PROJECT REPORT ON Comparative Analysis on ULIP verses Other Investments Submitted for Partial Fulfillment for the Award

of the Degree of Master of Business Administration

UNDER THE GUIDANCE OF (Mr. Rajesh S. Pyngavil) SUBMITTED BY Ankita Bajaj MBA (2nd Sem) (0041914308)

GITARATTAN INTERNATIONAL BUSINESS SCHOOL (Affiliated to GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY) ROHINI, NEW DELHI -110085

ACKNOWLEDGEMENT

I extend my profound gratitude to Mr. Manish Oberoi, Assistant Branch Manager, Kotak Life Insurance, for his interest, guidance and suggestions throughout the course of the project. I feel honored and privileged to work under him. He shared his vast pool of knowledge with me that helped me steer through all the difficulties with ease. This project file would not have been possible without his guidance and I would like to thank him for everything he has done for us. I would also like to thank Mr. Sachin Choudhary, Deputy Manager- Channel Marketing for his valuable and kind suggestions to me. I express my sincere thanks to all the members of the office who spent their valuable time for guiding me through the project. I am extremely thankful to my family members and all my friends whose wishes, encouragement and help were the force behind the endeavor.

With regards Ankita Bajaj (0041914308)

TABLE OF CONTENTS 1) Chapter 1-Executive Summary 2) Chapter 2-Company Profile 2.1 Kotak Mahindra Group 2.2 Kotaks Mahindra Old Mutual Life Insurance 2.3 Old Mutual Plc 2.4 Organizations Structure 2.5 Companys vision 2.6 Companys mission 3) Chapter 3- Objectives 4) Chapter 4- Introduction 4.1 ULIP(Unit Linked Investment Plan) 4.2 Traditional Plans 4.3 Mutual Funds 4.4 National Saving Certificate 4.5 Public Provident Fund 4.6 Fixed Deposits 5) Chapter 5- Research Methodology 6) Chapter 6- Analysis 6.1 Occupation 6.1.a) Businessmen 6.1.b) Professionals 6.1.c) Housewives 6.1.d) Retired

7) Chapter 7- Discussion 8) Chapter 8- Conclusion Annexure: Questionnaire for Consumer Perception in Investment in ULIP and Other Investments Glossary References

LIST OF TABLES 1) Table 1- Investments 2) Table 2- Interest rates for NSC 3) Table 3- Interest rates for PPF 4) Table 4- Profile and Current Investment Portfolio 5) Table 5- Profile and Current Investment Portfolio 6) Table 6- Profile and Current Investment Portfolio 7) Table 7- Profile and Current Investment Portfolio

LIST OF DIAGRAMS 1) Diagram 1- Occupations 2) Diagram 2- Plans for Investment 3) Diagram 3- Important Factors 4) Diagram 4- Preferred Investment 5) Diagram 5- Type of Insurance 6) Diagram 6- Plans for Investment 7) Diagram 7- Important Factors 8) Diagram 8- Preferred Investment 9) Diagram 9- Type of Insurance 10) Diagram 10- Plans for Investment 11) Diagram 11- Important Factors 12) Diagram 12- Preferred Investment 13) Diagram 13- Type of Insurance 14) Diagram 6- Plans for Investment 15) Diagram 7- Important Factors 16) Diagram 8- Preferred Investment 17) Diagram 9- Type of Insurance

CHAPTER-1 EXECUTIVE SUMMARY

The title of my project is COMPARITIVE ANALYSIS OF ULIP VERSES OTHER INVESTMENTS. The objective of the project was to comparatively analyze various investment patterns in Delhi and NCR regions. Total Investment scenario is changing, in past people were not interested in investment because they were not ready to risk their money and were more interested in keeping it in a safe. There are many options available for investment like life Insurance, Mutual fund, Public Provident Fund, Fixed Deposits, NSC, etc. The project was taken to know about, what are the main aspects of different investment available and what are the preferences of customers. Also to determine the reason for their preference. A survey was conducted to collect information about the preferences of the customer. The sample size of the survey was 50.The questionnaire was filled from the people of different age groups and occupation. Across different occupation it has been observed that there is reluctance towards other investment other then Insurance and Fixed Deposits. The primary goal for investment in fixed deposits and insurance is the opportunity for steady growth and the second reason is the safety of their investment principal. It has been observed that maximum number of professionals are aware about ULIP and lesser number of retired people know about ULIP. The most dominating amongst investment is Fixed Deposit. The survey shows that mutual funds is the least preferred form of investment due to the high risk involved and also the lack of guarantee. The most important factor among the customers is flexibility , high returns, liquidity and transparency.

CHAPTER-2 COMPANY PROFILE

2.1 Kotak Mahindra Group: The Kotak Mahindra group is one of Indias leading banking and financial services organizations, with offerings across personal financial services; commercial banking; corporate and investment banking and markets; stock broking; asset management and life insurance. Kotak Mahindra believes in offering its customers a lifetime of value. A commitment that has made it a leading financial services group which, services around 6.2 million customer accounts and has a distribution network of branches, franchisees, representative offices and satellite offices across 300 cities and towns in India and offices in New York, London, Dubai, Mauritius and Singapore. The group has a net worth of over Rs. 6523 crore

2.2 Kotak Mahindra Old Mutual Life Insurance Ltd. : Kotak Mahindra Old Mutual Life Insurance is a joint venture between Kotak Mahindra Bank Ltd. along with its affiliates and Old Mutual plc. Kotak Mahindra Old Mutual Life Insurance is one of the fastest growing insurance companies in India and has shown remarkable growth since its inception in 2001. Kotak Life Insurance employs around 5,565 people in its various businesses and has 197 branches across 141 cities. The Group services around 2.6 million customer accounts. The Kotak Group has over 1,300 offices, and services around 5.9 million customer accounts across India. 2.3Old Mutual plc:

Old Mutual plc is an international savings and wealth management company based in the UK. Originating in South Africa in 1845, it is among the top 100 largest companies in the FTSE100. The group has a balanced portfolio of businesses offering Asset Management, Life Assurance, Banking and General Insurance Services in over 40 countries, with a focus on South Africa, Europe and the United States, and a growing presence in Asia Pacific. Old Mutual plc employs approximately 54,000 employees worldwide with its primary listing on the London, secondary listing on the Johannesburg stock exchanges as well as in Namibia, Malawi and Zimbabwe.

