A PROJECT REPORT ON

INVESTMENT ALTERNATIVES

Executive Summary

‘INVESTMENT ALTERNATIVES’, is not just a project but an information warehouse where I have tried my best to simplify the content in such a manner that even a layman can understand it. This project has truly helped me a lot to gain insights about various investment instruments. I have tried to cover as much as possible information, but due to vastness of the subject, the in-depth study of the subject was not possible. So, the information is brief and in precise form. It covers various investment vehicles such as savings a/c, FD, PPF, insurance, mutual funds, real estate, share market, etc. Lastly, I have tried to do a comparative analysis of all the investment instruments and have tried to prove that Share Market is the best option for investors (not speculator) who should have their fundamentals clear before entering the share market.

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Famous Quotes On Investment Aims and Objectives Of Investment Alternatives What Is Investment? What Investment Is Not.? Why Should One Invest? Investment Objectives When To Start Investing? What Care One Should Take While Investing? What Are Various Options Available For Investment? Savings Account Fixed Deposit Liquid Funds Money Market Funds National Savings Certificate Post Office Monthly Scheme Public Provident Fund Company Fixed Deposit Bonds And Debentures Mutual Fund Insurance Derivatives Commodities Market Investing In Indian Real Estate Share Market Stock Market Indices Gold Investment Tips For Stock Market Investors Tips By Mr. Warren Buffet Which Investment Option Is Best Interviews References

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INVESTMENT ALTERNATIVES

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FAMOUS QUOTES ON INVESTING:‘Tis money that begets money – English Proverb. “Money is better than poverty, if only for financial reasons” - Woody Allen. “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years” - Warren Buffett. “The four most dangerous words in investing are ‘This time it’s different’” – Sir John Templeton. “In investing money the amount of interest you want should depend on whether you want to eat well or sleep well”- Kenfield Morley. “Successful investing is anticipating the anticipations of others.”- John Maynard Keynes. “The genius of investing is recognizing the direction of a trend - not catching highs and lows”- Anonymous. “Capital as such is not evil; it is its wrong use that is evil. Capital in some form or other will always be needed” - Mahatma Gandhi.

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AIMS OF INVESTMENT ALTERNATIVES
 When it comes to implementing an investment strategy, today’s investor is faced with an overwhelming number of choices  It is important to know the different alternatives available in order to optimize one’s investment goals.  Every investor should choose from the various options available putting at place, one’s own needs and objectives  All investments vary in terms of their returns, risk profile, time horizon, liquidity etc.

OBJECTIVES OF INVESTMENT ALTERNATIVES

To invest primarily in a global portfolio of investment grade fixed income securities.

 To secure ones future  To save ones excess income.

To incorporate the investor’s appetite for risk, as well as the ability to tolerate risk.

 To Growth and expansion of an established company including product diversification and forward / backward integration

To Develop competitive products and cutting-edge technology.

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WHAT IS INVESTMENT?
“The act of committing money or capital to an endeavor with the expectation of obtaining an additional income or profit is investment.”
It’s actually pretty simple: investing means putting your money to work for you. The money you earn is partly spent and the rest saved for meeting future expenses. Instead of keeping the savings idle you may like to use savings in order to get return on it in the future. This is called Investment. Investment is a term, which is frequently used in the field of economics, business management, finance and it means savings or savings made through delayed consumption. Investment can be divided into different types according to various theories and principles. In general purview, investment is the application of money for earning more money. A particular amount of money is invested in the bank or an asset is bought in the anticipation that some return will be received from the investment in the future. There can be a number of definitions of Investment. While dealing with the various options of investment, the definitional variations of investment need to be kept in mind.

What is investment in terms of Economics:
According to economic theories, investment is defined as the “per unit production of goods, which have not been consumed, however, will be used for the purpose of future production.” Examples of this type of investments are tangible goods like construction of a factory or bridge and intangible goods like 6 months of on-job training. In terms of national production and income, Gross Domestic Product (GDP) has an essential constituent, which is called as gross investment. (http://us.geocities.com/frauline2008/terms.html) 7

What is investment in terms of Business Management:
According to business management theories, investment refers to tangible assets like machinery and equipments and buildings and intangible assets like copyrights or patents and goodwill. The decision for investment is also known as capital budgeting decision, which is regarded as one of the key decisions. (geocities.)

What is investment in terms of Finance:
In finance, investment refers to purchasing securities or any other financial assets from the capital market or money market or purchasing real properties with high market liquidity for example, gold, silver, real properties, and precious items. These are called ‘investment vehicles’. Financial investments are investment in stocks, bonds, commodities and many other types of security investments. Indirect financial investments can also be done with the help of mediators or third parties, such as pension funds, mutual funds, commercial banks, and insurance companies. According to personal finance theories, an investment is the implementation of money for buying shares or mutual funds or purchasing an asset with the involvement of the factor of capital risk. Here we are going to focus on investment in terms of finance, only. (geocities.)

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WHAT INVESTING IS NOT?
Investing is not gambling. Gambling is putting money at risk by betting on an uncertain outcome with the hope that you might win money. Part of the confusion between investing and gambling, however, may come from the way some people use investment vehicles. For example, it could be argued that buying a stock based on a “hot tip” you heard at the water cooler is essentially the same as placing a bet at a casino. True investing doesn’t happen without some action on your part. A “real” investor does not simply throw his or her money at any random investment; he or she performs thorough analysis and commits capital only when there is a reasonable expectation of profit. Yes, there still is risk, and there are no guarantees, but investing is more than simply hoping Lady Luck is on your side. (financialhub-sg)

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WHY SHOULD ONE INVEST?
Obviously, everybody wants more money. It’s pretty easy to understand that people invest because they want to increase their personal freedom, sense of security and ability to afford the things they want in life. However, investing is becoming more of a necessity. The days when everyone worked the same job for 30 years and then retired to a nice fat pension are gone. For average people, investing is not so much a helpful tool as the only way they can retire and maintain their present lifestyle. Nowadays, investments are the foundation of our future financial level. Bad investments can bring us negative turnovers and therefore decrease our future possibilities. You are looking at two options for your money, the first you can spend it or save it and second, invest it. In short, one needs to invest to: § To beat inflation and earn return on your idle resources § generate a specified sum of money for a specific goal in life § make a provision for an uncertain future / for retirement. One of the important reasons why one needs to invest wisely is to meet the cost of Inflation. Inflation is the rate at which the cost of living increases. The cost of living is simply what it costs to buy the goods and services you need to live. Inflation causes money to lose value because it will not buy the same amount of a good or a service in the future as it does now or did in the past. For example, if there was a 6% inflation rate for the next 20 years, a Rs. 100 purchase today would cost Rs. 321 in 20 years. This is why it is important to consider inflation as a factor in any long-term investment strategy. Remember to look at an investment’s ‘real’ rate of return, which is the return after inflation. The aim of investments should be to provide a return above the inflation rate to ensure that the investment does not decrease in value. For example, if the annual inflation rate is 6%, then the investment will need to earn more than 6% to ensure it 10

increases in value.If the after-tax return on your investment is less than the inflation rate, then your assets have actually decreased in value; that is, they won’t buy as much today as they did last year. Investors can learn a lot from the famous Greek maxim inscribed on the Temple of Apollo’s Oracle at Delphi: “Know Thyself”. In the context of investing, the wise words of the oracle emphasize that success depends on ensuring that your investment strategy fits your personal characteristics. Even though all investors are trying to make money, each one comes from a diverse background and has different needs. It follows that specific investing vehicles and methods are suitable for certain types of investors. Although there are many factors that determine which path is optimal for an investor, we’ll look at two main categories: investment objectives, and investing personality. (indian-capital-market-basics.)

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INVESTMENT OBJECTIVES:The options for investing our savings are continually increasing, yet every single investment vehicle can be easily categorized according to three fundamental characteristics - safety, income and growth - which also correspond to types of investor objectives. While it is possible for an investor to have more than one of these objectives, the success of one must come at the expense of others . Generally speaking, investors have a few factors to consider when looking for the right place to park their money. Safety of capital, current income and capital appreciation are factors that should influence an investment decision and will depend on a person’s age, stage/position in life and personal circumstances. A 75-year-old widow living off of her retirement portfolio is far more interested in preserving the value of investments than a 30-year-old business executive would be. Because the widow needs income from her investments to survive, she cannot risk losing her investment. The young executive, on the other hand, has time on his or her side. As investment income isn’t currently paying the bills, the executive can afford to be more aggressive in his or her investing strategies. An investor’s financial position will also affect his or her objectives. A multi-millionaire is obviously going to have much different goals than a newly married couple just starting out. For example, the millionaire, in an effort to increase his profit for the year, might have no problem putting down $100,000 in a speculative real estate investment. To him, a hundred grand is a small percentage of his overall worth. Meanwhile, the couple is concentrating on saving up for a down payment on a house and can’t afford to risk losing their money in a speculative venture. Regardless of the potential returns of a risky investment, speculation is just not appropriate for the young couple.

As a general rule, the shorter your time horizon, the more conservative you should be. For instance, if you are investing primarily for retirement and you are still in your 20s, you still have plenty of time to make up for any losses you might incur along the way. At the same time, if you start when you are young, you don’t have to put huge chunks of your pay-check away every month because you have the power of compounding on your side. 12

On the other hand, if you are about to retire, it is very important that you either safeguard or increase the money you have accumulated. Because you will soon be accessing your investments, you don’t want to expose all of your money to volatility - you don’t want to risk losing your investment money in a market slump right before you need to start accessing your assets.

