FIN 8722 – Group Assignment

SUBMITTED BY

STUDENT NAME 1.SANI SONI

2.KULDEEP KUMAR
3. FARISHTA SAPRA

STUDENT ROLL NO. .220010301051

2. 220010301011
3. 220010301092

PROGRAMME MASTER OF ADMINISTRASION

SESSION/SEMESTER 4TH

SUBMITTED TO

FACULTY MR.GIRISH AHUJA

SUBMITTED TO- MR. GIRISH

AHUJA (SOM)
 TRACK-
Create an assignment using a comprehensive financial plan for a client giving
details

1. Profile of the client

a. Family background and details

b. Financial figures – Balance Sheet, Cash flow

2. Goal setting

3. Budget allocation

a. Analysis of current situation of client

b. Analysis of current economic scenario

c. Initial advice to client

4. Proposed investment/disinvestment/loan

a. Portfolio designing

i. Equity

ii. Debt

iii. Mutual Fund

iv. Gold

v. Real estate

vi. Any other

5. Tax planning

6. Comprehensive Plan
 ACKNOWLEDGEMENT

I would like to express my profound gratitude to all those who have been instrumental in the
preparation of my report on Personal Wealth Management.

To start with, I would like to thank MR GIRISH AHUJA, Faculty- Finance, GD GOENKA
UNIVERSITY, for providing me the chance to undertake this project & gain insights about Personal
Wealth Management which would prove out to be very beneficial to me in my future assignments,
my studies and my career ahead.

I express my profound sense of gratitude and veneration to you for your deep insights and classroom
teaching which provided me with valuable qualitative data that have formed the backbone of this
study.

I would also like to thank my client MR ANIL SONI for his continuous co-operation

SANI SONI
 CONTENT

Literature review ....................................................................... 5

Personal Wealth management: ........................................................................................................... 5

Portfolio Management process:.............................................. 6

1. Profile of the client
a. Family background and details
b. Financial figures – Balance Sheet, Cash flow
2. Goal setting
3. Budget allocation
a. Analysis of current situation of client
b. Analysis of current economic scenario
c. Initial advice to client
4. Proposed investment/disinvestment/loan
a. Portfolio designing
i. Equity
ii. Debt
iii. Mutual Fund
iv. Gold
v. Real estate
vi. Any other
5. Tax planning
6. Comprehensive Plan
References: ................................................................................22
Questionnaires 23
 LITRETURE REVIEW

Personal Wealth management:

Personal wealth management (PWM) is the term generally used to describe highly customized and
sophisticated investment management and financial planning services delivered to high net worth
investors. Generally, this includes advice on the use of trusts and other estate planning, vehicles,
business succession or stock option planning, and the use of hedging derivatives for large blocks of
stock.

Private wealth management is the investment management specialization focused on high-net- worth
individuals and families. Portfolio design and investment solutions in private wealth management are
customized to reflect the complexities of the investor’s unique circumstances. This review reflects
the current best thinking on private wealth management. Wealth management is defined as an all-
inclusive service to optimize, protect and manage the financial goal of an individual, household, or
corporate. (Wiiliam J. Jennings, 2010)

Each stage requires a different focus. In order that the process is successful, the wealth manager and
the client need to understand the nature of the process and appreciate that are needed at each stage.

Some of the key things that need to be taken care at different stages of this process are as under:
Investment strategy: Deploying the proper investment strategy requires that the investors clearly
define the long, medium and short term rational for the investment. The decision should be based
upon clear understanding and evaluation of the: (Vinod Mehta,2011)

Portfolio Management process:

Depending upon various objectives such as Capital preservation, capital growth, cash flows,
aggressive growth, capital growth and cash flows, wealth building etc. various combinations could be
made of various investment options available such as.

