INVESTMENT OPPORTUNITIES IN INDIA

Investment objectives will almost always change for every investor throughout

their lives. Capital appreciation might be more important while you are young;

meanwhile entering your golden years might place a greater emphasis on

providing income. Whatever your objective, knowing what investment options are

out there is extremely important.

Here are 8 Investments that we feel every investor should be aware of:

EQUITY

Plain and simple, equity is ownership in part of a company. For every stock you

own in a company you own a small piece of the office furniture, company cars,

and even that lunch the boss paid with the company credit card. More

importantly, you are entitled to a portion of the company’s profits and any voting

rights attached to the stock. With some companies the profits are typically paid

out in dividends. The more shares you own, the larger portion of the company

(and profits) you own.

Equity represents ownership in a company and a portion of profits (dividends).

Investors also have voting rights to elect the board members who oversee the

major decisions made by management. In the long term, equity, by means of

capital growth, yield higher rewards than other forms of investment securities.

This higher return comes at a cost as equity entails the most risk. Should a

company go bankrupt and liquidate, the common shareholders will not receive

money until the creditors, bondholders, and preferred shareholders are paid.

OBJECTIVES AND RISKS:

Over the long term, there is no investment that provides better returns at a

reasonable risk than equity. History has dictated that equity averages 11-12%

per year and outperforms just about every other type of security including bonds

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and preferred shares. Stocks provide potential for capital appreciation, income,

and protection again moderate inflation.

Risks associated with stocks can vary widely, and usually depends on the

company. Purchasing equity instruments in a well established and profitable

company means there is much less risk you'll lose your investment whereas by

purchasing a penny stock your risks increase substantially. By using margin

stocks also allow you to dramatically increase your leverage in a stock. This is

only recommended for experienced investors.

STRENGTHS:

Equity is very easy to buy and sell

Especially with progresses in the Internet it is very easy to find reliable

information on public companies making analysis possible.

One of the major means if one is looking for capital appreciation.

These instruments have high liquidity.

Provides investors high income.

WEAKNESS:

Your original investment is not guaranteed. There is always risk the stock

you invest in will decline in value and you may lose your entire principal.

Your stock is only as good as the company you invest in, a poor company

means poor stock performance.

MUTUAL FUNDS

A mutual fund is simply a large group of people who lump their money together

and give it to a management company to invest it for you. A mutual fund

manager proceeds to buy a number of stocks from various markets and

industries. Depending on the amount you invest, you own a part of the overall

fund.

OBJECTIVES AND RISKS:

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For the most part, investors should buy mutual funds as a long term investment.

The nice thing about mutual funds is that the objectives change from fund to

fund. Each mutual fund has a different strategy, it is your job to decide what your

objective's are. Mutual fund strategies range from growth/aggressive, low risk,

balanced, momentum, and many others.

Your risk tolerance will play a big role in what fund you purchase, it all comes

down to the old risk/return tradeoff. For example, if your fund is for retirement,

then perhaps a low risk money market fund is best for you. Many funds justify

their under-performance as a factor of risk. If you are willing to sacrifice some

performance in return for a better sleep at night then these "low risk" funds are a

good option.

STRENGTHS:

You get to own several companies no matter how much you decide to

invest. In other words, you get instant diversification.

You can easily make monthly contributions.

A professional manager is the one managing the money. Theoretically,

because of his/her experience and knowledge you should receive above

average returns.

WEAKNESS:

Fund managers take a slice of the profits for their work. This slice varies

but can be quite high.

You pay management fees no matter if the fund actually makes you

money or not.

INSURANCE:

Insurance is income protection investment. The person you name as your

beneficiary will receive proceeds from an insurance company. Insurance policies

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are always an intelligent decision while investing your hard-earned money. More

than a tax-saving instrument or an interest earning investment, an insurance

policy is a guarantee that your loved ones would not have any financial difficulties

in case any unfortunate incident happens to you.

Insurance policies with high premium and low risk cover are similar to deposits

and bonds. With a view to ensure that such insurance policies are treated at par

with other investment schemes, it is proposed to substitute clause (10D) of the

Section 10, so as to provide that the exemption available under the said clause

shall not be allowed on any sum received under an insurance policy (maturity

proceeds) in respect of which the premium paid in any of the years during the

term of the policy, exceeds 20% of the capital sum assured. However, any sum

received under such policy on the death of a person (death benefits) shall

continue to be exempt.

OBJECTIVES AND RISKS:

No matter who you are, one benefit of insurance is the peace of mind that you

get. If anything happens, the beneficiary will receive a check in a matter of days.

Another reason is to cover any debts or liabilities you leave behind. Insurance

can also create an inheritance for your heirs. Leaving a legacy by giving to

charitable organizations are another good reason for insurance.

Most insurance policies carry relatively small risk because insurance companies

are usually stable and are heavily regulated by government. In "cash value"

policies you are allowed to invest your policy in stock, bond or money market

funds. In these types of policies the value of your insurance depends on the

performance of those funds.

STRENGTHS:

Insurance provides an excellent peace of mind in case unfortunate

incidents happen to you.

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Insurance policies are a relatively low risk investment.

Insurance provides tax deferred savings, capital appreciation.

WEAKNESS:

Cash value funds can fluctuate depending on what the financial markets

are doing.

Provides nominal income as it is less risky.

REAL ESTATE:

When you purchase a home the first thing you look at is the design and layout.

But looking at the house as an investment could prove very lucrative years down

the road. For a large portion of us, buying a home will be the largest single

investment that we make in our lifetimes. Real estate investing doesn't just mean

purchasing a house, it can include vacation homes, commercial properties, land

(both developed and undeveloped), condominiums, along with many other

possibilities.

When buying property for the purposes of investing the most important thing you

should always consider is the location. Unlike other investments, real estate is

dramatically affected by the condition of the immediate area where the property

is located, and other local factors.

When assessing the value of real estate there are several factors that are

considered. This includes the age and condition of the home, improvements that

have been made, recent sales in the neighborhood, if there are any new zoning

plans, etc. They look at the potential income a house may produce and how it

compares to other houses in the area.

OBJECTIVES AND RISKS:

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Real estate investing allows investors to target their objectives, for example if

your objective is capital appreciation then buying a promising piece of property in

a promising neighborhood will help you achieve this. On the other hand if it is

income you are looking for then buying a rental building can help provide regular

income.

There are significant risks in holding real estate. For example property taxes,

maintenance, repairs among other costs of holding the asset. Furthermore real

estate is considered to be very illiquid, if you needed to sell the property

immediately it can sometimes be hard finding a buyer.

STRENGTHS:

Whether or not your objective is income or capital appreciation real estate

investing has the ability to achieve either.

Mortgages allow you to borrow against the property up to three times the

value, this can dramatically increase investors leverage. Remember that

you typically need a 5% down payment first.

WEAKNESS:

Selling property quickly can be a problem.

There are significant holding costs, especially if you are not residing in it.

Examples are property tax, insurance, maintenance, etc.

BULLION:

The Indian connection with gold has been as old as Vedas. In our tradition, gold

transcended its limits as an asset, became symbolic of Mahalakshmi, the

goddess of wealth. It is a valued personal and family object of pride, an

emotional asset. It links up culture, religion and economics. Even the poorest of

poor Indian families would like to keep some gold. Hoard it.

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Indians are the largest investors in gold in its various forms. An interesting

development recently has been the permission for banks to issue gold bonds.

These bonds represent securitisation of gold. Investors can hold these bonds

and earn some returns, instead of holding the metal and incur costs and risks

associated with storage. The instrument is still in its infancy.

OBJECTIVES AND RISKS:

Investments in gold is not subject to erosion on account of rupee depreciation,

which perhaps its biggest advantage. Historically, gold has been perceived as a

hedge against inflation or as a means of security in bad times. Hence, investors

do not always look for returns while investing in gold. The main objective an

investor should look in this investment is inflation hedge. The risk levels of the

instrument are low and safe.

STRENGTHS:

Investors can hedge against inflation or as a security in bad times.

Investors can expect moderate returns with respect to this investment.

Gold as an investment is safe and moderate in terms of volatility.

WEAKNESS:

In India gold is valued personal and family object of pride rather as an

investment.

There is no capital appreciation even in the long run time horizon.

Income levels are very less compared to other investment avenues.

GOVERNMENT BONDS:

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A bond is nothing more than a loan of which you are the lender. Just like people

need money, so do companies and governments. A company needs funds to

expand into new markets while governments need money for everything from

infrastructure to social programs. The problem large organizations run into is that

they typically need far more money than the average bank can provide. The

solution is to raise money by issuing bonds (or other debt instruments) to a public

market. Thousands of investors then each lend a portion of the capital needed.

Bonds are the most important and unique financial instruments in the financial

markets of any economy.

OBJECTIVES AND RISKS:

Bonds are an attractive investment option, particularly now with the liquidity that

accompanies their listing on stock exchange. Bonds are stable option in terms of

fixed returns and are recommended for the risk- averse investors. The

investment objective of bonds is providing regular returns in medium or long term

time horizon. This type of investment opportunity has a very high safety and

moderate in terms of volatility and liquidity.

