Project report

On

INVESTMENT OPTIONS IN INDIA

A Project Submitted to
University of Mumbai for partial completion of the degree of
Bachelor of Management Studies
Under the Faculty of Commerce

Submitted By

Swapnil Santosh Main

Nava Samaj Mandal’s

NAVA SAMAJ MANDAL DEGREE COLLEGE

(Affiliated To University Of Mumbai)

Nava Samaj Mandal Marg, Dixit Cross Road No.1, Vile

Parle (East), Mumbai – 400 0057. Tel: 022 –26123181

APRIL 2019-2020
 Declaration

I, the undersigned Master Swapnil Main here by, declare that the work embodied in this project work
titled “Investment Options In India”, forms my own contribution to the research work carried out
a result of my own research work and has not been previously submitted to any other University for
any other Degree / Diploma to this or any other University.

Wherever reference has been made to previous works of others, it has been clearly indicated as such
and included in the bibliography.

I, here by further declare that all information of this document has been obtained and presented in
accordance with academic rules and ethical conduct.

SWAPNIL MAIN
Roll No.54
 Certificate

This is to certify that Mr. SWAPNIL SANTOH MAIN has worked and duly completed her Project
Work for the degree of Bachelor of Management Studies under the Faculty of Commerce in the
subject of FINANCE and her project is entitled, “INVESTMENT OPTIONS IN INDIA” under my
supervision.

I further certify that the entire work has been done by the learner under my guidance and that
no part of it has been submitted previously for any Degree or Diploma of any University.

It is her own work and facts reported by her personal findings and investigations.

Signature of InternalExaminer Signature of ExternalExaminer

Signature ofCo-ordinator Signature ofPrincipal

 Acknowledgment

I take this opportunity to thank the University of Mumbai for giving me chance to do this
project.

I would like to thank our Principal, Dr. (Mrs.) Jayshree Parikh for providing the necessary facilities
required for completion of this project.

I take this opportunity to thank our Co-ordinator ___________, for his moral support and guidance.

I would also like to express my sincere gratitude towards my project guide Guide namewhose
guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference books and
magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in the
completion of the project especially my Parents and Peers who supported me throughout myproject.
 INDEX
Chapter no. Content Page no.

1. INTRODUCTION 1-19
1.1Introduction of Investment
1.2Meaning of Investment
1.3Two Concepts of Investment
1.4History of Investment
1.5Scope of Investment
1.6Characteristics of Investment
1.7Advantages of Investment
1.8Disadvantages of Investment
1.9Factors Influencing investment
decisions

2. REVIEW OF LITERATURE 20-25

3. RESEARCH METHODOLOGY 26-28

3.1Research Methodology
3.1.1Primary Data Collection Method
3.1.2Secondary Data Collection
Method
3.2Objectives of study

/ 3.3Hypthesis

4. 4.1 Types of Investment 29-63

4.2Investment Avenues in India
5. DATA ANALYSIS& 64-75
INTERPRETATIONS

6. MAJOR SHARE MARKET SCAMS 76-79

7. CONCLUSION 80

8. BIBLOGRAPHY 81
 ABSTRACT

India needs very high rate of investments to make a bound forward in efforts of attaining high level of
growth. Since the beginning of planning, the prominence was on investments the primary instruments of
economic growth and increase in national income. This study attempts to premeditate the investment
preference of Government employees using convenient sampling method.

Investment is an type of activity that is engaged in by the people who have to do savings i.e. investments
are made from their savings, or in other words it is the people invest their savings. A variety of different
investment options are available that are bank, Gold, Real estate, post services, mutual funds & so on
much more. Investors are always investing their money with the different types of purpose and objectives
such as profit, security, appreciation, Income stability.

The investment aims at the multiplication of money at higher or lower rates depending upon whether it is
long term or short term investment and whether it is risky or risk-free investment. Investment activity
involves the creation of assets or exchange of assets with a profit motive. Researcher has here in this
paper studied the different types and avenues of investments as well as the factors that are required
while selecting the investment with the sample size of 60 salaried employees by conducting the survey
through questionnaire in Mumbai city of, India. Actually, here the present study identifies about the
preferred investment avenues among Government Employees using their own self-assessment test. The
researcher has analyzed and found that that Government employees consider the safety as well as good
return on investment that is invested on regular basis. Respondents are much more aware about the
different investment avenues available in India except female investors. This Current study deals with the
“Analysis Of Investment Avenues And Savings Habit Of Government Employees.”

Most of the investments are considered to transfers of financial assets from one person to another.
Various investments options are available with the differing risk-reward trade-off. Finance refers to the
concept of deferred consumption which may involve purchasing an asset, giving a loan or keeping funds in
a bank account to generate future returns. An understanding of the core concepts and a thorough analysis
of the options can help investor create a portfolio that maximizes returns while minimizing risk exposure
 Investment Options In India
CHAPTERI:-INTRODUCTION OF INVESTMENT

1.1 Investment

An investment is an asset or item acquired with the goal of generating

income or appreciation. In an economic sense, an investment is the
purchase of goods that are not consumed today but are used in the
future to create wealth. In finance, an investment is a monetary asset
purchased with the idea that the asset will provide income in the future
or will later be sold at a higher price for a profit. Investing is putting
money to work to start or expand a project - or to purchase an asset or
interest - where those funds are then put to work, with the goal to
income and increased value over time. The term "investment" can refer
to any mechanism used for generating future income. In the financial
sense, this includes the purchase of bonds, stocks or real estate property
among several others. Additionally, a constructed building or other
facility used to produce goods can be seen as an investment. The
production of goods required to produce other goods may also be seen
as investing. Taking an action in the hopes of raising future revenue
can also be considered an investment. For example, when choosing to
pursue additional education, the goal is often to increase knowledge
and improve skills in the hopes of ultimately producing more income.
Because investing is oriented toward future growth or income, there is
risk associated with the investment in the case that it does not pan out
or falls short. For instance, investing in a company that ends up going
bankrupt or a project that fails. This is what separates investing from
saving - saving is accumulating money for future use that is not at risk,
while investment is putting money to work for future gain and entails
some risk. To invest is to allocate money in the expectation of some
benefit in the future. In finance, the benefit from an investment is
called a return. The return may consist of a gain or loss realised from
the sale of property or an investment, unrealised capital appreciation or
depreciation , or investment income such as dividends, interest, rental
income etc., or a combination of capital gain and income. The return
may also include currency gains or losses due to changes in foreign
currency exchange rates. Investors generally expect higher returns from
riskier investments. When a low risk investment is made, the return is
also generally low. Investors, particularly novices, are often advised to

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 adopt a particular investment strategy and diversify their portfolio.
Diversification has the statistical effect of reducing overall risk.
Investments are important because in today’s world, just earning
money is not enough. You work hard for the money you earn. But that
may not be adequate for you to lead a comfortable lifestyle or fulfill
your dreams and goals. To do that, you need to make your money work
hard for you as well. This is why you invest. Money lying idle in your
bank account is an opportunity lost. You should invest that money
smartly to get good returns out of it.
In Short Investment Means:-
 The investing of money or capital in order to gain profitable returns, as
interest, income, or appreciation in value.
 a particular instance or mode of Investing
 a thing Investing in, as a business, a quantity of shares of stock, etc.
 something that is invested; sum invested.
 the act or fact of investing or state of being invested, as with a garment.

 a devoting, using, or giving of time, talent, emotional energy, etc., as

for a purpose or to achieve something
Making Smart Investment can help you generate income by putting
your money to work. While you may work hard to earn money, it may
not always be enough to fulfil your dreams and goals. To start
investing, you can consider either growth-oriented or fixed-income
investment instruments. People often get confused between savings and
investments, which play different roles in your personal financial
planning. While both savings and investments are important, they have
different objectives. The intent or purpose of keeping the money aside
is the first differentiating factor. You usually save money to keep some
money aside for emergencies. However, investing is when you put this
money to work for you in smart investment avenues, with the hope to
generate wealth for the future. Savings and investments vary in the way
your wealth is accumulated. While savings are considered as a passive
way of wealth accumulation, well-planned investment strategies can
help in accumulating more wealth.

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1.2 Meaning

Investors choose to hold group of securities rather than single security

that offers the 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 returns after taking into
consideration the risk element.

Traditional portfolio analysis has been a very subjective nature, but it

has proved success to some investors who have made their investments
by making analysis of individual securities through evaluation of return
and risk conditions. The investors have been able to get the maximum
return at the maximum risk. The normal method of calculating the
return on individual security is to find out the amount of dividends,
price earnings ratios, common holding period and an estimate of the
market value of the securities. The modern portfolio theory believes in
maximization of return through a combination of securities. it deals
with the relationship between different securities and inter relationships
of risk between them. An investor can achieve a success by making a
choice of investment outlets and combining a security of low risk with
another security of high risk.

The word investment can be defined in many ways according to

different theories and principles. It is a term that can be used in several
contexts. However, the different meanings of “investment” are more
alike than dissimilar.

Generally, investment is the application of money or other assets in the

hope that in the future it would appreciate or generate more income.
Investment means the current commitment of funds for a period of time
in order to derive a future flow of funds that will compensate investor
for the time the funds are committed, for the expected rate of inflation
and also for uncertainty involved in future flow of funds.” Investors
expect return on his investment which should compensate them for the
risk they take in forgoing current consumption of money for future
consumption and for inflation.

“Investment management is the process of managing money, including

investing, budgeting, banking, and taxes also called as money
management”

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 1.3 Two Concept Of Investment

ECONOMIC INVESTMENT

CONCEPT OF INVESTMENT

FINANCIAL INVESTMENT

 Economic Investment

The concept of economical investment means additions to the capital

stock of the society. The capital stock of society is the goods which are
used in the production of other goods. The term investment implies the
formation of new and productive capital in the form of new
construction and producers durable instrument such as Plant &
Machinery, Inventories and human capital are also included in this
concept. Thus, an investment, in economic terms means an increase in
building, equipment, inventory. when a person Invest his fund for
acquisition of some physical asset, say a building or equipment, such
type of investments is called economic investment.

 Financial Investment:

This is an allocation of monetary resources to assets that are expected

to yield some gain and return over a given period of investment. 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 debentures. People invest their funds in Shares, Debentures, Fixed
deposits, National Saving certificates, Life Insurance Policies,
Provident Funds etc. In their view, investment is a 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
principal capital.

4
 1.4 History

The Code of Hammurabi (around 1700 BC) provided a legal

framework for investment, establishing a means for the pledge of
collateral by codifying debtor and creditor rights in regard to pledged
land. Punishments for breaking financial obligations were not as severe
as those for crimes involving injury or death. In the early 1900s,
purchasers of stocks, bonds, and other securities were described in
media, academia, and commerce as speculators. Since the Wall Street
crash of 1929, and particularly by the 1950s, the term investment had
come to denote the more conservative end of the securities spectrum,
while speculation was applied by financial brokers and their
advertising agencies to higher risk securities much in vogue at that time.
Since the last half of the 20th century, the terms speculation and
speculator have specifically referred to higher risk ventures. The
history of investment banking in India traces back to when European
merchant banks first established trading houses in the region in the
19th century. Since then, foreign banks (non-Indian) have dominated
investment and merchant banking activities in the country. In the
1970’s, the State bank of India entered the business by creating the
Bureau of Merchant Banking and ICICI Securities became the first
Indian financial institution to offer merchant banking services. By 1980,
the number of merchant banks had risen to more than 30. This growth
in the financial services industry included rapid expansion
of commercial bank and other financial institutions.

 Deep History

Security trading in India goes back to the 18th century when the East
India Company began trading in loan securities. Corporate shares
started being traded in the 1830s in Bombay (now Mumbai) with the
stock of Bank and Cotton presses. The simple and informal beginnings
of stock exchanges in India take one back to the 1850s when 22
stockbrokers began trading opposite the Town Hall of Bombay under a
banyan tree. The tree still stands in the area which is now known as
Horniman Circle.

5
The venue then shifted to banyan trees at the Meadows Street junction,
which is now known as Mahatma Gandhi Road, a decade later. The
shift continued taking place as the number of brokers increased, finally
settling in 1874 at what is known as Dalal Street. This yet informal
group known as the Native Share and Stockbrokers Association
organized themselves as the Bombay Stock Exchange (BSE) in 1875.
The BSE is the oldest stock exchange in Asia and was the first to be
granted permanent recognition under the Securities Contract
Regulation Act, 1956.The BSE was followed by the Ahmedabad Stock
Exchange in 1894 which focused on trading in shares of textile mills.
The Calcutta Stock Exchange began operations in 1908 and began
trading shares of plantations and jute mills. The Madras Stock
Exchange followed, being set up in 1920.

