people have to develop a corpus to last them through their retirement without any help from family. 9o (o%ern#ent pon ored pen ion p'an Cnlike the C' and C. where they have I!A and state pension respectively as social security enefit during retirement, the government of India does not provide such enefits.'o, persons are responsi le for themselves now. Bo4 hoppin( $ith youngsters hopping *o s regularly they do not get enefit of plans like super annuity and gratuity. -oth these require certain num er of working years spent in the service of a particular employer. Inf'ation &ne needs to take into account inflation while calculating retirement corpus as well as returns. $ith the rising inflation it would only the raise the cost of living and it would also eat the return on the investment. %he #AG! /compounded annual growth rate0 of inflation over the past 3? years is 9.9 per cent. Assuming an individual at the age of 7?, requires !s69,??? a month to lead

a comforta le life, for the same standard of living after 7? years, he may require !s 3.69 lakh a month, given the inflation factor.In India persons employed in the organised sector have some form of social security such as ,mployees )rovident Fund /,)F0, ,mployees )ension 'cheme /,)'0 and gratuity.%hose who are employed in government and its related arms also en*oy the enefit of pension along with G)F and gratuity. -ut these two sections account for only seven percent of the working population. %he remaining >7 per cent of the people have no form of 'tudy of Individual Financial )lanning 36mechanism to take care of their retirement. &ver =? per cent of Indian employees haved one no retirement planning independent of any mandatory government plans. %hose who plan for retirement have the option of investing in )u lic )rovident Fund/))F0, pension plans and retirement plans offered y the insurance companies. #urrently, the insurance sector accounts for 8.3 per cent of the GD) and out of this pension accounts for 3.; per cent. %hese num ers reconfirm that Indians are not well prepared to meet their life post@retirement. 2ence, one needs to plan for retirement in the early part of ones working life along with other goals. !etirement planning consists of two parts4 one is accumulation of savings and the other is earning an annuity from the savings. During the accumulation phase, one has to plan for a required amount at the start of retirement and ased on individual risk appetites one can plan to achieve this through various asset classes. -ut post@retirement one has to earn interest on the savings without taking too much of risk. At the same time have to try to outpace the inflation rate to ensure that person can sustain with the savings for rest of the life. During the accumulation phase one has to look out for the ta+ efficient way of savings. For e+ample, ))F, pension plans offered y the insurance companies and the retirement plans offered y the mutual funds are very ta+ efficient. %he maturity proceeds of all these plans are ta+ free. In selecting a pension plan, one has to keep a watch on the recurring e+penses. As the investment is for the long term,

recurring e+penses can have the effect of reducing returns over the long term. 1/& Concept 2 Si(nificance of the Stud! Financial )lanning is an integral part of any individual life, especially in this modern world where value of everything is e+pressed in terms of money. %he active working span of human life is short as compared to the life span. %his means people will e spending appro+imately the same num er of years in after retirement what they have spent in their active working life. %hus it ecomes important to save and invest while working so that person will continue to earn a satisfying income and en*oy a comforta le lifestyle. Financial )lanning ena les a person to identify their goals, assess the current position and takes necessary steps to achieve the goals. It helps us to understand how financial decisions made effect our life. Financial )lanning is not *ust a out investment planning ut it is a out life time planning. %hus through proper financial planning a person can have a easy and secured financial life. 1/) Scope %he scope of study is getting familiar with various investment avenues availa le in market.%o study the life stages of an individual and to identify their risk tolerance, income flow, life goals and current investment. 'tudy should cover all areas of the individuals financial needs and should result in the achievement of each of the individuals goals. 'tudy of Individual Financial )lanning 37%he scope of planning will include the following4 H !isk "anagement and Insurance )lanning H Investment )lanning H

!etirement )lanning H %a+ )lanning 1/+ 34jecti%e of Stud! H %o identify investment ha it of people. H %o understand financial planning done in India. H %o analyse the characteristics of different asset class. H %o study changes in financial planning with change in age. H %o identify various avenues for investment. H %o spread awareness of financial planning. H %o e+amine factors influencing the investment decision. 1/; -iterature Re%ie: ?oo1 : Investment Analysis and )ortfolio "anagement Author : )rasanna #handra Pu4'ication :

%A%A "cG!A$ 2I11%his ook gives insight of various investment alternatives and attri ute related to it. It alsoe+plains various strategies to e followed y investment practitioners. It has provided mevalua le inputs and etter understanding while undertaking this pro*ect. 'ome ma*or pointsare4 H Different investment avenues and their characteristics H !elation etween risk and return H Importance of asset allocation Chapter 2: Introduction to the Indu tr! 'tudy of Individual Financial )lanning 38 2/ Introduction to .inancia' P'annin( Indu tr! Financial services refer to services provided y the finance industry. %he finance industry encompasses a road range of organi(ations that deal with the management of money. Among these organi(ations are anks, credit card companies, insurance companies, consumer finance companies, stock rokerages, investment funds and some government sponsored enterprises.%he Indian financial services industry has undergone significant changes over the years, particularly in the last decade, and continues to evolve today. Financial )lanning L a distinct element within the spectrum of financial services industry @ is still relatively a young discipline. -ut personal finance products : services are increasingly ecoming an important part of this industry as the Indian consumers seek to ma+imi(e and optimi(e the potential earnings and fruits of their hard@earned money. #urrently, there are distinct divisions within the financial services

industry. A person goes to a ank to save his money or to get a loan. 2e uys stocks and onds from a roker. 2e purchases insurance from an insurance agent and mutual funds from a mutual fund distri utor. %he regulation of the industry reflects the division of these transaction@ ased services. Cate(or! Product for a'e and ad%ice Insurance agent Insurance )olicies "utual Fund distri utor "utual Funds ,quity share rokerJsu @ roker 'hare trading, I)&s Income ta+ consultant %a+ )lanning, ,mployee -enefits Distri utorJAdvisor of multiple financial products : services "Fs, Insurance, )ost &ffice schemes, share trading, ta+ etc Indians have een making investment through such agents which was restricted to a particular product. Apart from the a ove agent friends and professionals like #hartered Accountant played an important role in investment decisions. %his is how for few decades investors have een doing their Financial )lanning. 2owever, financial services, especially on the retail side, have undergone a ma*or transformation and financial consumers are demanding a holistic : comprehensive approach to their personal finance. Narious factors have cataly(ed this change like privatisation of insurance and mutual fund sectors has increased product options for the investor. 'econd, fluctuating interest rates and the end of Bguaranteed return products have prompted investors to look for alternative modes of investment. And also with a num er of mis@selling instances taking place in the financial markets, investors confidence inBadvisors has een shaken and the investors are asking for a Btrusted financial advisor. Chapter ": Introduction to the Co#pan! "/1: Profi'e of Re'iance Mone!"/2: Re'iance Mone! A ociate "/": ?u ine of Re'iance Mone!"/$ Re'iance Mone! ?u ine Mode' 'tudy of Individual Financial )lanning 39

"/1 Profi'e of Re'iance Mone! !,1IAG#, "&G,O is a part of the !eliance Anil Dhiru ai Am ani Group and is promoted y !eliance #apital, the fastest growing private sector financial services company in India, ranked amongst the top 7 private sector financial companies in terms of net worth. %he official launch of !eliance "oney was announced on 7rd "ay 6??<.!eliance money is a comprehensive financial service and solution provider that ena les people to carry out trading and investment activities in a secure, cost@ effective and convenient manner. It is a one@stop@shop, providing end@to@end financial solutions/including mo ile and we @ ased services0. It has the largest non@ anking distri ution channel with over 3?,??? outlets and 6?,??? touch points spread across 9,3;9 citiesJ townsK catering to the diverse needs of over 7 million e+isting customers. %hrough reliance money, one can invest in a wide range of asset classes from ,quity, ,quity and #ommodity Derivatives, &ffshore Investments, )ortfolio "anagement 'ervices, $ealth "anagement 'ervices, Investment -anking, "utual Funds, I)&s, 1ife and General Insurance products and Gold #oins. #ustomers can also avail 1oans, #redit #ard, "oney %ransfer and "oney #hanging services. !eliance "oney offers the convenience of on@line and offline transactions through a variety of means, including its )ortal, #all : %ransact, %ransaction .iosks and at its network of affiliates. Its endeavor is to change the way India transacts in financial market and avails financial services. "/2 Re'iance Mone! A ociate !eliance "oney amongst others has affiliates4 Re'iance Securitie -i#ited provides equity roking services to retail, institutional and corporate clients. It is a mem er of oth Gational 'tock ,+change /G',0 and -om ay 'tock ,+change /-',0. It is also a ',-I registered )ortfolio "anager. Re'iance Capita' -i#ited

provides depository participant services. It is a Depository )articipant with #D'1 and G'D1. Re'iance Co##oditie -i#ited provides commodity roking services to oth retail and corporate clients. #urrently it is a mem er of oth "#P and G#DP. Re'iance Mone! E0pre provides "oney #hanging /FF"#0 and "oney %ransfer 'ervices /"%'0. Re'iance .inancia' -i#ited provides financial services. It is a G-F# registered with the !eserve -ank of India. 'tudy of Individual Financial )lanning 3; "/" ?u ine of Re'iance Mone! !eliance "oney usiness can e roadly classified into three categoriesK Tradin(: ,quity, #ommodities, Derivatives : &ffshore Investment. *i tri4ution: "utual Funds, 1ife Insurance, General Insurance, )rivate -anking :#orporate -usiness, I)&, Fi+ed Deposit, )"' : $ealth "anagement. 3TC Ser%ice : "oney %ransfer, "oney #hanging, )recious "etal !etailing "/"/1/ Tradin( Porta' !eliance "oney is first in the country to introduce a flat fee prepaid structure with unique security token for trading. It provides a single platform to operate in "arkets like ,quity, #ommodity, Derivatives and &ffshore Investment. !eliance Demat account also provides for investment in I)&s and GF&s and e+isting mutual funds which are issued in market from time to time. %his huge ranges of services are offered at the lowest price in Indian "arket. #ompany has set up a four tire system for convenience of the clients to do transaction which includes &nline portal, #all

center, Franchises and .iosks.%he company was first to setup $e ased kiosk for online transaction at over 3?,???location across India. "ore over it provide wide range of trading platform to suit the need and skills of the clients. ,asy %rade, Instant %rade, Fast %rade, )ower %rade, #ommodities "ega %rade and "o ile %rading are some of its platform. %hus providing a user friendly environment to carry financial transaction. 2/"/2 *i tri4ution !eliance "oney has association with all the ma*or companies in India which provides different financial instruments. It is a single stop solution for all financial needs. !eliance "oney distri utes all I)&s /-ook -uilding as well as Fi+ed )riced0 pan India through its distri ution channel /&nline Q &ffline0 and helps get I)& Investment enefits y providing end to end assistance. %hrough online distri ution investor need not worry a out filling up I)& application forms, drawing cheques and standing in long queues to su mit the forms. %hey can apply for I)&s online at the click of a utton within a minute through reliancemoney.com. If the investor does not have access to internet, !eliance "oney would help apply for I)&s offline through a network of ranches and usiness partners. !eliance "oney is emerging as one of Indias top mutual fund distri ution houses and is also a preferred distri utor amongst all A"#s. !eliance "oneys research team provides consistent, superior, independent and un iased advice to its investors to invest in "utual Fund schemes suited to their risk profile and financial goals. "utual Funds of almost all the A"#s can e availed through !eliance "oney. As of 3st Eune 6??> it had 6> A"# partner, providing over 39?? funds. 'tudy of Individual Financial )lanning 3<#ompany provides 1ife insurance and General Insurance with an e+haustive range of insurance policies that covers most risks. It has e+clusive and inclusive association with ma*or private life insurance companies. %hus ena ling to choose from various plans availa le in the market right from child plan to retirement

