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With India emerging as a strong market, the investments avenues have also increased, to
advice our customers the right avenue according to their suitability. "To cater to the unique
needs and requirements of the mass affluent by providing complete financial solutions and
thereby enabling them to transform their dreams into reality." that is what financial
planning has been the one of the important part in investments decisions .

In the old days, investment options were limited. The limitation was a result of the
predominant role and responsibility assumed by the government in presiding over our
financial future. In present time, all that is changing, and changing rapidly. Not only are
investment options increasing, the complexity is increasing as market forces come into
fuller play. The market is bound to become more complex and investment advice for
financial planning (saving) will emerge as a professional activity. Intelligent investor has
already emerged as a major instrument of rendering and receiving advice in this respect.
The income level of urban and middle class people is increasing and these people are saving
part of their income to invest in profitable and safe avenues.

Investment is the employment of funds with the aim of achieving additional income or
growth in value. The essential quality of an investment is that it involves “waiting” for a
reward. It involves the commitment of resources that have been saved or put away from
current consumption in the hope that some benefits will accrue in future.

In this study the efforts were made to analyze the personal financial planning, investment
avenues available to the customers and to know the factors that they keep in mind while
investing. The perception of the customers is to be found from the various investment


Every study has certain objectives and the study is carried out to fulfill those objectives.
The objectives of this project “To study the Personal Financial Planning and Investors
Perception is as follows:

1. To find out the investment proposals available.

2. Find out avenues which best suit persons income for investment
3. To identify factors influencing investment preferences
4. To determine investors perception regarding investment decisions and determine the
most preferred proposal
5. Focus on mutual funds & Insurance ULIP schemes
6. To determine the satisfaction level of customers from their investment portfolio.

To determine the safe and secured return investment proposal for customer to recommend


Every project requires genuine research. Successes of any project and getting
genuine results from that, depends upon the research method used by the researcher.
Research Methodology is a way to systematically solve the research problems. It may
be understood as a science of studying how research is done scientifically. In this various
steps that are generally adopted by a researcher in studying the research problem along
with the logic behind them is studied.

Data Collection:
Both Primary and Secondary data has been used for the purpose of data collection.
Primary data has been collected by conducting personal interviews of the respondents and
administering a self designed questionnaire.
Secondary data has been collected by using secondary sources of information like
Company Boucher, Journals, Magazines and Websites.

Comparative analysis:

The data collected is further thoroughly studied and comparative analysis being
carried upon



Financial planning is an ongoing process for an individual. It is the process of meeting your life goals
through the proper management of your finances. Life goals can include buying a home, saving for your
child's education or planning for retirement. A person may start it at an early age and carry it forward
through his life with changes to suit his changing goals and needs. Financial planning provides direction
and meaning to your financial decisions. It allows you to understand how each financial decision you
make affects other areas of your finances. Financial Planning can take a "big picture" view of our financial
situation and make financial planning recommendations that are right for us. The financial planning can
look at all of our needs including budgeting and saving, taxes, investments, insurance and retirement
planning. Financial Planning is very important to achieve your financial goals which take different faces
in ones life. Financial goals can vary from buying a house to buying crockery, buying car to buying seat
covers and also from planning for children's expenses to buying their uniform and stationery.

• Financial planning is a process that helps a person work out where he or she is now, what he/she
may need in the future and what he/she must do to reach the defined goals
• The process involves gathering relevant financial information, setting life goals, examining the
person’s current financial status and coming up with a strategy or plan for how the person can meet
his/her goals given the person’s current situation and future plans.
• The objective of financial planning is to ensure that the right amount of money is available in the
right hands at the right point in the future to achieve and individual’s financial goals.

Process of Financial planning:-

• Financial Planning is the overall process of advising clients on how to achieve their financial
• Financial Goals and Objectives refer to all goals and needs of a client which have a monetary
aspect to them. These are best defined when mthe amount and the time frame are both clearly
• Asset Allocation: The allocations of a client’s investments at a broad level across various asset
classes, which include hard assets (real estate, jewellery, etc.) and financial assets.
• Risk Allocation: The extent of loss in value that a client can tolerate, psychologically and
financially and for how long they can withstand such declines in value.
• Financial Plan: A document that details clearly in writing the financial goals, available
resources, time frame for investment, asset allocation, specific investment, etc.

• Portfolio Rebalancing: The process of making changes to the asset allocation and specific
investment to ensure that the client’s investment strategy stays consistent and current with
changes in their needs, financial situation and market conditions.

Types of Financial Goals

After the above discussion, the next most important element in financial planning is to understand the
various types of financial goals and how to use them in practice.

• Long-term goals
Long-term financial goals represent the long-term requirements of an individual. Long-term goals may
extend beyond a period of six years. The time period should not be so long that the goals become
unrealistic to achieve. It is possible that goals change over a period of time and thus need to be revised on
a regular basis. The following table describes an individual's long-term goals:

• Short-term goals
Short-term goals are for a period of one year or less. They are immediate goals in the form of expenses in
the current period, such as education expenses for a child newly admitted in nursery school. To attain
long-term goals, it is essential to attain current short-term goals. The short-term goals also provide for the
surplus required for savings, which are crucial for long-term goals. The following table provides a
description of a person's short-term goals:

• Intermediate goals
Intermediate goals fill up the gap between the short-term and long-term goals. They are generally spread
over a period of two to five years. The following table describes an individual's intermediate goals:It is
always advisable to prioritize these goals on the basis of the urgency in fulfilling them. By doing so, an
individual will be able to identify the goals that he/she has to concentrate on immediately and which of
them can be deferred for some time.

Importance of Financial Planning

Financial planning is very important for each and every body who earns. When it comes to money the
question of managing them efficiently comes along. Financial planning is about efficiently managing ones
finances. Every one has few goals or dreams in their lives, to fulfill them on time it is very important to
manage your finances.

However it is by and large understood that financial planning is the Rich's shoes, but in fact it is all the
more important for the middle income group. "It's not for the well-to-do; it's how you become well-to-do."

As India is a growing economy, the problem of understanding the various investment option is also
growing. Also attached is the problem of understanding the risk return trade off is important. On these
lines we can discuss these few importance of financial planning for any investor or for that matter saver.

• Financial planning provides direction and meaning to your financial decisions.

• It allows you to understand how each financial decision you make, affects other areas of your
finances. For example, buying a particular investment product might help you pay off your debts
faster or it might enhance your goal of buying a car by a year or two.
• By viewing each financial decision as part of a whole, you can consider its short and long-term
effects on your life goals.
• You can also adapt more easily to life changes and feel more secure that your goals are on track.

How can Financial Planning be done?

Yes you can but if you have the required skills. Financial planning is very technical and conceptual
process. Some personal finance software packages, magazines or self-help books can help you do your
own financial planning. However, you may decide to seek help from a professional financial planner if:

• You need expertise you don't possess in certain areas of your finances. For example, a planner can
help you evaluate the level of risk in your investment portfolio or adjust your retirement plan due
to changing family circumstances.
• You want to get a professional opinion about the financial plan you developed for yourself.
• You don't feel you have the time to spare to do your own financial planning.
• You have an immediate need or unexpected life event such as a birth, inheritance or major illness.
• You feel that a professional adviser could help you improve on how you are currently managing
your finances.
• You know that you need to improve your current financial situation but don't know where to start.

Steps in Financial Planning

However Financial Planning is a very specialized process. It is also governed by lots of bodies. There fore
it follows a standard process as prescribed by the Financial Planning Board. The Financial Planning
Process consists of the following six steps:

1. Establishing and defining the client-planner relationship.

The financial planner should clearly explain or document the services to be provided to you and define
both his and your responsibilities. The planner should explain fully how he will be paid and by whom.
You and the planner should agree on how long the professional relationship should last and on how
decisions will be made.

2. Gathering client data, including goals.

The financial planner should ask for information about your financial situation. You and the planner
should mutually define your personal and financial goals, understand your time frame for results and
discuss, if relevant, how you feel about risk. The financial planner should gather all the necessary
documents before giving you the advice you need.

3. Analyzing and evaluating your financial status.

The financial planner should analyze your information to assess your current situation and determine what
you must do to meet your goals. Depending on what services you have asked for, this could include
analyzing your assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.

4. Developing and presenting financial planning recommendations and/or alternatives.

The financial planner should offer financial planning recommendations that address your goals, based on
the information you provide. The planner should go over the recommendations with you to help you
understand them so that you can make informed decisions. The planner should also listen to your concerns
and revise the recommendations as appropriate.

5. Implementing the financial planning recommendations.

You and the planner should agree on how the recommendations will be carried out. The planner may carry
out the recommendations or serve as your "coach," coordinating the whole process with you and other
professionals such as attorneys or stockbrokers.

6. Monitoring the financial planning recommendations.

You and the planner should agree on who will monitor your progress towards your goals. If the planner is
in charge of the process, she should report to you periodically to review your situation and adjust the
recommendations, if needed, as your life changes.


KARVY, is a premier integrated financial services provider, and ranked among the top five in the
country in all its business segments, services over 16 million individual investors in various capacities,
and provides investor services to over 300 corporates, comprising the who is who of Corporate India.

KARVY covers the entire spectrum of financial services such as Stock broking, Depository Participants,
Distribution of financial products - mutual funds, bonds, fixed deposit, equities, Insurance Broking,
Commodities Broking, Personal Finance Advisory Services, Merchant Banking & Corporate Finance,

placement of equity, IPOs, among others. Karvy has a professional management team and ranks among
the best in technology, operations and research of various industrial segments.

Karvy – Early Days

The birth of Karvy was on a modest scale in 1981. It began with the vision and enterprise of a small group of
practicing Chartered Accountants who founded the flagship company …

Karvy Consultants Limited. Started with consulting and financial accounting automation, and carved inroads into
the field of registry and share accounting by 1985. Since then, Karvy used its experience and superlative expertise to
go from strength to strength…to better services, to provide new ones, to innovate, diversify and in the process,
evolved Karvy as one of India’s premier integrated financial service enterprise.

Thus over the last 20 years Karvy has traveled the success route, towards building a reputation as an integrated
financial services provider, offering a wide spectrum of services. And have made this journey by taking the route of
quality service, path breaking innovations in service, versatility in service and finally…totality in service.

KARVY highly qualified manpower, cutting-edge technology, comprehensive infrastructure and total customer-
focus has secured for the position of an emerging financial services giant enjoying the confidence and support of an
enviable clientele across diverse fields in the financial world.Values and vision of attaining total competence in
servicing has served as the building block for creating a great financial enterprise, which stands solid on our
fortresses of financial strength - various companies.

With the experience of years of holistic financial servicing and years of complete expertise in the industry to look
forward to, Karvy now emerged as a premier integrated financial services provider. .

As the flagship company of the Karvy Group, Karvy Consultants Limited has always remained at the helm of
organizational affairs, pioneering business policies, work ethic and channels of progress.

 Milestone of Karvy
• Corporate Registry services 1985
• Stock Broking & ISCs 1990
• Financial Product Distribution 1993
• Corporate Finance 1995
• Depository Services 1997
• ITES & BPO Services 2000
• Personal Finance Advisory Services 2001
• Secondary Debt & WDM Services 2003
• Joint Venture with Computer Share 2004
• Comtrade 2004


• Karvy Consultants Limited

• Karvy Stock Broking Limited
• Karvy Investors Services Limited
• Karvy Computershare Pvt Limited
• Karvy Global Services Limited
• Karvy Comtrade Limited
• Karvy Insurance Broking Private Limited

Having emerged as a leader in the registry business, the first of the businesses that ventured into, Karvy
transferred this business into a joint venture with Computershare Limited of Australia, the world’s largest
registrar. With the advent of depositories in the Indian capital market and the relationships that have
created in the registry business, believing they were best positioned to venture into this activity as a
Depository Participant. Karvy is the early entrants registered as Depository Participant with NSDL
(National Securities Depository Limited), the first Depository in the country and then with CDSL (Central
Depository Services Limited). Today, service over 6 lakhs customer accounts in this business spread
across over 250 cities/towns in India and are ranked amongst the largest Depository Participants in the
country. With a growing secondary market presence, we have transferred this business to Karvy Stock
Broking Limited (KSBL), associate and a member of NSE, BSE and HSE.

