50633694 a-project-report-on-360-degree-fiancial-planning


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50633694 a-project-report-on-360-degree-fiancial-planning

  1. 1. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T A PROJECT REPORT ON 3600 FINANCI AL PLANNING AND AWARENESS OF BAJAJ CAPITAL Ltd. IN LUCKNOW Page | 1
  2. 2. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T (LIFE INSURANCE) Submitted in fulfillment of Summer Training Program for M.B.A. (Finance and Marketing) Session 2009-2011 Submitted to Submitted By Mr. Vivek Singh Swati Gupta (Branch Head) Mr. Dheerendra Kumar (Area Manager) Central Institute of Management & Technology Page | 2
  3. 3. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T U.P. Technical University, Lucknow Page | 3
  4. 4. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T ACKNOWLEGDEMENT I express my deepest sense of gratitude of Mr. for inspiring me to do thisresearch project. During the whole research work he guided and provided methe valuable inputs, which helped me in the completion of the project. Despitehis busy schedule he granted me a generous amount of his time with greatinterest.I owe my sincere regards and feel extremely grateful.A special thank to Sir who constantly monitored my work and preceded supportand guidance the projectI am thankful to all those respondents who spared their valuable time attendingto my questions, which has contributed a great in the completion of the project. SWATI GUPTA M.B.A. (F&M.) IIIrd Semester C.I.M.T. (U.P.T.U.) 2009-2011 Page | 4
  5. 5. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T Page | 5
  6. 6. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T DECLARATION I hereby declare that the following documented project report titled "360degree financial planning and awareness of Bajaj Capital in Lucknow" isan authentic work done by me. The study was undertaken as a part of the course curriculum of M.B.A.Full time Programme Central Institute of Management & Technology U.P.Technical University, Lucknow.I here by declare that the study has not been submitted to any otherinstitute/organization for the reference. SWATI GUPTA M.B.A. IIIrd Semester 2009-2011 Page | 6
  7. 7. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T Page | 7
  8. 8. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T PREFACEInvestment is the sacrifice of certain present value for the uncertain futurereward. It entails arriving at numerous decisions such as type, mix, amount,timing, grade etc. of investment and disinvestments. Further, such decisionsmaking has not only to be continuous but rational too. Broadly speaking, aninvestment decision is a trade off between risk and return. All investmentchoices are made at points of time in accordance with the personal investmentends and in contemplation of an uncertain future.Since investments in securities are revocable, investment ends are transient andinvestment environment is fluid, the reliable bases for reasoned expectationsbecome more and more vague as one conceives of the distant future.Investors in securities will, therefore, from time to time, reappraise and re-evaluate their various investment commitments in the light of new information,changed expectations and ends. Page | 8
  10. 10. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T COMPANY PROFILEBajaj Capital is one of India’s leading Financial Services companies offeringFree Advice on Investments, Insurance, Tax Saving, Retirement Planning,Financial Planning, Children’s Future Planning and other services. We alsohave a wide range of products and services for Corporates, High Net worthIndividuals, and NRIs… all under one roof.At Bajaj Capital, we believe in dreaming big. Dreams inspire us to excel. Theyignite hope and kindle in us the passion to stretch our limits. We also believethat nothing can or should stop us from realising our dreams… and financialconstraints should be the last thing to stop anyone. Page | 10
  11. 11. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TFour decades of excellenceFor over four decades, we have been helping people realise their aspirations byhelping them make their wealth grow, and plan their financial lives.Today, we are a one of the largest financial planning and investmentadvisory companies in India, with a strong presence all over the country. Wetake pride in serving our customers – both individual and institutional – and areknown for our strong professionalism and work ethics.Wide range of servicesWe offer a comprehensive range of services including financial planning andinvestment advice, and the entire gamut of financial instruments andinvestment products of almost all major companies, both public and private. Inaddition, we also provide investment assistance by helping you complete allthe formalities, and help you keep regular track of your investments.These services and products are delivered through our network of 134 BajajCapital Investment Centres located all over the country.We are also a SEBI-approved Category I Merchant Banker. We raiseresources for over 1,000 top institutions and corporate houses every year, and Page | 11
  12. 12. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.Toffer specialised services to Non-Resident Indian (NRIs) and HighNetworth Clients. Page | 12
  13. 13. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TWhat you can expect from us  Sound, research-based advice  Unbiased, independent and need-based advice  Prompt, courteous service  Honest, ethical dealings  Accessibility Page | 13
  14. 14. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T MilestonesThe History of Bajaj CapitalBajaj Capital has contributed to the growth of the Indian Capital Market atevery step.In 1965, we were the first to innovate the Companies Fixed Deposit. Today, weare playing an active role in the growth of the Indian Mutual Fund industry.We are also working closely with private insurance companies to deepen Indiasinsurance market.Here is a brief gist of our journey throug the years.1964Bajaj Capital sets up its first Investment Centre™ in New Delhi to guideindividual investors on where, when and how to invest. Page | 14
  15. 15. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TIndias first Mutual Fund, Unit Trust of India (UTI) is incorporated in the sameyear.1965Bajaj Capital is incorporated as a Company. In the same year, the companyintroduces an innovative financial instrument – the Company Fixed Deposit.EIL Ltd. (Oberoi Hotels, then known as Associated Hotels of India Ltd.)becomes the first company to raise resources through Company Fixed Deposits.1966Bajaj Capital expands its product range to include all UTI schemes andGovernment saving schemes in addition to Company Fixed Deposits.1969Bajaj Capital manages its first Equity issue (through an associate company) ofGrauer & Wells India Ltd.; right from drafting the prospectus to marketing theissue.1975Bajaj Capital starts offering need-based investment advice to investors, whichwould later be known as Financial Planning in the investment world. Page | 15
  16. 16. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T1981SAIL becomes the first government company to accept deposits, followed byIOC, BHEL, BPCL, HPCL and others; thus opening the floodgates for growthof retail investment market in India.Bajaj Capital plays an active role in all the schemes as Principal Brokers1986Public Sector Undertakings (PSUs) begin making public issues of bondsMTNL, NHPC, IRFC offer a series of Bond Issues. Bajaj Capital is among thetop ranks of resource mobilisers.1987SBI leads the launch of Public Sector Mutual Funds in India. Bajaj Capitalplays a significant role in fund mobilisation for all these players.1991SBI issues India Development Bonds for NRIs. Bajaj Capital becomes the top Page | 16
