REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA

CHAPTER - 1 1.1 - General Introduction about Banking industry
The Indian Banking industry, which is governed by the Banking Regulation Act of India, 1949 can be broadly classified into two major categories, non-scheduled banks and scheduled banks. Scheduled banks comprise commercial banks and the co-operative banks. In terms of ownership, commercial banks can be further grouped into nationalized banks, the State Bank of India and its group banks, regional rural banks and private sector banks (the old/ new domestic and foreign). These banks have over 67,000 branches spread across the country. The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969 and resulted in a shift from Class banking to Mass banking. This in turn resulted in a significant growth in the geographical coverage of banks. Every bank had to earmark a minimum percentage of their loan portfolio to sectors identified as ³priority sectors´. The manufacturing sector also grew during the 1970s in protected environs and the banking sector was a critical source. The next wave of reforms saw the nationalization of 6 more commercial banks in 1980. Since then the number of scheduled commercial banks increased four-fold and the number of bank branches increased eight-fold. After the second phase of financial sector reforms and liberalization of the sector in the early nineties, the Public Sector Banks (PSB) s found it extremely difficult to compete with the new private sector banks and the foreign banks. The new private sector banks first made their appearance after the guidelines permitting them were issued in January 1993. Eight new private sector banks are presently in operation. These banks due to their late start have access to state-of-the-art technology, which in turn helps them to save on manpower costs and provide better services. During the year 2000, the State Bank Of India (SBI) and its 7 associates accounted for a 25 percent share in deposits and 28.1 percent share in credit. The 20 nationalized banks accounted for 53.2 percent of the deposits and 47.5 percent of credit during the same period. The share of foreign banks (numbering 42), regional rural banks and other scheduled commercial banks accounted for 5.7 percent, 3.9 percent and 12.2 percent respectively in deposits and 8.41 percent, 3.14 percent and 12.85 percent respectively in credit during the year 2000.

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REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA
The industry is currently in a transition phase. On the one hand, the PSBs, which are the mainstay of the Indian Banking system are in the process of shedding their flab in terms of excessive manpower, excessive non Performing Assets (Npas) and excessive governmental equity, while on the other hand the private sector banks are consolidating themselves through mergers and acquisitions. PSBs, which currently account for more than 78 percent of total banking industry assets are saddled with NPAs (a mind-boggling Rs 830 billion in 2000), falling revenues from traditional sources, lack of modern technology and a massive workforce while the new private sector banks are forging ahead and rewriting the traditional banking business model by way of their sheer innovation and service. The PSBs are of course currently working out challenging strategies even as 20 percent of their massive employee strength has dwindled in the wake of the successful Voluntary Retirement Schemes (VRS) schemes. The private players however cannot match the PSB¶s great reach, great size and access to low cost deposits. Therefore one of the means for them to combat the PSBs has been through the merger and acquisition (M& A) route. Over the last two years, the industry has witnessed several such instances. For instance, HDFC Bank¶s merger with Times Bank Icici Bank¶s acquisition of ITC Classic, Anagram Finance and Bank of Madura. Centurion Bank, Indusind Bank, Bank of Punjab, Vysya Bank are said to be on the lookout. The UTI bankGlobal Trust Bank merger however opened a pandora¶s box and brought about the realization that all was not well in the functioning of many of the private sector banks. Private sector Banks have pioneered internet banking, phone banking, anywhere banking, mobile banking, debit cards, Automatic Teller Machines (ATMs) and combined various other services and integrated them into the mainstream banking arena, while the PSBs are still grappling with disgruntled employees in the aftermath of successful VRS schemes. Also, following India¶s commitment to the W To agreement in respect of the services sector, foreign banks, including both new and the existing ones, have been permitted to open up to 12 branches a year with effect from 1998-99 as against the earlier stipulation of 8 branches.

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REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA

1.2- Back ground of the study

The word "investment" can be defined in many ways according to different theories and principles. It is a term that can be used in a number of contexts. However, the different meanings of "investment" are more alike than dissimilar. Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in form of interest, income, or appreciation of the value of the instrument. It is related to saving or deferring consumption. Investment is involved in many areas of the economy, such as business management and finance no matter for households, firms, or governments. An investment involves the choice by an individual or an organization such as a pension fund, after some analysis or thought, to place or lend money in a vehicle, instrument or asset, such as property, commodity, stock, bond, financial derivatives (e.g. futures or options), or the foreign asset denominated in foreign currency, that has certain level of risk and provides the possibility of generating returns over a period of time. Current sacrifice --------future reward

There are number of different alternative investments options in India. These investment options however are for those who have made huge investments or have large amount of disposable income to invest. The most important feature of financial investments is that they carry high market liquidity. The two key aspects of any investment are time and risk. The sacrifice takes place now and is certain. The benefit is expected in future and tends to be uncertain in some investment (like government bonds) the time element is the dominant attribute in yet another investment (like equity shares) both time are risk are important.
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REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA
Essentials of investment refer to why investment, or the need for investment, is required. The investment strategy is a plan, which is created to guide an investor to choose the most appropriate investment portfolio that will help him achieve his financial goals within a particular period of time. There is a believe that high yielding return investment option will bear high risk and the option which yield low return will bear low return risk. Most of the investors try to know the returns of the investment before actually investment. And the judgment is done mostly based on the historic performance of the particular investment alternative.

INTRODUCTION TO THE TOPIC
The ultimate investment objective of any investor is to maximize investors¶ wealth. The objective depends on the investor¶s need (purpose) and attitude Investment objectives: Capital Appreciation: Capital appreciation is concerned with long-term growth. This strategy is most familiar in retirement plans where investments work for many years inside a qualified plan. Income: Income to provide a steady stream of income through regular interest/dividend payment.

Growth: Growth to increase the value of the principal amount through capital appreciation.

Stability: Stability to protect the principal amount invested from the risk of loss.

Marketability/ Liquidity: Many of the investments we have discussed are reasonably liquid, which means they cannot be immediately sold and easily converted into cash.

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but a trader who enjoys jumping into and out of stocks as if they were bad shoes.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA Speculation: The speculator is not a true investor. it should be further clarifies on the basis of risk. But as known earlier risk and return goes hand in hand.e. risk and ret8urn. Therefore. investors do the historic performance of the options and make investment. an investor seeking higher returns must be willing to face higher levels of risk. Any investor would like to invest in that option which gives him more or high return. There are many factors which influence in selection of the investment alternatives. There are: Disposable income of the investor Willingness/attitude of the investor Risk & return Tax shelter Liquidity Growth Time horizon Knowledge of the investor 1.3. If the option results in high return it bears high and the option which gives low return will have low risk.Statement of problem The study entitled ³REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA¶ a study done in Bangalore City. Karnataka will be done to find out which all the investment options are available for investors and which option is more suitable for which type of Page 5 . any investment objectives should be stated in terms of both risk and return i. Thus. These are the main investment objectives of any investor. An investor tries to achieve his investment objectives keeping in the mind these two important key aspects i. Generally. time horizon and purposes.e. Speculators or traders are interested in quick profits.

These days we are getting more money compared to last decades. You do not have to be wealthy to be an investor. or whatever is important to you. So while CD's have a low investment risk.4. This is the type of risk one usually thinks of when considering investments. There are many types of risk involved with investments.Need and importance of the study Investment means putting your money to work to earn more money. stocks are considered more risky because you have no guarantee about the actual return. Every mutual fund has a fund manager or investment advisor so it is also called as managed funds. of your enjoying a comfortable retirement. This study also focuses on the risk and return involved in the different investment modes. Let's consider two types: investment risk and purchasing power risk. you need to know the investment options thoroughly and their relative risk exposures. On the other hand. Investing even a small amount can produce considerable rewards over the long-term. They are guaranteed. Mutual Fund is a type of collective investment method by which many people pool their money in a fund and invest in various securities like stock. this risk is greatest with those investment alternatives with a set. bonds or cash investments. guaranteed rate of return. Done wisely. it can help you meet your financial goals like buying a new house. For example. Of equal importance is a second type of risk associated with investments which is also important to consider. 1. they have a high purchasing power risk Today choosing a best investment plan is difficult because there are so many investment options available. In world¶s top stock markets collective investments holds a major share because of its flexibility. Investing in mutual funds is also subject to market risks but return is good. paying for college education of your children. CD's and EE savings bonds are considered safe investments because the probability that the actual return on your investment will be what you expect is 100 percent.  Mutual Funds: Mutual Fund companies collect money from investors and invest in share market. Purchasing power risk is the risk that the value of the money you invest will not keep up with inflation.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA investor. And which option is more volatile and which is more constant. But you need to decide about how much you want to invest and where . Investment risk is the probability that the actual return on an investment will be different from what you expect. In general. especially if you do it regularly. Depends on the objective of Page 6 . To choose wisely.

