SECTION I

INTRODUCTION

Investors choose to hold groups of securities rather than single security that offer that
greater expected returns. They believe that a combination of securities held together will give a
beneficial result if they are grouped in a manner to secure higher return after taking into
consideration the risk element. Traditional portfolio analysis has been of very subjective nature
but it has proved success to some investors who have made their investment by making analysis
of individual securities through evaluation of return and risk conditions.

1
 The investor has been able to get the maximum return at the minimum risk. The normal
method of calculating the return on individual security is to find out the amount of dividends,
price earnings ratio, common holding period and an estimate of the market value of the
securities. The modern portfolio theory believes in the maximization of return through a
combination of securities. It deals with the relationship between them. An investor can achieve
success by making a choice of investment outlets and combining security of low risk with
another security of high risk.

One needs to invest to and earn return on resources and generate a specified sum of
money for specific goal in life and make provision for an uncertain future. One of the important
reasons why one needs to invest wisely it’s to meet the cost of inflation. Inflation is the rate at
which the cost of living increases. Investment is the allocation of monetary resources to asset that
are expected to yield some gain or positive returns over a given period of time.

Investment Avenue means a particular organization or system in which an investor can

place surplus funds with the objectives of having certain gains in the futures. These organizations
will be well organized like bank, financial institutions, mutual funds and company. Different
investment avenues have different futures: few offer fixed return and certain others offers stock
markets based return and yet certain others offer mix of these two. Few of these have an element
of safety and yet others do not have any kind of safety. In certain cases these are in negotiable
form and in other cases these are non-negotiable. Investment alternatives of a country are subject
to different rules and regulation of either the government or sum apex body like Reserve Bank of
India, NABARD, SEBI OR Companies Act.

Features of investment alternatives:-

 A place where one can invest surplus.

 Investment accepting organization might have an obligation or not.
 Market oriented vs. others.
 Fixed or floating return.
 Risk in the inherent part of everyone avenues.
 Regulation

2
 INVESTMENT

The concept of investment has many meanings. Investment the employment of funds with the
aim of getting on it. It is the commitment of funds which have been saved from current
consumption with the hope that some benefits will receive in future. Thus; it is a reward for
waiting for money. Saving of the people is invested in assets depending on their risk and return.

THERE ARE TWO CONCEPTS OF INVESTMENTS:

(1)ECONOMIC INVESTMENT:

The concept of economic investment means additions of the capital stock of the society. The
capital stock of the society is the goods which are used in the production of there goods. The
term investment implies the information of new and productive capital in the form of new
construction and producer’s durable instrument such as plant and machinery. Inventories and
human capital are also included in this concept. Thus, an investment in economic terms means an
increase in building, equipment, and inventory.

(2)FINANCIAL INVESTMENT:

This is an allocation of monetary resources to assets that are expected to yield some gain or
return over a given period of time. It is a general or extended sense of the term. It means an
exchange of financial claims such as shares and bonds, real estate etc. Financial investment
involves contracts written on pieces of paper such as shares and debenture. People invest their
funds in shares, debentures, fixed deposits, National saving certificate, Life Insurance polices,
provident fund etc. In their view, investment is commitment of funds to derive future income in
the form of interest, dividends, rent, premiums, pension benefits and the appreciation of the value
of their primitive economics most investment are of the real variety whereas in a modern
economy much investment is of the financial variety.

3
The economic and financial concepts of investment are related to each other because investment
is a part of the saving of individuals which flow into the capital market either directly or through
institutions. Thus, investment decision and financial decision interact with each other. Financial
decisions are primarily concerned with the source of money where as investment decisions are
traditionally concerned with uses or budgeting of money.

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 INVESTMENT OBJECTIVE

Investing is a wide spread practices and many have made their fortunes in the process.
The starting point in this process is to determine the characteristics of the various investments
and then matching them with the individuals need and objectives. These objectives may be
tangible such as buying a car, house etc .and intangible objectives such as social status, security
etc. similarly; these objectives may be classified as financial or personal objectives. Financial
objectives are safety, probability and liquidity. Personal or individual objectives may be related
to personal characteristics of individuals such as family commitments, status, dependents,
educational requirement etc.

The objectives can be classified on the basis of the investors approach as

follows:

(A)SHORT TERM HIGH PRIORITY OBJECTIVES:

Investors have a high priority towards achieving certain objective in a short time. For
example, young couple will give high priority to buy a house. Thus, investors will go for high
priority objectives and invest their money accordingly.

(B)LONG TERM HIGH PRIORITY OBJECTIVES:

Some investors look forward and invest on the basis of objectives of long term needs. They
want to achieve financial independence in long period. For example, investing for post-
retirement period or education of a child etc. investors, usually prefer a diversified approach
while selecting different types of investments.

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(C) LOW PRIORITY OBJECTIVES:

These objectives have low priority in investing. These objectives are not painful. After
investing in high priority assets, investors can invest in these low priority assets. For example,
provision for tour, domestic appliance etc.

(D) MONEY MAKING OBJECTIVES:

Investors put their surplus money in this kind of investment. Their objective is to maximize
wealth. Usually, the investors invest in shares of companies which provide capital appreciation
apart from regular income from dividend.

6
 INVESTMENT AND SPECULATION

“Speculation is an activity, quite contrary to its literal meaning, in which a person

assumes high risks, often without regard for the safety of his invested principal, to achieve large
capital gains.” The time span in which the gain is sought to be made is usually very short.

Investment involves putting money into an asset which is not necessarily marketable in
order to enjoy a series of returns. The investor sacrifices some money today in anticipation of a
financial return in future. He indulges in a bit of speculation. There is an element of speculation
involved in all investment decision. However, it does not mean that all investment are
speculative by nature. Genuine investments are carefully thought out decision. On the other
hand, speculative investments are not carefully thought out decisions. They are based on tips,
and rum ours.

An investment can be distinguished from speculation in three ways -:

 Risk
 Capital Gain
 Time Period

Risk has definite financial meaning. It is a possibility of incurring a loss in a financial

transaction. Investment involves limited risk while speculation is considered as an
investment of funds with high risk. The purchase of a security for earning a stable return
over a period of time is an investment whereas the primary motive to earn high profits
through price changes in termed as speculation. Thus, speculation involves buying a
security at low price and selling at high price to make a capital gain. Investment involves
longer term allocation of funds whereas speculation involves holding security for a short
term and trading quickly for earning higher gain.

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Speculation involves a higher level of risk and more uncertain expectation of returns.
Investments are not risk-free but the risk can be calculated. The expected return is
consistent with the risk of the investment. The truth is that any investment is a
speculation if the investor uses his judgment and forecasts the probable course of events
in order to reap the returns on his investment.

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 ELEMENTS OF INVESTMENTS

a) RETURN:
Investors buy or sell financial instrument in order to earn return on them. The
return on investment is the reward to the investors. The return includes both
current income and capital gains or losses, which arises by the increases or
decreases of the security price.

b) RISK:
Risk is the chance of loss due to variability of returns on investment. In case of
every investment, there is a chance of loss. It may be loss of interest, dividend or
principal amount of investment. However, risk and return are inseparable. Return
is a precise statistical term and it is measurable. But the risk is not precise
statistical term. However, the risk can be quantified. The investment process
should be considered in terms of both risk and return.

c) TIME:
Time is an important factor in investment. It offers several different
courses of action. Time period depends on the attitude of the investor who follows
a “buy and hold” policy. As time moves on, analysts believe that conditions may
change and investors may revaluate expected return and risk for each investment.

