Scribd Logo
Upload

Welcome to Scribd!

  • Unit-2, 3,4 Fin Lit

    Uploaded by

    bhavak bajaj
    10 views45 pages

    Original Title

    UNIT-2, 3,4 FIN LIT

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    10 views45 pages

    Unit-2, 3,4 Fin Lit

    Uploaded by

    bhavak bajaj

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 45
    Chapt Chapter-8: Security and Precaution against Fi Bonking dnd Digital Payment 1er-7: Security and Modes of ‘Digital Payments nancial and Online Frauds 43 7 ; Security and Modes of Digital Payments Learning Outcomes TS ser syng tis chop, you shoul be bl to underston: | > therole played by RBI. > the concept of digital banking, > benefits of PoS and ATM machines, and the various types of banking cards. | > new development in digital banking, 7.1 Introduction Digitalization is getting more common in India with every passing day. After demonetisation drive in | 2016, the digital banking has grown a faster pace Most ofthe Indian banks have launched ther internet | banking and mobile barking websites to facilitate the customers with online availability of almost all banking products like opening of PD, paying taxes, recharging mobiles, ordering cheque book and doing much mote. Internet banking is now a common mode of secure and convenient banking services, Let tisunderstand the concept of digital banking, modes of digital payment, various channel for acceptance | of card based digits! payment and new development in digital banking, Before understanding these concept, we all should understand bout the Central Bank of India and is role in economy. ™ Pi ef aed ead af oD ST ed) aD Dof > , 7.12 Financia itercy + lnnan credit of cash depos ito yout owa acount, + Quick and convenient way to depot cath + The per trantcto limits 49,900 for Caress depot and through Debit Card €2.00 lnc (oubectoaccount ba ded with PAN numb), epost cash in your PPE RD an Laan accounts + Upto 200 curency nate canbe deposed ina ingle transction + The ADWM only accepts denominations of 100,200, 8500-8 £2000) 17.8 Ch Recycler Cash recjeler oaks ike any ther ATM. Cash recycler ls illo yout depoitcash aswel fut cash vuthdrawal aan ATM cefects i yor seount Balance immediately, the cath deposit alo takes pace In realtime and the wansacion tle in your bank account a once, When ou deposit csh cash ote and displays the amount denomination wit and the total amount ‘machine for deposit. Once it dsplys the amount, you have to canim if the amount is ore andthe ansaton wil then be compete 7.8 Modes of Digital Payments - Biometric Based The objective ofthis section sto enable students fo understand the significance of VIDAL and Aadhasr 7.8.1 Unique ientiication Authority of nda (VIDAL) The government of nia has taken strong tp in the rection of securing dig ransactions trough he launch of Unique ldenication Authority f India (UIDAN), Launched a stator authority the Aintative is aimed towards suing unique dent document named a Axdbaa " UIDATS key objective i to eliminate dupiat and fake Security and Modes of Digital Payments 7.13 7.82 hothor Enabled Poyment System (heP5) + ‘AadtatEabedPyent Sytem (ACS) ia payee operated by NPCI. APS empones 2 tank comer o cea ier Aadhaar nad bank ecount pero bs bulges ke bale equ cath depot, ch withdrew, teen & Aad to Aude fnd aes hough busines creponden. Aaa Erabled Parent Sater (he) «pment sytem opesed by NPCL Ars Bre aniers te ROUTED wirhde war | 7.8.3 Micro ATMs A perfec solution fr Raraand Hinterlands Micro ATMs re handheld devices radable with authorised ‘ranking correspondent (aso kaown asbank mitra) allowing Aadhaarholéersto perform basic banking ‘eansactions Fingerprint and/or Retina ofthe customer are wed to suthentiate a cusomet Mico ATMs at portable and canbe carried anywhere in jst one hand. 7.9. Modes of Digital Payments Mobile Based Banking and Others The objective ofthe section ito enable tcens to eaen about the various forms of digital payments including internet banking, mabe baking, branches banking and ital platforms suchas UPI and mobile wal 7.9.) Inert Bonking Internet baking, alo known as onine banking «-bankng or vet banking, isan electronic peyment system that enables customers ofa bank o oer financial insitin to conduct «range of Suna \ransactions through the financial nsttutons webste.Internet banking allows yout transact on yout bank account over the internet using you laptop tablet or smartphone: When You taser an amount ‘sing Internet Banking can be done through diferent method, including, + National Electronic Fund Tanfe (NEFT) + Real-Time Gross Setement (RTGS) + Immediate Payment Service (IMPS) + 0S 79.2 Bronchlss Banking 2 layman language, Sranchless banking i nothing but banking without gong toa bank Most url sare inaccessible. Taking about the detaded deh naan " he dtaed deiton, we can say that anchles banking conus -- ple, Your nearby retailer who act at a"Hman ATMS lets the ss viathei mobile phones and then depositor withdraw ash physically tats traditional banking from branches baking i phil presence and branches located across the countries where W operates, On the other banking portals allow customers to view ther balances transfer money, opeh ew counts. and even apply fora morgage. And the best thing ithe constant avalablity ofthese tures Opening a branch in each village may not be fea. Moreover the education or ieracy lev In such 2501s promising. Here branchls banking comes to the resee aking about the branchles banking definition, then itis the method of delveringhanking services ‘outside conventional bank branches. This is maialy done through agency banking support Mobile banking Internet Banking, and Neobanking are the prime branches benng types ird-party bank outposts, for ena ‘customers do banking tramac has regional head hand, branches National Electronic Fund Transfer (NEFT) aaa nic Funds Transfer (NEFT) is «nation-wide centralised payment system owned and by the Reserve Bank of india (RBI. The payment mode enable companies and indvial to ds electronically to other compants and individual. Central Board of Secondary Education ‘Te account holder needs to register the benefciay account deals such as account bolder fname, account type (savings etc), account number and Indian Financial System Code (FSC) which heips to identify individual bank branches. Real-Time