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A STUDY ON INVESTMENT AVENUES FOR INVESTOR WITH SPECIAL REFERENCE TO BUSINESS PEOPLE AT TIRUVANNAMALAI TOWN

WORDS WORTH
High investment is possible through high savings which in turn,is due to the high disposable income of the people Finance Minister P.Chidambaram. 1.1 INTRODUCTION Wealth creation is not an art. It is an attribute of ones attitude towards money. How does one know whether have the right kind of attitude towards money? To answer this question, this topic that A Study on Investment Avenues for a Investor focus on two basic, money-related aspects and activities viz.,avenues and institution available for investment. Now-a-days,investment avenues are widen in the world to create positive sources of income, one can invest disposable income in domestic or offshore market. People in society are investing their savings in a systematic manner and many are in a unsystematic manner. Many do not have financial education. A systematic investment plan always yields a fair return.

Investment is the most important things today. People are earning handsomely, but they do not know where, when and how to invest. Everyone should realize that financial planning is a must today in order to know where one stands financially and also to focus to ones financial efforts in the right direction. A proper understanding of money, its value, the available avenues for investment, various financial institutions, the rate of return/risk etc., are essential to successful manage ones finance for achieving lifes goal. There are large numbers of investment available today. To make our lives easier they would classify or grouped under 4 main types of Investment Avenue. The terms are named as follows: 1.Financial Securities:These investment instruments are tradable and negotiable these would include equity shares, preference shares, convertible debentures, non convertible debentures, public sector bonds, savings certificates, gift-edged securities and money market securities. 2. Non-secured financial securities:These investment instruments are not tradable, transferable, non negotiable. And would include bank deposit, post office deposit, company fixed deposit, provident fund schemes, national savings schemes and life insurance.

3.Mutual fund schemes:If an investor does not directly want to invest in the markets,they could buy units/shares in a mutual fund schemes. These schemes are mainly grouth (or equity) oriented, income (or debt) oriented or balanced (i.e. both grouth and debt) dchemes. 4.Real Assets:Real assets are physical investment. This would include real estate, gold and silver,precious stones,rare coins &stamps and art objects. Increasingly, over the past several years, with competitive pressures have triggered massive shifts in the style and speed of business across the glibe. In this situation financial sector have developed through various avenues for investment.Market whether organized or unorganized various financial

instruments/avenues to enable the investors to invest their disposable income freely. This financial institutions are clearly stated their disposable income freely.The financial institutions are clearly stated their conditions and regulations subject to market risk to the investors. Under these circumstances,investors have their own time to invest and have their own choice to invest their investment in available avenues like, bank deposits,postal savings schemes,public provident fund, share market both primary and secondary, life insurance policies,government

security or bonds(like NSC), mutual funds,real estate,gold,company deposits and other avenues for investment. Therefore, investors can choose their choice among various available avenues for investment. The key to successful investing is to know what level of future financial performance is embedded in today,stocks price and to be able to revise ones expectations. Whats going on today is not important but what will happen in the future is important. Investment constantly peers into an uncertain future and anticipate change. Although,Specifically for investment for practitioner, students and other groups such as individual investors will that this dissertation will enable them to have information about available avenues for investment and alternative forms of financial institutions. 1.2. NEED FOR THE STUDY Investment is the most important thing today. Business mens are earning handsomely. They have all right to invest and spend to some extent. But lack of financial education, put them in much more difficult situation. At present lot of investment avenues are available market with investor education. Investors can choose from a varity of instruments and assets. While making the choice, they should also consider the rate of return and risk that on their investment.

Comparatively this study reveals investors mantality on investment and its implications. There are institutions which offer attractive packages to investors.Medias like TV,Newspaper,Magazines etc., help the investors to access their available avenues for investment. Majority of investor being educated elites in this study, know the available avenues of investment and institutions. Thus, to ascertain business mens psychology over investment and financial institutions, an attempt has been made to project the various available avenues for investment and the need for governments suitable action in their business. 1.3. STATEMENT OF THE PROBLEM In the investment process, that the investor should have knowledge about the investment alternatives and the markets. The rate of return on investment is highly fluctuation but at the sane time, investors have to analyze the rate of return/risk on investment. Financial institutions have been playing a key role to attract investors.Investors are being affected because of the middle agents like broker, jobber etc., Business mens earn profit handsomely but they dont know to access in various available avenues of investment. Lack of financial education, set aside their disposable income in low safety, profitability and marketability of investment As investore, they also expect a good rate of return from their investment. For all

