financial planning in portfolio management

Single Window Services

Chapter 2. ORGANIZATION PROFILE

2.1 History of Organization

(Alparambha: Kshemakara) – It’s always advisable to make a small and humble

beginning. It ultimately pays off handsomely in the long run.

The concept of Single Window Services (SWS) came out of a need to provide a customer-

centric, hassle-free and highly reliable package in an environment of complete trust and

credibility. Promoted by a highly qualified technocrat with a keen eye for financial markets,

SWS today is a symbol of quality, reliability and, above all, complete credibility. The products

and services offered by SWS encompass a vast array of financial options such as Life & General

Insurance, Mediclaim, Deposit schemes from reputed corporate houses, Postal & other Savings

Schemes, Automobile, Home & Personal loans, Mutual Funds and, above all, all forms of policy

servicing.

The SWS was incorporated in 1994, and the certificate of Commencement of Business in 1996.

The age-old wisdom, which has percolated over generations, has proved its efficacy time &

again in whatever ventures we pursue. This, precisely, is the philosophy that is followed at

Single Window Services, a complete solution provider for all your financial needs, future

provisions and planning.

It has been our constant endeavors, as the name aptly suggests, to provide a complete bouquet of

financial services to all our clients; be it life or general insurance, or a multitude of investment

options available in today’s ever-expanding world; or simply future planning with some specific

goal in mind via a single interface.

Although most professionals today tend to think that they have adequate life and health

insurance cover, the ground realities prove otherwise. In most cases, this realization comes too

late. In order to overcome this problem, SWS has adopted a unique methodology of Investment

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& Insurance Audit for all its clients. This helps them realize their actual value and take

appropriate corrective steps well in time.

In today’s ever-changing world, keeping up-to-date is mandatory at all levels of functionality.

Training & Orientation Activity, therefore, has become an inseparable part of any enterprise.

SWS, apart from offering turn-key, single-stop financial services, has also provided for a

comprehensive facility that can be used for conferences, meetings, training & orientation

seminars, mini-exhibitions, on-line examinations, etc.

With a capacity that can accommodate 30 participants, the centrally air-conditioned Training

Hall at SWS provides the best of audio-visual facilities combined with comfortable seating and a

soothing ambience to help make any program a grand success. A state-of-the-art public address

system, provision for multiple computer terminals, slide & LCD projector, broad-band

connectivity, fully-adjustable lighting system and piped music that soothes and enhances

participants’ mood are just a few of the features that go hand in hand with the conference-cum-

training hall at SWS.

The Training Division at SWS also offers you a one-stop solution combining catering, stationery

and other support services when you organize events at SWS Training Hall. While the facility is

conveniently located (just 2 minutes’ walking distance off College Road), the professional

support services play a key role in the success of any event.

The Training Division maintains a database of professional trainers / facilitators in various

subjects and can also organize training schedules suited to your specific requirements. You can

choose from a variety of pre-designed course options or request for a custom-designed training

program. A number of options combining subjects such as Communication Skills, Selling Skills,

Value Engineering, Personal Total Quality (PTQ), Business Ethics, etc. are currently available

with the services of experienced facilitators associated with SWS.

We, at SWS, are committed to provide one-stop quality services to all our customers. We

sincerely believe that ‘Excellence is the best bargain you can offer’!

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2.2 Organization Flow Chart

11

Chief Financial consultant

Chief Tax consultant

Back Office Staff

CEO

MarketingDept

AccountDept

GIC LIC Mutual Fund


2.3 Objective of company

In next three years, the Most Preferred Financial Advisor in Nashik and surrounding districts.

Achieve a high level of client satisfaction through value-added services like comprehensive

financial planning, support and back-up services and providing fair return on their investments

and savings.

2.4 Services Offered by company

LIFE INSURANCE

GENERAL INSURANCE

MUTUAL FUND

STOCK

TAX

ADVISORY @ FINANCIAL PLANNING

CLAIM SETTLEMENT

SUCCESSION PLANNING... ALLIED SERVICES IN THE FORM OF NETWORK

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Chapter 3

INTRODUCTION TO FINANCIAL PLANNNG

Each one of us needs ‘finance at various stages of our life & to ensure that we have the

money available at the right time when needed. We may need money at the time of marriage of a

daughter or son & we need money at that time only, and not later! Or at the time of medical

emergency and again at the time as later the money helps. Or money will be needed simply at

the time of retirement. We need finance at different times for different goals. Buying a home

providing for a Childs education or marriage or retirement. Are examples of goals in life that can

be measure in monitory terms?

Every individual can benefit from objective help to create, grow, other lifestyle

objectives systematically without any anxiety. Financial planner can guide individuals to

achieve their ultimate aim of spending retire life peacefully without compromising living

standards. A Qualified financial planner will provide advice on:

Systematic savings

Cash flow management

Debt management

Asset allocation for investment

Managing risk through insurance planning

Tax strategies to increase inventible surplus

Distribute residual wealth through estate planning.

The objective of financial planning is to ensure that the right amt of moneys available in

the right hands at the right point in the future to archive an individual’s financial goals.

Successful financial planning makes a considerable contribution to the sum total of human

happiness. Financial planning is process that helps a person work out where he or she now, what

he or she may need in the future & what he or she must do to reach the defined goals. The

process involves gathering relevant financial information., setting life goals , examining the

person’s current financial status & coming up with a strategy & plan for how the person can

meet his or her goals given the persons current situation and future plans.

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3.1 DEFINITION & SCOPE, NEEDS

Financial planning is a highly personalized service where you need to understand not

only the total picture of client’s financial position but also his behavior attitude & risk profile.

Definition’

Financial planning is process of –

-Identifying person’s financial goals

-Evaluating existing resources current financial position

-Designing the financial strategies that help the person achieve those goals

Financial planning includes investment planning, retirement planning, estate planning, tax

planning, risk mgmt. Financial planning is a highly personalized service where you need to

understand not only the total picture of client’s financial position but also his behavior attitude &

risk profile.

AIMS OF FINANCIAL PLANNING

The first & basic aim of the financial planning is,

To protect the wealth & also create & make a growth in the client’s wealth

Some other goals of financial planning are education planning, retirement planning, foreign tour

planning, wedding planning, tax saving etc.

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Fundamentals of Financial Planning

Financial planning is the process of solving financial problems and achieving financial goals by

developing and implementing a personalized "game plan." In order to be effective this "plan"

must take into consideration an individual’s overall picture. It must be:

Coordinated

Comprehensive

Continuous

Financial planning is like all other phases of life; it involves choices

Spend now or save for later? Pay off existing bills or increase retirement savings?

Focus savings money on short term or long-term goals?

A true financial plan does not focus one aspect or product, but instead seeks to take all areas of

planning into consideration when making financial decisions.

What is Included?

Cash Flow Management

This aspect of planning deals with the day to day allocation of income; and its effective

use in paying for current living expenses and in accumulating assets which will be used

in meeting financial goals.

Tax Planning and Management

This area focuses on the understanding of and application income tax law, estate and

inheritance taxes; and, when possible, minimizing these taxes.

Risk Planning and Management

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This area of planning deals with the risk of losing life, income, or property. It includes

the use of insurance products and strategies.