The borrower pays interest to the lender or investor throughout the life of the bond. Convertible preferred stock is preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares. banks and. each new equity issue can have legal clauses attached to it that make it dynamically different from the more general cases. similar to an IOU (I own you). take care of accounts and invest money over many different available securities. Borrowers seeking funds from the public through bond issues usually announce the issues through the financial press and electronic media. For individual investors it is very easy type of investment because someone else manage their funds. Shares of such stock are called "convertible preferred shares" (or "convertible preference shares" in the UK) Although there is a great deal of commonality between the stocks of different companies. Some shares of common stock may be issued without the typical voting rights being included.  Bonds: A statement of debt. Bonds are generally medium to long-term fixed-interest securities. usually anytime after a predetermined date. common stock typically carries voting rights that can be exercised in corporate decisions.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA the funds like long term growth and low risk factor or high income growth with high risk factor or low growth rate and stability of principal. other entities and individuals in return for cash from lenders and investors. They also have preference in the payment of dividend over prefer stock and also have given the preference at the time of liquidation over common stock. Note that not all equity shares are the same. Preferred stock may hybrid by having the qualities of bonds of fix return and common stock having voting right. they have other features of accumulation in dividend. An early definition of a bond was 'a coupon security offering more than one interest payment' but the emergence of zero-coupon Page 7 . for instance.  Equity shares: Stock typically takes the form of shares of either common stock or preferred stock. Preferred stock differs from common stock in that it typically does not carry voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders. companies. Bonds are issued by governments. fund manager invests in respective fields on behalf of shareholders. or some shares may have special rights unique to them and issued only to certain parties. As a unit of ownership. the Reserve Bank. in the case of commonwealth securities. and spell out the details in a prospectus available from stockbrokers.

The important non-marketable financial assets held by investors are briefly described below. one can make a bank deposit. savings account and fixed deposit account.  Bank deposits enjoy exceptionally high liquidity. the interest is paid on maturity. mostly to large-scale investors who set the price levels. In contrast when you buy equity shares in the stock market you do not know who the seller is and you do not care. The important features of bank deposits are as follows:  Deposits in scheduled banks are very safe because of the regulations of the Reserve Bank of India and the guarantee provided by the Deposit Insurance Corporation. when you open a savings bank account at a bank you deal with the bank personally. which guarantees deposits up to Rs 100. So the best way maximize returns on your savings account is to treat it like a current account between the 1st and the 10th and a fixed deposit for the rest of the month. For example. While a deposit in a current account does not earn any interest.000 per depositor of a bank.  The interest rate on fixed deposits varies with the term of the deposit. They can be enchased prematurely by incurring a small penalty.  Post Office Time Deposits (POTD) Similar to fixed deposits if commercial banks. There are various kinds of bank accounts: current accounts.  If the deposit is less than 90 days.  Bank Deposits:  Perhaps the simplest of investment avenues opening a bank account and de-positioning money in it.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA bonds has complicated the picture. POTDs have features:  Deposits can be made in multiples of Rs 50 without any limit. deposits in other kinds of bank accounts earn interest.  Loans can be raised against bank deposits  Most banks calculate interest on the minimum deposit between the 10th and the last date of the month.  There is a ceiling on the interest rate payable on deposits in the savings account.  The interest rates on POTDs are in general slightly higher than those on bank deposit Page 8 .  Non-Marketable Financial Assets: A good portion of the financial assets of individual is held in the form of non-marketable financial assets like bank deposits. otherwise it is paid quarterly. and provident fund deposits. post office deposits company deposits. it is lower for fixed deposits of shorter term and higher for fixed deposits of longer term. A distinguishing feature of these assets is that they represent personal transactions between the investor and the issuer. In general. Australian commonwealth (Treasury) bonds are sold by periodic tender.

On withdrawal after one year.16 percent Investment in NSC can be deducted before computing the taxable income under Section 80C.000. Over this period Rs 100 becomes Rs 160. There is no tax deduction at source. The salient features of the scheme are as follows: The term of the scheme is 6 years.1. Kisan Vikas Patra (KVP): Scheme of the post office.000 . subject to a penal deduction of 2 percent.1.000 It has a term of 6 years. There is no maximum limit. The interest rate is 8. Rs 500.000 in a joint account.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA  The interest is calculated half yearly and paid annually. Rs 5.000.  After six months.000 in a single account or Rs 600.4 percent.  Monthly Income Scheme of the Post Office (MISPO): A popular scheme of the post office. with 5 percent deduction before 3 years. However. Hence the compound rate of return works out to 8.000 and Rs 10. withdrawals are permitted. no interest is payable. The investment doubles in 8 years and 7 months. interest is paid for the period the deposit has been held.  A POTD account can be pledged  Deposits in 10 years to 15 years Post Office cumulative Time Deposit Account can be deducted before computing the taxable income under Secion80C. National Savings Certificate: Issued at post offices. but before the term of deposit. Hence the compound interest rate works out to 8. The maximum investment can be Rs 300. Rs 1. KVPs can be pledged as a collateral security for raising loans There is a withdrawal facility after 2½ years. There is no tax deduction at source Page 9               . the National Saving Certificate offers the following features: It comes in denomination of Rs 100. on withdrawals made between six months and one year. the MISPO is meant to provide regular monthly income the depositors. The minimum amount of investment is Rs 1. the Kisan Vikas Patra has the following features: The minimum amount of investment is Rs.  No withdrawal is permitted for up to six months.0 percent payable monthly A bonus of 10 percent is payable on maturity There is no tax deduction at source. There is a facility of premature withdrawal after one year.

Brealey and Stewart C. The two shorter types are auctioned on a weekly basis. and it also allows companies with a temporary cash shortfall to sell securities or borrow funds on a short-term basis. on the other hand. They come in three different lengths to maturity:90.S. After all. Purchasers of T-bills at auction can enter a competitive bid (although Page 10 . bankers' acceptances. Myers explained in their book Principles of Corporate Finance. as Richard A. Although securities purchased on the money market carry less risk than long-term debt. 180. but an informal network of banks and traders linked by telephones. which are professionally managed mutual funds consisting only of short-term securities. often choose to invest in money-market funds. commercial paper. The short-term debts and securities sold on the money markets²which are known as money market instruments²have maturities ranging from one day to one year and are extremely liquid. and computers. fax machines. "the range of possible outcomes is less for short-term investments. T-bills can be purchased directly through the auctions or indirectly through the secondary market. Large corporations generally handle their own short-term financial transactions. In essence. it acts as a repository for short-term funds." TYPES OF MONEY MARKET INSTRUMENTS:  TREASURY BILLS Treasury bills (T-bills) are short-term notes issued by the U. Money markets exist both in the United States and abroad. Even though the distant future may be clouded. Some examples of common money market instruments include treasury bills. you can't afford to spend too much time in evaluating the loan.  Money market investment: The money market is the arena in which financial institutions make available to a broad range of borrowers and investors the opportunity to buy and sell various forms of short-term securities. and 360 days. federal agency notes. The money market is important for businesses because it allows companies with a temporary cash surplus to invest in short-term securities. only well-established companies can borrow in the money market. The money market is not a physical place. If you are going to lend money for only one day. government. you can usually be confident that a particular company will survive for at least the next month. participating in the money market through dealers. certificates of deposit (CDs). while the annual types are auctioned monthly. Second. eurodollar deposits. and the fortunes of companies can change rather rapidly. The suppliers of funds for money market instruments are institutions and individuals with a preference for the highest liquidity and the lowest risk. banks do sometimes fail.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA  It can be pledged as collateral for raising loans. they are still not entirely risk free. and repurchase agreements. Thus you will consider only blue-chip borrowers. Small businesses. But.

they feature the added benefit that the interest is not subject to federal income tax.  CERTIFICATES OF DEPOSIT Certificates of deposit (CDs) are certificates issued by a federally chartered bank against deposited funds that earn a specified return for a definite period of time. These obligations are not generally backed by the government. dollar obligations in a foreign branch of a domestic bank. and in exchange the bank agrees to repay the money with specified interest at the end of the time period. Although they carry somewhat more risk than T-bills and tend to be less negotiable. T-bills for noncompetitive bids are supplied at the average price of all successful competitive bids.  FEDERAL AGENCY NOTES Some agencies of the federal government issue both short-term and long-term obligations.S. The maturity rates on CDs range from 30 days to six months or longer. but some types of CDs can be sold to another investor if the original purchaser needs access to the money before the maturity date. Corporations are major purchasers of this type of money market instrument. including the loan agencies Fannie Mae and Sallie Mae. but the risk of default is still very small.  SHORT-TERM TAX EXEMPTS These instruments are short-term notes issued by state and municipal governments. There is usually a penalty for early withdrawal of funds. Large denomination (jumbo) CDs of $100.000 or more are generally negotiable and pay higher interest than smaller denominations. Agency securities are actively traded. brokered CDs generally pay higher interest rates and offer greater liquidity than CDs purchased directly from a bank. They are one of several types of interest-bearing "time deposits" offered by banks. so they offer a slightly higher yield than T-bills. and the amount of the face value can vary greatly as well. corporations find that the lower yield is worthwhile on this type of short-term investment. The certificate constitutes the bank's agreement to repay the loan. However. Since brokers deal in large sums.000. An individual or company lends the bank a certain amount of money for a fixed period of time. Page 11 . which are negotiable certificates issued against U. For this reason. but are not quite as marketable as T-bills.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA this method entails a risk that the bills may not be made available at the bid price) or a noncompetitive bid. Brokerage firms have a nationwide pool of bank CDs and receive a fee for selling them. such certificates are insured by the FDIC only up to $100. There are also eurodollar CDs.

