PROJECTOFFUNCTI

ONAL
MANAGEMENT

TOPI
C:I
NVESTMENT
MANAGEMENT
SUBMI
TTEDTO:MSNI
TIKASONI

SUBMI
TTEDBY:PUSHKAR,RAJESH,
SAARTHAK,
SADHVI,
SAKSHAM,SANSKAR,SNEHA,
AYUSH

ROLLNO.-
17645,
17646,
17647,
17648,
17649,
17650,
17652,
17653
(RESP)
 ACKNOWLEDGMENT
Thefeeli
ngofacknowledgeandexpressi
ngiti
nwordsaretwot hi
ngs
apar
t.Iti
sweakness,butIhonestl
yadmitwhenIt
rul
ywisht oexpress
mywar m gr
atit
udeandindebtednesst
owardssomebody,Iam always
atl
ossofwor ds.

Theproj ectcouldnothav ecompl et

edwi t
houtsuppor text
endedtome
byMsNI TIKASONI ,shegui
dedmedur ingthepreparati
onofthe
proj
ectandev erytimewhenIr eachedoutf orhim wi
thmydi ffi
cult
ies,
shewel comedt hem whichhelpedmet osuccessf ul
l
ycompl etethe
proj
ect.Iexpr essmyhear tf
eltgrati
tudewithgreatpl
easureanda
senseofobl igationtoMsNI TIKASONI, f
orhertimelysupportand
superv
isi on.

Iwoul
dal soli
ketothankDr.MahenderSingh,myHeadofDepar
tment
.
Hewasal waysther
ewi t
hhissupportandthosewonder
fuli
nsi
ghts
whenevertheywereeagerl
yneeded.

Iwouldalsol
iketothankDr.MonikaSharmahonorablePr
inci
pal
of
mycollegewhosecont i
nuedcooperat
ionandsupporti
nmakingthi
s
proj
ectasuccess.

And,
finall
yawor
dofgr at
it
udetomyfamil
yandfr
iendswhower
e
al
wayst her
ewi
ththei
rsuppor
tandencour
agement.

Regar
ds
PUSHKAR,
RAJESH,
SARTHAK,SADHVI
,SAKSHAM,
SANSKAR,
SNEHA,
AYUSH,
 I
NTRODUCTI
ONTO
I
NVESTMENTMANAGEMENT

Moneydoesnothav eanyv al ueunlessi ti

sinv ested.If
aper sonhasal argesum ofmoneyandhekeepsi ti
n
hiscupboar d,i
twi llnotgrow.I thast obei nvest edin
somef inancialassett ogetar etur
n.Ther ecanbeno
returnwi thoutrisk.Itiswi thint hi
sframewor kofr isk
andr eturnt hatinvestmenthast obemade.I tis
assumedt hataper soni sr iskav er
seandatt hesame
ti
me, heexpect sagoodr etur nont hemoneyt hathe
i
nv ests.Ther efore,aninvest orhast ot r
ade-off
betweenr iskandr eturn.Thi schapteri san
i
ntroduct iontot het ermsi nv estment ,speculationand
gambl ingdepi ctingitsnat ur eandscope.
Italsopr esentst hemediaforinvestmentsand
explainsthei nvestmentprocess.Invest
mentisthe
commi t
mentoff undswi t
hal ong-
termtime
framewor k,theobj ect
ivebei
ngaddi ti
onali
ncometo
regularreceiptsandgr owthinthev al
ueoffundsofan
i
nv estor.

Inv estmenti nvol

ves‘ wait
ing’foraf uturer ewardin
termsofi ncomet hroughr egul
ari nterest,divi
dends,
premi ums, orappreciationinthev alueoft hepri
nci pal
capi t
al.Thet erm‘Investment’isunder stood
differentl
ybyeconomi stsandf inancial experts.
Economi stsconsideritasnewandpr oduct i
vecapi tal
andf inancialexpertsemphasi zeonal locationand
transferofr esour
cesf r
om oneper sont oanot her.Itis
alsodi ff
erenttothet ermsspecul at i
onandgambl ing
andtheydi
ff
eri
nter
msofr
isk,
timef
ramewor
kand
gai
ns.

I
tmustbeclear
lyest
abl
ishedt
hatinv
est
ment
inv
olv
eslong-t
erm commit
ment.

Fi
nancialandeconomicmeaningofi
nvest
mentar
e
di
ff
erentandmustbeunder st
oodint
ermsofuseof
capi
tal.

Invest
mentspecul at
ionandgambli
ngcanbe
di
sti
ngui
shedfrom eachothert
hrought
heirr
isk,
time
peri
odofcommi t
mentandgains.
 I
NVESTMENTMANAGEMENT
PROCESS
Theinvest
mentmanagementpr ocessreferstohandli
ng
thefi
nanci
alasset
sandotherinv est
ments-notonly
sell
i
ngandbuy i
ngoftheassets.Thesolepurposeofthe
i
nvestmentmanagementcompanyi stooverseei
tscli
ents’
moneyandusei tt
oachiev
et heirinv
estmentgoals.
Whil
eeachinv est
orhasauni quegoal,f
ivei
nv est
ment
managementpr ocessstepshelpinvest
mentcompani es
sel
ectandinvestthebestassetclassaccordingtot
he
i
nvestor
’sneedsandr i
sktolerancecapabi
li
ties.

1.UNDERSTANDTHEI
NVESTOR
Thef ir
standf oremostst epoft heinvest
ment
managementpr ocessistounder standinvest
or
preferencesandgoal s.Basedonhi sgoals,budget
,and
objectives,
setst hebenchmar kf orhisport
fol
io
managementpr ocess,analyzi
ngt heperformanceand
whet hertheinvestor’
sobj ecti
vesareachieved.

2.ASSETALLOCATI
ON DECI
SION
Si
nceiti
ssoimperati
ve.Assetal
locati
onisthefi
rst
i
nvest
mentdecisi
on.I
nt hi
sstep,
ani nvest
ment
managementcompanyf i
ndsouthowt oall
ocatethe
i
nvestmentacr ossthediff
erentcl
asses,l
i
ke,fixed-i
ncome
securi
ti
es,realest
ate,equit
y,mutualf
unds,domest icand
i
nternati
onal.Aportfol
iomanageralsoconsidersthe
microeconomiccondi t
ioninmindbeforeall
ocatingasset
s.