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d) LIQUIDITY:
Liquidity is also important factors to be considered while making an investment.
Liquidity refers to the ability of an investment to be converted into cash as and
when required. The investors want his money back any time. Therefore, the
investment should provide liquidity to the investor.

e) TAX SAVING:
The investor should get the benefit of tax exemption from the
investment. There are certain investments which provide tax saving investment
increase the return on investment. Therefore, the investors should also think of
saving income tax and invest money in order to maximize the return on
investment.

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 INVESTMENT ATTRIBUTES

Every investor has certain specific objectives to achieve through his long term/ short term
investment. Such objective may be monetary/ financial or personal in character. The
objective included safety and security of the funds invested (principal amount), profitability
(through interest, dividend and capital appreciation) and liquidity (convertibility into cash as and
when required). These objectives are universal in character as every investor will like to have a
fair balance of these three financial objectives. An investor will not like to take under risk about
his principal amount even when the interest rate offered is extremely attractive. These objective
or factors are known as Investment Attributes.

There are personal objectives which are given due consideration by every investors while
selecting suitable avenues for investment. Personal objectives may be like provision for old age
and sickness, provision for house construction, provision for education and marriage of children
and finally provision for dependents including wife, parents or physically handicapped member
of the family.

Investment Avenue selected should be suitable for achieving both the objectives
(financial and personal) decided. Merits and Demerits of various investment avenues need to be
considered in the context of such investment objectives.

(1) PERIOD OF INVESTMENT:

Period of investment is one major consideration while selecting avenue for investment.
Such period may be short(up to one year), medium (one to three year) or long (more
than three years). Return/rate of interest is normally more in the case of longer term
investment while it is less in the shorter period investment. The period of investment
relates to liquidity. An investor has to decide when he needs money back and adjust the
period accordingly. LIC policy is an investment for a very long period. Balance in the
savings bank account is a short term investment with highest liquidity but lowest rate of
return.

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(2) RISK IN INVESTMENT:
RISK is another factor which needs careful consideration while selecting the avenue for
investment. Risk is a normal feature of every investment as an investor has to part with
his money immediately and has to collect it back with some benefit in due course. The
risk may be some investment avenues and less in others.
The risk in the investment may be related to non-payment of principal
amount or interest thereon. In addition, liquidity risk, inflation risk, market risk,
political risk, etc. are some more risks connected with the investment made. The risk in
investment depends on various factors. For example, the risk is more, if the period of
maturity is longer. Similarly, the risk is less in the case of debt instrument (e.g.
debenture) and more in the case of ownership instrument (e.g. equity share). In addition,
the risk is less if the borrower is creditworthy. It is always desirable to select an
investment avenue where the risk involved is minimum/comparatively less. Thus, the
objective of an investor should be to minimize the risk and to maximize the return out
of the investment made.

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 SECTION II

LITERATURE OF REVIEW
Investment is the employment of funds with the aim of achieving additional income
or growth in value. The essential quality of an investment is that it involves ‘waiting’ for
a reward. It involves the commitment of resources, which have been saving or put avail
from current consumption in the hope that some benefits will accrue in future. The term
investment not appears to be as simple as it has been defined. Investment has been further
categories by financial experts and economist. It has also often been confused with the
term speculation.
Invest is the allocation of monitoring resources to assets that are expected to yield
some gain or positive return over a given period of time. These assets range from sage
investment to risky investment. Investment in this form are also called “Financial
Investment”.
From the point of view people who invest their funds, they are suppliers of ‘capital’
and in their view, investment is a commitment of a person funds to derive future income
in the form of interests, dividends, rent, premiums, pension benefits or the appreciation of
the value of their principle capital. To the financial investors it is not impartment whether
money is invested for a productive use or for the purchase of second hand instruments
such as existing shares and stocks listed on the stock exchanges. Most investment are
consider transfers of financial assets from one person to another.

Investments are Important

Investments are both important and useful in the context of present- day
conditions. Some factors that have made investment decision increasingly important are:

 Longer Life Expectancy Or Planning For Retirement:-

Investment decision have become significant as people retire between the age
of 55 and 60. Also, trend shows longer life expectancy.

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 Increasing Rates Of Taxation:-

Taxation is one of crucial factors in any country, which introduces an element of

compulsion in a person’s savings.

 Interest Rates:-
Other aspects which is necessary for a sound investment plan is the level of interest
rates. Interest rates vary between one investment and another. Theses may vary between
risky and safe investments. Stability of interest as important as receiving a high rate of
interest.

 Inflation:-
Inflation has become a continues problem since the last decade. In these years of
rising prices, several problems are associated coupled with a falling standard of living.
The interest earned through investment should not unduly increase taxation burden.

 Income:-
Another reason why investment decisions have assume important is the general
increase in the employment opportunities. The employment opportunities give rise to
both male and female working force.

 Investment Channels:-
The investors in choice of investment will have to try to achieve a proper mix
between high rate of return and stability of return to reap the benefits of both. Some of
the instrument available at corporate stock, life insurance, fixed deposit in corporate
sector.

 Elements Of Investment:-
Investment is concerned with the purchase sale of financial asses and the attempt of
the investor to make logical decisions about the various alternatives in order to earn
returns of them. The returns are further dependent on the varying degrees of risk.

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 The financial and economic meaning of investment are related to each other because
investment is a part of savings of individual which flow into the capital market either or
through institutions.

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 COMPARISON OF INVESTMENT AVENUES

Selection of suitable avenue for investment depends on various factors. An integrated

approach on the part of an investor is necessary in this regard. An investor also needs proper
education, training, and guidance for the selection of most convenient avenues for his
investment. It is a delicate decision which needs knowledge, judgment and vision.

Investment decision needs flexibility as per the situation in capital and money markets.
They need periodical review for suitable adjustments. An investor has to review his investment
portfolio and make suitable adjustments in the same periodically. Investment made in a particular
avenue may become risky or unremunerative after a period of five or ten years. Such investment
avenue needs to be replaced by selecting a better avenue. This suggests the importance of
flexibility in investment decisions. The following points are considered for selecting suitable
investment avenue:

Period of
Invesment
Investment Risk in
Objectives Investment

Selection
Return on of Market
Standing of
Investment
Investment Borrowing
Agency
Avenues
Future
Tax Marketabili
Benefits ty
Loan
Facility

Basic Consideration for Selection of Investment Avenue

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 TAX SAVING INVESTMENT
There are certain schemes introduced for the purpose of tax saving. These
schemes provide income tax benefits to the investors who invest in these schemes. Under
Section 80C of the Income Tax Act, 1956, the following schemes are eligible for tax
saving. The Finance Act, 2010 provides tax exemptions up to RS.1,00,000 for the
investment in the following schemes:-

1. LIFE INSURANCE PREMIUM:

Life Insurance Premiums paid by a person on his life

or on the life of spouse or on life of any child of that person is entitled for deduction
under this section. Maximum Premium of 20% of the policy amount can be allowed
for deduction.

2. PUBLIC PROVIDENT FUND:

Investment made by an Individual towards the 15 years

Public Provident Fund set up by the government under the Public Provident Fund
scheme, 1968 is qualified for deduction up to a maximum of RS.70,000 in a year.

3. POST OFFICE SAVING DEPOSITS:

Any sum deposited in a 10 years or 15 years

account under the Post Office Savings Bank Rules 1959 by an Individual is entitled
for deduction up to a limit of RS. 1,00,000.

4. NATIONAL SAVINGS CERTIFICATE (NSC):

Amount invested by an individual in National Saving Certificate issued by Post

Office is entitled for deduction.

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 5.UNIT LINKED INSURANCE PLAN (ULIP):

Investment made by an individual for participating in the Unit Linked Insurance

Plan of Unit Trust of India are entitled for deduction up to an amount of Rs.1,00,000
in a year.