Personality:Peter Lynch, one of the greatest investors of all time, has said that the “key organ for investing is the stomach, not the brain”. In other words, you need to know how much volatility you can stand to see in your investments. Figuring this out for yourself is far from an exact science; but there is some truth to an old investing maxim: you’ve taken on too much risk when you can’t sleep at night because you are worrying about your investments. Another personality trait that will determine your investing path is your desire to research investments. Some people love nothing more than digging into financial statements and crunching numbers. To others, the terms balance sheet, income statement and stock analysis sound as exciting as watching paint dry. Others just might not have the time to plough through prospectus and financial statements. The main factor determining what works best for an investor is his or her capacity to take on RISK. Hence, the key to a successful financial plan is to keep apart a larger amount of savings and invest it intelligently, by using a longer period of time. The turnover rate in investments should exceed the inflation rate and cover taxes as well as allow you to earn an amount that compensates the risks taken. Savings accounts, money at low interest rates and market accounts do not contribute significantly to future rate accumulation. While the highest rates come from stocks, bonds, and other types of investments in assets such as real estate. Nevertheless, these investments are not totally safe from risks, so one should try to understand what kind of risks are related to them before taking action. The lack of understanding as how stocks work makes the myopic point of view of investing in the stock market ( buying when the tendency to increase or selling when it tends to decrease) 13

perpetuate. To understand the characteristics of each one of the different types of investment can or may help you determine which of them is the right one for your needs. (.investopedia.)

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WHEN TO START INVESTING?
The sooner one starts investing the better. By investing early you allow your investments more time to grow, whereby the concept of compounding (as we shall see later) increases your income, by accumulating the principal and the interest or dividend earned on it, year after year. The three golden rules for all investors are:  Invest early  Invest regularly  Invest for long term and not short term

(indian-capital-market-basics.)

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WHAT CARE SHOULD ONE TAKE WHILE INVESTING?
Before making any investment, one must ensure to: 1. Obtain written documents explaining the investment. 2. Read and understand such documents. 3. Verify the legitimacy of the investment. 4. Find out the costs and benefits associated with the investment. 5. Assess the risk-return profile of the investment. 6. Know the liquidity and safety aspects of the investment. 7. Ascertain if it is appropriate for your specific goals. 8. Compare these details with other investment opportunities available. 9. Examine if it fits in with other investments you are considering or you have already made. 10. Deal only through an authorised intermediary. 11. Seek all clarifications about the intermediary and the investment. 12. Explore the options available to you if something were to go wrong, and then, if satisfied, make the investment. These are called the Twelve Important Steps to Investing. (indian-capital-market-basics.)

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WHAT ARE VARIOUS OPTIONS AVAILABLE FOR INVESTMENT?
One may invest in: § Physical assets like real estate, gold/jewellery, commodities etc. and/or § Financial assets such as fixed deposits with banks, small saving instruments with post offices, insurance/provident/pension fund etc. or securities market related instruments like shares, bonds, debentures etc.

What

are

various

Financial

options

available

for

investment?
Short-term:Briefly speaking, savings bank account, money market/liquid funds and fixed deposits with banks may be considered as short-term financial investment options.

Long-term:National Savings Certificate, Post Office Savings Schemes, Public Provident Fund, Company Fixed Deposits, Bonds and Debentures, Mutual Funds, Insurance etc., are long term financial investment options.

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Now let’s discuss the short-term and long-term financial options/ investment vehicles in detail:-

BANKS:Savings Account:A Saving Bank account (SB account) is meant to promote the habit of saving among the people. It also facilitates safekeeping of money. In this scheme fund is allowed to be withdrawn whenever required, without any condition. Hence a savings account is a safe, convenient and affordable way to save your money. Bank deposits are fairly safe because banks are subject to control of the Reserve Bank of India with regard to several policy and operational parameters. Bank also pays you a minimal interest for keeping your money with them. Features: The minimum amount to open an account in a nationalized bank is Rs 100. If cheque books are also issued, the minimum balance of Rs 500 has to be maintained. However in some private or foreign bank the minimum balance is Rs 500 or more and can be up Rs. 10,000. One cheque book is issued to a customer at a time. Savings account can be opened either individually or jointly with another individual. In a joint account only the sign of one account holder is needed to write a cheque. But at the time of closing an account, the sign of the both the account holders are needed. Return: The interest rate of savings bank account in India varies between 2.5% and 4%. In Savings Bank account, bank follows the simple interest method. The rate of interest may change from time to time according to the rules of Reserve Bank of India. One can withdraw his/her money by submitting a cheque in the bank and details of the account,

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i.e. the Money deposited, withdrawn along with the dates and the balance, is recorded in a passbook. Advantages: It’s much safer to keep your money at a bank than to keep a large amount of cash in your home. Bank deposits are fairly safe because banks are subject to control of the Reserve Bank of India with regard to several policy and operational parameters. The federal Government insures your money. Saving Bank account does not have any fixed period for deposit. The depositor can take money from his account by writing a cheque to somebody else or submitting a cheque directly. Now most of the banks offer various facilities such as ATM card, credit card etc. Through debit/ATM card one can take money from any of the ATM centres of the particular bank which will be open 24 hours a day. Through credit card one can avail shopping facilities from any shop which accept the credit card. And many of the banks also give internet banking facility through with one do the transactions like withdrawals, deposits, statement of account etc. (webindia123.)

Fixed Deposits (FD's):A fixed deposit is meant for those investors who want to deposit a lump sum of money for a fixed period; say for a minimum period of 15 days to five years and above, thereby earning a higher rate of interest in return. Investor gets a lump sum (principal + interest) at the maturity of the deposit. Bank fixed deposits are one of the most common savings scheme open to an average investor. Fixed deposits also give a higher rate of interest than a savings bank account. The facilities vary from bank to bank. Some of the facilities offered by banks are overdraft (loan) facility on the amount deposited, premature withdrawal before maturity period (which involves a loss of interest) etc. Bank deposits are fairly safer because banks are subject to control of the Reserve Bank of India. Features:Bank deposits are fairly safe because banks are subject to control of the Reserve Bank of 19

India (RBI) with regard to several policy and operational parameters. The banks are free to offer varying interests in fixed deposits of different maturities. Interest is compounded once a quarter, leading to a somewhat higher effective rate. The minimum deposit amount varies with each bank. It can range from as low as Rs. 100 to an unlimited amount with some banks. Deposits can be made in multiples of Rs. 100/Before opening a FD account, try to check the rates of interest for different banks for different periods. It is advisable to keep the amount in five or ten small deposits instead of making one big deposit. In case of any premature withdrawal of partial amount, then only one or two deposit need be prematurely encashed. The loss sustained in interest will, thus, be less than if one big deposit were to be encashed. Check deposit receipts carefully to see that all particulars have been properly and accurately filled in. The thing to consider before investing in an FD is the rate of interest and the inflation rate. A high inflation rate can simply chip away your real returns. Returns: -

The rate of interest for Bank Fixed Deposits varies between 4 and 11 per cent, depending on the maturity period (duration) of the FD and the amount invested. Interest rate also varies between each bank. A Bank FD does not provide regular interest income, but a lump-sum amount on its maturity. Some banks have facility to pay interest every quarter or every month, but the interest paid may be at a discounted rate in case of monthly interest. The Interest payable on Fixed Deposit can also be transferred to Savings Bank or Current Account of the customer. The deposit period can vary from 15, 30 or 45 days to 3, 6 months, 1 year, 1.5 years to 10 years.

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Duration 15-30 days 30-45 days 46-90 days 91-180 days 181-365 days 1-2 years 2-3 years 3-5 years

Interest rate (%) per annum 4 -5 % 4.25-5 % 4.75--5.5 % 5.5-6.5 % 5.75-6.5 % 6-8 % 6.25-8 % 6.75-8

Advantages: Bank deposits are the safest investment after Post office savings because all bank deposits are insured under the Deposit Insurance & Credit Guarantee Scheme of India. It is possible to get loans up to75- 90% of the deposit amount from banks against fixed deposit receipts. The interest charged will be 2% more than the rate of interest earned by the deposit. With effect from A.Y. 1998-99, investment on bank deposits, along with other specified incomes, is exempt from income tax up to a limit of Rs.12, 000/- under Section 80L. Also, from A.Y. 1993-94, bank deposits are totally exempt from wealth tax. The 1995 Finance Bill Proposals introduced tax deduction at source (TDS) on fixed deposits on interest incomes of Rs.5000/- and above per annum. (webindia123)

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LIQUID FUNDS:Liquid funds are used primarily as an alternative to short-term fix deposits. Liquid funds invest with minimal risk (like money market funds). Most funds have a lock-in period of a maximum of three days to protect against procedural (primarily banking) glitches. (iloveindia.) Liquid funds score over short term fix deposits. Banks give a fixed rate in the range 5%5.5% p.a. for a term of 15-30 days. Returns from deposits are taxable depending on the tax bracket of the investor, which considerably pulls down the actual return. Dividends from liquid funds are tax-free in the hands of investor, which is why they are more attractive than deposits.