3.SELECTYOURI
NVESTMENTAPPROACH
Nowt heinvestmentstr
ategyhasbeendel i
neated.With
theassetal l
ocat i
oninmind,t
hepor tfoli
omanagerwi l
l
selecttheinv est
mentvehicl
esthaty ouwi lluseto
i
mpl ementy ourport
fol
i
ost r
ategy.Her e,aninvestorneeds
tokeept wot hi
ngsinmindwhilestrategizingtheportf
olio;
diversif
icat
ionandr emaini
nginvestedv alue.

4.BUI
LDYOURPORTFOLI
O
I
nt hefi
rstthr
eesteps,weconstructapor t
foli
othatmeets
yourprefer
encesandgoals.Thebuildi
ngbl ocksforthe
portf
oli
oareETFsandl ow-cost
,tax-ef
fi
cientindexfunds
whichprovideagreatwaytodiversi
fyapor tf
oli
o.

5.REPORT,
REBALANCE,
ANDREVI
EW
Thi
sisafinalandimpor t
antstepoftheinv
estment
managementpr ocess.Hereyouneedt omeasurethe
per
formanceoft heportf
oli
owi t
hrespectt
oabenchmar k.
Revi
ewandr ebalanci
nghelpinvest
orstoreducetheri
sk
ofl
osingmoney .
I
NVESTMENTPROCESSSTEPS
I
nthi
sarti
cle,
therear
emain5i
nvest
mentpr
ocesssteps
t
hathel
pinvestor
sbett
erhowt
heinv
est
mentprocess
wor
ks.
Her
ear
ethef
oll
owi
ngst
epsofi
nvest
mentpr
ocess:
1.
AssessYourCur r
entFi
nancialSi
tuati
on
2.Defi
neYourI nv
estmentObject
ives
3.All
ocateYourAssets
4.Sel
ectanI nv
estmentProcessStrat
egy
5.MonitorandManageI nv
estmentPr ocess

STEP1.ASSESSYOURCURRENTFI
NANCI
AL
SI
TUATI
ON
Planni
ngst ar
tsbyev aluati
ngyourcurr
entf i
nanci al
sit
uati
on.Wi t
hy ourinv estmentgoal
satt het opofy our
mind,you’l
lneedt ot akenoteofthefollowingf actors:
 
yourassets,l
iabil
i
ties, and,mostimportantl
y, yourri
sk
appeti
te.Takingthet i
met oassessallofthesewi l
lhelp
you(andy ouragent )decideontherightpol i
cies
and i
nvestmentst r
at egies.
Tohelpy ouplanhowmuchyoushouldsavefortheyears
ahead,here’sahel
pful
 
inv
est
mentprocessguide 
forever
y
stageofy ourl
ie.
f

STEP2.DEFI
NEYOURI
NVESTMENTOBJECTI
VES
Aftertaki
ngnot eoft het hreefactor
sment i
onedabov e,
younowneedt ocreateadet ail
edri
sk-ret
urnprofil
e.Since
themar ketisvolat
ileinnat ure,youneedt odeterminethe
l
ev elofri
sky ou’
rewi ll
ingt otakeandt heunpredi
ctabili
ty
ofprofityoucanwi thst and.Asar ul
eoft humb, r
emember
thatthehigherther eturn,thehighertherisk.
Howev er
,thi
sdoesn’tmeanthatyoushouldgoalli
nand
putyoureggsinonebasket.Thekeytoasuccessful
i
nvestmentiscreat
ingastrat
egythatcangiveyoua
decentamountofreturnsatanacceptabl
elevel
ofri
sk.
Afterward,youmustsetthebenchmarkstot
rackhowwell
yourinvestmenti
sdoing.Othert
hangivi
ngyouapict
ure
ofitsperfor
mance,i
twillal
soall
owy outomake
adjustmentswhennecessaryeasil
y.
STEP3.ALLOCATEYOURASSETS
Nowt hatyouhav eacl earpictureofyourfinanci
al
condit
ionandar i
sk-r
eturnpr ofi
leatyourdisposal,t
henext
thi
ngy ouhav etodoist odeci deonhowy ou’l
lal
locate
yourassets.Asani nvestor,
y oucansel ectfr
om v ar
ious
assetclasses,suchasst ocks, bonds,andcash,andspl i
ta
decentamountofcapi tal
intoeach.
Bydi versif
yingy ourassetsproperly
,you’r
ehi t
ti
ngt wo
bir
dswi thonest one,meet i
ngy ourexpectedamountof
ret
ur ns,andmi ni
mizingrisk.Eventhought heasset
all
ocat i
onst rategyyou’vechosendependsony ourcur
rent
fi
nanci alsit
uat i
on,adjust
ment sareexpect edtobemade
asy out ransit
ionfrom onel i
festagetothenext .
Whenconsi deri
ngpr opertyasaf ir
st-t
imebuy erorlong-
terminv estoryouneedt oconsi derthatit’
sal ong-ter
m
assetandcanbei ll
iquid.Thismeanst hatit’
sv eryhardto
convertt ocashintheshor tterm andi fyout r
yt osell
quickl
yi tusuall
ymeanst akingahi tonthepr ice.The
propertydoespr ovi
deaconsi stentretur
n, howev er–as
youwillgett hemont hlyrenteachmont h.Consul twith
a mortgagebr oker
 beforei nvesti
nginpr operty.
Inyouryearsasay oungprof
essi
onal,y
oumaybemor e
wil
li
ngt otaker
isksandall
ocatemorefunds.But,
inthe
caseofpeoplewhoar egetti
ngcl
osertoret
irement,
it’
s
expectedthatt
hey’l
lcashoutacert
ainamountsincethei
r
tol
eranceforri
skislower.
STEP4.SELECTANI
NVESTMENTPROCESS
STRATEGY
Onceyou’
veall
ocatedyourassets,
you’
l
lneedtodeci
deon
howyou’l
lgr
owy ourmoney .Si
mplyput
,youhavetwo
ty
pesofport
fol
iostrat
egiestochoosef
rom.
 Passive-Passivepor t
foli
omanagementi sastrategy
whereintheinvestor’spurposeistomi r
roramar ket’s
i
ndex .It
’sareacti
vest rat
egythatall
owst heinvestorto
acquireret
urnsequal t
ot heshar
eoft hemar ket.
 Activ
e-Activeportfoli
omanagementent ail
smor er i
sk
si
ncet heinvestor
’spur poseistooutperfor
mt hemar ket.
Sincethisstr
ategyr equir
esconstanttweaking,one’s
compl et
efocusandat tenti
onareneeded.
I
fyou’rethinkingofwhicht ypeisbett
er,
theanswer
dependsont heassetclassesyou’vesel
ect edandt he
i
nfluenceoft heeconomi csectorsinv
olved.Tol earnmor
e
abouttheirkeydiff
erences,takealookatt his 
guide.

