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 humblebeginning. 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 andcredibility. 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 productsand services offered by SWS encompass a vast array of financial options such as Life & GeneralInsurance, Mediclaim, Deposit schemes from reputed corporate houses, Postal & other SavingsSchemes, Automobile, Home & Personal loans, Mutual Funds and, above all, all forms of policyservicing.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 atSingle Window Services, a complete solution provider for all your financial needs, futureprovisions and planning.It has been our constant endeavors, as the name aptly suggests, to provide a complete bouquet offinancial services to all our clients; be it life or general insurance, or a multitude of investmentoptions available in today’s ever-expanding world; or simply future planning with some specificgoal in mind via a single interface.Although most professionals today tend to think that they have adequate life and healthinsurance cover, the ground realities prove otherwise. In most cases, this realization comes toolate. In order to overcome this problem, SWS has adopted a unique methodology of Investment 9

Single Window Services& Insurance Audit for all its clients. This helps them realize their actual value and takeappropriate 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 acomprehensive facility that can be used for conferences, meetings, training & orientationseminars, mini-exhibitions, on-line examinations, etc.With a capacity that can accommodate 30 participants, the centrally air-conditioned TrainingHall at SWS provides the best of audio-visual facilities combined with comfortable seating and asoothing ambience to help make any program a grand success. A state-of-the-art public addresssystem, provision for multiple computer terminals, slide & LCD projector, broad-bandconnectivity, fully-adjustable lighting system and piped music that soothes and enhancesparticipants’ 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, stationeryand other support services when you organize events at SWS Training Hall. While the facility isconveniently located (just 2 minutes’ walking distance off College Road), the professionalsupport services play a key role in the success of any event.The Training Division maintains a database of professional trainers / facilitators in varioussubjects and can also organize training schedules suited to your specific requirements. You canchoose from a variety of pre-designed course options or request for a custom-designed trainingprogram. A number of options combining subjects such as Communication Skills, Selling Skills,Value Engineering, Personal Total Quality (PTQ), Business Ethics, etc. are currently availablewith the services of experienced facilitators associated with SWS.We, at SWS, are committed to provide one-stop quality services to all our customers. Wesincerely believe that ‘Excellence is the best bargain you can offer’! 10

Single Window Services 2.2 Organization Flow Chart CEOChief Financial Back Office Staff Chief Tax consultant consultant Marketing Account Dept Dept GIC LIC Mutual Fund 11

Single Window Services 2.3 Objective of companyIn 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 comprehensivefinancial planning, support and back-up services and providing fair return on their investmentsand 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 12

Single Window ServicesChapter 3INTRODUCTION TO FINANCIAL PLANNNG Each one of us needs ‘finance at various stages of our life & to ensure that we have themoney available at the right time when needed. We may need money at the time of marriage of adaughter or son & we need money at that time only, and not later! Or at the time of medicalemergency and again at the time as later the money helps. Or money will be needed simply atthe time of retirement. We need finance at different times for different goals. Buying a homeproviding for a Childs education or marriage or retirement. Are examples of goals in life that canbe measure in monitory terms? Every individual can benefit from objective help to create, grow, other lifestyleobjectives systematically without any anxiety. Financial planner can guide individuals toachieve their ultimate aim of spending retire life peacefully without compromising livingstandards. 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 inthe 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 humanhappiness. Financial planning is process that helps a person work out where he or she now, whathe or she may need in the future & what he or she must do to reach the defined goals. Theprocess involves gathering relevant financial information., setting life goals , examining theperson’s current financial status & coming up with a strategy & plan for how the person canmeet his or her goals given the persons current situation and future plans. 13

Single Window Services3.1 DEFINITION & SCOPE, NEEDS Financial planning is a highly personalized service where you need to understand notonly 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 goalsFinancial planning includes investment planning, retirement planning, estate planning, taxplanning, risk mgmt. Financial planning is a highly personalized service where you need tounderstand not only the total picture of client’s financial position but also his behavior attitude &risk profile.AIMS OF FINANCIAL PLANNINGThe first & basic aim of the financial planning is,To protect the wealth & also create & make a growth in the client’s wealthSome other goals of financial planning are education planning, retirement planning, foreign tourplanning, wedding planning, tax saving etc. 14