plans.-anking service such as fi+ed deposit facility at competitive rates with ma*or anks is also availa le. It offers personali(ed financial solution through its )ortfolio "anagement 'ervice /)"'0 : $ealth "anagement 'ervices. #ompany endeavours to deliver est returns through a diligent fund management frame work, supported y rigorous analysis and a proven investment methodology in different market conditions. 2/"/" 3TC Ser%ice !eliance money offers many &ver %he #ounter /&%#0 services such as "oney %ransfers, "oney #hanging : )recious "etal !etailing. !eliance "oney has strategic tie@up with institutions, offering the $estern Cnion "oney %ransfer service through their national ranch network, like -ank of !a*asthan, 'yndicate -ank, Eammu : .ashmir -ank, %amilnad "ercantile -ank 1td., A) "ahesh #o@&p Cr an -ank, etc. for offering money transfer services. !eliance "oney ,+press is a Full@Fledged "oney #hanger /FF"#0 authori(ed y the !eserve -ank of India for foreign e+change transactions. An individual intending to travel a road may avail this service and change local currency into foreign currency of the destination country and vice versa on return. !eliance "oney ,+press offers a wide range of foreign e+change products for retail and corporate clients. %his include 'ale : )urchase of Foreign #urrency Gotes, American ,+press %ravelers #heques : )repaid Foreign #urrency #ard, -ulk : $holesale )urchaseJ'ale of currency Gotes and ,+port of Foreign #urrency. %he !eliance "oney ,+press FF"# service is availa le through a network of 83 !-I approved !eliance "oney ,+press outlets situated in various cities, across the country. !eliance "oney offers >>.>>D pure, 68 carat, 'wiss Gold coins in ?.9gms, 3.9gms and=gms denominations in tamper proof packaging with certificate of purity from 'wiss Assayer. !eliance "oney offers >>>.> /2ighest purity that can e achieved in Gold0 Gold coins. 'tudy of Individual Financial )lanning

3= "/$/ Re'iance Mone! ?u ine

Mode'

Chapter $: In%e t#ent A%enue $/1: -ife In urance$/2: E8uit!$/": Mutua' .und$/$: Certificate of *epo it $/&: PP.$/): Rea' E tate$/+: 7o'd$/;: In%e t#ent in ?an1 $/C: In%e t#ent throu(h Po t 3ffice 'tudy of Individual Financial )lanning 3> $/1/ -ife In urance 1ife Insurance is a policy provided y an insurance company, according to which in e+change for premium payments, the insurer is o liged to pay a certain sum /a lump sum or portions of smaller sums0 to the eneficiary in the event of insured death. 1ife Insurance is literally a matter of life and death, since purchasing 1ife Insurance is asically planning for after the death. $hen healthy and well, people from all walks of life prefer not to think that one day they would pass away. 2owever planning for after the death may e as important as planning other significant actions in life. -y paying a very small sum of money a person can safeguard himself and his family financially from an unfortunate event. 1ife insurance provides economic support to the dependent in family and in some cases can even create an estate for heirs. .actor to 4e con idered 4efore 4u!in( an -ife In urance Po'ic! -efore uying a 1ife Insurance )olicy it is always important to find out why do I want to uy Insurance and for what purpose. 2ow much 1ife Insurance #over do I need, comes second. Few factors which need to e considered are4 HAge and num er of dependents. HAnnual Income and Annual ,+penses. H&utstanding 1ia ilities like 2ome 1oan, #ar 1oan etc. Investments and 'avings.

H1ife 'tyle ,+penses. "oney require in Future. As a rule of thum when uying first 1ife Insurance )olicy it is suggested that person should have Insurance #over of at least 9 to 3? times of their annual income. %here are many different scientific methods availa le to access the total 1ife Insurance #over. %he need for Insurance changes and increases with age depending on the com ination of factors stated a ove. It is advised that one should review his Insurance needs every 7 years. ,very individual is different and his needs are different and one set of rules for Insurance cannot e applied to all. 1ife Insurance is a very important and integral part of Financial )lanning for the Future. A wide range of insurance products are availa le in the market. ,ach insurance product is different from the others having some unique attri utes which are devised to meet specific needs of different individuals. 2owever, with such a wide range of products availa le, it ecomes very difficult for an individual to choose an insurance plan that is est suited to meet his requirements. -ased on the financial plans and needs and oneIs afforda ility to pay premium, an individual can choose any of the plans availa le in the market. 'ome of those plans are listed in the ta le elow4 'tudy of Individual Financial )lanning 6? $/1/1/ Ter# In urance %erm Insurance, as the name implies, is for a specific period, and has the lowest possi le premium among all insurance plans. )erson can select the length of the term for which they would like coverage, up to 79 years. )ayments are fi+ed and do not increase during the term period. In case of an untimely death, dependents will receive the enefit amount specified in the term life insurance agreement. %erm policies, cover only the risk during the selected term period. If the policyholder survives the term, the risk cover comes to an end. )erson can renew most %erm Insurance policies for one or more terms even if their health condition has changed. ,ach time the policy is renewed for a new term,

premiums may clim higher. $hen a policy holder survives the policy term person is not entitled to any paymentK the insurance company keeps the entire premium paid during the policy period.'o, there is no element of savings or investment in such a policy. It is a 3?? percent risk cover. It simply means that a person pays a certain premium to protect his family against his sudden death. 2e forfeits the amount if he outlives the period of the policy. %his e+plains why the %erm Insurance )olicy comes at the lowest cost. Go surrender, loan or paid@up values are granted under term life policies ecause reserves are not accumulated. If the premium is not paid within the grace period, the policy lapses without acquiring any paid@up value. A lapsed policy can e revived during the lifetime of the life assured ut efore the e+piry of the period of two years from the due date of the first unpaid premium on the usual terms. Accident and J or Disa ility enefits are not granted on policies under the %erm plan. $/1/2/ Endo:#ent In urance #om ining risk cover with financial savings, endowment policies is the most popular policies in the world of life insurance. ,ndowment insurance are policies that cover the risk for a specified period and at the end the sum assured is paid ack to the policy holder along with all the onus accumulated during the term of the policy. %he ,ndowment insurance policies work in two ways, one they provide life insurance cover and on the other hand as a vehicle for saving. If the insured dies during the tenure of the policy, the insurance firm has to pay the sum assured *ust as any other pure risk cover. A pure endowment policy is also a form of financial saving, where y if the person covered remains alive eyond the tenure of the policy, he gets ack the sum assured with some other investment enefits. In addition to the asic policy, insurers offer various enefits such as dou le endowment and marriageJ education endowment plans. %he cost of such a policy is slightly higher ut worth its value. %hey are more e+pensive than %erm policies and $hole life policies. Gormally the onus in calculated on the sum insured ut the only draw

ack is that the onuses are not compounded. ,ndowment insurance plans are est for people who do not have a saving and an investing ha it on a regular asis. ,ndowment Insurance )lans can e ought for a shorter duration period. ,ndowment Insurance is ideal if person has a short career path, and hope to en*oy the enefits of the plan /the original sum and the accumulated onus0 during life time. ,ndowment plans are especially useful 'tudy of Individual Financial )lanning 63when person retireK y uying an annuity policy with the sum received, it generates a monthly pension for the rest of the life. $/1/"/ Dho'e -ife In urance $hole 1ife )olicies have no fi+ed end date for the policyK only the death enefit e+ists and is paid to the named eneficiary.In whole life insurance plan the risk is covered for the entire life of the policyholder, irrespective of when it happens that is the reason they are called whole life policies. %he policy holder is not entitled to any money during his or her own lifetime, i.e., there is no survival enefit. %his plan is ideal in the case of leaving ehind an estate. )rimary advantages of $hole 1ife Insurance are guaranteed death enefits, guaranteed cash values, and fi+ed and known annual premiums.%his policy, however, fails to address the additional needs of the insured during his post@ retirement years. It doesnIt take into account a personIs increasing needs either. $hile the insured uys the policy at a young age, his requirements increase over time. -y the time he dies, the value of the sum assured is too low to meet his familyIs needs. As a result of these draw acks, insurance firms now offer either a modified $hole 1ife )olicy or com ine in with another type of policy. $/1/$/ Mone!A?ac1 P'an "oney ack policies are quite similar to endowment insurance plans where the survival enefits are paya le only at the end of the term period, plus the added enefit of money ack policies is

that they provide for periodic payments of partial survival enefits during the term of the policy so long as the policy holder is alive. An additional and important feature of money ack policies is that in the event of death at any time during the term of the policy, the death claim comprises full sum assured without deducting any of the survival enefit amounts. %he insurance premium of "oney -ack )olicies is higher than %erm Insurance )olicy ecause in %erm Insurance there is no survival enefit after the e+piry of the insurance period. "oney -ack )olicies are good for people who want to insure their life and also want to some return from their investmentIs at a later date. %hese policies are structured to provide sums required as anticipated e+penses /marriage, education, etc0 over a stipulated period of time. $ith inflation ecoming a ig issue, companies have reali(ed that sometimes the money value of the policy is eroded. %hat is why with@profit policies are also eing introduced to offset some of the losses incurred on account of inflation. "oney@-ack plans are ideal for those who are looking for a product that provides oth @insurance cover and savings. It creates a long@term savings opportunity with a reasona le rate of return, especially since the payout is considered e+empt from ta+ e+cept underspecified situations. 'tudy of Individual Financial )lanning 66 $/1/&/ U-IP Cnit linked insurance plan /C1I)0 is life insurance solution that provides for the enefits of risk protection and fle+i ility in investment. %he investment is denoted as units and is represented y the value that it has attained called as Get Asset Nalue /GAN0. %he policy value at any time varies according to the value of the underlying assets at the time. In a C1I), the invested amount of the premiums after deducting for all the charges and premium for risk cover under all policies in a particular fund as chosen y the policyholders are pooled together to form a Cnit fund. A Cnit is the component of the Fund in a Cnit 1inked

Insurance )olicy %he returns in a C1I) depend upon the performance of the fund in the capital market. C1I) investors have the option of investing across various schemes, i.e, diversified equity funds, alanced funds, de t funds etc. It is important to remem er that in a C1I), the investment risk is generally orne y the investor. In a C1I), investors have the choice of investing in a lump sum /single premium0 or making premium payments on an annual, half@yearly, quarterly or monthly asis. Investors also have the fle+i ility to alter the premium amounts during the policyIs tenure. For e+ample, if an individual has surplus funds, he can enhance the contri ution in C1I). #onversely an individual faced with a liquidity crunch has the option of paying a lower amount /the difference eing ad*usted in the accumulated value of his C1I)0. C1I) investors can shift their investments across various plansJasset classes /diversified equity funds, alanced funds, de t funds0 either at a nominal or no cost. E0pen e Char(ed in a U-IP Pre#iu# A''ocation Char(e: A percentage of the premium is appropriated towards charges initial and renewal e+penses apart from commission e+penses efore allocating the units under the policy. Morta'it! Char(e : %hese are charges for the cost of insurance coverage and depend on num er of factors such as age, amount of coverage, state of health etc. .und Mana(e#ent .ee : Fees levied for management of the fund and is deducted efore arriving at the GAN. Ad#ini tration Char(e : %his is the charge for administration of the plan and is levied y cancellation of units. Surrender Char(e : Deducted for premature partial or full encashment of units. .und S:itchin( Char(e: Csually a limited num er of fund switches are allowed each year without charge, with su sequent switches, su *ect to a charge.