6. DEPOSITS IN NATIONAL HOUSING BANK:

Any sum invested in home loan account schemes of the National Housing Bank is
entitled for deduction up to an overall limit of Rs. 60,000 in a year.

7. REPAYMENT OF HOUSING LOAN:

Payment not exceeding Rs. 1,00,000 in respect of loan installment or repayment of

housing loan taken for the purpose of a residential house is entitled for deduction.

8. FIXED DEPOSIT:

FD in a bank for more than 5 years maturity period is allowed as

deduction up to Rs. 1,00,000.

9. MUTUAL FUND:

Investment up to Rs. 1,00,000 in units of a mutual fund referred to in Section 10(23D); popularly
known as Equity Linked Saving Scheme (ELSS) and approved by the board are eligible for
deduction under this act.

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 10. LIC’s PENSION PLAN:

The premium paid for LIC’s a New Jeevan Suraksha Policy qualifies for deduction up to a
limit of Rs. 1,00,000 in a year.

In addition deduction of Rs. 20,000 is available u/s 80CCF of the Income Tax
Act, 1956 towards the amount invested in the Infrastructure Bonds which will be of a Long Term
in nature.

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 INVESTMENT ALTERNATIVES

Wide varieties of investment avenues are now available India. An investor can himself select the
best avenue after studying the merits and demerits of different avenues. Every financial
advertising, newspapers, supplements on financial matters and investment journals offers
guidance to investor in the selection of suitable investment avenues.

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The following investment avenues are popular and used extensively in India:

(1) INVESTMENT IN SHARES, DEBENTURE AND BONDS of different types of issued by

companies, corporations and public sector organization.

(2) POSTAL SAVING SCHEME

(3) PF, PPF, AND OTHER TAX SHELTER SAVING SCHEMES such as National Saving
Schemes, National Saving Certificate and Tax Saving Schemes of LIC, ICICI, Infrastructure
bonds and so on.

(4) INVESTMENT IN INVESTMENT INTERMEDIARIES such as UTI and mutual funds

run by LIC, banks and HDFC etc.

(5) DEPOSITS IN COMPANIES (public deposits) or deposits in public sector organization and
banks.

(6) LIFE INSURANCE INVESTMENT i.e. investment in different life policies such as whole
life policy, endowment policy and so on.

(7) INVESTMENT IN GOLD, SILVER, PRECIOUS METALS AND ANTIQUES

(8) INVESTMENT IN REAL ESTATE

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(9) INVESTMENT IN GILT-EDGED SECURITIES and securities of government and semi-
securities organization (e.g. Relief bonds, bonds of port trusts, treasury bills etc.)

It may be noted that there are some avenues/ investment schemes where tax
benefits are available. Such schemes are called tax saving schemes of investment the tax
liability reduces when investment is made in such schemes. The schemes are decided by the
government and announced along with the annual budget. A tax payer can take the benefit of
such schemes and bring down his total tax liability. The basic purpose of such schemes is to
encourage investment in certain investment avenues. In some schemes, the entire investment is
made tax free i.e.it is deducted from yearly taxable income.

POPULAR TAX SAVINGS INVESTMENT SCHEMES ARE AS NOTED

BELOW:

(1) Public Provident Fund (PPF)

(2) Tax sheltered saving schemes of post office such as NSC, NSS etc.

(3) Investment in Infrastructure Bonds of IDBI, ICICI.

(4) Life Insurance Schemes where insurance premium is given tax benefit.

(5) Investment in Mutual funds. Here, the tax benefit relates to income earned through such
investment.

(6) Investment in Residential House. Principal as well as Interest provide tax benefits.

(7) Investment in Pension Plan of Life Insurance Companies.

(8) Med claim i.e. Health Insurance.

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 National
(postal)
Bank Saving Real
Deposits Scheme Estate

Public
PF/ PPF
Deposits

HDFC Investmen UTI &

Mutual
Schemes
t Avenues Funds

LIC GOI Saving

Schemes Bonds

Money Shares
Market and
Securities Gold and Debenture
Silver

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 INTRODUCTION OF INVESTMENT ALTERNATIVES

Alternative Investment assets are those which are not part of traditional asset classes such as
cash, stocks, or bonds that retail investors are most familiar with. Such a definition would
encompass investing in mainstream assets such as real estate or commodities or luxury goods
such as artor wine. However, for this report, alternatives will be those which have historically
utilized distinctive fund structures and which only wealthy individuals and institutions have had
access to. Alternatives will thus encompass a wide range of asset classes, including private
equity real estate and private equity infrastructure funds, secondary funds, and private debt
funds. In particular, this report will focus on three asset classes: private equity buyouts, hedge
funds, and venture capital. Historically, these three have played the most important role in the
evolution of the industry and have accounted for the vast majority of the capital allocated to
alternatives.

There are various investment alternatives which are available to Indian investor. An
investor may select one or a combination of the best investment options which appeals to him or
her. The selection of the investment options also depend on the age, income, dependents etc. of a
particular person. Different avenues and alternatives of investment included share market,
debenture, or bonds, money market instrument, mutual funds, life insurance, real estate, precious
objects, derivatives, non- marketable securities. All investment avenues are differentiated based
on their distinctive features in terms of risk, return, term etc.

Investment avenues are the outlets of funds. There are varieties of investment avenues or
alternatives. Investors are free to select any one or more alternative avenue depending upon their
needs. All categories of investors are equally interested in safety, liquidity and reasonable return
on the funds invested by them. In India, investment alternatives are continuously increasing
along with new developments in the financial markets. Investment is now possible in corporate
securities, public provident fund, mutual fund etc. Thus, wide variety of investment avenues are
now available to the investors. However, the investors should be very careful about their hard
earned money. An investor can select the best avenue after studying the merits and demerits of
the following investment alternatives:

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(1) Shares and Debentures
(2) Government Bonds
(3) Money Market Instrument
(4) Public Deposit
(5) Bank Deposit
(6) Post Office Saving
(7) HDFC Schemes / Housing Bank Schemes
(8) Mutual Fund Schemes
(9) Life Insurance Schemes
(10) Public Provident Fund
(11) Gold – Silver
(12) Real Estate

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 NON- MARKETABLE FINANCIAL ASSETS

Non-marketable financial asset refers to those financial instruments that cannot be sold in
the capital market. The investors can invest their funds in such financial instrument but
they cannot sell them in capital markets.
Some of the non-marketable financial assets are as follows:
(1) Post Office Saving Scheme
(2) Public Provident Fund (PPF)
(3) Bank Deposits
(4) Company Deposits/ Public Deposits

(1) POST OFFICE SAVING SCHEME:

Post office operates as a financial institution. It collects small saving of the people
through saving bank accounts facility. In addition, time deposit and government loans are
also collected through post offices. Certain government securities such as Kisan Vikas
Patras, National Saving Certificates, etc. are sold through post offices. New schemes
are regularly introduced by the postal Departments in order to collect saving of the
people. This includes recurring deposits, monthly income scheme, PPF and so on.
Post office is one of the oldest and the largest saving institution in the country. With a
network of more than 1.5 lakh post offices across the country, Indian post offers various
post office saving schemes. These are risk free investment options that are safe and
secured and also provide stable returns.
Postal saving banks scheme were popular in India for a long period as banking
facilities were limited and were available mainly in the urban areas up to 1950s. The
popularity of postal saving schemes is now reducing due to growth of banking and other
investment facilities throughout the country. However, even at present, small investor use
postal saving facilities for investing their saving/ surplus money for short term/ long term
due to certain benefits like stable return, security and safety of investment and loan
facility against postal deposits. Even tax benefit is one attraction for investment in post
office. Investment in postal scheme is as good as given money to government for

26
 economic development along with reasonable return and tax benefit. Post Office
Saving Bank (POSB) has a customer base of more than 11 crore account holder with
annual deposits exceeding Rs.70,000 crore and the network 1,55,000 branches. The
outstanding balance under all national saving schemes in post offices stood at Rs.
2,18,695.15 crore by March 2001. Postal Saving Scheme included the following:

A. SAVING BANK ACCOUNTS :

No fixed period. Simple interest rate 4% p.a. The
maximum balance that you can hold in a single account is Rs. 1,00,000 and in joint
account Rs.2,00,000.

