INTRODUCTION: Investing wisely is an important part of financial security.

Investment is putting money into something with the expectation of profit. More specifically, investment is the commitment of money or capital to the purchase of financial instruments or other assets so as to gain profitable returns in the form of interest, dividends, or appreciation of the value of the instrument (capital gains). It is related to saving or deferring consumption. Investment is involved in many areas of the economy, such as business management and finance no matter for households, firms, or governments. An investment involves the choice by an individual or an organization, such as a pension fund, after some analysis or thought, to place or lend money in a vehicle, instrument or asset, such as property, commodity, stock, bond, financial derivatives (e.g. futures or options), or the foreign asset denominated in foreign currency, that has certain level of risk and provides the possibility of generating returns over a period of time. CHARACTERISTICS OF INVESTMENT: All investments are characterized by certain features. These characteristic features of investments are; 1. Return 2. Risk 3. Safety and 4. Liquidity Return: All investments are characterized by the expectation of a return. In fact, investments are made with the primary objective of deriving a return. The return may be received in the form of yield plus capital appreciation. The difference between the sale price and the purchase price is capital appreciation. The dividend or interest received from the investment is the yield. Different types of investments promise different rates of return. The return from an investment depends upon the nature of the investment, the maturity period and a host of other factors. Risk: Risk is inherent in any investment. This risk may relate to loss of capital, delay in repayment of capital, non-payment of interest, or variability of returns. While some investments like government securities and bank deposits are almost riskless, others are more risky. Risk and return of an investment are related. Normally, the higher the risk, the higher is the return. Safety: The safety of an investment implies the certainty of return of capital without loss of money or time. Safety is another feature which an investor desires for his investments. Every investor expects to get back his capital on maturity without loss and without delay. 1

Liquidity: An investment which is easily saleable or marketable without loss of money and without loss of time is said to possess liquidity. Some investments like company deposits, bank deposits, P.O. Deposits, NSC, NSS, etc. are not marketable. Some investment instruments like preference shares and debentures are marketable, but there are no buyers in many cases and hence their liquidity is negligible. Equity shares of companies listed on stock exchanges are easily marketable through the stock exchanges. An investor generally prefers liquidity for his investments, safety of his funds, a good return with minimum risk or minimization of risk and maximization of return.

INVESTMENT AVENUES: There are many investment opportunities in India. The economy of India does not depend on earnings from export therefore there is more room for investment in this country. There are many areas which make the perfect places for a sound investment. Following are some of the investment alternatives useful in systematic and rational investment management. Such alternatives can be grouped into;

1. Non- Marketable Financial Assets 2. Money Market Instruments 3. Bonds or Fixed Income Securities 4. Equity Shares 5. Mutual Fund Schemes 6. Financial Derivatives 7. Life Insurance 8. Real Estate and 9. Precious objects

NON MARKETABLE FINANCIAL ASSETS: A good portion of the financial assets of individual is held in the form of non-marketable financial assets like bank deposits, post office deposits company deposits, and provident fund deposits. A distinguishing feature of these assets is that they represent personal transactions between the investor and the issuer. The important non-marketable financial assets held by investors are briefly described below; 2

Bank Deposits: Perhaps the simplest of investment avenues opening a bank account and de-positioning money in it, one can make a bank deposit. There are various kinds of bank accounts: current accounts, savings account and fixed deposit account. While a deposit in a current account does not earn any interest, deposits in other kinds of bank accounts earn interest. The important features of bank deposits are as follows: 1. Deposits in scheduled banks are very safe because of the regulations of the Reserve Bank of There is a ceiling on the interest rate payable on deposits in the savings account. 2. The interest rate on fixed deposits varies with the term of the deposit. In general, it is lower for fixed deposits of shorter term and higher for fixed deposits of longer term. 3. If the deposit is less than 90 days, the interest is paid on maturity; otherwise it is paid quarterly. 4. Bank deposits enjoy exceptionally high liquidity. They can be enchased prematurely by incurring a small penalty. 5. Loans can be raised against bank deposits. Post Office Time Deposits (POTD): Similar to fixed deposits if commercial banks, POTDs have features: 1. Deposits can be made in multiples of Rs 50 without any limit. 2. The interest rates on POTDs are in general slightly higher than those on bank deposits. 3. The interest is calculated half yearly and paid annually. 4. No withdrawal is permitted for up to six months. 5. After six months, withdrawals are permitted. 6. A POTD account can be pledged. 7. Deposits in 10 years to 15 years Post Office cumulative Time Deposit Account can be deducted before computing the taxable income under Secion80C. National Savings Certificates: Issued at post offices, the National Saving Certificate offers the following features: 1. It comes in denomination of Rs 100, Rs 500, Rs 1,000 , Rs 5,000 and Rs 10,000 2. It has a term of 6 years. Over this period Rs 100 becomes Rs 160.1. Hence the compound rate of return works out to 8.16 percent 3. Investment in NSC can be deducted before computing the taxable income under Section 80C. 3