2.4 Organizations Structure: Kotak Life Insurance work as a team and have a flat management structure. Our top management has many years of experience which has helped guide the company into a position of leadership.

2.5 Companys Vision: Kotak Life Insurance has a deep rooted commitment to improve the quality of life of its customers, employees and stakeholders. We aim at improving the long term value in our relationship by continuous innovation and improvements.We do this by our three-prong effort which strives to make Kotak Life Insurance a corporate with values. Increase customer value : Kotak Life Insurance has gone to the heart of its customer's requirements and developed products which are unique and serve the customer needs perfectly. We built a relationship of mutual trust and benefit to serve the Indian customer. At Kotak Life Insurance the customer always comes first. Cohesive Work Environment: Management forms a long-term partnership with their employees by offering them an invigorating work experience. They not only demand loyalty, sincerity and values but also give it back in equal measures. Kotak Life Insurance will like to offer its employees space to grow, innovate and build

along-term career. Work with Honour: Kotak Life Insurance delivers everyday services in the marketplace with the high sense of duty and commitment. Their employees strive to build the long-term value for all those come in contact with Kotak Life Insurance. Their consumers, distributors, employees, shareholders and the nation have their commitment that they will uphold the values of trust, integrity and a Sense of Honour in every thought, act and deed in order to positively contribute to individual, society and nation growth 2.6 Companys Mission: They focus on the needs of their customers and create confidence, trust and loyalty by offering a wide range of innovative insurance solutions. Strengthened by their commitment to professional management, they ensure the continued growth and advancement of their employees.

CHAPTER-3 OBJECTIVE
The study has the following objectives: 1.To identify critical factors that influence the buying behavior of individuals on the basis of the following: -. Growth Safety Increase in Wealth different occupations. 3. To find the importance of investment to a common man. 4. To find the preference of consumer regarding various investment options. 5. To know the customer preference for traditional and ULIP products offered by insurance companies. different

2. To compare the buying and involvement pattern of people across different age groups and

CHAPTER-4 INTRODUCTION
Insurance is an upcoming sector, in India the year 2000 was a landmark year for life insurance industry, in this year the life insurance industry was liberalized after more than fifty years. Insurance sector was once a monopoly, with LIC as the only company, a public sector enterprise. But nowadays the market opened up and there are many private players competing in the market. There are fifteen private life insurance companies has entered the industry. After the entry of these private players, the market share of LIC has been considerably reduced. In the last five years the private players is able to expand the market (growing at 30% per annum) and also has improved their market share to 18%. For the past five years private players have launched many innovations in the industry in terms of products, market channels and advertisement of products, agent training and customer services etc.

4.1 ULIP(Unit Linked Investment Plan):

In earlier days, insurance was bought primarily for life cover and very few people actually bothered about tax saving or investment as such. LIC was the only player and offered money back policies, endowment policies and few single premium policies like Bima Nivesh. However as an asset class it wasnt considered as an option. Now the scenario has completely changed, there are lots of private players and many new options have come up. One among these new products is ULIPs which are hugely popular and sold as an attractive asset with insurance/retirement benefit. Insurers have developed plans that combine the benefits of life insurance as well as giving various options of participating in the growth of capital market. Such plans are called ULIP.

Unit Linked Insurance Plan is a life insurance policy which provides a combination of life insurance protection and investment. ULIP is a most famous and safe way of investment in current scenario. In the event of the insured persons untimely death, his nominees would normally receive an amount that is higher of the sum assured (insurance cover) or the value of the units (Investments). However, there are some schemes in which the policy holder receives the sum assured plus the value of the investments. Every insurance company has four to five ULIPs with varying investment options, charges and conditions for withdrawals and surrender. Moreover, schemes have been tailored to suit different customer profiles and, in that sense, offer a great deal of choice. The charges paid in these schemes in terms of entry load, administrative fees, underwriting fees, buying and selling charges and asset management charges are fairly high and vary from insurer to insurer in the quantum and also in manner in which they are charged. Some of the other features offered by insurers along with ULIPs are the following: The policyholder can pay additional premium for investment at any time. Partial or total withdrawal is allowed. Sometimes there are conditions attached. Some insurers, not all, charge a redemption fee in such cases. These policies will not entitled to any bonus. There is no annual bonus, but there may be a loyalty bonus paid at the end.

TYPE OF FUNDS: Equity Fund: In this type of fund, sometimes also called Growth Funds, there would be more investments in equities which are shares/ stocks traded in the stock market. Debt Fund: In this type of fund, also called bond Funds, the investments are primarily in government and government guaranteed securities and such safe debts and other high investment grade corporate bonds.

Money Market Funds: In this type of fund, sometimes also called Liquid Funds, the investment may be more in short term money market instruments such as treasury bills, commercial papers, etc. Balanced Fund: In this type of funds, the investments are in both equity as well as debts.

