Amardeep Singh, for giving me opportunity to do this project in Unicon securitiesI wish to express my sincere and heartfelt gratitude towards my guide Mr. Ritesh Rajebhosale of Unicon securities, without whose support and guidance the completion of this project would not have been possible. I wish to also thank and to express my hearty gratitude to Mr. Sadhan Sir and all those senior delegates in Unicon securities, who have helped me throughout the project and for providing necessary & valuable information, suggestions and above all this is their time and effort. I also express my gratitude to my well-wishers and friends for their constant support and motivation.
And lastly I thanks and express my gratitude towards the one who was always with me, is with me and will be with me throughout my life, GOD. Place: Pune Date: ANURADHA MAID. EXECUTIVE SUMMARY There is growing competition between brokerage firms in post reform India. For investor it is always difficult to decide which brokerage firm to choose. Research was carried out to find which brokerage house people prefer and to figure out what people prefer while investing in stock market. This study suggests that people are reluctant while investing in stock and commodity market due to lack of knowledge. Main purpose of investment is returns and liquidity, commodity market is less preferred by investors due to lack of awareness.
The major findings of this study are that people are interested to invest in stock market but they lack knowledge. Through this report we were also able to understand, what are our Company’s (Unicon Investment solution ) positive and strong points, on the basis of which we come to know what can be the basis of pitching to a potential client. We also gave suggestions to the company, what improvement can be done to our product. MANAGEMENT TEAM 1 Mr . Gajendra Nagpal Founder & CEO 2 Mr. Ram M Gupta Co-Founder & President 3 Mr. Y. P. Narang Head-Fixed Income Group 4 Mr. Sandeep Arora Chief Operating Officer 5 Mr. Vikas Mallan Chief Financial Officer,Head- 6 Mr.
Trinadh Kiran National Head (E-Broking) 7 Mr. Subhash Nagpal Director-Strategic Planning 8 Ms. Anjali Mukhija Chief Compliance Officer 9 Mr. Anurag Nayar Chief Technology officer 10 Mr. Ashish Kukreja Head HNI Client Relations 11 Ms. Deepa Mohamed Head – HR & Train Unicon Investment Solutions UNICON is a financial services company which has emerged as a one-stop investment solutions provider. It was founded in 2004 by two visionary and flamboyant entrepreneurs, Mr. Gajendra Nagpal and Mr. Ram M. Gupta, who possess expertise in the field of Finance.
The company is headquartered in New Delhi, and has its Corporate office in Mumbai with regional offices in Kolkata, Chennai, Hyderabad and Noida. UNICON is a professionally managed company, lead by a team with outstanding managerial acumen and cumulative experience of more than 400 man years in the financial markets. The company is supported by more than 4500 Uniconians and has an extensive network of over 500 business office in 235 cities across India. With a customer base of over 200,000, the UNICON Group has an eye for the intricate financial needs of its clients and caters to both their short-term and long-term financial needs through a comprehensive bouquet of investment services.
It has been founded with the aim of providing world class investing experience to the investing community. These services range from offline & online trading in equity, commodities and currency derivatives to debt markets to corporate finance and portfolio management services. The company has a sizable presence in the distribution of 3rd party financial products like mutual funds, insurance products and property broking. It also provides expert Advisory on Life Insurance, General Insurance, Mutual Funds and IPO’s. The distribution network is backed by in-house back office support to provide prompt and efficient customer service. The Equity broking arm – UNICON Securities Pvt.
Ltd offers personalized premium services on the NSE, BSE & Derivatives market. The Commodity broking arm Unicon Commodities Pvt. Ltd offers services in Commodity trading on NCDEX and MCX. The UNICON group also has a PCG division providing investments solutions for High Net Worth Individuals. The Corporate Advisory Services arm – Unicon Capital Services (P) Ltd offers entire gamut of Investment Banking services to corporate. UNICON can boast of some of the most respected names in the Private Equity space like Sequoia Capital and Nexus India Capital as its share holders. UNICON COMPANY GROUPS Unicon Real Estates Pvt. Ltd [pic] Unicon Commodities Pvt. Ltd [pic]
Unicon Insurance Advisors Pvt. Ltd [pic] Unicon securities Pvt. Ltd [pic] Unicon Fin cap Pvt. Ltd [pic] Mission : To create long term value by empowering individual investors through superior financial services supported by culture based on highest level of teamwork, efficiency and integrity. [pic] Vision : To provide the most useful and ethical Investment Solutions – guided by values driven approach to growth, client service and employee development. [pic] UNICON STOCK BROKING LIMITED ? Unicon stock broking limited is one of the cornerstones of the Unicon’s structure, flows freely towards attaining diverse goals of the customer through varied services.
It creates a plethora of opportunities for the customer by opening up investment vistas backed by research- based advisory services. Here, growth knows no limits and success recognizes no boundaries. Helping the customer create waves in his portfolio and empowering the investor completely is the ultimate goal. VARIOUS ACTIVITIES UNDERTAKEN BY UNICON SECURITY PVT LTD: Stock Broking: UNICON offers trading on a vast platform; National Stock Exchange, Bombay Stock Exchange. More importantly, they make safe to the maximum possible extent, by accounting for several risk factors and planning accordingly. They assisted in this task by their in-depth research, constant feedback and sound advisory facilities.
Their highly skilled research team, comprising of technical analysts as well as fundamental specialists, secure result oriented information on market trends, market analysis and market predictions. This crucial information is given as a constant feed back to the customers, through daily reports delivered along with their updated portfolio. Besides this they are also offered special portfolio analysis packages that provide daily technical advice on scrip’s for successful portfolio management and provide customize advisory services to help customer make the right financial moves that are specifically suited to their portfolio. Factors such as their success in the electronics custody business has helped build on our trading of trust even more. Consequentially their retail client base expanded very fast.
To empower the investor further they have made serious efforts to ensure that their research calls are disseminated systematically to all their stock broking clients through various delivery channels like e-mail, chat, SMS, phone calls etc. Private Client Group: This specialized division was set up to cater to the high net worth individuals and institutional clients keeping in mind that they require a different kind of financial plannng and mangement that will augment not just exsisting finances but their lifestyle as well. For this purpose they offer a comprehensive and personalized service that encompasses planning and protection of finances, planning of business needs and retirement needs and a host of other services, all provided on a one-to-one basis. Distribution of Financial Products:
A team of highly qulified and dedicated professionals drawn from the best of academic and professional backgrounds are committed to maintaining high levels of client service delivery. This has propelled them to a position among the top distributors for equity and debt issues with an estimated market share of 15% in terms of applicationss mobilized besides being established as the leading procurer in all public issues. To further tap the immense gowth potetialin the capital markets they enhanced the scope of their retail brand, thereby providing planning and advisory services to the mass affluent. Here they understand the customer needs and lifestyle in the context of present earnings and provide adequate advisory services that will ncessarily help in creating wealth.