Ser%ice Ta0 *eduction : 'ervice ta+ is deducted from the risk portion of the premium. 'tudy of Individual Financial )lanning 67 $/1/)/ Annuitie and Pen ion Insurance companies offer two kinds of pension plans @ endowment and unit linked. ,ndowment plans invest in fi+ed income products, so the rates of return are very low. A pension plan or an annuity is an investment that is made either in a single lump sum payment or through instalments paid over a certain num er of years, in return for a specific sum that is received every year, every half@year or every month, either for life or for a fi+ed num er of years. Annuities differ from all the other forms of life insurance in that anannuity does not provide any life insurance cover ut, instead, offers a guaranteed income either for life or a certain period. %ypically annuities are ought to generate income during oneIs retired life, which is why they are also called pension plans. -y uying an annuity ora pension plan the annuitant receives guaranteed income throughout his life. 2e also receives lump sum enefits for the annuitantIs estate in addition to the payments during the annuitantIs lifetime. )ension plans are perfect investment instrument for a person who after retiring from service has received a large sum as superannuation enefit. 2e can invest the proceeds in a pension plan as it is safest way of secured income for the rest of his life. &ne can pay for a pension plan either through an annuity or through instalments that are annual in most cases. T!pe of Annuitie E Pen ion P'an -ife Annuit!: Guarantees a specified amount of income for lifetime. After death, the amount invested is refunded to nominee. 7uaranteed Period Annuit!:

)rovides specified income for lifetime and guarantees that nominee will receive payments for a certain minimum num er of years, even if person should die earlier. In case person lives longer than the specified minimum num er of years, they are entitled to receive annuity payments for lifetime. Annuit! Certain: Cnder this plan, the stipulated annuity is paid for a fi+ed num er of years. %he annuity payments stop at the end of that period, irrespective of how much longer person may live. *eferred Annuitie : %he premiums paid into such plans may e deducted from ones ta+a le income at the time of payment. In addition, the interest earned on the annuities is not ta+ed immediately. -ut the proceeds of the annuity will e ta+a le when they are paid to person. 'tudy of Individual Financial )lanning 68 $/1/+ -ife Sta(e in -ife In urance 1;A2&=Un#arried0 H "<A$& !ear Coup'e :ithchi'dren H $& !r anda4o%e H Maturedcoup'eRetired H 2&A"<Marridcoup'e :ith no1id 9o dependent E'ia4i'itie thereforeneed for in urancei 'e Introduction ofdependent / Start offinancia' p'annin( @4a'ance 4et:een a etPea1 earnin( a(e ran(e/5i(h a et creation 24ui'd up of 'ia4i'itie /Critica' ta(e forA et 4a e 4ui'd up2 'ia4i'itie

reducedEta1en care of/ 9eedfor retire#entp'annin( #ore thanprotection / 9eed for protection'o:/ 7reater needfor re(u'ar inco#e Endo:#ent E U-IPF Endo:#ent E U-IPF G Ter# Annuitie At each ta(e , re8uire#ent , re pon i4i'itie and .inancia' 9eed differ 'tudy of Individual Financial )lanning 69 $/1/;/ 9eed Ana'! i in 'ife Sta(e 9eed E Purpo e Reco##ended In uranceP'an?e t Suited for H 'avings : capitalappreciation H )rotection /!isk cover0C1I) H "oderate to highincome H 2ave dependents H 'ecurity to dependents H !isk cover%erm policy H Ooung individuals

H 1ow income H 2ave dependents H #hildIs future studies H #hildIs marriage#hildren plans H #ouples having smallkids H !etirement -enefits H !isk cover)ension plans H )ersons aged a ove 8? H )ersons not having apension provision fromtheir employer H !isk cover H )eriodic payments"oney ack policy H

)ersons havingrecurringfinancial requirements H 1ow to moderateincome H !isk cover H 'avings,ndowment )lans H !equirement of fi+edsum after lapse of certain period 'tudy of Individual Financial )lanning 6; $/2/ E8uitie ,quities are a type of security that represents the ownership in a company. ,quities are traded / ought and sold0 in stock markets. Alternatively, they can e purchased via the Initial )u lic &ffering /I)&0 route, i.e. directly from the company. Investing in equities is a good long@term investment option as the returns on equities over a long time hori(on are generally higher than most other investment avenues. 2owever, along with the possi ility of greater returns comes greater risk. Share Price *eter#ination At any given moment, equitys price is strictly a result of supply and demand. %he supply is the num er of shares offered for sale at any one moment. %he demand is the num er of shares investors wish to uy at e+actly that same time. %he price of the stock moves in order to achieve and maintain equili rium. $hen prospective uyers outnum er sellers, the price rises. ,ventually, sellers attracted to the high selling price enter the market andJor uyers leave, achieving equili rium etween uyers and sellers. $hen sellers outnum er uyers, the price falls. ,ventually uyers

enter andJor sellers leave, again achieving equili rium. %hus, the value of a share of a company at any given moment is determined y all investors voting with their money. If more investors want a stock and are willing to pay more, the price will go up. If more investors are selling a stock and there arenIt enough uyers, the price will go down. &f course, that does not e+plain how people decide the ma+imum price at which they are willing to uy or the minimum at which they are willing to sell. In professional investment circles the efficient market hypothesis /,"20 continues to e popular, although this theory is widely discredited in academic and professional circles. -riefly, ,"2 says that investing is overall /weighted y a 't dev0 rationalK that the price of a stock at any given moment represents a rational evaluation of the known information that might ear on the future value of the companyK and that share prices of equities are priced efficiently, which is to say that they represent accurately the e+pected value of the stock, as est it can e known at a given moment. In other words, prices are the result of discounting e+pected future cash flows. Another theory of share price determination comes from the field of -ehavioural Finance. According to -ehavioural Finance, humans often make irrational decisionsRparticularly ,related to the uying and selling of securitiesR ased upon fears and misperceptions of outcomes. %he irrational trading of securities can often create securities prices which vary from rational, fundamental price valuations. Stoc1 #ar1et in%e t#ent H Econo#ic G Mathe#atic EStati tic G P !cho'o(! 'tudy of Individual Financial )lanning 6<,conomics Deals with fundamentals of company. 'tatistics deals with study of companies financial statement and it past performance in stock market. )sychology deals with market sentiments /2erd mentality0 which are most crucial as it can lead in wrong direction. In%e t in ?'ue Chip Stoc1

'tock of a well@esta lished and financially sound company that has demonstrated its a ility to pay dividends in oth good and ad times and is a leading player in its. %hese stocks are usually less risky than other stocks. .eature of ?'ue Chip Stoc1 %here are no specific criteria for lue chip stocks. %he most common characteristics of such stocks include4 1/ Re%enue : #ompanies with revenues higher than that generated y industry peers. 2/ Earnin( : #ompanies that have een generating healthy earnings on a consistent asis. "/ *i%idend : #ompanies that pay regular dividends to common stockholders, even if their performance has een unsatisfactory in a particular period. "oreover, the dividend pay out is raised at regular intervals. $/ ?a'ance Sheet: %he alance sheets are ro ust and their de t lia ilities are not e+tensive. &/ Credit Ratin(: %heir credit ratings in the ond and unsecured de t markets are high. )/ Si6e: %he market capitali(ation of these companies is higher than that of other companies in the same industry. +/ Product Portfo'io: %hey have e+tensive and diversified product lines. %hey also have a wide glo al presence. ;/ Co#petition: %hey are cost efficient, with high distri ution control and e+cellent franchise value, all of which contri ute towards their competitive advantage. $/"/ Mutua' .und

A "utual Fund allows a group of people to pool their money together and have it professionally managed, in keeping with a predetermined investment o *ective. %his investment avenue is popular ecause of its cost@efficiency, risk@diversification, professional management and sound regulation. )erson can invest as little as !s. 3,??? per month in a "utual Fund. %here are various general and thematic "utual Funds to choose from and the risk and return possi ilities vary accordingly.A "utual Fund is a trust that pools the savings of a num er of investors who share a common financial goal. %he money thus collected is then invested in capital market instruments such as shares, de entures and other securities. %he income earned through these investments and the capital appreciation realised are shared y its unit 'tudy of Individual Financial )lanning 6=holders in proportion to the num er of units owned y them. %hus a "utual Fund is the most suita le investment for the common man as it offers an opportunity to invest in a diversified, professionally managed asket of securities at a relatively low cost. %he flowchart elow descri es roadly the working of a mutual fund4 T!pe of Mutua' .und Sche#e in India $ide variety of "utual Fund 'chemes e+ist to cater tothe needs such as financial position, risk tolerance and return e+pectations etc. %he ta le elow gives an overview into the e+isting types of schemes in the Industry. H ?! Structure o &pen @ ,nded 'chemes o

#lose @ ,nded 'chemes H ?! In%e t#ent 34jecti%e o Growth 'chemes o Income 'chemes o -alanced 'chemes o "oney "arket 'chemes H 3ther Sche#e o %a+ 'aving 'chemes o 'pecial 'chemes o Inde+ 'chemes o 'ector 'pecfic 'chemes Structura' *e cription of Mutua' .und

'tudy of Individual Financial )lanning 6>"ost mutual funds are openAend . %he reason why these funds are called Sopen@endS is ecause there is no limit to the num er of new shares that they can issue. Gew and e+isting shareholders may add as much money to the fund as they want and the fund will simply issue new shares to them. &pen@end funds also redeem, or uy ack, shares from shareholders. In order to determine the value of a share in an open@end fund at any time, a num er called the Get Asset Nalue is used. Investor can purchase shares in open@end mutual funds from the mutual fund itself or one of its agentsK they are not traded on e+changes. C'o edAend funds ehave more like stock than open@end fundsK that is to say, closed@end funds issue a fi+ed num er of shares to the pu lic in an initial pu lic offering, after which time shares in the fund are ought and sold on a stock e+change. Cnlike open@end funds, closed@end funds are not o ligated to issue new shares or redeem outstanding shares. %he price of a share in a closed@end fund is determined entirely y market demand, so shares can either trade elow their net asset value /Sat a discountS0 or a ove it /Sat a premiumS0. 'ince one must take into consideration not only the fundIs net asset value ut also the discount or premium at which the fund is trading, closed@end funds are considered to e more suita le for e+perienced investors. Investor can purchase shares in a closed@end fund through a roker, *ust as one would purchase a share of stock. ?R3A* MUTUA- .U9* TYPES 'tudy of Individual Financial )lanning 7? $/"/1/ E8uit! .und

,quity funds are considered to e the more risky funds as compared to other fund types, ut they also provide higher returns than other funds. It is advisa le that an investor looking to invest in an equity fund should invest for long term i.e. for 7 years or more. %here are different types of equity funds each falling into different risk racket. In the order of decreasing risk level, there are following types of equity funds4 A((re i%e 7ro:th .und A In Aggressive Growth Funds, fund managers aspire for ma+imum capital appreciation and invest in less researched shares of speculative nature. -ecause of these speculative investments Aggressive Growth Funds ecome more volatile and thus, are prone to higher risk than other equity funds. 7ro:th .und A Growth Funds also invest for capital appreciation /with time hori(on of 7to 9 years0 ut they are different from Aggressive Growth Funds in the sense that they invest in companies that are e+pected to outperform the market in the future. $ithout entirely adopting speculative strategies, Growth Funds invest in those companies that are e+pected to post a ove average earnings in the future. Specia'it! .und A 'peciality Funds have stated criteria for investments and their portfolio comprises of only those companies that meet their criteria. #riteria for some speciality funds could e to investJnot to invest in particular regionsJcompanies. 'peciality funds are concentrated and thus, are comparatively riskier than diversified funds.. %here are following types of speciality funds4 Sector .und : ,quity funds that invest in a particular sectorJindustry of the market are known as 'ector Funds. %he e+posure of these funds is limited to a particular sector /say Information %echnology, Auto, -anking, )harmaceuticals or Fast "oving #onsumer Goods0 which is why they are more risky than equity funds that invest in multiple sectors.

