EXECUTIVE SUMMARY

The main objective of project is to know the saving & investment behavior pattern of consumer.
I also tried to know the Risk taking behavior of consumer i.e. how much they can take risk on
their investment. In which type of product they feel comfortable to invest, their Growth
epectation and future investment plans. The project includes introduction of various products
including mutual funds, e!uity and types of investments. "y project also includes portfolio
management is all about how to manage an investor#s portfolio in mutual fund, how to diversify
the investments into different schemes of funds, to manage client#s portfolio efficiently we first
need to understand the industry, current economic condition of the economy, investor#s behavior,
their objective, risk apatite. This project report has helped me to analy$e the customer#s portfolio
and %ortfolio management& in which, it emphasis on the study of different product and services
in respect to the risk and return involved in it.
1
OBJECTIVE OF THE PROJECT:
The objectives of the project are mainly'
(nalysis of current investment strategies adopted by the different age group and different
income group.
)asic acceptance of investment instrument towards the investors.
*ind out the potential customer and their needs.
)asic trends of investment in the market.
Primary Objective
The main objective of this study is doing an In'depth analysis of various investment products and
services like Insurance, "+T+(, *+-., deposits, wealth advisory services. /ther objective is
to know the saving and investment behavior of people, t heir Risk taking attitude on investment
and their future plans of investment.
Sec!"#ary !bjective
To understand the portfolio management process in various %roducts like "utual *und
To know the effects of political, economical, social and technological factors on various
products in India.
0valuating fund performance
2
$IMITATIO% OF THE STU&Y:
The limitation or the problem I faced during the project are as follows1
-on co'operation of people during the field survey.
2mall area for field survey.
,imited time.
3rong information gives by the respondents.
,imited number of respondents.
3
RESEARCH METHO&O$O'Y
Primary #ata:
4onducting field survey based on the investment strategies taken by the small investors and
the instrument they prefer to invest. To fulfill the particular I have done field survey in about
567 people. The entire project is designed like this1 '
*ormation of !uestionnaire depending upon the investor mind set and the need.
%utting strong emphasis on the !uestionnaire that respondent must fill the !uestionnaire.
*or that I restrict my !uestions to twelve. Thus it becomes short and time saving.
I visited the malls area in "umbai and some of my relatives and friends. (s a result I got
a mied response
(fter gathering the entire data sheet I have put it in the ecel sheet and started analy$ing.
Sec!"#ary C!((ecti!" !) #ata
2ources of the data collection will be,
Internet
8arious maga$ines9bulletins
-ews papers
Related books
4
I%TRO&UCTIO% OF PORTFO$IO MA%A'EME%T
MEA%I%' OF PORTFO$IO:
:( portfolio is a collection of securities, since it is really desirable to invest the entire funds of
individual or an institution or a single security& It is essential that every security be viewed in a
portfolio contet. Thus it seems logical that the epected return of the portfolio. %ortfolio
(nalysis considers future risk and return in holding various blends of individual securities.
I%TRO&UCTIO% OF PORTFO$IO MA%A'EME%T:
%ortfolio "anagement refers to the management of portfolios for others by professional
investment managers it refers to the management of an individual investor#s portfolio by
professionally !ualified person ranging from merchant banker to specified portfolio company.
MEA%I%' OF PORTFO$IO MA%A'EME%T
%ortfolio is a collection of asset.
The asset may be physical or financial like 2hares )onds, .ebentures, and %reference
2hares etc.
The individual investor or a fund manager would not like to put all his money in the
shares of one company, for that would amount to great risk.
"ain objective is to maimi$e portfolio return and at the same time minimi$ing the
portfolio risk by diversification.
%ortfolio management is the management of various financial assets, which comprise the
portfolio.
5
(ccording to 2ecurities and 0change )oard of India ;%ortfolio manager< Rules, 5==>? :
portfolio& means the total holding of securities belonging to any person?
.esigning portfolios to suit investor re!uirement often involves making several
projections regarding the future, based on the current information.
3hen the actual situation is at variance from the projections portfolio composition needs
to be changed.
/ne of the key inputs in portfolio building is the risk bearing ability of the investor.
%ortfolio management can be having institutional, for eample, +nit Trust, "utual
*unds, %ension %rovident and Insurance *unds, Investment 4ompanies and non'
Investment 4ompanies. Institutional e.g. individual, @indu undivided families,
-on'investment 4ompany#s etc.
( professional, who manages other people#s or institution#s investment portfolio with the
object of profitability, growth and risk minimi$ation, is known as a portfolio manager.
The portfolio manager performs the job of security analyst. In case of medium and large
si$ed organi$ation, job function of portfolio manager and security analyst are separate.
%ortfolios are built to suit the return epectations and the risk appetite of the investor.
6
OBJECTIVES OF PORTFO$IO MA%A'EME%T:
The main objective of investment portfolio management is to maimi$e the returns from the
investments and to minimi$e the risk involved in investment. "oreover, risk in price or inflation
erodes the value of money and hence investment must provide a protection against inflation.
Sec!"#ary Objective:
The following are the other ancillary objectives:
Regular Return
2table Income
(ppreciation /f 4apital
"ore ,i!uidity
2afety /f Investment
%ortfolio "anagement services helps investors to make a wise choice between alternative
investments with pit any post trading hassle#s this service renders optimum returns to the
investors by proper selection of continuous change of one plan to another plane with in the same
scheme, any portfolio management must specify the objectives like maimum return#s, and risk
capital appreciation, safety etc in their offer.
.ebentures Apartly convertible and non'convertible debentures debt with tradable
warrants.
7
%reference shares
Government securities and bonds
/ther debt instruments
+nder variable income securities1
0!uity 2hares
"oney market securities like treasury bills commercial paper etc.
( portfolio manager has to decide up on the mi of securities on the basis of contract with the
client and objectives of portfolio.
8
FU%CTIO%S OF PORTFO$IO MA%A'EME%T
The basic purpose of portfolio management is to maimi$e yield and minimi$e risk. 0very
investor is risk averse. In order to diversify the risk by investing into various securities following
functions are re!uired to be performed.
The functions undertaken by the portfolio management are as follows1
To frame the investment strategy and select an investment mi to achieve the desired
investment objective?
To provide a balanced portfolio which not only can hedge against the inflation but can
also optimi$e returns with the associated degree of risk?
