Managing Personal Finance Financial Planning Process:

Ppt – 1
Personal Financial planning –
⚫ The process of managing your money to achieve personal economic satisfaction
⚫ Daily financial activities involve
EARN-SPEND-SAVE-INVEST-GIFT-SHARE
Financial Planning is a planned set of actions throughout lifetime.
Personal Financial Planning is arranging to spend, save and invest money to live
comfortably, have financial security and achieve goals. Everyone has different financial
goals. Goals are the things that we want to accomplish.
For example: Getting a college education, buying a car, and starting a business are goals.
Planning our personal finances is important because it will help us to reach our goals, no
matter what they are. It up to us to make and follow a financial plan.
Step 1: Determine your financial situation at present
Some of the benefits of planning are:
To start your financial planning, first, you need to determine your
➢ We will have more money and financial security present financial situation concerning current income, savings, living expenses, and debts.
➢ We will know how to use the money to achieve our goals. Prepare a list of all your current assets, debt balances and expenses on various items.
➢ We have less chance of going into debt we cannot handle. Only then you can plan your activities for financial planning.
➢ We can help our partner and support our children, if we have a family.
Step 2: Develop your Financial Goals

Personal finance is all about: Financial goals are vital to financial planning. Financial goals can be short-
term goals as well as long-term goals. The purpose is to differentiate needs from wants
⚫ Goal setting (short term & long term) and to build savings and investments for future financial security. Goals can be, to buy a
⚫ Money Management Strategy house in next 5 years, save for kid’s education, save for retirements, buy a beachfront
property etc.
⚫ Investment planning (Risk and return)
Step 3: Identify Alternative Courses of action
⚫ Insurance planning
While doing financial planning, good decision making is crucial, and that
⚫ Credit planning (Loans & Cards)
requires developing alternative courses of action. Following the situation, you may need
⚫ Housing decision (Rent or Buy) to decide whether to continue the same course of action or continue with current situation.
You may need to make such decisions based on recent outcomes after you started
⚫ Tax planning
working on your plan.
⚫ Retirement planning
⚫ Estate planning (Will, transfer of property etc.)
Step 4: Evaluate the alternatives
Based on the situations in your life, your values, and present economic
conditions, you need to evaluate the available alternatives. You have to calculate the
opportunity cost, and that is what you give up while making a particular choice.
You also need to evaluate the risks involved in the decision as there is some
uncertainty attached to every decision you make. While some decisions involve high
risks, some have comparatively low risks.
In making a decision, Financial Planning Information Resources are very
crucial. With the changing economic, social, and personal conditions, you need to update
your knowledge.
Step 5: Create and implement the financial action plan
In this step, you need to develop and implement your action plan to achieve your
goals. First, focus on accomplishing your immediate or short-term goals. Then you should
focus on the goals next in your priority list.
Step 6: Review and revise your plan annually
As Financial Planning is a dynamic process, you need to assess your financial Money management strategy:
decisions regularly. Changing socio-economic and personal factors may require more
frequent assessment. Regular review of your own choice and revision if required will help
you to bring the financial goals and actions in line matching the current situation.

Goal setting:

Key focus and allocation:

Emergency funds, periodic expenses, fixed expenses, amount for financial goals.
Investments – risk and reward:
 Business requires special types of insurance policies that insure against specific
types of risks faced by a particular business.
For example, a fast-food restaurant needs a policy that covers damage or injury that
occurs as a result of cooking with a deep fryer. An auto dealer is not subject to this type
of risk but does require coverage for damage or injury that could occur during test drives.
There are also insurance policies available for very specific needs, such as
kidnap and ransom (K&R), medical malpractice, and professional liability insurance,
also known as errors and omissions insurance.

Life Insurance:

Life insurance is a contract between you and an insurance company. Essentially, in exchange
for your premium payments, the insurance company will pay a lump sum known as a death
Investment types and last 10years average returns (CAGR): benefit to your beneficiaries after your death.

Your beneficiaries can use the money for whatever purpose they choose. Often this includes
paying everyday bills, paying a mortgage or putting a child through college. Having the
safety net of life insurance can ensure that your family can stay in their home and pay for the
things that you planned for.

There are two primary types of life insurance: term and permanent life. Permanent life
insurance such as whole life insurance or universal life insurance can provide lifetime
coverage, while term life insurance provides protection for a certain period.

Health Insurance:
Health Insurance is a medical coverage that helps you meet your medical expenses by
offering financial assistance. Due to the high cost of hospitalization expenses, it is
important to have a health insurance plan in place. In the current pandemic situation,
Insurance: health insurance plays a vital role in safeguarding your finances. You can buy a health
insurance plan for your family and avail the below mentioned benefits & coverage.
➢ Insurance is a contract (policy) in which an insurer indemnifies another against
losses from specific contingencies or perils. • Medical expenses
➢ There are many types pf insurance policies. Life, health, homeowners, and auto are • Cost of hospitalization
the most common forms of insurance. • ICU Charges
➢ The core components that make up most insurance policies are the deductible, • Ambulance cost
policy limit and premium. • Day care procedures
 • AYUSH benefit

How much of Gold is there in the world?

Gold as an Asset class:
⚫ Gold has known history of 5000 yrs.
⚫ Purpose of investing in Gold – Investment or need based
⚫ Why Gold is Precious and price higher
– Scarcity
– Physical properties –malleable and ductile
– Aesthetic attributes
– Wealth storage and money equivalent

Gold vs Stock market:

