Study on Invesment Options

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A SUMMER TRAINING REPORT

ON

Study the investors preference towards various

Investment options

TOWARDS THE PARTIAL FULFILLMENT OF

POST GRADUATE DIPLOMA IN MANAGEMENT

SESSION (2011-13)

SUBMITTED TO- SUBMITTED BY-

PROF.Charu Chaudhary Vishal Chauhan

Sec-D

I.T.S MOHAN NAGAR GHAZIABAD

WWW.ITSGHAZIABAD.AC.IN


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TABLE OF CONTENTS

Part1 Page No:

1. Declaration 52. Acknowledgement 63. Internal Mentor Certificate 74. Preface 85. Executive Summary 96. Introduction of the project 107. Objective of Study 11

8. Company Profile 12-209. Introduction of the Topic 21-60

(i) Stock 23-28(ii) Bond 29-34(iii) Mutual fund 35-48(iv) Savings and interest 49-52(v) Other investments 53-60


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10.Research methodology 61-6211.Data analysis 63-6812.Interpretation 6913.Suggestions 7014.Conclusion 7115.Limitations 7216.Bibliography 7317.Annexure 74-76


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DECLARATION

I, Vishal Chauhan, PGDM (2011-2013), hereby declare that this project report entitled Study

the investors preference towards various investment options is based on my own study. This

project is completely based on my work experience of 67 days in the IFIN Limited.

I also declare that this report is submitted only to Institute Of Technology And Science,

Ghaziabad and IFIN Ltd. for evaluation purpose.

DATE:

PLACE: SIGNATURE


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ACKNOWLEDGEMENT

I, Vishal Chauhan, want to express my sincerest gratitude to Mr. Tarique Kamal; Branch Head ofIFCI Financial services Ltd. Noida Branch for giving me this immense opportunity to work with

IFCI Financial services Ltd. The support and learning that he provided me in those 67 days are

incomparable and I am very well realized the true meaning of learn while you work.

Finally with the deepest sense of esteem and gratitude: I express my sincere thanks to Mr. Ashish

Sharma, Assistant Branch Manager of IFCI Financial services Ltd., My PGDM Coordinator

V.N.Bajpai, and our Mentor Prof. Charu Choudhary whose excellent guidance and

encouragement was indispensable for completion of this project. I express my valuable gratitude

to our guide for utilizing Guidance, patience, suggestion and deeply indebt to all of them for

excellent ideas and assistance.

I am also indebted to all staff members of IFCI Financial services Ltd., Noida sector 18 Branch

and my friends who helped me in the completion of this project.

(Vishal Chauhan)


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Internal Mentor Certificate

This is to certify that the Project Work titled Study the investors preference towards variousinvestment optionsis a bonafide work of Vishal Chauhan carried out in partial fulfillment for

the award of degree of PGDM of INSTITUTE OF TECHNOLOGY & SCIENCE, MOHAN

NAGAR GHAZIABAD under my guidance. This project work is original and not submitted

earlier for the award of any degree / diploma or associate ship of any other University/Institution.

Sign.Designation.


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PREFACE

Theoretical studies are not sufficient to get into corporate world and understand the complexities

of large scale organizations. Practical training is an important part of management course.

Practical training exposes us to real practices of management in the organization. It also exposes

students the treasures of experience, knowledge and learning which are prerequisite of making a

successful career. Practical knowledge also helps us to deal with the different uncertain situation

which we will be facing in the future.

This is the final evaluation report for the trainees Summer Training Project Report. The Summer

Training Project Report commenced on 2nd

may 2012 and formerly closes on 7th

july 2012. The

duration of my Summer Training Project Report is approximately 67 days.

It is known that these 67 days summer training project report is the prelude to the pre placement

efforts. It is during these 67 days of exposure to the industry that the trainee impresses the host

organization with his hard work, sincerity, knowledge and ethics. In the most cases a successful

summer project report leads to a Pre-Placement offer. Summer project report would also be great

learning experience since it enables the trainee to blend theory and practice, observe and learn

the current trends in the market.

In this report intern is totally free to share all this experience during summer project report, good

and bad both. It also taught us how to face the different situation. So this report reflects the

originality, and the true picture of the interns work. Hence Im putting my learnings in this

report.


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EXECUTIVE SUMMARY

Industry exposure is the most crucial part of the management studies in which a student is able to

synchronize her technical knowledge with practical knowledge gained from the organization in

which she gets her training. I have a great pleasure in presenting this work as a part of the Two

years full time management program. I was allotted a project title Study the investors

preference towards various investment options at IFIN financial services Ltd., which helped

me a lot in knowing about the working of the organization as well as trading on the Equity

market.

In this project I collect the data through questionnaire (primary data) and websites (secondary

data). I talked about persons who invest the money in different financial products and know their

risk perception about investments options.

In this project I conclude that investors should choose the financial products very carefully

because these products have different features which cant match with everyone needs.

They should choose the investments options according to their future needs.


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INTRODUCTION of Project

This project is prepared by me in IFIN financial services ltd (Subsidy of IFCI) situated at Job

Plaza, sec 18 Noida.

IFIN is government financial services company that deals in stock market (equity market,

commodity market, e-gold, e-silver, mutual fund, insurance etc.

This project is based on the study of various investments options (stocks, mutual funds, bonds,

banks, other investmentsprivate ventures, public funds, annuities, real estate)

Through this project we try to know about the investors preference towards financial products

and also I want to know why they invest their money in investments options.

And I also want to know the risk appetite of the investors who are investing their money in the

market. In which portfolio they like to invest their money and why they invest their money in

this portfolio.


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Objective of the study

To study the financial products (stocks, mutual funds, savings & interest and otherinvestments.

To study the consumers preference towards various investment options. To study the risk perception of the investors. To study how investors perception has changed before and after financial crisis.


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PART - 1

COMPANYPROFILE


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IFIN

IFCI financial services Ltd

(A subsidiary of IFCI Ltd)

INTRODUCTION-

GENESIS OF IFCI-

At the time of independence in 1947, India's capital market was relatively under-developed.

Although there was significant demand for new capital, there was a dearth of providers.

Merchant bankers and underwriting firms were almost non-existent and commercial banks were

not equipped to provide long-term industrial finance in any significant manner. It is against thisbackdrop that the government established The Industrial Finance Corporation of India (IFCI) on

July 1, 1948, as the first Development Financial Institution in the country to cater to the long

term finance needs of the industrial sector. The newly established DFI was provided access to

low-cost funds through the central banks Statutory Liquidity Ratio or SLR which in turn

enabled it to provide loans and advances to corporate borrowers at concessional rates.

LIBERALIZATION - CONVERSION INTO COMPANY IN 1993

By the early 1990s, it was recognized that there was need for greater flexibility to respond to the

changing financial system. It was also felt that IFCI should directly access the capital markets for

its funds needs. It is with this objective that the constitution of IFCI was changed in 1993 from a

statutory corporation to a company under the Indian Companies Act, 1956. Subsequently, the

name of the company was also changed to "IFCI Limited" with effect from October 1999.


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PRINCIPAL OFFICER

Executive Directors

Mr. T.K.Ray

Ms. Shashi Sharma

Chief General Manager

Mr. Sanjoy Sathee

Vice president

Mr. Gautam meour

Advisor HR

Mr. V Satyaavenkata Rao

Company Secretary & compliance Officer

Ms. Rupa Sarkar

IFCI Financial Services Ltd. (I-FIN)

IFCI Financial Services Ltd (I-FIN) was promoted in 1995, by IFCI Ltd., to provide a wide range

of financial products and services to investors, institutional and retail. I-FIN is primarily

involved in Stock Broking, Investment Banking, Mutual Fund Distribution & Advisory Services,

Depository Participant Services, Insurance Products Distribution and the like.


