The two “S” – Strategy for the Stock Market

Crashing markets can be a good thing too, as it provides with an opportunity to get in at the bottom and wait for the markets to rise. This is beneficial for an investor looking to stay on in the market for a longer term and the one who is looking at long-term benefits. Here by ‘long term’ refers to a period of over three years. Many people make money in the short term but one needs to understand that this is generally not the way the equities behave. There are periodic corrections in the market and the investor has to be prepared for the same.

So what exactly the strategy should be to weather gains in a sliding market?

Making the appropriate investment allocation
To better understand how proper asset allocation can add value to an investment plan, first lets have a look at what is it all about? Looking at the investment expanse there are a lot assets (which loosely refers to investment avenues) and as an investor you really don’t know, a) which asset must form part of your plan and b) if it must then how much of it should you own. Which asset you must own gives you a wide choice among the asset classes namely, equities, debt, mutual funds, etc and how much you need to own varies from investor to investor. You might have a portfolio that consists of a number of mutual funds, ETFs, stocks, and bonds. Now, you need to be sure that every asset has a role to play in your portfolio. And equally important is the allocation. If you have taken the time to create an investment mix that is suitable for your risk tolerance and investment objective, then a bear market shouldn’t concern you. For instance, if you have a few decades before you need the money, and you are an aggressive investor, you might be invested completely in stocks. This doesn’t make the difference till the time you understand the fact that with significant gains may come significant losses at times. 
 

Take the benefit of rupee cost averaging
The markets are still to put up a clear picture in place with more troughs than crests. In such a scenario, one needs a careful and a sensible strategy that would minify the cost of buying an investment option and that would in a way act as a shield against abrupt risks. One of the strategies of the kind is called Rupee-Cost Averaging (RCA). RCA in simple terms means investing a fixed amount of money each month into an investment such as a stock, or mutual fund or other investments. In RCA, a certain number of shares are bought regardless of its price. This means more number of shares is bought when prices are low, and fewer shares are bought when prices are high. By doing this, eventually, the average cost per share comes down.
For example, your fixed investment might buy 10 shares when the price is low and only five shares when the price is higher. So here, RCA lessens the risk of investing a large amount in a single investment at the wrong time (i.e. at an inflated price), by taking the average cost per share down in a falling market. This lessening of the average cost per share will help you gain better overall profits as the market moves up in the long term. If the market is lower this month, you may lose money on the shares you bought last month, but this month you receive more shares, which, in the future, will help offset any losses. Regardless of the amount of money that you have to invest, rupee-cost averaging is a long-term strategy. As the financial markets are in a constant state of flux, they tend to move in the same general direction over fairly long periods of time. Bear markets and bull markets can last for months, if not years. Because of these trends, rupee-cost averaging is generally not considered as a short-term strategy….

Profit from falling stocks
Often, investors in a bearish market get their money placed in fixed return instruments such as bonds or debt mutual funds because they pose less of a risk. Now as the money is withdrawn from the stock market due to stock sales, the supply exceeds the demand and the prices of the stocks are further driven down.
On the other hand, bear markets do offer some great benefits because they provide the investors with an opportunity to buy into stocks at bargain prices. When the prices drop, often substantially, before recovering, it presents the investor with an optimal buy in at a low price. However, investors should be prepared to take a short-term loss as prices dip just before the upward turn.

Consider defensive stocks
It would be wise to look at the experience of renowned investor, the late ‘Sir John Templeton’. His investing mantra was simple: “Buy at the point of maximum pessimism”.
The investors who look forward to maintain positions in the stock market should adopt a defensive strategy. This type of strategy involves investing in larger companies with strong balance sheets and a long operational history, which are considered to be defensive stocks. The reason for this strategy in place is that these large stable companies tend to be less affected by an overall downturn in the economy or stock market, making their share prices less sensitive to a larger fall. With strong financial positions, including a large cash position to meet ongoing operational expenses, these companies are more likely to survive downturns. These also include companies that service the needs of businesses and consumers, such as food businesses (people still eat even when the economy is in a downturn). On the other hand, the speculative companies with not much growth happening are the ones to be kept off from your reach because they are less likely to have the financial security that is required to survive downturns.