  17. 17. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.Tmobiliser with collections of over US $20 million.1993The first private sector Mutual Fund – Kothari Pioneer – is launched, followedby Birla and Alliance in the following years. Bajaj Capital plays an active roleand is ranked among the top mobilisers for all these schemes.1995IDBI and ICICI begin issuing their series of Bonds for retail investors. BajajCapital is the co-manager in all these offerings and consistently ranks amongthe top five mobilisers on an all-India basis.1997Private sector players lead the revival of Mutual Funds in India through Open-ended Debt schemes. Bajaj Capital consolidates its position as Indias largestretail distributor of Mutual Funds.1999Bajaj Capital begins marketing Life and General Insurance products of LIC andGIC (through associate firms) in anticipation of opening up of the InsuranceSector. Bajaj Capital achieves the milestone of becoming the top Pension Page | 17
  18. 18. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TScheme seller in India and launches marketing of GICs Health Insuranceschemes.2000Bajaj Capital implements its vision of being a One-stop FinancialSupermarket. The Company offers all kinds of financial products, including theentire range of investment and insurance products through its InvestmentCentre. Bajaj Capital offers full-service merchant banking includingstructuring, management and marketing of Capital issues. Bajaj Capitalreinvents Financial Planning in its international sense and upgrades its entireteam of Investment Experts into Financial Planners.2002The company focuses on creating investor awareness for Financial Planningand need-based investing. To achieve this goal, the company introduced theInternational College of Financial Planning. The graduates of this institutebecome Certified Financial Planners (CFPs), a coveted professionalqualification. Page | 18
  19. 19. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T2004Bajaj Capital obtains the All India Insurance Broking Licence. Simultaneously,a series of wealth creation seminars are launched all over the country, makingBajaj Capital a household name.2005Bajaj Capital launches 360° Financial Planning, a software-based programmeaimed at encouraging scientific and holistic investing.2007Bajaj Capital launches Stock Broking and Depository (Demat) Services.2008Bajaj Capital launches Just Trade, an online Platform for investing in Equities,Mutual Funds, IPOs Page | 19
  20. 20. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T MISSION, AIMS & OBJECTIVESBajaj Capitals Mission StatementThe focus of our organisation is to be the most useful, reliable and efficientprovider of Financial Services. It is our continuous endeavour to be atrustworthy advisor to our clients, helping them achieve their financial goals.Aims  To serve our clients with utmost dedication and integrity so that we exceed their expectations and build enduring relationships.  To offer unparalleled quality of service through complete knowledge of products, constant innovation in services and use of the latest technology.  To always give honest and unbiased financial advice and earn our clients everlasting trust.  To serve the community by educating individuals on the merits of Financial Planning and in turn help shape a financially strong society.  To create value for all stake holders by ensuring profitable growth.  To build an amicable environment that accords respect to every individual and permits their personal growth.  To utilise the power of teamwork to function as a family and build a seamless organisation. Page | 20
  21. 21. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T  Why Invest Through Bajaj Capital  Wide range of products and services  41 years experience as Investment Advisors and Financial Planners  More than eight lakh satisfied clients all over India  Countrywide network of 134 branches  Over 12,000 NRI clients across the globe  Personalised wealth management advice  24 x 7 online accessibility through www.bajajcapital.com  Strong team of qualified and experienced professionals including CAs, MBAs, MBEs, CFPs, CSs, Insurance experts, Legal experts and others  SEBI-Approved Category I Merchant Bankers  Group Co BCIBL is an IRDA-licensed Direct Insurance Broker Page | 21
  22. 22. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TWho’s at Bajaj Capital Mr. K.K. Bajaj ChairmanA visionary par excellence, a pioneer and a leader, Mr K.K. Bajaj has beeninstrumental in shaping Bajaj Capital’s emergence as one of India’s largestInvestment Advisory companies.He is a highly respected figure in the field of institutional and personal financeand Company FDs. His emphasis on honesty, ethics and values are the guidingprinciples of the organisation.Mr Bajaj is also a prolific writer and has written over 200 articles on diverseissues such as Personal Finance, Economic Affairs, and Health.Mr. Rajiv Deep Bajaj Vice Chairman & Managing DirectorA qualified Financial Planner, Mr Rajiv Deep Bajaj was the first to introducethe concept of Financial Planning in India. In fact, he is the Founding Chairmanof the Association of Financial Planners (AFP). He is also amongst the first Page | 22
  23. 23. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.Tbatch of 25 Certified Financial Planners (CFP tm) designation holders in India.A Post-graduate in Management and holder of an International Certificate forFinancial Advisors from the Chartered Insurance Institute, London, Mr RajivDeep Bajaj has played a pivotal role in expanding Bajaj Capitals reach acrossthe country. He has recently pursued an Executive MBA in InternationalWealth Management under an exchange program between University ofGeneva, Switzerland and Carnegie Mellon University, Pittsburgh, USA.His youthful energy, dynamic leadership, vision and 16 years strategicmanagement experience in Banking, Financial Advisory, Insurance Brokingand Financial Planning have strengthened Bajaj Capital.The Media and Industry honchos have regularly acclaimed Mr. Rajiv DeepBajaj for his strengths as a powerful orator and writer. His views on variousInvestment Strategy and Financial Planning-related issues are regularly flashedin some of the leading media entities like The Economic Times, BusinessToday, Star TV, CNBC and Aaj Tak. His personal life goal is to spread‘Financial Education’ amongst the Indian masses in order to increase theirknowledge base and shift their perspective from ‘Saving to Investing’. Page | 23
  24. 24. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TMr. Sanjiv Bajaj Joint Managing DirectorMr. Sanjiv Bajaj started his career in 1995 as managerial trainee, worked onvarious projects which included developments at alternate channel ofdistribution like Brokers associations...etc. From here, he moved on toInvestment Advisory services, which included understanding the clients needs,and by using various tools of financial planning to offer them a solution to meethis requirements. Mr Sanjiv Bajaj is versatile personality with diverse areas ofinterest. He is a Post-graduate in Business Management with specialisation inFinance, and holds an International Certificate for Financial Advisors from theChartered Insurance Institute, London. Thanks to him, Bajaj Capital is todaythe largest individual agent for LIC. Mr Sanjiv Bajaj has a keen interest in IT,and has played a major role in implementing the ERP software and E-commerce activities in the company Mr. Anil ChopraCEO & Director Mr. Anil Chopra is the Chief Executive Officer & Directorof Bajaj Capital Limited, He joined the Company in 1984. Mr. Chopra has beeninstrumental in expanding the branch network of Bajaj Capital Ltd. all overIndia.A Chartered Accountant and a Certified Financial Planner, Mr Chopra is Page | 24
  25. 25. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.Tcredited with introducing international accounting and HR practices in theorganisation. His most valuable contribution, however, has been in building upa financially literate society and making Bajaj Capital a strong retail brand. Heis considered an authority, and is widely sought after by the media for quotes onkey developments in the industry.The Significance of Our LogoOur logo depicts Lord Ganesha who is the source of all our values and ethics inbusiness.  The large ears of Lord Ganesha remind us to hear more. We listen carefully to our clients to understand their needs.  The weight of the trunk on the mouth symbolises silence. We work silently, without blowing our own trumpet.  The long trunk symbolises continuous exploration. We explore all avenues to provide the best investment opportunities for our clients.  The heavy posture of Ganesha symbolises stability. We help our clients to attain financial stability through wise investments. Page | 25