1. The ultra high net worth banker’s handbook

The book is written by two leading private bankers and dismantles services for clients with extremely
high capital from the perspective of the customer and banker. The main idea – is the importance of
confidentiality of client and need to understand complex customer problems and their correlation
with available financial resources. The book is written in simple language accessible and contains
several specific examples from the authors’ experience in working with clients, addressing concerns
such as family management, the structuring of state, advising on the risks, asset management and
corporate finance and asset monetization. Equifax Free Credit Report.
 2. Advising ultra-affluent clients and family offices

The author defines as a key trend reassesses asset management and the desire of customers to
understand the nature of the services provided by their financial advisors: their core competencies
and how they adjust to the overall program of wealth management client. The most affluent
customers now separate consulting from accounting and investment products and are looking for
independent consultants to help select the best in class investment products from the world’s range of
suppliers and then assemble and track the results with special guarantees. The book is a
comprehensive guide, which outlines the individual “building blocks” for building an informed
decision on management of the states.

3. Wealth: how the world’s high-net-worth grow, sustain and manage their fortunes

What are the opportunities for wealth creation are now available and how investors can take
advantage of them? Major trends include globalization and advances in technology that contribute to
diversification of investments in various investment funds, asset classes and geographic locations.
Improvement of investment products and investors themselves represent different challenges for the
industry, which is inherently a long time remains popular. In addition, for wealthy clients are
important family matters, transfer of state through the generations and more philanthropic goals.

4. Global private banking and wealth management: the new realities

This compact and comprehensive overview of wealth management industry was published in 2006
before the financial crisis, but it still has significance today. The chapter examines changes in the
global market, clients and their segmentation, products and pricing, distribution channels, the players,
operating excellence, organizational design, regulatory and tax issues. It included the definition of
financial instruments and a glossary of terms, market analysis, states in 25 countries and an
application with FATF recommendations on combating money laundering.

5. Bernet &Partner :Private banking library: The portal has links to reviews and reports on
private banking, made by researchers and consultants, for example, Swiss Banking Institute,
Capgemini / Merrill Lynch, PricewaterhouseCoopers, Boston Consulting Group and Barclays
Wealth. However, most

surveys since 2009, as the most recent surveys, is not publicly available. Updated information is
presented in the survey in 2011 Euromoney, but complete results are available only to subscribers.
(William Reichenstein,2011)
 1. PROFILE OF CLIENT;

a. Family background and details

Profile: Anil Soni

Mr. Anil Soni, 40 years old, is currently owns a business in Uttar Pradesh of retail outlet. He did his
schooling till graduate only and since then he is working. He is single father of a 16 year old boy,
whose mother passed away 8 years back. His is living in Banda (Uttar Pradesh) in 450 square feet flat
and apart from this he owes 1 commercial shop and 450 square feet 2 story house which is currently
rented to a family. He had never paid any tax nor have any life or health cover, debt free.

Personal Details

Name: Anil Soni

Age: 50 years

Marital Status: single father

Educational Background: Graduate

Occupation: retail outlet owner

Spending Habits: donations, eating, reading novels

Financial Knowledge: very low

Family Details

Brother: 2 brothers and 3 sisters all settled Child: A 16 year old son studying in a good school

Financial Details

Income: Rs. 3 lakh per annum plus 60 k (from rent but not sure income) total 3.6 lakh per annum

Liabilities: Nil

Investments: Gold and property

b. Financial figures – Balance Sheet, Cash flow

A. Investment Detail:

Name of the investment Duration Total

1. Gold (250 gm.) Long term 7,50,000

2. Property Long term 2,00,00,000

1commercial shop ,( 1 450 sq.
ft. flat)
3. 2 storey 450 sq. ft. house)

B. Financial Information/expenses (cash outflow) ( average Rs per month)

1. Food 6000

2. Travel( child school van) 1000

3. School fees and tution fee and other school expenses 6000

4. Utilities 2000

5. Mobile Recharge 500

6. Medical Expenses 1000

7. Recreation & Entertainment 1000

8. Electricity bill 1000

9. Water bill 500

10. Clothing and other 1000

* There for depending upon net inflows and outflows the surplus is 1.2 lakh per annum
C. Balance sheet in the book of Mr. Anil Soni as on 31 march, 2023

Assets Rs. Rs.