STEP5.MONI
TORANDMANAGEI
NVESTMENT
PROCESS
Nowt haty ourst
rategi
eshav ebeeni mplement ed,i
t’
sti
me
tomoni torandmanagey ourinvest
ment s.Toknowhow
wellyourpor t
fol
i
oi sdoing,youneedt oreviewits
perf
ormanceatr egul
arinterval
s.Whetherit’squart
erl
yor
annuall
y ,t
hebenchmar ksy ou’v
esetwi l
ltel
l youify
ou’r
e
sti
l
linlinewi t
hyourgoal s.
Sincechangesi ny ourli
feandtheeconomywi l
loccurover
ti
me, it’
snecessaryt otweakyourstr
ategi
es,aswell.I
f
yourinvestmentpr ocessisn’
tinl
inewithyourr
isk-r
eward
profi
le,youcanr e-bal
anceitbysell
i
ngi nv
estmentsthat
haver eachedtheirtarget
sandbuy i
nginvest
ment sthat
haveahi ghpotent i
alforret
urn.

I
MPORTANCEOFI
NVESTMENTS

Investmentsareimpor tantduet oi ncr

easeinlif
e
expectancyofaper son,planningforreti
rementincome,
highplanni
ngf oraddi t
ional i
ncomeduet ohighratesof
taxati
onandi nfl
ati
onar ypr essureinaneconomy ,t
he
expectati
onofcont i
nuousst abl
eincomei ntheform of
regulardi
vidends,inter
estsandot herrecei
pts.The
foll
owingdiscussionpr ovi
desanexpl anati
onoft hese
i
ssues.

1.LONGERLI
FEEXPECTANCY
Investmentdecisi
onshav ebecomesi gnifi
cantbecause
stati
sticsshowthatlif
eexpect ancyhasi ncreasedwith
goodmedi cal
care.Peopleusual l
yret i
rebet weenthe
agesof60and65.Thei ncomeshr inksatt hetimeof
reti
rementbecauset heannual inf
lowofear ni
ngsfrom
empl oymentstops.Ifsavingsareinv estedatt heri
ght
ageandt i
me,wealthincreasesifthepr incipalsum is
i
nv estedadequatel
yindi f
ferentsavingschemes.The
 i
mportanceofi nvestmentdeci si
onsi senhancedbythe
f
actthatthereisani ncr
easingnumberofwomen
wor
kingint heorganizati
ons.Menandwomenar e
r
esponsibleforplanningtheirowni nvestmentsduri
ng
t
hei
rwor kingli
fesot hatafterret
irementt heyareabl
e
t
ohav east abl
eincomet hroughbal ancedinvest
ments.

2.TAXATI
ON
Taxati
oni ntroducesanel ementofcompul si
onina
person’ssav ings.Everycount ryhasdif
ferenttaxsavi
ng
schemesf orbr i
ngingdownt axati
onlevel
sofaper son.
Sinceinvestment spr ovideregularandstableincomeand
al
sogi vereliefintaxation,theyareconsideredtobev er
y
i
mpor tantandusef ulifinvestmentsaremadebypr oper
planni
ng.

3.I
NTERESTRATES
I
nt erestratesv aryaccor dingt ot hechoiceofi nvestment
out l
et.Invest orspr efersaf einv estment swithagood
return.Ar isk-lesssecur itywi llbr i
nglowr atesofr eturn.
Gov ernmentsecur itiesar er i
skf ree.Howev er,mar ketr i
sk
i
shi ghwi thhi ghrat esofr etur n.Beforeallocationsofany
amount ,thedi fferentt ypesofsecur i
ti
esmustbeanal y zed
tocal culatet heirbenef itsandt heirdisadvantages.The
i
nv estorshoul dmakehi spor tfol i
owithsev eralkindsof
i
nv estment s.Stabi l
ityofi nter esti sasimpor t
antas
receivingahi ghr ateofi nt erest .Thisbooki sconcer ned
withdet ermi ningt hatt hei nv est orisgetti
nganaccept able
r
etur
ncommensur
atewi
tht
her
iskst
hatar
etaken.

4.I
NFLATI
ON
Inadev elopingeconomy , t
her ear erisi
ngpr i
cesand
i
nflat
ionar ytrends.Ar isei npr iceshassev eralpr obl
ems
coupledwi thaf all
ingst andar dofl i
vi
ng.Bef orefundsar e
i
nvested, theymustbeev aluat edtof i
ndt her i
ghtchoi ceof
i
nvestment stot i
deov eri nflationarysituations.The
i
nvestorwi l
l
lookatdi fferenti nv estmentout l
etsand
compar et her ateofreturn/ interesttocov ert her i
skof
i
nflat
ion.Secur i
tyandsaf etyofcapi t
alisi mpor tant.
Therefore,he/ sheshoul di nv estinthosesecur it
iesthat
haveanassur edandr egul arr eturn.Ani nvestorhast o
consider,thet axati
onbenef i
tdeci desthesaf etyofcapital
anditscont inuousr eturn.

5.I
NCOME
Investmentdeci sionsar ei mpor t
antduet hegener al
i
ncreasei nempl oy mentoppor tuniti
esandan
understandingofi nv est mentchannel sforsav inginI ndi
a.
Newandwel lpayingj oboppor tuniti
esar einsect or sli
ke
soft
war et echnology ;busi nesspr ocessingof fi
ces, call
centr
es, exports,medi a,tourism, hospit
ality
,
manuf acturingsect or,banks, i
nsuranceandf inanci al
servi
ces.Theempl oy mentoppor tuniti
esgav er iset o
i
ncreasingi ncomes.Hi gherincomehasi ncreaseda
demandf orinvestment sandear ningsabov et her egular
i
ncomeofpeopl e.Inv est mentout letscanbesel ect edto
makeinvestmentsf orsupporti
ngtheregularincome.
Awarenessoffinancialasset
sandr ealassetshasledto
theabi
li
tyandwi l
li
ngnessofwor ki
ngpeopletosav eand
i
nvestthei
rfundsforr et
urnintheirl
eanper i
odleadi
ngto
thei
mpor t
anceofi nvestments.

