A PROJECT REPORT ON

“A STUDY OF FINANCIAL PLANNING & INVESTMENT OF

INDIVIDUALS”
in

SUBMITTED BY

MS. DIVYA PRAKASH DHUMAL

UNDER THE GUIDANCE OF

Prof. Ekta Wayal
M.B.A. (Finance)
Submitted

SAVITRIBAI PHULE UNIVERSITY, PUNE

In the partial fulfillment of the requirement for the award of the degree of Master of
Business Administration.

Through THE PRINCIPAL,

Sharadchandra Pawar Institute of Management and Research, Someshwar
2023-24

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 GUIDE CERTIFICATE

This is certify that the project entitled, “A STUDY OF FINANCIAL PLANNING &

INVESTMENT OF INDIVIDUALS” is a benefited work prepared by under my guidance and

direct supervision and submitted to the Savitribai Phule University, Pune as a partial fulfillment

of the degree of Bachelor of Business Administration.

To the best of my knowledge and belief, the matter presented in this project has been submitted

earlier for the award of Master of Business Administration Degree of Savitribai Phule University

Pune.

Place: Someshwar Prof. Ekata Wayal

Date: Research Guide

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 DECLARATION

I the undersigned hereby declare that the project report entitled “A STUDY OF FINANCIAL

PLANNING & INVESTMENT OF INDIVIDUALS” written and submitted by me under the

guidance of Prof. Ekata Wayal. my original work.

The information given in this project report is based on the data collected by me during course of

Project Work. I have not copied from any other project submitted or being this year for similar

purpose.

I understand that any such coping is liable to be punished in any way, the institute

authorities deem fit.

Place: Someshwar (Ms. Divya P. D)

Research Student
Date:

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 ACKNOWLEDGEMENT

This project bears the imprint of many persons co-operation and it gives me great pleasure in
express here heartiest gratitude towards them.

First of all I will take this opportunity to offer my sincere gratitude to the branch manager.

My special thanks to our Principal Dr. A. Markale sir, as well as our Head of the Department
Miss for giving me the permission and support throughout my project work.

I also extent my particular thanks to my project guide Prof. wayal E. for constant
encouragement, valuable suggestions, guidance and advice.

I am also thankful to the teacher Prof. Wayal E. and Mr. Yogesh Shelar .who help me in one
way or other in successful completing the project.

I would like to convey my regards to my parents, and teacher and my friends support to me.

Place: Someshwar (Ms. Divya P. Dhumal)

Research Student
Date:

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 EXECUTIVE SUMMARY

Financial planning is process of accessing financial goals of individuals, taking of inventory of

money and other assets which the person have, determined life goals and then take necessary
steps to achieve goals in the stipulated period. It is method of quantifying person’s requirement
in terms of money.
It was great opportunity to work with Shubham Dhumal & CO CHARTERED
ACCOUNTANTS. CA SHUBHAM DHUMAL & Associates vision is to offer comprehensive
business and tax & Finance related services and assist enterprises & Individuals to tackle
complex situations in the fast changing scenarios of business with the power of rightful decision
making.
Today, India financial planning means only investing money in the tax saving instruments.
Thanks to the plethora of tax exemptions and incentives available under various sections and
subsections of the Income Tax Act.
Stock brokerages, investment fund and some government sponsor enterprises. Financial planning
is one such as advisory service, which is yet to get recognition from investor. Although financial
planning is not new concepts, its just needs to be conducted in organized manner. Today we
avail this insurance agent, mutual fund agent, tax consultancy, charted account etc. Different
agent provides different services and product oriented. Financial planner other hand is a service
provider which unable and individual to select proper product mix for achieving their goals.
The major things to be consider financial planning are time horizon to achieve life goals,
identified risk tolerance of client their liquidity need, the inflation which would it up loving and
decrease standard of living of need for growth and income. Keeping all this in mind financial
planning is done with six step process. These are self-assessment of client identified personal
goal, financial goals and objective, identified financial problems and opportunities, determine
recommendations and alternative solutions, implementation of appropriate strategy to achieve
goals and review update plan periodically
A good financial plan includes contingency planning, risk planning (insurance), Tax planning
and investment and saving option.

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 INDEX
Chapter Contains Page No.
1 INTRODUCTION TO FINANCIAL PLANNING 7
1.1 Significance of the study 8
1.2 Objective of the study 8
1.3 Study question 9
1.4 Hypotheses 9
1.5 Scope of the Study 9
1.6 Limitations of the Study 10
1.7 Data Collection
10
THEORETICAL BACKGROUND OF FINANCIAL PLANNING &
2 STUDY OF INDIVIDUALS 11
2.1 Introduction / Basic Concepts 11
2.2 Characteristics of Financial Planning 12
2.3 Nature & Scope 13
2.4 Advantages & Disadvantages of Financial Planning 16
2.5 Importance of Financial Planning
18
3 ORGANIZATION 19
3.1 Visions & Missions of the Organization 19
3.2 Staff Related Information 19
3.3 Services Offered By the Organization
20
INDIVIDUALS FUTURE GOALS & CREATE INVESTMENT
4 PLANNING 22
4.1 Defining Individuals future goals & create investment planning 22
4.2 Avenues of investment Products that gets mostly advised to investment 24
4.3 Making Diversification in portfolio with a help of risko meter: 32
4.4 Creating rules / ways to achieve individual’s SMART goals: 33
4.5 Best Advantages which gets to long-term investors: 36
4.6 Benefits of Long term Investments 36
4.7 Investment Strategies of Individuals: 39
4.8 Tax Savings Investment Planning:
48
5 FINDINGS, SUGGESTIONS & CONCLUSIONS 59
5.1 Findings: 59
5.2 Suggestions: 59
5.3 Conclusions:
59
6 BIBLIOGRAPHY 60

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 1. INTRODUCTION TO FINANCIAL PLANNING

Financial Planning is the process of meeting life goals through the proper management of
finances. Financial planning is a process that a person goes through to find out where they are
now (financially), determine where they want to be in the future, and what they are going to do
to get there. Financial Planning provides direction and meaning to person’s financial decisions. It
allows understanding of how each financial decision a person makes affects other areas of their
finances. For example, buying a particular investment product might help to pay off the
mortgage faster or it might delay the retirement significantly. By viewing each financial decision
as part of the whole, one can consider its short and long-term effects on their life goals. People
can also adapt more easily to life changes and feel more secure that their goals are on track.
In simple Financial Planning is what a person does with their money. Individuals have been
practicing financial planning for centuries. Every individual who received money had to make a
decision about the best way to use it. Typically, the decision was either spends it now or save it
to spend later. Everyone have to make the same decision every time they receive money. Does it
need should be spend now or to save it to spend it later?
Today, India financial planning means only investing money in the tax saving instruments.
Thanks to the plethora of tax exemptions and incentives available under various sections and
subsections of the Income Tax Act. This has led to a situation where people invest money
without really understanding the logic or the rationale behind the investments made. Further the
guiding force in investment seems to be the 'rebate' they receive from the individual agents and
advisors. The more the rebate an agent gives, the more smug person are in the belief that they
have made an intelligent decision of choosing the right agent who has offered them more rebate.
In the process what is not being realized is the fact that the financial future is getting
compromised.
Financial planning is not just about investments. There are many ways to use a business plan for
the duration of the economic period. You agree to manage your finances to relate them to your
goals and what you want to achieve. Making an independent investment in a life insurance
product doesn't mean anything if you don't know the amount of coverage needed, if the expired
product is adequate, or if life coverage is required.
In all the world, everyone earns money to achieve one or more of their life goals. People use the
money for pure purposes, like financing their daily expenses to buy exotic luxuries for a better
life. Payment can be recorded, accumulated, and increased to support various financial goals of
an individual or group. Such as education, life insurance, marriage, buying a house, retirement,

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and even the transfer of inheritance to the next generation of power on the market. The money
earned

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is used to finance some of the immediate expenses or a goal in the distant future. When the
payment is received to support one of the future objectives, it must invest optimally to offer the
maximum return and minimize costs and risks.

The individual's risk profile and time horizon of the goal and the taxation Aspects related to
personal finance. Since 2012 financial Planning is increasing day by day. The individual's risk
profile and time horizon of the goal and the taxation Aspects related to personal finance. Since
2012 financial Planning is increasing day by day.
Financial planning and investment of individuals are an integral part of any individual life,
especially in this modern world, where the value of everything is expressed in terms of money.
An active working span of human life is short as compared to the life span. It means people will
be spending approximately the same number of years after retirement what they have spent in
their active working life.
Thus, it becomes essential to save and invest while working so that people will continue to earn
money and enjoy a comfortable lifestyle.
Financial planning enables a person to identify their goals and objective, assess their current
position, and takes essential steps to achieve the goals and objectives. It helps us to understand
how the financial decisions made an effect on the life for us.
Financial planning - By proper financial planning, a person can have a comfortable and secure
economic life.