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A BOUQUET OF SERVICES

I-FIN is uniquely positioned, by virtue of being in the fold of IFCI, which is a pioneering All

India Financial Institution, to offer a wide array of financial products, and services to the

investing community in India and NRIs. These include:

Stock Broking, Commodities Broking, Currency Trading, Portfolio Management Services,

Depository Participant Services, Merchant Banking, Insurance Broking, Mutual Fund Products

Distribution, IPO Distribution, Corporate Advisory Services.

I-FINS MEMBERSHIPS & LICENCES

The National Stock Exchange of India Limited (NSE): I-FIN is a premier broking house and

is currently a member of NSE in all the segments Cash Market (CM), Futures & Options

(F&O), Whole sale Debt Market (WDM) and Currency Derivatives. The company caters to

many prestigious institutional clients in the insurance, mutual funds and banking segments.

The Bombay Stock Exchange of India Limited (BSE): I-FIN is a member of one of the oldest

stock exchanges in India, namely the BSE, in the Cash Market (CM) segment.

Multi Commodity Stock Exchange of India Limited (MCXSX): I-FIN has obtained a license

from MCX-SX, and is a member of the Currency Segment. MCX-SX provides a host of benefitsto a wide range of financial market participants, including exporters, importers, corporates and

banks to hedge currency exposures.


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Depository Participant (DP): As a Depository Participant with the National Security

Depository Limited (NSDL) and Central Depository Participant Limited (CDSL), I-FIN serves

its clients in a wholesome fashion.

Merchant Banking: As a SEBI approved Category I Merchant Banker; I-FIN is involved in the

capital raising exercises of Indian Corporates.

Insurance Corporate Agent: I-FIN is an IRDA approved Corporate Agent (CA) for both Life

and Non-Life Insurance sectors. It is empanelled with LIC for Life Insurance and Bajaj Allianzfor the Non-Life Insurance Sector.

Mutual Fund Distribution: Registered with the Association of Mutual Funds in India (AMFI)

as a distributor of Mutual Fund products, I-FIN has been highly active and very successful in the

distribution of various mutual fund products.

Portfolio Management Services: As a SEBI registered Portfolio Manager; we offer

Discretionary Portfolio Management Services backed by Equity Research - Fundamental and

Technical.

MANAGEMENT TEAM

Mr. Sujit K. Mandal

DIRECTOR

Mr. Manoj P. Rege.

EXECUTIVE DIRECTOR

Mr. M.V.Muthu

MANAGING DIRECTOR

Mr. S.P. Arora


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OTHER MEMBERSHIPS

Through IFCI Commodity Ltd. a subsidiary of IFCI Financial Services Ltd.

Derivatives Exchange Ltd (NCDEX)

National Spot Exchange Limited (NSEL)

COMMODITY-

Commodities: Commodities as a word originated from the French word committie

meaning benefit, profit. Rightly so! The kind of continuously growing turnover which

commodities market has seen is incredible, benefiting both producers and buyers. These

amazing results have transformed commodities as a most sought after asset class. And

this has caught attention of the whole world. Commodities market is particularly

significant to our country as India is essentially a commodity-based economy. Therefore,it should not be surprising to see that Indian Commodities Market is also taking giant

strides, growing at a scorching pace and is well poised to occupy its rightful place in the

world. This has provided the Indian investors with new emerging investment

opportunities in the arena of commodities. Commodity Derivatives trading in India is

now done through the electronic trading platform of two popular exchanges NCDEX

Productsoffered by IFCI

Mutual fund Insurance Equity Commodity


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(National Commodity & Derivative Exchange Limited) and MCX (Multi Commodity

Exchange). The various commodities being traded on the exchanges include precious

metals, crude oil, and agro-commodities amongst others. Commodities Limited is a

member of both the exchanges (MCX & NCDEX) that allows you to trade in all the

commodities traded at both the exchanges. At present, trading in commodities is

restricted to futures contracts only.

MUTUAL FUND-

Mutual fund is a professionally managed type of collective investment scheme that pools

money from many investors and invests it in stocks, bonds, short-term money market

instruments and other securities. Mutual funds have a fund manager who invests the money

on behalf of the investors by buying / selling stocks, bonds etc. Currently, the worldwide

value of all mutual funds totals more than $US 26 trillion.

INSURANCE-

Insurance is the only way to protect the economic value of assets and life. It is defined as the

equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An

insurer is a company selling the insurance. A policyholder is the person or entity buying the

insurance policy. The insurance rate is a factor used to determine the amount to be charged for a

certain amount of insurance coverage, called the premium.


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EQUITY-

1. A stock or any other security representing an ownership interest.2. On a company's balance sheet, the amount of the funds contributed by the owners (the

stockholders) plus the retained earnings (or losses). Also referred to as "shareholders'

equity".

3. In the context of margin trading, the value of securities in a margin account minuswhat has been borrowed from the brokerage.

4. In the context of real estate, the difference between the current market value of theproperty and the amount the owner still owes on the mortgage. It is the amount that

the owner would receive after selling a property and paying off the mortgage.5. In terms of investment strategies, equity (stocks) is one of the principal asset classes.

The other two are fixed-income (bonds) and cash/cash-equivalents. These are used in

asset allocation planning to structure a desired risk and return profile for an investor's

portfolio.

IFIN is a leading equity and securities firm in India. The company currently handles

almost 2-3% of the total volumes traded on NSE and in the realm of online trading and

investments it currently has a share of close to 5% of the market, per some recent

published reports. The major activities and offerings of the company today are Equity

broking, Depository participant services, Portfolio Management Services, InstitutionalBrokerage & Research, Investment Banking and Corporate Finance. To broaden the

gamut of services offered to its investors, the company has also recently unveiled a new

avatar of its online investment portal armed with a host of revolutionary features.


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IFIN is a member of the National Stock Exchange of India, Bombay Stock Exchange of India,

Depository Participant with National Securities Depository Limited and Central Depository

Services (I) Limited, and SEBI approved Portfolio Manager

'By far the most significant event in finance during the past decade has been the extraordinary

development and expansion of financial derivatives. These instruments enhance the ability to

differentiate risk and allocate it to those investors most able and willing to take it- a process that

has undoubtedly improved national productivity growth and standards of living.' ---- Alan

Greenspan, Chairman, Board of Governors of the US Federal Reserve System


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Introduction of the Project Topic

The companies are all looking at greater efficiencies in their businesses, squeezing out the last

rupee from restructuring their operations, finances, divisions, profit centres. Almost all the

companies have seen smart growth in sales and profits. The Sensex is up by more than double

by 2004, many stocks are up many times over-not merely because of sentiment but because

the markets are finally recognizing the power of performance, the untapped potential of Indian

enterprise, the ability of Indian businesses of adapt.

INVESTMENT

AVENUES

OUTLOOK ANALYSIS

Fixed

Income

Rates on small savings will need to come down in line with the

benchmark sovereign yield curve. Also, given the asset-liability

mismatch, schemes like PPF may need to be wound up.

Mutual

Funds

In place of debt fund, one should look at MIPs in these times as the

downside for equities looks negligible.

Insurance In a diminishing-returns environment, unit linked plans offer


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policyholder an opportunity to make big gains on their investments.

Gold Despite lower returns, it is prudent to allocate 5 percent of your

investments to gold, as it isnt volatile like stocks and provides a

hedge against uncertainties.

Stocks We expect equities as an asset class to provide attractive returns

over the next five years. While the ride may be bumpy in the near

term, the long-term growth will be good.

Real

Estate

The general sentiments on Indian real estate are extremely positive

and I believe that the real estate market will continue to be

buoyant for some times.