6.I
NVESTMENTOUTLETS

Theav ailabi l
ityofal argenumberofi nvestmentout let
s
hasmadei nv est ment susef ulandi mpor t
ant.Apar tfrom
putti
ngasi desav i
ngsi nsav i
ngsbankswher einterestis
l
ow, invest or shav et hechoiceofav ari
etyof
i
nst r
ument s.Thequest iontor easonouti swhi chi st he
mostsui tabl echannel ?Whi chi nvestmentwi l
lgi
v ea
balancedgr owt handst abil
i
tyofr eturn?Thei nvest orin
hischoiceofi nv estmenthast heobj ecti
veofapr oper
mixbet weenhi ghr ateofr eturnandst abi
li
tyofret urnto
getthebenef itsofbot ht ypesofi nvestment s.Thus, the
objecti
v esofi nv estmentar et oachiev eagoodr at eof
returni
nt hef uture,reducingr i
skt ogetagoodr etur n,
l
iquidit
yi nt imeofemer gencies,safetyoff undsby
selecti
ngt her i
ghtav enuesofi nvestmentsandahedge
againsti nflation.
NATUREANDSCOPEOF
I
NVESTMENTMANAGEMENT
Nat ureandscopeofinv est
mentcanbedet er
mined
fr
om t hemeaningoffinanciali
nvest
mentsandhowi t
i
sdi ff
erentf
rom economi cinvest
ment.I
tisal
so
determinedfr
om thetimeper i
odandt heri
skandits
di
fferenceswit
hspecul ati
on,gambli
ngandarbit
rage.

Thenat
ureofscopeofi
nvest
mentmanagementi
s:
 o Tounderstandt heexactmeani ngofi nvestment
o Tofindoutdi f
fer entav enuesofi nvestment
oTomaxi mizer etur nandmi ni
mi zerisk
oTomakeapr ogr ammef ori
nvest mentthrough
evaluat
ingsecur i
ties,constructingapor tf
oli
oand
revi
ewingapor tfolio
oTof i
ndoutat i
meper i
odf orinvestment stotake
place
oToev al
uatet hroughv arioustechniquest ogetthe
bestretur
nf ort hei nvestor

FINANCIALANDE CMEANI
CONOMI NGOF
INVESTMENT

Financi alI
nvestment sar etheal l
ocat ionofmonet ary
resour cesrangingf r
om r isk-
freetor i
skyinv estment sand
witht heexpect ati
onofagoodr eturnt hatvarieswi thrisk.
Thei nv est
orhast oai m atat rade-of fbetweenr iskand
return.Thei nvestorsar ethesuppl iersof‘ capital’ andin
theirview, i
nvestmenti sacommi tmentofaper son’ s
fundst oder iv
ef utur
ei ncomei nthef or m ofinter est,
dividends, r
ent,premi ums, pensionbenef itsort he
appr eciati
onoft hev alueoft heirprincipalcapi t
al .Tot he
fi
nancial i
nv est
or,i
tisnotimportantwhet hermoneyi s
i
nv est
edf oraproductiveuseorforthepur chaseof
secondhandi nstr
ument ssuchasexi st
ingshar esand
stockslistedont hestockexchanges.Mosti nvest
ments
areconsi deredtobet ransf
ersoffinancialassetsfr
om
oneper sont oanot her
.

Theeconomi stunderst
andst heterm‘ Investment’ asnet
additionstotheeconomy ’scapitalstockwhi chconsi st
sof
goodsandser vi
cesthatareusedi nt hepr oducti
onof
othergoodsandser vi
ces.Forthem, t
het erminvest ment
i
mpl iestheformationofnewandpr oductivecapitalint
he
form ofnewconst ructi
on,newpr oducer s’durable
equipmentsuchaspl antandequi pment ,incl
uding
i
nv entori
esandhumancapi tal.

Thef i
nancial andeconomi cmeani ngofi nv estmentcannot
besepar atedbecauset heterm drawsar el
ationshipwit
h
theeconomi stsandf inancialexper t
s.I nvestmentisapar t
ofthesav i
ngsofi ndividual
swhi chf lowi ntot hecapit
al
mar keteit
herdi rectl
yort hroughinst ituti
ons; theymaybe
divi
dedi n‘new’ or‘secondhand’ capi talfi
nanci ng.
I
nv estorsas‘ suppli
ers’ and‘i
nvestoras‘ users’ ofl
ong-
ter
mf undsfindameet ingplaceint hemar ket.
I
NVESTMENTANDSPECULATI
ON

Inv
est
mentisdist
ingui
shedfr
om specul
ati
oninthr
ee
wayswhichar
ebasedont hefact
orsofr
isk,t
imeperi
od
andgai
ns.

1. RI
SK
Theterm‘r
isk’
hassi
gnif
icanceint
hefi
nanci
al
meaningofinv
est
ment.What ev
eramounti
sinv
est
ed
hast hepr obabil
it
yofi ncur r
ingagai noral ossi na
fi
nanci al t
ransaction.Inv estmenti snotconsi deredt o
i
nv olvehi ghr i
skbuti thasl i
mi tedriskandr i
skcanbe
calculatedt hroughdi fferenttechniquesandt he
capitalcanbei nvest edinav enueswher ethepr i
ncipal
i
ssaf e.‘ Speculati
on’ iscor r
elatedwi th‘hi
ghr isk’and
shortcommi tment .Ther earedegr eesofr isk,and
arbit
raryj udgement sar emadebet weenhi ghr iskand
l
owr i
sk.Ani nvestorcannothav ecompl etelyrisk-
free
i
nv estment sbecauset herearecer tainnon-
controllabler i
sksthatcannotbecal culated.The
purchasi ngpowerr iskort hef alli
nt hereal v
alueof
theinter estandpr incipal i
sbey ondt hecont rolofa
person.Themoneyr ateriskort hefalli
nmar ketv al
ue,
withther i
sei nint
er estratesal socannotbe
controlled.

