Let us have a look at why we need to go for financial planning and why it is important for us.

Meeting the inflation blues
The rising cost of living needs higher cash inflows. It also means that you will need to save more to maintain or improve your current living standards in future. Inflation eats away whatever paltry returns you make out of traditional bank deposits and small savings. You must devise effective and high paying strategies for better yields on your savings to avoid that.
Growing aspirations
The growing aspirations of people require higher outlays. Be it your first car or house, your dream foreign holiday, education for your children, their wedding expenses, an early retirement or meeting other needs, it requires money and a lot if it. As aspirations grow, so does the need to be careful in your financial position and status.
Longer life span
Improved health standards have meant longer life span, which requires larger investments and post retirement income to sustain and maintain your standards. Needless to say that you need to work and rework your strategies to take you through at all times. you need to plan your finances and constantly review it to understand where you stand. It is not a one off task. It is rather a continuum. Make sure that you have a healthy balance when you need it most. As the saying goes—you can be without money when you are young, but you can certainly not grow older without it.
Low interest rate regime
Gone are the days of double digit interest income when your bank saving account and PPF and NSC used to pay 12% or more after tax returns. The measly returns offered by most of the bank deposit and small saving instruments require a fresh outlook, a change in strategy and rework your portfolio. You can no longer afford to be complacent or laid back. You can no be a passive investor. You need to be an active financial planner. This is not a choice but a requirement. Nothing can be left to chance. It requires strategizing and implementing your decisions.
Tax Liability
Effective tax liability is increasing due to introduction of new taxes such as fringe benefit tax, education cess and so on. You also need to do financial planning so that you can take tax neutral decision as far as possible and reduce your liability wherever possible. This will also lead to compulsory saving and risk free return, which should also form part of your total investment portfolio.

Book Building Process
Book building is a process of price discovery in case of IPOs. When Companies come through the book building route, the price of the issue is not fixed before hand. Rather the issue document only gives a floor price or the price band within which investors can bid for the shares. The IPO applicants bid for the shares being issued by the company quoting the price of their bid and the quantity that they would like to bid at. Only the retail investors have the option of bidding at ‘cut-off’. Cut off means that the investors are not active bidders but they are willing to accept whatever price is getting arrived at based on bidding done by other persons. After the bidding process is complete, the ‘cut-off’ price is arrived and shares are issued to successful applicants.

What is a price band?
Price band in the book building process refers to the band within which the investors can bid. The spread between the floor and the cap of the price band is not be more than 20%. In other words, it means that the cap should not be more than 120% of the floor price. It is up to the company and its merchant bankers to decide on the price or the price band of the public issue. There is no cap or regulatory approval needed for determining the price of an IPO. The only requirement is that the issuing company is required to disclose in detail about the qualitative and quantitative factors justifying the issue price.

How is the Retail Investor defined as?
‘Retail individual investor’ means an investor who applies or bids for securities of or for a value of not more than Rs.1,00,000.

Can a retail investor also bid in a book-built issue?
A retail investor can bid in a book-built issue for a value not more than Rs.1,00,000. Any bid made in excess of this will be considered in the HNI category or High net Worth category.

What is “online bidding”?
A company bringing out an IPO can use the infrastructure of a stock exchange for on-line system offer of securities. An investor desirous of making the application may place his bids through the online terminals offered by some of the stock brokers. This is the easiest way of investing in IPO, where broking houses such as ICICIdirect.com, Kotak Securities, Geojit securities etc, offer their clients to invest in IPOs through click of the button.

Let us have a look at a few of the advantages of investing in equity and how equity investment helps you achieve both short and long term financial objectives. Your equity investment offers you the following advantages:

Dividends

Dividends are the periodical returns generated by your investment in the share capital of the company. This is your regular income if the company is performing well and is a reward for taking risk of investing in the capital. Companies generally reward their shareholders through dividend pay-outs, which give an indication that the company’s financial and profit situation is pretty good.

Bonus shares

If the company is sitting on a huge reserve, it also rewards its shareholders by issue of bonus shares. Bonus shares are additional shares allotted to existing shareholders on some predetermined ratio such as 1:2, which means one additional share for every 2 shares held by the shareholder. These shares are allotted with having to pay anything and hence the acquisition cost of investment is reduced to that extent.

Rights issue

Rights shares are allotted to the existing shareholders at a discount to the existing market price. The difference between bonus and rights is that while bonus is free, for rights, shareholders have to pay the discounted price. However the shareholders also have a right to renounce the rights, if they feel that the price is not worthwhile for them to make additional investment in the company

Capital appreciation

This is one of the foremost reasons for investing in equity capital of a company. Investing in equity capital at appropriate price levels can see your investment value jump significantly over a period of time. Capital appreciation is the reward for risk bearing and hence your wealth may see an upward movement over a period of time as the share price of stocks in your portfolio increases. This is by far the most important factor attracting people to invest in capital market.

Liquidity

Liquidity in the form of converting your investment into cash in times of need. This means that equity investment is one of the most liquid investments possible and you can safely invest therein, being fully rest assured that your investment is easily convertible into cash as and when you require converting it into cash.