Investments options

a. Stockb. Bondc. Mutual fundd. Savings and intereste. Other investments


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STOCK

How do investor begin investing into a stock marketWhen is the best time to invest in stocksWhy should one invest in stocks


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STOCK

The stock of a business is divided into multiple shares, the total of which must be stated at the

time of business formation. Given the total amount of money invested in the business, a share

has a certain declared face value, commonly known as the par value of a share. The par value is

thede minimis(minimum) amount of money that a business may issue and sell shares for in

many jurisdictions and it is the value represented as capital in the accounting of the business. In

other jurisdictions, however, shares may not have an associated par value at all. Such stock is

often called non-par stock. Shares represent a fraction ofownership in a business. A business

may declare different types (classes) of shares, each having distinctive ownership rules,

privileges, or share values.

Ownership of shares is documented by issuance of a stock certificate. A stock certificate is a

legal document that specifies the amount of shares owned by the shareholder, and other specifics

of the shares, such as the par value, if any, or the class of the shares.

How do investor begin investing into a stock market

Primary Market

The stock can be bought in the primary or secondary market. When the company issuesthe stock for the first time, also called public issue, any one can subscribe to this issue.

There may be some restrictions regarding the number, the mode of payment and place

where the applications can be submitted.

The company issues a prospects a detailed document giving complete informationregarding the company including the time frame for the project, utilization of the funds,

future prospects, and risks perceived by the management etc.

The prospective applicants are advised to study this document carefully. The public issueis kept open for a few days for enabling the persons to apply.

After receiving all the applications the shares are issued within the stipulated time. The company may also invite applications in case of substantial expansion. But such

public issues are few and far between.
http://en.wikipedia.org/wiki/Share_%28finance%29http://en.wikipedia.org/wiki/Par_valuehttp://en.wikipedia.org/wiki/De_minimishttp://en.wikipedia.org/wiki/De_minimishttp://en.wikipedia.org/wiki/De_minimishttp://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Ownershiphttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Stock_certificatehttp://en.wikipedia.org/wiki/Shareholderhttp://en.wikipedia.org/wiki/Shareholderhttp://en.wikipedia.org/wiki/Stock_certificatehttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Ownershiphttp://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/De_minimishttp://en.wikipedia.org/wiki/Par_valuehttp://en.wikipedia.org/wiki/Share_%28finance%29


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Secondary Market

The other market is the secondary market. Huge transactions take place in this marketevery working day.

Here the existing shareholders sell their shares to buyers. To purchase or sell shares inthis market a person has to register himself with a broker or a broker house authorized to

operate in this market the shares are quoted in a stock exchange and this information is

widely available. *The intimation to purchase or sell (quantity and price) has to be

confirmed to the broker. Some brokerage has to be paid.

After the necessary formalities, which may take at best a few days, the transaction iscompleted.

The shares are kept in a depository and the details are given to the account holderperiodically.

The advantage of the secondary market is that the past performance of the company isavailable for study.

While investing in stocks it is necessary to remember that liquidity is low. Only funds notlikely to be needed urgently should be invested.

It is absolutely essential to study the background and the past performance of thecompany. The performance should be compared with the performance of the competitors.

To minimize the risks, it is advisable to have diversified stocks. One must devote time to

study the trends and the market movement of stocks.

Stock markets these days follow a global trend. Watch not only NYSE & NASDAQ butalso FTSE, NIKKEI, HANG SENG as well as DAX and CAC. Stock market is the place

to make tons of money. Even of you do not, you will never forget the experience.

When is the best time to invest in stocks

It used to be believed that the best time to invest in a company is when it goes public. i.e.issues stock for the first time called initial public offer or I.P.O.


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The value is analyzed, the information is totally presented and there is a basis for theissue price. But there is only one snag. The performance hand if you have some stocks in

the Parma group it may not face any risks at all. In fact due to the possibility of biological

warfare, it may do better.

So if you invest in a diversified market your risks would be certainly less. But you mustunderstand the meaning of RISK,

The definition of risk is chance or possibility of a danger, loss or injury? We can rewordthis for investment purpose as, chance that the actual outcome from an investment will

differ from the expected outcome? Hence an investment in terms of risk can turn out to

be bad or very good too! So when you buy stocks in several markets you reduce the risk.

But you also sacrifice the chance of getting higher returns.

Hence the decision to buy stocks in several different markets also called diversification will naturally depend on your ability to take risks.

If you are young, have good income and less liability you can afford to buy stock in onlya few markets. If you are lucky you can win a lot of money. You can lose a lot too! But if

you are retired and dependent on the income from the stock for your livelihood you

cannot take the risk, you must invest in several markets. This will call for judgment.

When the economy of a country is affected, all markets will be affected but not equally

badly.

In times of recession the first industry affected is capital goods industry. The lastprobably is drugs & pharmaceuticals. So depending on the guess of the future and your

limited ability to take risks you must choose a judicial mix of stock in different markets.

If you were to buy all the stock in the market in the right proportion the returns willmatch the market index. In such a situation you will perform as well or as badly as the

market. But the purpose of the investment in stocks of your choice is to earn a better

return than the market.


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Secondly it will not be possible for anyone to buy all the stock in the right proportion allthe time. Hence with the limited funds and limited information available regarding the

future movement of price of various stocks you will take a decision to buy stock in

different markets to match the degree of risk you can afford to take.

Why should one invest in stocks

The returns generated buy stocks in most countries are not exceptional. The picture issimilar around the word. The US common stocks on an average rose 4.2 times during

1989-99. In the U.K. the rise ending the 25 year period during 1999 was 36 fold. In Japan

share values, ended 1999 are languishing over 50% below the peak in 1989. but they are

still 5 times higher than what they were in 1974.

A study conducted by an investment bank has shown that the average return on gilt edgedsecurity (Bonds) for 1974-94 (after adjusting for inflation and assuming no tax) was

5.7%. In contrast, the corresponding figure for equities (stock) was 13.5%? Equities

represent the risk capital that is invested in projects to produce the best returns. Such

capital can be, and is, reinvested elsewhere when there are better opportunities. This

mobility may not be free. But risk capital will always be limited and the demand for it

will always carry it to where returns are better.

But there are certain limitations when you invest in stocks. Apart from risks there is alsothe issue ofliquidity. If you want the funds badly can you sell the stock easily, safely and

without loss? This problem of liquidity is the issue.

Since the stock market is volatile, the price could be very low at the precise time that youneed the money. You have little option but to sell at a loss to get the money that you

want. Such volatility may not exist in securities and Bond market because the interest

payable is fixed and time period is also fixed. So it is said that the liquidity is good.


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Some persons get a lot of thrill and excitement by the decision to invest in stocks,watching the movement of prices, making money by selling stock when the gains are

handsome and feeling a sense of achievement now and then. But along with investment

in stocks goes a responsibility. It becomes necessary to watch not only movements of

prices on national stock exchange but important exchanges world over.

The stock markets these days are global; it becomes also imperative to watch theeconomy and performance of industries. Fortunately data are available but these must be

analyzed understood and acted upon. The performance of individual management is

important as even when an industry faces problems, some unit can show superlative

performance and outstanding results.


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BONDS

What is Bond How do investor begin investing into a Bond When is the best time to invest in Bonds

What are the differences between the different Bonds (5 yr., 10 yr., etc.)

Why should investor invest in Bonds


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BONDS

What is Bond

In finance, a bond is a negotiable certificate that acknowledges the indebtedness of thebond issuer to the holder. It is negotiable because the ownership of the certificate can be

transferred in the secondary market. It is a debt security, in which the authorized issuer

owes the holders a debt and, depending on the terms of the bond, is obliged to pay

interest (the coupon) to use and/or to repay the principal at a later date, termed maturity.

A bond is a formal contract to repay borrowed money with interest at fixed intervals

(semiannual, annual, sometimes monthly).

A bond is defined as a long-term promissory note with stipulated interest supported by aconsideration or under seal secured by a mortgage.