  26. 26. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T  Lord Ganesha is known as the remover of obstacles and bestower of prosperity. We emulate His example and try our best to help our clients attain prosperity by proper financial planning.  Our logo has a yellow background. Yellow is the colour of gold, which symbolises wealth. According to Vedic lore, it is also the colour associated with Brihaspati, the guru and counsellor of the Gods. We offer our clients sage counsel to make their wealth grow.  The letters are in red. Red is the colour rajas – symbolising power and incessant activity. It symbolises our aggressive quest for your well-being and happiness.  The white streak represents the trunk of Lord Ganesha. White is the colour of satva guna, and implies our selfless commitment to your life- long happiness. Page | 26
  27. 27. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T 3600 FINANCIAL PLANNING AND AWARENESS OF BAJAJ CAPITALExperience the power of Bajaj Capitals 360The only thing permanent in life is change. Times change. People change. Sodoes life. You expect life to be much better tomorrow than it is today.Tomorrow, you hope to fulfil all your dreams and aspirations. But whathappens if things take an untoward turn? Or, if there is an eventuality? Perhapsits time for you to change the way you plan your investments...Learn more about Bajaj Capitals 360º Financial Planning Page | 27
  28. 28. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T • Why do you need Bajaj Capitals 360° Financial Planning? • Who needs 360° Financial Planning? • What is 360° Financial Planning all about? • How will 360° Financial Planning help me? • How do I get my personalised 360° Financial Plan created? Page | 28
  29. 29. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TDon’t just dream... Plan!Financial Planning is becoming increasingly popular in developed countries allover the world. Now, with a little help from Bajaj Capital, you too can giveyourself the 360° Financial Planning edge! Get your Financial Planprepared now Why do you need Bajaj Capitals 360° Financial Planning?You may have many dreams, needs and desires. For example, you could bedreaming of: • Owning a new car Buying a dream house Providing your children with the best education Planning a grand wedding for your children • Having a great time after your retirementBut in todays world of skyrocketing costs and increasing inflation, how manyof these dreams can you hope to turn into reality? By planning well, you canutilise your limited resources to the fullest.360° Financial Planning helps you see the big picture and invest for specificlong-term and short-term goals well in time.Who needs 360° Financial Planning? Page | 29
  30. 30. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TEveryone does! Because everyone has a right to dream. And realising dreams iseasier when you work to a plan thats: • Reliable Realistic • ProvenBajaj Capitals 360° Financial Planning Programme could make a difference toall those who wish to lead a worry-free, financially secure life.What is 360° Financial Planning all about?360° Financial Planning is a unique software-based simulation that takes aholistic view of your life-long financial needs and charts a personalisedinvestment strategy to help you meet them. Broadly, it involves: • Identifying your current financial status Listing and prioritising your goals Creating a sound investment plan to achieve them • Monitoring the plan to facilitate swift corrective action, if needed360° Financial Planning is based on the premise that every individual hascertain basic financial needs that are expressed at various stages of life (gettingmarried, buying assets like homes, vehicles, or providing for your childrenseducation and wedding). With the help of 360°Financial Planning, you can Page | 30
  31. 31. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.Tprepare yourself well in time for all these goals.How will 360° Financial Planning help me?Instead of investing in an ad-hoc manner, 360° Financial Planning helps youtake a holistic, all-round view. Briefly, 360° Financial Planning comprises: • Investment Planning: To make your wealth grow • Cash Flow Planning: To provide for assets and meet the periodic cash requirements • Tax Planning: To save on taxes and increase your income • Insurance Planning: To protect yourself, your family and your assets • Childrens Future Planning: To give your children a financially secure future • Retirement Planning: Because retirement is a time to relax, not to get worried Top How do I get my personalised 360° Financial Plan created? Here’s how Financial Plans are prepared: • The process begins with identifying your needs with the help of the Need Analysis Form. Our Financial Planners then use the especially-created Page | 31
  32. 32. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T 360° Financial Planning software to generate a personalised Snapshot. The Snapshot gives you a graphic account of all your financial requirements, at every stage of your future life. Based on the Snapshot, our experts work out an investment strategy. • Once implemented, our experts keep regular track of your investments.A Financial Planning session takes just 15 minutes Page | 32
  33. 33. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TInvestment Planning Everyone needs to save for a rainy day. Once you havesaved enough to take care of emergencies, you should start thinking aboutinvesting and to make your money grow. We can help you plan yourinvestments so that you can reap adequate benefits and achieve your financialgoals.Bajaj Capital’s Investment Planning Service includes:  Risk Profiling  Asset Allocation and Portfolio Construction  Creation and Accumulation of Wealth through Systematic Investment Plans (SIP)  Regular review of progress and Portfolio Rebalancing Essentially, Investment Planning involves identifying your financial goals throughout your life, and prioritising them. Investment Planning is important because it helps you to derive the maximum benefit from your Page | 33
  34. 34. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T investments. Your success as an investor depends upon your ability to choose the right investment options. This, in turn, depends on your requirements, needs and goals. For most investors, however, the three prime criteria of evaluating any investment option are liquidity, safety and return. Investment Planning also helps you to decide upon the right investment strategy. Besides your individual requirement, your investment strategy would also depend upon your age, personal circumstances and your risk appetite. These aspects are typically taken care of during investment planning. Investment Planning also helps you to strike a balance between risk and returns. By prudent planning, it is possible to arrive at an optimal mix of risk and returns, that suits your particular needs and requirements. Page | 34
  35. 35. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TWhat Is Cash Flow Planning?In simple terms, cash flow refers to the inflow and outflow of money. It is arecord of your income and expenses. Though this sounds simple, very fewpeople actually take the time out to find out what comes in and what goes out oftheir hands each monthCash flow planning refers to the process of identifying the major expendituresin future (both short-term and long-term) and making planned investments sothat the required amount is accumulated within the required time frame.Cash flow planning is the first thing that should be done prior to starting aninvestment exercise, because only then will you be in a position to know howyour finances look like, and what is it that you can invest without causing astrain on yourself. It will also enable you to understand if a particularinvestment matches with your flow requirement.So does it involve looking at future cash flows only? Not really. You shouldalways do a cash flow for yourself as on date, and you will realize that youcould have a potential savings amount within each month of your working life.This is the amount that you should look at saving for meeting your financialgoals. The best way of doing this is to have a personal budget. Page | 35
