Financial Planning for Young

Investors
By
Dr. Harnam Singh
M. Com, M.B.A., Ph. D.
Assistant Professor,
Deen Dayal Upadhyay KAUSHAL
Kendra
S.B.S. Govt. P. G. College,
Rudrapur
Agenda
Introduction Protection related
Financial planning products
SMART goals Borrowing related
How to achieve your goals products
Risk v/s return Investment strategies
The power of
How not to lose money
compounding
How to begin investing
Inflation effects on
investments Advantages of
Savings v/s investments financial education
Loans v/s investments Investor protection
Savings and investment and grievances
related products Dos & Donts
Need for financial
education
Deterioration of personal
finances
Proliferation of new and
complex financial products
 Money matters: They
really matter!

Do not save what is left after spending, but spend

what is left after saving
-Warren Buffet
WHAT IS FINANCIAL
PLANNING?
The financial planning process
Gathering financial data
What is the source of income
and what is its nature
Monthly Salary
Business Income
How much are your monthly
expenses
Exercise

Cash flow
calculator
Identify Goals
Identify gaps or issues
Are there any expenses which
have to be met on a priority,
due to which plan may have to
be changed
Are there any liabilities which
are already existing or worse
still, may crop up suddenly?
Prepare the financial plan
SMART GOALS
Objective Incorrect Correct approach
s approach
Specific I need money to I will save Rs. 50,000 to pay
pay my college my college fees in a years
fees time
Measurabl I will pay off my In the next six months, I will
e debts return Rs. 3,000 I owe to
my friends
Attainable I will save money I will save Rs. 2000 every
month by cutting down on
eating out and partying
Realistic If I save money, I If I save regularly, need not
will be rich borrow more money, I can
pay off my debts by next
year and will have enough
savings till I begin to earn
Time- I will save money I will save Rs. 10000 a year
bound for my vehicle for the next 2 years for my
How to achieve goals
Arrange goals in order of their
time to reach (short term,
followed by medium term and
lastly long term)
Plan investments for each goal.
Implementing the plan, the real
challenge
RISK AND RETURN
Risk and Return
Risk and investing go hand in
hand
Risk increases as the expected
potential return increases
No-risk, whats that?
Manage the risks
 Risk v/s returns
Risk Instruments
category
Low risk Cash, bank FD
Medium risk Debentures, bonds,
fixed income mutual
funds
High risk Equity shares, equity
mutual funds
The power of
compounding
 The eighth wonder -
compounding
Rs.1 lac invested @ 10%
Year Simple Compound
interest @ interest @ 10%
10% p.a. p.a.
1 1,10,000.00 1,10,000.00
2 1,20,000.00 1,21,000.00
3 1,30,000.00 1,33,100.00
4 1,40,000.00 1,46,410.00
5 1,50,000.00 1,61,051.00
20 3,00,000.00 6,72,749.99
25 3,50,000.00 10,83,470.59 Compounding
THE RULE OF 72
WHAT IS INFLATION?
 Effects of Inflation
Item Price Price in
in 2009-
2001- 10
02
Sugar (1 kg) Rs. 16 Rs. 40
Cooking oil (5 Rs. 290 Rs. 500
liters)
Rice (1 kg) Rs. 14 Rs. 35 Inflation

Petrol ( 1 liter) Rs. Rs.

calculator

33.46 48.83
Basics of Savings and
Investment
Savings Investing
Short term Long term
Value remains Value moves up
stable and down in short
Lower returns term
over long term Potentially higher
returns over long
term
Price of procrastination
Twin brothers: Anil and Sunil
Anil saved from the age 25
years till 35 years. He did not
withdraw till 60
Sunil started saving at 35
years, but continued till 60
years
Both saved Rs. 50,000 per year
and earned 10% p.a. on their
investments
Price of procrastination
Twin brothers: Anil and Sunil
Amount accumulated at 60
years
Rs. 86 lacs

Rs. 49 lacs
CHOOSING THE
RIGHT INVESTMENT
OPTIONS
Loans v/s
Investments
Before you borrow:
Financial strength
Credit card debt and personal loans
Low interest rates
Tax benefits
Loan for investments
THE PRODUCTS
Savings & investment related
products
Bank deposits
Small savings schemes
Bonds / debentures
Company fixed deposits
Mutual funds
Equity shares
Depository system
Protection Related Products
Insurance
Life insurance
Term life insurance
Endowment policies
Annuities / Pension plans
ULIPs
Health insurance
Comprehensive health insurance
Hospitalisation policy
Critical illness plan
Specific condition coverage
Borrowing Related Products
Personal loans
Home loans
Reverse mortgage
Loan against securities
Credit card debt
Steps to avoid excess debt:
Set debt limits
Shop carefully for debts
Dont give into temptation
Automatically have money go
towards your bills
How not to lose
money
Ponzi schemes
Ponzi schemes promise high
returns and low risk
Initial investors may get high
promised returns
Money from initial investors is
given to new investors thus it is
only rotation of funds, not
investment of funds
If its too good to be true its
probably not true. Its a Ponzi!
PURCHASING FINANCIAL
PRODUCTS
Selection of intermediary
Registration with regulator or a
body approved by regulator, e.g.
AMFI or stock exchange
Steps to become securities market
investor
Know Your Client (KYC) form and
documents
PAN Card
Personal identification proof
Address proof
Demat accounts & trading
accounts required for equity
investing
For investing in MF, demat is
optional
Advantages of Financial
Education
Helps build a secure financial future

Prepared for financial emergencies

Protection from marketing gimmicks
Feeling a sense of accomplishment
Disciplined approach to money
Awareness of questionable practices
Setting a good example for your family
Benefit other aspects of your life
Regulators
Various regulators in Indian
financal markets are:
Securities & Exchange Board of
India (SEBI)
Reserve Bank of India (RBI)
Forward Markets Commission (FMC)
Insurance Regulatory &
Development Authority (IRDA)
Ministry of Corporate Affairs (MCA)
Ministry of Finance (MoF)
 Dos
i.Check for the Registration of
Broker/Distributor/Agent/
Company distributing
financial product
ii.Read all the documents
carefully
iii.Strike off all blank /
irrelevant fields / clauses in
Know Your Customer (KYC)
registration form
iv.ask for the list of fees and
charges applicable, before
investing
v.Make payments only
through A/c payee
cheques / drafts / EFT
to the company (selling
product)/scheme and
not to distributor /
agent
vi.In case of change in
Donts
i.Do not invest with borrowed
money
ii.Do not expect unrealistic /
guaranteed returns
iii.Do not be influenced by
advertisement / advices /
rumours / unauthentic news
promising unrealistic gains
and windfall profits in mass
media
iv.Do not be guided by
astrological predictions for
your investments
v.Do not invest on any explicit
/ implicit promises made by
anyone
vi.Do not invest in any
scheme just because of
incentives / gifts /
inducements etc. offered
vii.Do not be swayed by
 Toll free helpline
1800 22 7575/1800 266
7575

THANK YOU !