Single Window ServicesFundamentals of Financial PlanningFinancial planning is the process of solving financial problems and achieving financial goals bydeveloping 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 • ContinuousFinancial 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 ofplanning 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. 15

Single Window Services • Risk Planning and Management 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 todevelop his goals, collect all related financial data, analyses the data, Develop & suggest variousalternatives, strategies to archive client’s goals, evaluation of various alternatives & selection ofappropriate alternative. After selecting appropriate alternative, implementation of the financialplan is take place. After implementing the plan the monitoring & regular preview of the plan isdone. The modifications as per the market conditions as & when required are implemented 16

Single Window Services Planning By Keeping Life Stages In Mind Single Family RetirementLeaving Earner Marriage Buying Providing RetirementSchool House For FamilyStudent 1st Job Marriage House Kids Retirement Education 17

Single Window ServicesProcess 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 recommendationsBenefits 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 inflationFinancial planning is beneficial for secure the future of the client through planning his futuregoals, financial status.It analyses your financial status, identify your weaknesses & suggest improvements.Financial planning makes available the proper documentation for audit .all this process reducesstress of the client 18

Single Window ServicesMeaning of PortfolioA Portfolio is a combination of different investment assets mixed and matched for the purposeof 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 realestates etc. However, for most investors a portfolio has come to signify an investment infinancial instruments like shares, debentures, fixed deposits and mutual fund units.Diversification of PortfolioIt is a risk management technique that mixes a wide variety of investments within a portfolio. Itis 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. 19

Single Window Services 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: 20

Single Window Services1. 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. 21

Single Window Services 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 approachingfinancial planning: 1. Dont 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. 22

Single Window ServicesINVESTMENT OPPORTUNITIES IN INDIAFrom the Investment point of view following are the main opportunities available for Investment inIndia, each of these schemes fulfills the objectives of investors and these schemes having its ownadvantages and disadvantages but by combining all these major investment schemes we can make thebest portfolio for investor which fulfills the expectation and financial goals of the investor. TheseInvestment opportunities include – I. Stock Market. II. Mutual Fund. III. Insurance. IV. Postal Schemes for Investment. V. Debt market. VI. Real Estate. 23

Single Window Services I. Stock Market – 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. 24

Single Window ServicesII. Mutual Fund -Mutual fund is a trust that pools money from a group of investors (sharing common financialgoals) and invests the money thus collected into asset classes that match the stated investmentobjectives of the scheme. Since the stated investment objectives of a mutual fund schemegenerally form the basis for an investors decision to contribute money to the pool, a mutualfund cannot deviate from its stated objectives at any point of time.Every Mutual Fund is managed by a fund manager, who using his investment managementskills and necessary research works ensures much better return than what an investor canmanage on his own. The capital appreciation and other incomes earned from these investmentsare passed on to the investors (also known as unit holders) in proportion of the number of unitsthey own.When an investor subscribes for the units of a mutual fund, he becomes part owner of the assetsof the fund in the same proportion as his contribution amount put up with the corpus (the totalamount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unitholder.Any change in the value of the investments made into capital market instruments (such asshares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV isdefined as the market value of the Mutual Fund schemes assets net of its liabilities. NAV of ascheme is calculated by dividing the market value of schemes assets by the total number ofunits issued to the investors.For example -If the market value of the assets of a fund is Rs.100, 000The total number of units issued to the investors is equal to 10,000Then the NAV of this scheme = (A)/(B), i.e. 100,000/10,000 or 10.00Now if an investor X owns 5 units of this schemeThen his total contribution to the fund is Rs.50 (i.e. Number of units held multiplied by theNAV of the scheme) 25

Single Window ServicesAdvantages of Mutual Fund for an Investor – • Portfolio Diversification • Professional Management • Less Risk • Low Transaction Costs • Liquidity • Choice of Schemes • Transparency • Flexibility • SafetyDisadvantages of Mutual Fund for Investor – • Costs Control Not in the Hands of an Investor • No Customized Portfolios • Difficulty in Selecting a Suitable Fund Scheme 26

Single Window Services III. Insurance 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 COVERSDepending on the circumstances, you may need insurance in the following areas: • Life • Health • Home • Motor • Personal Liability • Professional Liability • Business • Disability 27