.orei(n Securitie .und : Foreign 'ecurities ,quity Funds have the option to invest in one or more foreign companies. Foreign securities funds achieve international diversification and hence they are less risky than sector funds. 2owever, foreign securities funds are e+posed to foreign e+change rate risk and country risk. MidACap or S#a''ACap .und : Funds that invest in companies having lower market capitali(ation than large capitali(ation companies are called "id@#ap or 'mall@ #ap Funds."arket capitali(ation of "id@#ap companies is less than that of ig, lue chip companies/less than !s. 69?? crores ut more than !s. 9?? crores0 and 'mall@#ap companies have market capitali(ation of less than !s. 9?? crores. "arket #apitali(ation of a company can e calculated y multiplying the market price of the companyIs share y the total num er of its outstanding shares in the market. %he shares of "id@#ap or 'mall@#ap #ompanies are not as liquid as of 1arge@#ap #ompanies which gives rise to volatility in share prices of these companies and consequently, investment gets risky. 'tudy of Individual Financial )lanning 73 3ption Inco#e .und I: $hile not yet availa le in India, &ption Income Funds write options on a large fraction of their portfolio. )roper use of options can help to reduce volatility, which is otherwise considered as a risky instrument. %hese funds invest in ig,high dividend yielding companies, and then sell options against their stock positions,which generate sta le income for investors. *i%er ified E8uit! .und A ,+cept for a small portion of investment in liquid money market, diversified equity funds invest mainly in equities without any concentration on a particular sector/s0. %hese funds are well diversified and reduce sector@specific or company@specific risk. 2owever, like all other funds diversified equity funds too are

e+posed to equity market risk. &ne prominent type of diversified equity fund in India is ,quity 1inked 'avings 'chemes /,1''0. As per the mandate, a minimum of >?D of investments y ,1'' should e in equities at all times. ,1'' investors are eligi le to claim deduction from ta+a le income /up to !s 3 lakh0 at the time of filing the income ta+ return. ,1'' usually has a lock@in period and in case of any redemption y the investor efore the e+piry of the lock@in period makes him lia le to pay income ta+ on such income/s0 for which he may have received any ta+ e+emption/s0 in the past. E8uit! Inde0 .und A ,quity Inde+ Funds have the o *ective to match the performance of a specific stock market inde+. %he portfolio of these funds comprises of the same companies that form the inde+ and is constituted in the same proportion as the inde+. ,quity inde+ funds that follow road indices /like ':) #GP Gifty, 'ense+0 are less risky than equity inde+ funds that follow narrow sectoral indices /like -',-AG.,P or #GP -ank Inde+ etc0. Garrow indices are less diversified and therefore, are more risky. Va'ue .und A Nalue Funds invest in those companies that have sound fundamentals and whose share prices are currently under@valued. %he portfolio of these funds comprises of shares that are trading at a low )rice to ,arning !atio /"arket )rice per 'hare J ,arning per 'hare0 and a low "arket to -ook Nalue /Fundamental Nalue0 !atio. Nalue Funds may select companies from diversified sectors and are e+posed to lower risk level as compared to growth funds or speciality funds. Nalue stocks are generally from cyclical industries/such as cement, steel, sugar etc.0 which make them volatile in the short@term. %herefore, itis advisa le to invest in Nalue funds with a long@term time hori(on as risk in the long term,to a large e+tent, is reduced. E8uit! Inco#e or *i%idend Yie'd .und A %he o *ective of ,quity Income or Dividend Oield ,quity Funds is to generate high recurring income and steady capital appreciation

for investors y investing in those companies which issue high dividends /such as )ower or Ctility companies whose share prices fluctuate comparatively lesser than other companiesI share prices0. ,quity Income or Dividend Oield ,quity Funds are generally e+posed to the lowest risk level as compared to other equity funds. 'tudy of Individual Financial )lanning 76 $/"/2/ *e4t E Inco#e .und Funds that invest in medium to long@term de t instruments issued y private companies, anks, financial institutions, governments and other entities elonging to various sectors/like infrastructure companies etc.0 are known as De t J Income Funds. De t funds are low risk profile funds that seek to generate fi+ed current income /and not capital appreciation0to investors. In order to ensure regular income to investors, de t /or income0 funds distri ute large fraction of their surplus to investors. Although de t securities are generally less risky than equities, they are su *ect to credit risk /risk of default0 y the issuer at the time of interest or principal payment. %o minimi(e the risk of default, de t funds usually invest in securities from issuers who are rated y credit rating agencies and are considered to e of SInvestment GradeS. De t funds that target high returns are more risky. -ased on different investment o *ectives, there can e following types of de t funds4 *i%er ified *e4t .und A De t funds that invest in all securities issued y entities elonging to all sectors of the market are known as diversified de t funds. %he est feature of diversified de t funds is that investments are properly diversified into all sectors which results in risk reduction. Any loss incurred, on account of default y a de t issuer, is shared y all investors which further reduces risk for an individual investor. .ocu ed *e4t .und I A

Cnlike diversified de t funds, focused de t funds are narrow focus funds that are confined to investments in selective de t securities, issued y companies of a specific sector or industry or origin. 'ome e+amples of focused de t funds are sector, speciali(ed and offshore de t funds, funds that invest only in %a+ Free Infrastructure or "unicipal -onds. -ecause of their narrow orientation, focused de t funds are more risky as compared to diversified de t funds. Although not yet availa le in India, these funds are conceiva le and may e offered to investors very soon. 5i(h Yie'd *e4t fund A As we now understand that risk of default is present in all de t funds, and therefore, de t funds generally try to minimi(e the risk of default y investing in securities issued y only those orrowers who are considered to e of Sinvestment gradeS. -ut, 2igh Oield De t Funds adopt a different strategy and prefer securities issued y those issuers who are considered to e of S elow investment gradeS. %he motive ehind adopting this sort of risky strategy is to earn higher interest returns from these issuers.%hese funds are more volatile and ear higher default risk, although they may earn at times higher returns for investors. A ured Return .und A Although it is not necessary that a fund will meet its o *ectives or provide assured returns to investors, ut there can e funds that come with a lock@in period and offer assurance of annual returns to investors during the lock@in period. Any shortfall in returns is suffered y the sponsors or the Asset "anagement #ompanies/A"#s0. %hese funds are generally de t funds and provide investors with a low@risk investment opportunity. 2owever, the security of investments depends upon the net worth of the guarantor /whose name is specified in advance on the offer document0. %o safeguard the interests of investors, ',-I permits only those funds to offer assured return schemes 'tudy of Individual Financial )lanning

77whose sponsors have adequate net@worth to guarantee returns in the future. In the past, C%I had offered assured return schemes /i.e. "onthly Income )lans of C%I0 that assured specified returns to investors in the future. C%I was not a le to fulfill its promises and faced large shortfalls in returns. ,ventually, government had to intervene and took over C%IIs payment o ligations on itself. #urrently, no A"# in India offers assured return schemes to investors, though possi le. .i0ed Ter# P'an Serie A Fi+ed %erm )lan 'eries usually are closed@end schemes having short term maturity period /of less than one year0 that offer a series of plans and issue units to investors at regular intervals. Cnlike closed@end funds, fi+ed term plans are not listed on the e+changes. Fi+ed term plan series usually invest in de t J income schemes and target short@term investors. %he o *ective of fi+ed term plan schemes is to gratify investors y generating some e+pected returns in a short period. $/"/ "/ 7i't .und Also known as Government 'ecurities in India, Gilt Funds invest in government papers/named dated securities0 having medium to long term maturity period. Issued y the Government of India, these investments have little credit risk /risk of default0 and provide safety of principal to the investors. 2owever, like all de t funds, gilt funds too are e+posed to interest rate risk. Interest rates and prices of de t securities are inversely related and any change in the interest rates results in a change in the GAN of de tJgilt funds in an opposite direction. $/"/$/ Mone! Mar1et E -i8uid .und "oney market J liquid funds invest in short@term /maturing within one year0 interest earing de t instruments. %hese securities are highly liquid and provide safety of investment, thus making money market J liquid funds the safest investment option when compared with other mutual fund types. 2owever, even money market J liquid funds are e+posed to the interest rate risk. %he typical investment options for liquid funds include %reasury -ills /issued

y governments0, #ommercial papers /issued y companies0 and #ertificates of Deposit /issued y anks0. $/"/&/ 5!4rid .und As the name suggests, hy rid funds are those funds whose portfolio includes a lend of equities, de ts and money market securities. 2y rid funds have an equal proportion of de t and equity in their portfolio. %here are following types of hy rid funds in India4 ?a'anced .und A %he portfolio of alanced funds include assets like de t securities, converti le securities, and equity and preference shares held in a relatively equal proportion. %he o *ectives of alanced funds are to reward investors with a regular income, moderate capital appreciation and at the same time minimi(ing the risk of capital erosion. 'tudy of Individual Financial )lanning 78-alanced funds are appropriate for conservative investors having a long term investment hori(on. 7ro:thAandAInco#e .und A Funds that com ine features of growth funds and income funds are known as Growth@and@Income Funds. %hese funds invest in companies having potential for capital appreciation and those known for issuing high dividends. %he level of risks involved in these funds is lower than growth funds and higher than income funds. A et A''ocation .und A "utual funds may invest in financial assets like equity, de t, money market or non@financial /physical0 assets like real estate, commodities etc.. Asset allocation funds adopt a varia le asset allocation strategy that allows fund managers to switch over from one asset class to another at any time depending upon their outlook for specific markets. In other words, fund managers may switch over to equity if they e+pect equity market to provide good returns and switch over to de t if they e+pect de t market to

provide etter returns. It should e noted that switching over from one asset class to another is a decision taken y the fund manager on the asis of his own *udgment and understanding of specific markets, and therefore, the success of these funds depends upon the skill of a fund manager in anticipating market trends. $/"/)/ Co##odit! .und %hose funds that focus on investing in different commodities /like metals, food grains,crude oil etc.0 or commodity companies or commodity futures contracts are termed as #ommodity Funds. A commodity fund that invests in a single commodity or a group of commodities is a speciali(ed commodity fund and a commodity fund that invests in all availa le commodities is a diversified commodity fund and ears less risk than a speciali(ed commodity fund. S)recious "etals FundS and Gold Funds /that invest in gold, gold futures or shares of gold mines0 are common e+amples of commodity funds. $/"/+/ Rea' E tate .und Funds that invest directly in real estate or lend to real estate developers or invest in sharesJsecuriti(ed assets of housing finance companies, are known as 'peciali(ed !eal ,state Funds. %he o *ective of these funds may e to generate regular income for investors or capital appreciation. $/"/;/ E0chan(e Traded .und =ET.> ,+change %raded Funds provide investors with com ined enefits of a closed@end and an open@end mutual fund. ,+change %raded Funds follow stock market indices and are traded on stock e+changes like a single stock at inde+ linked prices. %he iggest advantage offered y these funds is that they offer diversification, fle+i ility of holding a single share/trada le at inde+ linked prices0 at the same time. !ecently introduced in India, these funds are quite popular a road. 'tudy of Individual Financial )lanning 79

$/"/C/ .und of .und "utual funds that do not invest in financial or physical assets, ut do invest in other mutual fund schemes offered y different A"#s, are known as Fund of Funds. Fund of Funds maintain a portfolio comprising of units of other mutual fund schemes, *ust like conventional mutual funds maintain a portfolio comprising of equityJde tJmoney market instruments or non financial assets. Fund of Funds provide investors with an added advantage of diversifying into different mutual fund schemes with even a small amount of investment, which further helps in diversification of risks. 2owever, the e+penses of Fund of Funds are quite high on account of compounding e+penses of investments into different mutual fund schemes. 'tudy of Individual Financial )lanning 7; Ri 1 5eirarch! of *ifferent Mutua' .und Different mutual fund schemes are e+posed to different levels of risk and investors should know the level of risks associated with these schemes efore investing. %he graphical representation hereunder provides a clearer picture of the relationship etween mutual funds and levels of risk associated with these funds4 'tudy of Individual Financial )lanning 7< Ad%anta(e of Mutua' .und %he advantages of investing in a "utual Fund are4 H *i%er ification: %he est mutual funds design their portfolios so individual investments will react differently to the same economic conditions. For e+ample, economic conditions like a rise in interest rates may cause certain securities in a diversified portfolio to decrease in value. &ther securities in the portfolio will respond to the same

economic conditions y increasing in value. $hen a portfolio is alanced in this way, the value of the overall portfolio should gradually increase over time, even if some securities lose value. H Profe iona' Mana(e#ent: "ost mutual funds pay topflight professionals to manage their investments. %hese managers decide what securities the fund will uy and sell. H Re(u'ator! o%er i(ht: "utual funds are su *ect to many government regulations that protect investors from fraud. H -i8uidit!: ItIs easy to get money out of a mutual fund. $rite a check, make a call, and get the cash. H Con%enience: )erson can usually uy mutual fund shares y mail, phone, or over the Internet. H -o: co t: "utual fund e+penses are often no more than 3.9 percent of investment. ,+penses for Inde+ Funds are less than that, ecause inde+ funds are not actively managed. Instead, they automatically uy stock in companies that are listed on a specific inde+ H Tran parenc!