Theser i
sksaff
ectboththespeculat
orandthe
i
nvestor.Highri
skandlowr i
skare,t
heref
ore,
gener
al
i
ndicatorstohel
panunder st
andingbet
weent he
ter
msi nvestmentandspeculat
ion.
2. CAPI
TALGAI
N

Speculat
ionisbuyinglowandsel l
inghighinashort
ti
met omakelargecapitalgai
ns.Themot i
vein
specul
ati
onisprimaril
ytoachievepr ofi
tst
hrough
pri
cechanges.Thiscanbedi st
inguishedfrom
i
nvestmentwheresecur i
ti
esarepur chasedbyan
i
nvestort
hroughproperev al
uati
on, anal
ysi
sand
 r
ev i
ewwitht
hev i
ewofrecei
vi
ngast
abl
eret
urnov
er
along-
ter
m per
iodoft
ime.

3. TI
ME
Timeperiodexpl
ainst hedi f
fer encebet ween
i
nvestmentandspecul ation.Af undal l
ocati
onov era
l
ong-ter
m peri
odi scalledinv est ment.Ashor t-
ter
m
holdi
ngisassociatedwi t
ht radi ngforthe‘quickturn’
andiscall
edspecul at
ion.Thespecul at
orisnot
i
nterest
edinholdingasecur ityf orcurr
entincome
butforhi
ghshort-term gains.

I
NVESTMENTANDGAMBLI
NG

Gambl
ingi
sartif
ici
alandunnecessaryriskcr
eatedf
or
i
ncr
easedexpectedret
urns.Thedif
ferencebetween
i
nv estmentandgambl i
ngisver
ycl ear.From theabov e
discussion,i
tisestabli
shedt
hatinv estmenti sanattempt
tocarefull
yplan,evaluat
eandallocatef undsinv ar
ious
i
nv estmentoutlet
swhi choff
erssaf etyofprincipal
,
moder ateandcontinuousretur
nsandl ong-t
er m
commi t
ment.

Thedisti
nct
ionsbet
weeni
nvest
ment,speculati
onand
gamblinggi
veusabasici
deaofthei
rnatur
e, pur
poseand
rol
e.

I
NVESTMENTANDARBI
TRAGE

Inv estmenti spl annedcommi tmentoff undsf r

om a
person’ssav ingsint odifferentout l
etswi ththeexpect at
ion
ofsaf e,stableandf arereturn.Ar bi
tragei sthemechani sm
ofmi nimi zi
ngr i
skt hroughhedgi ngandt akingadv antage
ofpr i
cedi fferencesi ndi
f ferentmar kets.Anar bitr
age
transactioni st hesimul t
aneouspur chaseoft hesameor
simi l
arsecur ityintwodi f ferentmar kets.Shor t-
ter
m gai ns
canbeexpect edthroughsucht ransactions..Arbit
r age
transactionshel pinenhanci ngef fi
ciencyandl i
quidityin
thest ockmar ketandi nincr easingthev olumeoft rade.
Hedger s, specul at
or sandar bit
rageur scanmi ni
mi zer i
sks
andmakepr of i
tsthrought hearbitr
agepr ocess.

TYPESOFREALANDFI
NANCI
AL
 ASSETS
Realassetsaretangiblegoodsi npossessionofaperson.
Fi
nancialsecuri
ti
esr epresentpapersthataredependent
onrealassetsforcreatingwealth.

1. REALASSETS
Realassetsareusedt oproducegoodsorser vices.
Theyaretangibleassetsthathaveaphy si
calform.
Someexampl esofrealassetsarelandandbui l
dings,
fur
nitur
e,gold,si
lver
,diamondsorar ti
fact
s.Theymay
bemar ketabl
eornon- marketabl
e.Theymayal sohav e
thefeatur
eofbei ngmov eabl
eornon- moveable.

2. FI ALASSETS
NANCI
 Financial asset sar ecal l
edpapersecur it
ies.Some
exampl esoft heseasset sar eshar es, bonds,
debent ur es, bill
s,loans, lease, deriv ati
v esandf i
xed
deposi ts.Fi nanci al assetsr epresentacl aim by
secur i
ties, ont hei ncomegener atedbyr eal asset sof
someot herpar ti
es.Suchasset scanbeeasi l
ytraded,
ast heyar emar ket ableandt ransf erabl e.Financial
asset sar et ransact i
onsbet weent woormor epar ti
es.
Forexampl e, ifaper sont akesani nsur ancepol icyof`
1,00,000ofLi feInsur anceCor porat ion, t
hecont r actis
aliabili
tyofLI Cbutanassetoft heper soninsur i
ng
himsel fbecausehehasacl aim ov ert heinsur ance
companyt or eceivet hepr incipal sum wi thint er
eston
thehappeni ngofanev entoront hecompl et i
onofa
certainnumberofy ears.

3. COMMODI
TYASSETS

Commodi t
iesareanewf orm ofinvestmenti nIndia.
Exampl esofcommodi tyasset sarewheat ,sugar,
potatoes,rubber,coffeeandot hergrains.
Commodi ti
esar ealsoint hef orm ofmet all
ikegold,
sil
ver,aluminum andcopper .Cot t
on, crudeoiland
forei
gncur rencyareot herexampl esofcommodi ti
es.
Impor t
ersandexpor t
ersinv estincommodi ti
est o
diver
sifytheirportf
oli
os.Tr ader shedgeort ransactin
commodi ti
estomakegai ns.ANat i
onal Commodi ty
andDer ivati
vesEx changeLt d.( NCDEX)hasbeenset
upinIndi
ain2003asapubl
i
cli
mit
edcompanyt
o
tr
ansacti
ncommoditi
es.