A bond has the promise of stipulated interest on a long-term basis. There is a guaranteefor the performance.

Bonds issued by the Governments are also terms as securities. The issuing Governmentor Federal / Central Government in case of issue by State Government or Local Authority

guarantees the payment. Companies issueDebentures.

These may be secured by a charge on specific assets of the company. To ensure propercompliance of the regulations and proper upkeep & maintenance of the assets, a trust is

formed or trusties are appointed. Even debt instruments issued by companies are covered

under the broad term BOND for the purpose of investments.

It is compulsory for such companies to get a rating from the recognized RatingAgencies. This helps in estimating the repaying capacity of the company. Triple a i.e.

AAA is the highest rating.

The interest on a bond can be fixed for the entire period, or it can be floating. Thefloating rate will be linked to either the bank rate or some other independently determinedrate such as LIBOR. In general, the safety of the investment and the regular income from

the interest are assured.

The market price of the bonds does not fluctuate widely only on the market. This ensuresliquidity.


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A bond-holder is a secured creditor. He has legal rights to sue the company in case ofdefault. Bonds maintain a balance of safety, yield and liquidity.

The returns in investments from bonds over a period of time are likely to be less thanreturns from stock market.

How do investor begin investing into a Bond

Basically bonds are debt instruments. They are stable forms of investments. The period ofissue is generally 10 to 15 years. In some countries there are restrictions on investment in

Government Securities by individuals.

Sometimes minimum amounts to be invested are prescribed. In many countriesindividuals can invest in Government Securities in the same manner as stocks. These are

quoted on the stock exchange and can be purchased in the same manner as stocks through

brokers.

The investment in bonds can be through the primary market when they are first issued.The application has to be submitted as per the terms stipulated by the issuing authority. In

case of companies debentures are now in the same category as stocks. The depositorieskeep the individuals accounts.

In many countries the prime lending rates or bank rates are being reduced over a periodof time. This is a big opportunity for the bond market. The fluctuations in the bond

market depend on these interest rates. Hence the volume of transactions on the bond

market is very small compared to the stock market.

Transactions through the broker are possible on the PC. There are e-brokerage facultiesavailable. You need to have a specified bank account and a specific depository account.

The facility provider registers these. The transactions then can be carried out on your PC.

The instructions are given on your PC to purchase or sell. The facility provider verifies

your bank balance as well as your depository stock balance. As soon as the transaction is


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completed, your bank balance is debited in case of purchase or credited in case of sale.

Simultaneously your depository balance is credited in case of purchase or debited in case

of sale. This is not only quick but also safe.

Primarily investors are buying bonds / debentures to balance your portfolio. At least partof your investment is safe.

Bonds may have some special tax benefits as decided by Government.

When is the best time to invest in Bonds

Bond market in general is not volatile. It is a liquid investment, which means that you canbuy and sell bonds without appreciable loss.

You can invest in bonds whenever you have the necessary funds available. Bonds pay a fixed and unchanging income with the expectation that their price will not

be subject to wide fluctuation.

The interesting point to note is that historically the interest rates moved from 4.5% in1960 to near 10% in late 1980s. But the trend in the first few years of the twenty first

century has been for the interest rates to fall.

In US it is only 2% (Nov. 2001). This raises several interesting issues. If the expectation(today? is that the interest rates will go down in the next say 10 to 15 years, Bonds which

give the guaranteed (todays) interest for the next 10 to 15 years (depending on the

maturity period) is a very good investment indeed.

You are assured the higher rate of (todays interest) over the next 10 to 15 years when theinterest rates may go down. This will increase the value of the Bond over the period

depending on the fall in interest rate. But one can argue that these low rates can continue

only for a limited period and as soon as the economy revives, the interest rates may be

revised up wards. Under such a situation, the long term Bond may result in some losses.

So even in case of Bonds the future course of events is important.


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What are the differences between the different Bonds (5 yr., 10 yr., etc.)

Investors have a fascination with potential rewards associated with investing in stocks orequities.

There is consequently, a lack of interest in understanding Bonds, which are, fixed incomesecurities. But several factors now contribute towards a renewed enthusiasm.

First is the downward trend in interest rates. Second has been the slide in price of information technology stocks. Third is the effect

of disasters such as terrorist attacks in the US. This has shifted the relative odds in the

stock and bond market.

Governments, corporations and individuals issue debt instruments. They call for fixedperiodic payments called interest and eventual repayment of the amount borrowed, called

the principal.

Bonds issued by federal, state and local governments differ in quality, yield and maturity.These are among the safest and most liquid securities available.

Short-term government securities have maturity of one year or less. Treasury bills areoffered weekly at a discount, with maturity of 10 to 30 years.

Corporations engaged in industry or business offer private debt instruments. They rangefrom high quality to defaulted securities.

The subclasses mainly represent. Modifications of the two basic promises which areinterest and repayment of principal.

Convertible bonds provide the holder with an option to exchange the bond for apredetermined number of stocks at any time prior to maturity. Secured or mortgage

bonds are secured by a specific lien against assets. During liquidation the creditors

receive proceeds from the sale of those assets up to a limit of debt.

It is also obligatory in many countries for the debt instruments to be rated by a ratingagency. The rating agency, after study of the finances of the company, gives a rating,

which signifies the ability of the corporation to repay. These ratings are also revised from

time to time depending on the change in the finances of the corporation.


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The types and variations of bonds are substantial. You have to study the bond contract,which spells out all the details behind the issue.

In general yield from the safest bonds i.e. Govt. bonds will be less than yield privatebonds. It is necessary to strike a proper balance depending on your specific needs.

Why should investor invest in Bonds

Diversification is said to reduce risk. Govt. bonds-gilts in UK and treasury bonds in theUnited States are definitive risk free assets because the likelihood that the government

will default on its obligations is effectively zero.

Bonds or debentures and other securities in this category all have some assurance fromthe issuer to repay the capital and interest. Some assets may be specifically be mortgaged

for the security. Independent rating agencies may have given a rating for the bond

debentures after fully analyzing the financial position of the issuer.

Bonds have a long term and well-defined terms of interest payment and repayment ofcapital. This makes bonds less volatile. There is very little risk and good liquidity.

Bonds can be traded in the market at relatively stable prices. This means that you can getthe money by selling bonds whenever you need some money.

You do not have to sell at a distress. Unlike stock, a legal liability has been created inyour favor at the time of issuing the bonds. You have a legal remedy in case of default.

The consideration, therefore, for investment in bonds is liquidity. It is necessary for you to study your future needs in terms of cash. When you are likely to

need? How much you are likely to need? What are the different ways in which you can

get the amount?

Each case is different, the needs the different and the resultant mix of investments willalso be different.

Investors can spread the risks by not putting all their eggs in one basket. They can investin different categories of investment including bonds to reduce losses due to future

uncertainties.

The future is going to be always unpredictable and different. Bonds help in containingthese risks.


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MUTUAL FUNDS

What is a Mutual Fund How do investors begin investing into the Mutual Fund Market

When should an investor invest in Mutual Funds How do an investor choose a Mutual Fund

Why do investor invest in Mutual Funds

Types of Mutual Fund

Concept of Mutual Fund

Advantage & Disadvantage of Mutual Fund


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MUTUAL FUND

What is a Mutual Fund?

A mutual fund is a type of professionally-managed collective investment scheme that pools

money from many investors to purchase securities. While there is no legal definition of mutual

fund, the term is most commonly applied only to those collective investment schemes that are

regulated, available to the general public and open-ended in nature. Hedge funds are not

considered a type of mutual fund.

The term mutual fund is less widely used outside of the United States.

In the United States, mutual funds must be registered with the Securities and Exchange

Commission, overseen by a board of directors or board of trustees and managed by a registered

investment advisor. They are not taxed on their income if they comply with certain requirements.