H .'e0i4i'it! H Choice of che#e H Ta0 4enefit H De'' re(u'ated *ra:4ac1 of Mutua' .und "utual funds have their draw acks and may not e for everyone4 H 9o 7uarantee : Go investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how alanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they 'tudy of Individual Financial )lanning 7= uy and sell stocks on their own. 2owever, anyone who invests through a mutual fund runs the risk of losing money. H .ee and co##i ion : All funds charge administrative fees to cover their day@to@day e+penses. 'ome funds also charge sales commissions or SloadsS to compensate rokers, financial consultants, or financial planners. ,ven if people dont use a roker or other financial adviser, person will pay a sales commission if they uy shares in a 1oad Fund. H

Mana(e#ent ri 1: $hen persons invest in a mutual fund, they depend on the fundIs manager to make the right decisions regarding the fundIs portfolio. If the manager does not perform as well as person had hoped, one might not make as much money on investment as was e+pected. &f course, if money invested in Inde+ Funds, person foregoes management risk, ecause these funds do not employ managers. $/$/ Certificate of *epo it #ertificate of deposit was introduced in India in 3>>3. It is a scheme of raising funds y commercial anks, e+cept rural anks and is a negotia le receipt of funds. Due to their negotia le nature, they are also called Gegotia le #ertificate of Deposit /G#D0. It may e in a registered form or a earer form. %he later is more popular as it can e transacted more readily in secondary markets. Cnlike %reasury ills, this carries an e+plicit rate of interest. 'u scri ers to the #ertificate of Deposits are Individuals, #orporations, #ompanies, %rusts, Funds and Associations etc. %he conventional deposits though have a fi+ed maturity, the depositors can withdraw them prematurely, where as in case of #ertificate of Deposits the investors have to wait till they mature. %hough interest on certificate of deposits is ta+ed, it is still a popular form of short@term investments for companies due to following reasons4 o %hese certificates are fairly liquid. o %hey are generally risk free. o %hey offer a higher yield as compared to conventional deposits. $/&/ Pu4'ic Pro%ident .und =PP.>

))F is considered safe investment avenue. %he current interest rate on ))F is =D per annum. Again like ,)F the rate of interest is not fi+ed. %he government modifies the same from time to time. %he est part of ))F is that the interest thereon is e+empt from ta+ under section 3?/330 of the Income %a+ Act. %a+ deduction can e claimed on contri ution made y an individual into his own ))F account or into the ))F account of his spouse or children. ))F account can e opened in a nationali(ed ank or a post office. It is a 39@year account.%he entire amount including accumulated interest can e withdrawn after 39 years. 'tudy of Individual Financial )lanning 7>)artial withdrawals /which are also ta+ free0 are allowed from the <th year. %he minimum investment amount is !s 9?? per financial year and the ma+imum is !s <?,??? per financial year. %he amount of investment one can make may vary every year giving persona lot of fle+i ility in planning their investments. "any may not like to invest in ))F due to its very long tenure /39 years0. 2owever, one may open an account and contri ute only small sums initiallyK after all minimum annual contri ution is *ust !s 9??. In later years, contri utions can e increased. $/)/ Rea' E tate In%e t#ent !eal ,state Investment is now treated as a ma*or case of capital udgeting y using state@of@the@art investment analysis which incorporates the future stream of income it may generate and the associated risk ad*ustments. It has een the highlight of the investment literature since the 3><?s when investment theorists e+tended techniques such as pro a ility, time value of money and utility into its analysis. !eal estate is asically defined as immova le property such as land and everything permanently attached to it like uildings. !eal property as opposed to personal or mova le property is characteri(ed y the right to transfer the title to the land whereas title to personal property can e retained. %he investment in real estate essentially depends on the risks

associated with it, that is to say, even if the venture succeeds when the future stream of income will accrue to the investor and the alternative investment opportunities. !eal estate investment can e attractive if viewed as a usiness opportunityK it can generate rental income, using it as collateral to secure a loan for a usiness venture, to offset otherwise ta+a le income through cash savings on ta+@deducti le interest rate losses, or simply from the profits garnered from its resale. Gota le, in this conte+t is the gains reaped y real estate speculators who trade in real estate futures / y uying and selling purchase options0.#ommon e+amples of real estate investment are individuals owning multiple pieces of real estates one of which is his primary residence and others are occupied y tenants from where the rental income accrues. !eal estate investment is also associated with appreciation in the value of property there y having the potential for capital gains. %a+ implications differ for real estate investment and residential real estates. !eal estate investment is long term in nature and investment professionals routinely maintain that ones investment portfolio should have at least 9D@ 6?D invested in real estate 'tudy of Individual Financial )lanning 8? $/+/ 7o'd %he love for gold in India is legendary. %here has always een a good demand for gold in India making it the largest consumer of gold in the world. %he consumption of gold is mostly in form of *ewellery. -ut as investment an investors generally uy gold as a hedge or safe haven against any economic, political, social or currency@ ased crises. %hese crises include investment market declines, inflation, war and social unrest. Gold can e ought in various forms, one can either uy it in the form of physical gold @@ ars, iscuits and or coins or even in a dematerialised form. Gold *ewellery is not a good investment as it

is not as liquid as ars or gold fund. %he disadvantage is that a huge amount is to e paid as making charges or design charges which is discounted while selling it. %he second disadvantage is most *ewellers do not give cash in lieu of gold. Instead they allow to e+change it for gold *ewellery or in a ar or coin form. Gold ,+change@%raded Fund or Gold ,%F is the new investment option of recent origin. %his open@ended mutual fund collects money from the investors to invest in standard gold ullion. Instead of physical holding the gold, the investors will e assigned units of the gold ,%F. Gold ,%F are listed in the stock e+changes of their respective countries. Gold ,%Fs give the same advantages of holding gold in the physical form without the hassles associated with keeping gold in physical form. $ith gold ,%Fs, person need not worry a out the safe storage, liquidity and purity of physical gold. %he fund house that issues the gold ,%F takes over the responsi ility of storage and insurance of this gold. 'ince gold ,%Fs are registered with stock e+changes, they confirm with the norms and regulations of the regulating authorities. %he transparency of operation of these funds ensures that the quality of gold that the fund is investing in confirms to glo al standards of purity. %here is complete transparency in the Get Asset Nalue or GAN of the funds and the market prices at which they are traded. %he ease of investing in small denominations in Gold ,%Fs makes it easy for retail investors to participate in the schemes. -y investing in gold ,%Fs, one can accumulate a si(ea le amount of gold over a long period of time. !etail investors could invest even in one unit of the fund, which is equivalent to one or Tgram of gold, every month. Gold ,%Fs are also ta+ efficient unlike physical gold. $hile physical gold is considered along@term investment, only if it is hold for three years, gold ,%Fs acquire this status after one year. In short, selling gold within three years of purchase will attract capital gains ta+. "oreover , holding large quantities of physical gold can attract wealth ta+, while gold in demat form does not. %his apart, the

spread etween the uy and sell prices pertaining togold ,%Fs is less than that of physical gold. 'tudy of Individual Financial )lanning 83Gold )rice is determined y demand and supply equili rium. It has an effect of glo al demand on its pricing. %he demand for gold has een steadily rising, while the supply has remained relatively inelastic, leading to a rise in the prices. Gold prices are also inversely related to dollar price. %hough Gold is a safe asset. ,specially during recessionary economic situations, when equity prices plummet, price of gold remains sta le even in an unsta le economic environment. Gold is always a good hedge against inflation and is therefore a safe investment option. Including gold in investment portfolio provides the proper diversification of assets. A good portfolio is one where prices of all assets do not move up and down at the same time and at the same rate. Although, the long@term return from gold might not e as huge as return from the equity market, ut nonetheless, they are the safest custodian of hard@earned money. $/;/ In%e t#ent in ?an1 -ank investment can e said as the most common or primary investment avenues. Got many people recogni(e this sector as an investment avenue. -anks are the most common and many a times people first investment e+perience. Few investments in ank can e in following form4 $/;/1/ .i0ed *epo it A fi+ed deposit is meant for those investors who want to deposit a lump sum of money for a fi+ed periodK say for a minimum period of 39 days to five years and a ove, there y earning a higher rate of interest in return. Investor gets a lump sum /principal Q interest0 at the maturity of the deposit. 'tudy of Individual Financial )lanning 86-ank fi+ed deposits are one of the most common savings scheme open to an average investor. Fi+ed deposits also give a

higher rate of interest than a savings ank account. %he facilities vary from ank to ank. 'ome of the facilities offered y anks are overdraft/loan0 facility on the amount deposited, premature withdrawal efore maturity period/which involves a loss of interest0 etc. -ank deposits are fairly safer ecause anks are su *ect to control of the !eserve -ank of India. %he anks are free to offer varying interests in fi+ed deposits of different maturities. Interest is compounded once a quarter, leading to a somewhat higher effective rate. %he minimum deposit amount varies with each ank. It can range from as low as !s. 3??to an unlimited amount with some anks. Deposits can e made in multiples of !s. 3??J@.%he thing to consider efore investing in an FD is the rate of interest and the inflation rate. A high inflation rate can simply chip away real returns. %he rate of interest for -ank Fi+ed Deposits varies etween 8 and 33 per cent, depending on the maturity period /duration0 of the FD and the amount invested. Interest rate also varies etween each ank. A -ank FD does not provide regular interest income, ut a lump@sum amount on its maturity. 'ome anks have facility to pay interest every quarter or every month, ut the interest paid may e at a discounted rate in case of monthly interest. $ith effect from A.O. 3>>=@>>, investment on ank deposits, along with other specified incomes, is e+empt from income ta+ up to a limit of !s.36, ???J@ under 'ection =?1. Also, from A.O. 3>>7@>8, ank deposits are totally e+empt from wealth ta+. %he3>>9 Finance -ill )roposals introduced ta+ deduction at source /%D'0 on fi+ed deposits on interest incomes of !s.9???J@ and a ove per annum. $/;/2/ Recurrin( *epo it %he !ecurring deposit in -ank is meant for someone who wants to invest a specific sum of money on a monthly asis for a fi+ed rate of return. At the end, person will get the principal sum as well as the interest earned during that period. %he scheme, a systematic way for long term savings, is one of the est investment option for the low income groups. %he minimum investment of !ecurring Deposit varies from ank to ank ut