Single Window ServicesLIFE INSURANCE: Life insurance is a risk sharing mechanism whereby a policy owner (the insured) agrees toinvest some money with an insurance company that obligates itself to pay money to abeneficiary on the insured’s death. It is a legal contract between an insurance company andpolicy owner.Life insurance needs analysis: The first in determining what type of insurance to buy is a ‘needs analyses. You need toassess the financial impact on your family if the breadwinner should die. You can assess the indifferent 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. 28

Single Window Services3. The ‘Needs’ Method: This method tries to calculate the amount required by your family to maintaintheir existing lifestyle and their financial goals. The amount of the life cover under thisMethod is calculated by subtracting the total of your current financial resources from thepresent value of your family’s projected expenses.FORMS OF LIFE COVER: Life insurance covers are availably three forms. Each form exists for a differentobjective. 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. 29

Single Window Services 3. ENDOWMENT PLAN: 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 ofthe premium paid is linked to the policy period and the sum assured and the rest is invested. 30

Single Window Services NON-LIFE INSURANCETYPES OF NON LIFE INSURANCE:1. Personal- Medical Disability2. Property- Damage to property Loss of income Indirect losses3. Liability- Under statute Under common law Under contract 31

Single Window ServicesIV. DEBT Debt is that parts of the total investment that will yield steady returns and provide anelement of stability to the whole portfolio of the individual. This is an important asset class as itis not just returns but the nature of the portfolio that has to be taken into Consideration fordifferent 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 32

Single Window ServicesBonds • A bond is a debt instrument issued for a period of one year or more. • This is a more conservative investment. • 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 ispaid. The difference between the issue price and redemption price represents the return to theholder. 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 fixedconversion price.Treasury Bills: Short-term (up to one year) bearer discount security issued by government as ameans of financing their cash requirements. 33

Single Window Services V. Postal Schemes for Investment –Following chart will explain some of the popular schemes of Postal Department for Investment – Minimum Maximum InterestScheme Investment Investment Features Tax Breaks (%) (Rs.) (Rs)National Savings Section 80C 8.00a 100 No limit 6-year tenureCertificate benefitPublic Provident Section 80C 8.00b 500 70,000 15-year term; tax-free returnsFund benefitKisan Vikas Patra 8.41b 100 No limit Money doubles in 8 years, 7 months No tax benefit Single A/c: 4.5 No tax benefitMonthly Income lakhs 8.00 1,500 6-year tenure; monthly returnsScheme Joint A/c: 9 lakhsTime Deposits 6.25-7.50 200 No limit Available for 1, 2, 3, 5 years No tax benefitRecurring 7.50c 10 No limit 5-year tenure No tax benefitDepositsSenior Citizens 5 year tenure; minimum age 55; also 9.00d 1,000 15 lakhs No tax benefitSaving Scheme available with public sector banks Single A/c: 1Savings Bank lakh Any individual can open an account; 3.5 No tax benefitAccount Joint A/c: 2 Cheque facility available. lakhsSec 80C benefit: Investments up to Rs 1 lakh in specified securities (maximum of Rs. 70,000 in PPF) qualify for deduction A b c d Compounded half-yearly Compounded yearly Compounded quarterly Payable quarterly 34

Single Window ServicesVI. Real Estate InvestmentIndia Real Estate Investment is a significant feature of the Indian realty market under theinitiation of the investors and developers, leading to future real estate development in India. Thedevelopment of private ownership of property real estate in India has become a major area ofbusiness with India Real Estate Investment playing the vital role. India Real Estate Investmentinvolves 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 thegovernment.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). 35

Single Window Services 3.2 Presentation of the information either in Tabular form and / GraphicalWhat are Risk Analysis and Portfolio Planning?Risk AnalysisRisk analysis is very important tool for portfolio planning, because each persons risk appetite isdifferent due to reasons like income level, age, mentality, financial goals and objectives. SoPortfolio planner must have to find out the risk appetite of the client with the help of RISKANALYSIS tool. By analyzing the risk of client the portfolio planner came to know whether theclient is AGGRESSIVE, MODERATE, and CONSERVATIVE.Basic Types of Portfolios In general, aggressive investment strategies - those that shoot for the highest possiblereturn - are most appropriate for investors who, for the sake of this potential high return, have ahigh-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 mostappropriate for investors who are risk averse and have a shorter time horizon. Conservativeportfolios will generally consist mainly of cash and cash equivalents, or high quality fixedincome instruments. To demonstrate the types of allocations that are suitable for these strategies,well 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-incomeinvestment. Money in a savings account and a certificate of deposit (CD), which pays a bithigher interest, are examples. (You can read more about the money market in the.) 36