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MONEY MARKET FUNDS:A money market fund is a type of mutual fund that is required by law to invest in low-risk securities. These funds have relatively low risks compared to other mutual funds and pay dividends that generally reflect short-term interest rates. Unlike a “money market deposit account” at a bank, money market funds are not federally insured. Money market funds typically invest in government securities, certificates of deposits, commercial paper of companies, and other highly liquid and low-risk securities. They attempt to keep their net asset value (NAV) at a constant $1.00 per share—only the yield goes up and down. But a money market’s per share NAV may fall below $1.00 if the investments perform poorly. While investor losses in money market funds have been rare, they are possible. It’s an investment fund that holds the objective to earn interest for shareholders while maintaining a net asset value (NAV) of $1 per share. Mutual funds, brokerage firms and banks offer these funds. Portfolios are comprised of short-term (less than one year) securities representing high-quality, assets liquid debt and as monetary a low-risk, instruments. low-return A money market fund’s purpose is to provide investors with a safe place to invest easily accessible cash-equivalent characterized investment. Because of their relatively low returns, investors, such as those participating in employer-sponsored retirement plans, might not want to use money market funds as a long-term investment option. (sec.gov)

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NATIONAL SAVINGS CERTIFICATES
What is National Savings Certificate?
National Savings Certificates (NSC) are certificates issued by Department of post, Government of India and are available at all post office counters in the country. It is a long term safe savings option for the investor. The scheme combines growth in money with reductions in tax liability as per the provisions of the Income Tax Act, 1961. The duration of a NSC scheme is 6 years. Features: NSCs are issued in denominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000 for a maturity period of 6 years. There is no prescribed upper limit on investment. Individuals, singly or jointly or on behalf of minors and trust can purchase a NSC by applying to the Post Office through a representative or an agent. One person can be nominated for certificates of denomination of Rs. 100- and more than one person can be nominated for higher denominations. The certificates are easily transferable from one person to another through the post office. There is a nominal fee for registering the transfer. They can also be transferred from one post office to another. One can take a loan against the NSC by pledging it to the RBI or a scheduled bank or a co-operative society, a corporation or a government company, a housing finance company approved by the National Housing Bank etc with the permission of the concerned post master. Though premature encashment is not possible under normal course, under sub-rule (1) of rule 16 it is possible after the expiry of three years from the date of purchase of certificate. Tax benefits are available on amounts invested in NSC under section 88, and exemption can be claimed under section 80L for interest accrued on the NSC. Interest accrued for any year can be treated as fresh investment in NSC for that year and tax benefits can be claimed under section 88.

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Return: It is having a high interest rate at 8% compounded half yearly. Post maturity interest will be paid for a maximum period of 24 months at the rate applicable to individual savings account. A Rs1000 denomination certificate will increase to Rs. 1601 on completion of 6 years. Interest rates for the NSC Certificate of Rs 1000
Year 1 year 2 year 3 year 4 years 5 years 6 years Rate of Interest Rs 81.60 Rs 88.30 Rs 95.50 Rs103.30 Rs 111.70 Rs 120.80

Advantages: Tax benefits are available on amounts invested in NSC under section 88, and exemption can be claimed under section 80L for interest accrued on the NSC. Interest accrued for any year can be treated as fresh investment in NSC for that year and tax benefits can be claimed under section 88. NSCs can be transferred from one person to another through the post office on the payment of a prescribed fee. They can also be transferred from one post office to another. The scheme has the backing of the Government of India so there are no risks associated with your investment.

How to start?
Any individual or on behalf of minors and trust can purchase a NSC by applying to the Post Office through a representative or an agent. Payments can be made in cash, cheque or DD or by raising a debit in the savings account held by the purchaser in the Post Office. The issue of certificate will be subject to the realization of the cheque, pay order, DD. The date of the certificate will be the date of realization or encashment of the

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cheque. If a certificate is lost, destroyed, stolen or mutilated, a duplicate can be issued by the post-office on payment of the prescribed fee. (webindia123.)

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POST OFFICE MONTHLY INCOME SCHEME
The post-office monthly income scheme (MIS) provides for monthly payment of interest income to investors. It is meant for investors who want to invest a sum amount initially and earn interest on a monthly basis for their livelihood. The MIS is not suitable for an increase in your investment. It is meant to provide a source of regular income on a long term basis. The scheme is, therefore, more beneficial for retired persons. Features: Only one deposit is available in an account. Only individuals can open the account; either single or joint. (two or three). Interest rounded off to nearest rupee i.e., 50 paise and above will be rounded off to next rupee. The minimum investment in a Post-Office MIS is Rs 1,500 for both single and joint accounts. The maximum investment for a single account is Rs 4.5 lakh and Rs 9 lakh for a joint account. The duration of MIS is six years. Returns: The post-office MIS gives a return of 8% interest on maturity. The minimum investment in a Post-Office MIS is Rs 1,000 for both single and joint accounts.
Deposit Rs 5,000 10,000 50,000 1,00,000 2,00,000 3,00,000 6,00,000 Monthly Interest 33 66 333 667 1333 2000 4000 Amount returned on maturity 5,000 10,000 50,000 1,00,000 2,00,000 3,00,000 6,00,000

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Advantages: Premature closure of the account is permitted any time after the expiry of a period of one year of opening the account. Deduction of an amount equal to 5 per cent of the deposit is to be made when the account is prematurely closed. Investors can withdraw money before three years, but a discount of 5%. Closing of account after three years will not have any deductions. Post maturity Interest at the rate applicable from time to time (at present 3.5%). Monthly interest can be automatically credited to savings account provided both the accounts standing at the same post office. Deposit in Monthly Income Scheme and invest interest in Recurring Deposit to get 10.5% (approx) interest. The interest income accruing from a post-office MIS is exempt from tax under Section 80L of the Income Tax Act, 1961. Moreover, no TDS is deductible on the interest income. The balance is exempt from Wealth Tax. (.webindia123.)

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PUBLIC PROVIDENT FUNDS
PPF is among the most popular small saving schemes. Currently, this scheme offers a return of 8 per cent and has a maturity period of 15 years. It provides regular savings by ensuring that contributions (which can vary from Rs.500 to Rs.70,000 per year) are made every year. For efficient “tax saving” there is nothing better than PPF! But for those who are looking for liquidity, PPF is NOT a good option. Withdrawals are allowed only after five years from the end of the financial year in which the “first deposit” is made. PPF does not provide any regular income and only provides for accumulation of interest over a 15-year period, and the lump-sum amount (principal + interest) is payable on maturity. The lump-sum amount that you receive on maturity (at the end of 15 years) is completely tax-free!! One can deposit up-to Rs 70,000 per year in the PPF account and this money will also not be taxed and be removed from your taxable income. If you are relatively young and have time on your side, then PPF is for you.

How to invest in PPF?
A PPF account can be opened with a minimum deposit of Rs.100 at any branch of the State Bank of India (SBI) or branches of its associated banks like the State Bank of Mysore or Hyderabad. The account can also be opened at the branches of a few nationalized banks, like the Bank of India, Central Bank of India and Bank of Baroda, and at any head post office or general post office. After opening an account you get a pass book, which will be used as a record for all your deposits, interest accruals, withdrawals and loans. However, be warned: you can have only one PPF account in your name. If at any point it is detected that you have two accounts, the second account that you have opened will be closed, and you will be refunded only the principal, not the interest. Again, two adults cannot open a joint account. The account will have to be opened in only one person’s name. Of course, the person who opens an account is free to appoint nominees. (indiahowto.) 29

COMPANY FIXED DEPOSIT
Company Fixed Deposit is the deposit placed by investors with companies for a fixed term carrying a prescribed rate of interest. Company Fixed Deposit have always offered interest which is 2-3% higher than Bank Deposit rate, because they have to pay higher interest to banks for borrowing money. Interest is paid on monthly/quarterly/half yearly/yearly or on maturity basis and is sent either through cheque or ECS facility. TDS is deducted if the interest on fixed deposit exceeds Rs.5000/- in a financial year. At the end of deposit period principal is returned to the deposit holder.

How to choose a good company deposit scheme?
» Ignore the unrated Company Deposit Schemes. Ignore deposit schemes of little known manufacturing companies. For NBFC’s, RBI has made it mandatory to have an ‘A’ rating to be eligible to accept public deposits, one should go further and look at only AA or AAA schemes. » Within a given rating grade, choose the company with a better reputation. » Once you decide on a company, next choose the schemes that have given a better return. Unless you need income regularly, you should prefer cumulative to regular income option since the interest earned automatically gets reinvested at the same coupon rate giving upon better yields. It also gives you a lump-sum amount at one go. » It is better to make shorter deposit of around 1 year to 3 years. This way you not only can keep a watch on the company’s rating and servicing but can also plan to have your money back in case of emergency. » Check on the servicing standards of the company. You should not oblige companies that care little about investor services like promptly sending interest warrants or the principal cheque. » Involve your reputed Financial planner / Investment Advisor like us for advice in all your transactions. Do not bypass and invest directly just to earn an extra incentive. » For investors living in outstation city, check whether the company accepts outstation cheques and make payment through at par cheques. 30

Which companies can accept Deposit?
Companies registered under Companies Act 1956, such as: » Manufacturing Companies. » Non-Banking Finance Companies, » Housing Finance Companies. » Financial Institutions. » Government Companies.

