Ø
The amount of the regular investment also
depends upon the surplus amount or the disposable income that the individual
has, disposable income depends on
o
Individual’s income
o
Number of dependants
o
Current liabilities.
o
Current liabilities.
o
The surplus amount is the spare amount of money
left over after an individual has paid all their monthly liabilities.
o
Nobody should be encouraged to commit more to
savings and investment than they can
genuinely afford
o
Professional advisors must take account of
client’s liabilities as part of their saving and investment advise (Eg home
loan, car loan , education loan, personal loan and credit card debts)
o
Existing assets & liabilities: professional advisers must also consider the
individual’s current assets and liabilities as these affect both the client’s
needs and their ability to finance them, future accumulation of liabilities
like taking new loans impacts the need for savings.
Features and benefits of savings
products
Ø Guaranteed
and variable returns: some products offer
guaranteed returns and some variable returns.
Ø Regular
income and capital growth : some savings products provide regular income
(interest paid by a bank fixed deposit), some provide capital growth (gold)
Ø Penalties:
penalties are associated with the premature withdrawal of funds from fixed term
contact. Ex: exit load on mutual funds.
Ø Lock-in:
some products have a stipulate ‘lock-in’ period during which the funds cannot
be withdrawn.
Ø risk:
all savings products carry a level of risk- low risk, medium risk and high
risk.
Ø Buying
& selling mechanisms: are important – convenience to the individual
investor & speed of transaction.
Ø Flexibility:
o Facility
to switch between different forms of investment
o Payment
of variable contributions, and even to
o Facility
to temporarily stop making contributions altogether,
o Partial
withdrawal of funds without affecting the product in force,
o Premium
holiday, switching, partial withdrawals in a ULIP plan are examples of
flexibility.
Ø
Products can be purchased through-
o Individual
agents.
o Internet
o Call
centres
o ATMs
o Corporate
agents like banks & brokers.
o Websites
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