CONCLUSION:
Investing in a downturn is actually not that different. But it takes tremendous courage to buy when there is widespread gloom and panic around. Therefore, one needs to take care of the right investment mix between wealth-growing but volatile investment avenues, such as shares, and wealth-protecting ones such as bonds or bank deposits, mutual funds, etc. What is unusual in this case is that it becomes very difficult to follow a disciplined strategy when markets are going haywire. Investing in such times becomes a test of your character as much as of your intelligence.

           “You may make most of your money during a bear market; you just need to realise it at the time.”

*The number includes the recent issues as on August 31, 2008

The total amount raised by the companies in the primary market in the current calendar year till August is Rs.18532.63 crore.

Lets have a look at the brief detail of the amount raised:

Total 38 companies planned to raise money in the year 2008 so far. But of these 38 companies, 3 companies had withdrawn their issues due to weak market sentiments. Out of the remaining 35 companies, 54.28% of the companies raised an amount less than or up to Rs.100 crore. According to our analysis we observe that weak investors sentiment in stock markets, easier ECB norms, high inflation rate and economic slowdown have led to the slow performance of majority of these companies by making them hover around their issue price. Moreover, many companies listed at a premium on the listing day but could not manage the same later on thereby falling their issue prices. However, there have been some issues which not only managed to perform well in such kind of market but are also trading at a premium on the back of strong fundamentals. Some of these companies are Vishal Info Tech, Anu’s labs, Kiri Dyes and Bang Overseas, who are enjoying a gain of 99%, 54%, 14% and 15% respectively (comparing the issue price with the closing price of September 11 2008).

Further, 10 companies raised an amount in between Rs.100 crore and Rs.300 crore constituting 28.57% of the total money raised so far. Out of these, 6 companies listed with premium when compared to their issue price and 4 companies including Sejal Architectural, shriram EPC listed with a discount and the remaining one company (GSS America) listed at the issue price itself. Out of the six companies, only 3 have managed to sustain the position of still trading above the issue price. This year so far also saw a mega IPO of that of Reliance Power that raised Rs.11700. This issue alone constituted 63% of total IPO money raised. But this much-hyped issue did not perform well in the market and is still trading below its issue price. After a few months of listing Reliance Power came out with a bonus issue to adjust the price after the bonus but did not succeed in the same. The price after the bonus issue is far below the adjusted price.

The remaining 5 issuer companies include some average issues like that of Onmobile Global, Future capital, REC etc. These companies raised an amount ranging from Rs.300 crore and Rs.900 crore and above. Most of these IPOs have reasonably been good with some exceptions such as IRB, KSK etc. The situation in IPO market may improve in last two-three months of the year, if the economies like US and UK, come out of the recession cycle, and inflation comes down owing to base effect and steps taken by the government.

* SECTOR BIFURCATION

OTHERS: This category includes different industries like agronomic seed industry, beverage packaging, alcohol, broaches & gear cutting tools, credit rating agency, education, fire protection etc.

REAL ESTATE: Real estate sector in the above mentioned chart also includes companies in the infrastructure development of roadways, highways and runways.

TEXTILE: Textile sector includes companies into apparel manufacturing, companies into yarn manufacturing and companies in all of the above activities.

Coming to the second proposal, this looks like a turn on for the primary market. This actually questions the practice of paying upfront for shares that you are not even sure of being allotted. This practice sounds a bit illogical… At the time of over subscription, you end up getting allotment of only a fraction of shares you applied for. Then why to pay full money for all the shares at the time of applying for the shares? The reason behind paying the full amount is that the stock issuing company needs to be certain about your commitment and that it should get the money on time once the shares are allotted to you. But the same thing can be achieved in another way, which the SEBI has come out with, by earmarking or blocking the money in your account. The money stays in your account during the entire IPO process, and gets deducted only when you are allotted the shares. This new IPO payment and refund process launched by SEBI is – Applications Supported by Blocked Amount (ASBA).

Now what is this all about?

Applications Supported by Blocked Amount (ASBA) payment method for IPO?
Introduced in July 2008, Applications Supported by Blocked Amount (ASBA) Process, is the alternative payment method (optional) for IPO application where the IPO bidding amount remains in investors account, but blocked by the bank until allotment is done. This is an additional method of payment, available exclusively for retail individual investors through Self Certified Syndicate Banks (SCSB’s). The purpose of adding this new payment option is to reduce the turn around time for IPO Stock listing and to make the refund process faster. Technically there is no refund process for this kind of payment option as only the required money for allocated shares is withdrawn from the investors account. Investor can use the remaining money as soon as the required money is withdrawn and the money gets unlock. As companies cannot list there shares before completing the refund process, ASBA will reduce there load on refund process and ultimately will make the listing process faster.