IT enabled services
Technology Services division forms the ideal platform to unleash technology initiatives and make our
presence felt on the Internet. Past achievements include many quality websites designed, developed and
deployed by it. Karvy also possess own web hosting facilities with dedicated bandwidth and a state-of-
the-art server farm (data center) with services functioning on a variety of operating platforms such as
Windows, Solaris, Linux and Unix.The corporate website of the company, “”, gives
access to in-depth information on financial matters including Mutual Funds, IPOs, Fixed Income
Schemes, Insurance, Stock Market and much more. A link called ‘Resource Center’, devoted solely to
research conducted by our team of experts on various financial aspects like ‘Sector Research’, deals
exclusively with in-depth analysis of the key sectors of the Indian economy. Besides, a host of other links
like ‘My Portfolio’ which acts as a personalized and customized financial measure, makes this site
extremely informative about investment options, market trends, news as also about our company and each
of the services offered here.

Member - National Stock Exchange (NSE), The Bombay Stock Exchange (BSE), and The Hyderabad
Stock Exchange (HSE).Karvy Stock Broking Limited, one of the cornerstones of the Karvy edifice, flows
freely towards attaining diverse goals of the customer through varied services.Creating a plethora of
opportunities for the customer by opening up investment vistas backed by research-based advisory
services. Here, growth knows no limits and success recognizes no boundaries. Helping the customer create
waves in his portfolio and empowering the investor completely is the ultimate goal.

Stock Broking Services

Karvy offer services that are beyond just a medium for buying and selling stocks and shares. Instead we
provide services which are multi dimensional and multi-focused in their scope. There are several
advantages in utilizing our Stock Broking services, which are the reasons why it is one of the best in the
country. It offers trading on a vast platform National Stock Exchange, Bombay Stock Exchange and
Hyderabad Stock Exchange. More importantly, they make trading safe to the maximum possible extent,
by accounting for several risk factors and planning accordingly.Assisted in this task by in-depth research,
constant feedback and sound advisory facilities. Highly skilled research team, comprising of technical
analysts as well as fundamental specialists, secure result-oriented information on market trends, market

analysis and market predictions. This crucial information is given as a constant feedback to customers,
through daily reports delivered thrice daily ; The Pre-session Report, where market scenario for the day is
predicted, The Mid-session Report, timed to arrive during lunch break , where the market forecast for the
rest of the day is given and The Post-session Report, the final report for the day, where the market and the
report itself is reviewed. Karvy also offer special portfolio analysis packages that provide daily technical
advice on scrip’s for successful portfolio management and provide customized advisory services to help
you make the right financial moves that are specifically suited to customer portfolio.Karvy Stock Broking
services are widely

networked across India, with the number of trading terminals providing retail stock broking
facilities,services have increasingly offered customer oriented convenience, which provide to a spectrum
of investors, high-net worth or otherwise, with equal dedication and competence. To empower the investor
further we have made serious efforts to ensure that research calls are disseminated systematically to all our
stock broking clients through various delivery channels like email, chat, SMS, phone calls etc.

Depository Participants
The onset of the technology revolution in financial services Industry saw the emergence of Karvy as an
electronic custodian registered with National Securities Depository Ltd (NSDL) and Central Securities
Depository Ltd (CSDL) in 1998. Karvy set standards enabling further comfort to the investor by
promoting paperless trading across the country and emerged as the top 3 Depository Participants in the
country in terms of customer serviced.

Offering a wide trading platform with a dual membership at both NSDL and CDSL, a powerful medium
for trading and settlement of dematerialized shares. A 1600 team of highly qualified and dedicated
professionals drawn from the best of academic and professional backgrounds are committed to
maintaining high levels of client service delivery. This has propelled us to a position among the top
distributors for equity and debt issues with an estimated market share of 15% in terms of applications
mobilized, besides being established as the leading procurer in all public issues.

To further tap the immense growth potential in the capital markets we enhanced the scope of our retail
brand, Karvy – the Finapolis , thereby providing planning and advisory services to the mass affluent.
Here understanding the customer needs and lifestyle in the context of present earnings and provide
adequate advisory services that will necessarily help in creating wealth. Judicious planning that is
customized to meet the future needs of the customer deliver a service that is exemplary. The market-savvy
and the ignorant investors, both find this service very satisfactory. The edge that have over competition is
portfolio of offerings and professional expertise. The investment planning for each customer is done with
an unbiased attitude so that the service is truly customized. Monthly magazine, Finapolis, provides up-
dated market information on market trends, investment options, opinions etc. Thus empowering the
investor to base every financial move on rational thought and prudent analysis and embark on the path to
wealth creation.

Advisory Services

Under retail brand ‘Karvy – the Finapolis', delivers advisory services to a cross-section of customers. The
service is backed by a team of dedicated and expert professionals with varied experience and background

in handling investment portfolios. They are continually engaged in designing the right investment
portfolio for each customer according to individual needs and budget considerations with a comprehensive
support system that focuses on trading customers' portfolios and providing valuable inputs, monitoring
and managing the portfolio through varied technological initiatives. This is made possible by the expertise
that have gained in the business over the years

Merchant Banking

Recognized as a leading merchant banker in the country, registered with SEBI as a Category I merchant
banker. This reputation was built by capitalizing on opportunities in corporate consolidations, mergers and
acquisitions and corporate restructuring, which have earned the reputation of a merchant banker. Raising
resources for corporate or Government Undertaking successfully over the past two decades have given us
the confidence to renew focus in this sector.Quality professional team and work-oriented dedication have
propelled to offer value-added corporate financial services and act as a professional navigator for long
term growth of our clients, who include leading corporate, State Governments, foreign institutional
investors, public and private sector companies and banks, in Indian and global markets. Karvy also
emerged as a trailblazer in the arena of relationships, both at the customer and trade levels because of
unshakable integrity, seamless service and innovative solutions that are tuned to meet varied needs.Team
of committed industry specialists, having extensive experience in capital markets, further nurtures this
relationship.Financial advice and assistance in restructuring, divestitures, acquisitions, de-mergers, spin-
offs, joint ventures, privatization and takeover defense mechanisms have elevated relationship with the
client to one based on unshakable trust and confidence.

has traversed wide spaces to tie up with the world’s largest transfer agent, the leading
Australian company, Computershare Limited. The company that services more than 75
million shareholders across 7000 corporate clients and makes its presence felt in over 12
countries across 5 continents has entered into a 50-50 joint venture with us. With
management team completely transferred to this new entity, we will aim to enrich the
financial services industry than before. The future holds new arenas of client servicing
and contemporary and relevant technologies as we are geared to deliver better value and
foster bigger investments in the business. The worldwide network of Computershare will
hold in good stead as expect to adopt international standards in addition to leveraging the
best of technologies from around the world.

Excellence has to be the order of the day when two companies with such similar
ideologies of growth, vision and competence, get together.

Mutual Fund Services

Karvy attained a position of immense strength as a provider of across-the-board transfer agency services
to AMCs, Distributors and Investors. Nearly 40% of the top-notch AMCs including prestigious clients like
Deutsche AMC and UTI swear by the quality and range of services that we offer.Besides providing the
entire back office processing, providing the link between various Mutual Funds and the investor, including
services to the distributor, the prime channel in this operation. Carrying the ‘limitless' ideology forward,
Karvy have explored new dimensions in every aspect of Mutual Fund servicing right from volume
management, cost effective pricing, delivery in the least turnaround time, efficient back-office and front-
office operations to customized service. They have been with the AMCs every step of the way, helping
them serve their investors better by offering them a diverse and customized range of services. Service
enhancements such as ‘Karvy Converz' a full-fledged call center, a top-line website (,
the ‘m-investor' and many more, creating a galaxy of customer advantages.

Issue Registry
In voyage towards becoming the largest transaction-processing house in the Indian Corporate segment,
Karvy have mobilized funds for numerous corporate, Karvy has emerged as the largest transaction-
processing house for the Indian Corporate sector. With an experience of handling over 700 issues, Karvy
today, has the ability to execute voluminous transactions and hard-core expertise in technology
applications have gained us the No.1 slot in the business. Karvy is the first Registry Company to receive
ISO 9002 certification in India that stands testimony to its stature Karvy has the backing of skilled human
resources complemented by requisite technological packages to ensure a faster processing capability.
Karvy has the benefit of a good synergy between depositories and registry that enables faster resolution to
related customer queries. Apart from its unique investor servicing presence in all the phases of a public
Issue, it is actively coordinating with both the main depositories to develop special models to enable the
customer to access depository (NSDL, CDSL) services during an IPO. Karvy,s trust-worthy reputation, competent
manpower and high-end technology and infrastructure are the solid foundations on whichsuccess is

Corporate Shareholder Services

Karvy has been a customer centric company since its inception. Karvy offers a single platform servicing
multiple financial instruments in its bid to offer complete financial solutions to the varying needs of both
corporate and retail investors where an extensive range of services are provided with great volume-
management capability. Today, Karvy is recognized as a company that can exceed customer expectations
which is the reason for the loyalty of customers towards Karvy for all his financial needs. An opinion poll
commissioned by “The Merchant Banker Update” and conducted by the reputed market research agency,
MARG revealed that Karvy was considered the “Most Admired” in the registrar category among financial
services companies.

Karvy have grown from being a pure transaction processing business, to one of complete shareholder

The specialist Business Process Outsourcing unit of the Karvy Group. The legacy of expertise and
experience in financial services of the Karvy Group serves well as enter the global arena with the
confidence of being able to deliver and deliver well. Here it offers several delivery models on the
understanding that business needs are unique and therefore only a customized service could possibly fit
the bill. Service matrix has permutations and combinations that create several options to choose from. Be
it in re-engineering and managing processes or delivering new efficiencies, service meets up to the most
stringent of international standards , outsourcing models are designed for the global customer and are
backed by sound corporate and operations philosophies, and domain expertise.Providing productivity
improvements, operational cost control, cost savings, improved accountability and a whole gamut of other
advantages. Karvy operate in the core market segments that have emerging requirements for specialized
services, wide vertical market coverage includes Banking, Financial and Insurance Services (BFIS), Retail
and Merchandising, Leisure and Entertainment, Energy and Utility and Healthcare. Karvy horizontal
offerings do justice to our stance as a comprehensive BPO unit and include a variety of services in
Finance and Accounting Outsourcing Operations, Human Resource Outsourcing Operations, Research and
Analytics sOutsourcing Operations and Insurance Back Office Outsourcing Operations.

At Karvy Commodities, focused on taking commodities trading to new dimensions of reliability and
profitability. Karvy have made commodities trading, an essentially age-old practice, into a sophisticated
and scientific investment option .Here it enable trade in all goods and products of agricultural and mineral
origin that include lucrative commodities like gold and silver and popular items like oil, pulses and cotton
through a well systematized trading platform, technological and infrastructural strengths and especially
street-smart skills make an ideal broker. Service matrix is holistic with a gamut of advantages, the first and
foremost being legacy of human resources, technology and infrastructure that comes from being part of
the Karvy Group.
Karvy wide national network, spanning the length and breadth of India, further supports these advantages.
Regular trading workshops and seminars are conducted to hone trading strategies to perfection. Every
move made is a calculated one, based on reliable research that is converted into valuable information
through daily, weekly and monthly newsletters, calls and intraday alerts. Further, personalized service is
provided here by a dedicated team committed to giving hassle-free service while the brokerage rates
offered are extremely competitive. Commitment to excel in this sector stems from the immense
importance that commodities broking has to a cross-section of investors & farmers, exporters, importers,
manufacturers and the Government of India itself.