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 Modern History

In the post-independence era, the BSE dominated the volume of trading.

However, the low level of transparency and undependable clearing and
settlement systems, apart from other macro factors, increased the need
of a financial market regulator, and the SEBI was born in 1988 as a
non-statutory body. It was made a statutory body in 1992.
After the Harshad Mehta scam in 1992, there was a pressing need for
another stock exchange large enough to compete with the BSE and
bring transparency to the stock market. This gave birth to the National
Stock Exchange (NSE). It was incorporated in 1992, become
recognized as a stock exchange in 1993, and trading began on it in
1994. It was the first stock exchange on which trading took place
electronically. In response to this competition, BSE also introduced an
electronic trading system known as BSE On-line Trading (BOLT) in
1995.
The BSE launched its sensitivity index, the Sensex, now known as the
S&P BSE Sensex, in 1986 with 1978–79 as the base year. This is an
index of 30 companies and is a benchmark stock index, measuring the
overall performance of the exchange. The index reached the level of
1,000 in July 1990, 2,000 in January 1992, 4,000 in March 1992, 5,000
in October 1999, and 6,000 in February 2000. The exchange introduced
equity derivatives in 2000. Index options were launched in June 2001,
stock options in July 2001, and stock futures in November 2001.
India’s first free-float index, BSE Teck, was launched in July 2001.
Its competitor, NSE, launched its benchmark exchange, the CNX Nifty,
now known as Nifty 50, in 1996. It comprises of 50 stocks and
functions as the performance measure of the exchange. In terms of
electronic screen-based trading and derivatives, it beat BSE by
launching first of its kind products and services.
The first organised stock exchange in India was started in 1875 at
Bombay and it is stated to be the oldest in Asia. In 1894 the
Ahmedabad Stock Exchange was started to facilitate dealings in the
shares of textile mills there. The Calcutta stock exchange was started in
1908 to provide a market for shares of plantations and jute mills.
Then the madras stock exchange was started in 1920. At present there
are 24 stock exchanges in the country, 21 of them being regional ones
with allotted areas. Two others set up in the reform era, viz., the
National Stock Exchange (NSE) and Over the Counter Exchange of
India (OICEI), have mandate to have nation-wise trading.
The Stock Exchanges are being administered by their governing boards
and executive chiefs. Policies relating to their regulation and control
are laid down by the Ministry of Finance. Government also Constituted

7
Securities and Exchange Board of India (SEBI) in April 1988 for
orderly development and regulation of securities industry and stock
exchanges.

8
1.5 SCOPE OF INVESTMENTS
Investment activity includes buying and selling of the financial assets,
physical assets, and marketable assets in primary and secondary
markets. Investment activity involves the use of funds or savings for
further creation of assets or acquisition of existing assets.
Investment activities refer to acquisition of assets like:
⦁ FINANCIAL ASSETS
⦁ PHYSICAL ASSTES
⦁ MARKETABLE ASSETS FROM THE PRIMARY AND
SECONDARY MARKET

Financial assets are

⦁ PFNEW ISSUE STOCK MARKET
⦁ LIC scheme
⦁ Pension scheme
⦁ Post office certificate and deposits Physical assets are
⦁ House, land, building and flat
⦁ Gold, silver and other metals Marketable assets are
⦁ Shares
⦁ Bonds
⦁ Government securities
⦁ Mutual fund

Physical assets are

⦁ House, land, building and flat
⦁ Gold, silver and other metals

Marketable assets are

⦁ Shares
⦁ Bonds
⦁ Government securities
⦁ Mutual fund

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 1.6 Characteristics Of Investment

 Safety of principal
Safety of funds invested is one of the essential ingredients of a good
investment programme. Safety of principal signifies protection against
any possible loss under the changing conditions. Safety of principal can
be achieved through a careful review of economic and industrial trends
before choosing the type of investment. It is clear that no one can make
a forecast of future economic conditions with utmost precision. To
safeguard against certain errors that may creep in while making an
investment decision, extensive diversification is suggested. The main
objective of diversification is the reduction of risk in the loss of capital
and income. A diversified portfolio is less risky than holding a single
portfolio.
Diversification refers to an assorted approach to investment
commitments. Diversification may be of two types, namely,
i. Vertical diversification; and
ii. Horizontal diversification.
Under vertical diversification, securities of various companies engaged
in different stages of production (from raw material to finished
products) are chosen for investment. On the contrary, horizontal
diversification means making investment in those securities of the
companies that are engaged in the same stage of production. Apart
from the above classification, securities may be classified into Bonds
and Shares which may in turn be reclassified according to their types.
Further, securities can also be classified according to due date of
interest, etc. However, the simplest diversification is holding different
types of securities with reasonable concentration in each.

 Liquidity and Collateral value

A liquid investment is one which can be converted into cash
immediately without monetary loss. Liquid investments help investors
meet emergencies. Stocks are easily marketable only when they
provide adequate return through dividends and capital appreciation.
Portfolio of liquid investments enables the investors to raise funds
through the sale of liquid securities or borrowing by offering them as
collateral security. The investor invests in high grade and readily
saleable investments in order to ensure their liquidity and collateral
value.

 Stable income
Investors invest their funds in such assets that provide stable income.
Regularity of income is consistent with a good investment programme.
The income should not only be stable but also adequate as well.

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 Capital growth
One of the important principles of investment is capital appreciation. A
company flourishes when the industry to which it belongs is sound. So,
the investors, by recognizing the connection between industry growth
and capital appreciation should invest in growth stocks. In short, right
issue in the right industry should be bought at the right time.

 Tax implications
While planning an investment programme, the tax implications related
to it must be seriously considered. In particular, the amount of income
an investment provides and the burden of income tax on that income
should be given a serious thought. Investors in small income brackets
intend to maximize the cash returns on their investments and hence
they are hesitant to take excessive risks. On the contrary, investors who
are not particular about cash income do not consider tax implications
seriously.

 Stability of Purchasing Power

Investment is the employment of funds with the objective of earning
income or capital appreciation. In other words, current funds are
sacrificed with the aim of receiving larger amounts of future funds. So,
the investor should consider the purchasing power of future funds. In
order to maintain the stability of purchasing power, the investor should
analyze the expected price level inflation and the possibilities of gains
and losses in the investment available to them.

 Legality
The investor should invest only in such assets which are approved by
law. Illegal securities will land the investor in trouble. Apart from
being satisfied with the legality of investment, the investor should be
free from management of securities. In case of investments in Unit
Trust of India and mutual funds of Life Insurance Corporation, the
management of funds is left to the care of a competent body. It will
diversify the pooled funds according to the principles of safety,
liquidity and stability.

 Risk Factor
Every investment contains certain portion of risk. It is a key feature of
investment which refers to loss of principal, delay in payment of
interest and capital etc. Most investors prefer to invest in less riskier
securities.

 Expectation Of Return
Return expectation is the main objective of investment. Investors
expect regularity of high and consistent income for their capital.

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 Safety
Investors expect safety for their capital. They desire certainty of return
and protection of their investment or principal amount.

 Liquidity
Liquidity means easily sale or convert the capital or investment into
cash without any loss. So, most investors prefer liquid investments.

 Marketability
It is another feature of investment that they are marketable. It means
buying and selling or transferability of securities in the market.

 Stability Of Income
Investors invest their capital with high expectation of income. So,
return on their investment should be adequate and stable.

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 1.7 Advantages Of Investment
One of the primary advantages of investment is that a prudent investor
can have their money work for them to earn more money, rather than
having to earn that extra money themselves. This gives them the
benefit of enjoying a higher standard of living for roughly the same
amount of work.

 Grow your money

Investing your money can allow you to grow it. Most investment
vehicles, such as stocks, certificates of deposit, or bonds, offer returns
on your money over the long term. This return allows your money to
build, creating wealth over time.

 Save for retirement

As you are working, you should be saving money for retirement. Put
your retirement savings into a portfolio of investments, such as stocks,
bonds, mutual funds, real estate, businesses, or precious metals. Then,
at retirement age, you can live off funds earned from these investments.
Based on your personal tolerance of risk, you may want to consider
being riskier at a younger age with your investments. Greater risk
increases your chances of earning greater wealth. Becoming more
conservative with your investments as you grow older can be wise,
especially as you near retirement age.

 Earn higher returns

In order to grow your money, you need to put it in a place where it can
earn a high rate of return. The higher the rate of return, the more money
you will earn. Investment vehicles tend to offer the opportunity to earn
higher rates of return than savings accounts. Therefore, if you want the
chance to earn a higher return on your money, you will need to explore
investing your money.

 Reach financial goals

Investing can help you reach big financial goals. If your money is
earning a higher rate of return than a savings account, you will be
earning more money both over the long term and within a faster
period. This return on your investments can be used toward major
financial goals, such as buying a home, buying a car, starting your own
business , or putting your children through college.

 Build on pre-tax dollars

Some investment vehicles, like employer-sponsored 401(k)s, allow you
to invest your pre-tax dollars. This option allows you to save more
money than if you could only invest your post-tax dollars.

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 Qualify for employer-matching programs
Some employers offer to match the money you invest in your 401(k)
plan up to a certain amount. Of course, the only way you can qualify
and earn these matching funds is if you are actively investing in your
401(k) plan. Thus, many people invest in their 401(k)s to gain the
matching employer funds.

 Start and expand a business

Investing is an important part of business creation and expansion.
Many investors like to support entrepreneurs and contribute to the
creation of new jobs and new products. They enjoy the process of
creating and establishing new businesses and building them into
successful entities that can provide them with a strong return on their
investment.

 Support others
Many investors like investing in people, whether they are business
owners, artists, or manufacturers. These investors feel good helping
others achieve their goals.

 Reduce taxable income

As an investor, you may be able to reduce your taxable income by
investing pre-tax dollars into a retirement fund, like a 401(k). If you
generate a loss from an investment, you may be able to apply that loss
against any gains from other investments, which lowers the amount of
your taxable income.

 Be part of a new venture

New ventures need the backing of money, and they look to investors
for that backing. Some investors may like the excitement of investing
in a new, cutting-edge product or service, or being part of something
like a business or film that introduces them to a glamorous world.

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1.8 Disadvantages Of Investment
An investor may bear a risk of loss of some or all of their capital
invested. Investment differs from arbitrage, in which profit is generated
without investing capital or bearing risk. Savings bear the (normally
remote) risk that the financial provider may default. Foreign currency
savings also bear foreign exchange risk: if the currency of a savings
account differs from the account holder's home currency, then there is
the risk that the exchange rate between the two currencies will move
unfavourable , so that the value of the savings account decreases,
measured in the account holder's home currency. In contrast with
savings, investments tend to carry more risk, in the form of both a
wider variety of risk factors, and a greater level of uncertainty.

1. High Expense Ratios and Sales Charges

If you’re not paying attention to mutual fund expense ratios and sales
charges; they can get out of hand. Be very careful when investing in
funds with expense ratios higher than 1.20%, as they will be considered
on the higher cost end. Be wary of 12b-1 advertising fees and sales
charges in general. There are several good fund companies out there
that have no sales charges. Fees reduce overall investment returns.

2.Management Abuses
Chruning , turnover and window dressing may happen if your manager
is abusing his or her authority. This includes unnecessary trading,
excessive replacement and selling the losers prior to quarter-end to fix
the books.

3.Tax Inefficiency
Like it or not, investors do not have any choice when it comes to
capital gain payouts in mutual funds. Due to the turnover, redemptions,
gains and losses in security holdings throughout the year, investors
typically receive distributions from the fund that are an uncontrollable
tax event.

4.Poor Trade Execution

If you place your mutual fund trade anytime before the cut-off time for
same-day NAV, you’ll get the same closing price NAV is for buy or
sell on the mutual fund. For investors searching for faster execution
times, maybe because of short investment horizons, day trading, or
timing the market, mutual funds provide a weak execution strategy.

5. Volatile Investments
Investment in BSE is subjected to many risks since the market is
volatile. The shares of a company fluctuate so many times in just a
single day. These price fluctuations are unpredictable most of the times
and the investor sometimes have to face severe loss due to such
uncertainty.