1.1 Significance of the study

The significance of the study is to achieve higher long-term returns, you have to be prepared to
accept or reject that the value of your investment may fall significantly in the short term. This is
because investments that provide higher returns are usually more volatile than those producing
Low returns. There is a trade-off between risk and return.

1.2 Objective of the study

 This project executed to know what is precisely the Financial Planning. How is it carried
out? Who carries it out? Why is it carried out? When it will be carried out? What is the
interest of carrying it out?
 To take an overview of the investor's short and long-term goals and objectives.
 To have the current financial strengths and weaknesses and effect of the financial plan for
the investor.
 To study the financial objectives anchored to current resources for the investor.
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  To give a particular summation of all recommendations.
 To suggest an appropriate financial plan for mutually selected recommendation
 To also give a comprehensive economic overview of the financial plan for the investor,
supported by financial statements and the other parties.
 To follow step by step enforcement and monitoring plan.

1.3 Study question

 What is the overview of the investors in short and long-term goals?

 What is the financial strengths and weakness the investors having to implement
financial planning?
 What the financial objectives of investor's anchored to current resources?
 What is the step for implementing and monitoring plans?

1.4 Hypotheses
 There is no significant of long and short-term goals.
 There is no significance of financial strengths and weaknesses that the investors had to
implement financial planning.
 What the financial objectives of an investor's anchored to current resources.
 What is the step for implementing and monitoring plans?

1.5 Scope of the Study

Individual financial planners are not just for wealthy people also for any individual wants to have
their own business. Every person can benefit from objective help to create, grow, accumulate,
and utilize wealth to fulfill one's personal goals, family goals, and another lifestyle objective
systematically without any concern. Financial planners can lead individuals to achieve their
ultimate purpose of spending retired life peacefully without compromising living standards and
the other issue. An eligible financial planner will provide advice on Systematic saving Cash flow
management, Debt management and Assets allocation of investment Managing risk through
insurance planning. Tax strategies to increase inventible surplus.
 Distribute residual wealth through estate planning. Systematic saving.
 Cash flow management. Debt management.
 The asset allocation of investment.
 We are managing risk through insurance planning.

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The financial planning is a profession for people with good communication skills combined with
knowledge of how the financial service industry works and deal. As a financial planner, he could
work for a bank, insurance company, or have his own practice. Most important is to understand
that the suitability of products you are guiding people to purchase based on their risk appetite,
age, and time frame of goals and objectives. Financial planners need to continually update
themselves on new products, services, and tax laws that might be good for their clients. This
field requires a lifetime of continuing education. A trusted financial planner can play an essential
role in life for people, helping them to achieve dreams such as owning a home, seeing their
children's education- marriage, and enjoy an active retirement.

1.6 Limitations of the Study

The project work mainly based on the mentioned sources of information.

Limitation of the investor in investing in a particular kind of asset-based on his / her age. Time

limitation.

1.7 Data Collection

The Primary Data: The primary data for the study has collected by surveying investor's
investment objectives and risk profile.
The Secondary Data: The secondary data includes information obtained from various sources,
which provides for Books, Magazines, Newspapers, websites, etc.

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 2. THEORETICAL BACKGROUND OF FINANCIAL PLANNING &

STUDY OF INDIVIDUALS

2.1 Introduction / Basic Concepts

It is the process of planning your investments and assets to help them attain their financial goals,
keeping in mind your risk profile. Financial planning lists the goals you want to achieve and
allows you to set in motion the investments you have to make to achieve them. For example, you
may want to purchase a house after 5 years, for which you may need Rs 50 lakhs. To save Rs.
50 lakhs for the house, effective financial planning would detail how much you should invest
and in which asset class to ensure that you have the amount in 5 years.
Smart financial planning can make or break your finance plans. Therefore, it is important
that the process is efficient, effective, and backed by tried and true strategies.

 Set Financial Goals:

This is the entire basis of financial planning. Whether

you are saving for a medical emergency or a big event such as marriage, your investment goals
should be specific. They should offer expected returns within the given time frame. And most
importantly, they should be realistic and achievable considering the current market and
economy.

 Invest your savings:

Financial planning introduces the habit of investing.
You should consider investing your savings in different asset classes such as mutual funds,
equities, etc., for capital appreciation. Once you start investing, you will start experiencing the
power of compounding and value appreciation.

 Diversify:

No investment is safe from the ups and downs of the market and the economy. You can consider
the following factors to ensure that you diversify your investments:
 To get assured returns and liquidity for emergencies, invest in the money market,
debt instruments, corporate FDs, and fixed deposits.
 For aggressive returns, investing in stocks is recommended. You can reduce the
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risk through investment in equity mutual funds.

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 Hedge risk with insurance:

Life is uncertain, and any unfortunate incidents might leave your loved ones without a
breadwinner. To ensure that they do not suffer from financial struggles in your absence, an
insurance policy is essential. You can choose from a variety of insurance plans such as life
insurance plans, term insurance plans, health insurance plans, etc.

 Be consistent:

Compounding acts as a powerful force in the world of investment. To make the best of it, start
investing early, and save regularly. Only then can you build a great portfolio that helps you
achieve all of your financial goals.

2.2 Characteristics of Financial Planning

 Simplicity

A financial plan should be so simple that it may be easily understood even by a layman. A
complicated financial structure creates complications and confusion.

 Based on Clear-cut Objectives

Financial planning should be done by keeping in view the overall objectives of the company. It
should aim to procure funds at the lowest cost so that profitability of the business is improved.

 Less Dependence on Outside Sources

A long-term financial planning should aim to reduce dependence on outside sources. This can be
possible by retaining a part of profits for ploughing back. The generation of own funds is the way
of financial operations. In the beginning, outside funds may be a necessity but financial planning
should be such that dependence on such funds may be reduced in due course of time.

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 Flexibility:

The financial plan should not be rigid. It should allow a scope for adjustments as and when new
situations emerge. There may be a scope for raising additional funds if fresh opportunities occur.
Similarly, idle funds, if any, may be invested in short-term and low-risk bearing securities.
Flexibility in a plan will be helpful in coping with the demands of the future.

 Solvency and Liquidity

Financial planning should ensure solvency and liquidity of the enterprise. Solvency requires that
short-term and long-term payments should be made on dates when these are due. This will
ensure credit worthiness and goodwill to the concern. Solvency will be possible when liquidity
of assets is maintained. There should be sufficient funds whenever payments are to be made.
Proper forecasting of future payments will be helpful in planning liquidity.

 Cost

The cost of raising capital is an important consideration in selecting a financial plan. The
selection of various sources should be such that the cost burden should be minimum. As and
when possible interest bearing securities should be returned so that this burden is reduced.

 Profitability

A financial plan should adjust various securities in such a way that profitability of the enterprise
is not adversely affected. The interest bearing securities and other liabilities should be so
adjusted that business is able to improve its profitability.

2.3 Nature & Scope

 Nature

1. Access Business Environment

Financial planning involves proper assessment of business environment for facilitating
efficient decision making. It properly evaluates nature of operations performed within the
organization for identifying the nature of business.

2. Clarify business Vision and Goals

It considers all aims and objectives of business before formulating any plans. Financial
planning focuses on enhancing the business profitability by acquiring funds at lowest cost.
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3. Determine the Capital Requirements
Financial planning properly analyses the capital requirements of business needed for
smooth functioning. It estimates both fixed and working capital needs of business for
carrying out its activities.

4. Decides Capital Structure

It determines the optimum capital structure for organization. Capital structure is the
proportion of debt and equity in capital of business. It involves deciding the debt-to-equity
ratio both in short as well as long term.

5. Frame Financial Policies

Financial planning is concerned with formulating policies related to raising, investment
and administration of business capital. It frames policies for controlling cash movements,
lending and borrowing by business.

6. Maintain Adequate Funds

Regulating right amount of funds at every point of time is must for every business.
Financial planning helps in maintaining proper amount of funds by raising it from distinct
sources timely.

7. Long-Term View
Financial planning is concerned with long-term view of company. It influences the pattern
of financing in long term and have major effects on all its future goals.