4.2 TRADITIONAL PLANS:

Plans of insurance that provide only death cover are called Term Assurance plans. Those that provide only survival benefits are called Pure Endowment plans. All traditional life insurance plans are combination of these two basic plans. A traditional plan of assurance has the following features: Who can be insured? The various possibilities are (i) individual adults (ii) children (minors) (iii) two or more persons jointly under one policy. What can be the Sum Assured (SA)? Some plans stipulate a minimum SA. There can be maximum limits also for SA as well as certain benefits, like Accident benefits. In what contingency would the SA be payable? Could be on death or on survival. When would the SA be payable? On the contingency happening or on some other dates. How would the SA be payable? Could be in one lump sum or in installments. What would be the term (duration) of the policy? This determines the period during which the specified event should occur for the SA to be payable. Some plans provide for benefits even beyond the term. Does the SA increase? This can happen because of participation in surpluses and bonus additions or because of guaranteed increases in SA. Does the SA reduce? This can also happen, if the plan is to meet reducing liabilities under a mortgage. Are there additional benefits? These, also called supplementary benefits and may be provided by way of riders, in addition to the basic covers.

4.3 MUTUAL FUNDS:

Mutual fund means indirect investment in share market, mutual fund has following characteristics It is a pool of money, collected from investors, invested according to certain investment objectives. The ownership of the fund is thus joint or mutual; the fund belongs to all investors. Mutual Funds are also known as Financial Intermediaries In India, Mutual Funds are constituted as Trust. The investors share is denominated by units whose value is called as Net Asset Value (NAV) which changes every day. The investment portfolio is created according to the stated investment objectives of the fund. The ownership is in the hands of the investors who have pooled in their funds. It is managed by a team of investment professionals and other service providers. An equity fund will invest in Equity shares, Preference Shares, Warrants etc. A Debt Fund will invest in Debt Instruments only.

Following are the different products and services Offered by Mutual Fund Companies
Open ended schemes Close ended schemes Growth/Equity oriented Schemes Income/Debt oriented Schemes Balanced Funds Money market or liquid funds

Gilt Funds Index Funds Exchange Traded Funds Sectoral Funds Thematic Funds Commodity Funds Real Estate Funds Tax Saving Funds Hybrid Funds There are several ways for investment and disinvestments in mutual funds such as : Systematic Investment Plans (SIPs) Value Averaging Systematic Transfer Plans (STPs) Systematic Withdrawal Plans(SWPs) Automatic Reinvestment Plans.

Open ended fund:

In an open-ended fund, sale and repurchase of units happen on a continuous basis, at NAV related prices, from the fund itself. The corpus of open-ended funds, therefore, changes every day. Close ended fund:

A closed-end fund offers units for sale only in the NFO. It is then listed in the market. Investors wanting to buy or sell the units have to do so in the stock markets. Usually closed-end funds sell at a discount to NAV.

The corpus of a closed-end fund remains unchanged. Growth fund:

Provide capital appreciation over the medium to long-term Investor who does not require periodic income distribution can choose the option, where the incomes earned are retained in the investment portfolio and allowed to grow, rather than being distributed to investors. Investors with longer investment horizons and limited requirements for income choose this option. The return to the investor who chooses a growth option is the rate at which his initial investment has grown over a period for which he has invested in the fund. The investor choosing this option will vary the NAV with the value of the investments portfolio , while the no. of units held with remains constant. Income fund

Provide regular and steady income to investor Balanced fund

Provide both growth and regular income. Money market fund

Provide easy liquidity, regular income and preserve the income Tax saving scheme

Offers tax rebates to the under specific provisions of the Indian income tax laws. Investment made under some schemes are allowed as deduction U/S 88 of the income tax act .

Automatic Reinvestment Plans

Reinvestment of amount of dividend made by fund in the same fund. In this option, the no. of units held by the investor will change with every reinvestment.

The value of units will be similar to that under the dividend option There are four types of plans as follows Lump sum Investment

It is one time investment.. Investors can invest particular amount one time for fixed time of period. Systematic Investment Plans( SIP) For regular investment

SIP is investing a fixed sum periodically in a disciplined manner for long term. It gives benefit of Rupee Cost averaging. In SIP monthly minimum Rs.500 or Rs.100 are invested. Compound interest is calculated. Many SIP gives insurance benefits. VAP is modified version of SIP. It is Voluntary Accumulation Plan. It allows the investor flexibility with respect to the amount and frequency of investment. In VAP, investor has to impose voluntary self discipline. Systematic Withdrawal Plan ( SWP) For regular income

The lump sum amount is invested for one time and then fixed percent amount is withdraw monthly. Remaining amount will grow continuously. This plan is suitable for retired person, because it gives regular income. family. It gives option to the investor if the current fund performance in not satisfactory. Systematic Transfer Plan ( STP)

Transfer on a periodic basis a specified amount from one scheme to another within the same fund

Dividend option

Investors will receive dividends from the mutual fund , as an and when dividends are declared.

Dividends are paid in the form of warrants or are directly credited to the investors bank accounts. In normal dividend plan , periodicity of dividends is left to the fund managers, the timing of the dividend payout is decided by fund manager. Mutual funds provide the option of receiving dividends at pre-determined frequencies, which can vary from daily, weekly, monthly, quarterly, half-yearly and annually . Investors can choose the frequency of dividend distribution that suits their requirements. Investors choosing this option have a fixed number of units invested in the fund and earned incomes on this investment. The NAV of this investors holding will vary with changes in the value of portfolio and the impact of the proportion of income earned by the fund to what is actually distributed as dividend.

