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 ones 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 ones 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 GoalsRisk taking Ability 10. ExpenditureIncomeRisk taking AbilityAssetsLiabilities 11. Human Life Cycle Disciplined Planning IncomePhase IPhase IIPhase IIIChilds Marriage Childs Education Housing Child birthHaving a Financial Goal is primary to starting a Investment Plan.Marriage Career 22 yrs38 yrsBirth & EducationEarning Years22 yrs60 yrsOver 25 - 30 yrsRetirementAge 12. INVESTMENT ACTIVITY (ACQUISITION OF ASSETS) 1. FINANCIAL ASSETS2. PHYSICAL ASSETS SAVERHOUSECASHBANK DEPOSITSLAND INVESTORP.F./LIC PENSION POST OFFICE3. MARKETABLE ASSETSSHARES, BONDS, GOVT. SECURITIES, MUTUAL FUNDS, CURRENCIESBUILDINGS GOLD SILVEROTHER 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 newofferings 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 YearNumber of issuesAmount raised (Rs. Crore)2008-094716,6202009-107657,5552010-119167,6092011-127148,468Apr 12-Dec 124020,869 18. STOCK EXCHANGE Stock exchange is that place where trading ofshares 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 2012Regulators Market Infrastructure Institutions Merchant bankers UnderwritersSEBI,RBI, MoF, MoCA Exchanges, Depositories, Clearing Corporations 199 3Brokers8,922Sub brokers77,163R & T Agents74Custodians19Depositories and DPs FIIs2 and 823 1767 20. Trading & Settlement ProcessDepositoryClearing HouseInvestorBrokerExchange 21. Secondary Market Facts -BSE 2007-082008-092009-102010-112011-12Number of Companies listed4,8874,9294,9755,0675,191Turnover Cash Segment (Rs .Cr.)15,78,85 711,00,07513,78,80911,05,0276,67,498Market Capitalisation ( Rs.Cr.)51,38,01 430,86,07561,65,61968,39,084 62,14,941 22. Secondary Market Facts -NSE 2007-082008-092009-102010-112011-12Number of Companies listed1,3811,4321,4701,5741,665Turnover Cash segment (Rs.Cr)35,51,03 727,52,02341,38,02335,77,41028,10,893Market Capitalisation ( Rs.Cr.)48,58,12 228,96,19460,09,17367,02,61660,96,518 23. 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) 24. 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 25. Mutual Funds An investment company that pools money from itsunit 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) 26. Calculation of NAV(Net Asset Value) Formula = Net Value of Assets / Number of Units Outstanding. 27. Investment vehicle Insurance Insurance is an economic tool by whichone can exchange large uncertain financial loss with a small & definite cost called premium. Types of Insurance - Life Insurance - General Insurance(Non Life) 28. Insurance Companies in India Life Insurance CompaniesPrivate Sector- 16 Public Sector- 1 General Insurance Companies(Non Life) Private Sector-9 Public Sector- 4 29. Types of Life Insurance Plans Term Life Insurance Endowment Policies Annuities Group Insurance ULIP New Pension Scheme2009 30. 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) 31. Growth of Indian Insurance Companies 32. Market Share of Insurance Companies in India 33. Currency market Currencytransactions 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. 34. Major Currencies Transaction in India US DOLLAR EURO BRITISH POUND JAPANESE YEN 35. RISK AND RETURN 36. 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 expectedoutcomes. Risk is outcome that is not favorable.RETURN: Return differs amongst different instruments.The most important factor influencing return is risk. Normally, the higher therisk ,the higher is the return. 37. Risk and Return Relationship for Some Investment OptionsReturnDerivatives (High Risk) Equity Shares Real Estate Mutual Funds Bonds , Debentures Deposits(FD,PPF,PO)(Low Risk)Risk 38. Life Cycle Investment Guide Mid TwentiesLate Thirties to Early Fo rties10% 10% REAL ESTATE5%5%CA SHCASH20%55%65%REA L ESTA TE30%BONDSB ONDS STOCKSSTOCKSMid FiftiesLate Sixties and beyond13% 5% 44%REA L ESTA TE15%25%REA L ESTA TE10%CA SH B ONDS38%CA SH B ONDSSTOCKSSTOCKS50% 39. Time Value of Money Now Rs.1 lakhs Invested @ 10% Year 1Simple Interest @ 10% P.A. 1,10,000.00Compound Interest @ 10% P.A. 1,10,000.0021,20,000.001,21,000.0031,30,000.001,33,100.0041,40,000.001,46,410.0051,50,000.001,61,051.00203,00,000.006,72,749.99253,50,000.0010,83,470.59304,00,000.0017,44,940.23 40. Effects of Inflation ItemPrice in 2001-02Price in 2012-13Sugar (1 kg) Cooking oil (5 liters) Rice (1 kg) Petrol ( 1 liter)Rs. 16 Rs. 290 Rs. 14 Rs. 33Rs. 40 Rs. 600 Rs. 60 Rs. 75 41. 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 42. Savings & Investment Related Products Bank deposits Tax Savings Schemes(NSC,PPF,POS,ELSS,Infrastructure Bonds) Bonds / debentures Company fixed deposits Mutual funds Equity shares 43. 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 44. Borrowing Related Products Personal loans Vehicle Loans Home loans Reverse mortgage Loan against securities Credit card debt 45. Choosing the Right Investment Options SafetyLiquidityReturns 46. Various Parameters considered before Investment Stock Market Indices-Sensex,Nifty RBI Monitory Policies-Bank Rate, InterestRate Economic Policies- GDP, Inflation, Growth rate, GNP,PPP, IIP,Foreign Exchange etc Govt. Policies- Budget,Tax Structure,etc 47. Format of Individual Worth Statement Name: A. Sunil LiabilitiesAs on 31.03.2013 RsAssetsRsHousing Loan6,30,000Cash on Hand4,000Vehicle Loan1,15,000Cash with Bank12,000Fixed Deposits4,50,000Recurring Deposits1,20,000Credit Card outstanding18,000Paid up in LIC68,000Investment in Shares4,15,000Vehicles (Market Value)3,20,000House (Market Value) Networth35,18,000JewelleryTotal42,81,000Total28,12,000 80,000 42,81,000 48. 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. 49. 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) 50. FINANCIAL PLANNING ASSET ALLOCATION 51. INVESTOR PROFILEMonoj&Manju( Age 28 years ) Short-term Planning to purchase a 15% Financial GoalsPlanning 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% retirementInvestment StrategyAggressive Growth Portfolio Balanced Portfolio Short-term Short-term Bonds 10% 10% Bonds 15% 15%Stocks 75% 52. 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 Ill inherit 10 crores. Impressed, the woman obtained his business card and three days later. She become his stepmother. This is a Financial Planning. 53. Securities Market and Knowledge Initiatives SEBIs 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 54. NISM Certifications-SEBI More than 15 Modules are available . Important Modules are NISM Series VII: Securities Operations and RiskManagement 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 55. 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 56. NCFM 2009/10 57. 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 58. 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 numbersto 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 59. 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 60. Success Investment MantraSafe LifeHappy Investing