although they also arise when companies purchase goods on credit or need to finance inventory. in which banks act as intermediaries between buyers and sellers. These agreements are the most liquid of all money market investments. In fact. Unlike some other types of money-market instruments. commercial paper is issued directly by well-established companies. the draft becomes the bank's IOU and is a negotiable security. Commercial paper has maturities of up to 270 days (the maximum allowed without SEC registration requirement). "The bank then agrees to this demand by writing 'accepted' on it. Page 12 . A2 and P2 paper is considered high quality." Bankers' acceptances are generally used to finance foreign trade. but they assume no principal position and are in no way obligated with respect to repayment of the commercial paper. and many corporations arrange for their banks to transfer excess cash to such funds automatically. Banks may act as agents in the transaction. credit-worthy corporations with unused lines of bank credit and therefore carries low default risk. ranging from 24 hours to several months. The highest ratings are A1 and P1." according to Brealey and Myers.  REPURCHASE AGREEMENTS Repurchase agreements²also known as repos or buybacks²are Treasury securities that are purchased from a dealer with the agreement that they will be sold back at a future date for a higher price. This security can then be bought or sold at a discount slightly greater than the discount on Treasury bills of the same maturity.  BANKERS' ACCEPTANCES "A banker's acceptance begins life as a written demand for the bank to pay a given sum at a future date. respectively. Companies may also sell commercial paper through dealers who charge a fee and arrange for the transfer of the funds from the lender to the borrower. The maturity of acceptances ranges from one to six months." Brealey and Myers noted. Once accepted. but usually indicates that the issuing corporation is smaller or more debt burdened than A1 and P1 companies. as well as by financial institutions. Dollar volume for commercial paper exceeds the amount of any money market instrument other than T-bills. they are very similar to bank deposit accounts. "By cutting out the intermediary. It is typically issued by large. Standard and Poor's and Moody's provide ratings regarding the quality of commercial paper. Issuers earning the lowest ratings find few willing investors. major companies are able to borrow at rates that may be 1 to 1 ½ percent below the prime rate charged by banks.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA  COMMERCIAL PAPER Commercial paper refers to unsecured short-term promissory notes issued by financial and nonfinancial corporations.

 General Insurance This insurance type involves insuring the risks associated with the general life such as automobiles. Page 13 . Thus. through insurance. the policy holder is entitled to receive the amount spent for his health purposes from the insurance company. Common examples of investment properties are apartment buildings and rental houses. in return for relatively small. burglary. A biker is always subjected to the risk of head injury. natural incidents. commercial property.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA  Life Insurance: Insurance is bought in order to hedge the possible risks of the future which may or may not take place. this ie equivalent to the insurance premiums paid. Insurance can range from life to medical to general (residential. It is common for investors to own multiple pieces of real estate. a person buys security and protection. Here. one of which serves as a primary residence. A simple example will make the meaning of insurance easy to understand. business related. but use them to generate ongoing rental income from tenants. Still. Once a Life Insurance is sold by a company then the company remains legally entitled to make payment to the beneficiary after the death of the policy holder. natural incidents. This is a mode of financially insuring that if such a incident happens then the loss does not affect the present well-being of the person or the property insured. commercial and residential properties. Those who invest in real estate also expect to generate capital gains as property values increase over time. The tax implications for investment real estate are often different than those for residential real estate. This helmet in such cases acts as insurance by protecting him/her from any possible danger. while the others are used to generate rental income and profits through price appreciation. in which the owners do not live in the residential units. insurance attempts to quantify such losses financially. Insurance can be defined as the process of reimbursing or protecting a person from contingent risk of losses through financial means. Though loss of life or injuries incurred cannot be measured in financial terms. The price paid was the possible inconvenience or act of wearing the helmet.  Medical Insurance This is also known as mediclaim. etc. people riding bikes cover their heads with helmets. But it is not certain that the accident causing him the head injury would definitely occur. regular payments to the insuring body or insurance company.  Real Estate: Real estate that generates income or is otherwise intended for investment purposes rather than as a primary residence. etc).  Life Insurance It insures the life of the person buying the Life Insurance Certificate.

the Isle of Man Gold Cat.m.  To understand the importance of these investment alternatives that are available India. the main objectives of the study are to gain insight to investor¶s preferences for various investment alternatives.  Others As shown above. Gold future and options also provide a way to invest in gold. Investors can invest in gold by purchasing gold bullion. Page 14 . the Canadian Maple Leaf. ACCESS. the South African Krugerrand. In order to gain thorough insight to various investment alternatives. Popular gold coins issued by governments include the American Eagle. It allows for the influence of more than one character tics of investment are studies thoroughly. there are various investment alternatives available in market. Price quotations are in dollars. a division of the New York Mercantile Exchange. They trade in a unit that is based on 100 troy ounces. and the China Mint Panda Bear. the Australian Kangaroo. or financial uncertainty such as a sell-off in the stock market. Trade after hours occurs on NYMEX¶s Internet-based electronic trading platform. They trade on Comex. various books and journals and post records have been analyzed. Since the various alternatives of investment can be perceived in many dimensions such as risk. so as to have knowledge regarding the various investment avenues. terrorist attacks. Trade occurs from 8:20 a. ET.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA  Gold: A precious metal that has functioned as a currency or served as a longstanding investment since the early days of civilization. which is a precious metal that is in a tradable form. typically a bar or wafer. ET until 1:30 p. 1. return or time. Gold futures and options also are traded on other exchanges throughout the world.70. A perpetual mapping is used to explore consumer¶s product perceptions.m. which means that investors will put their money in gold during times of extreme uncertainty such as war. Gold is a safe haven investment. such as $360. or during times of high inflation. this technique of mapping is multi dimensional in nature.5 Objectives of the research  The basic objective of the study is to expose the student to the savings and investments options available in India. Gold coins also are minted by governments or by a private company as an investment piece.

REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA  To study the investor preference towards the investment.  To understand the risk and return involved in the various instruments. Page 15 .  To know about the major role-played by these in the mobilization of the savings.  To compare the strength and weakness of different investment opportunity.  To be aware of the factors that may hinder new initiatives.

The preference shareholders have priority over equity shareholders in payments of dividends and when the company is terminated. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors. There are two forms of equity capital: Preference (Preferred) Shares and Equity (Common) Shares.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA Following are the Investments I am going to cover in my report: EQUITY SHARES The stock or capital stock of a business entity represents the original capital paid into or invested in the business by its founders. Businesses procure money for their operations by issuing debt and equity capital. Equity shareholders have a voting rights & there are oner of the campine they have right to select aboard of director these are the Page 16 . Stock is distinct from the property and the assets of a business which may fluctuate in quantity and value. Companies are legally bound to pay their creditors interest income along with the original capital amount.They have voting rights and share all the money remaining after the business' obligations are met. Equity shareholders are the actual owners of the company.

1956. It is the market in which investors have the first opportunity to buy a newly issued security directly through the company.  Rights issue: A right issue is offered by a company that is listed on a stock exchange. The listed company issues fresh securities to its existing shareholders on a particular date. in proportion to the number o Page 17 . well established companies with an impressive track record  Growth shares: Shares of companies with fairly entrenched position in a growing market with higher profitability and growing market share than the average  Income shares: Shares of companies with fairly stable operations. Some of the objectives of an IPO are:  To promote a new company  To expand an existing business  To diversify production  To meet regular working capital requirements There are 4 ways in which a company may raise equity capital in primary market:  Public issue: A public issue involves sale of securities to public at large. Public issues in India are governed by the provisions of the Company¶s Act. IPOs are offered through the fixed price process or the book building process or a combination of both. relatively limited growth opportunities and high dividend payouts. All IPOs [Initial Public offerings] come under primary market.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA care takers of the campine & how many shares shareholder holding is represented intrest of the shareholder. These issues are offered in a particular ratio. In India. but they dont hove a fixed dividend these are risk takers when the campine in loss they dn't get any dividend when the campine in profit's they get more dividend they get dividend after taking of preference shareholders & debentures .  Speculative shares: Shares that tend to fluctuate widely as there is a lot of speculative trading between them Equity Market Equity market is a place where a company can raise its fund and give an opportunity to investors to invest in the companies listed on the market. Classification of equity shares  Blue chip shares: Shares of large. Segments of the equity market are:  Primary Market  Secondary market Primary Market It is also called the new issues market where in a company can raise fresh capital for its use.

REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA f securities held. In other investments. ventures and banks. Nobody knows your worth except you tell him/her. in this case.  Preferential Allotment: This involves the issue of shares to financial institutions. and banks. the more money you Page 18 .  Dividend: This is cash reward given to share holders as part of the profit made by the company at the end of each financial year. mutual funds. venture capital funds. Company has to repay the capital only at the time of winding up.  The rate of growth is far beyond the bank interest rate. undistributed profits and accumulated profit  Equity shareholder is give first priority when ever company wants to raise fresh capital. people can easily look at the assets of the business or your property (real estate) and come up with approximate worth of it.  Company gives the bonus shares to the equity shareholders at a free cost on account of reserves. prior to the issue date. The larger the units of your shareholding. The company needs not to return capital.  Private Placement: This involves sale of securities to a limited number of investors such as financial institutions. However.  Equity shares are easily transferred from one person to another at the stock exchange according to the procedure laid down in the article of association of the company. mutual funds. It is declared at the annual general meeting (AGM) of the company.  Equity share holders enjoys voting right whenever there is a meeting they will enjoy their voting power. Advantages  Inflation rate is higher than commercial banks interest rate but lower than equity price appreciation. The identity of the investors is not known when the offer document is prepared. the identity of the investors is known when the issuing company seeks approval of its shareholders.  Equity capital is the permanent capital for the company.  You are protected from the eyes of the public. This method is followed when companies want o raise capital without diluting the stake of their existing shareholders. Features  They don't have no preferential right in respect of payment of dividend  Equity shares are risk bearing shares because they are the actual owners of the company when ever company run into losses they have to bear the losses. enjoys voting power in electing board of directors.

it means that you spent 300. if you are to self your shares. in the third quarter of the year 2007. Higher inflation does not mean higher profits. Sometimes. Thus your capital has appreciated from N300. For instance. For example.  Sometimes companies go into liquidation thereby eroding the investments of ordinary shareholders. few months ago there was a high demand of the shares of Benue Cement Company of Nigeria which traded for about N6.  Fraudulent stock brokers: some stockbrokers are unfaithful to their clients. Due to scarce nature of it and the good performance of the company. your returns would be 48x50. which short term oriented investors find very distressing. This means a unit for every unit you already hold. some banks in Nigeria that did not meet up with the N25 billion minimum capitals as directed by the central Bank of Nigeria (CBN) died with investors¶ money. Therefore you need to diversify a lot. They may collect your money when there is perceived information that the shares of a particular company is a good one and instead of making the transactions in your name may divert Page 19 . that it costs N48.000 units. but there is no positive link between inflation and corporate profits.which is equal to 2.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA receive at the end of each financial year. and due to the occasional dishonest auditor you won't be able to see it coming. If you had bought N50. in fact it may be quite the contrary.  Capital appreciation: Price of shares move up or down responding to the forces of demand and supply. a man who holds 100. For instance. There are companies that have yearly dividend policy. in these times property may provide superior returns.00 per share. Limitations  Share prices fluctuate a lot.00 per share.4 million naira. A discerning investor should know what to do at any point in time. In times of high inflation shares may have trouble achieving high returns above the inflationary rate. sometimes share prices drop so much. Your financial adviser should be able to tell you some of them.  Shares require analysis and hard work if you are going to do better than average. 000 units of the shares at N6. company declares bonus instead of dividend or both. though this is easy to do since you can buy small amounts of shares.000.000. First Bank of Nigeria declared one-for-one bonus.00 buying the shares. For example.000 units previously will be given an additional 100.00 per share.000 units free after the declaration of the First Bank bonus making the values of his shares 200.  Crash in share prices: Due to one reason or the other.4 million naira.  Some companies go broke.  Bonus issues: This is free shares given to existing shareholders of a company.oo This implies that there is about 700% increment in the value of the stock. 000. If you don't feel you need to do better than average you can buy an index fund or a managed fund and get a diversified basket of shares without any hard work for you. Now.  Shares are a high performance asset class. a unit of it now costs about N 48. Indeed stock business has the potential of making you a millionaire overnight. You must be vigilant to watch over your investment if you consider it important to you.00 to 2.

REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA the money for their selfish interest. Page 20 . they may call you for refund or may embezzle your money like that. may be use it to make their own investments. When the company has closed her book. You must be careful in selecting your stockbroker.

Page 21 .REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA MUTUAL FUNDS A mutual fund is a company that pools money investors and the money in stocks. The combined holdings the mutual fund owns are known as its portfolio. bonds. Each share represents an investor¶s proportionate ownership of the fund¶s holdings and the income those holding generate. or some combination of these investments. short term market instrument and other securities or assets.

the main objective of UTI was to mobilize the savings of the house hold sector. the more commonly offered schemes may be broadly classified as follows:  Growth schemes: the corpus of a growth fund is invested substantially in equity or equity-related instruments. The objective is to achieve long term capital growth for the unit holder. Based on the investment policy. Page 22 . Today. mutual funds are sponsored by various private and public sector players. the balance in debt instruments.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA Just like this picture below: In India mutual fund started with the setting up of Unit Trust of India (UTI) in 1964. UTI launched many schemes.

 Diversification: diversification is an investing strategy that can be neatly summed up as ³Don¶t put all your eggs in one basket´. They have negligible interest risk exposure as well as credit risk. select. The objective of a balanced scheme is to combine growth with stability. debt obligation of state and local government. spreading your investments across a wide range of companies and industry sector fails. Advantages  Professional management: professional money managers¶ research. say 10 to 20%.  Money market scheme: also called the liquid scheme. information technology and telecommunication and so on. may be invested in equity instruments.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA  Index schemes: it is an equity scheme that invest that invest its corpus in basket of equity stocks that comprise a given stock market index. The objective is to earn a modest return without credit risk.  Gilt schemes: it invests its corpus in sovereign securities issued by the central and state government for payment of principal and interest. the corpus is primarily invested in invested in money market instrument. Thus an index fund appreciates or depreciates the same way as the index.  Balanced schemes: it invests its corpus in two board assets classes. Page 23 . monitor the performance of the securities the fund purchases. Some investors find it easier to ownership of individual stocks or bonds. corporate debenture and money market instruments. A small portion of the corpus. viz.  Income schemes: the corpus of an income scheme is invested primarily in money market fixed income securities such as Government of India securities. Equity and Debt in more or less balanced manner.  Sect oral schemes: it invests its corpus in the equity stocks of a given sector such as pharmaceuticals.

with mutual fund. annual fees and other expenses regardless of how the fund performs. And. Page 24 . Limitations  Cost despite negative returns: investors must pay sales charges. depending on their timing of their investment. In general mutual funds must calculate their NAV at least every business day. which the fund might not calculate until many hours after you have placed your order. depends on the type of scheme. The market risk that affects the market as a whole continues to be borne by the investor. the price at which you purchase or redeem shares will typically depend on the fund¶s NAV.  Price uncertainty: with an individual stock. By contrast.  Lack of control: investor typically cannot ascertain the exact make up of a fund¶s portfolio at any given time. typically after the major US exchange close.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA  Affordability: some mutual funds accommodate investors who don¶t have a money to invest by setting. lot of  Liquidity: mutual fund investors can readily redeem their shares at the current NAV-plus any fees and changes assessed on redemption at any time. you can obtain real time (or close to real time) pricing information with relative ease by checking financial websites or by calling your broker. The way this risk get reflected. nor can they directly influence which securities the fund managers buy and sell or the timing of the trade. You can also monitor how a stock price changes from hour to hour or even second to second. investors may also have to pay taxes on any capital gains distribution they receive even if the fund went on to perform poorly after they bought shares. risk does not get completely eliminated. Though the diversification associated with mutual funds reduces the risk to a minimum.

REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA Page 25 .

REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA Types of Mutual Funds: Page 26 .

The event could be the expiry of the insurance policy or the death of the insured before the expiry (date of maturity) of the policy as per the term of the policy. a specified sum of money on the happing of event.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA LIFE INSURANCE A life insurance is a contract between an individual (termed as insured) and the insurance company to pay the insured. or his nominated heirs. Page 27 .

Annuities for regular income during retirement. Regular savings. Tax benefits. Housing finance. TYPES OF POLICIES:  Whole life assurance plans: these are low cost insurance plan where the sum assured is payable on the death of insured. marriage etc« It encourages savings and ensures that these savings are Page 28 .REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA OBJECTIVES OF THE LIFE INSURANCE POLICY: Protection for family. Bonus.  Endowment assurance plan: this is basically a savings plan for an event like children¶s education.

Page 29 .  Money back plan: this popular saving cum protection policy because it provides lump sum at a periodic interval. the sum assured is payable on the maturity of the policy. Insurance policies have riders attached them. These add-ons can be purchased with the policy on payment of a small additional premium. Thus this rider meets an important need for finance security in the event of contracting illness.  Waiver of premium rider: This rider provides for waiver of premium payable under the base policy and the event of long term disability arising out of accident and illness. The pension payment are made till the death of the annuitant (person who has a pension plan) unless the policy has provision of guaranteed period.  Term assurance plan: this is a pure protection policy. Under this plan. Riders are add-ons to the life insurance policies described above. which provides a benefit on the death of the individual within a specified term. The commonly offered riders in the Indian context are:  Accidental death benefit rider: it is usually attached to savings cum protection policy.  Pension plan: These plans provide for either immediate or deferred pension for life. The rider pays out a specified sum over and above the sum assured under the base policy in the event of the death resulting from accident during term of the plan.  Critical illness rider: the rider pays out a specified sum on the diagnosis of a specified ³critical illness´. These plans are suitable for those prospects that seek high insurance cover at low cost. The plan is a pure risk plan with no saving element.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA protected as well as achieved at the end of the term. This amount could be used for nursing and the other forms of care.

over and above the sum assured under the base policy in the event of death of the policy holder during the policy term. The illiquid assets may have to be sold in order to meet these obligations when they come due. This may cause a financial loss if the assets must be sold cheaply in order to get the money on time. the life insurance proceeds can be used to continue to support the family members you¶ve left behind  To pay off any debts left behind Home loans. car loans. Some types of life insurance policies may actually make money for you. Life insurance can automatically provide assets for them after the death of the insured. medical bills.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA  Term rider: the term rider is usually attached to savings policy and pays out a specified sum.  A great investment vehicle. and stocks). there may not be much left over for the family. CDs. and savings bonds). Page 30 . Life insurance can be used to pay off these debts.Life today is full of uncertainties. and credit card debts are often left unpaid when someone dies. because the proceeds are available almost immediately upon the death of the insured. When the time comes and your paychecks stop. These obligations must be paid from the assets left behind. in this scenario Life Insurance ensures that your loved ones continue to enjoy a good quality of life against any unforeseen event. one may leave some liquid assets (such as cash. as well as provide the benefits described above. Advantages  Risk Cover . leaving your other assets intact for your family to use  To provide liquidity to one¶s assets When one dies. This can deplete the resources that your family needs. and some illiquid assets (such as real estate. Life insurance can avert this situation. This can help with long-term financial goals.  To create an asset for one¶s heirs After the debts and expenses are paid. an automobile. Reasons why one should take insurance:  To ensure continuity of income Say that your income is used to support yourself and your family.