At Karvy Insurance Broking Pvt. Ltd., provide both life and non-life insurance products to retail
individuals, high net-worth clients and corporates. With the opening up of the insurance sector and with a
large number of private players in the business, they are in a position to provide tailor made policies for
different segments of customers. In journey to emerge as a personal finance advisor,it will be better
positioned to leverage relationships with the product providers and place the requirements of customers
appropriately with the product providers. With Indian markets seeing a sea change, both in terms of
investment pattern and attitude of investors, insurance is no more seen as only a tax saving product but

also as an investment product. Karvys wide national network, spanning the length and breadth of India,
further supports these advantages. Further, personalized service is provided here by a dedicated team
committed in giving hassle-free service to the clients.

• Among the top 5 stock brokers in India (4% of NSE volumes)
• India's No. 1 Registrar & Securities Transfer Agents
• Among the to top 3 Depository Participants
• Largest Network of Branches & Business Associates
• ISO 9002 certified operations by DNV
• Among top 10 Investment bankers

• Largest Distributor of Financial Products
• Adjudged as one of the top 50 IT uses in India by MIS Asia
• Full Fledged IT driven operations

Investment proposals in India

Investment is the employment of funds with the aim of achieving additional income or
growth in value. The essential quality of an investment is that it involves “waiting” for a reward.
It involves the commitment of resources that have been saved or put away from current
consumption in the hope that some benefits will accrue in future.

As a part of investments proposals in India there are several prospects by whish customer
could look for investment criteria which are as follows

• Investment management
• Investment advice
• Tax planning
• Tax preparation
• Retirement planning
• Planning for life, long term care insurance advice
• Planning for other financial goals
• Estate planning

The aspect which customer consider while investing into these proposals are

• Safety
• Return
• Time Period
• liquidity

Various Proposals of investment on which study is to be carried out are as follows

• Mutual funds
• Life insurance
• Post office schemes
• Public provident fund
• National saving certificates
• Kisan vikas patra
• Bank Fixed Deposits
• Deposit Scheme For Retiring Government Employees

History on mutual funds
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the
initiative of the Government of India and Reserve Bank the. The history of mutual funds in India
can be broadly divided into four distinct phases

First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of
India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was
de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and
administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988
UTI had Rs.6,700 crores of assets under management.
Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance
Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non-
UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank
Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund
(Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.

At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

Third Phase – 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian
investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came
into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari
Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund
Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India
and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33
mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under
management was way ahead of other mutual funds.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate
entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835
crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain
other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the
rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and
functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000
more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming
to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the
mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004,
there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

Mutual Funds in India

Mutual Fund is an instrument of investing money. Nowadays, bank rates have fallen down and are generally below
the inflation rate. Therefore, keeping large amounts of money in bank is not a wise option, as in real terms the value
of money decreases over a period of time. One of the options is to invest the money in stock market. But a common
investor is not informed and competent enough to understand the intricacies of stock market. This is where mutual
funds come to the rescue. A mutual fund is a group of investors operating through a fund manager to purchase a
diverse portfolio of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in. 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. Also, one doesn't have to figure out which stocks or bonds to buy. But the biggest
advantage of mutual funds is diversification.

Diversification means spreading out money across many different types of investments. When one investment is
down another might be up. Diversification of investment holdings reduces the risk tremendously.

Objectives of Mutual Funds

1. Income. Income funds focus on dividends and interest that provide income to investors. This is a relatively
steady source of money, but the fund’s NAV can still go up and down.

2. Growth. Growth funds focus on increasing the value of the principal or amount invested through capital
gains and net asset values. Growth funds are usually more risky but offer greater potential return.

3. Stability. Stability funds focus on protecting the amount invested from loss so the fund’s NAV does not go
Down. This is the least risky type of fund but may make the least amount of money.

Types of Mutual Fund Schemes

Mutual fund schemes may be classified on the basis of its structure and its investment objective.

By Structure
Open-end Funds
An open-end fund is one that is available for subscription all through the year. These do not have
a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV")
related prices. The key feature of open-end schemes is liquidity.

Closed-end Funds

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years.
The fund is open for subscription only during a specified period. Investors can invest in the
scheme at the time of the initial public issue and thereafter they can buy or sell the units of the
scheme on the stock exchanges where they are listed. In order to provide an exit route to the
investors, some close-ended funds give an option of selling back the units to the Mutual Fund
through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of
the two exit routes is provided to the investor.

Interval Funds

Interval funds combine the features of open-ended and close-ended schemes. They are open for
sale or redemption during pre-determined intervals at NAV related prices.

By Investment Objective

Growth Funds

The aim of growth funds is to provide capital appreciation over the medium to long term. Such
schemes normally invest a majority of their corpus in equities. It has been proved that returns
from stocks, have outperformed most other kind of investments held over the long term. Growth
schemes are ideal for investors having a long term outlook seeking growth over a period of time.

Income Funds

The aim of income funds is to provide regular and steady income to investors. Such schemes
generally invest in fixed income securities such as bonds, corporate debentures and Government
securities. Income Funds are ideal for capital stability and regular income.

Balanced Funds

The aim of balanced funds is to provide both growth and regular income. Such schemes
periodically distribute a part of their earning and invest both in equities and fixed income
securities in the proportion indicated in their offer documents. In a rising stock market, the NAV
of these schemes may not normally keep pace, or fall equally when the market falls. These are
ideal for investors looking for a combination of income and moderate growth.

Money Market Funds

The aim of money market funds is to provide easy liquidity, preservation of capital and moderate
income. These schemes generally invest in safer short-term instruments such as treasury bills,
certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes
may fluctuate depending upon the interest rates prevailing in the market. These are ideal for
Corporate and individual investors as a means to park their surplus funds for short periods.

Gilt Fund

These funds invest exclusively in government securities. Government securities have no default risk.
NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is
the case with income or debt oriented schemes.

Index Funds

Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE
50 index (Nifty), etc These schemes invest in the securities in the same weightage comprising of an
index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index,
though not exactly by the same percentage due to some factors known as "tracking error" in technical
terms. Necessary disclosures in this regard are made in the offer document of the mutual fund

There are also exchange traded index funds launched by the mutual funds which are traded on the
stock exchanges.
Other Schemes

Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the Indian Income
Tax laws as the Government offers tax incentives for investment in specified avenues.
Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed
as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to
investors to save capital gains u/s 54EC by investing in Mutual Funds.

Special Schemes
• Industry Specific Schemes

Industry Specific Schemes invest only in the industries specified in the offer document. The
investment of these funds is limited to specific industries like Infotech, FMCG, Pharmaceuticals

• Index Schemes

Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or
the NSE 50

• Sectoral Schemes

Sectoral Funds are those which invest exclusively in a specified sector. This could be an industry
or a group of industries or various segments such as 'A' Group shares or initial public offerings.

Benefits of Investing in Mutual Funds

Professional Management

Mutual Funds provide the services of experienced and skilled professionals, backed by a
dedicated investment research team that analyses the performance and prospects of companies
and selects suitable investments to achieve the objectives of the scheme.


Mutual Funds invest in a number of companies across a broad cross-section of industries and
sectors. This diversification reduces the risk because seldom do all stocks decline at the same
time and in the same proportion. You achieve this diversification through a Mutual Fund with far
less money than you can do on your own.

Convenient Administration

Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad
deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your
time and make investing easy and convenient.

Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they
invest in a diversified basket of selected securities.

Low Costs

Mutual Funds are a relatively less expensive way to invest compared to directly investing in the
capital markets because the benefits of scale in brokerage, custodial and other fees translate into
lower costs for investors.


In open-end schemes, the investor gets the money back promptly at net asset value related prices
from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the
prevailing market price or the investor can avail of the facility of direct repurchase at NAV
related prices by the Mutual Fund.


You get regular information on the value of your investment in addition to disclosure on the
specific investments made by your scheme, the proportion invested in each class of assets and the
fund manager's investment strategy and outlook.


Through features such as regular investment plans, regular withdrawal plans and dividend
reinvestment plans, you can systematically invest or withdraw funds according to your needs and


Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund
because of its large corpus allows even a small investor to take the benefit of its investment

Choice of Schemes

Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

Well Regulated

All Mutual Funds are registered with SEBI and they function within the provisions of strict
regulations designed to protect the interests of investors. The operations of Mutual Funds are
regularly monitored by SEBI.

Indian Mutual Fund Industry

Changing Composition

March 1998 March 2002 October 2005

Private Sector Public Sector

Public Sector 41% 8% UTI
11% Public Sector
Private Sector 9% 12%

UTI Private Sector

51% 79%

Mutual funds are no longer looked down upon but seen as a healthy investment option and
in April 07 total investment in 33 funds crossed Rs 3.5 lakh crore, an industry official has

Also, the risk appetite is growing with burgeoning young middle class, making mutual
funds a preferred option compared to small saving schemes that is considered safe but give
low returns.
"Main reason for the growth in assets of mutual funds is awareness which is increasing day
by day and the returns they are giving,"
"MFs are increasingly being recognised by households, in order to maximize returns," he
Total AUM as on April 30 was Rs 3,50,441 crore as compared to Rs 3,26,388 crore a month

In March 2007, Foreign Institutional Investors (FIIs) were net buyers of
equities with purchases of Rs 14,033 m (as on March 30, 2007). On the
contrary mutual funds were net sellers to the tune of Rs 20,275 m.

These are only some of the statistics that show that the Indian mutual funds
industry is still in its infancy. It is important to study the present industry scenario
to gain a better

Understanding of the impediments to the growth of the industry:

• Lack of Investor Awareness: Retail investors had a wrong notion about mutual funds as an
investment avenue. The benefits of risk diversification, professional management and ease of
administration involved while investing in mutual funds are not clearly understood. Knowledge
of financial products is ingrained in school and college curriculum in countries like UK, US and

• Investor Risk Appetite: Equity funds account for 30% of the total AUM in India.
This figure is more than 50% in most developed countries. Frequent stock market scams and the
bust of tech sector specific MFs have contributed to this apprehension. The growth in mutual
funds has come through the growth in investments in short term instrument like Money Market
Mutual Funds which account for 40% of AUM.

• Higher Returns of Alternative Debt Instruments: Government guaranteed schemes provide

risk free returns at competitive rates of returns. This is why mutual funds have difficulty
competing retail business.

• Concentration of Corporate Investors: Mutual funds have become overly attractive to

corporate investors because of higher returns than bank deposits and ability to distribute capital
gains tax. Corporate investors account for 57% of the AUM (by value). Though the turnover rates
have increased the average fund in management has grown by only 25% in the past 4 years.

It is clear that the lack of growth in funds under management in India is because of the absence of
long term investors. Corporate investors take profits frequently resulting in destruction in the
compound growth in funds under management. Distributors are forced to pass on more
commissions to companies, while fund companies are compelled to offer funds with wafer thin
margins. Retail investors lose out in the sense that they continue to pay higher expenses.

• Distribution: One of the major factors impacting the growth of mutual fund industry is the
absence of any regulation in distribution of mutual funds. Mutual fund investors need distributors
who are able to inform them about the efficacy of distribution product for a particular risk profile
and stage in life cycle. Lack of distributor awareness and the absence of any disclosures from
distributors make mis selling of MF products commonplace. Also penetration in rural areas is a
problem. Only 3% of rural households own mutual funds. For mutual funds to set up a
distribution network in these centers can be very expensive.

Current Scenario
Since private players were allowed in 1993, the Indian Mutual fund industry has witnessed a sea
change in the way it operates, in the regulatory and investor attitude towards Mutual fund
products. From a single player in 1987 today there are 29 mutual funds offering as many as 477
schemes. The total assets under management have risen to Rs 334563 crores. However, the
accolades regarding the growth of the MF industry should be reserved until this growth is
analyzed taking the MF industry in other developed countries in consideration. Here are certain
statistics that reflect that Indian Mutual fund industry still has a long way to go when compared to
global standards:

• AUM as a Percentage of GDP: In most of the developed countries the total assets under
management ranges from 30% -60% of the GDP. Total assets under management are only 8% of
the GDP in case of India.