Investment Planning and Management

Almost everyone has accumulation goals for which investments must be made and

managed. These could include buying a home; planning for college; or providing for

retirement.

Retirement Planning and Management

By far the most common accumulation goal is the ability to become financially

independent. Retirement strategies encompass the understanding of the employer-

sponsored retirement plans; and personal savings accumulation plans.

Estate Planning and Management

The final phase of planning is for the transfer of assets to our heirs with minimization of

taxes and other costs.

Task of financial planner

Task of financial planner is to make a good client planner relationship, assist the client to

develop his goals, collect all related financial data, analyses the data, Develop & suggest various

alternatives, strategies to archive client’s goals, evaluation of various alternatives & selection of

appropriate alternative. After selecting appropriate alternative, implementation of the financial

plan is take place. After implementing the plan the monitoring & regular preview of the plan is

done. The modifications as per the market conditions as & when required are implemented

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Planning By Keeping Life Stages In Mind

17

Family RetirementSingle

LeavingSchool

Earner Marriage BuyingHouse

ProvidingFor

Family

Retirement

RetirementMarriageStudent 1st Job House KidsEducation


Process of financial planning

• Establishing & defining the client planner relationship

• Gather client data including goals

• Analyze & evaluate your financial status

• Develop & present financial planning recommendation

• Implement the financial planning recommendation

• Monitor the financial planning recommendations

Benefits of financial planning

• Security through future planning

• Analyses every aspect of your financial situation

• Identified weaknesses & suggest improvements

• Reduces stress

• Proper documentation for audit available

• Prepares everyone to defeat inflation

Financial planning is beneficial for secure the future of the client through planning his future

goals, financial status.

It analyses your financial status, identify your weaknesses & suggest improvements.

Financial planning makes available the proper documentation for audit .all this process reduces

stress of the client

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Meaning of Portfolio

A Portfolio is a combination of different investment assets mixed and matched for the purpose

of achieving investor’s goal(s). Items that are considered in the portfolio can include any asset,

shares, debentures, fixed deposits, mutual fund units to items such as gold, silver and even real

estates etc. However, for most investors a portfolio has come to signify an investment in

financial instruments like shares, debentures, fixed deposits and mutual fund units.

Diversification of Portfolio

It is a risk management technique that mixes a wide variety of investments within a portfolio. It

is designed to minimize the impact of any one security on overall portfolio performance.

Diversification is possibly the best way to reduce the risk in a portfolio.

Advantages of having Diversified Portfolio

A good investment portfolio is a mix of a wide range of asset class.

Different securities perform differently at any point in time, so with a mix of asset types,

your entire portfolio does not suffer the impact of a decline of any one security.

When your stocks go down, you may still have the stability of the bonds in your

portfolio.

There have been all sorts of academic studies and formulas that demonstrate why

diversification is important, but it’s really just the simple practice of “NOT PULLING

ALL YOUR EGGS IN ONE BASKET.”

If you spread your investments across various types of assets and markets, you will

reduce the risk of your entire portfolio getting affected by the adverse returns of any

single asset class.

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What is investing?

Investment refers to a commitment of funds to one or more assets that will be held over

some future time period. Almost all individuals have wealth of some kind, ranging from

the value of their services in the workplace to tangible assets to monetary assets.

Anything not consumed today and saved for future use can be considered an investment.

For our purposes, investment will mean a measurable asset retained in order to increase

one’s personal wealth.

Why invest?

We invest to improve our future welfare. Funds to be invested come from

assets already owned, borrowed money, and savings or foregone consumption. By

foregoing consumption today and investing the savings, we expect to enhance our future

consumption possibilities. Anticipated future consumption may be by other family

members, such as education funds for children or by ourselves, possibly in retirement

when we are less able to work and produce for our daily needs. Regardless of why we

invest we should all seek to manage our wealth effectively, obtaining the most from it.

This includes protecting our assets from inflation, taxes and other factors.

What Process Do We Use to Invest?

The financial planning process consists of six steps that help you take a "big picture"

look at where you are financially. Using these six steps, you can work out where you are

now, what you may need in the future and what you must do to reach your goals. These

six steps are:

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1. Establishing and defining the client-planner relationship .

The financial planner should clearly explain or document the services to be provided

to you and define both his and your responsibilities. The planner should explain fully

how he will be paid and by whom. You and the planner should agree on how long the

professional relationship should last and on how decisions will be made.

2. Gathering client data, including goals .

The financial planner should ask for information about your financial situation. You

and the planner should mutually define your personal and financial goals, understand

your time frame for results and discuss, if relevant, how you feel about risk. The

financial planner should gather all the necessary documents before giving you the

advice you need.

3. Analyzing and evaluating your financial status .

The financial planner should analyze your information to assess your current

situation and determine what you must do to meet your goals. Depending on what

services you have asked for, this could include analyzing your assets, liabilities and

cash flow, current insurance coverage, investments or tax strategies.

4. Developing and presenting financial planning recommendations and/or

alternatives .

The financial planner should offer financial planning recommendations that address

your goals, based on the information you provide. The planner should go over the

recommendations with you to help you understand them so that you can make

informed decisions. The planner should also listen to your concerns and revise the

recommendations as appropriate.

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5. Implementing the financial planning recommendations .

You and the planner should agree on how the recommendations will be carried out.

The planner may carry out the recommendations or serve as your "coach,"

coordinating the whole process with you and other professionals such as attorneys or

stockbrokers.

6. Monitoring the financial planning recommendations .

You and the planner should agree on who will monitor your progress towards your

goals. If the planner is in charge of the process, she should report to you periodically

to review your situation and adjust the recommendations, if needed, as your life

changes.

Common Mistakes.

It may be helpful to be aware of some common mistakes people make when approaching financial planning:

1. Don't set measurable financial goals.

2. Confuse financial planning with investing.

3. Neglect to re-evaluate their financial plan periodically.

4. Think that financial planning is only for the wealthy.

5. Think that financial planning is for when they get older.

6. Think that financial planning is the same as retirement planning.

7. Wait until a money crisis to begin financial planning.

8. Expect unrealistic returns on investments.

9. Think that using a financial planner means losing control.

10. Believe that financial planning is primarily taxed planning.

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INVESTMENT OPPORTUNITIES IN INDIA

From the Investment point of view following are the main opportunities available for Investment in

India, each of these schemes fulfills the objectives of investors and these schemes having its own

advantages and disadvantages but by combining all these major investment schemes we can make the

best portfolio for investor which fulfills the expectation and financial goals of the investor. These

Investment opportunities include –

I. Stock Market.

II. Mutual Fund.

III. Insurance.

IV. Postal Schemes for Investment.

V. Debt market.

VI. Real Estate.

I . Stock Market –

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Stock markets refer to a market place where investors can buy and sell stocks. The price at

which each buying and selling transaction takes place is determined by the market forces (i.e.

demand and supply for a particular stock).