Liquid Assets

Cash at hand 100,000

Total liquid assets 1,00,000 1,00,000

Real Estate

Current market value of property 2,00,00,000

Personal possessions

Market value of bike 15,000

Furniture and Appliances 25,000

Stereo and Video equipment and others 10,000

Jewellery 7,50,000

Total Household assets 2,08,00,000 2,08,00,

000

Investment assets 00

Total Investment Assets 00 00

Total assets 2,09,00,

000

Liabilities

Current liabilities Nil

Total liabilities (no long term liabilities) 00

Net Worth (assets minus liabilities) 2,09,00,

000
 GOAL SETTING

Financial Goals in smart form:

S - Specific

M – Measurable

A - Achievable

R - Relevant

T - Time-bound

Goals( specific) Objectives (measureable) Key Dates( time

bound)

Buy a computer for child Save Rs 40,000 2024

Buy a bike Save 70,000 2026

Trip Spend Rs. 50,000 2026

Buy a car Save Rs 10 lakh 2028

Child education including higher Save at least 10 lakh 2032

studies

Marriage of son Save up to 15 lakh 2034

Retirement Planning Corpus of Rs. 20 lakh 2037

* What is missing here is the attainable and realistic part that will depend upon the surplus that is

1.2 lakh per annum savings.

Ignoring the inflation factor as the income will also be growing in the same proportion so the inflation impact
on goals will either be nil or marginal to consider (assumption).
 BUDGET ALLOCATION

A. Analysis of current situation of client

 In the given case at the person is at 50 age, single father, unstable income souse 3 times is
not adequate. It has to be much at least close to 10 times at no medical cover is there
nether possible at 50 age.
 The liquidity conditions are very low apart from some cash in hand nothing else is liquid,
though gold can be but there is emotional cost associated with it.
 The risk is too high as life is uncertain estate planning is required, so that if anything
happened to Mr Bhardwaj his child can still be safe. The wealth will be in the right hand
and no legal problems will be created.
 Retirement planning is required as he had already reached a stage of retirement but still
working, which is causing health issues to him. Now it’s time he start thinking about
retirement and put illiquid assets into good investable options, so that he will not only be
able to increase the corpus but also get regular flow of income to meet various financial
goals he has.

B. Analysis of current economic scenario

Ratio Analysis

Basic solvency ratio

This ratio indicates your ability to meet monthly expenses in case of any emergency or
catastrophe. It is calculated by dividing the near-term cash you have with your monthly
expenses.

Basic solvency ratio = Cash / Monthly expenses (this ratio is not mentioned in percentage)

You can also call it as emergency or contingency planning ratio. This ratio helps you prepare
for unforeseen problems.

In given case:
Cash= 1, 00,000
Monthly expenses= 20000
Therefore Basic solvency ratio= 10000/20000 5 times
What is adequate ratio= at least 3 months. In the given case at the person is at 50 age,
single father, unstable income souse 3 times is not adequate. It has to be much at least
close to 10 times at no medical cover is there nether possible at 50 age.

Liquid Ratio:
Liquidity ratio = Liquid assets / Net worth

In the given case:

Liquid assets are only cash i.e. 1, 00,000 and net worth is 2.09 crore
Which means it’s like .5 % and At least 15% is the ideal ratio. The liquidity is a huge
matter of concern.

Savings Ratio:

Savings ratio = Savings / Gross income,

where In given case:

Savings are 1.2 lakh per annum against the gross income of 3.6 lakh
Which means ratio is 33% that is good.