• Penetration of Mutual funds: In India it is estimated that 6.7% of the households hold mutual
funds. This figure is close to 50% in case of the US and 17% in case of UK. Mutual funds
account for only 0.73% of total financial assets in India (11% of bank deposits). AUM for Mutual
funds had exceeded the bank deposits in US in as early as 1998. These are only some of the
statistics that show that the Indian mutual funds industry is still in its infancy. It is important to
study the present industry scenario to gain a better understanding of the impediments to the
growth of the industry:

• Lack of Investor Awareness: Retail investors had a wrong notion about mutual funds as an
investment avenue. The benefits of risk diversification, professional management and ease of
administration involved while investing in mutual funds are not clearly understood. Knowledge
of financial products is ingrained in school and college curriculum in countries like UK, US and

• Investor Risk Appetite: Equity funds account for 30% of the total AUM in India. This figure is
more than 50% in most developed countries. Frequent stock market scams and the bust of tech
sector specific MFs have contributed to this apprehension. The growth in mutual funds has come
through the growth in investments in short term instrument like Money Market Mutual Funds
which account for 40% of AUM.

• Higher Returns of Alternative Debt Instruments: Government guaranteed schemes provide
risk free returns at competitive rates of returns. This is why mutual funds have difficulty
competing retail business.

• Concentration of Corporate Investors: Mutual funds have become overly attractive to

corporate investors because of higher returns than bank deposits and ability to distribute capital
gains tax. Corporate investors account for 57% of the AUM (by value). Though the turnover rates
have increased the average fund in management has grown by only 25% in the past 4 years. It is
clear that the lack of growth in funds under management in India is because of the absence of
long term investors. Corporate investors take profits frequently resulting in destruction in the
compound growth in funds under management. Distributors are forced to pass on more
commissions to companies, while fund companies are compelled to offer funds with wafer thin
margins. Retail investors lose out in the sense that they continue to pay higher expenses.

• Distribution: One of the major factors impacting the growth of mutual fund industry is the
absence of any regulation in distribution of mutual funds. Mutual fund investors need distributors
who are able to inform them about the efficacy of distribution product for a particular risk profile
and stage in life cycle. Lack of distributor awareness and the absence of any disclosures from
distributors make mis selling of MF products commonplace. Also penetration in rural areas is a
problem. Only 3% of rural households own mutual funds. For mutual funds to set up a
distribution network in these centers can be very expensive. In many countries, mutual fund
industry sees a point of inflection, a point after which the AUM increases spectacularly after a
period of sluggish growth. This happened in case of US after 1992-93 when the AUM increased
from $1 trillion to $7.3 trillion in 2004. Many studies have revealed that this period of growth
corresponds to following factors:

• Explosive growth in capital markets

• A sound system of regulation
• Increase in investor awareness

Comparison of Indian MF Industry with Global Standards

The first mutual fund was established in the year 1924 in US. Like any other product they went
through a life cycle experiencing sluggish growth between 1930 – 1970s and then witnessed
rapid growth from 1990s onwards. The total worldwide AUM was $16.3 Trillion in 2004- 05. A
brief comparison of Indian MF industry with Global MF industries (citing examples of US and
EU countries) is presented below:

Types of Products: Indian funds do not offer products that cater to entire life cycle of an
investor. Mutual funds in US offer products that cater to diverse needs of investors ranging from
purchase of house, car etc to admission in university. Mutual funds investing in commodities and
real estate do not exist in India. An important factor that has led to growth in Mutual fund
industry in US is the presence of pension. . As Americans began to pay attention to their own
retirement plans through company sponsored retirement schemes, called "401(k)" plans, mutual
funds started being looked upon as a smart option.

Regulation: The mutual fund industry is one of the most regulated industries in the financial
sector. The MF industry in US has been plagued by many scandals and SEC has acted fast to
restore investor confidence and trust. Fines to the tune of $1.5 billion have been levied. Though

allegations regarding frauds have surfaced in Indian MF industry also SEBI has been quick to
investigate and restore confidence. However, certain issues regarding SEBI still exist
• Unlike its American counterpart SEBI hasn’t been able to formulate regulations to
increase the depth of MFs.
• Regulations regarding the privatization of Pension funds took a long time to
• SEBI hasn’t been able to educate investor on the usage of mutual funds as
investment options.

Risk Management Techniques: A recent survey by PWC revealed that as many as 50 percent of
the respondent mutual funds are not managing risk properly. 50 percent of the respondents did
not even have documented risk procedures or dedicated risk managers. Indian Mutual fund
industry does not use statistical techniques of risk management but is using diversification
effectively within the market limitations. As far as use of derivatives is concerned, they are not
presently used because of the low volumes, low liquidity and absence of sufficient hedging

products in the market Risk management in US mutual funds is more prevalent with the use of
statistical software and the use of VaR approach to risk management. Several fund companies
have set up risk control measures internally, but they still have a long way to go in relaying this
to clients.

Governance: With the recent late trading and market timing scandals in US mutual funds the
issue of corporate governance of mutual fund has again gained center stage. There have been
allegations of late timing in Indian MFs. The structure of Indian mutual funds is very similar to
US mutual fund . SEC (the US MF regulator) requires ¾ of the directors to be independent. This
proportion is 2/3 in case of India. However, there remain fundamental doubts whether the current
governance structure provides institutionally appropriate checks and prevents potential conflict of
interest and provide effective fund administration. Currently, a mutual fund is set up in the form
of a trust under the Indian Trust Act, which was enacted in 1882 to essentially govern private
trusts and charitable institutions. The trust structure has the following difficulties for a mutual
• The issue of individual versus collective liability of trustees, which has deterred
experienced persons from serving as trustees of mutual funds
• AMC is not subjected to a specific law book and is indirectly regulated by SEBI
through trustees.
• Approval of directors of AMC lies with the trustees and not with SEBI.The study of MF
structures of other countries (UK) reveals that there is a scope for simplification of the current

structure. Eliminating the sponsor and giving the power to propose the creation of the MF to the
asset management company (AMC) could be a possible alternative.

Future Expectations from Indian Mutual Fund Industry

Taking into consideration the above comparison and the current situation prevailing in the capital
markets, the realistic expectations from the Indian Mutual fund Industry could

• Increased Penetration: With the proposed opening up of pension funds to the private sector we
can expect the penetration levels of MFs to increase in the next few years. Because of their
experience in managing MFs the AMCs will play an important role in the management of
pension funds.
• Increased Emphasis on Retail Investors through Supply Chain Innovations:
Retail investments less than Rs 10,000 are unprofitable for AMCs. However, certain supply chain
innovations and investments in retail infrastructure would lead to increased emphasis on retail
investors. Some of the possible innovations can be the use of “straight-through processing," an
industry buzz phrase for automating mutual fund transactions so that the entire process-from
placing a trade to final settlement-is fast, relatively seamless and less subject to manipulation.
Straightforward concept, straight-through processing requires substantial integration and
cooperation among members of the mutual fund supply chain. Using IT, members of the mutual
fund supply chain can improve efficiency, manage risk and improve regulatory compliance-all
critical moves for maintaining investor confidence in mutual funds. As urban markets reach a
peak mutual funds would target second rung cities and smaller towns to increase their investor

• Diverse Range of Products: In order to make MFs more acceptable to the retail investor
mutual fund industry has to mature to offering comprehensive life cycle financial planning and
not products alone. These would include products catering to specific life cycle needs like buying
a house, funding college admission etc. With increase in investor awareness many new products
would be introduced. Some of them are listed here: derivative based MFs (though a cap on
derivative exposure for a sponsor currently exists), commodities and real estate MFs
( appropriate regulation from SEBI in case of real estate pending ), feeder funds, funds of funds,
capital protected funds, etc.

• Increase in the need for financial advice: As the affluence of Indians increases and the range
of financial products available to meet people’s needs expands – mortgages, deposits, life
products, defined contribution pensions, mutual funds, etc – the need for financial advice will
increase. Mutual fund distribution will become geared towards providing sound financial advice
according to investor’s risk profile and stage in life cycle.

TOP 10 I - year returns (%)

Diversified funds
Taurus Discovery Stock 111.32
SBI Magnum Global Fund 94 111.21
SBI Magnum Sector
Umbrella - Contra 98.87

Reliance Growth 93.23
Taurus Starshare 89.93
Sundaram Select Midcap 88.83
Alliance Equity Fund 78.79
Taurus Bonanza Exclusive Growth Scheme 95 78.78
SBI Magnum Multiplier Plus 93 78.59
Tata Growth Fund 75.04

Sectoral funds
Alliance Buy India Fund 94.48
Prudential ICICI FMCG 93.34
UTI Thematic Basic Industries Fund 80.61
Kotak MNC Fund 63.67
Franklin FMCG Fund 62.51
Reliance Diversified Power Fund 61.09
Alliance New Millennium 61.03
UTI Thematic Banking Sector Fund 59.41
Canexpo Plan 58.65
Prudential ICICI Technology Fund 58.18

Balanced funds
Cantriple + 85.14
Canganga 75.73
SBI Magnum Balanced Fund 60.06

Kotak Balance 53.67

HDFC Prudence Fund 49.71
Tata Balanced Fund 49.57
BOB Balance Fund 49.50
Escorts Balanced Fund 46.54
Alliance 95 44.05
Prudential ICICI Balanced 41.73

Floating rate funds

Grindlays F R F - STP - Plan C - Super I P 5.07
JM Floater Fund - S T P 5.04
DSP ML Floating Rate Fund 5.02
LIC MF Floating Rate Fund - ST 4.98
Birla Floating Rate Fund - LTP 4.97
UTI Floating Rate Fund - STP 4.93
Tata FRF - ST 4.91
Templeton Floating Rate Income Fund LT 4.88
Deutsche FRF 4.87

Life Insurance
Life is very fragile and death is a certainty. We cannot control the uncertainties of life. But, we can cover
the risks surrounding us. Life insurance, simply put, is the cover for the risks that we run during our lives.
It protects us from the contingencies that could affect us. Life insurance is not for the person who passes
away, it for those who survive. It is the responsibility of every bread earner to guard against the events that
could affect the family in the unfortunate circumstance of his / her demise. Thus, having a life insurance
policy is very vital. Before going for a life insurance policy it is imperative that you know about various
types of life insurance policies

Endowment Policy, India

An endowment policy covers risk for a specified period, at the end of which the sum assured is paid back
to the policyholder, along with the bonus accumulated during the term of the policy. An endowment life
insurance policy is designed primarily to provide a living benefit and only secondarily to provide life
insurance protection.

Group Insurance, India

Group insurance offers life insurance protection under group policies to various groups such as
employers-employees, professionals, co-operatives, weaker sections of society, etc. It also provides
insurance coverage for people in certain approved occupations at the lowest possible premium cost.Group
insurance plans have low premiums. These include employer-employee groups, associations of
professionals (such as doctors, lawyers, chartered accountants etc.), members of cooperative banks,
welfare funds, credit societies and weaker sections of society.

Joint Life Insurance Policy, India

Joint life insurance policies are similar to endowment policies as they too offer maturity benefits to the
policyholders, apart form covering risks like all life insurance policies. But joint life policies are
categorized separately as they cover two lives simultaneously, thus offering a unique advantage in some
cases, notably, for a married couple or for partners in a business firm..

Loan Cover Term Assurance Policy, India

Loan cover term assurance policy is an insurance policy, which covers a home loan. Such a policy covers
the individual's home loan amount in case of an eventuality. The cover on such a policy keeps reducing
with the passage of time as individuals keep paying their EMIs (equated monthly instalments) regularly,
which reduces the loan amount.This plan provides a lumpsum in case of death of the life assured during
the term of the plan. The lumpsum will be a decreasing percentage of the initial sum assured as per the
policy schedule. Since this is a non-participating (without profits) pure risk cover plan, no benefits are
payable on survival to the end of the term of the policy.