Mutual funds have both advantages and disadvantages compared to direct investing in individual

securities. They have a long history in the United States. Today they play an important role in

household finances.

There are 3 types of U.S. mutual funds: open-end, unit investment trust, and closed-end. The

most common type, the open-end mutual fund, must be willing to buy back its shares from its

investors at the end of every business day. Exchange-traded funds are open-end funds or unit

investment trusts that trade on an exchange. Open-end funds are most common, but exchange-

traded funds have been gaining in popularity.

Mutual funds are classified by their principal investments. The four largest categories of funds

are money market funds, bond or fixed income funds, stock or equity funds and hybrid funds.

Funds may also be categorized as index or actively-managed.

Investors in a mutual fund pay the funds expenses. There is controversy about the level of these

expenses. A single mutual fund may give investors a choice of different combinations of

expenses by offering several different types of share classes.


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An individual investor who desires to invest in stock has limited money. On the otherhand the different stocks being traded in the stock market are quite large. When an

opportunity arises to purchase some stock, he may not have the liquid cash. He may not

be able to study the trends in stock market. He may not be able to analyze the movement

of prices in the stock market.

It may be difficult for him to visualize the future prospects of different categories ofindustries; He may not be able to analyze the performance of individual companies and

the changes in their management.

In short very few persons can have the time, knowledge and skills to take the bestadvantage of opportunities that arise in the stock market.

Mutual funds are basically investment companies, which continuously sell and buy stock. Any one can participate in its activities by investing in the mutual fund. The investment

company usually a trust manages the total capital available to a mutual fund.

All the stock owned, by this company valued at the market price is the net asset value orNAV. This amount divided by the total No. of unites issues will be the NAV per unit.

The Mutual Fund Company continuously sells the units and repurchases its units on adaily basis by announcing NAV daily.

The Mutual Fund Company will buy the units from the investor at his option at any timeat the NAV. For managing the fund, the company will charge some commission called

load? This can be charged either at the time of selling or at the time of repurchase.

It can be seen that by investing in mutual fund one can get the advantage of large marketand the expertise of the professional management. The fund manager of AMC is

watching the stock market all the time and trying to get the best yield for the investors.

Mutual funds state specific investment objectives in their prospects. The main type orobjectives are growth, balanced income, and industry specific funds.

Growth funds possess diversified portfolios of common stocks in the hope a portfolio ofstocks, and bonds. This achieves both capital gains and dividend along with interest

income. Income funds concentrate heavily on high interest and high dividend yielding

securities.


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Industry specific funds invest in portfolios of selected industries. This appeal to investorswho are extremely optimistic about the prospects for these few industries.

One should be willing to assume the risks associated with such a concentration ofinvestment. As it happened in information technology a bad performance can virtually

result in huge losses. Sometimes the same company may have a family of mutual funds.

The investors may be allowed to shift from a fund with one objective to a fund with a

different objective for a fee.

How do investors begin investing into the Mutual Fund Market

There are a number of mutual fund companies. Each company has a family of mutualfunds with different objectives such as growth, income, industry specific etc.

Investor is tempted to invest in a mutual fund because of the professional services andexpertise associated with the management of a mutual fund. To being investing you can

approach any of the mutual fund and by a very simple application, purchase the shares at

the NAV. The NAV is available on a daily basis.

The mutual fund will let you know the load? i.e. additional amount you have to paywhen you buy and when you sell. In case of entire commission added to NAV at the time

of purchase by the investor the process is called entry (front-end loading). In case of

entire commission being charged at the time of sale by the investor the process is called

exit (backend) loading.

The mutual fund keeps on selling and purchasing stock in the market. Depending on theprice of the stock the NAV will be changing. This will be quoted on a daily basis so that

the investor can decide whether to buy more units or sell the total or some part of it.

The mutual fund will also declare the pay dividend from time to time depending on thedividend income. The dividends declared on the stocks owned by the mutual fund will be

the income of the mutual fund. The mutual fund will declare dividend and pay the same

to the investors depending on its income.


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Each Asset Management Company (Mutual Fund House) will have a family of mutualfunds Schemes with different objectives.

Before investing, the prospects of the mutual fund that specifies the condition should bestudied. The past performance of the mutual fund can be examined. The comparison can

be made with the stock market index.

Over a period of time the mutual fund should do better than the index. (The index gives ameasure of how the overall stocks have moved either up or down.) Such a study should

include dividends declared by the mutual fund over a period of time.

After investing, the performance of the mutual fund will be communicated to theinvestor.

A comparison with performance of other mutual funds with the same objectives will helpin understanding the subject.

There is no secondary market in the units of a mutual fund. Investment in mutual fund isby buying new units in the fund. Mutual funds pay no taxes on the income they receive as

they have been constituted as a Trust in accordance with the provisions of the Indian

Trusts Act, 1882 by the Sponsor. In order to qualify for the tax exempt status, funds must

distribute most of the income they get (90% in U.S. and 100% after costs in U.K.) They

must hold a diversified portfolio. In U.S. no more than 25% can be in a single investment.

For half of the portfolio no more than 5% can be securities of a single issuer. These

aspects severely limit the flexibility.

When should an investor invest in Mutual Funds

Mutual funds are a means to invest in a portfolio of stocks. Such an investment indifferent stocks may not be possible for an individual investor.

Hence the best time to invest is when the NAV of the mutual fund is at the lowest. Not only in relation to the past but also future. Actually it is only the future that is

important. If one were confident or sure of future of any individual stock then it would be


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best to invest in that stock. The risk would be there but so would be the possibility of

rewards. But many a time the future is not clear.

The economic situation does not indicate any clear picture regarding the future. At such ajuncture it would be advisable to invest in mutual fund.

Mutual fund reduces risk because the investment is in a number of different stocks. Secondly it is also possible to select a mutual fund with an objective suited to your needs.

How do an investors choose a Mutual Fund

Choosing a mutual fund is the most crucial aspect of investment in a mutual fund. In caseof a stock it is easy to look at the past performance such as sales, profits, price on the

stock market, dividends record etc. It is also possible to compare the performance with

the other competitors.

In case of mutual fund, firstly there are different families of Mutual Funds being managed by different

companies.

Secondly there are mutual funds with different objectives. Thirdly the past performance of a mutual fund may not be a good guide to future

performance. One has to be very careful in evaluation.

First aspect has to be trust. Is the management of the fund trustworthy? Are there anyadverse or doubtful reports in the market? This is important because many a time a good

performance could be a matter of chance.

Secondly mutual funds are with different objectives. It is necessary to decide whichobjective is important for you. If one can take risks, growth objective may give better

returns over a period of time. One should have the patience to wait for the long term,

which may be necessary. Income funds may not give appreciation in capital but may

assure income. If the need is regular income, then one has to invest in income fund.

On the other hand there will a number of industry specific funds. Information technology,Parma sector, hotel & hospitality industry, processed food, fast moving, consumer goods,


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capital goods, automobiles, white goods, etc.etc.. All the industries cannot do better

at the same time.

The future of an industry will depend on many factors. An expert who can analyze thesefactors and make a good guess can certainly get good rewards.

There are many methods of evaluating the performance of the selected mutual fund. Thepurpose is to find if the management of a fund has done better through its selective

buying and selling. One way is to compare the yield of a mutual fund with the market or

a random portfolio. Even if the mutual fund has done better, the cost should be also taken

into account. It should be ensured that the excess return is sufficient to cover the added

expenses incurred for the purchase of mutual fund. Lastly even after choosing a fund and

investing, the performance must be watched.

Why do investor invest in Mutual Funds

Frequently, investors feel insecure in managing their own investment. They considerthemselves inadequate to perform this task successfully. The investor feels that he lacks

the education, background, time, foresight, resources and temperament to handle the

portfolio. In such a case the choice is mutual fund. Managers trained in the ways ofsecurity analysis devote full time to the objective of the fund. This permits a constant

monitoring.