Gold as an asset class
⚫ Two ways to own Gold – Physical vs Paper
Understanding gold price:
Gold investment:
Tax planning:
Tax planning plays an important role in the financial growth story of every individual as
tax payments are compulsory for all individuals who fall under the IT bracket. With tax
planning, one will be able to streamline his/her tax payments such that he or she will
receive considerable returns over a specific period of time involving minimum risk. Also,
effective tax planning will help in reducing a person's tax liability.
Assessment year 2021-2022
Assessment year 2021-2022
Tax savings:
Retirement planning is a process of
⚫ Set retirement goals (ST, MT & LT)
⚫ Asses your current financial position
⚫ Explore retirement income sources (Gratuity, and Pension income)
⚫ Understand health issues (age related & life style)
⚫ Evaluate retirement risks (life expectancy, pending loans, son/daughter’s
education & marriage)
⚫ Manage & Monitor – Post retirement finances
Estate Planning:
⚫ Estate planning is all about how individuals’ assets will be preserved, managed and
distributed after death.
⚫ Also, management of an individual’s properties and financial obligations in the
event that they become incapacitated.
⚫ Creation of a will (register it)
⚫ Appointing a right executor of will
Estate planning in simple terms refers to the passing assets / investments down
from one generation to another. You decide how much of your estate – be it property(s),
car(s), personal accolades, financial investments, etc. – you want to pass on to whom and
how, after your demise.
It is a dynamic process that needs to be reviewed at regular intervals to absorb
any changes that might happen in our life or in the laws of the country.
Ppt3
Inflation:
Inflation is the decline of purchasing power of a given currency over time. A quantitative
estimate of the rate at which the decline in purchasing power occurs can be reflected in
the increase of an average price level of a basket of selected goods and services in an
economy over some period of time. The rise in the general level of prices, often
expressed as a percentage, means that a unit of currency effectively buys less than it did
in prior periods.
Inflation can be contrasted with deflation, which occurs when the purchasing power of housing, which can be contractually fixed for at least several months (in the case of rents)
money increases and prices decline. or several decades (in the case of mortgage payments). Even a dramatic change in home
prices does not translate into an immediate jump in rents or mortgage payments the way,
(OR) say, an oil price increase translates into higher gasoline prices.

• Inflation is the rate at which the value of a currency is falling and, consequently, The EPI is constructed from price series that are not seasonally adjusted. Therefore, the
the general level of prices for goods and services is rising. index reflects the prices actually paid by consumers every month.
• Inflation is sometimes classified into three types: Demand-Pull inflation, Cost-
Push inflation, and Built-In inflation.
• The most commonly used inflation indexes are the Consumer Price Index (CPI) Ppt 5
and the Wholesale Price Index (WPI).
• Inflation can be viewed positively or negatively depending on the individual Components of personal financial planning:
viewpoint and rate of change.
• Those with tangible assets, like property or stocked commodities, may like to see
some inflation as that raises the value of their assets.

How is inflation measured?

Inflation is an increase in the level of prices of the goods and services that households
buy. It is measured as the rate of change of those prices. Typically, prices rise over time,
but prices can also fall (a situation called deflation).
The most well-known indicator of inflation is the Consumer Price Index (CPI), which
measures the percentage change in the price of a basket of goods and services consumed
by households.

The Everyday Price Index:

The Everyday Price Index (EPI), published by the American Institute of Economic
Research (AIER).The purpose of the AIER’s Everyday price Index (EPI) is to measure
changes in the prices of goods and services that are important to people’s everyday lives.
The index reflects the price uncertainty (i.e. unexpected and unavoidable price changes)
that people face with purchases they cannot easily adjust from one month to the next.

The EPI tracks a subset of prices from the broader Consumer Price Index (CPI) reported
by the Bureau of Labor Statistics (BLS). The CPI includes prices of all goods and
services purchased by a typical urban consumer. The EPI, in contrast, includes only goods
and services purchased on a day-to-day basis that cannot be easily postponed or forgone.

These include everyday items such as food, utilities, fuel, prescription drugs, telephone
services, etc. The EPI excludes infrequently purchased items, such as cars, appliances,
furniture, or apparel. Purchases of such products can be planned for or postponed,
eliminating unexpected shocks to household budgets. The EPI also excludes the cost of
 1. Obtaining:
You obtain financial resources from employment, investments, or ownership of
a business. Obtaining financial resources is the foundation of financial planning, since
these resources are used for all financial activities.
2. Planning:
Planned spending through budgeting is the key to achieving goals
and future financial security. Efforts to anticipate expenses and financial decisions can
also help reduce taxes. The ability to pay your fair share of taxes—no more, no less—is
vital to increasing your financial resources.
3. Savings:
Long-term financial security starts with a regular savings plan for
emergencies, unexpected bills, replacement of major items, and the purchase of special
goods and services, such as a college education, a boat, or a vacation home. Once you
have established a basic savings plan, you may use additional money for investments that
offer greater financial growth. An amount of savings must be available to meet current
household needs. Liquidity refers to the ability to readily convert financial resources into
cash without a loss in value. The need for liquidity will vary based on a person’s age,
health, and family situation. Savings plans such as interest-earning checking accounts,
money market accounts, and money market funds earn money on your savings while
providing liquidity
4. Borrowing:
Maintaining control over your credit-buying habits will contribute to your
financial goals. The overuse and misuse of credit may cause a situation in which a
person’s debts far exceed the resources available to pay those debts. Bankruptcy is a set
of federal laws that allow you to either restructure your debts or remove certain debts.
The people who declare bankruptcy each year may have avoided this trauma with wise
spending and borrowing decisions. Chapter 7 discusses bankruptcy in detail.
5. Spending:
Financial planning is designed not to prevent your enjoyment of life but
to help you obtain the things you want. Too often, however, people make purchases
without considering the financial consequences. Some people shop compulsively,
creating financial difficulties. You should detail your living expenses and your other
financial obligations in a spending plan. Spending less than you earn is the only way to
achieve long term financial security.
6. Managing risk:
Adequate insurance coverage is another component of personal financial
planning. Certain types of insurance are commonly overlooked in financial plans. For
example, the number of people who suffer disabling injuries or diseases at age 50 is
greater than the number who die at that age, so people may need disability insurance more
than they need life insurance. Yet surveys reveal that most people have adequate life
insurance but few have disability insurance. The insurance industry is more aggressive in
selling life insurance than in selling disability insurance, thus put ting the burden of
obtaining adequate disability insurance on you. Many households have excessive or
overlapping insurance coverage. Insuring property for more than it is worth may be a
waste of money, as may both a husband and a wife having similar health insurance
coverage.
7. Investing:
While many types of investment vehicles are available, people invest for two
primary reasons. Those interested in current income select investments that pay regular
dividends or interest. In contrast, investors who desire long-term growth choose stocks,
mutual funds, real estate, and other investments with potential for increased value in the
future.
You can achieve investment diversification by including a variety of assets in your
portfolio —for example, stocks, bond mutual funds, real estate, and collectibles such as
rare coins. Obtaining general investment advice is easy; however, it is more difficult to
obtain specific investment advice to meet your individual needs and goals.
8. Retirement and Estate Planning:
Most people desire financial security upon completion of full-time
employment. But retirement planning also involves thinking about your housing situation,
your recreational activities, and possible part-time or volunteer work. Transfers of money
or property to others should be timed, if possible, to minimize the tax burden and
maximize the benefits for those receiving the financial resources. A knowledge of
property transfer methods can help you select the best course of action for funding current
and future living costs, educational expenses, and retirement needs of dependents.
Developing a flexible financial plan:
A financial plan is a formalized report that summarizes your current financial situ ation, analyzes your financial
needs, and recommends future financial activities. You can create this document on your own, seek assistance
from a financial planner, or use a money management software package. Exhibit 1-10 offers a framework for
developing and implementing a financial plan, along with examples for several life situations.
Implementing the financial plan:
We must have a plan before you can implement it. However, once you have clearly
assessed your current situation and identified your financial goals, what do you do next?
The most important strategy for success is to develop financial habits that contribute to Present value of a single amount:
both short-term satisfaction and long-term financial security, including the following:
If you want to know how much you need to deposit now to receive a certain amount in
1. Using a well-conceived spending plan will help you stay within your income while you the future, the formula and financial calculator computations are as follows:
save and invest for the future. The main source of financial difficulties is overspending.
2. Having appropriate insurance protection will help you prevent financial disasters.
3. Becoming informed about tax and investment alternatives will help you expand your
financial resources.