To make timely buying and selling of securities?
To maimi$e the after'ta return by investing in various taes saving investment
instruments.
9
*HY PEOP$E I%VEST+
Investors do invest in different instrument to simplify their lifestyle and to make certain goals in
future life. "ost investors invest for the long term to fulfill the inflation and for the capital
appreciation. )y and large the investors have typical re!uirement to fill, and those are1'
Ca,ita( ,reervati!":
The chance of losing some capital has been a primary need. This is perhaps the strongest need
among investors in India, who have suffered regularly due to failures of the financial system.
*ea(t- .e"erati!":
This is largely a factor of investment performance, including both short'term performance of an
investment and long'term performance of a portfolio. 3ealth accumulation is the ultimate
measure of the success of an investment decision.
$i)e C!ver:
"any investors look for investments that offer good return with ade!uate life cover to manage
the situations in case of any eventualities. Recent days investors do invest in the endowment
policies and +,I%s.
Ta/ avi".:
,egitimate reduction in the amount of ta payable is an important part of the Indian psyche.
0very rupee saved in taes goes towards wealth accumulation.
I"c!me:
10
This refers to money distributed at intervals by an investment, which are usually used by the
investor for meeting regular epenses. "ostly daily traders invest for income.
F0t0re U"certai"ty:
-o one has seen the future so every person personally save money for any contingencies. %eople
invest in short term for this. There must be an easy cash withdraw for the contingencies.
Eae !) 1it-#ra1a(:
This refers to the ability to invest long term but withdraw funds when desired. This is strongly
linked to a sense of ownership. It is normally triggered by a need to spend capital, change
investments or cater to changes in other needs.
Beat i")(ati!":
Inflation is a major player in the economy. It reduced the valuation of rupee. Investors do in vest
to maintain the buying capacity of them.
Retireme"t ,(a""i".:
"ost of the service person do invest to get return after the vesting period, for that the investment
such a manner that the returns comes at the time of retirement.
11
%EE& FOR PORTFO$IO MA%A'EME%T:
%ortfolio "anagement is a process encompassing many activities of investment in assets and
securities. It is a dynamic and fleible concept and involves regular and systematic analysis,
judgment and action. The objective of this service is to help the unknown and investors with the
epertise of professionals in investment portfolio management. It involves construction of a
portfolio based upon the investor#s objectives, constrains, preference for risk and returns and ta
liability. The portfolio is reviewed and adjusted from time to time in tune with the market
conditions. The evaluation of portfolio is to be one in terms of targets set for risk and returns.
The changes in the portfolio are to be effected to meet the changing condition. %ortfolio
construction refers to the allocation of surplus funds in hand among a variety of financial assets
open for investment. %ortfolio theory concerns itself with the principles governing such
allocation.
The modern view of investment is oriented more go towards the assembly of proper combination
of individual securities to form investment portfolio. ( combination of securities held together
will give a beneficial result if they grouped in a manner to secure higher returns after taking into
consideration the risk elements. The modern theory is the view that by different regions, in
different industries or those producing different types of product lines. "odern theory believes in
the perspective of combination of securities under constraints of risk and returns.
12
IMPORTA%CE OF PORTFO$IO MA%A'EME%T
In the past one'decade, significant changes have taken place in the investment climate in India.
%ortfolio management is becoming a rapidly growing area
serving a broad array of investors' both individual and institutional'with investment portfolios
ranging in asset si$e from thousands to cores of rupees. It is becoming important because of the
following reasons1
0mergence of institutional investing on behalf of individuals. ( number of financial
institutions, mutual funds, and other agencies are undertaking the task of investing money
of small investors, on their behalf.
Growth in the number and the si$e of invisible fundsAa large part of household savings is
being directed towards financial assets.
Increased market volatility' risk and return parameters of financial assets are
continuously changing because of fre!uent changes in governments industrial and fiscal
policies, economic uncertainty and instability.
Greater use of computers for processing mass of data.
%rofessionali$ation of the field and increase use of analytical methods ;e.g. !uantitative
techni!ues< in the investment decision'making, and
,arger direct and indirect costs of errors or shortfalls in meeting portfolio objectives'
increased competition and greater scrutiny by investors.
13
A&VA%TA'ES OF PORTFO$IO MA%A'EME%T
Individuals will benefits immensely by taking portfolio management services for the following
reason1 '
3hatever may be the status of the capital market? over the long period capital markets
have given an ecellent return when compared to other forms of investment. The return
from bank deposits, units etc., is much less than from stock market.
The Indian stock markets are very complicated. Though there are thousands of companies
that are listed only a few hundred, which have the necessary li!uidity. It is impossible for
any individual wishing to invest and sit down and analyses all these intricacies of the
market unless he does nothing else.
0ven if an investor is able to visuali$e the market, it is difficult to investor to trade in all
the major echanges of India, look after his deliveries and payments. This is further
complicated by the volatile nature of our markets, which demands constant reshuffling of
port
14
PORTFO$IO MA%A'EME%T PROCESS
Investors like to invest through the instinct and want to gain profit from the market by investing.
@owever, while financial institutions are undoubtedly a part of the process of investing. (s
investors, it is not surprising that we focus so much of our energy and efforts on investment
philosophies and strategies, and so little on the investment process.
STEPS I%VO$VE& I% I%VESTME%T P$A%%I%'
Investment is not only prediction it has its own reasons behind every up and down in the market.
2o it is has its own theory to move in particular directions. To get in to the market investors must
go through the following process.
A"a(yi a"# ,r!)i(i". !) t-e i"tr0me"t1
The first step is performing a -eed (nalysis check. The re!uirements and epectations of the
investor should be met by the instrument. .uring the profiling investor should consider their age,
their profession, the number of dependents, and their income. )y doing this check, the risk
profile of the investor should be designed.
Eva(0ati". t-e a(ter"ative1
The net step would be revaluating the needs. /ther investment instruments and options should
be analy$ed. The risk'return profile of investment products is evaluated in this step. 0very
investment product varies according to its return potential and riskiness. Investment products
15
giving a high rate of return are generally risky and volatile. The products giving a lower rate of
return usually are less risky.
A"a(y2e t-e Pr!)i(e1
The net step would be analy$e the risk'return profile of the investor on to the investment
portfolio. The investment instruments are matched with the risk'return profile of the investor. (ll
the investment alternatives that offer epected rate of return are evaluate for consideration.
