A penny saved is worth two pennies earned....
Here,presenting various Financial Sector, where you can invest your earning to attain returns upon your savings.
2. INTRODUCTION -
The financial sector is a section of the economy made up of firms and institutions that
provide financial services to commercial and retail customers.
For the function of economical WEALTH MANAGEMENT
INCLUDES -
● Banking
● Real Estate
● Insurance
● Stock Market
● Share Market
● Investment
3. Share Market -
Top 2 share market through - Characteristics -
● National stock exchange
● Bombay stock exchange
Measuring index -
● NIFTY - Top 50 Companies
● SENSEX - Top 30 companies
Governing body - SEBI
Taxable in nature
High risk
Funds get blocked
0 liquidity
High brokerage - lack of
knowledge
4. Types of market -
● Primary market - dealing direct from companies.
Companies ↔ customer
● Secondary market - dealing among customers . sell to one another
Customer ↔ customer ( at higher rate to earn more profits )
Why people fall in this market ?
●Lack of knowledge ● emerging frauds ● need to track trends
How to invest ?
Year PE (Price Earning Ratio) Return
2000 28 53%
2003 11 116%
2008 10 130%
2008 28 64%
5. Gold Investment -
Gold investment can be done in many forms like buying jewelry, coins, bars, gold
exchange-traded funds, Gold funds, sovereign gold bond scheme, etc.
CHARACTERISTICS -
Taxable
No liquidity
Less returns
Times consuming
Involves huge making charges
People buy due to tradition
6. Other Golds -
sovereign gold bond scheme -
● Buying gold in the form of certificates from the authorised body of government.
● Investment periods - 2-3 times in a year
● Requirement - demat account
● Duration - minimum 8 years ( receive interest )
● No tax implemented
7. Real Estate -
Real estate investing involves the purchase, ownership, management, rental and/or sale of
real estate for profit can be - plot, individual house, apartments etc.
Characteristics -
Need huge surplus amount
High risk
Least liquidity
Taxable
Returns entirely depends upon the location
8. PPF - Public Provident Fund
A public provident fund (PPF) account is an investment option that provides income tax
deduction u/s 80C for the amount invested.
Limitation - 1.5 lakhs
Characteristics -
Tax free investment
HighLy secured - government authorised
Liquidity is low
Lock in period - 15 years
Returns - 7.5% interest
9. Loan Against PPF
In PPF account loan is available from a 3rd financial year up to 6th financial year from the date of
opening the account
The maximum amount of loan that can be availed is 25% of the balance at the end of the 2nd financial
year preceding the year in which the loan was applied for.
The interest rate of loan is 2% higher than the prevailing interest rate on PPF account.
If 8% is interest that loan rate will be @ 10%
PPF Under 80C -
deduction under section 80C of Income Tax Act, interest earned is exempted and maturity
proceeds are also exempted from tax.
The interest is calculated in compound interest .
10. EPF - Employee Provident Fund -
The employer has to contribute an amount equal to 10% or 12% of your basic salary towards
EPF.
Interest rate - 8.65%
Returns - tax free
Insured account - avail after death
Withdrawal after retirement ,partial withdrawal after 5-10 years
Calculated on basic salary + DA
11. Recurring Deposit -
A recurring deposit is a special kind of term deposit offered by banks which help people
with regular incomes to deposit a fixed amount every month into their recurring deposit
account and earn interest at the rate applicable to fixed deposits.
Characteristics -
Inculcate a habit of saving among people
Taxable - @10%, if interest earned over RS.40000/year
Self maintaining account -Connected to the saving account
No liquidity
Maximum periods - 10 years
Interest rate varies from 6%-7%
12. Term Period of the Recurring Deposit Account: The term periods are divided into three
categories:
1. Short-Term Tenure: A short-term tenure usually lasts from 6 months to a year.
2. Medium-Term Tenure: A medium-term tenure usually lasts from more than a year to 5
years.
3. Long-Term Tenure: A long-term tenure lasts from more than 5 years to 10 years.
Facility of Premature Withdrawal in the Recurring Deposit Account - Facility of Premature
Withdrawal in the Recurring Deposit Account is available but with a penalty of 1% deduction
from the interest amount.
13. Mutual Funds -
A mutual fund is a company that pools money from many investors and invests the money
in securities such as stocks, bonds, and short-term debt.
Regulated by SEBI
Characteristics -
Fight against inflation
Consistently Good Performance.
Involves risk
Returns may vary from 4% to 30%
More the time, more the returns
14. TYPES OF MUTUAL FUNDS
Funds Risk and
return
Duration Investment Forms
Equity funds Risk ↑
Return ↑
Long term Share market Large caps
Mid caps
Small caps
Debts funds Risk ↓
Return ↓
Short and
long term
government,
Corporate
bonds,FD
Balanced or
hybrid funds
Risk ↕
Return ↕
Short and
long term
EquitY and
debts (60/40)
Money market Risk ↓
Return ↓
Short term Treasury
bills,certificate
of deposits
15. Insurance - Protection from financial losses
Characteristics -
contract for mutual benefit.
Financial security of your asset
Transfer of risk - from insured to insurer
Return on premiums
Encourages savings