15
6.Brokerage Commissions Kill Profit Margin
Every time an investor purchase or sells his shares; he has to pay some
amount as a brokerage commission to the broker, which kills the profit
margin.

7.Time Consuming
Investment in NSE is not as easy as investing in a lottery as you have
to complete many formalities in the process and hence is time
consuming..

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⦁FACTORS INFLUENCING INVESTMENT
DECISION
Investment levels are influenced by:
⦁ Interest rates (the cost of borrowing)
⦁ Economic growth (changes in demand)
⦁ Confidence/expectations
⦁ Technological developments (productivity of capital)
⦁ Availability of finance from banks.
⦁ Others (depreciation, wage costs, inflation, government policy

Factors Affecting
Investment

⦁ Interest rates
Investment is financed either out of current savings or by borrowing.
Therefore, investment is strongly influenced by interest rates. High
interest rates make it more expensive to borrow. High interest rates also
give a better rate of return from keeping money in the bank. With
higher interest rates, investment has a higher opportunity cost because
you lose out the interest payments.
The marginal efficiency of capital states that for investment to be
worthwhile, it needs to give a higher rate of return than the interest rate.
If interest rates are 5%, an investment project needs to give a rate of
return of at least 5% or more. As interest rates rise, fewer investment
projects will be profitable. If interest rates are cut, then more
investment projects will be worthwhile.

⦁ Economic growth
Firms invest to meet future demand. If demand is falling, then firms
will cut back on investment. If economic prospects improve, then firms
will increase investment as they expect future demand to rise. There is

17
 strong empirical evidence that investment is cyclical. In a recession,
investment falls, and recover with economic growth.

⦁ Confidence
Investment is riskier than saving. Firms will only invest if they are
confident about future costs, demand and economic prospects. Keynes
referred to the ‘animal spirits’ of businessmen as a key determinant of
investment. Keynes noted that confidence that wasn’t always rational.
Confidence will be affected by economic growth and interest rates, but
also the general economic and political climate. If there is uncertainty
(e.g. political turmoil) then firms may cut back on investment decisions
as they wait to see how event unfold.

 Inflation
In the long-term, inflation rates can have an influence on investment.
High and variable inflation tends to create more uncertainty and
confusion, with uncertainties over the cost of investment. If inflation is
high and volatile, firms will be uncertain at the final cost of the
investment, they may also fear high inflation could lead to economic
uncertainty and future downturn. Countries with a prolonged period of
low and stable inflation have often experienced higher rates of
investment.

 Productivity of capital
Long-term changes in technology can influence the attractiveness of
investment. In the late nineteenth century, new technology such as
Bessemer steel and improved steam engines meant firms had a strong
incentive to invest in this new technology because it was much more
efficient than previous technology. If there is a slowdown in the rate of
technological progress, firms will cut back investment as there are
lower returns on the investment.

 Availability of finance
In the credit crunch of 2008, many banks were short of liquidity so had
to cut back lending. Banks were very reluctant to lend to firms for
investment. Therefore, despite record low-interest rates, firms were
unable to borrow for investment – despite firms wishing to do that.
Another factor that can influence investment in the long-term is the
level of savings. A high level of savings enables more resources to be
used for investment. With high deposits – banks are able to lend more
out. If the level of savings in the economy falls, then it limits the
amounts of funds that can be channelled into investment.

18
 Wage costs
If wage costs are rising rapidly, it may create an incentive for a firm to
try and boost labour productivity, through investing in capital stock. In
a period of low wage growth, firms may be more inclined to use more
labour-intensive production methods.

 Depreciation
Not all investment is driven by the economic cycle. Some investment is
necessary to replace worn out or outdated equipment. Also, investment
may be required for the standard growth of a firm. In a recession,
investment will fall sharply, but not completely – firms may continue
with projects already started, and after a time, they may have to invest
on less ambitious projects. Also, even in recessions, some firms may
wish to invest or start-up

 Public sector investment

Most of the investment is driven by the private sector. But, investment
also includes public sector investment – government spending on
infrastructure, schools, hospitals and transport.

 Government policies
Some government regulations can make investment more difficult. For
example, strict planning legislation can discourage investment. On the
other hand, government subsidies/tax breaks can encourage investment.
In China and Korea, the government has often implicitly guaranteed –
supported the cost of investment. This has led to greater investment –
though it can also affect the quality of investment as there is less
incentive to make sure the investment has a strong rate of return

19
CHAPTER 2:- Review Of Literature

The emerging economic environment of competitive markets

signifying individuals’ sovereignty has profound implications for the
savings and their investment in India. The term investment refers to
funds invested in various saving schemes, consisting of deposit in
banks, post office, Government and Semi-Government securities, loans,
mutual funds shares and debentures of companies. The financial and
economic meaning of investment is related to each other, because
investment is a part of savings of individuals, which flows into the
capital market either directly or through institutions divided into new
and secondary capital financing. According to F. Amling- ‘Investment
may be defined as the purchase by an individual or institutional
investor of a financial or real assets that produces a return proportional
to the risk assumed over some future investment period.
A review of literature consigns a research study in proper perspective
by showing the quantity of work already carried out in the related area
of the study. The purpose of this part is to understand the results of
various studies already undertaken in the relevant field and to find out
the research gap in the present study.
A large number of studies on the investment behaviour have been
performed during the past few years all over the world. In this modern
era, so many types of investments are available. Each type of
investment has its own advantage and disadvantages. An investor can
also choose the type of investment which suits his needs. The following
are the extracts of various articles published by different authors in
several magazines and journals.

2.1 Preference of Various Investment Avenues

Joseph et al (2014) has carried “A Study on Preferred Investment
Avenues among the People and Factors Considered for Investment”.
The study has been undertaken with the objective, to analyze the
investment choice of people in few cities in Bangalore. The study is
based on using a structured questionnaire. The study concludes that all
the age groups among the respondents give more importance to invest
in bank deposit and insurance. Income level of a respondent is an
important factor which affects investment portfolio of the respondent.
Respondents are more aware about various investment avenues like
insurance, bank deposits, small savings like post office savings etc.
Many people are not willing to take risk for their funds, so many prefer
to invest in bank deposits, insurance, post office saving etc., The study
suggested to every respondents that, they have to acquire a specific
knowledge of various kinds of investment opportunities available in the
financial market and appraisal of investment for avoiding loss.

20
Pandian et al (2013) carried out a study on “A Study of Investors
Preference towards Various Investments Avenues in Dehradun
District”. The study was conducted to understand the awareness of
people towards various investment avenues and the investors’
preference towards various investment avenues in Dehradun Districts.
The investors are selected by convenient sampling technique.
Accordingly, the researcher has selected 120 investors in the study area.
The investigation shows that, majority of the investors invest their
money in equity shares only and also the majority invest their money
for the purpose of capital appreciation. The study revealed that when
comparing the earnings and the loss incurred by the investors in stock
market. It is heartening to note that most of the investors incurred loss
only. The study offered suggestion to the investors that; the investor
has to invest their money in less risky securities like mutual fund and
debenture.

Sireesha et al (2013) has carried out a study on impact of

demographics on select investment avenues: a case study of twin cities
of Hyderabad and Secunderabad, India. The research study seeks to
reveal the relationship between the demographic factors and investment
avenues selected by investors. A survey method is adopted to gather
information from 165 respondents through questionnaire in Hyderabad
and Secunderabad and the samples were selected at random from
different age groups, occupations, income levels, and qualifications.
Points were allotted to the preferences specified by the respondents
through the questionnaires. The study finally concludes that income
and amount saved has an impact on the purpose of investment made by
the investors. Most of the investors preferred to invest their money in
the bank and post office savings schemes and this reflects the
conservative nature of an investor i.e., the investor wants their money
to be safe and they do not require any higher return and capital
appreciation. The study offers a suggestion to the wealth manager to
design a portfolio to their client according to their income pattern.

Malekar et al (2012) in their article entitled “A study of investor

behaviour on investment avenues in Mumbai Fenil” stated that
investor‘s perception will provide a way to accurately measure how the
investors think about the products and services provided by the
company. The objective of the study is to find out the need of the
current and future investors and to study on investor behaviour. A
sample of 100 investors was taken for the study. Most of the investors
were making conservative decisions that reflecting a survival mode in
the business operation. During these difficult times, understanding
what investors decide on an ongoing basis is critical for survival.
Therefore, the study is identified that people like to invest in stock
market as compared to any other markets, even if they face huge losses.

21
Giridhari et al (2011) have carried out a study on “Investment
Preferences among Urban Investors in Orissa”. They discuss that
people were irrational in their decision making about investment in
securities. They make cognitive or emotional mistakes in decision
making. It happens due to various biases which are being discussed in
the field of behavioural finance. It explains that investment decisions
and risk tolerance of investors depend on age, sex, income, marital
status, education, family background, occupation and also the
environment on which people lived. The investors of urban areas were
targeted for this research study. This research study also cleared that
male investors are more risk seeker and more active than compare to
female investors. The types of investors are also discussed in this study.
Structured Questionnaire and statements used for conducting this
research and the sample size was 210. The results of study show that
individuals invest to full fill their needs and also take other benefits like
safety, tax benefits, high capital gains, liquidity, secured future and for
future needs.

Thirupath (2011) has conducted a study on “Investment Patterns and

Tax Planning of Salaried Class Investors in Vellore District”. The
focus of this study is on the individual salaried class investors. Keeping
in view the potential savings of the salaried class investors, this study
outlines the conceptual background with focus on investment and tax
planning, examines the profile and awareness of the salaried class
investors, analyses the attitude and satisfaction of the salaried class
investors towards investments, evaluates the factors motivating the
investors for investments and expected rate of return on investment,
analyses the awareness and attitude of investors towards tax planning
and offers suggestions for increasing investments in Government
sectors and on balanced investment patterns for individual investors.

Barua and Srinivasan (1991) worked on the investment decision

making process of individuals has been explored through experiments.
They conclude that the risk perception of individuals is significantly
influenced by the skewness of the return distribution. This implies that
while taking investment decisions, investors are concerned about the
possibility of maximum losses in addition to the variability of returns.
Thus the mean variance framework does not fully explain the
investment decision making process of individuals.

22
The majority 28.3 % of the respondents felt that Kisan Vikas Patra was
providing high return with interest rate of 8.41%, Next preference was
Monthly income scheme (MIS) by 23.3 % of the respondents. MIS
with its handsome 8 percent returns proved to be a major draw. 15 % of
the respondents felt that Recurring deposit was giving more return on
investment. 11.1 % of respondents preferred Postal life insurance
scheme, 8.9 % felt that Time deposit was giving high return, 5 % felt
that Public provident fund was providing high return on investment,
only 2.9 % felt that Post office savings A/c and 4.4% felt National
savings certificate provides high return on their investment respectively.
The majority of respondents preferred reasons for post office
investment, 77.9% of respondents felt that there was 100% safety for
their investment. 10.3% had invested in Post office as a small saving as
they do consider the interest rate. 2.9% were availing tax benefits.

23
2.2 Awareness on Investment

Puneet (2014) has carried out a study to analyse the awareness level
and investment behaviour of salaried individuals towards financial
products. All those salaried individuals of Himachal Pradesh were
considered as the population for this study. A sample of 516
respondents was used for the purpose of this study. Results of the study
suggest that respondents are quite aware about traditional and safe
financial products whereas awareness level of new age financial
products among the population is low. Also majority of the respondents
park their money in traditional and safe investment avenues.

Mane et al (2014) analysed the “Awareness and Selection of Different

Financial Investment Avenues for the Investor in Pune City”. This
study deals with the behaviour of the investor to identify the better
investment avenues available in Pune. The study mainly focused to
identify the investors’ preference towards the investment. The sample
size of the study is 784, drawn from Krejcie and Morgan table. This
study confirms the earlier findings with regard to the relationship
between age and income level of the individual investors. It concludes
that large numbers of portfolio is not good for healthy investment and
women are the deciding factor of the family.