Policyholders have the option of taking loan against the policy.  Builds the habit of thrift . Regular savings over a long period ensures that a decent corpus is built to meet financial needs at various life stages.Life Insurance is one of the best instruments for retirement planning.Life Insurers through riders or stand alone health insurance plans offer the benefits of protection against critical diseases and hospitalization expenses. offer in-built guarantees and defined maturity benefits through variety of product options such as Money Back. these policies help the policyholders meet the dual need of protection and long term wealth creation efficiently.Since traditional policies are viewed both by the distributors as well as the customers as a long term commitment. IRDA.Life Insurance is a long-term contract where as policyholder. The investment income is distributed among the policyholders through annual announcement of dividends/bonus.Life Insurance not only provides for financial support in the event of untimely death but also acts as a long term investment. Guaranteed Maturity Values.  Safe and profitable long-term investment . Life Insurance being a long-term savings instrument.e. This helps you meet your unplanned life stage needs without adversely affecting the benefits of the policy they have bought.  Protection plus savings over a long term . This benefit has assumed critical importance given the increasing incidence of lifestyle diseases and escalating medical costs.  Facility of loans without affecting the policy benefits . through various rules and regulations ensures that the safety of the policyholder's money is the primary responsibility of all stakeholders. building your dream home or planning a relaxed retired life. the regulatory body. you have to pay a fixed amount at a defined periodicity. their marriage. traditional endowment plans. This builds the habit of long-term savings.Insurance acts as an effective tool to cover mortgages and loans Page 31 . be it your children's education. Traditional life insurance policies i.  Growth through dividends .  Assured income through annuities .Traditional policies offer an opportunity to participate in the economic growth without taking the investment risk.  Mortgage Redemption. according to your life stage and risk appetite. Guaranteed Cash Values.Life Insurance is a highly regulated sector. You can meet your goals.  Tax Benefits-Insurance plans provide attractive tax-benefits for both at the time of entry and exit under most of the plans. also ensures that the life insurers focus on returns over a long-term and do not take risky investment decisions for short term gains. The money saved during the earning life span is utilized to provide a steady source of income during the retired phase of life.  Protection against rising health expenses .REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA  Planning for life stage needs .

it is either for a fixed number of years or until a certain age. which may require higher premium depending on the age and other factors. Page 32 . The unstable inflation guarantees a steep climb.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA taken by the policyholders so that.  Language of premium: It is usually difficult to resolve precisely how costly commissions truly are. this policy can be quite costly.  Insufficient funds: There is a lack of assurance that ample finance will be accessible to cover unpaid premiums when the policyholder holds inadequate funds. On completion of the term or when the insured reaches a certain age the policy expires compelling them to qualify for another insurance program. and it is normally explained in language that is complex for someone who is unfamiliar to insurance policies.  Deduction of funds: While policies include conditions in which shares from cash accounts can be used to disburse premiums.  Expiration of term insurance: This kind of insurance in not permanent. For an insured on a budget. Disadvantages  Inconsistent premiums: Most policies contain mandatory premiums that increase in due course. The cost is commonly concealed within the fine print of the terms and conditions. in case of any unforeseen event. such a request practically always results in deducting funds from the cash value / investment account. who desires to buy coverage adequate to profit his relations upon his decease. the burden of repayment does not fall on the bereaved family.

retail industrial. Improvement of realty property as part of a real estate investment strategy is generally considered to be a sub-specialty of real estate investing called real estate development. hospitality. healthcare etc. The main growth thrust is coming due to favorable demographics. real estate becomes a risky investment. it is also capital intensive (although capital may be gained through mortgage leverage ) and is highly cash flow dependent. rental and/or sale of real estate for profit. management. Indian real estate has huge potential demand in almost every sector especially commercial. residential. ownership. Real estate is an asset form with limited liquidity relative to other investments. increasing purchasing power. If these factors are not well understood and managed by the investor.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA REAL ESTATE Real estate investing involves the purchase. Page 33 .

Similarly. The Importance Of Inflation And GDP and Curbing The Effects Of Inflation. rental rates are increased whenever a lease term expires and the tenant is renewed.Real estate returns are directly linked to the rents that are received from tenants. Building Hospitals. It is usually more efficient to purchase larger real estate assets because you can spread the transaction Page 34 . Building Recreational facilities Advantages  Diversification Value . An investor has a greater degree of control over the performance of a real estate investment than other types of investments. The Importance Of Diversification and A Guide To Portfolio Construction. Examples of such activities include: replacing a leaky roof. (To find out more about inflation.For transactions in the private real estate market. real estate income tends to increase faster in inflationary environments. Limitations  Costly to Buy. Some leases contain provisions for rent increases to be indexed to inflation. (To read more about diversifying.As part of a portfolio. Building Educational institutions.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA existence of customer friendly banks & housing finance companies.The positive aspects of diversifying your portfolio in terms of asset allocation are well documented.  Inflation Hedge . improving the exterior and re-tenanting the building with higher quality tenants. professionalism in real estate and investors are likely invest in Urban land Semi urban land Residential properties Agricultural land Commercial properties for Hotel Development. see All About Inflation. transaction costs are significant when compared to other investment classes. Real estate returns have relatively low correlations with other asset classes (traditional investment vehicles such as stocks and bonds).In previous chapters we've noted that real estate is a tangible asset. Building Resorts. Introduction. Sell and Operate . an investor can do things to a property to increase its value or improve its performance. which adds to the diversification of your portfolio. Either way.)  Yield Enhancement . real estate allows you to achieve higher returns for a given level of portfolio risk.)  Ability to Influence Performance . allowing an investor to maintain its real returns. by adding real estate to a portfolio you could maintain your portfolio returns while decreasing risk. see Allocation. In other cases. As a result.

real estate requires ongoing management at two levels. you require property management to deal with the day-to-day operation of the property. Once rents reach economic levels.  Requires Management . additional properties are brought to market to meet demand.It can be a challenge to build a meaningful. then vacancies will decrease. Real estate has two cycles: the leasing market cycle and the investment market cycle. Second. On the demand side of the investment market are investors who have capital to invest in real estate. conditions of the leasing market are dictated by the supply side.  Difficult to Acquire .The real estate investment market moves in a different cycle than the leasing market.  Interest on loans taken for buying / constructing a residential house is tax deductible within Page 35 .REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA costs over a larger asset base. which is the amount of space required by tenants. As with most markets. and these units are typically backed by a diverse portfolio. Purchases need to be made in a variety of geographical locations and across asset classes. and the demand side. which can be out of reach for many investors. First. As prices increase. vacancies).  Agriculture land is exempt from wealth tax and agriculture income as per Income Tax Act is not taxable. If the supply of capital seeking real estate investments is plentiful. you need strategic management of the property to consider the longer term market position of the investment. Real estate is also costly to operate because it is tangible and requires ongoing maintenance. even if it is handled by the owner. diversified real estate portfolio. then property prices increase. Management comes at a cost. it will require time and resources. You can. purchase units in a private pool or a public security.With some exceptions. The leasing market consists of the market for space in real estate properties. real estate is cyclical. If demand for space increases. Sometimes the management functions are combined and handled by one group.  For wealth tax purpose. which is the amount of space available (or. FEATURES:  Capital appreciation over period of time.  Cyclical (Investment Market) . the value of residential property is reckoned at its historical cost and not its present market price. however. The supply side consists of properties that are brought to market by their owners. and the resulting scarcity of space will cause an increase in market rents. it becomes profitable for developers to construct additional space so that supply can meet demand.  Cyclical (Leasing Market) .Not unlike other asset classes.

Since the various alternatives of investment can be perceived in many dimensions such as risk. return or time. 2.1. A perpetual mapping is used to explore consumer¶s product perceptions.3-Conclusion Page 36 .2. various books and journals and post records have been analyzed. journals and information from the related persons.Purpose The main purpose of the study is to gain insight to investor¶s preferences for various investment alternatives. this technique of mapping is multi dimensional in nature.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA a certain limit. It allows for the influence of more than one character tics of investment are studies thoroughly. so as to have knowledge regarding the various investment avenues. CHAPTER ± 2 REVIEW OF LITRATURE 2.Methodology This report entitled ³REPORT ON SELECTRD INVESTMENT ALTENATIVES AVAILABLE IN INDIA´ will done taking into consideration the data obtained from the questionnaire and secondary data available from the various sources like internet. In order to gain thorough insight to various investment alternatives. Most of the information will from publicly available data and various publishers. 2.

