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 TOPROF.Charu Chaudhary

SUBMITTED BYVishal Chauhan Sec-D

I.T.S MOHAN NAGAR GHAZIABAD WWW.ITSGHAZIABAD.AC.IN

TABLE OF CONTENTS
Part 1 1. Declaration 2. Acknowledgement 3. Internal Mentor Certificate 4. Preface 5. Executive Summary 6. Introduction of the project 7. Objective of Study 8. Company Profile 9. Introduction of the Topic (i) (ii) (iii) (iv) (v) Stock Bond Mutual fund Savings and interest Other investments Page No: 5 6 7 8 9 10 11 12-20 21-60 23-28 29-34 35-48 49-52 53-60
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10.Research methodology 11.Data analysis 12.Interpretation 13.Suggestions 14.Conclusion 15.Limitations 16. Bibliography 17.Annexure

61-62 63-68 69 70 71 72 73 74-76

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

ACKNOWLEDGEMENT

I, Vishal Chauhan, want to express my sincerest gratitude to Mr. Tarique Kamal; Branch Head of IFCI 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)

Internal Mentor Certificate

This is to certify that the Project Work titled Study the investors preference towards various investment options is 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.

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.

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.

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 investments private 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 other investments. 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 COMPANY PROFILE

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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 this backdrop 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 benefits to 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 Allianz for 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 16

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

Derivatives Exchange Ltd (NCDEX) National Spot Exchange Limited (NSEL)

Products offered by IFCI

Mutual fund

Insurance

Equity

Commodity

COMMODITYCommodities: 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 17

(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 FUNDMutual 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.

INSURANCEInsurance 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 minus what has been borrowed from the brokerage. 4. In the context of real estate, the difference between the current market value of the property 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, Institutional Brokerage & 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 Fixed Income

OUTLOOK ANALYSIS

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 Insurance

In place of debt fund, one should look at MIPs in these times as the downside for equities looks negligible. 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. b. c. d. e. Stock Bond Mutual fund Savings and interest Other investments

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STOCK

How do investor begin investing into a stock market When is the best time to invest in stocks Why 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 the de 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 of ownership 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 issues the 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 information regarding 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 issue is 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.

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Secondary Market The other market is the secondary market. Huge transactions take place in this market every working day. Here the existing shareholders sell their shares to buyers. To purchase or sell shares in this 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 is completed. The shares are kept in a depository and the details are given to the account holder periodically. The advantage of the secondary market is that the past performance of the company is available for study. While investing in stocks it is necessary to remember that liquidity is low. Only funds not likely to be needed urgently should be invested. It is absolutely essential to study the background and the past performance of the company. 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 but also 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. 25

The value is analyzed, the information is totally presented and there is a basis for the issue 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 must understand the meaning of RISK,

The definition of risk is chance or possibility of a danger, loss or injury? We can reword this 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 only a 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 last probably 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 will match 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. 26

Secondly it will not be possible for anyone to buy all the stock in the right proportion all the 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 is similar 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 edged security (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 also the issue of liquidity. 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 you need 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 the economy 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 the bond 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 a consideration or under seal secured by a mortgage. A bond has the promise of stipulated interest on a long-term basis. There is a guarantee for the performance. Bonds issued by the Governments are also terms as securities. The issuing Government or Federal / Central Government in case of issue by State Government or Local Authority guarantees the payment. Companies issue Debentures. These may be secured by a charge on specific assets of the company. To ensure proper compliance 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 Rating Agencies. 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. The floating rate will be linked to either the bank rate or some other independently determined rate 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 ensures liquidity.

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A bond-holder is a secured creditor. He has legal rights to sue the company in case of default. 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 than returns from stock market.

How do investor begin investing into a Bond

Basically bonds are debt instruments. They are stable forms of investments. The period of issue 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 countries individuals 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 depositories keep the individuals accounts.