Pre,ari". a" O,tim0m P!rt)!(i!1
Then according to the risk appetite and return pattern an optimum portfolio is designed for the
investor. The basket of investment instrument selected in the previous step are given due
weightage and appropriate amount of money is invested in each of the investment avenue so as
to get maimum return with minimum possible risk.
C!"ite"t M!"it!ri".1
*inally a continuous watch on the portfolio is etremely important. *undamental analysis of the
investment products done in the previous stages would only help in selecting the right product
but the right time of entry or eit from a particular stream is evaluated by doing a technical
analysis. *or this professional portfolio management is a must.

16
(nalysis and profiling of
the instrument
0valuating the
alternatives
Investment %lanning
Investment %lanning
17
(nalyse the
%rofile
%reparing an
/ptimum
%ortfolio
4onsistent
"onitoring
P!rt)!(i! ma"a.eme"t i a c!m,(e/ activity3 1-ic- may be br!4e" #!1" i"t!
t-e )!((!1i". te,:
S,eci)icati!" !) i"vetme"t !bjective a"# c!"trai"t:
The typical objectives sought by an investor are current income, capital appreciation,
safety, fied returns on principal investment.
C-!ice !) aet mi/:
The most important decision in portfolio management is the asset mi decision. This is
concerned with the proportions of :2tock& or :+nits& of mutual fund or :)ond& in the
portfolio. The appropriate mi of 2tock and )onds will depend upon the risk tolerance
and investment hori$on of the investor.
F!rm0(ati!" !) ,!rt)!(i! trate.y:
/nce the certain asset mi has been chosen an appropriate portfolio strategy has to be
decided out. Two broad portfolio choices are available. (n active portfolio management1
it strive to earn superior risk adjusted returns by resorting to market timing, or sector
rotation or security selection or some combination of these. ( passive portfolio
management involves holding a broadly diversified portfolio and maintaining a pre'
determined level of risk eposure.
18
MO&ER% PORTFO$IO THEORY
Ri4 a"# Ret0r" i" a ,!rt)!(i! c!"te/t
+sually the investment is not in single stock but in a combination of stocks that is called a
:portfolio&. A ,!rt)!(i! i #e)i"e# a 5mi/e# ba. !) ec0ritie67 This is best understood by
taking the eample of :"utual *unds&. Bou must have heard of :mutual funds& in India, like
*ranklin Templeton "utual *unds, (llian$ "utual *unds, +nit Trust of India, Codak "ahindra
"utual *und etc. These funds invest in1
.ifferent industries ;also called sectors<
.ifferent time periods ;also called maturities<
.ifferent inde ;also called inde funds<
.ifferent units in the same industry ;eample in the 4ement sector, (44 and )irla
4ements<
.ifferent instruments of finance A debt instruments like bond and debentures or share
capital instruments like e!uity share capital or preference share capital or even short'term
instruments called money market instruments
The above is to spread the risk of investment but at the same time optimi$ing the return from the
investment and not minimi$ing it. Therefore we need to understand the concept of :risk& and
:return& in the contet of a portfolio.
19
BE%EFITS OF CHOOSI%' PORTFO$IO MA%A'EME%T SERVICES 8PMS9
I%STEA& OF MUTUA$ FU%&S:
3hile selecting %ortfolio management service ;%"2< over mutual funds services it is found that
portfolio managers offer some very services which are better than the standardi$ed product
services offered by mutual funds managers. 2uch as1
Aet A((!cati!"1 (sset allocation plan offered by %ortfolio management service helps in
allocating savings of a client in terms of stocks, bonds or e!uity funds. The plan is tailor
made and is designed after the detailed analysis of clientDs investment goals, saving
pattern, and risk taking capacity.
Timi".: %ortfolio managers preserve clientDs money on time. %ortfolio management
service help in allocating right amount of money in right type of saving plan at right time.
This means, portfolio manager provides their epert advice on when his client should
invest his money in e!uities or bonds and when he should take his money out of a
particular saving plan. %ortfolio manager analy$es the market and provides his epert
advice to the client regarding the amount of cash he should take out at the time of big risk
in stock market.
F(e/ibi(ity: %ortfolio managers plan saving of his client according to their need and
preferences. )ut sometimes, portfolio managers can invest clientDs money according to
his preference because they know the market very well than his client. It is his clientDs
20
duty to provide him a level of fleibility so that he can manage the investment with full
efficiency and effectiveness.
In comparison to mutual funds, portfolio managers do not need to follow any rigid rules of
investing a particular amount of money in a particular mode of investment.
"utual fund managers need to work according to the regulations set up by financial authorities
of their country. ,ike in India, they have to follow rules set up by 20)I.
Service a"# Strate.ie Pr!vi#e# T-r!0.- P!rt)!(i! Ma"a.eme"t Are:
%ortfolio managers works as a personal relationship manager through whom the client
can interact with the fund manager at any time depending on his own preference.
To discuss any concerns regarding money or saving, the client can interact with his
appointed portfolio manager on monthly basis.
The client can discuss on any major changes he want in his asset allocation and
investment strategies.
%ortfolio management service ;%"2< handles all type of administrative work like
opening a new bank account or dealing with any financial settlement or depository
transaction.
3hile choosing online %ortfolio management service ;%"2<, the client receives a +ser'
I. and %assword, which helps him in getting online access to his portfolio details and
checking his portfolio as fre!uent as he want.
21
%ortfolio management service ;%"2< also help in managing ta of his client based on the
detailed statement of the transactions found on his portfolio.
P!rt)!(i! Ma"a.eme"t Payme"t Criteria:
There are types of payment criteria offered by portfolio managers to their client, such as1
*ied'linked management fee.
%erformance'linked management fee.
Fi/e#:(i"4e# ma"a.eme"t )ee:
In fied'link management fee the client usually pays between E'E.6F of the portfolio value
calculated on a weighted average method.
Per)!rma"ce:(i"4e# ma"a.eme"t )ee:
In performance'linked management fee the client pays a flat fee ranging between 7.6'5.6F based
on the performance of portfolio managers. The profits are calculated on the basis of Dhigh
watermarkingD concept. This means, that the fee is paid only on the basis of positive returns on
the investment.