Single Window Services1. Conservative portfolio: - Conservative model portfolios generally allocate a large percent of the total portfolio tolower-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

Single Window Services2. 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

Single Window Services3. 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

Single Window Services4. 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

Single Window Services5. 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

Single Window ServicesPortfolio 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

Single Window Services 3.2Data Interpretation and AnalysisSample Portfolio of different backgrounds, financial conditions, objectives and financialgoals –To study the risk analysis, portfolio analysis and planning we need to study live cases tounderstand how it works and beneficial in practical life. For this I decided to take live examplesof 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

Single Window ServicesCase. ________________________________ Personal Financial Plan For Mr. Satish Deshpande & Family ________________________________ 44

Single Window Services 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 DataAppendix 2: Personal Financial Fact-Finder 45

Single Window ServicesIntroductionSatish, 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 incomein mainly for her own savings and personal use. Within next 2-3 yrs she will stop herconsultancy and focus on your children’s education and home.You are very keen on insurance part. And paying almost 200000/- premium p.a. Total 14policies with sum assured Rs. 3815000. Majority of the policies are Endowment and few TermInsurances.Your Net worth analysis shows a net worth of Rs. 4590000/- Total Assets now in July 2008 areRs. 8182000/- and liabilities of Rs. 3592000/- 46

Single Window ServicesYour 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

Single Window Services 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

Single Window ServicesCurrent Financial SituationCash Flow AnalysisIn-Flow Rs Out-Flow Rs.Satish Income (after tax) 1,352,040 Tax PaymentPushpas Income (after tax) 165,000 Satish Tax 225,000LIC Maturity 134,000 Pushpas Tax 0Dividend Received 20,000Bank 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 Pushpas life insurance 57,901 Vehicle Insurance 12,686 Other Insurance 21,000 Subtotal 199,851Total 1,673,140 Total 1,454,173 Difference 218,967 49

Single Window ServicesCash out Flow is Satishs Tax Car loan installments (Honda City) Car loan installments 1% (Wagon R) House loan 1% instalments Personal 4% 15% Loan 7% Car maintenance 5% House maintenance 4% Credit Card 15% payments 3% Eating 1% out Grocerie 3% s 5% Travel 0% 1% Utilitie 16% 15% s 1% Miscellaneo us Satish’s life insurance Pushpa’s life insurance Vehicle Insurance Other Insurance 50

Single Window ServicesNet worth Statement – CurrentAssets Rs. Liabilities Rs.Liquid assets: Home Loan 1780000Cash in hand 20000 Car loans 456000Saving account 116950 Personal Loan 1356000Fixed Deposits 0Mutual Funds 776000Sub Total 912950Non-liquid assets:Properties 3500000Equities 200000PPF 1005789Cars 800000Life insurance cash value 764053Other Assets 1000000Sub Total 7269842TOTAL 8182792 TOTAL 3592000 NETWORTH 4590792 51

Single Window ServicesNet worth Statement – Current Assets 0% Cash in hand 1% Saving account 12% 9% Mutual Funds 9% Properties Equities 10% PPF 44% Cars 13% Life insurance cash 2% value Other Assets 52

Single Window ServicesRisk Management/Insurance PlanningThe current personal insurance summary is as follows:Person Plan type Premium p.a. Insurance CoverMr. 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 AssuredCurrent House Not InsuredCars Adequately CoveredOther Household Assets Not Insured 53

Single Window ServicesInvestment PlanningThe following table lists out the portfolio of investment-grade assets currently owned and theportfolio return rate:Asset Rs Return Rate Weighted Return Rate 116,95Saving Account 0 3.50% 0.14% 200,00Equities 0 18.00% 1.26% 764,05Life insurance Value 3 4.50% 1.20% 776,00Mutual funds 0 15.00% 4.07% 1,005,78PPF 9 8.00% 2.81% 2,862,79Total: 2 Portfolio Return: 9.48% Investments 4% 7% 35% Saving Account Equities 27% Life insurance Mutual funds PPF 27% 54