In many countries the prime lending rates or bank rates are being reduced over a period of 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 faculties available. 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 31

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 part of 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 can buy 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% in 1960 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 the interest 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 or equities. There is consequently, a lack of interest in understanding Bonds, which are, fixed income securities. 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 fixed periodic 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 are offered weekly at a discount, with maturity of 10 to 30 years. Corporations engaged in industry or business offer private debt instruments. They range from high quality to defaulted securities. The subclasses mainly represent. Modifications of the two basic promises which are interest and repayment of principal. Convertible bonds provide the holder with an option to exchange the bond for a predetermined 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 rating agency. 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 private bonds. 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 the United 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 from the 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 of capital. 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 get the 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 in your 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 will also be different. Investors can spread the risks by not putting all their eggs in one basket. They can invest in 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 containing these risks. 34

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 exchangetraded 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 other hand 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 of industries; 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 best advantage 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 or NAV. 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 a daily basis by announcing NAV daily. The Mutual Fund Company will buy the units from the investor at his option at any time at 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 market and 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 or objectives are growth, balanced income, and industry specific funds. Growth funds possess diversified portfolios of common stocks in the hope a portfolio of stocks, 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 investors who are extremely optimistic about the prospects for these few industries. One should be willing to assume the risks associated with such a concentration of investment. 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 mutual funds with different objectives such as growth, income, industry specific etc. Investor is tempted to invest in a mutual fund because of the professional services and expertise 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 pay when 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 the price 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 the dividend 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 mutual funds Schemes with different objectives.

Before investing, the prospects of the mutual fund that specifies the condition should be studied. 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 a measure 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 the investor. A comparison with performance of other mutual funds with the same objectives will help in understanding the subject.

There is no secondary market in the units of a mutual fund. Investment in mutual fund is by 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 in different 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 a juncture 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 case of 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 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. Funds being managed by different

First aspect has to be trust. Is the management of the fund trustworthy? Are there any adverse 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 which objective 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, 40

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 these factors and make a good guess can certainly get good rewards.

There are many methods of evaluating the performance of the selected mutual fund. The purpose 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 consider themselves 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 of security 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 it possible 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 brokerage commission. Mutual funds pay no taxes on the income they receive. They do not pay taxes on the capital 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 buying new shares in the fund. Investors can sell shares back to the fund. These transactions take place at the per share value of the fund. 41

This is feasible because mutual funds mostly hold marketable securities. These trades on the 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 show that 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 funds outperformed the market by very small amounts. The same study found that there was no consistency with respect to which funds provided the 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 close43

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. 44

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 and channels 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 at any 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 much you 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 cannot anticipate 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 it is 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 also higher for a longer period. The bank will pay higher interest if your term of deposit is 5 years instead of 2 years. The reason 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 before maturity 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 of times. Depending on the rules the interest was paid on the minimum balance in the account. The interest 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 possible to 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 made withdrawal 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

51

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 savings accounts 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 to the 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 the banks 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 Ventures Private Funds Annuities
Real Estate

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OTHER INVESTMENT
Private Ventures Private Ventures (PV) is a nonprofit, nonpartisan, social research and policy organization. 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 are having 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 a prospects. 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 stock exchange, 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 their promoters 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. The prices 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 they do 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 quite difficult 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 who agrees to the conditions of the management. The person who invests in private companies must be able to know what is happening in the 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 small investors. 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. The trustworthiness 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 in various 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 specific private 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 capital market.

Basically venture capital has emerged by wealthy persons who can pool their resources and 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 to be 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 done thoroughly 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 succeed will 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 hire professional 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 potential market 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 its efficient use. Diversifying into a member of different companies and regional diversification can minimize 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 an annuity. 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 most countries 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 some uncertainty 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 a portfolio. 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 the employees in such schemes. 58

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 future has 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. Information on 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 investors would 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 a portfolio 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, higher than 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 by investors 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. Indirectly the investment can be through an intermediary. They include REIT, Public Ltd. Companies or syndicates.

There are also debt investments in real estate. You can provide a part of debt capital in return 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

Occupation of the Respondents

Other 21% Student 8% Job-holder 27%

Business man/women 44%

Age of Respondents
35-45 24%

above 45 0%

18-25 32%

25-35 44%

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Annual Income of Respondents

Below 1,00,000 8% Between 1,00,0002,50,000 18%

Above 4,00,000 36%

Between 2,50,0004,00,000 38%

In Which following you like invest your money?