Money Back Policy, India

Money back policy provides for periodic payments of partial survival benefits during the term of the
policy, as long as the policyholder is alive.They differ from endowment policy in the sense that in
endowment policy survival benefits
are payable only at the end of the endowment period.An important feature of money back policies is that
in the event of death at any time within the policy term, the death claim comprises full sum assured
without deducting any of the
survival benefit amounts, which may have already been paid as money-back components. The bonus is
also calculated on the full sum assured

Pension Plan, India

A pension plan or an annuity is an investment that is made either in a single lump sum payment or through
installments paid over a certain number of years, in return for a specific sum that is received every year,
every half-year or every month, either for life or for a fixed number of years.

Term Life Insurance Policy, India

Term life insurance policy covers risk only during the selected term period. If the policyholder survives
the term, the risk cover comes to an end. Term life policies are primarily designed to meet the needs of
those people who are initially unable to pay the larger premium required for a whole life or an endowment
assurance policy.

Benefits of a “term assurance plan”

The main reason for taking an insurance plan is to provide a suitable financial buffer against
contingencies. The existence of term assurance pla ns is governed by this utility.

1. Death benefit – In case of unfortunate death of the policyholder these plans provide the payment of
the sum
assured to the nominee. Hence, such plans provide financial protection for the family in case of death of
the insured person during the term.

2.Low cost risk cover – A term plan is the cheapest product available in the insurance industry today.
Cost wise, it is the most effective of all insurance plans.

3. Cover against outstanding loans – Any term plan can also be used as a cover against
outstanding loans and liabilities. In case the person has taken a large number of loans, then the person can
take a term assurance plan equal to the amount of the loan so that in case of his death, the insurance
company will clear the outstanding liabilities helping the family to become free from the financial
burden. Investor’s Corner

4 Tax benefits of a “term assurance p lan” Premiums paid towards a term assurance plan are eligible for
a deduction under section 80C up to a maximum of Rs.1,00,000. The death benefit that will be received
under such a policy will
also be exempt from tax under section 10(10D) of the Income
Tax Act.

Unit Linked Insurance Plans (ULIP)
Unit linked insurance plan (ULIP) is life insurance solution that provides for the benefits of 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.
ULIP provides multiple benefits to the consumer. The benefits include:
• Life protection Investment and Savings
• Flexibility Adjustable Life Cover
• Investment Options Transparency
• Options to take additional cover Death due to accident
• Disability Critical Illness
• Surgeries Liquidity
• Tax planning

Fund Name Objective Equities Debt Instruments Money Market &

Secure Fund Progressive returns 0% to 20% 60% to 100% 0% to 20%

by investing higher
element of assets in
debt with minimum
exposure to equities
Balanced Fund Capital growth by 0% to 45% 50% to 90% 0% to 10%
availing of
opportunities in debt
and equity market
and providing a good
balance between risk
and return
Growth Fund High capital growth 30% to 85% 0% to 50% 0% to 20%
by investing higher
element of assets in
the equity market
Protector Fund Progressive returns 0% to 20% 60% to 100% 0% to 20%
on your investment
by investing higher
element of assets in
debt securities with a
minimum exposure
to equities.

Whole Life Insurance Policy, India

A whole life policy runs as long as the policyholder is alive. As risk is covered for the entire life
of the policyholder, therefore, such policies are known as whole life policies. A simple whole life
policy requires the insurer to pay regular premiums throughout the life. In a whole life policy, the
insured amount and the bonus is payable only to the nominee of the beneficiary upon the death of
the policyholder. There is no survival benefit as the policyholder is not entitled to any money
during his / her own lifetime.

A whole life plan which covers the individual throughout his life may be highly appropriate in
the following cases
· A young person who is interested in getting a cover for rest of his life
· A working executive who wants to take advantage of getting a life long insurance cover
· A person who understands the importance of insurance and believes in securing his future
against losses
· A person who does not believe in taking up a host of insurance products, but believes in a one
product which provides a comprehensive risk cover, lasting as long as he lives.


Risk cover –
The primary objective of taking an insurance policy is to have a risk cover. Hence, it is important that
the sum assured is commensurate with the changing needs and requirements of the individual.

Survival benefits –
A whole life plan is said to be an insurance policy which provides a cover for living too long only
because Cash inflows – The inflows that the policyholder gets from the policy at regular intervals can
be a determining factor while selecting a whole life plan. An example that can be quoted is that Tata
AIG’s Mahalife pays cash every year in perpetuity from the 10th year of the policy.

Cash benefits –
The bonuses that are payable on the plan are also another feature that needs to be taken into account.
Some plans have pay guaranteed bonuses while some other plans provid e non-guaranteed bonus
payouts after 6 years, while a few others provide such payouts only
from the 10th year. Hence, the individual should select that policy which starts the bonus payouts at
the earliest so as to benefit from the power of compounding.

Flexibility –
Ultimately, the policy belongs to the individual. Hence, the individual should have the flexibility to
select the sum assured, the premium paying term etc. While some plans have the flexibility, some do
not offer such flexibility to the indiv idual.

Simplicity –
While flexibility is indeed important, in case too much of options are given to the policyholder it
makes the product more complex. Hence, it is important to strike a via-media to ensure that the
product is flexible and at the same time easy for the policyholder to understand.
Ever dreamt of a life cover till the age of 80 &beyond? Whole life plan provides just that!

Public Provident Fund,
Popularly known as PPF, is a savings cum tax saving instrument. It also serves as a retirement planning tool for
many of those who do not have any structured pension plan covering them. Public Provident Fund account can be
opened at designated post offices throughout the country and at designated branches of Public Sector Banks
throughout the country. The account can be opened by an individual in his own name, on behalf of a minor of whom
he is a guardian, or by a Hindu Undivided Family.
The Public Provident Fund Scheme is a statutory scheme of the Central Government of India.

• The Scheme is for 15 years.

• The rate of interest is 8% compounded annually.
• The minimum deposit is 500/- and maximum is Rs. 70,000/- in a financial year.
• One deposit with a minimum amount of Rs.500/- is mandatory in each financial year.
• The deposit can be in lump sum or in convenient installments, not more than 12 Installments in a year or
two installments in a month subject to total deposit of Rs.70,000/-..
• The account in which deposits are not made for any reasons is treated as discontinued account and such
account can not be closed before maturity.

• The discontinued account can be activated by payment of minimum deposit of Rs.500/- with default fee of
Rs.50/- for each defaulted year. .
• The deposits shall be in multiple of Rs.5/- subject to minimum amount of Rs.500/-.
• The deposit in a minor account is clubbed with the deposit of the account of the Guardian for the limit of
• No age is prescribed for opening a PPF account.
• Interest is not contractual but rate is notified by Ministry of Finance, Govt. of India, at the end of each year.
• The facility of first withdrawal in the 7th year of the account subject to a limit of 50% of the amount at
credit preceding three year balance. Thereafter one Withdrawal in every year is permissible..
• The PPF scheme is operated through Post Office and Nationalized banks.
• PPF account can be opened either in Post Office or in a Bank.
• Account is transferable from one Post office to another and from Post office to Bank and from Bank to Post
• Account is transferable from one Bank to another bank as well as within the bank to any branch.
• Deposits in PPF qualify for rebate under section 80-C of Income Tax Act.
• The interest on deposits is totally tax free.
• Deposits are exempt from wealth tax.
• Nomination facility available.
• Best for long term investment.


Sl. Name of Interest Maturity Limit of I.T.benefit Place of Deposit
No. the Period Deposit
PPF 8% 15 years Min: 20% Rebate u/s 88 upto SBI and selected
Rs.500 Rs.70000/- & I.T concessions Nationalised
Max: for interest u/s 10(i)I.T. Banks
Rs.70000 concession for entire interest
in a year amount.

Post Offices
India possesses the largest postal network in the world with 187000 post offices spread all over the country as on
March 31, 2006, of which 89 per cent are in the rural sector. Post offices in India play a vital role in the rural areas.
They connect these rural areas with the rest of the country and also provide banking facilities in the absence of banks
in the rural areas. Post Offices offer various types of accounts. These are:

Post Office Saving Account

• Minimum amount Rs20/- in case of non- cheque account, Rs.500/- in case of cheque
• Minimum balance of Rs.500/- is to be maintained for a cheque account.
• Account is opened with cash only.
• Maximum balance permissible Rs. 1,00,000/- in a single account and 2,00,000/- in Joint
• Two/Three adults, individuals, minor through guardian.
• A Minor having 10 years of age can also open an account directly.
• One individual account and one joint account can only be opened at a post office.
• Income tax relief is available on the amount of interest under the provisions of section 80L of Income Tax

Post Office Five Year Recurring Deposit Scheme

a) An account can be opened in multiple of Rs.5 & minimum monthly deposit is Rs 10.
b) An account can be opened of any post office & can be transferred from one post office to another
anywhere in India.
c) One can open more than one account.
d) Nomination facility is available.
e) Automatic deductions are made at the source by employer on the consent of the employer through
Payroll .M.P.K.B.Y Agent will collect the amount from depositor every month & deposit it in the post
f) The account can be opened on behalf of a minor & operated either
by mother or father.
g) One can get rebate rupees one on 6 advance deposits & rupees
four on 12 advance deposits of an account of R.10/- denomination.
h) An insurance like benefit is available on the Deposits up to denomination of Rs.50/-.
i) Account can be continued up to ten years

Post Office Monthly Income Account

Post Office Monthly Income Account is meant for those investors who want to invest a lump sum and
earn interest on monthly basis for their livelihood. The scheme is, therefore, a boon for retired persons.
The account can be opened by a single adult or 2-3 adults jointly. Maturity period is 6 years.

• Minimum investment amount is Rs.1000/- or in multiple thereof.

• Maximum amount is Rs. 3 lakhs in a single account and Rs. 6 lakhs in a joint account.
• Premature encashment facility after one year.
• Interest income is taxable, but no TDS.
• The Only Post Office scheme where monthly interest is payable.
• Account can be opened by an individual, two/three adults jointly, and a minor through a guardian.
• A minor having attained 10 years of age can open an account in his/her own name directly.
• Minors have a separate limit of investment of Rs. 3 lakhs and the same is not clubbed with the
limit of guardian.
• A separate account is opened for each deposit.
• Facility of premature closure of account after 1 year to 3 years @ 2.00% discount.
• Deduction of 1% if account is closed prematurely at any time after three years.
• Facility of reinvestment on maturity of an account.
• Interest not withdrawn does not carry any interest.
• Maturity proceeds not drawn are eligible to earn savings account interest rate for a maximum
period of two years..
• Nomination facility is available.
• Rebate under section 80 C is not admissible.
• Most suitable scheme for senior citizens and for those who need regular monthly income.

Post Office Time Deposit Account
Post office time deposit account is just like the bank fixed deposit account. These time deposits are meant
for those investors who want to deposit a lump sum for a fixed period. Time deposit account can be
opened at any post office with a minimum deposit of Rs. 200. There is no maximum limit for the account.

Interest payable annually but calculated quaterely at following rates:

Period Rate of Interest

One Year 6.25%
Two Years 6.50%
Three Years 7.25%
Five Years 7.50%

• Minimum amount of deposit is Rs.200/-.

• No maximum limit.
• Account can be closed after 6 months but before one year without any interest.
• Facility of redeposit on maturity of an account.
• No interest is payable on undrawn interest amount.
• Account can be opened by an individual, two adults jointly and minor through guardian.
• A Minor who has attained the age of 10 years can open the account in his/her own name to be
operated directly.
• Non Resident Indian / HUF can not open the account.
• Any number of accounts can be opened.
• Two, three and Five years accounts can be closed after one year at a discounted rate of interest.
• Deposits not drawn on maturity are eligible to saving account interest rate for a maximum period
of two years.
• Account can be pledged as security against a loan to banks/ Government institutions.
• Accounts are transferable from one Post office to any Post office in India.
• Rebate under section 80-C is not admissible.
• Interest income is taxable.
• Deposits are exempt from wealth tax.
• No T.D.S.
• Nomination facility available.

National Savings Certificate

National Savings Certificate, popularly known as NSC, is a time-tested tax saving instrument that
combines adequate returns with high safety.

National Savings Certificate can be purchased by the following:

• Rs. 1000/- grows to Rs. 1601/- in six years.