STRENGTHS:

As the security is issued by government, it has minimal risk.

Investors have the opportunity to invest in very long term debt sometimes

up to 20 years because of the long maturity periods.

Almost all the issues by the government have adequate liquidity except for

a few.

Tax benefits are available under section 80L up to Rs 3,000.

WEAKNESS:

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The inflation will decrease the real return on the security and the

possibilities of higher interest rates decrease the value of bond.

Bonds are associated with low risk and hence fore go the opportunity to

give higher returns as much as equity.

BANKING DEPOSITS:

In recent years the Banking sector has been undergoing rapid changes,

reflecting a number of underlying developments. The most significant has been

the advances in communication and information Technology, which has

accelerated and broadened the financial information dissemination.  Bank

deposits have been a favoured investment option with the Indian investor, mainly

because of the liquidity and safety benefits they offer. Most banks are promoted

either by the government or by leading financial institutions.

OBJECTIVES AND RISKS:

The liquidity and safety offered by banks does however come at a price. Yield on

bank deposits is negligible after accounting for inflation and tax. While the return

of the capital is guaranteed by the bank, deposit is not a secured investment, its

perceived safety coming from the soundness of the bank management or

ownership. Investors should be advised to park only at their savings in bank

deposits. The investment objective is regular income and considered to be one of

the safest investments. Generally the risk level of the investments is low.

STRENGTHS:

Investments are secured, as they are maintained either by government or

well established financial institutions. They score high on safety, as the

return of capital is guaranteed to the depositor by the bank.

Provides a regular and steady source of income to the investors.

The investment period of the bank products are flexible at all times,

generalizing the investors preferences.

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Bank products have very high liquidity and moderate in terms of volatility.

WEAKNESS:

The bank depositor does not hold the bank portfolio of investments.

Low interest rates give low income to the investors.

SMALL SAVING SCHEMES:

Returns from all small saving schemes - PPF, NSC, Post office MIPs and Kisan

Vikas Patra - have been reduced by 1 percent (as expected by most and feared

by all risk-averse investors). But they still continue to yield a remunerative 8

percent plus per year post tax. The post-office monthly income scheme, with an

investment limit of Rs 3 lakh, gives a monthly return on 8 percent annual basis

plus a bonus of 10 percent at the end of the term. Indira and Kisan vikas patra

were originally introduced by as post office schemes in order to tap the savings

of the rural India, but also became popular with urban investors.

OBJECTIVES AND RISKS: If security is your prime concern, continue to invest

here. Also due to their inherent safety and additional tax benefits on many small

saving instruments like NSC, PPF and Post office MIPs, you should invest in

them. Besides, with RBI cutting savings bank deposit rates to 3.5 per cent from 4

percent and the GOI Relief bonds reset to 7% and 6% respectively, the small

saving schemes are a better option.

STRENGTHS:

Tax exempt status makes these investments as an attractive mechanism

for the small investors to build his savings portfolio.

As government supported investments, these scores high on safety,

compared to bank deposits.

Provides regular and steady income to the investors.

WEAKNESS:

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The invested money is locked in for long-term; hence there is a problem of

liquidity.

Unit linked insurance plans (Ulip)

A Unit Link Insurance Policy (ULIP) is one in which the customer is provided with

a life insurance cover and the premium paid is invested in either debt or equity

products or a combination of the two. In other words, it enables the buyer to

secure some protection for his family in the event of his untimely death and at the

same time provides him an opportunity to earn a return on his premium paid. In

the event of the insured person's untimely death, his nominees would normally

receive an amount that is the higher of the sum assured or the value of the units

(investments). To put it simply, ULIP attempts to fulfill investment needs of an

investor with protection/insurance needs of an insurance seeker. It saves the

investor/insurance-seeker the hassles of managing and tracking a portfolio or

products.

Unit-linked life insurance products are those where the benefits are

expressed in terms of number of units and unit price. They can be viewed as a

combination of insurance and mutual funds. The number of units, which the

customer would get would depend on the unit price when he pays his premium.

The daily unit price is based on the market value of the underlying assets

(equities, bonds, government securities etc.) and computed from the net asset

value.

Unit-linked insurance plans, ULIPs, are distinct from the more familiar ‘with

profits’ policies sold for decades by the Life Insurance Corporation. ‘With profits’

policies are called so because investment gains (profits) are distributed to

policyholders in the form of a bonus announced every year. ULIPs also serve the

same function of providing insurance protection against death and provision of

long-term savings, but they are structured differently. In ‘with profits’ policies, the

insurance company credits the premium to a common pool called the ‘life fund,’

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after setting aside funds for the risk premium on life insurance and management

expenses. Every year, the insurer calculates how much has to be paid to settle

death and maturity claims. The surplus in the life fund left after meeting these

liabilities is credited to policyholders’ accounts in the form of a bonus. In a ULIP

too, the insurer deducts charges towards life insurance (mortality charges),

administration charges and fund management charges. The rest of the premium

is used to invest in a fund that invests money in stocks or bonds. The number of

units represents the policyholder’s share in the fund. The value of the unit is

determined by the total value of all the investments made by the fund divided by

the number of units. If the insurance company offers a range of funds, the

insured can direct the company to invest in the fund of his choice. Insurers

usually offer three choices — an equity (growth) fund, balanced fund and a fund

that invests in bonds.

The two strong arguments in favour of unit-linked plans are that — the investor

knows exactly what is happening to his money and two, it allows the investor to

choose the assets into which he wants his funds invested. A traditional ‘with

profits,’ on the other hand, is a black box and a policyholder has little knowledge

of what is happening. An investor in a ULIP knows how much he is paying

towards mortality, management and administration charges. He also knows

where the insurance company has invested the money. The investor gets exactly

the same returns that the fund earns, but he also bears the investment risk. The

transparency makes the product more competitive. So if you are willing to bear

the investment risks in order to generate a higher return on your retirement

funds, ULIPs are for you. Traditional ‘with profits’ policies too invest in the market

and generate the same returns prevailing in the market. But here the insurance

company evens out returns to ensure that policyholders do not lose money in a

bad year. In that sense they are safer. ULIPs also offer flexibility. For instance, a

policyholder can ask the insurance company to liquidate units in his account to

meet the mortality charges if he is unable to pay any premium instalment. This

eats into his savings, but ensures that the policy will continue to cover his life.

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ULIP - Key Features

1. Premiums paid can be single, regular or variable. The payment period

too can be regular or variable. The risk cover can be increased or

decreased.

2. As in all insurance policies, the risk charge (mortality rate) varies with

age.

3. The maturity benefit is not typically a fixed amount and the maturity

period can be advanced or extended.

4. Investments can be made in gilt funds, balanced funds, money market

funds, growth funds or bonds.

5. The policyholder can switch between schemes, for instance, balanced

to debt or gilt to equity, etc.

6. The maturity benefit is the net asset value of the units.

7. The costs in ULIP are higher because there is a life insurance

component in it as well, in addition to the investment component

8. Insurance companies have the discretion to decide on their investment

portfolios.

9. They are simple, clear, and easy to understand.

10. Being transparent the policyholder gets the entire episode on the

performance of his fund.

11. Lead to an efficient utilisation of capital.

12. ULIP products are exempted from tax and they provide life insurance.

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13. Provides capital appreciation

14. Investor gets an option to choose among debt, balanced and equity

funds.

Unit-linked plans enjoy several advantages. They are:

Simple, clear and easy to understand

Transparent and visible for customers to take decisions

Flexible and adaptable

Puts the policyholder in control

Policyholder gets the entire upside on the performance of his fund

Besides all the advantages they offer to the customers, unit-linked plans also

lead to an efficient utilisation of capital.

MUTUAL FUNDS

INTRODUCTION

A Mutual Fund is a financial service organization / trust that receives

money from the small investors, invests it in the share market, earns return on it,

attempts to make it grow and agrees to pay the investors cash on demand on the

present value of his investments.

Investors who are ignorant of share market or do not want to get involved

in it directly can invest in the Mutual Funds with the help of mutual fund based

stock market experts, who analyze the companies before investing in it.Thus

MUTUAL FUNDS play a very crucial role in an economy by mobilizing and

investing them in capital market and money market, thus establishing a link

between savings and capital market (share market). MUTUAL FUNDS are a

method of channeling the savings of a person directly to the productive

capacities of the country.

MUTUAL FUNDS in India with the establishment of UTI in 1964, with it's

monopoly till 1987, with popular Unit 64 and ULIP as an associate trusts of IDBI.

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At present there are many MUTUAL FUNDS trusts in India like IDBI, ICICI,

HDFC, SUNDARAM, BIRLA, KOTAK MATHINDRA etc.

MUTUAL FUNDS are becoming very popular form of investment

characterized by many advantages that they share with other forms of

investments and what they posses uniquely themselves. MUTUAL FUNDS route

offer several important advantages.

