PROJECT ON FINANCIAL PLANNING FOR AN INVESTOR FOR KOTAK MAHINDRA BANK, EAST STREET, PUNE

MASTER OF BUSINESS ADMINISTRATION (FINANCE)

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR AWARD OF MASTER OF BUSINESS ADMINISTRATION OF TILAK MAHARASHTRA UNIVERSITY, PUNE.

SUBMITTED BY: ROOMLATA GYANSINGH BAGHEL PRN: 07208013250 OF PAI INTERNATIONAL CENTRE FOR MANAGEMENT EXCELLENCE, PUNE. Guided By Mr Prashant Gundawar TILAK MAHARASHTRA UNIVERSITY.

GULTEKDI, PUNE 411037.

ACKNOWLEDGEMENT.
It is common knowledge that a guide plays the role of light in a maze of darkness. I would like to thank, Kotak Mahindra Bank at East Street Branch Pune for having given me an opportunity to undergo summer training in their company. My deep-rooted respect and sincere gratitude to Mr. Amul Sharma (Regional Manager) ,Mr.Sachin Vaze (Branch Manager ), Mr.Dinesh Shendkar (Relationship Manager-Business Banking) and Mr Prashant Gundawar (Internal Guide) who in spite of their busy schedule listened to my problems and suggested prompt solutions. I am also thankful to Prof. R.Ganeshan (Director) for his constant support throughout the duration of the project, a Special thanks to Ms. Shikha Khare and

our staff member Ms.Saumya Mehta, who helped me during the study.
Once again, I would like to thank all the staff members and my friends who during the course of my training helped me with my learning objectives.

I hope that I have been successful in my endeavour. Discrepancies, mistakes, if any, are solely mine.
Roomlata Baghel MBA (PICME).

TABLE OF CONTENTS
S.NO. 1. 2. 2.1 2.2 2.3 3. 4. 5. 6. 6.1 6.2 6.3 6.4 7. 8. 9. 10. 11 CONTENT Rationale of the Study. Objective of the Study. Title of the Project. Objective of the Study. Scope of the Study. Profile of the Company. Review of the literature. Research Methodology. Theoretical Background. Introductory Chapter. Planning Process. Formation of Goals. Benefits of Financial Planning. Data Analysis and Practical Representation of the Plan. Conclusion. Suggestion and Recommendation. Appendix Bibliography. 33-52 53-54 55-56 57-63 64-65 6-17 18-19 20-24 25-32 PAGE NO. 1-2 3-5

RATIONALE OF THE STUDY

1.

RATIONALE OF THE STUDY

The rapid growth of capital markets in India has opened up new investment avenues for investors. Keeping this in mind the Financial Institutions provide number of services to its customer with a wide spectrum of investment opportunities. In order to retain their customers they provide them with special services besides traditional services. The invention of new technology and services by financial institutions has given the consumers a wide range of investment avenues to invest in. One of the special services brought out by them is FINANCIAL PLANNING SERVICES which aims at identifying a persons financial goals, evaluating existing resource and designing the financial strategies that help the person to achieve those goals and enables him to earn maximum returns at minimum level of risk. The stock markets have become attractive investment options for the common man. But the need is to be able to effectively and efficiently manage investments in order to keep maximum returns with minimum risk. Financial Planning helps you to give direction and meaning to your clients financial decisions. It allows him to understand how each financial decision affects other areas of finance. For example, buying a particular investment product may help your client to pay of his mortgage faster or may delay his retirement significantly. By viewing each financial decision as a part of a whole, you may help your client consider the long term and the short term effects on his life goals. You will help them feel more secure and more adaptable to life changes, once they can measure that they are moving closer to the realization of their goals. In near future a proper financial planning is required to invest money in all type of financial product because there is good potential in market to invest. The main objective of this project on FINANCIAL PLANNING is to review the real meaning of Financial Planning, its objectives, role, framework, responsibilities of Financial planner and the study of various other issues related to Investment planning, Tax planning, Asset allocation and Retirement planning. I am inclined to this topic, as it has given me actual knowledge of this service along with its working and how the financial planner plans and manages the portfolio. Moreover, it has guided me

to understand this so called complex world of investment and financial planning and also increase my knowledge to such extent. I hope it will prove beneficial to me in developing my further career.

OBJECTIVE OF THE STUDY

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2.

OBJECTIVE OF THE STUDY

A. TITLE OF THE PROJECT

FINANCIAL PLANNING FOR AN INVESTOR IN KOTAK MAHINDRA BANK, EAST STREET, PUNE.

B. OBJECTIVE OF THE STUDY

To take an overview of the clients in short and long term goals. To have the clients current financial strengths and weaknesses and implications of financial plan.

To study the clients financial objectives anchored to current resources. To give a detailed summation of all recommendations.

To suggest appropriate financial plan for mutually selected recommendations.

To also give comprehensive economic overview of the clients financial plan, supported by financial statements.

To follow step-by-step implementation and monitoring plan.

C. SCOPE OF THE STUDY

Personal Financial Planners are not just for wealthy people. Every individual can benefit from objective help to create, grow, accumulate and utilize wealth to fulfil ones personal goals, family goals and other lifestyle objectives systematically without any anxiety. Financial planners can guide individuals to achieve their ultimate aim of spending retired life peacefully without compromising living standards. A Qualified financial planner will provide advice on. Systematic Savings Cash Flow Management Debt Management Assets Allocation for Investment Managing Risk through Insurance Planning Tax Strategies to increase investible surplus Distribute residual wealth through estate planning

Financial Planning is a profession for people with good communication skills combined with knowledge of how financial service industry works. As a Financial Planner one could work for a bank, insurance company, a brokerage house or have own practice. Most important is to understand that the suitability of products you are guiding people to purchase is based on their Risk Appetite, Age and Time Frame of Goals and Objectives. Financial Planners need to update themselves constantly on new products, services and tax laws that might be good for their clients. This is a field that requires a life time of continuing education. A Trusted Financial Planner can play an important role in peoples lives helping them to achieve dreams such as owning a home, seeing their childrens education and enjoy an active retirement.

PROFILE OF THE COMPANY

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3.
The Kotak Mahindra Group:-

PROFILE OF THE COMPANY

Overview

Kotak Mahindra is one of India's leading financial organizations, offering a wide range of financial services that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the diverse financial needs of individuals and corporates. The group has a net worth of over Rs. 6,523 crore and has a distribution network of branches, franchisees, representative offices and satellite offices across cities and towns in India and offices in New York, London, San Francisco, Dubai, Mauritius and Singapore. The Group services around 6.2 million customer accounts.

