1. FINANCIAL PLANNING FOR
YOUNG I NVESTORS
Presented by
Prof.K.Prabhakaran, SEBI Financial
Education Resource Person
& Assistant Professor-Finance,
RVS Faculty of Management,
Coimbatore.

2. Agenda
 Introduction About SEBI
 Basis of Savings and Investment
 Financial Planning
 Savings and Investment Related
 Management of Personal








Finance
SMART Goals
How to achieve your Goals
Investment Activity
Human life Cycle
Various Investment Vehicles
Risk & Return
Time Value of Money
Effect on Inflation








products
Protection Related Products
Borrowing Related Products
Format of Individual Worth
Statement
Regulators of Indian Financial
Markets
Financial Planning-Asset
Allocation
NISM,NCFM Certificate Exams
Toll free Helpline Services
Important Websites

3. SEBI
Securities and Exchange Board of India
(SEBI) - A statutory body established
under the SEBI Act, 1992
Objectives
 Protect the interests of Investors
 Promote and Development the
Securities Market
 Regulate the Securities Market

4. Financial Planning
“
Financial Planning is the process of
meting one’s life goals through the
proper
management
of
personal
finances.
The above definition can be best
understood by breaking it into three
parts viz.
i) Financial Planning as a process
ii) Meeting one’s life goals
iii) Management of Personal Finances

5. Management of Personal
Finances
Financial Planning is all about managing finances of
an individual or family. The following aspects of
personal finance should be analyzed as a whole rather
than seeing them in isolation.
 Income
 Expenses
 Assets,
 Liabilities
 Insurance
 Taxation

6. SMART

7. HOW TO ACHIEVE GOALS
Arrange goals in order of their time to
reach (short term, followed by medium
term and lastly long term)
 Goals can be short term (upto 3 years),
medium term (3 to 5 years) and long
term (upwards of 5 years)
 Plan investments for each goal.


8. Exercise

9. Prepare the Financial Plan
Financial
Goals
Risk
taking
Ability

10. Expenditure
Income
Risk
taking
Ability
Assets
Liabilities

11. Human Life Cycle – Disciplined
Planning
Income
Phase I
Phase II
Phase III
Child’s Marriage
Child’s Education
Housing
Child birth
Having a Financial
Goal is primary to
starting a
Investment Plan.
Marriage
Career
22 yrs
38 yrs
Birth & Education
Earning Years
22 yrs
60 yrs
Over 25 - 30 yrs
Retirement
Age

12. INVESTMENT ACTIVITY (ACQUISITION OF ASSETS)
1. FINANCIAL
ASSETS
2. PHYSICAL ASSETS
SAVER
HOUSE
CASH
BANK DEPOSITS
LAND
INVESTOR
P.F./LIC
PENSION
POST OFFICE
3. MARKETABLE
ASSETS
SHARES, BONDS,
GOVT. SECURITIES,
MUTUAL FUNDS,
CURRENCIES
BUILDINGS
GOLD
SILVER
OTHER METALS

13. Vehicles











Bonds and Debentures
Bank Deposits
Post office Deposits
Employees Provident fund
Gold
Company Deposits
Real Estate
Equity Shares
Mutual funds
Currencies(FOREX)
Insurance Products

14. Investment vehicles –
Equities Shares
Total equity capital of a company is
divided into equal units of small
denominations, each called a share.
For example, in a company the total
equity capital of Rs 2,00,00,000 is
divided into 20,00,000 units of Rs 10
each. Each such unit of Rs 10 is called
a Share.

15. Primary and Secondary
Market
 Primary Market is a place where new
offerings by Companies are made either
as an Initial Public Offering (IPO)
&Following Public Offering(FPO).
 Secondary Market is a market where
securities are traded after being initially
offered to the public in the Primary Market
and/or listed on the Stock Exchange.