22
In addition to these criteria, the manager also gets around 56'E7F of the total profit earned by
the client. The portfolio managers can also claim some separate charges gained from brokerage,
custodial services, and ta payments.
Va(0e Y!0r M!"ey Be)!re Se(ecti". P!rt)!(i! Ma"a.eme"t Service 8PMS9:
E;0ity bia1 0!uity portfolio offered by %ortfolio management services helps in
adding high value than what a debt portfolio offers. )ecause of this, many portfolio
managers emphasis on e!uity investments and some offer hybrid products.
$ar.e 0r,(0 t! i"vet1 The client should always choose the portfolio managers
after considering his portfolio si$e and the fee he would charge for managing his
portfolio. %"2 are recommended to those clients who have large surplus amount of
money to invest. /therwise, the company can also think for cheap options like a
financial planner or advisor to construct an asset allocation plan and to manage
investment.
23
TYPES OF PORTFO$IO MA%A'EME%T:
The two types of portfolio management services are available to the investors1
T-e &icreti!"ary P!rt)!(i! Ma"a.eme"t Service 8&PMS9:
In this type of services, the client parts with his money in favor of manager, who in return,
handles all the paper work, makes all the decisions and gives a good return on the investment and
for this he charges a certain fees. In this discretionary %"2, to maimi$e the yield, almost all
24
P!rt)!(i! Ma"a.eme"t
T-e &icreti!"ary P!rt)!(i!
Ma"a.eme"t Service 8&PMS
T-e %!":&icreti!"ary
P!rt)!(i! Ma"a.eme"t Service
portfolio managers parks the funds in the money market securities such as overnight market, 5GE
days treasury bills and =7 days commercial bills. -ormally, return on such investment varies
from 5H to 5G per cent, depending on the call money rates prevailing at the time of investment.
T-e %!":&icreti!"ary P!rt)!(i! Ma"a.eme"t Service:
The manager function as a counselor, but the investor is free to accept or reject the manager#s
advice? the manager for a services charge also undertakes the paper work. The manager
concentrates on stock market instruments with a portfolio tailor made to the risk taking ability of
the investor.
E<UITY PORTFO$IO MA%A'EME%T
It is logical that the epected return of a portfolio should depend on the epected return of the
security contained in it. There are two approaches to the selection of e!uity portfolio. /ne is
technical analysis and the other is fundamental analysis.
Technical analysis assumes that the price of a stock depends on supply and demand in the stock
market. (ll financial and market information of given security is already reflected in the market
price. 4harts are drawn to identify price movements of a given security over a period of time.
These charts enable the investors to predict the future
movement of the price of security. 0!uity portfolio is a risky portfolio, but at the same time the
return is also higher. 0!uity portfolio provides highest returns. (n efficient portfolio manager
can obviously give more weightage to fundamental analysis than the technical analysis.
25
The fundamental analysis includes the study of ratio analysis, past and present track record of the
company, !uality of management, government policies etc. There may be several combinations
of investment portfolio. (llocation of funds for e!uity portfolio is a !uestion of top most
importance to any portfolio manager. (mong all risky investments, selection of the best possible
combination and allocation of funds among these selected investment groups are of great
importance.
BO%&S PORTFO$IO MA%A'EME%T
The individual investors can invest in bond portfolio. The portfolio can be spared over variety of
securities. Investment in bond is less risky and safe as compared to
e!uity investment. @owever, the return on bond is very low. There are no much fluctuations in
bond prices. Therefore, there is no capital appreciation in this case. 2ome bonds are ta saving
which help the investor to reduce his ta liability. There is no much li!uidity in bonds,
investment in bond portfolio is less risky and safe but, return is reasonable, low li!uidity and ta
saving are some of the more important features of bond portfolio investment. @owever, it is
suitable for normal investors for getting average return over their investment. )ond portfolio
includes different types of bond, ta free bonds and taable bonds. Ta free bonds are issued by
public sector undertaking or Government on which interest s compounded half yearly and
26
payable accordingly. They have a maturity of I to 57 years with the facility for buyback. The ta
free bonds means the interest income on these bonds is not taable. Therefore, the interest rates
on these bonds are very low. @owever, taable bonds yield higher interest compounded
half yearly and also payable half yearly. They also have buy back facilities similar to taable
bonds.
TYPES OF I%VESTME%TS
In general, there are three different types of investments. These include stocks, bonds and cash.
+nfortunately it gets very complicated from here. There are each type of investment has
recorded numerous types of investments. There is much to learn in any other form of investment.
The stock market is a great place for those who are afraid to know little or nothing to invest.
*ortunately, the amount of information necessary to learn a direct relationship to the type of
investor you are. There are three types of investors1 conservative, moderate and aggressive. The
different types of investments, including for meeting two levels of risk tolerance1 high risk and
low risk.
27
C!"ervative I"vetme"t1
This is one of the different types of investments. In this type of investment, the investors
normally invest in cash. This suggests that they leave their money in interest'bearing savings
accounts, money market accounts, mutual funds, Treasury bills, & 4ertificates of the
.eposit. They are very much safe investments which grow over the long period of time.
They are as well low risk investments. The conservative investment portfolio is geared
towards preserving capital. ( minimal risk investment strategy is used. This type of portfolio
is ideal for retirees who are focused more on having assets available than a stream of income
from interest. 2ince the primary goal is to preserve capital, you can dip into your principal to
supplement living epenses instead of relying on the portfolioDs earned income.
M!#erate I"vetme"t: This is one of different types of investments. In this sort of
investment, the investors often invest in the cash as well as bonds, & might play in the
market. "oderate investing can be less or moderate risks. In a moderate investment,
investor fre!uently also invests in the real estate property, providing that it is low risk real
estate. The moderate investment portfolio is another investment portfolio ideal for
retirees. ( strategic, rather than tactical, approach is taken with this kind of portfolio. (
balanced portfolio will typically invest in bonds for income generation and stocks for
investment growth. This combination is to help mitigate significant financial loss should
the stock market eperience a downturn.
28
A..reive I"vetme"t: This is one of different types of investments. In this type of
investment, the investors usually do most of these investments in the market, that#s
higher risk. They often invest in the firm enterprise as well as more risk real'estate. (s an
eample, in an aggressive investment, the investor puts their money in to an older
apartment building, then invests more cash to moderni$e the property, they#re at risk.