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History:The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance Limited. This company was promoted by Uday Kotak, Sidney A. A. Pinto and Kotak & Company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and that's when the company changed its name to Kotak Mahindra Finance Limited. Since then it's been a steady and confident journey to growth and success. 1986 1987 1990 Kotak Mahindra Finance Limited starts the activity of Bill Discounting Kotak Mahindra Finance Limited enters the Lease and Hire Purchase market The Auto Finance division is started The Investment Banking Division is started. Takes over FICOM, one of India's largest financial retail marketing networks Enters the Funds Syndication sector Brokerage and Distribution businesses incorporated into a separate company - Kotak 1995 Securities. Investment Banking division incorporated into a separate company - Kotak Mahindra Capital Company The Auto Finance Business is hived off into a separate company Kotak Mahindra Prime Limited (formerly known as Kotak Mahindra Primus Limited). Kotak Mahindra takes a 1996 significant stake in Ford Credit Kotak Mahindra Limited, for financing Ford vehicles. The launch of Matrix Information Services Limited marks the Group's entry into information distribution. Enters the mutual fund market with the launch of Kotak Mahindra Asset Management Company.

1991

1992

1998

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Kotak Mahindra ties up with Old Mutual plc. for the Life Insurance business. 2000 Kotak Securities launches its on-line broking site (now www.kotaksecurities.com). Commencement of private equity activity through setting up of Kotak Mahindra Venture Capital Fund. Matrix sold to Friday Corporation Launches Insurance Services Kotak Mahindra Finance Ltd. converts to a commercial bank - the first Indian company to do so. Launches India Growth Fund, a private equity fund. Kotak Group realigns joint venture in Ford Credit; Buys Kotak Mahindra Prime 2005 (formerly known as Kotak Mahindra Primus Limited) and sells Ford credit Kotak Mahindra. Launches a real estate fund Bought the 25% stake held by Goldman Sachs in Kotak Mahindra Capital Company and Kotak Securities

2001

2003

2004

2006

Our Corporate Identity

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The Journey So Far:-

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Group Structure:-

14

* Includes direct and indirect holdings

Board of Directors: Subsidiaries as on 31st March 2009

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Sr. No.

Name of the Company

Directors
Uday Kotak (C) Falguni Nayar (MD)

Kotak Mahindra Capital Company 1 Limited Dipak Gupta Jaimin Bhatt Uday Kotak (C) C. Jayaram Narayan S.A. (MD) 2 Kotak Securities Limited Falguni Nayar Vikram Sud D.Kannan ( Executive Director & Chief Operating Officer ) Uday Kotak (C) Kotak Mahindra Prime Limited 3 (formerly known as Kotak Mahindra Primus Limited) C. Jayaram Chandrashekhar Sathe Dipak Gupta Shanti Ekambaram

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Shanti Ekambaram Jaimin Bhatt Mohan Shenoi Uday Kotak (C) Gaurang Shah (MD) Shivaji Dam Dipak Gupta Hasan Askari Kotak Mahindra Old Mutual Life 4 Insurance Limited Vineet Nayyar Pallavi Shroff S.S. Thakur Pankaj Desai (Whole-time Director) Andrew Cartwright - Alt. to Paul Hanratty Uday Kotak (C) Kotak Mahindra Asset Management 5 Co. Limited Sukant Kelkar R.C. Khanna Paul Hanratty

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C. Jayaram Narayan S.A. Bipin R. Shah Amit Desai (C) Chandrashekhar Sathe 6 Kotak Mahindra Trustee Company Limited Girish Sharedalal Tushar Mavani Anirudha Barwe Shailesh Haribhakti (C) K.M.Gherda Chandrashekhar Sathe Berjis Desai Shivaji Dam Vikram Sud Uday Kotak 8 Kotak Forex Brokerage Limited Dipak Gupta Chandrashekhar Sathe

Kotak Mahindra Trusteeship Services 7 Limited

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Dipak Gupta Jaimin Bhatt Shanti Ekambaram 9 Kotak Mahindra Investments Limited R. Sundarraman C. Jayaram Jaideep Hansraj Ashraf Ramtoola Ravi Lochan Pola Sow Man Ah Yuk Shing Louis Didier Merle 10 Kotak Mahindra (International) Ltd. Ashish Nanda Somer Massey Shyam Kumar Syamasundaran Viswanathan Varadarajan Bilal Sassa Abhishek Bhalotia 11 Kotak Mahindra (UK) Limited Shyam Kumar Syamasundaran

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Viswanathan Varadarajan Paul Parambi C. Jayaram Hasan Askari Ruchit Puri

Ravi Lochan Pola Viswanathan Varadarajan 12 Kotak Mahindra Inc. Shyam Kumar Paul Parambi C. Jayaram Abdool Azize Owasil Sow Man Ah Yuk Shing Shyam Kumar Syamasundaran Didier Merle Ravi Lochan Pola Riad Aubdool

Global Investment Opportunities 13 Fund Ltd.

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C. Jayaram Shanti Ekambaram Jaimin Bhatt 14 Kotak Investment Advisors Limited Falguni Nayar S. Sriniwasan Nitin Deshmukh

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REVIEW OF LITERATURE

4.

REVIEW OF LITERATURE
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This project was undertaken to know what exactly is the Financial Planning, How it is
carried out ,Who carries it out, Why it is carried out, When it is carried out ,and the most important What is the benefit of carrying it out. Below my question were answered. Basically Financial Planning is the process of meeting life goals through the proper management of your finances. There is a need for financial planning because the financial situation in the country has changed in the last few years, this has changed in such a manner that it will be difficult for one to maintain a decent standard of living with the current means this requires financial planning and in addition there are also several individual specific factor that has to be fulfilled. Financial planning provides direction and meaning to ones financial decisions. The process involves gathering relevant financial information, setting life goals, examining customer current financial status and then coming up with a plan for customer on how he can meet with his goals. The process that is followed by the Kotak bank is the planner first discuss the general recommendations with the client informally, this allows the clients to indicate their preferences and opinions on the options that have been designed. Once the planner and the client agree on the recommendations, a concise written proposal is prepared along these lines: An overview of the clients short and long term goals. The clients current financial strengths and weaknesses and implications of financial plan. The clients financial objectives anchored to current resources. A detailed summation of all recommendations. The financial plan for mutually selected recommendations. A comprehensive economic overview of the clients financial plan, supported by financial statements. A step-by-step implementation and monitoring plan.

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RESEARCH
METHODOLOGY

5.

RESEARCH METHODOLOGY

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DEFINITION: Research refers to a search for knowledge. It can be defined as a scientific and systematic
search for pertinent information on a specific topic. Research comprises defining and redefining problems, formulating hypothesis or suggested solutions; collecting, organizing and evaluating data; making deduction and reaching conclusions; and at last carefully testing the conclusions to determine whether they fit the formulating hypothesis Clifford Wood.

RESEARCH METHODOLOGY
It is a way to systematically solve the research problem. It may be understood as science of studying how research is done scientifically. In it we study the various steps that are generally adopted by the researcher in studying his research problem along with the logic behind them. In general methodology is an optional framework within which the facts are placed so that the meaning may be seen more clearly. The sources of data shown that designing of a research plan calls for decision on the data sources are research approaches (primary and secondary data) research instruments (observation survey experiment) sampling plan and contact methods (personal interviews).

RESEARCH DESIGN
A research design is the determination and statement of the general research approach or strategy adopted for the particular project. It is the heart of the planning. If the design adheres to the research objectives, it will ensure that the client need will be served.

