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CHAPTER -01

INTRODUCTION
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INTRODUCTION

Finance is a field that is concerned with the allocation (investment) of assets and
liabilities over space and time, often under conditions of risk or uncertainty. Finance
can also be defined as the art of money management. Participants in the market aim to
price assets based on their risk level, fundamental value, and their expected rate of
return. Finance can be split into three sub-categories: public finance, corporate
finance and personal finance. It is a term describing the study and system of money,
investments, and other financial instruments. Some people prefer to divide finance
into three distinct categories: public finance, corporate finance, and personal finance.
There is also the recently emerging area of social finance. Behavioral finance seeks to
identify the cognitive (e.g., emotional, social, and psychological) reasons behind
financial decisions.

1.1 Definition of finance:

According to the experts, “finance is a simple task of providing the necessary funds
(money) required by the business of entities likes companies, firms, individuals and
others on the term that are most favorable to achieve their economic objective”

According to the entrepreneurs, “finance is concerned with cash. It is so, since, every
business transaction involves cash directly or indirectly”

1.2 What is planning?

Planning is very important for successfulness and the effective performance of an

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organization not only for organizations but also for individuals. It is the most basic of
all the managerial functions. It involves selecting missions and objectives and the
actions to achieve them. Therefore, every organization gives a greater emphasis on
planning. It is a process involves the determination of future course of action, that is
why an action, what action, how to take action, and when to act. These are related
with different aspects of planning process. Planning is define as followed:

Terry has defined planning in terms of future course of action i.e., “planning is
the selection and relating of facts and making and using of assumptions regarding the
future in the visualization and formalization of proposed activities believed necessary
to achieve desired result.”

Peter Drucker defined as “planning is the continuous process of making present

entrepreneurial decisions systematically and with best possible knowledge their
futurity, organizing systematically the efforts needed to carry out these decisions and
measuring the results of these decisions against the expectation through organized
systematic feedback.”

According to Theo Haimann, “planning is the function that determines in advance

what should be done. It consists of selecting the enterprise objectives polices,
programs, procedures and other means of achieving these objectives.”

1.3 What is a 'Financial Plan’?

A financial plan is a comprehensive evaluation of an investor's current and future

financial state by using currently known variables to predict future cash flows, asset
values and withdrawal plans.

A Financial Plan identifies the Project Finance (i.e., money) needed to meet specific
objectives. It defines all of the various types of expenses that a project will incur
(labor, equipment, materials and administration costs) along with an estimation of the
value of each expense. It also summarizes the total expense to be incurred across the
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project and this total expense becomes the project budget. As part of the Financial
Planning exercise, a schedule is provided which states the amount of money needed
during each stage of the project.

What is a 'Financial Planning’?

Financial planning is a continuous process of directing and allocating financial

resources to meet strategic goals and objectives. Financial planning is the process of
setting, planning, achieving and reviewing your life goals through the proper
management of your finances. Managing your present and future finances. This can
also be viewed as a single process encompassing both finance and operations. The
operating people focus on sales and production while financial planners are interested
in how to finance the operations. The output from it takes form of budgeting the most
widely use form of budget is pro forma or budgeted financial statements. The
foundation for the budgeted financial statements is detailed budgets. It includes sales
forecast, production forecast and estimates in support of finance plan. Collectively, all
of these budgets are referred to as master budget.

1.4 Financial Planning Standards Board India:

Financial Planning Standards Board (FPSB) India, is an Indian professional body

based in Mumbai that deals with setting professional standards. Its mission is to
develop and promote financial standards to benefit and protect the entire nation as a
whole. FPSB India works closely with nearly all aspects of the Indian economy. As a
professional membership and certification firm, it is part of a global organization to
establish beneficial and universal standards for financial planning in India and works
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with prominent financial service corporations.

As a self-regulatory organization, FPSB India promotes and maintains higher
standards of professionalism than required and seeks to cooperate with the
government and regulation agencies to uniformly regulate personal financial planning
practitioners.
FPSB India holds itself to a higher standard through its code of ethics and rules of
professional conduct, which is mandated for all members and is licensed for CFP
through its affiliate agreement with FPSB Denver, USA. Other peer countries are
Australia, Austria, Belgium, Brazil, Canada, China, China Taipei, France, Germany,
Hong Kong, Indonesia, Japan, Malaysia, New Zealand, Republic of Korea, Singapore,
South Africa, Switzerland, United Kingdom and the United States. There is a push to
establish international financial standards, increase financial literacy, and create a
suitable redressal mechanism for investors in India to improve the development and
financial health of the country. Other financial services firms around the world have
this as a goal as well, as it affects the overall economic health of a nation and the
credibility of specific institutions. Many leading financial services firms are coming
together and attempting to professionalize the industry by setting international
standards. Currently over 200 firms in 20 countries are aiming towards this objective.

1.5Common Financial Planning Mistakes:

1. Failure to plan:
Many people earn, spend, save, and invest their money without a great deal of thought
or planning. They have only vague goals and don't analyze whether their limited
financial resources are being put to the most productive uses to achieve those goals
and provide financial stability. Without a financial plan and accompanying tools such
as a budget, you're going to have a tough time knowing where you're going or how
best to get there.
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2. Failure to communicate:
Spouses or partners frequently have different styles of investing and managing money.
These differences need to be discussed up front, then either reconciled or

accommodated. Otherwise, conflicts over money can damage overall household

finances and even lead to relationship problems. Leaving a spouse out of the
"financial loop" can also be devastating if the other spouse dies first but financial
communication should extend beyond spouses. You should discuss finances with your
children, particularly adult children who may inherit family wealth. Talking with
children about finances is also critical in the event that they ultimately have to care for
you or settle your estate.

3. Procrastination on the savings front:

People, particularly young people, often say, "I'll start saving later, when I can afford
to." This overlooks the tremendous power of compounding. Catching up takes a lot
more money than most people realize. Think about the following example: If you
invest $100 a month for 30 years at an average annual return of 8% for 30 years, you
will have accumulated almost $150,000. If you wait 10 years before staring, you'll
have to sock away $260 a month for the next 20 years to reach roughly the same
amount. If you wait until the last 10 years, you'll have to sock away $800 a month to
achieve the same results.

4. Failure to diversify personal finances:

The bear market of 2000-2003 painfully illustrated the benefits of diversifying among
a variety of investment categories. But diversification might well involve more than
just investments. One situation we run into frequently is that of a couple who both
work in the same industry perhaps even for the same company and who invest heavily
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in stock options and employer or industry stock in their retirement plans. If your
employer or industry suffers hard times, you could lose your jobs and much of your
savings in one fell swoop. Furthermore, if your employer dominates the region where
you live, the value of your home could suffer at the same time.