Ppt6
Future value of a single amount:
• The future value of an amount consists of the original amount plus compound interest. Present value of a series of equal amounts (an annuity):
• This calculation involves the following elements: The final time value of money situation allows you to receive an amount at the end of
each time period for a certain number of periods. The formula and financial calculator
• FV = Future value computations are as follows:
• PV = Present value
• i = Interest rate
• n = Number of time periods

Future value of a series of equal amounts (an annuity)

Future value may also be calculated for a situation in which regular additions are made to
savings. The formula and financial calculator computations are as follows:
Ppt 7:
Time value of money:
Future values:
Present Values:
Ppt 8:
Financial and personal aspects of career choice:
• Consider the trade-offs of career decisions.
▪ Evaluate the trade-offs related to personal, social and economic factors.
• Formal training affects financial success.
• Competencies of successful people include
willingness to cope with conflict and adapt to change.
Stages of career planning and advancement:
Social Influences on career opportunities:
Personal factors affecting career selection:
• Aptitudes - What natural abilities, such as working well in team settings, do you
possess?
• Interest’s inventories - Help you determine what gives you satisfaction.
• Your personality - How much structure do you like? Do you perform best
in low-pressure or high-pressure working environments?
• Assess and research personal goals, abilities, and career fields.
• Evaluate the employment market, identify employment opportunities.
• Develop a resume and cover letter. Apply.
• Interview. Assess your performance.
• Evaluate the positions you are offered.
• Plan and implement a program for career development.
• Demographic trends
▪ Increase in working parents means more
demand for food service and child care.
▪ More leisure time means more interest in health, and recreation products and
services.
▪ An increase in the number of older people raises demand for travel, health
care services, and retirement facilities.
▪ Increased demand for further employment training creates opportunities for
teachers and trainers.
• Geographic trends
▪ Where jobs are, salaries, and living costs.
Economic conditions affect career opportunities: ▪ Volunteer work - develop organizational skills.
• Career opportunities are affected by… ▪ Internships - experience helps obtain employment.
▪ High interest rates. ▪ Campus projects - helps obtain career skills.
▪ Price increases. • Using career information sources.
▪ Decreased demand for goods and services. ▪ Library materials.
▪ Mass media career information.
Trends in industry and technology affect career opportunities: ▪ World wide web.
• Increased competition from Asia, Europe, and other regions has reduced ▪ Campus career development office.
demand for American-made products.
• Automated production methods have decreased the need for many entry-level
Identifying job opportunities:
employees in factories.
• Job advertisements.
• Some service industries are expected to have the greatest potential employment in
the 21st century... • Career fairs.
• Employment agencies.
Service industries expected to Have the Greatest Employment Potential Include: • Job creation.
• Computer technology. • Visit companies.
• Health care. • Telephone and business directories.
• Business services. • Web search.
• Social services. • Talk with alumni in your field.
• Sales and Retailing.
• Hospitality and food services. Applying for employment:
• Management and human resources. • Resume:
A resume is a formal document that a job applicant creates to itemize their qualifications
• Education.
for a position. A resume is usually accompanied by a customized cover letter in which
• Financial services. the applicant expresses an interest in a specific job or company and draws attention to
the most relevant specifics on the resume.
American job coaches insist that a resume should be only one or two pages in length.
Employment search strategies:
British job applicants traditionally are expected to produce a somewhat more detailed
• Obtaining employment experience. document, called a CV (curriculum vitae).
▪ Part-time employment. - do you like the work?
 • Cover Letter: Long-term career development:

A cover letter is a document sent alongside your CV when applying for jobs. It acts as a • Training opportunities.
personal introduction and helps to sell your application. A cover letter is necessary as it • Career paths and advancement.
gives you the chance to explain to an employer why you're the best candidate for the job. • Changing careers.
You do this by highlighting relevant skills and experience; therefore, you should always
write your cover letter with the position you're applying for in mind. Stages of career development:

• Interview:

An interview is essentially a structured conversation where one participant Pre-entry and career
asks questions, and the other provides answers.[1] In common parlance, the word
"interview" refers to a one-on-one conversation between an interviewer and
exploration.
an interviewee. The interviewer asks questions to which the interviewee responds, usually
providing information.

Resume activity: Establishment and

• If you do not already have a resume-prepare one.
professional growth.
• Trade resumes with another student in the class
• Evaluate your partner’s resume
• Discuss each other’s resumes and offer suggestions for improving them
Advancement and mid-career
Financial and legal aspects of employment:
adjustment.
• Research the job and the company before
accepting an employment position.
• The work environment.
▪ Corporate culture. Late-career and pre-retirement
▪ Company policies and
procedures. stage.
• Factors affecting salary.
▪ Education, training, company size, and comparable salaries, responsibilities 1. Exploration:
• Evaluating employee benefits.
▪ Nonsalary benefits include child care, leaves of absence, and elder care. The exploration stage is the pre-employment stage, wherein the individuals are in their
▪ Cafeteria-style benefits allow workers benefit credits that they can choose to mid-twenties and enter from their college life to the work environment. The individuals
meet their needs. narrow down their work preferences on the basis of the directions shown by their parents,
▪ Flexible spending and medical savings accounts. friends, family, teachers.
▪ Compare job offer benefits based on market value or future value At this stage, several expectations about the work are created that may be the fantasies, or
▪ Know your employment rights unrealistic beliefs about the work, very much before entering into the firm.
 2. Establishment: Elements of developing a resume:

At this stage, an individual actually experiences the work culture in his first job. • Personal data section.
Here, all the expectations and fantasies come to an end, and one has to face the reality of
life. This stage covers about 10 years from the 25 years of age. • Career objective section.