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 Scope

• Ensure Availability of Funds

Financial planning ensures availability of adequate funds within the business for smooth
functioning. It first estimates the capital requirements and then determines various sources
for procuring such funds.
• Reduces Uncertainties
It minimizes the chances of uncertainties for business by delivering the right amount of
funds at right time. Proper financial planning avoids any hindrance to the growth and
continuity of business.
• Avoids Unnecessary Funds
Financial planning avoids any chances of shortage and surplus of funds within the business.
It properly determines the funds requirements before raising them from distinct sources.
Both of these conditions that is shortage and surplus of funds adversely affects the
profitability of business.
• Proper Balance Between Funds Inflow and Outflow
It focuses on maintaining proper balance in between the cash inflow and outflows to ensure
optimum liquidity within the organization. Financial planning regulates all cash transactions,
lending and borrowing by business organization.

• Facilitates Growth and Expansion Programs

Financial planning assist business in fulfilling long term growth and expansion plans. This
guarantees the availability of required funds every time which support organization in
attaining its long-term goals.

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2.4 Advantages & Disadvantages of Financial Planning

 Advantages

 It Helps in Determining Financial Goals and Achieving Them

The primary aim of creating a financial plan is to decide the financial goals. The goal provides a
direction to achieve financial needs in a limited time. By focusing on goals, people are ten times
more likely to achieve their financial independence. But not all the financial plans are excellent
and provide sustainable results. However, if you have implemented well- researched and
SMART goals, you can surely obtain the same as you wish.

 Keep Your Future Safe From Uncertainty:

You can use several investment options in financial planning, from the money market to the
share market. You can keep some money in savings and fixed accounts, get some bonds of a
good company and buy some potential equity shares. You can consider investing in real estate,
gold, and even in mutual funds along with these investment options. By considering the best for
you, you can secure your futuristic financial needs. Hence, it is also a significant advantage of
financial planning that you can consider.

 You Stay Prepared For Upcoming Challenges:

You don’t know what will happen in the future; you can just do things to face such uncertain
risks. Hence, you want to survive by facing medical emergency needs, marriage expenses,
accident losses, or any other risk. Then having a robust financial plan can help you a lot to do the
same. Also, if you have a financial plan, you stay active to face any situation that we have
discussed. As you are preparing your plans for the same and secure your post-retirement life.

 Positive Impact on Your Mental Health:

Another benefit of preparing a financial plan is that you enjoy good mental health. Because it
was proven in a survey that showed over 80 percent of people felt better just after one year from
the date of writing their financial needs. By having your financial goal, you do not need to worry
much about fulfilling your needs. You just followed the schedules you wrote and promised to
implement them promptly. People are willing to improve their mental health status by reducing
tension about financial needs. They can prepare their financial plan by optimizing their expenses
and incomes.

 It Covers Beginning to End of Your Life:

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The significant advantage of financial planning is that it covers your life’s initial stage to post-

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retirement time. Hence, whether you need a home, car, medical expenses, and funds to spend
your post-retirement life. By making your ideal financial plan, you can achieve all these things
for your stable and wealthy life. It can also be divided into short-term and long- term goals. So
you can decide the proportion of savings from your current earnings.

 Disadvantages:

 It Just An Estimate With Prediction:

Planning always contains a top portion of looking forward to the future. And if you consider only
planning lots of stuff without looking at the past. Then there are high chances you will suffer
from poor results. Hence, the major disadvantage of financial planning is, it is just a prediction of
the future. That may or may not be accurate in terms of the expected outcome. Therefore, while
preparing a financial goal, one needs to consider various factors as well.

 Future Is Uncertain To Get Correct Outcome:

The future is uncertain, and it can make your investment double or reduce its worth by half of it.
And when the thing does not happen as you expected, then you can suffer from a loss. Therefore,
many times relying entirely on the financial plan may not be safe for you. In that case, having
another source of earnings can help you in minimizing that uncertain loss. Hence, another
disadvantage of financial planning in the future is uncertainty, but it is planned based on
assumptions.

 It’s A Time Taking Process For An Individual:

It is not an easy task to build a sustainable financial goal with the proper approach. You may
need to consult with a finance expert or have to go through several resources. And all these
activities will consume lots of time that you can utilize somewhere else for good deals. However,
if you make a financial goal without research, there is no benefit to your goals. Because you are
putting yourself at significant risk without making a wise and research full decision.

 Financial Planning Needs Continuous Check:

Once you have created the financial goal and the way you are going to utilize it. Then you will
also have to give some time for timely monitoring. So you can check whether the plans are
working in the right direction or not. You can also decide whether your financial goal is
overpromising or under-promising. Hence, it also requires a timely check for all the activities
you execute under your financial plan.

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2.5 Importance of Financial Planning

 It provides direction to your goals or dreams. Financial planning helps you understand your
goals better in terms of why you need to achieve these goals and how they impact other
aspects of your life and finances.

 Planning encourages you to manage inflation. You are aware of the price of various
things and activities. You plan your budget in a better manner.

 Financial planning makes you disciplined towards money. You do not spend unnecessarily.
You keep a check on your savings and spending.

 By planning your finances, you plan for the future. You are able to gain visibility into your
finances in the future. You have a fair idea of how much money would you have, say ten
years down the line. You would be aware of the returns your investments should earn to
achieve your goals.

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 3. ORGANIZATION

3.1 Visions & Missions of the Organization

CA Yogesh Shelar & Associates mission is always to strive to be front-runners in our profession
and be a one stop value additive service. Guiding our actions, these values each of which are
closely interconnected, reflect what we shall be known for in our industry.
The dedication & sincerity of its partners and staff give it an edge over other Chartered
Accountants firms.

Traditional CA Practices were mainly focused around the regulatory requirements of Financial
Services, audit and tax. The profession and its practice have gradually evolved from being mere
regulatory compliance support to playing an active role in clients' businesses through broad-
ranging support and advisory functions.
Our practice focus is management support services that are geared towards growing and
strengthening our client's business, where we work in tandem with the owners & management.
We are a group of trusted professionals working ethically acting on a broad range of Financial
Advices, Audit, Tax and statutory requirements with our clients.
CA Yogesh Shelar & Associates vision is to offer comprehensive business and tax & Finance
related services and assist enterprises& Individuals to tackle complex situations in the fast
changing scenarios of business with the power of rightful decision making.
We seek to build strong and lasting relationships with our clients by providing them quality
services which are personalized, reliable and value driven Commitment to provide:

 Quality, cost-effective service

 Continuous accessibility
 Sound Investing &business related advice
 High ethical and professional standards

3.2 Staff Related Information

While Doing Study in the Organization everyone from staff is lots of helped me to a good
projects & collection of Data. In the Firm total 10 Assistant / Staff Members Works In the
organizations. Some are Students, Working as a articles & Some has good experienced assistance
that helped me lot to collects data

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3.3 Services Offered By the Organisation

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 4. INDIVIDUALS FUTURE GOALS & CREATE INVESTMENT

PLANNING

4.1 Defining Individuals future goals & create investment

planning Step #1: Assess Your Current Financial Situation

The first step in making an investment plan for the future is to define your present financial
situation. You need to figure out how much money you have to invest. You can do this by
making a budget to evaluate your monthly disposable income after expenses and emergency
savings. This will allow you to determine how much you can reasonably afford to invest.
It’s also important to consider how accessible, or liquid, you need your investments to be. If you
might need to cash in on your investment quickly, you would want to invest in more liquid
assets, like stocks, rather than in something like real estate.

Step #2: Define Financial Goals

The next step in making an investment plan is to define your financial goals. Why are you
investing? What are you hoping to earn money for? This can be anything from buying a car in a
few years to retiring comfortably many years down the road.
You must also define your goal timeline, or time horizon. How quickly do you want to make
money from your investments? Do you want to see quick growth, or are you interested in seeing
investment growth over time?
All of your goals can be summed up in three main categories: safety, income and growth. Safety
is when you are looking to maintain your current level of wealth, income is when you want
investments to provide active income to live off of and growth is when you want to build wealth
over the long term. You can determine the best investment path for you based on which of these
three categories your goals fall into.