Upto what limits can a company accept deposit?
A Non-Banking Non-Finance Company (Manufacturing Company) can accept deposit subject to following limits. » Upto 10% of aggregate of paid-up share capital and free reserves if the deposits are from shareholders or guaranteed by directors. » Otherwise upto 25% of aggregate of paid-up share capital and free reserves. A Non-Banking Finance Company can accept deposits upto following limits: » Equipment Leasing Company can accept four times of its net owned fund. »Loan or Investment Company can accept deposit upto one and half time of its net owned funds.

What is the period of the deposit?
Company Fixed Deposits can be accepted by a Manufacturing Company having duration from 6 months to 3 years. Non-Banking Finance Company can accept deposit from 1 year to 5 years period. A Housing Finance Company can accept deposit from 1 year to 7 years.

Where not to Invest?
» Companies which offer interest higher than 15%. » Companies which are not paying regular dividends to the shareholder. 31

» Companies whose Balance Sheet shows losses. » Companies which are below investment grade (A or under) rating.

There is an old saying “DON’T PUT All YOUR EGGS IN ONE BASKET”.
The company deposits should be spread over a large number of companies. This will help the investor to diversify his risk among various companies/industries. Investors should not put more than 10% of their total Investible funds in one company. (avdhootinvestment.)

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BONDS AND DEBENTURES
Debt instruments can be further classified into the following categories based on the different characteristics with which they are floated in the market:  Debentures  Bonds

Debentures
Main characteristics
• • • •

They are fixed interest debt instruments with varying period of maturity. Can either be placed privately or offered for subscription. May or may not be listed on the stock exchange. If listed on the stock exchanges, they should be rated prior to the listing by any of the credit rating agencies designated by SEBI. When offered for subscription a debenture redemption reserve has to be maintained. The period of maturity normally varies from 3 to 10 years and may also be more for projects with a high gestation period.

Types of debentures: There are different kinds of debentures, which can be offered. They are as follows:
• • •

Non convertible debentures (NCD) Partially convertible debentures (PCD) Fully convertible debentures (FCD)

The difference in the above instruments is regarding the redeemability of the instrument:

In case of NCDs, the total amount of the instrument is redeemed by the issuer,

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In case of PCDs, part of the instrument is redeemed and part of it is converted into equity, In case of FCDs, the whole value of the instrument is converted into equity. The conversion price is stated when the instrument is issued.

Debentures might be either callable or puttable:Callable debenture is a debenture in which the issuing company has the option of redeeming the security before the specified redemption date at a pre-determined price. Similarly, a puttable security is a security where the holder of the instrument has the option of getting it redeemed before maturity.

BONDS
Bonds may be of many types - they may be regular income, infrastructure, tax saving or deep discount bonds. These are financial instruments with a fixed coupon rate and a definite period after which these are redeemed. The fundamental difference between debentures and bonds is that the former is normally secured whereas the latter is not. Hence in general bonds are issued at a higher interest rate than debentures. This avenue of financing is mainly availed by highly reputed corporate concerns and financial institutions. The three main kinds of instruments in this category are as follows:  Fixed rate  Floating rate  Discount bonds

The bonds may also be regular income with the coupons being paid at fixed intervals or cumulative in which the interest is paid on redemption. Unlike debentures, bonds can be floated with a fixed interest or floating interest rate. They can also be floated without interest and are called discount bonds as 34

they are issued at a discount to the face value and an investor is paid the face value on redemption, and if offered for longer terms are known as deep discount bonds.

The main advantage with interest bearing bonds is the floating interest rate, which is stipulated based on certain mark-up over stock market index or some such index.

From the point of view of the investor bonds are instruments carrying higher risk and higher returns as compared to debentures.

This has to be kept in mind while floating bond issues for financing purposes. With the current buoyancy in capital markets for equity instruments the demand for corporate bonds is low.

(.indiamarkets)

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MUTUAL FUNDS:A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:

Mutual Fund Operation Flow Chart (.jmfinancialmf.) ORGANIZATION OF A MUTUAL FUND There are many entities involved and the diagram below illustrates the organisational set up of a mutual fund:

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ADVANTAGES OF MUTUAL FUNDS: The advantages of investing in a Mutual Fund are:  Professional Management  Diversification  Convenient Administration  Return Potential  Low Costs  Liquidity  Transparency  Flexibility  Choice of schemes  Tax benefits  Well regulated

TYPES OF MUTUAL FUND SCHEMES: Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry. BY STRUCTURE:  Open - Ended Schemes  Close - Ended Schemes  Interval Schemes

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BY INVESTMENT OBJECTIVE:  Growth Schemes  Income Schemes  Balanced Schemes  Money Market Schemes OTHER SCHEMES  Tax Saving Schemes  Special Schemes  Index Schemes  Sector Specific Schemes (http://finance.indiamart.com/india_business_information/types_of_schemes_mutual_fun ds.html) FREQUENTLY USED TERMS: Net Asset Value (NAV) Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date.

Sale Price Is the price you pay when you invest in a scheme. It’s also called Offer Price. It may include a sales load. Repurchase Price Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price.

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Redemption Price Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related. Sales Load Is a charge collected by a scheme when it sells the units. Also called, ‘Front-end’ load. Schemes that do not charge a load are called ‘No Load’ schemes. Repurchase or ‘Back-end’ Load Is a charge collected by a scheme when it buys back the units from the unit holders?

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INSURANCE
Life insurance in India made its debut well over 100 years ago.

In our country, which is one of the most populated in the world, the prominence of insurance is not as widely understood, as it ought to be. What follows is an attempt to acquaint readers with some of the concepts of life insurance, with special reference to LIC. It should, however, be clearly understood that the following content is by no means an exhaustive description of the terms and conditions of an LIC policy or its benefits or privileges. For more details, please contact our branch or divisional office. Any LIC Agent will be glad to help you choose the life insurance plan to meet your needs and render policy servicing.

What Is Life Insurance?
Life insurance is a contract that pledges payment of an amount to the person assured (or his nominee) on the happening of the event insured against. The contract is valid for payment of the insured amount during: The date of maturity, or Specified dates at periodic intervals, or Unfortunate death, if it occurs earlier. Among other things, the contract also provides for the payment of premium periodically to the Corporation by the policyholder. Life insurance is universally acknowledged to be an institution, which eliminates ‘risk’, substituting certainty for uncertainty and comes to the timely aid of the family in the unfortunate event of death of the breadwinner. By and large, life insurance is civilisation’s partial solution to the problems caused by death. Life insurance, in short, is concerned with two hazards that stand across the life-path of every person. That of dying prematurely is leaving a dependent family to fend for itself. That of living till old age without visible means of support.

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Life Insurance Vs. Other Savings
Contract Of Insurance:
A contract of insurance is a contract of utmost good faith technically known as uberrima fides. The doctrine of disclosing all material facts is embodied in this important principle, which applies to all forms of insurance. At the time of taking a policy, policyholder should ensure that all questions in the proposal form are correctly answered. Any misrepresentation, non-disclosure or fraud in any document leading to the acceptance of the risk would render the insurance contract null and void.

Protection:
Savings through life insurance guarantee full protection against risk of death of the saver. Also, in case of demise, life insurance assures payment of the entire amount assured (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable.

Aid To Thrift:
Life insurance encourages ‘thrift’. It allows long-term savings since payments can be made effortlessly because of the ‘easy instalment’ facility built into the scheme. (Premium payment for insurance is either monthly, quarterly, half yearly or yearly). For example: The Salary Saving Scheme popularly known as SSS, provides a convenient method of paying premium each month by deduction from one’s salary. In this case the employer directly pays the deducted premium to LIC. The Salary Saving Scheme is ideal for any institution or establishment subject to specified terms and conditions.

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Liquidity:
In case of insurance, it is easy to acquire loans on the sole security of any policy that has acquired loan value. Besides, a life insurance policy is also generally accepted as security, even for a commercial loan.

Tax Relief:
Life Insurance is the best way to enjoy tax deductions on income tax and wealth tax. This is available for amounts paid by way of premium for life insurance subject to income tax rates in force. Assessee can also avail of provisions in the law for tax relief. In such cases the assured in effect pays a lower premium for insurance than otherwise.

Money When You Need It:
A policy that has a suitable insurance plan or a combination of different plans can be effectively used to meet certain monetary needs that may arise from time-to-time. Children’s education, start-in-life or marriage provision or even periodical needs for cash over a stretch of time can be less stressful with the help of these policies. Alternatively, policy money can be made available at the time of one’s retirement from service and used for any specific purpose, such as, purchase of a house or for other investments. Also, loans are granted to policyholders for house building or for purchase of flats (subject to certain conditions).

Who Can Buy A Policy?
Any person who has attained majority and is eligible to enter into a valid contract can insure himself/herself and those in whom he/she has insurable interest. Policies can also be taken, subject to certain conditions, on the life of one’s spouse or children. While underwriting proposals, certain factors such as the policyholder’s state of health, the proponent’s income and other relevant factors are considered by the Corporation.

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Insurance For Women:
Prior to nationalization (1956), many private insurance companies would offer insurance to female lives with some extra premium or on restrictive conditions. However, after nationalization of life insurance, the terms under which life insurance is granted to female lives have been reviewed from time-to-time. At present, women who work and earn an income are treated at par with men. In other cases, a restrictive clause is imposed, only if the age of the female is up to 30 years and if she does not have an income attracting Income Tax.

