Final 1

Financial Planning for an
Individual
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PROJECT REPORT
ON
FINANCIAL PLANNING FOR AN

INDIVIDUAL
FOR
NNM SECURITIES
BY
VIDIT DOSHI
Submitted in partial fulfillment of requirements for award of
Post Graduate Diploma in Management
ATHARVA SCHOOL OF BUSINESS
Marve Road, Charkop Naka, Malad(W), Mumbai 400 095
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DECLARATION
I hereby declare that the Project titled “FINANCIAL PLANNING FOR AN
INDIVIDUAL” submitted as a part of the study of Post Graduate Diploma in Management
(PGDM) is my original work. The Project has not formed the basis for the award of any other
degree, diploma, associate ship, fellowship or any other similar titles.
VIDIT DOSHI
(Name of Student)
Place: Mumbai
Date:
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CERTIFICATE
This is to certify that VIDIT DOSHI has completed the Project “FINANCIAL
PLANNIING FOR AN INDIVIDUAL” under the guidance of Prof. SUJATA PANDE in partial
fulfillment of the requirements for the award of Post Graduate Diploma in Management for the
academic period 2009-11.
Signature of the Guide Signature of the Director
Place: Mumbai
Date:
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ACKNOWLEDGEMENTS
I take this opportunity to express my gratitude and extend my thanks to all those who helped and
guided me to make this endeavor successful.
I express my sincere thanks to NNM SECURITIES; NIKUNJ MITTAL (MANAGING

DIRECTOR)
I extend my sincere thank to Shri Sunil Rane, Executive President, Atharva Education Trust;
Shri N. S. Rajan, Dean, and Dr. S. K. Bhattacharya, Director, Atharva School of Business, for
providing me the opportunity to work on this Project. I also thank my Project Guide, Prof.
Sujata Pande, for giving his support and guidance in successful completion of the Project.
I cannot end this page without thanking my FAMILY for their encouragement and support while
undertaking this Project.
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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
person’s requirement in terms of money.
The finance industry encompasses a broad range of organizations that deal with the
management of money. Among these organizations are banks, insurance companies, consumer
finance companies, stock brokerages, investment funds and some government sponsored
enterprises. Although financial planning is not a new concept, it just needs to be conducted in
organized manner. Today we avail this service from Insurance agent, Mutual fund agents, Tax
consultant, Equity Brokers, Chartered Accountants, etc.
Financial Planner on other hand is a service provider which enables an individual to select
proper product mix for achieving their goals.
The major things to be considered in financial planning are time horizon 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. Keeping all this in
mind financial planning is done with six step process. This are self assessment of client, identify
personal goals and financial goals and objective, identify financial problems 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 Contingency planning, Risk Planning (insurance), Tax
Planning, Retirement Planning and Investment and Saving option
In market there are different instruments which can be adapted to fulfill the need of
various planning objective. These instruments are different from each other in terms of returns,
risk, fund allocation, charges, investment term, tax incentives, etc. A detail description of
instruments like Life insurance, Equity, Mutual Funds, PPF, Investment in Gold, Investment in
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Real Estate, Deposits with Banks and Post Office, etc. are covered in this report. This will help
the investor to make their investment decisions.
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TABLE OF CONTENTS
Sr. Page
Topic
No. No.
1. Introduction of the Project
2. Objectives
3. Relevance of the Study
4. Industry Overview
5. Company Profile
6. Investment Avenues
7. Taxation
8. Research Methodology
9. Data Analysis & Interpretation
10. Limitations & Recommendations
11. Scope
12. Conclusion
13. Bibliography
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World Economy
Growth prospects
After a sharp and synchronized global downturn—indeed the only contraction since the
Second World War—the world economy is improving, but Europe’s debt crisis has created new
hurdles on the road to sustainable medium term growth. International trade and global industrial
production have also been recovering noticeably, with an increasing number of countries
registering positive quarterly growth of gross domestic product (GDP).
World Economic Growth, 2004 – 2010
The World Bank projects global GDP to expand between 2.9 and 3.3 percent in 2010 and
2011, strengthening to between 3.2 and 3.5 percent in 2012, reversing the 2.1 percent decline in
2009. Developing economies are expected to grow between 5.7 and 6.2 percent each year from
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2010-2012. High-income countries, however, are projected to grow by between 2.1 and
2.3 percent in 2010—not enough to undo the 3.3 percent contraction in 2009—followed by
between 1.9 and 2.4 percent growth in 2011.
According to World Bank Report, the impact of the European debt crisis has so far been
contained, prolonged rising sovereign debt could make credit more expensive and curtail
investment and growth in developing countries.
Fact Sheet: Global Economic Prospects (World Bank Report):
• The East Asia and Pacific region is expected to grow by 8.7 percent in 2010 and 7.8
percent in 2011. The region has benefitted from close links with China, which led the
recovery.
• The recovery in Europe and Central Asia is projected at 4.1 percent in 2010. Countries
like Russia & Turkey are showing strong growth which contributes 3/4th of the regional
GDP, while the countries like Greece, Ireland, Italy, Portugal & Spain are creating
headwinds for the region.
• Latin America and the Caribbean region : After contracting by an estimated 2.3
percent in 2009, output in the region is forecast to expand by around 4.3 percent each
year over 2010-2012, just somewhat slower than during the boom period.
• Middle East and North Africa : The recovery is projected to strengthen, with growth
firming from 4.0 percent in 2010 to 4.3 and 4.5 percent in 2011 and 2012, respectively.
• GDP in South Asia has benefitted from stimulus measures (notably in India, and to a
lesser extent in Bangladesh and Sri Lanka), relatively robust remittance inflows, which
continued to expand (in contrast to declines elsewhere), and the recovery in global
demand.
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Indian Economy
Overview
Indian economy has been witnessing a phenomenal growth since the last decade. The
country is still holding its ground in the midst of the current global financial crisis. Further, the
World Bank has projected an 8 per cent growth for India in 2010, which will make it the fastest
growing economy for the first time, overtaking China’s expected 7.7 per cent growth.
Significantly, among the major economies in the Asia-Pacific region, India's private domestic
consumption as share of GDP, at 57 per cent in 2008, was the highest.
Despite the uncertain outlook for developed economies, further monetary tightening in
the pipeline and the beginning of pullout of fiscal stimulus, real GDP growth in India will
accelerate this year and next, reaching 7.5% this year and 7.9% in 2011. Investment and
industrial activity, which is more oriented towards the domestic market, will sustain growth,
while consumer sentiment will be dampened by high inflation.
The economy of India is the eleventh largest economy in the world by nominal GDP and
the fourth largest by purchasing power parity (PPP). In the 1990s, following economic reform
from the socialist-inspired economy of post-independence India, the country began to experience
rapid economic growth, as markets opened for international competition and investment. In the
21st century, India is an emerging economic power with vast human and natural resources, and a
huge knowledge base. Economists predict that by 2020, India will be among the leading
economies of the world.
Since 1991, continuing economic liberalization has moved the economy towards a
market-based system. A revival of economic reforms and better economic policy in 2000s
accelerated India's economic growth rate. By 2008, India had established itself as the world's
second-fastest growing major economy. However, the year 2009 saw a significant slowdown in
India's official GDP growth rate to 6.1% as well as the return of a large projected fiscal deficit of
6.8% of GDP which would be among the highest in the world.
India's large service industry accounts for 62.6% of the country's GDP while the
industrial and agricultural sector contribute 20% and 17.5% respectively. Agriculture is the
predominant occupation in India, accounting for about 52% of employment. The service sector
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makes up a further 34%, and industrial sector around 14%. The labour force totals half a billion
workers.
Economic Indicators
04-08 avg. 2009 2010 2011
GDP (% growth, real) 8.5 5.7 7.5 7.9
Inflation (%, year-end) 5.8 10.9 10.7 5.7
Fiscal Balance (% of GDP) -3.9 -7.7 -6.4 -6.1
Exports (% of growth) 27 -17.9 16.1 12.1
Imports (% growth) 33.7 -22.1 20 16
Current Account (% GDP) -1.1 -0.8 -1 -1.3
Reserves (month of Imports) 9.1 9.8 9.4 8.9
External Debt (% of GDP) 17.5 17.4 15.7 14.5
Debt Service ratio 11 9.8 8 7.5
Currency (per USD, year-end) 44.2 46.7 44 41
Foreign Exchange Reserves
As on March 26, 2010, India's foreign exchange reserves totaled US$ 277.04 billion, an
increase of US$ 24.71 billion over the same period last year, according to the Reserve Bank of
India's Weekly Statistical Supplement.
Fiscal Policy
The budget for the 2010-2011 fiscal year projects improvements for the deficit after the
fiscal stimulus of last year and the large one-off expenditures of the year before. As a share of
GDP, the deficit is expected to reach 7.8% of GDP (including off-budget food, fuel and fertilizer
price subsidies of 1.7% of GDP) from 9.6% last year and 11.8% in 2008/2009. The improvement
will come from a combination of weaker expenditure growth from reduced subsidies, and greater
revenues from the acceleration of economic growth, the reversal of indirect tax cuts that were
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part of the fiscal stimulus package, the expansion of the tax base and the revival of the
privatization program. The delayed introduction of a national VAT will limit the expansion of the
tax base, which will remain short of the pre-crisis level. Solvency indicators will start to improve
again, but are expected to remain above comfortable levels, with public debt to GDP reaching
68% by 2014-15 from 76.5% at the end of FY2009-10.
Monetary Policy
The Reserve Bank of India (RBI, the central bank) continued to tighten monetary policy
in April, raising reserve requirements and its two main interest rates by another 50 basis points.
However, interest rates and reserve requirements ratios remain very low by historical standards,
and real interest rates are firmly in negative territory. While part of the increase in prices is due to
higher food prices from the poor harvest, economic indicators are consistently showing a strong
pace of activity. The wholesale Price Index (WPI), the RBI’s target indicator for inflation,
increased to 9.9% y/y in February and March, but the various consumer price indices are all
continue to hover around 15% in March. We expect additional tightening going forward, as
strong capital inflows have boosted liquidity.
Growth Potential
• The rise of Indian Consumer Market', estimates that the Indian consumer market is likely
to grow four times by 2025, which is currently valued at US$ 511 billion.
• In textiles, the country is ranked fourth, while in electrical machinery and apparatus it is
ranked fifth. It holds sixth position in the basic metals category; seventh in chemicals and
chemical products; 10th in leather, leather products, refined petroleum products and
nuclear fuel; twelfth in machinery and equipment and motor vehicles.
• With the availability of the 3G spectrum, about 275 million Indian subscribers will use
3G-enabled services, and the number of 3G-enabled handsets will reach close to 395
million by 2013-end.
• Out of the more than 200 companies from over 50 countries that form part of the World
Economic Forum's Global Growth Companies (GGC) Community, India today has the
second largest representation, with a total of 18 GGCs. Indian GGCs come from every
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sector, with a strong representation in information technology and electronics, retail,