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Research design is a plan structured and strategies of investigation. It is the arrangement of condition and analysis of data in a manner to combine relevance to the research purpose with economy in procedure. In order to achieve the objective it was necessary to talk to the customers and public to draws the conclusions regarding the objective. For visiting the customers and publics to collect the relevant information; a questionnaire has to be designed. The questionnaire was designed in such a manner to achieve the objective of the research. The sample size taken is 100 customers and publics.

TYPE OF RESEARCH
In this project Descriptive Research has been used.

Descriptive Research:
This is kind of research structure which is concerned with describing the characteristics of the problem. In this way the main purpose of such a research design is to present a descriptive picture about the marketing problem on the basis of actual facts. For this it is important to obtain the complete and actual information about the subjects.

Research Objective:
The Financial Planning is vast in nature. It is intended to provide a birds-eye view of the clients assets. The Financial planner has to have bottomless knowledge of markets, funds etc. Considering this fact, the scope of the study is defined to satisfy following objectives:

Understand the necessity of financial planning, Study and apply the financial planning process, Identify various investment alternatives that can fit in clients profile, and Provide the client in an appropriate asset allocation mix based on certain factors like time horizon, risk tolerance etc.

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This project consist of Quantitative as well as Qualitative data as data collect for preparing plan is both the types

Gathering Data
There are two types of data to gather from the client - Quantitative - Qualitative.

Quantitative Data
Quantitative data provides specific information concerning a client along with numerical details Concerning his/her financial status. It also provides the basis for the many financial analyses that the financial Planner needs to perform. Examples of quantitative data include the following: General family profile Names, addresses, and phone numbers of family members Assets and liabilities Cash inflows and outflows Insurance policy information Employee benefit and pension plan information Tax returns for the last three years Details on current investments Retirement benefits available Client-owned business information Copies of wills and trusts

Qualitative Data
Qualitative information provides general information concerning a client's goals, lifestyle, health status, risk tolerance level, employment status, hobbies, attitudes, and fears. Knowing a client's specific goals, such as planning to move when retiring at age fifty-five, funding a child's college education and expenses, starting an expensive hobby just before retirement, or traveling extensively during retirement,

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is important to the success of any financial plan. Examples of qualitative data include the following: Goals and objectives Health status of client and family members Interests and hobbies Expectations about employment Risk tolerance level Anticipated changes in current/future lifestyle Other planning assumptions.

Data Sources:
SECONDARY DATA: The secondary data includes information obtained from various sources which includes Kotak Mahindra Bank, Books, Business Newspapers, Websites, etc

LIMITATIONS: 1. The project work is mainly based on the above mentioned sources of information. 2. Limitation of client in investing in particular kind of asset based on his age. 3. Time limitation

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THEORITICAL BACKGROUND

6.
Definition:-

THEORITICAL BACKGROUND
Introductory Chapter:-

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Financial Planning is the process of identifying a persons financial goals, evaluating existing resources and designing the financial strategies that help the person to achieve those goals.

Process of Financial Planning:Financial planning is a highly personalized service. It is not a product. It is a cyclical service that constantly repeats as client needs change over time. Preparation and implementation of the financial plan is a long-term relationship and not a one-off exercise. For the success of the financial planning exercise, it is essential that the prospective client should have complete confidence in the financial planners capabilities. Confidence is built when the planner can demonstrate adequate knowledge, technical depth and complete dependability. Also remember that financial planning is a two-way interaction between the client and the planner. It is not and should not be treated as a one-way prescription which is to be given by the planner to the client. Both the planner and the client have certain responsibilities to make the exercise a success.

The Planning Process:The preparation of the financial plan is a multi-dimensional process. It requires the planner to collect as much information as possible about the current resources, assets and liabilities of the client. The planner needs to analyze the collected information from a number of different aspects to develop an optimal financial plan. To prepare and implement a comprehensive and effective financial plan, the Financial Planning Standards Board recommends the following 6-step process:Let us look at the above steps in more detail.

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1. Establish the Client-Planner Relationship Before approaching a client, it is important for the financial planner to clearly understand his own role. The role of the financial planner is not to suggest get-rich-quick schemes. Rather, it is to evaluate and study the clients' needs, gather and analyze data and prepare a financial plan for now and for the future. Preparation and implementation of the financial plan is a long-term relationship and not a one-off exercise. A financial planner has to prepare a plan that helps his clients: Organize their finances Improve their cash flows Lower their personal income taxes Plan for their retirement Improve their investment performance Lower their investment risk Insure themselves appropriately and reduce insurance costs Minimize their estate settlement costs To achieve this, the planner needs to answer the following questions: What is the most immediate concern of the client? What is the clients current financial situation? What are the clients immediate and long-term needs? What is the gap between the clients needs and the current financial situation? What services can you apply to the clients needs? How would the client benefit from your service portfolio? What is the estimated time frame to complete the plan and accomplish goals? Is your role likely to be of an adviser, motivator, teacher, or director?

Client agreements and confidentiality clauses When a client utilizes the services of a financial planner, he/she shares financial and other personal information with the planner that is normally not shared with anyone else. The client-planner relationship presupposes a very high level of trust between the two parties. Consequently, the planner is under obligation to maintain utmost confidentiality of this information. To prevent unnecessary litigation and disputes in the future, it is recommended that the financial planner should enter into a client

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agreement which formalizes the relationship with the client and establishes the basis on which the service would be provided. Such an agreement is also referred to as the 'Letter of Engagement.'

2. Gather clients data and determine goals and expectations The next step involves researching and collecting information that will help the financial planner design and implement a successful financial plan. There are two aspects to this exercise:(a) Understanding the client's current financial position. (b) Getting to know the client's financial goals, objectives and requirements. The first helps the financial planner understand where the client is at the moment and the second helps, the financial planner understands where the client wishes to go.

Formulation of Goals
Financial goals are the milestones that the client hopes to reach with the help of his financial resources. These milestones could be concerning different aspects of life like: Saving for marriage / childbirth Buying a new car / house / electronic equipment Creating a corpus for retirement Creating a corpus for children's education Adequately insuring self and family Creating cash reserves for emergency usage etc. The financial planner should ensure that the goals are: Specific; Realistic;

Measurable / Quantifiable in money terms; and To be achieved within a specific time period Once the client has stated clear, quantifiable goals for financial planning, the next step is to rank those goals in order of importance. This is necessary because most clients do not have the resources to fulfil all their goals. The financial planner must make it clear to the client that less important goals must be sacrificed or postponed to achieve the more important ones.This done, the

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financial planner needs to work out the amount of money available for achieving these goals. To achieve most financial goals, the client would need to start saving and investing appropriately. Therefore it is important for the financial planner to know where the money to invest will be coming from. 3. Analyze clients objectives, needs and current financial situation Preparation of the Client's Personal Financial Statements Preparation of the Cash flow Statement and the Budget Prioritizing Goals The next step is to prioritize the financial goals of the client and work out the amounts that are required to be invested towards achieving these goals. Evaluate Qualitative Factors Qualitative factors have a significant bearing on the financial plan for a client. The client's tolerance towards risk, investment preferences, current health status etc. need to be kept in mind while evaluating alternative Strategies. 4. Develop appropriate strategies and present the financial plan A financial planner needs to develop appropriate strategies for the client in the following areas: Cash flow management Insurance planning Investment planning Retirement planning Income tax planning Estate planning

Cash flow management

Cash flow management is the means for funding clients goals in other planning areas, therefore; generally it is the starting point of the planning process. Once the cash flow management plan is in place, the inflows have to be channeled in one of the three areas - expenses, reserves for emergencies and capital accumulation.