2 Sampling techniques: Data collection techniques: survey and personal interview method.REPORT ON SELECTRD INVESTMENT ALTENATIVES AVAILABLE IN INDIA 3.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA Each investment alternatives have their own pros and cons related to it.1 Type of research: DISSERTATION Topic. Page 37 . As per the analysis done. Secondary data will be used in the case of these alternatives investments and the main source of data is from various y y y y Web site Books Journals And other various publicly available information.3 RESEARCH METHODOLOGY 3. the results show that the bank deposits attracted more investors than any other alternative because of its low risk even though there is low returns. The comparative analysis will be done on the basis of marketing research procedure and different strategies. CHAPTER .

Page 38 . These shares give the investors ownership rights like voting right. a stock¶s value can go to zero. Historically. their values can decline if the stock market goes down (market risk) or the issuing company does poorly (company risk). Today. Investing in mutual funds is also subject to market risks but return is good. among other things.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA 3. UTI launched many schemes. the main objective of UTI was to mobilize the savings of the house hold sector.  Mutual Fund as an investment alternative In India mutual fund started with the setting up of Unit Trust of India (UTI) in 1964. stock prices have been the most volatile of all the different types of investments.3 Instruments Tables Bar chart Graphs 3. As owners of the company. Stocks are generally considered a risky investment because. This means stocks can potentially be top performers as a part of your overall financial plan. meaning their prices can move up and down quickly. They enjoy the preemptive right which enables them to maintain their proportional ownership.4 Actual data Equity Shares as an investment alternative Stocks are among the best long-term investments. including bond holders. mutual funds are sponsored by various private and public sector players. right over the profit and also in decision making. In theory at least. stockholders are paid after all creditors. They become partners in progress of the company. The stock market offers a vary stable and reliable method of building wealth long-term. Mutual fund companies collect money from investors and invest in share market. frequently and not always in a predictable way. are paid.

Thus. Mutual Funds also declare whether this will be an open ended scheme (i. Therefore. according to the time of closure schemes are classified as follows:(a) Open ended schemes (b) Close ended schemes (C) ACCORDING TO TAX INCENTIVE SCHEMES:Mutual Funds are also allowed to float some tax saving schemes. every Mutual Fund is supposed to declare in the prospectus the kind of instruments in which it will make investments of the funds collected under that scheme.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA TYPES OF MUTUAL FUND According to the type of investment: While launching a new scheme.). Thus. sometimes the schemes are classified according to this also:(a) Tax saving funds (b) Non tax saving funds (D) ACCORDING TO THE TIME OF PAYOUT:Sometimes Mutual Fund schemes are classified according to the periodicity of the pay outs (i. The categories are as follows:(a) Dividend Paying Schemes Page 39 .e. there is no specific date when the scheme will be closed) or there is a closing date when finally the scheme will be wind up. the various kinds of Mutual Fund schemes as categorized according to the type of investments are as follows :(a) equity funds/schemes (b) Income Funds (c) Balanced Funds (d) Gilt funds (e) Money market funds (f) Sector specific funds (g) Index funds B) ACCORDING TO THE TIME OF CLOSURE OF THE SCHEME:While launching new schemes. dividend etc.e.

Decreasing term assurance to cover home loan repayment. Special money back plan for women. Pension plans. In addition it offers favorable risk-return tradeoffs due to the uniqueness of properties and the localized and relatively inefficient market in which they are traded. or his nominated heirs. Joint life plans. Special plans. Whole life plans. a specified sum of money on the happening of an event. Page 40 . The event could be the expiry of the insurance policy or the death of the insured before the expiry (date of maturity) of the policy as per the term of the policy.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA (b) Reinvestment Schemes  Life Insurance Policies as an investment alternative A life insurance is a contract between an individual (termed as insured) and the insurance company (insurer) to pay the insured. Endowment assurance plans.  Real Estate an investment alternative Real estate offers an attractive way to diversity an investment portfolio. Unit plans.  It involves ownership of tangible asset real property rather than a financial claim. Term assurance plans. Money back plans. Children plans. The various plans available in the life insurance are as follows: Insurance plans. Real estate differs from security investments in two ways. Plans for handicapped dependents. Plans for high worth individuals.

Page 41 . theme and knowledge city over 250 acres at Kharghar in Navi Mumbai. You must carefully consider these factors before investing in real estate. When you are planning to enter the real estate market you must have adequate cash at all times because the investment is very huge and moreover the returns are generally reaped in the long term. In a stock market you generally take wild risks and invest blindly on the basis of some speculations. Andhra Pradesh.95 million making it.  Tata Realty and Infrastructure Limited (TRIL) will develop a US$ 758. This is a prerequisite when it comes to real estate investment. New Projects  Zuri Group Global is planning to invest about US$ 247. The total value of the transaction is US$ 454.  Real estate developer The 3C Company will develop an affordable housing project over 41 acres of land in Noida at an investment of US$ 519.  Unitech will invest US$ 853.47 million IT Special Economic Zone (SEZ) in Chennai.  A consortium consisting of the Essel Group and Delhi-based Bhushan Steel and Power will develop an amusement. Similarly you will have to posses adequate reserves to maintain the properties for a considerable period of time.3 million will be made by industries in the Aerospace and Precision Engineering Special Economic Zone at Adibatla.93 million. one of the largest real estate transactions in India. You should not follow the principles of investing in a stock market for a real estate market. in absolute terms.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA  Managerial decisions about real estate greatly affect the return earned from investment in it.5 million towards setting up fivestar business hotels and luxury residential properties over the next three years.42 million in construction of up to 30 million sq ft of residential and commercial spaces to be launched by next year.  An investment of US$ 627.

In this graph the majority of the respondents were in income bracket of Rs. Page 42 .1: Showing respondents income level of distribution.10000-25000 per month.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA CHAPTER-4 DATA ANALYSIS AND INTERPRETATION The analysis is been done among selected investments with the help of questionnaire. OF RESPONDENTS 34 46 20 100 % OF RESPONDENTS 34% 46% 20% 100 Table No. INFERENCE: The above table shows the various income levels of respondents. Current income range of the respondents: SALARY RANGE < 10000 10000 ± 25000 >25000 Total NO. The next week group is the Rs.10000 classification and at last is the 25000 classification.

OF RESPONDENTS 24 22 38 16 100 Table No. OF RESPONDENTS 50 45 40 35 30 25 20 15 10 5 0 < 10000 10000 . INFERENCE: Page 43 .2: Showing age group among respondents.25000 Ø 25000 NO. OF RESPONDENTS Graph No.1: Showing respondents income level of distribution.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA NO. Age range of the respondents: AGE RANGE < 25 Years 25± 30 Years 31± 50 Years <50 Years Total NO.

OF RESPONDENTS < 25 Years 25 30 Years 31 50 Years Ø 50 Years Total Graph No. especially from a perspective of saving for the future. In this graph the majority of the respondent belonged to the group of 31 to 50 years. including education of investments. including education of children. This group is mostly to think of investments.2: Showing age group among investors Page 44 . especially from a perspective of saving for the future.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA The above table shows the different age distribution of respondents. retirement etc NO. self-employment.

Stocks / Shares 2. Mutual Funds 5 Gold 6. Page 45 . no one person has less than four investments in various investments. Respondents have chosen multiple investments. Bonds / Debentures 3. Real Estate 9. Life insurance NO. in the graph the maximum number of people (30 out of 100) have invested in Bank Deposits.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA The investments in which the investors currently invested in: INVESTMENTS 1. OF RESPONDENTS 10 6 30 15 10 8 7 6 8 Table no: 3 showing the number respondents to the alternative investment INFERENCE: As seen above. Vikas Patras 8. Bank Deposits 4. NSCs 7.

3. 8. OF RESPONDENTS 5 0 Graph No. 9.4: Showing gender distribution of income level 1(<10000) Page 46 . 5. 2. PARTICULARS Stocks/Shares Bonds/Debenture Bank deposits Mutual Funds Gold NSCs Vikas Patras Real Estate Life insurance MALE 2 2 10 4 3 2 2 1 3 FEMALE 0 0 2 1 2 0 0 0 0 TOTAL 2 2 12 5 5 2 2 1 3 Table No. 6. OF RESPONDENTS 30 25 20 15 10 NO.3: Showing investments categories of respondents SL NO. 1. 7.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA NO. 4.

12 10 8 6 MALE 4 2 0 FEMALE TOTAL Graph no. hold meetings. 4: showing gender distribution of income level (< 10000) Page 47 . so banks and other institution should regularly. seminars camps for the people to become more aware of the various available for investment.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA INFERENCE: In the above table it can be seen that the respondents who belonged in the income level of less than Rs.10000 a month have invested in bank deposits. When compare to the investments the women and male respondents have invested more in bank deposits. The income group did not have the benefits of much advice from investment professionals.

25000 the most number of respondents preferred the bank deposits. This could be due to bank deposits being considered as risk free investments.10000.5: Showing Gender distribution of income level 2 (Rs.10000. and interest rate have been fluctuating giving we can see more number of women respondents are showing keen interest in investing in bank deposits.25000) INFERENCE: In the above table. Page 48 .REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA SL NO. the income group between Rs. 1 2 3 4 5 6 7 8 9 PARTICULARS Stocks/Shares Bonds/Debentures Bank deposits Mutual funds Gold NSCs Vikas pathras Real estate Life insurance MALE 5 3 9 6 2 2 3 2 2 FEMALE 0 0 4 2 2 2 0 1 1 TOTAL 5 3 13 8 4 4 3 3 3 TABLE NO.

REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA 14 12 10 8 6 4 2 0 MALE FEMALE TOTAL Graph 5: Showing Gender distribution of income level 2(Rs.10000-25000) Page 49 .

This could be that the income they earn them to pat on the market.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA SL NO. Mutual funds followed by investment in the market in the form of Stocks/Shares.25000) INFERENCE: It can be observed from the preceding graph has maximum investment in the category of Vikas patras. at the cost of growth. trading risk off return and cash on in the bearish market and earn high dividends. Bank deposits. Page 50 . 1 2 3 4 5 6 7 8 9 PARTICULARS Stocks/Shares Bonds/Debentures Bank deposits Mutual funds Gold NSCs Vikas patras Real estate Life insurance MALE 3 1 3 2 1 2 1 2 2 FEMALE 0 0 2 0 0 0 1 0 0 TOTAL 3 1 5 2 1 2 2 2 2 Table No.6: Showing distribution of income level 3(>Rs.

REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA 5 4.5 4 3.5 1 0.5 2 1.5 0 MALE FEMALE TOTAL Graph 6: Showing Gender distribution of income level 3(>Rs.25000) Page 51 .5 3 2.

REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA

SL NO. 1 2 3 4 5 6 7 8 9

PARTICULARS Stocks/Shares

MALE 10

FEMALE 0 0 8 3 4 2 1 1 1

TOTAL 10 6 30 15 10 8 7 6 8

Bonds/Debentures 6 Bank deposits Mutual funds Gold NSCs Vikas patras Real estate Life insurance 22 12 6 6 6 5 7

Table 7: showing the gender distribution in the investment alternatives

30 25 20 15 10 5 0 MALE FEMALE TOTAL

Graph no 7: showing the gender distribution in the investment alternatives

Page 52

REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA

SL NO. 1 2 3 4 5 6 7 8 9

INVESTMENTS

INCOME LEVEL 1

INCOME LEVEL 2 5 3 13 8 4 4 4 3 3

INCOME LEVEL 3 2 1 5 3 3 2 1 2 2

TOTAL

Stocks/Shares Bonds/Debentures Bank deposits Mutual funds Gold NSCs Vikas patras Real estate Life insurance

3 2 12 4 3 2 2 1 3

10 6 30 15 10 8 7 6 8

TABLE NO.8: Showing Income distribution among investment alternatives.

INFERENCE:

In the above table it can be observed that of all the investment categories, the three income groups have preferred, with the bank deposits the most popular one, second by Mutual funds rounding off the 3rd category of vikas patrikas, NSCs, Shares/stocks

Page 53

REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA

30 25 20 15 10 5 0 INCOME LEVEL 1 INCOME LEVEL 2 INCOME LEVEL 3 TOTAL

Graph 8: Graph showing income distribution among investment categories.

Page 54

REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA

SOURCES OF INFORMATION Brokers/investment banker Friends/family/ co-workers Media/ advertising Other sources Total

% OF RESPONDENTS 22% 28% 32% 18% 100

TABLE NO.9: Showing sources of information. INFERENCE: As in the above table, we can see that the respondents were able to get information about investment opportunities was from various sources, though most of them (32%) were influenced by media / advertising. Friend / family /co-workers influenced by another group (28%) and around (22%) were influenced by broker /investment banker.

Page 55

REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA The other sources include awareness camps. news papers. bill boards. articles and other media % OF RESPONDENTS Brokers/investment banker Friends/family/ co-workers Media/ advertising Other sources Total Page 56 .

Around 80% of full-time/part time employees has been shown keen interest in investing various instrument and 2nd is the retired employee around 15% have invested in various instruments and next is the student respondents around 5% have invested. Page 57 . we can see that different employment situation of respondents. INFERENCE: In the above table. OF RESPONDENTS % OF RESPONDENT 80 80% Retired 15 15% Student Total 5 100 5% 100% TABLE NO.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA Current employment position of the respondents: EMPLOYMENT SITUATION Full-time/part time NO.10: Showing respondent¶s current employment position.

REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA NO. Page 58 .10: Showing respondent¶s current employment situation. OF RESPONDENTS Full-time/part time Retired Student Total 100 5 15 80 GRAPH NO.

NO.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA Description of investor¶s investment knowledge: SL. INVESTMENT KNOWLEDGE NO.OF RESPONDENTS 1 Rely exclusively on my financial advisor 16 2 Understand basic investment principles 28 3 General understanding of financial markets 38 4 Good working knowledge.11: Showing investors investment knowledge. We can see that most of the investors¶ investment knowledge relies on the general understanding of financial market and less number of investors exclusively on financial advisors this may be due to the investors lack in the knowledge of various investments. manage my own 18 portfolio TABLE NO. INFERENCE: The above table shows the statement which describes the investors¶ investment knowledge. Page 59 .

Page 60 . we can see that the main objective of investors in investing various instruments.OF RESPONDENTS 12 22 16 14 30 6 TABLE NO. The table clearly shows that the more number of investors objective is savings for child¶s future and leave an estate for their family but the least objective of investor is that expansion of business. For future large expenses Savings for child¶s education Expansion of business NO. 12: Showing objective of investors for investment.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA Objective of the investors for the investment: SL NO. 1 2 3 4 5 6 OBJECTIVES Capital appreciation For some steady income Retirement plan. INFERENCE: In the above table.

INFERENCE: In the above table. Page 61 .REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA SL.NO 1 2 3 4 5 INVESTMENT Bank deposits Mutual funds Stock / shares Vikas patras NSCs NO. second come ³MUTUAL FUND´. third comes the ³STOCK/SHARES´.13: Showing investments that have performed well according to investors. we can see that. OF RESPONDENTS 30 16 10 10 10 TABLE NO. and forth comes the ³VIKAS PATRIKA´ and last is the ³NSC´. amongst the respondents the instrument ³BANK DEPOSITS´ was the one with most preferences.

OF RESPONDENTS 10 5 0 Bank deposits Mutual funds Stock / shares Vikas patras NSCs Graph No. OF RESPONDENTS 30 25 20 15 NO.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA NO.11: Showing investments performed well according to investors. Page 62 .

e. providing for capital gains and growth in investment. The stocks/shares are generally long-term instruments (i... we can see out of 18 respondents. Page 63 .REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA STOCK / SHARES: RISK RETURN HIGH MODERATE LOW DURATION LT ST 11 HIGH MODERATE 3 6 4 2 3 7 TABLE NO.14: Showing rating of stocks/shares. more than 3 years). 7 have chosen the long-term in stocks/shares owing to the longterm nature and 11 have chosen the short-term in stocks/shares. who are invested in the market. 3 respondent perceive the instrument as HIGH in risk and 2 respondent perceive MODERATE in risk and 6 respondents perceive the instrument as MODERATE 3 respondent in LOW in return. who have invested in stocks/shares i.e. but those who are speculative can pay in the market for a short-term (lesser than 1 year). INFERENCE: In the above table.

16: Showing rating of Mutual Fund. since a mutual fund can exists anywhere between 1-3 years. Again the option is divided over the categories into longterm or short-term. Page 64 . But very less number of respondents feels that the returns would be LOW. it can see that the respondents feel that the risk would be HIGH to some extent and they feel that the returns would be MODERATE. INFERENCE: Observing the table.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA MUTUAL FUNDS RISK RETURN HIGH MODERATE ± HIGH MODERATE LOW DURATION LT ST 6 3 2 4 1 0 2 6 TABLE NO.

manage my own 21 portfolio TABLE NO. We can see that most of the investors¶ investment knowledge relies on the general understanding of financial market and less number of investors exclusively on financial advisors this may be due to the investors lack in the knowledge of various investments.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA Description of investor¶s investment knowledge: SL. INFERENCE: The above table shows the statement which describes the investors¶ investment knowledge.NO. INVESTMENT KNOWLEDGE NO.OF RESPONDENTS 1 Rely exclusively on my financial advisor 17 2 Understand basic investment principles 29 3 General understanding of financial markets 35 4 Good working knowledge. Page 65 .19: Showing investors investment knowledge.

REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA PERIOD OF TIME < 5years 5-10 years 11-19 years 20 years NO. 44% of them are invested under this period of time and next is around 34% have been invested in the period of time from 5-10 years and the least is the period of time around 20 years of more. 20: Showing period of time for investing. INFERENCE: Showing the above table we can see different period of investors in investing their instruments but most of investors have invested in the period 11-19 years i.e. Page 66 . This is because the investors may feel that their investment won¶t be safe in the long-term. OF RESPONDENTS 16 34 44 6 %OF RESPONDENTS 16% 34% 44% 6% TABLE NO.

OF RESPONDENTS %OF RESPONDENTS GRAPH NO. Page 67 .REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA 45 40 35 30 25 20 15 10 5 0 < 5years 5-10 years 11-19 years 20 years NO.13: Showing investors period of time in investing.