Debt to asset ratio:

It is the percentage of total assets of an individual that goes towards payment of debt. This
ratio is calculated by dividing your total liabilities by total assets

Debt to asset ratio = Total liabilities / Total assets

In given case:
Liability is zero. So debt to asset ratio is in good shape.

Depending on the analysis of these core financial ratios we can see that the matter of
concern liquidity and the savings which is not sufficient to fulfil the kinds of financial
goals Mr Anil has.
C. Initial advice to client

 In the given case at the person is at 50 age, single father, unstable income souse 3 times is
not adequate. It has to be much at least close to 10 times at no medical cover is there
nether possible at 50 age.
 The liquidity conditions are very low apart from some cash in hand nothing else is liquid,
though gold can be but there is emotional cost associated with it.
 The risk is too high as life is uncertain estate planning is required, so that if anything
happened to Mr SONI his child can still be safe. The wealth will be in the right hand and
no legal problems will be created.
 Retirement planning is required as he had already reached a stage of retirement but still
working, which is causing health issues to him. Now it’s time he start thinking about
retirement and put illiquid assets into good investable options, so that he will not only be
able to increase the corpus but also get regular flow of income to meet various financial
goals he has.
 He should open a bank account as currently no bank account is operating nature.
 Start paying tax by doing proper tax planning.
 It’s the time he should think who will look upon his child if in case anything happened to
him to feed him.
 Invest in PPF, which not only help in post retirement time but also helps in tax benefit.
 Take life insurance even if costly for both he and his child with medical cover as well.
 PRAPOSED INVESTMENT/DISINVESTMENT/LOAN PLANNING;

 Proposed investment detail

Name of the investment Duration Total

Gold( 250 gm ) Long term 7,50,000

Property( 1 commercial shop Long term 1,60,00,000

and 1 2 storey 450 sq ft
house)
Equity investment Medium to long 8,00,000
term
Fixed income investments Short to long term 20,00,000

Mutual funds Medium to long 12,00,000

term

 Proposed Financial Information/expenses (cash outflow) ( average Rs per month)

Food 6000

Travel( child school van) 1000

School fees and tuition fee and other school expenses 6000

Utilities 2000

Telephone 500

Medical Expenses 1000

Recreation & Entertainment 1000

Electricity bill 1000

Water bill 500

Clothing and other 1000

Health and life insurance premium 1500

 Investment in some of the fixed income in mutual funds 5000

 Projected Balance sheet in the book

Assets Rs. Rs.

Liquid Assets

Cash at hand 160,000

Total liquid assets 1,60,000 1,60,000

Real Estate

Current market value of property 1,60,00,000

Personal possessions

Market value of scooty 15,000

Furniture and Appliances 25,000

Stereo and Video equipment and others 10,000

Jewellery 7,50,000

Total Household assets 1,68,00,000 1,68,00,000

Investment assets

Equity 8,00,000

Fixed income investments 20,00,000

Mutual funds 12,00,000

Total Investment Assets 40,00,000

Total assets 2,09,00,000

Liabilities

Current liabilities Nil

Total liabilities (no long term liabilities) 00

Net Worth (assets minus liabilities) 2,09,00,000

 COMPREHENSIVE PLANNING

 In the given case at the person is at 50 age, single father, unstable income souse 3 times is not
adequate. It has to be much at least close to 10 times at no medical cover is there nether possible
at 50 age.

 The liquidity conditions are very low apart from some cash in hand nothing else is liquid, though
gold can be but there is emotional cost associated with it.

 The risk is too high as life is uncertain estate planning is required, so that if anything happened to
Mr Bhardwaj his child can still be safe. The wealth will be in the right hand and no legal problems
will be created.

 Retirement planning is required as he had already reached a stage of retirement but still working,
which is causing health issues to him. Now it’s time he start thinking about retirement and put
illiquid assets into good investable options, so that he will not only be able to increase the corpus
but also get regular flow of income to meet various financial goals he has.

 He should open a bank account as currently no bank account is operating nature.