Secondly the mutual fund has large amounts of money entrusted to it. This makes itpossible to diversify investments. The diversification will be as per the objectives. An

average investor cannot achieve this.

The mutual fund being a large institution, it may be able to obtain lower brokeragecommission.

Mutual funds pay no taxes on the income they receive. They do not pay taxes on thecapital gains they realize. Investment in mutual fund mode is very simple.

There is no secondary market in the shares of a mutual fund. Investment is by buyingnew shares in the fund. Investors can sell shares back to the fund. These transactions take

place at the per share value of the fund.


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This is feasible because mutual funds mostly hold marketable securities. These trades onthe recognized stock exchange. This gives mutual fund an important edge. The success of

mutual funds in attracting capital to manage has been notable.

It should be remembered that historically there is very little statistical evidence to showthat mutual funds have performed better. An analysis done in U.K. has found that very

few funds have been able to beat the all share index or FTSE.

The Securities and Exchange Commission in U.S. found some evidence that mutual fundsoutperformed the market by very small amounts.

The same study found that there was no consistency with respect to which funds providedthe investor with superior performance. What has to be remembered is that would an

individual investor be able to do better. The confidence of investors in mutual funds and

its growth seems to indicate otherwise.

So if an investor think along the lines of the majority, he can choose mutual fund.

CATEGORIES OF MUTUAL FUND:


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Mutual funds can be classified as follow :

Based on their structure: Open-ended funds: Investors can buy and sell the units from the fund, at any

point of time.Close-ended funds: These funds raise money from investors only once.

Therefore, after the offer period, fresh investments can not be made into the fund. If

the fund is listed on a stocks exchange the units can be traded like stocks (E.g.,

Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of close-


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ended funds provided liquidity window on a periodic basis such as monthly or

weekly. Redemption of units can be made during specified intervals. Therefore,

such funds have relatively low liquidity.

Based on their investment objective:Equity funds: These funds invest in equities and equity related instruments.

With fluctuating share prices, such funds show volatile performance, even losses.

However, short term fluctuations in the market, generally smoothens out in the

long term, thereby offering higher returns at relatively lower volatility. At the

same time, such funds can yield great capital appreciation as, historically, equities

have outperformed all asset classes in the long term. Hence, investment in equity

funds should be considered for a period of at least 3-5 years. It can be further

classified as:

i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty

is tracked. Their portfolio mirrors the benchmark index both in terms of

composition and individual stock weightages.

ii) Equity diversified funds- 100% of the capital is invested in equities spreading

across different sectors and stocks.

iii|) Dividend yield funds- it is similar to the equity diversified funds except that

they invest in companies offering high dividend yields.

iv) Thematic funds- Invest 100% of the assets in sectors which are related

through some theme.

e.g. -An infrastructure fund invests in power, construction, cements sectors etc.

v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking

sector fund will invest in banking stocks.

vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.


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Balanced fund: Their investment portfolio includes both debt and equity. As a

result, on the risk-return ladder, they fall between equity and debt funds. Balanced

funds are the ideal mutual funds vehicle for investors who prefer spreading their

risk across various instruments. Following are balanced funds classes

i) Debt-oriented funds -Investment below 65% in equities.

ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.


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Debt fund: They invest only in debt instruments, and are a good option for

investors averse to idea of taking risk associated with equities. Therefore, they

invest exclusively in fixed-income instruments like bonds, debentures,

Government of India securities; and money market instruments such as certificates

of deposit (CD), commercial paper (CP) and call money. Put your money into any

of these debt funds depending on your investment horizon and needs.

i) Liquid funds- These funds invest 100% in money market instruments, a large

portion being invested in call money market.

ii) Gilt funds ST- They invest 100% of their portfolio in government securities of

and T-bills.

iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt

instruments which have variable coupon rate.

iv) Arbitrage fund- They generate income through arbitrage opportunities due to

mis-pricing between cash market and derivatives market. Funds are allocated to

equities, derivatives and money markets. Higher proportion (around 75%) is put in

money markets, in the absence of arbitrage opportunities.

v) Gilt funds LT- They invest 100% of their portfolio in long-term government

securities.

vi) Income funds LT- Typically, such funds invest a major portion of the

portfolio in long-term debt papers.

vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an

exposure of 10%-30% to equities.

viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line

with that of the fund.


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ADVANTAGES OF MUTUAL FUND

Portfolio Diversification Professional management Reduction / Diversification of Risk Liquidity Flexibility & Convenience Reduction in Transaction cost Safety of regulated environment Choice of schemes Transparency


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DISADVANTAGE OF MUTUAL FUND

No control over Cost in the Hands of an Investor No tailor-made Portfolios Managing a Portfolio Funds Difficulty in selecting a Suitable Fund Scheme


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SAVING & INTEREST

What types of saving accounts provide investment When should investor invest in savings accounts

Why invest in term deposit accounts How do investor choose the right savings accounts for investment


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SAVINGS AND INTEREST

When should investor invest in savings accounts

A bank is a financial institution and a financial intermediary that accepts deposits andchannels those deposits into lending activities, either directly or through capital markets.

A bank connects customers that have capital deficits to customers with capital surpluses.

Saving bank accounts generally pay smaller interest. But you can get the amount back atany time without any advance notice or loss of interest. Secondly other higher yielding

investments require higher quantum of money.

Banking business" means the business of receiving money on current or deposit account,paying and collecting cheques drawn by or paid in by customers, the making of advances

to customers, and includes such other business as the Authority may prescribe for the

purposes of this Act; (Banking Act (Singapore), Section 2, Interpretation).

Hence when the amounts are small and you do not know how many times and how muchyou will save, it is best to put the money in the savings bank account. Many other

investments carry the cost of commission, documentation or fee.

In case of savings account the process is very simple. Similarly when you cannotanticipate when you will need the funds, savings account is a good option. The

supposition is that the total amounts are small and you may need this in a hurry.

Investment in savings bank account has two risks. One is the reliability of the bank. It has happened in quite a few countries. The bans have

collapsed. Even in such a case the small investor is protected by some kind of insurance.

You must make sure that the insurance cover is adequate for your balance.

The other is inflation level in the country. If the inflation level is in twenties or thirties itis eating away into the value of your savings. Hence you have to think of other

alternatives.


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Why invest in term deposit accounts

Term deposit accounts are essentially investment of your savings for a specified period.The term deposit is like investment in a bond. The bank agrees to give you a fixed rate of

interest (or a floating rate which is very rare) one the term deposit for an agreed period of

years.

This rate is generally higher than the rate of interest in case of savings account. It is alsohigher for a longer period.

The bank will pay higher interest if your term of deposit is 5 years instead of 2 years. Thereason for this is that the banks can safely lend this money to a businessman for this long

period. Theoretically you cannot ask for the return of this money before the term.

In actual practice subject to some penalty, you can withdraw the term deposit beforematurity in many cases. Hence if the amounts are large and you are fairly sure of not

needing this for a long period, it makes sense to invest in term deposits. The term should

be chosen with care so that you get the highest rate of interest possible and get the

amount when you are likely to need it. So if you can spare the amount for a longer period

it makes sense to invest the money in term deposits.

How do investors choose the right savings accounts for investment

Savings bank accounts were quite simple. You could deposit the money any number oftimes.

Depending on the rules the interest was paid on the minimum balance in the account. Theinterest was credited once in a year. But of late there is competition in the banking sector

too.

Secondly computerization in banking has made accounting faster. It is also now possibleto give standing instructions to the bank regarding the operation of the savings account.