Medical And Non-Medical Schemes
Life insurance is normally offered after a medical examination of the life to be assured. However, to facilitate greater spread of insurance and also to avoid inconvenience, LIC has been extending insurance cover without any medical examination, subject to certain conditions.

With Profit And Without Profit Plans
An insurance policy can be ‘with’ or ‘without’ profit. In the former, bonuses disclosed, if any, after periodical valuations are allotted to the policy and are payable along with the contracted amount. In ‘without’ profit plan the contracted amount is paid without any addition. The premium rate charged for a ‘with’ profit policy is therefore higher than for a ‘without’ profit policy.

Keyman Insurance:
Keyman insurance is taken by a business firm on the life of key employee(s) to protect the firm against financial losses, which may occur due to the premature demise of the Keyman. (licindia.)

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DERIVATIVES:Types of Derivatives?
Forwards: A forward contract is a customized contract between two entities, where settlement takes place on a specific date in the future at today’s pre-agreed price. Futures: A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Futures contracts are special types of forward contracts in the sense that the former are standardized exchange-traded contracts, such as futures of the Nifty index. Options: An Option is a contract which gives the right, but not an obligation, to buy or sell the underlying at a stated date and at a stated price. While a buyer of an option pays the premium and buys the right to exercise his option, the writer of an option is the one who receives the option premium and therefore obliged to sell/buy the asset if the buyer exercises it on him. Options are of two types - Calls and Puts options: ‘Calls’ give the buyer the right but not the obligation to buy a given quantity of the underlying asset, at a given price on or before a given future date. ‘Puts’ give the buyer the right, but not the obligation to sell a given quantity of underlying asset at a given price on or before a given future date. Presently, at NSE futures and options are traded on the Nifty, CNX IT, BANK Nifty and 116 single stocks. Warrants: Options generally have lives of up to one year. The majority of options traded on exchanges have maximum maturity of nine months. Longer dated options are called Warrants and are generally traded over-the counter. What is an ‘Option Premium’? 44

At the time of buying an option contract, the buyer has to pay premium. The premium is the price for acquiring the right to buy or sell. It is price paid by the option buyer to the option seller for acquiring the right to buy or sell. Option premiums are always paid upfront. What is ‘Commodity Exchange’? A Commodity Exchange is an association, or a company of any other body corporate organizing futures trading in commodities. In a wider sense, it is taken to include any organized market place where trade is routed through one mechanism, allowing effective competition among buyers and among sellers – this would include auction-type exchanges, but not wholesale markets, where trade is localized, but effectively takes place through many non-related individual transactions between different permutations of buyers and sellers. What is meant by ‘Commodity’? FCRA Forward Contracts (Regulation) Act, 1952 defines “goods” as “every kind of movable property other than actionable claims, money and securities”. Futures’ trading is organized in such goods or commodities as are permitted by the Central Government. At present, all goods and products of agricultural (including plantation), mineral and fossil origin are allowed for futures trading under the auspices of the commodity exchanges recognized under the FCRA. What is Commodity derivatives market? Commodity derivatives market trade contracts for which the underlying asset is commodity. It can be an agricultural commodity like wheat, soybeans, rapeseed, cotton, etc or precious metals like gold, silver, etc. Difference between Commodity and Financial derivatives? The basic concept of a derivative contract remains the same whether the underlying happens to be a commodity or a financial asset. However there are some features which are very peculiar to commodity derivative markets. In the case of financial derivatives, 45

most of these contracts are cash settled. Even in the case of physical settlement, financial assets are not bulky and do not need special facility for storage. Due to the bulky nature of the underlying assets, physical settlement in commodity derivatives creates the need for warehousing. Similarly, the concept of varying quality of asset does not really exist as far as financial underlyings are concerned. However in the case of commodities, the quality of the asset underlying a contract can vary at times.

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COMMODITIES MARKET:Commodity markets are markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which they are bought and sold in standardized contracts.

India Commodity Market
The vast geographical extent of India and her huge population is aptly complemented by the size of her market. The broadest classification of the Indian Market can be made in terms of the commodity market and the bond market. Here, we shall deal with the former in a little detail. The commodity market in India comprises of all palpable markets that we come across in our daily lives. Such markets are social institutions that facilitate exchange of goods for money. The cost of goods is estimated in terms of domestic currency. Indian Commodity Market can be subdivided into the following two categories:
• •

Wholesale Market Retail Market

Let us now take a look at what the present scenario of each of the above markets is like. The traditional wholesale market in India dealt with whole sellers who bought goods from the farmers and manufacturers and then sold them to the retailers after making a profit in the process. It was the retailers who finally sold the goods to the consumers. With the passage of time the importance of whole sellers began to fade out for the following reasons:

The whole sellers in most situations, acted as mere parasites who did not add any value to the product but raised its price which was eventually faced by the consumers.

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The improvement in transport facilities made the retailers directly interact with the producers and hence the need for whole sellers was not felt.

In recent years, the extent of the retail market (both organized and unorganized) has evolved in leaps and bounds. In fact, the success stories of the commodity market of India in recent years has mainly centred around the growth generated by the Retail Sector. Almost every commodity under the sun both agricultural and industrial are now being provided at well distributed retail outlets throughout the country. Moreover, the retail outlets belong to both the organized as well as the unorganized sector. The unorganized retail outlets of the yesteryears consist of small shop owners who are price takers where consumers face a highly competitive price structure. The organized sector on the other hand are owned by various business houses like Pantaloons, Reliance, Tata and others. Such markets are usually sell a wide range of articles both agricultural and manufactured, edible and inedible, perishable and durable. Modern marketing strategies and other techniques of sales promotion enable such markets to draw customers from every section of the society. However the growth of such markets has still centered around the urban areas primarily due to infrastructural limitations. Considering the present growth rate, the total valuation of the Indian Retail Market is estimated to cross Rs. 10,000 billion by the year 2010. Demand for commodities is likely to become four times by 2010 than what it presently is.

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INVESTING IN INDIAN REAL ESTATE
Indian Real Estate: “Undeniably tremendous!”
And, that is the undeniable verdict of a Price Waterhouse Coopers study conducted on the investment environment in terms of Indian real estate. Ever since the Government of India gave its stamp of approval to 100% foreign direct investment (FDI) in housing and real estate, NRIs, overseas real estate developers, hoteliers, and others have been tracking a path to the sub-continent. Sensing the business potential for developing serviced plots, constructing residential / commercial complexes, business centres / offices, minitownships, investments in infrastructure facilities e.g. roads, bridges, manufacture of building materials, etc., FDI is flooding in to take advantage of the tremendous real estate opportunities.

Indian Real Estate: Growing Potential
The increasing demand for Indian real estate has not only generated employment, it has also been instrumental in the growth of steel, cement, bricks and other related industries. Estimated to be in the region of US $12-billion, real estate development in India is growing by as much as 30% each year. Already, eighty percent of Indian real estate has been developed for residential space, and 20% comprises of shopping malls, office space, hospitals and hotels. Fuelled largely due to off-shoring / outsourcing of BPOs, call centres, high-end technology consulting and software development and programming firms, real estate growth in India has great investment prospectives.

Indian Real Estate: Investment Opportunities
Tax reform measures in the last few years have ensured real estate in India is one of the most productive investment sectors, with money invested in real estate offering regular returns on investment including appreciating in value. And, the Government of India by opening up 100% foreign direct investment, and fiscal reforms like stamp duty and

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property tax reductions, setting up real estate mutual funds has turned real estate into a promising investment option. Already, it has approved the first Rs. 100-crore FDI project in Gurgaon. With urban populations expected to grow from 290-million to 600-million by 2021, housing requirements are expected to top 68-million by 2021, which means India’s urban housing sector could do with an investment of US $25-billion over a 5-year period. Poised for rapid urbanisation, 3 out of 10 of the world’s largest cities are in India. An influx of jobs due to off-shoring / outsourcing has resulted in rising disposable incomes, increased consumerism, factors responsible for changing the face of residential and commercial real estate in India. Wishing to take advantage of real estate investment opportunities, banks and housing finance companies are falling over themselves to tie-up with developers or offer project loans at competitive rates. (.sharemarketbasics)

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SHARE MARKET:The Stock Market is a market which deals in stocks of companies belonging to both the public sector as well as private. The Indian Stock Market is mostly referred to as the Share Market because it deals primarily with shares of various companies listed in for trading. The stock market is a viable investment option at hands for investors in India. Since Indian Stocks market is showing strength and making steady gains over last few years barring few low ebbs it is wise to prefer stock market as reliable mode of investment than other investment options. (bazaarlive.)