these, they need adequate flow of information. Hence, the present study entitled INVESTMENT AVENUES FOR A INVESTORS has been taken up. 1.4. REVIEW OF LITERATURE Gold, property and financial papers constitute some of the more popular options people make use of for wealth enhancement and preservation. However, a truly effective investment portfolio must include some other avenues for investment. As such new avenues available for investment are Mutual Funds, Venture Capital, Derivatives, Share Market Funds, Bank Deposit Scheme,Postal Scheme,LIC, and Government Bonds etc. These things are innovated/introduced by research scholars in various occasions. In this way literature on investment got developed in the financial sector to some extent. M.Sellan-Senior Lecturer in Commerce-Cuddalore(2007) in his study entitled as A STUDY ON AVENUES TOWN AVAILABLE FOR INVESTMENT TO AT

CUDDALORE

SPECIAL REFERENCE

TEACHING

PROFESSIONALS AT COLLEGE LEVEL Portrayed the behavior of teaching professionals at college level in terms of planning their investment. He has taken salaried class in general and study also analyzed of investment behavior of teaching prifessionals, examined the popularity of different types of investment

avenues, found the factors that motivate to invest by the individual investor such as tax avoidance, good return with less risk, safety, marketability etc., A survey was conducted for Readers Digest by market Analysis and Consumer Research Organization(MACRO). The survey The Investment habits of indias Under -40s was sonducted with the objective of analyzing how young Indian in the 25 to 40 age invest, examining their debt managament capacity and knowing their savings habits. The study found the various reasons to invest city wise, percentage of income invest and percentage of people investing. It concluded that tax saving as a major reason to invest followed by education, marriage and finally creating wealth. TABLE1-1 Percentage of earnings invested by young Indians % OF INCOME INVESTED 1 to10% 11 to 20% 21 to 30% 31 to 40% % OF PEOPLE INVESTING 27 % 38% 21% 8%

TABLE 1-2 City wise, the 3 bigger reasons why young Indians invest 1. Mumbai 1. Buy a House 2. Save tax 3. Kids education 2. Delhi 1. Save tax 2. Create Wealth 3. Kids education 3. Kolkata 1. Save tax 2. Retirement 3. Medical expenses 4. Jaipur 1. Save tax 2. Kits education 3. Create wealth 5.Kanpur 1. Kits Education 2. save tax 3. retirement 5. Coimbator 1. Buy a House 2. Kits education 3. Kids Marriage Source: Readers Digest March 2007

1.5. OBJECTIVES OF THE STUDY Following are the objectives of the present study 1.To study the awareness about available avenues for a investors. 2.To examine the knowledge and problem about available avenues for investment. 3.To develop awareness on investment among business Peoples 4.To Analyze the investing habits of business Peoples 5.To know the expected rae of return in investment amoung business people 6.To offer suggestions on the basis of findings.

1.6. RESEARCH METHODOLOGY Definition of population and sanpling frame work Tituvannamalai District came into existence on 30th September 1989 after the bifurcation of the erstwhile North Arcot District. The District lies between 11.55* and 13.15* North latitude and 78* 20 to 79* 50 East longitude. The district is bounded on the north and west Vellore District, on the southwest by Krishnagiri District, on the south by Villupuram District and on the east by Kanchipuram District. The total population of this district 21,81,859 comprising of

10,93,191 Men and 10,88,662 womem as per 2001 census(Provisional figure). The urben population is 4,00,549 constituting 18% of the total Population,the remaining 82% ie.17,81,304 is rural population. The density of the population is 352 per sq.km. Tiruvannamalai town business people run the various type business (like Super market, Shopping Centre, Paints, Hard wares, Tile and Sanitary warew, Plywood, Auto Mobile and Agencies etc.,) Small Scale Industries: Food and Food Production-1198 Cotton textile-131 Readymade Garments-1940 Bricks& mosaic tiles-104 Blue metal-31 Xerox-280 Electrical motor rewinding-540 Total No. of Factories-251 Services and other astivities-146 Approximately Tiruvannamalai town having 21% Above Business/industries Activities. Therefore 970 Shops/Showrooms. (ANNUAL EMPLOYMENT REPORT OF TIRUVANNAMALAI DISTRICT)

