Page 101 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Personal Financial Planning

Notes The average rate of return on bonds and securities in India has been around 10 - 12 % p.a.
Certificate of Deposits : These are short-to-medium-term interest bearing, debt instruments
offered by banks. These are low-risk, low-return instruments. There is usually an early withdrawal
penalty. Savings account, fixed deposits, recurring deposits etc are some of them. Average rate
of return is usually between 4-8 %, depending on which instrument you park your funds in.
Minimum required investment is ` 1,00,000.
Mutual Funds: A mutual fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money, thus, collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through these
investments and the capital appreciation realised are shared by its unit holders in proportion to
the number of units owned by them. Thus, a mutual fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified, professionally managed
basket of securities at a relatively low cost.
Mutual funds are open-ended funds operated by investment companies which raise money
from shareholders and invest it in a group of assets, in accordance with a stated set of objectives.

Example:
(i) AIG World Gold Fund
(ii) Franklin InfoTech Fund

(iii) Birla Sun Life Commodity Equities Fund
(iv) ICICI Prudential Technology Fund
Cash Equivalents: These are highly liquid and safe instruments which can be easily converted
into cash, treasury bills and money market funds are a couple of examples for cash equivalents.
Others: There are also other saving and investment vehicles such as gold, real estate, commodities,
art and crafts, antiques, foreign currency etc. However, holding assets in foreign currency are
considered more of an hedging tool (risk management) rather than an investment.

Task Name the major companies providing following financial products in India:
1. Mutual Fund services
2. CD’s
3. Credit Advice

Case Study Selecting the Right Investment Vehicles

election of Investment vehicles is most important. Young Turks buy investments
with long and short term goals like purchase of home, fine car, education of their
Ssiblings and finally for their retirement etc. Some short term goals can also be like
buying i-phone for spouse, LED TV for house, etc, but whether your goals are long term or
short term, you need to select your investment vehicle to perfection. In this new year 2011

Contd...

96 LOVELY PROFESSIONAL UNIVERSITY