  36. 36. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TWhy is cash flow planning important?Cash flow plans are commonly used by business houses. Without a viable cashflow plan, a company could easily spend more than its revenue, putting it inperil. Unfortunately, most of us do not realise that a cash flow plan is asimportant for people like us as well. The principles that apply to corporatefinance and to our personal lives are largely the same.There has never been a bigger need than today for families and individuals towork out cash flow plans. Without proper cash flow planning one could easilyget caught in the debt trap. Of course, it goes without saying that creating a planis not enough. One also needs to implement the plan, besides bringing about achange in the spending habits.Cash flow plan brings you face-to-face with what you should ideally be saving,and investing in a systematic and regular manner, and what would it mean toyou to withdraw from your portfolio after a couple of years. It brings down innumbers what your financial future has in store for you, and gives a crystalclear view (as much as is possible with inflation and the interest rate scenario). Page | 36
  37. 37. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TTax Planning - IntroductionProper tax planning is a basic duty of every person which should becarried out religiously. Basically, there are three steps in tax planningexercise. These three steps in tax planning are:Calculate your taxable income under all heads ie, Income from Salary, HouseProperty, Business & Profession, Capital Gains and Income from OtherSources.Calculate tax payable on gross taxable income for whole financial year(i.e.,From 1st April to 31st March) using a simple tax rate table, given on nextpage.After you have calculated the amount of your tax liability. You have twooptions to choose from: 1. Pay your tax (No tax planning required) 2. Minimize your tax through prudent tax planning.Most people rightly choose Option B. Here you have to compare theadvantages of several tax saving schemes and depending upon your age, socialliabilities, tax slabs and personal preferences, decide upon a right mix of Page | 37
  38. 38. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.Tinvestments, which shall reduce your tax liability to zero or the minimumpossible.Every citizen has a fundamental right to avail all the tax incentives provided bythe Government. Therefore, through prudent tax planning not only income-taxliability is reduced but also a better future is ensured due to compulsory savingsin highly safe Government schemes. We sincerely advise all our readers andclients to plan their investments in such a way, that the post-tax yield is thehighest possible keeping in view the basic parameters of safety and liquidity Page | 38
  39. 39. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TThe Need For Insurance Planning"Insurance is not for the person who passes away, it for those whosurvive," goes a popular saying that explains the importance of InsurancePlanning.It is extremely important that every person, especially the breadwinner, coversthe risks to his life, so that his familys quality of life does not undergo anydrastic change in case of an unfortunate eventuality.It is extremely important that every person, especially the breadwinner, coversthe risks to his life, so that his familys quality of life does not undergo anydrastic change in case of an unfortunate eventuality.Insurance Planning is concerned with ensuring adequate coverage againstinsurable risks. Calculating the right level of risk cover is a specialised activity,requiring considerable expertise. Proper Insurance Planning can help you lookat the possibility of getting a wider coverage for the same amount of premium Page | 39
  40. 40. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.Tor the same level of coverage for the same amount amount of premium or thesame level of coverage for a reduced premium. Hence, the need for properinsurance planning.Insurance, simply put, is the cover for the risks that we run during our lives.Insurance enables us to live our lives to the fullest, without worrying about thefinancial impact of events that could hamper it. In other words, insuranceprotects us from the contingencies that could affect us.So what are the risks that we run? To name a few - the risk on our lives that is,the worries of replacement of the incomes that we contribute to the running ofthe household), the risks of medical contingencies (since they have thecapability of depleting our wealth considerably) and risks to assets (since thereplacement of these can have tremendous financial implications). If we canimagine a situation where our goals are disturbed by acts beyond our control,we can realise the relevance of insurance in our lives.Insurance Planning takes into account the risks that surround you and thenprovides an adequate coverage against those risks. There is no risk not worthinsuring yourself against, and insurance should first and foremost be looked as ameasure to guard against risks - the risk of your dreams going awry due toevents beyond your control Page | 40
  41. 41. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TChildrens Future PlanningLike every parent, you too must be overjoyed to watch your child grow. All parents wantto give the best possible upbringing to their children. This includes good education andsecurity, in case of any eventuality. Soon, your little bundle of joy will grow up, and itwill be time to provide for his or her higher education and wedding.The purpose of Childrens Future Planning is to create a corpus for foreseeableexpenditures such as those on higher education and wedding, and to provide for anadequate security cover during their growing years.Childrens Future Planning acquires added importance because childrens education andwedding are high priority life goals, which can neither be postponed nor can there be acompromise on the amount.Good education has always been the passport to a secure future. Today, careeropportunities have grown manifold, and there are many professional course that your Page | 41
  42. 42. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.Tchild can aspire for. However, costs of higher education have also increasedexponentially.Like most parents, you might be saving regularly to ensure a safe tomorrow for yourchild. However, savings alone is no longer enough. For ensuring adequate funding ofyour childs education, you as a parent, need to do two things:  Invest appropriate amount systematically and at regular intervals  Provide for a financial security blanket to cover any eventuality It is never too early to start saving and investing for your childs future. Especially in todays context. For example, the cost of a professional degree today is approximately Rs 2.5 lakhs. If your child is one-year-old today, after 17 years when he/she goes to college, you may require a sum of Rs 6.3 lakhs, assuming an annual rate of inflation of 6%.There are many products which your Financial Planner can use to achieve the aboveobjectives. For example, he could suggest a Childrens Future Plan offered by any goodinsurance company, to build a corpus for your childs higher education, and provide for asecurity cover in the event of the parents unfortunate demise.Childrens plans are also available under unit-linked option. Being unit-linked, they offeraccess to investments in all kinds of asset classes - equity, debt and cash. Page | 42
  43. 43. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TRetirement PlanningSome like it. Some don’t. But retirement is a reality for every working person.Most young people today think of retirement as a distant reality.However, it is important to plan for your post-retirement life if you wish toretain your financial independence and maintain a comfortable standard ofliving even when you are no longer earning. This is extremely important,because, unlike developed nations, India does not have a social security net.Retirement Planning acquires added importance because of the fact that thoughlongevity has increased, the number of working years haven’t. Page | 43