Step #3: Determine Risk Tolerance and Time Horizon

The next step in crafting your investment plan is to decide how much risk you are willing to
take. Generally speaking, the younger you are, the more risk you can take, since your portfolio
has time to recover from any losses. If you are older, you should seek less risky investments and
instead invest more money upfront to spur growth.
Additionally, riskier investments have the potential for significant returns – but also major
losses. Taking a chance on an undervalued stock or piece of land could prove fruitful, or you
could lose your investment. If you are looking to build wealth over years, you may want to
choose a safer investment path.
Determining your time horizon is fairly simple compared to its risk counterpart. The term
essentially means about when do you want to begin pulling from your investments for your
ultimate financial goal. For the vast majority of Americans, time horizon is basically
synonymous with retirement.
By figuring out your risk tolerance and time horizon, you can build a reliable asset allocation for
yourself. This entails taking your investor profile, figuring out what you should invest in and
what percentage of your overall portfolio each investment type should take up. Try using Smart
Asset’s to get started.

Step #4: Decide What to Invest In

The final step is to decide where to invest. There are many different accounts you can use for
your investments. Your budget, goals and risk tolerance will help guide you towards the right
types of investment for you. Consider securities like stocks, bonds and mutual funds, long- term
options like 401(k) plans and IRAs, bank savings accounts or CDs, and 529 plans for education
savings. You can even invest in real estate, art and other physical items.
Wherever you device to invest, make sure to diversify your portfolio. You don’t want to put all
of your money into stocks and risk losing everything if the stock market crashes, for example.
It’s best to allocate your assets to a few different investment types that fit in with your goals and
risk tolerance in order to maximize your growth and stability.
Once you reach this step in the process, it may be appropriate to find a financial advisor. An
advisor can help you determine the best ways to invest your money based on your current
financial situation and goals.

Step #5: Monitor and Rebalance Your Investments

Once you have made your investments, it’s not wise to just leave them alone. Every so often,
you should check in to see how your investments are performing and decide if you need to
rebalance. For example, maybe you aren’t putting enough money into your investments monthly
and you aren’t on track to reach your goals, or maybe you’re depositing more than you need to
and you’re
 ahead of schedule. Maybe you want to move your money to a more stable investment as you get
closer to achieving your long-term goals, or maybe your investments are performing well and
you want to take on even more risk to reach your goals sooner.
Once you feel like your investment plan is in good shape, you’ll want to consider rebalancing
your portfolio. This involves bringing your portfolio’s composition back to its intended asset
allocation. For instance, let’s say your stock investments performed much better than the rest of
your portfolio. In order to keep your proper asset allocation in place, it may make sense to sell
some of your stocks and redistribute that money to other investment types. These could include
bonds, CDs, ETFs and more.

4.2 Avenues of investment Products that gets mostly advised to investment

Mutual Funds

Commodities Equity Shares

Avenues of investment Products

Debentures
& Bonds
Real Estate

Insurance
Investment in Post office & Deposits Schemes
Money Market
Instruments
a) Mutual Funds

Mutual funds are an easy and tension-free investment, and they automatically diversify the
investments. A mutual fund is an investment only in debt or equity or a mix of debts and equity
and ratio depending on the scheme. They provide benefits such as a professional approach,
benefits of scale, and convenience. Further investing in a mutual fund will get the advantage of
professional portfolio management services at a lower cost, which otherwise was impossible. In
the case of an open-ended mutual fund scheme, a mutual fund gives investors assurance that a
mutual fund will provide support to the secondary market. There is absolute transparency about
investment performance to investors. On a real-time basis, investors are informed about the
performance of the investment. In mutual funds also, we can select among the following types of
portfolios.

 Equity Schemes

 Debt Schemes

 Balanced Schemes

 Sector Specific Schemes etc.

b) Equity Shares

Equity investments represent ownership in a running company. By ownership, we mean to share

in the profits and assets of the company, but generally, there are no fixed returns. It is considered
a risky investment, but at the same time, depending upon the situation, it is a liquid investment
due to the presence of stock markets. There are equity shares for which there is regular trading;
for those investments, liquidity is more otherwise; liquidity is not highly attractive for stocks
with less movement. Equity shares of companies can be classified as follows:

 Blue-chip scrip
 Growth scrip
 Income scrip
 Cyclical scrip
 Speculative scrip

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c) Debentures & Bonds

Debentures or bonds are long-term investment options with a fixed stream of cash flows
depending on the quoted interest rate. They are considered relatively less risky. The amount of
risk involved in debentures or bonds depends on who the issuer is. For example, if a government
makes the issue, the risk is assumed to be zero. However, investment in long-term debentures or
bonds has risks in terms of interest rate risk and price risk.

Suppose a person requires an amount to fund his child’s education after five years. He is
investing in a debenture, with a maturity period of 8 years, annually with coupon payment. In
that case, there is a risk of reinvesting coupons at a lower interest rate from the end of year 1 to
the end of year five, and there is a price risk for an increase in the rate of interest at the end of the
fifth year, in which price of a security falls. In order to immunize risk, investment can be made
as per the duration concept. The following alternatives are available under debentures or bonds:

 Government securities

 Savings bonds

 Public Sector Units bonds

 Debentures of private sector companies

 Preference shares

d) Insurance Schemes

They are one of the crucial parts of good investment portfolios. Life insurance is an investment
for the security of life. The main objective of other investment avenues is to earn a return, but the
primary goal of life insurance is to secure our families against the unfortunate events of our
death. It is popular among individuals. Other kinds of general insurance are helpful for
corporates. There are different types of insurance which are as follows:

 Endowment Insurance Policy

 Money Back Policy

 Whole Life Policy

 Term Insurance Policy

 General Insurance for any kind of assets.

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e) Money Market Instruments

Money market instruments are like debentures, but the time period is less. It is generally less
than one year. Corporate entities can utilize their idle working capital by investing in money
market instruments. Some of the money market instruments are

 Treasury Bills

 Commercial Paper

 Certificate of Deposits

f) Real Estate

Every investor has some part of their portfolio invested in real assets. Almost every individual
and corporate investor invests in residential and office buildings. Apart from these, others
include:

 Agricultural Land

 Semi-Urban Land

 Commercial Property

 Raw House

 Farm House etc.

g) Investments in post office & Deposits

This type of investment is more preferable for those people whose risk is less & need surety
of returns from investing. Mostly in this schemes everyone gets fixed types of returns as
mentioned in his particular scheme of investment. Following products are offered to invest in
post office schemes:

 Post Office Savings Account(SB)

 National Savings Recurring Deposit Account(RD)

 National Savings Time Deposit Account(TD)

 National Savings Monthly Income Account(MIS)

 Senior Citizens Savings Scheme Account(SCSS)

 Public Provident Fund Account(PPF )

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 Sukanya Samriddhi Account(SSA)

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h) Investments in Commodities

A commodity is an asset class or a group of assets that are most likely used by you in your
everyday life, such as oil, metals, spices, pulses, etc. They can be mainly categorized as movable
goods that anyone can purchase or sell, except for actionable claims or money. Basically there
are so many commodities are available to invest in commodities & gain good percentage of
returns from it. Investing in commodities are good option to diversify the portfolio from risk
because in commodity prices are not fluctuate more. We have seen good example

When covid-19 impacts whole global market get down to bottom then commodities like gold,
silvers are gives some kinds of positive returns. Followings are types of commodities that we can
invest in market

Metals and Materials Precious metals and materials

Agriculture

Grains Base Metals Gold

Bulk Commodities
Oil and oilseeds Silve

Other Platinum
Spices

Palladium
Pulses Pulses

Energy

Natural Gas Crude Oil Brent Crude

Thermal Coal Alternate Energy

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i) Creating a risk profile riskometer of every clients

Every investor has a unique perception of risk. Therefore, measuring the risk appetite of an
investor is vital for risk profilers. They do this to ensure that you are not sold a riskier mutual
fund than you can handle. To measure your risk appetite, risk profilers evaluate your need,
ability, and willingness to take a risk.Your 'need' to take risks arises when you aim for higher
returns to reach certain financial goals. Similarly, your ability to take risks depends on your
financial profile (like your remuneration, number of dependents and more) and the investment
horizon. Lastly, your willingness to take a certain amount of risk depends on how much risk you
can psychologically handle. A mutual fund distributor can choose various methods to evaluate
your risk profile based on these.

j) The risk profile of mutual funds

Now that your risk profile is evaluated, it can be matched with that of the mutual fund you wish
to invest in. The risk profile of a scheme is the degree of risk attached to the principal invested.
For this, you can refer to the risk profile disclosure on the first page of a mutual fund's scheme
information document (SID). To better understand, you can also refer to the pictorial
representation of your fund's risk profile in the riskometer.