It is also called as a learning stage; wherein the fresher learns under the guidance of a
mentor. At this stage, the fresher commits many mistakes and try to learn from these,
thereby gaining a position in the society and working for his career advancement.
3. Mid-career:
This stage covers the age period of 35 to 45 years. At this stage, the individual is
no longer considered to be a fresher and his mistakes are taken seriously by the senior
management.
Here, the employee must evaluate his current career position, i.e. whether he is
advancing, or has stabilized or has started to decline and look for the future career
prospects. At this stage, an individual has to maintain a balance between his career and
his personal life i.e. spouse and children.
4. Late- career:
At this stage, an individual reaches to a particular position in the organization
hierarchy, on the basis of his career graph which is characterized by growth or stagnation.
If an individual grows even after the mid-career (i.e. 20 years after mid-forties), then he is
considered to be having the pleasant experience with the work. Here, an individual
becomes the mentor and guide others through his experiences.
5. Decline:
This is the last stage of career development. At this stage, an individual has to
step out of his work or get a retirement from his official commitments. It is considered as
one of the difficult stages, as it is very hard for the employees to leave the firm who are
doing excellent even after their late career.
• Education section.
• Experience section.
• Related information section.
• References section.
Three types of resumes:
1. Chronological Resume:
The chronological resume is exactly what its name implies. Your work history
is listed in order, according to dates. Begin with your most current position and end with
the earliest. Many employers prefer this type because it gives them an overview of your
experience.
This basic resume type is best for those people with a solid employment background who
have no lapses in their work history. It is also beneficial if most of your experience
coincides with the job you are interested in.
Generally, the last 10-15 years should be listed on the resume. Start with the most current
position and work backward. It is not etched in stone that only full-time jobs should be
listed. Include part-time positions, volunteer work, or anything else that will emphasize
the skills you have to offer.
2. Functional:
A functional resume focuses on your skills and experience and de-emphasizes
your work history. Employment history is secondary to the abilities you have to offer.
This basic resume type is preferable if you have lapses in employment. The gaps could
occur for any number of reasons such as raising a family, illness, or job loss.
It is also beneficial for new graduates who have limited employment experience or people ▪ Include how to contact you.
who are in the middle of a career change. Those who have had diverse occupations with
no focused career path will also find this basic resume type helpful. ▪ Summarize how you can help the company

3. Targeted: The Job Interview:

The final format you might want to consider is a targeted resume. This basic • Prepare for the interview by getting information about your prospective employer.
resume type is customized and specific to the position you want. Your work history,
abilities, and education are reflections of the job requirements. ⧫ Library resources such as annual
reports or recent articles.
For example, if you were applying for a position as a book editor in a publishing
company, you could emphasize your master’s degree in English and your internship with ⧫ Internet searches of company
an editor during your senior year. Perhaps you worked part time as a proofreader to help and industry information.
with college expenses. List the writing contests you’ve won. All these things would make
an employer want to know more about you.
⧫ Observations during company visits.

• Prepare questions to ask about your interests, the organization, policies, and
benefits.
Creating a cover letter:
• Practice interview skills.
• Introductory paragraph.

• Get reader’s attention.

The Interview Process:
▪ Overview your qualifications.
• Dress appropriately.
• Development paragraph.
• Arrive about 10 minutes early.
▪ Specific qualifications.
• The interview process.
▪ Refer to details on resume.
⧫ A screening interview is an initial, brief contact to reduce the pool of
▪ Experiences and training. candidates.

• Concluding paragraph. ⧫ “E-interviews” - Some screening is done online.

▪ Ask for interview. ⧫ The selection interview is for finalists, and may involve a series of activities.
 • After the interview. ▪ What are the dollar and psychological costs of using credit for this purchase?

⧫ Follow-up thank you letter.

Advantages of credit:
⧫ Evaluate your interview performance. • Current use of goods and services.
• Permits purchase even when funds are low.
• A cushion for financial emergencies.
Introduction to Consumer Credit: • Advance notice of sales.
Consumer credit is personal debt taken on to purchase goods and services. A credit • Easier to return merchandise.
card is one form of consumer credit.
• Convenient when shopping.
Although any type of personal loan could be labelled consumer credit, the term is more
often used to describe unsecured debt that is taken on to buy everyday goods and • One monthly payment.
services. However, consumer debt can also include collateralized consumer loans like • Safer than cash.
mortgage and car loans.
• Needed for hotel, car reservations and shopping online.
Consumer credit is also known as consumer debt. • To take advantage of float time/grace period.
Three ways consumers can finance purchases.
• May get rebates, airline miles, or other bonuses.
▪ Draw on their savings. • Indicates financial stability.
▪ Use present earnings.
▪ Borrow against expected future income. Disadvantages of consumer credit:
• Trade-offs with each alternative.
• Temptation to overspend.
• Consumer credit: Major economic force.
• Can create long-term financial problems, slow progress toward financial goals.
• Potential loss of merchandise
Use and Misuse of credit: due to late or non-payment.
• Before you use credit for a major purchase, ask yourself some questions. • Ties up future income.
▪ Do I have the cash for the down payment? • Credit costs money - more costly than paying with cash.
▪ Do I want to use my savings for this purchase?
▪ Does this purchase fit my budget? Types of credit:
▪ Could I use the credit I’ll need in some better way? • Closed-End Credit.
▪ Can I postpone this purchase? ▪ One-time loans for a specific purpose that you pay back in a specified period
of time, and in payments of equal amounts.
▪ What are the opportunity costs of postponing this purchase?
 • Mortgage, automobile, and installment loans for furniture, appliances • Check credit report.
and electronics.
• Open-End Credit.
When you make Purchases online:
▪ Use as needed until reaching line of credit max.
• Use a secure browser.
• Credit cards, departments store cards, bank credit cards, incidental
• Keep records of online transactions.
credit.
• Review monthly statements-can do so online.
▪ You pay interest and finance charges if you do not pay the bill in full when
due. • Read policies of the websites you visit concerning refunds, site security, and
privacy.
• Keep personal information private unless you know who is gathering it and why.
Credit Cards:
• Shop at businesses you know and trust.
• Eight out of ten U.S. households carry one or more credit cards.
• Never give out your password to anyone online.
• One-third are convenience users- pay balances in full each month.
• Don’t download files sent by strangers.
• Two-thirds are borrowers, carrying a balance over, paying finance charges.
• Some use cards for cash advances - expensive.
Measuring your credit capacity:
• Co-branding - linking a credit card with a business offering rebates on products and
services. • Before you take out a loan, ask yourself:
• Smart cards have an imbedded computer chip. ▪ Can you afford the loan?
• Debit cards: similar impact as writing a check. ▪ What do you plan to give up in order to make the payment?