Thepromot er
sofNCDEXwer eICICIBankLt d.,
Nati
onalBankf orAgricul
tureandRur alDev elopment
(NABARD),Lif
eI nsur
anceCor porati
onofI ndi a,Punj
ab
Nati
onalBank,Canar aBank, CRISILLt d.,
Indian
FarmersFerti
l
izerCooper ati
veLt d.(IFFCO)and
Nati
onalStockExchangeofI ndiaLt d.( NSE).Al lt
hese
i
nstit
uti
onssubscr i
bedt otheequi tyshar esofNCDEX.
I
NVESTMENTAVENUES
Manyt ypesofi nvestmentav enuesorchannel sfor
maki nginvestment sar eav ai
lable.Asound
i
nv estmentpr ogrammecanbeconst ruct
edifthe
i
nv estorfami l
i
arizeshimsel fwi t
ht hev ar
ious
al
ternativeinvestment sav ail
able.Investmentmedia
areofsev eralkinds–somear esimpl eanddirect
,
otherspresentcompl expr oblemsofanal ysi
sand
i
nv esti
gations.Somei nvestment sareappr opri
atefor
onet ypeofi nvestorandanot hermaybesui t
ableto
anotherper son.

Theul timat eobj ectiveoft hei nv est ori st oder i

vea
var ietyofi nv est ment sthatmeett hispr eferencef or
riskandexpect edr eturn.Thei nv est orwi llselectthe
por tfolio,whi chwi l
l maxi mi zehi sut ili
ty .Secur it
ies
pr esentawi der angeofr i
sk- f
reei nst rument st ohi ghl
y
specul ati
v eshar esanddebent ures.Fr om t hisbr oad
spect rum, thei nvestorwi l
l hav et osel ectt hose
secur i
tiest hatmaxi mizehi sut il
ity.Thei nvestor, i
n
ot herwor ds, hasanopt i
mi zati
onpr obl em.Hehast o
chooset hesecur i
ty,whi chwi l
lmaxi mi zehi sexpect ed
ret urnssubj ectt ocer tainconsi der ations.The
i
nv estmentdeci si
oni sanopt i
mi zat ionpr oblem but
theobj ectivef unctionv ariesf r
om i nv est ortoi nvestor.
Itisnotonl yt heconst ructionofapor tf oli
ot hatwi l
l
pr omi set hehi ghestexpect edret ur nbuti tisthe
sat isfactionoft heneedoft hei nvest or .Fori nstance,
onei nvestormayf aceasi tuationwhenher equires
extremel i
qui dity.Hemayal sowantsaf etyof
secur i
ti
es.Ther efore,hewi l
l havet ochooseasecur it
y
withlowr etur ns.Anot herinv estorwoul dnotmi nd
highr i
skbecausehedoesnothav efinancial
problemsbuthewoul dli
keahi ghr et
urn.Suchan
i
nv estorcanputhi ssavingsi ngr owthshar es, asheis
will
ingtoacceptt herisk.Anot heri mportant
considerationi st hetemper amentandpsy chologyof
theinvestor .Somei nvestorsar et emper ament all
y
suitedtotaker isks;therear eot herswhoar enot
will
ingtoinv estinr i
skysecur i
ti
esev enifther eturnis
high.Onei nv estormaypr efersaf egov ernmentbonds
wher easanot hermaybewi lli
ngt oinvestinbl uechip
equityshar esoft hecompany .
Thei nv estmentav enueshav ebeencat egor i
zedasdi rect
andi ndi r
ecti nvestmentalternat
ives/avenues.Di rect
i
nv estment sar ethosewher etheindiv i
dual makeshi sown
choiceandi nvestmentdeci si
on.Indirectinvestment sare
thosei nwhi chthei ndiv
idualhasnodi r
ecthol dont he
amounthei nv ests.Hecont ri
but
eshi ssav ingstocer tai
n
organi zationsl i
keLi f
eInsuranceCor poration(LIC)orUni t
TrustofI ndia(UTI )anddependsupont hem tomake
i
nv estment sonhi sandot herpeopl e’
sbehal f.So, t
hereis
nodi rectr esponsi bi
li
tyorholdont hesecur i
ti
es.

Ani
ndi
vi
dual
alsomakesi
ndi
recti
nvest
mentf
or
reti
rementbenef it
s,int hef orm ofpr ov identf undsand
pension, l
ifeinsurancepol i
cy ,i
nvest mentcompany
securiti
esandsecur i
tiesofmut ual funds.I ndi vi
dualshav e
nocont rol overthesei nvest ments.Theyar eent rustedt o
takecar eoft hepar ti
cularor ganization.I nt he
organizationsl i
keLifeI nsuranceCor por ationorUni tTr ust
ofIndia,pr ovi
dentfundsar emanagedaccor dingtot heir
i
nv estmentpol i
cybyagr oupoft rust eesonbehal foft he
i
nv estor.Theexampl esofi ndir
ecti nv estmental t
ernat i
v es
areani mpor tantandr apidlygrowi ngsegmentofour
economy .Inchoosi ngspeci fi
cinvest ment s, investorswi l
l
needdef i
niteideasr egardinganumberoff eaturest hat
theirportfoli
oshoul dhav e.Tosummar ize:

Dir
ectinvest
mentsarethosewher ethei
ndi
vidualhas
adirecthol
donhisinvestmentdecisi
on.
I
ndirecti
nvestment
saret hosewherethei
nvestoris
dependentonanotherorganizat
ion.
1.RI
SK-
LESSVS.RI
SKYI
NVESTMENTS

Mosti nv estorsareriskav ersebutt heyexpect

maxi mum r etur
nfrom thei rinv
estment s.Ev ery
i
nv estmentmustbeanal yzedbecauset herei ssome
riskinit.Onl ygovernmentsecur i
ti
esar erisk-less.The
Indianinv estmentscenehasmanyschemest oof fert
o
ani ndi
vidual .Onananal y
si softheseschemes, i
t
appear st hattheinvestorhasawi dechoi ce.Av ast
rangeofi nvestmentsisi nt hegovernmentsect or.
Thesear emost lyri
sk-freebutl owr etur
ny ielding.
Severali
ncenti
vesareatt
achedt oit
.Thepr ivatesector
i
nvestmentsconsistofequit
yandpr eferenceshar es,
debentur
esandf i
nancial
engineeri
ngsecur it
ies.These
havethefeatur
esofhighrisk.Ult
imately
, t
hei nvestor
mustmakehi sinvest
mentdeci si
ons.