Diversification: MUTUAL FUNDS invest in many companies rather than

investing in one. Thus they can protect themselves from unexpected drop in

value of some shares. The small investor cannot achieve wide diversification on

this own because, mainly less funds at his disposal. MUTAUL FUNDS on the

other hand, pool funds so many investors thus can participate in a large basket of

many different companies

Expertise supervision: When the investors invest in MUTUAL FUNDS they

get the advantage of expertise management of their money as the MUTUAL

FUNDS trusts carry on extensive research as to how the companies perform,

what are the trends in the stock market, what investments are to be sold, when to

sell them, which investments to be purchased, which to be sold and so on …..,

which is not possible for the small investor to do himself.

Liquidity: Shares in MUTUAL FUNDS can be bought and sold on any

business day, so investors’ easy access to their money which is not possible

while direct investing in the stock market.

Reduced Risk : Risk in investments is to recover the principal amount and

the return on it. MUTUAL FUNDS investments on both fronts provide a

comfortable situation. The expert supervision, diversification and liquidity

minimize the risk.

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Classification of Mutual Funds

On the basis of consistution

Open ended Schemes

The units offered by these schemes are available for sale and repurchase on any

business day at NAV based prices. Hence, the unit capital of the schemes keeps

changing each day. Such schemes thus offer very high liquidity to investors and

are becoming increasingly popular in India. Please note that an open-ended fund

is NOT obliged to keep selling/issuing new units at all times, and may stop

issuing further subscription to new investors. On the other hand, an open-ended

fund rarely denies to its investor the facility to redeem existing units

Closed ended Schemes

The unit capital of a close-ended product is fixed as it makes a one-time sale

of fixed number of units. These schemes are launched with an initial public

offer (IPO) with a stated maturity period after which the units are fully

redeemed at NAV linked prices. In the interim, investors can buy or sell units

on the stock exchanges where they are listed. Unlike open-ended schemes,

the unit capital in closed-ended schemes usually remains unchanged. After

an initial closed period, the scheme may offer direct repurchase facility to the

investors. Closed-ended schemes are usually more illiquid as compared to

open-ended schemes and hence trade at a discount to the NAV. This

discount tends towards the NAV closer to the maturity date of the scheme.

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Interval Schemes

These schemes combine the features of open-ended and closed-ended

schemes. They may be traded on the stock exchange or may be open for sale or

redemption during pre-determined intervals at NAV based prices

On the basis of investment objective

Equity Oriented Schemes

These schemes, also commonly called Growth Schemes, seek to invest a

majority of their funds in equities and a small portion in money market

instruments. Such schemes have the potential to deliver superior returns over the

long term. However, because they invest in equities, these schemes are exposed

to fluctuations in value especially in the short term.

Equity schemes are hence not suitable for investors seeking regular income or

needing to use their investments in the short-term. They are ideal for investors

who have a long-term investment horizon. The NAV prices of equity fund

fluctuates with market value of the underlying stock which are influenced by

external factors such as social, political as well as economic.HDFC Growth Fund,

HDFC Tax Plan 2000 and HDFC Index Fund are examples of equity schemes.

Further it can be classified as follows:

General Purpose

Sector Specific

Special Schemes

Debt Based Schemes

These schemes, also commonly called Income Schemes, invest in debt

securities such as corporate bonds, debentures and government securities. The

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prices of these schemes tend to be more stable compared with equity schemes

and most of the returns to the investors are generated through dividends or

steady capital appreciation. These schemes are ideal for conservative investors

or those not in a position to take higher equity risks, such as retired individuals.

However, as compared to the money market schemes they do have a higher

price fluctuation risk and compared to a Gilt fund they have a higher credit risk.

Further it can be classified as follows:

Income Schemes

Liquid Income Schemes.

Money market Schemes

Gilt Schemes

Hybrid Schemes

These schemes are commonly known as balanced schemes. These schemes

invest in both equities as well as debt. By investing in a mix of this nature,

balanced schemes seek to attain the objective of income and moderate capital

appreciation and are ideal for investors with a conservative, long-term

orientation. HDFC Balanced Fund and HDFC Children’s Gift Fund are examples

of hybrid schemes.

Introduction

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Each one of us needs “finance” at various stages of life, and to ensure that

we have the money available at the right time, when needed. We may need

money at the time of marriage of a daughter or son, and we need it then or later,

or at the time of medical emergency, and again at the time, as later the money

will not help. Or money will be needed simply at the time of retirement. In other

words, we need finance at different times for different goals. Buying a home,

providing for a child’s education and marriage or for retirement are all examples

of goals in life that can be measured in monetary terms. Personal financial needs

are of two types- protection and investment. An earning member providing for his

family to have continued income after his death is an example of a protection

need. Providing for marriage expenses of a daughter is an example of an

investment need.

Needs may be one of the important reasons behind any investment

objectives/ decisions made by an individual investor. Some of the investment

objectives may be capital gains, generate regular income, secure future, safety of

investment, avail tax benefits and others.

Now the question arise how to satisfy the needs or how to achieve the

above mentioned investment objectives, thus the answer provides to you with

various investment avenues. Some of them are Mutual funds, Banking products,

Insurance products, Bonds, Real estates, Gold, Equity shares, Pension plans.

Besides returns, other potential benefits of any investment also include

the safety of capital, risk or the stability of returns, the liquidity or access to the

funds when needed, and the convenience with which the investment can be

managed.

Problems faced by individual investors in managing their investments are

investors lack knowledge about various investments made by them, volatility of

respective markets, lack of awareness of various investment avenues, lack of

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financial advice, risks involved in various investments returns provided by various

investments, timing the markets, lack of financial resources, under performance

of the markets, the proposition of investment and service was either unclear or

not fully honored, too many products were launched with out the regard to

customer needs and risk exposures, over emphasis on funds under management

and finally emotions such as greed and fear which drive their investment

decisions.

STATEMENT OF PROBLEM

With respect to all these individual investors, some of them are not aware

of all the investment avenues. In my study I, would be trying to ascertain the

awareness level of investors’ of various investment avenues and objective of

investment with respect to age, education, occupation, monthly income and

savings. Along with the above mentioned I would be studying investors’ objective

behind investing in Mutual fund and Unit Linked Insurance plans.

OBJECTIVES OF THE STUDY

To ascertain the investors awareness about all investment avenues.

To know the objective behind their investment.

To know the objective behind investing in Mutual Funds and Ulip.

SCOPE OF THE STUDY

The study basically tries to identify the awareness of various investments and

investors’ preference for mutual fund and unit linked insurances plan (ULIP). The

study was done to individual investors restricted to the city of Bangalore. The

study was done in specific for Unit linked insurance plans and Mutual funds.

METHODOLOGY

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a) Type of the study

Survey based analytical study was done. A survey was done with a sample size

of 100; information relating to investors was collected regarding their age,

education, occupation monthly income and savings

Exploratory study is used. It is used when researchers lack the clear idea of the

problems they will meet during the study. Through exploration researchers

develop concepts more clearly, establish priorities, develop operational

definitions and improve the final research design.

b) Type of data

Primary data:

This data was collected with help of the questionnaire to know the various factors

influencing the investments, investment preferences of the investors, the profile

of the investors based on their education background, occupation, income levels

and savings and such other factor are used.

Secondary data:

This type of data was collected from websites and various journals to know the

various investment avenues and their strengths and their weakness.

c) Sources of data

The questionnaire formed the main primary source for the purpose of study for

collecting information on the structural profile of the investors.

All of the relevant primary data was through the questionnaire that was

administered to the investors (attached as annexure1)

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The secondary data that was required has been collected through the

magazines, newspaper articles, textbooks and Internet.

d) Type of Survey

The research conducted on the basis of sample survey. The reason for choosing

sample survey was that the population is large and the elements are not so

different from each other.

e) Sampling

Empirical field studies require collection of first hand information or data

pertaining to the units of study from the field. A part of the population is known as

sample. The process of drawing a sample from a larger population is called

sampling

There are two types of sampling namely Probability sampling and Non-probability

sampling. Probability sampling is based on the concept of random selection,

whereas non-probability sampling is non-random sampling.

Non - Probability sampling is that sampling procedure which does not afford

any basis for estimating the probability that each item in the population has of

being included in the sample. In such a design, personal element has a great

chance of entering into the selection of the sample.

Probability Sampling

Probability sampling is also known as “Random Sampling” or “Chance

Sampling”. Under this sampling design, every item of the universe has an equal

chance of inclusion in the sample. It is, so to say, a lottery method in which

individual units are picked up from the whole group not deliberately but by some

mechanical process.

For the purpose of the present study, non-probability sampling has been

selected.

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A non-probability sample of 100 respondents was selected because the total size

of target population was enormously unlimited. It is specifically called

“Convenience sampling” because no formal source of respondents was

available. Only the use of third party databases was available for research.

f) Size of sample

There is a large target population and which is unknown; the sample size was

restricted to 100.The sample of 100 would represent the entire population.

g) Tool for data collection

Questionnaire: - The study was conducted with the aid of well-structured

questionnaire that avoided the ambiguous, loaded as well as leading questions.

