Session 1

Savings is the process of putting cash aside and parking it in extremely safe and liquid.

portion of current income not spent on consumption.

Investing is the process of using money to buy an asset that you think will generate a safe and acceptable return

purchase of assets with the goal of increasing future income.

FD’s and FMP Bonds/Debenture Shares Derivatives Mutual Funds Real Estate Gold and Silver

Short-term: Ready to go

Ready access to cash

Minimal risk Earn interest

Long-term: Achieve major goals

Harder to access cash

Always involves risk Potential for profit

Return Investments are made with the primary objective of

deriving a return.

The return may be received in the form of Capital appreciation and Dividend yield

Percentage Return =

Ending Price- Beginning Price + Dividend-------------------------------------------------------

Beginning Price

= Capital gain yield + Dividend yield

Assume we purchased one share of ABC LTD at Rs.25 and received Rs.2 in dividend for the year. After one year the stock price increased to Rs.31. What is the percentage return we achieved?

Calculation : Percentage Return = capital gain yield + Dividend Yield

= (31-25)/25 + 2/25 = 24% + 8% = 32%

Risk Possibility of variation of the actual return from the

expected return is termed risk.

Safety and

Liquidity

Maximization of return Minimization of Risk Hedge against inflation

Risk• The chance that the value of an

investment will decrease. Return

• The profit or yield from an investment. Liquidity

• The ability of an investment to be converted into cash quickly without loss of value.

Today, a large soft drink at your favorite fast-food place

.also you decide to save some money for the future as well. So you put a Rs.100 in your

savings account, where it earns 8%.

NEFE

The point? Inflation can work against your money. You need to learn to invest wisely, follow the rate of inflation, and make sure your investment rates are higher than those of inflation.

The time value of money refers to the fact that the money in

hand today is worth more than the same value of money

promised at some future time.

Refers to the amount of money to which an investment will grow over a finite period of time at a given interest rate.

Put another way, future value is the cash value of an investment at a particular time in the future.

What is the relationship between risk and return?

Step 1: Meeting Investment Prerequisitesa. Make certain necessities of life are provided forb. Adequate protection against losses from death,

illness and disability

Step 2: Establishing Investment Goalsa. Accumulating retirement fundsb. Enhancing current incomec. Saving for major expendituresd. Sheltering income from taxes

Step 3: Adopting an Investment Plana. Develop a written investment planb. Specify target date and risk tolerance for each

goal

Step 4: Evaluating Investment Vehiclesa. Assess potential return and risk

Step 5: Selecting Suitable Investmentsa. Research and gather information on

specific investmentsb. Make investment selections

Fixed Deposit is a Good Investment Option to Begin With

Insurance Policy Investment is also a Popular Option

Public Provident Funds has High Returns National Saving Certificate (NSC) is a

Widely Common Option Mutual Fund Investments is a Safe. Investing in IPO’s Stock Investments is the Best for Risk

Takers Investment in Gold & Silver is Healthy

?Thank you

I am 35 and my wife is 33. Both of us are employed My parents aged 68 and 66 are dependent on us. Our daughter are aged one and two I plan to work till I turn 65 but my wife may stop

working after few years I need to save Rs.15 Lakh for each of my

daughter’s education and Rs.20 Lakh each for their marriage

Home loan Rs.29 Lakh – EMI amounts to Rs.49100 I earn Rs.125000 and my wife earns Rs.75000 Monthly expenses (Rent & Household) Rs.50000 PF balance is Rs.7,96,200