THE FINANCIAL INSTRUMENTS

INVESTMENT OBJECTIVES

Liquidity
Age Need for Regular Income

Risk Tolerance
Tax Liability

Human Life Cycle Disciplined Planning

Income Phase I Phase II
Childs Marriage Childs Education Housing

Phase III

Having a Financial Goal is primary to starting a Investment Plan.

Child birth Marriage 22 yrs 38 yrs Over 25 - 30 yrs

Birth & Education

22 yrs

Earning Years

Retirement
60 yrs

Age

INVESTMENT AVENUES
High
H i g h

Equity Growth Funds Index Balance Funds Funds

Dont Invest here

R I S K

Income Funds RETURN

Aggressive Stance High

Liquid Fund

Comp FD

Sedate Zone

P.O.

Optimal
L o w

## the size of the circle denotes the level of liquidity

INVESTMENT INSTRUMENTS
1. PUBLIC PROVIDENT FUND 2. NATIONAL SAVINGS CERTIFICATE (NSC) 3. 8% SAVINIGS BONDS

4. POST OFFICE MONTHLY INCOME SCHEME

5. SENIOR CITIZEN SAVING SCHEME 6. LIFE INSURANCE POLICIES 7. UNIT LINKED INSURANCE POLICY 8. EQITY SHARES OF LISTED COMPANIES

INVESTMENT INSTRUMENTS
9. MUTUAL FUNDS 10. EQUITY LINKED SAVING SCHEME (ELSS) 11. TERM DEPOSITS WITH BANKS 12. SAVINGS DEPOSITS WITH BANKS 13. FIXED DEPOSITS WITH COMPANIES 14. JEWELLERY, GOLD & PRECIOUS METALS 15. IMMOVABLE PROPERTY 16. PAINTINGS

PUBLIC PROVIDENT FUND

Very Safe Investment Not so liquid. Investment remains locked for 15 years

8% interest per year. Compounded Annually Amount Invested is eligible for deduction under section 80C Interest is exempt under section 10. No TDS from interest. No tax when money is received back

NATIONAL SAVINGS CERTIFICATE

Very Safe. Unless the Government goes bankrupt and defaults, there is no chance of losing money Life is six years but can be transferred after one year. Return is 8% per annum compounded half yearly. Encashment is not possible till end of three years. Thereafter, premature encashment is permitted at a discounted rate of interest. Amount invested is eligible for deduction under section 80C. Interest is taxable but no TDS. No tax on reinvestment

8% SAVING BONDS
Very Safe. Unless the Government goes bankrupt and defaults, there is no chance of losing money Life is six years. Very illiquid. Not transferable and not encashable before end of six years. ROI is 8% per annum No tax benefits

Interest is fully taxable. TDS applicable.

No tax on reinvestment
5/30/2012

POST OFFICE MONTHLY INCOME SCHEME

Very Safe. Unless the Government goes bankrupt and defaults, there is no chance of losing money. Life is six years. Can be withdrawn at any time after one year at discounted rates.

8% per annum interest payable monthly. In addition, bonus of 10% is payable on maturity only on accounts opened upto 13th February, 2006.
Interest is fully taxable. No TDS from interest. No tax on reinvestment.

SENIOR CITIZEN SAVING SCHEME

Very Safe. Unless the Government goes bankrupt and defaults, there is no chance of losing money Life is five years. Can be withdrawn at any time after one year at discounted rates.

9% per annum interest payable quarterly.

No tax benefits

Interest is fully taxable. No TDS from interest. No tax on reinvestment

LIFE INSURANCE POLICY

Quite safe. None of the insurance companies have defaulted till date Loan against policy allowed by many companies

Not strictly an option for generating income. It is more of a safety net for future. Amount paid as premium is eligible for deduction under section 80C

Amount received back on maturity of policy including the accumulated bonus is exempted from tax

UNIT LINKED INSURANCE PLAN

Quite safe. None of the insurance companies have defaulted till date Since part of the money is invested in stock markets, there is market related risk of NAV going down

Amount paid as premium is eligible for deduction under section 80C

Amount received back on maturity of policy including the accumulated bonus is subject to the laws applicable to capital gains

SHARES
Substantial risk as the prices of shares fluctuate from time to time and are market driven Very liquid. Can be sold on stock exchanges any time and the sale proceeds would be received within a few days Maximum scope for capital appreciation which would differ from one company to another Dividend is exempt from tax under Section 10. Short Tem Capital Gains Tax is charged @ 10% Long Tem Capital Gains Tax is exempt from tax