Gross Settlement (RTGS) RTGSis real-time settlement system which allows for fst processing of money transfer between any wo accounts. “Real Time’ means the procesting of instructions atthe time they ate recived ‘Gross Setement means thatthe stlement of funds transfer instructions occurs individually, The payments made via RTGS are final and irrevocable. The BGS systems primary meant orlare value tansacins ‘The minimum amount to be remited through RTGS is €2,0,00- wth 0 upper imi. Immediate Payment Service (MPS) IMPS is» product made available by the National Payments Corporation of India (NPCI), Xt allows for 2417 instant funds transfer service that canbe accessed on rouliple channels ike Mobi, Internet, ATM and SMS. The key feature of IMPS is that itis avalabe atl times. Te transaction fe for IMPS is nominal. and it allows transfer limit of Rupees 2 lakhs per transaction, 7.9.3 Mobile Bonking — Bonk in Your Pocket Mobile Banking is a free of cost service provided bythe bank which enables you to make fnanca) transactions on your robe device With dalton, bank are develpngfst-clas meble app, and almost everyone holding an interne-enabled smartphone can avail of mobile banking facies. The highly robust Mobile banking application security features eliminate fraudlent activites, thus making ble ig ne mode enc roe aaa knoe eu aeid nd creo ot oes the ling ey Security and Modes of Digital Payments || 7.5 Mos popular banks today oe the facity of Mobile + Checking ofthe account balance + Making fonds ranser + Bill payments and card payments + Service request such as ordering cheque books Understand financial fraud and types of freads or scams > Ways to spot fraud and stop frauds; > Know about Ponti Scheme and precautions taken to avoid the Ponti Scheme trap > Understand the concept of phishing and its working, > Explain the steps to protect from phishing: > Know about creditcard closing and skimming, > Understand the preventive measure to secure online payment. 8.1 Introduction Everything has gone digital, if something hasn't yet, it will soon. Entire businesses, organizations and services have gone digital. Although technological advancement helps people to enjoy the advantages of cashless! digital payment systems over others, but with techsiology comes its vulnerabilities. Digital financial transactions, while convenient also pose a threat to your money. There are risk involved in digital and online banking as wel. Every year, thousands of Indian fall victim to online financial fraud With significant rise in the number of digital payments over the last few years, the incidence of online banking fraud has also increased manifold, In financial year 2019, more than 50,000 cates of fraudulent : usage of debit cards, credit cards and internet banking to the tune of €150 crore was reported in India Despite several measures to curb this menace, it continues to be the most widely reported form of 82.) Femi Laoey 3 get Se rl ers nie pt it td ener bning Sept wemeay eee tyme cee 6 pecs acai: Hoses ah pore ook Speen ere clemeeenen e Rated chee me genymtpocens parents ta =e 82 Fonda Froud Fasc ead rsa 2 pong roe nny wy yr web ew ses st Pep ag eth ecg avenge Sep ches tbs at copped che ng [Prey these schemes This us because criminals are very creanive and they keep changing their tactics to fed new mcm Yeu ca ep your mone le by bong mero se fat Doyo tw ee bo ssc Te ox scp pocang yur pt fad ors enw wht ised bor Sseogeee meine Ope ecto 183 Types of Froud or Sms Fever and ster tne pope a ray of we troagh nai andthe tghene. when vce malng oenen by oming pened Mes Merhting Fred ‘Yee smcereas coal tates hie cone om slg company sing youto ccna. et ‘takes yore fe wee Toe mle are ieves oto leprae oe pene eles os vehi ie compen coset lowestnent Froud Sexoeene rrats yout veins bans ot bey mechanic lou a expected treat srw mente Afer wie new pepe pong Tt when te emt wea got =o (ote Soom “Congratcacos Yee war the lorerysuepsabeyg pat! A ys br oo in Yor pe ‘seen sal ors popes Lept coes Gok ca fr oe clay pe (Get cd Debt Card Freed Cons card ad et cad ed app when teats yor car crema peas Sects mame (FIN) webu our perini.Newer share yout PIN wih aese Ay Freed — iyo peta cp ef pcpe wo hee scone at Dae scngonn nad cegen berornaninese eaten mate Security and Precention paint Fnmacil wad Onitne Fronds § 83 ae iewetines: aterm the appropriate Sa SS a eget ent Se eal Seon ee aa eae eee [te encaetoreaan eeregiecc een ae Sooo ar a Rat eee ee ae a eee {otras pre eae peers See = the phone, by email or on 2 website you do not Imowe. 84 Ponzi Scheme A oc Scheme ia faadulet investment operince wher theopeac sn iva or pam, am that money is izvesed i high ear caning nsroments Howenez, what realy happens Sat ‘ery Dew depot wed to pay of exer deposts rather than trum prot armed shevagh egminate sources. Typical exraediary rears ae promi os the erga! emestnet. The Saute wl ‘ash wh invest’ money 1th system evenly colapus wih ter invests seceing ming ~ tnchding ther nial iavesment There ae colfse Pons hemes a we The lage Pons scheme ‘story, wich defrnded approsinatey § 65 bilion was re by Bernard Maat who was areed 2008. Hes sil serving a 15-year sentences pra. Bs important check the ethers pommel by eposinvenment ake mo accept money from the pearl public Gaaraseing high Soesomest ‘tars wah eo rik and insistence fo roll ove theives svcd be iene are age Pepe ned to make sre hat ther aes arabes Bed by a eptmate ay ‘Precofins te Avoid the Ponzi Schetne Trop ++ yout considering any typeof investment seek advice and do research befor iowesting + Pest fender we rage techn ron to dente te moet vee ach at ‘Tg yield vest: programe or bel cemencyarterage Deel ge aid er aged. + Ateas kl ucson shou tbe company ad the scheme Be igh eran they = ‘wdolgequetonntemer posses | + Aakaboat the bur of deo who ae maging the scheme and ak sett et one of ten, 84 | nancial Literacy 8.5 Phishing Phishing eeltes tothe practice fetching sh by throwing bit nto the wate In the wold of banking, Phebe is «pe of freed that inves stealing personal nermation exch a CustomerID, Interne PIN credit or debit card number, Card expiry date, CVV number, ee. theough email and aber means that appear to be fom legitimate source. Using ch senitve data, faudters make unauthorised transaction from the individuals cred card det card or bank