What are the basic requirements to apply in an IPO using ASBA process?
1. Only retail individual investors have ASBA facility at this time.
2. The bank where investor has account should be a ‘Self Certified Syndicate Banks (SCSBs). The list of the SCSB’s is available soon on SEBI’s website.
3. An investor can only apply at cut-off price. Once submitted the bids cannot be revised. Investors are allowed to withdraw the application before issue gets close.
4. The application amount (total bid amount) for IPO application will remain locked until allotment is done. An investor cannot withdraw the money in locking period.

Some related FAQs on ASBA:

Who are Self Certified Syndicate Banks (SCSBs) and how do I know if my bank has the facility to apply in an IPO using ASBA payment method?
Banks, which are certified by SEBI, allow retail individual investor to apply in IPO’s using ASBA payment method, are known as ‘Self Certified Syndicate Banks (SCSBs)’. SCSB’s has capability to block the IPO Application amount until IPO allotments are done. SCSB guarantee the Issuer Company for the blocked money and make sure that it’s not being used for any other purpose. Bids can be submitted online through Internet banking websites or by visiting the branch office of the bank. Once receiving the IPO Application from an investor, SCSB’s sends the bidding information to BSE/NSE electronically. After allotment, Issuer Company or the registrar of the IPO withdraw the required money from the bank account and unlock the remaining amount for investor to use immediately.

Detail process flow for ‘Applications supported by Blocked Amount (ASBA)’ payment Option.
1. Self Certified Syndicate Banks (SCSBs) accept retail individual investors bid for IPO Shares through Internet banking or at certain designated branches.
2. Investor receives the acknowledgement from the bank along with the IPO Application Number.
3. Bank blocks the amount in investor’s bank account for the IPO as applied and send the application information to the designated stock exchanges for that IPO. In case of insufficient amount in investor’s bank account, the bank can reject the IPO application and do not sent the bidding to stock exchanges.
4. Banks keep the physical forms or electronic date (in case of online IPO Application) for specified period of time.
5. IPO Registrar receives the final bidding information from stock exchanges soon after issue gets closed. ASBA applications are processed along with the other IPO applications.
6. IPO Registrar validates the bids and rejects the application that doesn’t match the application requirements.
7. Registrar completes the ‘Basis Of Allotment’ and gets it approved from stock exchanges.
8. Registrar sends request for money to SCSB’s to transfer money to escrow public issue account.
9. Registrar receives the money and transfers the allocated shares to investors Demat Account.

I do not have bank account with SCSB’s listed on SEBI website. Can I still apply in IPO’s using ASBA payment option?
To apply in an IPO using ASBA payment method, an investor should have account with SCSB. Even if your bank is listed as SCSB, only few of its branches may have ability to process IPO Applications with ASBA payment option. So one needs to contact the nearest branch to check if they have this facility available or not.

Will bank charge any additional fees from there customers if they choose ASBA IPO Payment Option?

List of SCSB is as under: (As on 12/09/08)
Name of the Bank
1. Corporation Bank
2. Union Bank of India
3. HDFC Bank
4. State Bank of India
5. ICICI Bank Ltd.
6. IDBI Bank
7. Axis Bank
8. State Bank of Bikaner & Jaipur
9. Bank of Baroda
10. Kotak Mahindra Bank

*This list will be updated on the 1st day and 15th day of each month

As of now, there is no information available if banks will charge additional fees from investors or from the issuer company to handle this process.

When the banks will need money in customers account to lock for ASBA payment option?
Bank will need the money in investor’s account at the time of placing the bid for IPO shares through ASBA payment option. SEBI has clearly instructed that banks will not accept IPO application before blocking the bidding amount (for ASBA process). The amount will remain locked until registrar / stock exchange request bank to release the fund either because the investor didn’t receive the allotment, IPO application got rejected or investor withdraw the IPO application.

Can an investor apply on ‘Lower Price Band’ using ASBA payment method?
No. In the current form of ASBA, retail individual investors can only apply at cut-off price to use ASBA payment option.