Single Window ServicesRetirement PlanningThere is currently no clear plan on retirement. You have not really focused on this aspect. Itseems that your major focus is on your current profession and you have not given a thought onRetirement Planning.Education PlanningIt seems that you have not specifically allocated funds for education funding of your two sons.Estate PlanningThere is no arrangement of any nature including will and trust done, other than the nominationsdone for Mutual funds and Insurance policies.The other facts and data are collected in the “Personal Financial Fact-Finder” form as attached inthe Appendices. 55

Single Window ServicesAssumptionsFollowing 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

Single Window ServicesRecommendationsCash Flow ManagementThe current cash flow surplus is very low at around 2 Lacs per annum. Based on no change orvery 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 liquidassets 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 shouldreally appreciate that you don’t have any balance on credit card. In your routine outflow themajor contribution is of EMI of different loans. We will see any alternative available to reducethe EMI contribution.Car Loan (Honda City): - In this case the loan was taken in 2003. As it is higher end car theloan rate is vary low. It comes out to be 6.7% only. So its better we should keep it as it is. Theloan will end in Aug 08Car Loan (Wagon R): - This loan is also at lower side. Interest rate comes out to be 8%. Betterto continue this loan without any change.House Loan: - In this case the interest rate is almost same with other banks so there is hardlyany scope for debt arbitrage.Personal Loan: - This is taken from 3 banks at different time and at different rate. The averageinterest 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

Single Window ServicesWe have various options available to repay this loan.Your Insurance portfolio shows that majority of the policies are of Endowment type and few areTerm insurances. We have taken out the Loan quotation for all those endowment policies. TotalLoan 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 productcalled Loan against Securities. (LAS) current interest rate for that is 13%. We can pledge all theinvestment in those against which 50% loan will be available. i.e. Rs. 488000/- will be availableat 13% we will utilize Rs. 450000/- from that. Surplus of Rs. 38000/- will be available which wewill not utilize as LAS is fluctuating on market, so it will act as buffer to adjust the marketcondition.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 amounthalf yearly) LAS is CC loan. Hence we can adjust the principle repayment in both the loans asper our wish.Considering that we will repay the principle also then equivalent EMI will be 11338/- 58

Single Window ServicesIf the above reductions are implemented, the new cash flow statement will look like thefollowings:Cash Flow Statement - RevisedIn-Flow Rs. Out-Flow Rs. 1,352,04Satish’s Income (after tax) 0 Tax PaymentPushpas Income (after tax) 165,000 Satish Tax 225,000LIC Maturity 134,000 Pushpas Tax 0Dividend Received 20,000 OthersBank 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 Pushpas life insurance 57,901 Vehicle Insurance 12,686 Other Insurance 21,000 Subtotal 199,851 1,673,14Total 0 Total 1,354,837 Difference 318,303 59

Single Window Services Revised Cash Out Flow Satish’s Tax 2% Car loan installments (Honda City) Car loan installments (Wagon R) 1% House loan installments 4% LIC Policy Loan 17% Loan Against Securities 8% Car maintenance House maintenance 5% Credit Card payments Eating out 4% Groceries 16%4% Travel Utilities1% M iscellaneous4% Satish’s life insurance 6% Pushpa’s life insurance 0% Vehicle Insurance 1% 5% Other Insurance 17% 1% 5% 60

Single Window ServicesThe new net worth statement after debt arbitrage will be as follows:Net worth Statement – RevisedAssets Rs. Liabilities Rs.Liquid assets : Home Loan 1,780,000Cash in hand 20000 Car loans 456,000Saving account 116950 LIC Policy Loan 587,000Fixed Deposits 0 Loan Against Securities 450,000Mutual Funds 776000Sub Total 912950Non-liquid assets :Properties 3500000Equities 200000PPF 686789Cars 800000Life insurance cash value 764053Other Assets 1000000Sub Total 6950842TOTAL 7863792 TOTAL 3,273,000 NETWORTH 4,590,792Here, we can see a dramatic change in the cash flow surplus. From Rs. 2.18 Lacs surplus, wenow 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

Single Window Services Revised Asset 0% Cash in hand 1% Saving 13 10 account % % Mutual Funds 10 Properties % Equities10% PPF 44 Cars 9% % 3% Life insurance Value cash Other Assets 62

Single Window ServicesRisk Management/InsurancePersonal InsuranceYou 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

Single Window Services2. 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 2543792 assets only i.e. S/A, Equities, Mutual Funds, PPF, Cash Value of Insurance Additional insurance required 4731407 64