Thedi lemmaf acedbyt heIndianinv estoristhe

reconci li
ati
onofpr of i
tabil
it
y,li
quidityandr i
skof
i
nv estment s.Gov ernmentsecur i
ti
esar erisk-
freeand
theinv estorissecur ed.Howev er ,
tohi m, thereturnor
yiel
di sv eryimportantashehasl i
mi tedr esourcesand
woul dliket oplananappr eciat
ionoft heinvestments
forhisf uturerequir
ement s.Gov ernmentsecur it
iesgi
ve
l
owr eturnsanddonotf ulfi
lhisobj ectiv
eofmoney
appreci ati
on.

Pri
vatesect orsecuriti
esareat tr
acti
ve,thoughr i
sky.
Reli
ance,Infosys,Wi proandTat asgivetot heinvest
or
theexpectationoff utureappreciati
onofinv estmentby
several
times.Themul ti
nati
onal andbluechi p
companiesof f
erv er
yhi ghratesofreturnandal sogive
bonusshar est otheirshareholders.
 RealEstateandGoldhavetheadvantageofel i
mi nati
ng
theimpactofinfl
ati
on,si
ncethepricerisesexperienced
bythem havebeenv er
yhigh.TheIndianinvestorinthis
contextcannotchoosehi
sinvestment sveryeasil
y.

Ani nvestorcanmaximizereturnswi t
hmi ni
mum r i
sk
i
nvol v
edi fhecaref
ull
yanalyzest heinfor
mationpubli
shed
i
nt hepr ospect
usesofprivat
ecompani es.Content
sasthe
pastper for
mance,nameofpr omot er
sandboar dof
di
rectors, t
hemainactiv
iti
es,itsbusinessprospect
sand
sel
l
ingar
rangement
sshoul
dbeassessedbef
oret
he
i
nvest
ordeci
destoi
nvesti
nthecompany.

From t
hepointofviewofaninv
estor,
converti
blebonds
mayunderpropercondi
ti
ons,pr
oveanidealcombi nati
on
ofhi
ghyiel
d,l
owr i
skandpotenti
alofcapi
talappreciat
ion.

2.FI
XEDANDVARI
ABLEPRI PALS
NCI ECURI
TIES

Fixedpr i
nci palinv estment sarecl assif i
edast hose
whosepr incipal amountandt het ermi nalvalueare
knownwi thcer tai nty.Cashhasadef i
niteandconst ant
rupeev alue, whet heri tisdeposi t
edi nabankorkepti n
acashbox.I tdoesnotear nanyret urn.Sav i
ngs
account shav eaf ixedr eturn;theydi fferonlyintermsof
ti
meper i
od.Thepr i
ncipal amounti sf ixedplusinterest
i
sear nedont hedeposi t.Sav i
ngscer t
ifi
catesare
classifi
edasnat ional sav ingscertificates,banksav i
ngs
cer t
if
icatesandpost alsav i
ngscer ti
f i
cates.Gov er
nment
bonds, cor poratebondsanddebent ur esaresoldhav ing
af ix
edmat ur
ityv al ueandaf i
xedr ateofi ncome
ov ert
ime.

Thev ari
ablepri
ncipalsecuri
tiesdiff
erfrom t hef i
xed
pri
ncipalsecuri
ti
esbecauset heirterminal valuesare
notknownwi t
hcer tai
nty
.Thepr i
ceofpr efer ence
sharesisdeterminedbydemandandsuppl yf orces
eventhoughpr eferenceshareholdershav eaf ixed
ret
urn.Equitysharesalsohav enof i
xedr eturnor
 maturitydat e.Conv ert
ibl
esecur i
tiessuchas
convertibledebent uresorpreferenceshar escan
convertt hemsel vesintoequityshar esaccor dingt o
cert
ainpr escri
bedcondi ti
onsandt hushav ef eaturesof
fi
xedpr incipalsecur i
ti
essuppl ement edbyt he
possibil
ityofav ari
ableterminalvalue.Debent ures,
pref
erenceshar esandequi t
yshar esar eexampl esof
securit
iessol dbycompani est oinvestorstor aise
necessar yf unds.Tosummar ize:

Fi
xedsecur it
iest
erminalval
uesar ecer
tai
nwith
fi
xedreturnandmat uri
tydates.
Vari
ableprinci
palsecuri
ti
esterminalval
uesar
e
uncer
tain.Theirpr
iceisdeter
mi nedbydemand
andsupplymechani sm.

3.NON- TYI
SECURI NVESTMENTS

‘Non- securi
tyI nvestment s’diff
erfr om secur it
iesi n
othercat egories.Real estatemaybet heowner shipofa
singlehomeori ncluder esident i
alandcommer cial
proper t
ies.Thet ermi nal valueofr eal est at
eisuncer t
ain
butgener all
yt herei sapr iceappr eci ation,wher eas
depreci at
ioncanbecl aimedi ntax.Real estatei sless
l
iquidt hancor porat esecur iti
es.Mor tgagesr epr esent
thefinancingofr eal estate.Ithasaper iodi
cf i
xed
i
ncomeandt hepr incipalisr ecoveredatast ated
mat urit
ydat e.Commodi t
iesar eboughtandsol di nspot
mar kets;cont r
act stobuyandsel l commodi t
iesata
 futur
edat earet radedinfuturemarkets.Business
venturesrefertodi r
ectowner shi
pinvestmentsinnew
orgrowingbusi nessbeforefir
mssellsecur i
ti
esona
publi
cbasi s.Ar t,
anti
quesandot hervaluablessuchas
sil
ver,fi
neChi naandj ewelsarealsoanot herty
peof
speciali
zedinv estmentswhi choff
eraestheticqual
it
ies
also.

Thesefeaturesshoul
dbeconsi st
entwit
htheinv est
ors’
object
ivesandinaddit
ionshouldhaveaddit
ional
conveniencesandadvantages.Thefol
l
owingf eatur
esare
suggestedforasuccessfulsel
ecti
onofinv
estment s.

4.FEATURESOFI
NVESTMENTAVENUES

Thefeat
uresofani
nvestmentpr
ogr
ammeconsi stsof
saf
etyofpri
nci
pal
,l
iqui
dit
y,i
ncomestabi
l
ity
,adequate
i
ncome, purchasi
ngpower
,stabil
i
ty,appr
eciati
on,
f
reedom from managementofinvestment
s, l
egal
i
tyand
t
ransfer
abili
ty.