The language of the question was simple and easy to understand. The tool was

prepared in such a way that answers were given to various elements such as

age, education, occupation, income levels, percentage of savings, objectives

behind investment decisions. Some informal interviews served the purpose to

some extent.

Schedule: - The information in addition to the questionnaire was collected by

meeting company people personally. The information with respect to the

following areas was collected namely: Various recent investment avenues,

various factors that influence investment decision, various motivating factors for

investing etc.

Duration of the Study

The research was conducted for a period of eight weeks

h)Administration

The questionnaire was administered to the investors of Bangalore. Appointments

were fixed in order to administer the questionnaire according to their convenient

time. In all cases, the researcher was present when the questionnaire was filled

and so the clarifications were immediately provided.

23

i) Techniques for data Analysis

The data collected is tabulated into various sets of groups based on the

requirements.

In order to ascertain the awareness of investment avenues, data relating to

respondents age, education, occupation ,monthly income and their savings has

been collected and tabulated and then inference has been drawn from them.

In order to know the objectives behind their investment , investors data relating to

respondents age, education, occupation ,monthly income and their savings has

been collected and tabulated and then inference has been drawn from them.

In order to know the objectives behind investing in ULIP and mutual fund ,

investors data relating to respondents age, education, occupation ,monthly

income and their savings has been collected and also their purpose of

investment in ULIP and mutual fund has been collected.

LIMITATIONS OF THE STUDY

Since the sampling procedure was convenience, the sample selected may not

be a true representative of the population.

The respondents did not disclose some information, which was considered

confidential. Some personal details and other information were left out of the

study. The information collected is not completely authentic it could be

subjected to bias.

The study was confined to Bangalore due to which the result cannot be

applied universally.

24

CHAPTER SCHEME

Chapter: 1 Investment opportunities in India

This chapter mainly deals with various investment opportunities such as

equities, mutual funds, insurance, and deposits in various financial

institutions. Etc. It also deals with strengths and weakness of various

investment avenues.

Chapter: 2 Research Design

A research design serves as a bridge between what has been done in the

conduct of study to realize the specified objectives. It is an outline of the

projects working.

Chapter: 3 Profile

The current trends in the industry and brief company profile have been

outlined .The products and services the company offers has also been

briefed.

Chapter: 4 - A Study of investors’ awareness about various investment

avenues and purpose of investment- An Analysis

In this chapter using data collected the information has been tabulated and an

analysis has been drawn, on the basis of age, education, occupation, monthly

income and the savings of the investors.

Chapter: 5 Summary of Findings, conclusions and Suggestions

In this chapter we will actually include all that we have analyzed and what has

been found. Finally conclude checking whether the objective of the study has

been achieved or not.

25

PROFILE OF FINANCIAL SERVICES.

In the '90s there has been a decisive shift towards a new wave, the domain of

financial services. In the era of the consumer, financial services, which seek to

put the consumer in the forefront, have come to stay. Skillful marketing has

opened up a wide spectrum of areas where financial services find their presence

today.

The lines are blurring between financial services for business and individuals.

Traditional FSPs - once exclusive distributors of their own proprietary products -

are pursuing two new approaches:

First, many are sourcing other companies' products in order to distribute more to

their own customers. Banks are sourcing insurance products; brokerages are

sourcing credit cards, electronic bill presentment and payment. You don't need to

own the cow to sell the milk anymore.

Second, there is a movement towards the distribution of products through

partners' distribution channels, but with much trepidation as this raises complex

issues of brand dilution and revenue recognition. Most notable is Citibank. Its

proprietary heritage was so strong that in the 1970s and 1980s, Citibank had its

proprietary ATMs manufactured exclusively. Today, the Citi group distributes

products from other providers (DRIASI for small business insurance),

collaborates extensively (Bolero, myFICO), sells products to non-relationship

customers (Worldpay), and distributes Citi products through alternative channels

(Lending Tree, FXALL).

The main function of the financial services sector is to persuade people to entrust

their money into its care. The sector therefore also involves professional issues

relating to ethics and confidentiality. Corporate governance and the interests of

the stakeholders have become paramount and several well-meaning measures

are being taken in this direction.

26

A discussion on financial services in India cannot be done at one go for its

widespread and varied. This series on financial services focuses on its evolution.

It maps and analyses the changing financial services scenario and also provides

an insight into the various activities undertaken and services rendered by the

financial service providers in India.

The financial services industry in India is still emerging from a long period of

government control. The sector has been identified by IFSL as one of its top

priority markets. The main focus of attention by the British High Commission in

India is to encourage the Indian Government to bring down barriers to entry for

overseas companies. Whilst the private banking sector has benefited most to

date, much still needs to be done to allow free entry to overseas insurance and

accountancy services and in making a start on the legal services market, which

remains tightly closed to overseas law firms. As the market opens up,

opportunities for new financial services products can be expected to grow. But

the time, effort and resources required to develop the market will make it suitable

only for the larger companies.

PROFILE OF BAJAJ CAPITAL

Bajaj Capital is a financial services company engaged in the business of

Merchant Banking, Resource Mobilization, Distribution of Financial Products,

Investment Advisory Service, buying and selling of Money Market Investments

and Tailor Made Financial Planning for Individuals and Corporate Clients. Bajaj

Capital is a Securities and Exchange Board of India (SEBI) approved Category I

Merchant Banker/Investment Advisor, member of Delhi Stock Exchange and

dealer on OTC Exchange of India.

The company was promoted in 1965 by Shri. K. K. Bajaj, a lawyer turned

businessman with an objective to provide professional guidance to investors on

where, when and how to invest and to assist the corporate sector in its resource

27

raising activities. Bajaj Capital became the first company to set up ‘Investment

Centers’ all over India for this purpose. Today, Bajaj Capital has 90 offices in

over 40 important Indian Cities.

Every year Bajaj Capital raises resources for over 1000 top Institutions/Corporate

for their fixed income and Equity offerings. Bajaj Capital is also one of India’s

largest distributors of financial products like Mutual Funds and Insurance.

Merchant Banking 

Bajaj Capital enjoys SEBI category ( I ) authorization for Merchant Banking. They

offer the full spectrum of Merchant Banking Services, beginning from identifying

the best time for an issue to final stage of marketing it, to harvest unparalleled

success.

Bajaj Capital has always been cautious to associate only with select capital

issues and has managed over 100 issues for both Debt and Equity over the

years for Corporate sector from family owned companies to professionally

managed multinationals to government companies and across the entire

spectrum of industries. On a cumulative basis,they have managed issues worth

over Rs100 billion and are constantly ranked among Top 10 Merchant Bankers in

the country.

Bajaj Capital excels in the area of Debt offerings from Central and State Financial

Institutions and Infrastructure companies. Our excellence in this field is a function

of deep industry knowledge, proven financial savvy and a team of brightest

minds in the industry. These strengths enable us to structure, price and distribute

Debt solutions that generate outstanding response.

Resource Mobilization

Bajaj Capital is one of India’s leading mobilizes of public savings in shape of

financial instruments like company Deposits, Bonds, Debentures, IPO's and other

Government saving schemes. Bajaj Capital since inception has raised resources

for 2000 leading institutions and corporate including over 1600 Private Corporate,

28

over 40 Government Companies/PSUs, over 28 Mutual Fund, 15 Central and

State level Financial institutions & over 15 Banks. The list includes the who’s who

of Top Government Institutions and Private Corporate in India. Bajaj Capital’s

annual resource mobilization exceeds Rs30 billion.

Distribution of Mutual Fund

Bajaj Capitals is widely regarded as one of India’s largest distributor of Mutual

Funds. They distribute over 100 schemes of all leading and selected Mutual

Fund.

Investment Advisory

Bajaj Capital offers ‘need based’ Investment Advice to retail investors, High Net

worth Investors (HNI) & Institutional Investors. Bajaj Capital is serving 5, 40,000

Retail investors all over India including 10,000 NRIs and 5000 HNIs besides

2500 Institutional Investors. We offer investors advice on a range of over 1000

investment schemes including Fixed Income, Equity and Mutual Fund products

besides insurance.

Over 7000 prospective clients visit there offices all over India daily, seeking

investment advice. Bajaj Capital has a ‘Premier Clients Group’ exclusively to

cater to high Net worth Individuals (HNIs) who seek special attention.

Relationship Manager is assigned to every such Investor to constantly keep him

up to date on latest market changes and review his portfolio regularly.

Money Market

Bajaj Capital has an active Money Market desk which is engaged in purchase &

sale of Central & State Government Securities and Bonds catering to the needs

of Educational & Charitable Trusts, Societies, Corporate, Banks, Provident/Super

Annuation/Gratuity Fund and HNIs. Bajaj Capital is also active in meeting short-

term fund requirements of various corporate clients by arranging Inter Corporate

Deposits and raising commercial paper.