Sources of data The study uses both primary data and secondary data. The primary were collected by using a structure questionnaire method. A questionnaire, containing twenty three(23) question was framed with utmost care to fulfill the objectives of the study. Secondery data were collected from books, journals, magazines, dailies, reports of various agencies, relevant web sites etc., Sample size The questionnaire was administered to 200 Business Peoples at various business activities at Tiruvannamalai Town. Hence, the sample size is 200 which accounts for 20% of population Sampling method Convenient sampling method was followed, because it is non probability sampling. Data analysis Statistically to arrive at meaningful conclusions, data were analyzed by using the following statistical tools.

For quantitative aspects Simple percentage with ranks For the qualitative aspects, the simple percentage with ranks was adopted. Percentages used in this study, have been not rounded off.

1.6. LIMITATION OF THE STUDY Following are the limitations of the present study 1. The study confines only to the Business People at Tiruvannamalai Town. Hence, the finding cannot by generalized. 2. Due to shortage of time the sample size is limited to 200 only 3. The information provided by the respondents in spontaneous and they may not be consistent. 4. Accuracy of the primary data collected depends upon the authenticity of the information filed by the respondents of questionnaires.

1.8.CHAPTERIZATION Chapter-1 Contains a brief introduction relating to available avenues for investment, need for the study, statement of the problem, review of literature, objectives, research methodology and limitations of the present study. Chapter-2 Deals with conceptual frame work of investment in general Chapter-3 Gives details of avenues for investment available in India to the Business people. Chapter-4 Focus the analysis of views expressed by business mens in Tiruvannamalai town. Chapter-5 Presents summary of findings and offers suggestions, conclusion.

CHAPTER-2 INVESTMENT-A CONCEPTUAL FRAME WORK INTRODUCTION The word Investment has many interpretations as it means different things to different persons. For a person who as lent money to another, it may be an investment for a return. Similarly, if a person purchases shares of a company, bullion or real estate for the purpose of price appreciation, it is also an investment for him. Likewise, an insurance plan or a pension plan is an investment to its purchaser. From these illustrations, it is clear that investment is a commitment of funds for earning additional income. In other words, investment is considered the sacrifice of certain present value of money in anticipation of a reward DEFINITION OF INVESTMENT The following are some important definitions of investment: An investment is a commitment of funds made in the expectation of some positive rate of returns. If the investment is properly undertaken, the returns will commensurate with risk the investor assumes. - Donald E. Fischer and Ronald J. Jordan

The purchase by an individual or institutional investor of a financial or real asset that produces a return in proportion to the risk assumed over some future investment period.-F Amling According to the above definition the current commitment of funds for a period of time in order to derive a future flow of funds that will compensate the investing unit. - For the time the funds are committed - For he expected rate of inflation. - For the uncertainty / risk involved in the future flow of funds Investment is the employment of funds on assets with aim of earning income or capital appreciation. Investment has two attributes namely time and risk. Present consumption is scarified to get a return in the future. The sacrifice that has to be borne in certain but the return in the future may be uncertain. It will therefore, be useful to understand all the important meanings of the term investment before one can have its clear concept in mind. There are basically three concepts of investment. They are, 1. Economic investment 2. Business investment

3. Financial investment 4. Gambling 1. Economic investment: According to Economists, the term investment The capital stock

refers to the additions to the capital stock of the society.

includes goods which are used in the production of other goods (buildings, equipment, investment etc.,) 2. Business investment: This refers to putting money or money held in a private business. For example, if a men puts Rs.1,00,000 in a newly opened general store, it will be said that his investment in the business amounts to Rs.1,00,000. 3. Financial investment: This refers to putting money into securities, i.e. shares debentures, Mutual Funds, bonds, life insurance, postal, bank deposit schemes etc., However, the term financial investment is generally used for investment in, shares, bonds, postal, insurance, bank deposit schemes, real estate, gold, derivates, mutual funds etc., Therefore, this study gives more concentration to financial investment. 4. Gambling: Gambling is an act of creating artificial and unnecessary risks for expected increased return. A gamble is a very short term investment base on rumours and hunches. Gambling is undertaken just for thrill and excitement. In short, gambling involves acceptance of extraordinary risks even without a through

