STUDY ON FINANCIAL PLANNING FOR INDIVIDUAL INCESTORS

Abstract

The project report titled 'Study on Financial Planning for Individual Investors' explores the importance, structure, and practical application of financial planning in the lives of individuals, particularly in the context of Indian households. The study emphasizes that financial planning is not merely about saving for taxes but is a comprehensive approach that helps individuals meet life goals such as retirement, children’s education, asset creation, and managing contingencies through systematic management of income, savings, and investments. Financial planning involves evaluating one’s current financial position, defining goals, and strategizing a course of action that balances risk and return while considering factors such as time horizon, liquidity needs, inflation, and income requirements. The report discusses the six- step financial planning process—self-assessment, goal identification, problem diagnosis, solution recommendations, strategy implementation, and regular review—highlighting the dynamic nature of financial planning over different life stages. The report includes a detailed breakdown of investment avenues available to Indian investors, including life insurance, mutual funds, equities, real estate, gold, public provident fund (PPF), certificates of deposit, and post office savings schemes. These avenues vary in terms of risk, return, liquidity, and tax benefits, which makes choosing the right mix a critical component of financial planning. Mutual funds, in particular, are emphasized as cost-efficient and professionally managed options that are accessible even with low capital. To support the theoretical aspects, the study also incorporates a practical dimension through primary research conducted with 60 respondents from diverse backgrounds. The sample comprised individuals from various income levels and age groups, selected through random sampling during a 20-day fieldwork period. The research methodology combined structured and unstructured interviews along with questionnaires to gather data on awareness, preferences, and behaviors related to financial planning. Analysis of the primary data reveals significant insights. A vast majority of respondents— 86.7%—belonged to the age group of 21 to 30 years, an age considered optimal for initiating and building financial plans due to relatively lower responsibilities and higher disposable 6 income. However, despite their financial potential, many individuals demonstrated limited awareness of comprehensive financial planning. The study finds that life insurance and provident fund investments dominate the portfolios of individual investors, with limited exposure to equity markets and real estate due to perceived risks. Agents and brokers are the most common source of investment information, often influencing decisions more than certified financial planners or financial literacy tools. This dependence has, in some cases, led to dissatisfaction due to unplanned or misinformed investment decisions. Further, financial literacy levels varied considerably among respondents. While some rated their knowledge as 'very good,' their actual investment practices often contradicted this self- assessment. Time constraints also affected financial decision-making, with 64% of respondents stating they did not have adequate time to manage their financial affairs, leading to reliance on intermediaries or ad-hoc decisions. The study effectively demonstrates the need for a structured and informed approach to personal finance. It highlights how financial planning can differ depending on the life stage—young professionals, newly married individuals, parents, and retirees all require tailored financial strategies. It also underscores the impact of risk tolerance, investment objectives, income stability, and market knowledge on decision-making. Through an in-depth exploration of investment behavior, financial awareness, and planning approaches, this report contributes to understanding the gaps and opportunities in financial planning for individual investors. It provides a solid foundation for identifying areas where individuals can improve their financial practices and make more informed choices to secure their financial future.