REPORT
Entitled
“INVESTMENT PLANNING”
Submitted to the Department of Mathematics and Humanities in partial
Fulfillment of the Requirement for the Degree of
Bachelor of Technology
ELECTRONICS ENGINEERING DEPARTMENT
Presented & Submitted By
Potlapinjara Subhash Chandra Bose U20EC018
Edubilli Swaroop U20EC070
Ponna Dinesh U20EC009
Gorremutchu Niranjan U20EC076
Narendrabhai Gavli U20EC050
B. Tech 2022-23 Sem-V
Year: 2022-23
Department of Electronics Engineering
Sardar Vallabhbhai National Institute of Technology,
Surat 395007, Gujarat India
Sardar Vallabhbhai National Institute of Technology
Surat-395 007, Gujarat, India.
ELECTRONICS ENGINEERING DEPARTMENT
Certificate
This is to certify that the REPORT entitled “INVESTMENT
PLANNING” is presented & submitted by Candidates
Potlapinjara Subhash Chandra Bose U20EC018
Edubilli Swaroop U20EC070
Ponna Dinesh U20EC009
Gorremutchu Niranjan U20EC076
Gavli Narendrabhai U20EC050
of B.Tech. III, 5th Semester in the partial fulfilment of the requirement for the
award of B. Tech. degree in Electronics & Communication Engineering for
academic year 2022-23.
They have successfully and satisfactorily completed their Exam in all
respect. We, certify that the work is comprehensive, complete, and fit for
evaluation.
Faculty Name : Sign
1. Vaishali Dhingra
2. Unnati Kaniya
S.V.N.I.T SURAT 2|Page
Acknowledgement
We thrilled that we could finish over report on “INVESTMENT
PLANNING” without any obstacles or issues. We owe a debt of gratitude to
everyone who assisted us in the report preparation. Dr. P.N. Patel deserves special
thanks for his direction and support throughout the semester, as well as his
assistance with the report and presentation.
He helped me through every step of the process and was always available to help
me with any issues we encountered while planning the report. He was crucial in
assisting me in broadening my horizons and learning more.
Further, we thank the Department of Electronics Engineering and Head of the
Department, Dr. P.N. Patel, for his continuous and outstanding support in
fulfilling this task by providing us with all related infrastructure and other
facilities at the department for report work.
Thank You.
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INDEX
Sr. No Particular Page No
1 Introduction 06
2 Literature Review 08
3 Significance 10
4 Research Methodology 11
5 Discussion 13
6 Conclusion 16
7 Limitations 17
8 Reference 19
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Abstract
The current research examines the relationship between individual investment
planning, to find out the reasons for not investing. In this paper examined the
literature available in the field of investment behaviour of an individual. In order
to review the literature, research papers have been collected from various referred
journals related to individual investors’ planning. Findings suggest that both
investment knowledge influences the investment planning of an individual. Other
variables that have a significant impact on investment planning include income,
education, age, risk and return. The outcome of the study shows that people do
not risk taker, they prefer to invest in the investments which have less risk and
moderate return.
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Introduction
Investment planning is the process of identifying financial goals and
converting them through building a plan. Investment planning is the main
component of financial planning. The investment planning begins with
identification of goals and objectives. Then we need to match those goals with
our available financial resources. Nowadays there are many investment vehicles
to invest in, most common being cash, equities, bonds and property. So according
to the funds available we can invest in these vehicles to obtain our
goals and objectives.
Objectives of investment planning:
Safety: One of the main objectives of Investment planning is the safety of our
family, in the terms of finance. One should also invest in safe investment vehicles.
Investment is money market is safer than bond market.
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Income: In order to generate greater income, we need to invest in higher risk
investment vehicles to get higher income from it. Investors must analyse properly,
evaluate their risk-return ratio, and accordingly invest in appropriate asset classes
in order to enjoy the benefit of maximisation of returns. Therefore, a proper
investment planning is very important.
Growth of Capital: Capital gain is different from the returns in the sense that
they are only realized when the securities are sold at a higher price than the price
in which it was originally purchased. Selling at a lower price led to capital loss.
Therefore, investors who want capital gains should invest in securities for longer
term.
Tax Minimization: An investor may take up those investments in order to opt
for tax minimization as a part of his investment strategy. For example, a rich
businessman may want to seek those investments with favourable tax income in
order to reduce tax.
