2. Relevance of Finance Education
• When the Economy becomes market-driven
• Availability of many investment products
• Investment products are complex in
nature
• Investors incapability of understanding
investment causes misselling of products
• Huge losses accrue to investors
• Make the investors risk-averse
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3. First Debacle: Risk Management & Investment
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Risk Management involves a cost
and a contingent benefit and no
return on the money spent
Investment may carry a cost and
return, certain or uncertain
Combining both risk management &
investment in one product leads to
huge losses
4. Second Debacle: Wrong Approach to Market
Investment
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Investment in
market driven
products like
stocks,
commodities and
currencies require
wide understanding
and constant
monitoring
The one-shot
approach given to
investment in bank
deposits can not
help in market
driven investment
products
There is the need
to understand the
market and
procedure before
making such
investment
5. Third Debacle: Management of Losses
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Inexperienced dip
into the market
results in losses
Gamblers
behaviour results
in repeating the
mistakes with
vengeance even
with borrowed
money
Resulting huge
losses create a
disgust
The resultant is
risk aversion like
an uneducated
investors-Going
back to square
one with a load of
losses on the
shoulders
6. First Lesson in Learning Module
• Comparison of investment products
• Insurance is not an investment product
• Different Forms of Returns: Annual return,
capital appreciation, special return
• Transaction costs of different investment
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products
• Tax incidence on the returns
7. Categories of Investment Products
Mutual Funds and
Shares
Gold
Real Estate
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Risk-Free
Investment
Risky
Investment
Investment in NBFCs
Government Bonds
and Treasury Bills
Debentures and
Bonds of PSUs
Bank Deposits
Small Saving of
Government of India
8. Inferiority of Non-Corporate Investment
• NBFCs give only a slightly higher rate of
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interest
• Gold and land give only capital
appreciation
• Transaction costs are very high
• Higher level of taxability
• Very high level of risk in both gold and
land
9. Superiority of Investment in Shares
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Annual Dividend,
Interim Dividend,
Special Dividend
Increase in market value
Bonus shares
Benefit from corporate
action like share
splitting, buy-back of
shares, Rights Issue,
return of money
Low incidence of
taxation
10. Making a Beginning
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• Selecting a broker
• Opening a Trading Account with the
broker
• Opening a demat account
• Selecting a strategy
• Choosing the sectors
• Making a right portfolio
• Timing of purchase and sales
11. Conditioning the Behaviour
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A loss can be
converted into
a profit
opportunity
Losses are
part of life
Swim
against the
current
trend
Not expecting profit
from each share,
but expecting the
targeted return from
the portfolio
Avoiding
investment on
recommendatio
ns