4.4 NATIONAL SAVING CERTIFICATE:

The NSC is a post-office savings scheme Minimum investment Rs. 100/- No maximum limit. Rate of interest 8% compounded half yearly. Rs. 1000/- grow to Rs. 1601/- in six years. Two adults, Individuals, and minor through guardian can purchase. Companies, Trusts, Societies and any other Institutions not eligible to purchase. Non-resident Indian/HUF can not purchase. No pre-mature encashment. Annual interest earned is deemed to be reinvested and qualifies for tax rebate for first 5 years under section 80 C of Income Tax Act. Maturity proceeds not drawn are eligible to Post Office Savings account interest for a maximum period of two years. Facility of reinvestment on maturity. Certificate can be pledged as security against a loan to banks/ Govt. Institutions. Facility of encashment of certificates through banks.

Certificates are encashable any Post office in India before maturity by way of transfer to desired post office. Certificates are transferable from one Post office to any Post office. Certificates are transferable from one person to another person before maturity. Duplicate Certificate can be issued for lost, stolen, destroyed, mutilated or defaced certificate. Nomination facility available. Facility of purchase/payment to the holder of Power of attorney. Tax Saving instrument - Rebate admissible under section 80 C of Income Tax Act. Interest income is taxable but no TDS . Deposits are exempt from Wealth tax.

4.5 PUBLIC PROVIDENT FUND:

The Public Provident Fund Scheme is a statutory scheme of the Central

Government of India. It was established in 1968. The Scheme is for 15 years. The rate of interest is 8% compounded annually. The minimum deposit is 500/- and maximum is Rs. 70,000/- in a financial year. One deposit with a minimum amount of Rs.500/- is mandatory in each financial year. The deposit can be in lump sum or in convenient installments, not more than 12 Installments in a year or two installments in a month subject to total deposit of Rs.70,000/It is not necessary to make a deposit in every month of the year. The amount of deposit can be varied to suit the convenience of the account holders. The account in which deposits are not made for any reasons is treated as discontinued account and such account can not be closed before maturity. The discontinued account can be activated by payment of minimum deposit of Rs.500/- with default fee of Rs.50/- for each defaulted year.

Account can be opened by an individual or a minor through the guardian. Joint account is not permissible. Those who are contributing to GPF Fund or EDF account can also open a PPF account. A Power of attorney holder can neither open or operate a PPF account. The grand father/mother cannot open a PPF behalf of their minor grand son/daughter. The deposits shall be in multiple of Rs.5/- subject to minimum amount of Rs.500/-. The deposit in a minor account is clubbed with the deposit of the account of the Guardian for the limit of Rs.70,000/-. No age is prescribed for opening a PPF account. Interest is not contractual but rate is notified by Ministry of Finance, Govt. of India, at the end of each year. The facility of first withdrawal in the 7th year of the account subject to a limit of 50% of the amount at credit preceding three year balance. Thereafter one Withdrawal in every year is permissible.

Pre-mature closure of a PPF Account is not permissible except in case of death. Nominee/legal heir of PPF Account holder on death of the account holder can not continue the account, but account had to be closed. The account holder has an option to extend the PPF account for any period in a block of 5 years on each time. The account holder can retain the account after maturity for any period without making any further deposits. The balance in the account will continue to earn interest at normal rate as admissible on PPF account till the account is closed.

One withdrawal in each financial year is also admissible in such account. The PPF scheme is operated through Post Office and Nationalized banks. PPF account can be opened either in Post Office or in a Bank. Account is transferable from one Post office to another and from Post office to Bank and from Bank to Post office. Account is transferable from one Bank to another bank as well as within the bank to any branch.

Deposits in PPF qualify for rebate under section 80-C of Income Tax Act. The interest on deposits is totally tax free. Deposits are exempt from wealth tax. The balance amount in PPF in PPF account is not subject to attachment under any order or decree of court in respect of any debt or liability.

4.6 Fixed Deposits:

The Department of Posts, Government of India offers a fixed / term deposit through the post offices in India. It is called Post Office Time Deposit Account. Time Deposits are of 1 year, 2 year, 3 year and 5 year tenures. The minimum investment should be Rs 200 and its multiples. The tenure of bank fixed deposits are flexible, with periods ranging from 15 days to 10 years but the minimum amount is as high as Rs 10,000. In case of postal time deposits, the account can be closed after 6 months but before one year of opening the account. On such closure, the amount invested is returned without interest. If a time deposit of two or three years is withdrawn prematurely, post office will pay interest only for the completed year or years. For example, a fixed deposit for two years is withdrawn after 20 months, interest will be paid only for the one full year completed. The depositor will lose interest for the remaining 8 months. If a bank FD is closed before completing the original term of the deposit, banks have the discretion to charge penal interest. If a bank decides to charge penal interest, the depositor will be paid interest at a lower rate than that was contracted. A postal time deposit fetches annual interest rates in the range of 6.25 to 7.5per cent. Tax Benefits: No deduction of income tax at source. Tax exemption on five years fixed deposit account under 80C of the IT Act.

TABLE:1 INVESTMENTS:

Type of Investment

Advantages Provides Flexibility,

Disadvantages Risk involved, NAV of the fund can

ULIP

Transparency, Freedom of be less then the purchase amount choice, Tax benefit.
Liquidity, Convenience, Low No guarantees,

Mutual Funds

cost

taxable profits, high charges.

Fixed Deposits

High interest, no deduction Lesser rate of interest. of income tax.

Public Fund

Provident No tax on interest earned, no PPF cannot be held jointly, lengthy wealth tax, great returns. lock in period, lack of liquidity.

National Certificate

Saving Tax

saving on principle Interest accrued on NSC is taxable, No liquidity.

investment.