Example for a better understanding of how market forces determine stock prices. ABC Co. Ltd.

enjoys high investor confidence and there is an anticipation of an upward movement in its stock

price. More and more people would want to buy this stock (i.e. high demand) and very few

people will want to sell this stock at current market price (i.e. less supply). Therefore, buyers

will have to bid a higher price for this stock to match the ask price from the seller which will

increase the stock price of ABC Co. Ltd. On the contrary, if there are more sellers than buyers

(i.e. high supply and low demand) for the stock of ABC Co. Ltd. in the market, its price will fall

down.

Advantages of investing in Stock/Share market by Long Term Investment –

One can expect assured returns of 25-30% p.a. if invested for long term in the growing

companies.

Investor can receive the benefits of dividend or bonus shares.

Today the INFLATION rate is around 12%, in this scenario investment in the stock

market is able to give you the handsome returns compared to other investments.

In the capital market there is no capital gain tax on the profit made by selling of shares

after one year by the investor.

Disadvantages of investing in Stock/Share market -

Share market is very sensitive and highly volatile so there is high risk involved.

If the investment is made without having proper knowledge, the chances of

suffering losses become very high.

As discussed earlier that the stock market is very sensitive and volatile so any political,

commercial or global news can affect the market.

II. Mutual Fund -

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Mutual fund is a trust that pools money from a group of investors (sharing common financial

goals) and invests the money thus collected into asset classes that match the stated investment

objectives of the scheme. Since the stated investment objectives of a mutual fund scheme

generally form the basis for an investor's decision to contribute money to the pool, a mutual

fund cannot deviate from its stated objectives at any point of time.

Every Mutual Fund is managed by a fund manager, who using his investment management

skills and necessary research works ensures much better return than what an investor can

manage on his own. The capital appreciation and other incomes earned from these investments

are passed on to the investors (also known as unit holders) in proportion of the number of units

they own.

When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets

of the fund in the same proportion as his contribution amount put up with the corpus (the total

amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit

holder.

Any change in the value of the investments made into capital market instruments (such as

shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is

defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a

scheme is calculated by dividing the market value of scheme's assets by the total number of

units issued to the investors.

For example -

If the market value of the assets of a fund is Rs.100, 000

The total number of units issued to the investors is equal to 10,000

Then the NAV of this scheme = (A)/(B), i.e. 100,000/10,000 or 10.00

Now if an investor 'X' owns 5 units of this scheme

Then his total contribution to the fund is Rs.50 (i.e. Number of units held multiplied by the

NAV of the scheme)

Advantages of Mutual Fund for an Investor –

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Portfolio Diversification

Professional Management

Less Risk

Low Transaction Costs

Liquidity

Choice of Schemes

Transparency

Flexibility

Safety

Disadvantages of Mutual Fund for Investor –

Costs Control Not in the Hands of an Investor

No Customized Portfolios

Difficulty in Selecting a Suitable Fund Scheme

III. Insurance

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Insurance is a basic form of risk management, which provides protection against

possible loss to life or physical assets. A person who seeks protection against such loss is

termed as insured, and the company that promises to honor the claim, in case such loss

is actually incurred by the insured, is termed as Insurer. In order to get the insurance, the

insured is required to pay to the insurance company (i.e. the insurer) a certain amount,

termed as premium, on a periodical basis (say monthly, quarterly, annually, or even one-

time).

Concept of Insurance / How Insurance Works

The concept behind insurance is that a group of people exposed to similar risk come

together and make contributions towards formation of a pool of funds. In case a person

actually suffers a loss on account of such risk, he is compensated out of the same pool of

funds. Contribution to the pool is made by a group of people sharing common risks and

collected by the insurance companies in the form of premiums.

INSURANCE COVERS

Depending on the circumstances, you may need insurance in the following areas:

Life

Health

Home

Motor

Personal Liability

Professional Liability

Business

Disability

LIFE INSURANCE:

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Life insurance is a risk sharing mechanism whereby a policy owner (the insured) agrees to

invest some money with an insurance company that obligates itself to pay money to a

beneficiary on the insured’s death. It is a legal contract between an insurance company and

policy owner.

Life insurance needs analysis:

The first in determining what type of insurance to buy is a ‘needs analyses. You need to

assess the financial impact on your family if the breadwinner should die. You can assess the in

different ways.

1. The Multiple Earning Method:

The amount of life cover you should buy should be 3 to 10 times of your gross

annual earnings. It completely ignores your financial resources and needs.

2. The ‘ Human Life Value’ Method:

This method values human life at the present value of all future earnings

potential. The steps for calculating the amount of cover under this method are as below:

Deduct your personal expenses from your total income. This is the surplus that

you leave for your family and for your investments.

Calculate the number of years left in your earning life

(Retirement age-Current age)

Project family expenses up to retirement, allowing for increases due to inflation

and other factors.

Subtract any pension benefits that they might get at your death.

Add non-recurring expenses like children’s marriage.

Calculate the shortfall in the total expenses and income.

Calculate the present value of the shortfall.

3. The ‘Needs’ Method:

This method tries to calculate the amount required by your family to maintain

their existing lifestyle and their financial goals. The amount of the life cover under this

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Method is calculated by subtracting the total of your current financial resources from the

present value of your family’s projected expenses.

FORMS OF LIFE COVER:

Life insurance covers are availably three forms. Each form exists for a different

objective. These are:

1. Term Plan

2. Pensions Plan

3. Investment-cum-insurance products

Endowment plans

Money-back plans

Whole life plans

Unit linked insurance plans

1. TERM PLANS:

In the event of death in the policy period, your nominees receive

the amount of your cover i.e. the sum assured. You get nothing if you survive beyond

the policy period.

2. PENSION PLANS:

Pension plans are actually pure investment products. They provide

with an alternate income stream after your retirement.

3. ENDOWMENT PLAN:

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They also offer some returns on the premiums paid by you. So if you

die during the policy Term, your nominee’s get the sum assured plus some returns.

Even if you survive the term, you still get back the sum assures and the returns.

However, the premium charged for endowment plans is 5-6 times higher than the

premium for term plan.

4. MONEY-BACK PLANS:

Money-back plans are a variant of endowment plans. In case of the

endowment plans, the survival benefits are disbursed at the end of the policy term,

while in money-back plans the payback is staggered through the policy period.

Money back policy is a policy opted by people who want periodical

payments. A money back policy is generally issued for a particular period, and the

sum assured is paid through periodical payments to the insured, spread over this time

period. In case of death of the insured within the term of the policy, full sum assured

along with bonus accruing on it is payable by the insurance company to the nominee

of the deceased.

4. WHOLE-LIFE PLANS:

The term plan, endowment plans and money back plan provide

cover only till a specified age. Whole life plan provides cover till end of life. The

insured has to pay premium till a specified age. On reaching that age, the insured has

the option to encash the maturity benefits pr continue the cover for his entire

lifetime.

5. UNIT LINK INSURANCE PLANS:

It can be considered as a combination of mutual funds and term plans. Part of

the premium paid is linked to the policy period and the sum assured and the rest is invested.

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NON-LIFE INSURANCE

TYPES OF NON LIFE INSURANCE:

1. Personal-

Medical

Disability

2. Property-

Damage to property

Loss of income

Indirect losses

3. Liability-

Under statute

Under common law

Under contract

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IV. DEBT

Debt is that parts of the total investment that will yield steady returns and provide an

element of stability to the whole portfolio of the individual. This is an important asset class as it

is not just returns but the nature of the portfolio that has to be taken into Consideration for

different individuals.