MUTUAL FUNDS
Substantial risk as the NAV of units fluctuate from time to time and are market driven In most cases, very liquid. Can be withdrawn at any time subject to exit load which varies from scheme to scheme. Maximum scope for capital appreciation which would differ from one fund/scheme/plan to another Dividend is exempt from tax under Section 10. However, dividend distribution tax is levied on Mutual Fund companies Short Tem Capital Gains Tax is charged @ 10% Long Tem Capital Gains Tax is exempt from tax

EQUITY LINKED SAVING SCHEME

Substantial risk as the NAV of units fluctuate from time to time and are market driven Lock-in period of 3 years. Can be withdrawn at any time after 3 years. Maximum scope for capital appreciation which would differ from one fund to another

Amount invested is eligible deduction under Section 80C

for

FIXED DEPOSITS WITH BANKS

Quite safe. Unless the bank goes bankrupt and defaults, there is no chance of losing your money Not very liquid. The tenure of the FD would be a fixed period of not less than five years with a scheduled bank No capital appreciation. Only accumulation of interest which gets compounded every year in case of cumulative deposits. Amount invested is eligible for deduction under Section 80C Interest is fully taxable. TDS from interest in excess of Rs 10,000 per annum. No tax on reinvestment.

BANK FIXED DEPOSITS

30 Days ABN AMRO CITI BANK PNB HSBC HDFC BOB INDIAN BANK ICICI IDBI UTI 3.00% 3.00% 3.00% 3.75% 3.00% 3.75% 2.75% 3.00% 3.25% 180 Days 4.00% 6.00% 5.50% 4.50% 4.50% 5.50% 4.00% 5.25% 5.50% 1 Year 5.00% 7.25% 6.50% 5.00% 5.75% 7.00% 7.25% 7.00% 7.25% 7.50% 3 Year 7.00% 7.00% 7.50% 6.25% 6.00% 5.50% 6.00% 7.75% 7.50% 7.25% 5 Year 7.00% 7.00% 7.00% 6.25% 6.00% 7.00% 7.50% 8.25% 7.50% 7.25%

3.00%

4.50%

COMPANY FIXED DEPOSITS

Not very safe. Deposits are unsecured and if the company goes bankrupt, the depositor would get last priority in terms of settlement of dues. Liquidity depends on company and its policies. In many cases, can be liquidated at any time but subject to loss of interest. No capital appreciation. Only accumulation of interest which gets compounded every year in case of cumulative deposits. Interest is fully taxable. TDS from interest in excess of Rs 5,000 per annum. No tax on reinvestment.

JEWELLERY, GOLD & PRECIOUS METALS

Gold is considered to be a safe investment. However, jewellery and precious stones are generally not viewed from the point of view of investments Not a very liquid investment. Making charges becomes a sunk cost. However, now there is option of buying paper gold in exchange traded funds (ETF). No tax benefits. Capital gains tax needs to be paid on sale.

REAL ESTATE
House property and land have traditionally been perceived to be safe investments. However, in India, there is often a doubt about the validity of the title deed Not very liquid asset. Transfer of land and house property is a lengthy and complicated process. Tax benefits on repayment of housing loan under Section 80C and 24B

Capital Gains Tax applicable on sale.

Rent is taxable under the head Income from House Property.

PAINTINGS
The market for paintings is a nascent market in India. At present, it is very small and from that point of view, and also in view of the fact that art is very subjective, the safety of investment in Art cannot be accurately predicted

Returns are not very predictable. It would depend on the trends prevailing and on the popularity of the artist which may keep on changing from time to time.

Capital Gains Tax is applicable on sale of art pieces.

INVESTMENT VS SPECULATION
INVESTMENTS
LONG TERM MODERATE RETURNS

SPECULATION
SHORT TERM HIGH RETURNS HIGH RISK BORROWED FUNDS USED USES TECHNICAL ANALYSIS

DIVERSIFIED RISK
OWN FUNDS USED

USES FUNDAMENTAL ANALYSIS

DISCIPLINED INVESTMENT PLANNING

Derivatives & Equity Mutual Funds Income Funds & Real Estate GOI Relief Bonds Bank Fixed Deposits
Aggressive Assets

Serious Assets

Sacred Assets

MAXIMIZE RETURNS, MINIMIZE RISKS

Thank You MRS. RICHA VATS

E-Mail: richa.vats@yahoo.co.in