Judicious planning that is customized to meet the future needs of the customer deliver a service that is exemplary. The market-sarvey and the ignorant investors, both find this service very satisfactory. The edge that they have over competeition is their portfolio of offerings and their professional expertise. The investment planning for each cutomer is done with an unbaised attitude so that the service is truly customized. Advisory Services: Under their retail brand they deliver advisory services to a cross-section of customers. The service is backed by a team of dedicated and expert professionals with varied experience and background in handling investment portfolios.
They are continually engaged in designing the right investment portfolio for each customer according to individual needs and budget considerations with a comprehensive support system that focuses on trading customers portfolios providing valuable inputs, monitoring and managing the potfolio through varied technological intiatives. Those is made possible by the expertise they have gained in the business over the years. Mutual Fund Services Unicon have attained a position of immense strength as a provider of across the board transfer agency services to AMCs, Distributors and Investors. Nearly 40% of the top notch AMCs including prestigious clients like deutsche AMC and UTI swear by the quality and range of services that company offer.
Besides providing the entire back office processing, Unicon provide the link between the various Mutual Funds and the investor, including services to the distributor, the prime channel in this operation. Unicon insurance Broking Private Limited At Unicon insurance Broking Pvt. Limited, they provide life and non-life insurance products to retail individuals, high net worth clients and corporate. With the opening up of the insurance sector and with a large no of private players in the business, they are in a position to provide Tailor made policies for different segments of customers. In their journey to emerge as a personal financial adviser, they will be better positioned to leverage their relationship with the product providers and place the requirements of their customers appropriately with the product providers. With
Indian markets seeing a sea change, both in terms of their investments pattern and attitude of investors, insurance is no more seen as only a tax saving product but also as an investment product. Unicon Commodities Broking Limited At Unicon Commodities, they are focused on taking commodities trading to new dimensions of reliability and profitability. They have made commodities trading, an essentially age-old practice, into a sophisticated and scientific investment option. Company enables trade in all goods and products of agriculture and mineral origin that include lucrative commodities like gold and silver and popular items like oil, pulses and cotton through a well-systematized trading platform.
The technological and infrastructural strengths and especially the street smart skills make them an ideal broker. Their service matrix is holistic with a gamut of advantages, the first and foremost being their legacy of human resources, technology and infrastructure that comes from being part of the Unicon Group. CORNERSTONES OF STRAREGY: ? Focus on retail segment. ? Build a strong pan-India network managed by experienced professionals, build presence across both metros and class A/B town. ? Build full-service capabilities leveraging the network-offer the entire gamut of financial services, backed by strong transaction processing and high volume handling capability. Established a high degree of customer ownership and top-of-mind recall in the local markets- ensures steady customer traffic and repeat business. ? Build a trusted brand; ensure high visibility. Unicon offered following services- [pic] Unicon offered following services- 1- Equity Trading Platform (Online/Offline). 2- Commodities Trading Platform (Online/Offline). 3- Currency Trading 4- Portfolio Management Service. 5- NRI Services 6- Mutual Fund Advisory and Distribution. 7- Insurance Distribution. 6- Initial Public Offering (IPO). Benefits- • Instant Cash Transfer. • Multiple Bank Option. • Secure Order by Voice Tool Dial-n-Trade. • Automated Portfolio to keep track of the value of your actual purchases. • 24×7 Voice Tool access to your trading account. Personalised Price and Account Alerts delivered instantly to your Mobile Phone & E-mail address. • Live Chat facility with Relationship Manager on Yahoo Messenger • Special Personal Inbox for order and trade confirmations. • On-line Customer Service via Web Chat. • Enjoy Automated Portfolio. • Buy or sell even single share • Anytime Ordering. Equity Trading (Off/On Line)- E-broking services are specially designed for the net-savvy traders and investors who prefer operating from their home or office through the internet. They offer four different E-Broking trading platforms, each one tailored to meet different investor needs: Unicon Trade: 1- User friendly browser-based online trading platform. – Benefit from two unique trading options: Lite and Streaming. Lite provides static rates while Streaming gives you dynamic rates. 3- Can be used in proxy as well as firewall environments. 4- Advantages of mobility – Access your account from anywhere; home, office, cybercafe, laptop. Unicon Investor- 1-Browser based platform for Investors. 2-Trading becomes as simple as internet surfing. 3- Advantages of mobility – Access your account from anywhere; home, office, cybercafe, laptop. 4-Static Rates Refresh. 5-Feature of Multiple exchanges on single screen 6-Online Fund transfer facility 7-Integrated Back office: Access all your account information at anytime from anywhere.
Unicon Diet: 1-Application based platform for Day Traders 2-The speed of broker’s terminal on your desktop 3-Streaming quotes for continuous rates refresh 4-Single screen experience – All exchanges can be viewed on one screen 5-Online Fund transfer facility. Unicon Anywhere: 1-Application based platform for Day Traders. 2-Trading based on historical charts ; technical tools 3-Streaming quotes for continuous rates 4-Online Fund transfer facility 5-Integrated Back office: Access all your account information at anytime from anywhere. Investment Advisory- To derive optimum returns from equity as an asset class requires professional guidance and advice.
Professional assistance will always be beneficial in wealth creation. Investment decisions without expert advice would be like treating ailment without the help of a doctor. Research Department- Strong research has always been there forte. There investment advisory department is backed by an experience research team. This team comprises of 12 sector wise special analysts and a Research Head. Benefits at Unicon Expert Advice: There expert investment advisors are based at various branches across India to provide assistance in designing and monitoring portfolios. Timely Entry ; Exit: There advisors will regularly monitor investors investments and will guide investors to book timely profits.