4. It can be pledged as collateral for raising loans. Kisan Vikas Patra (KVP): Scheme of the post office, the Kisan Vikas Patra has the following features: 1. The minimum amount of investment is Rs.1,000. There is no maximum limit. 2. The investment doubles in 8 years and 7 months. Hence the compound interest rate works out to 8.4 percent. 3. There is no tax deduction at source. 4. KVPs can be pledged as a collateral security for raising loans 5. There is a withdrawal facility after 2 years. Others: 1. Monthly Income Scheme of Post Office (MISPO) 2. National Savings Scheme 3. Company deposits 4. Employees Provident Fund Schemes 5. Public Provident Schemes etc.

MONEY MARKET INSTRUMENTS: Debt instruments which have a maturity of less than one year at the time of issue are called money market instruments. These instruments are highly liquid and have negligible risk. The major money market instruments are Treasury bills, certificates of deposit, commercial paper, and repos. Treasury Bills: Treasury bills are the most important money market instrument. They represent the obligations of the Government of India which have a primary tenor like 91 days and 364 days. They are sold on an auction basis every week in certain minimum denominations by the Reserve Bank of India. They do not carry an explicit interest rate (or coupon rate). Instead, they are sold at a discount and redeemed at par. Certificates of Deposits: Certificates of deposits (CDs) represent short term deposits which are transferable from one party to another. Banks and financial institutions are the major issuers of CDs. The principal investors in CDs are banks, financial institutions, corporates, and mutual funds. CDs are issued in either bearer or registered form. They generally have a maturity of 3 months to 1 year. CDs are issued at a discount and redeemed at par. 4

Commercial Paper: A commercial paper represents short-term unsecured promissory note issued by firms that are generally considered to be financially strong. A commercial paper usually has a maturity period of 90 to 180 days. It is sold at a discount and redeemed at par. Repos: The term Repo is used as an abbreviation for Repurchase Agreement or Ready Forward. A Repo involves a simultaneous "sale and repurchase" agreement. Repos are a very convenient instrument for short-term investment. They are safe and earn a pre-determined return. BONDS OR FIXED INCOME SECURITIES: Bonds or debentures represent long-term debt instruments. The issuer of a bond promises to pay a stipulated stream of cash flows. This generally comprises periodic interest payments over the life of the instrument and principal payment at the time of redemption. Following are the important fixed income securities; 1. Government Securities (Gilt- Edged Securities) 2. RBI Relief Bonds 3. Private Sector Debentures 4. Public Sector Debentures and Preference Shares: Preference shares represent a hybrid security that partakes some characteristics of equity shares and some attributes of debentures. The salient features of preference shares are as follows: 1. Preference shares carry a fixed rate of dividend. 2. Preference dividend is payable only out of distributable profits. 3. Dividend on preference shares is generally cumulative. 4. Preference shares are redeemablethe redemption period is usually 7 to 12 years. EQUITY SHARES: Equities are a type of security that represents the ownership in a company. Equities are traded (bought and sold) in stock markets. Alternatively, they can be purchased via the Initial Public Offering (IPO) route, i.e. directly from the company. Investing in equities is a good long-term investment option as the returns on equities over a long time horizon are generally higher than most other investment avenues. However, along with the possibility of greater returns comes greater risk. Stock Exchanges classify equity shares as follows; 1. Blue-chip Shares 2. Income Shares 5 3. Growth Shares