Mazumdar (2014) carried out a study on “Individual Investment

Behaviour with Respect to Financial Knowledge and Investment Risk
Preference”. This study attempts to understand the relationship
between the level of knowledge and investment behaviour. It examines,
if individuals with high financial knowledge, tend to invest more in any
particular investment avenue like equity, fixed deposits, gold or real
estate. The study also tries to understand if an individual’s financial
risk preference affects investment behaviour. It examines if risk averse
investors, moderate risk takers and aggressive investors differ with
respect to their investment behaviour. It also gauges the association of
financial knowledge and investment risk preference. It shows that there
is no significant relationship between knowledge and individual
investment behaviour. No significant relationship is seen between
investor risk preference and individual investment behaviour. This
finding is contradictory to the previous studies as seen in literature.
Indian investors may tend to be basing their investment decisions based
on cultural upbringing, or may be influenced by social norms and
psychological biases. Role of friends, relatives and financial advisors
may be a major influencing factor. They found that investors with high
financial knowledge tend to invest more in risky avenues. This finding
supports result from previous research studies.

24
Umamaheswari et al (2014) has carried out a study on “Coimbatore
based Salaried Investors’ Awareness, Attitude, Expectation and
Satisfaction over their investments”. This paper is outlining the
relationship between the dominant societal and demographic factors of
the salaried middle class that affects the investment criteria namely,
investment awareness, investment attitude and investment returns.
Precisely, this study pursued on the salaried middle class of
Coimbatore District, Tamilnadu, India is executed with a focus to
comprehend the utilities of financial policies favouring public and the
sample group of salaried class investors comprising 1000 members. A
significant percentage of the salaried investors of Coimbatore know to
make good investment decisions, one third of salaried-class of
Coimbatore do not opt for the right financial plan due to lack of
investment awareness and only 50 per cent of the salaried-class of
Coimbatore has knowledge about the percentage of savings they have
to opt for future.

Chavare (2013) has undertaken a study to know the investment

practices of senior college teachers in Western Maharashtra. The
findings reveal that, the investors were having high level of knowledge
about various investment avenues. Also, most of the investors have
taken the assistance of investment planners during the decision making
of investment. The investors have mostly preferred low risk avenues
comparative to others. They wanted to invest their funds in safer
avenues and want to live comfortable. Researcher has found that, there
was a relationship between annual income and terms of investments.
But, an age of investors and the amount of investment is not
interrelated. Although a majority of the investors were having a high
level of knowledge, it is suggested that, the investors should have
thorough knowledge before making investment in different avenues.

25
 CHAPTER 3:- RESEARCH METHODOLOGY
3.1 Research Methodology
The project consists of theoretical as well as practical knowledge. Also
it contains ideas and information imparted by the guide. In this research
data is collected by through two sources
 Primary Research

 Secondary Research

3.1.1 PRIMARY DATA COLLECTION METHOD

In primary data collection method you collect the data yourself using
methods such as interviews and questionnaires. The key point here is
that the data you collect is unique to you and your research and, until
you publish , no one else has access to it . There are many methods to
collect primary data and the main methods include:
 Structured Questions

 Interviews

 Data Collection

 Observations

The primary data which is generated by the above methods, may be

qualitative in nature (usually in the form of numbers or where you can
make counts of words used)
PRIMARY DATA

SAMPLE SIZE: 35

SAMPLE UNIT :Google Forms

SAMPLE INSTRUMENT :

 Observation

 Google Forms

26
 3.1.2 SECONDARY DATA COLLECTION METHOD

Secondary data is collected by someone other than the user. Common

sources of secondary data include censuses, survey, organizational
record, or data collected through qualitative methodologies or
qualitative research.

SECONDARY DATA
 Newspaper

 Internet

Secondary data analysis saves time that would otherwise be spent

collecting data and particularly in the case of quantitative data ,
provides larger and higher- quality data base than would be unfeasible
for any individual researcher to collect on their own .In addition to that
, analysts of social and economic change consider secondary data
essential, since it is impossible to conduct a new survey that can
adequately capture past change / or developments.

SAMPLING INSTRUNMENTS
 INTERNET

AREA OF STUDY
 MUMBAI

27
3.2 Objectives Of Study

 To Understand various Avenues Of Investment In India.

 To Know weather people are aware of Stock Exchange.
 To Know the features of Investment Option do people prefer.
 To Know on whose advice do people make Investment decisions.
 To Understand on what basis the decision to invest depends on.
 To study the knowledge of the investor about investment option.
 To analyze the reason for choosing one particular investment.
 To signify the best preferred option amongst the different financial
instruments.
 To study the investors objective towards choosing an option out of
so many.
 To analyze the investment pattern by investors.
 To find out the saving habit of people and the percentage of
amount they invest in various financial instruments.
 To evaluate the attitude of people towards saving and decision
making regarding investments.
 To find out the reason of individual for not investing in financial
instruments.
 To find out what return people expect from the investment.
 To find out what various factors they consider before investing

3.3 Hypothesis

 H0 Most people are Aware of various Investment Avenues.

 H1 Most people are Unaware of various Investment Avenues.

 H0 Most people are Aware about Share Market and also how to
Invest in it.
 H1 Most people are Unaware about Share Market and also how to
Invest in it.

 H0 Decision of Investment depends on Companies Past Performance

and Economic Scenarios.
 H1 Decision of Investment depends on Industry Analysis and Credit
Rating.

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Chapter 4

4.1 Types Of Investment

Before you start investing, it is best to understand the different types of
investments. For most investors, investments vary in terms of risk
levels – low risk, medium risk and high risk. Here’s a look at these
investment options in detail:

Low-risk investments
These are instruments which pay fixed income – irrespective of the
changes in the business or economy. Bonds, debentures and fixed
deposits come under this category. Also, special investment vehicles –
PPF, EPF, SCSS, Sukanya Samriddhi, National Savings Scheme and
other small Post Office Schemes which are created by a government
statute for specific purposes are low risk as they guarantee the returns.
The returns are periodic and pre-determined. Low-risk investments are
not linked to the stock market movements and are usually governed by
the interest rate movements of the financiers. However, there is always
the returns are always guaranteed. Government bonds and life
insurance policies provide good returns, however, they have long lock-
in periods. So, you will have to wait for a long time to earn substantial
returns from these investment options. Fixed deposit is one of the very
few low-risk investments that offer stable, high returns and immediate
liquidity.

Medium-risk investments
These are investments which might have a certain percentage of risk
but these also pay higher returns to investors willing to invest in them.
Debt funds, balanced mutual funds, and index funds fall in this
category. Such instruments do have an element of debt and stability,
but they have their volatility linked to the markets which can hamper
your principal amount. The irregularity in earnings can make any fixed
income from such investment impossible.

High-risk investments
These are investments where there is no limit to the upside along with
the downside of risk-returns. These are stocks of companies, equity
mutual funds, even stocks, and derivatives. The return on these
instruments can give huge returns as well as chances of losses
depending on various external factors to the company and internal ones.
The quantity and timing of returns on these instruments are not fixed.
Hence, they are at high risk.

29
 4.2 Investment Avenues in India
The Indian investor has a number of investment options to choose from.
Some are traditional investments that have been used across
generations, while some are relatively newer options that have become
popular in recent years. Here are some popular investment options
available in India.
 Mutual Funds
 Fixed Deposits
 Bonds
 Stock
 Recurring Deposit
 Public Provident Fund (PPF)
 Gold/Silver
 Equities
 Real Estate (Residential/Commercial Property)
 Precious stones

1. Mutual Funds
Mutual Fund have been around for the past few decades but they have
gained popularity only in the last few years. These are investment
vehicles that pool the money of many investors and invest it in a way to
earn optimum returns. Different types of mutual funds invest in
different securities. Equity mutual funds invest primarily in stocks and
equity-related instruments, while debt mutual funds invest in bonds and
papers. There are also hybrid mutual funds that invest in equity as well
as debt. Mutual funds are flexible investment vehicles, in which you
can begin and stop investing as per your convenience. Apart from Tax-
Saving Mutual Fund, you can redeem investments from mutual funds
any time as well. Mutual funds are financial instruments that are
professionally managed and that invest money on behalf of any
investor in different securities. These mutual funds are classified into
various types based on the type of securities that they invest in. some of
the most popular mutual fund types are balanced funds, stock funds,
open-ended funds etc. These funds are classified based on their
percentage allocation in different securities. So an equity fund invests
popular is equity and is a high risk high return product while a debt
fund invests purely in debt and money market instruments and is hence
a low risk low return financial product.
Mutual funds are a popular and easily understood investment vehicle
for many investors. For investors with limited knowledge and time or
money. Mutual funds can provide simplicity and other benefits. To
help you decide whether investing in mutual funds is the right choice
for you or not .Mutual funds are financial instruments that are
professionally managed and that invest money on behalf of any
investor in different securities.

30
These mutual funds are classified into various types based on the type
of securities that they invest in. some of the most popular mutual fund
types are balanced funds, stock funds, open-ended funds etc. These
funds are classified based on their percentage allocation in different
securities. So an equity fund invests popular is equity and is a high risk
high return product while a debt fund invests purely in debt and money
market instruments and is hence a low risk low return financial product.

Mutual funds are a popular and easily understood investment vehicle

for many investors. For investors with limited knowledge and time or
money. Mutual funds can provide simplicity and other benefits. To
help you decide whether investing in mutual funds is the right choice
for you or not.

31
ADVANTAGES OF INVESTING IN MUTUAL FUNDS:
One of the advantages of a mutual fund is it allows you to capture the
returns of an entire segment of the market without having to buy and
sell individual stocks and bonds. This ability to diversify across many
investments with the purchase of a single fund is one of the main
reasons mutual funds are so popular.
⦁ By purchasing mutual funds, you are provided with the immediate
benefit of instant diversification and asset allocation without the large
amounts of cash needed to create individual portfolios.
⦁ Mutual funds are able to take advantage of their buying and selling
volume to reduce transaction cost for investors. When you buy a
mutual fund, you are able to diversify without the numerous
commission charges. Imagine if you had to buy each of the 10-20
stocks needed for diversification. The commission charges alone would
eat up a good chunk of your investment. With mutual funds you can
make transaction on much larger scale for lesser money.
⦁ Many investors don't have the exact sums of money to buy round lots
of securities. Investors can purchase mutual funds in smaller
denominations. Smaller denominations of mutual funds give investors
the ability to make periodic investments through monthly purchase
plans. So rather than having to wait until you have enough money to
buy higher-cost investments you can get in right away with mutual
funds. This provides an additional advantage.
⦁ Another advantage of mutual funds is that you can get in and out with
relative ease. In general, you are able to sell your mutual funds in a
short period of time without there being much difference between the
sale price and the most current market valued.
⦁ When you buy a mutual fund, you are also choosing a professional
money manager. This manager will use the money that you invest to
buy and sell stocks that he or she has carefully researched. Therefore
rather than having to thoroughly research every investment before you
decide to buy or sell you have a mutual fund's money manager to
handle it for you.

Returns:
Mutual funds cannot guarantee returns to investors as they are linked to
market performance. So, if the market is on a bull run and it does
exceedingly well, this is reflected in the value of your fund. However, a
poor performance in the market could negatively impact your
investments. Unlike traditional investments ,mutual funds do not assure
capital protection. Hence investors should do their research and invest
in funds that can help you meet your financial goals.
⦁ Market risk
The risk that you will lose some or all of your principal. As markets
fluctuate, there is always a possibility that the mutual funds you hold
might be caught in a decline.

32
⦁ Inflation risk
The risk of losing purchasing power. If your mutual funds gain 5% in a
year and the cost of living goes up by 2%, you are left with a real
return of only 3%.
⦁ Interest rate risk
The risk that rising interest rates will cause your mutual funds to
decline in value. When interest rates rise, bond prices decline and bond
mutual funds may also decline as a result.
⦁ Currency risk
The risk that a decline in the exchange rate will reduce your gains (or
add to losses). Even if the value of a foreign-currency-denominated
fund goes up, a decline in the foreign currency can reduce your returns
when they are exchanged back into Canadian dollars.
⦁ Credit risk
The risk that the issuer of a bond or other security won't have enough
money to make its interest payments or to redeem the bonds for face
value when they are due. Securities with a higher risk of default tend to
pay higher returns.

