On Management

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Retirement Planning Some basics

Retirement In the Initial earning years it may be difficult to find adequate savings and there may be immediate and closer financial goals that may take precedence over the retirement goal. The savings plan for retirement should consider the overall financial situation and goals of the individual. It may be necessary to start low and increase the savings as the income grows and the ability to save increases. Investments made in the accumulation stage should be growth oriented, since there is along investment horizon adequate to smoothen out the short term volatility in returns that such investments display. There is generally a greater ability to take risk, and the portfolio should be invested to earn higher returns. The distribution stage of retirement is when the corpus created in the accumulation stage is employed to generate the income required to meet expenses in retirement.Investment made at this stage is income -oriented primarily. The ability to take ri

8 traits of great Leaders

Very few people start out in life as a leader. Most people who are effective leaders have gone through many trial and errors before learning the basic leadership skills of what makes an effective leader. The comment that leaders are born not made is partially true. However, some techniques can help anyone become an effective leader. What are the traits of an effective leader? Henry David Thoreau once said, “To affect the quality of the Day that is the highest of arts.” 1. A leaders vision is to shape the lives and transform people into being better than they were. An effective leader has the ability to inspire collaboration versus trying to control people. 2. They have the ability to persuade others to do what is right compared to having to order people to do what is right. 3. In addition, leaders get others to commit voluntarily versus committing out of fear or compliance. 4. These men and women tend to be great thinkers and focus on thi

Money Markets Instruments

Money Market Securities in India The money market includes instruments for raising and investing funds for periods ranging from one day up to one year. Money market securities consist of repos/reverse repos, CBLOs ( collateralized borrowing and lending obligations),certificates of deposits, treasury bills, and commercial paper. All these securities are issued at a discount and redeemed at par, and are zero coupon in structure. Money markets also include inter-bank call markets that are overnight lending transactions between banks, inter- bank terms markets that are long term deposits between banks, and interoperate deposits, which are short term lending between companies. These transactions do not involve creation of a debt security and are therefore not included here. The Participants in the money market include banks, primary dealers, financial institutions, mutual funds, provident and pension funds, companies and the government. The purpose of the money market is to enable ins

NPV-Net Present Value :Capital Budgeting Concepts

DEFINITION OF 'NET PRESENT VALUE - NPV' Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of a projected investment or project. The following is the formula for calculating NPV: where C t = net cash inflow during the period t C o = total initial investment costs r = discount rate , and t = number of time periods A positive net present value indicates that the projected earnings generated by a project or investment (in present dollars) exceeds the anticipated costs (also in present dollars). Generally, an investment with a positive NPV will be a profitable one and one with a negative NPV will result in a net loss . This concept is the basis for the Net Present Value Rule , which dictates that the only investments that should be made are those with positive NPV values. When the investment in questi

A Summary of Behavioral Finance

The central assumption of the traditional finance model is that people are rational. The behavioral finance model , however , argues that people suffer from cognitive and emotional biases and act in a seemingly irrational manner. The important heuristic-driven biases and cognitive errors that impair judgment are : representativeness, overconfidence, anchoring, aversion to ambiguity, and innumeracy. The form used to describe a problem has a bearing on decision making, Frame dependence stems from a mix of cognitive and emotional factors. The prospects theory describes how people frame and value a decision involving uncertainty. People feel more for a pain from a loss than the pleasure from an equal gain-about two and half times as strongly. This phenomenon is referred to as loss aversion . People tend to separate their money into various mental accounts and treat a rupee in one account differently from a rupee in another because each account has a different significance to

Financial Glossary 2

Over capitalisation when the business had more funds invested in the business than can be profitably employed Risk management is the process of identifying and minimising the potential cost of unfavourable events. Insurance Is a service offering protection against future possible loss as a result of some unfavourable event in the future. Budget is an expression of management plans in financial terms Profitability is a financial objective of the business and is concerned with the adequacy of profit Liquidity is a financial objective of a business and is concerned with being able to meet all cash obligations when they are due Growth is a financial objective and is concerned with increasing the size of the business Cash budget is a plan for cash receipts, cash payments and the resultant cash balance at certain points in time Targeted profit level should provide a reasonable return on the owners' investment - this means that the retur