5. Chasing the market:

In the 1990s, many investors chased higher-risk stocks right over a cliff. Now some
observers worry that investors are over-concentrating on bonds or international stocks,
with the potential for bad results when interest rates rise. The goal of investing is not
necessarily to beat the markets—it's to achieve your life's goals. This is usually
accomplished by investing regularly, early, and with modest risk. Trying to outwit the
market year after year frequently causes investors to take excessive risk that, in the
long run, leave you well short of their goals.

6. Assuming bad things won't happen:

Newspaper headlines should convince most people that personal catastrophe or life-
changing events with negative financial consequences can occur unexpectedly at any
time. Yet families routinely fail to prepare financially for such events. For example,
not having sufficient emergency cash funds in the event of job loss or not carrying
disability or long-term care insurance. Don’t assume these events won't occur.

7. Putting off estate planning:

Families may have good intentions to get wills, develop an estate plan, rebalance their
portfolio, update their insurance, or take an inventory of their financial health, yet
never quite get around to doing it until it's too late. This is especially common in
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estate planning, with its overtones of mortality.

8. Doing it themselves:

Yes, you should always be involved in the details of your finances. However, the
benefits of working with an outside financial planner, someone who can look at your
situation objectively, usually far outweigh the associated costs. Often the additional
returns and tax savings, or mistakes avoided, or consolidation of paperwork/accounts,
or reduction of hassles or a combination of these factors can make hiring a financial
advisor a smart decision. A qualified planner who takes into account your entire
financial picture can provide impartial, technical advice and, often most importantly,
motivate you to put your financial house in order.

1.6 History of financial planning:

Who would have guessed that when Loren Dunton set up the Society for Financial
Counselling Ethics in 1969 that it would evolve into the financial planning profession
we know and love today? According to the Certified Financial Planner Board of
Standards in Denver, there are more than 94,000 CFP certification worldwide. The
revolution that Dutton started with a meeting of 13 individuals at Chicago’s O’Hare
Airport in 1969 continues to gain momentum, and to serve more investors who need
complex advice than ever before. With all that has happened in the economic and
financial markets since those prescient first steps.

There is such a strong interest in the various disciplines and means of financial
planning that a number of organizations have developed to support those interests,
including the Financial Planning Association (FPA), with 29,000 members; the
National Association of Personal Financial Advisors, (NAPFA), with 1,300 members;
the Personal Financial Planning division of the American Institute of Certified Public
Accountants with 7,400 members; and the independent broker/dealer group, the
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Financial Services Institute (FSI), with 2,000 individual and more than 100 firm
members.

Some advisors will remember the years leading up to the first graduating class of the
College of Financial Planning in 1973 as relatively placid ones for the financial
markets in the U.S. compared to the chaotic years that followed. Political and
economic pressures converged in the early 1970s to deeply affect the markets. The
decade opened in recession, while the grinding bear market continued its 15-year
reign, lasting from 1967 to 1982. The formation of OPEC led to oil price shocks
starting in 1973, which in turn led to double-digit inflation in 1974, and another
recession in 1973-1975. The wind-up to the Watergate hearings, a wage and price
freeze, the resignations of President Nixon and Vice President Agnew, and the wind-
down of the Vietnam War did not help economic matters. ERISA, the Employee
Retirement Income Security Act, was signed into law. We added a new word,
“stagflation,” that defined a time of stagnant wages and continued inflation that
curtailed buying power. By 1980, in economic and markets terms, U.S. investors were
reeling from the bear market, an inflation rate of 13.5%, and interest rates at their
highest levels ever. The country was suffering through a double-dip recession that
would last until 1982. This was the turbulent environment into which the first group
of Certified Financial Planners was born and cut its teeth.

“In 1973, ’74, and ’75, trying to distribute tax shelters, annuities, and real estate
limited partnerships. It was a particularly good time for those things because of
runaway inflation and very high taxation and interest rates,” says Coombs. Investors
were looking for tax shelters and inflation protection. Coombs set up his business,
Petra Financial Advisors, Inc., in Colorado Springs in early 1976, and registered as an
investment advisor in 1979. The stock market in the U.S. was emerging from a
particularly sharp ’73 to’74 drop. “Nobody paid any attention to the stock market
because it had been so bearish–you could hardly talk to anybody unless you talked
taxes.”
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“Financial planning, in its infancy, seemed to be hooked to limited partnerships,” says

Richard Averitt III, chairman and CEO of Raymond James Financial Services in St.
Petersburg, Florida. Averitt became a CFP in 1979. “Many people who did financial
planning did tax planning, which meant they sold limited partnerships, which came to

an ill end after the Tax Reform Act of 1986 made tax deductions for the business
illegal, retroactively. Financial planning stumbled.”

A Turning Point:

The way people looked at investing, estate planning, retirement planning, and tax
planning was turned on its head. The investment business started to change, too. Early
in his career, Richard Averitt III learned about investing at a warehouse where the
focus was on “investment-opportunity-driven” sales–when a new bond or other
product came to market, representatives made a list of clients and other prospective
buyers and called to talk to them about the product. On the flip side of this is the
financial planning movement that Averitt describes as “oriented around a
methodology that asks, ‘Who is my client and what are his or her needs?’ Financial
planning began to develop a new image, not associated with a failed investment, but
with a valid methodology.” Averitt credits Tony Greene, former president, CEO, and
chairman of Raymond James Financial Services, with leading the IAFP out of that
dark time, and into financial planning as we know it today, and says Greene was
instrumental in combining the ICFP and IAFP into one organization which became
the FPA in 2000.

“Financial planning today has become less associated with any product or investment
type at all and far more associated–as it should be–with individual investor planning
and investor needs,” notes Averitt. While Raymond James is a large firm, it is unique
in the way in which advisors can work with the firm. They can be full-time employees
or affiliate as independent professionals, as financial planners or as brokers, and there
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are several degrees of affiliation they can choose.

The Road Ahead

“I’ve been impressed with the singular dedication of the FPA to build and support the
mark and particularly their dedication to creating the next generation of financial
planners,” says Coombs. What investors want most, he says, is a “trusted relationship

with an individual, not a Web site or a big presence on the television screen. If they
can find that trusted relationship, they hold onto that, tightly. The clients we’ve lost
over the years–which haven’t been many–are those that we accepted without having
done a financial plan for, they had just hired us to be asset managers. We just don’t
lose clients that we have this trusted relationship with, and we’re not unique in that,
it’s system-wide.” Coombs adds, “that is what you ought to focus all of your time and
attention on–building and maintaining that trusted relationship. We spend 90% of our
time focusing on minutiae–asset management and taxes–which obviously we’ve got
to know something about, but the thing our clients are looking for is that trusted
relationship.”