TABLE:2 Interest rates for NSC Certificate of Rs.1000 Year 1 year 2 year Rate of Interest Rs 81.60 Rs 88.30

3 year 4 years 5 years 6 years TABLE:3

Rs 95.50 Rs103.30 Rs 111.70 Rs 120.80

Interest rates for PPF of Rs. 1000

Year Initial Balance 0 1000 2080 3246 4506 5867 7336 8923 10637 12488 14487 16645 18977 21495 24215 27152 Amount invested 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 0 Interest 0 80 166 260 360 469 587 714 851 999 1159 1332 1518 1720 1937 2172 Closing Balance 1000 2080 3246 4506 5867 7336 8923 10637 12488 14487 16645 18977 21495 24215 27152 29324

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

CHAPTER-5 RESEARCH METHODOLOGY

The study, through causal research aims at measuring the customers preference for different type of investment options available on the basis of various parameters based on customers response in Delhi and NCR. Methods adopted for surveys: Primary Research Field Survey Method- Random people above 21 years of age were asked to fill the questionnaire on life insurance Personal Interview technique- Respondents were asked about their awareness of ULIP and also the factors, which they look for while investing in an insurance plan. Secondary Research

Information on ULIP, Mutual Funds, Fixed Deposits, NSC and PPF were collected from books like IC-33, Internet, magazines like Outlook Money and newspapers like Economic Times and Financial Times. The survey process involved two phases: First phase included identification and selection of the target audience to be studied and to determine the parameters on which respondents will justify their preferences. The audience were targeted and analyzed basically on the basis of two important parameters: Age and Occupations. Demographical information was also taken in order to know the investment patterns according to the location, age, gender etc. A questionnaire was designed to collect the needed information from the respondents. (See the annexure) In the second phase data was collected through questionnaire from 50 respondents within Delhi and NCR. The responses that were generated during this exercise were converted in the form of percentages to have a comparative outlook, as the numbers itself cannot explain the true picture. These percentages were then represented through the simple tools like bar graphs, pie charts.

CHAPTER-6 ANALYSIS
FINDINGS:
6.1 OCCUPATION To begin with, the nature of occupation was divided broadly into 4 categories: Businessmen Professional Housewives Retired

DIAGRAM:1

occupation

10% 38%

32%

20%

business

housewife

professionals

retired

The study shows that almost 32% of people are professionals, 38% are into business and 20% are housewives and around 10% are retired.

DIAGRAM:2 Plans for Investment

50 45 40 35 30 25 20 15 10 5 0 no yes

no yes

The survey shows that14% of the whole population is not interested in investment and 86% of people are interested in investment.

6.1.a.) Businessmen: TABLE:4

Profile

Current Investment Portfolio

Mutual Fund NSC Fixed deposit(post office) Insura Public nce Provid ent 21.05 25 90 80 10 0 Fund 5.26 6.25 0 20

Businessmen Professional Housewives Retired

0 0 0 0

15.8 0 0 0

57.9 68.75

DIAGRAM:3

Important Factors

16%

26% a b c

58%

a.)How quickly I will be able to increase my wealth b.)The opportunity for steady growth c.)The safety of my investment principal DIAGRAM:4 Preferred Investment

PPF 5% Insurance 26% FD 53% FD NSC Insurance PPF NSC 16%

DIAGRAM:5

Type of Insurance

42% 58%

Traditional plans ULIP

The survey reveals there is some lack of awareness of the products like ULIP amongst people of this profile as it can be seen that only 42% of people are holding ULIP policy and the remaining are holding traditional policies. 53% of the people have invested in fixed deposit, 26% are interested in insurance , 16% in NSC and only 5% in mutual fund. The prime concern of this segment for investing is opportunity for steady growth. This class (38%) considers steady growth (58%) as the most important factor while the next major concern for them is quick increase in wealth(26%). It has also been observed that 57.9% of people are currently involved in the investment of fixed deposit. Amongst this class, we find Fixed Deposit to be dominating as 53% of people prefer investing in it and 26% in insurance. Out of this 26% only 42% are interested to invest in ULIP.

6.1.b.)Professional TABLE:5

Profile

Current Investment Portfolio

Mutual Fund NSC Fixed deposit(post office) Insura Public nce Provid ent 21.05 25 90 80 10 0 Fund 5.26 6.25 0 20

Businessmen Professional Housewives Retired DIAGRAM:6

0 0 0 0

15.8 0 0 0

57.9 68.75

Plans for Investment

12 10 8 6 4 2 0 no yes no yes

DIAGRAM:7

Important Factors

25% a b 49% 13% 13% c d

a.)How quickly I will be able to increase my wealth. b.)The opportunity for steady growth. c.) The amount of monthly income the investment will generate. d.)The safety of my investment principal.

DIAGRAM:8

Preferred Investment

PPF 13% Insurance 13% NSC 6% FD 68% FD NSC Insurance PPF

DIAGRAM:9

Type of Insurance

38% Traditional Plans ULIP 62%

The survey reveals there is lot of awareness of the products like ULIP amongst people of this profile as it can be seen that only 38% of people are holding traditional plans and the remaining 62% are holding ULIP policies. 68% of the people have invested in fixed deposit, 13% are interested in insurance , 13% in mutual fund and only 6% in Ppf . The prime concern of this segment for investing is safety of the investment principal. This class (32%) considers safety of investment principal (49%) as the most important factor while the next major concern for them is quick increase in wealth (25%). It has also been observed that 68.75% of people are currently involved in the investment of fixed deposit. Amongst this class, we find Fixed Deposit to be dominating as 68% of people prefer investing in it and 13% in insurance. Out of this 13% only 68% are interested to invest in ULIP.