Liquidity: Many investments are liquid which means they can be easily
converted into cash. But achieving this level of liquidity requires sacrifice of
certain level of income.
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Literature Review
The literature review mainly focuses on a variety of case studies as well as
thoughts of esteemed research on the issues of financial management. It also gives
the idea about the periodic changes that occur during the process of financial
management. The literature review also focuses the limitations, problem
associated with financial management and future scope.
1. Gaurav Kabra et al. (2010) in this study they want to know the factors influence
investment behavior and the impact of these factors on risk tolerance and mindset
of men and women while taking investment decisions and is age can be a reason.
For analysis, they used hedging and regression analysis. They concluded that now
investors are more matured and have adequate knowledge but still an individual
investor prefers to invest according to their risk tolerance capacity.
2. Geetha and Ramesh (2012) have found in their study, ‘A Study on Relevance
of Demographic Factors in Investment Decisions’ that demographic factors such
as gender, age, sex, education, occupation, income, savings and family size
influence the period of investment, frequency of investment, reach of information
of source and analytical abilities. The authors revealed that demographic factors
have a significant influence over some investment decisions. It also discloses
a general view of investor perception over various investment avenues.
3. K. Malar Mathi et al. (2012) the objective of this study is to understand
individual investor behavior. Data collected from review the literature, research
papers have been collected from various referred journals related to individual
investors’ behavior. They development of economy depend on the growth of
rural market in the country. Lack of finance in rural is the reason behind for low
investment. Shifting to urban for jobs.
4. Jothilingam et al. (2013) carried out examination available literature on the
investors’ attitude towards investment avenues. This based on primary data and
secondary data. It proposed that woman investors should enthusiastic to make an
investment in avenues other than gold, like mutual funds, shares, and securities,
currency. Conclude that investors preferred to invest in less risky investment
avenues like gold, mutual funds, and bank deposits. Investor avoids risk as much
as they can.
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5. Shalini Sah et al. (2013) They wanted to identify the beliefs and attitudes of
the individual investors with regard to financial investment decision making, with
particular reference to the investor biases. They conducted an in-depth study
to understand investor beliefs and preferences. They found that individual
investors have numerous beliefs and preferences that bias their financial
investment decisions. They suggested that an understanding of an individual
investor's psychology would help in better comprehending the way the individual
investment decisions are made.
6. Sindhu K. P(2014) The objective of this research paper was to establish the
influence of risk perception of individual investors on their investment
decisions in mutual funds. The risk perception of investors is an important factor
that influences investment. This study based on the review of literature and
discussions with experts in the field, identified the factors influence the risk
perception of the investor.
7. Puneet Bhusan (2014) assessed the financial literacy level of salaried
individuals affect their investment preferences towards financial products.
Primary data had done to collect data using a non-disguised structured
questionnaire. Multistage sampling method used in collecting data. There are
total of twelve districts in Himachal Pradesh. Out of these three districts namely
Shimla, Solan and Kangra were selected randomly (first stage). Measure the level
of financial literacy of the respondents using OECD approach in the study.
Financial literacy of an individual affects its awareness regarding financial
products and investment preferences. Due to low financial literacy individuals
prefers traditional financial products.
8. Laxman Prasad et al. (2015) the objective of their study was to understand
investor attitude towards investment option selection and to identify what all
factors affect the investor attitude towards investment option selection with
special reference to sip. Before investing investor should do proper research
about the risk involved in the investment or it is better to take suggestions from
the asset management company before investment.
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Significance
Benefits of Investment Planning:
The importance and benefits of investment planning are stated below:
Family Security: Investment planning is important from the point of view of
family security. If anything happens to the working member in the family, then
the other members of the family will be financially secure by the investment.
Efficiently manage income: It is quite possible to efficiently manage the income
and expenditure of person with an investment plan. Managing income helps the
person to manage other expenditures, tax payments etc.
Financial Understanding: Investment planning helps in understanding about
our current financial situation. It becomes easy for an individual to evaluate
investment or retirement plan by having financial understanding.
Savings: One should invest in those investment vehicles which are highly liquid.
Funds can be easily taken out from those investments in the case of emergency.