4. Cyclical Shares

5. Defensive Shares

6. Speculative Shares

MUTUAL FUND SCHEMES: A Mutual Fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in. By pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. There is a 100% growth in the last 6 years in MFs. A Mutual fund scheme may be a closed-end or an open-end scheme. 1. The subscription to a closed-end scheme is kept open only for a limited period, whereas an open-end scheme accepts funds from investors by offering its units or shares on a continuing basis. 2. A closed-end scheme does not allow investors to withdraw funds as and when they like, whereas on open-end scheme permits investors to withdraw funds on a continuing basis under a re-purchase arrangement. 3. A closed-end scheme has a fixed maturity period, whereas an open-end scheme has no maturity period. 4. The closed-end schemes are listed on the secondary market, whereas the open end schemes are ordinarily not listed. Also there where so many other investment schemes are offered by Mutual Funds, such as; 1. Equity Schemes: a) Growth Schemes 2. Balanced Schemes 3. Debt Schemes: a) Income Schemes b) Guilt Schemes c) Money Market Schemes b) Index Schemes c) Sector Schemes

FINANCIAL DERIVATIVES: A derivative is an instrument whose value depends on the value of some underlying asset. Hence, it may be viewed as a side bet on that asset. From the point of view of investors and portfolio managers, futures and options are the two most important -_-ancial derivatives. They are used for hedging and speculation. Futures: A futures contract is an agreement between two parties to exchange an asset for cash at a predetermined future date for a price that is specified today. The party which agrees to purchase the 6

asset is said to have a long position and the party which agrees to sell the asset is said to have a short position.

Options: An option gives its owner the right to buy or sell an underlying asset on or before a given date at a predetermined price. There are two basic types of options: call options and put options. A call option gives the option holder the right to buy a fixed number of shares of a certain stock, at a given exercise price on or before the expiration date. A put option gives the option holder the right to sell a fixed number of shares of a certain stock at a given exercise price on or before the expiration date.

LIFE INSURANCE: In a broad sense, life insurance may be viewed as an investment. Insurance premiums represent the sacrifice, and the assured sum, the benefit. The important types of insurance policies in India are: 1. Endowment assurance policy 2. Money back policy 3. Whole life policy 4. Term assurance policy.

REAL ESTATE: Property prices in major Indian cities are doubling in every 2-3 years so investing in property is a good idea. Investing in property is also a safe investment with good returns. Buy a flat, property or individual house is a prime area or suburbs of main cities and it will appreciate well in another few years. Getting a housing loan is not very difficult these days. Invest in property in main cities like Mumbai, Delhi, Chennai, Bangalore, Hyderabad, Calcutta, Kochi etc.

PRECIOUS OBJECTS: Precious objects are items that are generally small in size but highly valuable in monetary terms. The important precious objects are: Gold and Silver, Precious stones and Art objects. Gold and Silver: The 'yellow metal' is a preferred investment option, particularly when markets are volatile. Today, beyond physical gold, a number of products which derive their value from the price of gold are available for investment. These include gold futures and gold exchange traded funds. Gold and silver, the two most widely held precious metals, appeal to almost all kinds of investors for the following reasons: 7

Precious Stones: Diamonds, rubies, emeralds, sapphires, and pearls have appealed to investors from times immemorial because of their aesthetic appeal and rarity. Diamonds, in particular, have attracted interest because of their high per carat value. Art Objects:

SUMMARY: In its broadest sense, an investment is a sacrifice of current money or other resources for future benefits. Numerous avenues of investments are available today. You can either deposit money in a bank account or purchase a long term government bond or invest in the equity shares of a company or contribute to a provident fund account or buy a stock option or acquire a plot of land or invest in some other form. Recent studies says High Net worth Individuals [HNIs] or wealthy investors are proactive in portfolio management, risk management, consolidation financial assets and use of diversification strategies as actively as large institutions. HNIs are proactive in identifying new investment options and take inputs from professional advisors in volatile market conditions. Globally, India is one of the most preferred destinations for investment by renowned companies. Try to start invest money as early as possible so that the money will grow accordingly in your lifetime. Today Indian youths are well paid compared to last decades thanks to Information Technology, ITES like BPO, Call Center and overall strong economy. So people are able to save more money. Choosing a wise investment is very crucial because you have to balance the risks and returns.