• Minimum investment Rs. 500/-
• Maximum no limit.
• Certificates can be pledged as security against a loan to banks/ Govt. Institutions.

• A Tax saving investment under Sec 80C

• Interest income is taxable, but no TDS.
• Rate of interest 8% compounded half yearly
• Two adults, individuals, and minor through guardian can purchase.
• Companies, Trusts, Societies or any other Institutions are not eligible to purchase.
• Non-resident Indian/HUF cannot purchase.
• No premature encashment.
• Annual interest earned is deemed to be reinvested and qualifies for tax rebate for the first 5 years
under section 80 C of the Income Tax Act.
• Maturity proceeds not drawn are eligible to Post Office Savings Account interest for a maximum
period of two years.
• Nomination facility is available
• Facility of purchase/payment to the holder of Power of Attorney.
• Tax Saving instrument - Rebate admissible under section 80 l of the Income Tax Act.
• Deposits are exempt from Wealth Tax.

Kisan Vikas Patra

Kisan Vikas Patra (KVP) is a saving instrument that provides interest income similar to bonds. Amount
invested in Kisan Vikas Patra doubles on maturity after 8 years & 7 months.
Kisan Vikas Patra can be purchased by the following:

• Minimum Investment Rs. 500/- No maximum limit.

• Rate of interest 8.40% compounded annually.
• Money doubles in 8 years and 7 months.
• Two adults, Individuals and minor through guardian can purchase.
• Companies, Trusts, Societies and any other Institution not eligible to purchase.
• Non-Resident Indian/HUF are not eligible to purchase.
• Facility of encashment from 2 ½ years.
• Maturity proceeds not drawn are eligible to Post office Savings account interest for a
maximum period of two years.
• Facility of reinvestment on maturity.
• Rebate under section 80 C not admissible.
• Interest income taxable but no TDS Deposits are exempt from Wealth tax.

Government of India 8% Savings (Taxable) Bonds, 2003

The salient features of the Bond areas follows:
Eligibility for Investment

The Bonds may be held by -

(i) an individual, not being a Non-Resident Indian (NRI)
(a) in his or her individual capacity, or
(b) in an individual capacity on joint basis, or
(c) in an individual capacity on anyone or survivor basis, or
(d) on behalf of a minor as father/mother/legal guardian
(ii) a Hindu Undivided Family.
(iii) (a)'Charitable Institution' to mean a Company registered under Section 25 of the Indian Companies

Act 1956 or
(b) an institution which has obtained a Certificate of Registration as a charitable institution in accordance

with a law in force; or

(c) any institution which has obtained a certificate from Income Tax Authority for the purpose of Section
80G of the Income Tax Act, 1961.
(iv) "University" means a university established or incorporated by a Central, State or Provincial Act, and
includes an institution declared under section 3 of the University Grants Commission Act, 1956 (3 of
1956), to be a university for the purposes of that Act.

Senior Citizens Savings Scheme 2004

• One of the most attractive small savings scheme - ideal for VRS takers of the age of 55
years and above and Sr.citizens of 60 years and above.
• Interest @ 9 % per annum payable quarterly.
• Minimum deposit of Rs 1000 and its multiples and maximum Rs 15 Lakhs
• Five years scheme

Table A: Classification of Savings Schemes According to Tax Incentives Available

Schemes Interest Tax Tax Incentives on
Rate incentives interest @
Post Office Savings 3.5 Nil Under Section 10

Post Office Recurring

Deposits (5 years) 9.0 Nil Under Section 80L (1)(3)(i)

Post Office Monthly

Income Scheme (6 Years) 9.5 Nil Under Section 80L(1)(3)(i)

Post Office Time

Deposits (1 Year) 7.5 Nil Under Section 80L(1)(3)(i)

Post Office Time

Deposits (2 Years) 8.0 Nil Under Section 80L(1)(3)(i)

Post Office
Time Deposits (3 Years) 9.0 Nil Under Section 80L(1)(3)(i)

Post Office
Time Deposits (5 Years) 9.0 Nil Under Section 80L(1)(3)(i)

National Savings 9.0 Section 88 Under Section 80L(1)(3)(i)

Scheme 1992 (4 Years) (2)(ix)

National Savings 9.5 Section 88 Under Section 80L and

Certificate VIII (2)(x) interest accrued annually
Issue ( 6 Years) can be deemed to be
reinvested under Section 88

Kisan Vikas Patra 10.03 Nil Nil but no TDS

(7.25 Years)

Public Provident 9.5 Section Under Section 10(11)

Fund (15 Years) 88(2)(v)

Deposit Scheme for 8.5 Nil Under Section 10(15)(iv)(i)

Retiring Employees
(3 years)

Relief Bonds 8.5 Under section 10

* Tax rebate equal to 20 per cent (upto a ceiling of Rs.12,000) on deposits available under Section
88 and withdrawals completely
exempt under Section 10.
@ Tax deduction upto Rs.12,000 available under Section 80L.
Source: (1) Government of India, Note on “ Small Savings Schemes – An Overview”.
(2) Budget Documents, Government of India.

Bank Fixed Deposits
Bank Fixed Deposits are also known as Term Deposits. In a Fixed Deposit Account, a certain sum of
money is deposited in the bank for a specified time period with a fixed rate of interest.

The rate of interest for Bank Fixed Deposits depends on the maturity period. It is higher in case of longer
maturity period. There is great flexibility in maturity period and it ranges from 7days to 10 years. The
interest is compounded annually and is added to the principal amount. Minimum deposit amount is Rs
1000/- and there is no upper limit.

Loan / overdraft facility is available against bank fixed deposits. Premature withdrawal is permissible but
some penalty is levied. Tax Deductible at Source, if the interest paid/ payable on deposit exceeds
Rs.5000/- per customer, per year, per branch


This scheme is open to retired Central and State governments' employees and retired judges of Supreme
Court and High Courts. The account can be opened at designated branches of Public Sector Banks
throughout the country.

Minimum deposit limit to open the account is Rs 1000, while the maximum limit equals total retirement
benefits in multiple of one thousand rupees.

Retirement benefits means:

• Balance at the credit of employee in any of the Government Provident Funds

• Retirement / Superannuation gratuity
• Commuted value of pension
• Cash equivalent of leave
• Savings element of Government insurance scheme payable to the employee on retirement.

For Retirement PLANNING
Mr. Raghavendra Verma is a software engineer working for a reputed IT firm. He is earning Rs. 29,990 per month as his gross
income. He is aged 28 and his marital status is single. His monthly expenditure is presently Rs. 10,500. His net cash surplus, after
the tax cutting and PF contribution, stands at Rs. 13,485. He is planning to retire in the year 2034. He wants to have Rs. 20,000
per month as on today after his retirement to cover all his expenditure. He wants to start his retirement planning after two years
form now.The present case tries to find out a feasible retirement planning that he needs to do for achieving this goal.
Name of the Client: Mr. Raghavendra Verma
Gross Income (including PF): 29,990
Basic: 9,500
PF contribution (pm): 1,140
Expected Expenditure after retirement (pm): 20,000
Number of years to retirement: 25
Monthly Surplus: 13,485


• The client has a surplus of Rs. 13,485 out of which he should set aside some amount towards his retirement planning.
• The client intends to have 20,000 per month as his expenditure post-retirement.
• The inflated value of his desired expenditure after 25 years stands at 67,727 per month (Assumed inflation = 5%).
• The client is contributing 1,140 per month towards PF.
• The client has a term insurance policy on his name.
• Let us assume that he has a 10% salary hike each year.

The retirement scenario of the client can be summarized as given below :


• The client has to invest according to his risk profile in discussion with his financial planner.

Inflation assumed = 5% 5% 5%
Years left for retirement = 25 25 25
Present expenditure 20,000 20,000 20,000
Inflated value in 2034 67,727.1 67,727.1 67,727.1
Yearly expenditure 8,12,725.2 8,12,725.2 8,12,725.2
Expected annual return at
5% 5% 5%
retirement =
Total corpus to be
1,62,54,504 1,62,54,504 1,62,54,504
accumulated =
Balance accumulated by
70,00,000 70,00,000 70,00,000
Survival benefits of
0 0 0
Insurance plan
Amount Yet to be Covered 92,54,504 92,54,504 92,54,504
Assumed return= 15% 12% 8%
Tenure of investment (yrs) = 23 23 23
Annual savings required = 58,103.42 88,472.73 1,51,979
Effective rate of interest = 0.161 0.126 0.083
Monthly investment required
4,031.63 6,309.66 10,366.19
• The three possible situations given above give a fair idea of the amount to be invested from now
to achieve his retirement goals.
• The client is recommended to invest into mutual funds through the systematic investment plan.
• He can afford to invest into instruments giving around 15% annual return as he is still young.
• If the client is a moderate risk taker, he should opt for a balanced portfolio giving him a return of

The client should start early so as to reach his retirement goals in a smooth manner. He needs to carefully
invest his money after taking the consultation of a financial planner who can gauge the risk and return in a
more efficient manner. Finally, retirement planning is a must for everyone so that they do not face any
difficulties post-retirement and have a planned future all the way


Mr. Chintamani is a young newly married software engineer, working with an MNC now for past 4 years, earning INR 6.50 lacs.
He has one dependent, his wife. He has, as of now, Insurance of INR 4,00,000. He is investing his savings in mutual funds
regularly and has a portfolio of INR 3.75 lacs in mutual funds and INR 2 lacs in bank FD. He has an auto loan which will be
complete after 5 years. His monthly expenses come around INR 28,000 (inclusive of the auto loan EMIs).

Mr. Chintamani is not optimally insured. On the event of his death, his spouse will need some money to survive with the current
lifestyle. It is very important for Mr. Chintamani to insure himself optimally as Mrs. Chintamani is dependent on him. Mrs.
Chintamani might as well have to take care of their children in near future.

We will have to assess the need of insurance for Mr. Chintamani. Insurance can not be calculated as a
percentage/multiple of ones income. Insurance is a very much need based so should be calculated as per
the needs of Mrs. Chintamani on such an event. Insurance need can be calculated by calculating human
life value (HLV). HLV can be calculated by two methods, namely:

1. Need based approach

2. Income replacement method.

We shall take the first approach as it is more appropriate to calculate the needs.

Mr. Chintamani needs additional basic insurance to be optimally insured to take care of his wife's needs in
the event of his death. His total insurance needs according to the need based HLV approach is of INR 52.5
lacs. So he needs an additional insurance of INR 48.5 lacs. The amount has been calculated at decent
interest rate of 8% and inflation rate of 3.5% has been taken in to consideration. Final calculation has been
done with inflation adjusted rate of 3.62%. To calculate the need of insurance, his monthly expenses is
taken in to account and also an emergency fund been created along with taking care of the final cost.

Total Expenses (Today) 28,000

Corpus for Expenses 51,16,674.5
Emergency Fund 84,000
Final Cost 20,000
Total Insurance required 52,48,674.5
Insured for 4,00,000
Insurance Required 48,48,674.5

Mr. Chintamani needs the above insurance which he can take term plan. However, for tax purpose or for a
blend of savings and insurance he can partially also take an endowment plan.

Mr. Chintamani is heavily underinsured. Now, as he has got married recently, his insurance needs have drastically increased. It is
recommended that he gets optimally insured as soon as possible. He can take insurance in bits also if he thinks he cannot pay such
a heavy premium now.


Mr. Shekar is a young software engineer, working with an MNC earning around INR 4.50 lacs. He has no
dependents as of now. He is planning to get married soon. He has parked all his savings in bank FD. He is
skeptic of investing in the capital markets because of the recent crash in the market. He is also concerned
about the falling FD rates when compared to growing inflation. He is really worried so as to protect his
savings and wants them to grow well. He needs around INR 3,00,000 at the end of 2 years for his
marriage. He is also planning to buy a car (worth INR 3,50,000) after a year. His expense per month is
around 50% of his income (INR 32,000 per month). He has a bank FD of around INR 1,50,000 (4 years),
around INR 20,000 in bank's savings a/c.