consumer goods and banking.
• Introduction to Financial Planning
• Study of Various Factors
• Six Step Process of Financial Planning
• Constitute of Financial Planning
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Introduction
Introduction to Financial Planning
Financial Planning 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 (financially), determine where they want to be in the future, and what they are going to do to
get there. Financial Planning 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. By viewing each financial decision as part of the whole, one can consider its short and
long-term effects on their life goals. Person can also adapt more easily to life changes and feel
more secure that their goals are on track.
In simple words, Financial Planning is what a person does with their money. Individuals
have been practicing financial planning for centuries. Every individual who received money had
to make a decision about the best way to use it. Typically, the decision was either spends it now
or save it to spend later. Everyone have to make the same decision every time they receive
money.
Making a financial plan is a way to take charge of your financial future. A financial plan
helps you understand your choices and reach your life goals. Financial planning is for everyone
and as you get older and face changes such as retirement, it is important for you to have as much
information as you can about your financial future. Even if you are starting late, planning will
help you get your financial affairs in order and let you know where you stand.
Thus a financial plan looks at where you are now and where you want to be in the future,
and lays out a plan to help you get there. When you are making a financial plan you will have to
think about your long-term needs and about the kinds of things that might happen to you in the
future.
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Study of various factors
Things to consider while doing financial planning are:
Time Horizon and Goals: It is important to understand what individual’s goals are, and over
what time period they want to achieve their goals. Some goals are short term goals those that
people want to achieve within the year. For such goals it is important to be conservative in one’s
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 one’s advantage.
Risk Tolerance: Every individual should know what is their capacity to take risk. Crucially,
one’s risk profile will change across life’s stages. As a young person with no dependants or
financial liabilities, one might be able to take on lots of risk. However, if this young person gets
married and has a child, person will have dependants and higher fiscal responsibilities.
Liquidity Needs: Liquidity refers to, when money is needed to meet the goal and how quickly
one can access this money. If investment is made in an asset and expects to sell the asset to
supply funds to meet a goal, then it needs to be understood how easily one can sell the asset.
Usually, money market and stock market related assets are easy to liquidate. On the other hand,
something like real estate might take a long time to sell.
Inflation: Inflation is a fact of the economic life in India. At inflation or slightly above 5% per
annum, a packet of biscuits that costs Rs 20 today will cost Rs. 30 in ten years time. Just imagine
what the cost of buying a car or buying a home might be in ten years time! Therefore, the cost of
achieving goals needs to be seen in what the inflated price will be in the future.
Need for Growth or Income: As person make investments think about what is required, whether
capital appreciation or income. Not all investments satisfy both requirements. Many people are
buying apartments, but are not renting them out even after they take possession. So, this asset is
generating no income for them and they are probably expecting only capital appreciation from
this. A young person should usually consider investing for capital appreciation to take advantage
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of their young age. An older person however might be more interested in generating income for
themselves.
Six step process of Financial Planning
1) Self assessment: Clarify present situation, this is a preliminary step someone has to complete
prior to planning their finance. Doing a self assessment enable a person to understand their
present wealth status and responsibilities. Self assessment should contain following
• Main source of income
• Dependents in family
• Expenses and monthly savings
• Current investment status
One should identify their wealth status prior to move with financial planning.
2) Identify financial, personal goals and objectives: Each individual aspires to lead a better
and a happier life. To lead such a life there are some needs and some wishes that need to be
fulfilled. Money is a medium through which such needs and wishes are fulfilled. Some of the
common needs that most individuals would have are: creating enough financial resources,
providing for a child's education and marriage, buying a dream home, providing for medical
emergencies, etc. Once the needs/ objectives have been identified, they need to be converted into
financial goals. Two 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
needs/ objectives. Then person should estimate the amount of money needed in current value to
meet the objective/ need today. Then by using a suitable inflation factor one can project what
would be the amount of money needed to meet the objective/ need in future. Similarly one need
to estimate the amount of money needed to meet all such objectives/ needs.
3) Identify financial problems or opportunities: Once goals and current situation are
identified, the short fall to achieve the goal can be assessed. This short fall need to be covered
over a period of time to full fill various need at different life stages. Since future cannot be
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predict, all the contingencies should be considered will doing financial planning. a good financial
plan should hedge from various risk. A flexible approach should be taken to cater to changing
needs and should be ready to reorganize our financial plan from time to time.
4) Determine recommendations and alternative solutions: Now review various investment

options such as stocks, mutual funds, debt instruments such as PPF, bonds, fixed deposits, gilt
funds, etc. and identify which instrument(s) or a combination thereof best suits the need. The
time frame for investment must correspond with the time period for goals.
5) Implement the appropriate strategies to achieve goals: Until person put things into action
everything is waste. Necessary steps needs to be taken to achieve financial goals this may include
gathering necessary documents, open necessary bank, demat, trading account, liaise with brokers
and get started. In simple terms, start investing and stick to the plan.
6) Review and update plan periodically: Financial planning is not a one-time activity. A
successful plan needs serious commitment and periodical review (once in six months, or at a
major event such as birth, death, inheritance). Person should be prepared to make minor or major
revisions to their current financial situation, goals and investment time frame based on a review
of the performance of investments.
Constituents of Financial Planning
A good financial plan should include the following things:
Contingency planning
Contingency means any unforeseen event which may or may not occur in future.
Contingency planning is the basic and the very first step to financial planning. It was found that a
large number of people have invested in financial planning instrument but have ignored their
contingency planning. Why it is more important to have a contingency plan?
Because If person is not planned for contingencies he will use his long term investment to
fund such crises. It is possible that long term investment may not give enough returns if
withdrawn early there is also a possibility of capital erosion. In such situation all the financial
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plans made are of waste. With long term planning person also need to take care of present
situation in order to truly achieve financial goals. It is a thumb rule that one should have three
times money of monthly salary in liquid form to support contingency.
Risk Coverage (Life & Health Insurance)
Every individual is exposed to certain type of risk whether it is due to loss or damage of
personal property, loss of pay due to illness or disability; or even due to death. Such risk cannot
be determined but on occurrence there may be a financial loss to the individual or their family.
Proper personal financial planning should definitely include insurance. One main area of the role
of personal financial planning is to make sure that one has the ability to carry on living in case of
some unforeseen and unfortunate event. Basically, insurance provides a safety net to provide the
necessary funds when one meets with events like accidents, disabilities or illnesses. One main
contribution of insurance is that it helps provides peace of mind, knowing that enough funds are
at hand in the event when things do not go the way it should be.
1) Life Risk
Every individual is prone to risk of losing life is a truth but what is not certain is the time of
death. In this sense everyone is prone to life risk, but 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. Life insurance, simply put, is the cover for the risks that person run during their
lives. Insurance enables us to live our lives to the fullest, without worrying about the financial
impact of events that could hamper it. In other words, insurance protects us from the
contingencies that could affect us. Life insurance provides an economical support to the family
and dependents. It is extremely important that every person, especially the breadwinner, covers
the risks to his life, so that his family's quality of life does not undergo any drastic change in case
of an unfortunate eventuality.
2) Health Risk
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Lifespan of Indian is known to have decrease nowadays. Though staying forever young
remains a dream unattainable, living a long and safe quality life at peace is quite an achievable
goal. Health insurance is an insurance Policy that insures against any medical expenses. Insured
medical expenses will be taken care of by the insurance company provided person pays their
premium regularly. There are various type of health insurance. Disability insurance can protect
against the loss of a person's ability to earn a living. Critical illness insurance can afford some
protection from expending reserved financial resources due to an unforeseen major illness.
Property Coverage
Property Coverage insures personal property from damage, destroy or stolen.
Retirement Planning
A retirement plan is an assurance that person will continue to earn a satisfying income
and enjoy a comfortable lifestyle, even when they are no longer working. Due to the improved
living conditions and access to better medical facilities, the life expectancy of people is
increasing. This has led to a situation where people will be spending approximately the same
number of years in retirement what they have spent in their active working life. Thus it has
become imperative to ensure that the golden years of the life are not spent worrying about
financial hardships. A proper retirement planning, to a very large extent, will ensure this.
Planning ahead will let enjoy the retirement that is deserve. The retirement strategies decide upon
now makes a fundamental difference to the degree of financial freedom one will experience
when they do decide to take their pension.
Tax Planning
A good plan is one which takes the maximum advantage of various incentives offered by
the income tax laws of the country. However, do understand that the tax incentives are just that,
only incentives. Financial planning objective should be getting maximum advantage of various
avenues. It is to be remembered that tax planning is a part and not financial planning itself. In
any case the primary objective of a good financial plan is to maximize the wealth, not to beat the
taxmen. However many investment provides great returns which can offset the tax on it. But with
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the knowledge of the Income Tax (IT) Act one can reduce income tax liability. It also helps to
decide, where to invest and to claim deductions under various sections. The income earned is
subject to income tax by the government. The rate of income tax is different for different income
levels, and thus, the income tax payable depends on the total earnings in a given year.
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Objective Of Financial Planning

“Financial Planning for an Individual” is a Project which gives an idea of all the
various instruments that an individual can use to invest its savings in more systematic way on the
basis of its total income, the goal of an individual, its risk capita, number of dependent members.
In present fast life situation of every individual, financial planning is a must. For an
Individual it is important for him to know the various ways where money can be invested for
better returns based on various targets or goals of an individual i.e. goals for young individual,
married couple, retired individual are all different. This is influenced by its income, age, gender,
in dependable or dependable individual.
Objective Examples
To get value for money in family financial planning. Reduce various costs.
To minimize and defer income taxes and Pensions, Income
other government levies. splitting.
To maximize return on investments at Good investment strategies.
a reasonable level of risk. Investment tax incentives.
Diversified investments.
To accumulate the necessary savings Purchase of home.
for significant family needs. Children's education.
To have the necessary capital available Insurance.
in case of unexpected loss of income or Systematic savings.
savings or significant unforeseen Various other instruments.
outlays.
To have sufficient savings and income Systematic savings.
for retirement. Use of tax deferred plans.
This Project covers all the above stated points which can help individual to plan its finance
and can lighten its mental stress to certain level as the individual has planned his finance
according to his goals and requirements on a long term basis.
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Relevance Of Financial Planning

Financial planning is important because it allows you to ensure you will have funds
available to meet the needs of your future, and your present. Some people hate planning but it is
always good to prepare yourself financially. As we age, expenses tend to increase...from kids
who want toys, to teens who want cars and need tuition to being an adult, buying a home, a car,
getting married....up until the day we die by planning our funerals. Unexpected things happen all
the time - so being financially ready for it makes life much easier. People who don't financially
plan often find themselves living from paycheck to paycheck or struggling to come up with
money when something does unexpectedly occur. Anyone can find themselves in this situation,
whether they make a lot of money or very little. Not to worry though, usually those who don't
have financial plans can easily create one, to get themselves out of debt or plan for retirement.
It is important to plan finances in order to reap long term benefits through the assets in hand.
The investments that one makes are structured properly and managed through Financial
Planning. Every decision regarding our finances can be monitored if a proper plan is devised in
advance. The following points explain why financial planning is important:
• Cash Flow: Financial planning helps in increasing cash flow as well as monitoring the
spending pattern. The Cash Flow is increased by undertaking measures such as tax
planning, prudent spending and careful budgeting.
• Capital: A strong capital base can be built with the help of efficient financial planning.
Thus, one can think about investments and thereby improve his financial position.
• Income: It is possible to manage income effectively through planning. Managing income
helps in segregating it into tax payments, other monthly expenditures and savings.
• Family Security: Financial planning is necessary from the point of view of family
security. The various policies available in the market serve the purpose of financially
securing the family.
• Investment: A proper financial plan that considers the income and expenditure of a
person, helps in choosing the right investment policy. It enables the person to reach the
set goals.
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• Standard of Living: The savings created by through planning, come to the rescue in
difficult times. Death of the bread winner in a family, affects the standard of living to a
great extent. A proper financial plan acts as a guard in such situations and enables the
family to survive hard times.
• Financial Understanding: The financial planning process helps gain an understanding
about the current financial position. Adjustments in an investment plan or evaluating a
retirement scheme becomes easy for an individual with financial understanding.
• Assets: A nice 'cushion' in the form of assets is what many of us desire for. But many
assets come with liabilities attached. Thus, it becomes important to determine the true
value of an asset. The knowledge of settling or canceling the liabilities, comes with the
understanding of our finances. The overall process helps us build assets that don't become
a burden in the future.
• Savings: It is good to have investments with high liquidity. These investments, owing to
their liquidity, can be utilized in times of emergency and for educational purposes.
The argument made by people from low income groups is that they don't need to plan their
finances due to the less money they possess. However, no matter how much one earns, better
planning of income always helps in the long run.
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Introduction to Financial Planning Industry