16. Eligibility Criteria for Issue
of Primary Market
 Profitability Related
 Assets – Rs.3 crores, Net worth Rs.1 crore
 Distributable profits, Issue size < 5 * Net worth
 QIB related
 50 % allotment to QIBs
 Appraisal related
 Project to be appraised by Banks/ PFI with 15 % of
project cost contribution,
 Post issue capital = 10 crores
 Market making for 2 years

17. Primary Market- Facts
Year
Number of
issues
Amount raised
(Rs. Crore)
2008-09
47
16,620
2009-10
76
57,555
2010-11
91
67,609
2011-12
71
48,468
Apr 12-Dec 12
40
20,869

18. STOCK EXCHANGE
 Stock exchange is that place where trading of
shares is done in terms of sale and purchase.
 There are 25 stock exchanges in the India .
 BSE is oldest stock Exchange in Asia. It was
started at 1875.Parameter is SENSEX.
 NSE is the first online stock exchange in India. It
was started at 1992.Parameter is NIFTY.
 MCX-SX is New stock Exchange in India. It was
started at Feb 2013.Parameter is SX-40.

19. Market Participants
As on 31st Dec 2012
Regulators
Market Infrastructure
Institutions
Merchant bankers
Underwriters
SEBI,RBI, MoF, MoCA
Exchanges, Depositories,
Clearing Corporations
199
3
Brokers
8,922
Sub brokers
77,163
R & T Agents
74
Custodians
19
Depositories and DPs
FIIs
2 and 823
1767

20. Trading & Settlement
Process
Depository
Clearing
House
Investor
Broker
Exchange

21. Secondary Market Facts -BSE
2007-08
2008-09
2009-10
2010-11
2011-12
Number of
Companies
listed
4,887
4,929
4,975
5,067
5,191
Turnover
Cash Segment
(Rs .Cr.)
15,78,85
7
11,00,075
13,78,809
11,05,027
6,67,498
Market
Capitalisation
( Rs.Cr.)
51,38,01
4
30,86,075
61,65,619
68,39,084 62,14,941

22. Secondary Market Facts -NSE
2007-08
2008-09
2009-10
2010-11
2011-12
Number of
Companies
listed
1,381
1,432
1,470
1,574
1,665
Turnover
Cash segment
(Rs.Cr)
35,51,03
7
27,52,023
41,38,023
35,77,410
28,10,893
Market
Capitalisation
( Rs.Cr.)
48,58,12
2
28,96,194
60,09,173
67,02,616
60,96,518

24. STOCK PRICE MOMENTS
The price of every stock increases or decreases for the following Two
Analysis.
1.Fundamental Analysis
 Economic Analysis
(GDP,Inflation,Bank Rate, Political, Budgets, Infrastructure,FDI)
 Industry Analysis
(Growth,ILC, Structure, Nature of Competition, Profitability)
 Company Analysis
(Market Share, Sales, Capital Structure, SWOT Analysis ,
Dividends,
Financial Analysis)

25. CONT
2.Technical Analysis
Technical analysis is a method of
evaluating securities by analyzing the
statistics generated by market activity, such
as past prices and volumes.
 Charts (Line,Candle& Bar Chart)
 Technical Indicators (RSI,EMA,MFI,Pivot
Point)
 Market Efficiency(Strong. Semi strong
,Weak Form)
 Market Analysis with the help of Dow

26. Mutual Funds
 An investment company that pools money from its
unit holders and invests that money into a variety
of securities, including stocks, bonds, and moneymarket instruments.
 This represents a way of investing money into a
professionally managed and diversified pool of
securities that hopefully will provide a good return
on unit holders' money.
 More than 25 Mutual funds Companies(AMC) in India
 Best Schemes(Equity, ElSS, Growth,Liquidity,Gold ETF)
 Best Plan (SIP,STP)

27. Calculation of NAV(Net Asset
Value)
 Formula
= Net Value of Assets / Number of
Units Outstanding.

29. Investment vehicle Insurance
 Insurance is an economic tool by which
one can exchange large uncertain
financial loss with a small & definite
cost called ‘premium’.
 Types of Insurance
- Life Insurance
- General Insurance(Non Life)

30. Insurance Companies in
India
 Life Insurance Companies
Private Sector- 16
Public Sector- 1
 General Insurance Companies(Non
Life)
Private Sector-9
Public Sector- 4

31. Types of Life Insurance
Plans
 Term Life Insurance
 Endowment Policies
 Annuities
 Group Insurance
 ULIP
 New Pension Scheme
2009

32. Types of Non Life Insurance
Fire Insurance: (Protection for property against Fire & other Special Perils)
Marine Insurance: (Cover the loss / damage to goods, during transit)
Motor Insurance:(For Vehicles, Personal Accident, Liability to Third Parties)
Personal Accident Ins: (Cover the insured sustaining injury from Accident)
Health Insurance:(Reimburses Hospitalization expenses)
Liability Insurance: (Covers personal injury toThird Parties & their property)
Engineering Insurance: (Cover Civil, Mechanical Contractors & Industries)
Miscellaneous Insurance: (Householders / Shopkeepers Insurance etc.,)
Rural Insurance: (Covers Cattle ,Poultry, Pump set etc. of rural population)