usually it egins from !s 3??J@. %here is no upper limit in investing. %he rate of interest varies etween < and 33 percent depending on the maturity period and amount invested. %he interest is calculated quarterly or as specified y the ank. %he period of maturity ranging from ; months to 3? years.%he deposit shall e paid as monthly installments and each su sequent monthly installment shall e made efore the end of the calendar month and shall e equal to the first deposit. 'ince a recurring deposit offers a fi+ed rate of return, it cannot guard against inflation if it is more than the rate of return offered y the ank. $orse, lower the gap etween the 'tudy of Individual Financial )lanning 87interest rate on a recurring deposit and inflation, lower real rate of return. )remature withdrawal is also possi le ut it demands a loss of interest.%he rate of interest varies etween < and 33 percent depending on the maturity period and amount invested. %he interest is calculated quarterly or as specified y the ank. 'ome Gationalised anks are giving more facilities to their customer, 'tate -ank of India give Free !oaming !ecurring Deposit facility to their customers. %hey can transfer their account to any ranch of '-I free. %a+ enefit on the interest earned on !ecurring Deposit up to !s 36??? %a+ Deducti le at source if the interest paid on deposit e+ceeds !s 9???J@per customer, per year, per ranch. $/;/"/ Sa%in( ?an1 Account A 'aving -ank account /'- account0 is meant to promote the ha it of saving among the people. It also facilitates safekeeping of money. In this scheme fund is allowed to e withdrawn whenever required, without any condition. 2ence a savings account is a safe, convenient and afforda le way to save money. -ank deposits are fairly safe ecause anks are su *ect to control of the !eserve -ank of India with regard to several policy and operational parameters. -ank also pays a minimal interest for

keeping money with them.%he interest rate of savings ank account in India varies etween 6.9D and 8D. In 'avings -ank account, ank follows the simple interest method. %he rate of interest may change from time to time according to the rules of !eserve -ank of India.ItIs much safer to keep money at a ank than to keep a large amount of cash in home. -ank deposits are fairly safe ecause anks are su *ect to control of the !eserve -ank of India with regard to several policy and operational parameters. %he federal Government insures deposited money. 'aving -ank account does not have any fi+ed period for deposit. %he depositor can take money from his account y writing a cheque to some ody else or su mitting a cheque directly. Gow most of the anks offer various facilities such as A%" card, credit card etc. %hrough de itJA%" card one can take money from any of the A%" centres of the particular ank which will e open 68 hours a day. %hrough credit card one can avail shopping facilities from any shop which accept the credit card. And many of the anks also give internet anking facility through with one do the transactions like withdrawals, deposits, statement of account etc. $/C/ In%e t#ent throu(h Po t 3ffice 'hare of )ost office investment has also a ma*or part in Indian 2ousehold investment, which is mostly due to its all India presence of service network. Narious avenues for post office investment are as follows4 'tudy of Individual Financial )lanning 88 $/C/1/ Po t office Recurrin( *epo it Account =R*A> A )ost@&ffice !ecurring Deposit Account /!DA0 is a anking service offered y Department of post, Government of India at all post office counters in the country. %he scheme is meant for investors who want to deposit a fi+ed amount every month, in order to get a lump sum after five years. %he scheme, a systematic way for long term savings, is one of the est investment option for the low income groups.%he minimum

investment in a post@office !DA is !s 3? and then in multiples of !s. 9J@ for a period of 9 years. %here is no prescri ed upper limit on investment.%he deposit shall e paid as monthly installments and each su sequent monthly installment shall e made efore the end of the calendar month and shall e equal to the first deposit.&ne withdrawal is allowed after one year of opening a post@office !DA on meeting certain conditions. )erson can withdraw up to half the alance lying to their credit at an interest charged at 39D. %he withdrawal or the loan may e repaid in one lump or in equal monthly installments .)remature closure is allowed on completion of three years from the date of opening and in such case, interest is paya le as per the rate applica le for the )ost &ffice 'avings -ank Account. After maturity of the account, it can e continued for a further period of 9 years with or without further deposits. During this e+tended period, the account can e closed at anytime.%he post@office recurring deposit offers a fi+ed rate of interest, currently at <.9 per cent per annum compounded quarterly. %he post office offers a fi+ed rate of interest unlike anks which constantly change their recurring deposit interest rates depending on their demand supply position. As the post office is a department of the government of India, it is a safe investment. %he principal amount in the !ecurring Deposit Account is assured. "oreover Interest earned on this account is e+empted from ta+ as per 'ection =?1 of Income %a+ Act. $/C/2/ Ti#e *epo it A )ost@&ffice %ime Deposit Account is a anking service similar to a -ank Fi+ed Deposit offered y Department of post, Government of India at all post office counters in the country. %he scheme is meant for those investors who want to deposit a lump sum of money for a fi+ed periodK say for a minimum period of one year to two years, three years and a ma+imum period of five years. Investor gets a lump sum /principal Q interest0 at the maturity of the deposit. %ime Deposits scheme return a lower, ut safer, growth in investment.%ime Deposits can e made for the periods of 3 year, 6 years, 7 years and 9 years. %he minimum

investment in a post@office %ime deposit is !s 6?? and then its multiples and there is no prescri ed upper limit on investment. 'tudy of Individual Financial )lanning 89%he account can e closed after ; months ut efore one year of opening the account. &n such closure the amount invested is returned without interest. 6 year, three year and five year accounts can e closed after one year at a discount. %hey involve a loss in the interest accrued for the time the account has een in operation.Interest is paya le annually ut is calculated on a quarterly asis at the prescri ed rates.)ost maturity interest will e paid for a ma+imum period of 68 months at the rate applica le to individual savings account. &ne can take a loan against a time deposit with the alance in account pledged as security for the loan.%his investment option pays annual interest rates etween ;.69 and <.9 per cent,compounded quarterly. %ime deposit for 3 year offers a coupon rate of ;.69D, 6@yeardeposit offers an interest of ;.9D, 7 years is <.69D while a 9@year %ime Deposit offers<.9D return.In this scheme investment grows at a pre@ determined rate with no risk involved. $ith a Government of India@ acking, principal as well as the interest accrued is assured under the scheme.%he rate of interest is relatively high compared to the 8.9D annual interest rates provided y anks. Although the amount invested in this scheme is not e+empted as per section ==of Income %a+, the amount of interest earned is ta+ free under 'ection =?@1 of Income %a+ Act. $/C/"/9ationa' Sa%in( Certificate Gational 'avings #ertificates /G'#0 are certificates issued y Department of post, Government of India and are availa le at all post office counters in the country. It is a long term safe savings option for the investor. %he scheme com ines growth in money with reductions in ta+ lia ility as per the provisions of the Income %a+ Act, 3>;3. %he duration of a G'# scheme is ; years.G'#s are issued in denominations of !s 3??, !s 9??, !s 3,???, !s 9,??? and !s.3?,???for a maturity period of ; years. %here is no

prescri ed upper limit on investment. &ne can take a loan against the G'# y pledging it to the !-I or a scheduled ank or a co@ operative society, a corporation or a government company, a housing finance company approved y the Gational 2ousing -ank etc with the permission of the concerned postmaster.%hough premature encashment is not possi le under normal course, under su @rule /30 of rule 3; it is possi le after the e+piry of three years from the date of purchase of certificate. 'tudy of Individual Financial )lanning 8;It is having a high interest rate at =D compounded half yearly. %a+ enefits are availa le on amounts invested in G'# under section ==, and e+emption can e claimed under section=?1 for interest accrued on the G'#. Interest accrued for any year can e treated as fresh investment in G'# for that year and ta+ enefits can e claimed under section ==. G'#s can e transferred from one person to another through the post office on the payment of a prescri ed fee. %hey can also e transferred from one post office to another. %he scheme has the acking of the Government of India so there are no risks associated with investment. &ne can take a loan against the G'# y pledging it to the !-I or a scheduled ank or a co@operative society, a corporation or a government company, a housing finance company approved y the Gational 2ousing -ank etc with the permission of the concerned post master. $/C/$/ Po t 3ffice Ji an Vi1a Patra .isan Nikas )atras is a safe and long term investment option acked y the Government of India which provides interest income similar to onds. %he title of the scheme makes some misconception that it is only meant for farmers. -ut anyone can go for .isan Nikas )atra. .N) is eneficial for those looking for a safe avenue of investment without the pressing need for a regular source of income. "oney dou les at the end of specified period.%he minimum investment in .N) is !s 3??. #ertificates are availa le in denominations of !s 3??, !s 9??, !s 3,???, !s

9,???, !s 3?,??? and !s 9?,???. %he denomination of !s9?,??? is sold through head post offices only. %here is no limit on holding of these certificates. Any num er of certificates can e purchased. A .N) is sold at face valueK the maturity value is printed on the #ertificate.%he post@office .isan Nikas )atras /.N)s0 offers a fi+ed rate of interest, currently at =.83/6??>0 per cent per annum compounded half yearly which are su *ect to vary. %he maturity period is = years and < months and "oney dou les on maturity. ,ncashment is possi le from two and half years. %here is facility to reinvest the amount on maturity. Go income ta+ enefit is availa le under the .isan Nikas )atra scheme. Interest income is ta+a le, however, the deposits are e+empt from %a+ Deduction at 'ource /%D'0 at the time of withdrawal. .N) deposits are e+empt from $ealth ta+..N)s can e pledged as a security against a loan. It can e transfera le to any post offices in India. .N)s can e transfera le to one person to other efore maturity. Gomination Facility is also availa le. $/C/&/ Po t 3ffice Month'! Inco#e Sche#e %he post@office monthly income scheme /"I'0 provides for monthly payment of interest income to investors. It is meant for investors who want to invest a sum amount initially and earn interest on a monthly asis for their livelihood. %he "I' is not suita le for capital 'tudy of Individual Financial )lanning 8<appreciation. It is meant to provide a source of regular income on a long term asis. %he scheme is, therefore, more eneficial for retired persons.&nly one deposit is availa le in an account. &nly individuals can open the accountK either single or *oint./ two or three0. Interest rounded off to nearest rupee i.e, 9? paise and a ove will e rounded off to ne+t rupee. %he minimum investment in a )ost@&ffice "I' is !s3,9?? for oth single and *oint accounts. %he ma+imum investment for a single account is !s 8.9 lakh and !s > lakh for a *oint account. %he duration of "I' is si+ years.%he post@office "I' gives a return of =D interest on maturity. %he

minimum investment in a )ost@&ffice "I' is !s 3,9?? for oth single and *oint accounts.)remature closure of the account is permitted any time after the e+piry of a period of one year of opening the account. Deduction of an amount equal to 9 per cent of the deposit is to e made when the account is prematurely closed. Investors can withdraw money efore three years, ut a discount of 9D. #losing of account after three years will not have any deductions. )ost maturity Interest at the rate applica le from time to time /at present7.9D0. "onthly interest can e automatically credited to savings account provided oth the accounts standing at the same post office. Deposit in "onthly Income 'cheme and invest interest in !ecurring Deposit to get 3?.9D /appro+0 interest. %he interest income accruing from a post@office "I' is e+empt from ta+ under 'ection =?1 of the Income %a+ Act,3>;3. "oreover, no %D' is deducti le on the interest income. %he alance is e+empt from $ealth %a+. Chapter &: Re earch Methodo'o(! &/1: Re earch *e i(n&/2: *ata Co''ection Techni8ue and Too' &/": Sa#p'e *e i(n&/$: -i#itation 'tudy of Individual Financial )lanning 8= &/1/ Re earch *e i(n %he study is a out to find various avenues availa le for an individual to invest and ways to achieve long term and short term financial goals through financial planning. It intend to study the pattern in which individual allocates his savings in various asset class. It descri es the awareness of investor a out various alternatives availa le to them. It also aims at creating awareness of financial planning.%he data required for the study would e acquired through personal interview and questioner and it was collected y means of cold calling /#old calling is the process of approaching prospective customers or clients, who were not e+pecting such an interaction0,and the research period was spread out in twenty days. For this purpose researcher choose