33
2. Fixed Deposits
Fixed deposits are investment vehicles that are for a specific, pre-
defined time period. They offer complete capital protection as well as
guaranteed returns. They are ideal for conservative investors who stay
away from risks. Fixed deposits are offered by banks and for different
time periods. Fixed deposit interest rates change as per economic
conditions and are decided by the banks themselves. Fixed deposits are
typically locked-in investments, but investors are often allowed to avail
loans or overdraft facilities against them. There is also a tax-saving
variant of fixed deposit, which comes with a lock-in of 5 years. Fixed
deposits are a high-interest -yielding Term deposit and offered by
banks in India. The most popular form of Term deposits are Fixed
Deposits while other forms of term Deposits are recurring deposit and
flexi fixed deposit the latter is actually a combination of Demand
deposit and Fixed deposit. A fixed deposit is a financial instrument
provided by banks or NBFCs which provides investors a higher rate of
interest than a regular saving account until the given maturity date. It
may or may not require the creation of a separate account. It is known
as a term deposit or time deposit in Canada, Australia, New-Zealand
and the United States and as a bond in the United Kingdom and India.
for a fixed deposit is that the money cannot be withdrawn from the
fixed deposit as compared to recurring deposit or a demand deposit
before maturity. Some banks may offer additional services to fixed
deposit holders such as loans against fixed deposit certificates at
competitive interest rates. It's important to note that banks may offer
lesser interest rates under uncertain economic conditions. The interest
rate varies between 4 and 7.25 percent. The tenure of an fixed deposit
can vary from 7-15 or 45 days to 1.5 years and can be as high as 10
years. These investments are safer than Post Office Schemes as they
are covered by the deposit insurance and credit guarantee corporation
(DICGC). They also offer income tax and wealth benefits. To
compensate for the low liquidity fixed deposits offer higher rates of
interest than saving accounts. The longest permissible term for fixed
deposits is 10 years. Generally the longer the term of deposit, higher is
the rate of interest but a bank may offer lower rate of interest for a
longer period if it expects interest rates, at which the Central Bank of a
nation lends to banks (repo rates) will dip in the future. Usually in India
the interest on fixed deposits is paid every three months from the date
of the deposit. (example: if FD a/c was opened on 15th Feb., first
interest installment would be paid on 15 May). The interest is credited
to the customers' Savings bank account or sent to them by cheque. This
is a simple fixed deposit. The customer may choose to have the interest
reinvested in the fixed deposit account. In this case, the deposit is
called the cumulative fixed deposit or compound interest. For such
deposits, the interest is paid with the invested amount on maturity of
the deposit at the end of the term.

34
Although banks can refuse to repay fixed deposits before the expiry of
the deposit, they generally don't. This is known as a premature
withdrawal. In such cases, interest is paid at the rate applicable at the
time of withdrawal. For example, a deposit is made for 5 years at 8%,
but is withdrawn after 2 years. If the rate applicable on the date of
deposit for 2 years is 5 per cent, the interest will be paid at 5 per cent.
Banks can charge a penalty for premature withdrawal. Banks issue a
separate receipt for every fixed deposit because each deposit is treated
as a distinct contract. This receipt is known as the fixed deposit receipt
that has to be surrendered to the bank at the time of renewal or
encashment. Many banks offer the facility of automatic renewal of
fixed deposits where the customers do give new instructions for the
matured deposit. On the date of maturity, such deposits are renewed for
a similar term as that of the original deposit at the rate prevailing on the
date of renewal.
Nowadays, banks gives the facility of Flexi or sweep in fixed deposit,
where in you can withdraw your money through ATM, through cheque
or through funds transfer from your fixed deposit account. In such case,
whatever interest is accrued on the amount you have withdrawn will be
credited to your savings account and the balance amount will
automatically be converted in your new fixed deposit. This system
helps you in getting your funds from your fixed deposit account at the
times of emergency without wasting your time.

BENEFITS OF FIXED DEPOSIT :

⦁ The main advantages of a fixed investment such as a term deposit

include guaranteed interest rate for the agreed period and security so if
the market crashes your funds are safe, unlike the share market. Often
higher rates of interest than other savings accounts and competitive
yield.
⦁ The only reason why our parents and many in our generation also
have this single concept of investment is because of its safety features.
Also it is easy to raise a loan against your FD. One can borrow up to 90
per cent of the FDs amount.
⦁. The next advantage is the flexible maturity date, it is for this feature
that you can invest for a time frame that is as less as 6 months to as
long as 10 years or even more.
⦁ Customers can avail loans against FDs up to 80 to 90 percent of the
value of deposits. The rate of interest on the loan could be 1 to 2
percent over the rate offered on the deposit.
⦁ Residents of India can open these accounts for a minimum of 3
months.
⦁ Investing in a fixed deposit earns you a higher interest rate than
depositing your money in a saving account.

35
Risk involved:
⦁ Liquidity risk
A fixed deposit makes the availability of funds easy. However, not
all fixed deposits may be easily liquidated. For example, a tax-saver
FD whose tenure is five years, can’t be liquidated before its term. If
you have an FD at a bank that doesn’t permit online liquidation, you
may have to visit a branch and fill out their paperwork, and it may be
a few days before you get your money.

⦁ Return risk:
There are several returns-related risks in FDs. First of all, FDs may
offer you a moderate rate of return between 6-8 per cent in most
cases. At the lower end of this returns spectrum, your interest
earning may not be enough to compete with returns from small
savings or Mutual Fund SIPs.

⦁ Default risk:
Bank defaults are very rare. However, theoretically, it’s a possibility.
Your deposits – both principal and interest – at commercial and
cooperative banks are guaranteed up to Rs 1 lakh per bank.
Therefore, if a bank were to default and unable to repay your deposit,
the Deposit Insurance & Credit Guarantee Corporation were to cover
you up to Rs 1 lakh. If your losses are bigger than Rs 1 lakh per bank,
you may receive no compensation.

⦁ Tax risk:
Your FD interest earnings may be completely taxable unless you’re
over 60, where up to Rs 50,000 is exempt under Section 80 TTB.
Your interest earnings are combined with your income and taxed as
per your slab. Therefore, if you’re in the 30 per cent tax slab, a 7 per
cent FD may effectively be providing you only 4.9 per cent -- returns
further diminished by rising inflation.

⦁ Inflation risk:
Low returns from FDs may not beat even the prevalent rate of
inflation. For example, if your FD provides 6 per cent returns while
the inflation rate had crept up to 7 per cent, your capital has actually
eroded. In recent quarters, the inflation rate has been around 5 per
cent. Therefore, as a person in the 30 per cent slab investing in a 7
per cent FD, you’ve effectively earned 4.9 per cent, thus earning less
than the rate of inflation.

⦁ Concentration risk :
Some conservative, risk-averse investors prefer to save money only
through FDs. This is also a risk. Having all your money concentrated
into one form of asset means that you do not have diversification in
your portfolio.

36
⦁ Credit risk:
When you invest in corporate fixed deposits, you have to watch for
credit risks. A corporate FD is assigned a credit rating by research
agencies – FAAA, FAA, FA, etc. These signify a high chance of you
getting your principal and promised interest backin time. However,
companies with lower credit ratings – FB, FC, FD etc. – may have
greater difficulties in repaying your debt.

37
3.Bonds

Converged under the general class called ‘settled pay’ securities, the
expression “bond” is ordinarily used to allude to any established on
obligation. When you purchase a security, you are giving credit
(loaning) out your cash to an organization or government.
Consequently, they consent to give you enthusiasm on your cash and in
the long run pay you back the sum you loaned out. The primary
fascination of bonds is their wellbeing. On the off chance that you are
purchasing bonds from a consistent government, your investment is for
all intents and purposes ensured (or “chance free” in contributing
speech). The security and steadiness, be that as it may, included some
major disadvantages. Since there is little hazard, there is minimal
potential return. Therefore, the rate of profit for securities is by and
large lower than different securities. A bond is a fixed income
instrument that represents a loan made by an investor to a borrower
(typically corporate or governmental). A bond could be thought of asan
I.O.U. between the lender and borrower that includes the details of the
loan and its payments. Bonds are used by companies, municipalities,
states, and sovereign governments to finance projects and operations.
Owners of bonds are debt holders, or creditors, of the issuer. Bond
details include the end date when the principal of the loan is due to be
paid to the bond owner and usually includes the terms for variable or
fixed interest payments made by the borrower.
Governments (at all levels) and corporations commonly use bonds in
order to borrow money. Governments need to fund roads, schools,
dams or other infrastructure. The sudden expense of war may also
demand the need to raise funds.
Similarly, corporations will often borrow to grow their business, to buy
property and equipment, to undertake profitable projects, for research
and development or to hire employees. The problem that large
organizations run into is that they typically need far more money than
the average bank can provide. Bonds provide a solution by allowing
many individual investors to assume the role of the lender. Indeed,
public debt markets let thousands of investors each lend a portion of
the capital needed.
Moreover, markets allow lenders to sell their bonds to other investors
or to buy bonds from other individuals—long after the original issuing
organization raised capital. Any corporate and government bonds are
publicly traded; others are traded only over- the-counter (OTC) or
privately between the borrower and lender.
When companies or other entities need to raise money to finance new
projects, maintain ongoing operations, or refinance existing debts, they
may issue bonds directly to investors. The borrower (issuer) issues a
bond that includes the terms of the loan, interest payments that will be
made, and the time at which the loaned funds (bond principal) must be
paid back (maturity date). The interest payment (the coupon)is part of

38
the return that bondholders earn for loaning their funds to the issuer.
The interest rate that determines the payment is called the coupon rate.
The initial price of most bonds is typically set at par, usually $100 or
$1,000 face value per individual bond. The actual market price of a
bond depends on a number of factors: the credit quality of the issuer,
the length of time until expiration, and the coupon rate compared to the
general interest rate environment at the time. The face value of the
bond is what will be paid back to the borrower once the bond matures.

Most bonds can be sold by the initial bondholder to other investors

after they have been issued. In other words, a bond investor does not
have to hold a bond all the way through to its maturity date. It is also
common for bonds to be repurchased by the borrower if interest rates
decline, or if the borrower’s credit has improved, and it can reissue new
bonds at a lower cost.

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TYPES OF BONDS

⦁ Fixed rate bonds have a coupon that remains constant throughout the
life of the bond a variation are stepped coupon bonds whose coupon
increases the life of the bond.

⦁ Floating rate bonds have a variable coupon that is linked to a

reference rate of interest, such as libor or euribor. For example, the
coupon may be defined as three- month USD Libor + 0.20%. The
coupon rate is recalculated periodically, typically every one or three
months.

⦁ Zero coupon bonds pay no regular interest. They are issued at a

substantial discount to par value so that the interest is effectively rolled
up to maturity and usually taxed as such. The bondholder receives the
full principal amount on the redemption date. zero coupon bonds may
be created from fixed rate bonds by a financial institution separating
the coupons from the principal. In other words, the separated coupons
and the final principal payment of the bond may be traded separately.
See IO that is (interest only) and PO (principal only).

⦁ High yield bonds are bonds that are rated below investment grade by
the credit agencies. As these bonds are riskier than investment grade
bonds, investors or common man expect to earn a higher yield.

⦁ Convertible bonds let a bondholder exchange a bond to a number of

shares of the issuer's common stock. These are known as hybrid
securities because they combine equity and debt features.

⦁ Exchangeable bond sallows for exchange to shares of a corporation

other than the issuer.

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CHARACTERISTICS OF BONDS:

Most bonds share some common basic characteristics including:

⦁ Face value is the money amount the bond will be worth at maturity; it
is also the reference amount the bond issuer uses when calculating
interest payments.

⦁ Coupon rate is the rate of interest the bond issuer will pay on the face
value of the bond, expressed as a percentage.

⦁ Coupon dates are the dates on which the bond issuer will make
interest payments. Payments can be made in any interval, but the
standard is semi annual payments.

⦁ Maturity date is the date on which the bond will mature and the bond
issuer will pay the bondholder the face value of the bond.

⦁ Issue price is the price at which the bond issuer originally sells the
bonds.