33. Growth of Indian Insurance Companies

34. Market Share of Insurance
Companies in India

35. Currency market
 Currency
transactions are spot, Forward
&Derivative Market.
 NSE was the first exchange to have received an
in-principle approval from SEBI for setting up
currency derivative segment.
 The exchange launched its currency futures
trading platform on 29th August, 2008.
 Currency Options was introduced on October 29,
2010.

36. Major Currencies Transaction in
India
 US DOLLAR
 EURO
 BRITISH POUND
 JAPANESE YEN

37. RISK AND RETURN

38. RISK-RETURN RELATIONSHIP
RISK : Risk is possibility of harm, injury, loss, danger or
destruction.
•
Risk is unpredictable.
•
Risk is uncertainty about future.
•
Risk is the possibility of adverse deviation from expected
outcomes.
•
Risk is outcome that is not favorable.
RETURN: Return differs amongst different instruments.
The most important factor influencing return is risk.
Normally, the higher the
risk ,the higher is the return.

39. Risk and Return Relationship
for Some Investment Options
Return
Derivatives
(High Risk)
Equity Shares
Real Estate
Mutual Funds
Bonds , Debentures
Deposits(FD,PPF,PO)(Low Risk)
Risk

40. Life Cycle Investment Guide
Mid Twenties
Late Thirties to Early Fo rties
10%
10%
REAL ESTATE
5%
5%
CA SH
CASH
20%
55%
65%
REA L ESTA TE
30%
BONDS
B ONDS
STOCKS
STOCKS
Mid Fifties
Late Sixties and beyond
13%
5%
44%
REA L ESTA TE
15%
25%
REA L ESTA TE
10%
CA SH
B ONDS
38%
CA SH
B ONDS
STOCKS
STOCKS
50%

41. Time Value of Money
Now Rs.1 lakhs Invested @ 10%
Year
1
Simple Interest @
10% P.A.
1,10,000.00
Compound Interest @
10% P.A.
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
30
4,00,000.00
17,44,940.23

42. Effects of Inflation
Item
Price in
2001-02
Price in
2012-13
Sugar (1 kg)
Cooking oil (5 liters)
Rice (1 kg)
Petrol ( 1 liter)
Rs. 16
Rs. 290
Rs. 14
Rs. 33
Rs. 40
Rs. 600
Rs. 60
Rs. 75

43. Basics of Savings and
Investment
 Savings
 Investing
 Short term
 Long term
 Value remains stable  Value moves up and
down in short term
 Lower returns over
 Potentially higher
long term
returns over long
term

44. Savings & Investment Related
Products
 Bank deposits
 Tax Savings Schemes(NSC,PPF,POS,ELSS,
Infrastructure Bonds)
 Bonds / debentures
 Company fixed deposits
 Mutual funds
 Equity shares

45. Protection Related Products
 Insurance
 Life insurance
 Term life insurance
 Endowment policies
 Annuities / Pension plans
 ULIPs
 Health Insurance
 Comprehensive health insurance
 Hospitalization policy
 Critical illness plan
 Specific condition coverage

46. Borrowing Related Products
 Personal loans
 Vehicle Loans
 Home loans
 Reverse mortgage
 Loan against securities
 Credit card debt

47. Choosing the Right
Investment Options
Safety
Liquidity
Returns

48. Various Parameters
considered before
Investment
 Stock Market Indices-Sensex,Nifty
 RBI Monitory Policies-Bank Rate, Interest
Rate
 Economic Policies- GDP, Inflation, Growth
rate, GNP,PPP, IIP,Foreign Exchange etc
 Govt. Policies- Budget,Tax Structure,etc

49. Format of Individual Worth
Statement
Name: A. Sunil
Liabilities
As on 31.03.2013
Rs
Assets
Rs
Housing Loan
6,30,000
Cash on Hand
4,000
Vehicle Loan
1,15,000
Cash with Bank
12,000
Fixed Deposits
4,50,000
Recurring Deposits
1,20,000
Credit Card outstanding
18,000
Paid up in LIC
68,000
Investment in Shares
4,15,000
Vehicles (Market Value)
3,20,000
House (Market Value)
Networth
35,18,000
Jewellery
Total
42,81,000
Total
28,12,000
80,000
42,81,000