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Daily Expenses

Income

Cash Flow Management

Emergency Funds

Capital Accumulated

Once your clients have planned to maximize income and minimize spending, they need the planner's help to plan for their insurance, investment, education, income tax, retirement, and their estate.

The Benefits of Financial Planning

Financial Planning helps you give direction and meaning to your clients financial decisions. It allows him to understand how each financial decision affects other areas of finance. For example, buying a particular investment product may help your client to pay off his mortgage faster or may delay his retirement significantly. By viewing each financial decision as a part of a whole, you may help your client consider the long term and the short term effects on his life goals. You will help them feel more secure.

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Assessing your current wealth Net worth: - Your assets are the things that you own. You probably own assets that have many different forms, including cash, investments, personal property, real estate etc. Definition:Your net worth is the difference between the totals of your assets and liabilities. In other words, if you sold all your assets for the values stated and paid off all your debts, the amount left over would be your net worth. The net worth of a person is a measure of a persons financial position as of the date of the personal balance sheet. This relationship is shown below: Items of Value - Amounts Owed = Net Worth

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DATA ANLAYSIS & PRACTICAL REPRESENTATION OF THE PLAN

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7.

DATA ANLAYSIS & PRACTICAL REPRESENTATION OF THE PLAN

Financial planning:Financial planning for Tarun Sharma:-

A personal financial assessment is designed to help you evaluate your current financial position and your ability to achieve your objectives for the future. Your ability to maintain your lifestyle objectives for the future is determined by your investment capital and ongoing income. In analyzing your situation we need to consider what is achievable given your current position, and how we can take best advantage of the assets you have accumulated. This report has been prepared to assist in the analysis of your current financial position and to help you identify steps that you can take to achieve your personal financial goals and objectives. Although great care has been taken to ensure the accuracy of this report, it should be kept in mind that projections, by their very nature, are based on a variety of assumptions and as such it is likely that the actual results achieved will be somewhat different than illustrated. For this reason it is very important that you review your strategy on a regular basis to ensure its relevance to your changing financial position. Mr. Tarun Sharma
Date prepared: **July 2009

Personal Details
Self Name: Mr. Tarun Sharma DOB: 24-Jun-1977; Age: 31 Employer: ABC Solutions Address: 4rth Floor, DLF Phase 2, Sector 25, Gurgaon Family Members
Name Seema Khushi Simran Sanjay Sharma Relationship Wife Daughter Daughter Father Date of Birth 23-Apr-1978 23-Oct-2005 24-Apr-2008 Age (years) 30 3 1 month 68 Dependant Y es Y es Y es Y es

Spouse Name: Mrs. Seema Sharma DOB: 23rd Apr 1978 Age: 30

Contact Details Residential Address: 1234, Sushant Lok 1 Phone number: 9999222111/0124-455111

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Financial Goals
The following table lists your individual goals in today's value, when you expect to meet them and the expected rate of inflation. Goal (today's value) Rs. 30,000 Inflation rate 5% Start Year 2027 End Year 2056

Description

Frequency

Remarks

Retirement goal Living Monthly Expenses Khushi's school education goal Simran's school education goal Khushi's college education Simran's college education Khushi's professional education Simran's professional educationmarriage goal Khushi's Simran's marriage goal Primary home Annual Annual Annual Annual Single Single Single Single Single

30,000 30,000 48,000 48,000 10,00,000 10,00,000 4,00,000 4,00,000 30,00,000

10% 10% 10% 10% 10% 10% 5% 5% 5%

2009 2013 2022 2026 2026 2030 2028 2032 2008

2022 2026 2025 2029 2026 2030 2028 2032 2008 15% will be paid towards down payment of the house and 85% 2 years Everywill be funded age till your by bank loan 7 0

Vacation

Every 2 years

20,000

5%

2009

2047

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Assumptions:
1. Life expectancy for Mr Sharma and Mrs. Sharma is age 80. 2. Retirement age of Mr Sharma is 50 years. 3. An average annual inflation rate of 5% used in the analysis. 4. Savings account is expected to earn a 3.5% annual rate of return. 5. Liquid funds expected to earn an 6% annual rate of return. 6. Debt funds are expected to earn an 8% annual rate of return. 7. Large cap equity funds are expected to earn a 12% annual rate of return. 8. Mid cap equity funds are expected to earn a 14 % annual rate of return. 9. Education expenses are expected to increase at 10% per annum. 10. Salary income is expected to increase at 10% per annum. 11. Current living expenses are expected to increase at 10% per annum. Your Risk Level

Following our discussions regarding your investment objectives and the completion of the risk profile questionnaire, you are estimated to have a Moderate Profile.

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NET WORTH
Assets
Liquid Assets Savings account Liquid funds Total Financial Assets Fixed interest investments Mutual funds Direct equity Cash value of life insurance policies Employee stock option plan (ESOP) Total Tangible Assets Real estate Other assets (e.g. Art, Coin and Stamp Collections) Total Personal Assets Primary house Vacation home Car/Vehicle Jewellery Other personal assets Total Retirement Assets Provident fund Superannuation Gratuity Public provident fund Cash value of pension plan Total Total Assets Liabilities and Net Worth Outstanding Loan Home loan Vehicle loan Personal/Credit card loan Education loan Total Liabilities Net Worth (total assets-total liabilities) 0 198,712 163,709 0 362,421 324,928 0% 29% 24% 0% 53% 47% 0 0 200,000 0 0 100,000 0 300,000 687,349 44% 100% 0% 0 0 0 0 0 0% 60,260 0 0 266,349 39% 121,000 0 121,000 0 206,089 18%

Amount Rs.