They will also guide investors in adopting switching techniques from one stock to another during various market conditions. De-Risking Portfolio: A diversified portfolio of stocks is always better than concentration in a single stock. Based on their research, they diversify the portfolio in growth oriented sectors and stocks to minimize the risk and optimize the returns. Portfolio Management Service- Portfolio Management Services (PMS) is a sophisticated investment vehicle that offers a range of specialized investment strategies to capitalize on opportunities in the market PMS combined with competent fund management, dedicated research and technology, ensures a rewarding experience for its clients Unicon Mutual Fund-
The Unicon Mutual Fund distribution and advisory division offers investor the opportunity to diversify their investment portfolio. By offering a choice of investment schemes from all major mutual fund providers they have taken their 100% retail-focused philosophy a step further. Advantage with Unicon 1- Wide presence across India. 2- Facility to transact Online as well as Offline 3- Schemes of all major fund houses available 4- Latest NFO’s, MF News & Fund Manager views 5- Information & tools to help select the right scheme 6- Dedicated customer helpdesk 7- 24 X 7 webs enabled Back office. Depository Services- 1- Unicon securities Ltd has started its depository services by registering with CDSL. – There are various benefits of holding your demat account with them but the biggest advantage is that you shall be ensured of a risk free, prompt and efficient depository process 3- The transaction charges that are being levied by them are the lowest in the industry as they believe in providing quality services at the most affordable costs Investors have an option of choosing the products offered by CDSL: Easy facility: Investor can view; download and print the updated holding of their demat account along with valuation of holding Easiest facility: Investor can, by using this facility, submit own delivery instructions on the internet without the intervention of their DP. This is in addition to all the facilities provided under the ‘Easy’ facility Private Client Group- 1- Unicon offers personalized advisory services to affluent HNI investors and actively assists them in managing their portfolio. – PCG can seek guidance on specific stocks in their portfolio and can get pro-active advice for timely exit and fresh investments. 3- They also design customized products and services for their clients based on their risk profile, returns need and time horizon. 4- There experienced research team, in-depth analysis and customized value added products and services give them an immense advantage in assisting investor to generate wealth on a longer and consistent basis. Commodity Trading- 1- Indian markets have recently thrown open a new avenue for retail investors and traders to participate in commodity derivatives. For those who want to diversify their portfolios beyond shares, bonds and real estate, commodities are one of the best options. – Commodities actually offer immense potential to become a separate asset class for market-savvy investors, arbitrageurs and speculators. 3- Commodities are easy to understand and are based on the fundamentals of demand and supply. 4- Prices in commodities futures have been less volatile compared with equity and bonds, thus providing an efficient portfolio diversification option. Reason to choose Unicon Securities Ltd. – 1- Biggest strength is that they understand the need of retail investors very well. 2- Strict adherence to their business philosophy of providing the best value for money to customer 3- There 50+ member research & advisory team comprises of experienced fundamental and technical analysts, sector specialists, derivative strategists and commodity analysts. – Market competitive brokerage rates. 6- They use international news services like Bloomberg and Reuters to update with latest national and global trends. INVESTMENT DECISIONS Introduction These days almost everyone is investing in something… even if it’s a savings account at the local bank or a checking account the earns interest or the home they bought to live in. However, many people are overwhelmed when they being to consider the concept of investing, let alone the laundry list of choices for investment vehicles. Even though it may seem the everyone and their brothers knows exactly who, what and when to invest in so they can make killing, please don’t be fooled.
Majorities of investor typically jump on the latest investment bandwagon and probably don’t know as much about what’s out there as you think. Before you can confidently choose an investment path that will help you achieve your personal goals and objectives, it’s vitally important that you understand the basics about the types of investments available. Knowledge is your strongest ally when it comes to weeding out bad investment advice and is crucial to successful investing whether you go at it alone or use a professional. The investment option before you are many. Pick the right investment tool based on the risk profile, circumstance, time available etc. if you feel the market volatility is something, which you can live with then buy stocks.
If you do not want risk, the volatility and simply desire some income, then you should consider fixed income securities. However, remember that risk and returns are directly proportional to each other. Higher the risk, higher the returns. ALL ABOUT EQUITY INVESTMENT Stocks are investments that represent ownership or equity in a corporation. When you buy stocks, you have an ownership share however small in that corporation and are entitled to part of that corporation’s earnings and assets. Stock investors called shareholders or stockholders make money when the stock increases in value or when the company the issued the stock pays dividends, or a portion of its profits, to its shareholders.
Some companies are privately held, which means the shares are available to a limited number of people, such as the company’s founders, its employees, and investors who fund its development. Other companies are publicly traded, which means their shares are available to any investor who wants to buy them. The IPO A company may decided to sell stock to the public for a number of reasons such as providing liquidity for its original investor or raising money. The first time a company issues stock is the initial public offering (IPO), and the company receives the proceeds from that sale. After that, shares of the stock are treaded, or brought and sold on the securities markets among investors, but the corporation gets no additional income.
The price of the stock moves up or down depending on how much investors are willing to pay for it. Occasionally, a company will issue additional shares of its stocks, called a secondary offering, to raise additional capital. Types of Stocks With thousands of different stocks trading on U. S. and international securities markets, there are stocks to suit every investor and to complement every portfolio. For example, some stocks stress growth, while others provide income. Some stocks flourished during boom time, while others may help insulate your portfolio’s value against turbulent or depressed markets. Some stocks are pricey, while others are comparatively inexpensive.
And some stocks are inherently volatile, while others tend to be more stable in value. Growth & Income Some stocks are considered growth investments, while others are considered value investments. From an investing perspective, the best evidence of growth is an increasing price over tim often considered potential growth investments. So are stocks of young, quickly expanding companies. Value stocks, in contrast, are the stocks of companies that problems, have been under performing their potential, or are out of favor with investors. As result, their prices tend to be lower than seems justified, though they may still be paying dividends. Investors who seek out value stocks expect them to stage a comeback.
Market Capitalization One of the main ways to categorize stocks is by their market capitalization, sometimes known as market value. Market capitalization (market cap) is calculated by multiplying a company’s current stock price by the number of its existing shares. For example, a stock with a current market value of $30 a share and a hundred million shares of existing stock would have a market cap of $3 billion. Investor demand People buy a stock when they believe it’s a good investment, driving the stock price up. But if people think a company’s outlook is poor and either don’t invest or sell shares they already own, the stock price will fall.
In effect, investor expectations determine the price of a stock. For example, if lots of investors buy stock A, its price will be driven up. The stock becomes more valuable because there is demand for it. But the reverse is also true. If a lot of investors sell stock Z, its price will plummet. The further the stock price falls, the more investors sell it off, driving the price down even more. The Dividends The rising stock price and regular dividends that reward investors and give them confidence are tied directly to the financial health of the company. Dividends, like earnings, often have a direct influence on stock prices. When dividends are increased, the message is that the company is prospering.
This in turn stimulates greater enthusiasm for the stock, encouraging more investors to buy, and riving the stock’s price upward. When dividends are cut, investors receive the opposite message and conclude that the e. Stocks of companies that reinvest the company’s future prospects have dimmed. One typical consequence is an immediate drop in the stock’s price. Companies known as leaders in their industries with significant market share and name recognition tend to maintain more stable values than newer, younger, smaller, or regional competitors. Earnings and Performance Investor enthusiasm for a stock can sometimes take on a momentum of its own, driving prices up independent of a company’s actual financial outlook.
Similarly, disinterest can drive prices down. But to a large extent, investors base their expectations on a company’s sales and earnings as evidence of its current strength and future potential. When a company’s earnings are up, investor confidence increases and the price of the stock usually rises. If the company is li9sin g money—or not making as much as anticipated — the stock price usually falls, sometimes rapidly. Intrinsic Value A company’s intrinsic value, or underlying value, is closely tied to its prospects for future success and increased earnings. For that reason, a company’s future as well as its current assets contributes to the value of its stock.
