Professional Documents
Culture Documents
Meaning, Objectives of Investment, Difference between savings and investment, Golden principles of investment,
The investment environment, The investor life cycle, Investment avenues in India.
Risk and return trade-off, measuring returns – ROI, Absolute returns, Annualized return, Extended Internal Rate of
Return (XIRR), Types of risks in investments – Systematic and Unsystematic Risk, Measuring Risk - Standard
deviation and Beta, Managing risks in investments.
Features of fundamental analysis, Top-down vs. Bottom-up fundamental analysis, Components of economic
analysis, Economic Analysis - international & domestic economic scenario, Economic forecasting techniques,
Characteristics of an industry analysis, Key components of an industry, Porter’s Five Forces of Competition
framework, Company analysis – Financial and Non-financial parameters. Technical Analysis – concept,
assumptions and approaches, Difference between fundamental and technical analysis, Chart patterns and analysis,
Moving averages, Trend analysis, efficient market hypothesis.
Stock exchange – Features, History of stock exchanges in India, BSE and NSE, Role of stock exchanges, Players in
stock markets, Role of SEBI, Ways of investing in stock market, DEMAT and Trading account, Trading Process in
stock exchanges.
Meaning of Investment
Investment is an asset or item acquired with the goal of generating income or return.
Example :
2. Purchase of machinery
4. Investing on gold
Objectives of Investment
An investment is essentially an asset that is created with the intension of allowing money to grow. The wealth
created can be used for a variety of objectives such as meeting shortages in income, saving up for retirement, or
fulfilling certain specific obligations such as repayment of loans, payment of tuition fees or purchase of other
assets.
Investment may generate income in two ways. One, investment in a saleable asset, it earns income by way of
profit. Second, if investment is made in a return generating plan then that earns an income via accumulation of
gains.
Investment is putting savings into assets or objects that become worth more than their initial worth that helps to
earn income with time.
Investing helps to achieve short term and long term financial goals without too much stress or trouble. Some
investment options gives high liquidity, and helps to meet short term targets like funding home improvement or
creating emergency fund. Other investment options that come with a longer lock-in period are perfect for saving
up for long-term goals.
Investment helps to earn more money, another main objective of investing money is to ensure earn significant
return on initial amount invested. Some of the best investments to achieve growth include real estate, mutual
funds, commodities, and equity.
Apart from capital growth or savings investors also have another objective to reduce the burden of tax. Investment
helps to get the tax benefits offered by income tax act 1961. Investing in public provident fun (PPF), Equity linked
savings schemes (ELSS), Unit Linked Insurance plans (ULIPs) can be deducted from total income, there by it
reduces the tax liability.
Investment helps to keep our money safely. It is one of the primary objectives of investment. Some investment
helps keep hard earned money safe. By investing money in fixed deposits, government bonds, savings bank
account can help keep our money safe. Although the return on investment may be lower here, the objective of
capital preservation is easily met.
Investments can helps to earn steady income. Example fixed deposits that pay out regular interest, stock of the
companies pay dividend to investors that can help to meet our daily expenses after retirement.. It is also excellent
source of income to meet other expenses.
Savings for retirement is necessary. It is essential to have a retirement fund because people may not be able to
continue working forever. Additionally it would be unfair to depend on children to support later in life, hence
investment helps after retirement.
Investments and return earned from that helps to pay children’s higher educational fees.
Advantages of Investment
• Investing products are generally very liquid. It can be easily converted into cash on almost any weekday.
Disadvantages of Investment
Savings
• Saving is setting aside some money for future expenses or needs. It is the first and foremost step towards
leading a financially disciplined life.
• A savings account or bank fixed deposits are some of the popular savings options in India.
Objectives of savings
Pros of savings
• It earns interest.
• It provides safety
• Bank products are Very liquid, that means you can get your money as soon as you need it,
Cons of Savings
• Because returns are low, we may lose purchasing power over time, as inflation eats away at your money.
Savings Investment
Investing can helps to meet financial goals and the better the investment decisions we make, the more chance we
have of succeeding.
While nobody can make the best investment decision every single time, following these golden rules could helps to
get more from investments over the long term.
It’s true that starting to invest early can gives investments more time to grow over the long term. However, it’s
important not to begin investing until people can truly afford to.
Keeping some money which helps quickly in emergency situation helps to cope with life’s ups and down.
It is good to clear the debt before thinking of investment, if we loose our money in investment then that increases
the burden of paying loan.
If we have not cleared balance, whatever the amount taken using credit card, it charges extra amount, in the form
of interest hence better not to invest using credit card.
If people are getting money, then they should have to think about investment opportunities available.
Before investing investor has to expect how much amount he get as return. That helps to make good investment
decision among alternatives available. Target a realistic rate of return in the context of other available investment.
6. The greater the potential returns, the higher the level of risk.
Investor should know this before investing if there is a high returns there will be highest level of risk.
Investor should have to have idea of brokerage charges, how much they are paying as brokerage charge to sell and
purchase the asset. Brokerage charge should not be more than profit.
9. Understanding of investment.
Investors should understand exactly how much amount they are investing, how much return it is giving, risk level
and all before investing the money.