Single Window Services 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 childrenEducation PlanningTable of cost for the degree program for Children. 65

Single Window ServicesCost required for tuition fees and living expenses for degree course today’s is Rs.100000/- peryear & 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/-Retirement PlanningFinancial Independence by age 60Retirement income projection by Expense Method: 66

Single Window ServicesFrom fact-finding discussion held with James, we list out all the expenses that they projectedthey 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 thefigures are tabulated in the following table:Retirement Income - Projection by Expense MethodItems needed when retired Todays annual cost Inflation rate Cost at age 60Food 48000 6% 137008Clothing 20000 7% 67598Cars maintenance 19000 6% 54232Personal maintenance 24000 7% 81118Medical 10000 9% 47171Groceries 12000 7% 40559Travel 50000 6% 142716Utilities 60000 5% 144397Life insurance 200000 0% 200000Entertainment 30000 7% 101397Medical Insurance 20000 6% 57086House maintenance 12000 5% 28879Total 505000 2902161The Expense Method is the more accurate method but relies quite heavily on the rate ofinflation. 67

50000 100000 150000 200000 250000 0 C Fo od ar C Pe s rs ma loth on i i al nte ng m na ai n n t ce en an M ce ed G i ca ro ce l rie s Tr av Retirement U el68 Li fe tili in tie Retirement E n su r s M t an ed erta ce H i c a i nm ou l se Ins ent m ura ai n t n ce en an ce Single Window Services

Single Window ServicesFinding the lump sum for retirement:To find the lump sum to generate this projected retirement income is sufficient, we first selectthe 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 suchinflation-adjusted income generation.You need Rs 29021610/- to have this retirement income perpetually without liquidating any ofthe principal amounts. The amount looks very high. In layman terms, this is the “deluxescheme”. The second scenario will be the “economy scheme”. 69

Single Window ServicesScenario 2: Principal liquidation scheme.The annual retirement income is to be needed for a certain number of years only – normally tothe end of the life span projected. Taking a life span of up to 80 years old + a safety margin of10 years until age 90, we are taking a period of 30 years in which the lump sum accumulated atretirement will be used up together with the interest income generated to provide the per annumamount. Again here, based on the inflation adjusted rate of return i, we calculate the lump sumneeded 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, wheren = 30i = 2.8037 %PMT = 2902161FV = 0Mode = BGN (as retirement income is needed at the beginning of each year)PV = 59990371/-Lump sum needed is about Rs. 59990371/- 70

Single Window ServicesFunding the entire lump sumWe now see if you can fund this amount within 18 years from now.Funding the amount can come from 2 sourcesCurrent net assetsFuture cash flow surplusesAll the sources fund the accumulation phase as tabulated below:Source Method Value 18 years From now, at 11 % growth rateNOW – From revised net worth statement Amount isCurrent net assets Rs. 2543792 16645437/- (See Note 1 below) Using calculator, N = 18 I = 11 % M PV = Find FVFUTURE a) Cash flow statement – revised with annual surplus of Rs. 275000/- (After New Insurance Coverage) Using calculator, N = 18 13858882/- I = 11 % PMT = 275000/- Mode = End Find FV N TOTAL: (M + N) 30504319/-Note: (1) The net value of cars is not taken into this figure, as cars are not investment gradeasset unless they are liquidated. 71

Single Window ServicesOur 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 currentsituation.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, assetsshould 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 originalobjective 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 recommendthe option (d) to adapt. 72

Single Window ServicesInvestment PlanningTo meet the desired retirement lump sum at age 60, the portfolio investment rate of return usedabove is 12% for pre-retirement. However, based on the current portfolio, the portfolio returnrate 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 theAsset 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 havedirect 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. Youwill be able to withdraw Rs. 500000/-, which will invest in equity.We will reallocate the mutual Fund amount to Direct Equity 73

Single Window ServicesThe recommendations for Future InvestmentEvery 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 requiredWe have added Debt Funds in your portfolio. They are almost liquid as saving account. But theyield 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 itdoes not, the financial planner will need to discuss again with you again if they can arrive tosome acceptable conclusions which include but not limited to, making some changes to yourgoals and objectives. 74