account. How he Phishing is Do Sometimes, phishers also use the phone (voice phishing) ahd SMS (Smishig) to capture such sensitive financial data from account holders, posing a ofc from a bk, Most commonly, eudsers end fake emai to account holes asking therm to urgently very or update thet account information by Sci ant mapas webs or mercer Mit ofthe ober fd bageas became reser a ae ane whee Ther webs aida igh ck egg Sasind peng meer al afer cede nthe backer 2 Lochmatinr pee wobete: When you tee wehate emir ay Sameatce eek oar ‘Senge Peres: Couticmas Indeny POD atdeupefiepep: Bsa gebalymaceand ‘ssc Sova te sticer mens the he wchate owner Scmccraed shat er mcaty sine teh deena ie 5S Se se re pret in ay appar dey 2 ees perp aoe er npc Peers see Sank account cutest = seed ayicaines Ter gppbceteer or Ge Se crag at che canes Sa et ng yr pe oe OS Be cach wae eng pubic wk: Avid making any sane payment when yo aang Poti meee as hashes igh be atti on he me meter can peter adc en we et = eating (Mie se sng sch stn webs a ye lng in code can gp dcp we cher and eoeercates “Biking cm conser hese menses os cm diy midst of cfr cies and pom me poet de teed aes 29: Dasand Dr's to Pte Vaal frm Osine Baking Frond ek elephant sineiommas cupeear bang iene pce oa Someta error amen fein op aa em eaeon ltettahege Sena car arapends ae Deals Se ete te ot a celal pe brill ng a Seek eg eaten ar digo eee eg ‘Security and Precentonapuiat Financial end Ontine Fands) 89 ie 2 1 Secure your passwocd and PIN: Ii i the best interes f ce ears to memos their set ‘baking parword cr ATM PIN. One mast evoid sharing puonword with spose or svg 208 cake median sock as ena mesenger or text 2 Check bank statements segelaty: Check you bk semen stlean tce a week is cae ay ‘sapcoe activ, prt immediacy the banks and cyberciene department 3 Change panwoed segalarty Resting banking pusswnrl every two mantis the bes security Pracice B wl net only race the ik of taking Sema bet aio scar you Som pens! Deckers. Acs very the msthesicy of the Baits Ner Banking webpage by hecing 2s URL snd the PAD Lock symbol the bomom corner ofthe row. 4 Spetimpostere Scammer fs peed tbe semeaee pos ay trast hea baking oil ‘ernce gent or even 2 nb prover. They may iy to pend you nt reveling yoor smart card deta Doct ge out any cre card dens, cal addresses snd other perso! desis 20 \schnows pesies Acid mpoading i sacs tera phate calls or ead Report ls cand inumediatcy: H your debe card or ce candi ot or sie, es coe your Bank anda them te Meck the cand Dents: 1 Amid the evens Aci ng you de of rh cou umber a corbin yur ‘ATM pis Ab ce Sept. and snot emir tape oud tbe prt of yar ae bekng perme 2 Are sng pec computer or Stal permeate Doss scat sig ce cardi cand om shed compen ets sch an ce car pe ‘4 Demet lick on sspicions aks in made: Do nctepes snenpecad ened stachiness eine ‘sesmpe downlod Keka Bay bepa hacker gt senchorsed acest your arma $ ‘5S Wheete pert cn of nin bank ead: Vici fein Sc can gtr ‘epi oe Neto Opter Crne epecing Pera Conn pore on a par ‘aodled bythe sate UT pace sutertis conceined base oe the scan of smeOT we te a pode acme nee i Eat opie teagan, em wate gg snp 8s Review Questions Expinin the ways in which Fraudsters and scamsters target people? How do we spot fraud and stp them? Define Ponai Scheme What you can do o avid the Ponzi Scheme trap? Define phishing? How the phishing is done? What we can do to protect ourselves fram phishing? Define credit ard cloning skimming? How we cin protect ourselves frm card cloning frauds? What are the preventive measure adopted to secure your online payments and avoid cyber fraud vhs? 7. What are the dos and dot tobe fllowed vo protect rom online frauds? ao 7h LF {Investment Planning ond Management Chapter-09: Investment Planning and Management Chapter-10; Mutual Funds j Chapter-11:'Life Insurance and NoncLife Insurance Scheme Chapter-12:| Health Insurance Investment Planning and Management Learning Outcomes After studying this chopter, you should be able to: > Understand the process and objective of investment; > Explain the concept and measurement of return and risk: > Introduction to portfolio risk and return: > Diversification and portfolio formation. 9.1 Introduction Investments play a significant role in your ability to accumulate and preserve wealth. However, its crucial to realize from the start that no single investment is suitable for everyone. You have unique financial needs, goals, and a nest egg for retirement, Actually, the tetm investment means different things to different people; that is, while millions regularly invest in securities like stocks, bonds, and mutual funds, others speculate in commodities or options. Investing is generally considered to take a long-term perspective and is viewed as a process of purchasing securities wherein stability of value and level of ‘ return are somewhat predictable personal circumstances that determine which specific investments are appropriate for your individual situation. “ We invest today to have more tomorrow. Investment is simply deferred consumption. By forgoing consumption today and investing the savings, investors éxpect to increase their future consumption " possibilities by increasing their weal, WE ¢hoOse 10 Walt besawss we weak mers fe spend laee Investment is an instrument that promises some certain or uncertain return in the future. NA Manca ancy Wes vee ne ey Wr bn gun | ee A YW tg hing oN nin é ®nal gah Ne ANN A 2 feenatng ead: rete . wo ote dpe on wh ona oar eter gh wb diferent ‘op yee pow te ang ao hgh Up h ey ESSN ghee ae cand ae fon eames Sh vin wha a are ject and wl ned die Breen weg wey objec an wl ne erent yew ese ae mach money ayo 04 ou He ray A ome Yoo Md shea aro compan wah potent fr growing iy ewe 00146 Ue our money sh oF prvi mone tole an, you woud hao ret beannn shunted rents nar pe ee ot Re ‘de cum may to ee Dow pera te a netmen hake fo think about Ur agen ie he he a eR YOR AE, SHEP Nye Ue yoEAB no may Heng tab mee ks Hews ou a pln fo the Song sem. Be wae of our vestments oes Gown, you have tet eevee and owt even an gro oe alng po a ne Suge dB you we sacs a new Ama you want to rowe security You may stl e planning see thong mem, Sot we nee hepa east part of our money alle te provide for Sharer teem sexys oul and emergencies oo make major purchases wh asa family nome x % ‘Suge: B