Coombs has long been an enthusiastic proponent of mentoring new planners to bring
them along in the profession. “Just as I believe that our practices are strengthened by
one-on-one relationships with our clients, the profession is strengthened by one-on-
one relationships with new people coming into the profession. It’s a lonely world out
there [for those] trying to get started. It’s hard to find a comfortable environment [in
which] to try your wings.” Coombs was also responsible for a group called the “Rat
Pack.” During an FPA Retreat, a young planner, Paul Fain, talked about all the help
he got from his father’s friends while he was taking over his father’s practice after his
dad, P. Kemp Fain, Jr., had died. “He referred to us as the rats in the barn–if you
follow the rats in the barn, they will always lead you to where the food is. I thought
‘Why not create a Rat Pack?’ to help all the Paul Fains that are coming up,” says
Coombs. They created an “ad-hoc, amorphous group” in which, to qualify as a mentor,
your age and years of CFP practice must add up to 65 or higher, and you must be
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willing to commit five acts of mentorship every year. As a result, Aaron Coates
established the NextGen group; He initially referred to them as "the Mouseketeers,"

but he received a lot of criticism for that. It is intended for individuals under the age
of 35 and with fewer than three years of experience, mirroring the Rat Pack. We are
attempting to convince the FPA to create a group database so that anyone looking for
a mentor can search that database. He states that Bridge the Gap and the FPA
Residency programs are both excellent.

Coombs predicts that the future of financial planning will be driven by both
"individuals who develop a love and affection" for planning and a trend toward larger
firms. I believe they will succeed so long as they maintain their existing, dependable
client relationships. “Each flow will create a larger client base for those of us who
operate the old-fashioned way,” according to Coombs, believes that there will be an
ebb and flow of planning at the warehouses.

According to Averitt, technology is one area that has completely altered financial
planning. When I first started doing financial planning, we were sitting around with
calculators and making a financial plan could take months. It was a laborious, time-
consuming, and challenging to update process that was also full of potential for
human error. He points out that this is very different from how planning is done now.
He also says that as technology keeps getting better, planners will be able to be more
efficient and serve more clients in a more timely and thoughtful way, even if the
business's margins are going to be lower.

The bottom line for Averitt is that no investment plan is guaranteed to work, no matter
how well you make one. "But the financial planning process always works, so if you
engage in a financial planning process, you’ll get back on track," he says. Assuming
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you center your financial planning based around financial backer targets and
objectives, that is a superior interaction to accomplish financial backers' objectives
than to pursue market midpoints. The investor will receive the results of goal-directed
investing.

1.7 Scope of financial planning:

Financial planning covers all areas of the client’s financial needs and will result in the
following accomplishment of each client's goals. Typically, the following would be
included in the planning scope:

• Planning for insurance and risk management

• Problems with investments and planning

• Tax preparation

• Planning a will.

• preparing for retirement.

• Making plans for the children's and family members' education.
• Controlling cash flow and liabilities
• Preparation for retirement financial independence

• Using sound risk management and insurance strategies to manage cash flow risks.
• Making plans to reduce tax obligations and free up cash flow for other purposes.
• Making plans for the creation, preservation, and distribution of assets; • Keeping
personal cash flows stable and improving them by managing debt and lifestyle.
• Relationship administration

• Going beyond just selling products to know and meet the basic needs of the
customer.
• Creating, managing, and planning the accumulation of capital to generate future
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capital and cash flows for spending and reinvestment.

1.8 Investment options using financial instruments:

The most common investment options on the investment market are the following
financial instruments:

1.Saving Account

The portion of a consumer's disposable income that is not spent immediately but
rather saved for later use is referred to as savings. It was designed to meet the needs of
an emergency or unexpected circumstance. It has a positive financial impact. Robust
and safe A person can save money in a variety of ways, such as by accumulating it in
the form of cash holdings or depositing it into a savings, pension, or investment fund.
A savings account is a deposit account at a retail bank that pays interest but cannot be
used as money directly (like by writing a check, for example). Customers are able to
save a portion of their liquid assets in these accounts while also receiving a monetary
return.
“An account (as in a bank) on which interest is usually paid and from which
withdrawals can usually only be made by presentation of a passbook or by written
authorization on a prescribed form,” is the definition of a savings account. Savings
accounts are ideal for people who want to save money while earning a small amount
of interest. Savings accounts have the advantage of being able to withdraw money at
any time, unlike other long-term investments like certificates of deposit.
Depending on the type of account, savings accounts also require low initial

investment amounts. Many savings accounts are covered by the FDIC, just like
checking accounts. The depositor's funds are safe in the event of a bank failure. The
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ability to set up bill-paying automatic deductions and the low monthly fees are two
additional benefits.
Some account holders may be tempted by the ease of access to a savings account,
making long-term saving challenging. When compared to other types of investments,
the return on savings accounts typically ranks lowest. The majority of savings
accounts also require a certain minimum balance. If the balance in the account drops
below the charges are incurred by the account holder for the minimum amount, which
may negate any interest earned.

Your emergency funds can be safely stored in savings accounts. They generally offer
insurance and make it simple to access your funds. Your funds are fully insured if the
total of your or your family's deposit accounts at one FDIC-insured bank or savings
association is less than $100,000. Since these accounts provide a very high degree of
safety, their low interest rates are their main drawback.

2. Certificates of Deposit, or CDs:

A different kind of deposit account known as a CD typically has a higher interest rate
than a standard savings account. CDs, like savings accounts, are covered by an
insurance policy for up to $100,000. When you buy a CD, you put a set amount of
money into it for a set amount of time. Generally, the more drawn out the period,
higher is the loan fee. Early withdrawal carries penalties.

CDs are similar to savings accounts in that they are insured "money in the bank" and
thus virtually risk free. In the USA, CDs are insured by the Federal Deposit Insurance
Corporation (FDIC) for banks and by the National Credit Union Administration
(NCUA) for credit unions. They differ from savings accounts in that the CD has a
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specific, fixed term (often one, three, or six months, or one to five years) and, usually,
a fixed interest rate. The bank intends that the customer hold the CD until maturity, at
which time they can withdraw the money and accrued interest.

Institutions typically offer higher interest rates to customers who deposit money for a
predetermined period of time than they do to customers who can withdraw money at
any time, though this may not be the case in an inverted yield curve situation. While
CDs typically have fixed rates, some financial institutions also offer CDs with a
variety of variable rates. For instance, numerous banks and credit unions began
offering CDs with a "bump-up" feature when it was anticipated that interest rates
would rise in the middle of 2004. During the CD's term, these allow for a single
interest rate adjustment at a time of the customer's choosing. CDs that are indexed to
the stock market, bond market, or other indices are sometimes offered by financial
institutions.

3. Accounts for Money Market Deposits:

A money market deposit account is a combination of a savings and checking account.

They can only be used for a limited number of monthly deposits or withdrawals, but
they earn a little more than interest-bearing checking accounts.