Gariman )oint /"um ai0 area, where researcher could find enough educated office going people, which will help us getting etter understanding of how financial planning is done. 'tudy of Individual Financial )lanning 8> &/2/ *ata co''ection techni8ue and too' For the purpose of data collection researcher took help of oth primary data and secondary data collection method. Pri#ar! data are those, which are collected afresh and for the first time, and thus happen to e original in character. %his method was used y means of )ersonal Interview, wherein researcher had face@to@face contact with the persons. %he reason ehind choosing this method was to have detailed information on the su *ect. It also provided opportunity for selecting the sample for interview. %he interview conducted were a mi+ture of structured and unstructured interviews. 'cope was kept open for detailed discussion at the discretion of the interviewee. $here there was a time crunch a structured procedure was followed wherein predetermined questions were put forward.%he other method was adopted in primary data collection was Muestionnaires. %his was used to assist a more structured form of information. %he information thus o tained was standard and in a more un iased form. It assisted to collect data from a large sample si(e.%he pattern adopted was a general form of questionnaire. Muestions are in dichotomous/yes or no answers0, multiple choice and open ended question. &pen ended questions are restricted due to the difficulty faced in analy(ing. %he questioner was kept short and to the point. Secondar! data means data that are already availa le i.e., the data which is already collected and analy(ed y other. %o get a etter understanding and to have a larger e+posure on the su *ect this method was used. "ethods use was data availa le on worldwide we , articles in newspapers, financial industry reports, Financial

)lanning oard of India reports and article, reports pu lished y Government of India, etc. 'upport was also provided y the pro*ect guide y giving inputs from his years of e+perience. &/"/ Sa#p'e *e i(n 'ample design was ased on principles of sample survey. 'ample was decided on socio demographic factors such as income and age group. %he num er of respondent were restricted to 9? due to lack of time. 'ampling unit was geographical unit where the research was carried in Gariman )oint, "um ai. 'ource list for respondents was not predetermined it was on random asis. %he various parameters on which the research was to e conducted are4 H Awareness of financial )lanning H Alignment of life goals and financial goals H Investment distri ution in various asset classes H Decision influencing investment 'tudy of Individual Financial )lanning 9? &/$/ -i#itation -ac1 of re pon e fro# a#p'e: It is also said as access to resource of information. As the method adopted was cold calling the respondent were not easily availa le for discussion. Un:i''in( to re%ea' financia' po ition: In technical term it can e said as access to information. "any of are not comforta le to disclose our financial affairs openly. In such a situation researcher had to convince the respondent a lot

more times. Also many a times only general discussion would take place. Ti#e: Due to lack of time availa ility of respondent and the period which can e used to collect data was short the research could not e conducted on a large sample si(e. U in( or(ani6ation =co#pan!> na#e: "any a time to get access to respondent researcher had to revel the organi(ation identity. )eople thought that it was for the purpose of sales of promotional activity, which lead to negative response from many people. -ac1 of e0perti e: &n the side of the researcher the there was lack of in@depth information on the topic. Chapter ): *ata Ana'! i and Interpretation 'tudy of Individual Financial )lanning 93;.3. Age distri ution of the respondent A(e (roup of re pondent 9o/ of Re pondent Percenta(e 63@7? 3< 78D7?@89 3= 7;D89@;? 33 66Da ove ;? 8 =D%otal 9? 3??D 6 3 @ 7 ? 7 ? @ 8 9 8 9 @ ; ? a o v e ; ? Go.of !espondent3 < 3 = 3 3 8 ?6 8;=3?36383;3=6? G u m e r o f r e s p o n d e n t Age 9o/ofRe pondent

Almost <?D of respondent was from age group 63yrs to 89yrs this is considered to e most active age group. During this age, life of an individual changes very drastically. %he career is in growing stage in starting few years and there are hardly any responsi ilities, at this time there is a lot of funds availa le for disposal. It is this age where ma+imum risk can etaken and a greater period can e given to grow the amount invested. As a person enter into their 7?s they have increased family responsi ility and gradually the risk taking a ility reduces with the age. $ith a greater portion of such population included in data collection a greater degree of understanding can e gained how financial planning is done y young India. 'tudy of Individual Financial )lanning 96;.6. Income distri ution of respondent Inco#e Re pondent Percenta(e upto 6,??,??? 3= 7;6,??,??? @ 7,??,??? 37 6;7,??,??? @ 8,??,??? > 3=8,??,??? @ 9,??,??? ; 36a ove ;,??,??? 8 = Tota' &< 1<< Financial planning is a out assessing our present cash flowsK estimating the required cash flow after a certain period of time and to determine the steps required to achieve this over a period. %he amount of disposa le income at hand determines various investment decisions. It also helps in making ta+ plans so that ma+im enefit can e gained through various ta+ e+emptions. 'o it is necessary to know the income inflow of an individual. %he a ove graph shows that a ma*or portion of respondent are in income sla of upto !s.6,??,??? p.a.K this indicates that the persons may e in the eginning stage of career. $ith increasing income sla the no of respondent are reduced. 'tudy of Individual Financial )lanning 97;.7. )erson willingness to take risk according to age

A(e (roup Di''in(ne to ta1e ri 1 Tota' 5i(h Moderate -o: 63@7? = = 3 1+ 73@89 < > 6 1; 8;@;? 6 8 9 11 a ove ;? 3 3 6 $Tota' &< %he investment decisions are more ased on the willingness to take the risk rather than the a ility to take risk. %he a ove graph descri es the willingness to take risk at various life stages. At the younger age people are more willing to take risk which reduces over the years as responsi ility increase. Although different individual may have different preferences which could contradict their age. "any a time investment is a function of willingness rather than a ility which is clearly descri ed y a ove graph. 'tudy of Individual Financial )lanning 98;.8. Investment made y the respondent in various avenues Avenue !espondent )ercentage 1ife Insurance 9? 3??Fi+ed Deposit 73 ;6"utual Fund 6> 9=,quity "arket 38 6=Gold ; 36))F 83 =6)ost &ffice Deposit 68 8= ?93?396?697?798?899?1ifeInsuranceFi+edDeposit"utualFund,quity"arketG o l d ) ) F ) o s t & f f i c e Deposit A fair idea of asset allocation of individuals in various asset class can e o served through this. It was o served that the all respondent had a life cover policy. %his shows that the asics of financial planning were achieved. %he ne+t ma*or portion was )rovided Fund due to it eing more secure investment and also ta+ e+emption offered. "a*or investments were also made in -ank Fi+ed Deposits and )ost &ffice Deposits. ,quity was not a preferred investment among many due to its volatile nature ut

many used it as a long term investment y investing in large companies. Investment in gold was more in form of *ewelry which is not a good option as investment. Nery few invested in gold coinsJ ars and Gold ,%Fs. 'tudy of Individual Financial )lanning 99;.9. 'atisfaction of investors on their previous investment Sati faction Re pondent Percenta(e Oes 39 7?Go 6= 9;Geutral < 38 Tota' &< 1<< A ma*or portion of respondent was unsatisfied with the returns they got on their investment. %his reflects that investment decision was not taken properly. Few common reasons cited were4 H Inadequate knowledge a out the instrument in which investment was made H "isguided y the agent of financial company H #harges applica le were not disclosed initially H Cnplanned investment Also a ma*or portion of investment was in assets which has a low risk L low returns category. %his also was a ma*or reason of respondent unsatisfied with current returns. 'tudy of Individual Financial )lanning 9;;.;. Narious sources of informationJreference for investor which influence investment decision. Source of infor#ation Re pondent

Gews paper, )u lications :"edia 73)rofessionals 66AgentsJ-roker 7>Friends, )eer group, etc. 3; ?3?6?7?8?9?;?<?=?>? ) e r c e n t a g e *e(reeofor(ani eddata !espondent 5i(h-o:Moderate Gews)apers,)u lication:"edia)rofessionalsAgents:-rokerFriends,)eergroup,etc. %here are sources of information which are vital in making investment decision. %he graph shows the source of information which is plotted according to its authentication. &n the P a+is the e+treme right indicates highest authentication and it get reduce as we move to right. %he authentication of information plays a important role in right investment decision. $e find that ma*or respondent have taken investment decision on the ases of information provided y Agents : -roker of different financial company. %he ne+t ma*or information source is Gews papers, pu lication and media which are considered to e highly authenticated data. 2elp of professionals in investment decision is taken not y many, due the fees charged y various professional for their service. %here is less num er of respondent taking their investment decision on information provided y friends. "ostly the information provide y such people is ased on their e+perience which may not e true for others. %hat is the reason, such source of information is considered less organi(ed and relia le. 'tudy of Individual Financial )lanning 9<;.<. Investment & *ectives of Individuals In%e t#ent 34jecti%e Re pondent )rinciple 'afety >"aintain 'tandard of living 3<"eet future e+penses 3='afegaurd against contingencies ; Tota' &< Investment o *ective to a greater e+tend determine the investment tenure and the avenue. Different investment

o *ectives have different investment avenues to meet them. -y determining the o *ective we can easily determine the investment vehicle for individuals.%he persons looking for principal safety can investment in )ost office schemes, government securities, anks and ))F. Investment in ,quity and "utual funds can give greater returns which can eat high inflation rate. %erm deposits are useful when money is needed after a fi+ed period of time. 'tudy of Individual Financial )lanning 9=;.=. !espondent frequency of investment Preferred .re8uenc! of In%e t#ent Re pondent Percenta(e "onthly 63 86Muarterly 8 =2alf Oearly 9 3?Annually 33 66'ingleJ&ne time > 3= Tota' &< 1<< A good num er of investors prefer to invest regularly on monthly asis, thanks to 'ystematic Investment )lan. "onthly investment helps to invest in small denominations with enefits of !upee cost averaging. "onthly investment was largely found in "utual Funds. %o a surprise many prefer to invest in single or one time installment without knowing the risk attached to it. &ne time investment are a good option only for physical assets life real estate and gold. 'tudy of Individual Financial )lanning 9>;.>. Investment in mutual funds Mutua' .und In%e t#ent Re pondent "oney "arket Funds =Gilt Funds 8De t Funds 6-alanced Funds 6?Inde+ Funds 3?Diversified ,quity Funds 68'ector 'pecific Funds 38It was o served that a large num er of mutual fund investors have invested in Diversified ,quity Funds which are high on risk ut also gives a high return. %he other ma*or portion went to -alanced Funds which provides with a regular income, moderate capital appreciation and at the same time minimi(ing

the risk of capital erosion. Also large portion of investors have invested in 'ector 'pecific Funds which are high on risk ut also provides high returns when economy favors such sectors. All this funds provide a greater opportunity for capital appreciation with trying to minimi(e the effect of risk on fluctuations in equity market. A small portion of respondent has invested in fi+ed return funds like De t funds, Gilt funds and "oney "arket Funds. %his investment have low risk L low return characteristics with little capital appreciation. 'tudy of Individual Financial )lanning ;?;.3?. Financial 1iteracy of respondent .inancia' -iterac! Re pondent Nery Good 3<Good 36Average 39)oor ; Tota' &< %he purpose ehind knowing the financial literacy is to get to know how etter the respondent can take investment decision individually. A large portion of respondent stated they have a good knowledge of investment avenues ut their investment portfolio contradicted. %hus it states that many are not ready to acknowledge that they do not possess the required knowledge. %his keeps them into darkness and may lead to wrong investment decisions, which are hard to correct. 'tudy of Individual Financial )lanning ;3;.33. Do respondent have enough time to manage their investment affairs Ti#e A%ai'a4'e Re pondent Percenta(e Oes 3= 7;Go 76 ;8It reflects that not many have time to do financial planning. In such cases it is mostly o served that the investment decision was influenced y people around. Chapter +: Conc'u ion , -i#itation and Su((e tion