Protecting yourself against credit cards fraud: General rules of credit capacity:
• Sign new cards when they arrive. • Debt Payments-to-Income Ratio
• Treat cards like money - keep them secure.
monthly payments *
• Shred anything with your account number on it.
• Don’t give your number over the phone unless you initiate the call, and don’t put it net monthly income
on postcards.
• Get card & receipt after every transaction: compare receipts to bills when they Consumer credit payments should not exceed a max of 20% of your net income.
arrive, checking for errors.
*Not including house payment which is a long-term liability
• Notify the card issuer if you don’t get your billing statement, or if your card is lost
or stolen.
▪ If stolen call helpline numbers
 • Debt To Equity Ratio • If denied credit based on your report, you can get a free copy of your credit report
w/i 60 days of your request.
• Credit card companies must correct inaccurate or incomplete information.
• Only authorized persons have access to your report.
*Excluding home value
• Adverse data can be reported for seven years; bankruptcy for ten years.
Co-signing a loan:
• The creditor will give you a notice that tells you…
What if you are denied credit?
▪ You are being asked to guarantee the debt, so consider if you can afford it if
the borrower defaults. • Check your credit file at the credit bureau.
▪ If the borrow does not pay you may have to pay up to the full amount and
also any late or collection fees. • If you believe reasons for denial are invalid: file suit &/or notify federal
▪ If a payment is missed the creditor can collect the debt from you without first enforcement agency.
trying to get it from the borrower. • Ask the creditor to clarify reason for denial. If you believe the denial is valid:
• If you do cosign, consider... ▪ Apply to another creditor with different standards.
▪ Can you afford to pay the loan? If not, your credit rating could be damaged.
▪ Take steps to improve your creditworthiness.
▪ Liability for this debt may prevent you from getting other credit that you
want. ▪ You have the right to provide a 100 word explanation in your file.
▪ If you put up collateral, you could lose it if the loan goes into default.
▪ Check your state’s law to learn about cosigner’s rights.
▪ Request that a copy of overdue payment notices be sent to you. What creditors look for: 5 Cs
• Capacity: Likely the most important of the five, capacity is your business’ ability to
Build and maintain your credit rating: repay loans. Make sure your business plan demonstrates steps to repay any loans
• Limit your borrowing to your capacity to repay. you borrow. Specifically, lenders look at revenue, expenses, cash flow and
repayment timing and will look at your business and personal credit scores.
• Live up to the terms of contracts.
• Capital: The cash you put toward starting your business is called capital, and it’s a
• Check to see what is in your credit report.
good way to show a lender how serious you are about success. It’s unlikely that
▪ Credit bureaus collect information. you’ll be able to finance 100 percent of your startup or acquisition costs, so to get a
loan, you’ll need to make an investment in your business first. This may come from
▪ Experian, Trans Union and Equifax. deposits or money from other sources.
▪ FTC gets about 12,000 complaints about credit bureaus each year.
▪ Bureaus get information from banks, finance companies, credit card • Collateral: When evaluating a loan application, a lender will generally look at
companies, merchants, other creditors. collateral as a secondary source of repayment for the loan. They’ll want to make
sure that if the loan payments stop for some reason, they can recover what they’re
owed through collateral. This could be equipment, vehicles or inventory. The loan
Fair credit reporting act: amount will be based on a percentage of the collateral’s value, which is called the
loan-to-value ratio (LTV). Different types of collateral have different LTVs.
Is your credit report accurate?
 • Conditions: Be prepared to demonstrate that there’s a market for your business and What role does CIBIL play?
a clear purpose for the loan. Base your arguments on the local, regional and
national economy, the competitiveness of the business, the type of industry and
your experience in it, and your experience managing a business.

• Character: The final C includes a look into who you are as a borrower, including
your educational background, business experience and personal credit history.
Your personal credit history is important because you may be required to
personally guarantee the loan. Statistics show that the way a person handles
personal credit generally indicates how he or she will manage business credit. Any
references or other background information you can provide will be considered. It
helps if you and your employees have experience and a positive reputation in your
business’ industry.

Fair debt collection practices Act:

Collection agencies...
• Can’t be abusive or threaten.
• Can’t call you at work if you say not to.
• Can’t tell boss and friends.
• Can’t call you at odd hours.
• Must follow set procedures.
• Act does not apply to creditors attempting
to collect the debt themselves

CIBIL Score:
The Credit Information Bureau (India) Limited (CIBIL) is the most popular of the four
credit information companies licensed by Reserve Bank of India. There are three other
companies also licensed by the RBI to function as credit information companies. They are
Experian, Equifax and Highmark. However, the most popular credit score in India is the
CIBIL score. Let’s find out what is CIBIL score.
CIBIL Limited maintains credit files on 600 million individuals and 32 million
businesses. CIBIL India is part of TransUnion, an American multinational group. Hence
credit scores are known in India as the CIBIL TransUnion score.

CIBIL Score is a 3-digit numeric summary of your credit history, rating and report, and
ranges from 300 to 900. The closer your score is to 900, the better your credit rating is.
 Contents of consumer CIR:

What do lenders look for in CIR?

• Debt Burden Ratio
• Past payment behaviour
Participants of CIBIL:
• Status of filled suits against borrower
• Banks • Credit score (high or low)
• Financial Institutions • Loan accounts or credit card account
• Non-banking financial companies
• Housing finance companies
Benefits of CIBIL:
• State financial companies
• Credit card companies ❖ For credit Grantor:
• Know more about the credit worthiness of all borrowers.
• Effective decision about grant of credit
CIBIL Score:
• Maintain competitive advantage
• Credit score is a three-digit score in the range of 300 – 900 • Ascertainment of repayment ability of borrowers
• Lower cost of credit evaluation due to automated decision-system.
• Lower the score –higher the prob. Of default
• Quick and effective credit approval process
• 90% of loans are having CIBIL score above 750
❖ For borrower:
• Faster access to credit, if the score is good enough
• Reduced cost of borrowing
• Easy credit assessment and approval process,
• Reputation for those borrowers who follow a correct and timely repayment
behaviour.
• Becomes more responsible towards financial commitments.