29

Financial Planning 

Financial goal of each individual investor varies according to his dream, ambition

and family size and future financial planning for the children & old age pension

for self and wife so does the pathway to achieve it. At Bajaj Capital we apply the

principles of Financial Planning as both science & art, we understand the time

horizon, risk bearing capacity and investment goals of investors keeping in mind

their psyche and financial needs. Based upon this we help individual investors

plan their entire life up to Retirement, Taxes, Insurance needs and other

important personal financial goals

HISTORY

1964-Bajaj Capital sets up its first 'Investment Centre' in New Delhi to guide

individual investors on where, when & how to invest. India's first Mutual Fund,

Unit Trust (UTI) of India is incorporated in the same year.

1965-Bajaj Capital is incorporated as a company and in the same year innovates

a new financial instrument ‘Companies Fixed Deposits’. EIL Ltd. (Oberoi Hotels,

then known as Associated Hotels of India Ltd.) becomes the first company to

raise Fixed Deposits.

1966-Bajaj Capital expands its product range & includes all UTI schemes and

Government saving schemes in addition to Company Fixed Deposits.

1969- Bajaj Capital manages its first Equity issue (through associate company) of

Grauer & Weil India Ltd. right from drafting of prospectus to marketing of issue

1975- Bajaj Capital starts offering ‘need based’ investment advice to investors

which would later be christened as ‘Financial Planning’ in the investment world

30

1981- SAIL becomes the first government company to accept deposits, later

followed by IOC, BHEL BPCL, HPCL & others. Thus opening floodgates for

growth of retail investment market in India. Bajaj Capital plays an active role in all

the schemes as ‘Principal Brokers’.

1986- Public Sector Undertakings (PSU’s) start making Public issues of Bonds-

MTNL, NHPC, IRFC offer a series of Bond Issues. Bajaj Capital tops ranking in

most of them.

1987- Launch of Public Sector Mutual Funds in India led by SBI. Bajaj Capital

plays a significant role in fund mobilisation for all these players.

1991- SBI issues ‘India Development Bonds’ for NRIs. Bajaj Capital becomes the

top mobiliser with collections over US $ 20 million

1993- Launch of first Private Sector Mutual Fund- Kothari Pioneer followed by

Birla & Alliance in the following years. Bajaj Capital plays an active role and

ranked among top mobilisers for all these schemes.

1995- IDBI & ICICI start issuing their series of Bonds for retail investors. Bajaj

Capital is Co-manager in all these offerings & rank constantly among top 5

mobilisers, on all India basis

1997- Private sector players lead revival of Mutual Funds in India through Open-

ended0 Debt schemes. Bajaj Capital consolidates its position as India’s largest

retail Distributor of Mutual funds.

1999- Bajaj Capital starts marketing Life & General Insurance Products of LIC &

GIC (through associate firm) in anticipation of opening up of the Insurance

Sector.  Bajaj Capital achieves milestone of becoming top ‘Pension Scheme’

seller in India & launches marketing of Health insurance schemes of GIC.

31

2000 & beyond

As a 'One stop Financial Supermarket' Bajaj Capital offers all financial

products including the full range of Investment and Insurance products. Bajaj

Capital offers ‘Full service’ Merchant banking including structuring,

management & marketing of Capital Issues. Bajaj Capital reinvents  ‘Financial

Planning’ in its international sense & equips its full team of Investment Experts

‘as Financial Planners’

PRODUCT PROFILE:

Company Fixed Deposits

Company Fixed Deposits offer better returns than Bank Deposits with minimum

lock-in periods. Bajaj Capital offers select Fixed Deposit Schemes of reputed

Manufacturing, Finance and Government companies. They offer over 300

Company Deposit schemes

Bonds and Debentures

Bajaj Capital arranges Government of India Relief Bonds, which are tax-free

bonds. In addition they offer infrastructure Bonds (Tax Saving Bonds), Capital

Gains Tax Saving Bonds, Bonds from central and state Government Institutions.

Mutual Funds

Mutual funds are the only investment option that give you market related, realistic

returns through proper diversification of risk by investing in debt and equity

instruments. Bajaj capital also gives you transparency in transactions, anytime

liquidity and tax-efficiency. They offer over 100 Equity Funds, Debt Funds and

Liquid Funds.

Life Insurance

Provides for dependents in case of a mishap. Replaces earning power if

disabled. Protects your ability to meet accumulation, education, marriage goals.

We all have financial responsibilities; in the absence of the bread earner it

32

becomes very difficult to fulfill these. This is the reason for getting yourself and

your loved ones a life cover to give you peace of mind also giving protection for

critical illness and monthly income.

General Insurance

Address health care concerns. Provides for auto, home and personal liability

protection. Provides for potential long-term care costs. Plan for business

continuation. While to grow your wealth, you must protect yourself from a stroke

of misfortune which would take away some of your wealth earned over so many

years.

Pension Schemes

A pension scheme is a savings plan that is designed to grow over time to provide

you with an income during retirement. The government provides tax incentives

that allow your fund to grow virtually tax-free.

Housing Loans

Bajaj capital arranges housing loans for you while helping you save sizeable

amounts of tax in the bargain. The loans are for purchase, construction,

renovation, etc, and are from the leading Housing Finance Companies, offering

competitive interest rates at your door step.

Car/Scooter Insurance

Bajaj capital offers automobile solutions to safeguard your vehicle from theft,

accidents, and other mishaps, ensuring you very easy and hassle free

procedures.

Financial Planning Services Offered by Bajaj Capital

Financial Planning is the process of meeting your life's goals through proper

management of your finances. The process includes gathering relevant

financial information, setting your goals, examining your current financial

situation and formulating strategies for how you can achieve your goals, given

your current financial situation and future plans. At Bajaj capital they are

33

dedicated to the financial planning approach and give you advice only after

understanding your financial needs.

Investment Planning

Everyone should have secure savings for a rainy day. Once these are in place,

you have to start thinking about investing for the future. Baja capital helps you to

plan your investments so that you may reach your personal goals by investing

according to the risk that you can bear and your recommended mix of

investments.

Cash Flow Budgeting

Baja capital analyze your income, expenses, assets and liabilities to see which

budgeting techniques you can use to help you reach your current and long-term

financial goals.

Children's education and marriage planning:

One of the most important financial goals for every parent is to plan their

children's futures so that they can make the steps to success easier for them to

climb. Owing to the steep rise in the cost of higher education and marriage, it has

become essential to start planning and saving for these events well in

advance.Bajaj capital helps you to achieve these goals by suggesting prudent

investment avenues to you.

Asset purchase

Bajaj capital all long that one day we are able to purchase our dream house, car

or other assets. To help you fulfill these goals, we give you advice on how to

accumulate the funds to purchase these assets by suggesting monthly savings

plans and other investment instruments that will make your money grow to the

required amounts.

Tax Planning

Bajaj capital helps you to reach your personal goals by identifying how to

34

increase your income by saving taxes and by helping you invest in tax saving

instruments that fit your personal portfolio and situation.

35

INTRODUCTION

The project is an attempt to identify the investors’ awareness of various

investment avenues and to know the purpose of investing in unit linked insurance

plans and mutual funds.

This study required both Primary and Secondary data. Primary data was

collected through a structured questionnaire and the Secondary data was made

available through company literature and internet.

All the respondents were contacted personally which consisted of individual

investors of Bangalore. The information was collected by meeting them

personally.

In this project investor’s awareness of investment avenues, investors time

horizon for investing and objectives of investing in ULIP and mutual funds

The data collected has been analyzed thoroughly through, and presented in the

form of tables and graphs in the succeeding pages.

36

PROFILE OF THE RESPONDENTS

Age has a very important impact on the investment by the investors. The table

below shows age group of the respondents.

Table No.1

Table showing number of respondents and their age group

AGE

No. OF

Respondents

20-30 32

31-40 12

41-55 40

55 and

above 16

Total 100

Most of the respondents were in the age group of 41-55(40%).The least were in

the age group of 31-40(12%).

Educational qualification sometimes makes changes in the investment decisions

of the individual investors. The table below shows the education of the

respondents.

Table No.2

Table showing number of respondents and their education

Education

No. OF

Respondents

Under-

graduate 12

Graduate 40

Post graduate 48

Total 100

37

Post graduates were the maximum number of respondents (48%).Even the

graduates were more than 1/3 of the sample size (40%).

Occupation directly related to income which has major impact on the investment

decisions. The table below shows the occupation of the respondents.

Table No.3

Table showing number of respondents and their occupation

Occupation

No. OF

Respondents

Professional 20

Salaried 48

Business 32

Total 100

The professional were 20% of the respondents. The salaried were the

maximum number of respondents which was 48%. The business people were

nearly about 1/3 of the sample size (32%).

Investments in various avenues are directly related to the income of the

investors. The table below shows the monthly income of the respondents.

