nse module4

Vol. 1.1-4n4

Module 4

www.funancialquest.com – Online Course Module

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Online Course

Vol. 1.1-4n4

Module 4

Investing

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www.funancialquest.com

Duration: 20 Mins

Vol. 1.1-4n4

Contents• Saving

• How to save more

• Saving vs. Investing

• Investment Instruments

• Getting Started

• How to Build Wealth

www.funancialquest.com Module 4: Investing

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Vol. 1.1-4n4

Why is saving important?www.funancialquest.com Module 4: Investing | Saving

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Saving is the art of not spending one’s money in order to use it at a later point in time. The possible reasons why saving money is important:1. Emergency funds2. Retirement3. Large, necessary payments4. Education5. Luxuries

Vol. 1.1-4n4

The Rule of 72www.funancialquest.com Module 4: Investing | Saving

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Number of years x interest = 72

The Rule of 72 is a simple rule of thumb to calculate compound interest. For e.g., if putting your money in a savings account gets you an interest rate of 8%, we can quickly calculate:

Y = 72 / 8 = 9 years

Therefore, at 8% interest, your money will double in 9 years.

Vol. 1.1-4n4

Contents• Saving




• Getting Started



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Vol. 1.1-4n4

Get a savings accountwww.funancialquest.com Module 4: Investing | How To Save More

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Saving some money in a piggy bank is well and good, but if you’re serious about saving in the long term, open a savings account. If you already have a bank account, this account should be a different one, so that you spend from only one of the two accounts.

Look for a bank offering the highest interest rates, so that you earn the most on your money, year on year.

Vol. 1.1-4n4

Start saving NOW.www.funancialquest.com Module 4: Investing | How To Save More

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The next step is to start putting money in your account. Start with whatever you have, whether it's five bucks or a thousand, it all helps. The best thing to do is to make a saving plan. Decide how much you're willing to put aside every month and then do it.

If you already have an account, set up an automatic transfer every month, so that your money can go automatically into your savings account.

Vol. 1.1-4n4

Investwww.funancialquest.com Module 4: Investing | How To Save More

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Putting your money in a savings account is a passive way to earn interest and grow your money. But if you have a serious goal (paying for college, backpacking through Europe after graduation, etc.) the best idea is to start making your money work for you. The way to do this is to invest your money somewhere where it's going to make more interest than in your savings account.

Vol. 1.1-4n4

Contents• Saving




• Getting Started



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Vol. 1.1-4n4

Saving vs. Investingwww.funancialquest.com Module 4: Investing | Saving vs. Investing

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Saving is not the same as investing, though the two are often confused for each other.Saving is the act of preserving income for a future use. Therefore, The main objective of saving is to preserve the money. Money is usually saved in extremely safe, liquid securities or accounts, so that it can be converted to cash in a very short time.

Investing is the act of placing money in an asset that is expected to grow, i.e. that the asset will generate an acceptable return over time, making you wealthier with each passing year. Investing is a much longer process, often yielding better returns in the long run.

Vol. 1.1-4n4

Are you saving or investing?www.funancialquest.com Module 4: Investing | Saving vs. Investing

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Various forms of saving and investment are available

The following are ways in which you can save your money:

1.Checking accounts2.Savings accounts3.Short-term certificates of deposit4.Treasury Bills

A few examples of investment options:

1.Stocks2.Mutual funds3.Bonds4.Real estate5.Insurance

Vol. 1.1-4n4

Differences between saving and investment

www.funancialquest.com Module 4: Investing | Saving vs. Investing

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Savings Investment

1. Considered to be very low risk 2. Money can be quickly accessed

any time3. The objective of saving is to

preserve the money (e.g. Saving for a car, or for retirement)

4. Money remains idle5. There is very little risk of losing

money6. Inflation may erode any

earnings

1. Can be risky2. Money is usually locked for a

longer period of time3. The objective of investment is to

make more money (i.e. long term financial growth and wealth-building)