 Start paying tax by doing proper tax planning.

 It’s the time he should think who will look upon his child if in case anything happened to him to
feed him.

 Invest in PPF, which not only help in post retirement time but also helps in tax benefit.

 Take life insurance even if costly for both he and his child with medical cover as well.

Options where he can invest after restructuring of some of his Assets:

 The first restructuring suggested is to sell the flat he owns and shift to the 2 storey house
he has. This will result in cash generation of approx 40 lakh to him but it will result in the
elimination of rent income he was generation (60 thousand per year).
 The second suggestion will be to invest a part of this 40 lakh in various investment option
depending upon the profile in the following manner
As Mr ANIL SONI is 55 years of age the possible investment in equity at this stage for a
normal profile is 100-age i.e. 45 % but given the fact his risk tolerance level is low plus he is
single father this % could be well low to 20 % ( and is because along with capital preservation
capital appreciation is also required given near term retirement and child related expenses)
rest 80 % will be divide between fixed income and mutual funds in the ratio of 50% and 30 %
so that regular flow and retirement plan will be fulfilled with fixed income investments and
capital appreciation will be done by mutual funds and equity investments.
So even in equity the investment should be made in:
1. high growth shares
2. income
3. balanced
4. momentum

10
Growth
15
50 Income
Balanced
25 Momentum

Now after equity investment in fixed income securities are required that will reduce risk and
provide other benefits such as tax benefit and regular flow of income etc.
 30

40 FD

NSC

Bonds

20
10

Now mutual funds investment:

Sales

10
Growth
20 40
Fixed Income
Balanced

30 Money Market related

Apart from investing this 40 lakh the surplus of 60 thousand after eliminating rented income
should also go in creation of emergency fund every yr.
 Now based on the following investment of 40 lakh in the given proportion the following
tax planning can also be done:
 Medical insurance: A deduction of up to Rs 15,000 pa under section 80D is applicable
under this.
 Donations: Tax advantages under Section 80G entitle the donations to particular
funds/institutions.
 1 Make full use of the entire Section 80C deduction - The maximum reduction available
in Section 80C is Rs 100,000

Following investments/contributions meet the criteria for Section 80C reduction:

 Public Provident Fund
 Accrued interest on National Saving Certificate
 Life Insurance Premium
 National Saving Certificate
 Tuition fees paid for children's education (maximum 2 children)
 5-Year fixed deposits with banks and Post Office
 Equity Linked Savings Schemes (ELSS)
  New restructured financial statement will be:

Proposed investment detail

Name of the investment Duration Total

Gold( 250 gm ) Long term 7,50,000

Property( 1 commercial shop Long term 1,60,00,000

and 1 2 storey 450 sq ft
house)
Equity investment Medium to long 8,00,000
term
Fixed income investments Short to long term 20,00,000

Mutual funds Medium to long 12,00,000

term

Proposed Financial Information/expenses (cash outflow) ( average Rs per month

Food 6000

Travel( child school van) 1000

School fees and tuition fee and other school expenses 6000

Utilities 2000

Telephone 500

Medical Expenses 1000

Recreation & Entertainment 1000

Electricity bill 1000

Water bill 500

Clothing and other 1000

Health and life insurance premium 1500

Investment in some of the fixed income in mutual funds 5000

Projected Balance sheet in the book of Mr. Anil Soni as on 31 March, 2023

Assets Rs. Rs.

