Babasaheb Bhimrao

Ambedkar University
Department of rural management
Submitted by –

Karan Shukla
Roll number – 194120
Programme - B.B.A.
Semester – 5
Subject – Managing Personal Finance

Submitted to –

Dr. Suhel Ahmed

 Investor’s need and Nature, Avenues for
Investment
Investor’s Need

Investors bring inherent conflicts in the door with them:

 They want maximum growth and safety at the same time.

 They want a pool of money that allows them to enjoy life after work, and they have a
wonderful list of things they want to enjoy today.
 They want equity-like returns without volatility.
 When markets move upward, investors want to get a "piece of the action" and jump
on board, doing the opposite when markets go down. This sets up a buy-as-prices-get
higher-sell-as-they-get-lower paradigm.

Investor’s Advice

1. Set Your Objectives

Setting long-term objectives can be of great benefit when investing in stocks and shares.
Whether you wish to save for your own retirement or for your child’s education expenses
or to buy a property or any other reason, setting long-term goals will help you better
understand the importance of saving. In case you wish to invest in a scheme or
investment instrument for a short period of time and withdraw your funds after a few years,
another investment instrument can be considered for investment as the volatility of the
stock market offers no certainty on whether or not you can access your funds when
required.

Your investment portfolio will grow based on factors such as the amount of capital
invested, the tenure of the investment and the net annual earnings on the capital. It is
advised that you begin investing as early as possible as it can help you save a significant
amount of money.

2. Level of Risk
The level of risk associated with the investment option you choose must be carefully
analysed before you put your money into something. The best way to identify the risks
associated with various products and identifying the best option is to conduct a
comprehensive comparison between the different schemes. Doing so will enable you to
 figure out what level of risk each product holds and you can invest your money
accordingly. Understanding the level of risk involved with investments will help you avoid
those instruments that have the potential to see you incur losses.

3. Control Over Emotions

One of the primary requisites of investing in the stock market involves controlling your
emotions. The market sentiment towards a company becomes evident through the price of
its shares. For instance, if most investors are sceptical about the prospects of a particular
company, the prices of stocks and shares will reduce. Similarly, when investors show
confidence in a particular company, the prices of its stocks and shares will increase.
Investors who are positive about the market are called “bulls” and their negative
counterparts are called “bears”. The change in prices of shares is affected by the
persistent conflict between the bears and bulls, and the short-term changes in prices are
influenced by speculations, rumours and emotions instead of systematic analyses of the
prospects, assets and management of the company.

As stock prices keep changing, investors start to feel insecurity and tension, creating
questions like whether or not they should sell their stocks in order to avoid losses or if they
should retain the shares and hope for a rebound in prices. Since actions are primarily
driven by emotions, it is essential to ensure that all factors are analysed carefully before
making a final decision.

4. Study the Stock Market

Prior to making an investment, a beginner in the stock market is advised to study the stock
market for the basics including the various securities that compose the market. The fields
that must be focussed on include order types, financial definitions and metrics, various
kinds of investment accounts, timing of investment, methods of selecting stock, etc.
Gaining a thorough understanding of the stock market will ensure that you’re in a good
position to assess risks and make the right selection.

5. Diversification of Investments
Diversification of stocks is mainly done by expert investors after all the research has been
performed to classify and calculate the risk associated with their investment. However,
beginners will have to gain some experience in the stock market before undertaking the
diversification of their investments.

Diversifying exposure is among the most preferred methods to manage risks. If you
purchase stocks from five different companies and expect the prices of each investment to
grow continually, there may be situations wherein two of the companies may have
performed exceptionally, acquiring a 25% increase in price, the shares of two other
 companies may have increased by 10% each, and the shares of the fifth company were
liquidated to clear a huge lawsuit. Since liquidation of shares results in a loss for the
investor, diversification can help you recover that loss through profits from the other
companies, thus making it better for the investor than it would have been if he / she had to
invest in only one company.

6. Avoidance of Leverage
Leverage is when you borrow funds and use it to put your stock market plans into action.
For margin accounts, brokerage firms and banks can grant loans to purchase stocks,
generally 50% of the face value. So in case an investor decides to purchase 100 shares
for let’s say Rs.500 each, the total cost would be Rs.50,000, the purchase can be
completed by a loan of about 50% (Rs.25,000) from a brokerage firm.

Types of Investment Avenues

Financial Assets

Financial assets are known as traditional investment avenues of India. At first, they were
only available to the minimum audience. Still, later, as many alternatives came into the
picture, they made available widely available to all the people. 

Direct Equity 

If you’re looking for a long-term investment, talking in the layman term, it is just referred to as
investing in stocks. You usually buy a companies stock, and you become a partial owner of
that organization. Your profit and loss are dependent on the company’s growth and
development. 

The company’s stock you want to buy depends upon the knowledge you have about the
market and its trends. Investing in direct equity is of high risk, and profit is not necessary.
When someone buys a stock, then an individual is exposed to the associated risk as well.
Stocks of the various companies are listed for the public. Any individual can buy or sell the
stock if they have a Demat account and KYC verification is complete.

It is a wise choice if you take advice from a professional before you put your hard-earned
money into equity. Direct Equity is one of the most used investment avenue options. It gives
a higher growth rate than other types of investment avenues. An individual can earn on the
day to day basis by using this investment option.
  Mutual Funds

Mutual funds are one of the traditional investment avenues that are subjected to a good
return. It acts as a good investment option for many people in India. Relatively people should
take advice from the consultants, experts and even the agents and distributors. After doing
so, then take the first step into this investment pool.