Financial services refer to services provided by the finance industry. The finance industry
encompasses a broad range of organizations that deal with the management of money. Among
these organizations are banks, insurance companies, consumer finance companies, stock
brokerages, investment funds and some government sponsored enterprises.
The Indian financial services industry has undergone significant changes over the years,
particularly in the last decade, and continues to evolve today. Financial Planning - a distinct
element within the spectrum of financial services industry - is still relatively a young discipline.
But personal finance products & services are increasingly becoming an important part of this
industry as the Indian consumers seek to maximize and optimize the potential earnings and fruits
of their hard-earned money. Currently, there are distinct divisions within the financial services
industry. A person goes to a bank to save his money or to get a loan. He buys stocks and bonds
from a broker. He purchases insurance from an insurance agent and mutual funds from a mutual
fund distributor. The regulation of the industry reflects the division of these transaction-based
services.
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Indians have been making investment through such agents which was restricted to a
particular product. Apart from the above agent friends and professionals like Chartered
Accountant played an important role in investment decisions. This is how for few decades
investors have been doing their Financial Planning.
However, financial services, especially on the retail side, have undergone a major
transformation and financial consumers are demanding a holistic & comprehensive approach to
their personal finance. Various factors have catalyzed this change like privatisation of insurance
and mutual fund sectors has increased product options for the investor. Second, fluctuating
interest rates and the end of ‘guaranteed return’ products have prompted investors to look for
alternative modes of investment. And also with a number of mis-selling instances taking place in
the financial markets, investors’ confidence in ‘advisors’ has been shaken and the investors are
asking for a ‘trusted financial advisor’.
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Company Profile
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NNM SECURITIES PVT. LTD
“NNM Securities Private Limited is committed to satisfy the customers

by providing the total customer care through our high quality, reliable,
timely & cost effective value added services.”
Vision
“NNM’s vision is to be ranked amongst the best in providing knowlegde and value added
services in the field of financial services.”
Mission
“NNM’s mission is to create wealth & value for all its stakeholders and customers by inculcating
a culture of timely, reliable, cost effective, knowledge driven measures through continual
implementation of QMS.”
About us
NNM Securities Pvt. Ltd. (NNMSPL) was founded in 1950 as a small proprietorship firm in the
name of N. N. Mandsaurwala Co. NNMSPL has a 60 year old vintage membership with Bombay
Stock Exchange (BSE). We became a private limited firm in 1997 and attained ISO certification
in 2009.
Today we are a well diversified financial services firm offering a range of financial products and
services such as Wealth Management, Equity Broking, Commodity Broking & Distribution of
Wealth Products. Our diversified client base includes high net worth individuals, retail customers
and corporate clients.
Focus on customer-first-attitude, ethical and transparent business practices, respect for

professionalism, research-based value investing and implementation of cutting-edge technology
has been the key values to our sustainable growth in this field.
NNM Group
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Individual
Service Offering
Equity Broking – NNMSPL is in the business of providing securities broking and advisory
services and is a corporate member of capital market and derivative segment of NSE and of the
NNM
capital market and derivative segment of BSE. NNMSPL is a depository participant with CDSL
for trading and settlement of dematerialized shares. NNM Equity Analysis complements its
Securities –
equity broking and advisory services with high quality comprehensive report which can be
accessed online and also provide daily trading calls live during market hours. NNM offers
Pvt. Ltd
trading in the Currency Derivatives Segment in MCXSX.
Wealth Management – NNMSPL recognizes the need for having a dedicated team for
Equity
managing wealth of individuals and corporate.
Commodity Broking – NNMSPL is in the business of providing commodities broking and is a
Depository
corporate member of MCX, ICEX and NCDEX, thereby giving our customers enough
opportunities of hedging amongst various exchanges.
Distribution Of Wealth Products – It is a proven fact that Equities as an asset class typically
PMS
tend to outperform all other asset classes over the long run. Investing in equities, require
knowledge, time and a right mind-set. Equity as an asset class also requires constant monitoring
may not be possible for you to give the necessary time, given your other commitments. We
Institutional Business
recognize this and thereby address this needs currently by helping our investors invest in equities
through Mutual Funds and Insurance Products. NNMSPL also provides for other health needs of
customers through General Insurance.
Margin funding group

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Investment Options
Insurance
Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another,
in exchange for payment. An insurer is a company selling the insurance; an insured or
policyholder is the person or entity buying the insurance policy. The insurance rate is a factor
used to determine the amount to be charged for a certain amount of insurance coverage, called
the premium. Insurance Regulatory Development Authority (IRDA) is the regulatory body for
the insurance company and all insurance company have to follow the guidelines given by the
IRDA. Insurance is classified into two types:
1. Life Insurance and
2. Non Life Insurance i.e. General Insurance.
1) Life Insurance:
The life insurance industry had earlier been expected to grow by 15 per cent in the 2010 fiscal
year and cross the US$ 54.1 billion mark in total premium income by the end of March 2010,
according to industry body, Life Insurance Council.
Life insurance is classified into two products:
a. Traditional Plans
b. ULIP (Unit Linked Insurance Plan)
In this project we are not covering ULIP’s plan because we are considering Insurance as a
cover for life risk and not as an investment which ULIP products are meant for.
Unit Linked Insurance Plan
Unit linked insurance plan (ULIP) is life insurance solution that provides for the benefits
of risk protection and flexibility in investment. The investment is denoted as units and is
represented by the value that it has attained called as Net Asset Value (NAV). The policy value
at any time varies according to the value of the underlying assets at the time.
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Individual
In a ULIP, 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 by the policy holders are
pooled together to form a Unit fund. A Unit is the component of the Fund in a Unit Linked
Insurance Policy.
The returns in a ULIP depend upon the performance of the fund in the capital market.
The following charges are applicable in the case of ULIPs:
• Administration or fixed charges are the fees for administration of the plan.
• Flat fee which will be charged every month, regardless of the size of premium.
• Fund administration charges being a percentage of the fund and deducted daily.
• Fund switching charges levied when there is a switch from one fund to another.
• Insurance or risk cover charges is the premium for the death cover.
• Service Tax is also charged, usually on a monthly basis.
• Surrender charges may be charged for partial or full encashing of units before a
certain period of time.
In ULIP’s the amount collected from an policy holder as a premium is invested in the market
directly after deducting the above all charges, where as in Traditional Plan the charges are very
low compare to ULIP’s. So the amount invested in the market is less and hence the policy also
become less.
Traditional Plans:
Based on the benefit patterns the traditional Life Insurance products can be categorised into the
following types:
Term Insurance:
Term Insurance provides for life insurance protection for the selected term (period of
years) only. In case the person (whose life is insured) dies during the term, the benefits are
payable under the policy and in case of his survival till the end of the selected term the policy
normally expires without any benefit becoming payable.
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Whole Life Insurance:

As the name suggests, the whole life insurance policies are intended to provide Life
Insurance protection over one's lifetime. The essence of whole life insurance is that it provides
for payment of the assured amount upon the insured's death regardless of when it occurs. Under
these policies, the payment of the assured sum is a certainty in contrast to the term insurance
contracts. Only the time of payment of the assured sum is an uncertainty.
Whole life policies can be either participating type or non-participating type. Participating
type policies are those which are entitled to a share in the distributable surplus (profits) of the
Life Insurance company, whereby the cash value of the policy can go up, with the announcement
of bonus / dividend. Non-participating policies have the same benefit throughout the life of the
policy.
Endowment Insurance:
These are the most commonly sold policies. These policies assure that the benefits under
the policy will be paid on the death of the life insured during the selected term or on his survival
to the end of the term. Hence the assured benefits are payable either on the date of maturity or on
death of the life insured, if earlier.
Endowment policies assist in providing for the payment of a lump sum amount for a
specific purpose, say, provision for retirement, meeting the needs of the child etc. The money
required for the purpose will be built up whether the person is alive till that date or not. Like
whole life insurance policies, endowment policies can also be of participating and non-
participating types.
Annuities:
Under this policy, the sum assured is payable not in one lump sum payment but in
monthly, quarterly and half-yearly or yearly installments after the assured attains a certain age.
This policy is useful to those who want to have a regular income after the expiry of a certain
period e.g. after retirement. Annuity is paid so long as the assured survives. In annuity policy
medical checkup is not required.
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Money Back Insurance:
The money back plan not only covers your life, it also assures you the return of a certain
per cent of the sum assured as cash payment at regular intervals. It is a savings plan with the
added advantage of life cover and regular cash inflow. This plan is ideal for planning special
moments like a wedding, your child's education or purchase of an asset, etc. Money back plan
have "participating" and "non participating" versions in the market.
Policy for Children:

Policies for children are meant for the various needs of the children such as education, marriage,
security of life etc. Some of the major children policies are:
• Children’s deferred assurances

• Marriage endowment and educational annuity plans
• Children endowment policy
Non Life Insurance i.e. General Insurance:
In Non Life Insurance we are considering only Health Insurance.
Health Insurance:
Health Insurance also known as Mediclaim in India provides you the cover against the
medical care costs arising from disease or accidental injuries. Health insurance is a crucial
financial product that every individual must have irrespective of their age. It allows you to focus
on getting the best treatment without bothering about the financial costs of the same.
Depending on the terms of the health insurance policy it covers all or part of the medical
costs of treating the disease or injury including doctor's consultation charges, medicine and
nursing costs. Treatment can be sought in any recognized nursing home or hospital across India.
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This policy however usually does not cover routine medical expenses like outpatient care, and
daily medicines.
Health insurance in India can be bought both as an individual or a family or as a group.

Group Health Insurance is bought by either an employer or an association for its members. In this
article we will be covering only health insurance for individuals.
Mediclaim falls under the category of ‘protection’ products where there is no payment
from the insurer if no claim is made.
Need Analysis in life Stages
Need / Purpose Recommended Insurance Plan Best Suited for
Security to dependents Young individuals, Low

Term Policy
income, Have dependents
Risk Cover
Child's future studies
Children plans Couples having small kids
Child's marriage
Persons aged above 40
Retirement Benefits
Pension Plans Persons not having a pension
Risk cover
provision from their employer
Requirement of fixed sum after
Risk cover & Savings Endowment Plans
lapse of certain period
Conclusion
Every person should have at least one Life and Mediclaim insurance policy with them
because it provides protection against risk of death of the saver and in case of demise, life
insurance assures payment of the entire amount assured (with bonuses wherever applicable) to
the family or beneficiary. It also provides us an easy access to loan by providing policy as a
security against loan.
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By having Mediclaim policy you can reimburse your payment towards hospital charges
or can enjoy the cashless facility against any treatment of illness (check the policy as which
diseases treatment are covered under the policy.
Equities
A capital market is a market for securities (both debt and equity), where companies and
governments can raise long-term funds. It is defined as a market in which money is lent for
periods longer than a year, as the raising of short-term funds takes place on other markets (e.g.,
the money market). Capital markets consist of the primary market (IPO, FPO, Preferential
Issue, Rights Issue) and the secondary market (deals with those securities that are already
issued).
Equities are a type of security that represents the ownership in a company. Investing in equities is
a good long-term investment option as the returns on equities over a long time horizon are
generally higher than most other investment avenues. However, along with the possibility of
greater returns comes greater risk.
Share Price Determination At any given moment, equity’s price is strictly a result of supply and
demand. The supply is the number of shares offered for sale at any one moment. The demand is
the number of shares investors wish to buy at exactly that same time. The price of the stock
moves in order to achieve and maintain equilibrium.
When prospective buyers outnumber sellers, the price rises. Eventually, sellers attracted to the
high selling price enter the market and/or buyers leave, achieving equilibrium between buyers
and sellers. When sellers outnumber buyers, the price falls. Eventually buyers enter and/or sellers
leave, again achieving equilibrium.
Thus, the value of a share of a company at any given moment is determined by 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 aren't enough buyers, the price will go
down.
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Stock market investments= Economics + Mathematics/Statistics + Psychology
Economics Deals with fundamentals of company. Statistics deals with study of companies’
financial statement and it past performance in stock market. Psychology deals with market
sentiments (Herd mentality) which are most crucial as it can lead in wrong direction.
Why Invest in Equities?
Investing in the stocks and shares of companies is widely regarded as one of the best
ways to create growth within any portfolio. However, the returns from equities are dependent on
a number of factors, such as economic environment, government policy and investor sentiment -
all of which can affect the stock market.
Study to be made before we start investing
Equity Investment is considered to be the most fruitful & riskiest investment across the
globe. Stocks are just like gamble for people who don’t know how to invest. It is very hard to
predict the market, as a result the speculators end up losing money most of the times. Therefore
investment should be made for long-term rather than short term.
The trend of a stock market is dependents on factors such as:
• The global and local Macro economic conditions

