IAPM ASSIGNMENT

SMS2021038 Name : VIDHIT POOJARI

Class : TYBMS

ILL 1. You are a PMS (Portfolio Management Services) Consultant. A

middle aged investor approaches you to seek your advice on deploying
his surplus funds of Rs. 20 lacs in various shares, schemes, bonds and
Govt. Securities. Present to him any five investment schemes mentioning
various merits and demerits of each scheme. You may assume that he is
willing to take risk to the extent of 30% of his funds.

Sol :- Facts of the case:-

1. He is a middle age man hence he has a low risk taking capacity.

2. He has Rs 20,00,000 at his disposal for investment.
3. He is ready to take 30% of risk at his objective is to make good
Returns.

Investment Alternative Table

SR.NO Investment Amount to be % of

Alternative invested Investment
1. Mutual funds 6,00,000 30
2. Equity shares 5,00,000 25
3. FD 5,00,000 25
4. PPF 2,00,000 10
5. Bonds 2,00,000 10
Total 20,00,000 100

 Benefits and Drawback of the above listed investment

1. Mutual funds:
Benefits - a. Higher returns b. Higher liquidity c. Tax benefits
Drawbacks - a. Lock in period b. Over diversification c. High risk

2. Equity shares :
Benefits - a. Dividend b. Limited liability c. Higher returns
Drawbacks - a. Fluctuation in market price b. Limited control
c.High risk

3. Fixed deposits :
Benefits - a. Safety b. Fixed Returns c. Liquidity
Drawbacks - a. Low returns b. No Tax benefits c. Exit load

4.Public Provident Fund :

Benefits - a. Minimum risk b. Tax benefits c. Provision for
retirement ,old age etc.
Drawbacks - a. Lower Liquidity b. Long term investment (15 yrs )

5.Bonds :
Benefits - a. Safety and security b. Regular returns in the form of
interest c. Transferability
Drawbacks - a. No scope for capital appreciation b. No voting rights

ILL.2 .You are a Chief Executive of a Multinational Investment and

Portfolio Management Consultancy firm, and you are in-charge of
Marketing and Clients Support Dept. A prospective Investor with net
Surplus of Rs.10 lacs, visits your office for seeking your advice and
engaging your services for investing the surplus. You are required to
suggest to the Client various Investment avenues/investment plans
assuming that: (a) The client is a senior citizen, retired from a private
sector employment. (b) The client is a middle aged housewife, also
working on part time basis for NGO. Please suggest your plans separately
for both of these types of investor.

Sol:- A. Facts of the case :-

1. The client is a senior citizen ,retired from a private sector

employment.
2. He has Rs 10,00,000 at his disposal for investment.
3. Suggest them various investment with good returns.

B. Facts of the case :-

1. The client is a middle aged housewife , also working on part time
basis for NGO.
2. He has Rs 10,00,000 at his disposal for investment
3. Suggest them various investment with good returns.

A. Investment Alternative table

Senior citizen

SR.NO Investment Amount to be % of investment

Alternative invested
1. PPF 2,20,000 22
2. FD 2,50,000 25
3 Insurance 1,30,000 13
4. Retirement 3,00,000 30
schemes
5. Bonds 1,00,000 10
Total 10,00,000 100

B. Investment Alternative table

Middle age housewife

SR.NO Investment Amount to be % of investment

Alternative invested
1. Mutual funds 2,50,000 25
2. Equity shares 2,00,000 20
3 Bonds 2,00,000 20
4. Insurance 2,20,000 22
5. FD 1,30,000 13
Total 10,00,000 100

ILL.3 You are a Portfolio Management Consultant. A middle class

investor with investible Funds of Rs.15 lacs approaches you. He wants to
know the following: (a) What are the investment avenues available to him
which will give stable returns with minimum risk? (b) What are the
various types of risks? Please advise him
Sol :- Facts of the case:-

1. He is a middle class investor hence he has a minimum risk capacity.

2. He has Rs 15,00,000 at his disposal for investment.
3. He is ready to take minimum risk at his objective is to make stable
returns.
Investment Alternative table

SR.NO Investment Amount to be % of

Alternative Invested investment
1. Equity shares 1,80,000 12
2. Mutual funds 4,50,000 30
3. Insurance 3,00,000 20
4. FD 4,50,000 30
5. Bonds 1,20,000 8
Total 15,00,000 100