Investing in securities:
Securities include a broad range of investments.
➢ Stocks:
When you invest in a stock, you become one of the owners of a corporation. Stocks
represent ownership shares, also known as equity shares. Whether you make or lose
money on a stock depends on the success or failure of the company, which type of stock
you own, and what’s going on in the stock market overall and other factors.

Stocks and stock mutual funds often can be an important component of a diversified
investment portfolio. Learn more about different types of stocks and how to assess
whether a given stock is right for you.

➢ Bonds:
A bond is a loan that an investor makes to a corporation, government, federal
agency or other organization. Consequently, bonds are sometimes referred to as debt
securities. Since bond issuers know you aren't going to lend your hard-earned money
without compensation, the issuer of the bond (the borrower) enters into a legal agreement
to pay you (the bondholder) interest. The bond issuer also agrees to repay you the original • Good investors know something about the company before they invest in the
sum loaned at the bond's maturity date, though certain conditions, such as a bond being company’s stock.
called, may cause repayment to be made earlier.
• Gather information to evaluate a potential investment in a stock.
➢ Mutual Funds:
• Learn what the information you gather means.
Mutual funds are a popular way to invest in securities. Because mutual
funds can offer built-in diversification and professional management, they offer certain ▪ Are sales increasing?
advantages over purchasing individual stocks and bonds. But, like investing in any ▪ Are revenues increasing over time?
security, investing in a mutual fund involves certain risks, including the possibility that
you may lose money. ▪ Are earnings per share increasing over time?
• There are periods where stocks decline in value.
Technically known as an "open-end company," a mutual fund is an
investment company that pools money from many investors and invests it based on • The key to success is to allow investments to work for you over the long-term.
specific investment goals. The mutual fund raises money by selling its own shares to
investors. The money is used to purchase a portfolio of stocks, bonds, short-term money-
Why corporations issue common stock:
market instruments, other securities or assets, or some combination of these investments.
Each share represents an ownership slice of the fund and gives the investor a proportional • To raise money to expand a business.
right, based on the number of shares he or she owns, to income and capital gains that the • They don’t have to repay the money a
fund generates from its investments. stockholder pays for stock.
➢ Options (ESOP): • Dividends are not mandatory. Most corporations distribute 30-70% of their
earnings to stockholders.
Options are contracts that give the purchaser the right, but not the obligation, to
• In return for investing in the company, stockholders have voting rights.
buy or sell a security, such as a stock or exchange-traded fund, at a fixed price within a
specific period of time.
Why do investors purchase common stock?
Options can help investors manage risk. But buying and selling options also involves risk,
and it is possible to lose money. It pays to learn about different types of options, trading • They can make money in three ways.
strategies and the risks involved.
▪ Income from dividends in the form of cash or additional stock.
➢ Commodities: ▪ Appreciation of stock value.

Commodity funds invest in raw materials or primary agricultural products, known ▪ Possible increased value from stock splits.
as commodities. These funds invest in precious metals, such as gold and silver, energy ▪ Bonus shares
resources, such as oil and natural gas, and agricultural goods, such as wheat. Commodity
funds may also invest in the companies that produce these commodities.
When should you sell a stock?

Beginning to invest in stocks: • Follow the value of the stock. Do you have a certain price at which you will sell?
• Watch the company’s financials - are profits going up or down? If their profits
are well below the industry average it may be time to sell.
 • Track the firm’s product line. Are they state-of-the-art or becoming obsolete?
• Monitor economic developments. For example, will people buy cars if interest
rates or unemployment rates are high?
• Be patient. Allow time for a good stock to increase in value before you sell.
Preferred Stock:
Preferred stock, also known as preference shares, are shares in a company that are
given priority over common stocks when it comes to dividend payments. While
bonds are prioritized over preferred stock, shareholders of preferred stock are
always paid dividends before common stock dividends are paid out. Typically,
preferred stocks have a fixed dividend, unlike common stocks.
While common stock shareholders have voting rights within the
organization, this right is generally not afforded to holders of preferred stock.
Common shareholders are usually entitled to one vote per share owned.
Shareholder votes are used for corporate policies and business decisions, meaning
having the power to vote gives you some influence in the direction of the company.
Features of preferred stock:
• Cumulative feature.
▪ Unpaid cash dividends accumulate and must be paid before any cash
dividends are paid to the common stock holders.
• Conversion feature.
▪ Can be converted into shares of common stock in the same company.
Classification of stock investments:
➢ Blue chip Stock:
Blue chip stocks are shares in large, stable companies that are
continually profitable. They grow slowly and their earnings are extremely dependable.
These stocks are expensive but provide the lowest risk and have an established track
record for earnings.
➢ Income Stock:
Income stocks often are blue chip stocks from well-established
companies. The stocks normally pay high dividends; at times this may include the
majority of earnings. This is the least volatile class of stock that provides investors with
a consistently growing income stream. Companies with this type of stock are usually in
stable industries such as energy, finance, utilities and natural resources.
➢ Growth Stock:
Growth stocks are issued by companies that are expected to have
high earnings. However, the earnings are reinvested back into the business to fund
development. These stocks pay low dividends, if any. This doesn't deter some investors,
because as the company grows, its stock value is likely to increase.
➢ Cyclical Stock:
Cyclical stocks are dependent on the health of the economy.
During strong economic times, the stocks flourish. During tough economic times, they
lose a substantial amount of value. The companies that issue these types of stocks can
be found in the airline industry, electronics or car manufacturing.
➢ Defensive Stock:
Defensive stocks are in industries that offer products and services that
people need, regardless of how well the overall economy is doing. For example, most
people, even in hard times, will continue filling their medical prescriptions, using
electricity, and buying groceries. The continuing demand for these necessities can keep
certain industries strong even during a weak economic cycle.
Different types of stocks to invest in:
Mega Cap:
Companies with a market cap exceeding Rs. 20,000 Cr. usually blue chip stocks with
strong brand recognition; excellent track records and a history of wealth creation, such
as ITC, SBI, Coal India etc
Large Cap:
Large-cap stocks are generally considered safer and more conservative as investments,
while mid caps and small caps have greater capacity for future growth but are riskier.
Market cap between Rs. 7,000 Cr. and Rs. 20,000 Cr • Price-earnings ratio.
• Number of shares traded during the day.
Mid Cap: • The high and low price of the day.
Mid-cap stocks are stocks of companies with medium-size market capitalizations or • The price paid in the close transaction of the day.
valuations. They're so named because they fall between small-cap and large-cap stocks.
• The net change from the day before.
Companies with a market cap between Rs. 500 Cr. and Rs. 7,000 Cr.