⦁ Pricing Bonds

The market prices bonds based on their particular characteristics. A bond's

price changes on a daily basis, just like that of any other publicly-traded
security, where supply and demand in any given moment determine that
observed price. But there is a logic to how bonds are valued. Up to this point,
we've talked about bonds as if every investor holds them to maturity. It's true
that if you do this you're guaranteed to get your principal back plus interest;
however, a bond does not have to be held to maturity. At any time, a
bondholder can sell their bonds in the open market, where the price can
fluctuate, sometimes dramatically.
The price of a bond changes in response to changes in interest rates in
the economy. This is due to the fact that for a fixed-rate bond, the
issuer has promised to pay a coupon based on the face value of the
bond – so for a $1,000 par, 10% annual coupon bond, the issuer will
pay the bondholder $100 each year. Say that prevailing interest rates
are also 10% at the time that this bond is issued, as determined by the
rate on a short-term government bond. An investor would be
indifferent investing in the corporate bond or the government bond
since both would return $100. However, imagine a little while later,
that the economy has taken a turn for the worse and interest rates
dropped to 5%. Now, the investor can only receive$50 from the
government bond, but would still receive $100 from the corporate bond.
This difference makes the corporate bond much more attractive. So,
investors in the market will bid up to the price of the bond until it
trades at a premium that equalizes the prevailing interest rate

41
environment—in this case, the bond will trade at a price of$2,000 so
that the $100 coupon represents 5%. Likewise, if interest rates soared
to 15%, then an investor could make $150 from the government bond
and would not pay$1,000 to earn just $100. This bond would be sold
until it reached a price that equalized the yields, in this case to a price
of $666.67.

This is why the famous statement that a bond’s price varies inversely
with interest rates works. When interest rates go up, bond prices fall in
order to have the effect of equalizing the interest rate on the bond with
prevailing rates, and vice versa.

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Risk Factor:
The most well-known risk in the bond market is interest rate risk – the
risk that bond prices will fall as interest rates rise. By buying a bond,
the bondholder has committed to receiving a fixed rate of return for
asset period. Should the market interest rate rise from the date of the
bond's purchase, the bond's price will 19fallaccordingly. The bond will
then be trading at a discount to reflect the lower return that an investor
will make on the bond.
⦁ Interest Rate Risk Factors for Bonds
Market interest rates are a function of several factors, including the
demand for and supply of money in the economy, the inflation rate,
the stage that the business cycle is in, and the government's monetary
and fiscal policies.
From a mathematical standpoint, interest-rate risk refers to the
inverse relationship between the price of a bond and market interest
rates. To explain, if an investor purchased a 5% coupon, a 10-year
corporate bond that is selling at par value,the present value of the
$1,000 par value bond would be $614. This amount represents the
amount of money that is needed today to be invested at an annual
rate of 5% per year over a 10-year period, in order to have $1,000
when the bond reaches maturity.
Now, if interest rates increase to 6%, the present value of the bond
would be $558, because it would only take $558 invested today at an
annual rate of 6% for 10 years to accumulate $1,000. In contrast, if
interest rates decreased to 4%, the present value of the bond would
be $676. As you can see from the difference in the present value of
these bond prices, there truly is an inverse relationship between the
price of a bond and market interest rates, at least from a
mathematical standpoint.

⦁ Reinvestment Risk for Bond Investors

One risk is that the proceeds from a bond will be reinvested at a
lower rate than the bond originally provided. For example, imagine
that an investor bought a $1,000 bond that had an annual coupon of
12%. Each year the investor receives $120 (12% *$1,000), which
can be reinvested back into another bond. But imagine that over time
the market rate falls to 1%. Suddenly, that $120 received from the
bond can only be reinvested at 1%, instead of the 12% rate of the
original bond.

⦁ Call Risk for Bond Investors

Another risk is that a bond will be called by its issuer. Callable
bonds have call provisions, which allow the bond issuer to purchase
the bond back from the bondholders and retire the issue. This is
usually done when interest rates have fallen substantially since the
issue date. Call provisions allow the issuer to retire the old, high-rate
bonds and sell low-rate bonds in a bid to lower debt costs.

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⦁ Default Risk for Bond Investors
This risk refers to an event wherein the bond's issuer is unable to pay
the contractual interest or principal on the bond in a timely manner,
or at all. Credit ratingservices such as Moody's, Standard & Poor's
and Fitch give credit ratings to bond issues, which helps to give
investors an idea of how likely it is that a payment default will occur.

⦁ Inflation Risk for Bond Investors

This risk refers to an event wherein the rate of price increases in the
economy deteriorates the returns associated with the bond. This has
the greatest effect on fixed bonds, which have a set interest rate from
inception.

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4. Stocks
Buying shares of companies is a one time investment plan. It is one of
the easiest ways to invest your money in any business. These are part
ownership units of the company which each investor buys. You can
trade these shares in a marketplace called the Stock market where all
trades are done electronically. It is one of the most lucrative and
riskiest investment options to buy.Stocks, also known as company
shares, are probably the most famous investment vehicle in India.
When you buy a company’s stock, you buy ownership in that company
that allows you to participate in the company’s growth. Stocks are
offered by companies that are publicly listed on stock exchanges and
can be bought by any investor. Stocks are ideal long-term investments.
But investing in stocks should not be equated to trading in the stock
market, which is a speculative activity. When you purchase stocks (or
‘values’), you turn out to be somewhat a proprietor of the business.
This gives you a privilege to vote at the shareholder’s meeting and
enables you to get any benefits that the organization assigns to its
owners–these benefits are alluded to as profits. While bonds give a
consistent stream of wage, stocks are unstable. That is, they vacillate in
an incentive every day. When you buy a stock, you aren’t ensured
anything. Many stocks don’t pay profits, profiting just by expanding in
esteem and going up in price–which won’t not occur. As contrast with
bonds, stocks give moderately high potential returns. Obviously, there
is a cost for this potential: you should accept the danger of losing a few
or the greater part of your investment.

5.Recurring Deposits
A recurring deposit (RD) is another fixed tenure investment that allows
investors to put in a specific amount every month for a pre-defined
period of time. RDs are offered by banks and post offices. The interest
rates are defined by the institution offering it. An RD allows the
investor to invest a small amount every month to build a corpus over a
defined time period. RDs offer capital protection as well as guaranteed
returns.

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6. Gold & Silver
Investing money silver and gold as commodity is simple and profitable.
Anyone can learn the easy ways of buying silver and gold as a physical
wealth. Since the value of gold and silver considerably high the
precious metal constitutes to be great investment option for common
people. Investing in gold and silver has more advantages as compared
to any form of currency. Silver is one of the things which is considered
a good investment by many people. Even though silver has a small
market, there are many compelling reasons why silver must be under
your investment list
From an investment point of view the precious metals have been a
much-coveted commodity for ages. Silver and gold are highly sought-
after not only because of their lustrous beauty, but also because they
are a lucrative investment option. Hence investing in silver can be a
wise choice. Gold is one of the oldest investment solutions that have
been preferred by all the investors. Investors from all around the globe
have a theory in their mind that there is no better way of keeping their
money safe than buying gold

ADVANTAGES OF INVESTING IN GOLD AND

SILVER:

⦁ Price is less as compared to other assets: There is more than one

reason why people prefer to go with gold as compare to other
investment solutions. The gold market has the record of staying high
for a long period of time. Be it any country of the world, the gold
markets touches the peak and continues to stay there for a long period
of time which is why people consider it to be the best way of
preserving their wealth.
⦁ Globally accepted: Gold is acceptable all over the world. Moreover
there is certainly no different type of gold in different parts of the
world which mean you can trade it regardless of your locations. You
can simply keep the gold with you and sell it whenever you get perfect
rates for it.
⦁ It is a hard asset: All the investments you own are not hard assets.
More precisely they are not tangible. You may invest in paper profits,
shares, digital trading and a multitude of similar things. Physical silver
is something that you can carry in person all the time if you want to
though it is not recommendable.
⦁ It is cheap Silver is not cheap but it is cheaper in relative terms than
other investments. It is 1/70th of the price of gold which can even
protect you against financial crisis. It is much affordable for an average
investor. This metal is yet considered one of the most precious
investment a person can make. It is not necessary to invest into a full
ounce of gold. Rather, silver can be more reasonable in this terms.

46
⦁ World demand is growing: Global demand for silver is at its peak
and is continually growing at a dramatic pace. Major governments have
seen record level of sales in recent years and most are even operating at
their peak production right now.
⦁ More practical for regular purchase: Silver is obviously not that
cheaper to buy but can be practical when it comes to selling. Someday
you may face the need to sell your ounce of gold and meet your
financial demands. It is recommendable to do it along with silver. It
comes in smaller denominations that gold which makes it easier for
you to sell. It gives you more flexibility with the sale and allows you to
sell only what you want at that time.
⦁ Growth in use: Almost all products nowadays use silver. From
machines to coins and batteries to solar panels, each and everything
uses some quantity of silver. There are certain characteristics in silver
like electrical conductivity and its reflectivity which makes it a suitable
metal for usage in many purposes. Due toits character, the industries
are continually utilizing this metal for their advantage. This makes
silver high in demand. We can reasonably expect the source of demand
to remain sturdy.

47
DISADVANTAGES OF INVESTING IN GOLD:

⦁ Not regular profit: People usually with lack of knowledge and

invest in gold but sooner or later they realize that investing in gold isn't
bringing much advantage to them. Buying gold and keeping it with you
isn't going to bring any benefit at all, notunless you decide to sell it.
There is no interest or income you are getting out of that gold.

⦁ Commission: Moreover, If you are investing in gold by buying in

form of jewels then you might end up paying a lot of commission to the
seller in the name of the making of the jewellery.

⦁ Not predictable gold market: Moreover, if you check the history of

the gold and its prices, you will realize that despite the fact that the
prices of gold stays high for a long period of time, there are times when
the prices out of nowhere starts dropping which is not at all a good
thing for the investor prices out of nowhere starts dropping which is not
at all a good thing for the investor.

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7.EQUITY
An equity investment is money invested in a company through the
purchase of its shares. When people speak about equity investment
they generally refer to the buying of shares in the stock of a company
traded on a stock exchange. Equity investors purchase shares in the
expectation that they will rise in value in the form of capital gains
and/or generate capital dividends from the company. Should an equity
investment rise in value, the investor receives the monetary difference
only through the sale of the held shares or if the company's assets are
liquidated and all its obligations are met.
The main benefit from equity investments is the possibility to increase
the value of the principal amount invested. This comes in the form of
capital gains and dividends.
An equity fund offers investors a diversified investment option for
typically a minimum initial investment amount. To diversify a portfolio
manually to the same extent that equity funds are diversified would
require much more capital investment. Another potential benefit is to
increase investment through rights shares should the company wish to
raise additional capital. In the trading world, equity refers to stock. In
the accounting and corporate lending world, equity (or more commonly,
shareholders’ equity) refers to the amount of capital contributed by the
owners or the difference between a company’s total assets and its total
liabilities. In the real estate world, equity refers to the difference
between an asset’s market value and the debt owed on the asset.
The two most common types of equities traders encounter are common
stock and preferred stock. Share certificates bearing the name of the
shareholder, the number of shares, and the name of the company
represent these equities, or shares. The number of shares a corporation
is authorized to issue is outlined in its corporate charter. When a
company decides to sell additional shares to new or existing
shareholders, this is sometimes called raising equity. Although
shareholder rights vary by company, one of the most prominent
characteristics of equity is that it entitles the owner to vote on certain
matters and to do so in proportion to the number of shares he or she
owns. The company’s articles of incorporation and bylaws determine
the number of votes each share is entitled to.
Equity holders enjoy voting rights and other privileges that only come
with ownership, because equity represents a claim on a proportionate
share of a company’s assets and earnings. These claims are generally
subordinate to lenders’ claims, but only equity holders can truly
participate in and benefit from growth in the value of the enterprise.
Some financial instruments have equity characteristics but are not
actually equity. Convertible debt instruments, for example, represent
loans that convert into shares when a company (the borrower) crosses
certain thresholds, thereby turning a lender into an owner in certain
events. Stock options also act like equity in that their value changes
with the value of the underlying shares, but the option holders
generally do not have voting rights and are not eligible to receive the
dividends or other distributions made to bona fide equity holders.
49
It is important to understand that although balance sheet equity
represents the company’s net worth, the company’s shares are
ultimately worth only what buyers are willing to pay for them.
Investment is an type of activity that is engaged in by the people who
have to do savings i.e. investments are made from their savings, or in
other words it is the people invest their savings. A variety of different
investment options are available that are bank, Gold, Real estate, post
services, mutual funds & so on much more. Investors are always
investing their money with the different types of purpose and
objectives such as profit, security, appreciation, Income stability.
Researcher has here in this paper studied the different types and
avenues of investments as well as the factors that are required while
selecting the investment with the sample size of 60 salaried employees
by conducting the survey through questionnaire in Pune city of, India.
Actually, here the present study identifies about the preferred
investment avenues among individual investors using their own self-
assessment test. The researcher has analyzed and found that that
salaried employees consider the safety as well as good return on
investment that is invested on regular basis. Respondents are much
more aware about the different investment avenues available in India
except female investors.