 Various types of risk:-

1. Systematic Risk- Systematic risk involves those risk that are applicable
to the entire economy and the entire market . It is basically an
unavoidable risk.
a. Purchasing Power- Purchasing power risk, also known as inflation risk,
is the type of risk that arises due to inflation. When inflation occurs, it
decreases the value of money and investments because its lowers the
value of the dollar, thus driving up the price of goods, services, and
investments.
b. Interest Risk-Interest rate risk is the final type of systematic risk, this
type of risk occurs when there are changes in the interest rates market.
This type of risk mostly effects bonds and other fixed income securities
because their valuation is based off of interest rates and they have an
inverse relationship to the stock market
c. Liquidity- Liquidity risk is associated with an investor’s ability to
transact their investment for cash. Typically, investors will require some
premium for illiquid assets which compensates them for holding
securities over time that cannot be easily liquidated.
2. Unsystematic Risk- Unsystematic risk is due to the influence factors
prevailing within an organization.Such factors are normally controllable
from an organization’s point of view.
a. Default Risk- If the investor invest his money in a particular company
and if the company gets bankrupt , it is said to be Default risk.
b. Business Risk- Business risk, basically, implies the type of
unsystematic risk which questions whether the firm will be able to
earn a considerable amount of profits or not. Every business has some
usual expenses, and to cover them, there should be at least as much
earning which covers the usual expenses. For instance, salaries,
marketing cost, and so on.
c. Financial Risk- Financial Risk is also known as credit risk . It arises
due to change in the capital structure of the organization. The capital
structure mainly comprises of three way by which funds are sourced
for the projects.

ILL.4 As a Portfolio Management Consultant, you are approached by an

investor with investible funds of Rs. 25 lacs. He wants to know from you
the following. (a) What are the investment avenues available to him
which will give stable returns with minimum risk? (b) What are the
various types of risks?

Sol:- Facts of the case:-

1.He is a middle class investor hence he has a minimum risk capacity.

2.He has Rs 25,00,000 at his disposal for investment.
3.He is ready to take minimum risk at his objective is to make stable
returns.
Investment Alternative table

SR.NO Investment Amount Invested % of Investment

Alternative
1. FD 8,75,000 35
2. Mutual funds 7,50,000 30
3. PPF 5,00,000 20
4. Bonds 2,50,000 10
5. Insurance 1,25,000 5
Total 25,00,000 100
 Various types of risk:-

1. Systematic Risk- Systematic risk involves those risk that are applicable
to the entire economy and the entire market . It is basically an
unavoidable risk.
a.Purchasing Power- Purchasing power risk, also known as inflation risk,
is the type of risk that arises due to inflation. When inflation occurs, it
decreases the value of money and investments because its lowers the
value of the dollar, thus driving up the price of goods, services, and
investments.
b.Interest Risk-Interest rate risk is the final type of systematic risk, this
type of risk occurs when there are changes in the interest rates market.
This type of risk mostly effects bonds and other fixed income securities
because their valuation is based off of interest rates and they have an
inverse relationship to the stock market
c.Liquidity- Liquidity risk is associated with an investor’s ability to
transact their investment for cash. Typically, investors will require some
premium for illiquid assets which compensates them for holding
securities over time that cannot be easily liquidated.

1. Unsystematic Risk- Unsystematic risk is due to the influence factors

prevailing within an organization.Such factors are normally controllable
from an organization’s point of view.
a.Default Risk- If the investor invest his money in a particular company
and if the company gets bankrupt , it is said to be Default risk.
b.Business Risk- Business risk, basically, implies the type of
unsystematic risk which questions whether the firm will be able to
earn a considerable amount of profits or not. Every business has some
usual expenses, and to cover them, there should be at least as much
earning which covers the usual expenses. For instance, salaries,
marketing cost, and so on.
c.Financial Risk- Financial Risk is also known as credit risk . It arises
due to change in the capital structure of the organization. The capital
structure mainly comprises of three way by which funds are sourced
for the projects.
ILL.5 You being a Portfolio Management Consultant, an investor with an
investible surplus of Rs.45 Lakhs and Income before tax of Rs.10 Lakhs
has approached you for advice. He wishes to know the following:
(a)What are the various investment avenues available to him, which will
give him stable returns with minimum risk? (b) What are the various
investment avenues available which minimize his income tax outflow?

Sol:-

1.He is a middle class investor hence he has a minimum risk capacity.

2.He has Rs 45,00,000 at his disposal for investment and income before
tax Rs 10,00,000
3.He is ready to take minimum risk at his objective is to make stable
returns.

Investment Alternative Table

SR.NO Investment Amount Invested % of investment

Alternative
1. Mutual funds 11,25,000 25
2. Equity shares 6,75,000 15
3. FD 13,50,000 30
4. Bonds 9,00,000 20
5. PPF 4,50,000 10
Total 45,00,000 100

 The investment alternatives that will minimize the income tax of

the investor

1. Public provident Funds - Public provident fund is one of the major

tax sheltered investment avenue. All deposits under public provident
funds are subject to tax exemption under section 80C of the Income
tax act.
2. Mutual funds - Mutual funds schemes invest money in various tax
saving investment schemes so as to provide tax benefit to the
investors
3. Fixed deposits - Fixed deposits made with the commercial banks
provide reasonable returns with minimum risk and are also subject to
tax benefit under section 80C Of the income tax Act.
4. Life insurance - Investment in life insurance protects the family
members through financial support in case of death of the policy
holder. Moreover , it also provides tax benefits under section 80C of
the income Tax Act.