knowledge about them for pecuniary gains. Horse racing, playing cards, lottery etc., are some typical examples of gambling. PORTPOLIO MANAGEMENT The portfolio management deals with the process of selection of investment from the number of opportunities / avenues with different expected returns and carrying different levels of risk and selection the investment is made with a view to provide the investors the maximum yield for a given level of risk or ensure minimum be risk for a given level of return. Hence, investment and portfolio management has emerged as one of the importand and specialized branches of financial management. FACTORS INFLUENCING SLELECTION OF INVESTMENT Selection of investments should rather be based on research of various factors. The fundamental consideration for investment should be a growth oriented company with substantial future potential. The major objectives of investment are increasing the rate of return and reducting the risk. Other objectives like safely, liquidity and profitability against inflation can be considered on subsidiary objectives.

Return Investors are always expected a good rate of ruturn from their investment. The investment should earn reasonable and expected return on the investment before the selection of investment the investor should keep in mind that the form of return. The return expectiong from investments in securities are of two types. They are, 1. Periodic cash receips. 2. Capital gain. 1.Periodic Cash Receips: Cash dividends are payable as and when the companys after tax earning that its board of directors divides to distribute to the shareholders. In care of debentures, bonds, bank deposits, bublic deposits etc., the coupon rate is payable at the end of each specified period.. 2. Capital Gain: The second component of return is the change in the price of the investment called the capital gain or loss. This element of return is the different between the purchase of price and the price at which the asset can be or is sold. Therefore, it can be a gain or loss. The combination of the periodic cash receipts and capital gain made on the investments constitutes the total return on particulars investment as shown below in equation(1)

Cash payment recived + Price change over the perios Total Return = -------------------------------------------------------------------Purchase price of the sucurity

Capital appreciation The other important objective of investment is appreciation of capital invested over a period. The expectation of apppreciation in sucurities is in the following three ways. i. Conservative growth ii. Aggressive growth iii. Speculation. Conservative growth: Investors with a goal to achieve conservative conservative growth seek to build an investment portpolio that will make money over the long-term by capical appreciation known as wealth building over time. Aggressive growth: Investor with a goal to achieve short-term and long-term capital gains opts for aggressive growth in stock. Current income from dividends is of a low priority and the investors are risk seekers.

Speculation: Both investment and speculation are somewhat interrelated. It is said that speculation requires investment and investments are to some extent speculative. Speculation is the purchase or sale of anything in the hope of profit from anticipated change in price. Accouding to Emery, Speculation consits in buying and selling commodities or securities or other property in the hope of a profit from anticipated changes of value. As speculation involves high risks, in order to take advantage of price fluctuations, stock brokers furnish a separate list of sucurities for speculation purposes alone. Safety and security of funds The selected investment avenue should be under the legal and regulatory frame work. If it is not under the legal frame work, it is difficult to represent the grievances, if any. Apporaval of the law if self adds a flovor of safety. Even though approved by law, the safety of the principal differs from one mode of investment to another. Investment made in government assures more safety than with private party. From the safety point of view investment can be ranked as follows bank deposits government bonds, UTI Units, debentures, shares and deposits with the non-banking financial company.(NBFCS)

Risk The lever of risk depends on the objective of investment. The investors expect greater return should also be prepares to carry higher risk. Also an investors should assure that High risk - high reward and low-risk, low-reward. By careful planning and periodical review of the market situation, the investor can minimize their risk on the portfolio. Risk avoidance and risk minimization are the important objectives of securities analysiss. Risk and Uncertainty: Some times, a decision can lead to more than one possible outcome, such siturations are best with uncertainly when it is not known exactly what will happen in future, but the variance possiblities are neglected by their assumed probability of occurrence is called risk. The difference between risk and

uncertainty has been than uncertainty cannot be quantified while risk can be quntified of the likelihood of future out comes. Represented as follows:

Types of Risk The risk is categorized into two types 1. Systematic Risk 2. Unsystematic Risk This is represented as follows:

CHART 2.2 The various types of risk


Risk

Systematic Risk: Systematic risk refers to that portion of variation in return caused by factors that affect the price of all securities. This movement is generally due to the response to economic, social and changes. The systematic risk cannot be avoided. Market Risk: Variation is prise sparked off due to real social, political and economic events is referred to as market risk. Interest Rate Risk: The uncertainty in future market values and the size of future incomes, caused by fluctuations in the general level of interest is known as interest rate risk. Inflation Risk: An uncertainty of purchasing power is regarted to as an risk due to inflation.

