Today the Indian market is flooded with a range of financial products and services. The list of financial products is very long and is continuously increasing. Few products out of the list are mutual funds, NPS, corporate fixed deposit, capital gain bonds etc. All of these products claim to grow your money and here is where the problem arises. Most of the investors have no idea about the products they are investing in. Or let’s say even though they know about the product, but do they know about any potential risks, limitations, costs as well as other characteristics of the products. With this arises a need of a financial planner. Financial Planners who go by a variety of titles-from Relationship Manager to Wealth Manager, Personal Portfolio Manager to Investment Advisor-play the role of advising a client on the best financial management plan for him or her with the help of financial planning.

What is financial planning?

Everyone has needs or aspirations. And almost all of them need financial commitments. With commitments, it becomes a financial goal.  So financial planning is a planned and systematic approach to provide for the financial goals that will help people realize their needs and aspirations, and be happy.

For example, a father wants his son, who has just passed his 10th standard Board examinations, to become a doctor. This is an aspiration. In order to realize this, formal education expenses, coaching class expenses, hostel expenses and various other expenses need to be incurred over a number of years. The estimated financial commitments towards these expenses become financial goals. These financial goals need to be met so that the son can become a doctor.

The needs or aspirations are a good starting point, but in order to plan, these need to be converted into financial goals. The financial goals must be defined in terms of time horizon and the amount of money required to fund the goal.

In the above example, the father has to plan (financially) for funding the son’s medical education. For that purpose, one needs to know the time when the son is ready to go to the medical college, which will be after 2 years, in this example as the son has just passed his 10th standard examination. The father also needs to estimate the amount required for tuition fees and other related expenses.

A financial planner helps in converting a need to a financial goal. A financial goal tells us what would be the amount of money required at the time of the need, taking into consideration risk appetite of the client, inflation, rate of return, cost in today’s terms and no. of years in the future when the expense will be incurred.

How does a financial planner help in advising individuals about mutual funds?

  • First of all, a financial planner understands individual’s financial needs and help him/her to formulate long-term investment goals and objectives then,
  •  Help an investor develop realistic expectations by discussing the risks and rewards of investing
  •  Make the individual know about the various schemes available in the market and the related risks, costs, lock-in period if any, taxation etc.
  • Keep an eye on the costs when advising mutual fund schemes to the individuals, as it can have an impact on the net returns.
  •  Match an individual’s goals and objectives with appropriate mutual funds according to the risk tolerance
  •  Continually monitor the individual’s mutual fund portfolio.

Some illustrative model mutual fund portfolios are:

i) Young call centre / BPO employee with no dependents

50% diversified equity schemes (preferably through SIP); 20% sector funds; 10% gold ETF, 10% diversified debt fund, 10% liquid schemes.

ii) Young married single income family with two school going kids

35% diversified equity schemes; 10% sector funds; 15% gold ETF, 30% diversified debt fund, 10% liquid schemes.

iii) Single income family with grown-up children who are yet to settle down

35% diversified equity schemes; 10% Index fund, 15% gold ETF, 30% diversified debt fund, 10% liquid schemes.

iv) Couple in their seventies, with no immediate family support

15% diversified equity index scheme; 10% gold ETF, 30% diversified debt fund, 30% MIP, 15% liquid schemes

The financial planner should have a model portfolio for every distinct client profile.

  • Explain the clients about the working of the mutual funds
  • Conduct regular reviews of an investor’s financial status to ensure proper positioning of the mutual fund portfolio
  • Help an investor “stay the course” of a long-term investment program
  • Recommending Equity Linked Savings Scheme (ELSS) if an investor wants to save tax.
  • Help in the retirement planning of his client by advising him to invest in mutual funds. Mutual funds help to build a corpus that can come to use for the people post-retirement.
  • Financial planners who are comfortable with the tax laws can also help the investor in matters relating to the taxation of mutual funds.
  • clearing all the doubts about the mutual fund myths. For example, a person requires a large amount to invest in MFs or Mutual funds only invests in equities and etc. It is important that these myths are busted.
  • A financial planner not only gives advice on mutual funds but also on other financial products. The main motive of the financial planner is that the financial goals of his clients are met and accordingly he advises the client.


CMT Level 1 Study Material

As a matter of fact you can watch live market trading that helps you to connect with CMT. Join a Technical Analysis Course which works on real time markets by using tools & techniques . That’ll give you behavioural understanding of real time Share market. Understanding the money management by real time trading or investment activity. As we know CMT is an MCQ Exam & ask question on application level. Create short notes of Course Content. Get PPT based Short Notes & note interpretation of tools & Techniques on technical analysis. Short Notes help you out to quick revision at the CMT exam time. CMT Books have very complicated language & course content is not properly aligned as it takes topics from various books of different writers. 

So we have to take individual topics and understand concepts in simple, Concise and Clear manner. Take content from various books or websites like Investopedia or Stock Charts on Each Topic for in-depth understanding. Apply tools & techniques with the help of Technical analysis or trading software’s. Read Books twice as MCQ can be created from a single line. while study mark important topics.