6.1.c.) Housewives: TABLE:6

Profile

Current Investment Portfolio

Mutual fund NSC Fixed deposit(post office) Insura Public nce Provid ent 21.05 25 90 80 10 0 Fund 5.26 6.25 0 20

Businessmen Professional Housewives Retired DIAGRAM:10

0 0 0 0

15.8 0 0 0

57.9 68.75

Plans for Investment

9 8 7 6 5 4 3 2 1 0 no yes no yes

DIAGRAM:11

Important Factors

20% 40% a b c d 30% 10%

a.)How quickly I will be able to increase my wealth. b.)The opportunity for steady growth. c.) The amount of monthly income the investment will generate. d.)The safety of my investment principal. DIAGRAM:12 Preffered Investment

Insurance 20% FD NSC Insurance FD 70%

NSC 10%

DIAGRAM:13

Type of Insurance

50%

50%

Traditional plans ULIP

The survey reveals there is equal awareness of the products like ULIP amongst people of this profile as it can be seen that 50% of people are holding traditional plans and the another 50% are holding ULIP policies. 70% of the people have invested in fixed deposit, 20% are interested in insurance , and only 10% in Ppf . The prime concern of this segment for investing is safety of the investment principal. This class (20%) considers of safety of investment principal (40%) as the most important factor while the next major concern for them is opportunity for steady growth (30%). It has also been observed that 90% of people are currently involved in the investment of fixed deposit. Amongst this class, we find Fixed Deposit to be dominating as 70% of people prefer investing in it and 20% in insurance. Out of this 20% only 50% are interested to invest in ULIP.

6.1.d.)Retired: TABLE:7

Profile

Current Investment Portfolio

Mutual fund NSC Fixed deposit(post office) Insura Public nce Provid ent 21.05 25 90 80 10 0 Fund 5.26 6.25 0 20

Businessmen Professional Housewife Retired DIAGRAM:14

0 0 0 0

15.8 0 0 0

57.9 68.75

Plans for Investment

6 5 4 3 2 1 0 no yes Series1

DIAGRAM:15

Important Factors

20%

20% a b c d 40%

20%

a.)How quickly I will be able to increase my wealth. b.)The opportunity for steady growth. c.) The amount of monthly income the investment will generate. d.)The safety of my investment principal DIAGRAM:16 Preferred Investment

Insurance 20% NSC 0%

PPF 0% FD NSC Insurance PPF FD 80%

DIAGRAM:17

Type of Insurance

20%

Traditional Plans ULIP

80%

The survey reveals there is lack of awareness of the products like ULIP amongst people of this profile as it can be seen that 80% of people are holding traditional plans and the remaining 20% are holding ULIP policies. 80% of the people have invested in fixed deposit, 20% are interested in insurance , 0% in mutual fund and 0% in Ppf . The prime concern of this segment for investing is opportunity for steady growth. This class (10%) considers safety of investment principal (40%) as the most important factor and the rest other factors are considered equally important(20%). It has also been observed that 80% of people are currently involved in the investment of fixed deposit. Amongst this class, we find Fixed Deposit to be dominating as 80% of people prefer investing in it and 20% in insurance. Out of this 20% only 20% are interested to invest in ULIP.

CHAPTER-7 DISCUSSION
Through the survey it has been observed that 64% of people have their current investment in Fixed Deposits and only 20% in Insurance. The main reason behind selection of FD is In this scheme your investment grows at a pre- determined rate with no risk involved. With a Government of India-backing, your principal as well as the interest accrued is assured under the scheme. The account can not be closed within 6 months of opening it. Between 6 months to 1 year, the account can be closed but no interest is paid out in this case. After one year, the account can be closed in this case, the interest that you receive is 2% less than the interest fixed at the time of opening the account. (There is a penalty of 2% on the interest rate). For example, if you opened a Post Office Time Deposit Account for 3 years, and close it after 1 year, you would receive interest at the rate of 5.25% instead of 7.25%. You can pledge your time deposit account as a security for availing a loan.

After Fixed Deposits the second most preferred form of investment is Insurance. Some of the life insurance advantages are: If an estate owner has not accumulated enough assets for his family, Insurance quote helps create an instant estate for the sake of the Familys security. Life Insurance provides the option to pass equal assets to the children who are not active in the Family business at the time the family business is passed on. Life Insurance policies can help secure the future of children for college/educational purposes as the amount of life Insurance Policy increases on a minors or parents life. The growth of a cash-value policy is tax-deferred - you do not pay taxes on the cash value accumulation until you withdraw funds from the policy. Life Insurance can be useful in paying estate taxes, along with other estate settlement amounts. Federal Estate Taxes are due nine months after death.

If theres a Business Transfer, life insurance can provide ready cash to finance a transaction between business owners who are ready to buy the deceased owners share from his or her estate after death.

If theres a home mortgage, one can pass the family residence to their spouse/children to free them of any mortgage if one has a Life Insurance Policy for the same. It is preferred to have a decreasing term policy that decreases in face amount as the mortgage balance is paid down.

Life Insurance helps retain your Business from the loss of a key employee. Untimely death of a key employee can pose severe financial loss to the business. The right insurance proceeds can provide liquidity to pay off personal loans or business loans. Charitable Remainder Trusts provide tax benefits. Life Insurance helps replace a charitable gift. A lot of Insurance products presently provide good returns, which could be a beneficial way for saving necessary funds for retirement years. Benefits are available immediately and may be used to help pay expenses such as final illness and funeral costs, eliminating the need to sell estate assets to cover these costs.

Advantages of investing in National Saving Certificate are : 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. One can avail of a loan against the certificates by pledging it to the bank. The bank will have the NSC assigned in its favour and advance a percentage of up to 75% of face value plus the amount of accrued interest till the date of taking the loan.

In the category of Retired people the first option chosen is Fixed Deposits and the second preference of investment is Public Provident Fund. Advantages of Public Provident Fund are: Lowest risk possible

There is no chance of someone running away with your money. Or later on being told that there is no way your money can be returned to you. The PPF is a government-backed scheme, so you can be sure the government will not default. This is the highest security an investment can have and, therefore, the safest.

