Question

1) interview an interviewee who age above 22 with her financial condition related to current saving plan, insurance plan, investment plan and others relevant information. (400 words)

2) Explain the effect of covid-19 toward the interviewee’s personal financial planning and management. (400 words)

Answer 1

1)

The person is an IT professional aged 27 years, working in Banglore, India. His annual CTC is 9 Lakhs. In the initial phase of his career, he has already involved himself in financial markets for fulfilling his future goals by investing in various instruments like Liquid Funds, GILT funds, Mutual funds (hybrid), and also secures his dependent by subscribing to the life and health insurance plans.

My interviewee prefers liquid funds as they outperform the performance of a normal savings scheme or account of banks but he still has 30% of his monthly salary in it for daily expenses. He has opted for SIP (systematic investment plans) as they are an effective way to manage funds. In SIP he has to deposit a certain sum of money every month. He allocates 10% of his monthly income.

He has invested in hybrid MF where the money is invested in stocks as well as debt instruments. Hybrid funds are diversified hence gives him a return of 9% annually (approx), which he expects according to his moderate risk-taking capability. His future goals for these investments are children's education, one real estate property, a foreign trip, and some miscellaneous expenses. He has made a SIP and every month he allocates 30% of his monthly income to this fund.

He has availed health insurance plan for 3 people which has covered up to 15 Lakhs of his family (includes him and his parents) and this allows some tax relief. He pays a premium of 18000 annually. He has also a Life insurance plan which is an endowment plan with 20 years of maturity. It covers 50 Lakhs and has a monthly premium of 10,000.

2)

Due to the pandemic, the market volatility rose in equity markets for which he decided to go for gold bonds and guilt funds that are pure debt instruments. It is his emergency fund that he has created for future uncertainty. This came out completely after several job losses that happened due to the pandemic.

This pandemic brought down his MF investment by 10% which he prefers now in creating a contingency or emergency fund. As he has already purchased health insurance and life insurance so he had some cushioning but he never thought about having a contingency fund.

His expenses have also gone down in this critical situation as there was a lot of uncertainty going on in the corporate world.