50. Worth Statement Exercise
The details of the liabilities and assets of Mr. Tamil as
on 31.03.2013 are as follows.
• Housing Loan from SBI: Rs 8,12,000
• Market value of House: Rs 19,20,000
• Personal Loan from Canara Bank: Rs1,42,000
• Investment in L&T shares: Rs 3,40,000
• Market Value of Car: Rs 3,60,000
• Vehicle Loan from SBI: Rs1,40,000
• Investment in Chits: Rs 90,000
• Furniture & Fittings : Rs 48,000
Calculate the Networth of Mr. Tamil in the Worth
Statement Format.

51. Regulators in Indian Financial
Markets
◦ 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)

52. FINANCIAL PLANNING
– ASSET ALLOCATION

53. INVESTOR PROFILE
Monoj&Manju( Age 28 years )
Short-term
Planning to purchase a
15%
Financial Goals
•Planning to purchase a house in the
next 5 - 8 years
•Planning to purchase of car for next 2
years
Stocks
•Creating long-term wealth for
75%
retirement
Investment Strategy
Aggressive Growth Portfolio
Balanced Portfolio
Short-term
Short-term
Bonds
10% 10%
Bonds
15%
15%
Stocks
75%

54. Financial Planning-Joke
 Jack was a single guy living @ home with his father




and working in the family business.
When he found out he was going to inherit a fortune
when his sickly father died, he decided he needed a
wife with which to share his fortune.
One evening @ an investment meeting he spotted
the most beautiful woman he had ever seen, Her
natural beauty took his breath away. I may look like
just an ordinary man, he said to her, but in just a few
years, my father will die, and I’ll inherit 10 crores.
Impressed, the woman obtained his business card
and three days later…. She become his stepmother.
This is a Financial Planning.

55. Securities Market and
Knowledge Initiatives
 SEBI’s Initiative
 NISM(National Institute of Security Market)
 Pocket Money
 Investor Outreach
 Financial Education Workshops
 Initiatives of Stock Exchanges
 National Stock Exchange
 Bombay Stock Exchange
 MCX-SX

56. NISM Certifications-SEBI
More than 15 Modules are available . Important Modules
are
 NISM Series VII: Securities Operations and Risk
Management
 NISM Series VIII: Equity Derivatives
 NISM Series I: Currency Derivatives
 NISM Series VI: Depository Operations
 NISM Series V A: Mutual Fund Distributors
 NISM Series XI: Equity Sales
nism.ac.in-quick link-nism certifications

57. NCFM Certifications-NSE
More than 40Modules are available . Important
Modules are
 Capital Market (Dealers) Module (CMDM)
 Derivatives Market (Dealers) Module (DMDM)
 Commodities Market Module
 Investment Analysis and Portfolio Management
 Technical Analysis Module
 Surveillance in Stock Exchanges Module
 Banking Sector Module
 Insurance Module
 Mutual Funds (Advanced) Module
nseindia.com-education-nsecertification-ncfm

58. NCFM 2009/10

59. Employment
Opportunities
 Public and Private Sector Banks Financial Institutions
 Regulatory Bodies-(SEBI,RBI,FMC,MCA,MOF)
 Stock Broking Companies
 Mutual Fund Companies
 FOREX Market(Currencies)
 Commodity Markets
 Insurance Companies

61. Toll-free Helpline Service for
Investors
 To lodge grievance or to view status of the grievance
◦ www.scores.gov.in
◦ www.sebi.gov.in
◦ www.investor.sebi.gov.in
 Investors can contact the following Toll free numbers
to know about the status of their grievances and to
get assistance
◦ 1800 22 7575
◦ 1800 266 7575
The toll free helpline service is available on all days
from 9:30 a.m to 5:30 p.m (excluding declared

62. Websites
 www.myiris.com
 www.moneycontrol.com
 www.investopedia.com
 www.nseindia.com
 www.bseindia.com
 www.mcxindia.com
 www.sebi.gov.in
 www.nism.ac.in
 www.imf.org
 www.rbi.gov.in
 www.ssrn.com

63. Success Investment Mantra
Safe
Life
Happy Investing