Single Window Services Restructured Existing Investment Portfolio 12% 5% 0% Saving Account Equities Life insurance 30% Mutual funds 53% PPF Future Investment Portfolio 7% 7% Saving Account 27% Equities 33% Mutual funds Debt Funds PPF 26% Asset Allocation Debt 47%53% Equity 75

Single Window ServicesEstate PlanningThe 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 thebeneficiaries 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 beproperly done for all insurance policies and mutual funds. 76

Single Window ServicesTax PlanningTax relief & rebatesYou are keen to maximize whatever relief and rebates you can get so that he can pay minimumtaxes.You already have a taken a good care of TaxesYou have full advantage of Home loan interest repayment.Life Insurance policies itself takes care of tax rebate u/s 80 CAs we have increased the Health Insurance premium you will be able to get full benefit u/s 80 DFrequent Churning of shares used to generate Short Term Capital Tax. Now as per newrecommendation your equity portfolio will be handled by professionals, they will take goodstocks and hold them for at least more than a year. Hence Short Term Capital Tax will beminimized. 77

Single Window ServicesImplementation/ Action Plan What Who to do it Deadline Apply for loan from LIC Client 1 July 08 Withdraw amount from PPF Client 1 July 08 Withdraw the amount from Mutual Client 1 July 08 Funds 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 Financial Planner 1 July 08 comprehensive insurance program for the entire family To review retirement planning goals Financial Planner + Client 10 July 08 and objectives To restructure the current asset Financial Planner 15 July 08 portfolio from 9.48% to 12.0% To get a will written and nominations Financial Planner 10 July 08 for others. Review the portfolio Financial Planner + Client 15 Dec 08 78

Single Window ServicesAppendix 1Personal 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 Rs. 1352000/- per Rs. 165000/- per NA NA employment annum annum 79

Single Window Services 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

Single Window Services 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

Single Window Services QUESTIONNAIRE PERSONAL FACT FINDER Date: 28-june-08 Name: - Satish Deshpande Address Phone No. Fax No. Marital Marrie Date of Birth 1-Sep-65 Status d Relation Name Age Occupation Spouse Pushpa 39 Self Employed Child 1 Umesh 12 Education Child 2 Amey 9 Education Education Background B.E. MBA Occupation Husband- Consultant Wife- Consultant Employer Self EmployedQ. 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 Income Year 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? 82

Single Window Services N/AQ Are your income tax returns prepared by you or a professional accountant? Professional AccountantQ Do you file income tax jointly or separately with your spouse? SeparatelyQ DO you have a personal retirement plan? NoQ At what age do you want to retire? 60Q What concerns you most about retirement? Monthly IncomeQ What does retirement mean to you? Involving in Social Work, Traveling, Develop my personal hobbiesQ Do you expect to maintain, upgrade or reduce your pre-retirement standard of living during retirement? Maintain pre-retirement standard after retirementQ Do you think your current retirement program provide adequately for your Retirement income needs? Don’t know Are you willing to lower your standard of living duringQ retirement? NoQ Do you have dependants you need to care for during retirement? NoQ How much do you need now to maintain your current standard of living? Minimum Rs 350000/- without considering loan repaymentQ What assets do you currently owned? Two Cars HouseQ Are any property individually owned by you or your spouse? YesQ What other investments have you invest in? PPF, Shares, Mutual FundsQ What is your opinion on the following investment? 83

Single Window Services I like to take risk and the trading Stocks activity Properties One is sufficient which I am not going to sell ant time Mutual Funds They are good as an investment option Fixed Income Not really interested/Don’t want taxable income Others PPF is good Government schemeQ CompanyQ What existing benefits does your company provide as retirement benefits? N/AQ How do you foresee your future with this company? N/AQ Does the company have any retirement gratuity or death gratuity for employees? N/AQ Do you own any shares in the company? N/AQ What will happen to the shareholding upon death, disability or retirement? N/AQ What is your plan 5 years from now? My wife will stop working within next 3 yrs. Planning to expand the consultancyQ What percentage of retirement fund contributions is your company contributing? N/AQ What is your current retirement fund balance? N/AQ Have you made any withdrawals from retirement fund? NoQ Do you plan to make any withdrawals in the future? No 84

Single Window ServicesBIBLIOGRAPHY • CFP Book’s (Certified Financial Planning) • www.singlewindowservices.com • www.mutualfund.com • AMFI Course Book 85

financial planning in portfolio management

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financial planning in portfolio management Document Transcript