Table No.4

Table showing number of respondents and their monthly income

Monthly income

No. OF

Respondents

< 10000 4

10001-20000 40

20001-30000 36

30001 and above 20

Total 100

38

Investors’ monthly income below 10000 was 4%. Investors in the income group

of 10001-20000 were 40%; this was the largest group in monthly income basis.

Investors monthly income of 20001-30000 was 36%.

Investing in various investment avenues is related with the savings pattern of the

investors. The table below shows the monthly savings of the respondents.

Table No.5

Table showing number of respondents and their monthly savings

Monthly savings

No. OF

Respondents

< 2500 12

2501-5000 40

5001-10000 32

10001 and above 16

Total 100

Investors saving less than a 2500 a month were 12%, this was small group.

Investors saving between Rs2501-5000 were 40%, this was the largest group.

39

Age has a very important impact on the investment decision. People in different

age group perceive different level of risk. The table below shows the investment

objective of different age group.

Table No.6Table showing the investment objective of various age groups.

Investment objective

Age20-30 31-40 41-55

55 & above Total

Fixed Income 20(6) 12(3) 36(10) 16(4) 84(24)Housing 12(3) 12(3) 8(2) 12(3) 44(12)Children education/Marriage 12(3) 8(2) 28(8) 12(3) 60(17)Retirement Plan 12(3) 4(1) 24(7) 8(2) 48(13)Tax relief 24(7) 12(3) 20(6) 12(3) 68(19)Liquidity 20(6)   16(4) 16(4) 52(15)Total 356(100)

Graph No.1

Graph showing the investment objective of various age groups

Inference:

Investors in the age group of 41-55, invest with an objective of fixed

income (11%). In the same age group 8% of them prefer for future like children

education or marriage. Investment for retirement plan is low- 13%.The second

important objective for many investors is for tax relief (19%).

40

Education has an impact on the investment objective. Different level of education

has a different objective. The table below shows the education impact on their

investment objective.

Table No.7:Table showing the investment objective of various education groups.

Investment Objective

Education 

Under graduate Graduate

Post Graduate Total

Fixed Income 8(2) 36(10) 36(10) 80(22)Housing 4(1) 16(4) 24(7) 44(12)Children education/Marriage 8(2) 20(6) 28(8) 56(16)Retirement Plan 4(1) 24(7) 24(7) 52(15)Tax relief 8(2) 32(9) 24(7) 64(18)Liquidity   32(9) 28(8) 60(17)Total 32(8) 160(45) 164(47) 356(100)

Graph No.2

Graph showing the investment objective of various education groups.

Inference:

FIXED INCOME : Investors who are graduates and post graduates their main

objective of investment is fixed income.Graduates and Post graduates give

second preference for investing as tax relief tool. Under graduates don’t have the

investment objective of liquidity.

41

Investors’ objectives differ along with their monthly income. The table below

shows investment objective of the investors with their monthly income.

Table No.8Table showing the investment objective of investors of various monthly income levels.  Investment Objective

Monthly Income Less than 10000

10001-20000

20001-30000

30001 & above  Total 

Fixed Income 4(1) 24(7) 32(9) 16(4) 76(21)Housing   16(4) 12(3) 16(4) 44(12)Children education/Marriage 4(1) 16(4) 16(4) 20(6) 56(16)Retirement Plan   20(6) 12(3) 16(4) 48(13)Tax relief 4(1) 28(8) 16(4) 20(6) 68(19)Liquidity   20(6) 28(8) 16(4) 64(18)Total 12(3) 124(35) 116(34) 104(28) 356(100)

Graph No.3

Graph showing the investment objective of investors of various monthly income levels.

Investment objective

0

5

10

15

20

25

30

35

Less than10000

10001-20000 20001-30000 30001 &above

MONTHLY INCOME

INV

ES

TO

RS Fixed Income

Housing

Children education/Marriage

Retirement Plan

Tax relief

Liquidity

Inference:

Investors in the monthly income group of 20001-30000 prefers for

investing mainly for fixed income (9%).The second importance they give is for

liquidity of their investments. But investors in the income group of 10001-20000

mainly prefer investing for tax relief(8%).

42

Age has an impact on the awareness of investors. The table below shows the

investors awareness about various investment avenues on the basis of the age

Table No.9Table showing the awareness of various investment avenues on the basis of age

Investment Avenues

Age 20-30 31-40 41-55 55 & above Total Banks 32(6) 8(2) 40(8) 12(2) 92(18)Post office Deposits 32(6) 8(2) 40(8) 16(3) 96(18)Equities 32(6) 12(2) 28(5) 12(2) 84(16)Insurance 32(6) 12(2) 32(6) 12(2) 88(17)Real estate 24(5) 12(2) 28(5) 12(2) 76(15)Mutual Funds 28(5) 12(2) 32(6) 16(3) 88(17)Total 180(34) 56(12) 200(38) 88(16) 524(100)

Graph No.4

Graph showing the awareness of various investment avenues on the basis of age

Inference:

Investors in the age group of 21-30 are aware about almost all the

investment opportunities, where as investors in the age group of 55 and above

are not aware of the investment opportunities as of the age group of 21-30.Even

investors in the age group of 41-55 is aware of the various investment avenues.

43

The education level has a impact on awareness on the investment avenues. The

following table shows the awareness level of the investors on the basis of

education.

Table No.10Table showing the awareness of various investment avenues on the basis of Education.

 Investment Avenues

EducationUnder

graduate GraduatePost

Graduate TotalBanks 12(2) 32(6) 48(9) 92(18)Post office Deposits 12(2) 40(8) 48(9) 100(19)Equities 8(2) 28(5) 48(9) 84(16)Insurance 8(2) 32(6) 48(9) 88(17)Real estate 8(2) 36(7) 32(6) 76(15)Mutual Funds 8(2) 32(6) 44(8) 84(16)Total 56(12) 200(38) 268(50) 524(100)

Graph No.5

Graph showing the awareness of various investment avenues on the basis of Education.

0 5 10 15 20 25 30 35 40 45 50

INVESTORS

Under graduate

Graduate

Post Graduate

ED

UC

AT

ION

INVESTMENT AWARENESS

Mutual FundsReal estateInsuranceEquitiesPost office DepositsBanks

Inference:

Most of the Undergraduates are not aware of investment avenues. Post

graduates are aware of most of the investment avenues. Most of them (19%) are

aware of post office deposits as investment avenues.

44

Occupation has a very important impact on the awareness level of the

investment avenues. It may be because of the peer group or the job profile may

have affected on the awareness of the investment avenues. The following table

tells us the relationship between awareness level of investment avenues and the

occupation.

Table No.11Table showing awareness of various investment alternatives of various occupations.   Investment Avenues

Occupation Professional Salaried Business TotalBanks 20(4) 48(9) 32(6) 100(19)Post office Deposits 20(4) 48(9) 28(5) 96(18)Equities 20(4) 40(8) 28(5) 88(17)Insurance 20(4) 32(6) 32(6) 84(16)Real estate 12(2) 40(8) 28(5) 80(15)Mutual Funds 20(4) 28(5) 28(5) 76(15)Total 112(22) 236(45) 156(32) 524(100)

Graph No.6

Graph showing awareness of various investment alternatives of various occupations.

INVESTMENT AWARENESS

0

10

20

30

40

50

60

Professional Salaried Business

OCCUPATION

IN

VE

ST

OR

S

Banks

Post office Deposits

Equities

Insurance

Real estate

Mutual Funds

Inference:

The awareness level of professional of various investment alternatives is

when compared to the business people .The salaried investors are aware of

most the investment alternatives. Salaried and business people have equal

awareness level for mutual fund. Salaried are more aware of banks and post

office deposits as investment avenues.

45

Investment awareness even depends on savings pattern of the investors. The

following table tells us about the savings pattern and their awareness level of

investment avenues

Table No.12

Table showing saving of the investors and their awareness of various investment avenues

 Investment Avenues

SavingLess than

2500 2501-5000 5001-1000010001 & above Total

Banks 12(2) 36(7) 32(6) 16(3) 96(18)Post office Deposits 12(2) 36(7) 32(6) 16(3) 96(18)Equities 8(2) 32(6) 24(5) 16(3) 80(15)Insurance 8(2) 32(6) 28(5) 16(3) 84(16)Real estate 4(1) 32(6) 32(6) 12(2) 80(15)Mutual Funds 4(1) 36(7) 32(6) 16(3) 88(17)Total 28(10) 204(39) 180(34) 92(17) 524(100)

Inference:

The awareness level of various investment alternatives in the monthly

saving group of Rs2501-5000 and Rs5001-10000 is high. But awareness level of

investment avenues of investors monthly income is less than 2500 is very low.

Table No.13

Table showing awareness of investment and the investors’ monthly income.