The Federal Deposit Insurance Corporation (FDIC) insures these deposit accounts up
to a maximum of $250,000 per person and bank. Every penny of principal and interest
earned on the account is guaranteed as long as the account balance remains below the
insurance limit. In most cases, these accounts have higher interest rates than savings
accounts. They provide many of the same services as checking accounts do, but you
typically can only make a certain number of transfers or withdrawals at a time. They
won't make you rich, like most safe investments. In today's market, the rate of return
paid on the accounts is typically only slightly higher than standard savings account
rates. This rate of return varies depending on market conditions and the bank's
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standard rates. Most of the time, they get paid a little less than inflation. They make it
simple to access your money and are extremely secure.

By maintaining a portfolio of well-diversified money market instruments, a money

market fund aims to provide the highest possible level of short-term income. These
funds allow investors to put money into them with a short-term investment horizon of
up to one year.
Money market funds are an option for investors with a low-risk appetite and excess
cash in a savings account. The returns on these funds will be higher than those on
your savings account. Corporate and retail investors could be the investors.

Money market funds, on the other hand, aren't the best choice if you want to invest in
the medium to long term. Dynamic bond funds or balanced funds, on the other hand,
may offer somewhat higher returns. In a similar vein, money market funds should not
be considered unless you have short-term surplus cash that you do not require
immediately.

How it works?

Deposit holders can use debit cards and write checks to get money out of money
market accounts whenever they need to. However, Regulation D (FRB) regulates the
accounts as savings accounts for regulatory purposes. Customers are allowed six
withdrawals per month, with the exception of cash withdrawals from automated teller
machines. Violations will incur service fees of approximately $10 per transaction and
may result in the account being closed.

4. Stock exchange:

As of April 2018, National Stock Exchange of India Limited (NSE) was the 11th
largest stock exchange in the world with a total market capitalization of more than
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US$2.27 trillion. Investors in India and around the world frequently use the NIFTY
50, the 50-stock index, which is the flagship index of the NSE, as a gauge of the
Indian capital markets. The NSE launched the Nifty 50 index in 1996. However, the
stock exchanges in India only contribute about 4% of the Indian economy or GDP,
according to Vaidyanathan (2016). You own a portion of the assets of the company
when you buy stocks. You might be able to sell your stock for a profit or receive
periodic dividends if the business does well. The stock price could fall if the business
does poorly, and you could lose some or all of the money you invested.

In the following category, NSE provides investment and trading options.

• Equity
• derivatives

Equity: A company's primary source of financing is equity shares. It is made

available to everyone. Equity shareholders do not have any advantages when it comes
to dividends and capital repayment. They are entitled to the company's residual
income, but they also have control over the company's operations, and the
shareholders as a whole are the company's owners.

Derivative: Derivatives can be traded on an exchange or over-the-counter (OTC).

The majority of derivatives are OTC derivatives, which are not standardized. In the
meantime, derivatives traded on exchanges are more tightly regulated and
standardized. Compared to standardized derivatives, counterparty risk in OTC
derivatives is typically higher.

5. Bonds:
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A bond is a financial instrument that represents the issuer's debt to its holders.
Municipal bonds and corporate bonds are the most common types of bonds.

The bond is a debt security in which the issuer owes the holders a debt and is required
to either pay them interest (the coupon) or repay them the principal at a later date,
known as the maturity date, depending on the terms of the bond. In most cases,
interest is due on a predetermined schedule—sometimes monthly, semiannually, or
annually. Most of the time, the bond is negotiable, meaning that the instrument's
ownership can be transferred on the secondary market. This indicates that the bond is
highly liquid on the secondary market once the transfer agents at the bank medallion
stamp it.

A bond is a government-issued or company-issued certificate of debt that promises to

pay a predetermined sum of money at a predetermined time and pays interest at a
predetermined rate. The length of a bond can be anywhere from a few months to 30
years. Bonds are tradable assets that are generally regarded as safer than stocks due to
the fact that bondholders are compensated prior to stockholders in the event of a
company's bankruptcy. The likelihood that a given bond will default is evaluated by
independent bond-rating agencies.

Government Bond: The central or state government issues bonds, also known as gilt-
edged securities or government securities (G-secs), on a regular basis. These are
issued for medium- to long-term use by the nation's central bank on behalf of the
government, with half-yearly interest payments.

Corporate Bond: When public companies issue bonds, they are known as a corporate
bond. When it comes to international market, a secured corporate debt instrument is
known as a corporate bond, but in the case of the unsecured debt instrument, it is
known as a corporate debenture. In India, corporate debt instruments are termed as
debentures.
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Bond type Description

Corporate Corporations issue bonds to expand,

cover expenses and finance other
activities. They are fully taxable and
usually pay a higher rate of interest than a
government bonds.

Government (treasury) Considered to be long term investment.

They have maturities of 10 years or
longer and carry lowest degree of risk.

Municipal It is a debt obligation issued by a state,

city or local government to finance
government or special projects. They are
exempt from federal, state and local taxes

6. Investment in gold:

Gold is a favorite investment by all and sundry in India. High liquidity and inflation-
beating capacity are its strong selling points, not to mention beauty, prestige and so on.
Though, there are phases when markets witness a fall in gold prices, it never lasts and
always makes a strong comeback. Of all the precious metals, gold is the most popular
as an investment.

Investors generally buy gold as a way of diversifying risk, especially through the use
of futures contracts and derivatives. The gold market is subject to speculation and
volatility as are other markets. Safety, Liquidity and Returns are the three criteria
most conventional investors look for before making any investment. While gold meets
the first two criteria swimmingly, it doesn’t do badly at the last one either. Here are
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two main reasons why you should invest in gold:

a. gold investment is worthwhile because it is an inflation-beating investment. Over a

period of time, the return on gold investment is in line with the rate of inflation.
b. Gold has an inverse relationship to equity investments. Example, if the equity
markets start performing poorly, gold too would have performed well. Considering
gold as an investment option in your investment portfolio will be a buffer to the
overall volatility of your portfolio.

1.8 The 8 Characteristics of a Successful Financial Plan:

Having a financial plan in place means more than just having a good asset allocation
or some insurance to protect the people you care for. No matter what plan you have in
place, it is recommended that you sit with an experienced planner/advisor and make
sure that YOUR financial plan includes ALL of the following 8 characteristics;

1. Consistent flow of money into the plan. It isn’t enough to randomly “feed “your
strategy and the returns on your portfolio. When it comes time to "reap," consistency
breeds stability and predictability.
2. a rate of return that is appropriate for your plan's objectives and risk tolerance.
3. minimizing tax repercussions while developing your strategy.
4. Minimum tax repercussions while you enjoy the benefits of your labor.

5. control over your money. There will most likely be multiple "buckets" of money in
your plan. There are some with short-term goals and others with long-term goals. The
funds set aside for an objective ought to be easily accessible when it is achieved.
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6. minimal danger. If you have put in the effort to create a well-thought-out plan,
don't try to move faster by taking on more risk than you need to in order to achieve
the objectives you set for yourself with the assistance of your planner.
7. Prepare for unexpected situations and emergencies. Life takes place!
8. ability to adapt and change
 23

CHAPTER -02

RESEARCH
METHODOLOGY
 24

RESEARCH METHODOLOGY

Definitions of the population since the study is mainly related to know the investment
patterns of the salaried investors on different products. Their potentially of earning
income and reducing risk of the investment community on the product” where each
security in the market has to be analyzed through their earnings over the other.