% of Total

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Projected cash flowCash Flow Current Amount (Rs) Description Income Salary-Fixed(CTC) Salary-Variable Income from business/profession Pension Rental income Investment income Other income Total Income Expenses Living Expenses Household expenses House rent Education expenses Total Income Loan EMI's Home Loan Vehicle loan Personal loan/Credit card Total Insurance Premiums Life insurance Health insurance Motor insurance Home(content) insurance Home(building) insurance Other insurance Total Other Expenses Travel and vacation 0 0 0 0 3% 26,647 3,575 0 0 0 0 30,222 2,221 298 0 0 0 0 2,519 49,839 3,575 0 0 0 0 53,414 4,153 298 0 0 0 0 4,451 19% 0 76,152 1,18,656 1,94,808 0 6,346 9,888 16,234 19% 0 76,152 1,18,656 1,94,808 0 6,346 9,888 16,234 40% 4,03,200 0 0 4,03,200 33,600 0 0 33,600 40% 4,03,200 0 0 4,03,200 33,600 0 0 33,600 100% 10,00,008 0 0 0 0 0 0 10,00,008 83,334 0 0 0 0 0 0 83,334 100% 10,00,008 0 0 0 0 0 0 10,00,008 83,334 0 0 0 0 0 0 83,334 % of total income Annual Monthly Recommended Amount (Rs) % of total income Annual Monthly

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Charity Others Total Contribution to Emergency Fund Taxes Salary-Fixed Salary-Variable Income from business/profession Pension Rental income Other income Total Excess(shortage)before savings Savings Contribution to Retirement assets PF(employer's contribution) PF(employee's contribution) Superannuation Gratuity PPF Other Committed Savings Excess (shortage)after Savings 20% 4% 4% 0% 2% 0% 8% 0%

0 0 0

0 0 0 0%

0 0 0

0 0 0

75,822 0 0 0 0 0 75,822

6,319 0 0 0 0 0 6,319 8%

75,822 0 0 0 0 0 75,822

6,319 0 0 0 0 0 6,319

42,001 42,001 0 16,801 0

3,500 3,500 0 1,400 0

4% 4% 0% 2% 0%

42,001 42,001 0 16,801 0

3,500 3,500 0 1,400 0

1,95,153

16,263

17%

1,71,961

14,330

Create and maintain an adequate emergency fund

You must ensure that you are adequately prepared for unexpected events in the short-term by creating an emergency fund equal to three to six months of living expenses. This will enable you to pay for costs that are not covered by insurance, as well as any kind of urgent expenses. You have Rs. 1.21 lakh in your savings account. You are advised to maintain Rs. 50,000 (approximately one month of your expenses) as an emergency fund. Though one must keep at least 3-6 months of living and committed expenses in emergency fund. However, you have an immediate goal of house purchase in the year 2008. You are advised to build and maintain an emergency fund gradually (after you have acquired the immediate goal home purchase) to an equivalent amount of Rs. 1.50 Lakh over time.

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Your emergency fund Category Total Amount transferred from savings account to investment portfolioaccount amount allocated to emergency fund Savings

Amount in Rs. 1,21,00 0 71,00 0 50,00 0

Investment Planning
Current Asset Allocation Asset allocation is the cornerstone of good investing. Each investment included in your portfolio must be of an overall asset allocation strategy and this plan must be genetic (one-size-fits-all),but rather must tailored to your specific needs. Based on the information that have provided, the current asset allocation if your portfolio is:
Amount (Rs) 71,000 0 1,00,000 2,66,349 4,37,349 % of total asset 16.23% 0.00% 22.87% 60.90% 100.00%

Asset Class Cash Liquid funds Fixed interest instruments Equity Total

Asset Allocation
Cash Liquid funds Fixed interest instruments Equity

Expected Portfolio Return : 9.71%

Proposed Asset Allocation

Asset allocation is the cornerstone of good investing. Each investment included in your portfolio must be part of an overall asset allocation strategy and this plan must be genetic (one -size-fits-all),but rather must tailored to your specific needs. Based on the information that have provided, the current asset allocation if your portfolio is:
Asset Class Liquid Funds Fixed interest Instruments Large Cap Equity Mid Cap Equity Total % 5% 25% 65% 5% 100.00%
Fixed interest Instruments Large Cap Equity Mid Cap Equity Liquid Funds

Expected Portfolio Return : 10.80%

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Protection Planning
The purpose of the protection planning section is to examine existing insurance coverage and make recommendations. The goal is to determine whether there is adequate coverage and/or if any additional coverage that may be needed. Life Insurance Observation Currently you are covered by different life insurance policies worth sum assured of Rs. 8 laky by LIC, Max Life and ING Vyasa. You pay an annual premium of Rs. 26,647 per annum. (See life insurance details, Annexure 1). Life insurance need analysis requires that we look at what would happen in the event of your death. This analysis is done using information you provided to us about your income, expenditure, assets and insurance coverage. We have computed the insurance coverage requirement for you based on a scenario that all household expenses that will need to be incurred by your family and all other financial goals and liabilities are fully met in the event of your death. As per our analysis you are under-insured by Rs. 1 crore. (See life insurance need analysis, Annexure 2)

Insurance Needs Vs Current Coverage

12000000 10000000 8000000 6000000 4000000 2000000 0

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Recommendation You are advised to buy an additional term life policy worth Rs. 1 crore. The annual estimated premium is expected to be Rs.26, 192 for a term of 20 years. (Source: HDFC Term Life Insurance Policy).
Health Insurance Observation

Currently, you are not covered for health by any private health plan. You must have adequate health insurance coverage especially because of rapidly rising health care costs. In addition to the employer provided plan, it is strongly advisable to keep a private health plan. This is especially useful if you change jobs. Also, health insurers do not accept pre-existing diseases.

Recommendation You must consider buying a family floater scheme worth sum assured Rs. 3 Lakh. This will cover you, your spouse and your child. The estimated annual premium is Rs. 3,575. (Source: Reliance Health Silver Plan) Planning for Goal Observation You are planning to buy a new house of approximately Rs. 30 Lakh in the year 2008. Analysis Based on your current situation, you can meet the above mentioned goal to the extent as mentioned below: Amount in Rs. (in today's value) Year Goal Amount (Desired) 30 Lakh Goal Amount (Achievable) 30 Lakh

Purchase of new house

End of 2008

Recommendation: Funding available towards your home purchase goal 1. Down payment of 15% of the value of home through the Investment Portfolio 2. Bank loan for funding the balance of Rs. 25.50 Lakh. 1. Down payment of Rs. 4.50 Lakh through the Investment Portfolio as follows: Savings account Rs. 71,000 must be utilized Mutual funds Rs. 2.07 Lakh Surplus of year 2008 Rs. 1.71 Lakh 2. Bank loan for funding the balance Rs. 25.50 Lakh. Description Year Annual Estimated EMI in Rs. Annual Income 2009-2023 3.04 Lakh Note: Please note that our analysis shows that in the year 2009, the annual income surplus is not expected to support the EMI in the year 2009 by Rs. 96,000. However, as you will get tax benefits under section 24(b) for the interest portion paid towards home loan, you will be able to meet the EMI expense by the Money saved on taxes.