  44. 44. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TOur Retirement Planning Service involves:  Computing that amount that would be required post-retirement. This is done after taking inflation and time value of money into account.  Building your Retirement Corpus using Systematic Investment Plans (SIPs) and other long-term growth orient products  Ensuring adequate post-retirement income through safe investments. The asset allocation and selection of investment vehicles keep changing as your risk-bearing capacity diminishes. Page | 44
  45. 45. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TPlan for A Worry Free RetirementIn simple words, retirement planning means making sure you will have enoughmoney to live on after retiring from work. Retirement should be the best periodof your life, when you can literally sit back and relax or enjoy your life byreaping benefits of what you earn in so many years of hard work. But it is easiersaid than done. To achieve a hassle-free retired life, you need to make prudentinvestment decisions during your working life, thus putting your hard-earnedmoney to work for you in future. Page | 45
  46. 46. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TWhy is it important?India, unlike other countries, does not have state-sponsored social security forthe retired people. And after several decades when pensions provided manypeople with a large chunk of money they needed to live comfortably after theyretired, things are changing. While you may be entitled to a pension, or incomeduring retirement, in the new economic era, you are increasingly likely to beresponsible for providing for your own needs.Although the compulsory savings in provident fund through both employee andemployer contributions should offer some cushion, it may not be enough tosupport you throughout your retirement. That is why retirement planning isextreme ly important for every one.There are many reasons for the working individuals to secure their future emergence of nuclear families and its attendant insecurity, increasinguncertainties in personal and professional life, the growing trends of seekingearly retirement and rising health risks are among few important risks. Besidesfalling interest rates and the sustained increase in the cost of living make it acompelling case for individuals to plan their finances to fund their retired life.Planning for retirement is as important as planning your career and marriage.Life takes its own course and from the poorest to the wealthiest, no one gets Page | 46
  47. 47. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.Tspared. "Everyone grows older". We get older every day, without realising.However, we assume that old age is never going to touch us.The future depends to a great extent on the choices you make today. Rightdecisions with the help of proper planning, taken at the right time will assuresmile and success at the time of retirement. Page | 47
  48. 48. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TPLAN FOR A WORRY FREE RETIREMENTIn simple words, retirement planning means making sure you will have enoughmoney to live on after retiring from work. Retirement should be the best periodof your life, when you can literally sit back and relax or enjoy your life byreaping benefits of what you earn in so many years of hard work. But it is easiersaid than done. To achieve a hassle-free retired life, you need to make prudentinvestment decisions during your working life, thus putting your hard-earnedmoney to work for you in future. Page | 48
  49. 49. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TWhy is it important?India, unlike other countries, does not have state-sponsored social security forthe retired people. And after several decades when pensions provided manypeople with a large chunk of money they needed to live comfortably after theyretired, things are changing. While you may be entitled to a pension, or incomeduring retirement, in the new economic era, you are increasingly likely to beresponsible for providing for your own needs.Although the compulsory savings in provident fund through both employee andemployer contributions should offer some cushion, it may not be enough tosupport you throughout your retirement. That is why retirement planning isextreme ly important for every one.There are many reasons for the working individuals to secure their futureemergence of nuclear families and its attendant insecurity, increasinguncertainties in personal and professional life, the growing trends of seekingearly retirement and rising health risks are among few important risks. Besidesfalling interest rates and the sustained increase in the cost of living make it acompelling case for individuals to plan their finances to fund their retired life.Planning for retirement is as important as planning your career and marriage.Life takes its own course and from the poorest to the wealthiest, no one gets Page | 49
  50. 50. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.Tspared. "Everyone grows older". We get older every day, without realising.However, we assume that old age is never going to touch us.The future depends to a great extent on the choices you make today. Rightdecisions with the help of proper planning, taken at the right time will assuresmile and success at the time of retirement. Page | 50
  51. 51. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T INVESTMENTSMutual Funds are among the hottest favourites with all types of investors. Investing inmutual funds ranks among one of the preferred ways of creating wealth over the longterm. In fact, mutual funds represent the hands-off approach to entering the equitymarket. There are a wide variety of mutual funds that are viable investment avenues tomeet a wide variety of financial goals. This section explains the various aspects ofMutual Funds.• What are Mutual Funds?• Why choose Mutual Funds?• Types of Mutual Funds• Snapshot of Mutual Fund Schemes• Choosing the Right Mutual Fund Scheme• How to calculate the growth of your Mutual FundsInvestments?• Points to Remember• GlossaryWhat are Mutual Funds ?A Mutual Fund is a trust that pools together the savings of a number of investors whoshare a common financial goal. The fund manager invests this pool of money in securities-- ranging from shares and debentures to money market instruments or in a mixture ofequity and debt, depending upon the objectives of the scheme. Page | 51
  52. 52. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TWhy choose Mutual Funds ?Investing in Mutual Funds offers several benefits: • Professional expertise: Fund managers are professionals who track the market on an on-going basis. With their mix of professional qualification and market knowledge, they are better placed than the average investor to understand the markets • Diversification: Since a Mutual Fund scheme invests in number of stocks and/or debentures, the associated risks are greatly reduced. • Relatively less expensive: When compared to direct investments in the capital market, Mutual Funds cost less. This is due to savings in brokerage costs, demat costs, depository costs etc. • Liquidity: Investments in Mutual Funds are completely liquid and can be redeemed at their Net Assets Value-related price on any working day. • Transparency: You will always have access to up-to-date information on the value of your investment in addition to the complete portfolio of investments, the proportion allocated to different assets and the fund manager’s investment strategy. • Flexibility: Through features such as Systematic Investment Plans, Systematic Withdrawal Plans and Dividend Investment Plans, you can systematically invest or withdraw funds according to your needs and convenience. Page | 52
  53. 53. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T • SEBI regulated market: All Mutual Funds are registered with SEBI and function within the provisions and regulations that protect the interests of investors. AMFI is the supervisory body of the Mutual Funds industry. Page | 53