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Benefits of investing in equity:

⦁ DIVIDEND
An investor is entitled to receive a dividend from the company. It is
one of the two main sources of return on his investment.

⦁ CAPITAL GAIN
The other source of return on investment apart from dividend is the
capital gains. Gains which arise due to rise in market price of the share.

⦁ LIMITED LIABILITY
Liability of shareholder or investor is limited to the extent of the
investment made. If the company goes into losses, the share of loss
over and above the capital investment would not be borne by the
investor.

⦁ EXERCISE CONTROL
By investing in the company, the shareholder gets ownership in the
company and thereby he can exercise control. In official terms, he gets
voting rights in the company.

⦁ CLAIM OVER ASSETS AND INCOME

An investor of equity share is the owner of the company and so is the
owner of the assets of that company. He enjoys a share of the incomes
of the company. He will receive some part of that income in cash in the
form of dividend and remaining capital is reinvested in the company.

⦁ RIGHTS SHARES
Whenever companies require further capital for expansion etc, they
tend to issue ‘rights shares’. By issuing such shares, ownership and
control of existing shareholders are preserved and the investor receives
investment priority over other general investors. Right Shares are
issued at a price lower than current market price of the equity share. So,
existing investor can take that advantage or otherwise can renounce
right in some one’s favour to get value of right.

⦁ BONUS SHARES
At times, companies decide to issue bonus shares to its shareholders. It
is also a type of dividend. Bonus shares are free shares given to
existing shareholders and many times they are given in lieu of
dividends.

⦁LIQUIDITY
The shares of the company which is listed on stock exchanges have the
benefit of any time liquidity. The shares can very easily transfer
ownership.

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⦁STOCK SPLIT
Stock split means splitting a share into parts. How should an investor
be benefited by this? By splitting of share, the per-share price reduces
in the market which eventually increases the readability of share. At the
end, stock split results in higher volumes with a number of investors
leading to high liquidity of the share.

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Risk involved :

⦁ DIVIDEND
The dividend which a shareholder receives is neither fixed nor
controllable by investor. The management of the company decides how
much dividend should be given. If there is a loss, there is no question
of dividend. If there is a profit, unless Board of Directors propose
dividend, investors will not receive dividend.

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

⦁ Fluctuation in market price: The market price of any equity share

has a wide variation. It is always very difficult to book profits from the
market. On the contrary, there are equal chances of losses.

⦁Limited control: An equity investor is a small investor in the

company, therefore, it is hardly possible to impact the decision of the
company using the voting rights.

⦁ Residual claim: An equity 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 other stakeholders’ viz.
debenture holders etc.

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8. LIFE INSURANCE
Life insurance is a contract between an insurance policy holder and an
insurer and assurer, where the insurer promises to pay a designated
beneficiary a sum of money that is the benefit in exchange for a
premium, upon the death of an insured person. Depending on the
contract, other events such as terminal illness or critical illness can also
trigger payment. The policy holder typically pays a premium, either
regularly or as one lump sum. Other expenses, such as funeral expenses,
can also be included in the benefits.
Life policies are legal contracts and the terms of the contract describe
the limitations of the insured events. Specific exclusions are often
written into the contract to limit the liability of the insurer; common
examples are claims relating to suicide, fraud, war, riot, and civil
commotion.

Life-based contracts tend to fall into two major

categories:

⦁ Protection policies: This policies are designed to provide a benefit,

typically a lump sum payment, in the event of a specified occurrence.
A common form more common in years past of a protection policy
design is term insurance.

⦁ Investment policies: The main objective of these policies is to

facilitate the growth of capital by regular or single premiums.

When it comes to considering life insurance as an investment, you’ve

probably heard the adage, “Buy term and invest the difference.” This
advice is based on the idea that term life insurance is the best choice for
most individuals because it is the least expensive type of life insurance
and leaves money free for other investments. Permanent life insurance,
the other major category of life insurance, allows policyholders to
accumulate cash value, while term does not, but there are expensive
management fees and agent commissions associated with permanent
policies, and many financial advisors consider these charges a waste of
money.

There are many arguments in favour of using permanent life insurance

as an investment. The issue is, these benefits aren’t unique to
permanent life insurance. You often can get them in other ways without
paying the high management expenses and agent commissions that
come with permanent life insurance.

54
ADVANTAGES OF PERMANENT LIFE INSURANCE:

⦁ You get tax-deferred growth:

This benefit of the cash-value component of a permanent life
insurance policy means you don’t pay taxes on any interest,
dividends or capital gain in your life insurance policy until you
withdraw the proceeds. If you’re maxing out your contributions to
these accounts year after year permanent life insurance might have a
place in your portfolio and could provide some tax advantages.

⦁ You can keep most policies up to age 120, as long as you pay
the premiums:
A key advertised benefit of permanent life insurance over term life
insurance is you don’t lose your coverage after a set number of years.
A term policy ends when you reach the end of your term, which for
many policyholders is at age 65 or 70. But by the time you’re 120,
who will need your death benefit. Most likely, the people you
originally took out a life insurance policy to protect your spouse and
children are either self-sufficient or have also passed away.

⦁ Permanent life insurance can provide accelerated benefits if

you become critically or terminally ill:
You may be able to receive anywhere from 25% to 100% of your
permanent life insurance policy’s death benefit before you die if you
develop a specified condition such as heart attack, stroke, invasive
cancer or end-stage renal failure. The upside of accelerated benefits,
as they’re called, is you can use them to pay your medical bills and
possibly enjoy a better quality of life in your final months.
Arguments in Favor of Buying Term Insurance and Investing the
Differencethat is: When you buy a term policy, all of your premium
go toward securing a death benefit for your beneficiaries. Term life
insurance, unlike permanent life insurance, does not have any cash
value and therefore does not have any investment component.
However, you can think of term life insurance as an investment in
the sense that you are paying relatively little in premiums in
exchange for a relatively large death benefit.
Using permanent life insurance as an investment might make sense
for some people in some situations usually high net-worth
individuals looking for a way to minimize estate taxes. For the
average person, the odds are poor that permanent life insurancewill
be a good investment compared with buying term and investing the
difference.

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Risk:

⦁ High Cost And Fees

If you want to take advantage of the investment opportunity, you
have to purchase a permanent life insurance. Only they offer
customers the chance of a cash value accumulation. Therefore, the
premiums are much higher (sometimes ten times bigger). In addition,
there are plenty of fees and charges that you have to pay.
Unfortunately, a big part of the premiums goes to cover fees, for
example – administration costs. Let’s not forget the commission you
owe the person who sold you the policy. If you want to take out a
loan from your cash value, you need to pay a cash surrender fee up
to 10% alongside an interest rate.

⦁ Uncertain And Negative Returns

Insurance companies talk customers into buying life policies by
promising certain, and usually high, returns. By accumulating cash
value you earn an interest, which many companies promise to be
higher than most savings accounts. Even though often policies go
with a guaranteed minimum interest rate, the real return is not as
high as that. Well, it’s very simple. There are many fees and charges
imposed on your account. After they are deducted the return is far
less than the guaranteed interest rate, let alone the promised one.
What’s more, these “promised” returns will happen only if you wait
for a certain period of time before taking money out, say 20 years.
One more thing on the downside is that, especially during the first
years of the term, the chances are high that your returns will be
negative. This is because often the fees and charges exceed the
interest your cash value can generate.

⦁ Lack Of Flexibility
Unfortunately, life insurance policies do not offer much flexibility.
Life is not static. Sometimes the more you predict, the fewer things
happen the way you expected. Can you predict an unfortunate event?
A disease or an accident. No, but you can be ready for this. Having
an Individual Retirement Account (IRA) or a 401(k) gives you the
freedom to reduce the amount you pay in case you face financial
problems. This will not affect your account and the money in it will
still generate interest over time. So where is the problem. However,
life insurance does not offer you that. If you miss a payment, the
money will be taken out of your cash account (if it’s a permanent life
insurance). Of course, this will result in a decrease in your cash
value. If there is not enough money in your account, or you have
spent it on paying premiums, you might lose your policy.
Don’t you have the right to face financial difficulties and delay a
payment or freeze payments for a while? Life insurance will not put
up with this if you want your coverage to remain active until the end
of the term.

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⦁ Not Really Tax-Deferred
Some life insurances boats with the fact that they are offer tax-
deferred accounts. To some extent this is true. For example, whole
life insurances, give you the opportunity to make tax-free
“withdrawals” as well as to “grow” a tax-free savings account. The
first thing is that, though the growth of your cash value is exempt
from taxes, the premiums you pay are not. Unlike health insurance
premiums, life insurance ones are considered personal expenses. The
Internal Revenue Service (IRS) imposes taxes on personal expenses.
What is a little bit tricky is that the “withdrawals”, for example, are
tax-free but they aren’t actual distributions? In fact, to take money
out you have to borrow money from your cash value. You are the
lender and borrower at the same time. But you have to pay an
interest rate to your policyholder. So, the equation is easy: You don’t
pay taxes on these amounts of money but you have to pay an interest
rate because you have borrowed the money. Can you imagine the
rate to be higher than the possible taxes you have to pay on
withdrawals? It’s quite possible. Another thing worth mentioning is
that if you take out a lot of money, you might exhaust your cash
value. Which, as you already know, can lapse the policy.

9. DEBENTURES
A debenture is one of the most typical forms of long term loans that
a company can take.It is normally a loan that should be repaid on a
specific date, but some debentures are irredeemable securities
(sometimes referred to as perpetual debentures).
The majority of debentures come with a fixed interest rate. This
interest must be paid before dividends are paid to shareholders. In
the US, most debentures are unsecured, but elsewhere debentures are
typically secured through the borrower’s assets.

Debenture holders
Debenture holders (investors) are not allowed to vote in the
company's general shareholders meetings, but they may have
separate meetings or votes, for instance regarding changes to the
rights associated with the debentures. The interest that is paid to
debenture holders is calculated as a charge against profit in the
company's financial statements.

Types of debentures
Debentures come in two types:
Convertible debentures:
Convertible bonds or bonds that can be converted into equity shares
of the issuing company after a predetermined period of time. To
investors, convertible bonds are more attractive because the bonds
can be converted, and to companies they have the advantage that

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 they normally have lower interest rates than non-convertible
corporate bonds.

Non-convertible debentures:
Standard debentures that can't be converted into equity shares of the
liable company. Since they can't be converted, they usually have higher
interest rates than convertible debentures.

⦁Benefits
Debentures are mainly beneficial to companies by having a lower
interest rate than other types of loans, e.g. overdrafts. Further, they
normally only need to be repaid by a very remote date. The main
benefits of debentures to investors is that they can usually be sold in
stock exchanges quite easily and they come with less risk than e.g.
equities.

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Risk:

⦁ Interest rate risk

The majority of debentures and unsecured notes have a fixed rate of
interest and a fixed repayment of capital amount. In this case, where
the securities are held to maturity, investors will receive the expected
amount, irrespective of interest rate movements. The main risk that
fixed-rate debentures and unsecured notes holders are exposed to is
the opportunity cost that a better rate of return may be available
elsewhere if interest rates were to increase.

⦁ Credit/default risk
The credit risk is the risk that the investor’s interest and/or capital
are not repaid by the borrower. A good credit rating by an
independent and reputable credit rating agency gives a measure of
confidence for investors. Unfortunately, the majority of debenture
issuers and unsecured notes will not have been rated in this way,
which makes it difficult to gauge the financial health of the issuer.
Factors that affect the credit risk include the ranking of the debt in
terms of repayment upon liquidation of the company, purposes the
investors’ funds will be used for, and financial strength of the
company.

⦁ Liquidity risk
The majority of debentures and unsecured notes do not offer a
readily available exit mechanism and as such should be considered a
relatively illiquid investment. Issuers may allow the investor to
access their original capital investment at their discretion in

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10. SAVINGS
Savings accounts pay interest, it is more beneficial to keep your
unneeded funds in a savings account than in a checking account so
your money can grow. In addition, savings accounts are one of the
most liquid investments outside of other demand accounts and cash.
While savings accounts facilitate saving, they also make it very easy to
access your funds. In contrast, it is typically more difficult to cash a
bond, make a withdrawal from a retirement account, or sell stocks or
other assets. A savings account is a long-term, fundamental money
management tool that can help you meet numerous financial needs. It
also means you’re placing your money somewhere that is not under
your absolute control, since it is being held by a bank or credit union.