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Goal: Khushis Education Observation You need to plan for the following education expenses of Khushi's in today's value. 1. School education of Rs. 30,000 per annum starting in the year 2009 till the year 2021. This is expected to Grow at 10% per annum. 2. College education expenses of Rs. 40,000 per annum (in today's value) between 2022 and 2025. 3. Professional education expense of Rs. 10 Lakh in today's value in the year 2026. Analysis Based on your current situation, you can meet the above mentioned goal to the extent as mentioned below: Amount in Rs. (in future value) Year Goal Amount (Desired) School education expenses College education expenses Professional education expense 2009-2021 2022-2025 2026 Rs. 30,000/year Rs. 1.1 crore/year Rs. 55.59 lakh Goal Amount (Achievable) Rs. 30,000/year (grows at inflation rate of 10%) Rs. 1.1 crore/year (grows at inflation rate of 10%) Rs. 55.59 lakh

Recommendation You should consider utilizing the following sources of cash to help you fund your goal as per our analysis. 1. Regular annual income surplus to fund the school education We have treated the school and college expense as a regular expense and deducted this from your cash flow every year. Your annual income surplus during the years 2009-2025 is expected to support the education expenses as mentioned above. 2. Investment from the Annual surplus in the recommended portfolio to fund college and professional education expenses Description Year Amount to be invested (Rs.) Investment from 2011-2025 1.48 Lakh annual surplus Note: The Investment is expected to be made in the recommended asset allocation which is expected to generate 10.80% per annum

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Observation You need to plan for the following education expenses of Khushi's in today's value. 1. School education of Rs. 30,000 per annum starting in the year 2013 till the year 2025. This is expected to grow at 10% per annum. 2. College education expenses of Rs. 40,000 per annum (in today's value) between 2026 and 2029. 3. Professional education expense of Rs. 10 lakh in today's value in the year 2030. Analysis Based on your current situation, you can meet the the above mentioned goal to the extent as mentioned below: Amount in Rs. (in future value) Year Goal Amount Goal Amount (Desired) (Achievable) School education expenses 2013-2025 Rs. 30,000/year Rs. 30,000/year (grows at inflation rate of 10%) College education expenses 2026-2029 Rs. 2.66 Lakh/year Rs. 2.66 Lakh/year (grows at inflation rate of 10%) Professional education expense
Recommendation

2030

Rs. 81 Lakh

Rs. 81 Lakh

You should consider utilizing the following sources of cash to help you fund your goal as per our analysis. 1. Regular annual income surplus to fund the school education We have treated the school and college expense as a regular expense and deducted this from your cash flow every year. Your annual income surplus during the years 2013-2025 is expected to support the education expenses as mentioned above. 2. Investment from the Annual surplus in the recommended portfolio to fund college and professional education expenses Description Year Amount to be invested (Rs.) Investment from 2010 88,782 annual surplus 2011 43,939 2012 1.24 lakh 2013 1.06 lakh 2014-2027 1.58 lakh Note: The Investment is expected to be made in the recommended asset allocation which is expected to generate 10.80% per annum

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Observation Khushi's is expected to get married in 2028. You need to plan for the following expenses in today's value. 1. Marriage expenses of Rs. 4 lakh (today's value) in the year 2028. Analysis Based on your current situation, you can meet the above mentioned goal to the extent as mentioned below: Amount in Rs. (in future value) Year Goal Amount (Desired) Rs. 10.61 lakh Goal Amount (Achievable) Rs. 10.61 lakh

Marriage expenses

2028

Recommendation You should consider utilizing the following sources of cash to help you fund your goal as per our analysis. 1. Regular annual surplus Description Annual Income Surplus Year 2015-2027 Amount to be invested (Rs.) 37,035

Note: The Investment is expected to be made in the recommended asset allocation which is expected to generate 10.80% per annum Observation You need to plan for following expenses in today's value: 1. Domestic - You wish to spend Rs. 20,000 on vacation every 2 year. Analysis Amount in Rs. (in today's value) Description Year Estimated Amount (Desired) Domestic 2009-2047 20,000 Inflation rate (Assumed) 5% Goal Amount (Achievable) 20,000

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Recommendation In our analysis, we have taken the above expense as an annual regular expense and your cash flow is supporting this expense from your annual income surpluses from 2009-2047. Observation The probable year for your expected 2nd child to get married is 2032. You need to plan for the following expenses in today's value. 1. Marriage expenses of Rs. 4 Lakh (today's value) in the year 2032. Analysis Based on your current situation, you can meet the above mentioned goal to the extent as mentioned below: Amount in Rs. (in future value) Year Goal Amount (Desired) Marriage expenses on 2032 Rs. 12.90 Lakh Goal Amount (Achievable) Rs. 12.90 Lakh

You should consider utilizing the following sources of cash to help you fund your goal as per our analysis. 1 Regular annual surplus Description Annual Income Surplus Year 2014-2031 Amount to be invested (Rs.) 26,630

Note: The Investment is expected to be made in the recommended asset allocation which is expected to generate 10.80% per annum Observation You intend to retire at age 50. After retirement you need to plan for the following expenses in today's value. 1. Annual household expenses of Rs. 3.60 Lakh in today's value between 2027(your retirement year) and 2056 (life expectancy).

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Analysis Based on your current and projected financial situation you cannot meet the above mentioned goals due to retirement at age 50. Amount in Rs. (in today's value) Year Annual household expenses 2027-2056 Goal Amount (Desired) Rs. 3.60 Lakh/year Goal Amount (Achievable) Rs. 3.60 lakh/year

Amount in Rs. (in future value) Year Annual household expenses Goal Amount (Desired) Rs. 9.55 lakh per annum Goal Amount (Achievable) Rs. 9.55 lakh per annum

2027-2056

Note: You are contributing every month Rs. 3,500 towards to Provident Fund and Rs. 1,400 per month towards Gratuity. In our analysis, expected growth rate of PF and Gratuity is 8% per annum. Also there is a contribution from your employer of Rs. 3,500 per month towards your Provident Fund account. Recommendation You should consider utilizing the following sources of cash to fund your retirement goal as per our analysis: 1. Retiral assets 2. Insurance maturity proceeds 3. Annual income surplus to be invested in recommended asset allocation 1. Retiral assets Description Provident fund and Gratuity fund

Year 2027

Estimated accumulated amount 52.42 lakh

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2. Insurance maturity proceeds Description LIC Jeevan Anand Maturity Year 2029 Estimated maturity proceeds 5 lakh

Note: We have not taken the non-guaranteed portion i.e. bonus, we have only taken the guaranteed part. 3. Annual income surplus to be invested in recommended asset allocation to fund the balance of retirement goal: Description Annual income surplus Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Amount to be invested 10,970 (Rs.) 12,972 117,725 167,617 290,647 353,947 498,710 578,534 670,463 762,740 1,295,626 1,411,208 1,970,708 17,68,991

Note: All the above surpluses have been allocated towards your retirement goal, this is done after funding the other goals such as Khushi's marriage, education, etc.

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NEXT STEPS Goal/Needs

Life Insurance

Next Step
You are advised to buy an additional term life insurance policy worth Rs. 1 crore. The annual estimated premium is expected to be Rs. 23,192 for a term of 20 years. (Source: HDFC Term Life Insurance Policy). You must consider buying a family floater scheme worth sum assured Rs. 3 Lakh. This will cover you, your spouse and your child. The estimated annual premium is Rs. 3,575. (Source: Reliance Health Silver Plan) Savings account to be used for maintaining an emergency fund Current savings account balance is Rs. 1.21 lakh. You need to maintain an emergency fund of Rs. 50,000 where the money is easily accessible and liquid to meet any unforeseen contingencies. Balance must be utilized towards the home goal. Fixed interest investments: Retain the PPF till its maturity date. Then, invest the maturity proceeds in the recommended portfolio. We have allocated this investment towards your retirement goal. Mutual funds: You may liquidate this and fund the down payment of the home goal in the year 2008. If you are not liquidating this then you have to arrange additional source of fund for the down payment of the house goal.