Key Highlights of IPOs and FPOs in the CY 2008

Ø The crash, and the subsequent volatility in the stock market, adversely hit Initial Public Offer (IPO) plans of many Indian companies. The CY 08 saw as many as 21 IPOs in the first three months of current year. Of which, 3 companies namely, Wockhardt Hospitals, Emaar MGF and SVEC constructions had withdrawn the IPOs due to weak market sentiments.
Ø The amount raised by the IPOs so far amounts to INR 165.72 bn. The year has not seen any Follow-on Public Offer (FPO) so far.
Ø Of the 14 listings 6 IPOs (42.86%) managed to debut with marginal premiums. However, last calendar year in the same corresponding period 17 (47.22%) IPOs, of the 36 listings debuted at premiums.
Ø The fortune of the primary market is closely linked with that of the secondary market, and there is a lag affects on the number of issues hitting the market and their listing premium vis-à-vis the sentiments of the broader market.
Ø The subscription levels also impact the returns of the investors of various categories. The QIBs also did not give a good response to the issues that came, apart from the two big issues that of Future Capital and Reliance Power. These two IPOs witnessed a subscription of 180.72 times and 82.61 times respectively. In case of Rural Electrification Corporation also, the QIB portion got subscribed 39.30 times.
Ø Talking about the NIB category, the maximum subscription seen in this category was in Reliance Power IPO (190.02 times). In the remaining IPOs this category just managed to get subscribe fully.

IPO Snapshot 2007

Ø The year 2007 had been another blockbuster year in the history of Indian IPO market with total capital raised reaching a whopping INR 442 bn from 96 IPOs and 3 FPOs over the year. This number surpassed the previous year’s amount of 190 bn and is the highest till date beating the earlier high of INR 305 bn in 2004.
Ø The year saw the largest issue of DLF with issue size of INR 92 bn.
Ø Interestingly, the IPOs were not concentrated to a few industries, but spread across the board with companies from 14 different industries.
Ø 16 construction companies contributed to the total of 108 IPOs that came in the CY07, raising approximately INR 151 bn as against INR 36.5 bn last year through 10 IPOs.
Ø 45 companies, out of 108 IPOs comprised of various mid-sized industries including that of agronomic seed industry, auto components industry, piping & plumbing, paper industry, gems & jewellery, etc. The issues were of small size but as the amount raised by the companies comprised of INR 63 bn.
Ø 3 companies came out with FPOs this year compared to 20 companies in 2006. However, the absolute amount raised through FPOs increased significantly from INR 45 bn in 2006 to INR 105 bn. FPOs (as a proportion of total funds mobilised) declined to 24% from 31% last year.
Ø 22 IPOs in 2007 were oversubscribed by over 50x with the highest over all oversubscription of 160x in Religare Enterprises.
Ø DLF was the largest IPO in 2007 mobilizing INR 92 bn and ICICI Bank came up with the largest FPO of INR 100.5 bn. It was RPL in 2006 that came out with the biggest IPO for INR 27 bn and Bank of Baroda with the largest FPO of INR 16.3 bn.
Ø The highest listing gain of 242% was witnessed in Everonn Systems India with over all over subscription of 144x, while the worst listing was seen by Broadcast Initiatives, at a discount of 41%.
Ø Orbit corp, Everonn Systems, and MIC Electronics, have created the maximum wealth for investors in 2007 while, Abhishek mills, House of pearl fashion, and Asahi Songwon Colors eroded maximum wealth.

2008: THE ROAD AHEAD

2008 is expected to see much action scheduled to take place in the primary market. As per sources, the issues pending with SEBI and other mega issues that are in pipeline are around 485 (nearly 419 IPO and 66 FPO). The primary and secondary markets are highly interdependent. The secondary market conditions play a significant role in the over-subscription and the listing premium that a stock commands. At the same time, Mega IPOs that suck liquidity from the markets at times result in lack of buyers/support in the markets. Surely, there are several pros and cons associated with the mega IPOs and FPOs. With the Indian economy growing at an average real GDP rate of around 8% p.a., many mid-sized businesses from different sectors have grown manifold. There has been a paradigm shift from a human intensive business to capital intensive business. Such an expansion in the scale of business certainly accentuates the requirement for funds. One can expect many IPO’s with few big ones being Jai Prakash Power Ventures Ltd. (INR 40 bn) and National Hydroelectric Power corp ltd. (INR 22 bn). Few other mega IPOs include BSNL and Sahara Infrastructure & Housing Ltd. In CY 08 mega FPO (rights issue) of INR 120 bn by State Bank of India is awaited. Other PSUs that are expected to come up with issue of shares (fresh issue or divestment or both) during the year include NTPC (INR 60 bn), HPCL (INR 50 bn), Coal India (INR 30 bn), and Gujarat State Petroleum Corp Ltd. (INR 40 bn).