Numeric measures that influence investment:

Small Cap:
• Corporate earnings play a large part in the increase or decrease in value of a stock.
Small-cap is short for small market capitalization, which is equal to a company's share
• Earnings per share are the corporation’s after-tax earnings divided by the number
price times the number of shares outstanding.
of outstanding shares of common stock. An increase in earnings is generally a
Companies with a market cap upto Rs. 500 Cr. healthy sign.
• Price-earnings (PE) ratio.
Internet stock information: ▪ Price of one share of stock divided by the earnings per share of stock over
the last 12 months.
• A Company’s home page has more up-to-date information than their printed
materials. • PEG ratio = PE ratio÷ Yrly. EPS growth
▪ Annual report, earnings, and other financial factors. • Dividend payout = Dividend Amt. ÷ EPS
• http://finance.yahoo.com. • Total return = Current rtn. + Capital gain
• www.moneycontrol.com • Annualized holding period gain = Total return/Original investment X 1/Number of
years investment is held.
• www.morningstar.com
• www.equitymaster.com
• www.bloomberg.com
• www.reuters.com

How to read the newspaper financial section:

• You will see stock quotes in newspapers such as The Wall Street Journal, Business
line and economic times
• 52 week high and low price.
• The name of the company, and ticker symbol.
• Projected annual dividend and yield percentage.
• The current yield helps you monitor the value of your investments. It is the yearly
amount of income generated by an investment divided by the investment’s current
market value. An increase in current yield is considered good.
• Beta is a measurement of risk. The beta for
stock index is 1.0. Conservative stocks generally have low betas and speculative
 stocks have high betas. If a stock has a beta of two, its price will move twice as
fast as the market in either direction.
• Book value per share.
• Net worth of company determined by deducting all liabilities from the
corporations assets and dividing the remainder by the number of outstanding
shares of common stock.
• If a share costs more than the book value the company may be overextended
or it may have a lot of money in research and development.
Investment Theories:
➢ Fundamental analysis:
o Based on the assumption that a stock’s intrinsic or real value is determined
by the company’s future earnings.
o Fundamentalists consider the…
▪ Financial strength of the company.
▪ Type of industry company is in.
▪ New-product development.
▪ Economic growth of the overall economy.
➢ Technical analysis:
o Based on the assumption that a stock’s value is determined by the forces of
supply and demand in the stock market as a whole.
o Not based on expected earnings or the intrinsic value of a stock but rather
on factors found in the market as a whole.
o Chartists plot past price movements and other market averages to observe
trends they use to predict a stock’s future value.
➢ Efficient market theory:
o Sometimes called the random walk theory.
o Based on the assumption that stock price movements are purely random.
o A stock’s current market price reflects its true value.
o It is impossible for an investor to outperform the average for the stock
market as a whole over a period of time.
Buying and selling stocks:
❖ Primary market:
o A market in which an investor purchases financial securities through an
investment bank, or other representative, from the issuer of those securities.
o An investment bank is a financial firm that assists corporations in raising funds,
usually by helping to sell new security issues.
o An IPO occurs when a corporation sells stock to the general public for the first
time.
❖ Secondary market:
o A market for existing financial securities that are currently traded among
investors through brokers
Securities Exchange:
• A marketplace where member brokers who represent investors, meet to buy and
sell securities.
• The securities sold at an exchange must be listed, or accepted for trading, at the
exchange.
• BSE, NSE, NYSE etc.
• The Over-the-Counter (OTC) market.
▪ Network of dealers who buy and sell the stocks of companies not listed on a
securities exchange.
Stock transactions:
➢ Market order:
A market order is an order to buy or sell a security immediately.
This type of order guarantees that the order will be executed, but does not
guarantee the execution price. A market order generally will execute at or near the
current bid (for a sell order) or ask (for a buy order) price. However, it is important
for investors to remember that the last-traded price is not necessarily the price at
which a market order will be executed.
➢ Limit Order:
A market order is an order to buy or sell a security immediately. This
type of order guarantees that the order will be executed, but does not guarantee the
execution price. A market order generally will execute at or near the current bid
 (for a sell order) or ask (for a buy order) price. However, it is important for Ppt12:
investors to remember that the last-traded price is not necessarily the price at which
a market order will be executed. Indian Capital Market:

➢ Stop Order: Market

Regulator SEBI
A stop order, also referred to as a stop-loss order is an order to buy or
sell a stock once the price of the stock reaches the specified price, known as the stop
price. When the stop price is reached, a stop order becomes a market order. Stocks and
Commodities Other
➢ Discretionary order: Depositories
Derivative Intermediaries
Exchanges
A discretionary order is one where a broker or other financial markets
professional can place and work an order without explicit acknowledgment from the
customer. These orders can broaden the specification of standard types of conditional
orders to give an order a higher likelihood of execution. Additionally, discretionary
orders help to improve the chances of order execution while still also allowing the
investor to place certain conditional constraints.

Starting investment in capital market:

Long-term and short-term investment strategies:
• Long-term techniques.
▪ Buy and hold.
▪ Rupee cost averaging.
▪ Direct investment and dividend
re-investment plans. (DRIPS)
• Short-term techniques.
Many DPs offer a 3-in-1 account opening facility which gives you the convenience of
▪ Buying stock on margin (borrowing money).
opening a trading, demat and bank account – all together. Now some DPs are now
▪ Selling short (borrowing stock). offering online demat account opening. Trading or Broking account is required only if
you want to buy / sell shares through stock exchange.
▪ Trading in options (predetermined price).
▪ Day trading
About NSDL:
National Securities Depository Limited (NSDL) is an Indian central
securities depository under the jurisdiction of Ministry of Finance, Government of India
based in Mumbai. It was established in August 1996 as the first electronic securities
depository in India with national coverage. It was established based on a suggestion by a operating from more than 30,700 service centers spread across the country, and few in
national institution responsible for the economic development of India. abroad too.
NSDL provides bucket of services to investors, stock brokers, custodians, issuer
companies, Saving account current account Business corresponding etc. through its
Services offered by Depository Participant:
nationwide network of Depository Participants or DPs and digital platforms.