Unsystematic Risk: Unsystematic risk refers to that portion of the risk which is caused due to factors unique or related to a firm or industry. For examples, if excise duty or customs duty on goods increases, the share price of the industry declines. The unsystematic risk will arise due to the following reasons. External and Internal business risk: Such as business cycle, govt. policies and firms operations etc., Financial Risk: Financial Risk is associated with the capital structure of a firm. A firm with no debt financing has no financial risk. Liquidity: The liquidity of investment is the prime concern for investment prime made by an investor. Before making investment, the investor should keep in mind the degree of liquidity required. The investor should prefer for securities which ensure liquidity or marketability.

Tax Considerations The investor, before selecting the securities for investment will take into consideration the provision of income tax, Capital gains tax, and wealth tax to minimize tax burden and avail all tax examption available. FINANCE Vs INVESTMENT Investment decision and finance decision interact with each other like the two blades of a pair of scissors, the investment (and savings) decision interacts with the finance (and spending) decision to cut the pie (called total income) into mutually satisfactory (optional) proportions. For many years finance and investment have encompassed the three major areas of spending in the aggregate economy as stated in equation (2) CHART 2-3 FOUNDATION OF INVESTMENT

INVESTMENT MANAGEMENT AND OTHER DISCIPLINES Investment principles are base on elements developed in a number of academis displine. This may classified as basis (Luxury items & furniture, Consumable products, Paint, sanitary wares, tiles, items etc.,) and applied (Dealership and Distributor) as depicted in the above chart. Trade/business is assigned a special classification since it is unnecessary to some parts of the investment process but critical to some others. The above disciplines are interacts with each other while investing in modern concepts, the above mentioned disciplines are widely used while taking and investment decisions. INVESTMENT PROCESS The investment process involves a series of operations guiding to the purchase of investment avenues in the market. The flowchart shows the stages and factors connected thereof.

CHART 2-4 INVESTMENT PROCESS

CHAPTER 3 INVESTMENT AVENUES AVAILABLE IN INDIA Investing in the financial markets, arguably a subject of interest for scores, never formed part of all discipline in our curriculam. A subject that would have shaped the monetary destiny of each of us was never even considered. The concept of investor education never existed a decade ago, and crystallized only after the IPO scam in 1994-95. Fundamantal and technical analysis, which are the key to participating in the market were made available only to the privileged sections of the society then. The investors intention relating to disposable income makes the question that where, when and how to invest. In the past, investment avenues were limited to precious assets,schemes o the post office and bank. At present investors can choose from a variety of instruments and assets. While making the choice, they should consider the expected rate of return and available risk on their investment. Financial education and knowledge about the different avenues enable the

investors to choose investment intelligently. Investment avenues are of several kinds. Many types of investment channels are also available. Therefore, the investors protection and awareness on investment are becoming a necessity. To

view above all, the securities and exchange board of India (SEBI) to the lead in making the Indian retail investor well informed. The various investment avenues can be classified under the following categories. CHART 3-1 INVESTMENT MEDIA

The financial investment avenues are further classified with negotiable securities that the transferable and non negotiable securities that are not transferable. The negotiable securities may yield variable income or fixed income. These are equity shares. Bonds, debentures, government securities and money market securities. The non negotiable securities are not transferable. They yield only fixed income. They are deposits schemes of post offices, banks, companies and non bankin financial institution, etc. There are tax-banefit schemes such as public provident fund, GPF, National savings certificate etc., are also available. Mutual fund, chit fund, and venture capital etc., are another types of financial investment avenues. They are of recent in India. At present there are 1500 plus MF schemes in the market. In the last decade, the MF industry has grown substantially and today MFs. Are the best suited vehicles for individual investing. The non financial investment avenues also known as real precious assets which are also part of the portfolio. They are gold, silver, arts, property etc.,

CHAPTER V SUMMARY OF FINDINGS, SUGGESSIONS AND CONCLUTION The liberalization of Indian economy opened up several new investment opportunities and the growing disposable income made Indian less averse to risk. India has a relatively high nationsl savings rate compared with other countries. Indians are among the highest savers in the world but do not save wisely.