Standard of Living: The savings created by the investment is very useful in
difficult times. For example, death of the working individual in the family affects
the standard of living to a great extent. That time the investment made by the
working person becomes useful source of income of the family.
Investment planning provides direction and meaning to one's financial decisions.
It allows one to understand how each financial decision affects other areas of
finances. By viewing each financial decision as a part of a whole, one can
consider its short-term and long-term effects on life goals.
Investing is a key aspect of creating wealth, which enables you to beat inflation
and help to fulfil the financial objectives and at the same time stabilize the
financial future as well.
The financial objectives are not the same and differ from person to person. The
decision of investment should be taken on the premise of the risk appetite of the
investor and likewise, the investor is clear with the classification of investment
plans on different parameters of risk.
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Research Methodology
Our Investment Methodology
When we look at the world of investment management, we can break it
down into 4 primary categories of investment method that can be used by an
investor to attempt to achieve his or her goals. We have found through both
proprietary and third-party research that no single one of these methods is
effective in all scenarios, but instead that each approach tends to have a particular
market environment or part of the market cycle to which it is very well adapted.
Our conclusion is that in order to achieve one’s life goals, one should diversify at
the level of investment method, applying the most effective aspects of multiple
completely divergent methods of investing, and not be dogmatic about using a
single method. The broad categories of investment method can be seen as four
pillars of a complete investment portfolio management methodology:
THE 4 PILLARS
1. Liability Driven Investing
LDI is often used by large institutions such as banks, insurance companies, and
pension funds.
It is based on the concept of directly matching investor assets with the entity’s
known, quantifiable risks and liabilities in an attempt to transfer these (and
possibly market-related risks) to another party. It often involves the heavy use of
fixed income (bond) instruments, and possibly derivatives.
2. Strategic Asset Allocation
Strategic Asset Allocation is the most widely utilized and accepted method of
investment. In practice it involves setting a predetermined percentage split
between stocks, bonds, and other asset types (an asset allocation); diversifying by
asset type and number of securities as much as possible within these categories;
and rebalancing back to the original splits as market values shift (making target
allocation changes only as necessary based on changes in the investor’s
objectives, risk tolerance, and life cycle).
This is by far the most ubiquitously used method in the robo-advisor and passive
investment communities.
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3. Opportunistic Investing
Based on our definition, opportunistic strategies are mainly focused on taking
advantage of asset class market timing opportunities, and not necessarily on
opportunities related to individual companies or stocks.
4. Selective/Concentrated Investing
Selective or Concentrated Investing is the oldest form of investing and involves
taking positions in one or more individual companies or securities in an attempt
to take advantage of some inefficiency related to the price of that security, to
capitalize on an associated idiosyncratic risk of the stock, or in expectation of
future growth in the company.
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Discussion
How to create a solid investment plan?
Fig: Step of investment planning
1. Find when and how much you are saving
There can be many unforeseen emergencies in our life such as life-threatening
diseases for which saving are important. We should also determine how much to
keep aside every month for our savings.
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2. Set your financial goals
We need to identify our short term as well as long term goals. This is how we
start goal setting in investment planning.
Identifying and setting our goals is an important step in investment planning.
It should be well defined by adding some value to it. We should have the clarity
about the goals which we wish to achieve. Different goals require different
investment planning like:
➢ For retirement
➢ For child education
➢ For child higher education
➢ For child marriage
➢ For buying a house
➢ For creating emergency fund
3. Analyse your risk-taking ability
We should know our risk-taking appetite. If we have just start earning, then
our risk-taking appetite is very less. We should invest in those investment
vehicles which has less like fixed deposits.
4. Create a savings portfolio
After determining goals and risk-taking appetite, the next step in
investment planning is to create a savings portfolio. One should have a diversified
portfolio which should include many investment vehicles such as stocks, gold,
bonds, fixed deposit, real estate etc.
5. Learn about all investment options
Before we start investing in, we need to learn about all the investment
options available in the financial market. We need to go through all the
investment vehicles such stocks, bonds, gold, real estate, life insurance etch and
compare the rate of returns and risks associated with it.
6. Calculate your asset allocation
After determining the risk return portfolio, the investor can develop our
asset allocation strategy in investment planning. The investor can select from
the various asset classes available in the financial market and allocate assets in
such a way that it achieves optimum diversification while targeting the
expected returns.