Mr. Shekar is young and earning well. He has got the capacity to invest in slightly comparative risky
avenues. As at this age and income he has the capacity to absorb short term losses and recoup them very
soon. His short term goals can be met through a systematic and disciplined investment style. He also needs
to keep some amount aside for emergency.However, his worry for the volatile capital market can be taken
care of. He can invest in parts in the equity markets through a Systematic Investment Plan (SIP). This will
in turn average out the cost of acquisition and will ensure a decent return. It will also ensure that he has
not bought on the peaks.

Mr. Shekar should start investing an amount from his current monthly income for his short term future
goals. Looking in to Mr. Shekar case to meet one life stage goal and one lifestyle goal reaching very soon,
we have to start investing very soon.Mr. Shekar needs INR 3 lacs at the end of 2 years and around INR 3.5
lacs at end of 1 year. It is recommended that he takes an auto loan for 80% of the cost and rest he can
finance himself. However, for the INR 3 lacs at the end of 2 years, he should finance the entire amount
himself as the personal loans are very expensive. The equity market being at corrections now, so over a
period of 1-2 years, it will yield around 10-12%. Let us consider 10% to take a pessimist view of the
If he invests INR 16,000 (50% of Income) in an equity fund at expected return of 10%, it will yield him in
the following manner:

Amount Invested per Month is Rs. 16,000

1 2 3 4 5
8% 1,99,199 4,14,931 6,48,569 9,01,599 11,75,630
1100% 2,01,049 4,23,151 6,68,509 9,39,560 12,38,993
12% 2,02,920 4,31,575 6,89,230 9,79,562 13,06,715
15% 2,05,766 4,44,609 7,21,848 10,43,654 14,17,192
20% 2,10,615 4,67,438 7,80,605 11,62,478 16,28,131
25% 2,15,602 4,91,730 8,45,376 12,98,301 18,78,377
30% 2,20,729 5,17,585 9,16,823 14,53,753 21,75,865

Here, at 10% CAGR, at the end of first year, the fund accumulated is INR 2,01,050 from this he can take out INR 70,000 for the
purchase of his car and take a loan for INR 2.8 lacs. He will leave the balance amount in the same fund. From second year
onwards if he invests in INR 13,000 instead of 16,000 (as he needs to pay for the auto loan EMI, which will come around INR
5,000 @ 12% for 7 years) At the end of second year he will accumulate around INR 3,08,500 (sum of first years residue and
second years investment of INR 13,000), which is slightly above then what he needs for his marriage.

1 2 3 4 5

8% 1,61,849 3,37,131 5,26,962 7,32,549 9,55,199

10% 1,63,352 3,43,810 5,43,164 7,63,392 10,06,682
12% 1,64,873 3,50,655 5,59,999 7,95,894 10,61,706
15% 1,67,185 3,61,245 5,86,502 8,47,969 11,51,469
20% 1,71,125 3,79,793 6,34,242 9,44,514 13,22,857
25% 1,75,176 3,99,531 6,86,868 10,54,870 15,26,182
30% 1,79,342 4,20,537 7,44,918 11,81,175 17,67,891

This also ensures a large amount of his EMI payments. However, he will have to manage the rest amount
from his monthly expenses for one year.
Mr. Shekar had little idea about investing in equities market and was worried about the falling market. He
was worried about the low returns in FDs too. He also had a couple of short term important goals. Now he
can systematically invest and earn decent returns as well. He can also, in this plan, ensure that his short
term goals are taken care and it also takes care of the EMIs to some extent, comfortably.


Ms. Amrita Rao (aged: 28) is working as a software engineer in an MNC and has a gross income of 4.02
lakhs/annum. She has a monthly surplus of 10,000 which is being put in the savings account of the bank.
She has invested 20,000 into NSC and has no other investments. She has a term insurance policy for
which she pays an annual premium of around 4,000. She has a tax liability of 37,230 per annum. Let us
analyze the case and in the process highlight the importance of proper tax planning.

• Ms. Amrita Rao has a monthly surplus of 10,000.

• Salary basic is 10,000.
• Investments of worth 20,000 are done in NSC.
• Yearly premium paid for the term policy is 4,000.
• Total Tax Liability for a year is 37,230.

Let us see the present tax liability of Ms. Amrita Rao.

• As we see here, due to improper planning of investments, the tax being paid is as high as 37,230.
• The benefits of Sec 80C have not been fully utilized.
• The surplus amount of 10,000 is in the savings account which gives a meager 3.5%.
• Other investment avenues like ELSS, ULIPs, PPF etc have totally been ignored.

Gross Salary 4,02,000

Profession Tax 0
Gross Salary after Section 10 & 17 3,41,400
Accommodation Perquisites 0

Income chargeable under head 'Salaries' 3,41,400

House property / other income or loss 0
Other income 0
Gross Total Income 3,41,400
Deductions under sec 80C 41,400
Net taxable income 3,00,000
Tax on Income 36,500
Surcharge on Income Tax 0
Tax including Surcharge 36,500
Education Cess 730
Total Tax Liability 37,230

Total Income tax paid from salary 0

Tax paid outside of salary 0
Income tax due 37,230
Remaining months in year 12
Tax per Month 3,103


• Section 80C has come as a boon to investors who have an appetite for risk. Until the previous
year, investment in tax-saving funds (ELSS) for the purpose of availing a tax benefit was
restricted to Rs. 10,000 per year.
• In the current fiscal year all such restrictions have been done away with; an individual assessee
now has the flexibility to invest the Rs. 1,00,000 that is allowed under Section 80C in any
proportion that he wishes (only in PPF is there an upper limit of Rs. 70,000 p.a.) in specified
• Investments up to Rs. 70,000 per annum into PPF are eligible for deduction under Section 80C;
further the interest earned is tax exempt under Section 10 of the Income Tax Act.
• PPF can be an ideal tool while planning for long-term objectives like one's retirement or children's
education and marriage.
• There are a lot of advantages in investing into a unit linked insurance plan (ULIP) which enables
us to avail the deductions under sec 80c and also gives us good returns as major investment of
these funds are into the equity and equity related instruments.

Deductions under Chapter VI (sec 80C) Produced Limited

Dedn under Pension scheme (sec 80C) 0 0
NSC (sec 80C) 20,000 20,000
Public Provident Fund (sec 80C) 0 0
Employees Provident Fund & Voluntary PF (sec 80C) 14,400 14,400
Tution fee (sec 80C) 0 0
Housing loan principal repayment (sec 80C) 0 0
Insurance premium (sec 80C) 4,000 8,000
Infrastructure Bonds & others (MF, ULIP, etc.) (sec 80C) 70,000 70,000
Total Investments 1,00,000

Ideally it's advisable to allocate the 1,00,000 in the above manner to avail sec 80C

The present structure of investment would result in the tax liability reduced to 1,681 per month. It is therefore advised to select the
present investment pattern to gain the tax exemptions and deductions available. Thus the surplus should be directed in this fashion
for effective financial planning.
DETAILS No of Percentage
Student 8 7.2
Business man 14 12.7
Professional 33 30
Retired 20 18.3
Service 25 22.7
others 10 9.1

1 Occupation Details of the people intervened

As with the above table , the respondent who were intervened with respect to their occupation
details is categorized which from the survey 33 people were professional and 10 people who fall
in other category like house wife , unemployed etc.















As with the graph the majority of people intervened are professional with 30 % of the total and
lowest to other with 9.1%.

2 Annual Income of the people intervened

Annual income No of Percentage

Up to 100000 11 10
100000 - 200000 29 26.3
200000 - 500000 57 51.8
Above 500000 13 11.9

The respondent who were intervened as were of different income groups range which starts till
100000 and moves till 500000 & above .The majority of the income group was of middle class
who have their income between 100000 and 500000.

No of response(%)




30 No of response(%)



Upto 100000 TO 200000 TO 500000 &
100000 200000 500000 above

With the above graph majority of the people who were intervened have their annual income
around between 200000 – 500000 with share of 51.8% from total people intervened.

3. Investment out of their monthly/annual income on an average?

Income invested No of Percentage

Less than 30 % 64 58.2
30 % to 50 % 35 31.8
More than 50 % 11 10

The table clearly shows that majority of people tends to invest less than 30% of the total income
which is 58.2 % respondent agreed about investment less than 30 % of their total income.
No of Response (%)


No of Response (%)
less than 30 % 30% to 50% above 50 %
Income Invested

The above graph shoes that less than 30 % of total income people prefer to invest in different
investment options.

4. Time Horizon of Investment made

Income invested No of Percentage
UPTO 1 YEAR 8.1 09
1 TO 3 YEARS 24.6 26
3 TO 5 YEARS 37.2 41
5 YEARS & 30.1 34
The above table shows that people tend to invest for particular longer time period which is sown
in table through response. Lesser number of people invest in for shorter time period ranging 1 – 3
years majority people tend to invest for longer time period.



Upto 1 1 to 3 3 to 5 5 years &
year years years above
Time Horizon

The trend what is seen through study is that people willing to invest for longer period of time
which through survey more than 3 years & above.37.2% people said they invest between 3 – 5
years & 30.1 % said they invest more than 5 years.

5 Investment in Various Products

PRODUCTS No of The table here shows the investment of people into various
financial products. People today with the newer trends in
STOCK financial sector invest largely in insurance, shares, post
BROKING office schemes with latest upcoming trend in investment is
FUNDS mutual funds .

No of respondent

43 44
32 31 No of response(%)



it s

















Po Invest Options

The trend what we see through the graph is people tend ti invest more in insurance schemes with
total of 80 respondent agreed on investing in insurance , post office schemes , shares are also
preferred with 54 & 43 respondent respectively


Income invested No of Percentage

SAFETY 18 16.3
LOW RISK 12 10.09
OTHERS 5 4.51

With above table facts the reason for investing in different investment avenues has been studied
an majority people invest for purpose of tax benefits with 39.1 % other look for returns, safety,
low risk and liquidity factor.

No of Response (%)

45 39.1

25 20
16.3 No of Response (%)
15 10 10.09
10 4.51













The above graph shows that people invest their money with objective of tax assistance with
39.1% respondent agreed others look for returns which is 29% of response the minimum criteria
i.e. 4.51% .

7 Risk Taken to Achieve Higher Returns

RISK No of Percentage
PATTERN responses
VERY 40 36.3
MODERATE 49 44.5
A LOT 21 19.2

People these days are little bit conscious in terms of taking decision regarding investment they
prefer to take lesser risk in order to have safe and assured returns. still majority of people invest
in various products taking moderate level of risk which is approx. 44.5% respondent agreed to it

50 Moderate
40 Very Little

A Lot
No of Respondent
Very Little 36.3
Moderate 44.5
A Lot 19.2
Risk Pattern

Very Little Moderate A Lot

As shown in the above graph people take moderate risk in terms of investing in different products
which is 44.5% of respondent, 19.2 % respondent said they take lots of risk while investing
mainly these are who invest in shares/stock etc.

8 Respondent preferences in different financial products

(A) Shares



20 Response

















l it




DETAILS No of Percent
respon age
Very little 7 6.3 With the above table and graph people who were intervened
preferred had their moderate preferences in investing shares which are
Little 18 16.3 willing to take risk in investing which is 37.1% over other
preferred financial products since they returns are higher in this so they
Moderat 42 37.1 are moderately preferred by the customers.
More 21 19.3
Most 22 20

(B) Insurance

DETAILS No of Percentage
Very little 4 3.6
Little 11 10
Moderate 29 26.3
More 49 44.5
Most 27 24.6

50 44.5


30 26.3 24.6
10 3.6
0 Little
Very Moderat More Most
little e preferred preferred
Response 3.6 10 26.3 44.5 24.6

With above graph and tables it is clear that trend is shifting towards security people now days
prefer to be secure themselves and their family. Insurance is more preferred these days as 44.5 %
respondent prefer insurance since it provide security and also it gives good returns for the
investor. 24.6% people invest in insurance as this is most preferred investment proposal by them.