  54. 54. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TTypes of FundsThere are a wide variety of Mutual Fund schemes that cater to your needs, whatever yourage, financial position, risk tolerance and return expectation. Whether as the foundationof your investment program or as a supplement, Mutual Fund schemes can help you meetyour financial goals. The different types of Mutual Funds are as follows:Diversified Equity Mutual Fund SchemeA mutual fund scheme that achieves the benefits of diversification by investing in thestocks of companies across a large number of sectors. As a result, it minimizes the risk ofexposure to a single company or sector.Sectoral Equity Mutual Fund SchemeA mutual fund scheme which focuses on investments in the equity of companies across alimited number of sectors -- usually one to three.Index FundsThese funds invest in the stocks of companies, which comprise major indices such as theBSE Sensex or the S&P CNX Nifty in the same weightage as the respective indice.Equity Linked Tax Saving Schemes (ELSS)Mutual Fund schemes investing predominantly in equity, and offering tax deduction toinvestors under section 80 C of the Income Tax Act. Currently rebate u/s 80C can be Page | 54
  55. 55. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.Tavailed up to a maximum investment of Rs 1,00,000. A lock-in of 3 years is mandatory.Monthly Income Plan SchemeA mutual fund scheme which aims at providing regular income (not necessarily monthly,dont get misled by the name) to the unitholder, usually by way of dividend, withinvestments predominantly in debt securities (upto 95%) of corporates and thegovernment, to ensure regularity of returns, and having a smaller component of equityinvestments (5% to 15%)to ensure higher return.Income schemesDebt oriented schemes investing in fixed income securities such as bonds, corporatedebentures, Government securities and money market instruments.Floating-Rate Debt FundA fund comprising of bonds for which the interest rate is adjusted periodically accordingto a predetermined formula, usually linked to an index.Gilt Funds - These funds invest exclusively in government securities.Balanced FundsThe aim of balanced funds is to provide both growth and regular income as such schemesinvest both in equities and fixed income securities in the proportion indicated in theiroffer documents. They generally invest 40-60% in equity and debt instruments.Fund of Funds Page | 55
  56. 56. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TA Fund of Funds (FoF) is a mutual fund scheme that invests in other mutual fundschemes. Just as fund invests in stocks or bonds on your behalf, a FoF invests in othermutual fund schemes.Mutual Investment Who should InvestmentFund Objective Risk Portfolio invest horizonType Those who Treasury Bills, Liquidity + park their Certificate of Moderate funds inMoney Deposits, Income + Negligible current 2 days - 3 weeksMarket Commercial Reservation of accounts or Papers, Call Capital short-term Money bank deposits Call Money,Short- Commercialterm Papers, Those withFunds Liquidity + Little Interest Treasury Bills, surplus 3 weeks -(Floating - Moderate Rate CDs, Short- short-term 3 monthsshort- Income term fundsterm) Government securities.Bond Regular Income Credit Risk & Predominantly Salaried & More than 9 - 12Funds Interest Rate Debentures, conservative months Page | 56
  57. 57. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T Government(Floating - securities, Risk investorsLong- Corporateterm) Bonds Salaried & Security & Interest Rate GovernmentGilt Funds conservative 12 months & more Income Risk securities investors Aggressive Long-termEquity investors with Capital High Risk Stocks 3 years plusFunds long term out Appreciation look. To generate returns that are Portfolio NAV variesIndex commensurate indices like Aggressive with index 3 years plusFunds with returns of BSE, NIFTY investors. performance respective etc indices Balanced ratio Capital of equity andBalanced Growth & Market Risk debt funds to Moderate & 2 years plusFunds Regular Income and Interest ensure igher Aggressive Rate Risk returns at lower riskHow to choose the right Mutual Fund scheme Page | 57
  58. 58. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TOnce you are comfortable with the basics, the next step is to understand your investmentchoices, and draw up your investment plan relevant to your requirements. Choosing yourinvestment mix depends on factors such as your risk appetite, time horizon of yourinvestment, your investment objectives, age, etc.What should be kept in mind before investing in Mutual Funds ?Mutual Fund investment decisions require consistent effort on the part of the investor.Before investing in Mutual Funds, the following steps must be given due weightage todecide on the right type of scheme:1. Identifying the Investment Objective2. Selecting the right Scheme Category3. Selecting the right Mutual Fund4. Evaluating the PortfolioA) Identifying the Investment ObjectiveYour financial goals will vary, based on your age, lifestyle, financial independence,family commitments, level of income and expenses, among many other factors.Therefore, the first step is to assess you needs. Begin by asking yourself these simple Page | 58
  59. 59. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.Tquestions:Why do I want to invest?The probable answers could be: • "I need a regular income" • "I need to buy a house/finance a wedding" • "I need to educate my children," or •A combination of all the aboveHow much risk am I willing to take?The risk-taking capacity of individuals vary depending on various factors. Based on theirrisk bearing capacity, investors can be classified as: • Very conservative • Conservative • Moderate • Aggressive • Very AggressiveTo ascertain your risk appetite, try out our Risk Thermometer.What are my cash flow requirements? Page | 59
  60. 60. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TFor example, you may require: •A regular Cash Flow •A lumpsum after a fixed period of time for some specific need in the future • Or, you may have no need for cash, but you may want to create fixed assets for the futureB) Selecting the scheme categoryThe next step is to select a scheme category that matches your investment objectives: • For Capital Appreciation go for equity sectoral funds, equity diversified funds or balanced funds. • For Regular Income and Stability you should opt for income funds/MIPs • For Short-Term Parking of Funds go for liquid funds, floating rate funds, short- term funds. • For Growth and Tax Savings go for Equity-Linked Savings Schemes.Investment Investment Ideal InstrumentsObjective horizonShort-term 1- 6 months Liquid/Short-term plansInvestmentCapital Diversified Equity/ Balanced Over 3 yearsAppreciation Funds Page | 60
  61. 61. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T Monthly Income Plans /Regular Income Flexible Income Funds Equity-Linked SavingTax Saving 3 yrs lock-in Schemes (ELSS)C) Selecting the right Mutual fundOnce you have a clear strategy in mind, you now have to choose which Mutual fund andscheme you want to invest in. The offer document of the scheme tells you its objectivesand provides supplementary details like the track record of other schemes managed bythe same Fund Manager. Some important factors to evaluate before choosing a particularMutual Fund are:The track record of performance over that last few years in relation to the appropriateyardstick and similar funds in the same category.How well the Mutual Fund is organized to provide efficient, prompt and personalizedservice.The degree of transparency as reflected in frequency and quality of theircommunications.D) Evaluation of portfolioEvaluation of equity fund involve analysis of risk and return, volatility, expense ratio,fund manager’s style of investment, portfolio diversification, fund manager’s experience. Page | 61
  62. 62. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TGood equity fund should provide consistent returns over a period of time. Also expenseratio should be within the prescribed limits. These days fund house charge around 2.50%as management fees.Evaluation of bond funds involve its assets allocation analysis, returns consistency, it’srating profile, maturity profile, and it’s performance over a period of time. The bond fundwith ideal mix of corporate debt and gilt fund should be selected. Page | 62