your family i becoming more independent you may have less need for short term \soenga and be able 2 sre mare for your reizement, You may be at the peak of your ‘earning Per. wah cash avadabe fr igvetzents, but uawilng to invest your money in ad ectag cae 7 ‘Sage: Quor poe Baer setand. yo muy be relying on your investment to provide a regular, slate cummet.add te Denes sacha your public or private pensions. ‘93 ey focuses "Se set te a eat three faces abot every investment ts eter, the risk and liquidity. | Renae. he pone that a este mao as sevestment can come in two diferent forms: \ comes sopil gs soon peg ed Revegotel $IE “ we swvenmsenss ih gre ip ene: 11 Si haah ts mas 0 bacagined ne 1b sony Yow you il lo your money. Hide Tawi on goo nese yo e (wig a tah i gana gal - (0) Wk mean 0 v0 toe coset Mlle f ve yo can unio a gp 9.4 Objoctivs of Sound Investment, features fr which the inven sh Soh iw eee peg? crue wiht cvs ves Fig te ae ie OPI iio consideration hie esting, Some ok ese cto oe essed {Regular Retr: One of the main objectives of soa en the bi pre wars fat gien lev of tke Some individual iret in gneve» secon sme oh Saco: Consequently, Sey vet In products thas ofr setarne ropa We bank aed Leper, orpocte and gpvenment bonds, An nvenment is consire go mentee A ers ‘nb tg ima + Growth: Grow) is ao an important objective for many lavesoes: + majortey oh oem tome {oecave capt ans, which meane tat they want the invested aout to grow ve 2 eso ft, Several options inthe market ofl theve benets to the iavesor. Tse ioc socks, ‘mutual funds, gol, property, commorites ee, + Liquidity: Many ivetment options ae not igo This means they canta be sd and commeried Incash naan, However, some pele ivedting i options that canbe used during emerges Such gud instumens include sock, money market instroments and exchange raed Sends. +Tax Exemption: Some people ives thelr maney in various financial pedics slay to ede thee abily. Some products fe tx exemptions while many ole tex beefs angers profits. Tx benefits are ofthe allowing three kinds. + Inal Tax Benefit: An inital tax bent refers to the tax relief enjoyed wines making the investment, Fo example, when you deposit in public provident fund acount, you wil peta x beef under section 8 ofthe income tax ae. + Safety of Pincpa: While no investment option is entirely se, some products ae prefered by investors who are rk averse Some individuals ives intending : ieyeheal erat noreheyeinen deg a et eet as as Concept of Return Return i the primary motivating force and the principal reward in the investment decision procest. In sine words return the bene or un oa iver resig fom he imestcst pee Se ‘ee oman veneered ca inflow terms ded tere, bom dt. avaiable ote investor from investment. Tete are two types of return — = es (Realise retara, "wre are these etre which should 9.6 I Financial Literacy * Realised return: Tiss the historical tun of the annual return on asets over several yon an ivestment. Historie turn on investment (ve the holding period The return which has ben ead by an investor Fig.4: Investment Based Rett 9.6 Measurement of Return Holding Period Retur/Realsed Retra {The return may be measured asthe total gin ot loss tothe holder over a given period of tine and may bbe defined as percentage return onthe intial amount invested. The return canbe measured allow : __Imeresy Dividend + Price change in ants oer the period pare teeters Purchase price of thease, Total return is divided into two parts: revenue return and capital return. Revenve return is the «essential component ofthe return refers othe periodic cash inflow o income rom investment inthe form of interest or dividends. Capital return or price changes refers othe dference Between the cost price ofthe investment andthe rteat which ican be ori sld. tis thediference between the beinning price and the ending price of the investment Expected Return (Ex-Ante Return) 3 average retutn based on 4 series of historical returns may not help make futur predictions about Sree ee eee on a ‘each expected outcome. Security analysts can actually construct a probability distribution of returns Investment Planning and Management \| 9.7 sxc ws cm cated by sgn bes 1 te epced er oteames Bpecel : tet pence een cree my are em (abl) sre er) caring an summing te ee Sey ste weed rege Sr ena by ping he pole ern the epee BN 9.7. Real Rote of Return iacome caved by Reale oeturnisbe inftion ade urn. Rteofafatod may alo redacteincome. ‘Sines Soie perigee hod So co heen an hae econ The iosip between he elite of ere, nomial a of ears ad fain an Be cspresedas tea Rte etn « Nein Rate of Retention Rate pyar 1+ Inflation Rate For example: Assume ifthe rate of ners is 10% andthe ate of ination i 6 then thera ate of| return would be 006) 0.04 Rea Rateof Return = ©10=006), 28 soos 3.77% (+006) “106 Soifthe ination in the mate i 6540 instead of geting 10% return you actully got 277%. 9.8. Impact of Toxes on Investment Decision Income fom inestment are alo subject to tax. However the rates of tx dies from investmeat 10 investment, Some income from investment are also exempt fom tax sch as public provident fund, Tx fee bonds etc. The dividend pai to equity shareholders are sbject to tax to sharehelders Howes, interest in case of mos ofthe investment ae toable inthe han of irvesos.Smiaty the apt gain ‘may aio be required tobe castiied into shot term and long term capital gin depending upon the ‘evant tx provisions. The shareholders ar able to pay longterm capital gain tax onsale of shares (010% over and above lakh. The sort term pital gain onsale of shares is also tax @ 15%. Even now ‘he ale of mutual fund unit areal able to tax under the short erm and longterm capital gain. Ak investor need not ignore the taximpliation in making investment decisions An investor must nd ut ‘he fe taxretur ohisinvesten and then this afer tax return be considered for decision making ‘order to find out the total return frm an investment, the tax implication of eapital ain/ones should also be incorporated. Asa mesure ofa planning, ivetors can tie the sale of investments, ‘The income tax adjusted return may be elated as allows: Jaco tex reentry) = Tesbemotntrn 4 Qa (* ‘Where, t= taxrate. as Es For example i Me. Xs earning 20% interest on bonds and his income is sujet to tax @30%. The ftertan rate of reteni| ‘Aes tax