This can help you in making some regular payments. Similarly ATMs have madewithdrawal of money quite simple and possible at any time? So when choosing a savings

account and the bank, you can look at the facilities being provided. A bank having total

computerization can permit you to withdraw money from any city in the country. it is


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also helpful if the bank has branches in more cities and readily accessible from where you

reside or work.

The rate of interest will be generally the same but this should be verified. Some savingsaccounts may have the facility of automatic transfer of funds to a higher interest bearing

term deposits, if the balance increased beyond a certain limit.

In another case the funds in the higher interest bearing term deposits can be transferred tothe savings bank, if you have issued cheques exceeding the balance.

Some banks will accept instructions for regular payments for insurance, telephones,electricity bills etc. from the savings bank account. Similarly many banks will credit the

dividends, annuity and such other payments directly to the savings account electronically.

Hence to choose the right savings account the different facilities being offered by thebanks and the convenience it will offer to you should be studied. In some cases even

facilities proposed in near future should be taken into account while choosing the right

savings account.


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OTHER

INVESTMENT

Private VenturesPrivate FundsAnnuities Real Estate


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OTHER INVESTMENT

Private Ventures

Private Ventures (PV) is a nonprofit, nonpartisan, social research and policyorganization. Its mission is to improve the effectiveness of policies, programs and

community initiatives, especially as they affect vulnerable communities. The

organization develops new models and performs evaluations of existing initiatives; it also

assists programs seeking to replicate and expand.

Private companies have stocks, which are not widely held. Basically these companies arehaving stock, which is held either by a few individuals or their friends, relations or

individuals who are known to the promoters.

Public companies have to invite subscription to stock by means of the issue of aprospects. It has to give complete information in respect of their prospective activities,

risks, anticipated sales, expected profits etc.

The stock is permitted to quote on stock exchange. Since the stock is quoted on the stockexchange, the management is required to make available all-important information,

which may affect the price of the stock on the market. They are required to publish the

quarterly results in the newspapers. The basic idea is that since public at large is investing

in public companies no one should be able to take advantage of any inside information

which is not available to the subject to such discipline. They cannot invite subscription

from general public. This severely limits availability of large funds from public.

Hence generally only those who know the management of the company or theirpromoters and can put their faith in them will want to invest in such companies.

Stock in a private company cannot be sold in the stock exchange through a broker. Theprices are not quoted. There may be conditions attached to the sale.

The present promoters or management may have the first? Right to buy the share. If theydo not buy the same can be sold to someone else. But this is possible only of the present

management agrees. They are thus investments with high risk.

Secondly they may not be readily available. They are not traded. Hence it may be quitedifficult to know the value of the stock.


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The liquidity is also limited. You may not be able to sell if you do not find a buyer whoagrees to the conditions of the management.

The person who invests in private companies must be able to know what is happening inthe company by his own diligence. The management of a private company has a lot of

freedom since they are not subject to the discipline of a public company. This may help

then in achieving better results. The investor will share the rewards.

Over a period of time the present promoters may want to buy out the stock held by smallinvestors. They may be willing to pay quite a high price for this. Not many companies are

now private and those who have stock in such successful companies may not want to sell.

Hence the opportunities for investing in a private company are not always available. Thetrustworthiness and track record of the management, requires proper scrutiny.


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Private Funds

A private equity fund is a collective investment scheme used for making investments invarious equity (and to a lesser extent debt) securities according to one of the investment

strategies associated with private equity. Private equity funds are typically limited

partnerships with a fixed term of 10 years (often with annual extensions). At inception,

institutional investors make an unfunded commitment to the limited partnership, which is

then drawn over the term of the fund. From investors point of view funds can be

traditional where all the investors invest with equal terms or asymmetric where different

investors have different terms.

A private equity fund is raised and managed by investment professionals of a specificprivate equity firm (the general partner and investment advisor). Typically, a single

private equity firm will manage a series of distinct private equity funds and will attempt

to raise a new fund every 3 to 5 years as the previous fund is fully invested.

Venture capital industry is a relatively small but growing sector of the investable capitalmarket.

Basically venture capital has emerged by wealthy persons who can pool their resourcesand create a large amount of private capital. Venture capital investments possess unique

characteristics.

First of all here the philosophy is long-term investment. In case of a start up company i.e.a company, which is just staring, the investor must have the patience to wait till the seed

become a mature fruit. It does take time to build and develop a new company.

The investor must also realize that where a company will finally end up may turn out tobe quite different from the end proposed. Companies frequently need to change products

or at least modify the prototype if the product does not meet with the expectations,? The

selection of the venture has to be proper.


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The idea should be right and outside conditions suitable. All the homework must be donethoroughly including time frame for each stage from concept to sales. The team, which

will implement the project, should be cohesive and committed to the project. It should not

depend on one individual. There should be enough cushions in the financial calculations

so that a slight change does not sink the project.

In spite of all the precautions, all projects will not succeed. But a few that will succeedwill do so well that the venture capital industry will still make above average returns.

This is the force that is driving the venture capital industry.

The venture capitalists can either manage the fund themselves or more often hireprofessional who can manage the fund and day-to-day decisions. Only the venture

capitalists or private fund owners will decide the policies.

Either way success will depend on their ability to analyze economic trends for potentialmarket opportunities. Careful screening and selection of teams who are capable of

exploiting new opportunities is vital.

The exist strategy represents a plan for recouping the investment. Generally there are two main avenues. One is merely selling the company or selling the

investment to other investors when the company is very successful. The other alternative

is to go public i.e. make an IPO (initial public offer) and sell the shares in the company to

a wide range of investors. Efficient financial markets, which seek out and fund important

new technologies, are necessary today. Without this, innovations and products would not

have emerged with a speed, which could not have been imagined a few decades ago.

The progress of a country may well depend on the availability of venture capital and itsefficient use.

Diversifying into a member of different companies and regional diversification canminimize risk.

Another important diversification is investment in firms at various stages of development.


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Annuities

An annuity is a fixed sum paid in perpetuity. It can be linked to an index but generally it is a

fixed sum.

When you are in employment, either you or your employer or both can invest in anannuity. A small amount is paid to the annuity provider till the age of retirement.

This amount, accumulated over the years, enables the annuity provider to pay a fixed sum(monthly, quarterly or yearly as agreed) to you till you live. This is a good retirement

benefit. Annuity can also be purchased at any time by a single payment also. Depending

on the single payment and terms of the annuity, the annuity provider will continue to pay

the annuity till you live. In a way it is like pension. The annuity payments are calculated

taking into account the interest rates, life cycles, inflation etc.

Interest rates during the later part of 2001 are going down all over the world. But in mostcountries inflation is very much under control. Under such a situation a retired person

with limited liability desires to have fixed income till are lives.

He can then manage his affairs well. In other forms of investment there is someuncertainty as to how much income he can get. Even in case of 15 years bonds, the

interest that he will get after the 15-year period is over cannot be known in advance. If

after 15 years the bank rate is low, he may get lower interest in new investment in bonds.

In case of stock market the uncertainty is considerably more. In case of annuity, once he has made his purchase of annuity, his annuity payments will

ensure the fixed income contracted for till he lives. He can live for another 5 years or

another 30 years he will continue to get the payments. So for certain category of persons

annuity payments are good investments.

Some employees are allowed to invest some portion of the salary (agreed by him) in aportfolio. Here the annuity payments after retirement will depend on the success of the

portfolio.

These are also therefore called variable annuity. There are certain tax benefits to theemployees in such schemes.


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Real Estate

Real estate has received attention in recent years as a compliment to stocks and bonds. Real estate is either land and / or building and is fixed in location. Each piece of real

estate is unique because of the location. No two real estates are identical, The value of

real estate also depends on how nearby properties are and the way they are utilized.

The value also depends on local and economic conditions. A real estate cannot be moved.Hence location in an area of demand becomes very important.