2.1 Objectives of study:

1) To identify investment habit of people.

2) To understand financial planning done in Navi Mumbai.
3) To analyze the characteristics of different asset class.
4) To study the changes in financial planning with change in age
5) To identify various avenues for investment
6) To spread awareness of financial planning
7) To examine the factors influencing the investment
8) To study pattern in which individual allocates his savings.
9) To study factors influencing investment decision.

2.2 Sample size:

The sample size denotes the number of elements selected for study. For the present
study questionnaire distribution to 63 number of individuals.
 25

2.3Data collection:

Data was collected by using main two methods i.e., primary data and secondary data

1. Primary Data
Primary data are those that were gathered specifically for a specific purpose and were
gathered by the researcher for the first time. As a result, they are original in character.
Snowball sampling and non-probability connivance sampling will be used to collect
data from various investors. The connivance sampling method is used to select
salaried individuals. The choice of units from the populace in light of their simple
accessibility and availability to the specialist is known as Sampling.
A questionnaire is distributed to 100 respondents during a survey to collect
information. There are a variety of age groups, occupations, income levels, and
qualifications among the 61 respondents. For our research, we select the following
sources.
We choose following resources for our research.

Questionnaire Design:
In this part of our research, we ask salaried people questions that can be completed
quickly and easily with little effort, and we ask the customer to provide accurate
answers. Closed-ended questions are included in the questionnaire.
Close finished Questions:

It contains those inquiries wherein the respondent is given a set number of choices
reactions from which he/she is to choose the one that generally firmly coordinated his
mentality.

• Dichotomous question

• Multi-choice question

The fixed alternative questions can take the following forms:

 26

Dichotomous Question: It simplifies the issues by providing respondents with only

two options to choose from and refers to one.

Multi Choice Questions: The term "multiple choice" refers to a question with
multiple choices. When a problem has more than two aspects, multiple-choice
questions can be used.

Customer: The customer contributes to the development of a more precise perception

of our research.

2. Secondary Data:

Secondary data are those, which have already been collected by some other persons
for their purpose. Secondary data are usually in shape of finished products. External
Data: It was generated from internet websites and books. Statistical tools and
techniques used: The data has been analysis by graph and charts

2.4 Scope of study:

The scope of study is getting familiar with various investment avenues in market. To
study the life stages of an individual and to identify their risk tolerance, income flow,
life goals and current investment. Study should cover all areas of the individual
financial needs and should result in achievement of each of the individual goals.
Scope of planning will include the following:
1. Risk management and insurance planning
2. Investment planning
3. Retirement planning
4. Tax planning

2.5 Limitations of study:

 27

1. This research was only taken in a limited area only i.e., Panvel, Navi Mumbai.
2. This research is limited to an individual.
3. Due to limitation of time and sources, data was collected only from 61respondents.
4. In some primary data collection methods there is no control over the data collection.
Incomplete questionnaire always gives a negative impact on research.
5. Some respondents do not give timely responses. Sometimes, the respondents may
give fake, socially acceptable and sweet answers and try to cover up realities.

6. The data collected by the third party may not be a reliable party so the reliability
and accuracy of data go down.
 28

CHAPTER -03

LITERATURE REVIEW
 29

LITERATURE REVIEW

3.1 The author Becker and Mulligan has done the research on ‘Individual
financial planning horizons’ in the year 1997:

Construct an optimization model where individuals can choose to consume now or in

the future; the tradeoff depending on an endogenous time discount factor (β ).
Individuals can choose to spend resources to increase this value and therefore the
value of future consumption. Their model predicts that the degree of future orientation
will be related to the level of education and wealth. They argue that this model is
consistent with various empirical studies, in particular, that consumption growth is
faster for individuals and countries that are better educated and that we see the
inequality of consumption across individuals and countries increasing over time. For
example, traditional investment advice suggests that asset allocation should shift away
from stocks and towards bonds as an investor gets older.

3.2 The aetherometric, Montalto, and Fox has done research on ‘Finances was
used to determine the extent to which Financial Planners were used by
households’ in year 2002:

The result of this research showed that 21.2% of households in the United States
made use of a Financial Planner. He also note that in a consumer survey
commissioned by the Consumer Federation of America and the Financial Planning
Association it was reported that 92% of Americans consider financial planning to be
personally important. The view that when consumers are looking for comprehensive
personal financial planning, they are more likely to seek the services of a Financial
Planner over and above other specific experts in financial discipline such as
accounting. He has used survey data to show that where households decide that they
need to do personal financial planning, they spend more time developing and
 30

monitoring plans and this effort is associated with increased wealth. He has identified
a shift in attitude of individuals who now recognize that integrated long-term financial
planning is critical to effective financial management and that a single expert who can
consolidate all of their financial needs into a comprehensive plan is more efficient. An
individual who wishes to achieve financial independence at retirement or protect
assets that are mortgaged if they die, faces the risk of not having the money to do so if
no personal financial planning has been done. The personal financial planning process
is an exercise in applying risk management techniques at an individual level. This
should include the more comprehensive identification of risks which individuals face,
the appropriate prioritization of these risks and the effective management of these
risks. It was noted that individuals have the tendency to spend more time on managing
smaller risks that they encounter but do not spend time on risks that affect their
overall financial wellbeing. He suggests that the tools for Financial Planners to use in
the personal financial planning process will increase in sophistication and that the
skill level of Financial Planners will have to increase as well.

3.3 The author David S. Murphy has done research on ‘Personal financial
planning attitudes: a preliminary study of graduate students’ in year 2010

: The purpose of this paper is to report on a survey about the personal financial
planning attitudes of MBA students in the USA. The findings indicate that, while
most respondents feel both that financial planning is important and that they are
interested in developing a financial plan, very few feel that they have the necessary
skills and knowledge to prepare their own plan. In addition, the participants indicated
a strong preference for professional personal financial planning advice. The study also
indicates that less than 13 % have prepared a comprehensive personal financial plan.
When asked to identify the one professional from whom they would seek advice,
certified financial planners were the preferred resource. While the results are not
generalizable to the wider population, the views of this group are important because
one might expect that educated individuals would be both more interested in personal
 31

financial planning and more capable of preparing their own plans compared with
average Americans. A perceived need of respondents is to feel that their financial
planner will put their needs first. While some professionals believe this to be the
hallmark of ‘independence’ the respondents placed less importance on planner
independence. In order to foster client confidence, planners must act in ways that
convey clearly the primacy of their clients’ needs.