Investment Avenues

Monthly IncomeLess than

1000010001-20000

20001-30000

30001 & above Total

Banks 4(1) 36(7) 36(7) 20(4) 96(18)Post office Deposits 4(1) 36(7) 32(6) 20(4) 92(18)Equities   36(7) 28(5) 20(4) 84(16)Insurance   36(7) 36(7) 20(4) 92(18)Real estate   24(5) 36(7) 12(2) 72(14)Mutual Funds   32(6) 36(7) 20(4) 88(16)Total 8(2) 200(39) 204(39) 112(22) 524(100)

Inference: Investors monthly income between 10001-30000 are aware of most

of the investment avenues, but investors monthly income less than 10000 are

aware of only 2 investment avenues.

Occupation has a very important impact on the purpose of investing in ULIP. It

may be because of the peer group or the job profile may have affected on the

46

awareness of the investment avenues. The following table tells us the

relationship between purpose of investing in ULIP and their occupation

Table No.14Table showing the purpose of investing in ULIP on their occupation

 Purpose of investing

In ULIP

Occupation Professional Salaried Business TotalReturns 8(6) 20(15) 12(9) 40(30)Liquidity 8(6) 8(6) 8(6) 24(18)Protection for dependents 4(3) 12(9) 8(6) 24(18)Tax Relief 12(9) 20(15) 12(9) 44(33)Total 32(24) 60(45) 40(31) 132(100)

Graph No.7

Graph showing the purpose of investing in ULIP on their occupation

INVESTMENT IN ULIP

0

5

10

15

20

25

Professional Salaried Business

OCCUPATION

INV

ES

TO

RS

ReturnsliquidityProtection for dependentsTax Relief

Inference:

Investment in ULIP by the investors is mainly for tax relief (33%) and

returns (30%).Most of the salaried invest in ULIP for the purpose of returns and a

tool for tax relief and benefits. Investing in ULIP as a purpose of liquidity

investment is same for professionals, salaried and also for business people.

47

Investors’ objectives for investing in ULIP differs along with their monthly

income.the table below shows the purpose of investing in ULIP and the monthly

income of the investors.

Table No.15

Table showing purpose of investing in ULIP on the basis of monthly income

  Purpose of Investing

In ULIPMonthly Income Less than

1000010001-20000

20001-30000

30001 & above Total

Returns   12(9) 16(12) 12(9) 40(30)Liquidity   4(3) 12(9) 8(6) 24(18)Protection for dependents   4(3) 16(12) 4(3) 24(18)Tax Relief   12(9) 16(12) 16(12) 44(33)Total 32(24) 60(45) 40(31) 132(100)

Graph No.8

Graph showing Educational qualification of the investors and their purpose

of investment in mutual funds.

INVESTMENT IN ULIP

0 2 4 6 8 10 12 14 16 18

Less than 10000

10001-20000

20001-30000

30001 & above

MO

NT

HL

Y IN

CO

ME

INVESTORS

Tax Relief

Protection for dependents

liquidity

Returns

Inference:

Investors in the all monthly income group invest in ULIP mainly with an

objective of tax relief (33%).Investors monthly income less than 10000 are not

interested in investing in ULIP, this may be because of other investment that they

have already invested. Investors income between 20001-30000 have equal

importance for returns, protection for dependents and tax relief.

48

Education level has an impact on the purpose of investing in mutual fund. The

table below shows education of the investors and the purpose of investment in

the mutual fund

Table No.16

Table showing Educational qualification of the investors and their purpose of investment

in mutual funds.

Purpose of Investment in M/Fs Education Under

graduate GraduatePost

Graduate TotalProfessionally Managed 4(3) 20(14) 24(17) 48(34)Returns 4(3) 20(14) 24(17) 52(37)Liquidity   8(6) 4(3) 8(6)Tax relief 8(6) 12(9) 12(9) 32(23)Total 16(12) 60(43) 64(45) 140(100)

Graph No.9

Graph showing Educational qualification of the investors and their purpose

of investment in mutual funds.

INVESTMENT IN MUTUAL FUNDS

0

5

10

15

20

25

30

Under graduate Graduate Post Graduate

EDUCATION

INV

ES

TO

RS

Professionally Managed

Returns

Liquidity

Tax relief

Inference: Postgraduates invest in mutual funds because they are

professionally managed and have good returns (17%). Investment in mutual fund

as a liquidity instrument is very less among investors. Graduates invest in mutual

funds because they are professionally managed and have good returns (14%).

49

Occupation of the investors can have influence on the purpose of investing in the

mutual fund. The table below shows the purpose of investment in mutual fund

and their occupation

Table No.17

Table showing the purpose of investment in mutual funds on the basis of

the investors occupation

Purpose Of investment

Occupation Professional Salaried Business TotalProfessionally Managed 12(9) 12(9) 24(17) 48(34)Returns 12(9) 16(11) 24(17) 52(37)Liquidity     8(6) 8(6)Tax relief 8(6) 16(11) 8(6) 32(23)Total 140(100)

Inference:

Most of investors purpose of investing in mutual fund is because it is

professionally managed (34%). Investors don’t see mutual fund as a liquidity

investment avenue, only the business people see it as a liquidity instrument. The

business people are the one who invest mainly for the purpose of returns and

professional management.

50

Impact of Age on the investment horizon. The table below shows the investment

horizon of investors on basis of their age

Table No. 18Table showing the investment horizon of the investors on the basis of their age

Investment Horizon

Age 20-30 31-40 41-5555 &

above Total

Less than 1 year 4(4) 4(4) 8(8)

1-2 years 8(8) 8(8) 4(4) 20(20)

2-5 years 16(16) 4(4) 12(12) 4(4) 36(36)

5 year and above 4(4) 8(8) 16(16) 8(8) 36(36)

Total 32(32) 12(12) 40(40) 16(16) 100(100)

Graph No.10

Graph showing the investment horizon of the investors on the basis of their age

Inference:

Investor between the ages 41-55 are investing for a long term i.e for more

than 5 years. Investors between the ages20-30 are investing for term of 2-5

years. Most of the investors don’t invest for a short term (less than a year).

51

Investment Horizon

02468

1012141618

20-30 31-40 41-55 55 &above

Age

Nu

mb

er o

f In

vesto

rs

Less than 1 year

1-2 years

2-5 years

5 year and above

The education level of the investors will have impact on their investment horizon.

The table below shows investment horizon of the horizon and their education

qualification.

Table No.19

Table showing the education of the investors and their investment horizon.

Investment Hori

zonAge

Under graduate Graduate

Post Graduate Total

Less than 1 year 4 4 8

1-2 years 8 12 20

2-5 years 8 8 20 36

5 year and above 4 20 12 36

Total 12 40 48 100

Graph No.11

Graph showing the education of the investors and their investment

horizon.

INVESTMENT HORIZON

0 5 10 15 20 25

Under graduate

Graduate

Post Graduate

ED

UC

AT

ION

INVESTORS

5 year and above

2-5 years

1-2 years

Less than 1 year

Inference:

50% of the graduates invest for more than 5 years .Approximately 40% of

the post graduates invest for a period between 2-5 years.

52

Investors’ investment horizon is related to their monthly income. The table below

shows the investment horizon and their monthly income.

Table No.20

Table showing investment horizon of investors and their monthly income

Investment HorizonAge

Less than 10000

10001-20000

20001-30000

30001 & above Total

Less than 1 year 8 8

1-2 years 8 12 20

2-5 years 4 16 12 4 36

5 year and above 8 12 16 36

Total 4 40 36 20 100

Graph No.12

Graph showing investment horizon of investors and their monthly income

Inference:

People having monthly income of more than Rs10000 invest for long term.

People investing for more than 5 years are those who are having monthly income

of more than 30000.

53

Age is one of the crucial factor influencing investment decisions either in ULIP or

Mutual fund. The table below shows the investment option of the investors and

their age

Table No.21

Table showing the age of the investors and their option to invest either in ULIP/mutual

fund/both.

Investment optio

nAge 20-30 31-40 41-55 55 & above Total

ULIP 8 4 12Mutual fund 8 24 4 36

Both 28 12 8 4 52Total 36 12 40 12 100

Graph No.13

Graph showing the age of the investors and their option to invest either in

ULIP/mutual fund/both.

Inference

The age group between 20-30 liketo invests in ULIP and Mutual fund. But

the age groups above 55 are very risk averse, so they don’t like to expose

themselves to Mutual fund. Investors in the age group of 31-40 would lke to

invest in Mutual funds because they are mainly intereted in returns

54

0

5

10

15

20

25

30

Number of Investors

ULIP Mutualfund

Both

Investment Option

20-30

31-40

41-55

55 & above

Education has an impact on investment in ULIP or in mutual fund .the table

below shows the education of the investors and the investment option they have

choosed

Table No.22

Investment

option

Education

Uner

graduate Graduate

Post

Graduate Others Total

ULIP   8 4   12

Mutual fund 4 16 16   36

Both 8 16 28   52

Total 12 40 48 0 100Table showing the education of the investors and their option to invest

either in ULIP/mutual fund/both.