Health Insurance

Recommendation for existing investment

Current annual surplus for year 2008 is expected to be approx. Rs. 1.71 Recommendation for current annual surplus Lakh. This amount is expected to be directed towards the down payment of Year 2008 the home goal. You must invest the monthly surplus for the next 6 months in capital preservation funds as this is needed for down payment within 6 months. Estate Planning Car goal We recommend that you must consider writing a Will within the next 1 year. You are advised to avail the car lease option provided by your company for a new car. You are having a car loan liability as of now. Your Relationship Manager will discuss about the car lease facility in detail vis-a-vis your existing car loan liability.

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Annexure 1
Life Assured Date of Birth Tarun Sharma 24th June 77 Sum Assured (Guaranteed) 9,50,000 Annual Premium 26,647

Company Name

Insurer

Term Premiu m Paying Term 2 25 65

Year of Commence ment

Sum Assured

Annual Premium

Type LIC-Jeevan Anand Plan 149 MAX

Policy No Tarun Sharma 241268027 Tarun Sharma

Year of Maturity 2004 2029 2003

(Guarant eed)

Mode of Payment 20,517

Remarks

5,00,000

Annual Premium 6,130 Rs. 3,065 paid semi annually 4,300 You have discontinued this policy, still sum assured continues

Whole Life ING Vyasa

234256972 Tarun Sharma

65 10

2068 2005

3,00,00

ULIP

11256985

10

2015

1,50,000

Annually

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Annexure 2:
A House Rent Education B Vacation Charity/Gift Others C Home Loans Vehicle Loan

Your Insurance Need Analysis

Survivors Living Expenses 95,19,875 0 0 Other Expenses 0 0 0 Outstanding Debt to be Paid off 0 1,98,709 1,63,709 Protection for Goals 0 0 0 20,00,000 0 0 1,18,82,296 1,21,000 0 0 2,06,089 60,260 0 0

Personal Loans/Credit Cards D House/Land Purchase Jewellery and Arts Purchase of Car Education Marriage Other goals E F Total Funds Needed to cover Expenses, Liabilities and Goals (A+B+C+D) Assets Currently Available to Support Family Savings account Liquid Assets Financial Assets Fixed interest investments Mutual funds Direct Equity Employee stock option plan(ESOP) Tangible Assets Real estate Other assets (e.g. Art, Coin and Stamp Collection) Retirement Assets Provident Fund Superannuation Gratuity Public Provident Fund

2,00,000 0 6,87,349

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G H I J K L Other Regular Income

Total Survivors Estimated Annual Income from Employment Total Available Funds to Cover Expenses, Liabilities and Goals (F+G+H) Life Insurance Coverage Required (E-I) Life Insurance Coverage Already Available Additional Insurance Required (J-K)

0 0 6,87,349 1,11,94,948 9,50,000 1,02,44,948

Financial Glossary:
Net Worth: Assets less Liabilities. Cash Flow: Income less Expenses. Monthly Budget: A way of tracking your monthly income and expenses. Contingency Reserve Fund: Fund to meet any unforeseen immediate Emergency/contingency need. Large Cap Stocks: These are investments in the common stocks of wellRecognized, large companies that are expected to produce relatively Secure and stable earnings. Mid Cap Stocks: These are investments in stocks of mid-sized companies that are expected to provide a blend of growth and earnings. Small Cap Stocks: These are investments in common stock of r e l a t i v e l y small, low capitalization companies whose earnings are expected to grow at an above-average rate.

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CONCLUSION

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8.
judgment, and actions.

CONCLUSION

The overall study about each and every aspect of this topic shows that Financial Planning is a dynamic and flexible concept which involves regular and systematic analysis, proper management,

It can also be concluded that client or Investors should start planning soon, set measurable goals, Look at the bigger picture and should not expect unrealistic returns on the investments and value of the plan lies in its implementation and it accurately reflects what you are personally trying to accomplish. It can also be concluded that with the combination of different stocks we can reduce the risk and increase the returns of a portfolio. . By constructing portfolio we can only minimize the unsystematic risk we cannot reduce systematic risk. A proper Fundamental & Technical Analysis should be done before selecting any particular stock for the portfolio. It minimizes the risk involved . Financial Planning Service which was not so popular earlier as other services has gained lot of importance and popularity & will gain more importance in future as people are now understanding the importance of it. Financial planning service is very important and effective investment tool for meeting your life goals through the proper management of your finances.

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SUGGESTIONS &
RECOMMENDATIONS

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9.
To the Client:

SUGGESTIONS & RECOMMENDATIONS

The most vital problem spotted is of ignorance. Investors should be made aware of the benefits. Investors should be made to realize that ignorance is no longer a bliss and what they are losing by delay in planning. Set measurable goals: Set measurable goals that you want to achieve with a specific time. For example What should be your lifestyle after retirement, or that to send children to good Schools Start planning soon: Delay in financial planning affects the whole big picture that he has in mind for himself and his family. Developing good habits like saving, budgeting, investing and regularly reviewing finances early in life, makes one better prepared to meet changes and handle emergencies. Be realistic in terms of expectations: Financial planning is a commonsensical approach to managing finances to reach life goals. It is a lifelong process. There are certain extraneous factors like inflation, changes in macroeconomic policies or interest rates that may affect financial results. Understand the effect of each financial decision: To realize that each financial decision that is taken affect several areas of his life.

To The Planner:
The planner should target for more and more young investors. Young investors as well as persons at the height of their career would like to go for advisors due to lack of expertise and time. The planner should try to highlight some of the value added benefits, such as tax benefits, systematic transfer plan, etc. Investors could also try to increase the spectrum of services Offered. The most important reason for not availing the serves of planner was spotted to be expensive. The planner should try to charge a nominal fee at the beginning. But if no then they could go for offering more services and benefits at the existing rate.

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Appendix

61

10.
Customer Name:

APPENDIX.

Questionnaire followed by the Kotak bank to identify investors investment objectives and risk profile.

___________________________

Investment Advisor: ___________________________ An important aspect of investment planning and analysis is to ensure that our clients money is invested in a manner that reflects the individual attitudes and personal circumstances. In order to achieve this we need a clear understanding of what your risk profile is. When we refer to risk, we mean how much an investment is likely to go up or down in the short-term. To achieve higher long-term returns, you have to be prepared to accept that the value of your investment may fall significantly in the short-term. This is because investments that provide higher returns are usually more volatile than those producing low returns. There is a trade-off between risk and return. Your risk profile will be affected by a number of factors including: Investment experience Time-frame Professional management Tax effectiveness Income requirements

Completing the following questions will help us understand the individual attitude to investing. This will enable us to recommend investments appropriate to your specific needs. 1. Which best describes how you keep up with financial and investment matters? a. I dont. b. I take notice of the financial report in the news or on television shows. c. I read the investment section in the newspaper.