INVESTING IN STOCKS
Many of us would like to try our luck in the Stock markets. Yes, Why Not ? Trading stocks is one of the most lucrative methods of making money. Here’s Why : 1. You do not need a lot of money to start making money, unlike buying property and paying a monthly mortgage. 2. It requires very minimal time to trade - unlike building a conventional business. 3.. It’s ‘fast’ cash and allows for quick liquidation (You can convert it to cash easily, unlike selling a property or a business). 4. It’s easy to learn how to profit from the stock market. But You need to have your basics clear. Unless you do….you will be wasting your time and loosing money. You need to be crystal clear of each and every aspect of Investments, stock options, Stock Trading, Company, Shares, Dividend & Types of Shares, Debentures, Securities, Mutual Funds, IPO, Futures & Options, What does the Share Market consist of? Exchanges, Indices, SEBI , Analysis of Stocks – How to check on

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what to buy?, Trading Terms (Limit Order, Stop Loss, Put, Call, Booking Profit & Loss, Short & Long), Trading Options – Brokerage Houses etc. You must have heard stories of the fabulous returns made in the stock markets in recent months. And you longed wishfully for a piece of the action. But you could also have heard horror stories of how a friend lost his shirt in the stock market. And were promptly thankful that you didn’t lose yours. Let’s set the record straight. Wisely chosen (those are the key words), stocks are a must for any serious investor. They add that extra zing to your collection of investments. Study after study has revealed that over the long term, stocks outperform all other assets. That means you can expect to earn more from shares than from bonds, fixed deposits or gold. No doubt the risk is higher with shares. But if you are in for the long haul, so are the potential returns. But before you take the plunge and invest in the stock market, get your basics right. 1. Stocks are not only for the brilliant Stocks are far from being rocket science. The strategies you need to know to maximise your wealth and the pitfalls you need to avoid are not beyond comprehension. Even if you feel that you don’t have the time, and prefer to entrust your money to a portfolio manager or mutual fund, the least you need to know is which funds are better, how to choose your fund manager, and keep a tab on his performance. 2. So what is a share? Any business has a lot of assets: The machinery, buildings, furniture, stock-in-trade, cash, etc. It will also have liabilities. This is what the company owes other people. Bank loans, money owed to people from whom things have been bought on credit, are examples of liabilities. Take away the liabilities from the total assets, and you are left with the capital. Capital is the amount that the owner has in the business. As the business grows and 52

makes profits, it adds to its capital. This capital is subdivided into shares (or stocks). So if a company’s capital is Rs 10 crore (Rs 100 million), that could be divided into 1 crore (10 million) shares of Rs 10 each. Part of this capital, or some of the shares, is held by the people who started the business, called the promoters. The other shares are held by investors. These investors could be people like you and me or mutual funds and other institutional investors. 3. What does this mean for investor? You must have realised by now that owning a share means owning a share in the business. When you invest in stocks, you do not invest in the market. You invest in the equity shares in a company. That makes you a shareholder or part owner in the company. Since you own part of the assets of the company, you are entitled to the profits those assets generate. Or bear the loss. So, if you own 100 shares of Gujarat Ambuja Cement, for example, you own a very small part -- since Gujarat Ambuja has millions of shares -of the company. You own a share of its assets, its liabilities, its profits, its losses, and so on. Owning shares, therefore, means having a share of a business without the headache of managing it. Your Gujarat Ambuja shares, for instance, will rise in value if the company makes good profits, or may do badly if people stop building houses and demand for cement falls. 4. What do mean by rise in value? If the company has divided its capital into shares of Rs 10 each, then Rs 10 is called the face value of the share. When the share is traded in the stock market, however, this value may go up or down depending on supply and demand for the stock. If everyone wants to buy the shares, the price will go up. If nobody wants to buy them, and many want to sell the shares, the price will fall. The value of a share in the market at any point of time is called the price of the share or the market value of a stock. So the share with a face value of Rs 10, may be quoted at Rs 55 (higher than the face value), or even Rs 9 (lower than the face value). If the number of shares in a company is multiplied by its market value, the result is market capitalisation. For instance, a company having 10 million shares of a 53

face value Rs 10 and a market value of Rs 30 as on November 1, 2004, will have a market capitalisation of Rs 300 million as on November 1, 2004. 5. So how does one buy shares? Alright, you have decided you want part of the action. Shares are bought and sold on the stock exchanges -- the two main ones in India are the National Stock Exchange (NSE), and the Bombay Stock Exchange (BSE). You can use three different routes to buy shares: Through your broker, trade directly online, or buy shares when a company comes out with a fresh issue of shares. This is called an initial public offering (IPO). Clear the jargon first! If a brand new company or a company already in existence, but with no shares listed on the stock exchange, decides to invite the public to buy shares, it is called an Initial Public Offering (IPO). It is the first time that it is approaching the public for money. That is why the company is also referred to as ‘going public’. If a company that is already listed (has its shares for buying and selling on the stock exchange) is coming out with a fresh tranche of shares, it is called the new issue (like the current Dena Bank issue). Then, there are the disinvestments -- where the government sells its stakes in public sector companies in the market. Although these are not technically new issues, they too create a buzz in the market. ~ Every company needs money A company needs money to grow and expand -- to purchase new machinery, land or even repay its loans. To do that, one of the options it has is to ask the public for money. 54 (sharesmarket)

It comes out with a public or new issue. The company offers shares and the public buys those shares. These shares are listed on the Stock Exchange. People who invest in the company get rewarded (as dividends) by the company, or sell the shares as the share price rises. ~ How can I buy these shares? There are two ways:  If you want the shares of a company that is already listed, you can buy them from the Stock Exchange through brokers. This is called buying from the secondary market.  Buying from the primary market means that you buy them directly from companies when they make new issues of shares or come out with IPOs. You can also get rights issues and bonus shares, but more on that later. Why would you pick up shares through IPOs, rather than buy them from the market? Because, often, companies issue their shares cheaply and, later, when these shares are listed on the Stock Exchange, they list at a premium (higher than the price at which they were issued). So you could make a lot of money if you sell those shares. What if you don’t want to sell the shares soon? Sure. It also happens that companies who are going public or listing their shares for the first time also usually offer their shares cheap, and could go on to become very successful. IPOs thus offer investors the chance to participate in their prosperity cheaply. These listing gains are the chief attractions of buying in the primary market.

~ So what’s the catch? 55

The trouble is, there are usually plenty of applicants for good IPOs. And they are heavily oversubscribed (the demand for the number of shares is more than the number being offered for sale). And although 25% of the issue has to be reserved mandatorily for the retail investor (those who apply for shares of a value less than Rs 50,000), even the retail portion is oversubscribed several times for good issues. In this scenario, lots are drawn and only a few individuals are allotted shares. Hence, you may not get the number of shares you asked for. There is also a chance that you may also not get an allotment at all, in which case your money will be returned to you. If you don’t get any shares, your money will be returned to you within 21 days. This is true even if you get partial allotment (you get only some of the shares you applied for), and the extra money you have paid is returned. If you do get an allotment, your demat account will be credited with the shares. Once the shares are listed, you can sell them in the market and pocket the gains. Of course, you can also hold your shares for the long term if you want, but most people opt out if the price on listing is well above the price at which you were allotted the stocks. Remember, you need to have a demat account before applying for IPOs. Else your form will be rejected. (.rediff.)

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Lets know about Stock Market Indices:
A stock index represents the change in the value of a set of stocks, which constitute the index. More precisely, a stock index number is the current relative value of the weighted average of the prices of a pre-defined group of stocks. For example, if an index is assigned an arbitrary base value of 100 on a given date with a certain number of stocks assigned to it, this date onwards, the change in index would be measured in terms of changes that the base value of 100 acquires. A good stock market index is one, which is well diversified and is adequately liquid. Some of the prominent indices in India are: 1. Sensex 2. Nifty 3. Nifty Junior 4. BSE 200 5. Nifty Bankex etc.

Among all these indices, BSE Sensex and Nifty deserve special mention. Brief details about these indices are as follows: 1. BSE Sensex: The Bombay Stock Exchange is the oldest stock market of India. “Sensex” stands for sensitive index. It was created in 1978-79 with a base value of 100. It comprises of thirty stocks of leading Indian companies and is well diversified with representation of almost all the sectors of the economy like Banking, Information Technology, Cement, Autos, Manufacturing, Capital Goods, etc. The Sensex is revised from time to time to incorporate companies belonging to emerging sectors of the economy. The movement in Sensex values on working days is computed on a real time basis. 2. Nifty: Nifty is the stock market index of National Stock Exchange. It comprises the stocks of 50 of the largest and the most liquid companies from about 25 sectors in India. It was introduced in 1995 keeping in mind that it would be used 57

for modern applications such as index funds and index derivatives, besides reflecting the stock market behaviour. NSE maintained it till July 1998 and subsequently it has been managed by IISL (India Index Services and Products Ltd.) 3. Sectoral Indices: Sectoral Indices are those indices, which represent a specific industry sector. All stocks in a sectoral index belong to that sector only. Hence an index like the NSE Bankex is made of Banking Stocks. Sectoral Indices are very useful in tracking the movement and performance of particular sector.

GOLD INVESTMENT:No other commodity enjoys as much universal acceptability and marketability as gold." - Hans F. Sennholz Last week continued to be a sad week for investors. The road to multiplying money through investment in shares since Jan 2008 is full of bricks & stones. Many have burnt their fingers in share market. The uncertainty has made the investors to look for alternatives. This has paved a way for investment in gold especially this year. Investment in real estate is not at all easy. Investing in the yellow metal is an ideal money move this year, say experts. Gold often has a negative correlation with stocks. This is the reason why gold has become a popular vehicle for portfolio diversification. Gold is not only a 58

safe vehicle at all times but it also yields handsome returns in the long term in the form of appreciation in its price. One thing is sure - you do not have to be glued in front of the computer monitors to track the price movements of stocks through out the day, which is required while trading online. No doubt, gold prices have been volatile but definitely not to the extent seen in case of share prices. Gold price movement is likely to be within a reasonable range. For example on a day - to - day basis it could be in tens or hundreds of rupees per 10 grams of gold. When to buy gold? Actually I can say it could be 24x7 – Invest any time you like! And at any time you have funds to invest! But one can avoid festival seasons as prices are likely to be higher at that time. If we look at the past, almost since 1998, the trend in the prices is upward. Indians are the biggest buyers of gold in the world. The lure for the gold has not reduced in spite of the rise in prices. Have a close glance at the gold prices given in the following table. From 1975 to 2008, gold prices have steadily increased except of course during the years 1997-1998, when there was a decline in prices.