Features of debt

The returns here are in the form of interest

Coupon rate determines the interest received for investors

The yield is another important factor to look at

Yield measure the return of an instrument that is held till its maturity

Yield changes at different points of time depending upon market conditions

Yield is relevant for traded debt instruments

This will give the total return for debt

Investors can put their money into debt directly or through mutual fund

They are quite steady in returns

There are various debt instruments like bonds, debentures, and deposits.

Use of debt

Used to bring in an element of stability in the picture

Makes the investment a bit less risky than equity

There is no cause for daily monitoring unless there is an intention to trade the

instruments

There is an element of surety about the returns when held till maturity and there is not

credit default

Bonds

A bond is a debt instrument issued for a period of one year or more.

This is a more conservative investment.

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Bonds raise capital for the issuer by borrowing money from investors. With a bond note,

the issuer is basically promising to repay the principal along with interest on a specified

date, also known as the maturity date.

The government, states, cities, corporations and many other types of institutions sell

bonds.

The various types of Bonds are as follows:

Zero Coupon Bond:

Bond issued at a discount and repaid at a face value. No periodic interest is

paid. The difference between the issue price and redemption price represents the return to the

holder. The buyer of these bonds receives only one payment, at the maturity of the bond.

Convertible Bond:

A bond giving the investor the option to convert the bond into equity at a fixed

conversion price.

Treasury Bills:

Short-term (up to one year) bearer discount security issued by government as a

means of financing their cash requirements.

V. Postal Schemes for Investment –

Following chart will explain some of the popular schemes of Postal Department for Investment –

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SchemeInterest

(%)

Minimum

Investment

(Rs.)

Maximum

Investment

(Rs)

Features Tax Breaks

National Savings

Certificate8.00a 100 No limit 6-year tenure

Section 80C

benefit

Public Provident

Fund8.00b 500 70,000 15-year term; tax-free returns

Section 80C

benefit

Kisan Vikas Patra 8.41b 100 No limit Money doubles in 8 years, 7 months No tax benefit

Monthly Income

Scheme8.00 1,500

Single A/c: 4.5

lakhs

Joint A/c: 9

lakhs

6-year tenure; monthly returnsNo tax benefit

Time Deposits 6.25-7.50 200 No limit Available for 1, 2, 3, 5 years No tax benefit

Recurring

Deposits7.50c 10 No limit 5-year tenure No tax benefit

Senior Citizens

Saving Scheme9.00d 1,000 15 lakhs

5 year tenure; minimum age 55; also

available with public sector banksNo tax benefit

Savings Bank

Account3.5

Single A/c: 1

lakh

Joint A/c: 2

lakhs

Any individual can open an account;

Cheque facility available.No tax benefit

Sec 80C benefit: Investments up to Rs 1 lakh in specified securities (maximum of Rs. 70,000 in PPF) qualify for deduction

A Compounded half-yearly b Compounded yearly c Compounded quarterly d Payable quarterly

VI. Real Estate Investment

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http://www.indiapost.gov.in/6yearsNSC.html

http://www.indiapost.gov.in/6yearsNSC.html

http://www.indiapost.gov.in/SavingsAccount.html

http://www.indiapost.gov.in/SavingsAccount.html

http://www.indiapost.gov.in/senior%20citizen.html

http://www.indiapost.gov.in/senior%20citizen.html

http://www.indiapost.gov.in/5YearsRD.html

http://www.indiapost.gov.in/5YearsRD.html

http://www.indiapost.gov.in/TimeDeposit.html

http://www.indiapost.gov.in/6yearsMIS.html

http://www.indiapost.gov.in/6yearsMIS.html

http://www.indiapost.gov.in/KVP.html

http://www.indiapost.gov.in/15yearsPPF.html

http://www.indiapost.gov.in/15yearsPPF.html


India Real Estate Investment is a significant feature of the Indian realty market under the

initiation of the investors and developers, leading to future real estate development in India. The

development of private ownership of property real estate in India has become a major area of

business with India Real Estate Investment playing the vital role. India Real Estate Investment

involves minimum risk for getting maximum return.

India Real Estate Investment has rising demand in every sector like commercial, residential,

retail, industrial and hospitality. But maximum demand is observed in the booming IT sector.

The India Real Estate Investment is facilitated by the liberal economic policies of the

government.

Factors Favoring India’s Real Estate Investment

Increasing growth in residential properties due to lower interest rates, easy availability of

housing finance, rising income, better job prospects and increase of nuclear families.

Growth of retail market in India due to increasing demand from retailers, higher

disposable incomes.

Burgeoning IT and ITES industry

Growing commercial property market

Emerging hospitality or hotel industry due to the exceptional boom in inbound tourism

and the IT sector.

Development of the special economic zones (SEZ).

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3.2 Presentation of the information either in Tabular form and /

Graphical

What are Risk Analysis and Portfolio Planning?

Risk Analysis

Risk analysis is very important tool for portfolio planning, because each persons risk appetite is

different due to reasons like income level, age, mentality, financial goals and objectives. So

Portfolio planner must have to find out the risk appetite of the client with the help of RISK

ANALYSIS tool. By analyzing the risk of client the portfolio planner came to know whether the

client is AGGRESSIVE, MODERATE, and CONSERVATIVE.

Basic Types of Portfolios

In general, aggressive investment strategies - those that shoot for the highest possible

return - are most appropriate for investors who, for the sake of this potential high return, have a

high-risk tolerance (can stomach wide fluctuations in value) and a longer time horizon.

Aggressive portfolios generally have a higher investment in equities.

The conservative investment strategies, which put safety at a high priority, are most

appropriate for investors who are risk averse and have a shorter time horizon. Conservative

portfolios will generally consist mainly of cash and cash equivalents, or high quality fixed

income instruments. To demonstrate the types of allocations that are suitable for these strategies,

we'll look at samples of both a conservative and a moderately aggressive portfolio.

Note that the terms cash and the money market refer to any short-term, fixed-income

investment. Money in a savings account and a certificate of deposit (CD), which pays a bit

higher interest, are examples. (You can read more about the money market in the.)

36


1. Conservative portfolio: -

Conservative model portfolios generally allocate a large percent of the total portfolio to

lower-risk securities such as fixed-income and money market securities.

Your main goal with a conservative portfolio is to protect the principal value of your

portfolio. As such, these models are often referred to as "capital preservation portfolios".

Even if you are very conservative and prefer to avoid the stock market entirely, some

exposure can help offset inflation. You could invest the equity portion in high-

quality blue chip companies, or an index fund, since the goal is not to beat the market.

37


2. Moderately Conservative Portfolio: -

A moderately conservative portfolio is ideal for those who wish to preserve a large

portion of the portfolio’s total value, but is willing to take on a higher amount of risk

to get some inflation protection.

A common strategy within this risk level is called "current income". With this strategy,

you chose securities that pay a high level of dividends or coupon payments.