B. MONTHLY INCOME SECHEME:

Period: 6 years. Interest rate is 8.00 per cent p.a.
payable monthly. Plus bonus @ 10 per cent at maturity with effect from March
1, 2003. (The rate was 9 per cent from March 1, 2002). There will be no tax
deduction at source.

C. RECURRING DEPOSITS:
Period 5 years. Interest rate 8.4 p.a. The interest is
compounded on quarterly basis. Maturity value is notified and paid accordingly.

D. TIME DEPOSITS:
Period: 1 year to 5 years. No maximum limit of deposit in an account. The
interest rates on time deposits with effect from March 1, 2003 are as noted
below:

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 Period Interest Rate
1 years 8.40%
2 years 8.40%
3 years 8.40%
5 years 8.50%

E. INVESTMENT IN GOVERNMENT SECURITIES:

Investment in government
securities is possible through post office. Here, the terms and conditions are
fixed by the government.
Thus, post office provides various schemes for safe investment of surplus
funds. However, the return on investment is rather low. The interest rates are
reduced considerably in recent year. Such trend of lowering of interest rate is
applicable to all types of saving schemes in India. The postal rules and
producers are lengthy. Moreover, quick service and personal attention are not
given due to inadequate staff, use of old methods and producers etc.

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 POSTAL DEPOSIT

Sr. No. Scheme Interest Minimum Maximum Tenure Tax

Rate % Investment Investment Benefits
1 Monthly 8.40 1500 4,50,000 6 years Nil
Income
Scheme
2 Kisan Vikas 8.41 100 No Limit 8.7 years Nil
Patra
3 Recurring 8.30 10 No Limit 5 years Nil
Deposit
4 NSCs 8.50 100 No Limit 6 years 80C
5 Saving 4.00 50 1,00,000 Nil
Account
6 Time 8.20 to 200 No Limit 1 to 5 80C
Deposit 8.40 years
7 Senior 9.20 1000 15,00,000 5 years 80C
Citizen
Saving
Scheme
8 Public 8.70 500 70,000 p.a 15 years 80C
Provident
Fund

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(2) PUBLIC PROVIDENT FUND:
Public provident fund (PPF) is a savings-cum tax
saving instrument in India. The aim of this scheme is to mobilize small saving by
offering an investment with reasonable returns combined with income tax benefit. This
PPF scheme serves to be one of the most beneficial investment options for both salaried
people as well as those who are self-employed. This scheme is introduced in 1969.

The highlights of PPF:

 Period- 15 years
 Interest Rate- 8.70% p.a
 Maximum Deposit Amount- Minimum Rs.500 and Maximum Rs.1,50,000 in
financial year.
 Tax Benefit-
a. Interest earned is fully exempted.
b. Annual contribution qualifies for tax rebate under sec 80C of Income
Tax.

The features of PPF scheme are as noted below:

(1) PPF account may be opened at any branch of the SBI or its subsidiaries or at
specified branches of nationalized banks like the Bank of Maharashtra, Bank of
Baroda etc. PPF account can be opened even in a post office on the same
terms and conditions. Such account can be opened by any individual or by HUF.
Even NRI can be opened PPF account.
(2) The PPF account is for a period of 15 years but can be extended for more years
(five years at a time) as the desire of the depositor.
(3) The depositor is expected to make a minimum deposit of Rs. 100every year.
Money can be deposited once in every month.
(4) The PPF account is not transferable, but nomination facility is available.

30
 (5) The deposits in PPF account are qualified for tax emptionunder the Income Tax
Act (section 80C). The balance amount in PPF account is fully exempted from
the Wealth Tax. The PPF account is also exempted from attachment from the
court.

Advantage of PPF Account:

(1) Lowest risk than any other Government or Private schemes.

(2) Higher returns.
(3) Tax Benefits
(4) Provision for old age, retirement etc.

Limitations of PPF Account:

(1) Long Lock in period (15 years)

(2) Low liquidity

(3) BANK DEPOSIT:

The term bank deposit refers to an amount that is placed (invested) into a bank
account. It is a sum of money that is deposited in a bank for the purpose of
earning interest. Investment of surplus money in bank deposits is quite popular
among the investors. Banks collect working capital for their business through
deposits called Bank Deposit. The deposits are given by the customer for specific
period and the bank pays interest on them. In India all types of banks accept
deposit by offering interest. The deposits can be accepted from individuals,
institutions and even business enterprises. The business profitability of banks
depends on deposit collection. For depositing money in bank, an investor/
depositor has to open in a bank.

31
 Different types of deposit accounts are:
1. Current Account
2. Saving Account
3. Fixed Deposit Account
4. Recurring Deposit Account

NRIs and NREs can keep money in nationalized and other banks as saving or
fixed deposits. In case of NRI and NRE Account, the bank is not taxable. Some banks
offer one percent higher interest rate on NRI and NRE accounts.

IMPORTANT FEATURES OF BANK DEPOSIT ACCOUNT ARE AS

FOLLOW:

(1) Any individual (of major age) can open a bank account by following simple
procedure. An account holder is treated as bank customer and all normal banking
facilities and services offered to him. A bank account may be single or joint
nomination facility is also given to account holder.
(2) Deposit in the banks is safe and secured. They can be withdrawn as per the
term and conditions of the bank account. The benefit of deposit insurance
scheme is also available to bank depositors.
(3) Money can be deposited at any time in the case of current and saving bank
accounts. In the case of fixed deposit account, it is deposited only once and
money is deposited every month in the case of recurring deposit account.
(4) Interest is paid on bank deposits(expect current deposit)
The interest rate is decided by the RBI from time to time as per the money market
station. The co-operative banks offer nearly one per cent higher interest rate as
compared to commercial banks. Even senior citizen are offered a little higher
interest rate (normally one per cent).

32
 Interest rates of State Bank of India

DOMESTIC/ NRE/ NRD TERM DEPOSIT

Period For public (%) For senior citizen (%)

7 days to 90 days 7.50 7.50
91 days to 179 days 7.50 7.50
180 days to 210 days 6.80 6.80
211 days to 1 year 7.50 7.50
1 years to 2 years 9.0 9.25
2 years to 3 years 9.0 9.25
3 years to 5 years 9.0 9.25
5 years to 10 years 9.0 9.25

As per the government policy the bank interest rates are going down for the last 3-4
years. People now money in banks for safety and liquidity and not for interest payment
which is no more attractive.

Interest on NRI Deposits is as follows:

Period Interest Rate %

1 years to 2 years 3.72%
2 years to 3 years 3.15%
3 years to 5 years 3.45%

(5) Interest is paid on quarterly or six monthly bases. However, if the deposit
period is less than 90 days, the interest is paid on maturity.
(6) Bank deposits have high liquidity. Banks even give loan on the security of fixed
deposit receipts.

33
ADVANTAGES OF BANK DEPOSITS:

a. Highly safe and secured investment.

b. Reasonable Return on Investment.
c. Higher liquidity as money can be easily withdrawn whenever required.