You can calculate intrinsic value by figuring the assets a company expects to receive in the future and subtracting its long-term debt. These assets may include profits, the potential for increased efficiency, and the proceeds from the sale of new company stock. The potential for new shares affects a company’s intrinsic value because offering new shares allows the company to raise more money. Analysts looking at intrinsic value divide a company’s estimated future earnings by the number of it s existing shares to determine whether a stock’s current price is a bargain. This measure allows investors to make decisions based on a company’s future potential independent of short-term enthusiasm or market hype. Stock Splits
If a stock’s price increases dramatically the issuing company may split the stock to bring the price per share down to a level that stimulates more trading. For example, a stock selling at $100 a share may be split 2 for 1 doubling the number of existing shares and cutting the price in half. The split doesn’t change the value of your investment, at least initially. If you had 100 shares when the price was $100 a share, you’ll have 200 shares worth $50 a share after the split. Either way, that’s $10000. But if the price per share moves back toward the pre-split price, as it may do your investment will increase in value. For example if the price goes up to $75 a share your stock will be worth $15000, a 50% increase.
Investors who hold a stock over many years, through a number of splits, may end up with a substantial investment even if the price per share drops for a time. A stock may be split 2 for 1, 3 for 1, or even 10 for 1 if the company wishes, though 2 for 1 is the most common. Stock Research and Evaluation Before investing in a stock, its important to research the issuing company and understand how the investment is likely to perform, for example, you’ll want to know ahead of time whether you should anticipate a high degree of volatility, or more stable slower growth. A good place to start is the company’s 10 k report, which it must file with the Securities and Exchange Commission (SEC) each year.
Its extremely detailed and quite dry, but it is through. You’ll want to pay attention to the footnotes as well as the main text, since they often provide hints of potential problems. Company News and Reports Companies are required by law to keep shareholders up to date on how the business is doing. Some of that information is provided in the firm’s annual report, which summarizes the company’s operations for individual investors. A summary of current performance is also provided in the company’s quarterly reports. Buying and Selling Stock To buy or sell a stock you usually have to go through a broker. Generally the more guidance you want from your broker the higher the broker’s fee.
Some brokers usually called full-service brokers provide a range of service beyond filling buy and sell orders for clients such as researching investments and helping you develop long and short-term investment goals. Discount brokers carry out transactions for clients at lower fees than full-service brokers but typically offer more limited services. And for experienced investors who trade often and in large blocks of stock there are deep-discount brokers whose commissions are even lower. Online Trading is the cheapest way to trade stocks. Online brokerage firms offer substantial discounts while giving you fast access to your accounts through their Web Sites.
You can research stocks track investments and you to trade before and after normal market hours. Most of today’s leading full-service and discount brokerage firm make online trading available to their customers. Online trading is an extremely cost-effective option for independent investors with a solid strategy who are willing to undertake their own research. However the ease of making trades and the absence of advice may tempt some investors to trade in and out of stocks too quickly and magnify the possibility of locking in short-term losses. Volatility One of the risks you’ll need to plan for as a stock investor is volatility. Volatility is the speed with which an investment gains or loses value. The ore volatile an investment is the more you can potentially make or lose in the short term. Managing Risk One thing for certain: Your stock investment will drop in value at some point. That’s what risk is all about. Knowing how to tolerate risk and avoid selling your stocks off in a panic is all part of a smart investment strategy. Setting realistic goals allocating and diversifying your assets appropriately and taking a long-term view can help offset many of the risks of investing in stocks. Even the most speculative stock investment with its potential for large gains may play an important role in a well-diversified portfolio. Characteristics of Equity Risk |High | |Return |High | |Security |Low | |Tax Incentives |Moderate to High | |Liquidity |High | |Volatility |High | ALL ABOUT MUTUAL FUND INVESTMENT A Mutual Fund is an entity that pools the money of many investors—its Unit-Holders — to invest in different securities. Investments may be in shares, debt securities, money market securities or a combination of these. Those securities are professionally managed on behalf of the Unit-Holder and each investor hold a pro-rata share of the portfolio i. e. entitled to any profits when the securities are sold but subject to any losses in value as well. Mutual Funds and sell stocks, bonds or other securities.
A Fund raises money to make its purchases, known as its underlying investments by selling shares in the fund. Earnings the fund realizes on its investment portfolio, after the trading costs and expenses of managing and administering the fund are subtracted are paid out to the funds shareholders. Mutual Fund Set Up A Mutual Fund is set up in the form of a trust, which has Sponsor, Trustees, Asset Management Company (AMC), and custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities.
Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are invested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund. SEBI Regulations require that at least two thirds of the directors of Trustee Company or board of trustee must be independent. I. e. they should not be associated with the sponsors. Also 50% of the directors of ANC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme. However, Unit Trust of India (UTI) is not registered with SEBI (as on January 15, 2002). Types of Funds Stock funds also called equity funds- invest primarily in stocks. • Bond funds invest primarily in corporate or government bonds • Balanced funds invest in both stocks and bonds. • Money market funds make short-term investment and try to keep their share value fixed at $1 a share. Every fund in each category has a price known as its net asset value (NAV) and each NAV differs based on the value of the funds holdings and the number of shares investors own. The price changes once a day, at a 4 pm EST, when the markets close for the day. All transactions for the day – buys and sells –are executed at that price. Schemes According to Maturity Period
A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period. Open –Ended Fund/Scheme An open-ended fund or scheme is one that is available for subscription and repurchase one continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices, which are declared on a daily basis. The key feature of Open-End Schemes is liquidity. Close-Ended Fund / Scheme A Close-Ended Fund or Scheme has a stipulated maturity period e. g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme.
Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i. e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis. Schemes according to Investment Objective A Scheme can also be classified a growth scheme, income scheme or balanced scheme considering its investment objective.
Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as follows. Growth / Equity Oriented Scheme The aim of growth funds is to provide capital appreciation over the medium to long-term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation etc. And the investors may choose an option depending on their preference. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date.
Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time. Income /Debt Oriented Scheme The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country.
If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However long term investors may not bother about these fluctuations. Balanced Fund The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40%-60% in equity and debt instruments. share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds. Sector specific Funds/schemes
These are the funds/schemes, which invest in the securities of only those sectors or industries as specified in the offer documents. E. g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks etc. the returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. They may also seek advice of an expert. Tax Saving Schemes These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government Offers Tax Incentives for investment in specified avenues. E. g.
Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefit. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like any equity-oriented scheme. The Appeal of Mutual Funds Mutual Funds simplify what you may find most complicated about investing—figuring out what to buy and when to sell to meet your particular goals or objectives. For example, if you are seeking growth by investing in blue chip stocks, there are a wide variety of funds to chose from that pursuing precisely this strategy. To chose the fund that will help you meet a specific goal, you can compare ts long-term performance – over 5 or 10 years – to other funds with similar objectives learn about whom the manager is and how the fund is run and check out its fee structure. You can use the funds prospectus, information on the fund company’s Web Sites and professi0onal advice. Mutual funds can help you diversify your portfolio or spread out the money you have to invest to meet different goals. One way to diversify is to chose funds with different objectives aligned with your own, or representing different segments of the market. For example, you might buy a blue-chip fund, a small company growth fund, an international stock fund and a government fund. Diversification
Most expert agrees that it’s more effective to invest in a variety of stocks and bonds than to depend on a strong performance of just one or two securities. But diversifying can be a challenge because buying a portfolio of individual stocks and bonds can be expensive. And knowing what to buy – and when – taken time and concentration. Mutual funds can offer solution. When you put money in to a fund, it’s pooled with money from other investors to create much greater buying power than you build a diversified portfolio. Since a fund may own hundreds of different securities, its success isn’t dependent on how one or two holding do. Investment objectives
To achieve its investment objective – whether it is long – term growth or capital preservation or anything in between – the fund’s manager invests in securities he or she believes will provide the result the fund seeks. To identify those securities, a fund’s research staff often uses what’s known as a bottom – up style, which involves a detailed analysis of the individual companies issuing the securities. When the object is small– company growth or the focus is on emerging markets, the process can be more difficult because there’s limited information available. You may choose mutual funds with specific investment objectives to round out your portfolio of individual holdings. Or you may choose a number of mutual funds with different objectives creating a diversified portfolio in that way. Professional management
Another reason investors are attracted to mutual funds is that each fund has a professional manager who sets its investment buying style and directs the key buy and sell decisions. A buying style defines the particular investments or types of investments a fund makes from the pool that may be appropriate for meeting its objective. For example, in seeking long-term capital appreciation, some equity fund managers stress value investments, which mean they buy stocks whose prices are lower than might be expected. Others stress growth investments; often younger, dynamic companies the manager believes will become major players in their industry or in the economy as a whole. Some experts believe that a fund’s manager has a major role in determining the results a fund achieves.
They advise that you confirm that a successful manager is still with the fund before you invest and that you consider selling your shares if that manager leaves. Reinvestment Being able to reinvest your distributions to buy additional shares is another advantage of investing in mutual funds. You can choose that option when you open a new account, or at any time while you own shares. And of course you also have the option to receive your distributions if you need the income the fund would provide. By investing regularly, you build the investment base on which future earnings will be able to accumulate, a process known as compounding. The more you have invested, the greater you’re potential for future growth.
And because the fund handles the process, rolling over distributions into new shares as they are paid, you don’t have to budget for investing or remember to write the check. Risk There is always the risk that a mutual fund wont meet its investment objective or provide the return you are seeking. And some funds are by definition, riskier than others. For example a fund that invests in small new companies-whether for growth or value –exposes you to the risk that the companies will not perform as well as the fund manager expects. And in market downturns, falling prices for a funds underlying investment may produce a loss rather than a gain for the fund. Short-Term Gains
Each time a mutual fund sells an investment for more than the fund paid to buy it, the fund realizes a capital gain. And those gains are passed along to the funds investors in proportion to the number of shares in the fund that investor owns. Most actively managed funds don’t wait more than a year before selling investments. That means that any profit on the sale is a short-term capital gain, which is taxed at your regular tax rate. And since a fund typically doesn’t withhold taxed on your behalf, as an employer does, you must come up with the amount your owe from other sources if you don’t want to sell shares-at a potential additional gain – to raise the money you owe. Characteristics of Mutual fund Risk |Moderate | |Return |Moderate | |Security |Moderate | |Tax Incentives |Moderate | |Liquidity |Moderate | |Volatility |Moderate | ALL ABOUT LIFE INSURANCE INVESTMENT Life Insurance is income protection in the event of your death. The person you name, as your beneficiary will receive proceeds from an insurance company to offset the income lost as a result of your death.
You can think of life insurance as a morbid from of gambling: if you lived longer than the insurance company expected you to then you would “lose” the bet. But if you died early, then you would “win” because the insurance company would have to pay out your beneficiary. Insurers (or underwriters) look carefully at decades worth of data to try to predict exactly how long you will live. Insurance underwriters classify individuals based on their height, weight, lifestyle (i. e. whether or o not they smoke) and medical history (i. e. if they have had any serious health complications). All these variables will determine what rate class category a person fits into.
This doesn’t mean that smokers and people who have had serious health problems can’t be insured, it just means they’ll pay different premiums. There are two very common kinds of life insurance term life and permanent life. Term life insurance is usually for a relatively short period of time, whereas a permanent life policy is one that you pay into throughout your entire life. These payments are usually fixed from the time you purchase your policy. Basically, the younger you are when you sign-up for this type of insurance, the cheaper your monthly payments will be. Need for life insurance Risks and uncertainties are part of life’s great adventure – accident, illness, theft natural disaster – they’re all built into the working of the Universe, waiting to happen.
Insurance then is man’s answer to the vagaries of life. If you cannot beat man-made and natural calamities, well at least be prepared for them and their aftermath. Types of life Insurance Most of the products offered by Indian Life insurers are developed and structured around these “basic” policies and are usually an extension or a combination of these policies. So, the different types of insurance policies are Term Insurance Policy • A term insurance policy is a pure risk cover for a specified period of time. What this means is that the sum assured is payable only if the policyholder ides within the policy term. For instance, if a person buys Rs. 2 lakh policy for 10-years period?
Well, then he is not entitled to any payment; the insurance company keeps the entire premium paid during the 10-year period. • What if he survives the 10-year period? Well, then he is not entitled to any payment; the insurance company keeps the entire premium paid during the 10-year period. • So, there is no element of savings or investment in such a policy. It is a 100 percent risk cover. It simply means that a person pays a certain premium to protect his family against his sudden death. He forfeits the amount if he outlives the period of the policy. This explains why the Term Insurance Policy comes at the lowest cost. Endowment Policy Combining risk cover with financial savings, an endowment policy is the most popular policies in the world of life insurance. In an Endowment Policy, the sum assured is payable even if the insured survives the policy term. • If the insured dies during the tenure of the policy, the insurance firm has to pay the sum assured just as any other pure risk cover. • A pure endowment policy is also a form of financial saving whereby if the person covered remains alive beyond the tenure of the policy; he gets back the sum assured with some other investment benefits. In addition to the basic policy, insurers offer various benefits such as double endowment and marriage / education endowment plans. The cost of such a policy is slightly higher but worth its value. Whole Life Policy As the name suggests, a Whole Life Policy is an insurance cover against death, irrespective of when it happens. • Under this plan, the policyholder pays regular premiums until his death, following which the money is handed over to his family. This policy, however fails to address the additional needs of the insured during his post-retirement years. It doesn’t take into account a person’s increasing needs either. While the insured buys the policy at young age, his requirements increase over time. By the time he dies, the value of the sum assured is too low to meet his family’s needs. As a result of these drawbacks, insurance firms now offer either a modified Whole Life Policy or combine in with another type policy. Money Back Policy These policies are structured to provide sums required as anticipated expenses (marriage, education etc) over a stipulated period of time. With inflation becoming a big issue, companies have realized that sometimes the money value of the policy is eroded. That is why with –profit policies are also being introduced to offset some of the losses incurred on account of inflation. • A portion of the sum assured is payable at regular intervals. On survival the remainder of the sum assured is payable. • In case of death, the full sum assured is payable to the insured. • The premium is payable for a particular period of time. UNIT-linked insurance Bima Plus is a unit-linked endowment plan. The plan is available over a duration of 10 years.