• The performance of Indian Companies
• The IIP data
• The GDP growth on quarter basis
• The reduction in the fiscal deficit year on year basis
• The increase in imports & exporters
Fundamental Analysis
A company’s financial statements provide the most accurate information to its
management and shareholders about its operations, efficiency in the allocation of its capital and
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its earnings profile. Three basic accounting statements form the backbone of financial analysis of
a company: the income statement (profit & loss), the balance sheet, and the statement of cash
flows.
Ratios
• Earning per Share (EPS)
• Price to Earnings ratio (P/E)
• Dividend Yeild
• Industry P/E
• Return on Equity
• Dividend Yeild,
Technical Analysis
Technical analysis involves making trading decisions by studying records or charts of past
stock prices and volume, and in the case of futures, open interest. The technical analysts do not
attempt to measure a security’s intrinsic value but believe in making short-term profit by
analyzing the volume and price patterns and trends.
Returns over a Period of time from various Sectors (%)

Capital Oil &
Sensex CD Psu Fmcg Pharma IT Banks Auto Metals
Goods Gas
5 yrs 152.2 135.5 118.1 304.3 150.8 106.3 86.8 169.9 183.8 169.7 213.7
3 yrs 19.7 35.6 39 18.9 73.3 50.6 9.3 33.4 73.8 38 40.3
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2 yrs 30.3 35.6 66.8 45.1 52.4 37.7 32.4 80.6 129.7 10.8 18.8
Table showing Percentage Comparison between BSE and GDP
Year Sensex GDP Inflation
2004 - 2005 6602.69 7.5 6.5

2005 – 2006 9397.93 9.5 4.4
2006 – 2007 13786.91 9.6 5.4
2007 – 2008 20286.99 9.0 4.7
2008 – 2009 9647.31 6.7 8.4
2009 – 2010 14493.84 6.8 1.6
Graph showing the relation between the stock price of BSE & GDP, BSE & Inflation
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Conclusion
When the stock market climate is uncertain, investors often become nervous and lose sight of
their long-term investment goals. They are often tempted to postpone new investment and even
sell their current holdings with the aim of re-investing when stock markets stabilize. However, if
investors are able to take a medium/long-term view, it is often best to hold onto investments
through periods of volatility. It is very difficult to time movements in and out of the market,
particularly in periods of extreme volatility. And getting it wrong can significantly affect the
performance of investments. Selling at the first sign of a downturn can prove particularly bad.
Sharp falls in markets are often followed by sharp gains. While it may be tempting for investors
fearing further losses to sell their investments, they risk locking in losses and missing out on
gains. The long-term performance of equities demonstrates that there is no need to time the
markets; it’s enough just to be in the markets. In contrast, waiting for a better time to invest can
cost investors dearly.
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Mutual Funds
What Is Mutual Fund?

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market instruments
such as shares, debentures and other securities. The income earned through these investments and
the capital appreciation realized is shared by its unit holders in proportion to the number of units
owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it
offers an opportunity to invest in a diversified, professionally managed basket of securities at a
relatively low cost.
Advantages
1) Professional Management
2) Diversification
3) Convenient Administration
4) Return Potential
5) Low Cost
6) Liquidity
7) Transperency
8) Flexibility
9) Choice of scheme
Disadvantages Of Mutual Fund
1. No control over cost
2. No tailor made portfolio
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3. Managing a portfolio
MUTUAL FUND CLASSIFICATION
1) Open - Ended Funds:
An open-end fund is one that is available for subscription all through the year. These do
not have a fixed maturity. There is no lock-in period in open-ended mutual funds.
Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices.
The key feature of open-end schemes is liquidity.
2) Close – Ended Funds:
These schemes have a pre-specified maturity period. One can invest directly in the
scheme at the time of the initial issue. Depending on the structure of the scheme there are
two exit options available to an investor after the initial offer period closes. Investors can
transact (buy or sell) the units of the scheme on the stock exchanges where they are listed.
The market price at the stock exchanges could vary from the net asset value (NAV) of the
scheme on account of demand and supply situation, expectations of unit holder and other
market factors. Alternatively some close-ended schemes provide an additional option of
selling the units directly to the Mutual Fund through periodic repurchase at the schemes
NAV; however one cannot buy units and can only sell units during the liquidity window.
SEBI Regulations ensure that at least one of the two exit routes is provided to the
investor.
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Types Of Mutual Funds
There are various types of mutual funds available based on the investments made by them. They
are explained as follows:
1. Equity Funds: These funds are those where investments are made in equities. The main
objective of these funds is capital appreciation. However, these are very high risk funds due
to the volatile nature of the equity market. The various equity funds available are:
• Aggressive Growth Fund
• Growth Fund
• Diversified Fund
• Sector Fund
• Index Fund
2. Debt Funds: These funds invest in the debt instruments. These funds have a lower end of
risk and they mainly target at income flow. These have various sub-types explained as
follows:
• Diversified Debt Fund
• Focused Debt Fund
• High Yield Debt Fun
3. Gilt Funds: Invest their corpus in securities issued by Government, popularly known as
Government of India debt papers. These funds carry zero default risk but are associated with
interest rate risk. These schemes are safer as they invest in papers backed by Government.
4. Money Market Funds: A money market fund is a mutual fund that invests solely in money
market instruments. Money market instruments are forms of debt that mature in less than one
year and are very liquid. Eg Treasury bills ,Commercial Paper,etc.
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5. Gold Funds: These funds invest in gold and gold-related securities. They can be structured
in either of the following formats:
• Gold Exchange Traded Fund
• Gold Sector Funds
6. Hybird Funds: A category of mutual fund that is characterized by portfolio that is made up
of a mix of stocks and bonds, which can vary proportionally over time or remain fixed. These
funds--often referred to as balanced funds-- are attractive to investors who want to allocate
their assets in one investment vehicle. Many of these funds buy blue-chip stocks and high-
quality bonds. Risks and returns typically are moderate, and expenses can be high. Investors
can achieve similar results by buying separate stock and bond funds.
7. COMMODITY FUNDS: Commodities mutual funds are those investing in certain

designated real assets (as listed in the following paragraph) or their derivatives like futures
contracts (instruments that facilitate investment in commodities). The commodities or the
derivatives are traded for maximizing profits. Commodity mutual funds are an interesting,
and potentially rewarding, way to diversify your investment portfolio beyond stocks and
bonds. That's because commodities are often viewed as a hedge against inflation. It means
the prices of commodities tend to rise in step with inflation.
8. REAL ESTATE MUTUAL FUNDS: Real Estate Mutual Funds are mutual funds used for
the purpose of investment in the real estate property, either directly or indirectly
The main objective of the Real Estate Mutual Funds is to raise funds for the expansion of the
retail businesses by means of real estate development.
Risk Return Hierarchy of Mutual Funds
Different mutual fund schemes are exposed to different levels of risk and investors should know
the level of risks associated with these schemes before investing. The graphical representation
hereunder provides a clearer picture of the relationship between mutual funds and levels of risk
associated with these funds:
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Growth Option:
The investor does not receive an income; in this case the growth option NAV already
reflects the growth in investments (if any) registered by the mutual fund. If the investor is in need
of an income, he can redeem his units; the difference in the growth option between the time he
bought the mutual fund and redeemed it is effectively his income.
Dividend Payout: Under this option, the fund declares a dividend as and when it has surplus
money. An important highlight of this option is that any dividend received within 12 months
from the date of investment, a part of the short-term capital appreciation, is converted into tax-
free income. If you had to sell your units, you would have had to pay tax. But when you get a
dividend, you don't. Another major advantage of this option is that it allows you to book a profit
at different levels without having to bother about the right or wrong time to do so. Considering
the tax laws and the automatic rebalancing of portfolio, this certainly can be a better option.
Dividend Reinvestment: Under this option, the fund declares a dividend and reinvests it
into the fund. The point to be noted is that the entire tax-free dividend amount is reinvested on a
particular day, which in a way is timing the market
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Investment Plans And Services
Systematic Investment plan (SIP): The Systematic Investment Plan (SIP) is a simple and time
honored investment strategy for accumulation of wealth in a disciplined manner over long term
period. The plan aims at a better future for its investors as an SIP investor gets good rate of
returns compared to a one time investor.
• Systematic Reinvestment Plan (SRP): It involves reinvestments of any profit gained

from these investments.
• Systematic Withdrawal plans (SWP): A systematic withdrawal plan is a financial plan

that allows a shareholder to withdraw money from an existing mutual fund portfolio at
predetermined intervals. The money withdrawn through a systematic withdrawal plan
can be reinvested in another portfolio or used to pay for something else. Often, a
systematic withdrawal plan is used to fund expenses during retirement. However, this
type of plan may be used for other purposes as well.
• Systematic Transfer Plans (STP): Using this facility the investor can transfer a fixed
amount from one type of fund into another type of fund of the same fund house. For
example, an investor can transfer a fixed amount periodically from a debt fund into an
equity fund or vice a versa. This is a very useful strategy from the investors overall
financial planning perspective.
Developing A Model Portfolio…

It’s a 4 step program:-
1. Work with Investors to develop long term Goals
2. Determine the asset allocation of the investment portfolio
3. Determine the Sector distribution
4. Select specific fund Manager & their schemes
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4 Different Portfolios
Equity funds Hybrid Funds Govt. Bonds

(Aggressive / (Balanced funds) (Money Market
Conservative/Moderate) Funds)
Young Unmarried
50 % (Aggressive ) 25% 25%
Professionals
Young couple with 2

40 % (Conservative ) 40% 20 %
incomes & kids
Older Couple single 25 % (moderately

45% 30%
income Aggressive )
Recently retired
25 % (moderately) 35% 40%
couple
Conclusion:
Mutual funds are considered as one of the best available investments as compare to others
they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual
fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to
do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing
risk & maximizing returns.
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Post Offfice Schemes
SCHEME Interest Payable,Investment LimitsSalient features including Tax Rebate

Rates, Periodicity etc. and
Denominations
5-YearPost On maturity INR 10/-Minimum INR 10/-One withdrawal upto 50% of the
Office account fetches INRper month or anybalance allowed after one year. Full
Recurring 728.90/-. Can beamount inmaturity value allowed on R.D.
Deposit continued for another 5multiples of INRAccounts restricted to that of INR. 50/-
Account years on year to year5/-. No maximumdenomination in case of death of
basis. limit. depositor subject to fulfillment of
certain conditions. 6 & 12 months
Rate of interest 7.5%
advance deposits earn rebate.
(quarterly
compounded).
PostOffice Interest payableMinimum INRAccount may be opened by individual.
annually but calculated
Time 200/- and in2,3 & 5 year account can be closed after
quarterly.
Deposit multiple thereof.1 year at discount. Account can also be
Period Rate
Account No maximumclosed after six months but before one
1 yr. A/c 6.25% limit. year without interest. The investment
under this scheme qualify for the
2 yr. A/c 6.50%
benefit of Section 80C of the Income
3 yr. A/c 7.25%
Tax Act, 1961 from 1.4.2007.
5 yr. A/c 7.50%
Post Office 8% per annum payableIn multiples of INRMaturity period is 6 years. Can be
Monthly i.e. INR 80/- will be1500/- Maximumprematurely encashed after 1 year but
Income paid every month on aINR 4.5 lakhs inbefore 3 years at the discount of 2% of
Account deposit of INR 12000/-. single account andthe deposit and after 3 years at the
INR 9 lakhs indiscount of 1% of the deposit. A bonus
joint account. of 5% on principal amount is admissible
on maturity.
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15year 8% per annumMinimum INR.Deposits qualify for deduction from