They presume to be able to rent the apartments for more cash than the apartments are
currently worth A or sell the whole property for a benefit from their first investments. In
few cases, it works very well, and other cases, it doesn#t. It#s a risk. %rior to you start
investing? it#s very vital that you should be familiar with the different types of
investments, and what those investments will do for you. +nderstand the risks concerned
and take note of past trends too. The past will definitely repeat by itself, & investors
knew first handJ
Type /f Investment Risk Return
4onservative Investment ,ow ,ow
"oderate Investment "oderate "oderate
(ggressive Investment @igh @igh
29
THREE TYPES OF I%VESTORS:
There are many different types of investors in the stock market. 2ome people are bearish,
believing that the market is going to fall, while others are bullish, believing that the market is
about to rise. 0very investor is different because they have different risk profiles, time frames,
and investment objectives. @owever, the result they are all trying to achieve is similar and that is
to gain as much money as possible as a result of that investments..
The three types of investors1 conservative, moderate and aggressive. The different types of
investments, including for meeting two levels of risk tolerance1 high risk and low risk.
C!"ervative I"vet!r: 4onservative investors often invest in cash. This means that
their money in interest'bearing savings accounts, money market accounts, mutual funds,
Treasury bills and certificates of deposit. It is very certain that investments grow over a
30
long period of time. These investments are low risk. 4onservative investors are typically
those with either a short term goal ;less than > years<, or those who are in retirement
seeking a regular income stream. These portfolios tilt away from e!uity investments into
more preservation investments, like real estate investment trusts ;R.0.I.T.Ds<, individual
bonds, bond funds, municipal bonds and annuities. These assets are not intended to
provide great growth within the portfolio, but are designed to provide income and
preserve the principal balance over the investorDs estimated lifespan.
M!#erate I"vet!r1 "oderate investors often invest in cash and bonds, and can try on
the echange. "oderate investing may be low or moderate risk. "oderate investors often
invest in real estate, provided it is low risk real estate. "oderate investors also seek
longer term investment gains through a mi of e!uity investments. 3hile many of the
investments are the same, the overall portfolio contains some more conservative
investments, creating a portfolio that builds wealth with less annual swings in the
portfolioDs performance. (n investor with a time frame of between K'57L years is most
appropriate for this type of portfolio and the average level of return that an investor can
epect to receive is between 57'55F annually. This annual investment return represents
the stock marketDs long term average growth over the past several decades.
31
A..reive I"vet!r1
(ggressive investors commonly do most of their investments in the stock market, which
is an increased risk. They also tend to invest in business ventures and real estate at high
risk. *or eample, if an aggressive investor puts his money into a larger building, then
invests more money to renovate the property are in danger. They epect to be able to
apartments for more money than the rent flats currently for sale are worth it A 3hole or
the property for a profit on their original investment. In some cases this has worked well
and not in others. There is a risk. (ggressive investors tend to concentrate on e!uity
investments such as individual stocks and mutual funds. They are open to more risk,
32
willing to see large short term swings in market performance on an annuali$ed basis.
They aim for large growth in the market, often above what the long term market
performance has shown. They are also seeking !uick growth in their portfolio, and some
are even called M.ay Traders.M The recommendation for this investor is to have a
minimum timeframe of 56 years before they will need their principal investment, to allow
for variations in the market to average out. The average rates of return that an aggressive
investor epects to see is between 5E'5HF, a few percentage points above the long term
stock market average.
VARIOUS I%VESTME%T OPTIO%S
2avings form an important part of the economy of any nation. 3ith the saving invested in
various options available to the people, the money acts as the driver for growth of the country.
There are basically two kinds of investments. /ne that gives returns at fied rate and other where
the rate of return is depending upon the certain factors of the economy.
Fi/e# Ret0r" O,ti!"
%ost office monthly income scheme
%ublic provident fund
33
)ank fied deposits
Government securities or gilts
R)I taable bonds
4ompany fied deposits
Infrastructure bonds
)onds
Variab(e Ret0r" O,ti!"
"utual *unds
2hare and 2tock market
%rimary invested in e!uity ;I%/<
2econdary market investment in e!uity
.erivative, *utures and /ptions
Gold
Real estate
*oreign echange assets
Fi/e# Ret0r" O,ti!"
+nder fied return investments, investor will get fied return on their investments. The rate of
return is pre decided at the time of investment. Rate of return can be calculated on per annum
basis or at completion of particular time period.
P!t O))ice M!"t-(y I"c!me Sc-eme:
34
In this scheme an investment can be made by individuals in single or joint names maimum of
Rs. K lakhs ;Rs.> lakhs per person< with an interest of GF p.a. in a monthly income scheme. This
will give you Rs. H7779' per month if you invested the maimum amount. In addition, this
investment will fetch you a taable bonus of 57F on the deposit maturity ;i.e. after K years<.
P0b(ic Pr!vi#e"t F0"#:
The rate of public provident fund is G F p.a. currently. This is basically a long term investment
opportunities ;maturity 56 year< as the entire amount that is accumulated in this account can be
withdrawn entirely only after 56 years. %artial withdrawal is allowed only after 6 years. Interest
is eempt from income ta and contributions are eligible for ta deductions.
Ba"4 Fi/e# &e,!it:
)ank fied deposits yield will vary from bank to bank but they are more or less streamlined. The
yields are currently in the region of 6.6F to K.6F per annum for deposits ranging from >7 days
to five years. (ll the schedule banks are covered by .I4G4 ;.eposit Insurance and 4redit
Guarantee 4orporation<which means that up to 5 lakh deposited in a bank per person is
absolutely safe and insured even if the bank collapse.
2)I *ied .eposit Interest Rates;F<
56 days to H6 days >.E6
HK days to =7 days H.E6
=5 days to 5G7 days 6.67
5G5 days to less than 5 year K.67
5 year to less than E years I.E6
E years to less than 5777 days I.67
5777 days I.I6
5775 days to less than > years I.67
> year to less than 6 years I.67
35
'!ver"me"t Sec0rity !r 'i(t:
Government security and gilts are totally secure. Government bonds are
issued by the government of India periodically. These are now available in the secondary market
through satellite dealers and banks. They are known to yield 6F to KF per annum.
RBI Ta/ab(e B!"#:
These are GF saving bonds which are taable. The maturity is after K years
and there is no upper limit to investment is these bonds. The interest accrued on these bonds is
taable under the Income Ta (ct, 5=K5.