DISADVANTAGES OF BANK DEPOSITS:

a. No scope for capital appreciation.

b. Low returns.

(4) COMPANY DEPOSITS/ PUBLIC DEPOSITS:

1. Nowadays, fixed deposits are not only accepted by banking institutions. Fixed
deposits are also accepted by companies in order to meet their financial
requirements.
2. Thus, company fixed deposit is the deposit placed by investors with companies
for a fixed term carrying a prescribed rate of interest.
3. Fixed deposit placed with banks is known as Bank Fixed Deposit. Whereas fixed
deposit placed with companies is known as Company Fixes Deposit.
4. Company fixed deposits offer higher returns than bank fixed deposits.
5. Company deposits are unsecured deposits as there is an element of risk associated
with company fixed deposits. The investors will not be able to recover his capital
if the company goes into financial crisis. Investor would have no rights on the
asset of the company
6. Thus, credit rating of the company plays a significant role in investor’s decision.
An investor should opt for the company with AA or AAA rating, as company
rated below could be risky.
7. Interest rate offered on company fixed deposits is in the range of 9% to 15%.

34
 MONEY MARKET INSTRUMENT
The money market instrument is the market in which short term funds are borrowed
and lent. The financial instruments for raising short term funds in the money market are
known as Money Market Instrument. Thus, money market instruments are short term
debt instrument having a maturity ranging from one day to one year and are extremely
liquid.

Some of the money market instruments are:

(1) TREASURY BILL:

a) Treasury Bills are one of the safest money market instruments as they are
issued by central government. They are zero- risk instruments and hence
returns are not that attractive.
b) Treasury Bills are issued by the Government of India to meet their short-term
financial requirements.
c) Treasury Bills are issued at a discount to their face value and redeemed at par.
Thus, the difference between the purchase price and the maturity value is the
interest earned by the buyer of the instrument. The purchase price of Treasury
Bills is determined by the bidding process through auctions.
d) Treasury Bills arecirculated by both primary markets as well as secondary
market. They come with the maturities of 3- month, 6- month and 1 year.
e) At present, the government of India issues three types of treasury bills through
auctions. They are:
 91 days T- bill
 182 days T- bill
 364 days T- bill

35
 (2) COMMERCIAL PAPERS:
Commercial paper (CP) is a money market security. It
is a short term unsecured promissory note issued by a firm for the loan taken. Such
commercial papers are issued by reputed companies for meeting their urgent short
term needs
The features of commercial paper are as follow:
a) The usual period for the issues of commercial paper is 180 days.
b) It is sold at a discount and redeemable at its face value.
c) The denomination of commercial paper is normally high and is bought by institutional
investors and companies for short term investment of surplus funds available with them.
Commercial paper is not popular with the individual investors as they do not have
capacity to purchase it due to high denomination. The return on investment is also not
attractive.
The commercial papers were introduced in India as per framework suggested
by the Working Group on Money Market in 1987.The RBI announced its decision to
introduce a scheme under which certain companies could issue CPs in the Indian Money
Market. The RBI issued guidelines to issue CPs which come into effect from 1 st January
1990. The objective was to enable highly rated companies to diversify their sources of
short term borrowings. It is an addition instrument for the investor in the market. The
guidelines issued by the RBI were applicable to all non-banking financial and non-
financial companies who intend to raise funds through issuing CPs. The companies
governed by the Foreign Exchange Regulation Act, 1973 have been granted general
permission by the RBI to issue commercial papers. Any private or public sector company
could issue CPs provided that it satisfies the conditions laid down by the RBI.
Any person, bank, company incorporated or unincorporated body could invest
in CPs. Non Resident Indians were also allowed to invest in CPs but only on non-
reparable and non-transferable basis and this must be indicated on CPs issued to them.
The maturity period of CP was initially from 3 months to 6 months. The minimum size of
a CP was Rs.25 lakhs and CPs was to be issued in the multiples of 25 lakhs subject to the
minimum size of an issue being Rs.1 crore. Similarly, the minimum amount to be

36
invested by a single investor in the primary market was Rs. 1 crore of the face value. The
CP could be issued on a single date or in parts on different dates within a period of two
weeks from the date of approval of issue by the RBI. These conditions were modified by
the RBI later on. CPs is to issue at a discount to their face value and the discount rate is to
be freely determined in the market. The timing amount of issue of CPs need the approval
of RBI. CPs is freely transferable and negotiable. Banks are not permitted to either
undertaker to co-accept the issues of CPs. A company issuing CPs may seek the standby
facility from its banker for an amount not exceeding the amount of the issue for meeting
the liability of the CPs on maturity. The issuing company is required to meet the stamp
duty, dealer’s fees, rating agency fees, the standby facility charges and all other expenses
required for issuing CPs. The maximum amount of CP finance that a company allowed to
raise is limited to 20per cent of the maximum permissible bank finance. The working
capital fund based limit of the issuing company from banks is to be reduced to the extent
of the amount of CPs when they are actually issued.

(3) CERTIFICATE OF DEPOSIT:

A certificate of deposits a time deposit with a commercial bank but can be
negotiated.
a. Certificate of deposit is a promissory note issued by a bank in the form of a
certificate entitling bearer (holder) to receive interest. It is similar to bank
term deposit account
b. The certificate maturity date, the fixed rate of interest and the value. It can be
issued in any denomination.
c. These certificates are available in the tenure of 3 months to 5 years and
restrict the holders to withdraw funds on demand. However, on payment of
certain penalty the money can be withdrawn on demand.
d. The returns on certificate of deposits are higher than treasury bill because
assumes higher level of risk.

37
(4) BANKERS ACCEPTANCE:

a. Bankers Acceptance is like a short term investment plan that comes

from a company or a firm backed by a guarantee from the bank. It is
like a bill of exchange stating a buyers promise to pay the seller a
certain specified amount on a certain date.And the bank guarantees
that the buyer will pay the seller at a future date.
b. Firms with strong credit rating can draw such bill.
c. These securities come with the maturities between 30 and 180 days
and the most common term for these instrument is 90 days,
d. It is used by companies as time draft to finance imports and exports.

(5)COMMERCIAL BILLS/ BILLS OF EXCHANGE:

a. Commercial bills are short term, self liquidating money market

instrument with low risk.
b. It is negotiable instrument and hence is easily transferable.
c. A bill of exchange is drawn by a seller on the buyer to make payment
within a certain period of time. The duration of this bill ranges
between 1 to 6 months.
d. Commercial bills are purchased and discounted by commercial banks
and rediscounted by financial institutions like EXIM banks, SIDBI,
IDBI etc.

(6)CALL AND NOTICE MONEY:

a. Call money is a money market instrument wherein funds are borrowed/ lent
for a period of one day.
b. Notice money is a money market instrument wherein funds are borrowed/
lent for a period of more than 1 day up to 14 days.

38
c. In this market, the rate at which funds are borrowed and lent is called the call
money rate. The call money rate is determined by demand and supply of
short term funds.
d. In call money market, the main participants are commercial banks, co-
operative banks and primary dealer.

39
 DEBENTURE AND BONDS

A debenture is a medium to long term debt instrument used by large companies to borrow
money, at a fixed rate of interest the term debenture is used interchangeably with bond. A
debenture is like a certificate of loan evidence the fact that company is liable to pay a specified
amount with interest to the debenture holder. Thus, debenture holders are known as creditors of
the company. The issuer of the bond promises to pay a stipulated stream of cash flows. This
generally companies of periodic interest payments over the life of the instrument and principal
payment at the time of redemption. Debenture indicates loan given to the company at a specific
rate of interest and on certain term and conditions.