Public (compounded yearly). 500/- Maximumincome under Sec. 80C of IT Act.
Provident INR. 70,000/- in aInterest is completely tax-free.
Fund financial year.Withdrawal is permissible every year
Account Deposits can befrom 7th financial year. Loan facility
made in lumpsumavailable from 3rd Financial year. No
or in 12attachment under court decree order.
installments.
Kisan Money doubles in 8No limit onA single holder type certificate may be
Vikas Patra years & 7 months.investment. issued to an adult for himself or on
Facility for prematureAvailable inbehalf of a minor or to a minor, can also
encashment. denominations ofbe purchased jointly by two adults.
INR. 100/-, INR.
Rate of interest 8.4%
500/-, INR. 1000/-,
(compounded yearly)
INR. 5000/-, INR.
10,000/-, in all Post
Offices and INR.
50,000/- in all
Head Post Offices.
National 8% InterestMinimum INR.A single holder type certificate can be
Savings compounded six100/- Nopurchased by an adult for himself or on
Certificate monthly but payable atmaximum limitbehalf of a minor or to a minor.
maturity. INR. 100/-available inDeposits quality for tax rebate under
grows to INR 160.10denominations ofSec. 80C of IT Act. The interest
after 6 years. INR. 100/-, 500/-,accruing annually but deemed to be
1000/-, 5000/- &reinvested will also qualify for
INR. 10,000/-. deduction under Section 80C of IT Act.
Senior 9% per annum, payableThere shall be onlyMaturity period is 5 years. A depositor
Citizens from the date of depositone deposit in themay operate more than a account in
Savings of 31st March/30thaccount in multipleindividual capacity or jointly with
Scheme Sept/31st December inof INR.1000/-spouse. Age should be 60 years or
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the first instance &maximum notmore, and 55 years or more but less
thereafter, interest shallexceeding rupeesthan 60 years who has retired on super
be payable on 31stfifteen lakh. annuation or otherwise on the date of
March, 30th June, 30th opening of account subject to the
Sept and 31st condition that the account is opened
December. within one month of receipt of
retirement benefits. Premature closure is
allowed after one year on deduction of
1.5% interest & after 2 years 1%
interest. TDS is deducted at source on
interest if the interest amount is more
than INR 10,000/- p.a.
National Savings Certificate (NSC) Public Provident Fund (PPF)

Interest Paid: 8%, compounded half- Interest Paid: 8%, compounded annually
yearly
No monthly/yearly payments No monthly/yearly payments
Minimum investment: Rs 100 Minimum investment: Rs 500 (annually)
Maximum investment: No Limit Maximum investment: Rs 70,000
Duration of investment: 6 years Duration of investment: 15 years
Tax benefit under Section 80 ‘C’ available.
Tax benefit under Section 80 ‘C’
Maximum limit: Rs 70,000 (limit of the
available. Maximum limit: Rs 100,000
investment in PPF)
Good medium-term investment option Good long-term investment option
Interest if fully Taxable Interest is fully Exempt
Why to invest in Post Office Schemes
1. These schemes are offered by the Government of India.

2. Safe, secure and risk-free investment options.
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3. No Tax Deduction at Source (TDS).

4. Nomination facility is available.
5. Nomination can be changed at any time
6. The instruments are transferable to any Post Office anywhere in India.
7. Attractive rates of interest.
Conclusion:
1. Post Office Schemes are suitable for every individual ranging from age 18 to senior
citizens.
2. In this, Monthly income plan is most suitable for senior citizens as they receive fix
income every month.
3. Public Provident Fund is must for every individual who has started earning as it gives fix
amount of non-taxable returns on a long term basis.
4. Some Post office schemes such as Recurring deposit account can also be used by
housewives for saving purpose.
5. Do consider opening a PPF account if you do not have one. You can put in as little as Rs
500 a year to keep it going.
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Fixed Deposit
Fixed deposits are loan arrangements where a specific amount of funds is placed on
deposit under the name of the account holder. The money placed on deposit earns a fixed rate of
interest, according to the terms and conditions that govern the account. The actual amount of the
fixed rate can be influenced by factors such as the type of currency involved in the deposit, the
duration set in place for the deposit, and the location where the deposit is made.
Government of India has designated certain schemes as eligible for tax savings under Sec
80c of the IT Act. Amounts upto Rs. 1 lakh per year are deductible from taxable amounts under
this provision.
Interest Rates for some of the Banks
Bank Days Years

Name 91-179 180-270 271-364 1-2 2-3 3-5 5 – 10
SBI 4.75 5.25 5.25 6.00 6.50 6.50 7.25
BOB 5.00 5.50 5.50 6.50 7.00 7.00 7.00
BOI 3.50 4.50 5.00 6.00 6.00 6.50 6.50
ICICI 5.25 6.00 6.00 6.50 7.00 7.50 7.75
HDFC 4.50 5.50 5.75 6.50 7.00 7.50 7.50
Kotak 3.50 4.75 5.50 6.50 6.75 6.75 6.75
Conclusion
Bank Fixed Deposit schemes are only for securing certain amount of money which is required
after a specific duration for a specific purpose.
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Same as Bank FD there is Corporate Fixed Deposits for Short term as well as Long term where
and this corporate fixed deposits are done more by HNI’s and not by an normal individual.
Gold
The love for gold in India is legendary. The consumption of gold is mostly in form of
jewellery. But as investment an investors generally buy gold as a hedge or safe haven against any
economic, political, social or currency-based crises. These crises include investment market
declines, inflation, war and social unrest.
Gold can be bought in various forms, one can either buy it in the form of physical gold --
bars, biscuits and or coins or even in a dematerialised form. Gold jewellery is not a good
investment as it is not as liquid as bars or gold fund. The disadvantage is that a huge amount is to
be paid as making charges or design charges which is discounted while selling it.
Gold Exchange-Traded Fund or Gold ETF is the new investment option of recent origin.
This open-ended mutual fund collects money from the investors to invest in standard gold
bullion. Instead of physical holding the gold, the investors will be assigned units of the gold ETF.
Gold ETF are listed in the stock exchanges of their respective countries. Gold ETFs give the
same advantages of holding gold in the physical form without the hassles associated with
keeping gold in physical form. With gold ETFs, person need not worry about the safe storage,
liquidity and purity of physical gold. The fund house that issues the gold ETF takes over the
responsibility of storage and insurance of this gold. Since gold ETFs are registered with stock
exchanges, 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 global standards of purity. There is complete transparency in the Net Asset Value
or NAV of the funds and the market prices at which they are traded. The ease of investing in
small denominations in Gold ETFs makes it easy for retail investors to participate in the
schemes. By investing in gold ETFs, one can accumulate a sizeable amount of gold over a long
period of time. Retail investors could invest even in one unit of the fund, which is equivalent to
one or ½ gram of gold, every month. Gold ETFs are also tax efficient unlike physical gold.
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While physical gold is considered a long-term investment, only if it is hold for three years while
gold ETFs acquire this status after one year. In short selling, gold within three years of purchase
will attract capital gains tax. Moreover, holding large quantities of physical gold can attract
wealth tax, while gold in demat form does not.
Gold Price is determined by demand and supply equilibrium. It has an effect of global
demand on its pricing. The demand for gold has been 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. Though Gold is a safe asset. Especially during recessionary economic situations,
when equity prices plummet, price of gold remains stable even in an unstable 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 be as huge as return from the
equity market, but nonetheless, they are the safest custodian of hard-earned money.
Gold Price History
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Bonds & Debentures

Bonds & Debentures are fixed income instruments which are issued for the purpose of
raising capital. Both private entities, such as companies, financial institutions, and the central or
state government and other government institutions use this instrument as a means of garnering
funds. Over and above the scheduled interest payments as and when applicable, the holder of a
bond is entitled to receive the par value of the instrument at the specified maturity date. Bonds
issued by the Government carry the lowest level of risk but could deliver fair returns.
Bonds can be broadly classified into:
1) Tax-Saving Bonds
2) Regular Income Bonds
Tax-Saving Bonds offer tax exemption up to a specified amount of investment. Examples are:
a. ICICI Infrastructure Bonds under Section 88 of the Income Tax Act, 1961
b. NABARD/ NHAI/REC Bonds under Section 54EC of the Income Tax Act, 1961
c. RBI Tax Relief Bonds
Regular-Income Bonds, as the name suggests, are meant to provide a stable source of income at
regular, pre-determined intervals. Examples are:
a. Double Your Money Bond

b. Step-Up Interest Bond
c. Retirement Bond
d. Encash Bond
e. Education Bonds
f. Money Multiplier Bonds/Deep Discount Bond
Similar instruments issued by companies are called debentures.
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Difference between Bonds & Debentures:
Debentures and bonds are similar except for one difference:

Bonds are more secure than debentures. A debenture is an unsecured loan you offer to a
company. The company does not give any collateral for the debenture but pays a higher rate of
interest to its creditors and bondholders are paid low interest. In case of bankruptcy or financial
difficulties, the debenture holders are paid later than bondholders.
Conclusion
• Individuals invest in bonds and debentures only when they have a long term horizon more
than 5 yrs with a specific goal.
• Even HNI’s can invest more in Bonds & debentures, both in Corporate bonds &
government Bonds.
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Real Estate
Real Estate Investment is now treated as a major case of capital budgeting by using state-
of-the-art investment analysis which incorporates the future stream of income it may generate
and the associated risk adjustments. Real estate is basically defined as immovable property such
as land and everything permanently attached to it like buildings. The 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. Real estate investment can be attractive if viewed as a business opportunity; it can
generate rental income, using it as collateral to secure a loan for a business venture, to offset
otherwise taxable income through cash savings on tax-deductible interest rate losses, or simply
from the profits garnered from its resale. Notable, in this context is the gains reaped by real estate
speculators who trade in real estate futures (by buying and selling purchase options). Common
examples of real estate investment are individuals owning multiple pieces of real estate’s one of
which is his primary residence and others are occupied by tenants from where the rental income
accrues. Real estate investment is also associated with appreciation in the value of property
thereby having the potential for capital gains. Tax implications differ for real estate investment
and residential real estates. Real estate investment is long term in nature and investment
professionals routinely maintain that one’s investment portfolio should have at least 5%-20%
invested in real estate.
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Derivatives
Derivative is a product whose value is derived from the value of one or more basic
variables, called bases (underlying asset, index, or reference rate), in a contractual manner. The
underlying asset can be equity, forex, commodity or any other asset.
For example, wheat farmers may wish to sell their harvest at a future date to eliminate the
risk of a change in prices by that date. Such a transaction is an example of a derivative. The
price of this derivative is driven by the spot price of wheat which is the "underlying".
Factors Driving the Growth of Derivatives

Over the last three decades, the derivatives market has seen a phenomenal growth. A large variety of derivative
contracts have been launched at exchanges across the world. Some of the factors driving the growth of financial
derivatives are:
1) Increased volatility in asset prices in financial markets,

2) Increased integration of national financial markets with the international markets,
3) Marked improvement in communication facilities and sharp decline in their costs,
4) Development of more sophisticated risk management tools, providing economic
agents a wider choice of risk management strategies, and
5) Innovations in the derivatives markets, which optimally combine the risks and returns
over a large number of financial assets leading to higher returns, reduced risk as well
as transactions costs as compared to individual financial assets.
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Derivative Products
Derivative contracts have several variants. The most common variants are forwards,
futures, options and swaps. We take a brief look at various derivatives contracts that have come
to be used.
1) Forwards: A forward contract is a customized contract between two
entities, where settlement takes place on a specific date in the future at
today's pre-agreed price
2) Futures: A futures contract is an agreement between two parties to
buy or sell an asset at a certain time in the future at a certain price. Futures
contracts are special types of forward contracts in the sense that the former
are standardized exchange-traded contracts.
3) Options: Options are of two types - calls and puts. Calls give the buyer
the right but not the obligation to buy a given quantity of the underlying
asset, at a given price on or before a given future date. Puts give the buyer
the right, but not the obligation to sell a given quantity of the underlying
asset at a given price on or before a given date.
4) Warrants: Options generally have lives of upto one year, the majority
of options traded on options exchanges having a maximum maturity of nine
months. Longer-dated options are called warrants and are generally traded
over-the-counter.
5) Swaps: Swaps are private agreements between two parties to
exchange cash flows in the future according to a prearranged formula. They
can be regarded as portfolios of forward contracts. The two commonly used
swaps are:
• Interest rate swaps: These entail swapping only the interest related
cash
flows between the parties in the same currency.
• Currency swaps: These entail swapping both principal and interest
between the parties, with the cash flows in one direction being in a
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different currency than those in the opposite direction.
Participants in the Derivatives Markets