38


3. Moderately Aggressive Portfolio: -

Moderately aggressive model portfolios are often referred to as "balanced portfolios"

since the asset composition is divided almost equally between fixed-income securities

and equities in order to provide a balance of growth and income.

Since these moderately aggressive portfolios have a higher level of risk than those

conservative portfolios mentioned above, select this strategy only if you have a longer

time horizon (generally more than five years), and have a medium level of risk tolerance.

39


4. Aggressive Portfolio: -

Aggressive portfolios mainly consist of equities, so these portfolios' value tends to

fluctuate widely. If you have an aggressive portfolio, your main goal is to obtain long-

term growth of capital. As such the strategy of an aggressive portfolio is often called a

"capital growth" strategy.

To provide some diversification, investors which aggressive portfolios usually add some

fixed income securities.

40


5. Very Aggressive Portfolio: -

Very aggressive portfolios consist almost entirely of equities. As such, with a very

aggressive portfolio, your main goal is aggressive capital growth over a long time

horizon.

Since these portfolios carry a considerable amount of risk, the value of the portfolio will

vary widely in the short term.

41


Portfolio Planning

After analyzing client’s risk appetite portfolio planner starts his actual work of Portfolio

Planning.

Firstly portfolio planner finds out the goals and objectives of his clients for investing in

the right direction.

Then he designs the investment of his client in stock market, mutual fund, insurance,

FD’s, realty investment and bonds etc. for making diversified portfolio.

After designing the client’s portfolio, portfolio planner discussed his proposed

investment pattern with his client and after getting approval from him he actually invest

his money.

After making investment, Portfolio Planner has the duty to keep regular watch on client’s

portfolio.

42


3.2Data Interpretation and Analysis

Sample Portfolio of different backgrounds, financial conditions, objectives and financial

goals –

To study the risk analysis, portfolio analysis and planning we need to study live cases to

understand how it works and beneficial in practical life. For this I decided to take live examples

of different persons with different objectives, financial conditions, objectives and goals.

Procedure for making Portfolio of the client –

Fill up the Risk analysis and portfolio analysis of the client to know his/her personal and

financial details.

Then analyze the Risk Appetite of the client.

Then understand his/her financial goals.

Then study the cash inflow and outflow pattern of the client.

After this study the existing Investments of the client.

Then prepare the Model investment Portfolio for client.

After clients free consent for the proposed plan, invest his/her money according to that.

After this keep regular watch on clients Portfolio and make necessary changes wherever

required.

43


Case.

________________________________

Personal Financial Plan

For

Mr. Satish Deshpande & Family

________________________________

44


45

Introduction

Goals and Objectives

Current Financial Situation

Assumptions

Cash-Flow Management

Risk management / Insurance planning

Education Planning

Retirement Planning

Investment Planning

Estate Planning

Tax Planning

Implementation / Action Plan

Appendix 1: Personal Data

Appendix 2: Personal Financial Fact-Finder


Introduction

Satish, you are 42 years old, married to Pushpa age 39 recently.

You are currently earning Rs. 1352000/- p.a. and main support for the family. Pushpa’s income

in mainly for her own savings and personal use. Within next 2-3 yrs she will stop her

consultancy and focus on your children’s education and home.

You are very keen on insurance part. And paying almost 200000/- premium p.a. Total 14

policies with sum assured Rs. 3815000. Majority of the policies are Endowment and few Term

Insurances.

Your Net worth analysis shows a net worth of Rs. 4590000/- Total Assets now in July 2008 are

Rs. 8182000/- and liabilities of Rs. 3592000/-

46


Your Objectives & Concerns

1. Cash Flow & Net worth Management

To have a significant cash flow surplus annually of around 15-18% of household

gross income in order to provide a funding source for all future wealth accumulation

targets. Any cash flow review should not significantly change your lifestyle.

2. Risk planning & Management

You want to have a complete family’s personal insurance program. This includes

covering all debts and having lump sums for generating income for the surviving

family members.

3. Education of both the children.

You have 2 sons. Your goal is to give them the Best quality of Education in best

colleges in India. By, retirement, you expect both of them to be independent and do

not need financial support.

4. Retirement Planning

You have some personal savings. Your goal is to retire at age 60. At that time you

want maintain the standard of living same as before retirement for yourself and

spouse. Lowering the standard is unacceptable. You are however not aware whether

the current recourses are adequate to provide retirement needs.

5. Investment Planning

Asset portfolio should grow at a rate, which supports the realization of the wealth

accumulation goals for financial freedom (retirement) and education for children.

47


6. Estate Planning

To have wills written for both husband and wife and to have a trust set up for the

child.

7. Tax Planning

To optimize tax savings under the Indian tax system. You are keen on using up all

personal tax relieves and rebates and to have good income reallocation planning.

Sub-Objectives

1. Good long term capital appreciation

2. Returns from investment should be tax free or with minimum tax

48


Current Financial Situation

Cash Flow Analysis

In-Flow Rs Out-Flow Rs.

Satish Income (after tax) 1,352,040 Tax Payment

Pushpa's Income (after tax) 165,000 Satish Tax 225,000

LIC Maturity 134,000 Pushpa's Tax 0

Dividend Received 20,000

Bank Interest 2,100 Subtotal 225,000

Standard of Living

Car loan installments (Honda City) 212,400

Car loan installments (Wagon R) 79,764

House loan installments 225,144

Personal Loan 235,392

Car maintenance 19,000

House maintenance 12,000

Credit Card payments 6,122

Eating out 48,000

Groceries 12,000

Travel 50,000

Utilities 60,000

Miscellaneous 69,500

Subtotal 1,029,322

Insurance Premium

Satish life insurance 108,264

Pushpa's life insurance 57,901

Vehicle Insurance 12,686

Other Insurance 21,000

Subtotal 199,851

Total 1,673,140 Total 1,454,173

Difference 218,967

49


Cash out Flow is

50


Net worth Statement – Current

Assets Rs. Liabilities Rs.Liquid assets: Home Loan 1780000Cash in hand 20000 Car loans 456000Saving account 116950 Personal Loan 1356000Fixed Deposits 0 Mutual Funds 776000 Sub Total 912950 Non-liquid assets: Properties 3500000 Equities 200000 PPF 1005789 Cars 800000 Life insurance cash value 764053 Other Assets 1000000 Sub Total 7269842 TOTAL 8182792 TOTAL 3592000 NETWORTH 4590792

51


Net worth Statement – Current

52


Risk Management/Insurance Planning

The current personal insurance summary is as follows:

Person Plan type Premium p.a. Insurance Cover

Mr. Satish Endowment + Term Insurance 92533/- 3815001/-

Mrs. Pushpa Endowment 56550/- 1142653/-

Master Umesh Unit Linked 6395/- 75000/-

Master Amey Unit Linked 6351/- 100000/-

The current property insurance summary is as follows:

Property Sum Assured

Current House Not Insured

Cars Adequately Covered

Other Household Assets Not Insured

53


Investment Planning

The following table lists out the portfolio of investment-grade assets currently owned and the

portfolio return rate:

Asset Rs Return Rate Weighted Return Rate

Saving Account 116,950 3.50% 0.14%

Equities 200,000 18.00% 1.26%

Life insurance Value 764,053 4.50% 1.20%

Mutual funds 776,000 15.00% 4.07%

PPF 1,005,789 8.00% 2.81%

Total: 2,862,792 Portfolio Return: 9.48%

54


Retirement Planning

There is currently no clear plan on retirement. You have not really focused on this aspect. It

seems that your major focus is on your current profession and you have not given a thought on

Retirement Planning.

