Page 189 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Personal Financial Planning

Notes Diversification will help you to reduce the amount of risk in your portfolio, increasing the
chances that you’ll reach your retirement savings goals.

Make saving a priority by setting up automatic payments from your checking account to
your retirement savings account, make the maximum salary deferral contribution to your
employer-sponsored retirement plan and work aggressively to pay down large debts that
can reduce your saving rate.
Make a household budget to ensure that you are contributing as much as possible to
saving for retirement and aim to reduce unnecessary expenses.
A debt instrument that is secured by the collateral of specified real estate property and that
the borrower is obliged to pay back with a predetermined set of payments.

10.5 Keywords

Active Management: It refers to fund managers actively picking stocks and making buy and sell
decisions in attempt to reap the highest returns possible.

Annuitant: A person who receives the benefits of an annuity or pension.
Annuity: financial product sold by financial institutions that is designed to accept and grow
funds from an individual and then, upon annuitization, pay out a stream of payments to the
individual at a later point in time. Annuities are primarily used as a means of securing a steady
cash flow for an individual during their retirement years.
Beneficiary: A person or entity named in a will or a financial contract as the inheritor of property
when the property owner dies.
Deferred Annuity: A type of annuity contract that delays payments of income, installments or a
lump sum until the investor elects to receive them.
Mortgage: A debt instrument that is secured by the collateral of specified real estate property
and that the borrower is obliged to pay back with a predetermined set of payments.
Variable Annuity: An insurance contract in which, at the end of the accumulation stage, the
insurance company guarantees a minimum payment. The remaining income payments can vary
depending on the performance of the managed portfolio.

10.6 Review Questions

1. Describe the various investment options available for retirement planning.
2. What do you understand by the term annuities? What are the different types of annuities?

3. Explain the concept of asset allocation and diversification with the help of an example.
4. What are mortgages? Also explain its types.
5. How does an annuity help in retirement planning?
6. Briefly describe the Indian mortgage market.

Answers: Self Assessment

1. Insurance 2. series of gradual

3. immediate annuities and 4. Monthly
deferred annuities.

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