return = 020 (1-030) = 0.1406 4% 2 SA Dine ee ae Icasethe! che ean oe: meot hasbeen fed bth pes of pon ux end tbl eters cove SOARES SERS teed tern na a gale tn i a ‘Taxequivlent return = Te free Return TTarRate For example if Mr Ais earning 8% tx free interest on debenture 3 sg estglieteend rt ene is net ae ‘Taxequivalent reurn = —0O8— 059) 9.9 Risk : ‘Alhough the return is an essential aspect of determining whether an ivestent i appropri, is ‘equi important o consider the rik associated with an ivestment. ach ype of iveseent oes + ‘decent level or type of return, similarly each investment hs diferent associted rks, ‘Uncertainty and Risk / Uncertainty the cone concept of risk his fen used in connection or interchangeably wih he term ik Tac caning of uncertain rer a ate f mind characterised by doubt dc toa ack of nowedge aan eet lor wl ot happen in the fare. Inthe case of isk, we cn assign the probability of sespening or not happening ofan event based n fata gure aalable Reading te dein. aera we cannot assign a probaly forthe happening of vets eles the facts or gues ee ee enable While risk sa tat of mature, uncetany a state ofthe human mind 13-16% 9.10 Typesof isk There ate two primary types of rik — Systematic isk and Unysemati rik » tematic ik she eype orisha isimpssible to avid altogether. refers to that portion Sreriiy in reten whichis cused by the factors acting all the firms, Bzamples of ‘pacman rik ude inftion,recesion, intrest rate poly of he goverment plitical Jere ply, tx reforms and war. These are the factors which effec ames fms « Unnptematicrik is the isk tha fects an isolated group of companies or indies. Ths risk rt be Sacesions a returnees ctf wich ar speci tthe errr ms and ot the markt as wl So thea the factor which areal by 9.11. Sources of Risk biferet sources contrbutcto variations in eu from an investment. Each of hese sources constitutes to isk The diferent types of i in investment are as follows Investment Panning and Management ) 9.9 Bethan ss When lveig inser you ny brew sce te Pome Ieee a mn ain apf o ven ay ovine. Such far 2s eas tater cae ox es more chen te cs, 10 poor menagerie dresions ese kath car ty arround te Sts cat Hows and subvequet sie ome operating expenses on ine ch debe used 10 fiance the frm and (a) Financia Risk: Pana sk concern the amount the pony that the frm wil not have ficient cash tine, Lal thé companys balance sheet o get handle op «Feri ‘empunedvithite ro ongtrm debt acest ow infarc risk This Bite company ao has aheathy earings pcr. (iW) Macket idk: Mae ik sus fom the behaviour of esos i the se can lead to swingin secury prices. OF we cn say hat tis caused dt tf investors ie, the tendency ofthe ivestrs to follow te econ o ‘changes can be due to undetying intrinsic factors and change Social conditions ot investor tastes and pelerences Purchasing Power Risk : Changes inthe general lev! of produce parchasing power rs In periods f rising prices (lation the money declines. This means that the sae amount of money can bs goods and services due to increased prices. Therefore if vest In times fing inflation, then the investor i actully geting lower terms. In general investments (such as stocks and realestate whose values end fgencal pice levds are moat profitable during periods of rising pices, whereas svesiments (echt tarred ene pee darn piillon is eels "9.12 Types of Ivestors Based on investor preference o atte towards they ate asi int thee groups: sk ves rikseeer and rik neta investors. i i ‘Risk Aver: These istry to avid ik: howe, they my be sey 10 ak isk if te return avaiable for aking extra kis commensurate. For every adivonl uit of rh they demand higher and higher compensation, in rms of higher eturs. Some investors ate mo reaver investors also known as conservative vests, Some investor are es sn taveoes and are cled aggresive investors. + Risk Neutrals: Thee investors require ut ascent return fr aking the is They make the investment decisions purely based on Return. Tey donot conser risk ey wat no ext return fra given level of ik Rsk isnot an seni factr For these investor 4+ Risk Secker: They undetake mare and more risk even if i not accompanied by higher etn, They ate isk lovers and engage in fir games wel as gambling just fo the sake of fon or exitement w 9.10 || Financia Literacy cence beweca the es sie 9.13 Risks in Different Types of Investment Diet nsf ett sec slat ind Te he mere es sh bonded ca The cs pe (0 Cath Th chek pcs power ke i ut fies pricip mene ey preg peel ace at no SSeuagle youre ns ac lero py ou ve be nition ner 7 Foot ace ine purusog power yn ee ene te (i) Bonde Th evenness Bonds ns ores 1s The Interest willbe paid, and youl get your money back | systematic Risk Ce kets ee at et ra (el tert ese, ey ea oeaed Ca anal el od eeu) Seis sr reso copy bd on wig mp performace return onthe investment oF ale = eof earn nthe aera Types of Risk Unsystematic Risk (ii) Shares: The inves aaarvsae, The sock’ price can be valued based oa what the market expects the company te fy och tarde inthe fare Tat rae Bed the company xc the rafts turn oat tobe lower or higher than expected, you booght the eee bane sre of rice ay be ected by any conemiconierser price. In addition the ; he region or the entire stock mathe, ‘company. the industry, RISKIEST 9.14 Meosurement of Tote Rsk isk is dened asthe variably in expected rears. ‘atta methods like Range, Sandard Deviation and Variance. This variably canbe estimated sing varoes Fe? Investment Playing and Manager 9.12 || Financial Literacy : \ For example, Rohan faces risk : oe akon ae rire rade wile deciding ive. I he depos al is mony hee 4 low returm ie. the interest rate paid bythe bank, il al his ron al iar ton amount fat (aren he Depots nd Ca Gate India provides insurance wp to! lakh). However. ifhe invests nei, he faces therikof losing a significant part ofhis capital along witha chance to gta lng ian pital along $d much higher return compared to saving 2 Mutual Fund: A matua fd pools money from many investors a4 8 thot tem money markt instrument, other curtis or amet oF YOR Investments The combined holdings thatthe motual fond ownsare known 265720 ‘nit represents a investors proportionate pmersip ofthe fond’ nolbog? 