Graph No.14

Table showing the education of the investors and their option to invest

either in ULIP/mutual fund/both

Of their lac

Inference

Most of the Undergraduates don’t like to invest in ULIP this may be

because their lack of knowledge.Most of the post graduates prefers to invest in

oth, this shows that education level plays a very important role in investing ULIP

or Mutual fund.

55

Investing in ULIP/Mutual fund/both depends on the savings pattern of the

investors .The table below shows the savings of the investors and investment

their option.

Table No.23

Table showing savings of the investors and their option to invest either in

ULIP/mutual fund/both.

Investment Monthly optionSavings

less than 2500

2501-5000 5001-10000

10001 & above Total

ULIP 4 8 12Mutual fund 4 24 8 36

Both 8 16 20 8 52Total 12 40 32 16 100

Graph No.15

Graph showing savings of the investors and their option to invest either in ULIP/mutual fund/both

Inference:

Most of the investors prefer to invest in ULIP as well as Mutual Funds. Investors

monthly saving below 5000 are not interested investing only in ULIP, but they are

interested in investing in both the investment opportunities.

56

INTRODUCTION

The primary data collected through the questionnaire was thoroughly analyzed

and then presented in the form of tables and graphs .The findings from the

analysis has been listed below:

Summary of Findings.

Investors’ awareness about all investment avenues:

Investors in the age group of 21-30 are aware about almost all the

investment opportunities, where as investors in the age group of 55 and

above are not aware of the investment opportunities as of the age group

21-30.Even investors in the age group of 41-55 are aware of the various

investment avenues.

Most of the Undergraduates are not aware of investment avenues. Post

graduates are aware of most of the investment avenues. Most of investors

(19%) are aware of post office deposits as investment avenues.

The awareness level of professionals of various investment avenues is

less when compared to the business people .The salaried investors are

aware of most the investment avenues. Salaried and business people

have equal awareness level for mutual fund. Salaried are more aware of

banks and post office deposits as investment avenues.

The awareness level of various investment avenues in the monthly saving

group of Rs2501-5000 and Rs5001-10000 is high. Investors saving less

than 2500 are having very less awareness of various investment avenues.

Investors monthly income between 10001-30000 are aware of most of the

investment avenues, but investors monthly income less than 10000 are

aware of only 2 investment avenues

Investors Objective behind their investment:

Investors in the age group of 41-55, invest with an objective of fixed

income (11%). In the same age group 8% of them prefer for future, like

57

children education or marriage. The second important objective for many

investors is for tax relief (19%).

Investors who are graduates and post graduates their main objective of

investment is fixed income. Graduates and Post graduates give second

preference for investing as tax relief tool. Under graduates don’t have the

investment objective of liquidity.

Investors in the monthly income group of 20001-30000 prefers for

investing mainly for fixed income (9%).The second importance they give is

for liquidity of their investments. But investors in the income group of

10001-20000 mainly prefer investing for tax relief (8%).

Most of the salaried investors main objective for investment avenues is

fixed income.

Objective/purpose of investing in Mutual Funds and Ulip:

ULIP:

Investment in ULIP by the investors is mainly for tax relief (33%) and

returns (30%). Investors in the age group of 21-30 mainly invest for tax

relief and returns. It is same even for the investors in the age group of 41-

55.

Most of the salaried invest in ULIP for the purpose of returns and as a

tool for tax relief and benefits. Investing in ULIP as a purpose of liquidity

investment is same for professionals, salaried and also for business

people.

Investors in all the monthly income group invest in ULIP mainly with an

objective of tax relief (33%).Investors monthly income less than 10000 are

not interested in investing in ULIP, this may be because of other

investment that they have already invested. Investors’ monthly income

between 20001-30000 has equal importance for returns, protection for

dependents and tax relief.

58

MUTUAL FUND:

Most of investors purpose of investing in mutual fund is because it is

professionally managed (34%). Investors’ main objective of investing in

mutual fund is returns. Investors in the age group of 41-55 invest with the

objective of good returns and also for tax relief.

Postgraduates invest in mutual funds because they are professionally

managed and have good returns (17%). Investment in mutual fund as a

liquidity instrument is very less among investors. Graduates invest in

mutual funds because the funds are professionally managed and have

good returns (14%).

Most Investors don’t see mutual fund as a liquidity investment avenue,

only the business people see it as a liquidity instrument. The business

people are the one who invest mainly for the purpose of returns and

professional management.

59

CONCLUSION

Investment awareness of individuals differs on their age, education,

occupation, monthly income and their savings. Even investors objectives differ

from each individual. Investors objective differs even in investing in Unit linked

insurance plans and mutual funds. Most of the investors prefer to invest in both

the investment avenues. But only few prefer to invest only in Unit linked

insurance plans. Returns in Unit linked insurance plans and mutual funds are

almost similar. The financial planner has to know the objectives of the investors

and know the risk appetite of the investors and then should suggest the best

investment avenue

Investors’ awareness about all investment avenues

Investors in the age group of 21-30 are aware about almost all the investment

opportunities, where as investors in the age group of 55 and above are not aware

of the investment opportunities as of the age group 21-30.Even investors in the

age group of 41-55 are aware of the various investment avenues.Most of the

Undergraduates are not aware of investment avenues. Post graduates are aware

of most of the investment avenues..The awareness level of professionals of

various investment avenues is less when compared to the business people .The

salaried investors are aware of most the investment avenues. Salaried and

business people have equal awareness level for mutual fund. Salaried are more

aware of banks and post office deposits as investment avenues. Investors saving

less than 2500 are having very less awareness of various investment avenues.

Investors’ monthly income between 10001-30000 are aware of most of the

investment avenues, but investors monthly income less than 10000 are aware of

only 2 investment avenues

Investors Objective behind their investment:

Investors in the age group of 41-55, invest with an objective of fixed income

(11%). In the same age group 8% of them prefer for future, like children

education or marriage. The second important objective for many investors is for

60

tax relief (19%).Investors who are graduates and post graduates their main

objective of investment is fixed income. Graduates and Post graduates give

second preference for investing as tax relief tool. Under graduates don’t have the

investment objective of liquidity. Investors in the monthly income group of 20001-

30000 prefers for investing mainly for fixed income (9%).The second importance

they give is for liquidity of their investments. But investors in the income group of

10001-20000 mainly prefer investing for tax relief (8%).

Objective/purpose of investing in Mutual Funds and Ulip:

ULIP:

Investment in ULIP by the investors is mainly for tax relief (33%) and returns

(30%). Investors in the age group of 21-30 mainly invest for tax relief and returns.

It is same even for the investors in the age group of 41-55. Most of the salaried

invest in ULIP for the purpose of returns and as a tool for tax relief and benefits.

Investing in ULIP as a purpose of liquidity investment is same for professionals,

salaried and also for business people. Investors in all the monthly income group

invest in ULIP mainly with an objective of tax relief (33%).Investors monthly

income less than 10000 are not interested in investing in ULIP, this may be

because of other investment that they have already invested. Investors’ monthly

income between 20001-30000 has equal importance for returns, protection for

dependents and tax relief.

MUTUAL FUND:

Most of investors purpose of investing in mutual fund is because it is

professionally managed (34%). Investors’ main objective of investing in mutual

fund is returns. Investors in the age group of 41-55 invest with the objective of

good returns and also for tax relief. Postgraduates invest in mutual funds

because they are professionally managed and have good returns (17%).

Investment in mutual fund as a liquidity instrument is very less among investors.

Graduates invest in mutual funds because the funds are professionally managed

and have good returns (14%).

61

SUGGESTIONS

The suggestions made here are based on the study conducted as a part of “Bajaj

capital Ltd”.

It is necessary for the financial planners to remember that, customer is the

decision maker. It is important to make plans according to customer

requirements.

Financial services industry started its growth very recently, so creating

awareness among various professionally managed funds is necessary.

They should try to understand the needs and preferences of investors and

keep re scheduling the portfolios.

Planners taking on the role of guides can also help investors become

aware of certain needs that have not yet been realized.

Age, education, occupation, monthly income and savings of individual play

a very crucial role in awareness and objectives of investment

opportunities, so the financial planner should be very meticulous in

financial planning of individuals.

Awareness about ULIP is very less among investors, so it is very

important for financial advisors and planners to tell about the benefits of

ULIP and how it can be suited to individual needs.

Most of the investors prefer to invest in mutual fund for the reason

because it is having good returns, but even ULIP funds is also

professionally managed and even it is having good returns.

62

1. BOOKS

Association of Mutual Funds of India Bulletin

Financial management – Prasanna Chandra

Financial services – ICFAI press ( VOL I )

2. MAGAZINES

CFA – CHARTERED FINANCIAL ANALYLIST

INVESTMENT MONITOR

ASIA INSURANCE POST

3. WEBSITES

www.amfiindia.com - Association of Mutual Funds of India

www.mutualfundsindia.com - Mutual funds of India

www.bajajcapital.com- Bajaj Capital Ltd.

www.rupeelane.com

www.investopedia.com

www.equitymaster.com

www.icfaipress.org

63