Indian Capital Market – Depository System:

The interlinks between Depository and various other stakeholders in the capital
markets are shown below:

Issuer Company / RTA

Clearing Corporation (NSE Clearing

Other Depository Limited/ Indian Clearing Corporation
Limited)

Even unlisted shares can be dematerialized. **Transfer of securities held in physical

form not allowed w. e. f. April 1, 2019. Re-lodgement of transfer deeds which were
submitted prior to this, but were rejected or returned, was allowed till March 31, 2021.
DP 2 Shares pending for transfer with listed company / its RTA shall be issued only in demat.
DP 1

NSDLs Investor centric e-services:

Stock Broker / Stock Broker /

Trading Member 1 Investor 1 Investor 2 Clearing Member 2

NSDL’s contribution to Indian Capital Markets has made it one of the Leading Capital
Markets on multiple fronts in the world. With the adoption of state of art technology for
various products and services and un-matched reach within the country, NSDL has won
the trust of investors and other intermediaries, thus standing true to its tag line –
Technology, Trust & Reach. NSDL provides a bouquet of services to investors,
stockbrokers, stock exchanges, custodians etc. through its network of more than 275 DPs
(Depository Participants). Many big banks (nationalized, private and co-operative),
stockbrokers and financial institutions have joined NSDL as DPs. NSDL DPs are
Be a prudent investor: Why do we invest?
Investment is necessary to support your financial needs when you do not earn money.
1. By investing a portion of your income you allow money to grow and work for you.
Keep record of documents signed, account statements, contract notes received
and payments made. Save important emails and take periodic back up of data. 2. 3 parameters to assess suitability of any investment avenue are –
i. Return potential
ii. Safety

Change password of your online accounts frequently. Never share OTP and PIN iii. Liquidity
with any one. 3. Various avenues where money can be invested, are broadly classified into some
groups, known as ‘Asset Class’. Stocks or Equity shares are most popular class of
assets.

Read SMS, emails, letters, statements, bills sent by your broker, bank, DP and
NSDL. These are sent to you to keep you updated. What is meant by stock selection?

Accept the DIS only if serial number is pre printed and Client ID is pre stamped
or pre printed. Keep DIS in safe custody.

Inform your DP about any change in your Personal Information such as address,
bank account immediately.

Always mention your Mobile Number and email ID in account opening form and
keep them updated. Do not act on Unsolicited SMS and emails providing Tips,
stock recommendations, assured returns etc.

Types of analysis:
Our publications are available in Hindi, English and other languages at
www.nsdl.co.in → Education

Schedule of Awareness Programs, Registration and Feedback facilities are

available at www.nsdl.co.in
Fundamental Analysis: Using Financial Ratios for Fundamental Analysis:
Fundamental analysis is a method used to identify the true value of a stock. 1. Price To Earnings Ratio
1. The current price of a stock may not reflect the actual value of the stock. The stock i. It is one of the most widely used financial ratio analysis.
may be overvalued or undervalued in the market.
ii. Computation - Price Per Share / Earnings Per Share
2. Fundamental analysis helps investors to study the health of the company, and thus
iii. As a thumb rule, a low P/E ratio is preferred while buying a stock.
leading to the actual value of the stock.
2. Price To Book Value
3. This is done by using various qualitative and quantitative factors.
i. Computation - Current price of the stock / Book value per share.
4. The main purpose of this method is to identify companies that that are
fundamentally strong in order to invest in them for the long term. ii. A lower P/BV ratio could mean that the stock is undervalued.
However, the definition of lower varies from sector to sector.
Types of fundamental analysis: 3. . Return On Equity (ROE)
i. It is the amount of net income returned as a percentage of shareholders equity.
1. Qualitative Analysis ii. Computation - Return on Equity (Net Income) / Average Stockholder Equity
It takes into account information that can’t be expressed in numbers. 4. Debt To Equity Ratio
i. It relates to the company itself. i. It measures the relationship between the borrowed capital (i.e. debt) and the
capital contributed by shareholders (i.e. equity).
ii. Factors – examples – ii. Computation - Total Liabilities / Total Shareholder Equity
a) Management experience and performance iii. As a thumb of rule, companies with a debt-to equity ratio more than 1 are
riskier.
b) Corporate governance 5. Current Ratio
i. It is a key financial ratio for evaluating a company's liquidity.
c) Industry and competition etc.
ii. Computation - Current Assets / Current Liabilities
iii. As a thumb rule, a company with a current ratio greater than 1 is better.
2. Quantitative Analysis
i. It is related to information that is shown in company’s financial statements. It Economic Analysis:
involves measuring simple statistical data to complex calculations
1. It involves assessing or examining topics or issues from an economist’s perspective
ii. This analysis helps you to evaluate investment opportunities such as when to buy
and sell securities. 2. This allows investors to analyse the market from the big picture to all the way
iii. Factors – examples - down to individual stocks.
a. Company’s revenues
3. By examining the economic numbers one can determine the current market
b. Profit margins strength and have a better idea of what the future holds.
c. Return on equity 4. Key Economic indicators investors must incorporate while selecting stocks:
d. Future growth potential i. Indices (e.g. Nifty, Sensex)
e. Financial ratios ii. GDP
iii. Unemployment rate
 iv. Inflation rate ➢ Line Charts:
This is one of the most familiar charts which plot the price of a share against
v. Consumer Confidence
a trading day. It usually depicts the closing price and the duration for which this is
vi. Purchase Managers' Index plotted could range from a few days to few years depending on the need. The line
formed by joining the dots plotted on the graph shows the movements in stock price
during the period.
Technical Analysis:

➢ Bar Charts:
1. It plots the intra-day high and low prices of a stock using a bar for each trading day
for a specified time period.
2. The top of the bar corresponds to the day’s high and the bottom, day’s low.
3. Two additional horizontal lines indicate the opening and closing price. The length
of the bar is proportional to the volatility in a stock.
4. Colored coded - If the share price closes above the open price it is colored green,
and if the close is below the open the bar is colored red.

➢ Candlestick Chart:
1. It displays the relationship between the high & low and opening & closing prices
of a stock.
2. The body of the candle represents the opening and closing prices during the
period.
Basic terms used in study of price charts:
3. Above and below the body are vertical lines called wicks or shadows that show
the lows and highs of the traded prices.
4. While an individual candle provides sufficient information, patterns can be
determined only by comparing one candle with its preceding and next candles.

Difference between fundamental and technical analysis:

Price charts:
Technical analysts use a variety of charts based on the information they seek. However,
there are three types of charts that are most commonly used. They are: Line, Bar and
Candlestick
 5 Steps approach for great stock picking:

1. Approach stock purchases as buying a business rather than just a stock purchase in
the portfolio.
2. Evaluate the true worth of the business considering the future earning potential.
3. The margin of safety is the real risk containment measure, and not stop loss.
4. Do not depend on turnaround as it seldom occurs.
5. Invest for the long term to generate inflation-adjusted superior returns.