Gold Prices in India As on 31st Mar 1975 1980 1985 1990 1995 1996 1997 1998 1999 Gold price per 10 gm 540 1330 2130 3200 4658 5713 4750 4050 4220 As on 31st mar 2000 2001 2002 2003 2004 2005 2006 2007 (27-6-2008) 59 Gold price per 10 gm 4395 4410 5030 5260 6005 6165 8210 9500 12568

These figures are enough to instill confidence in investors to invest in gold. Why invest in gold? Investing in gold is almost like having money on hand. It is preferred for the following reasons. 1. Liquidity - Any time, gold can be converted in to cash and hence it is a highly liquid asset. 2. High Value - It is a precious metal of high value just next to diamond and platinum with 10 grams of gold costing around rupees 12,500. 3. Convertability – Ornaments can be converted in to gold coins or bars and vice versa. 4. Easy to store – gold in any physical form needs hardly any space for storage and gold worth millions of rupees can be safely stored in a small bank locker. 5. Indestructibility – gold does not rust or decay on storage. 6. Status Symbol - Gold has an intrinsic value. It is highly desired by everybody all over the world since ages. For ladies, especially in India, possessing gold ornaments is a status symbol. 7. Good security – One can easily get loan from banks since banks easily accept gold as security and offer loans. 8. Benefit of diversification - Investor should always follow the principle of "Not putting all the eggs in to the same basket" in order to maximize the return and minimize the risk. Investment in gold helps one to achieve efficient portfolio. 9. Hedge against inflation - Gold acts as a hedge against inflation because of capital appreciation. What form of gold to buy? Gold comes in different forms. You can either buy it in physical form like gold bars, biscuits, coins, ornaments or even in a dematerialized form. 1. Ornaments. For many Indians purchasing gold means buying ornaments. Indian women have craze for gold. Nicholas Boileau has aptly quoted "Gold gives an appearance of beauty even to ugliness." But from the investment point of view this is not profitable since you lose what you have paid as making charges (25% to 40% depending on the design). A word of advice to Indian males! Do not tell your wives when you want to invest in gold for getting better return. 60

2. Gold bars, Gold Coins & Biscuits - These are the ideal forms of physical gold to invest. They are priced at market value and can easily be exchanged for cash at market price with nominal service charge. 3. Investment in Gold bonds or certificates The other option is to invest in gold bonds or certificates issued by commercial banks. These bonds generally carry low interest rates and a lock-in period varying from three years to seven years. On maturity, depositors can take the delivery of gold or amount equivalent depending on their options. 4. Gold ETFs Gold exchange traded funds (ETFs) are nothing but open-ended mutual funds that invest the money collected form the investors in standard gold bullion (0.995 purity). The units of these funds can be traded on stock exchange. By investing in these funds, investor can own gold in dematerialized form. The major advantage is that carrying and storage cost and risk of theft can be totally eliminated. Some of the popular mutual fund houses who have launched GETFs are Kotak Mutual Fund, Reliance Mutual Fund and Quantum Mutual fund. (indianmba.)

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5 simple tips for stock market investors:
1. Investment is very easy if you approach stock markets with an open mind. Don’t clutter your mind with numbers like support, resistance and volumes etc. Those are meant for traders. We are investors then why should we waste time in thinking about them. 2. Invest in good companies with sound business prospects at reasonable valuations and give management sufficient time. Treat every short term fall as an investment opportunity. Sincerely believe in fundamentals. 3. Read every good article on businesses and companies. Listen to every expert. Analyse them in your own way then invest in good stocks. Don’t follow any one blindly. I daily spend 6-8 hours in reading and 1-2 hours in listening about stocks and companies. I am passionate about stocks and companies. So I enjoy every moment of reading. 4. Never follow herds and broker tips. Buy good companies when no one is talking about them and sell the scrip when all are buying it. Quarterly results and balance sheets will help you in picking good companies. I bought metal stocks, Bartronics and Tanla Solutions in the last week in spite of steep fall as I believe in their fundamentals and growth prospects. 5. Allocate 25% of money to buy emerging stocks and contra stocks. Those who bought sugar stocks? (Select companies) in 2007 got more than 100% returns in just 10 months. Emerging stocks will take 3-5 years but sometimes give more than 500% returns.

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Tips and advice for smart investors by Warren Buffet:
1. Beware of companies displaying weak accounting. 2. Unintelligible footnotes usually indicate untrustworthy management. 3. Be suspicious of companies that trumpet earnings projections and growth expectations. 4. Suspect those CEO's who regularly claim they do know the future –and we become downright incredulous if they consistently reach their declared targets. 5. Managers that always promise to “make the numbers” will at some point be tempted to make up the numbers. 6. Derivatives are financial weapons of mass destruction. 7. A director whose moderate income is heavily dependent on directors’ fees is highly unlikely to offend a CEO or fellow directors, who in a major way will determine his reputation in corporate circles. 8. If regulators believe that “significant” money taints independence (and it certainly can), they have overlooked a massive class of possible offenders. (Referring to outside directors) Those attributes are two legs of our “entrance” strategy, the third being a sensible purchase price. We have no exit to strategy –we buy to keep. That is one reason why Berkshire Hathaway is usually the first- and sometimes the only– choice for sellers and their managers. This is the synopsis of Warren Buffet speech in 2003. (beginnerinvest)

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NOW

LETS

CHECK

OUT

WHICH

INVESTING

OPTION IS THE BEST???????????
Here, I’m going to compare share market against most of the other lucrative investment options!!!!!!!
“Give

me a stock clerk with a goal and I’II give you a man who will make history. Give

me a man with no goals and I’II give you a stock clerk.” -James Cash. “Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised.” -Warren Buffet.  Wisely chosen (those are the key words), stocks are a must for any serious investor.  They add that extra zing to your collection of investments.  Study after study has revealed that over the long term, stocks outperform all other assets. That means you can expect to earn more from shares than from bonds, fixed deposits or gold.  No doubt the risk is higher with shares. But if you are in for the long haul, so are the potential returns.

Why do people buy shares against many other available investment options?
In a line: Because they can make big money on it.
There’s a huge difference between the gains and losses you can make by investing in the stock market as compared to your returns from bank fixed deposits, insurance, mutual 64

funds and other investments. In stocks, you can make unbelievable money -- it’s not uncommon for people to have doubled their money in the last one year. On the flip side (there is always one), when the markets crashed in May, many people lost more than a quarter of their investment. Compare this with your bank fixed deposit. Your FD will only fetch you around five to six percent per annum, but you can be sure of getting your money back. When you put your money in a bank deposit, you loan the money to a bank for a fixed return (rate of interest) and a fixed tenure (number of months or years). At the end, you get back your original amount and you are paid interest on the same. When you invest in stocks, you do not invest in the market (despite what you think). You invest in the equity shares of a company. That makes you a shareholder or part-owner in the company. The good news is that since you own a part of the assets of the company, you are entitled to a share in the profits those assets generate. The bad news is that you are also expected to bear the losses, if any. Now, if you are a shareholder, there are two ways you can benefit from the profits of the company: capital appreciation or dividend. Dividend Usually, a company distributes a part of the profit it earns as dividend. For example: A company may have earned a profit of Rs 1 crore in 2007-08. It keeps half that amount within the company. This will be utilised on buying new machinery or more raw materials or even to reduce its borrowing from the bank. It distributes the other half as dividend. Assume that the capital of this company is divided into 10,000 shares. That would mean half the profit -- i.e. Rs 50 lakh (Rs 5 million) -- would be divided by 10,000 shares; each share would earn Rs 500. The dividend would then be Rs 500 per share. If you own 100 shares of the company, you will get a cheque of Rs 50,000 (100 shares x Rs 500) from the company. Sometimes, the dividend is given as a percentage -- i e the company says it has declared a dividend of 50 percent. It’s important to remember that this dividend is a percentage of the share’s face value. This means, if the face value of your share is Rs 10, a 50 percent dividend will mean a dividend of Rs 5 per share. However, chances are you would not have paid Rs 10 (the face value) for the share. 65

Let’s say you paid Rs 100 (the then market value). Yet, you will only get Rs 5 as your dividend for every share you own. That, in percentage terms, means you got just five percent as your dividend and not the 50 percent the company announced. Or, let’s say, you paid Rs 9 (the then market value). You will still get Rs 5 per share as dividend. That means, in percentage terms, you got just 55.55 percent as dividend yield and not the 50 percent the company announced.

Capital Gain
As the company expands and grows, acquires more assets and makes more profit, the value of its business increases. This, in turn, drives up the value of the stock. So, when you sell, you will receive a premium over (more than) what you paid. This is known as capital gain and this is the main reason why people invest in stocks. They want to make money by selling the stock at a profit. It is not as easy as it sounds. A stock’s price is always on the move. It could either appreciate (increase in value) or depreciate (decrease in value) with respect to the price at which you purchased it. If you buy a stock for Rs 10 and sell it for Rs 20 after a year, then your return from that stock is Rs 10, or 100 percent. Or, if you buy a stock for Rs 10 and sell it for Rs 9, you lose Rs 1, or your loss is 10 percent.