9 those holdings generate. Buying & mutual fund uni i simple and e= ‘many banks, and the minimum vestment arouet is small Before remember tht ian offers 00 good to be tue, it probably Alo or company you ae investing in is teitered entity engaged = dierent types of mtu fd in the market some examples these are sold bY gis importa sate that the prods 9.16 Investment Opportunities ond Financial Producsin India Best investment Options in Indo 9 1. Bquity Stocks: Equity i a part ofa company also known as stock or share. When you buy shares of «company, you basically own apart ofthat company and can expect to poft when the company profs. These shares are traded on stock exchanges, which ciate the buying and sling of stocks, thus providing a marketplace. Investing in equities is rihir and defintely demands more time than other investments. For beginner, it’s beter to ives nthe share inarket via maoal funds wich are professionally managed and are les expensive. Boying individual equity tock of the companies listed o ulted onthe sock exchange is known as Dicect Equity investment You can gt capital gains or dvidend retums from your kee stock investments Te performance of stocks depends on factors such as market poston, company’ performance et. «This option is one of the most volatile investments andhasa high risk-retum rao «One ofthe best investment options to generat inflation-adjusted wealth «Suitable fra long-term horizon. Bonds or Debentures Bonds oc debentures represents long term deb instrmens, The are os bond promise to pay silted steam of cash foe. This neal compris of erode payments oe the iff the instrument and principal payment the ine of {edemption. Bonds may be dasifed int the folowing categories: ) Government securities: Debt securities sued bythe central government are pops eee Re 3 a, z \ 78 : 201, vas saunirei09 sirae ean SEEN tet dt pee ee aoe ssid Income tar te «30%, ss Perea “teeta argues Taser chet Pee Xan En ee ne Solutions fective (¢)=2%, Tarnte()=30% ‘Texequivalent ate (R) = TE See te a (5 Mr Xhas wo option for ivestmes: Option A fr 29% te fies whence Open Beis 18 tar fre. IF Mr income is abject to income txt 1308 which one spn se invetnent? Solution: : Me X shoud go forthe option providing higher neta of seen Cato fe a fem inboth ofthe cases Option A: ‘Norma Rate of Return (R) = 25% Income x Rate = 30% fective rte of Return =? * fective Rae = Rate of Retarn (Income ta Rae) =025(1-020) = 017S0r 758 (Option B: 18% tx fe return so Me. X seal op option B that rove ihe sate am ‘comarca to option A 89 9,20) Financial Literacy Review Questions ” 1. What are the Various Financial Products in Inds? Describe in D 2, Does indian Market is Ready or Perfect forthe tv i wth Examples 3. What do you mean by Concept of return from Investm a 5 etre ew Explain wt ive Example Rely rete 4 Def Diveriction, What tthe Beef of dvesieation whe prepring he porta of oe a ; 10 Mutual Funds Learning Outcomes & ——— _—__—— > vb dey iid Wesco eee re ; 10.1 Inaducon ‘Anutoal fun isa fnancal intermediary that pool the savings of investors fr collective investment ina diveied portfolio of securities, including equity, bonds, debentures and other instruments issued by a usins or government undertaking. Small investors, who are unable to participate in the capital mae, can access the stockmarket through the medium of mutual funds which can manage their fads for masimiing return, The investment may be diversified to spread risk and to ensure a - pod return (dividend or capital ain or bot) fo the investors Thus a mutual fund isa pool of funds erntributed by individual investors having common investment preferences. All the returns from Such investment, bth in terms of dividends and capital appreciation, the net of various incidental texpenies, accrvs tthe investors A mutual fund provides many financial and non-financial benefits fo the investors. Like shares, all mutual funds provide returns inthe form of dividends and capital sppreciation and even bonus issues eet En; ze z Be | 10.2 Net Asset Value [Net asset value i the market value ofthe assets minus the labilties onthe day of valuation. In other words, itis the amount the shareholders wil collectively get if the fand is dssolved or ligidsed. The ‘et asset value of a unit ofa mutual fund is the net aset value of the fund divided by the numberof outstanding unis, 10,3 Different Types of Mutual Funds Schemes * Open-Ended Schemes: Inthe cas of open-ended schemes, the mua fund continuously ofers to sell and repurchase ls unt at NAV: Open-ended funds do nt have tobe lied onthe stock exchange and can offer repurchases soon afer allotment. Tete do ot have a fed maturity lnvetrs can enter and ext the scheme during the lif ofthe fund. Therein ed redemption Period in open-ended schemes, which can be terminated whenever the need arises. Te key featur is ligidity. The majority of mutual funds, 59% approximately, are open funds. + Cloe-Ended Schemes: Schemes wih « tiplated maturity perio (ranging frm 2015 yeu) are called close-ended schemes. nvestors can inves dic inthe scheme atthe tie of nil {nse and thereat they can buy or el the uit ofthe scheme onthe stockexchanges whee they aselisted. The market pice athe stock exchange could vary fromthe scheméSNAV on acount of the demand and suppy sation, unit hoes enpecaions and other markt factor, One of he Charcot closed cere tat they aepneraly traded sx ict ONAN | : | aaah Fonds $503 he NAY of te cone eal scnemes is genes ba cloves to maturity, the dascooet narrows. The NAY o Alcloed every wee Interval Schemes ‘These combine the fares of opex-endd and cose ant xhenes Ther map be ma eam eichange o be open forsale or redexptie Gor render! aes = NET mt Growth Schemes ‘The objective of a rowth fund is to prove capa apprecatinn coc the med schemes normally invest mos ofthe fends i ogee sod are wing tert valve fr posible unre appreciation. Theres 20 puma or See oft, Doe eee sual cpseended ad listed on sock extanges These scheme eae Sr ta ting Se income at neding ther money back he shoe tem Met + Investors in thei prime earning years «Investors seeking growth ove the longer. ‘Income Schemes “The aim ofthe income schemes st provide regu nd ay came we Thee cee OL Wi Meetllee ferry imetn aeons cui meh rhode nd crore sede Cita eprcs, Inguch schemes may belted. Te return aswell a the rk newer s acon fash growth funds. Ideal for: . + Rail pepe and ote whe ned ap abit nd repr income + Ich medione nine te plemet rarsnge