10. Diversification:
Investments should be diversified or spread across a range of different companies to avoid loss. if any investment
not performs well, you incur loss, other investments may give profit. Hence money should spread on different
assets or companies.
Look beyond the short-term . Investing monthly over five or more years can smooth out returns. Investing money
at least for 5 years can earn more returns. Hence investor should have to look for long term investment.
STAGE 1:
AGE: 20-35
Individuals who fall within this stage are usually between the ages of 20 and 35. They have just begun their
careers and so they have a relatively low net worth. They also have relatively longer working years before they
retire.
Because of the time they have to engage in active work, individuals at this stage can build aggressive portfolios.
The goal is to build emergency savings (short term) and accumulate wealth (long term) through high yield
instruments. In an event that they lose their investment capital, they have ample time to rebuild their finances or
hold their investments until the returns yield in their favor.
STAGE 2:
AGE: 35-60
At this stage, investors have likely reached their peak earning years and so they can save and invest a lot more.
Individuals at this stage are usually aged between 35 and 60. While the short term goals may include vacations
and funding children’s education, the long term goal will be to build a nest egg large enough to see investors
through their life in retirement. Your portfolio becomes more balanced as retirement approaches.
STAGE 3:
AGE: 60+
At this stage, individuals may stop earning active income and will totally depend on their savings as well as the
returns on their investment to survive.
People who were able to successfully build wealth for retirement can achieve their desired lifestyle while in
retirement, but the most important objective is to outlive one’s savings. To achieve this, individuals should be
able to earn through investments but prioritize capital preservation. Investors usually become more conservative
as they retire.
Investment Environment
Investment environment includes all types of investment opportunities and the market structure that facilitates
buying and selling these investment.
Different types of securities, institutional set-up and market intermediaries are the components of investment
environment
Fixed Deposits (FD) and Recurring Deposits (RD) have continued to be a popular investment among
many investors especially those who seek guaranteed returns with minimal risk. FD and RD accounts
can be easily opened with leading banks and Non-Banking Financial Companies (NBFCs) as well as
the post office. Key features that make FD and RD a popular investment choice for 2022 include:
Assured returns
Minimal risk to principal invested
Flexible investment amount
Option of loan against FD in an emergency
Simple renewal and withdrawal facility
While FD and RD investments in India offer comparable returns, fixed deposits are better suited to
grow a lump sum investment with interest earnings. Recurring deposits, on the other hand, are better
suited to inculcate a savings habit and steadily through regular monthly investments into the account
along with interest earnings.
2. Mutual Funds
While investment in mutual funds is subjected to market risk one should evaluate the risk before
investing. If you understand the market and its risks, mutual funds can become your best investment
options to grow money multifold. Whether you are going for short term investments or long term, you
can create an investment portfolio based on your preferences.
3. Direct Equity
Direct equity investing is one of the best investment options for long term purpose. It is about the
equity shares of a company, which binds you in legal terms related to the company ownership.
By buying a company’s shares, you also get the right to get involved in company meetings and have
your say on the company’s decisions. Also, you get the profits as distribution in proportion to your
shareholding in the company.
As an investor, you must know that a company’s performance has an impact on the share price, both
positive and negative. Depending on the market conditions and your risk appetite, you can also choose
to give up the shares back later either to the company or a third party.
5. Bonds
Just like individuals, companies and government bodies need fund for infrastructural development and
social programs, for which they issue bonds to the public markets. The interested investors then buy
the bonds to help these entities raise money.
In other words, bonds are fixed-income investment options that cover the loan made by an investor to
a corporate or governmental borrower. What makes them one of the best investment plan in India is
that the terms for fixed interest payment, loan principal, and tenure are all included in the bond details.
Hence, it assures you of the safety of your investment along with an additional return.
Also, bond prices are inversely proportional to the offered interest rates. It means that these price fall
when interest rates increase and vice versa.
Some features and benefits of NPS that make it one of the best investment options for 2022 are:
7. ULIP
Another investment option for individuals who want market linked returns along with insurance
is Unit Linked Insurance Plan (ULIP). You can buy a life insurance which helps to invest in different
8. Stock Market
Liquid funds are like stock market investments, wherein money is invested in government bonds and
securities. Since there is no lock-in period, it allows you to withdraw money as per your requirement;
thereby making it one of the best investment options in the market.
When it comes to short term investments, liquid funds are the one of the best investment options in
India. You can invest in it for 3-5 years and withdraw money as per your requirement for fulfilling
your short term goals. They are less subject to market risks than mutual funds, which also makes it
one of the best investment options.
Although the maturity period of PPF is 15 years, you can start the partial withdrawal of your money
after completion of six years. However, you can also use your PPF balance as security to take loans. It
falls under the EEE category of tax savings, since the principal amount, interest earned, and maturity
amount – all are eligible for tax savings. Thereby PPF is one of the best investment options available.
As per Section 80C of the IT Act 1961, you can avail tax deductions for your contribution towards the
PPF account.
Investing in real estate is also a good option. Real estate investment refers to buying properties such as buildings
and land. This is one of the best investment options that can combat inflation.
Investing on precious objects like gold diamond, is also one of the good option for investment.