Others 10%

Banks 12%

Stock 29%

Insurance 10% Mutual funds 39%

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Why you like to invest in above selected investment

Very low return 14% Very High return 27% Low return 20%

High reurn 24%

Moderate 15%

Investment horizon

Short term 25% Long term 48%

Medium term 27%

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Maintaining the principal value of my investment account is more important than achieving significant growth
Disagree Strongly disagree 0% 0% Moderate 17% Strongly agree 47%

Agree 36%

Please select the investment characteristics with which you would feel most comfortable
Very high risk, very high return 21% Low risk, low return 17%

Hgh risk, high return 10% Moderate risk, moderate return 52%

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What is your portfolio model before financial crisis?

The moderate aggressive portfolio (20% fixed income & 80% equities) 17%

The aggressive portfolio (2% fixed income & 98% equities) 8%

The conservative portfolio (80% fixed income & 20% equities) 12%

The moderate portfolio (40% fixed income & 60% equities) 29%

The moderate conservative portfolio (57% fixed income & 43% equities) 34%

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Have you changed your portfolio after financial crisis?

No 13% Yes 87%

Changed their portfolio model after financial crisis.

The moderate aggressive portfolio (20% fixed income & 80% equities) 10% The aggressive portfolio (2% fixed income & 98% equities) 0%

The conservative portfolio (80% fixed income & 20% equities) 20%

The moderate portfolio (40% fixed income & 60% equities) 26%

The moderate conservative portfolio (57% fixed income & 43% equities) 44%

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Interpretations

Mostly businessman/women and job holder and others invest their money in different financial products. And students do invest little. No two investors are ever the same, and one persons attitude to risk may be very different from anothers. Mostly investors who invest their money in financial products, their age lies between 1835. 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 in lesser 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 who have 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 where you 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 to the 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-sum investment 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 risk investment 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. Non Response 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,july2012) http://www.ifciltd.com/AboutUs/PrincipalOfficers/tabid/84/Default.aspx(17th,july2012) http://en.wikipedia.org/wiki/Bond_%28finance%29(17th,july2012) http://en.wikipedia.org/wiki/Stock(17th,july2012) http://en.wikipedia.org/wiki/Mutual_fund(17th,july2012) http://en.wikipedia.org/wiki/Bank(17th,july2012) http://en.wikipedia.org/wiki/Public/Private_Ventures(17th,july2012) http://en.wikipedia.org/wiki/Annuity(17th,july2012) http://en.wikipedia.org/wiki/Private_equity_fund(17th,july2012) http://en.wikipedia.org/wiki/Real_estate(17th,july2012)

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Annexure

QUESTIONNAIRE

The questionnaire which was used in surveys is given below. NAME. PH.NO

1.

What is your occupation? (1) Student (2) Job holder (3) Business man/women (4) Others

2. What is your age? (1) 18-25 (2) 25-35 (3) 35-45 (4) Above 45 3. What is your annual income? (1) Below 1,00,000 (2) Between 1,00,000-250000 (3) Between 250000-400000 (4) Above 400000 4. In which following options you like to invest your money? (1) Stock (2) Insurance (3) Mutual funds (4) Banks (5) Other, specify..

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5. Why do you like to invest in above selected investment? V.L.Risk 1 L.Risk 2 Moderate 3 H.Risk 4 V.H.Risk 5

6. What is your investment horizon? (1) Long term (2) Medium term (3) Short term

7. Maintaining the principal value of my investment account is more important than achieving significant growth. (1) Strongly agree (2) Agree (3) Somewhat agree (4) Disagree (5) Strongly disagree

8. Please select the investment characteristics with which you would feel most comfortable.

Risk (1) (2) (3) (4) Low Moderate High Very high

Expected Return Low Moderate High Very high

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9. What is your portfolio model before financial crisis? (1) The conservative portfolio (80% fixed income & 20% equities). (2) The moderate conservative portfolio (57% fixed income & 43% equities). (3) The moderate portfolio (40% fixed income & 60% equities). (4) The moderate aggressive portfolio (20% fixed income & 80% equities). (5) The aggressive portfolio (2% fixed income & 98% equities). 10. Have you changed your portfolio after financial crisis? (1) No (2) Yes, specify.. (a) The conservative portfolio (80% fixed income & 20% equities). (b) The moderate conservative portfolio (57% fixed income & 43% equities). (c) The moderate portfolio (40% fixed income & 60% equities). (d) The moderate aggressive portfolio (20% fixed income & 80% equities). (e) The aggressive portfolio (2% fixed income & 98% equities).

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