(C) Post Office Schemes

Post Office Schemes



DETAILS No of Percentage
0 Little
Very little 13 11.8 Very
Moderat More
preferred preferred
preferred Response 11.8 10.9 23.7 43.6 10

Little 48 43.6
Moderate 26 23.7
More 12 The above table and graph shows that as compared
preferred to earlier days people now tend to invest less in
Most 11 10 post office schemes since with emergence of
preferred return oriented financial products like mutual
funds, Unit Link Insurance Plans (ULIP) as there
is lock in period of only 3 years and higher potential for returns in these instruments .Since they
are people who prefer more in investing in post office schemes with 43.6 agreed to invest in this.

(D) Mutual Funds

Mutual Funds

DETAILS No of Percentage
Very little 13 11.8

Res pons e preferred
Little 12 10.9
DETAILS No of Percent preferred
0 Little
V ery
preferred age
M oderat M ore M os t Moderate 26 23.7
little e preferredpreferred
pons e 10.9 12 40 10.9
30.1 12.5 5.4
preferred Crite ria More 48 43.6
Little 34 30.1 preferred
preferred Most 11 10
Moderate 44 40
More 14 12.5
Most 6 5.4

With increase in awareness and other factors mutual funds are one of the upcoming financial
instruments which would be most preferred for investment purpose.







0 Little
Very Moderat More Most
little e preferred preferred
Response 11.8 43.6 23.7 10.9 10

From the above table and graph the trend which is shown that people have little preference
investing bonds. 43.6% respondent agreed they had little preference in investing bonds while 10
% as most prefer investment option.

(F) Gold






0 Little
Very Moderat More Most
little e preferred preferred
Response 16.3 40.9 24.6 16.3 10.9

The above table and graph shows that around 65% of people have little & moderate preference in
investing in gold they largely buy gold for non investment purpose like marriage or gift. Still
there are some respondent who buy gold as an investment avenue and prefer it over other
investment avenue.

With increase in the international prices of gold people consider it a growth prospect and are now
prefer most as it is profitable source of investment.

(G) Fixed Deposit

DETAILS No of Percent
respon age Percentage
ses Fixed Deposits
Very little 21
little 14 19.3

Little 32
25 29.01
22.7 25

preferred 15

Moderate 18 29 16.3
26.3 10
preferred 0 Little
Very Moderat More Most
More 16
21 14.4
19.3 little
e preferred preferred

preferred Response 19.3 29.01 26.3 19.3 6.09

Most 19
7 17.2

The above table and graph indicates people have different preferences maximum of 29.1%
respondent little prefer investing in FD while 26.3% as moderate preferences. With increase in
inflation and the lock in period of 7 yrs the actual realized returns tend to be very low so now
people are shifting towards other prospect financial instruments like Mutual Funds ,
Insurance(ULIP) ETC.

DETAILS No of Percentage (H) Government Securities

Very little 18 16.3
preferred Govt Securities

Little 45 40.9 50
preferred 40
Moderate 27 24.6

preferred 20

More 18 16.3 10
preferred 0 Little
Very Moderat More Most
Most 12 10.9 little
e preferred preferred
preferred Response 11.8 10.9 23.6 43.7 10

The above table and graph indicates that people do prefer government securities as an investment
prospect .people invest in government securities in large number in order the risk associated with
them is comparatively less and are considered one for the safer investment option. As seen in the
graph 43.7% people prefer it more times in investing and 11.8% people prefer very little in
investing in Govt.Securities.

(I) Others



0 Moderat
Very Little
e More Most
little preferred
preferred preferred preferred
Resonse 12.4 22.7 16.3 14.2 17.2

The table and graph which include preferences of people who invest in non financial products
like investing in Real Estate which is the most preferred since the above graph shows only 17.2
% prefer in investing in other but actual if we look as example of real estate most of preference is
in investing in real estate with the change in the rates in urban and rural land respectively.22.7 %
people have little preference in investing in others investment options.

DETAILS No of Percentage
9 Investment Objective of the
responses Respondent
Very little 13
Little 12 10.9
preferred The table shown here includes the response of the
Moderate 26 23.6 people with their investment objective. The criteria
preferred which they consider while investing in various
More 48 43.7 investment proposals. the criteria which is being
preferred considered is capital preservation, income and income
Most 11 10 growth . People consider both capital preservation as
preferred well as income growth while investing in various
options .some percentage agreed on investing with criteria of moderate growth.

DETAILS No of Percentage
8 7.2
Income 14 12.4
Growth of 31 28.6
Income or
Growth and 24 21.8
Moderate 23 20.9
Maximum 10 9.09
In v e s tm e n t O b je c tiv e

25 2 1.9 20 .8

R es p ons e
15 1 2.4
10 7.2
C apitalIn c om G row thG row thM ode rM ax im
P res er e of and ate um
va tion Inc om Inc o m G row thG row th
R es p ons e 7.2 1 2.4 28.6 2 1.9 20 .8 9 .1

As shown in the above graph consideration of the objective while investing in different
investment products 28.6% of respondent have their objective of growth of income or capital
preservation. 21.9% respondent considers growth of income & capital preservation with balanced
approach. People prefer moderate growth as compared to have maximum growth in investing.

10 Mode of investment made

mode No of Percentage Mode Of Payment

responses 42.7
Quarterl 21 19.1

19.1 Response
y 20
Half 47 42.7 10

yearly 5
Yearly 32 29.1 Quaterly Half Yearly Yearly One Time

One time 10 9.1

With the above response we can clearly see people tend to invest in mode of half yearly 42.7 %
respondent agreed to invest in half yearly mode while 29.1 % said they invest in yearly mode.
Since these days with the upcoming trend of mutual funds and ULIP plans people now look for
one time investment mode for particular time period like in mutual funds (Close Ended ) lock in
period of 3 years for one time investment 9.1 % of respondent consider investing in this mode.

11 Liquidity of investments within next 5 years

Portion if No of Percentage L iquidity if In vestm ent
investment responses
Not to 32 29.29 30

liquidate 25

O % to 10 27 24.5 15
15.4 Response

% 10
11% to 29 26.31 5

20% 0
Not to O % to 10 11% to 21% to 21% to
21% to 17 15.4 liquidate % 20% 50% 50%
51% or 5 4.5

The above table and graph shows that the portions of investment people invest it for the long term
purpose in order to get some good returns. People in large portion invest in schemes which are of
long term purpose as 29.29% respondent don want to liquidate their investment within 5 year to
expect long term returns while another 24.5% said they want to liquidate their investment
between 0 to 10 % , 26.31 wants to liquidate between 11 to 20 %.
Since these days people are now willing to invest for the long term purpose investing in options
like insurance schemes , post office , bonds etc.

12. Response to financial planning services

Services Availed Availed Future interest Future interest

No of responses No of responses No of responses No of responses
Yes No Yes No

Investment 47 63 79 31
Investment 71 39 94 16
Tax preparation 89 21 34 76

Retirement 34 76 54 56

Planning for 82 28 85 25
life, long term
care insurance

Planning for 46 64 32 78
other financial
Estate planning 32 78 47 63

The table shown indicates people response to financial planning services as the respondent has
taken largely on matters of tax preparation, insurance and investment advice. While there is still
less number in respect to services for planning for financial goals, estate planning and retirement
planning. People are now days with change in the trends and with lesser time for financial
services are accepting various services may be investment management , investment advice or for
other financial goals .large number of people responded in getting services on investment advise
and investment management.


R E S P O NS E - Y E SR E S P O N S E - NO

1 00

Inves t Inves t Tax R etire P lanniP lanniE s tat e
m ent m e nt pre pa r m en t ng for ng for plan ni
R E S P O NS E - Y E S4 7 71 89 34 82 46 32
R E S P O NS E - N O 6 3 39 21 76 28 64 78




Inves t Inves t Tax R etire P lanniP lanniE s tat e
m ent m ent prepar m ent ng for ng for planni
R E S P O N S E - Y E S79 94 34 54 85 32 47
R E S P O N S E - N O 31 16 76 56 25 78 63

The above two graphs shows the response to financial planning services as we can see previously
people had availed 89 people responded they take advice for tax preparation, 82 responded for
taking advice on insurance planning while only 42 responded on taking services on investment
management advice,46 for planning financial goals .
Since with the change in trend and time constrain now people are willing to take financial
planning services in near future people show their keen interest in taking services on investment
advice total 94 responded to it in favor.79 responded on investment management services in near
future. Since people who already taken advice on insurance they still want to take advice in near
future 85 responded to take advice for security and risk cover for whole life.Since they already
prepare tax files through their representatives so most of people responded that they do not
require tar preparation services in future.

13. Investment in Mutual Funds in near future as comparison to other investment

avenues available

Investment in Mutual Funds

42% Yes
Yes No

Increasing in the returns and awareness in mutual funds people are now willing to invest in
mutual funds but they expect advice and guidance in investing in mutual funds since this trade is
still not full covered as financial advice by various advisory services provider so with increase in
the services and market trends people would invest heavily in mutual funds looking growth
prospect bright in this instrument.

• Criteria of People Invest in options less than 30% of their
total income
• People do tend to invest for long term purpose in order to
realize actual returns
• Still people prefer to invest in insurance schemes in order to
get returns as well cover life risk
• Majority of people take less or moderate risk while
• People still consider investment for tax saving option
• Among different investment options people prefer investing
more options like shares, insurance ,post office schemes etc
• People look investment for capital preservation and income
growth as criteria
• Majority of people prefer to invest in half yearly mode
• Personal financial planning advice is now being considered
by investors

• With increasing in awareness people now shifting their
preference toward mutual funds

Suggestion / Conclusion

 Now days people prefer to invest in securities which having

lesser risk and ensure returns so there is scope of mutual
funds to grow
 Mutual funds is still untapped so growth prospects are their
in this industry
 People now consider financial planning advice to attain
their objectives so services regarding financial products
have a larger scope
 Proper marketing and awareness of investment options
should be provided to customers





1. Name: 2. Age: _____

3. Sex: M/F 4. Educational Qualification__________________

5. Occupation Details:
Student Business-Man Professional
Retired House-Wife Any Other

6. Your Annual Income is between:

Up to 100000
Above- 500000

7 How much does u invest out of your monthly/annual income on an average?

Less than 30 %
30 % to 50 %
More than 50 %

8 What is time horizon of your investment?

1 year
3 years
3 to 5 years
5 years & above

9 Which of the following you have invested?
Shares/stock broking Bonds
Mutual Fund Post Office Schemes
Insurance Fixed Deposits
Gold Any other (specify)_______________

10. What is the reason for investing in different avenues?

Liquidity Safety
Returns Low risk
Tax benefit Others______________________

11. How much risk are you willing to take to achieve higher returns?

Very little Moderate amount A lot

1 2 3 4 5 6 7 8 9

12. Please Tick the following according to your preferences:

Very little Little Moderate More Most

preferred preferred preferred preferred preferred
Post office



13 What is your primary investment objective?

Capital Preservation
Growth of income or capital preservation.
Growth and Income (balanced):
Moderate Growth.
Maximum Growth:

14 How frequently do you review your investment decisions?

Half Yearly
One time

15 Will you need to liquidate portion of your investment portfolio over next five

No requirement to liquidate any portion of portfolio within 5 years

To liquidate between 0 % to 10 % of the investment portfolio within 5 years
To liquidate between 11 % to 20 % of the investment portfolio within 5 years
To liquidate between 21 % to 50 % of the investment portfolio within 5
To liquidate more than 51 % of the investment portfolio within 5 years

16 What financial planning services are you interested in?

Advisory Services Availed Future Interest

Investment management Y N Y N
Investment advice Y N Y N
Tax planning Y N Y N
Tax preparation Y N Y N
Retirement planning Y N Y N
Planning for life, long term Y N Y N
care insurance advice

Planning for other financial Y N Y N

Estate planning Y N Y N

17. Would you like to invest in Mutual Funds in near future as comparison to other
investment avenues available?

Yes No


Survey Analysis