Real estates are durable good shaving long economic life. Use of the property in futurehas to be thought of. Properties usually involve large funds and are not divisible. Due to

this the market for real estate is less efficient. For many large properties there are only a

few buyers.

Since the trading is not very often, the market price is difficult to establish. Informationon price is not readily available as in case of stocks and bonds. It takes a long time to

conclude a deal in real estate.

Ownership of a real estate requires management of the property. Institutional investorswould normally prefer a local partner to ensure expertise familiar with the local market.Real estate ownership also involves complicated legal procedures.

Hence transaction costs are quite high, compared to other investments.

One of the most important reasons for investing in real estate is hedge against inflation.

Real estate is a very good investment in an inflationary climate, including real estate in aportfolio import diversification. It enhances the risk return characteristics. Investment in

real estate results in tax benefits.


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The cost of real estate (less land) can be depreciated for the tax purpose oat a rate, higherthan the actual decline involve of property. Taxable investors can use this to shelter other

income.

There are many ways in which you can invest in real estate. Major types sought byinvestors are office building, industrial building, shopping centers, apartments buildings,

hotels, motels and some specialty real estate such as restaurants. With direct investment

the investor can obtain all or part of the real estate asset.

The investor can manage the asset himself or delegate this to others for a fee. Indirectlythe investment can be through an intermediary. They include REIT, Public Ltd.

Companies or syndicates.

There are alsodebt investments in real estate. You can provide a part of debt capital inreturn for a claim on a part of income from the property . such a claim would be secured

by alien on the property known as mortgage. This is the security for the investment. It can

be seen that there are many ways in which you can make investments in real estate. You

have to anlayse your own requirements and needs and take an appropriate decisions


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RESEARCH

METHODOLOGY


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Research Methodology

Data Source

This project is based on the study of primary as well as secondary data which was

collected through questionnaire,different websites, newspapers etc.

Data Location- Loni Road Industrial area.

Research Type- Basic research

Research Design- Descriptive Research Design

Sample Size- 100

Sampling- Quota Sampling, Snowball Sampling

Data Analysis tools- Pie charts


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Data Analysis

Student

8%

Job-holder

27%

Business

man/women

44%

Other

21%

Occupation of the Respondents

18-25

32%

25-35

44%

35-45

24%

above45

0%Age of Respondents


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Below 1,00,000

8%Between

1,00,000-

2,50,000

18%

Between 2,50,000-

4,00,000

38%

Above 4,00,000

36%

Annual Income of Respondents

Stock29%

Insurance

10%Mutual funds

39%

Banks

12%

Others

10%

In Which following you like invest your money?


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Very low return

14%

Low return

20%

Moderate

15%

High reurn

24%

Very High return

27%

Why you like to invest in above selected

investment

Long term

48%

Medium term

27%

Short term

25%

Investment horizon


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Strongly agree

47%

Agree

36%

Moderate

17%

Disagree0%

Strongly disagree0%

Maintaining the principal value of my investment

account is more important than achieving

significant growth

Low risk, low return

17%

Moderate risk,

moderate return

52%

Hgh risk, high

return

10%

Very high risk,

very high return

21%

Please select the investment characteristics with

which you would feel most comfortable


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The conservative

portfolio (80% fixed

income & 20%

equities)

12%

The moderate

conservative portfolio

(57% fixed income &

43% equities)

34%

The moderate


income & 60%

equities)

29%

The moderate

aggressive portfolio

(20% fixed income &80% equities)

17%

The aggressive

portfolio (2% fixed

income & 98%

equities)

8%

What is your portfolio model before financial

crisis?


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No13%

Yes

87%

Have you changed your portfolio after financial

crisis?

The conservativeportfolio (80% fixed

income & 20%

equities)

20%

The moderate

conservative portfolio

(57% fixed income &

43% equities)

44%

The moderate


income & 60%

equities)

26%

The moderate

aggressive portfolio(20% fixed income &

80% equities)

10%

The aggressive

portfolio (2% fixedincome & 98%

equities)

0%

Changed their portfolio model after financial crisis.


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Interpretations

Mostly businessman/women and job holder and others invest their money in differentfinancial products. And students do invest little.

No two investors are ever the same, and one persons attitude to risk may be verydifferent from anothers.

Mostly investors who invest their money in financial products, their age lies between 18-35.

Annual income of mostly investors are between 2, 50,000-4, 00,000 and above 4, 00,000. Mostly investors like to invest their money in stocks and mutual fund. Investors like to invest their money for high return. Mostly investors put their money for long time. Mostly investors do not want to lose their money until they get some profit or not. Mostly investors like to put their money in moderate portfolio (40% fixed income & 60

% equities) and conservative moderate portfolio (57%fixed income & 43% equities).

After financial crisis mostly investors changed their portfolio. Conservative portfolio has increased by 41%, moderate conservative portfolio has

increased by 11%, moderate portfolio has decreased by 20% and moderate aggressive

portfolio has decreased by 47%.

Investors are more interested to invest in those sectore where they get higher return inlesser time and also where the degree of risk are less and their principal amount should

be safe.


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Suggestions

The people of limited income group should invest their money in the companies whohave a good reputation like JPASSO,ICICI,SBI,LITL etc., where they believes that there

principle is safe and the risk factor is minimum.

If the annual income is high then there is more opportunities in market. On the other hand, if investor is in fifties with dependents (or even without them) he

should probably consider a more cautious approach.

If investor is young, single and has no plans for children, investor is in a position whereyou can probably accept a relatively high degree of risk for the ultimate benefits and

investors should go for it.

The old players can avail the opportunities even at high risk because they are as usual tothe stock market, so they are much aware about the fluctuation of the shares. The new

players are basically the new jobholders they want to initiate with the small investments

in some reputed company to keep the principal, safe. The risk-bearing tendency is very

low in the behavior of new investors.

When formulating a portfolio to recommend to a client- whether for a lump-suminvestment or a savings plan-my first consideration is always his or her individual risk

profile.


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Conclusion

As per study of the project we can conclude that investors are very much conservative

about their investments. They are ready to put their money in the market for long time but

for good return on average return.

In the market investors have various investments options which are described above.

Investors should choose the investments options as per their risk appetite and preferences

as well.

Young investors are very risk takers and they are ready to put their money in high riskinvestment options.

But some investors are very risk conscious and they analysis company fundamentals and

news and any information related to the company very carefully before investing.

At last I can say that investors should choose the financial products very carefully

because these products have different features which cant match with everyone needs.

They should choose the investments options according to their future needs.


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Limitations

1. Time consuming.2. Lack of mechanical tools and techniques.3. Cost consuming.4. Fake and un-updated data creates problem.5. NonResponse was a main constraint.6. Artificial behavior of the customers is a major constraint


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BIBLIOGRAPHY

http://www.ifciltd.com/ProductsServices/ProjectFinance/tabid/87/Default.aspx(17th,july2012)

http://www.ifciltd.com/SubsidiariesAssociates/IFCIFinancialServicesLtd/tabid/97/Default.aspx(

17th,july2012)http://www.ifciltd.com/AboutUs/CorporateStrategy/tabid/80/Default.aspx(17th,july2012)

http://www.ifciltd.com/AboutUs/IndianEconomyandIFCI/tabid/82/Default.aspx(17th,july2012)

http://www.ifciltd.com/AboutUs/CodeofConduct/tabid/86/Default.aspx(17th,july2012)

http://www.ifciltd.com/AboutUs/FairPracticesCode/tabid/85/Default.aspx(17th,july2012)

http://www.ifciltd.com/AboutUs/BoardofDirectors/tabid/83/Default.aspx(17th,july2012)

http://www.ifciltd.com/AboutUs/WhatWeAre/tabid/79/Default.aspx(17th,july2012)

http://www.ifciltd.com/Careers/WhyIFCI/tabid/151/Default.aspx(17th,july2

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