Mutual funds are becoming popular among the millennials, primarily as minimum knowledge
can also invest. All the fund managers take care of the portfolio funds. Mutual funds work in
a very authentic cycle manner. It starts with investors pool their money in the respective
funds and the fund manager regulates money. 

The main objective of these fund manager is they invest in securities and assets to generate
optimum returns.

It is also the most favourable option. You can start and stop your investment as per your
need; it is considered the most flexible investment avenues.

The returns, profit and loss are all dependent on the market movement. These mutual funds
are of two categories, open-end fund and closed-end fund. The essential difference between
both is open-ended is available for purchase continuously from time to time. In contrast,
close-ended mutual funds are restricted and open only for a certain period of years. 

Investing also requires a decent amount of income in your hand. An individual does not want
to be cut off his/her necessary expenses for the sake of investing them into some significant
investment avenues in India. 

 Fixed Deposit

This is the oldest investment avenues that the people of India are using. You must have
heard from your elders about it. This fixed deposit is the most used and trusted by the more
senior society. Fixed deposits are the option that the banks provide. 

The process is as straightforward; all you need to do is deposit a certain amount for a
specified period. You can earn a predetermined interest rate on that amount from the bank
or any other financial institution. This source of investment acts as the working capital of
banks.
As the name depicts, all the deposits are for the fixed tenure, which implies that the investor
deposits a fixed amount for the specified period of time. 

An individual can still withdraw these funds by two methods; they can take a loan on that
particular fixed deposit. Second, you can pay the penalty to take out all the money you
invested till now.

 According to the reports, most private banks provide a great interest rate compared to the
government, but this is just data that can be fluctuated based on the market trends. 

Some of the perks of choosing Fixed deposit as your following investment avenues are
reliable, and depositing in a bank is safe and secure. Any age group above 18+ can avail of
this investment just by opening a bank account. 

An individual can also help with loan services based on the fixed deposit. As a coin has two
sides, the Fixed deposit also has demerits. The rate of investment is comparatively low in
comparison to other investment avenues, and Regulatory bodies and government have a
significant impact on the growth of banks. 

 Public Provident Fund (PPF)

Public Provident fund or PPF is a long term investment plan with a long tenure of 15 years.
The Government of India governs it. It is generally a tax saving instrument cum Investment
avenue. It has an interest rate that is revised on a quarterly basis by the government.

You can open a PPF just by visiting a designated post office all over India. And by contacting
the branches of public sector banks. When an individual extracts the sum at the end of 15
years, it is a tax-free amount. You can also go for the partial withdrawal system. You can
avail yourself only after five years from the end of the year when you got your account
opened. PPF is another safe option for you to choose as an investment avenue in India as a
sovereign guarantee backs it. A public provident fund is generally a retirement plan when
you don’t have any other covered insurance for the future. 

Another option available focuses on the retirement-oriented investment; it is Employee

Provident Fund (EPF). Formation of Employee Provident Funds falls under Income Tax Act,
1961, to help all the salaried professionals to get a tax break by investing in EPF. The
deduction is done from the individual’s monthly salary, and the individual makes the same
amount. But you can only avail the invested funds after maturity, which is retirement.
Evaluation and Regulation of the interest rate done by the government quarterly. This type of
Investment avenue has access only for those who meet necessary conditions. 

 Real Assets

This type of investment assets is nothing but physical assets and assets in the form of
infrastructures. It is a physical attribute that is sold later and converted into cash. The most
famous real assets in India are.

 Real Estate

Since there is an increase in the population of India, one can see a significant increase in the
properties and lands to live on. This, in return, has turned into a great investment idea from
the previous few decades. It comprises of investment in lands, flats, houses, buildings,
agricultural lands, and many more. Buying a property is in trend for the past few years.
Hence makes it the best alternative to the financial assets in India. Most of the crowd is
running towards buying land and other residential properties. Which leads them to earn a
significant sum after a certain period of time. 

It consists of leasing, selling, and exchanging a particular property as per the investor’s
need. Real Estate is one of the profitable options, but it requires a viable funding option. It is
difficult or impossible to start from the lower funds. Real assets give a higher rate of return in
a short period of time. This also makes it comparatively good to other Investment avenues in
India. When the property requirement goes high, and the supply or options are limited, the
profit acquired can skyrocket. 

It mainly depends upon the many factors that decide how much an investor can earn profit.
Some of them are location and the price of that location which usually goes as circle rate of
the area.

 Gold and Silver

To this date, Investing in Gold and Silver is still a traditional investment avenue. Since
ancient times there isn’t any dip in the interest of investors to buy gold and silver. They use it
as an investment for future needs. We all are aware of the fact that gold and silver prices are
increasing day by day. But processing gold in any jewellery is not cost-effective as making
charges and other taxes come into play. 
You can buy golds in the form of gold coins or the state of gold ETF. Gold ETF’s in India is in
use since March 2007. Exchange-traded funds or ETF have various benefits over physical
forms of gold. Whichever is the form, the risk factor with it is still moderate as the price of
gold keeps fluctuating.

With the best option in diversification for the investors, they are also present in electronic
form. That makes it easy for everyone to trade online from anywhere.

 Commodities

Commodities are simply raw materials that we use to make some of the essential products
we employ daily. Talking about India, almost 60% of the people are constantly engaging in
agriculture. It is one of the most diversified options to get potential returns.

When you choose this as your investment avenue, then you can enjoy some of the essential
returns. People generally sell these commodities in various markets. These things play a
significant role in shaping the economic growth of our country.

An individual can estimate the commodity price and the fluctuation by the trends in export
and import.