Premium can be paid either yearly, half-yearly, or at one shot. The premium is used to purchase units in a fund of one’s choice, after the necessary deductions. The value of the units varies with the investment performance of the assets in the fund. Investments can be made in one of three types of funds: Secured fund, which invests predominantly in debt and money market instruments; Risk fund, in which the tilt is towards equities; and a Balanced Fund, a blend of the two. Switching between funds is allowed twice during the policy term, subject to the condition that they are at least two years apart. Charges for switching are 2 per cent of the fund’s cash value. Characteristics of Insurance Risk |Low | |Return |Moderate | |Security |High | |Tax Incentives |Moderate | |Liquidity |Moderate | |Volatility |Low | ALL ABOUT COMMODITIES INVESTMENT Gold is the oldest precious metal known to man. Therefore, it is a timely subject for several reasons.
It is the opinion of the more objective market experts that the traditional investment vehicles of stocks and bonds are in the areas of their all-time highs and may due for a severe correction. Why gold is “good as old” is an intriguing question. However, we think that the more pragmatic ancient Egyptians were perhaps more accurate in observing that gold’s value was a function of its pleasing physical characteristics its scarcity. WORLD GODL INDUSTRY • Gold is primarily monetary asset and partly a commodity. • The Gold market is highly liquid and gold held by central banks, other major institutions and retail Jeweler keep coming back to the market. Economic forces that determine the price of gold are different from, and in many cases opposed to the forces that influence most financial assets. • Indian is the world’s largest gold consumer with an annual demand of 800 tons. World Gold Markets Physical – London, Zurich, Istanbul, Dubai, Singapore, Hong Kong, Mumbai. Futures – NYMEX in New York, TOCOM in Tokyo. Indian Gold Market • Gold is valued in India as a savings and investment vehicle and is the second preferred investment after bank deposits. • India is the world’s largest consumer of gold in jeweler as investment. • In July 1997 the RBI authorized the commercial banks to import gold for sale or loan to jewelers and exporter. At present, 13 banks are active in the import of gold. This reduced the disparity between international and domestic prices of gold from 57 percent during 1986 to 1991 to 8. 5 percent in 2001. • The gold hoarding tendency is well ingrained in Indian society. • Domestic consumption is dictated by monsoon, harvest and marriage season. Indian jewellery off takes is sensitive to price increase and even more so to volatility. • In the cities gold is facing competition from the stock market and a wide range of consumer goods. • Facilities for refining, assaying, making them into standard bars in India, as compared to the rest of the world, are insignificant, both qualitatively. How gold stacks up as investment option
Gold and silver have been popular in India because historically these acted as a good hedge against inflation. In that sense these metals have been more attractive than bank deposits or gilt-edged securities. Despite recent hiccups, gold is an important and popular investment for many reasons: • In many countries gold remains an integral part of social and religious customs, besides being the basic form of saving. Shakespeare called it ‘the saint-seducing gold’. • Superstition about the healing powers of gold persists. Ayurvedic medicine in India recommends gold powder and pills for many ailments. • Gold is indestructible. It does not tarnish and is also not corroded by acid-except by a mixture of nitric and hydrochloric acids. Gold is so malleable that one ounce of the metal can be beaten into a sheet covering nearly a hundred square feet. • Gold is so ductile that one ounce of it can be drawn into fifty miles of thin gold wire. • Gold is an excellent conductor of electricity; a microscopic circuit of liquid gold ‘printed’ on a ceramic strip saves miles of wiring in a computer. • Gold is so highly valued that a single smuggler can carry gold worth Rs. 50 lakh underneath his shirt. • Gold is so dense that all the 90,000 tones estimated to have been mined through history could be transported by one single modern super tanker. • Finally, gold is scam-free. So far, there have been no Mundra-type or Mehta-type scams in gold. Thus the lure of this yellow metal continues.
One the other hand, it is interesting to note that apart from its aesthetic appeal gold has no intrinsic value. You cannot eat it, drink it, or even smell it. This aspect of gold compelled Henry Ford, the founder of Ford Motors, to conclude that ‘gold is the most useless thing in the world. ’ Why People Buy Gold A) Industrial applications take advantage of gold’s high resistance to corrosion, its malleability, high electrical conductivity and its ability to adhere firmly to other metals. There is a wide range of industries from electronic components to porcelain, which use gold. Dentistry is an important user of gold. The jewellery industry is another.
B) Acquisition of gold because of its long-proven ability to retain value and to appreciate in value. C) Purchases by the central banks and international monetary organizations like the International Monetary Fund (IMF). Investment Options There has been a shift in demand from jewellery (ornamentation) to coins and bars (investments). Coins cost less when compared to jewellery (which has additional making charges). Assayed, certified coins and bars are available through authorized banks. Demand for jewellery remains strong in traditional circles though gold-plated jewellery is also becoming popular. Gold futures: Right now, 75% of Indians demand is for jewellery, the rest is for coins and bars.
Investors can also dabble in gold futures; with demat delivery on stock exchanges. This is low cost and physical delivery is at 0. 995 purity. Gold futures trading clocked a recent turnover of Rs4, 300 crore. Gold ETFs: More sophisticated investment products will come. One possibility is exchange traded funds (ETFs) where gold is the underlying asset. Investors can trade ETF units with real time quotes. Gold ETF is long overdue, says Naveen Kumar, Head of Financial Initiatives, World Gold Council. Gold ETFs could be launched soon; it is a awaiting clearance from the Finance Ministry. Worldwide more than 600 exchange listed structured products based on gold are available.
Street track an ETF owned by the World Gold Council is listed on the NYSE. Commodity brokers like Kotak are offering capital protected bonds; these are open for a specific period (usually one year) with gold as the underlying asset. On appreciation profit is shared and if the price falls the capital is safe. Gold Banking Indian jewelers offer gold accumulation plan. Money can be deposited on a regular basis and jeweler converts into gold at prevailing prices. Interest is earned during the fixed period of tenure of investment. On redemption, the corpus is converted into gold coins. This is like a forced structure saving scheme. Characteristics of Commodities Risk |High | |Return |High | |Security |Low | |Tax Incentives |Moderate | |Liquidity |High | |Volatility |High | ALL ABOUT REAL ESTAES INVESTMENT Before the stock market and mutual funds became popular places for people to put their investment dollars, investing in real estate was extremely popular. We still maintain that investing in real estate is not just for land barons or the rich and famous. As a matter of fact, the home we buy and live in is often our biggest investment. Flying high on the wings of booming real estate, property in India has become a dream for every potential investor looking forward to dig profits. All are yeing Indian property market for a wide variety of reasons It’s ever growing economy, which is on a continuous rise with 8. 1 percent increase witnessed in the last financial year. The boom in economy increases purchasing power of its people and creates demand for real estate sector Once you have made the decision to become a homeowner, it usually means you will have to borrow the largest amount you have ever borrowed to purchase something. This realization may make you want to bury your head in the sand and sign on the dotted line, but you shouldn’t. For most people, this is the largest purchase they will ever make during their lifetime, and this makes it all the more important to gather as much knowledge as possible about what they’re getting into.