Debentures are more popular tan share due to the safety and security available. Company issue
different types of debenture for the convenience. Convertibles bonds and debenture are popular
among Indian investor. In India, bonds and debentures are also issued by public sector
companies and financial institutions. IDBI issues flexi bonds, deep discount bonds, retirement
bonds, growing interest bonds and regular income bonds. Such infrastructure bonds are popular
among the investor and their response is encouraging. They are oversubscribed on many
occasions. This is particularly due to tax benefit u/s 88. Deep discount bonds are issued for a
longer period (15 years or more) and investor gets attractive return if he is willing to wait longer
period. The bonds included regular return bonds, cumulative bonds and deep discount bonds.
Public sector bonds normally get good response from the investing class.

FEATURES OF DEBENTURE AND BONDS:

1. Debenture holders are not the owners of the company.

2. Debenture holders do not carry any voting rights.
3. Fixed rate of interest.
4. Compulsory payment of interest. The interest on debenture is payable irrespective
of whether the company is making profit and losses.
5. Investment in debenture and bonds are safer and better secured than investment in
share.

40
ADVANTAGESOF DEBENTURE AND BONDS:

a. Permanent and regular Income.

b. Safe and secured Investment.
c. High liquidity as debenture can easily sell.
d. Compulsory payment of Investment. The interest on debenture is payable irrespective of
whether the company is making profit and losses.
e. Simple procedure for investment.
f. Safety and security due to government backing.
g. Investment exempted for wealth tax.

DISADVANTAGES OF DEBENTURE AND BONDS:

a. Lower Rate of Redemption.

b. No capital Appreciation.
c. No participation in management.
d. No voting rights.

41
 EQUITY SHARES

Equity shares or ordinary share are those ownership securities which do not carry any
special rights in respect of annual dividend or the return of capital in the event of winding up of
the company.

Equity shareholders are the real owners of the company. They get dividend only after the
dividend on preference share is paid out of the profits of the company. They may not receive any
return, if there are no profits. At the time of winding up of the company equity capital can be
paid back after every claim including that of preference shareholders been settled.

According to Hoagland, Equity shareholders are the residual claimants against the assets
and income of the corporation. The financial risk is more with equity share capital. So equity
shares are also called “RISK CAPITAL”.

As the equity shareholders have higher risk, they also have a chance of getting higher
dividend if the company earns higher profits. Equity shareholders control the affairs of the
company because by processing the voting rights they elect the directors of the company.

ADVANTAGES OF EQUITY SHARES:

1. No change on Assets:

The company can raise the fixed capital without creating any charge over the
asset.

2. No Recurring Fixed Payments:

Equity shares do not create any

obligation on the part of company to pay fixed rate of dividend.

3. Long term funds:

Equity capital constitutes the permanent source of

finance and there is no obligation for the company to return the capital expect when the company
is liquidated.

42
4. Right to participate in Affairs:

Equity shareholders, being the real owners of the company, exercise their voting
rights and have a control over the company management. The equity shareholder’s vote on
various resolution, appointment of company directors, auditors and other important matters by
attending shareholder’s meeting.

5. Appreciation in the value of Assets:

Investors in equity shares are rewarded by handsome dividends and appreciation in the
value of their shareholding under boom condition.

6. Ownership:

Equity shareholders are the real owners of the company. They alone have voting rights.
They elect the directors to manage the company.

DISADVANTAGES OF EQUITY SHARES INVESTMENT

1. Dividend:

The dividend which a shareholder receives is neither fixed nor controlled by him. The
management of the company decides how much dividend should be given.

2. High Risk :

Equity shares investment is a risky share compared to any other investment like debts etc. The
money is invested based on the faith an investor has is company. There is no collateral security
attached with it.

3. Fluctuation in market price:

The market price of any equality share has a wide variation. It is always verydifficult to book
profits from the market. On the contrary, there areEqual chances of loses.

43
4. Limited Control :

An equity investor is a small investor of a company therefore It is hardly possible to impact

decision of the company using the voting rights.

5. Residual Claim :

An equality shareholder has a residual claim over both the assets and the income. Income
which is available to equity shareholders is after the payment of all shareholders’ viz. debenture
holders etc.

44
 PERFERENCE SHARES

Preference Shares are those shares which carry priority rights with regard to payment of
dividend and return of capital.

According to sec.85 of the Indian Companies Act, Preference share is that

part of the share capital of the company which is endowed with the following
preferential rights:
 Preference with regard to the payment of dividend at fixed rate.
 Preference as to repayment of capital in the event of winding up of the
company.

Thus, preference shareholders enjoy two preferential rights over the equity shares. Firstly
they are entitled to receive a fixed rate of dividend out of the profits of the company prior to the
declaration of dividend on equity shares.

Secondly, the assets remaining after the payment of debts of the company under
liquidation are first distributed for returning preferential capital (contributed by preference
shareholders.)

ADVANTAGES OF PREFERENCE SHARES:

1. Suitable to Conservative Investor:
Preference shares mobilize the funds from such investors who prefer safety of
their capital and want to earn income with greater certainty.
2. Retention on control:
Control of the company is vested with the management by issuing preference
shares outsiders because such shareholders have restricted voting rights.
3. Trading on Equity:
Preference shares bear a fixed yield and enable the company to adopt the policy
of “trading on equity” to increases the rate of dividend on equities out of profits
remaining after paying fixed rate dividend on preference shares.

45
 4. Flexibility in the Capital Structure:
In case of redeemable preference shares, company
may feel at bring flexibility in the financial structure as they can be redeemed
whenever a company desires.
5. No charge on Asset of the Company:
The company can raise capital in the form of preference shares for long term
without creating any charge on its assets.

DISADVENTAGES OF PREFERENCE SHARES:

1. Permanent Burden:
Preference Shares impose permanent burden on the company to
pay fixed dividend prior to its disbursement among other types of shareholders.

2. No Voting Rights:
The preference shares may not be advantageous from the point of
view of investors since they do not carry voting rights.

3. Redemption during the period of Depression:

Preference shareholders will suffer the loss, if the company exercises its
discretion to redeem the debentures during the periods of depression.

4. Costly:
Compared to debentures and Government securities, the cost of raising the
preference share capital is higher.

5. Income Tax:
Since Preference dividend is not an admissible deduction for
income tax purpose, the company has to earn more; otherwise the dividend on
equity shareholders will be affected.

46
 MUTUAL FUNDS

A mutual fund is a trust that pools the saving of a number of investors who share a common
financial goal. The money thus collected is then invested in capital market instrument such as
shares, debenture, and other securities. The income earned through these investments and the
capital appreciation realized is shared by its unit holders in proportion to number of units owned
by them. Thus, the mutual fund is the most suitable investment for a common man as it offers
opportunity to invest in diversified, professionally managed baskets of securities at a relatively
low cost. The flow chart below describes the working of mutual fund:

Types of Mutual Funds:

1.Open – Ended Schemes:

Open ended fund is the one that is available for subscription and can be redeemed on a
continuous basis. It is available for subscription throughout the year and investors can
buy and sell units at NAV related prices. These funds do not have a fixed maturity date.

2 .Close – Ended Scheme:

A closed – ended fund is the one that has a defined maturity period. These funds are open
for subscription for a specified period at the time of initial launch. These funds are listed
on a recognized stock exchange.

3. Interval Funds:

Interval funds combine the features of open – ended and close – ended funds. These
funds trade on stock exchanges and are open for sale or redemption at predetermined
intervals on the prevailing NAV.