 1) DetermineYour Objectives -
The first and the most important thing which is to be done is to direct yourself and create a timeline driven comprehensive wish list of all the
possessions. To start with, ask a simple question, “Why DoWant To Invest?” and pen down on a piece of paper the reasons for it. The reasons for two
different females may vary depending on their priorities. For instance:
For married women with kids, the reason for investing could be child’s education or child’s
marriage.
For women whose kids are already married, the desire to invest could stem from a dream
to set up a small boutique.
For women who are yet to be married, it could be for their marriage.
While penning down you realize that you come across variety of objectives and it is to be noticed that the list is longer than you
bargained for.
Whencompiling the list of objectives we come across with some interesting options:
¥ Saving for own marriage 5 years from today.
¥ Saving for child’s education 15 years from today.
¥ Saving for child’s marriage 20 years from today.
¥ Saving for a small business that you want to set up at a later date.
¥ Saving for a gift for your spouse or parents.
¥ Saving for retirement or an overseas trip ormay be a pilgrimage 30 years from today.
Once the objectives are clear in your mind, we move on to the second step of preparing the investment plan through an investment advisor. He will make an investment plan suiting your
investment objective and keeping in mind appetite for equity linked investments, investment time frame, tax-efficient returns and the like.Your role is to give inputs for the plan.

2) Identify The Investment Advisor –
Since the investment advisor will be playing a major role in helping you to achieve your investment objectives, therefore it is important to connect with a right advisor. It sometimes
happens that the advisors in lieu of boosting their commission end up having a ruinous impact on the investment plan. One needs to check the certification of the advisor in order to ensure
whether he is certified or not. The investment advisor should be objective and unbiased in his advice. Being objective means placing the client’s interest over your own. Even after making
investments in either of the avenues, your relationship with Investment advisor continues, in terms of account statement, premium cheques to be submitted to the life insurance company,
follow up on dividends on mutual funds and the like.
After identifying the investment advisor, now an investment plan is prepared.

3) Preparing An Investment Plan -
Now comes the implementation of the investment plan. Some pre requisites for implementation of the plan are the details regarding what you want to achieve, time frame over which you
want to achieve the investment objective, the amount of money you want to invest in equities (this is important because equities can give a push to your savings, but also carry a higher risk).
This may sound tedious to you but is necessary at the same time for the advisor to fulfill your investment objective. It’s just like telling your doctor everything so that he can prescribe the right
medicine.

Some Rules to remember

 v      Spend less than you earn

 v      Pay your self first

 v      Pay-off credit cards before other debts

 v      Always shop off-season

 v      Get pre-approved for a mortgage before you begin house hunting

4) Executing The Investing Plan -
After preparing the investment plan, your investment advisor will help to execute it. This involves, for instance, choosing the investment opportunities. Before choosing the avenues for
investment you should not forget emergencies. These can be temporary loss of job, accident or illness. Or be ready for pleasant surprises like weddings or birthdays. One needs to set aside
money equivalent to about 3-6 months expenses and invest timely. The different avenues are:
¥ Equity
¥ PPF
¥ Real Estate Gold, Bullion, Real Jewellery
¥ Art, Paintings and Antiques Mutual Fund
¥ Unit Linked Insurance Schemes Small Saving Schemes like NSC,KVP, and IPO
Deposits etc.
5) Review The Investment Plan -
Setting an investment plan and executing the same is one task and to ensure you stay the course is the other. This means regular review of the plan is necessary. There could be several
reasons behind reviewing the plan from time to time. One reason can be when stock market change course over a period of time, it disturbs your asset allocation. This may result in
redemption of some of your equity investments or purchase of more of them depending on how much risk you are willing to take. The other instance can be that you approach the milestone
(either your child’s education or marriage) and you need to move out of the equity investments since equities are risky in the shot term. The money should be invested in short-term debt,
which is relatively safe. This may sound complicated to you again but your investment advisor is the one who will keep an eye on such events and will make suitable adjustments to the plan.
On your part it helps to be informed since it’s your money on the line.
Different women have the different financial predicaments in which they are likely to find themselves. As it is known, there are a variety of issues, problems and solutions to consider. Once
these issues are kept in mind, it is easier to sail through. Money today is an important key to happiness hence women should plan their finances and investments well. Women can attain
success with education and planning.Adopting a systematic and individualized approach with the aid of financial planning professionals can help to address and solve these problems while
achieving woman’s investment, retirement and estate planning goals. So ladies, it’s time to wake up and smell the coffee.
“Start Saving in Summer of Your Life to Survive the Winter of Your Livelihood”.
 

