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  • Case 01: Solomon
  • Case 02: Sitara
  • Case 03: Tarun
Financial Planning Guide Financial Planning and Investment Guide

Let us look at some case studies to drive home some very important lessons in financial planning.

Looking for the best investment choice?

Solomon is in search of the right investment opportunity to finance his goals. Holding bank deposits may be a safe idea, but the returns may not be the highest; investing in equity may get a higher return, but with higher risk; and investing in PPF is safe, but it can be locked-in for too long.

Solomon should know that different investment avenues offer different combinations of risk, return, liquidity and time horizon. There is nothing that is best for all times and all purposes. A better approach is diversification. This means having a combination of various investment options and balancing the benefits and risk.


The additional benefit of diversification is that it reduces risk. When the equity markets go down, the investment in deposits hold up; when deposit rates are not large enough, equity returns make that up. A portfolio that holds various types of investments enables managing risks sensibly. This strategy of earmarking our money into various investments in a portfolio is called asset allocation. It is the most important investment decision that we could make.

Therefore: However good an investment opportunity looks, staking everything into it may be risky. Just as a balanced meal helps nutrition and balance, diversification helps investors manage risk and balance their returns. Mutual funds offer the simplest route to holding diversified investment products.

Is your income at risk?

Sitara was a hugely successful film star and earned an eye-popping income. She had an impressive fleet of cars, expensive clothes and jewellery and lived in a palatial mansion. That was during her peak of popularity. Last month, the newspapers reported her tragic death- alone, penniless and abandoned at her old age.

Sitara did not see that her stardom would not last forever. Her income was high, but also carried a high risk of her going out of jobs. Her expenses were driven by her habits. She took too long to curb her expenses. She survived by selling her assets, reducing herself to the penniless situation at death.

Therefore: The first principle in financial planning is to cushion a household's future by creating an investment portfolio that can generate additional income. Mutual funds offer a range of investment products to meet this need.


Are your assets flexible enough?

Tarun has always been ambitious and hard working. He has to pay EMIs for his house and car, care for his elderly parents and provide for his wife and kids. He is a regular saver. Everything seemed fine, until he suffered an unexpected heart attack at an early age of 42.

The income of Tarun's household which looked stable and adequate is now under risk, until he gets well and resumes work. The family needs support to get back on its feet. UNEXPECTED EVENTS DEMAND HIGHER FLEXIBILITY FROM OUR INVESTMENTS. They may also have to manage with a lower income, should Tarun have to take it easy because of health reasons. Tarun fell back on his investment portfolio, built through his careful savings. He partly liquidated his stocks and mutual funds and repaid the loans, so the family is not burdened with the EMI. The lower income would not affect the household, since there are no EMIs to pay. Tarun is confident of building back his portfolio through savings.
Therefore: Every household should ensure that a good portion of the investments are in assets that can be easily utilized to reduce loans and liabilities. Most mutual fund products are highly liquid readily convertible into cash.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

DESIGNED BY : Indigo Consulting
DEVELOPED BY :  Prosares Solution Pvt Ltd