Education Planning

It seems that you have not specifically allocated funds for education funding of your two sons.

Estate Planning

There is no arrangement of any nature including will and trust done, other than the nominations

done for Mutual funds and Insurance policies.

The other facts and data are collected in the “Personal Financial Fact-Finder” form as attached in

the Appendices.

55


Assumptions

Following are the assumptions based on the facts and discussions with you.

Your income will increase at the rate of 10 % per annum until age 60.

Spouse’s income will stop within next 3 years.

Rate of inflation at 7 % per annum based on government official rate on Consumer Price Index.

Equities investment rate of return at 18% p.a. on long-term basis.

Property investment rate of return at 10 % p.a. covering capital gain.

Investment-linked equities funds at rate of return of 15% p.a.

Investment-linked bond funds at rate of return of 7.5 % p.a.

Pre-retirement investment portfolio rate of return should be 12%

Post-retirement investment portfolio rate of return = 10%

56


Recommendations

Cash Flow Management

The current cash flow surplus is very low at around 2 Lacs per annum. Based on no change or

very minimal change in lifestyle, we have studied and done an analysis.

In recommending changes, we have kept in mind some basic principles:

Your lifestyle needs to be maintained as original as possible.

Any reshuffling of assets including paying off debts or loans must leave behind enough liquid

assets that cater to the 3-6 months’ of emergency buffer fund.

Our analysis and recommendations:

As you are living with your parents the household expenses are very much in control. We should

really appreciate that you don’t have any balance on credit card. In your routine outflow the

major contribution is of EMI of different loans. We will see any alternative available to reduce

the EMI contribution.

Car Loan (Honda City): - In this case the loan was taken in 2003. As it is higher end car the

loan rate is vary low. It comes out to be 6.7% only. So its better we should keep it as it is. The

loan will end in Aug 08

Car Loan (Wagon R): - This loan is also at lower side. Interest rate comes out to be 8%. Better

to continue this loan without any change.

House Loan: - In this case the interest rate is almost same with other banks so there is hardly

any scope for debt arbitrage.

Personal Loan: - This is taken from 3 banks at different time and at different rate. The average

interest rate of all 3 loans comes out to be 16%, which is slightly on higher side.

This is the area where we can think of repaying it earlier.

Total outstanding amount is Rs. 1356000/-

57


We have various options available to repay this loan.

Your Insurance portfolio shows that majority of the policies are of Endowment type and few are

Term insurances. We have taken out the Loan quotation for all those endowment policies. Total

Loan available is around Rs. 587000/-. Loan interest rate is 9%

Current value of your investment in Mutual Fund & Shares is Rs. 976000/- we have a product

called Loan against Securities. (LAS) current interest rate for that is 13%. We can pledge all the

investment in those against which 50% loan will be available. i.e. Rs. 488000/- will be available

at 13% we will utilize Rs. 450000/- from that. Surplus of Rs. 38000/- will be available which we

will not utilize as LAS is fluctuating on market, so it will act as buffer to adjust the market

condition.

Currently PPF has much more amount getting 8%. We will withdraw Rs. 319000.

Adding above 3 (587000+450000+319000) we will get Rs 1356000/-

We can close the personal loan from above amount.

Another important point is in LIC loan interest payment is mandatory (4.5 % of loan amount

half yearly) LAS is CC loan. Hence we can adjust the principle repayment in both the loans as

per our wish.

Considering that we will repay the principle also then equivalent EMI will be 11338/-

58


If the above reductions are implemented, the new cash flow statement will look like the

followings:

Cash Flow Statement - Revised

In-Flow Rs. Out-Flow Rs.Satish’s Income (after tax) 1,352,040 Tax Payment Pushpa's Income (after tax) 165,000 Satish Tax 225,000LIC Maturity 134,000 Pushpa's Tax 0Dividend Received 20,000 Others Bank Interest 2,100 Subtotal 225,000 Standard of Living Car loan installments (Honda City) 212,400 Car loan installments (Wagon R) 79,764 House loan installments 225,144 LIC Policy Loan 69,192 Loan Against Securities 66,864 Car maintenance 19,000 House maintenance 12,000 Credit Card payments 6,122 Eating out 48,000 Groceries 12,000 Travel 50,000 Utilities 60,000 Miscellaneous 69,500 Subtotal 929,986 Insurance Premium Satish’s life insurance 108,264 Pushpa's life insurance 57,901 Vehicle Insurance 12,686 Other Insurance 21,000 Subtotal 199,851 Total 1,673,140 Total 1,354,837 Difference 318,303

59


60


The new net worth statement after debt arbitrage will be as follows:

Net worth Statement – Revised

Assets Rs. Liabilities Rs.Liquid assets : Home Loan 1,780,000 Cash in hand 20000 Car loans 456,000 Saving account 116950 LIC Policy Loan 587,000 Fixed Deposits 0 Loan Against Securities 450,000 Mutual Funds 776000 Sub Total 912950 Non-liquid assets : Properties 3500000 Equities 200000 PPF 686789 Cars 800000 Life insurance cash value 764053 Other Assets 1000000 Sub Total 6950842 TOTAL 7863792 TOTAL 3,273,000 NETWORTH 4,590,792

Here, we can see a dramatic change in the cash flow surplus. From Rs. 2.18 Lacs surplus, we

now have a surplus of Rs. 3.18 Lacs, which can be used to fund your goals and objectives in life.

This surplus is necessary to do the funding, as current assets may not be sufficient to do the task.

61


62


Risk Management/Insurance

Personal Insurance

You are keen to upgrade your family’s insurance program so as to meet the goal and objectives.

Calculations for Sanjay’s sum assured :

Death & Total and Permanent Disability

As you are the breadwinner of the Family, there are certain responsibilities that you have to

complete,

There are 2 types of liabilities, which we should consider while deciding the Sum Assured.

1. Legal Liability

2. Moral Liability

1. Legal Liability

Head Amount

House Loan 1780000

Car Loan 456000

Other Loans 1356000

Total 3592000

63


2. Moral Liability

a. Maintaining same life style of the family

Based on principal liquidated basis:

Family should get at least Rs. 20000/- Monthly, which will cover the pension of

spouse also.

Rate of Return: 8% (Risk Free)

Inflation: 5%

Inflation Adjusted Rate of Return: 2.86%

Principle amount req. today = Rs. 6644000/-

b. Education of your children

Present value of Future requirement of Education of both the children is calculated

which comes out to be: Rs. 854200

Mr. Sanjay Rs.

Legal Liability 3592000

Moral Liability 7498200

Less: Current insurance 3815001

Less: Net worth of family on investment

assets only i.e. S/A, Equities, Mutual

Funds, PPF, Cash Value of Insurance

2543792

Additional insurance required 4731407

64


For wife, the need of wife will be arbitrary as if something were to happen to her,

husband will continue working and supporting the remaining family. Therefore, sum

assured of half of husband’s amount (Moral Liability) i.e. Rs. 3700000 should suffice.