SAFETYOFPRI
NCI
PAL

Theinvestor ,t
obecer tai
noft hesaf etyofpr i
ncipal,
shouldcaref ul
lyr eviewt heeconomi candi ndust r
y
tr
endsbef or echoosi ngthet ypesofi nvestment .To
ensuresafet yofpr incipal,theinvestorshoul dconsi der
div
ersif
icationofasset s.Adequat ediversificati
on
i
nvolvesmi xingi nvest mentcommi tment sbyi ndust ry
,
geographically,bymanagement ,byf i
nanci altypeand
bymat uri
ties.Apr opercombi nati
onoft hesef actor s
wouldreducet her iskofl oss.Diversifi
cationi npr oper
i
nvestmentpr ogrammesmustber easonabl y
accompl i
shed.

LI
QUI
DITY

Ani nvestorrequir
esami ni
mum amountofl iquidit
yin
hisinvestment stomeetemer gencies.Liquiditywillbe
ensuredi ftheinvest
orbuysapr oportionofr eadil
y
saleablesecuriti
esoutofhistotalportfoli
o.Hemay ,
theref
or e,keepasmal lpr
oporti
onofcash, f
ixed
depositsanduni tswhichcanbei mmedi atel
ymade
l
iquid.Investment sl
i
kestocksandpr opertyorr eal
estatecannotensur eimmediateliquidit
y.
 I
NCOMESTABI
LITY

Regulari
tyofincomeataconsi st
entratei
snecessaryi
n
anyinvestmentpat ter
n.Notonl
ystabil
i
ty,i
tisal
so
i
mpor tanttoseet hatincomei
sadequateaftert
axes.I
t
i
spossi bl
et ofindoutsomegoodsecur i
ti
eswhichpay
pract
icall
yalltheirear
ningsi
ndivi
dends.

APPRECI ONANDPURCHASI
ATI NG
POWERSTABILI
TY

Invest orsshoul dbalancet heirportfoliostof ightagainst

anypur chasingpoweri nstabi li
ty.I
nv estorsshoul djudge
pricel evel i
nflation,exploret hepossi bil
it
yofgai nandl oss
i
nt heinv estment savail
abl et othem, li
mitationsof
per sonal andf ami lyconsi derations.Thei nvest orsshould
alsot ryandf orecastwhi chsecur i
ti
eswi l
l appreciate.A
pur chaseofpr opertyatt her ightti
mewi l
lleadt o
appr eciationint ime.Gr owt hstockwi llal
soappr eciate
ov ertime.These, howev er, shouldbedonet hrough
anal ysisandnotasspecul ati
onorgambl e.

LEGALI
TYANDFREEDOM FROM CARE

Al
li
nvest
ment
sshoul
dbeappr
ovedbyl
aw.Lawr
elat
ingt
o
minor s, estat
es, t
rusts,shar esandi nsurancebest udi ed.
Il
l
egal secur i
ti
eswi llbri
ngoutmanypr obl emsf orthe
i
nv estor s.Onewayofbei ngf reefrom car ei st oinvesti n
secur i
tieslikeUni tTrustofI ndia,LifeInsur ance
Cor porat i
on,mut ual f
undsorsav ingscer tif
icates.The
managementofsecur i
tiesi sthenlef ttothecar eoft he
Trustwhodi versi
fiesthei nvestment saccor dingt osaf ety,
stabili
tyandl i
quiditywitht heconsi derationoft hei
r
i
nv estmentpol i
cy .Theident it
yofl egal secur i
t i
esand
i
nv estment sinsuchsecur iti
eswi l
l alsohel pt heinvest orin
avoidingmanypr oblems.

TANGI
BILI
TY

I
ntangibl
esecur i
ti
eshav emanyt i
mesl osttheirvaluedue
topri
celevel i
nfl
ation,confi
scatorylawsorsoci alcoll
apse.
Somei nv
est orsprefertokeepapar toftheirweal t
h
i
nvestedintangibleproperti
esl i
kebuildi
ng, machineryand
l
and.Itmay ,howev er,beconsideredthattangiblepropert
y
doesnoty i
eldani ncomeapar tfrom thedirectsatisf
acti
on
ofpossessionorpr operty.

I
nvest mentisast udyofempl oymentoffundsf orthe
purposeofar etur
ntothei nvestor.I
tisoflong-t
erm
hori
zonandi thastobepl annedt hroughapr operprocess
ofevaluati
on.Thei nvest
mentpr ocessconsistsof
di
fferentstagessuchaspr epari
ngani nvestmentpol i
cy,
makingi nv
est mentanalysis,val
uat i
onofsecur i
ti
es,
portf
olioconst r
ucti
onandr evi
ew.
1.
1 CONCLUSI
ON
Inv est menti sempl oy mentoff undsf orachi ev i
ng
addi tional i
ncomeandgr owt hi nv alue.
Inv est mentmustbedi stingui shedf rom
specul at ionandgambl i
ngi nter msoft i
mehor i
zon,
risk, ret urnanddeci sion- maki ngpr ocess.
Inv est menti susual lypl annedwher eas
specul at ionandgambl i
ngdependoni mmedi ate
deci sionswi t
hal sot heel ementof‘ luck’.
Inv est ment sar et ransf er soff i
nanci alasset sf r
om
oneper sont oanot her .Theyr angef rom lowr i
sk
tohi ghr i
sk.
Inv est ment sar eusual lylong- term andl owr i
sk.
Specul ationishi ghr i
skandhi ghr etur nandf or
shor t-
ter m per i
odoft i
me.
Inv est ment smaybef inanci al claimsorr ealand
tangi bl easset sl i
kel andandbui ldings, plantand
machi ner y,gold,ant iques, etc.
Inv est mentmaybedi rectandi ndirectsecur it
ies
l
ikeshar esanddebent ur es.Inv estment sin
pr ovidentf unds, pensi onf undsandmut ual f
unds
ar ef ormsofi ndirecti nv est ment s.
Ani nv est mentpr ogr am shoul dconsi stofsaf ety
oft hepr i
ncipal amount ,liquidity,incomeand
pur chasi ngpowerst abilityandappr eci ation.
Theinvestmentprocessconsi
stsoffourst
ages.
Thesear ei
nvest
mentpol i
cy,i
nvest
mentanalysi
s,
val
uati
onofsecuriti
es,andportf
oli
oconstr
uct
ion
andreview.