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k) Risko Meter
A riskometer defines the risk to the invested principal in a pictorial form. It is a 180- degree line
with an arrow pointing at a particular risk category or level. The risk levels mentioned on the
riskometer starting from its left to the right side are as follows:

 Low
 Low to Moderate
 Moderate
 Moderately high
 High
 Very High

 Looking at these categories, you can understand the risk to your principal

 Looking at the lower risk level, there can be non-equity based mutual funds, particularly
those offering higher liquidity—for example, liquid mutual funds and overnight funds.
 Then, there are funds with moderately low risk. These schemes can invest in debt, fixed-
income and certain equity-based securities—for example, fixed maturity plans, debt-oriented
schemes involving capital protection and certain arbitrage funds
 Going one level ahead to the moderate risk category, conservative monthly income plans
and income funds are examples of the moderate risk category
 Next, there is the moderately high-risk category. Index funds, ETFs (Exchange Traded
Funds) and solution-oriented funds are examples of funds that come under the moderately
high-risk level.

 Sectorial or thematic funds are examples of high-risk funds.

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How to use risk profiling?

You can align your mutual fund risk profile for effective financial planning based on your own
risk appetite. This can differ from one goal to another. For example, if your goal is to create an
emergency corpus, you need higher liquidity and lower short-term risk. Therefore, you can
invest in a liquid fund.
On the other hand, if your goal is retirement planning, and you have ample years in hand, you
can invest in a fund with moderately high risk or more if you are willing to do so.
There is age also matter if you are younger then your risk profile maybe Moderate to high &
if you are older then your risk profile maybe a moderate to low on left side of meter.

Risk V/S Returns

Every individual has their own risk taking capacity. Your risk-return profile is your level of risk
tolerance. If you invest in a high risk business like a startup firm your risk would be high.
Thereare three types of risk return profiles which you can fall under depending upon your source
of funds and the investments you choose to make. They are:

1 Conservative i.e. you take minimal risks ensuring your funds are secure. You prefer
investing in post office deposit schemes, bank fixed deposits, government bonds
2 Moderate i.e. you are willing to take some risks and prefer investing in mutual fund
schemes
3 Aggressive i.e. you are willing to take high risks and prefer investing in equity,
commodities markets and you may even be speculating for returns.

There is an important investment principle which says the level of your returns depends on the
level of risk you take. While you stay invested it is crucial you take necessary measures to
manage your risk. Once you invest in any asset class you should monitor your investments and
keep yourself updated about various market happenings to avoid any pitfalls. Always check the
potential risks when quoted returns are unusually high.

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4.3 Making Diversification in portfolio with a help of risko meter:

Diversification is a technique that reduces risk by allocating investments across various financial
instruments, industries, and other categories. It aims to maximize returns by investing in
different areas that would each react differently to the same event.

Most investment professionals agree that, although it does not guarantee against loss,
diversification is the most important component of reaching long-range financial goals while
minimizing risk. Here, we look at why this is true and how to accomplish diversification in your
portfolio.

A diversified portfolio is a collection of investments in various assets that seeks to earn the
highest plausible return while reducing likely risks. A typical diversified portfolio has a mixture
of stocks, fixed income, and commodities. Diversification works because these assets react
differently to the same economic event.

Key Takeaways

 You receive the highest return for the lowest risk with a diversified portfolio.
 For the most diversification, include a mixture of stocks, fixed income, and commodities.
 Diversification works because the assets don't correlate with each other.
 A diversified portfolio is your best defense against a financial crisis.

In a diversified portfolio, the assets don't correlate with each other. When the value of one rises,
the value of another may fall. The mixture can lower overall risk because, no matter what the
economy does, some asset classes will benefit. That can offset losses in the other assets. Risk
is also reduced because it's rare that the entire portfolio would be wiped out by any single event.
A diversified portfolio is your best defense against a financial crisis.

How Diversification Works

Stocks do well when the economy grows. Investors want the highest returns, so they bid up the
price of stocks. They are willing to accept a greater risk of a downturn because they are
optimistic about the future.
Bonds and other fixed-income securities do well when the economy slows. Investors are more
interested in protecting their holdings in a downturn. They are willing to accept lower returns for
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that reduction of risk. The prices of commodities vary with supply and demand. Commodities
include wheat, oil, and gold. For example, wheat prices would rise if there is a drought that limits
supply. Oil prices would fall if there is excess supply. As a result, commodities don't follow the
phases of the business cycle as closely as stocks and bonds do.

4.4 Creating rules / ways to achieve individual’s SMART goals:

Investment goals address three major themes regarding money and money management. First,
they intersect with a life plan that engages our thought processes in unexpected ways. Second,
they generate accountability, forcing us to review progress on a periodic basis, invoking
discipline when needed to stay on track. Third, they generate motivation that impacts our non-
financial selves in positive ways that can improve health and mental outlook.

Once established, the investment plan forces you to think about sacrifices that need to be made
and budgets that need to be balanced, understanding that delay or failure will have a direct and
immediate impact on your wealth and lifestyle. This process induces long-range thinking and
planning, allowing you to abandon a hand-to-mouth approach and set a priority list for the things
in life you truly value.

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Use monthly or quarterly statements to review progress and recommit to your chosen life plan,
making small adjustments rather than big changes when money flow improves or deteriorates.
Review your annual returns periodically, and enjoy seeing your wealth grow without direct
intervention or a holiday check from a relative. Learn to deal with losing periods in a mature
manner, using the red ink to build patience while reexamining how your decision-making may
have impacted those negative returns.

The Australian Investors Association recommends using the SMART format when setting
investment goals.

Here are the elements:

Specific – make each goal clear and specific.

Measurable – frame each goal so that you know when you have achieved it.

Achievable – you need to take practical action to achieve a goal.

Relevant – determine whether your goals relate to your life and are realistic.

Time-based – assign a timeframe to each goal so you can track progress.

A critical first step in managing your finances is to be able to setup SMART financial objectives.
Your goals have to be S (specific), M (measurable, motivated), R (realistic, resource-based), and
T (time-bound, can be monitored). Many people make the mistake of setting general goals which,
more often than not, will not materialize.

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Objectives Goals Incorrect Approach Right Approach

Specific You need to know I need money to pay my I will save the money
exactly what you college fees in a of Rs. 50,000 to
want and when year’s time pay my fees at
college
Measurable Your goal should be I will pay off my debts to In the next six months, I
measurable so that you my friends will return Rs 3000 to
know when you can my
achieve it two friends for
lending me their
money.
Attainable Your goals should beI will save money. I will save Rs.2,000
reasonable i.e. within each month by cutting
your reach down on eating out
and partying.
Realistic Your goals need to be If I save money I will If I save regularly, need
based on resources be rich. not borrow more
and tasks that you can money, I can pay off my
reasonably accomplish. debts by next year and
will have enough
savings
till I begin to earn.
Time-bound Goals with timelines I will save money for my I will save Rs.10000
allow you to track your vehicle. a year
progress and encourage for the next 2 years
you to keep going for my vehicle.
until you reach your
goal

Start by writing a document or journal that lists each investment goal and how you’ll measure
progress. List as much detail as possible, considering both short-term and long- term objectives.
Let's say you want to save for retirement but also plan to own a home in a safe neighborhood,
with enough cash left over for an occasional vacation. Now review your current financial
situation, noting how well you’ve handled money to this point and the steps you’re willing to
take to achieve that list of goals.

It may be premature to consider the practical actions required or time frames needed to mark
progress if your investment goals are unrealistic, outlandish or don’t match your current or
expected earnings power. You can dream about fulfilling life’s desires, but investment planning
requires a brutal reality check before executing the needed action plan. Simply stated, if the plan
doesn’t match your reality or your goals, throw it away and start over. Concentrate on baby steps
rather than broad-brush daydreams.
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Page 37
A small 401(k) contribution may be all that’s needed to get the investment plan on track during
its infancy. Employers sometimes match your contribution to a certain level, which allows you to
eventually think about more sophisticated planning. Financial advisors recommend you allocate
the maximum allowed whenever possible although that’s unrealistic for many young people just
starting out in their careers. This is especially true with the enormous burden of student loans
incurred by people born after 1990.

4.5 Best Advantages which gets to long-term investors:

We all earn money through various sources and jobs. Our jobs, salaries and everything else is a
good thing to have, but it will not be wise to depend on just your salary. Therefore, many
companies, banks, and other financial institutes ask you to invest a small part of your salary.

Some of the prominent investments which are encouraged across financial institutes are equities
and mutual funds in various ways. Mutual funds and share market are somewhat interconnected
and these investments vehicles are known to give you higher returns provided you do them right.