Wife Rs.

Total basic sum assured needed 3700000

Less: Current insurance 1100000

Additional insurance required 2600000

For the children, death cover will not be an important need as the financial loss to the

parents will be minimal. However, disability cover is needed and it is recommended that

disability income of Rs. 4000/- per month per child be given. To generate this income

perpetually with 8% (risk free rate), a basic sum assured of = Rs. 600000/- is

recommended for both the children

65


Education Planning

Table of cost for the degree program for Children.

Cost required for tuition fees and living expenses for degree course today’s is Rs.100000/- per

year & for Post Graduation is Rs. 200000/-

Considering 7% inflation in education amount required will be

Sr.no Year HE GR PG Umesh Amey Net req

1 2008 80000 100000 200000

2 2009 85600 107000 214000

3 2010 91592 114490 228980

4 2011 98003.44 122504.3 245008.6 98003.44 98003.44

5 2012 104863.7 131079.6 262159.2 104863.7 104863.7

6 2013 112204.1 140255.2 280510.3 140255.2 140255.2

7 2014 120058.4 150073 300146.1 150073 120058.4 270131.5

8 2015 128462.5 160578.1 321156.3 160578.1 128462.5 289040.7

9 2016 137454.9 171818.6 343637.2 171818.6 171818.6 343637.2

10 2017 147076.7 183845.9 367691.8 367691.8 183845.9 551537.8

11 2018 157372.1 196715.1 393430.3 393430.3 196715.1 590145.4

12 2019 168388.2 210485.2 420970.4 210485.2 210485.2

13 2020 180175.3 225219.2 450438.3 450438.3 450438.3

14 2021 192787.6 240984.5 481969 481969 481969

HE GR PG Total of EMI For Umesh 202866 622724 761121

For Amey 248520 355663 932307

EMI for Umesh 4855 8041 4372 17,269/-

EMI for Amey 2533 2433 3372 8399/- 25608/-

66


Retirement Planning

Financial Independence by age 60

Retirement income projection by Expense Method:

From fact-finding discussion held with James, we list out all the expenses that they projected

they will incur when they retire. The amount of each expense is benchmarked at today’s price.

The future pricing is found by taking inflation into consideration at 7 % per annum. All the

figures are tabulated in the following table:

Retirement Income - Projection by Expense Method

Items needed when retired Today's annual cost Inflation rate Cost at age 60

Food 48000 6% 137008

Clothing 20000 7% 67598

Cars maintenance 19000 6% 54232

Personal maintenance 24000 7% 81118

Medical 10000 9% 47171

Groceries 12000 7% 40559

Travel 50000 6% 142716

Utilities 60000 5% 144397

Life insurance 200000 0% 200000

Entertainment 30000 7% 101397

Medical Insurance 20000 6% 57086

House maintenance 12000 5% 28879

Total 505000 2902161

The Expense Method is the more accurate method but relies quite heavily on the rate of

inflation.

67


68


Finding the lump sum for retirement:

To find the lump sum to generate this projected retirement income is sufficient, we first select

the annual retirement income calculated from the Expense Method at Rs 2902161/-

Then we work into two scenarios on the length of time this income is needed.

Scenario 1: The principal intact scheme.

The Rs. 2902161/- annual retirement income is to be needed perpetually i.e. indefinitely. Here,

based on the inflation-adjusted discount rate I, we calculate the lump sum needed for such

inflation-adjusted income generation.

You need Rs 29021610/- to have this retirement income perpetually without liquidating any of

the principal amounts. The amount looks very high. In layman terms, this is the “deluxe

scheme”. The second scenario will be the “economy scheme”.

69


Scenario 2: Principal liquidation scheme.

The annual retirement income is to be needed for a certain number of years only – normally to

the end of the life span projected. Taking a life span of up to 80 years old + a safety margin of

10 years until age 90, we are taking a period of 30 years in which the lump sum accumulated at

retirement will be used up together with the interest income generated to provide the per annum

amount. Again here, based on the inflation adjusted rate of return i, we calculate the lump sum

needed for such inflation-adjusted income generation.

Assumptions: Rate of inflation, I = 7 %

Post-retirement rate of return in fixed income instruments, r = 10 %

We calculate the inflation-adjusted discount rate i = r – I / 1 + I

= 0.10 – 0.07 / 1 + 0.07

= 2.8037 %

Using financial calculator or table of values, where

n = 30

i = 2.8037 %

PMT = 2902161

FV = 0

Mode = BGN (as retirement income is needed at the beginning of each year)

PV = 59990371/-

Lump sum needed is about Rs. 59990371/-

70


Funding the entire lump sum

We now see if you can fund this amount within 18 years from now.

Funding the amount can come from 2 sources

Current net assets

Future cash flow surpluses

All the sources fund the accumulation phase as tabulated below:

Source Method Value 18 years From now, at11 % growth rate

NOW – Current net assets

From revised net worth statement Amount is Rs. 2543792

(See Note 1 below)

Using calculator,N = 18I = 11 %PV = Find FV

16645437/-

M

FUTURE a) Cash flow statement – revised with annual surplus of Rs. 275000/- (After New Insurance Coverage)

Using calculator,N = 18I = 11 %PMT = 275000/-Mode = EndFind FV

13858882/-

N

TOTAL: (M + N) 30504319/-

Note: (1) The net value of cars is not taken into this figure, as cars are not investment grade

asset unless they are liquidated.

71


Our findings:

Satish will have 16645437 + 13858882 = Rs. 30504319/- by the time he retire.

Satish requires Rs. 66553950/- to fund by the “economy scheme” method based on current

situation.

Actual amount is short to meet the requirement, so the options are:

A higher post-retirement rate of return of higher than 10%. During retirement years, assets

should be invested in very low risk or zero-risk assets. So, this is not recommended.

Delay the retirement age from 60 to probably 63. However, this does not meet Satish original

objective and will be pursued only as a last resort.

Reducing the retirement income will meet the lower retirement lump sum.

Based on the risk profile questionnaire, Satish has that much risk appetite hence we recommend

the option (d) to adapt.

72


Investment Planning

To meet the desired retirement lump sum at age 60, the portfolio investment rate of return used

above is 12% for pre-retirement. However, based on the current portfolio, the portfolio return

rate is only 9.48%.

The portfolio needs to be restructured to the followings:

Asset Rs Return Rate Weighted Return RateSaving Account 116,950.0 3.50% 0.16%Equities 1,346,000.0 18.00% 9.52%Life insurance 764,053.0 4.50% 1.35%Mutual funds - 15.00% 0.00%PPF 316,789.0 8.00% 1.00% Total: 2,543,792 Portfolio return: 12.03%

The recommendations are:

Based on the age and risk profile questionnaire, Satish has a moderate risk appetite. Hence the

Asset Allocation kept is:

Asset Class Amount %Debt 1,197,792/- 47%Equity 1,346,000/- 53%

As Equity portion has higher risk we suggest you to go for PMS activity, in which you will have

direct participation in equity market with professional advice.