INSURANCE PLANNING
Every good financial plan needs to start with a good foundation by protecting the risk. Here risk includes life insurance, health insurance and insurance of valuable assets, liabilities etc. The purpose of life insurance is to lessen the financial impact associated with death/ unexpected loss of assets / unexpected health challenges. Life insurance is to provide financial protection for the one’s dependant family. Without the continued benefit of the income, the dependant family might have to compromise on their ongoing expenses for housing, transportation, food, clothing and other necessities. Insurance can bring peace of mind, knowing that these risks are covered. Life Insurance should be selected to protect the life risk and not for the great returns it offers. We need to balance the cost and the investment component, hence it would be advisable to get a Term Insurance cover and invest in Postal Savings schemes, Mutual Funds, Direct Equity, Real Estate and the opinions are endless.

RETIREMENT PLANNING
AS LIVING TOO SHORT can be planned with Life Insurance Planning, Retirement Planning covers the problem of LIVING TOO LONG and hence is an integral part of a financial plan.
Strategies are designed to suit individual goals and comfort level as well as to take advantage of tax saving opportunities. For any plan to be effective, it is necessary to implement these strategies and to review the goals periodically.
Young person and we are talking about retirement, but most of us today want to retire at the age of 40 or 45. Retirement doesn’t necessarily mean stop working when we can work no more or retire at the age of 58. The modern age retirement means you retire when your investment income surpasses your salary or active income. In other words you can stop working and still maintain the same life style. Inflation and interest are factored to know the exact amount of the retirement fund.

INVESTMENT PLANNING
Living too short or living too long, both are covered, but in case of emergency, proper investment planning plays a vital role. Any good investment plan is one, which is balanced but diversified, absorbs risk and maximizes returns. We can do the following to benefit from investment planning:
Create an Emergency Fund: An emergency fund is usually a separate account that is maintained to meet unexpected and important short-term needs such as car repair or a new appliance or a sudden health crisis. Emergency funds are established to minimize the effect of an unexpected event such as temporary job loss or reduction in income.

Asset Allocation: Asset allocation is the process wherein we can match our risk tolerances and financial objectives to our investment portfolio. Selecting different asset types may reduce the risk of the overall investment portfolio. Most common asset classes are,
·Cash or short term investments (savings accounts, money market funds etc)
·Fixed Income investments (Cash Deposits, bonds etc.)
·Equities (domestic and foreign stock, equity mutual funds etc.
Allocating our investment to various assets classes depends on factors including investment objective, time horizon, attitude towards acceptable risk, desired return and tax bracket.
The rule that is to be followed here is, “PAY URSELF FIRST”.
This rule can be put in use by starting systematic investment plans offered by many mutual funds, wherein a specified amount is invested each month in selected managed diversified funds. Normally we get worried about the returns on the products and wait for the ideal investment opportunities thereby losing a lot of time. However, we need to understand that if we don’t save money regularly then on what amount will we get return?

FOR EXAMPLE:
If A saves Rs.5000 per month for 5 years, then he saved Rs.300000. If he would have spent all that money, then where does the question of return comes from? Here comes the job of a financial planner who plans the cash flow thereby helping to save that little extra money and places them in right investments to give reasonable return.
Now the last aspect that is to be covered and cannot be ignored is Tax and Estate Planning.

TAX & ESTATE PLANNING
Tax planning involves the art of minimising taxes by making investments in tax-favoured instruments and planning well in advance. On the other hand Estate Planning too plays an essential role in financial planning. Some think that estate planning is for the wealthy, a belief that is simply not true. An estate plan allows us to decide how our assets are to be distributed, both during our lifetime and on our death. Preparing an estate plan involves understanding of the legal documents, concepts and strategies, which a solicitor can very well make us aware of.

After explaining Financial Planning as a whole, we need to understand that we being good at our field of work would ensure higher growth, higher salaries and higher income but understanding the aspects of financial planning will ensure us a higher net worth. So it’s important to be aware of these concepts if we want to live a luxurious life throughout without compromising on our desires.