The following three broad categories of participants - hedgers, speculators, and
arbitrageurs trade in the derivatives market.
Hedgers – Hedgers face risk associated with the price of an asset. They use futures or
options markets to reduce or eliminate this risk.
Speculators - Speculators wish to bet on future movements in the price of an asset.
Futures and options contracts can give them an extra leverage; that is, they can increase both the
potential gains and potential losses in a speculative venture.
Arbitrageurs - Arbitrageurs are in business to take advantage of a discrepancy between
prices in two different markets.
If, for example, they see the futures price of an asset getting out of line with the cash price, they
will take offsetting positions in the two markets to lock in a profit.
Difference between Futures & Options

Futures Options
Exchange Traded Exchange Traded
Exchange Defines the Products Exchange Defines the Products
Price is Zero, Strike Price moves Strike Price is fixed, Price moves
Price is Zero Price is always Positive
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Both long & short at risk Only Short at risk
Examples of Futures
Payoff for a buyer of Nifty futures
The investor bought futures when the index was at 2220. If the index goes up, his futures position
starts making profit. If the index falls, his futures position starts showing losses.
Payoff for a seller of Nifty futures

The investor sold futures when the index was at 2220. If the index goes down, his futures
position starts making profit. If the index rises, his futures position starts showing losses.
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Examples of Futures
Payoff for investor who went Long Nifty at 2220

The investor bought the index at 2220. If the index goes up, he profits. If the index falls he
looses.
Payoff for investor who went Short Nifty at 2220
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The investor sold the index at 2220. If the index falls, he profits. If the index rises, he looses.
Payoff for buyer of call option

As can be seen, as the spot Nifty rises, the call option is in-the-money. If upon expiration,
Nifty closes above the strike of 2250, the buyer would exercise his option and profit to the extent
of the difference between the Nifty-close and the strike price. The profits possible on this option
are potentially unlimited. However if Nifty falls below the strike of 2250, he lets the option
expire. His losses are limited to the extent of the premium he paid for buying the option.
Payoff for writer of call option
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As the spot Nifty rises, the call option is in-the-money and the writer starts making losses.
If upon expiration, Nifty closes above the strike of 2250, the buyer would exercise his option on
the writer who would suffer a loss to the extent of the difference between the Nifty -close and the
strike price. The loss that can be incurred by the writer of the option is potentially unlimited,
whereas the maximum profit is limited to the extent of the up-front option premium of Rs.86.60
charged by him.
Payoff for buyer of put option

As can be seen, as the spot Nifty falls, the put option is in-the-money. If upon expiration,
Nifty closes below the strike of 2250, the buyer would exercise his option and profit to the extent
of the difference between the strike price and Nifty-close. The profits possible on this option can
be as high as the strike price. However if Nifty rises above the strike of 2250, he lets the option
expire. His losses are limited to the extent of the premium he paid for buying the option.
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Payoff for writer of put option

As the spot Nifty falls, the put option is in-the-money and the writer starts making losses.
If upon expiration, Nifty closes below the strike of 2250, the buyer would exercise his option on
the writer who would suffer a loss to the extent of the difference between the strike price and
Nifty-close. The loss that can be incurred by the writer of the option is a maximum extent of the
strike price (Since the worst that can happen is that the asset price can fall to zero) whereas the
maximum profit is limited to the extent of the up-front option premium of Rs.61.70 charged by
him.
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Conclusion
Derivatives product are the products which can be used for Hedging and Arbitraging, but
they are not for the Planning purpose. The extra money available with an individual can be used
for these products, because the Risk & Returns are high in Derivatives.
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Commodities
What is "Commodity"?
Commodity includes all kinds of goods. FCRA defines "goods" as "every kind of
movable property other than actionable claims, money and securities". Futures' trading is
organized in such goods or commodities as are permitted by the Central Government. At present,
all goods and products of agricultural (including plantation), mineral and fossil origin are
allowed for futures trading under the auspices of the commodity exchanges recognized under the
FCRA.
The national commodity exchanges have been recognized by the Central Government for
organizing trading in all permissible commodities which include precious (gold & silver) and
nonferrous metals; cereals and pulses; ginned and unginned cotton; oilseeds, oils and oilcakes;
raw jute and jute goods; sugar and gur; potatoes and onions; coffee and tea; rubber and spices,
etc.
What are the main differences between the physical and futures markets?
The physical markets for commodities deal in either cash or spot contract for ready
delivery and payment within 11 days, or forward (not futures) contracts for delivery of goods
and/or payment of price after 11 days. These contracts are essentially party-to-party contracts,
and are fulfilled by the seller giving delivery of goods of a specified variety of a commodity as
agreed to between the parties.
Rarely are these contracts for the actual or physical delivery allowed to be settled
otherwise than by issuing or giving deliveries. Such situations may arise when unforeseen and
uncontrolled circumstances prevent the buyers and sellers from receiving or taking deliveries.
The contracts may then be settled mutually.
Unlike the physical markets, futures markets trade in futures contracts which are
primarily used for risk management (hedging) on commodity stocks or forward (physical market)
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purchases and sales. Futures contracts are mostly offset before their maturity and, therefore,
scarcely end in deliveries. Speculators also use these futures contracts to benefit from changes in
prices and are hardly interested in either taking or receiving deliveries of goods.
GOLD & SILVER:
Gold is traditionally treated as safe investment in the difficult times. Big investors will
treat this as “Safe Hedge” when equities are not yielding good returns and when dollar is weak.
Same thing happened in 2008-09 when equities were in down turn. These people will sell their
hedge holdings like Gold once equities make bounce back. But Gold is safe hedge against
inflation.
Commodity trading is an interesting option for those who wish to diversify from the
traditional options like shares, bonds and portfolios.
Commodity market is a physical or virtual marketplace for buying, selling and trading
raw or primary products. Commodities are split into two types: hard and soft commodities. Hard
commodities are typically natural resources that must be mined or extracted (gold, rubber, oil,
etc.), whereas soft commodities are agricultural products or livestock (corn, wheat, coffee, sugar,
soybeans, pork, etc.)
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Indian commodity market:
Indian commodity market consists of both the retail and the wholesale market in the
country. The commodity market in India facilitates multi commodity exchange within and
outside the country based on requirements. Commodity trading is one facility that investors can
explore for investing their money.
Commodity Trading
The Government has made almost all commodities entitled for futures trading. Four multi
commodity exchanges have been set up in the country to facilitate this for the retail investors.
The four national exchanges in India are:
• Multi Commodity Exchange (MCX)

• National Commodity and Derivatives Exchange (NCDEX)
• National Multi-Commodity Exchange (NMCE)
• Indian Commodity Exchange Ltd (ICEX)
Wholesale Market
The wholesale market in India, an important component of the India commodity market,
traditionally dealt with framers and manufacturers of goods. However, in the present scenario,
their roles have changed to a large extent due to the enormous growth that the economy has
witnessed. The lengthy process of wholesalers buying from manufacturers; then selling it to
retailers who in turn sold it to consumers does not seem feasible today. An improvement in the
transport facility has made the interaction between the retailer and manufacturer easier; the need
for a wholesale market is gradually diminishing.
Retail Market
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The retail market in India is currently witnessing a boom. The growth in the India
commodity market is largely attributed to this boom in the retail market. Policy reforms and
liberal government policies have ensured that this sector is growing at a good pace. Some of the
reasons attributed to the growth of retail sector in India include the large population of the
country who has an increased purchasing power in their hand. Another factor is the heavy inflow
of foreign direct investment in this sector. More than 80% of the retail industry in the country is
concentrated in large cities.
Forward contracts
A forward contract is an agreement between two parties to exchange at some fixed future
date a given quantity of a commodity for a price defined today. The fixed price today is known as
the forward price.
Futures contracts
A futures contract has the same general features as a forward contract but is transacted
through a futures exchange.
Conclusion:
Commodity trading is an interesting option for those who wish to diversify from the
traditional options like shares, bonds and portfolios. Commodities are split into two types: hard
and soft commodities. Hard commodities are typically natural resources that must be mined or
extracted (gold, rubber, oil, etc.), whereas soft commodities are agricultural products or livestock
(corn, wheat, coffee, sugar, soybeans, pork, etc.)
The India Commodity market has undergone lots of changes due to the changing global
economic scenario; thus throwing up many opportunities in the process. Demand for
commodities both in the domestic and global market is estimated to grow by four times than the
demand currently is by the next five years.
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Commodity Trading is done by the investor as a Hedging tool rather than as an

investment tool. So this cannot be considered as an investment option for financial planning.
Major Players in Commodity Market are HNI’s rather than normal investors.
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Forex Trading
The Forex trading market is regarded as the biggest financial market. It is this market that
is responsible for the trading of currencies. Global forex market is the largest market in the world
with daily reported volume of over 1.8 trillion of transaction. Forex trading market is a place
where the currencies of different countries are bought and sold through forex traders. Forex
traders buy and sell currency with the hope of making profit from forex market when the value of
the currency changes in their favor, whether from forex market news or events that take place in
the world. Forex prices can change at anytime in response to real-time events, such as political
unrest or inflation rate.
The primary purpose of the foreign exchange market is to assist international trade and
investment, by allowing businesses to convert one currency to another currency. For example, it
permits a US business to import European goods and pay Euros, even though the business's
income is in US dollars. It also supports speculation, and facilitates the carry trade, in which
investors borrow low-yielding currencies and lend (invest in) high-yielding currencies, and
which (it has been claimed) may lead to loss of competitiveness in some countries.
The foreign exchange market is unique because of its
1. huge trading volume, leading to high liquidity

2. geographical dispersion
3. continuous operation: 24 hours a day except weekends, i.e. trading from
20:15GMT on Sunday until 22:00 GMT Friday
4. the variety of factors that affect exchange rates
5. the low margins of relative profit compared with other markets of fixed
income
6. the use of leverage to enhance profit margins with respect to account size.
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Daily Turnover (RBI report on economic review)
Forex Investment
Forex trading system allows traders to transact easily and increasing their earnings.
Investors should keep in mind that forex trading works on certain principles and this type of
trading is an investment not an income. Currency can fluctuate at any time, the best investment
was forex trading. Forex investor should have another source of income while dealing in forex
trading. After investor getting all information about forex broker's system, then the forex investor
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can start forex trading with small amounts. All the investor should always invest that amount for
which the forex trader can bear profit or loss in forex market.
Forex Analysis
Before we start forex trading, we need to start some forex analysis. Forex analysis basically
divided into two types: forex fundamental analysis and forex technical analysis. Forex
fundamental analysis uses economic and political factors such as housing starts, the
unemployment rate, or inflation, as a means of predicting currency movements. Forex technical
analysis uses reliable historical data as a means of forecasting these movements. Forex technical
analyst believes that history repeats itself over and over again. Forex technical analysis is not
concerned with the reasons (interest rates or inflation) for currency movements. Instead, it
believes that historical currency movements are a clear indication of future ones. Forex technical
analyst typically uses charts as a tool in predicting currency price movements.
Forex as Hedging
A hedger (an individual or company owning or planning ) achieves protection against changing
cash prices by purchasing (selling) futures contracts of the same or similar commodity and later
offsetting that position by selling (purchasing) futures contracts of the same quantity and type as
the initial transaction.
Currency hedging refers to a strategy that strives to minimize the exposure to exchange rate
fluctuations, thereby minimizing the uncertainty of future transactions denominated in a foreign
currency and providing some stability to earnings and cash flow.
Forex hedging involves buying or selling of correlating currency pairs to stay protected from
fluctuating exchange rates. Forex hedging protects the long or short position of a currency pair
against downside or upside risk.
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Conclusion
The Forex market is growing but at the same time it is a very volatile market. The Forex market
is affected by various factors such as political , economical , etc. The average return expected of
any investment in forex market is 20 – 30 % .
Forex investors often use a strategy called hedging to decrease some of the risk associated with
trading. Many people think of hedging as buying an insurance policy for their currency
position, and it acts in much the same way.
Traditional forex options are derivatives that allow the buyer to purchase an amount of currency
from another trader for a set price, and make a great hedging tool. Again, these are instruments
that are traded on the open market, and the investor is under no obligation to follow through with
the option.
Thus it is advisable that investment in forex market should be done majorily by High Networth
Individuals(HNI) and Bussiness both Large and Small that are dealing in international trade
which have the requirnments of foreign currencies .
Thus for any normal individual to invest in forex market he should have another source of
income while dealing in forex trading.
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Taxation
Introduction
The announcement of new India tax slabs in the Union Budget 2010-11 came as a big relief to
the common man. The expansion of tax slabs will not only provide considerable respite to
taxpayers but would also trigger savings and their consumption for infrastructure development.
Finance Minister has altered the Income Tax Slabs for all men, women and senior citizens. A
number of earning individuals were hoping for a comeback of Standard Deduction, but were left
unpleased after the announcement. He expanded the utmost tax slab of 30% to Rs 8 lakh from the
previous Rs 5 lakh. However, the exclusion limit of Rs 1.6 lakh has not been altered by him.
Different tax Slabs in India
IT Slab (in INR)