Tax rebate on money invested Under Section 88, PPF contributions (along with your subscriptions to other schemes that qualify for Section 88 benefits), are eligible for a 20% tax rebate. The maximum you can invest in PPF to avail of the rebate is Rs 70,000 per annum.

Great returns An investment in PPF will earn you 8% per annum. But because of the tax rebate, your actual return of 8% works out to be higher. Moreover, the returns are compounded. That means you not only earn interest in the money you put in, but you earn interest on the interest earned, too. Let's say you put in Rs 60,000 in the first year. You will earn Rs 4,800 as interest rate. The next year, your interest rate will be computed on Rs 64,800 (Rs 60,000 + Rs 4,800) as well as whatever fresh amounts you deposit.

No tax on interest earned The interest earned is totally exempt from tax under Section 10 (11) of the Income Tax Act. The 8% per annum that you get will not be taxed.

Flexibility of investment You can invest up to a maximum of Rs 60,000 per annum in the PPF. Some categories of investors, like authors, can go up to Rs 70,000. The minimum that you must put in every year is Rs 500. Besides having such a huge leeway in terms of the amount of money to be invested, you can invest the money in up to 12 installments. You don't have to put it all in one go. Each installment can be whatever amount you want it to be. They need not all be identical.

Exempt from all wealth tax: All the balance that accumulates over time is exempt from wealth tax. Also, should you default on any loan payments or declare bankruptcy and cannot repay your loans, the amount in your PPF account cannot be attacked by the courts.

Before maturity, you can make withdrawals from your account starting the sixth financial year. You may even apply for a loan from the third year on.

Advantages of investing in mutual funds are: Diversification:

Using mutual funds can help an investor diversify their portfolio with a minimum investment. When investing in a single fund, an investor is actually investing in numerous securities. Spreading your investment across a range of securities can help to reduce risk. A stock mutual fund, for example, invests in many stocks - hundreds or even thousands. This minimizes the risk attributed to a concentrated position. If a few securities in the mutual fund lose value or become

worthless, the loss maybe offset by other securities that appreciate in value. Further diversification can be achieved by investing in multiple funds which invest in different sectors or categories. This helps to reduce the risk associated with a specific industry or category. Diversification may help to reduce risk but will never completely eliminate it. It is possible to lose all or part of your investment. Professional Management:

Mutual funds are managed and supervised by investment professionals. As per the stated objectives set forth in the prospectus, along with prevailing market conditions and other factors, the mutual fund manager will decide when to buy or sell securities. This eliminates the investor of the difficult task of trying to time the market. Furthermore, mutual funds can eliminate the cost an investor would incur when proper due diligence is given to researching securities. This cost of managing numerous securities is dispersed among all the investors according to the amount of shares they own with a fraction of each dollar invested used to cover the expenses of the fund. Convenience:

With most mutual funds, buying and selling shares, changing distribution options, and obtaining information can be accomplished conveniently by telephone, by mail, or online. Although a fund's shareholder is relieved of the day-to-day tasks involved in researching, buying, and selling securities, an investor will still need to evaluate a mutual fund based on investment goals and risk tolerance before making a purchase decision. Investors should always read the prospectus carefully before investing in any mutual fund. Liquidity:

Mutual fund shares are liquid and orders to buy or sell are placed during market hours. However, orders are not executed until the close of business when the NAV (Net Average Value) of the fund can be determined. Fees or commissions may or may not be applicable. Fees and commissions are determined by the specific fund and the institution that executes the order.

LIMITATIONS: The limitations of Insurance are: Though everyone knows that we have to die one day, still the need for an insurance plan is not fully uncovered. A common man still needs to be told the importance of an insurance plan to him and his family. A normal plan seems to be a source of returns on maturity to him. Thus more awareness on the importance of insurance needs to be created amongst our common population. They do not know basic concept of ULIP. They do not know how does the share market function/. What are the benefits of investing money into it and what are the basic differences between Share Market, Mutual Fund and a ULIP. Still people think that insurance does not give good return. They are under the perception that the returns from an insurance plan varies between 5-6 per cent which is not true in case of ULIPs. Many customers are thinking that investment in share market is very risky as ULIPs are linked to share market. A general preference to LIC over private players. Given the recent downturn, a lot of people are skeptical about investing in private companies. The findings of sample survey cannot be generalized to the entire population, as the sample is not representative. As there is no set criterion for selecting the sample, there is a scope for the research being influenced by the bias of the researcher.

The limitations of Public Provident Fund - PPF are: 1. The interest rate keeps changing It was initially 12% per annum, dropped to 11%, then 9.5% and is now 8%. This rate of interest is fixed by the government and there is nothing you can do about it.

How to make this work for you: If the interest rate on PPF declines, interest rates on all other deposits (company and bank) and bonds also declines. So, frankly, there are no other alternative fixed-return investments that can compete because, overall, the interest rates are declining.

2. Lengthy lock-in period Fifteen years to be exact. But, in actuality, it works out to 16 years since the last contribution is made in the 16th financial year. Even if you make an investment on the last day of your account (the day it is due to mature), you will still get a tax rebate. But, of course, you will not earn interest on that amount on the last day. How to make this work for you: Use this as a retirement planning tool. Money you will never touch. If you are just 22, you will get the money when you are around 38. You can use it to prepay your housing loan then. 3. Interest is calculated on the lowest balance Interest is calculated on the lowest balance between the fifth and the last day of the month of March.