3.4 The author Dr. Sunil Karve has done a research on ‘A study of financial
planning need analysis’ in year 2015:

This research paper is focused on importance of financial planning analysis. A

financial plan sometimes refers to an investment plan, which allocates savings to
various assets or projects expected to produce future income, such as a new business
or product line, shares in an existing business, or real estate. In general usage, a
financial plan is a series of steps or goals used by an individual or business, the
progressive and cumulative attainment of which are designed to accomplish a final
financial goal like elimination of debt, retirement etc. This often includes a budget
which organizes an individual's finances and sometimes includes a series of steps for
spending and saving future income. In this research paper we highlighted the pattern
in which individual allocates his savings, whether investor is having awareness about
the financial planning & it’s importance.

3.5 The National Council of Applied Economic Research (NCEA) has done
research on ‘Urban Saving survey’ in year 1961:

They noticed that irrespective of occupation followed and educational level and age
attained, households in each group thought saving for the future was desirable. It was
found that desire to make provision for emergencies were a very important motive for
saving for old age Securities and Exchange Board of India (SEBI) and “Survey of
Indian Investors” had been report that Safety and Liquidity were the primary
considerations which determined the choice of an asset. In this paper we are trying to
find out the Factors which influence individual investment decision, the difference in
 32

the perception of Investors in the investing process on the basis of Age and the
difference in perception of the Investors on the basis of Gender.

3.6 The Tomas Dvoraka has done research on ‘Financial literacy in year 2010:
Financial literacy proves to be a major block for investors who do prefer safer
avenues of investment as they lack basic knowledge of financial markets. The
financial literacy has been measured in different terms by various authors. He
designed and administered a financial literacy test tailored to a specific defined
contribution plan and found that participant knowledge is particularly low among
women, low income, and low education employees. They also find some evidence
that personal contributions lead to more knowledge. Prior research indicated workers
including many college students were ignorant regarding their own finances, future
wealth, and retirement planning although in their business courses they learn the
importance of managing and maximizing other people’s wealth. He indicates that the
financial literacy of UAE investors is far from the needed level. The financial literacy
level is found to be affected by income level, education level, and workplace activity.
High-income respondents hold high educational degrees, and those who work in the
field of finance/banking or investment had as expected a higher financial literacy level
than others. Whereas, financial illiteracy exists regardless of the age of the
respondents a significant difference in the level of financial literacy was found as well
between the respondents according to their gender. Specifically, women have a lower
level of financial literacy than men. Finally, the results indicate that there is a
significant relationship between financial literacy and investment decisions. The most
influencing factor that affects the investment decision is religious reasons and the
least affecting factor is rumors. In general, it can be found that researchers have
correlated financial literacy with gender, race, socioeconomic status, financial
inclusion. The present study has helped to 21 understand financial literacy by
measuring the investor awareness towards various sets of financial products and risk
perception towards these products in Indian context.

3.7 The Andreas Oehler has done research on ‘Financial education and behavior’
in year 2008:
 33

Financial education with regard to old-age provision can be successful if it reaches

consumers in their environment at life-stages where important decisions need to be
made. To achieve that considerable efforts, have to be taken in terms of funding and
organizational set-up. However, evaluation is necessary to prove the effectiveness of
the education especially for vulnerable consumer groups. If evaluation reveals that
these groups cannot be targeted effectively or that consumers are not acting
subsequently to attending financial education, there might be a case for changing
behavior through the institutional set-up of pension schemes (i.e., through automatic
enrolment) and using financial education as a supportive policy instrument.

3.8 The Hayes has done research on ‘Gender differences in investment behavior’
in year 1998:
In general, women invest less money and invest their money in less risky investments
compared to men. Some explanations for this behavior include lower earnings, lower
financial knowledge, lower comfort levels with math, or smaller retirement benefits.
Women may also differ from men in their access to information, as well as the ability
or inclination to use available information Although women have become more
interested in, and better informed about, investments the NASD Investor Literacy
Research stresses that women still miss basic market knowledge have lower levels of
math comfort prefer traditional print media to software or the Internet to gather
financial information and favor stable, easy-to-manage investments.. The self-serving
attribution bias is greater among men than among women, with men tending to
emphasize their successes rather than their investment failures Men are also more
likely to spend more time and money on security analysis. Men make more
transactions, rely less on their brokers, anticipate higher possible returns, and believe
that returns are more highly predictable than women Both men and women expect
their own 27 portfolios to outperform the market, but men expect to outperform by a
greater margin than do women.
 34

CHAPTER – 04

DATA COLLECTION,
ANALYSIS AND
INTERPRITATION
 35

DATA COLLECTION, ANALYSIS AND INTERPRITATION

1. Gender

Options No, of responses percentage

Female 27 59%

Male 36 41%

63 Responses

Male
Female

Analysis

The gender distribution of the respondents indicated that 36 were male i.e., 59%

and 27 were female i.e., 41%

 36

2. Occupation

Options No. of responses Percentage

Studying 29 46.8

Business 8 12.9

Professional 6 9.7

Service 20 30.6

63 Responses

Studying
Business
Professional
Service

Analysis

The distribution according to the occupation of the respondents indicated that the
largest group of respondents is 29 i.e., representing 46.8 % studying. The second
largest group of respondents is 19 i.e., representing 30.6% working in service sector.
 37

The next group of respondents is 8 i.e. representing 12.9 % are doing business. The
next group of respondents is 6 i.e., representing 9.6% are professionals
 38

3. Annual Income

Options No. of responses percentage

Up to 2 lakhs 7 11.1%

2 lakhs to 5 lakhs 23 36.5%

5 lakhs to 10 lakhs 10 15.9%

None 23 36.5%

63 Responses

Upto 2 lakhs
2 lakhs to 5 lakhs
5 lakhs to 10 lakhs
None
 39

Analysis

The income distribution of the respondents indicated that the largest group of
respondents is 23 i.e. representing 37.1% were of income from 2 lakhs to 5 lakhs. The
second largest group of respondents is 22 i.e., representing 35.5% were none of
income. The next group of respondents is 10 i.e., representing 16.1% where income is
5 lakhs to 10 lakhs. The least group of respondents is 7 i.e. 11.3% were income is up
to 2 lakh
 40

4. What percentage of your income salary do you save?

Options No. of responses percentage

Less than 20% 20 31.7%

Between 20% - 30% 20 31.7%

Between 30% - 50% 10 15.9%

None 13 20.6%

63 Responses

Less than 20%

Between 20% - 30%
Between 30% - 50%
None
 41

Analysis

This was a multiple-choice question where respondents were asked what percentage
of their income salary do they save. The distribution of the respondents indicated that
the largest group of respondents is 20 i.e., representing 31.7% were they save less
than 20% of their part income. The second group of respondents is 20 i.e.,
representing 31.7% were they save between 20% to 35% part of income. The next
group of respondents is 13 i.e., representing 20.6% were they do not save anything.
The least group of respondents is 10 i.e., representing 15.9% were they save 35% to
50% of their part income.
 42