OF RESPONDENTS 22 Not concerned about inflation over the near term 24 but over the long-term I am concerned.21: Showing the feel about risk of inflation eroding the purchasing power of investors¶ investment. Around 24 respondents believe to the statement ³Not concerned about inflation over the near term but over the long-term I am concerned´.NO 1 2 STATEMENT Very concerned about inflationary risk.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA SL. TABLE NO. Page 68 . NO. inflation is low enough not to be serious concern and next around 25 respondents believe to the statement ³know prices are rising´. Out of 100 respondents around 29 respondents give top priority to the statement in these days. 4 These days. Last is around 22 respondents believe to the statement vary concerned about inflationary risk. INFERENCE: The table shows the risk of inflation eroding the purchasing power of investor¶s investments. 3 I know prices are rising. inflation is low enough not to be a 29 serious concern. but I am overly concerned 25 about prices changing into the future.

INFERENCE: The table shows the investor¶s time in deciding the change before the investment strategy.22: Showing the investors preference time in deciding the change of their investment strategy. The graph clearly shows that around 34% of respondents want to go for a time period of 1-2 years and 5-7 years whereas 19% of respondents want to go for a time period of 3-4 years and last is around 13% of the respondents want to go for a time period of <12 months. Page 69 .OF RESPONDENTS 13 34 19 34 %OF RESPONDENTS 13% 34% 19% 34% TABLE NO.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA TIME PERIOD < 12 months 1-2 years 3-4 years 5-7 years NO.

OF RESPONDENTS 15 10 5 0 < 12 months 1-2 years 3-4 years 5-7 years %OF RESPONDENTS GRAPH NO.13: Showing investors¶ time in deciding investment strategy.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA 35 30 25 20 NO. Page 70 .

risk of different investment alternatives.23: Showing total return. liquidity.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA TABLE NO. Page 71 .

 Life insurance Life insurance policies is preferred by all the class of the people as risk coverage investment Page 72 .1.The complete analysis:  Every investors have their own perceptions. . Gold and Pubic Provident Funds. or any other investments.  Mutual funds was preferred For investors with low risk appetite and who are satisfied with low returns. and investor do select the based on their perceptions. Investors pool together their money to buy stocks. and provided high returns for low moderate risks.  Real estate Real estate was the preferred of the income level of respondents. bonds.  Mutual funds Mutual funds work on more or less the same principles.  Other modes of investments that the respondents have listed include Insurance.5 SUMMARY OF FINDINGS 5.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA CHAPTER .

and intended for experienced and sophisticated investors who are willing to bear the high economic risks of the investment.2. Inherent to alternative investments is the possibility of both minor and major financial loss. and is frequently encountered in the fields of new or emerging technologies. the lure of potentially quick and high returns leads many an investor to take a roll of the dice and engage in a speculative plunge  Diversification Although each alternative investment differs in its risk/return characteristics. More often than not. an alternative investment carries a high degree of risk.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA  Equities Maximum returns over the long-term with high level of risk There are two ways in which you can invest in equities-  through the secondary market (by buying shares that are listed on the stock exchanges)  Through the primary market (by applying for shares that are offered to the public) 5. not suitable for all clients. On the other hand. which can include: Page 73 . adding alternative investments to a traditional long-only stock and bond portfolio may provide the potential for diversification Weakness Investing in alternative investments is speculative.SWOT Analysis Strength  Profit ratio The advantages of alternative investments lie primarily in the possibility of achieving a profit ratio higher than that normally found in traditional investments.

REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA  Loss of all or a substantial portion of the investment due to leveraging.  delays in tax reporting.  absence of information regarding valuations and pricing.  potential lack of diversification and resulting higher risk due to concentration of trading authority with a single advisor.  less regulation and higher fees than mutual funds. Hedge Funds  Hedge Funds are different from regular investment funds. Investing in mortgages can provide good income sources. investing in mortgagelending limited partnerships.  volatility of returns. Venture capital uses private equity to fund early-stage growth companies in an effort to Page 74 . commodities and currencies.  restrictions on transferring interests in the fund. futures and short sales to hedge their holdings. Opportunities Real Estate Investing  Investing in commercial and residential rental properties and/or a personal residence comes with an abundance of tax advantages. Venture Capital  For individuals with higher net worth. debt instruments. hedge funds can use options.  Lack of liquidity in that there may be no secondary market for the fund and none expected to develop. short-selling or other speculative investment practices. For example. Those holdings can include a wide variety of investments like equity shares. venture capital investing is a viable alternative. as they are allowed by regulators to implement a broad array of trading strategies that other funds are simply not permitted to do. and purchasing shares in a mortgage-making Real Estate Investment Trust (REIT). The three most popular ways to invest in mortgages are buying mortgage-backed securities.  advisor risk. which enhance the investment return.

wheat. Threats  Lack of knowledge among people about alternative investments available in India. depreciation and depletion allowances. Australian dollar. Commodities and Currencies  Commodities and currencies are popular alternative investments primarily due to the wide variety of choices. Oil and Gas Investing  One of the alternative investment opportunities that offers some tax benefits is investing in the oil and gas energy sector. As an investor. independent projects. just to name the most frequently traded currencies. you can invest in private. platinum. natural gas and pork bellies. corn. which is much like a mutual fund for venture capital investing. gold.  Other risks like absence of information regarding valuations and pricing. Oil and gas investing provides special tax benefits allowing you to deduct from your tax return a part of the expenses. Popular commodities are sugar.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA realize a big return on investment when the company eventually goes public. silver. Currencies also have a wide selection such as the US dollar. less regulation and higher fees than mutual funds and advisor risk. such as drilling costs. Canadian dollar and Euro. It is possible for a smaller investor to participate in this space by buying into a venture capital fund. which specifically track a particular segment within these sectors. Japanese yen. Both commodities and currencies can be traded in the futures market as well as through mutual funds and exchange traded funds (ETFs). delays in tax reporting. soybeans. oil. Page 75 .

or stock in the company I work for?  What are my investment objectives?  To provide income to use toward my current expenses?  To save for retirement?  To save for children¶s college education?  To accumulate capital?  To preserve capital?  Other (such as a short-term goal): Page 76 . money market funds) % Bonds or Bond funds % Stocks. CDs.  the investor has to have his checklist prepared which includes What is my current investment status?  Do I currently have any savings and investments? If yes.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA CHAPTER ± 6 SUGGESTIONS AND RECOMMENDATIONS There are many alternatives available in India. what percentage of my investments are in:    % Cash or cash equivalents (savings accounts. As we know most of the investors are risk averse and they always wish to maximize the returns with minimum risk. Each option has their own advantages and disadvantages which attracts the investors¶ interest. stock funds. Before investing in the any investment alternatives. And these are the two key aspects of any investment alternatives.

banks can go for better innovative in bank deposits which can attract more and more investors.  Don't buy life insurance solely as an investment. real estate having its boom in the investment but an investor has to be very careful in dealing with the real estate because this involves lots of manipulation and duplication. I want the highest possible yield and I¶m willing to accept the chance that I may lose my investment. if you do not want the problems associated with bad deliveries and the transfer process or you want to invest a large sum of money. investors have to be educated regarding the alternatives available. Page 77 .  Substantial risk. What will be the impact of taxes on my investment? How should be the Asset Allocation?  For this type of effective investment strategy. Because even today majority of the people whether salaried people are not believe the bank. I want the safest investments possible. I¶m willing to accept moderate risk of losing my investment if it means I will earn a higher return.  Based on the economic status of the investors the investment have to be made  As per the primary data bank deposits play a major role. This implies .  Modest risk.  Mutual funds have their own role to play in the economy. But the awareness regarding these is very less among the investors. you are incurring costs that you would not incur in alternate investment options.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA When do I need my money back? 1 year or 5 years or 20 years or 30 years or more How much risk am I willing to take?  Very little risk. the primary market is the better option. So people should be made aware. Therefore.  While you might find some high-yielding options in the secondary market.  Today.

REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA  Any investors can invest in bonds and mutual funds as they are safe and have regular incomes.  Investors who prefer to take risk and who patience to wait for the long period can the reap the benefit of the shares and real estate Page 78 .

Thus. Investors¶ choice and preferences were analyzed through the questionnaire which gave insight knowledge regarding the proper utilization of savings in the right investment or investment portfolio by knowing the various investment opportunities opened for different type of investor according to their preference.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA CHAPTER ± 7 CONCLUSIONS We know investment means sacrifice of the current holdings for future returns with minimal risk. Each individual and each class of investors have own way of the analyzing the alternatives. Each investment alternatives have their own pros and cons related to it. investor to ±  Avail the services of a professional money manager (who manages the mutual fund)  Access a diversified portfolio despite making a limited investment Page 79 . Investors¶ does not have sufficient knowledge regarding the investments. we have many alternatives which can suit the preference of the investors. the results show that the bank deposits attracted more investors than any other alternative because of its low risk even though there is low returns. As per the analysis done.

com  www.edu  business.REPORT ON SELECTED INVESTMENT ALTERNATIVES AVAILABLE IN INDIA BIBLIOGRAPHY  INFORMATION COLLECTED THROUGH  TEXT BOOK  SUHINDRA BHATT: SECURITIES AND INVESTMENT ANALYSIS  PRASANNA CHANDRA : INVESTMENT ANALYSIS  INTERNET  http://media.com  clem.investopedia.com Page 80 .mscd.mercer.wiley.com  www.mapsofindia.

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