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Lovely Professional


NO-2 [MGT-636]
TOPIC- Comparative analysis of allotted investment

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Roll number –RT1902A-27


 Introduction OF Alternative Investment..

 Types OF Investment.
 Introduction OF Risk.
 Introduction OF Return.
 Maturity Period.
 Comparative analysis of three investments.
 Return of three investment.
 The impact of budget 2010 on the allotted investment
 Alternative Investments
The most common instruments in which people invest are stocks, bonds and forex.
However, exposure to these limited investment options raises the risk profile.
Portfolio diversification, or holding assets with different characteristics, is an
effective way of reducing the risk exposure for the same level of profit potential.
Portfolio diversification can be achieved through alternative investments.
Investments made into assets that do not fall under one of the three traditional asset
types (cash, stocks and bonds) are called alternative investments.

Alternative Investments: Types

 Futures: Futures are standardized contracts for the sale and purchase of a
commodity on a specified date and at a predetermined price.

 Options: Options are similar to futures.

 ETFs: Exchange traded funds (ETFs) hold assets such as stocks, bonds,
commodities and precious metals.
 Hedged funds: Hedge funds invest in a broad range of investment options,
including stocks, debt and commodities.
 Real estate: This investment option involves buying and selling immovable
property, such as land and buildings.

 Art: The popularity of art as an alternative investment rose significantly

following the financial crisis of 2008 due to a prolonged downturn in the
stock market, a slowdown in the economy and low interest rates.
 Gold: Gold is a defensive investment and becomes more popular during
periods of prolonged economic and political upheavals.
 Wine investment: Investments in fine wine have yielded healthy returns
over the past few years. Wine investments also remained relatively insulated
from the 2007-2008 credit crunch.

Benefits of Alternative Investments

Alternative investments:
 Diversify an investor’s portfolio.
 Reduce risks.
 Offer good profit generating opportunities.

Drawbacks of Alternative Investments

The limitations of alternative investments are:

 The liquidity of these investments is lower than that of stocks, bonds and
 The fee structures for these investments are generally higher than those for
stocks and bonds.
 These investments require specific expertise, as a result of which the costs
associated with due diligence are high.
 It is difficult to establish benchmarks for these investments. This hinders
the performance appraisal of the investments Moreover; the lack of
performance data limits an investor’s ability to make an informed choice.

In investing parlance, risk refers to the probability of a monetary loss or actual
returns from an investment being lower than the expected returns. There is an
inverse relationship between investing risk and return. Investment options that are
risky need to offer higher returns than those that are less risky in order to attract
investors and make it worthwhile to take on the additional risk.

 Systematic Risk - Systematic risk influences a large number of

assets. A significant political event, for example, could affect several of the
assets in your portfolio. It is virtually impossible to protect yourself against
this type of risk.

 Unsystematic Risk - Unsystematic risk is sometimes referred to as "specific

risk". This kind of risk affects a very small number of assets. An example is
news that affects a specific stock such as a sudden strike by
employees. Diversification is the only way to protect yourself from
unsystematic risk. (We will discuss diversification later in this tutorial).
Return on Investment
In order to determine the performance of your portfolio you should make regular
calculations on its return. Many investors fail to make appropriate estimations. This
article aims to provide you with guidelines on how to calculate the returns on your

 Total Return
Total Return represents one of the easiest estimations, which also includes
dividends as part of our considerations. The formula for calculating total return is:

Total Return = [(End-of-the-Year Investment Value - Beginning-of-the-Year

Investment Value) + Dividends] / Beginning-of-the-Year Investment Value

 Simple Return
Simple return calculations are executed after you have sold the investment. The
formula you use to calculate it is:

Simple Return = (Net Proceeds + Dividends) / Cost Basis - 1

 Compound Annual Growth Rate

In order to make evaluation on the return of an investment that is held for more
than a year, you can use the compound annual growth rate ratio. It takes into
consideration the time value of money.

 Comparative analysis of three investments.

 Table show the Return or Maturity Value:
F.D. 10000 8% 10 8000 18000
FUND 10000 20% 10 20000 30000
E (ULIP) 10000 15% 10 15000 25000
TOTAL 73000
1. Tax-saving FDs
Tax-saving is no longer the guarded domain of Public Provident Fund (PPF)
and National Savings Certificate (NSC). Tax-saving FDs offered by banks
are also eligible for deduction under Section 80C. The deposits are subject to
a 5-Yr lock-in period. Presently, the returns on tax-saving FDs vary between
7.50%-8.50% per annum. The minimum and maximum investment amounts
(per annum) have been pegged at Rs 100 and Rs 100,000 respectively.
Introduction of tax-saving FDs offers risk-averse investors the opportunity to
diversify across instruments while conducting the tax-planning exercise.

2. F.D.:- in F.D. there is only systematic risk involve

Maturity can be 5 years to 25 years according to need of investor.

Return: - 8%

3. Insurance:- there is systematic and unsystematic risk

Maturity is 10to 35 year

Returns depend on the performance of share market generally return is 15-


4. Mutual fund:- there is systematic and unsystematic risk

Maturity is 1 to 10 year

Returns depend on the performance of share market generally return is 20-


We very well know that when we invest some amount of money in various
investment plan. There has always some or high risk available. In we take
high risk then we earn high return. If we take low risk we take low return.
High Risk = High Return.
Low Risk = Low Return.

It means if we take high return that means us aware high risk. When we
invest in FD it is a secure type of investment. If we invest money in share it
gives high return but also here high risk.

 The impact of budget 2010 on the allotted

investment alternative.
Budget has always negative or positive impact on the investment. That means if the
budget came in favors of investment than you get the high return but if the budget
came in against the economic condition than it is not good for you investment.

Indian budget 2010 came in the favor of Indian economic. We know that it is the
time of inflection so govt always want to control the inflection. It is a favorable for
the investment. Whole world are faced the economic crisis and India also faced it.
So we say that the budget has the positive impact on our investment.

We all see prices rising all the time. It’s a given. And we also know that inflation
eats into our returns. This is even more important than income, especially because
you have total control over this. Let’s say the inflation is 8%, and you invest in a
bank fixed deposit (FD) that gives you 10%. Should you be happy? Apparently,
yes, because you are earning more than the prevailing rate of inflation. But how can
we forget the all-pervasive income tax? If you fall in the highest tax bracket of
30%, the effective post-tax return for you is only 7% - which is less than the rate of

Therefore, you should choose your investments very wisely, especially in times
of high inflation. And it has a positive impact.