5. Why do you prefer Financial Planning

option No. of respondent percentage

Saving 35 55.6%

investment 28 44.4%

63 Responses

Saving
Investment

Analysis

This was a multiple-choice question where respondents were asked what do they
prefer as a part of their financial planning. The distribution of the respondents
indicated that the largest group of respondents is 35 i.e., representing 55.6% were they
prefer saving as a part of financial planning. The second largest group of respondents
 43

is 28 i.e., representing 44.4% were they prefer investment as a part of financial

planning.
 44

6. Do you have enough time to manage your investment affairs ?

Options No. of responses percentage

Yes 49 77.8%

no 14 22.2%

63 RESPONSE

Yes
No

Analysis

This was a multiple-choice question where respondents were asked do they have
enough time to manage their investment affairs. The distribution of the respondents
indicated largest group of respondents is 49 i.e., representing 77.8 % were they have
 45

time for investment affairs. The next group distribution of the respondents is 14 i.e.,
representing 22.2 % were they do not have time for investment affairs.
 46

7. What are your Spending Habits

Options No. of responses percentage

I have a definite spending pattern 32 50.8%

for regular monthly expenses

I carefully plan my bug 19 30.2%

purchases in advance

I do not spend in a planned 12 19%

manner

63 Responses

I have a definite spending

pattern for regular monthly
expenses
I carefully plan my bug
purchases in advance

I do not spend in a planned

manner

Analysis
 47

This was a multiple-choice question where respondents were asked what are their
spending habits. The distribution of the respondents indicated that the largest group of
respondents is 32 i.e. representing 50.8% were they have a definite spending pattern
for regular monthly expenses. The next group distribution of respondents is 19 i.e.,
representing 30.2 % were they have a carefully plan my big purchase in advance. The
least group of respondents is 12 i.e., representing 19 % were they do not spend in a
planned manner.
 48

8. My investment are generally are comprised of ____.

Options No. of responses percentage

Make planned 27 42.9%

investment in Mutual
fund

Buy fixed deposit 15 23.8%

schemes

Buy gold and ornaments 14 22.2%

Buy durable items like 7 11.1%

TV, LCD, Refrigerator,
Cell phone, Furniture,
etc.

63 Responses

Make planned investment in

Mutual fund

Buy fixed deposit schemes

Buy gold and ornamentstr

Buy durable items like TV, LCD,

Refrigerator, Cell phone,
Furniture, etc
 49

Analysis

This was a multiple-choice question where respondents were asked what is their
investment comprised of. The distribution of the respondents indicated that the largest
group of respondents is 27 i.e. representing 42.9% were they make planned
investments in mutual funds. One group of respondents is 15 i.e. representing 23.8 %
were they buy fixed deposits scheme The other group of respondents is 14 i.e.
representing 22.2% were they buy gold and ornaments The least group of distribution
of the respondents is 7 i.e. representing 11.7% were they buy durable items like TV,
LCD, refrigerator, cell phone, furniture, etc.
 50

9. What of investment do you prefer?

Options No. of responses percentage

Long term investment 40 63.5%

with sustainable return

Long term investment 23 36.5%

with sustainable return

63 Responses

Long term investment with

sustainable return
Short term investment with
high return

Analysis

This was a multiple-choice question where respondents were asked what kind of
investment do they prefer. The distribution of the respondents indicated largest group
 51

of respondents is 40 i.e., representing 63.5 % were they invest in long term investment
with sustainable return. The next distribution group of the respondents is 22 i.e.,
representing 36.5% where they invest in short term investment with high return.
 52

10. Your various sources of information/ reference which influence

investment decision?

Options No. of responses percentage

Newspaper, publication, 26 41.3%

Media

professional 12 19%

Agent/ Broker 14 22.2%

Friends, peer groups 11 17.5%

63 Responses

Newspaper, publication,
Media
Professional

Agent/ Broker

Friends, peer groups

 53

Analysis

This was a multiple-choice question where respondents were asked their various
sources of information/ reference which influence their investment decision. The
distribution of the respondents indicated that the largest group of respondents is 26 i.e.,
representing 41.3% were they refer newspaper, publication, media for their
investment decision. The second largest group of respondents is 14 i.e., representing
22.2 % were they refer to agent/broker for their investment decision. The next group
of respondents is 12 i.e., representing 19% were they refer to professional for their
investment decision. The least group of respondents is 11 i.e., 17.5% were they refer
to friends, peer groups for their investment decision.
 54

11. What is your major investment objective?

options No of respondent Percentage

High return 18 28.6%

Meet future expenses 15 23.8%

Liquidity 15 23.8%

Maintain standard of 8 12.7%

living

Principal safety 7 11.1%

63 Responses

High return
Meet future expenses
Liquidity
Maintain standard of living
Principle safety
 55

Analysis

This was a multiple choice question where respondents were asked their major
investment objective. The distribution of the respondents indicated that the largest
group of respondents is 18i.e. representing 28.6% were their main objective of
investment is high return. The second largest group of respondents is 15 i.e.,
representing 23.8% were their main objective of investment is to maintain liquidity.
The third group of respondents is 15i.e. representing 23.8% where their main
objective of investment is to meet future expenses. The next group of respondents is
8i.e. representing 12.7 % were their main objective of investment is maintain standard
of living. The least group of respondents is 7 i.e. representing 11.1% were their main
objective of investment is principal safety.
 56

12. Do you find financing agriculture sector would make a profitable

investment?

63 Responses

Options No. of responses percentage

Yes 36 57.1%

no 14 22.2%

maybe 13 20.6%

Yes
No
Maybe

Analysis

This was a multiple-choice question where respondents were asked do they find
financing agriculture sector would make a profitable investment. The distribution of
the respondents indicated largest group of respondents is 36 i.e. representing 57.1 %
were they are sure about the profitability by investing in agriculture sector. The next
distribution group of the respondents is 14 i.e., 22.2 were they think there is no
profitability by investing in agriculture sector. The least distribution group of the
 57

respondents is 13 i.e. representing 20.6 % they are not sure about the profitability by
investing in agriculture sector.
 58

13. What are your expectations on return from investments?

option No of percentage
respondent

5% to 10% 5 7.9%

10% to 20% 10 15.9%

20% to 40% 12 19%

40% to 50% 17 27%

50% to 100% 19 30.2%

63 Responses

5% to 10%
10% to 20%
20% to 40%
40% to 50%
50% to 100%
 59

Analysis

This was a multiple-choice question where respondents were asked what are their
expectation from return on investment. The distribution of the respondents indicated
that the largest group of respondents is 19 i.e., representing 30.2% were they expect
50% to 100% return on investment The second largest group of respondents is 17i.e.
representing 27% were they expect 40% to 50% return on investment. The third
largest group of respondents is 12 i.e. representing 19% were they expect 20% to 40%
return on investment. The next group of respondents is 10 i.e., representing 15.9%
were they expect 10% to 20% return on investment. The least group of respondents
5i.e. representing 7.9% where they expect 5% to 10% return on investment.
 60

