“STUDY OF INDIVIDUAL FINANCIAL PLANNING”

Presented By
Nandhini
 Literature Review
Book : Investment Analysis and Portfolio Management
Author : Prasanna Chandra
Publication : TATA McGRAW HILL

This book gives insight of various investment alternatives and attribute related to
it. It also explains various strategies to be followed by investment practitioners.
It has provided me valuable inputs and better understanding while undertaking
this project.

Some major points are:

• Different investment avenues and their characteristics

• Relation between risk and return
• Importance of asset allocation
 Background Study
Financial planning is a process that a person goes through to find out where they are
now (financially), determine where they want to be in the future, and what they are
going to do to get there. Financial Planning provides direction and meaning to
persons financial decisions. It allows understanding of how each financial decision a
person makes affects other areas of their finances.

The major things to be considered in financial planning are time horizon to achieve
life goals, identify risk tolerance of client, their liquidity need, the inflation which
would eat up living and decrease standard of living and the need for growth or
income. Keeping all this in mind financial planning is done with six step process.
This are self assessment of client, identify personal goals and financial goals and
objective, identify financial problems and opportunities, determining
recommendations and alternative solutions, implementation of appropriate strategy
to achieve goals and review and update plan periodically.
A good financial plan includes Contingency planning, Risk Planning (insurance),
Tax Planning, Retirement Planning and Investment and Saving option.
Contingency planning is the basic of financial planning and also the most
ignored. Contingency planning is to be prepared for major unforeseen event if it
occurs.
These events can be illness, injury in family, loss of regular pay due to loss of
job. Such events are not certain but may have financial hardship if they occur.
Thus a person should have enough money in liquid form to cover this risk.

Risk Coverage is done through insurance. Risk can be classified into life risk,
health risk and property risk. Today we have different insurance which covers
different risk. Everyone is exposed to life risk but the degree of risk varies. Life
insurance provides an economical support to the family and dependents. Apart
from life risk we are also exposed to health risk. Health insurance covers health
risk by funding medical expenses and hospital charges.
Also we have property insurance to cover risk attached to house property like
theft, fire,damage, etc. and various auto insurance.
Tax planning is what every income earner does without fail and this is what
financialplanning is all to them. A good plan is one which takes the maximum
advantage of various incentives offered by the income tax laws of the country.
However, do understand that the tax incentives are just that, only incentives.
Financial planning objective should be getting maximum advantage of various
avenues. It is to be remembered that tax planning is a part and not financial
planning itself. There are many investments which do not offer tax shelter that
does not mean they are not good investments. The prudent investment decision
made and the returns that accrue will more than offset the tax outgo. In any case
the primary objective of a good financial plan is to maximize the wealth, not to
beat the taxmen. However many investment provides great returns which can
offset the tax on it.
Retirement Planning is also an important aspect of financial planning. To a
greater extend most earning people do retirement planning. There are various
schemes in market through which a person can do his retirement planning. To
list a few are Annuity Insurance Plan, PPF and EPF.
In market there are different instruments which can be adapted to fulfill the need
of various planning objective. These instruments are different from each other in
terms of returns, risk,fund allocation, charges, investment term, tax incentives,
etc.
 Objective of Study

To identify investment habit of people.

To understand financial planning done in India.
To analyse the characteristics of different asset class.
To study changes in financial planning with change in age.
To identify various avenues for investment.
To spread awareness of financial planning.
To examine factors influencing the investment decision.
 Scope
The scope of study is getting familiar with various investment avenues available
in market.
To study the life stages of an individual and to identify their risk tolerance,
income flow, life goals and current investment. Study will cover all areas of the
individuals financial needs and should result in the achievement of each of the
individuals goals.

The scope of planning will include the following:

Risk Management and Insurance Planning

Investment Planning
Retirement Planning
Tax Planning
 Methodolgy

The study is about to find various avenues available for an individual to invest
and ways to achieve long term and short term financial goals through financial
planning. It is intend to study the pattern in which individual allocates his
savings in various asset class. It will describe the awareness of investor about
various alternatives available to them. It also aims at creating awareness of
financial planning. The data required for the study would be acquired through
interaction through employees,interviews,questionesr and it will be collected by
means of cold calling (Cold calling is the process of approaching prospective
customers or clients, who were not expecting such an interaction) for particular
period .