+/1: Conc'u ion +/2: -i#itation +/": Su((e tion 'tudy of Individual Financial )lanning ;6 +/1/ Conc'u ion %he 'aving ehaviour has een changed considera ly over the last couple of years.%he savings rate in India is comparatively higher than various other countries. ,arlier the trend of saving was in terms of physical assets ut it has started to shift now to financial instruments.%his trend partially reflects the relentless e+pansion of the various ranch networks of the financial institutions into the countyIs rural areas and partially holds the increasing trend of the easy accessi ility of the alternative investment opportunities.%oday corporate securities has ecome a part of household savings wherein retail individuals prefer to invest his saving in security market. %he reason sited for this are the growth seen in the stock market and a low interest rate and return offered y traditional instruments. Also the growing income of working class has also contri uted largely to the changing pattern of saving in India. %he hou eho'd a%in( in India can e roadly categori(ed into the following types4 H 'avings in physical properties H 'avings in financial instruments or financial household savings Financial household savings in India usually include the following4 H 'avings deposits with anks H 1ife insurance policies

H )rovident funds H )ension funds H 1iquid cash of households H Deposits with non@ anking financial institutions H Cnit %rust of India Investment 'chemes %he ma*or portion of financial saving goes into pension funds and life insurance.It has een found recently that the traditional instruments of savings like special ta+ incentives or higher interest rates are not a le to increase the rate of private saving rate in the long run. It is also found that the response of saving for the interest rate changes in India was amongst the lowest in the developing countries.&ver past 7? years, the prime two instruments for household long term saving like pension saving and life insurance have come to an idle state. &n the other hand, the mutual funds started to ecome more successful in the early years of 3>>?s. #onsidering these two factors, we can conclude two weaknesses of the saving market in India. First, pu lic sector dominates the markets. 'econd, the allocation of portfolio is under control that makes the low returns from the market developments. 'tudy of Individual Financial )lanning ;7 +/1/1/ .inancia' P'annin( @ A(e Approach 9eed Ana'! i ASta(e I A Youn( Profe iona'-ife Sta(e Ana'! i

H Age of 6?yrs and 7?yrs L young group. H 'tarted with new *o or profession. H "ay or may not have a 'pouse. H Am itious and #areer Focused. H )ro a ly do not have any dependents. H "ight not have made any Investment. H 1ikes to 'pend. .inancia' 9eed Ana'! i H "ight have a financial support from parents. H Go ha it of Investments and likes to spend. H "ay e thinking of -uying a 2ome or #ar. H )lanning to get married.

H "ay e thinking of 2igher ,ducation. H #an take high risk .inancia' P'annin( H Cnderstanding the importance of savings and enefits of compound growth returns. H 'ave more and invest more, its only possi le during this stage of life, where responsi ilities are less. H 1ife Insurance Geeds are almost negligi le, ut should e included in investment a sit will not only provide life cover ut also would create a ha it of 'aving. C1I) would e etter option in this stage. H ,quity and equity related instrument can occupy a greater portion of portfolio. H Geed for liquidity is less ut still keeping in mind the era of pink slip contingency plan should e in place. H 'hould think for uilding real estate. H Nery long term investment

-ife In urance 9eed Ana'! i ASta(e IIA 9e:'! Married-ife Sta(e Ana'! i H Age of 73yrs to 89yrs. H "arried and have Dependents, .ids. H Income on rise. H "ight have taken some 1oan i.e 2ome 1oan, #ar 1oan etc. H 2ave a high ,+penditure. 'tudy of Individual Financial )lanning ;8 H ,ffective ta+ planning is needed. H "ight have started some Investments in ,quity or "utual Funds. H !isk appetite is "oderate .inancia' 9eed Ana'! i H 2ave a high De t !epayment through Installments i.e ,"Is H

"ay want to save for #hildrens education. H )ersons need to financially protect their Family and Dependents from unfortunate events. H ,lderly parents also need financial support. H 'tart saving for retirement .inancia' P'annin( H Geed a more sta le portfolio, with moderate risk. H 'hould concentrate on less volatile investment H Insurance is a must, include child plan and retirement plans under this. H 'hould concentrate on reducing de ts H !elatively long term investment -ife In urance 9eed Ana'! i A Sta(e IIIAProud Parent =PreA Retire#ent>-ife Sta(e Ana'! i H Age of 89@;? years.

H "a*or e+penses goes towards #hild higher education and marriage. H !educed 1oan -urden H 2ave a good Income. H !etirement on mind. H 1ow risk taking appetite. .inancia' 9eed Ana'! i H 'aving for retirement. H #hilds 2igher ,ducation ,+penses or "arriage. H )revious Investments giving Good dividends and !eturns. .inancia' P'annin( H 'hould invest in instruments which provide regular return, such as fi+ed income products. H

"a*or portion of investment should e diverted towards retirement plan. H 2ealth insurance should e included. H Investment should e highly liquid -ife In urance 9eed Ana'! i A Sta(e IVA Po tARetire#ent-ife Sta(e Ana'! i 'tudy of Individual Financial )lanning ;9 H Age ;? years or a ove. H !etired from employment. H "ight have taken some assignment as consultant. H )lanning to pursue long cherished ho H ies.

#hildren are financially independent and married. H !educed monthly income. H "ight have small or no 1oan outstanding lia ilities. H

"arginal or (ero risk appetite. .inancia' 9eed Ana'! i H Geed regular income to maintain current life style. H Geed to protect investments from market risk. H Geed to save for spouse. H !equire enough cash alance for any emergency medical e+penditure for oth self and spouse. .inancia' P'annin( H 'ingle )remium Immediate Annuities H 2ealth Insurance is a must H !egular income products H 'hould do estate planning 'tudy of Individual Financial )lanning ;; +/2/ -i#itation !easons cited for not undertaking financial planning are4

Di'' tart financia' p'annin( 'ater @ Go one knows when the later would come. $e need to change this psychology and need to understand that financial planning is needed at every stage of life and earlier we start is etter. Daitin( to ha%e #one! to do financia' p'annin( @ $e should reali(e that we need a plan to have money and not money to have a plan. -ac1 of 1no:'ed(e @ there are plenty of ooks and we sites that can help to gain the knowledge of financial planning. A person can even engage a certified financial planner for this purpose. Mi (uide ear'ier under na#e of financia' p'annin( A $e need to understand that financial planning is not restricted to a particular asset class or product. ?e'ie%in( financia' p'annin( i on'! for rich A It is a fact that financial planning is even more important for the person with an average income than it is for someone who earns a very high income. Rea on for fai'ure of financia' p'an 9o financia' education @ %his is pro a ly e the num er one reason why we mess up our financial lives, ecause no one has taught us how to manage finances. Investing simply without knowing what we are doing is financial suicide. "ore over not many are willing to learn it on their own. $ith lack of knowledge we are ound to have a wrong way. $e need to understand that almost everything today is related to money in one way or another. -ea%in( p'annin( option and choice to other @ $e are never responsi le to ourselves in life, ut the truth is that personal finances are persons own responsi ility. "ostly elieve that government or employer would take care of their financial well eing in future. )erson should understand that the est government or employer can do is guide and provide opportunities. Re'!in( on 'ou ! ad%i or @

%here are many financial agents which claim to have all the knowhow of financial planning. $ith lack of awareness we elieve the agents and put all our hard earned money on their recommendations which may not e right all the time.'uch advices are mostly related to a product category and do not cover financial principal of diversification. 'tudy of Individual Financial )lanning ;< E0pen i%e free ad%ice @ In India advice come free from every corner, and every other person loves to do that. Advices can come from family mem ers, friends, and professionals. $e should know from whom to take advice. 7reed @ ,veryone ones to get rich over a night, when greed enters the mind it locks logical thinking. In the process of getting more we often loss more. $e should understand that there is risk attach to every investment which may not suite our risk appetite. 7i%e no priorit! to per ona' finance #ana(e#ent @ $e all know financial planning is important ut when it comes to implementing its not the same. Any investment o *ective should e preceded y a proper financial plan. Investment without o *ective can lead us nowhere. 9o c'ear or pecified financia' (oa' @ "any of us are not clear a out our financial goal, we *ust want to earn money. "aking lots and lots of money is not a proper goal. $e fail to understand the various need which would come with our growing age. .o''o:in( the cro:d #enta'it! A 'ome call it the UherdV mentality, too. $hen people lindly follow the advice of other its ound to meet disaster. 'tudy of Individual Financial )lanning ;= +/"/ Su((e tion

After all this it can e stated that the fundamental corner stones of successful investing are4 H 'ave regularly, Invest regularly H 'tart ,arly H Diversify H Cse ta+ shelter H .eep a regular check on investment and modify plans as and when needed )eople need to e educated and informed a out Financial )lanning and this provides a greater opportunity to financial product distri uter like !eliance "oney to educate people. #ompanies can arrange for seminars and sessions through which they can provide information to people and in return can get prospective clients from the audience. In this way oth the audience and the company can also e enefited. Financial planning is not a onetime activityK the initiative should e taken y financial planner to put this forward to their client. !egular meetings should e conducted etween the financial planner and client to review the investment portfolio. Alteration should e made in portfolio as per need and requirement of the client. %his will ensure that the investment o *ectives are achieved. It will create goodwill for the financial planner and his company. %his is one area where many planners are lacking today. Follow@up, follow@up,follow@up is need of hour and it should e understood y financial service provider.Goal should e properly divided into short term, medium term and long term.

)roper allocation should e done in various instruments according to the time period of goal. %here are various instruments availa le which can site different time period needs. If investment are giving regular return or are going to get matured should e reinvested properly. If an investor is seeking help from advisor then he should collect enough information of product from different sources. It will help to take proper investment decision and choose aright advisor. It is also necessary that advisor should have enough e+perience. %hus the ultimate responsi ility is on the investor when it comes to taking investment decision. Always keep investment a simple affair. Diversification is must ut not to a greater e+tend. Investor should know e+actly what he is investing in. If they do not have adequate information, question should e asked to financial advisor. It is etter to invest in instruments which we can understand rather than eing dependent on someone else advice. All the documentations should e complete and need to e preserved. At time of maturity it is necessary to produce the investment documents which act as a proof. -ut many times investors do not have proper documents which dishonours the claim at maturity. It is also 'tudy of Individual Financial )lanning ;>recommended that all the disclosure documents also e preserved as it would help in case of any dispute in settlement. Investment through 'I) should e encouraged. A little amount regularly invested for long period can create a greater wealth. 'I) helps in !upee cost averaging, develop ha it of saving and it provides convenience of investment. -uy and hold. Investment should e done fairly for a longer period of time only then capital appreciations is possi le. 'tudy of Individual Financial )lanning Bibliography De4 ite http4JJwww.reliancecapital.co.inJ http4JJwww.fps india.orgJ http4JJp rofit.ndtv.comJ)ersonalFinanceJInsurance.asp+

http4JJprofit.ndtv.comJ6??=J?3J3;3>?<8<J#ompare@Different@ Insurance@)l.html http4JJ usiness.rediff.comJreportJ6??>JmayJ39Jp erfin@types@of@life@insurance.htm http4JJwww.mywealthguide.comJp ersnl.htm http4JJwww.kingswoodconsultants.comJ1ifetimeFinancial )lanning.html http4JJwww. usinessgyan.com http4JJwww.itrust.inJfi nancial@planningJarticle.actionJ$hat@Is@Financial@)lanning@India ht tp4JJwww.dnaindia.comJmoneyJreportWunion@ udget@6??>@3?@ highlightsW36<39?7 http4JJfinance.mapsofworld.comJsavingsJindiaJ household.html 'earch Search 5i tor!: 'earching... !esult ?? of ?? ?? results for result for X p.