14. Do you prefer life term policies and LIC as investment option?

option No.of responses percentage

yes 48 74.6%

no 15 25.4%

63 Responses

Yes
No

Analysis

This was a multiple-choice question where respondents were asked do they prefer life
term policy and LIC as their investment option. The distribution of the respondents
indicated largest group of respondents is 48 i.e., representing 76.2% were they prefer
 61

life term and LIC as their investment option. The next distribution group of the
respondents is 15 i.e., representing 23.8% where they do not prefer life term and LIC
as their investment option.
 62

15. Do you prefer investment in gold jewelry or coins?

Options No. of responses percentage

YES 47 74.6%

NO 16 25.4%

63 Responses

Yes
No

Analysis
 63

This was a multiple-choice question where respondents were asked do they prefer
investment in gold jewelry or coins. The distribution of the respondents indicated
largest group of respondents is 47i.e. representing 74.6 % were they prefer investment
in gold jewelry or coins. The next distribution group of the respondents is 16 i.e.,
representing 25.4 % where they do not prefer investment in gold jewelry or coin.
 64

16. What type of investor do you consider yourself?

Options No. of responses percentage

High risk taken 12 19

Low risk taker 18 28.6

Opportunistic risk taker 21 33.3

I don’t take any risk 12 19

63 Responses

High risk taken

Low risk taker
Opportunistic risk taker
I don’t taking any risk
 65

Analysis

This was a multiple-choice question where respondents were asked what type of
investor, they consider themselves. The distribution of the respondents indicated that
the largest group of respondents is 21 i.e., representing 33% were they are an
opportunistic risk taker. The second largest group of respondents is 18 i.e.
representing 28% were they are risk taker. The third largest group of respondents is
12i.e. representing 19% where they are high risk taker. The last group of respondents
is 12 i.e., representing 19 % were they don’t like taking any risk.
 66

CHAPTER – 05

CONCLUSION,

SUGGESTION
 67

Conclusion

According to the findings of the study, routine financial planning has a significant
impact on investment and savings selection. The ability to take risks is less important
than willingness to take risks when making investment decisions. Good planning not
only raises a person's standard of living but also helps them maximize their
purchasing power and build wealth in the most efficient manner. Therefore, a person's
perspective on how to use their money to achieve their financial goals is the core of
financial planning.

It is also deduced that investors who regularly create and those who do not have a
financial plan have distinct preferences for the investment objectives of principal
safety, regular income, capital growth, and tax benefits. However, there is no
significant correlation between the habit of making or not making a financial plan and
the investment objective of quick returns and liquidity. Additionally, investors'
preferences for savings accounts, fixed deposits, mutual funds, stocks, and gold or
silver are significantly different between those who create and those who do not.
Anyway, the venture roads of little saving plot, disaster protection, capital market
obligation instruments and land doesn't have huge relationship to the propensity for
making/not making monetary arrangement.
 68

Suggestion

Spend at least 20% of your income on your most important financial goals. We refer
to building emergency savings, paying off debt, and padding your retirement as
priorities.
At least once a year, people should check in on their finances. This doesn't really
fundamentally mean a full monetary redesign every year, except it could mean
making little changes that over the long haul might pay off. It is necessary to raise
consumer awareness of the importance of financial education and how it can be
accessed. Financial education is for everyone, not just investors. It is just as important,
if not more so, for the typical family trying to find a budget that works for them and
save for their parents' retirement and education. All the more should be found out
about the monetary schooling, needs of shoppers at different stages in their lives and
how monetary schooling programs can be intended to best address these necessities. It
is possible to conclude that the fundamentals of successful investing are as follows:
• Regularly save and invest

• Early start

• Diversify

• Use a tax shelter

• Regularly monitor investments and adjust plans as necessary

All the documentations should be complete and need to be preserved. At the time of
maturity, it is necessary to produce the investment documents which acts as a proof.
But many times, investors do not have proper documents which dishonors the claims
at maturity. It is also recommended that all the disclosure documents also be
preserved as it would help in case of any dispute in settlement.
 69

Mutual funds could provide better advice to their investors the net and through the
traditional investment routes where there is an additional channel to deal with the
brokers.

Direct dealing with the fund could help the investor with their financial planning.

Financial planning is not a onetime activity, the initiative should be taken by financial
planner to put this forward to their client. Regular meetings should be conducted
between the financial planner client to review the investment portfolio. This is one
area where many planners are lacking today.
 70

Appendix

Questionnaire for the study of financial planning of an individual

1. Your occupation:
a) Service

b) Business
c) Professional

d) Farming

2. Your annual income?

a) Up to 2 lakhs

b) 2 lakhs to 5 lakhs

c) 5 lakhs to 10 lakhs

d) Above 10 lakhs

3. What percentage of your income salary do you save?

a) Less than 20%
b) Between 20% - 35%
c) Between 35% - 50%
d) Over 50%

4. What do you prefer as a part of your financial planning?

a) Investment

b) Saving
 71

5. Do you have enough time to manage your investment affairs?

a) Yes
b) No

6. How do you spend?

a) I have a definite spending pattern for regular monthly expenses

b) I carefully plan my big purchases in advance

c) I do not spend in a planned manner

7. My investment are generally are comprised of _______.

a) make planned investments in Mutual Funds

b) buy fixed deposit schemes

c) buy gold and ornaments.
d) buy durable items like TV, LCD, Refrigerator, Cell phone, Furniture, etc.

8. What of investment do you prefer?

a) long term investment with sustainable return

b) short term investment with high return

9. Your various sources of information/ reference which influence investment

decision?
a) Newspaper, Publications, Media

b) Professionals

c) Agent/ Broker
d) Friends, Peer groups
 72

10. What is your major investment objective?

a) High return
b) Meet future expenses
c) Liquidity
d) Maintain standard of living
e) Principal safety

11. Do you find financing agriculture sector would make a profitable investment?

a) Yes

b) No
c) Maybe

12. What are your expectations on return from investments?

a) 50% to 100%
b) 40% to 50%

c) 20 %to 40%
d) 10% to 20%
e) 5% to 10%

13. Do you prefer life term policies and LIC as investment option?
a) Yes
b) No

14. Do you prefer investment in gold jewelry or coins?

a) Yes
b) No
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15. What type of investor do you consider yourself?

a) High risk taker

b) Opportunistic risk taker

c) Moderate risk taker
d) Low risk taker

e) I don’t like taking any risk

 74

Bibliography

Website:

http://www.fpsbindia.org/
http://profit.ndtv.com/PersonalFinance/Insurance.aspx
https://en.wikipedia.org/wiki/Personal_finance
http://content.moneyinstructor.com/775/financial-instruments-know.html
http://www.allbankingsolutions.com/banking-tutor/mutual-funds-in-india.htm
https://en.wikipedia.org/wiki/LIC