4. Money is active5. There is a risk of losing money if

investments decline in value6. Usually earns more than value

of inflation in the long term

Vol. 1.1-4n4

Contents• Saving




• Glossary


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Vol. 1.1-4n4

Investment instrumentswww.funancialquest.com Module 4: Investing | Investing Instruments

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The following investment options are available to the Indian investor

1. Equity Shares2. Mutual Funds3. Bonds & Debentures4. Company Fixed Deposits5. Insurance6. Public Provident Fund

Vol. 1.1-4n4

Equity Shareswww.funancialquest.com Module 4: Investing | Investing Instruments

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A share or stock is an instrument that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. In other words, a shareholder is an owner of a company. Ownership is determined by the no. of shares a person owns relative to the number of outstanding shares. For example, if a company has 1,000 shares of stock outstanding and one person owns 100 shares, that person would own and have claim to 10% of the company's assets.

Historically, investing in the stock market has outperformed most other investments in the long run.

Vol. 1.1-4n4

Mutual Fundswww.funancialquest.com Module 4: Investing | Investing Instruments

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Mutual funds are a type of investment where an investment company sells shares to the public and then invests the money in a group of investments such as stocks and bonds.

Since mutual funds are operated by money managers, who attempt to produce a gain for the fund’s investors, it is an ideal investment vehicle for people who are new to investing, but still want to have a diverse portfolio.

Vol. 1.1-4n4

Bondswww.funancialquest.com Module 4: Investing | Investing Instruments

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Bonds are usually issued by a company, municipality or government. A bond investor lends money to the issuer and in exchange, the issuer promises to repay the loan amount on a specified maturity date. The issuer usually pays the bond holder periodic interest payments over the life of the bond.

Bond maturities range from a 90-day Treasury bill to a 30-year government bond. Corporate and municipals are typically in the three to 10-year range.

Vol. 1.1-4n4

Life Insurancewww.funancialquest.com Module 4: Investing | Investing Instruments

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Life Insurance is a form of protection against the loss of income that would result if the insured person passed away. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured.Most life insurance policies carry relatively low risk.

Vol. 1.1-4n4

Public Provident Fund (PPF)www.funancialquest.com Module 4: Investing | Investing Instruments

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The Public Provident Fund is one of the most low-risk investments available. In a PPF account, money is invested for a long term (15 years) at a rate determined annually by the govt., and compounded annually.

The biggest benefit of the PPF is that the investment is totally tax-deductible.

Vol. 1.1-4n4

Contents• Saving




• Glossary


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Vol. 1.1-4n4

Basic Investment Termswww.funancialquest.com Module 4: Investing | Basic Terms

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Dividend

If a company does well financially, its board of directors may decide to pay a small amount of its profits, called a dividend, directly back to its shareholders. Dividends are usually cash, but may also take the form of stock or other property. Net worth

Net worth refers to the value of a company or individual's assets. This is inclusive of cash, capital and income, after reducing total liabilities.

Portfolio

A collection of investments all owned by the same person or organization. For example, a portfolio might include a variety of stocks, bonds, and mutual funds.

Vol. 1.1-4n4

Basic Investment Termswww.funancialquest.com Module 4: Investing | Basic Terms

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Stock market

An organized market place in which stocks are traded by members of the exchange, such as brokers and principals. The core function of a stock exchange is to ensure fair and orderly trading, as well as efficient dissemination of price information for any securities trading on that exchange.

Liability

A liability is a loan or a debt which a business takes to support its activities financially. This debt needs to be returned to the creditors. Liabilities can be for a short term as well as long term.

Maturity

Maturity refers to a finite time period at the end of which the financial instrument will cease to exist and the principal is repaid with interest.

Vol. 1.1-4n4

-End of Module 4-


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When ready, test your knowledge and receive a score!

Note: The test contains 15 Objective Type Questions to be finished in 20 mins duration.

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