As you have completed almost first 15 yrs in PPF and extended that account for next 5 yrs. You

will be able to withdraw Rs. 500000/-, which will invest in equity.

We will reallocate the mutual Fund amount to Direct Equity

73


The recommendations for Future Investment

Every year the surplus investment of Rs. 275000/- will be as below.

Asset Rs. Return Rate Weighted Return RateSaving Account 20,000.0 3.50% 0.25%Time Deposits - 9.00% 0.00%Equities 73,000.0 18.00% 4.78%Mutual funds 72,000.0 15.00% 3.93%Debt Funds 90,000.0 7.50% 2.45%PPF 20,000.0 8.00% 0.58% Total: 275,000 Portfolio return: 12.00%

This will keep the asset allocation same as required

We have added Debt Funds in your portfolio. They are almost liquid as saving account. But the

yield is almost double than the saving.

This restructured portfolio will give 12 % return in order to meet your accumulation goals.

However, such restructuring must meet the risk profile of you in which we have matched. If it

does not, the financial planner will need to discuss again with you again if they can arrive to

some acceptable conclusions which include but not limited to, making some changes to your

goals and objectives.

74


75


Estate Planning

The need for estate planning centers more on will writing, trust creation and estate distribution.

A will is recommended to be written to instruct the trustees to distribute all wealth to the

beneficiaries as per the wishes of you should he be demised.

To ensure assets go to the right person(s), it is recommended that all nominations must be

properly done for all insurance policies and mutual funds.

76


Tax Planning

Tax relief & rebates

You are keen to maximize whatever relief and rebates you can get so that he can pay minimum

taxes.

You already have a taken a good care of Taxes

You have full advantage of Home loan interest repayment.

Life Insurance policies itself takes care of tax rebate u/s 80 C

As we have increased the Health Insurance premium you will be able to get full benefit u/s 80 D

Frequent Churning of shares used to generate Short Term Capital Tax. Now as per new

recommendation your equity portfolio will be handled by professionals, they will take good

stocks and hold them for at least more than a year. Hence Short Term Capital Tax will be

minimized.

77


Implementation/ Action Plan

What Who to do it DeadlineApply for loan from LIC Client 1 July 08

Withdraw amount from PPF Client 1 July 08

Withdraw the amount from Mutual Funds

Client 1 July 08

Invest the amount in Equity Financial Planner 15 July 08

Apply for Loan against Securities Financial Planner 1 July 08

Complete the LAS Financial Planner 15 Sep 08

Repay the Personal Loan Client 20 July 08

To prepare and complete a comprehensive insurance program for the entire family

Financial Planner 1 July 08

To review retirement planning goals and objectives

Financial Planner + Client 10 July 08

To restructure the current asset portfolio from 9.48% to 12.0%


To get a will written and nominations for others.


Review the portfolio Financial Planner + Client 15 Dec 08

78


Appendix 1

Personal Data

Area Satish Pushpa Umesh Amey

Birth date 1 Sep 1965 27 Mar 1967 19 Jan 1995 15 May 1998

Sex Male Female Male Male

Marital status Married Married Single Single

Address Same Same Same

Occupation Consultant Consultant Nil Nil

Employer Self Employed Self Employed Nil Nil

Income from employment

Rs. 1352000/- per annum

Rs. 165000/- per annum

NA NA

79


Chapter 4. Conclusion of the study

Most of people unaware about Financial Planning.

Mainly businessman & salaried person are more interested to do Financial Planning.

Mutual fund advertisement not succeeds in creating awareness in the people.

Most of investor does not know that how Portfolio Generate profit.

People are more interested in investing in traditional Investment options like insurance, FD, post.

80


Chapter- 5 Recommendations and suggestions

Co. should have to increase awareness in the customers.

Create a new tools and techniques which will easy to understand for clients.

Co. has to use effective Medias that can appeal to the masses.

Make those ads, which can educate customers about financial planning.

81


QUESTIONNAIRE

PERSONAL FACT FINDER Date: 28-june-08

Name: - Satish DeshpandeAddress

Phone No. Fax No.

Date of Birth 1-Sep-65Marital Status Married

Relation Name Age OccupationSpouse Pushpa 39 Self EmployedChild 1 Umesh 12 EducationChild 2 Amey 9 Education

Education Background B.E. MBA

Occupation Husband- ConsultantWife- Consultant

Employer Self Employed

Q. Brief summary of your working experience?Working as a Consultant from last 12 Yrs.

Q Personal legal Advisor Mrs. GodhaQ Personal Accountant Mr. Sandip DeshmukhQ Personal Tax Advisor Mr. Sandip DeshmukhQ Insurance Agent Mr. Deepak KulkarniQ Current Annual Income 1352000/-

Q Last 3 Years Annual IncomeYear 2007-2008 1352000/-Year 2006-2007 1217000/-Year 2005-2006 1095000/-

Q What is the average annual increment rate?10%

Q Average annual taxes paid in the last 3 years?180000/-

Q Are income tax withheld appropriately from your employment income?

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N/A

Q Are your income tax returns prepared by you or a professional accountant?Professional Accountant

Q Do you file income tax jointly or separately with your spouse?Separately

Q DO you have a personal retirement plan?No

Q At what age do you want to retire?60

Q What concerns you most about retirement?Monthly Income

Q What does retirement mean to you?Involving in Social Work, Traveling, Develop my personal hobbies

Q Do you expect to maintain, upgrade or reduce your pre-retirement standardof living during retirement?Maintain pre-retirement standard after retirement

Q Do you think your current retirement program provide adequately for your Retirement income needs?Don’t know

QAre you willing to lower your standard of living during retirement?No

Q Do you have dependants you need to care for during retirement?No

Q How much do you need now to maintain your current standard of living?Minimum Rs 350000/- without considering loan repayment

Q What assets do you currently owned?Two CarsHouse

Q Are any property individually owned by you or your spouse?Yes

Q What other investments have you invest in?PPF, Shares, Mutual Funds

Q What is your opinion on the following investment?

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StocksI like to take risk and the trading activity

Properties One is sufficient which I am not going to sell ant timeMutual Funds They are good as an investment optionFixed Income Not really interested/Don’t want taxable incomeOthers PPF is good Government scheme

Q CompanyQ What existing benefits does your company provide as retirement benefits?

N/A

Q How do you foresee your future with this company?N/A

Q Does the company have any retirement gratuity or death gratuity for employees?N/A

Q Do you own any shares in the company?N/A

Q What will happen to the shareholding upon death, disability or retirement?N/A

Q What is your plan 5 years from now?My wife will stop working within next 3 yrs. Planning to expand the consultancy

Q What percentage of retirement fund contributions is your company contributing?N/A

Q What is your current retirement fund balance?N/A

Q Have you made any withdrawals from retirement fund?No

Q Do you plan to make any withdrawals in the future?No

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BIBLIOGRAPHY

CFP Book’s (Certified Financial Planning)

www.singlewindowservices.com

www.mutualfund.com

AMFI Course Book

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http://www.mutualfund.com/

http://www.singlewindowservices.com/

Economy & Finance

financial planning in portfolio management