There are many considerations and strategies used to earn fast profits from share markets like
intraday trading. This way of trading might sometimes lead to losses as they are very short time
and there is no proven method to guarantee profits. Although, other people who invest in share
markets, SIPs, and mutual funds always advise to believe in holding shares or fund for the long
term.

But what does long-term actually mean in share markets and mutual funds in India? We
understand that mutual funds and stock market are sometimes in a volatile situation but if you let
the money stay, you will start seeing the growth in the right direction. You just have to find the
best mutual funds to invest in for long-term and see the magic happening.

Again, we are all back to the same question of what is a long-term investment and why is it a
wise word among the experts. In this article, we will cover your questions and also acquaint you
with the benefits of making a long-term investment in share market and mutual funds.

4.6 Benefits of Long term Investments

There are various benefits of long-term investments. Time is money and long-term investments
are the proof of that. Your short term investment goals might be solid, but the chances of success
are a little less. With long-term investments not only help you reap proper profits but also gives
you time to correct the investment mistake if any. And, it is bound to happen for sure if you are a
newbie or someone who might have misinterpreted a few facts.

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The following 5 benefits of long-term investments in the stock market and mutual funds.

1. The Power of Compounding:

Time is an influential factor when it comes to investments. Your returns depend upon the time
you enter and exit. Compounding is a concept which when followed with dedication gives great
rewards. However, it rewards better when savings are compounded over longer horizons.
Compounding, in short, basically means earning interest on previously earned interest. Let us
look at an example:

If you set aside a sum of say Rs 5,000 every month from the age of 25, at a return interest rate of
10%, in 60 years you will have with you funds worth about Rs 1 crore (Rs 10 million) and more.
However, if you start at 40 with the same amount and return rate of interest, the retirement fund
will amount to only around Rs 33 lakh (Rs 3.3 million). Consider you invest Rs 100 for a period
of 5 years.

People who are just starting out or very new to markets might feel that the power of
compounding is just another share market or mutual fund jargon. But, that is not the case. It is
how the whole mutual fund and overall investment scenario works out. Another thing to take
complete advantage of the power of compounding is to start investing early. You will be
surprised to see the returns.

Buying stocks for the long term allows you to take advantage of compounding, or the ability to
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reinvest your profits (e.g., dividends) over time to generate even greater profit potential. Time is
your greatest friend as an investor, and being able to reinvest a dividend at 3% can make a major
difference in your wealth come retirement. As an example, simply pocketing a 3% yield will
double your money about every 33 years, assuming no dividend or stock price growth. If
reinvested back into more shares of the same stock, your investment would double in almost 10
fewer years!
2. Time Period:

The time period seems like a secondary term, but it is not. The amount of time you invest
ensures more and more success. Be it achieving a life goal or financial goal, the amount of
success you achieve is directly proportional to the time period you invest in it. If you invest for a
short time, you may not reap enough profits or capitalize on the opportunity. Also, it takes time
for a stock or mutual fund to reach the peak and it is around 5-7 years roughly. Moreover, you
give substantial time for your stock or mutual fund to grow in long term investment.

3. Diversified Portfolio:

Yes, diversification of your investment can ensure maximum profits. It is simple to understand.
Let us say you have 6 eggs in one basket and you lose the basket, what happens? You lose your
eggs. Therefore, it is always wise to not put all the eggs in one basket. This is the exact strategy
you need to apply with your investments. With long-term investments, you get to do this much
more effectively than it sounds. You get time to think, monitor current investments and look
forward to making investments as per your current portfolio.

4. Rectifying investment mistakes

Sometimes, being a beginner a few technicalities are lost in the time and we expect to win profits
if we see a stock price rising. Long term investments give you a chance to keep an eye on them
and check out your options to maximize your returns. Also, if you see a steep drop in stock
prices which you bought after seeing the rising prices, you now know that it would have been a
good short-term investment and vice versa. So, next time, you will realize the requirement and
accordingly make the decision.

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5. Risk drop

Yes, the risk of losing your investment is way too less in long term investments than short term
investments. Ask how? Here it is. The fluctuations in the market in a short time are way too
much to gauge the performance of your stock and mutual fund. When you plan to trust short
term investment you also increase the risk of losing your money over fluctuations. Although,
with long term investments, the price of your stock is bound to grow and you also get time to
expand your portfolio to balance loses if needed.

In the end, what matters is you understanding your money and investing in a vehicle which will
ensure good returns over time. You can invest in some of the standard company stocks to make
sure your investment is in the right hands. Take a look around, see what is happening and make
the decisions based on facts and information. If you want to steer clear of all these obligations,
go for a long-term investment plan which is sure to help you reach your financial goals and not
much of a threat to your pockets in the long run too.

4.7 Investment Strategies of Individuals:

Before you begin to research your investment strategy, it's important to gather some basic
information about your financial situation. Ask yourself these key questions:

 What is your current financial situation?

 What is your cost of living including monthly expenses and debts?
 How much can you afford to invest—both initially and on an ongoing basis?

Even though you don't need a lot of money to get started, you shouldn't start investing until you
can afford to do so. If you have debts or other obligations, consider the impact investing will
have on your short-term cash flow before you start putting money into your portfolio.

Next, set out your goals. Everyone has different needs, so you should determine what yours are.
Are you saving for retirement? Are you looking to make big purchases like a home or car in the
future? Are you saving for your or your children's education? This will help you narrow down a
strategy as different investment approaches have different levels of liquidity, opportunity, and
risk

Next, figure out what your risk tolerance is. Your risk tolerance is determined by two things.

Page 41
First, this is normally determined by several key factors including your age, income, and how
long you

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have until you retire. Investors who are younger have time on their side to recuperate losses, so
it's often recommended that younger investors hold more risk than those who are older.

Risk tolerance is also a highly-psychological aspect to investing largely determined by your

emotions. How would you feel if your investments dropped 30% overnight? How would you
react if your portfolio is worth $1,000 less today than yesterday? Sometimes, the best strategy for
making money makes people emotionally uncomfortable. If you're constantly worrying about the
state of possibly losing money, chances are your portfolio has too much risk.

Finally, learn the basics of investing. Learn how to read stock charts, and begin by picking some
of your favorite companies and analyzing their financial statements. Keep in touch with recent
news about industries you're interested in investing in. It's a good idea to have a basic
understanding of what you're getting into so you're not investing blindly.

Strategy 1: Value Investing

Value investors are bargain shoppers. They seek stocks they believe are undervalued. They look
for stocks with prices they believe don’t fully reflect the intrinsic value of the security. Value
investing is predicated, in part, on the idea that some degree of irrationality exists in the market.
This irrationality, in theory, presents opportunities to get a stock at a discounted price and make
money from it.

It’s not necessary for value investors to comb through volumes of financial data to find deals.
Thousands of value mutual funds give investors the chance to own a basket of stocks thought to
be undervalued. The Russell 1000 Value Index, for example, is a popular benchmark for value
investors and several mutual funds mimic this index.

For those who don’t have time to perform exhaustive research, the price-earnings ratio (P/E) has
become the primary tool for quickly identifying undervalued or cheap stocks. This is a single
number that comes from dividing a stock’s share price by its earnings per share (EPS). A lower
P/E ratio signifies you’re paying less per $1 of current earnings. Value investors seek companies
with a low P/E ratio.

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Page 44
Who Should Use Value Investing?

Value investing is best for investors looking to hold their securities long-term. If you're investing
in value companies, it may take years (or longer) for their businesses to scale. Value investing
focuses on the big picture and often attempts to approach investing with a gradual growth
mindset.

Pros and Cons - Value Investing

Pros
 There's long-term opportunity for large gains as the market fully realizes a

value company's true intrinsic value.

 Value companies often have stronger risk/reward relationships.
 Value investing is rooted in fundamental analysis and often supported by financial metrics.
 Value companies are more likely to issue dividends as they aren't as reliant on cash
for growth.

Cons
 Value companies are often hard to find especially considering how earnings can

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be inflated due to accounting practices.

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  Successful value investments take time, and investors must be more patient.
 Even after holding long-term, there's no guarantee of success - the company may even be
in worse shape than before.
 Investing only in sectors that are underperforming decreases your portfolio's
diversification.

Strategy 2: Growth Investing

Rather than look for low-cost deals, growth investors want investments that offer strong upside
potential when it comes to the future earnings of stocks. It could be said that a growth investor is
often looking for the “next big thing.” Growth investing, however, is not a reckless embrace of
speculative investing. Rather, it involves evaluating a stock’s current health as well as its
potential to grow.