We give you the information you need, including making the decision on whether, when and what you should purchase; finding the types of mortgages and financing available; handling the closing; and knowing what you’ll need when its time to sell your home. We also explain the income tax consequences and asset protection advantages of home ownership. You can also use real estate, whether land or building strictly as investment vehicles, and depending on your individual situation, you can do it on a grand or smaller scale. Let’s look at the world of real estate and the investing options available. • Home as an Investment: Owing a home is the most common form of real estate investing.
Let us show you how your home is not just the place you live, but its also perhaps your largest and safest investment as well. • Investment Real Estate: The in and outs of investing in real estate and whether it’s the right investment vehicle for you. Whether you are thinking in terms of renting out your first home when you move on to a bigger one or investing in a building full of apartments we will explain what you need to know. Real Estate & Property Usually, the first thing you look at when you purchase a home is the design and the layout. But if you look at the house as an investment, it could prove very lucrative years down the road. For the majority of us, buying a home will be the largest single investment we make in our lifetime.
Real estate investing doesn’t just mean purchasing a house- it can include vacation homes, commercial prosperities, land (both developed and undeveloped), condominiums and many other possibilities. When buying property for the purpose of investing, the most important factor to consider is the location. Unlike other investments, real estate is dramatically affected by the condition of the immediate area surrounding the property and other local factors. Several factors need to be considered when assessing the value of real estate. This includes the age and condition of the home, improvements that have been made, recent sales in the neighborhood, changes to zoning regulations etc. You have to look at the potential income a house can produce and how it compares to others houses in the area. Objectives and Risks
Real estate investing allows the investor to target his or her objectives. For example, if your objective is capital appreciation, then buying a promising piece of property in a neighborhood with great potential will help you achieve this. On the other hand if what you seek is income then buying a rental property can help provide regular income. There are significant risks involved in holding real estate. Property taxes maintenance expenses and repair costs are just some of the costs of holding the asset. Furthermore real estate is considered to be very illiquid – it can sometimes be hard to find a buyer if you need to sell the property quickly. How to Buy or Sell it.
Real estate is almost exclusively bought through real estate agents or brokers their compensation usually is a percentage of the purchase price of the property. Real estate can also be purchased directly7 from the owner, without the assistance of a third party. If you find buying property too expensive, then consider investing in real estate investment trusts (REITs) which are discussed in the next section. Let’s take a look at the different types of investment real estate you might contemplate owing. Fixer-Uppers You can make money through investing in real estate if you buy houses, condominiums, buildings etc. , which need some work at a bargain price and fix them up.
You can probably sell the real estate for a higher price than you paid and make a profit. However, don’t underestimate the work, time and money that goes into buying, repairing and selling a home when you are determining whether it will be profitable for you to invest. Also remember that different tax rules will apply to the purchase and sale of a home if it is not your principal residence. Rental Property You can buy real estate for rental purposes and receive an income stream from renters. You may also be able to eventually sell the property for more than you bought it for and make a good profit. Although, don’t forget that you will now be a landlord who may have to deal with nonpaying tenants and destructive tenants.
Even if you have the worlds best tenants, you still have to deal with upkeep of the property and any problems that come up. Some investors hire a property manager or management company to manage their investment real estate. This is fine but don’t forget to factor in the management fees when you are calculating your profit from the investment. Please remember that rental real estate is subject to different tax rules than the home you reside in. you may be able to take tax deductions for losses, capital expenditure and depreciation if you meet certain requirements, but other deductions specific to principle residence may not be available to you. Unimproved Land Unimproved land is difficult investment to make a profit in.
Unless you manage to buy a piece of land that is extremely desirable at a good price and are certain that it is not barred from profitable use for the neighborhood it is located in (because of zoning or other issues), it will probably cost you more to own the property than you will ever make selling it. (Remember you will still have to pay property taxes and will also likely incur other upkeep costs on the land and you won’t be receiving any income from rents). If you have some sort of inside scoop on a piece of land (for example the person in the house on the lot next to the land is a wealthy recluse and does not want the property built upon so you can name your price to sell it to him) or plan on developing it yourself (building you home on a piece of property next to a lake), in that case it may be a good investment. Second Homes
Second Homes or vacation homes should be purchased primarily for vacation purposes not investment purposes. Most people end up with a loss on their vacation home properties because even if you can manage to rent the home, the costs of owning the home almost always exceed the rental income it bring in. Characteristics of Real Estate |Risk |Low | |Return |High | |Security |Moderate | |Tax Incentives |Low |Liquidity |High | |Volatility |High | All about Bank Deposits Indian Investors are more conservative when it comes to investment, investors look for guaranteed returns with minimum risk. This approach makes them feel comfortable in terms of risk and returns. Fixed deposit is one such avenue where the risk and returns matrix matches for conservative investors. 1. What is Fixed Deposit? The word itself defines the meaning, parking the money in a bank or corporate for a fixed period of time to get predetermined rate of return. Almost all public sector, private sector and commercial banks offer fixed deposit facility.
Apart from Banks, Non-Banking Financial Companies and Private companies also offer fixed deposits. 2. Bank Fixed Deposits Banks are considered as the safest bet for investment in to fixed deposits. Banks borrow money from the investors at a fixed rate and lend the same to the individuals as well as institutions. The Fixed deposit rate i. e. the rate of return which an investor gets on the principal invested, varies from bank to bank. Most of public sector banks offer good yield on fixed deposits where as private sector banks offer lower yield on fixed deposits. Currently, fixed deposit rates are varying from 4% to 11. 00%. Most of the banks offer 0. % to 1% over the normal fixed deposit rates to senior citizens. 3. Fixed Deposit Rates a. The new generation banks, like Tamilnadu Mercantile Bank, Karur Vyasa Bank, Kotak Mahindra Bank, Lakshmi Vilas Bank offer high fixed deposit rates compared to the other big names in the banking sector. The deposit rates offered by these banks are between 8. 5% to 10. 5% for all tenures. b. Most of the banks provide 0. 5% higher interest rates for senior citizens if the tenure is more than 1 yr. But if tenure if lower than 1 yr, the interest rates remains same for senior citizens also. This is widely true, but some banks like Axis bank gives 1% higher interest to senior citizens. c.