Assesee Type From To Tax to be Charged
Male 0 1, 60, 000 NIL
160001 500000 10%
500001 800000 20%
800001 and above 30%
Female 0 190000 NIL
190001 500000 10%
500001 800000 20%
Senior Citizens 0 240000 NIL
240001 500000 10%
500001 800000 20%
Impact of new tax Slabs in India
After the declaration of new tax slabs in India it is vital to assess its impact on savings. The chart
below evaluates savings under different categories of earning individuals:
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Earnings Previous IT Slab New IT Slab Individual Savings

60,000 0 0 0
3,00,000 14,000 14,000 0
4,00,000 35,020 24,720 10,300
5,00,000 55,620 35,020 20,600
6,00,000 86,520 55,620 30,900
7,00,000 1,17,420 76,220 41,200
8,00,000 1,48,320 96,820 51,500
9,00,000 1,79,220 1, 27,720 51,500
10,00,000 2,10,120 1,58,620 51,500
Tax Deductions
Specified Investment Schemes u/s 80C and u/s 80CCC (1)- [ Max Rs 1 Lakh in total ]
1. Life Insurance Premiums

2. Public Provident Fund (maximum Rs 70,000 in a year)
3. NSC (National Savings Certificates)
4. Unit Linked Insurance Plan (ULIP)
5. Equity Linked Savings Scheme (ELSS) of Mutual Funds
6. Infrastructure Bonds issued by Institutions/ Banks such as IDBI, ICICI, REC, PFC etc.
7. Pension scheme of LIC of India or any other insurance company.
8. Fixed Deposit with Banks having a lock-in period of 5 Years.
Deduction under section 80D.
Under this section, deduction of up to Rs 40,000 can be claimed in respect of premium paid by
cheque towards health insurance policy. Such premium can be paid towards health insurance of
spouse, dependent parents as well as dependent children as per following table:
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On whose life health Individual taxpayer, Addittional Deduction for Total

Insurance Policy is his/her spouse,and parents of the Individual
taken dependent children whether dependent or not
(Rs.) (Rs.)
General Deduction 15,000 15,000 30,000
Aditional Deduction if5,000 5,000 10,000

one of the insured is
Senior Citizen
Total 20,000 20,000 40,000
Accordingly a person who falls in the 30% tax bracket can save income tax up to Rs 4,635 (or
Rs. 5099 if the annual income exceeds Rs 10,00,000) by paying Rs 15,000 as premium for a
Mediclaim policy in a year.
Tax Free Income
The following incomes are completely exempt from income tax without any upper limit.
1. Interest on PPF/GPF/EPF.
2. Interest on GOI tax free bonds.
3. Dividends on Shares and on Mutual Funds.
4. Any capital receipt from life insurance policies i.e., sums received either on death of the
insured or on maturity of life insurance plans. However, in case of life insurance policies
issued after March 31, 2004, exemption on maturity payment u/s 10(10D) is available
only if the premium paid in any year does not exceed 20% of the sum assured.
5. Interest on savings bank account in a post office.
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6. Long term capital gain on sale of shares and equity mutual funds if the security
transaction tax is paid/imposed on such transactions.
Taxability of these sources of income.
1) Salary or Pension Income Salaried employees are issued a certificate of tax deducted at
source from salary income by their employers in Form No. 16. It also gives the Net
Taxable Salary figure.
2) Profit from Business / profession Income as arived on the basis of Profit & Loss A/c
3) Income from Interest
Interest Income from the following sources is also required to be included in the Gross
Taxable Income:
1. Interest on company deposits.

2. Interest on debentures/bonds.
3. Interest on savings bank account/ fixed deposits with banks.
4. Interest on post office savings schemes like MIS, NSC, KVP etc.
5. Interest on private loans given to relatives, friends or any other entity.
6. Interest on government securities.
Income from Equity, Mutual Fund and Derivatives.
Capital gain from equity is also required to be included in the Gross taxable income if the
holding is as follows:
Short term (Upto one year) – 15%
Long Term (more than one year) – NIL
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• Research Design
• Data Collection Techniques & Tools
• Sample Design
• Limitations
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Research Design
The study is about to find various avenues available for an individual to invest and ways
to achieve long term financial goals through financial planning. It intend to study the pattern in
which individual allocates his savings in various asset class. It describes the awareness of
investor about various alternatives available to them. It also aims at creating awareness of
financial planning.
The data required for the study would be acquired through personal interview and
questioner and it was collected by means of cold calling (Cold calling is the process of
approaching prospective customers or clients, who were not expecting such an interaction). For
this purpose we choose Mumbai as an area.
Data collection techniques and tools
For the purpose of data collection we took help of both primary data and secondary data
collection method.
Primary data are those, which are collected afresh and for the first time, and thus happen to be
original in character. This method was used by means of Personal Interview, wherein researcher
had face-to-face contact with the persons. The reason behind choosing this method was to have
detailed information on the subject. It also provided opportunity for selecting the sample for
interview. The interview conducted were a mixture of structured and unstructured interviews.
Scope was kept open for detailed discussion at the discretion of the interviewee. Where there was
a time crunch a structured procedure was followed wherein predetermined questions were put
forward.
The other method was adopted in primary data collection was Questionnaires. This was used to
assist a more structured form of information. The information thus obtained was standard and in
a more unbiased form. It assisted to collect data from a large sample size. The pattern adopted
was a general form of questionnaire. Questions are in dichotomous (yes or no answers), multiple
choice and open ended question. Open ended questions are restricted due to the difficulty faced
in analyzing. The questioner was kept short and to the point.
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Secondary data means data that are already available i.e., the data which is already collected
and analyzed by other. To get a better understanding and to have a larger exposure on the subject
this method was used. Methods use was data available on world wide web, articles in
newspapers, financial industry reports, reports published by Government of India, etc. Support
was also provided by the project guide by giving inputs from his years of experience.
Sample Design
Sample design was based on principles of sample survey. Sample was decided on socio
demographic factors such as income and age group. The number of respondent were restricted to
50 due to lack of time. Source list for respondents was not predetermined it was on random basis.
The various parameters on which the research was to be conducted are:
• Awareness of financial Planning
• Alignment of life goals and financial goals
• Investment distribution in various asset classes
• Decision influencing investment
Limitations
Lack of response from sample: It is also said as access to resource of information. As the
method adopted was cold calling the respondent were not easily available for discussion.
Unwilling to reveal financial position: In technical term it can be said as access to information.
Many of are not comfortable 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.
Time: Due to lack of time availability of respondent and the period which can be used to collect
data was short the research could not be conducted on a large sample size.
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Lack of expertise: On the side of the researcher the there was lack of in-depth information on
the topic.
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93
Individual
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Age distribution of the respondent
Age distribution of the Age group of respondent No. of Respondent

respondent Percentage
21-30 17 34%
30-45 18 36%
45-60 11 22%
Above 60 4 8%
Total 50 100%
Almost 70% of respondent was from age group 21yrs to 45yrs this is considered to be most
active age group. During this age, life of an individual changes very drastically. The career is in
growing stage in starting few years and there are hardly any responsibilities, at this time there is a
lot of funds available for disposal. It is this age where maximum risk can be taken and a greater
period can be given to grow the amount invested. As a person enter into their 30’s they have
increased family responsibility and gradually the risk taking ability reduces with the age. With a
greater portion of such population included in data collection a greater degree of understanding
can be gained how financial planning is done by young India.
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1) Income Distribution of the Repondent
Income Respondent Percentage

Upto 200000 18 36
200000-300000 13 26
300000-400000 9 18
400000-500000 6 12
Above 600000 4 8
Total 50 100
Financial planning is about assessing our present cash flows; estimating the required cash flow
after a certain period of time and to determine the steps required to achieve this over a period.
The amount of disposable income at hand determines various investment decisions. It also helps
in making tax plans so that maxim benefit can be gained through various tax exemptions. So it is
necessary to know the income inflow of an individual. The above graph shows that a major
portion of respondent are in income slab of upto Rs.2,00,000 p.a.; this indicates that the persons
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may be in the beginning stage of career. With increasing income slab the no of respondent are
reduced.
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Individual
2) Person willingness to take risk according to age
Age group High Moderate Low Total
21-30 8 8 1 17
31-45 7 9 2 18
40-60 2 4 5 11
Above 60 1 1 2 4
Total 50
The investment decisions are more based on the willingness to take the risk rather than the ability
to take risk. The above graph describes 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 responsibility
increase. Although different individual may have different preferences which could contradict
their age. Many a time investment is a function of willingness rather than ability which is clearly
described by above graph.
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3) Investment made by the respondent in various avenues
Avenue Respondent Percentage

Life insurance 50 100
Fixed Deposit 31 62
Mutual Fund 29 58
Equity 14 28
Gold 6 12
PPF 41 82
Post Office Deposit 24 48
A fair idea of asset allocation of individuals in various asset class can be observed through this. It
was observed that the all respondent had a life cover policy. This shows that the basics of
financial planning were achieved. The next major portion was Provided Fund due to it being
more secure investment and also tax exemption offered. Major investments were also made in
Bank Fixed Deposits and Post Office Deposits. Equity was not a preferred investment among
many due to its volatile nature but many used it as a long term investment by investing in large
companies. Investment in gold was more in form of jewelry which is not a good option as
investment. Very few invested in gold coins/bars and Gold ETFs.
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4) Satisfaction of investors on their previous investment
Satisfaction Respondents Percentage
Yes 15 30
No 28 56
Neutral 7 14
Total 50 100
A major portion of respondent was unsatisfied with the returns they got on their investment.
This reflects that investment decision was not taken properly.
Few common reasons cited were:
• Inadequate knowledge about the instrument in which investment was made
• Misguided by the agent of financial company
• Charges applicable were not disclosed initially
• Unplanned investment
Also a major portion of investment was in assets which has a low risk – low returns category.
This also was a major reason of respondent unsatisfied with current returns.
100
Individual
5) Investment Objectives of Individuals
Investment Objective Respondent

Principal Sasfety 9
Maintain Standard of living 17
Meet Future Expense 18
Safeguard against contingencies 6

Total 50
Investment objective to a greater extend determine the investment tenure and the avenue.
Different investment objectives have different investment avenues to meet them. By determining
the objective we can easily determine the investment vehicle for individuals. The persons
looking for principal safety can investment in Post office schemes, government securities, banks
and PPF. Investment in Equity and Mutual funds can give greater returns which can beat high
inflation rate. Term deposits are useful when money is needed after a fixed period of time.
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6) Respondent frequency of investment
Preferred Frequency of
Respondent Percentage
Investment
Monthely 21 42
Quaterly 4 8
Half Yearly 5 10
Annualy 11 22
Single/One time 9 18
Total 50 100
A good number of investors prefer to invest regularly on monthly basis, thanks to Systematic
Investment Plan. Monthly investment helps to invest in small denominations with benefits of
Rupee cost averaging. Monthly investment was largely found in Mutual Funds. To a surprise
many prefer to invest in single or one time installment without knowing the risk attached to it.
One time investment are a good option only for physical assets life real estate and gold.
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7) Financial Literacy of respondent
Financial Literacy Respondent