A drawback to growth investing is a lack of dividends. If a company is in growth mode, it often

needs capital to sustain its expansion. This doesn’t leave much (or any) cash left for dividend
payments. Moreover, with faster earnings growth comes higher valuations, which are, for most
investors, a higher risk proposition.

While there is no definitive list of hard metrics to guide a growth strategy, there are a few factors
an investor should consider. Research from Merrill, for example, found that growth stocks

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outperform during periods of falling interest rates. It's important to keep in mind that at the first
sign of a downturn in the economy, growth stocks are often the first to get hit.

Growth investors also need to carefully consider the management prowess of a business’s
executive team. Achieving growth is among the most difficult challenges for a firm. Therefore,
a stellar leadership team is required. At the same time, investors should evaluate the competition.
A company may enjoy stellar growth, but if its primary product is easily replicated, the long-
term prospects are dim.

Pros and Cons - Growth Investing

Pros
 Growth stocks and funds aim for shorter-term capital appreciation. If you make profits, it'll
usually be quicker than compared to value stocks.
 Once growth companies begin to grow, they often experience the sharpest and greatest
stock price increases.
 Growth investing doesn't rely as heavily on technical analysis and can be easier to begin
investing in.
 Growth companies can often be boosted by momentum; once growth begins, future periods
of continued growth (and stock appreciation) are more likely.

Cons
 Growth stocks are often more volatile. Good times are good, but if a company isn't
growing, its stock price will suffer.
 Depending on macroeconomic conditions, growth stocks may be long-term holds. For
example, increasing interest rates works against growth companies.
 Growth companies rely on capital for expansion, so don't expect dividends.
 Growth companies often trade at high multiple of earnings; entry into growth stocks may
be higher than entry into other types of stocks.

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Strategy 3: Momentum Investing

Momentum investors ride the wave. They believe winners keep winning and losers keep losing.
They look to buy stocks experiencing an uptrend. Because they believe losers continue to drop,
they may choose to short-sell those securities.

Momentum investors are heavily reliant on technical analysts. They use a strictly data-driven
approach to trading and look for patterns in stock prices to guide their purchasing decisions. This
adds additional weight to how a security has been trading in the short term.

Momentum investors act in defiance of the efficient-market hypothesis (EMH). This hypothesis
states that asset prices fully reflect all information available to the public. A momentum investor
believes that given all the publicly-disclosed information, there are still material short-term price
movements to happen as the markets aren't fully recognizing recent changes to the company.
Despite some of its shortcomings, momentum investing has its appeal. Consider, for example,
that The MSCI World Momentum Index has averaged annual gains of 11.76% since its
inception, more than twice that of the broader benchmark.5 This return probably doesn’t account
for trading costs and the time required for execution.

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Pros and Cons - Momentum Trading

Pros
 Higher risk means higher reward, and there's greater potential short-term gains using
momentum trading.
 Momentum trading is done in the short-term, and there's no need to tie up capital for long
periods of time.
 This style of trading can be seen as simpler as it doesn't rely on bigger picture elements.
 Momentum trading is often the most exciting style of trading. With quick price action
changes, it is a much more engaging style than strategies that require long-term holding.

Cons

 Momentum trading requires a high degree of skill to properly gauge entry and exit points.
 Momentum trading relies on market volatility; without prices quickly rising or dropping,
there may not be suitable trades to be had.
 Depending on your investment vehicles, there's increased risk for short-term capital gains.
 Invalidation can happen very quickly; without notice, an entry and exit point may no
longer exist and the opportunity is lost.

Strategy 4: Dollar- Cost Averaging

Dollar-cost averaging (DCA) is the practice of making regular investments in the market over
time and is not mutually exclusive to the other methods described above. Rather, it is a means of
executing whatever strategy you chose. With DCA, you may choose to put
$300 in an investment account every month.

This disciplined approach becomes particularly powerful when you use automated features that
invest for you. The benefit of the DCA strategy is that it avoids the painful and ill-fated strategy
of market timing. Even seasoned investors occasionally feel the temptation to buy when they
think prices are low only to discover, to their dismay, they have a longer way to drop.

When investments happen in regular increments, the investor captures prices at all levels, from
high to low. These periodic investments effectively lower the average per-share cost of the
purchases and reduces the potential taxable basis of future shares sold.

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Pros and Cons - DCA

Pros
 DCA can be combined with the other strategies mentioned above.
 During periods of declining prices, your average cost basis will decrease, increasing
potential future gains.
 DCA removes the emotional element of investing, requiring reoccurring investments
regardless of how markets are performing.
 Once set up, DCA can be incredibly passive and require minimal maintenance.

Cons

 DCA can be difficult to automate especially if you are not familiar with your broker's
platform.
 During periods of declining prices, your average cost basis will decrease, increasing your
future tax liability.
 You must have steady, stable cash flow to invest to DCA.
 Investors may be tempted to not monitor DCA strategies; however, investments - even
ones automated - should be reviewed periodically.

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4.8 Tax Savings Investment Planning:

 PPF ( Public Provident Fund )

 The Public Provident Fund has always been a popular tax saving schemes amongst the
taxpayer. One of the major reasons for this popularity is the fact that PPF falls under the
category of exempt–exempt–exempt tax status. You can open your PPF accounts with a
bank or post office.
 Taxpayers can claim a deduction under section 80C of the income tax act for the amount
invested by them during the financial year. The maximum amount eligible for deduction is
Rs. 1.5 lakhs. Since PPF falls under the exempt category, the interest and maturity amount
are exempt from tax.
 PPF account comes with a lock-in period of 15 years and it allows the investors the below
options at the end of the maturity period:
1. Withdrawal of proceeds from the account
2. Continue for another 5 years

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 EPF ( Employee Provident Fund )

Employee Provident Fund EPF is one of the popular savings schemes launched under the
supervision of the Government of India. The Ministry of Labour regulates EPF schemes in India.
It is the main scheme under the Employee Provident Fund and Miscellaneous Provisions
Act,1952. Employee Provident Fund Organization (EPFO) manages this savings scheme.

This scheme aims to build a sufficient retirement corpus for an individual. It inculcates the habit
of saving money for the salaried class employee. The fund includes monetary contributions from
both employer and employee. Each of them has to contribute 12% of the employee’s basic salary
(Basic + Dearness allowance) towards this fund every month. Once an individual retires, they
receive the entire contribution(of both employee and employer) as a lump sum with interest. The
rate of return earned is fixed, which is set by EPFO. Also, the interest accrued is tax-free.

The government of India has mandated contribution in this scheme. Thus, as the government
manages it, it is considered to be a low- risk investment.

Employee’s contribution towards EPF and interest is exempted from tax. One can claim tax
deduction under section 80C up to a limit of 1.5 lakhs. If the amount from PF is withdrawn at
maturity, then no tax has to be paid. However, suppose the employee withdraws any partial
amount due to any emergencies. In that case, the amount will be taxable to the employee.

In this scheme, an employee has to contribute 12% of their basic income towards the fund every
month. The employer matches this amount with an equal contribution. When you retire, you
receive the total amount (personal as well as the employer's contribution) as a lump sum along
with interest. The EPF is regarded as a low-risk investment as the Government of India manages
it and assures a fixed rate of return.

Companies with a minimum of 20 employees must maintain EPF accounts for their employees.
Some companies with fewer than 20 employees also adopt the EPF scheme. We shall discuss
this in detail later on.

Also, the provision of an EPF account is compulsory for employees with a salary of less than
₹15000. That said, most companies provide the facility to all employees regardless of their
salary. And if you move from one job to another, you can transfer your EPF corpus easily. This
is possible through something known as the Universal Account Number.

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 NPS (National Pension Scheme)

NPS or National Pension Scheme has become a popular income tax saving investment product.
It is a tax saving option that is available to both government and private employees. It enables
the depositor to build a corpus for their retirement along with a regular monthly income. The
amount invested by the depositor is invested in several schemes including the equity markets.

There are two types of NPS accounts, Tier-1 & Tier-2. A tier-1 account has a lock-in period until
the subscriber reaches the age of 60 years. The contributions made by the subscriber to tier-1 are
tax-deductible under section 80CCD(1) and 80CCD(1B). Tier-2 accounts are voluntary in nature
which allows the subscriber to withdraw the money when they like. However, contributions
under tier-2 accounts are not eligible for a tax deduction.

As per the provision of section 80CCD, an individual can claim a deduction up to Rs. 1.5

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 lakh by investing in NPS. Additionally, a new sub-section 1B was also introduced, which
offered an additional deduction of up to Rs. 50,000/-for contributions made by individual
taxpayers towards the NPS.