Most of the foreign banks like RBS, Citibank, Standard Chartered offers low-interest rates which ranges from 6% – 7. 5%. 4. Where is the catch Lot of banks offer high interest rates for special tenures like 500 days, or 555 days or 1000 days, but they have some restrictions which people don’t know like 1. Some banks have provision, if rates increase in future, you can not apply for extension at higher rate of interest, instead you have to close that account and apply for new one. I. e. Automatic renew is not possible and upon maturity, you will not be able to get overdue interest. 2. Sometimes, investor cannot do premature closure of deposit. However, these conditions vary from bank-to-bank. 5. Corporate Fix Deposits
Corporate fixed deposits are normal fixed deposits offered by Companies. The interest rates offered are generally higher than Bank interest rates and can be in range from 8%-15% . Higher the interest rates offered higher are the risks involved. 6. Why do companies have these deposits? When companies have cash crunch or Company wants to expand the business and require money, they can offer deposits at attractive rate of interest to common public, one of the reasons for this can be that they do not want to raise the additional capital by issuing shares. 7. Timing the Investment Fixed deposit rates change based on the Interest rate scenario changes in the country.
In the high interest rate scenario where RBI Tightens the monetary policy by increasing the Key rates for Banks, the banks also increase the Deposit rates and lending rates. The highest interest rate scenario is the best time to invest into Fix deposit. 8. Interest Rate Scenario Few years back, fixed deposits were available around 6-8% depending on the bank and tenure. But today it’s a different scene. Fixed deposits rates are high these days and you can observe one of the other bank announcing fixed deposits rates revised each month and in range of 9-10%. 9. Tax benefits The interest income from Fixed deposit is taxable under the head of income from other sources.
The only point is if you are in high tax bracket, most of the returns will go towards tax, but for investors who are in lower tax bracket of 10% or below the permissible limits, they can look for these options without much thought. FDs with the investment tenure of 5 years can be claimed under section 80 C, which gives the deduction upto Rs. 1 lakh. Before investing into Fix deposits needs a key aspect to be considered, 1. Check the interest rates, high interest rate should not come with lots of conditions. 2. Terms and condition on Interest payment and premature closure should be clear. 3. Try to avoid premature closure, choose the period according to your time horizon. Characteristics of Bank Deposits Risk |Low | |Return |Moderate | |Security |High | |Tax Incentives |High | |Liquidity |Moderate | |Volatility |Moderate | Characteristics of Investments : All investments are characrterised by certain features. Let us analyse these characteristic features of investments. Risk. Risk is inherent in any investment.
This risk may relate to loss of capital, delay in repayment of capital, nonpayment of interest or variability of returns. While some investments like insurance and bank deposits are almost riskless, other are more risky. The risk of an investment depends on the following factors. 1. The longer the maturity period, the larger is the risk. 2. The lower the credit worthiness of the borrower, the higher is the risk. 3. The risk varies with the nature of investment. Investment is ownership securities like equity shares carry higher risk compared to investments in debt instruments like debentures and bonds. Risk and return of an investments are related. Normally, the higher the risk, the higher is the return. Return :
All investments of characterized by the expectation of a return. In fact, investments are made with the primary objective of deriving a return. The return may be received in the form of yield plus capital appreciation. The difference between the sale price and the purchase price is capital appreciation. The dividend or interest received from the investment is the yield. Difference types of investment promise different rates of return. The return from an investment depends upon the nature of the investment, the maturity period and a host of other factor. Safety : The safety of an investment implies the certainty of return of capital without loss of money or time.
Safety is another feature which an investor desires for his investments. Every investors expects to get back his capital on maturity without loss and without delay. Liquidity : An investment which is easily saleable or marketable without loss of money and without loss of time is said to posses liquidity. Some investments like company deposits, bank deposits P. O. Deposits, NSC, NSS etc. are not marketable. Some investment instruments like preference shares and debentures are marketable, but there are no buyers in many cases and hence their liquidity is negligible. Equity shares of companies listed on stock exchanges are easily marketable through the stock exchanges.
An investor generally prefers liquidity for his investments, safety of his funds, a good return with minimum risk or minimization of risk and maximization of return. Liquidity means assets easily converted in to the cash. Volatility : A statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. A variable in option pricing formulas showing the extent to which the return of the underlying asset will fluctuate between now and the option’s expiration.
Volatility, as expressed as a percentage coefficient within option-pricing formulas, arises from daily trading activities. How volatility is measured will affect the value of the coefficient use Tax Incentives. Investment incentives are measurable economic advantages that governments provide to specific enterprises or groups of enterprises, with the goal of steering investment into favored sectors or regions or of influencing the character of such investments. These benefits can be fiscal (as with tax concessions) or non-fiscal (as with grants, loans, or rebates to support business development or enhance competitiveness). Characteristics of Investment alternatives Types of Investment Alternatives|Risk |Return |Security |Tax Incentive |Liquidity |Volatility | |Equity |High |High |Low |Moderate to high |High |High | |Mutual Fund |Moderate |Moderate |Moderate |Moderate |Moderate |Moderate | |Insurance |Low |Moderate |High |Moderate |Moderate |Low | |Commodities |High |High |Low |Moderate |High |High | |Real Estate |Low |High |Moderate |Low |High |High | |Bank Deposits |Low |Moderate |High |High |Low |Moderate | OBJECTIVE OF THE STUDY Title of the project “To study on various Investment Alternatives” The project was conducted with following objectives. • The primary objective of the project is to make an analysis of various investment alternatives. • The project work includes knowing about the investment decision like Equity, Real Estate, Insurance, Commodity, Bank Deposits, Mutual Fund and other all investment alternatives are discussed with other types and returns. • To create the different needs of investors, these options are also compared on the basis of various parameters like safety, liquidity, risk, return, and volatility etc. •
With reference to the analysis the project can give the perfect investing option or alternatives. SCOPE OF THE PROJECT The scope of the study is very much limited because the study is conducted only in some places in Pune . So from the data collected it is not possible to take a conclusion of the entire market. 1. The scope of the study is limited to the geographical areas of Pune. 2. Questionnaire survey of customers within Pune region does not imply attitudes of the rest of the country. 3. Survey conducted and its mixed responses will help the firm to tackle people retention and satisfaction. Data Analysis and Interpretation 1. Martial Status Married |33 | |Unmarried |17 | |TOTAL |50 | |Business |10 | |Salaried |22 | |Housewife |05 | |Agriculture |03 | |Student |04 | |Any other |06 | |TOTAL |50 | 2. Occupation 3. Age More than 18 years and up to 25 year- |12 | |More than 25 years and up to 40 years- |28 | |More than 40 years- |10 | |Total- |50 | 4. Income |Below 1lac |11 | |Between 1lacs to 3lacs |20 | |Between 3lacs to 5lacs |13 | |Above 5lacs |06 | |TOTAL |50 | 1. Preference of Investors Equity |14 | |Mutual Fund |11 | |Insurance |21 | |Commodities |8 | |Real Estate |11 | |Bank Deposits |21 | |Any Other |14 | |TOTAL |100% | [pic]