Very good 17
God 12
Average 15
Poor 6
Total 50
The purpose behind knowing the financial literacy is to get to know how better the respondent
can take investment decision individually. A large portion of respondent stated they have a good
knowledge of investment avenues but their investment portfolio contradicted. Thus it states that
many are not ready to acknowledge that they do not possess the required knowledge. This keeps
them into darkness and may lead to wrong investment decisions, which are hard to correct.
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Recommendations
After all this it can be stated that the fundamental corner stone’s of successful investing are:
• Save regularly, Invest regularly
• Start Early
• Diversify
• Use tax shelter
• Keep a regular check on investment and modify plans as and when needed
People need to be educated and informed about Financial Planning and this provides a greater
opportunity to financial product distribution like Reliance Money to educate people. Companies
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 both the audience and the
company can also be benefited.
Financial planning is not a onetime activity; the initiative should be taken by financial planner to
put this forward to their client. Regular meetings should be conducted between the financial
planner and client to review the investment portfolio. Alteration should be made in portfolio as
per need and requirement of the client. This will ensure that the investment objectives are
achieved. It will create goodwill for the financial planner and his company. This is one area
where many planners are lacking today.
Goal should be properly divided into short term, medium term and long term. Proper allocation
should be done in various instruments according to the time period of goal. There are various
instruments available which can site different time period needs. If investment are giving regular
return or are going to get matured should be 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 a right advisor.
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It is also necessary that advisor should have enough experience. Thus the ultimate responsibility
is on the investor when it comes to taking investment decision.
Always keep investment a simple affair. Diversification is must but not to a greater extend.
Investor should know exactly what he is investing in. If they do not have adequate information,
question should be asked to financial advisor. It is better to invest in instruments which we can
understand rather than being dependent on someone else advice.
All the documentations should be complete and need to be preserved. At time of maturity it is
necessary to produce the investment documents which act as a proof. But many times investors
do not have proper documents which dishonours the claim at maturity. It is also recommended
that all the disclosure documents also be preserved as it would help in case of any dispute in
settlement.
Investment through SIP should be encouraged. A little amount regularly invested for long period
can create a greater wealth. SIP helps in Rupee cost averaging, develop habit of saving and it
provides convenience of investment.
Limitations
Reasons cited for not undertaking financial planning are:
Will start financial planning later – No one knows when the later would come. We need to
change this psychology and need to understand that financial planning is needed at every stage of
life and earlier we start is better.
Waiting to have money to do financial planning – We should realize that we need a plan to
have money and not money to have a plan.
Lack of knowledge – there are plenty of books and websites that can help to gain the knowledge
of financial planning. A person can even engage a certified financial planner for this purpose.
Misguide earlier under name of financial planning - We need to understand that financial
planning is not restricted to a particular asset class or product.
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Individual
Believing financial planning is only for rich - 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.
Reasons for failure of financial plan
No financial education – This is probably be the number one reason why we mess up our
financial lives, because no one has taught us how to manage finances. Investing simply without
knowing what we are doing is financial suicide. More over not many are willing to learn it on
their own. With lack of knowledge we are bound to have a wrong way. We need to understand
that almost everything today is related to money in one way or another.
Leaving planning options and choices to others – We are never responsible to ourselves in life,
but the truth is that personal finances are persons own responsibility. Mostly believe that
government or employer would take care of their financial well being in future. Person should
understand that the best government or employer can do is guide and provide opportunities.
Relying on lousy advisors – There are many financial agents which claim to have all the
knowhow of financial planning. With lack of awareness we believe the agents and put all our
hard earned money on their recommendations which may not be right all the time. Such advices
are mostly related to a product category and do not cover financial principal of diversification.
Expensive free advice – In India advice come free from every corner, and every other person
loves to do that. Advices can come from family members, friends, and professionals. We should
know from whom to take advice.
Greed – Everyone ones to get rich over a night, when greed enters the mind it blocks logical
thinking. In the process of getting more we often loss more. We should understand that there is
risk attach to every investment which may not suite our risk appetite.
Give no priority to personal finance management – We all know financial planning is

important but when it comes to implementing its not the same. Any investment objective should
be preceded by a proper financial plan. Investment without objective can lead us nowhere.
107
Individual
No clear or specified financial goals – Many of us are not clear about our financial goal, we just
want to earn money. Making lots and lots of money is not a proper goal. We fail to understand
the various need which would come with our growing age.
108
Individual
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Individual
Conclusion
The Saving behaviour has been changed considerably over the last couple of years. The savings
rate in India is comparatively higher than various other countries. Earlier the trend of saving was
in terms of physical assets but it has started to shift now to financial instruments. This trend
partially reflects the relentless expansion of the various branch networks of the financial
institutions into the county's rural areas and partially holds the increasing trend of the easy
accessibility of the alternative investment opportunities. Today corporate securities has become
a part of household savings wherein retail individuals prefer to invest his saving in security
market. The reason sited for this are the growth seen in the stock market and a low interest rate
and return offered by traditional instruments. Also the growing income of working class has also
contributed largely to the changing pattern of saving in India.
The household savings in India can be broadly categorized into the following types:
• Savings in physical properties
• Savings in financial instruments or financial household savings
Financial household savings in India usually include the following:
• Savings deposits with banks
• Life insurance policies
• Provident funds
• Pension funds
• Liquid cash of households
• Deposits with non-banking financial institutions
• Unit Trust of India Investment Schemes
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The major portion of financial saving goes into pension funds and life insurance. It has been
found recently that the traditional instruments of savings like special tax incentives or higher
interest rates are not able 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.
Over past 30 years, the prime two instruments for household long term saving like pension
saving and life insurance have come to an idle state. On the other hand, the mutual funds started
to become more successful in the early years of 1990s. Considering these two factors, we can
conclude two weaknesses of the saving market in India. First, public sector dominates the
markets. Second, the allocation of portfolio is under control that makes the low returns from the
market developments.
Financial Planning – Age Approach
Need Analysis-Stage I - Young Professional
Life Stage Analysis
• Age of 20yrs and 30yrs – young group.
• Started with new job or profession.
• May or may not have a Spouse.
• Ambitious and Career Focused.
• Probably do not have any dependents.
• Might not have made any Investment.
• Likes to Spend.
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Individual
Financial Needs Analysis
• Might have a financial support from parents.
• No habit of Investments and likes to spend.
• May be thinking of Buying a Home or Car.
• Planning to get married.
• May be thinking of Higher Education.
• Can take high risk
Financial Planning
• Understanding the importance of savings and benefits of compound growth

returns.
• Save more & invest more, its only possible during this stage of life, where
responsibilities are less.
• Life Insurance Needs are almost negligible, but should be included in investment
as it will not only provide life cover but also would create a habit of Saving. ULIP would
be better option in this stage.
• Equity and equity related instrument can occupy a greater portion of portfolio.
• Need for liquidity is less but still keeping in mind the era of pink slip contingency
plan should be in place.
• Should think for building real estate.
• Very long term investment
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Individual
Life Insurance Need Analysis-Stage II- Newly Married Life Stage Analysis
• Age of 31yrs to 45yrs.
• Married and have Dependents, Kids.
• Income on rise.
• Might have taken some Loan i.e Home Loan, Car Loan etc.
• Have a high Expenditure.
• Effective tax planning is needed.
• Might have started some Investments in Equity or Mutual Funds.
• Risk appetite is Moderate
• Have a high Debt Repayment through Installments i.e EMIs •
• May want to save for Children’s education.
• Persons need to financially protect their Family and Dependents from unfortunate events.
• Elderly parents also need financial support.
• Start saving for retirement
Financial Planning
• Need a more stable portfolio, with moderate risk.
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Individual
• Should concentrate on less volatile investment
• Insurance is a must, include child plan and retirement plans under this.
• Should concentrate on reducing debts
• Relatively long term investment
Life Insurance Need Analysis- Stage III-Proud Parents (Pre-Retirement)
• Life Stage Analysis
• Age of 45-60 years.
• Major expenses goes towards Child higher education and marriage.
• Reduced Loan Burden
• Have a good Income.
• Retirement on mind.
• Low risk taking appetite.
• Saving for retirement.
• Childs Higher Education Expenses or Marriage.
• Previous Investments giving Good dividends and Returns.
Financial Planning
• Should invest in instruments which provide regular return, such as fixed income products.
• Major portion of investment should be diverted towards retirement plan.
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• Health insurance should be included.
• Investment should be highly liquid
Life Insurance Need Analysis- Stage IV- Post-Retirement
Life Stage Analysis
• Age 60 years or above.
• Retired from employment.
• Might have taken some assignment as consultant.
• Planning to pursue long cherished hobbies.
• Children are financially independent and married.
• Reduced monthly income.
• Might have small or no Loan outstanding liabilities.
• Marginal or zero risk appetite
• Need regular income to maintain current life style.
• Need to protect investments from market risk.
• Need to save for spouse.
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Individual
• Require enough cash balance for any emergency medical expenditure for both self and
spouse.
Financial Planning
• Single Premium Immediate Annuities
• Health Insurance is a must
• Regular income products
• Should do estate planning.
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Individual
Bibliography
Websites
http://www.reliancecapital.co.in/
http://www.fpsbindia.org/
http://profit.ndtv.com/PersonalFinance/Insurance.aspx
http://profit.ndtv.com/2008/01/16190747/Compare-Different-Insurance-Pl.html
http://business.rediff.com/report/2009/may/15/perfin-types-of-life-insurance.htm
http://www.mywealthguide.com/persnl.htm
http://www.kingswoodconsultants.com/LifetimeFinancialPlanning.html
http://www.businessgyan.com
http://www.itrust.in/financial-planning/article.action/What-Is-Financial-Planning-India
http://www.dnaindia.com/money/report_union-budget-2009-10-highlights_1271503
http://finance.mapsofworld.com/savings/india/household.html
Books
1) Book Name : Investment Analysis and Portfolio Management
Author : Prasanna Chandra
Publication : TATA McGRAW HILL
2) Book Name: Investment Analysis and Portfolio Management
Author: NSE INDIA
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Financial Planning for an

FINANCIAL PLANNING FOR AN

Submitted in partial fulfillment of requirements for award of

Post Graduate Diploma in Management

ATHARVA SCHOOL OF BUSINESS

Marve Road, Charkop Naka, Malad(W), Mumbai 400 095

Signature of the Guide Signature of the Director

I express my sincere thanks to NNM SECURITIES; NIKUNJ MITTAL (MANAGING

1. Introduction of the Project

3. Relevance of the Study

9. Data Analysis & Interpretation

10. Limitations & Recommendations

World Economic Growth, 2004 – 2010

Fact Sheet: Global Economic Prospects (World Bank Report):

Foreign Exchange Reserves

sector, with a strong representation in information technology and electronics, retail,

• Introduction to Financial Planning

• Study of Various Factors

• Six Step Process of Financial Planning

• Constitute of Financial Planning

Introduction to Financial Planning

Study of various factors

Things to consider while doing financial planning are:

Six step process of Financial Planning

• Main source of income

• Expenses and monthly savings

• Current investment status

4) Determine recommendations and alternative solutions: Now review various investment

Constituents of Financial Planning

A good financial plan should include the following things:

Risk Coverage (Life & Health Insurance)

Property Coverage insures personal property from damage, destroy or stolen.

Objective Of Financial Planning

Relevance Of Financial Planning

Introduction to Financial Planning Industry

NNM SECURITIES PVT. LTD

“NNM Securities Private Limited is committed to satisfy the customers

Focus on customer-first-attitude, ethical and transparent business practices, respect for

Commodity Broking – NNMSPL is in the business of providing commodities broking and is a

Margin funding group

Life insurance is classified into two products:

Unit Linked Insurance Plan

The following charges are applicable in the case of ULIPs:

Whole Life Insurance:

Money Back Insurance:

Policy for Children:

• Children’s deferred assurances

Non Life Insurance i.e. General Insurance:

In Non Life Insurance we are considering only Health Insurance.

Health insurance in India can be bought both as an individual or a family or as a group.

Need Analysis in life Stages

Need / Purpose Recommended Insurance Plan Best Suited for

Security to dependents Young individuals, Low

Stock market investments= Economics + Mathematics/Statistics + Psychology

Why Invest in Equities?

Study to be made before we start investing

The trend of a stock market is dependents on factors such as:

• The global and local Macro economic conditions

• Earning per Share (EPS)

• Price to Earnings ratio (P/E)

Returns over a Period of time from various Sectors (%)

Table showing Percentage Comparison between BSE and GDP

Year Sensex GDP Inflation