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7. Know how to build your portfolio
The most important step in investment planning is implementing the portfolio
plan. After we implement our portfolio plan the management process begins. It
is necessarily to monitor the investment performance regularly, mostly quarterly
and review the portfolio plan annually.
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Conclusion
Investment is important to achieve individual goal. Investment means we
have money, then we need to make analysis to invest the money and expected get
return in future. If the investment is run early, then we will make a lot of profit if
the investment run well, if not we will lose all of the investment need to start from
earlier. Apart from that, first thing first we must set an investment plan to make
the investment run well. From that, we can know what we will face in future,
what the risk need counter, what economy is going and many more. As we also
know, there are also specific place for investment to be done. It will involve
capital market, Bursa Malaysia, equity market, debt market and many more. So,
we need to know where we should invest our money whether to invest in high-
risk market or lower risk market to gain return in future. Usually, high return will
associate with high risk.
According to the study, different demographic factors such as age, gender,
annual income and no. of dependents have a significant impact on individual
investment Planning. This study attempts to find out the investment habit of
people, understand their investment planning and factors influencing the
investment decision through past research paper studies. Many of them do not
consult a financial adviser because they only invest in an investment like fixed
deposit, gold and health insurance which gives moderate returns and has low risk.
They are, not risk-taker. If they will consult with a financial adviser there are
various investment avenues available in the market. Financial literacy level tells
the awareness regarding investment avenues of an individual. Education gives
women confidence and the ability to understand the importance and need for
making decisions regarding investment for attaining their financial goals.
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Limitations
Limitations of Investment Planning
7.1 An Expensive Process
Planning is the top process, so it is extremely time-consuming and funds
consuming. It may delay certain cases that expenses regarding planning is directly
proportional to your time invested during planning stage. It is a major limitation
of investment planning for small business owners.
7.2 No Availability of Data
It is a leading limitation of investment planning in every organization. Where
you will not see the genuine data what a person desire. planning loses considering
those values in their absence.
7.3 Lack of Communication
If there is an insufficient communication and improper co-ordination
anywhere between different officers, departments associated with a company,
even the excellent investment strategy will never exercise effectively and is
assured in order to fail. This type of limitations of investment planning most
observed in large companies.
7.4 Lack of Communication
If there is an insufficient communication and improper co-ordination
anywhere between different officers, departments associated with a company,
even the excellent investment strategy will never exercise effectively and is
assured in order to fail. This type of limitations of investment planning most
observed in large companies.
7.5 Failure to Plan
Planning is a always a forward looking process. If a founder, owner, or
management possesses to follow instead of leading then he can never make a
good investment plan. Therefore, these limitations of investment planning can
be avoided by hiring a best investment planner.
7.6 Over Ambitious Projection
Sometimes professionals and business owners put through over ambitious
projections then the realistic once. Always describe the best clear vision.
7.7 Rigid Planning
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It involves your determination of the course of action ahead of time. It
may lead to inflexibility, internal as well as procedural rigidity.
For example:
Utilizing at the planning a business may succeed some objectives. Then
again, this way planning may build rigidity or even locks business into some
goals.
7.8 Rigid Planning
It involves your determination of the course of action ahead of time. It
may lead to inflexibility, internal as well as procedural rigidity.
For example:
Utilizing at the planning a business may succeed some objectives. Then
again, this way planning may build rigidity or even locks business into some
goals.
7.9 External Factors
One of the limitations of investment planning is external aspects, as they
are extremely tough to predict. a few external factors
For example:
War, natural calamities, stock market crisis and so forth. All can make
implementation of plan difficult. To overcome such limitation of financial
planning model, you should protect yourself with sufficient insurance policies.
7.10 Limits of Financial Statements
Investment statements depend on historical prices and as like one of the
determinants of investment planning which may affect cost level modifications
are completely dismissed. They are based on interim reports. The basic of
investment statements are based on historic data. These kinds of statements are
neither full nor accurate.
7.11 Limitations of Financial Accounting Data
Financial accounting allows option for treating transactions. Accounting
is based on principles and its mostly followed. But truth be told that there is
multiple principle for treatment of transactions in accounting books. This is one
major disadvantages of financial planning of an organization with respect to
accounting data.
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