Benefits of NPS Account

i. Low Cost

NPS is considered to be the world’s lowest cost pension scheme. Administrative charges and
fund management fee are also lowest.

ii. Simple: -

All applicant has to do is to open an account with any one of the POPs being run through all
Head Posts Offices across India and get a Permanent Retirement Account Number(PRAN)

iii. Flexible: -

Applicant can choose his/her own investment option and Pension Fund or select Auto choice
to get better returns.

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iv. Portable: -

Applicant can operate an account from anywhere in the country and can pay contributions
through any of the POP-SPs irrespective of the POP-SP branch with whom the applicant is
registered, even if he/she changes his/her city, job etc and also make contribution through
eNPS. The account can be shifted to any other sector like Government Sector, Corporate
Model in case the subscriber gets the employment.

 NSC (National Savings Certificate)

A government of India initiative, a national savings certificate is a fixed income investment

scheme that aims at the small and middle-income investors to invest and earn handsome returns.
It is considered a low-risk investment and as secure as the Provident Fund. The investors can
invest as per their income profile and investment habits.
Investment in NSC qualifies for deduction under section 80C of the income tax act up to Rs. 1.50
lakh. Apart from providing the benefit of tax exemption, it provides the investor with complete
capital protection and guaranteed interest. Some of the features of the NSC, tax saving option are
as follows:

 6.8% annual interest as a guaranteed return.

 You can claim a tax benefit under section 80C up to 1.5L.
 You can invest as low as Rs 1000 (or multiples of Rs 100 ). You can increase the

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 investment amount as per you convenience.
 On maturity, the entire maturity value will be received by the investor and the same will
be taxed in hands of the taxpayer.
 An Early exit is not available. You can use the same as collateral security in case of loans
from bank or NBFC.

 SSY (Sukanya Samridhi Yojana)

Sukanya Samriddhi Yojana has become one of the most important tax saving schemes. It was
launched in 2015 by the government of India as a part of the Beti Bachao Beti Padhao campaign.
It had a major impact on the general public. The scheme allows a fixed income investment
through which the taxpayer can invest regular deposits and at the same time earn interest on it.
Investing in Sukanya Samriddhi Yojana also qualifies as an eligible deduction under section 80C
of the income tax act.

The government of India determines the rate of interest on the scheme on a quarterly basis and is
payable on maturity. The scheme comes with a lock-in period of 21 years and will mature after
the expiry of 21 years. A minimum deposit of Rs. 250 is required to be made per year for 15
years. Failure to pay the minimum amount in a year will lead to disconnection of the account. To
re- activate the account, you need to pay a penalty of Rs. 50 along with the original Rs.
250deposit.

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In order to open a Sukanya Samriddhi account, below is the eligibility criteria for this tax saving
option:
i. Only girl children can claim the benefits of this scheme.
ii. The girl child cannot be more than 10 years of age. A grace period of one year is
provided which allows the parent to invest with 1 year of the girl child being 10 years of
age.
iii. The investor must submit age proof of the daughter.

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 Senior Citizen Savings Scheme

A Senior Citizen Savings Scheme is an income tax saving schemes available to senior citizens
who are residents in India. The scheme is available for investment through banks and post offices
and offers one of the highest rates amongst the various savings schemes.

Depositors can make an investment with a minimum amount of Rs. 1000 and in multiples
thereof. The scheme also provides the facility of investment through cash provided the
investment amount is less than Rs. 1 lakh. The deposits made into the scheme matures after a
period of 5 years. The depositors also have the option to further extend the maturity period by
another 3 years.

Investment in the Senior Citizen Savings Scheme qualifies as a deduction under section 80C up
to Rs. 1.5 lakhs from the taxable income. The interest on such deposits is fully taxable and liable
for a tax deduction if the interest is above Rs. 50,000. Deposits made into a Senior Citizens
Savings Scheme account are compounded and paid out annually.

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 ULIP (Unit Linked Insurance Plan)

ULIP Life Insurance Plan is one of the most important investment plans in India. It ensures that
one’s family is financially balanced in the case of an event of death. By purchasing a life
insurance policy, the taxpayer can avail of the benefit under the income tax act. Under section
80C of the income tax act 1961, the premium paid towards the purchase of a life insurance
policy qualifies for deduction up to Rs. 1.5 lakh. Furthermore, as per section 10(10D) income on
the maturity of the policy is tax free. The income is tax- free if the premium is not more than
10% of the sum assured. In the case wherein the money goes to the nominees of the person
insured, the same remains as a tax exemption in the hands of the nominee.

In terms of the deduction under section 80C 1961, the taxpayer can claim 20% of tax
deduction on the premium paid. The following conditions also apply:
i. The taxpayer purchases a life insurance policy on or before 31st March 2012
ii. The policy is in his own name or in the name of their spouse or child
iii. If the life insurance policy is purchased after 1st April 2012, then the premium paid
is eligible for tax deduction up to 10% of the sum assured.

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 Tax Savings Fixed Deposits

Fixed deposits are considered one of the safest tax savings schemes. It’s safer than equity
investments in terms of risk and returns. The banks decide the interest rates and it depends on
several factors. Below are some of the features of a tax-saving fixed deposit:
1. Investment in tax saver fixed deposit eligible for deduction under section 80C
while calculating the taxable income.
2. A minimum lock-in period of 5 years
3. The Senior citizens can get a higher interest rate on investment
4. In the case of a joint account, the primary holder can avail the benefit of tax deduction while
calculating the taxable income
5. Tax saver fixed deposits do not allow any premature withdrawal. However, after the expiry
of the 5 year lock-in period, investors get access to premature withdrawal. The terms and
conditions for premature withdrawal vary from bank to bank.

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 ELSS Mutual Funds

Equity Linked Savings Schemes are mutual fund investment schemes that invest a large
percentage of their portfolio in equity. Furthermore, the fund has a mandatory lock- in period of
3 years which is the shortest amongst all the investment products.
Investment in ELSS funds qualifies for deduction under section 80C of the income tax act up to a
maximum of Rs. 1.5 lakh. Both lump sum investment and the amount invested through a
systematic investment plan (SIP) qualifies for the deduction. Since ELSS funds invest a large
amount in equity, there is always some inherent risk.
ELSS funds provide the dual benefit of capital appreciation and tax-savings. This makes it one of
the most popular tax saving schemes amongst investors.
In general, taxpayers who want to claim tax deductions of up to Rs 1.5 lakh under Section 80C
provisions and are willing to take some risk should consider investing in ELSS. These mutual
funds are equity-oriented, and they invest a minimum of 60% of their portfolio in equity and
equity-linked instruments. This makes it crucial to be invested in the funds for a long period of
time in order to reap the benefit of the returns.

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 5. FINDINGS, SUGGESTIONS & CONCLUSIONS

5.1 Findings:

The comprehensive study about every aspect of this topic shows that Financial Planning is a
dynamic and flexible concept which involves regular and systematic analysis, proper
management, judgment, and actions.

It can also conclude that clients or Investors should start planning soon, set measurable goals,
Look at the bigger picture, and should not expect unrealistic returns on the investments and value
of the plan lies in its implementation. It accurately reflects what you are personally trying to
accomplish.

It can also conclude that with the combination of different stocks, we can reduce the risk and
increase the returns of a portfolio. By constructing a portfolio, we can only minimize the
unsystematic risk, and we cannot minimize systematic risk.

5.2 Suggestions:

In Future there is too Much Scope in Financial Services So need to increase firm Branches
quickly. In now situation every students and every young peoples are interested to invest their
earnings in different ways.

5.3 Conclusions:

A proper Fundamental & Technical Analysis should do before selecting any particular stock for
the portfolio. It minimizes the risk involved.

Financial Planning Service that was not so popular earlier as other services have gained a lot of
importance and popularity & will gain more reputation in the future as people now understand
the importance of it.

Financial planning service is an essential and useful investment tool for meeting your life goals
through the proper management of your finances.

Everyone should start financial planning at an early stage.

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 6. BIBLIOGRAPHY

 Books:

 The Only Financial Planning Book that You Will Ever Need
 If God Was Your Financial Planner by Suresh Sadagopan
 Let’s Talk Money: You’ve Worked Hard for It, Now Make It Work for You by
Monika halan.
 You Can Be Rich Too: With Goal Based Investing by P V Subramanyam and
M Pattabiraman.
 Value Investing and Behavioral Finance: Insights into Indian Stock Market Realities
by Parag Parikh.

 Internet & Websites: www.google.com www.ebooks.com

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