47
 GOLD AND SILVER

 There are many savings and investment options available in India. One of the options is
investing in gold and silver.
 Gold and silver are considered as an investment option and have become apart of many
portfolio investors.
 Gold has been seen as the ultimate form of safe instrument and the only true form of
wealth.
 Gold has been popular in India because it acted as good hedge against inflation. There is
so much uncertainty in the world in term of economic growth, thus many investors have
chosen to hedge (protect) their investment by investing the gold.

ADVANTAGES OF GOLD AND SILVER:

 Gold and Silver are very good ways to “store” or preserve wealth.
 Gold and Silver act as good hedge against inflation. During the time of inflation owing
some gold and silver can help in preserving some value of one’s assets.
 They are considered as a Global Asset Class. It is a currency that has no borders.
 Gold and silver has long proven ability to retain its value and appreciate in value.
 Both are highly liquid assets which can be easily bought and sold as and when required.

DISADVANTAGES OF GOLD AND SILVER:

 No regular income.
 Possibility of theft.
 Problem in physical storage.
 No tax benefit.
 Problem of impurities.

REAL ESTATE
48
 Real Estate investing involves purchase and sale of real estate properties with an of
earning profits.

Investment in real estate has become increasingly popular over the last fifty years and has
become a common investment vehicle.

Such properties included building, premises, industrial land, and plantations etc. The
prices of these properties tend to fluctuate depending on market forces.

ADVANTAGES OF INVESTEMENT IN REAL ESTATE

 Capital Appreciation.
 Loans are easily available from various institutions for purchasing real estate property.
 Interest on loans taken for purchase of real estate property is tax deductible up to certain
limit.

DISADVANTAGES OF INVESTMENT IN REAL ESTATE

 Huge investment.
 Low liquidity.
 Additional expenses in the form of repairs, maintenance etc.

LIFE INSURANCE

49
Life insurance is highly misunderstood concept in India. Traditionally, the aim of this product
way to provide insurance cover to the policy holder and thus to support the dependents in case of
any eventuality to the policy holder. But the passage of time and along with the privatization of
the insurance sector the basic aim of insurance cover has disappeared.

Insurance thus provides a backbone to investment and is very helpful in case of long
term saving with the protection of health.

ADVANTAGES OF INVESTING IN LIFE INSURANCE

 It provides protection to family members.

 It acts a provision for old age, retirement etc.
 It provides tax benefit under Sec 80C.

SECTION III

50
 RESEARCH METHODOLOGY

Data collection

Data collection is the process of gathering and measuring information on variables of interest.
A data collected from the respondents. Data such as awareness about investment options in India
attitudes towards investment decision etc. were collected through is questionnaire.

Data
Collection

Secondary
Primary Data
Data

Primary data

Questionnaire was used to collect the primary data from respondents. Awareness of various
investment alternatives in India which will be studied either the help of different independent
variable. The questionnaire was structured type and considered question relating to different
investment alternatives.

Secondary data

 The secondary data for this study were collected from magazines, journals.
 Collected data from Different websites.

51
Period of Study

The research is conducted in the duration of January 2019- March 2019.

Sample size

It indicates the number of people to be survey. The sample size for this study is 50 respondents.

Methodology

The data collected from questionnaire will be tabulated and analyzed

Tools are used

 Bar Chart
 Pie Chart

52
 DATA ANALYSIS

Q.1 Age:

A. 20 – 40 years B. 40 -60 years C. Above 60 years

20 – 40 years 64%
40-60 years 28%
Above 60 years 8%

Age
8%

20-40 Years
28% 40-60 Years
Above 60Years

64%

DATA INTERPRETATION:
 Investors have been divided into three categories based on their age as ‘Young’ (20 – 40
years), ‘Middle aged’ (40 – 60 years) and ‘Old’ (60 years and above).
 Out of 50 sample investors, 64% are Young investors, 28% are Middle aged investors
and 8% are Old investors.

53
Q.2 Occupation/Profession:

A. Salaried B. Professional C. Business D. Others

Salaried 52%
Professional 14%
Business 8%
Others 26%

Occupation/Profession
Others
26%

Salaried
52%

Business
8%

Professional
14%

DATA INTERPRETATION:
 Investors have been divided into four groups based on their occupation as ‘Salaried’,
‘Professionals’, ‘Business’ and ‘Others’.
 Out of 50 sample investors, 52% belong to the salaried category, 14% belong to the
Professional category, 8%of the investors are Businessmen and 26%belong to the others
category.

54
Q.3 Are you investor?

A. YES B. NO

YES 92%
NO 8%

Chart Title
8%

Yes
No

92%

DATA INTERPRETATION:
 The respondents were asked question that they were invest in any investment avenues.
 Out of total respondents 92% are investors.
 While 8% people were not invested in investment avenues.
 From the above pie chart it is clear that more people are interested in investment avenues.

Q. 4while investing which kinds of company do you target?

A. New Startup Business B. Most Popular Business C. Joint Venture Business

New Startup Business 25%

55
Most Popular Business 85.4%
Joint Venture Business 43.8%

Numbers of Respondents
90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
New Startup Business Most Popular Business Joint Venture Business

DATA INTERPREATION:
 The above table and graph represents the types of company targeted by respondents while
investing their money.
 Most of the investor preferred the most popular business to invest their money i.e. 85.4%
 43.8% investors are investing in Joint venture business.
 New start up business is preferred by only few investors i.e. 25% to invest their money.

56
Q. 5while investing the money which kinds of business will you give the preference?

A. Risk Free B. Risk

Risk Free 85.4%

Risk 14.6%

15%

Risk Free
Risk Free

85%

DATA INTERPREATION:
 The above table and diagram shows the preference of investors while investing the
money.
 Most of the investors preferred risk free business while investing the money i.e. 85.4%
 While 14.6% investors’ gives the preference to risk in investment.

57
Q.6 what type of alternative investment do you prefer from the following?

A. Debenture B. Real Estate C. Gold and Silver D. Mutual Fund

Debenture 26.5%
Real Estate 30.6%
Gold and Silver 12.2%
Mutual Fund 22.4%

Chart Title
35.00%
30.60%
30.00%
26.50%
25.00%
22.40%

20.00%

15.00%
12.20%
10.00%

5.00%

0.00%
Debenture Real Estate Gold and Silver Mutual Fund

DATA INTERPRETATION:
 From the above graph it can be analyzed that there are many options are available for
investor such as debentures, real estate, gold and silver, mutual funds etc.
 Investor would like to invest their money in real estate. There are 30.60% people who
invest their money in real estate.
 26.5% investors are investing their money in debentures.
 Mutual fund as a investment alternatives is preferred by 22.4% investors.
 Very few investors are interested to invest their money in gold and silver i.e. only 12.2%

58
Q. 7 if you investing money in shares which kind of shares give you maximum returns?

A. Equity Share B. Mutual Fund C. Debenture

Equity Share 31.9%

Mutual Fund 44.7%
Debenture 23.4%

45.00%

40.00%

35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
Equity Share Mutual Fund Debenture

DATA INTERPRETATION:
 The given graph and table give information about the responses of respondents about the
investment which gives maximum returns.
 Most of the investors think that mutual funds give maximum returns in investment i.e.
44.7%.
 31.9% investors says that by investing money in equity shares will give maximum
returns.
 While only 23.4% investors say that debenture gives maximum returns.