Bolanced Schemes The sim of balanced fund so provide both growth and income by periodical tring pat of the sncome and capital gin they earn. They lvet i hues and ed-ncoe secres he ‘ropotion indicated inthe ofer documents. na rsing sock mare, the NA ofthese schemes ray natusalkeppace,orfllequly when the mare fale. The porto such funds aly compres companies with good profit and dimdend track records, Tel tk exposures mode, they oer a reasonable rate of return. The NAV of sch funds ar ily o Be es volte tan pu egy ends deal for: Investors looking for a combination of income and moderate growth Coxe: : Raha ped 35, th reional markting a of ao company. ny emt fam ss wif ‘rdw aged Ramesh he modem ca fics who kao baw importation emg [fn oe Sen x gre men Ses pt bt fi Incas are growing: The present net salary Ramah iH ab Expenses Amouit Household expenses €25,000| Poona expenses 10000 Insrnce prety €5:00 Micelles, 14009 Ramish spends €50000 | is dat ary om hold epee peal expt ence prem ad ter milan pens ato aut “Th present of Rahal include: ied eps - 20, 00.000 BPF-€1.0000 Insurance vile 470,00 Prpery 2700000 Rath Mec ese enought coe an emergency, Thus, he ceady has bit | Pe a i scent Wea hore rep Gees iy atsiah nde eo oncaeid. New & ose aa tere Ate ae i few py a moth nan premise tele coe ef SOMO He al has ve | ado pls. Tash deutch ep endowed ply which mate o pare Tse yl on endowent poly mh oe andi makes semaine the mnt neu od et fy which on provid ihe ret. ecm au conde rendering Ws edowment pocs and Incase erm ene Raa as no deb Money Market Schemes ‘The main aim ofthese schemes isto provide easy liquidity, preservation of capital and moderate inconc. “hese schemes generally ives in safe, short-term instruments, such as treasury bils, certificates ‘of deposi. commercial paper and inte bank call money. Returns on these schemes may fluctuate, ‘depending upon the interes ratesprevaling in the market. Ideal for: Corporate and individual investor 18 4 means to park their surplus funds for short periods or awaiting a more favourable investment alternative. Mutual Funds | 10.5 Cher Scher Tox Saving Sthemes ‘ es schemes fe tx ee a he vers under ax ina peered rom ie oie. mae pone bene the Government fers a incentives fr ivestent in specified ven ‘ample Equity Linked Savings Schemes (E158) and Pension Schemes tote. This is Person Schemes ‘A pension scheme is type of lngterm savings plan. And fs a ax eficint way to save during your working life. Yu save some of your income regula during your working ie. This pves you an income inlaerife when you want to works frei. Tats the point of pension - security when youre older 10.4 Systematic Investment Plan (SIP) ‘ftematic Investment Plan, commonly refered toa an Sills you toreglatly invest fiedsumin Your favorite mutual fund schemes. In SU, fied ardour deduced from your sevings account every ‘month and directed towards the mutual fund you choose to evest in. systematic investment plan isa proces of esinet feed by he diferent mata finds nich the investorcan makes proc !nvestment of small amount instead of «mp sum. case: "hare started SIP of ENR 19000 per month forthe met 30 yearn hi cate, am asoing that «wel livers mtu fund scheme wil deliver 12% per year We hae schemes in Inia that have dane cet | double ofthat for 8 decade, Bt we sold not be oerptimist and sch 2% forth nda for ether | sonar. Se ser imei OK mh 30 ete ops wl py nach an aan of INR 3.34 Crores. ‘The investment can be made weekly, monthly, or quartet. SIP helps to grow money through compounding interest, ensuring higher returns on maturity. So we an say hat IP ia smart ot rather hassle-free, mode of investing in mutual funds, where you are allowed to contribute a predetermined sum of money, Is feible in nature, thus, investors can chooe to decrease ox incest the aunt of investment, or stop investing inthe plan whenever they want, SIP isthe safes and best choice for investment beginers and fr those who are not well versed in the mechanism of the financial mate Discipline your nancial decision Sey © Stariwithas tow as Rs 500 "No charges to investin SIP © Compouncing intrest benefits (© Help to manage market valaiity hh Uw wee CeCeCe EU ee 6 U ' Financial Litera 10s Si putter an invenor ho vais a the og poof ge sd wg inven ely Investors who want inet good amount bat ee uae Wile spablgene ag ne so, would abo find SIP abe worthwhile So SIP not a mal find aero eek investing in a tual fund. Ris simple atgy designed o help inet seamte see Concept if nsrace > Neel for ensure, > Prince fie nsrnc, > Types le race ples, > Concept Noni rane, > Diferet ype of Rikavoled in Intrance. 111 Introduction aoe plas tog ian cet or bane you ay every al owe may ptf to sony en hee ocr he ei Insane way poe anand or ‘ely The cae fee iy gh nec wend Bat ee thay oe apes a mantel pte ae wal ak oved ones tom fnancal hardship incase loses occur ‘ratce many polices provide amiature of savings anid protection bens. nt - 8s happening to ‘0 discuss about the life insurance and non-life insurance scheme, pada 5. 11.2 Life Insurance ‘When youbuyalife insurance policy youname beneficiary Lifeinsurance provides financial payment ‘0 your beneficiary upon your death : : ae 3 e, ppPPPIDPILLISPAD 12 | Financ it js el hing you soa il ee Ua ce asp oo om dee ae EC Co cas hor is ilyw inagas tal os pie ETA a ven mpi ot cea tr esl yn eld a a ay wre dna wo depen px ele ee 2 ac ptr rng yak ea Se 7 Se ore hc cr of ht ea gore ot what you wan to happen aerward, Obvious) the answer wil epend on the pcs of Your oweparicular circumstances (Family structre) REASONS why you could be | turned down for LIFE INSURANCE 11.3 Need for Life Insurance For if insurance to be necesary, two components red tobe tr. The fists hat there must be ot ‘conomic vale from the death of some Typically this lost al represents the future earing power the individual Future earning power alone i rot enough to justify fe insurance on thi if though To ned if insurance, apther person or group of people must depend on tha future earning power somehow. I could bea company depending upon that perso ability toring in revenue ot eould bea {pout depending onthe income from jb to pay for living expenses. Either way, both ftw income ‘arning potential and a reliance on that fur income by another must be presen fo create an economic cess frie insurance 1 