C!m,a"y Fi/e# &e,!it:
4ompany fied deposits was a highly popular investment vehicle in the past.
In today#s changing scenario where the corporate world has access to cheaper funds from sources
all over the world, the rate of interest offered by good companies make this a less attractive
investment vehicle.
I")ratr0ct0re B!"#:
(n infrastructure bond is a ta saving bond that was innovated in order to provide funds for the
development of the key infrastructure projects. Thus, investors in these bonds apart from the
material benefits in term of ta saving, have the higher satisfaction of having contributed to the
development of the country#s infrastructure. The rate of return on such bonds is between 6 to
6.6F. The bonds have lock in period of > years.
36
B!"#:
( bond is just an organi$ationDs I/+? i.e., a promise to repay a sum of money at a certain interest
rate and over a certain period of time. In other words, a bond is a debt instrument. /ther
common terms for these debt instruments are notes and debentures. "ost bonds pay a fied rate
of interest for a fied period of time.
&i))ere"t ty,e !) b!"#
In general there are few types of bonds available in the market to buy, like?
'!ver"me"t b!"#1
These bonds are issued by the government to raise money from the public.
Bi((: .ebts securities maturing in less than one year.
%!te: .ebt securities maturing in one to ten years.
B!"#: .ebt securities maturing in more than ten years.
Mar4etab(e ec0ritie )r!m t-e I"#ia" .!ver"me"tA known collectively as Treasuries
and are as Treasury bonds, Treasury notes and Treasury bills.
M0"ici,a( B!"#:
37
"unicipal bonds, known as :munis&, are the net progression in term of risk. The major
advantage in munis is that the returns are free from 2tate9central ta. ,ocal government some
time makes their debt non'taable for residents, thus making some municipal bonds completely
ta free. )ecause of the ta'savings yield in munis is lower than the taable bonds.
C!r,!rate b!"#:
( company can issue bonds just as it can issue stock. Generally, a short term corporate bond is
less than five years? intermediate is five to twelve years, and long term is over 5E years.
4orporate bonds are characteri$ed by higher yields because there is a higher risk of a company
defaulting than a government. The company#s credit !uality is most important1 the higher the
credit !uality, lower the interest rate the investor receives. )ondholders are not owners of the
corporation. )ut if the company gets in financial trouble and needs to dissolve, bondholders must
be paid off in full before stockholders get anything.
=er! c!0,!" B!"#:
This is a type of bond that make no coupon payments but instead is issued at a considerable
discount to par value. *or eample, let us say, a $ero coupon bond with a Rs. 5,777 par value and
57 years to maturity is trading at Rs. K77? then investor would be paying Rs.K77 today that will
worth Rs. 5,777 after 57 years.
38
Variab(e Ret0r" O,ti!"
M0t0a( F0"#:
( mutual fund is a company that pools the money of many investors to invest in a variety of
different securities. Investment may be in stocks, bonds, debentures, money market or
combination of these. These securities are professionally managed on the behalf of investor, by
the fund manager.
The investor can make money from a mutual fund in three ways1
Income is earned from dividends on stocks and internet on bonds. ( fund pays out nearly
all of the income it receives over the year to fund owners in the form of a distribution.
39
If the fund sells securities that have increased in price, the fund has a capital gain. "ost
funds also pass on these gains to investors in a distribution.
If fund holdings increase in price but are not sold by the fund manager, the fundDs shares
increase in price. Bou can then sell your mutual fund shares for a profit. *unds will also
usually give you a choice either to receive a check for distributions or to reinvest the
earnings and get more shares.
S-are a"# t-e St!c4 Mar4et:
(n e!uity share is a certificate or a book entry that represents the single unit of ownership in a
company or its business. They are sold either directly by the company or they can be ac!uired
through broker from the stock market. )y purchasing a share of a company, an individual gets an
ownership rights, right to vote and share in the company#s future profits and losses.
Primary Mar4et I"vetme"t i" E;0ity 8IPO9
The primary market is a place where the new offerings by companies are made as an Initial
%ublic /ffering ;I%/< I%/#s are offering made by the company for the first time in the market.
2uch offers to the public can be at par or can be at premium.
Sec!"#ary Mar4et I"vetme"t i" E;0ity:
The stock echange is a place where buyers and sellers meet to trade in shares in an organi$ed
manner. There are at present EK recogni$ed stock echanges in the country and are governed by
security board of India ;20)I<.
40
&erivative3 F0t0re a"# O,ti!":
.erivative is a contract9 product that has no independent value i.e. it derives its value from the
underlying assets. +nderlying assets can be securities, commodities, bullion, currency, livestock
or anything else. Through the use of derivative product, an investor can transfer the price by
locking in asset prices.
'!(#:
/f late, an inverse relationship between the dollar and gold has been in India. The lower the
dollar goes, the higher is the gold prices. 3hy does this happenN The dollar is the international
currency with nothing besides gold to challenge it. )esides being a commodity, gold is a
universally accepted form of money. India is a net importer of gold. The domestic production is
almost negligible and India is the highest consumer of gold in the world.
Rea( etate:
Investment in real estate or property is a good long term investment for well'heeled investors
with a huge amount of money. .epending on the total resources at your disposal, you can invest
a part of it in property.
F!rei." E/c-a".e Aet:
Till Oanuary E77H, Indian residents# investors were not allowed by our echange control rules to
invest in foreign echange assets. Recently, the reserve bank of India has allowed residents to
41
invest overseas to the etent of an e!uivalent of +2 P E6,777 per year. -ow investor from India
can take advantage of any attractive investment opportunity overseas.
&ATA A%AYSIS
1. I"vet!r> a.e
5G'>7
>5'H7
H5'67
Q67
42
*ig1 .istribution of age groups in the sample
E/,(a"ati!":
The above pie chart shows that the sample of 567 is predominantly consist of respondents of the
age groups of 5G'>7 years and >5'H7 years. This reveals that most of the investors are them who
are started their career recently or working for 57'56 years. This also shows that the age group of
greater than 67 years is very less interested in investment.
43
2. Occ0,ati!":
2ervice
)usiness
2elf 0mployed
44
*ig1 .istribution of occupation throughout the sample
E/,(a"ati!":
This graph shows that the respondents are mostly from the service class ;K5F< and business
person consists of only >IF of respondents. 2elf employed are very less in numbers.