Liquid Assets

Cash at hand 160,000

Total liquid assets 1,60,000 1,60,000

Real Estate

Current market value of property 1,60,00,000

Personal possessions

Market value of scooty 15,000

Furniture and Appliances 25,000

Stereo and Video equipment and others 10,000

Jewellery 7,50,000

Total Household assets 1,68,00,000 1,68,00,

000

Investment assets

Equity 8,00,000

Fixed income investments 20,00,000

Mutual funds 12,00,000

Total Investment Assets 40,00,000

Total assets 2,09,00,

000

Liabilities

Current liabilities Nil

Total liabilities (no long term liabilities) 00

Net Worth (assets minus liabilities) 2,09,00,

000
Such a portfolio will not only provide the liquidity plus help in corpus building for
financial goals he have.
 REFRENCES

 Contemporary Management Research, Vol. 6, No. 2, June 2010, 111-124

 William W. Jennings, CFA and William Reichenstein, CFA, Research Foundation

Literature Reviews, December 2006, 1-29.

 Wealth management(2013), dun and Bradstreet

 www.cfainstitute.org/learning/topics/pages/privatewealth

 PRIVATEBANKING_guide_SEPT10.pdf

 Asset-Management.pdf, Vinod Shah, June 2012

 Economic times article “Top 10 financial steps to take in your lifetime” published on

Oct 16, 2014

 Economic times article “Invest in mutual funds for better retirement planning”
published on Aug 13, 2014

 Economic times article “Ensure your dependents get insurance policy benefits, not
creditors” published on 5 Oct, 2014

 The Literature of Private Wealth Management, William W. Jennings & William

Reichenstein, Nov,2006

Personal Wealth Review,Wiiliam J.

 Questionnaires

Money Attitude:

Statements : Options

I need more money than I can use Yes No

It bothers me when I discover I could have gotten the same Yes No

thing for less somewhere else.
I behave as if money were the ultimate symbol of success. Yes No

Yes No
I show signs of nervousness when I don’t have enough money.
I dream I will one day be fabulously rich. Yes No

I worry that I will not have enough money to live comfortably Yes No
when I retire.
Money controls the things I do or don’t do in my life. Yes No

When I was a child, money seemed to be the most important Yes No

thing in my life.
I argue or complain about the cost of things. Yes No

This exercise on money attitude is meant to check what value does money have in an individual’s
life and how much control does money have in his/her life. Count of ‘yes’ is more than the count of
‘no’ which means that money has more influence over the life of Mr ANIL SONI.
Questionnaire-2 Financial values Inventory This exercise is meant to decide the priorities
where the individual will put in his/her money if asked to choose between two options.

S.no. Option 1 Option 2

1 Housing (Dream Home) Investments/Retirement Savings
2 Education: Self/Others Vacation/Travel
3 Retirement Savings/Investment Hobbies/Sports
4 Hobbies/Sports Charitable Giving/Religious Activity
Personal
5 Vacation/Travel
Appearance/Grooming/Clothes
6 Charitable Giving/Religious Activity Social Activities/Eating Out
7 Social Activities/Eating Out Car
8 Education: Self/Others Housing (Dream House)
9 Hobbies/Sports Housing (Dream House)
Personal
10 Car
Appearance/Grooming/Clothes
11 Savings/Investment Retirement Hobbies/Sports
12 Hobbies/Sports Car
13 Retirement Savings/Investments Social Activities/Eating Out
14 Housing ( Dream House) Vacation/Travel
15 Education : Self/Others Car
Charitable Giving/Religious
16 Vacation/Travel
Activities
17 Personal Appearance/Grooming/Clothes Education: Self/Others

Number of times circled each item in the pair activity:

Car 3
Charitable Giving 2
Education 4
Hobbies/Sports 0
Housing 1
Retirement 4
Vacation/Travel 3
We can see that the things that are coming out as most important are retirement, child education
and travel and car for child in future. As housing is not a matter of concern for them, they are high
on real assets.

Questionnaire-3

Emergency Fund

Is your income stable? Not at all More or less Completely

How dependant are you on Totally Slightly Not at all

interest, dividends and capital
gains on your investments to
cover your regular expenses?

Do you have life, health, auto and Little/No cover Some risks All risk covered
disability insurance? covered

As a multiple of your regular 15 days Two months Three months

monthly expenses (including loan
repayments and insurance
premium), how much of your
investments are in liquid options
like savings account, savings cum
deposit accounts and liquid funds?