  63. 63. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.THow to calculate the growth of your Mutual Fund investments ?Lets assume that Mr. Gupta has purchased Mutual Fund units worth Rs. 10,000 at anNAV of Rs. 10 per unit on February 1. The Entry Load on the Mutual Fund was 2%. OnSeptember 15, he sold all the units at an NAV of Rs 20. The exit load was 0.5%.His growth/ returns is calculated as under:1. Calculation of Applicable NAV and No. of units purchased:(a) Amount of Investment = Rs. 10,000(b) Market NAV = Rs. 10(c) Entry Load = 2% = Rs. 0.20(d) Applicable NAV (Purchase Price) = (b) + (c) = Rs. 10.20(e) Actual Units Purchased = (a) / (d) = 980.392 units2. Calculation of NAV at the time of Sale(a) NAV at the time of Sale = Rs 20(b) Exit Load = 0.5% or Rs.0.10(c) Applicable NAV = (a) – (b) = Rs. 19.903. Returns/Growth on Mutual Funds Page | 63
  64. 64. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T(a) Applicable NAV at the time of Redemption = Rs. 19.90(b) Applicable NAV at the time of Purchase = Rs. 10.20(c) Growth/ Returns on Investment = {(a) – (b)/(b) * 100} = 95.30% Points to Remember • Do not speculate: Always evaluate risk-taking capacity. • Do not chase returns: Because what goes up must come down. • Do not put all eggs in one basket: Diversification reduces the risk. • Do not stop working on Mutual Funds: Continuous evaluation of funds is a must. • Do not time the market: Every time is good for investments. • Mutual Funds are subject to market risks and there is no assurance that the fund objective will be achieved. • NAVs fluctuate depending on forces affecting the Capital market. • Past performance may or may not be sustained in the future.Assets Management Company: A highly regulated organization that pools money frommany people into portfolio structured to achieve certain objectives. Typically an AMCmanages several funds –open ended/ close ended across several categories- growth,income, balanced.Balanced Fund: A hybrid portfolio of stocks and bonds. Page | 64
  65. 65. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TClose Ended Fund: They neither issue nor redeem fresh units to investors. Some closedended funds can be bought or sold over the stock exchange if the fund is listed. Else,investor have to wait till redemption date to exit. Most listed close ended funds trade atdiscount to the NAV.Open Ended Fund: A diversified and professionally managed scheme, it issues freshunits to incoming investors at NAV plus any applicable sales charge, and it redeemsshares at NAV from sellers, less any redemption fees.Entry/ Exit Load: A charge paid when an investor buys/sells a fund. There could be aload at the time of entry or exit, but rarely at both times.Expense Ratio : The annual expenses of the funds, including the management fee,administrative cost, divided by the fund under management.Growth/Equity Fund: A fund holding stocks with good or improving profit prospects.The primary emphasis is on appreciation.Liquidity: The ease with which an investment can be bought or sold. A person should beable to buy or sell a liquid asset quickly with virtually no adverse price impact.Net Assets Value : A price or value of one unit of a fund. It is calculated by summing thecurrent market values of all securities held by the fund, adding the cash and any accrued Page | 65
  66. 66. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.Tincome, then subtracting liabilities and dividing the result by the number of unitsoutstanding.Interest Rate Risk: The risk borne by fixed-interest securities, and by borrowers withfloating rate loans, when interest rates fluctuate. When interest rates rise, the marketvalue of fixed-interest securities declines and vice versa.Credit Risk: Credit risk involves the loss arising due to a customer’s or counterparty’sinability or unwillingness to meet commitments in relation to lending, trading, hedging,settlement and other financial transactions.Capital Market Risk : Capital Market Risk is the risk arising due to changes in theStock Market conditions. Page | 66
  67. 67. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T INTRODUCTIONInvestment options 1. Insurance 2. PPF- Public provident fund 3. NSC- National Saving Certificate 4. Post Office Saving schemes 5. Mutual fund 6. Bank Saving Schemes 7. Securities 8. Real Estate Page | 67
  68. 68. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T RESEARCH OBJECTIVEThis research was undertaken with the following scope of work: • To know the current strategy of investment. • To know why salaried employees do investment {need of investment}. • To know when they invest. • To know where they prefer to invest. • To identify the whether they are aware about the Tax structure. • To give suggestion related to their investment strategy. Page | 68
  69. 69. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T DEFINITIONS OF INVESTMENT • Investing: the act of investing; laying out money or capital in an enterprise with the expectation of profit • Money that is invested with an expectation of profit • The use of money for the purpose of making more money, to gain income or increase capital, or both. • The use of money through various vehicles, or an individuals time and effort, to make more income or increase capital, or both. The term "investment" infers that the safety of principal is important. On the other hand, speculation connotes that risking principal is acceptable • Anything of value purchased to provide capital appreciation and/or income. Examples include stocks, bonds, mutual funds, unit investment trusts, certificates of deposit, money market funds and collectibles. Investments may also include artwork, antiques and real estate.But why do we save and then invest our savings somewhere?The answer seems to be too simple. We save to earn more money.We always invest for a specific purpose. For instance, we invest in lifeinsurance to save on taxes. We put money into recurring deposits to, say, part-finance the down payment for a house. We invest for our children’s education, Page | 69
  70. 70. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.Tfor their imminent weddings. We also invest to take care of our own needs afterretirement. Page | 70
  71. 71. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TMotives for investment may vary, but there are some common desires. peoplewant investments to give some return. • Safety • Liquidity • ReturnsWe have to use these criteria to assess our investment needs.For instance, if people want to put away money for retirement, safety will bethe most important criterion. A safe investment avenue that gives people adecent annual return will be good enough for people. What about the moneytheir father sent people for the down payment on their car? People haven’t evendecided on the model! People’ll probably keep the money in their savings bankaccount so that people can withdraw it quickly.At different stages of life their needs for financial security and plans for thefuture are likely to change. Here is a simple introduction to common financialneeds as they relate to different lifestyles and life stages.Protection Page | 71
  72. 72. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TFamilies with peopling, dependent children need adequate protection againstlosing their primary wage earners income if and when premature andunexpected death occurs. Page | 72
  73. 73. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T 1. Emergency FundLife insurance provides an additional consideration by providing an emergencyfund to provide money for survivors. It buys the time so essential and necessarythat is needed to adjust to the death of a parent or spouse. 1. EducationYet another priority need for peopling families is building adequate funds forhigher education costs. The need for highly specialized education is greater thanever before.Every year, the cost of education rises beyond estimated limits. Page | 73