Let's say you have Rs 100,000 in your PPF account and on the 10th, you deposit an additional Rs 10,000. Your interest will be calculated on Rs 100,000 (not Rs 110,000). How to make this work for you: If making a last minute deposit at the end of the financial year, do so before March 5.

4. Lack of liquidity Your money is stuck for years on end. It is not as easy as selling some shares or mutual fund units.

How to make this work for you: Take a loan from the third year of opening your account to the sixth year. So if the account is opened during the financial year 1997-98, the first loan can be taken during financial year 1999-2000 (the financial year is from April 1 to March 31). The loan amount will be up to a maximum of 25% of the balance in your account at the end of the first financial year. In this case, it will be March 31, 1998. If you repay the loan in 36 months, interest will be charged at 12% pa. Otherwise, interest will be charged on the outstanding sum at 6% per month. You can obtain a second loan before the end of the sixth financial year if the first one is fully repaid. You can make a partial withdrawal only after five financial years are completed from the end of the year in which the initial subscription was made. So, in effect, it works out from the seventh year onwards. The amount of withdrawal is limited to 50% of the balance in your account at the end of the fourth year immediately preceding the year in which the amount is to be withdrawn; or at the end of the preceding year, whichever is lower. For example, if the account is opened in 1993-94 and the first withdrawal is made during 19992000, the amount of withdrawal will be limited to 50% of the balance as on March 31, 1996, or March 31, 1999, whichever is lower.

Limitations of National Saving Certificate are :

NSCs do not offer any scope of premature withdrawal except on death or forfeiture by pledge or by court order. However, NSCs can be transferred from one person to another through the post office on the payment of a prescribed fee.

The returns of NSCs are fully taxable.

Limitations of mutual funds are: No Guarantees: The value of your mutual fund investment, unlike a bank deposit, could fall and be worth less than the principle initially invested. And, while a money market fund seeks a stable share price, its yield fluctuates, unlike a certificate of deposit. In addition, mutual funds are not insured or guaranteed by an agency of the U.S. government. Bond funds, unlike purchasing a bond directly, will not re-pay the principle at a set point in time.

Expenses: Because mutual funds are professionally managed investments, there are
management fees and operating expenses associated with investing in a fund. These fees and expenses charged by the fund are passed onto shareholders and deducted from the fund's return. These expenses are typically expressed as the expense ratio - the percent of fund assets spent (annually) on day-to-day operations. Expense ratios can vary widely among funds. Expense ratios for mutual funds commonly range from 0.2% to 2.0%, depending on the fund.

CHAPTER-8 CONCLUSION

Through the survey it has been observed that maximum number of people have opted for Fixed Deposits because of following reasons: Liquidity ( financially solvent). If one changes the original plan of savings, there is no loss. Tax Benefits: No deduction of income tax at source. Tax exemption on Five Years Time Deposit Account U/S 80C of the IT Act.

The second highest number is of ULIP. It is because of the following reasons:

Choice of funds- funds for investment can be chosen for maximum opportunity for growth. Liquidity: Since ULIP investments are NAV-based it is possible to withdraw a portion of your investments before maturity. Of course, there is an initial lock-in period (3 years) after which the withdrawal is possible. Transparency: fund allocation are shown clearly, all the charges are mentioned before the policy is done. Flexibility : Having selected an option, you still have the flexibility to switch to another option. Most insurance companies allow a number of free switches in a year. Tax benefits: . Premiums in ULIPs as well as traditional endowment plans are eligible for tax benefits under Section 80C subject to a maximum limit of Rs. 100,000. Third is Public Provident Fund which is preferred due to following reasons: for full tax deduction under 80 C, the additional gain will be that the interest would be tax free In the fourth number is NSC which is preferred since it gives the advantage of fund mobilization through small savings is its medium to long-term maturity profile. The least preferred form of investment amongst the people surveyed is Mutual Fund since the profits are taxable, it has high charges and also high risk is involved.

This instrument offers twin benefits. While the entire deposit up to Rs. 70,000 would qualify

ANNEXURE

Questionnaire for Consumer Perception in Investment in ULIP and Other Investment

Name- ......................................... AgeGenderOccupationMartial Status........................ Male Business Married Female Professional Unmarried Retired Housewife

1. Do you have any plans for investment? Yes No

2. Current investment portfolio? (rank 1-5) MF NSC Fixed Deposit, Post Office Savings Insurance(ULIP) PPF

3. What is your current income (per annum) ? a. 1-2 lakh b. 2-5 lakh c. 5-10 lakh d. 10 lakh and above

4. How long do you plan to invest your money ?

a. b. c. d.

2-5 yrs 6-10 yrs 11-15 yrs Over 15 yrs

5. What factors would you consider most important before choosing an investment ? a. b. c. d. How quickly i will be able to increase my wealth. The opportunity for steady growth. The amount of monthly income the investment will generate. The safety of my investment principal.

6. Most preferred form of investment ? Insurance F.D, P.O NSC MF

PPF 8. If insurance which type of plan would you prefer ? ULIP Traditional Plans

7. Any other reason (for your above preference) ? .......................................................................................................................................... ..........................................................................................................................................

REFERENCES

Books and Magazines

1) Balchandran, IRDA, IC-33 LIFE INSURANCE 2) Outlook Money ( Dec 15, 2002) 3) Business Standard (Dec 15, 2005) 4) Outlook Money (Jan 31, 2007)

Websites
1) www.traderji.com 2) http://www.webindia123.com/finance/post/time.htm 3)History and Profile of Kotak Group and Kotak Life Insurance http://www.kotak.com and http:// www.kotaklifeinsurance.com 4) Life Insurance Industry in India http://www.irda.gov.in 5) http://www.raagvamdatt.com/postofficetime-deposit-account-fixed-termdeposit/193/htm