3. *-at i y!0r m!"t-(y i"c!me+
R E,67,777
E,67,777 A 6,77,777
6,77,777' I,67,777
I,67,777 A 57,77,777
45
Q 57,77,777
*ig1 .istribution of sample annual income wise
E/,(a"ati!":
In the sample the income group of E,67,777 to 6,77,777 Rs is dominating. It reveals that this
income group were the major respondent in the survey. The second major income group is the
I,67,777 to 57,77,777. "ost investors are from the income group of E,67,777 to 6,77,777and
I,67,777 to 57,77,777 which is enthusiastic for the companies as the potential customers are
from the medium investor and the bid investors.
46
4. Y!0r &i,!ab(e I"c!me i" t-e m!"t-+
R6777
6777' 57,777
57,777' 56,777
56,777'E7,777
QE7,777
47
*ig1 .istribution of disposable income
E/,(a"ati!":
The pie shows that the major respondents have a disposable income of 6,777 to 57,777 Rs per
month which is good enough money for an investor who is investing regularly for the longer
term. It also depicts that investors who has a disposable income of more than E7,777 Rs is 596th
of the sample. This reveals company got a fair enough data base of high amount investors.
5. *-at ,erce"ta.e !) y!0r m!"t-(y i"c!me #! y!0 ave+
,ess than E6F
)etween E6F and 67F
)etween 65F and I6F
"ore than I6F
48
*ig1 .istribution of monthly income saved by the sample
E/,(a"ati!":
-ow above diagram shows that .ue to inflation or other reasons saving capacity of people has
reduced drastically. (lmost IH surveyed people saves ,ess than E6F and KE people saves
between E6F and 67F of their monthly income. 2till we have many investors whose saving is
very high, so there is vast scope to convert their saving in investments.
6. &0ri". t-e "e/t )ive year3 y!0r m!"t-(y i"c!me 1i(( m!t (i4e(y:
.ecline
Remain about the same
Increase slightly
49
Increase significantly
*ig1 -et five years the monthly income of investor will likely
E/,(a"ati!":
This shows that due to @igh economic growth and good scope of industriali$ation employee
growth has increased tremendously that#s why most of the surveyed people thinks that their
salary would increase significantly or slightly.
7. I" 1-ic- !) t-e )!((!1i". )!rm #! y!0 ave m!"ey 8e(ect a(( t-at a,,(y9
*.#s9R.
"utual *und
%*9%%*
50
,ife Insurance
.irect 0!uity
Real estate
Gold
/ther
*ig1 .istribution to save the money by the sample.
E/,(a"ati!":
The data gives the information that most of the surveyed persons prefer to invest in *.#s99R..
They don#t feel safe to go for risky but high return investment. )ut there is also huge ratio of
51
investment in Gold and "utual *und, this shows that there is also huge scope in 8ariable return
options.
8. *-ic- !) t-e )!((!1i". i"vetme"t 1!0(# y!0 )ee( m!t c!m)!rtab(e 1it- ta4i". i"t!
c!"i#erati!" t-e ri4 ret0r" tra#e:!))+
0!uity securities of established companies
"i of e!uity securities and government bonds
52
Government bonds
*ig1 .istribution of investment that investor feel comfortable.
E/,(a"ati!":
(bove diagram shows that IE surveyed people wants to invest in 0!uity securities of established
companies, which is highest of all. This shows that most of the people are (ggressive investor
53
and ready to take risk for high return. (lmost KE people out of 567 want to invest in "i of both
0!uity and )onds. They wants moderate return with moderate risk.
9. *-at i y!0r )irt ,ri!rity )!r i"vetme"t )!c0
4apital %reservation
*uture +ncertainty
54
Income
Ta 2avings
Retirement
*ig1 *irst priority of investment in the sample
E/,(a"ati!":
Ta saving is the major concern now in India. The above pie also show that H7F of people want
to invest for the ta savings, but that is for only 5.6 lakh. It is epected that before the investment
55
investors focus would be the main criteria where he wants to invest in. depending up on the
response I have found out that 5GF people invest to secure for *uture +ncertainties and 5=F
fight against inflation and do invest for only 4apital %reservation. /nly =F people focus on their
retirement time and invest for vesting period.
10. I" -!1 ma"y year 1!0(# y!0 1a"t t! 1it-#ra1 y!0r i"vetme"t
R > years
> A 6 years
56
K A = years
Q57 years
*ig1 3ithdraw from investment
E/,(a"ati!":
It shows that how investors want to stay remain invested in.HEF of investors want to stay in the
market for the >'6 years, it has been said that > years is a market cycle so, investor usually want
57
stay in for the two cycle. This is the very normal period for remain invested due to primary
)+,, and )0(R turn period go through 6'K years. E>F investors are the short term investor as
they want to get out of market within > years. )ut it is healthy for the investment market that
5GF investors want to stay invested for K'= years and 5IF more than 57 years. These long term
investors are keeping the market more stable than the short term investors.
11. H!1 m0c- ri4 ca,abi(ity #! y!0 -ave 1-e" y!0 i"vet+
8ery @igh
@igh
"oderate
,ow
58
*ig1 Risk tolerance ability
E/,(a"ati!":
The research showed that the most investors are risk averse and goo for the moderate risk. HEF
investors are in this category. This is good news for the market that only EEF of investors are
with low risk apetite. The low risk apetite investor mostly invested in the fied return
instruments. IF investors have very high and E=F investors have high risk profile, they usually
invest in the stocks and mutual fund, where the risk is high and the returns are also high in
proportion.
59
12. H!1 m0c- time ca" y!0 acce,t "e.ative ret0r"+
-ever accept negative return
/nce in > years
/nce in 6 years
/nce in I years
4an fluctuate in long run
60
*ig1 Risk bear acceptability
E/,(a"ati!"::
Investor#s negative return acceptability shows how he9she can accept the market up'downs
positively. If they really take it to the account then the can sustain in the market for the longer
time. In the above pie chart S-ever accept return# shows the group with low risk appetite where
as Sonce in > years# & Sonce in 6 years# represents the group with moderate risk appetite. Sonce
in I years# & Scan fluctuate in long run# represents the group with high or very high risk appetite.