varius builders He earning 70000 and eased equipment Ari espns Ait (Case: itis a2 earl guid Welder ho ia suber pus but pos C2000 im exper, st which are fed expenses ea eased a fens on partment and pends he ret of his earnings of 5000 ing an enteriiaen has he way of savings. u3 Wy rnc prion he Ki her acids pad hn fs on and pretation prc of 1 mots wy regan te of one of ren th prt bath rice the mabe pad pray for yey ond "thkatin eons Arata no incon 13 anh at mar cit oy cont of 20060 |p amum Wht te mony At ces by pyres on eran wor nt {2 Atha mv back he edo moe prt: He act eae of rm Ant wl nee heal aka welder apn wil ho in portly we Ps 114 Principles of Life Insurance 2 Lie instance stated on umber of rnc tht toned to eet mace ondans and ect insurance companies make profs, whe fering secarty ples a essed dirs — Principles of Insurance ‘There are broadly four major insurance principles applied in India, bee beng 1, Insrable Interest: Ths principle pertain th ef intrest an nel expec ‘haven a particular policy. Te interest cul be a ily bond a personal stoship2¢ so on. Based on the Interest lee, an insurance company can choose 16 AGERE FE application in order wo protect the misuse oa plicy. 2, Law ofarge Numbers: Thisis theory that esures ante ably and minum oes Jn thelong un when experiments are doe wth hg oben. 3. Gocd Fath: Purchasing isurice entering int cntractberwecn company an eid ‘This shoul be done in good fat by roving al elevates wth Booey: Covering {information rom the insurance company may tet serous onsegenc for tbeedivia, inthe ature, This being sd the insurer mst an explain a specs py ad everett there reno unerpaned or hidden causes and thatthe applica made are of aes at conditions. 73 114 i Financial Literacy 4 Risk & Minimal Loss Insurance iy and companies hae to d busines and mabe profits beeping in ithe ik face. The principe of minimal ik ss that he sured nda s expect toa necescy ation imi here rom any haa Tis cde flowing ‘ey fey geting a regular health check-up nd more. 11S ‘Need for Insurance Panning sorance plans are benef ayone Jookng to protect thei family, set property and themes rm franca ab lsses surance plans wil help you pay for meal emergencies, hospitalization contraction of any : ineses and treatment and medial ar required in he fre, *+ The Fnancal los to the family de to unfortnate death ofthe sole carer canbe covered by surance plans The family can also repay any debts ike home loans or other debts which the Person insured may have incurred in higher lifetime, + + Tesurance plan wil help your family maintain thei standard ofl in ese you are nat around 1 te future, This wil ep Uhm cover costs of running the household through the insrance Jump sum payout. The insurance money wl gv yout family ome much needed breathing space slong coverage fora espendture inca of enacted emereny the ply be osarance plans wal help in protecting the ture of your child in terms of his/her education. They wall make sue that your children are fancialy secure whe pursuing thet dreams and. smbions without any compromises, even when you are not aound. Many surance plans come with savings and invement schemes slog wih rela coverage ‘These help in builing wealthisvings for the future through regula investments. You pay ‘premiums regularly and portion ofthe sane goes toward fe coverage wile the other portion {oes towards ether a savings plan or investment plan, whichever you choos based on your fture goals and needs Insurance helps protect your home in the even of any unforeseen calamity or damage. Your home ‘nsurance plan will help you get coverage for damages to your home and pay forthe cost of eps or rebuilding whichever is neded. you have coverage fr valuables andes inside the house, then you can purchasé replacement items wih the insurance money. 11.6 How to Decide on the Best Life Insurance Plan that Suits Your Needs? Before deciding onthe best Life Insurance pla, you should understand some basic steps tht wil lead you tomake the right decision, ‘+ Need-based policy: The policy should be need-based It means you should assess the number ; of dependants in your family, the source of income, and the monthly commitments before you decide on the Life insurance policy. You should also draw alist of goals that you have set for 4 yourselfike education of your children, mariage of your children, retirement plans, buying & ream house, ec, and plan the investment accordingly. Life Insurance and Non-Life Insurance Scheme \ 11.5 + Seek the help ofan advisor: There are insurance advisors who can help you with your decision ‘They wil consider all the angles lle the source of income, monthly expenditure as per your esye, the numberof dependents, your assets andlinblities, etc, and wilarive at sum assured “The wil beable 1 advise you on which plan to ehoose. They wil help you choose the pan that ‘woul lve you optimum return for your investment The plans could bea term pln, uritinked Plan, endowment plan, o combination ofthe plans. So, is necessary to seek the advice of hese Ingutence advisors if you ste confased about te best plan for you "Compare products: There ate alot of players in the market giving various benefits with varie ‘premium levels. Compare the products and choose the ane that would give you optimum benef forthe east investment. You can compare the diferent policy on policy bazaarcom. 11.7 Types of life Insuronce Policies Broadly speaking ie nsurance canbe further categorized a pure risk overage plan ~ purely insurance andthe othe, which combination of insurance and investment component. But maybe You are not ‘sure which plan to opt for. Or maybe you need to know the diferent types of life insurance policies twalbl inthe market to make a wise choice! 1. Term Plan - Pure rik cover 2 Unitlinked insurance plan (ULIP) - Insurance + lvestment opportunity 3, Endowment Plan = Insurance + Savings 44 Money Back Periodic returns wit insurance cover ‘5. Whole Lif Insurance ~ Life coverage tothe life assured for whole fe 6, Cues Plan Fr fling your cid life goals ike education, marrage ete. 2. Retiement lan ~ Plan your retirement and retire gracefully Les dive deeper to know each plan in deta AD.) Term ie insurance “Tem rns singles om of if nsrance lan Ey oundersand and afb boy ‘tem ran ois deh ik cove fr asp per nae ee ued pe ey

    You might also like