59
Q.8while investing which kinds of investment do you target?
A. Post Office Saving B. Public Provident Fund C. Deposit with Bank

Post Office Saving 56.3%

Public Provident Fund 35.4%
Deposit with Bank 70.8%

80.00%

70.00%

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%
Post Office Saving Public Provident Fund Deposit with Bank

DATA INTERPRETATION:
 In the given table and graph gives us information about type of investment targeted by
the investors such as post office saving, public provident fund, deposit with bank.
 Deposit with bank is preferred by 70.8% for investing their money.
 Post office saving as an investment is preferred by 56.3% investors.
 Very few investors that is 35.4% invest their money in public provident fund

60
Q.9for getting higher returns which types of investment do you prefer?

A. Equity Shares B. Real Estate C. Bank Deposit

Equity Shares 50%

Real Estate 12.5%
Bank Deposit 37.5%

38%

Equity Shares
50% Real Estate
Bank Deposit

12%

DATA INTERPRETATION:
 The above table shows that the preference of investors for investing their money to get
higher returns.
 Equity shares are preferred by more investors about 50%.
 Investors are not interested to invest in real estate, only 12.5% investors preferred to
invest in real estate.
 37.5% investors invest their money in bank deposits.

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Q.10 After evaluating every perspective of alternative investment which one thinks you best?

A. Mutual fund B. Debenture C. Equity Shares D. Gold and Silver E. Real Estate

Mutual fund 23.4%

Debenture 21.3%
Equity Shares 17%
Gold and Silver 17%
Real Estate 19.1%

25.00%
23.40%
21.30%
20.00% 19.10%
17.00% 17.00%

15.00%

10.00%

5.00%

0.00%
Mutual fund Debenture Equity Shares Gold and Silver Real Estate

DATA INTERPRETATION:
 from the above table and graph one can conclude the best alternatives from the given
investment alternatives such as mutual funds, real estate, debentures, equity shares, gold
and silver.

 Mutual fund and debenture are the best alternatives from the views of many investors i.e.
23.4% and 21.3% respectively.
 17% investors think that equity shares and gold and silvers are the best alternatives.
 19.1% investors say that real estate is the best alternatives.

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 SECTION IV

FINDING

 It is found that Shares, Debentures/Bonds, Mutual Funds, PPF, Bank Deposits, Real
Estate, Gold/Silver generate greater relative return than relative risk in all categories of
investors irrespective of their age. Out of the above, young and middle aged investors
perceive investment in Real Estate as the best, followed by Gold/Silver whereas old
investors perceive investment in Gold / Silver as the best, followed by Real-estate.
 It is observed that Shares, Debentures/Bonds, Mutual Funds, PPF, Bank Deposits, Real
Estate, Gold/Silver generate greater relative return than relative risk in all categories of
investors irrespective of their gender. Out of the above, Real Estate is perceived as the
best asset followed by Gold/Silver by all the investors as a whole.
 It is also found from the analysis that Shares, Debentures/Bonds, Mutual Funds, Bank
Deposits, Real estate, Gold/Silver generate greater relative return than relative risk in all
categories of investors irrespective of their monthly family income. Out of the above, the
investors of low income group perceive investment in Real Estate as the best followed by
Gold/Silver. Investors of medium and high income group perceive investment in Real
Estate as the best followed by Insurance Policies and Gold / Silver.
 New generation investors perceive all the investments except Stock Futures and Other
investments to generate higher return than their relative risk. Hereditary investors rank
Insurance Policies as the best investment followed by Real Estate and Gold/Silver. New
generation investors perceive investment in Real Estate as the best followed by
Gold/Silver and Insurance Policies.
 It is further found from the study that Shares, Debentures/ Bonds, PPF, Mutual Funds,
Bank Deposits, Real Estate, and Gold/Silver generate greater relative return than relative
risk in all categories of investors irrespective of their market experience. Investors with
low market experience perceive investment in Real Estate as the best followed by
Gold/silver.

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 SUGGESTION

 As most of the respondents are salaried people i.e. they earn specific amount of salary
monthly, thus they prefer to invest in risk free investment avenues available in India.
Maybe that reason most of them preferred to invest in gold and bank deposit.

 Most of the respondents are looking for steady income and maximum avoidance of risk
from the selected investment alternatives

 Respondents are aware about the investment alternatives available in India.

 Most of the investors are aware of bank deposits and real estate avenues but they are not
aware about investment in Indian companies.

 There are many factors which influence investors while taking an investment decision.

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 CONCLUSION

It is imperative to understand the positives and negatives of the different types of

investment avenues to maximize the return. With the help of these kinds of studies different
sections of society understand the merits and demerits of the investment. The participants in the
Indian Capital market are unable to understand the investor investment objective due to the
dramatic change in the attitude of the investor. The investor can make the trading in securities as
a beneficial area of investment. It is purely based upon the investor’s awareness towards
investment objectives. When the investor gets more and more accurate information on the right
time, then they can enjoy the taste of success from investment in securities. The capital market
authorities should implement more training and awareness programs for the investors.

65
 BIBLIOGRAPHY

BOOKS:

Investment Analysis and Portfolio Management: - P.K. Bandagar

Investment Management: - V.K. Bhalla

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 APPENDICES

An alternative investment is an asset that is not one of the conventional investment types, such
as stocks, bonds, and cash. Financial system plays vital role in the economic growth of country.
It intermediates between the flow of funds belonging to those who save part of their income and
those who invest in productive assets. It mobilizes usefully allocates scare resources of a country.
It is a complex, well integrated set of subsystems of financial institutions, markets, and services
which facilitates the transfer and allocation of funds, efficiently and effectively. The financial
systems of most developing countries are characterized by coexistence and cooperation between
formal and informal financial sectors. Financial markets are a mechanism enabling participants
to deal in financial claims. The market provides a facility in which their demands and
requirements interact to set a price of such claims. The financial services are vital for creation of
firms, industrial expansion and growth.

Financial institutions are intermediaries that mobilize savings and facilitate the allocation
of funds in an efficient manner. Financial intuitions can be classified as banking and non-
banking financial institutions. A financial instrument is a claim against a person or an institution
for payment, at a future date, of a sum of money or aperiodic payment in the form of interest or
dividend. Financial instruments represent paper wealth such as debentures, bonds etc., different
types of financial instruments can be designed to suit the risk and return preferences of different
classes of investors. Saving and investment are linked through a wide variety of complex
financial instruments known as “Securities”.

Financial securities are primary and secondary securities. Primary securities are also
termed as direct securities as they are directly issued by the ultimate borrowers of funds to the
ultimate savers. Secondary securities are also referred to as indirect securities, as they are issued
by the financial intermediaries to the ultimate savers. Bank deposit, mutual funds are secondary
securities. Financial instruments differ in terms of marketability, liquidity, types of option,
returns, risk and transaction costs. Financial instruments help financial markets and financial
intermediaries to perform the important role of channelizing funds from leader to borrower.
Financial instruments are also known as investment avenues.

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 ANNEXURE

(1) Age:

A. 20 – 40 years B. 40 -60 years C. Above 60 years

(2) Occupation/Profession:

A. Salaried B. Professional C. Business D. Other

(3) Are you investor?

A. YES B. NO

(4) While investing which kind of company do you target?

A. New Startup Business B. Most Popular Business C. Joint Venture Business

(5) While investing the money which kind of business will you give the preference?

A. Risk Free B. Risk

(6) What type of alternative investment do you prefer from the following?

A. Debenture B. Real Estate C. Gold and Silver D. Mutual Fund

(7) If you investing money in shares which kind of shares give you maximum returns?

A. Equity Share B. Mutual Fund C. Debenture

(8) While investing which kinds of investment do you target?

A. Post Office Saving B. Public Provident Fund C. Deposit with Bank

(9)For getting higher returns which type of investment do you prefer?

A. Equity Shares B. Real Estate C. Bank Deposit

(10)After evaluating every perspective of alternative investment which one thinks you best?

A. Mutual fund B. Debenture C. Equity Shares D. Gold and Silver E. Real

Estate

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