  74. 74. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T 2. RetirementPeopling families should also plan for retirement in the long run. Investmentand pension plans are not adequate to fund the retirement needs at times. Once afamily attains a specific standard of living, it is very hard to adjust to a reducedstandard during the retirement years.Systematic savings over a working lifetime is the key towards supplementingother retirement programmes. The old rule of saving 10 percent of the annualincome still holds true for single income peopling families. Peopling familieswith modest incomes must commence with at least a 10 percent guideline ifthey cannot make a total commitment immediately. 3. DisabilityA single income peopling family would be in an extremely perilous situation ifthere would be a loss of income owing to a disability. In case an incomeprovider is unable to work, the economic consequences could be severe for thefamily. Not only does the family have to maintain the established standard ofliving, it also has to shoulder the additional burden of a disabled member withinitself. Disability is the major need that is to be addressed and protection againstthis loss is a priority. Page | 74
  75. 75. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TTax PlanningGenerally speaking, after a decade of their marriage their family would becomplete. People should look at tax planning in a more serious manner. It istime to plan for some investments and funds in the names of minor children andto take some insurance policy in the name of minor children for their educationand marriage purposes. This should be a long-term policy with a small amountof premium payment year after yearThe needs of mature adults tend to emphasis on their successors as well as theirelders. These generally include: • Providing funds for higher specialized studies for their children. • Assisting their children with payments on their new homes. • Loaning or granting money by way of gifts to other needy family members or relatives. • Ensuring health care and attention for their aged and dependent parents. • Planning for a dependent who might have specific needs. • Guaranteeing loans and financial obligations for their children. Page | 75
  76. 76. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T • Building a savings fund to provide additional income during retirement.Marriage and Education CostsThe cost of marriage and higher education for children forms a major expenseduring the mature adults life cycle. The costs of living increase year after year.And to meet these rising costs requires sacrifice and considerable effort on thepart of most families.The cost of higher education is also rising. More and more students are optingto go abroad to seek specialization in their chosen vocation. Foreign universitiesare also offering a wide range of specialized courses on Indian This makes acollege education highly desirable. Yet, as the costs go on mounting, it makesplanning all the more essential to make the education a reality. Page | 76
  77. 77. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TChildrens First HomeSince costs of housing have to be met with a large percentage from ourincomes, newly married couples are finding it harder than ever before to pay theminimum down payment or even acquire the necessary resources to qualify forhousing finance. Needless to say, these peopling couples need their parentshelp for providing the necessary funds.When a peopling couple applies for a loan, they should purchase dual-lifeinsurance policies, naming their parents as beneficiaries. If by chance, thecouple expires before the housing loan is paid off, the proceeds of the policycan easily suffice in meeting the repayment installments.In case the couple lives happily ever after, the cash value in the policies can beused to pay off the remainders of the loan after a while. The tax advantagesoffered are extremely advantageous for the peopling couple and their parents.Many other financial options are available, but the flexibility offered by lifeinsurance policies is unmatched by any of them.Gifts and LoansAdults in their mature years are usually confronted with financial demands fromgenerations proceeding as well as succeeding them. Page | 77
  78. 78. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TProviding funds for children, elderly parents, or relatives, either as a loan or anoutright gift, may create a change in the financial planning considerations. Page | 78
  79. 79. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TCaring for Dependent ParentsNot many people anticipate that as their children mature and gainindependence, they might be confronted by new dependents - their own parents.Since these people are responsible for their children as well as their elderlyparents, they subsequently get sandwiched between the expenses of both thegenerations’..A family sandwiched between the pressures of two generations is subjected toa lot of emotional and financial strain. Difficulties arise from balancing theneeds of parents and shouldering their childrens responsibility besidesconcentrating on personal financial goals. The only solution lies in planning inadvance for the risks covered. People who anticipate and prepare for the worstcan afford to make choices later on in life.Long Term CareLong term care insurance is yet another major planning consideration. Medicalassurance policies are not always adequate. They can never meet thecatastrophic costs of a major illness or a chronic disability. Not many peoplecan afford the large expenses of nursing homes with their current income. Page | 79
  80. 80. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TIf matured adult parents are unable to afford this coverage, it makes sense fortheir children to share the premium expenditure. This is a sensible precaution tobe exercised against any potentially high costs that might occur later. When thetime period for future health planning is over, the options available for theelderly are fewer and extremely unattractive.If a parents health goes from bad to worse and they become completelydependent on external help, the medical costs may be higher than the incomelevel of the family, regardless of how willing they might be.Dependents with Special NeedsJust like elderly parents, children who are physically or mentally handicappedrequire special consideration and are a source of major and expensive concern.A provision for their needs must be considered and plans made as early aspossible. Needless to say, the dependency period never ends with thesedependents.Providing necessary care for dependents having special needs can be extremelystrenuous, both emotionally and financially. At times, people who are caring forthe disabled sacrifice their own health and financial security at the expense ofthe other members of the family. The emotional pull generated can create aterse atmosphere within the household. Page | 80
  81. 81. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TParents of a dependent with special needs wish to see that these expenses aretaken care of on a long-term and guaranteed basis. With timely and properplanning, such expenses can be met easily regardless of what happens to theprovider of support. Page | 81
  82. 82. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.TTax PlanningOnce their children are grown up and settled in life, most of their responsibilitytowards them is over. It is now time to relax. Now people should plan theirinvestment strategies in such a manner that the income in their family group isdistributed from the point of view of tax planning, not merely in their name andthat of their spouse but in the names of their son, their daughter-in-law and theirgrand children. People should also now start focusing on the investmentdecisions which will have a long-term repercussion relating to their succession.Thus, it is recommended to people that they should prepare their Will and adopttax planning relating to the wills and achieve ultimate tax saving for familymembers who are going to be a part of their succession plan.Adulthood -The Middle Years 51 – 55 Middle years are the stage in the life cycle identified and characterized as a period of acquisition and establishment. People at this phase of life, assume more responsibility and often take on new career opportunities. Middle-aged people are constantly making commitments, acquiring assets and incurring additional debts as well. This phase in the human life cycle Page | 82
  83. 83. www.final-yearprojects.co.cc | www.troubleshoot4free.com/fyp/BAJAJ CAPITAL LTD. C.I.M.T develops the individuals long-term and ongoing relationships more than the others. Page | 83