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d. I read the WSJ more than three days a week. e. I subscribe to several financial journals/investment magazines and read the financial press each day.

2.

How familiar are you with the capital and investment markets? a. Very little understanding or interest. b. Not very familiar. c. Have enough experience to understanding the importance of diversification. d. Understand that markets may fluctuate and that different market sectors offer different income, value and taxation characteristics. e. Understand all investment sectors, the risks, and understand the various factors which may influence performance. 3. Which one of the following best describes how well you feel you are able to manage your way through the complexities of investments? a. I definitely need the help of a professional investment adviser. b. I need a professional investment adviser to help me make decisions on investments. c. I know what I want to do, but would prefer to have a professional investment adviser to work with me in tailoring my investment plan and making the right decisions. d. I prefer to make all investment decisions on my own. 4. For how long would you expect most of your money to be invested before you would need to access it? a. Less than 2 years. b. Between 2 3 years. c. Between 3 5 years. d. Between 5 7 years. e. Longer than 7 years.

5 What is your current income requirement (dividends plus interest) from your investments? a. Less than or equal to 2%. b. Greater than 2%, but less than or equal to 4%. c. Greater than 4%, but less than or equal to 6%.

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d. Greater than 6%. 6. Which investment balance do you feel most comfortable with? a. Less than or equal to 2%. b. Greater than 2%, but less than or equal to 4%. c. Greater than 4%, but less than or equal to 6%. d. Greater than 6%. 7. Other than your own home, how do you feel about borrowing to invest? a. Would not do. b. Very uncomfortable. c. Comfortable. d. Very comfortable. 8. Considering the annual returns of the six hypothetical investment plans below over the last ten years. Based on the range of possible outcomes shown, which plan would be most acceptable to you or best suit your investment philosophy? a. Average annualized return: 4%, Best case: 5%, Worst case: 2%. b. Average annualized return: 6%, Best case: 9%, Worst case: -2%. c. Average annualized return: 8%, Best case: 12%, Worst case: -5%. d. Average annualized return: 10%, Best case: 15%, Worst case: -8%. e. Average annualized return: 12%, Best case: 18%, Worst case: -10%. f. Average annualized return: 14%, Best case: 24%, Worst case: -12%. 1. A typical investment portfolio consists of both investments with high expected returns and high risk (i.e., stock, options, derivatives, property) and those with low expected returns and low risk (i.e., cash, money market, fixed income). Which of the following spread of investments would you feel comfortable investing it? a. 0% High Risk/High Return, 100% Low Risk/Low Return. b. 30% High Risk/High Return, 70% Low Risk/Low Return. c. 50% High Risk/High Return, 50% Low Risk/Low Return. d. 65% High Risk/High Return, 35% Low Risk/Low Return. e. 80% High Risk/High Return, 20% Low Risk/Low Return. f. 100% High Risk/High Return, 0% Low Risk/Low Return.

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10. If you didnt need your capital for more than 10 years, for how long would you be prepared to see your investment performing poorly before you cashed it ? a. You would cash it in immediately if there was any loss in value. b. Up to 3 months. c. Up to 6 months. d. Up to 1 year. e. Up to 2 years. f. More than 2 years. Your risk profile:Extremely Conservative Cash (0% High Risk, 100% Low Risk) Your main concern is preservation of capital. You would prefer to take no investment risk and invest in cash. The expected average return is 4.5% and the likelihood of a negative return is never. Conservative A very low risk taker (30% High Risk, 70% Low Risk) You are a conservative investor. Risk must be very low and you are prepared to accept lower returns to protect capital. The negative effects of tax and inflation w ill not concern you, provided your initial investment is protected. The expected average return is 6.5% and the likelihood of a negative return is once every 9 years. Moderately Conservative A low risk taker (50% High Risk, 50% Low Risk) You are a moderately conservative investor seeking better than basic returns, but risk must be low. Typically an older investor seeking to protect the wealth which you have accumulated, you may be prepared to consider less aggressive growth investments. The expected average return is 8% and the likelihood of a negative return is once every 6 years. Balanced An average risk taker (65 % High Risk, 35 % Low Risk) You are a balanced investor who wants a diversified portfolio to work towards medium to long-term financial goals. You require an investment strategy, which will cope with the effects of tax and inflation. Calculated risks will be acceptable to you to achieve good returns. The expected average return is 9% and the likelihood of a negative return is once every 5 years. Moderately Aggressive A high risk taker (80% High Risk, 20% Low Risk) You are a moderately aggressive investor, probably earning sufficient income to invest most funds for capital growth. Moderately aggressive investors are aiming to receive a significantly higher return than cash over time and are therefore prepared to accept a reasonably high level of volatility. The expected

65

average return is 11.5% and the likelihood of a negative return is once every 4 years. A minimum investment period of 5 years is advisable. Aggressive A very high risk taker (100% High Risk, 0% Low Risk) You are an aggressive investor prepared to compromise portfolio balance to pursue potentially greater long-term returns. Your investment choices are diverse, but carry with them a higher level of risk. Security of capital is secondary to the potential for wealth accumulation. The expected average return is 14% and the likelihood of a negative return is once every 4 years. I/we acknowledge that after completing the attached risk profile that my/our risk profile is:(please check) Extremely Conservative Conservative Moderately Conservative Balanced Moderately Aggressive Aggressive Investment Objectives Your Statement of Advice should take into consideration factors that are considered important to you. In designing your Statement of Advice could you please rate the following objectives in their order of importance to you. Please add any other financial objectives not in this list. Please rate each item in order of their importance to you by placing a circle around the relevant number. The numbers represent: 1. Not important 2. Slightly important 6 Use the last column to list the objectives in order of their priorities with A being the clients main priority. Objective Generate more income Invest for capital growth/wealth creation Invest in tax advantaged investments Invest to minimize the impact of inflation Importance: 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 Priority

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Invest in a regular savings and/or retirement plan Flexibility Security of capital Retirement planning Education planning Investment/portfolio management Asset Allocation Diversification Other

1 1 1 1 1 1 1 1 1

2 2 2 2 2 2 2 2 2

3 3 3 3 3 3 3 3 3

4 4 4 4 4 4 4 4 4

Other Objectives (Please provide details):-

Signed: ________________________________________________Date:__________________

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Bibliography

68

11.
I. BOOKS REFERED: BOOK NAME 1. Security Analysis & Portfolio Management 2. Financial Management

Bibliography.

BOOKS, NEWSPAPERS and WEBSITES: -

AUTHOR NAME Bodie, Kane & Marcus

I.M Pandey

3. Financial Planning Handbook - IMS Preschool.

II. NEWSPAPER REFERED: 1. Economic Times and 2. Financial Express.

III. WEBSITES USED: 1. 2.

3. 4. 5. 6. 7. 8.

www.equitymaster.com www.cmlinks.com www.nse.com www.nymex.com www.netashare.com www.kotak.com www.investopedia.com www.esnips.com

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