Anybody with a job earns money but investing wisely to make earnings grow is a very sifferent game. Most of the Business People unaware of various investment avenues available in the market they park their disposable income in unsystematic investment plans. The Business People intention relating to disposable income makes the question that where, when and how to invest. With that in mind, the researcher coined that topic and it is decided to find out,how Business People at Tiruvannamalai are investing, savings and managing their finance. The study clearly point out the followong findings. GENERAL FINDINGS People invest but do not invest wisely Objectives for invest and the choice of instruments are not matched. Need for understanding of financial management and planning People do not have a clear view over investment opportunities in the market.

Lack of knowledge to build a balance portfolio management. Investors perceptions on investment are very across all age group. Respondents feel that administered rate of return on investment is not enough. Inflated rate on investment put the investors in dilemma. Awareness about a particular avenues for investment set aside the investors to continue as it is. Need of financial literacy on the avenues for investment and financial instutions. A large majority of business peoples are investing mainly to meet financial amergency and regular income. Business peoples in the annual income range up to Rs.100000 is poor savings. A large majority of business peoples prefer to invest in financial institutions, bank, others. Venture capital and derivatives are unpopular avenues for investment. Some of the business people are used to put their investment in Real estate, mutual funds, shares and chit funds.

SPECIFIC FINDINGS An overwhelming majority (73%) of respondents had awareness about insurance followed by bank deposits, gold, real estate, chit funds, shares and postal savings schemes. Venture capital and derivatives were the most unpopular category of investments among respondents. Most of the young business people developing them business, so they are earn very low annual income, hence their investment habits are very poor. The lower level of respondent 10% business peoples earn monthly income range of 300000-500000. 9% of respondents in this area use investment to avoid income tax. 18% of the respondents have invested their investment to capital appreciations and 29% of them to make regular income. 2.5% of the respondents have invested their investment to just for parking excess cash and 2% others (like children education children marriage etc.,) 27% of respondents prefer to invest in bank deposits and 23% keep their money at financial institutions followed by 18% others (like gold, real estate and chit fund etc.,)

The majority 52% of respondents have invest in two types of investment (like bank deposit-Insurance, gold-real estate, shares-debentures) A large majority of respondents bank deposits, insurance, Real estate, postal savings schemes and gold etc., were perceived as the most safety, most profitability and most marketability investment. The majority 43% of the respondents prefer medium term investment i.e., from one year to five years. 78% respondents donts prefer reinvestment plan but their expected rate of return range of investment is 15% to 30%. The respondents felt that the problems on current investment avenues are not profitable, not safe, followed by not marketable, poor documentation, cumbersome procedure. At the time of investing majority 38% of the respondents take their own decisions after getting information from investment consultant, relation and friends, banker and media. At the time of taking future investment majority 36% of the respondents take decision through investment consultant after getting information from media, banks, own idea and relation and friends.

SUGGESTIONS The following suggestions are based on the business peoples response which may be considered by the policy markers, the finance institutions and the investors. Some business people know the awareness about investment avenues but most of the respondents they dont have sufficient knowledge. Financial institutions should create awareness sbout available avenues for investment and have to tell the people what is the meaning of risk and how it could be mitigated. Government should stress the financial institutions to conduct investor guidance workshops about available avenues for investment. Financial sector i.e., banking, financial services and life insurance industries will have to work with government. There is a need for financial literacy and instilling confidence among investors. Industry associations and NGOs to educate the investor on the need for savings and savings wisely. They should also educate the Indian population both on ways of meeting their financial objectives through financial protection and wealth creation. To overcome the problem faced by the investors, adequate policy reforms in financial sector is the need of the hour. Hence, the study may be considered that the awareness about the avenues for investment which will lead the investor in the future.

CONCLUTION Over the years, much of the mystery about financial markets have been removed layer by layer. Besides, Indian market are now one of the best regulated markets in the world. Hence, it is also time that along with increasing the overall literacy, we as a country also focus on increasing financial literacy. This would turn India from a country of good savers to a country of wise savers and help build financially strong and secure India.