What is the percentage of regular 0-5% 6-15 % Over 15%

income generating assets to your
net worth?

Do you have access to No access Limited access Ample access

comparatively cheap credit like
overdraft facilities against assets
like shares and home?

Mr Vipin Bhardwaj is having a highly risky lifestyle with no insurance cover at the age of 50 now he
is not even insurable even if premium will be too high. The regular income sources are on
lower side despite current cash in hand he not even enjoying a bank account facility. In case of big
medical emergency like heart problem or any other thing at 50 age the emergency fund or liquid
assets have to be huge which is not the case here.

Questionnaire 4:-

Are you in a DEBT TRAP?

You are using your savings to pay current Yes No
expenses.

You don’t know how much you owe. Yes No

You make late payment a habit. Yes No

Mr Vipin is completely debt free person, so he is in no Debt trap at all.

Questionnaire 5: What kind of lifestyle do you want?

1. Shelter

 At home with parents

 Own apartment/ home

 Share with friends and colleagues

 Rented flat

2. Transportation

 New car

 Used car

 Motor cycle

 Public transportation

3. Food

 Food at home
  Eat out

4. Utilities

 Electricity/gas

 Water

 Telephone

 Mobile

5. Expenses

 Internet

 Clothing

 Personal care

 Health care

6. Entertainment

 Cable

 Cds

 Movies

 Sports events

 Concerts

 Club/Gym

 Vacations

 Lessons

7. Personal
  Cosmetics/make up

 Laundry

 Newspaper

 Pets

 Gifts

 Health club membership

 Personal hygiene

 Reading/educationof child

 Tobacco/alcohol products

 Religious contributions/charity

 Savings

Questionnaire 6

Even if some things are to be assumed

RISK TAKING ABILITY

1. How do you think of “risk” in a money context?

a. Danger b. Uncertainty c. Opportunity
2. Your portfolio has…
a. Only cash b. PF, FDs and funds c. Mostly funds and stocks
3. How much fall in your investment makes you panic?
a. Any fall b. 10% c. 20%
4. A PSU bank making an IPO is offering a soft loan to subscribe. Will you take it?
a. No. b. Maybe c. Yes
5. How’s your investment knowledge?
a. Bad b. Average c. Good
6. How important is it to make your money inflation-proof?
a. Not important b. Not sure c. Very important
7. How easily do you adapt when things go wrong financially?
a. Not easily

b. Some resistance

c. Very easily

On the basis of given answers ewe can see that risk tolerance is very low which is quite obvious
with limited knowledge , limited money supply and risky family dynamics.

Questionnaire 7

Test to Measure Investment Risk Tolerance

1. You are winner of a TV game show. Which price would you choose?

 Rs 30,000 in cash ( 1 point)

 A 50 percent chance to win Rs 60,000 (3 points)

 A 20 percent chance to win Rs 150,000 ( 5 points)

 A 2 percent chance to win Rs 1,500,000 ( 10 points)

2. You are down Rs 15,000 in a game. How much you would be willing to put up to win Rs
15,000 back?

 More than Rs 15,000 ( 8 points)

 Rs 15,000 ( 6 points)

 Rs 7,500 (4 points)

 None ( 0 point)

3. A month after you invest in a share, it suddenly goes up 15 percent. With no further
information, what would you do?

 Hold it, hoping for further gains (3 points)

 Sell it and take your gains (1 point)

 Buy more-it will probably go higher (4 points)

 4. Your investment suddenly goes down 15 percent one month after you invest.
Its fundamentals still look good. What would you do?

 Buy more. If it looked good at the original price, it looks even better now (4 points)

 Hold on and wait for it to come back (3 points)

 Sell it to avoid losing even more (1 point)

Depending on the answers given we can see that the risk taking ability is marginal or even zero
to some extent.