Now look at both: Dividend and Capital Gain
If you buy a stock for Rs.10 and sell it for Rs.20 after a year, then your return from that stock is Rs.10, or 100 percent. Add the Rs.5 per share you have received as dividend, and your total return will be Rs 10 plus Rs.5 = Rs.15 or 150 percent (Rs.15 divided by Rs.10 multiplied by 100).If you buy a stock for Rs 10 and sell it for Rs 9 after a year, you would lose Rs 1 per share. However, you would have got Rs 5 as dividend. So you would net Rs 4 as earnings from the company. In percentage terms, your return would be 40 percent (Rs 4 divided by Rs 10 multiplied by 100).

Tax
One last point. If you are a tax payer, the finance minister has made it very easy for you to invest in the stock market. There is no tax on dividend. Neither will you be taxed on 66

long-term capital gains. This means, if you buy a share, hold it for at least a year and sell it at a profit, you don’t have to pay any tax on the profit your make. If you sell it within a year, the short-term capital gains tax is only 10 percent. Contrast this with fixed deposits, where you have to pay tax on the interest at your marginal tax rate. This means that, if you are in the 30 percent tax bracket and your interest income exceeds Rs 12,000 in a year, you’ll have to pay tax on your interest income at that rate (including the surcharge, the cess, etc, the rate works out to almost 35 percent). Investing in stocks may be more risky, but it is more tax-friendly. Besides, there is the potential to get a higher return on your investment.

Understanding return expectations
While some investments like PPF, FDs and post office savings deposits are categorised as fixed income securities, others such as equities, MFs and real estate are variable income assets. Fixed income securities offer a fixed return, which largely depends on government policy. For example, PPF fetches a return of 8 per cent per annum, as of now; this has been fixed by the government. In case of variable income securities, the rate of return is market determined. Hence, the returns continuously change with market dynamics. You, therefore, need to examine the pros and cons of both, variable and fixed income securities, to create an asset mix based on your risk profile and return expectations. Empirical evidence shows that among all the asset classes, equities provide the maximum return. The table below illustrates exactly that. Returns from Investment Assets: A comparison
Last 5 years 34.72% 10% 9.5% 6.39% Last 10 years 16.11% 7% 12% 12.55% Last 15 years 12.7% 15% 12% 13.00%

Equity Gold PPF Bank Deposits

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The above table proves that equities have outperformed all other popular assets in the last ten years. The reason why equities lag in the last fifteen years is primarily because of a series of scams in the stock market between 1992 and 2000 and also because the level of participation in the Indian securities market was nowhere close to what it is today. It is also important to note is that the Sensex is not a static value and its composition continues to change. Hence, returns generated by the index may not always talk about the same company. Performance of the Sensex in the last 15 years:
Sensex Value) 3561 4305 3244 4795 10609 14400 (Closing Year May, 1992 June, 1997 June, 2002 June, 2004 June, 2006 June(22nd , 2007)

The case for long term investment in equities: The movement during these fifteen years shows that it is rewarding to stay invested in equities for the long term. The following factors justify this: 1. Industries and businesses, to which companies belong, mature over a period of time. As industries grow, so do the profits of companies belonging to them. The best example of this can be found in the Indian telecommunications industry. Hence, investors start reaping the benefit of their investment over a period of time. 2. While markets undergo cyclical phases, which follow a series of peaks and troughs, over a period of time these factors get negated and returns from stocks present a valid picture. So, although you may incur some losses in the short term, if you are looking to invest in equities you must always think long-term. 3. Equities are the only investment asset, which are exempt from long-term capital gains tax, which means that you own all the returns generated. All other investments, excluding PPF and life insurance, are taxed for the gains made. This reduces the overall return in investment assets like NSC, bank deposits etc. 68

4. An investor can ill-afford to ignore that India is a fast growing economy and it is widely perceived that this robust growth would continue for many more years to come. The biggest beneficiary of this growth story would be the industries and service sector. It is almost certain that the Index of Industrial Production (IIP) would grow at a rate of over 10 per cent in the next few years. This would enhance profit growth of companies and it would get reflected in the upward movement of their share price.

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Interview with Mr. Manish R. Nagrecha, Branch Manager of Sharekhan Ltd.
Given the present rate of inflation, what kind of investment instrument do you prefer? I always prefer investment in securities and derivatives over other instruments. Why? Because I prefer high returns. Here the risks are quite high and hence the dividends too are high. I have the required knowledge to trade in securities and derivatives and hence I know where am I betting my money. Why don’t you go for investments with a fixed rate of return like fixed deposits and postoffice savings, etc.? The rate of return you get after investing in such instruments is quite low. The most disappointing fact about these instruments is that they aren’t liquid. So you mean to say that the share market is the best bet? For me, yes. But for others, it depends. It depends on your capacity to take risk and your retaining power. People should invest in share market only if their fundamentals are clear and they have done some research about the company they are planning to invest in because one wrong decision can lead to severe losses. Given a lump-sum of Rs.10 lacs, where would you invest? I would invest a minor sum of money in gold and bonds and a major sum in shares of Agrade companies. Cautions to be taken while investing in shares and debentures? You should have your fundamentals clear before entering the market. If you rely on others to make your investment decisions (in stock exchange), you are headed for disaster. Think for the long term if you want good returns. Don’t speculate. Never depend on ‘tips’. A sound investor is one who takes his own decisions.

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Interview with Mr. Sumit Beria, Senior Relationship Manager of ICICI Securities.
What kind of investment instrument do you prefer to invest your money in? I personally prefer to invest in securities and derivatives. I am also inclined towards insurance and gold. But for people who don’t have sufficient knowledge to invest in stocks and adequate funds should go for ‘mutual funds’, as they provide professional service as well as good returns. Why do you prefer stocks and derivatives when the returns are not fixed and the risks quite high? Risks are high but when you know where you are putting your money, you can be certain that your money will return. If you invest your money in fundamentally sound companies you can be sure about the returns. Here, the liquidity is also high, hence you can take away the invested money whenever required. Can you give examples of some fundamentally strong companies? All the A-grade companies are fundamentally sound. Even may medium and small-cap companies prove to be good investment avenues. If proper research is done before investing your money you can be certain that you lose a penny, but that requires a lot of effort on the part of investors. My personal favorites are TATA Motors, Larsen & Toubro, Reliance Industries, ICICI and DLF. How do you find out which companies are sound to invest in? As I said earlier, by doing some research. Your research should include finding the EPS of the company, the operations of the company, the growth rate of the entire sector, comparison of the company with its competitors (balance sheets, cash flow statements, etc.) Can you elaborate on the future of share market? As Indian economy is booming and our GDP is also rising, the stock exchange should remain positive. But as we know the share market is very volatile and hence no one can predict the future trends.

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REFERENCES
 http://www.accessmylibrary.com/coms2/summary_0286-37967309_ITM Access date :- 15 may 2009  http://www.avdhootinvestment.com/companydepositsfaq.html  beginnersinvest.about.com/cs/warrenbuffett/.../aawarrenbio.htm  www.bseindia.com Access Date: 25 May 2009  www.businessstandard.com  www.chase.com/cm/shared/crb Access Date: 25 May 2009  www.chevychasebank.com  http://dcda.fidelity.com/static/dcle/WPSFidelityPerspectives/documents/Q DIA_Guide_Final_61608.pdf  www.economicstimes.com Acess Date : April 29 2009  www.finance.yahoo.com  financial-dictionary.thefreedictionary.com/Alternative+investment Access Date:-15 may 2009  http://us.geocities.com/frauline2008/terms.html  www.indianmba.com/Faculty_Column/FC858/fc858.html  http://indian-capital-market-basics.blogspot.com/2008/02/why-shouldone-invest.html  http://www.indiamarkets.com/imo/finanavenues/Tree2/html/2t22.html  (http://www.indiahowto.com/public-provident-fund-as-investments.html)  www.indiansharemarket.net 72

 www.investmentu.com/.../china-investment-alternatives.html  http://www.investopedia.com/university/beginner/beginner3.asp  http://www.investorsoffshore.com/html/kb/altinvintro.html  http://www.justtrade.in/University/UniversityInner.aspx?id=5&pageopt=I  http://www.licindia.com/know_lic.htm  http://www.rediff.com/getahead/2005/jan/27ipo.htm  http://www.realestate.com.au/doc/Resources/News/investmentalternatives.htm  http://www.sec.gov/answers/mfmmkt.htm  http://www.sharesmarket.in/learning-corner.php  http://www.sharemarketbasics.com/Stockarticles/Real-estate-indiaInvestment.htm  http://www.sovereignsociety.com/Portals/0/landing/2535.html?gclid=CIQndrp15sCFQEupAodxyNCAg  http://stocks.about.com/od/investingstrategies/a/021906technque.htm  http://www.trustbank.com.bd/deposit/deposit_saving_acc.php  http://www.therealestatehomeguide.com/investment-property/arizona-realestate/  (http://www.webindia123.com/finance/bank/fix.htm)  http://works.bepress.com/paolocioppa/2/ Paper by Dr. Paolo Cioppa, UC Berkeley, Boalt Hall School of Law

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