ADVANTAGES OF SAVING ACCOUNT:

⦁ Savings accounts will usually accrue interest over time: Although
interest rates have been extremely low since 2007, with many
savings accounts having an interest rate below 1%, you will still
accrue interest over time with an account. That means you have
more earning potential with your money compared to keeping it in a
safe at home.
⦁ Funds are still readily available: With most banks and credit unions,
investor have online access to your funds 24 hours per day. All you
need to have is a data connection or access to the internet. Many
institutions will allow you to link your savings account to other
accounts you may have, like a checking account, which can help you
to avoid costly overdraw fees. This also allows you to quickly
transfer funds from one account to another, even outside of regular
banking hours.
⦁ Safety of money: Because your money is being held by a third-
party, it increases its personal safety. Not only does storing cash on
property make you a target for a potential robbery, but losses like
that are not always covered by a homeowner’s or renter’s insurance
policy. If there was a fire in your home or some other naturaldisaster,
you could lose your cash as well. Keeping your cash in a savings
account keeps you and your money safer.
⦁ People can open an account with very little money: Many savings
accounts can be started by paying small amount. Some institutions
may have an even lower limit, sometimes allowing an account to be
opened for as little as Rs 50. This gives you an opportunity to begin
saving your money, even if you don’t have much to save at the start.
⦁ Savings accounts can provide automated bill payments: Many
financial institutions allow bills to be paid automatically out of a
savings account without being subjected to the withdrawal and
transfer laws. This allows you to save time because you don’t need
to manually pay every bill each month and you’re less likely to
experience late fees because you missed or forgot a payment. Of
course, you’ll need to have money in the account to pay the bill, but
if you do, you’ll be able to maintain a better credit score over time.

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⦁ Receive security: A savings account gives you the opportunity to
put away cash in case you have an emergency situation. If you lose
your job, for example, you’d be able to draw upon your savings
account for your monthly expenses.

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DISADVANTAGES OF SAVING ACCOUNT:
⦁ Interest is often compounded monthly, or even annually, by most
financial institutions: There are online banks that will compound
your interest on a daily basis, but most traditional banks or credit
unions will only compound your interest monthly. This means the
full potential of your money isn’t always realized, especially when
compared to other investment opportunities.
⦁ There are withdrawal limits on a savings account: You can easily
transfer money from one account to another with regularity, but in
the United States, there are Federal limits on the number and the
types of withdrawals you can make per statement cycle. This law is
called “Regulation D” and limits you to no more than 6 transfers or
withdrawals from each savings or money market account during a
calendar month.
⦁ Some financial institutions charge fees for their savings accounts:
There may be monthly fees charged to your savings account for it to
be maintained. To avoid this disadvantage, look for fee-free options
at local banks or credit unions for the best results.

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11. Public Provident Fund
The Public Provident Fund (PPF) is a long-term tax-saving investment
vehicle that comes with a lock-in period of 15 years. Investments made
in PPF can be used to earn a tax break. The PPF rate is decided by the
Government of India every quarter. The corpus withdrawn at the end of
the 15-year period is completely tax-free in the hands of the investor.
PPF also allows loans and partial withdrawals after certain conditions
have been met. Public Provident Fund is one of the most common and
trusted investment plans in India. It pays interest rate annually and
requires a minimum of Rs 500 per annum investment. It has a life of 15
years with partial withdrawals allowed of the corpus at various points.
This option also pays a high and steady rate of interest as prescribed
the government from time to time.

12. Employee Provident Fund

The Employee Provident Fund (EPF) is another retirement-oriented
investment vehicle that earns a tax break under Section 80C. EPF
deductions are typically a part of an earner’s monthly salary and the
same amount is matched by the employer as well. Upon maturity, the
withdrawn corpus from EPF is also entirely tax-free. EPF rates are also
decided by the Government of India every quarter.

13. National Pension System

The National Pension System (NPS) is a relatively new tax-saving
investment option. Investors in the NPS stay locked-in till retirement
and can earn higher returns than PPF or EPF since the NPS offers plan
options that invest in equities as well. The maturity corpus from the
NPS is not entirely tax-free and a part of it has to be used to purchase
an annuity that will give the investor a regular pension.

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 Chapter 5:- DATA ANALYSIS &
INTERPRETATIONS

Introduction: The below survey was conducted regarding awareness

about share market among people. The sample size was minimum 35
people. The responses were fair enough. The data collected below is
purely primary data.
The questions of survey are as follows:

1. Do you invest your money?

 yes
 no

2. For what purpose do you invest your money?

 savings
 investment
 future growth
 retirement plans
 all of the above

3. Where do you prefer to invest?

 Share market
 banks
 post office
 gold

4. Have you invested your savings so far?

 yes
 no

5.Are you aware about share market?

 yes
 no

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 6. Do you invest in share market?

 Yes
 No

7. Which is the oldest stock exchange in India?

 Bombay stock exchange

 National stock exchange
 Calcutta stock exchange
 Magadha stock exchange

8. Who is the regulatory authority of stock exchange?

 Securities & exchange board of India

 Reserve bank of India
 Ministry of finance

9. In which markets do you / would you like to invest your money?

 Primary market
 Secondary market
 Both

10. What investment options are you considering?

 Equity
 Debenture
 Bonds
 Derivative
 Mutual funds

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11. What do you/would you look before investing in a particular
investment options?

 Return
 Minimum investment amount
 Locking period
 Risk
 Other factors

12. What is/would be the time span of your investment?

 Monthly
 Quarterly
 Half yearly
 Annually

13. On whose advice do you seek your investment decision?

 Local broker
 Magazine &newspaper
 Charted accountant
 Bank
 Family and friends
 Others

14. Your decision to invest depends upon?

 Past performance
 Economic scenario
 Industry analysis
 Company analysis
 Credit rating

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15. What level of risk are you ready to undertake for your investment
avenue?

 Less risk
 Moderate risk
 High risk

On the basis of above question the survey was conducted through

Google forms.

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DATA ANALYSIS

Interpretation: The above pie chart shows the percentage of

investment. Out of 100%, 85.7%invest their money while 14.3% does
not invest their money.

Interpretation: The above pie chart shows the percentage of

investment. Out of 100%, 5.8%invest for investment
purpose,40% invest for savings,37.1% invest for future
growth, 17.1% invest keeping all the points in mind.

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Interpretation: The above pie chart shows the sector of
investment. Out of 100% ,25.7% invest in Gold while 25.7%
prefer in mutual Funds, whereas 42.9 % invest in Fixed
Deposits and only 5.7% invest in stocks.

Interpretation: The above pie chart shows the investment

history of respondent. Out of 100%, 54.3% has only invested
their money so far and 45.7% didn’t invested so far.

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Interpretation: The above pie chart shows the awareness
about share market among respondent. Out of 100%, 65.7%
people are aware about share market and 34.3% people are
still not aware about share market.

Interpretation: The above pie chart shows the investment

decision of the respondent in share market. out of 100%,
37.1% invest in share market and 62.9% did not invested in
share market.

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Interpretation: The above pie chart shows the awareness
among the respondent regarding the oldest stock exchange in
India. Out of 100%, 75.6% choose Bombay, 13,3% choose
Calcutta, whereas 8.9% choose Magadha and 2.2 % choose
national stock exchange

Interpretation: The above pie chart shows the awareness

among the respondent regarding the regulatory authority of
stock exchange. Out of 100%, 45.7% choose SEBI, 45.7%
choose RBI and 8.6% choose ministry of finance.

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Interpretation: The above pie chart shows the choice of
market with respect to investment. Out of 100% ,31.4%
choose primary market , 28.6% choose secondary
market,40% choose both the market.

Interpretation: The above bar chart shows the investment

option respondent found best for their investment. out of
100% majority of respondent choose equity and mutual fund
as their choice of investment

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Interpretation : The above bar chart shows the factors
which the investor will consider before investing. Out of
100 %, majority of the respondent choose return as the first
and foremost factor before investing.

Interpretation :The above pie chart shows the time span of

the respondents investment. out of 100% ,40% will invest
monthly, 28.6% will invest annually , 28.6% quarterly and
2.8% half yearly

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Interpretation: The above pie chart shows the respondents
dependency on the advice for investment decision . Out of
100% ,42.9% depends on their family , 20% depends on
banks , 11.4% depends on local broker ,8.6% depends on
magazine & newspaper , and 14.3% depends on advice of
charted accountant

Interpretation :The above pie chart shows the factors which

are considered by the respondent before taking any
investment decision. Out of 100% ,20% consider past
performance , 25.7% considers economic scenario , 37.1%
considers company analysis and 14.3% considers credit
rating .
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Interpretation : The above pie charts shows the level of risk
the respondents are ready to undertake for their investment
decision. Out of 100% ,31.4% are ready to undertake less
risk , 54.3% are ready to undertake moderate risk and 14.3%
are ready to undertake high risk.

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 CHAPTER 6 : MAJOR SHARE MARKET
SCAMS

1. HARSHAD MEHTA SCAM

Harshad Mehta scam

Estimated Size: Rs 4,000 crore

Central figure: Harshad Mehta

Discovered: In 1992

Modus Operandi: Used money from banks to make personal gains via
investment.

2. CRB Scam

CRB Scam

EstimatedSize:Rs1,200crore

Central Figure: CR Bhansali

Discovered:1996

Modus Operandi: Raised public money through FDs, MFs and

debentures via nonexistent firms and invested them in stocks for
personal gains

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 3. KETANPAREKH

Ketan Parekh Scam

Estimated Size: Rs800crore

Central Figure: Ketan Parekh

Discovered:2001

Modus Operandi: Circular trading in selected stocks via borrowed

money from banks to manipulate share prices

4. SATYAM SCAM

Satyam Scam

EstimatedSize:Rs14,162crore

CentralFigure:RamalingaRajuDiscovered:2009

Modus Operandi: The top management of the software company

cooked up accounts to show inflated sales, profits and margins from
2003 to 2008

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 5. SAHARASCAM

Sahara Housing Bonds

Estimated Size: Rs24,029crore

Central Figure: Subrata Roy

Discovered:2010

Modus Operandi: Bonds issued to 29.6 million investors without

following SEBI regulations and investor protection measures
mentioned there in.

6. SPEAK ASIASCAM

Speak Asia Discovered:2012

Estimated Size: Rs2,200 crore

Central Figure: Ram Sumiran Pal

Modus Operandi: Investors were asked to subscribe to an e-magazine for a certain

sum, after which they became eligible to answer surveys and got paid for each survey.

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7. SARADHASCAM

Saradha Scam

Estimated Size: Rs10,000 crore

Central Figure: Sudipta Sen

Discovered:2013

Modus Operandi: Ran multiple investment schemes collecting money

from nearly 1.4 million investors in West Bengal and Odisha

8.NSEL SCAM

NSEL Scam

Estimated Size: Rs 5,600crore

Central Figure: Jignesh Shah

Discovered:2013

Modus Operandi: Investors were wooed by offering fixed returns on

paired contracts with agriculture and industrial commodities as
underlying. the stocks were missing, and money was allegedly
siphoned by so-called borrowers

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 CHAPTER 10 :

CONCLUSION

The investment options available in the share market are various and
while investing one needs to check the various factors such as liquidity ,
saving pattern , risk, etc. Various markets give various opportunities.
Before investing, the investor has to analyse the following factors:

1. Management Outlook.

2. Competitor’s Strategy.

3. Opportunities created by technological change.

4. Market forecast.

Therefore Financial investments are made with the future expectation

of making only financial returns in terms of cash flow from the
company in which investment is being carried out. The investor relies
to a greater extent on the existing management themselves, unlike
strategic investors. The term “investment” can be used to refer to any
mechanism used for the purpose of generating future income. In the
financial sense, this includes the purchase of bonds, stocks or real
estate property. Additionally, the constructed building or other facility
used to produce goods can be seen as an investment. The production of
goods required to produce other goods may also be seen as investing.
There are both pros and cons while investing in financial market but
one have to take this risk to invest money in different forms to secure
their future.

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Biblography
https://en.wikipedia.org/wiki/Investment
https://www.investopedia.com/terms/i/investment.asp
https://www.allbusiness.com/top-10-reasons-to-invest-money-93916-
1.html
https://blog.ipleaders.in/advantages-and-disadvantages-of-financial-
investment/

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