61
Though this is not applied to all, as risk assumption is different for every other person. @ere,
>KF investors need always positive returns or assured return, whereas >7F of investors can have
a moderate risk bearing appetite. (nd rest >HF investors can bear the high risk.
FI%&I%'S:
It clearly shows that the age group of 5G'>7 years has the most disposable income per
month because most of them are single. "ore the age grows the disposable income reduced
may be because the family epenses and the living epenses increased.
The age group of 5G'>7 years are highly invested in the mutual funds and share "arket
whereas >5'H7 years age group is also invested in all the instrument but they are !uite
62
heavily invested in the real estate sectors whereas more than 67 years age group are most
invested in the *. & R)I bonds.
Risk tolerance is the major concern in the investment market. If the risk is high then return
epected is high for the investors. (ge is also considered for the risk tolerance. It is
epected that the lower the age group risk tolerance is high
"ost of the respondents are in the >'6 years group. They remain invested for the a full
cycle of bear turn and bull turn. The age group of >5'H7 years are likely to remain invested
in K'= years.
The age group of 5G'>7 has higher acceptability of negative returns whereas the age group
of >5'67 has lower acceptability of negative returns whereas the age group of more than 67
years can accept negative returns.
2ervice category are likely to invest in the *ied .eposits and "utual *unds because fied
deposits gives fied rate of return whereas mutual funds is risk diversified. )usiness class
is more attracted towards the 2hares and real estate because they have the lum sum amount
to invest in the single time. *or the 2elf employed category, they are mostly invested in the
*ied .eposits and Insurance sector.
In the 2ervice category the investment focus is the ta savings, whereas for the )usiness
class 4apital preservation and *uture +ncertainty playes a big role in their investment
planning.
2elf employed category cannot accept negative return. In 2ervice category most investors
are risk averse, but few of them are now started to invest in the riskier profile so negative
acceptability is present. *or the business class, they are mostly invested in shares & mutual
funds, as results they responded S/nce in > years# and S4an fluctuate in long term#. The
63
investor who want to stay for > years are the short term players, whereas the long term
players can accept ups & downs in their investment for the higher return.
RECOMME%&ATIO%
The age group of 5G'>7 can be a great potential investors for the company as has high
risk profile, more disposable income, and the time hori$on is perfect >'6 years. "utual
*unds can also be offered as they have high risk profile. 4ompany should take initiative
to get .emat account of these customers.
64
The age group of >5'67 years, investors are with S"oderate# risk profile, most of the
investors are from the 57,777'56,777 Rs per month disposable income. 4ompany will get
a good investor with diluted risk profile. 4ompany can offer them +,I%s, and *ied
.eposits as investment instrument. "utual funds can be an option but that must be a debt
fund to invest.
*or the age group of above 67 years, the profile would be low moderate, as the term is
not more than > years. Investors have invested in insurance sector but in this age
insurance would not be a good option for investor. 4ompany should try to minimise the
risk tolerance by offering *ied deposits.
4ompany should tap the business class and service people by innovative marketing
strategies as they already invested, and offer *.s,. "utual fund can be a lucrative offer if
the *und is any moderate fund or debt fund.
*or the business class, the risk profile is high'very high. "ost investor are with negative
return acceptability and time hori$on is R > years. 4ompany should offer "utual funds
with risk profile @igh to very high thus investor can get a high return. (part from this
company should offer to open .emat account with them.
The disposable income bracket less than Rs.6777 per month are basically safe investors
and have not and do not prefer investing in mutual funds and +,I%. Thus positioning of
these products should be such that people are attracted towards this scheme. 0mphasis on
marketing of the products should be given.
Respondents under disposable income bracket Rs.6,777'Rs.57,777 have mainly invested
in insurance and real estate. )ut when survey was done and their preferences was asked
these respondents strongly preferred investing in these strategies.
65
.isposable Income )racket of Rs.56,777'Rs.E7,777 are the strong contenders for
investing their money and these people have invested in real estate, insurance and fied
deposits. "oreover there is mied preferences for their investments thus proper
segmentation of the sample should be done accordingly marketing strategies should be
adopted.
CO%C$USIO%
(s the market is doing well, current prices of various stocks have increased when compared to
purchase prices. Therefore, investor will get positive returns.
2ince the term :returns& from an investment refers to the benefits that an investor receives from
that particulars investment, hence we can infer that portfolio is generating more returns when
66
compared to individual. If risk parameter is taken in consideration, portfolio has low risk to that
of individual risk.
(s market is doing well, investor should wait invest now, in order to get positive returns.
In order to enjoy more returns, he should invest more? investor should invest in more risky
securities as a risk taker. In order to get less risky, the company should include Treasury bills is
one of the securities in portfolio as the treasury bills, the least risky of financial assets, earned the
lowest average annual rate of return. If the company is ready to take the high risk they can
choose small firm'common stock is one of the securities in portfolio to get the higher risk,. )ut
the company should take a long watch over the market to get good higher returns. If the investor
is a risk'averse investor, then he should invest in less risky securities and enjoy normal returns.
The future of portfolio management is bright provided proper regulations prevail and investor#s
needs are satisfied by providing variety of schemes. The interest of investors is protected by
20)I. %ortfolio management is governed by 20)I (ct.
.ue to the benefits available to the individual#s such as reduction in risk, epert professional
management, diversified portfolios, ta benefits etc. young generation ;i.e. age group bet. 5G'>7<
is willing to invest in different investment avenues through portfolio manager or through mutual
funds which are again managed by portfolio managers.
/n the other hand, age group of K7 & above are least interested in making investment in different
avenues through portfolio managers. They believe in investing and managing their portfolio on
67
their own. @owever, it can be said that the future of portfolio management is bright in years to
come.



BIBI$O'RAPHY:
2ecurity (nalysis & %ortfolio "anagement by %R(2(--( 4@(-.R(, Tata "cGraw
hill publishers.
*inancial management ;-inth edition< by I " %andey.
2ecurity analysis and %ortfolio management by Ritu (huja.
68
*EBO'RAPHY:
1117b"rec0ritie7c!m
1117"ei"#ia7c!m
1117i"vet!,e#ia7c!m
1117bei"#ia7c!m
1117ec!"!mictime7c!m
1117ebi7.!v7i"
1117m!"eyc!"tr!(7c!m



69
70