Lect.

Tejinder Singh Bedi Manjinder kaur

Class – B.B.A 4th
ACKNOWLEDGEMENT

An endeavor over a period can be successful only with the advice and support of well
wishers. I take this opportunity to express my gratitude and appreciation to all those
who encouraged me to complete this project.

I am deeply indebted to Lect. Tejinder Singh Bedi for my successful completion of the
project. I express my profound and sincere thanks to Lect. Tejinder Singh Bedi who
acted as a mariner's compass and steered me throughout my project voyage through
her excellent guidance and constant inspiration.

I shall be failing in my duty if i don't acknowledge my debt to all those respondents

who provided me data by filling the questionnaire. I extend my hearty thanks to my
friends and family member for helping me in the completion of the project .

I also extend my hearty thanks to all other faculty members and of our department
frothier external support and guidance. I acknowledge with profound gratitude and
reverence the help and guidance of one and all in my endeavor for gainful project
work I undertook.
 Table of contents

Chapter Contents Page no.

number
1. Introduction to bank 1-24
2. Introduction to project 25-52
3. Review of literature 53-55
4. Objectives of the study 56-57
5. Research methodology 58-60
6. limitation of the study 61-62
7. Data analysis and interpretation 63-75
8. Findings of the study 76-77
9. Conclusion 78-79
10. Suggessions 80-81
11. Bibliography 82-83
12. Annexure 84-87
 CHAPTER- 1
INTRODUCTION TO ING BANK

History Of ING
Company overview

ING Vysya Bank Ltd., is an entity formed with the coming together of
erstwhile, Vysya Bank Ltd, a premier bank in the Indian Private Sector
and a global financial powerhouse, ING of Dutch origin, during Oct
2002.
The origin of the erstwhile Vysya Bank was pretty humble. It was in
the year 1930 that a team of visionaries came together to form a bank
that would extend a helping hand to those who weren't privileged
enough to enjoy banking services.

It's been a long journey since then and the Bank has grown in size and
stature to encompass every area of present-day banking activity and
has carved a distinct identity of being India's Premier Private Sector
Bank.
In 1980, the Bank completed fifty years of service to the nation and
post 1985; the Bank made rapid strides to reach the coveted position
of being the number one private sector bank. In 1990, the bank
completed its Diamond Jubilee year. At the Diamond Jubilee
Celebrations, the then Finance Minister Prof. Madhu Dandavate, had
termed the performance of the bank ‘Stupendous’. The 75th
anniversary, the Platinum Jubilee of the bank was celebrated during
2005.
The long journey of seventy-five years has had several milestones…

1930 Set up in Bangalore

1948 Scheduled Bank
1985 Largest Private Sector Bank
1987 The Vysya Bank Leasing Ltd. Commenced
1988 Pioneered the concept of Co branding of Credit Cards
1990 Promoted Vysya Bank Housing Finance Ltd.
1992 Deposits cross Rs.1000 crores
1993 Number of Branches crossed 300
 Signs Strategic Alliance with BBL., Belgium. Two National
1996 Awards by Gem & Jewellery Export Promotion Council for
excellent performance in Export Promotion
Cash Management Services, & commissioning of VSAT.
Golden Peacock Award - for the best HR Practices by Institute
1998
of Directors. Rated as Best Domestic Bank in India by Global
Finance (International Financial Journal - June 1998)
State -of - the -art Date Centre at ITPL, Bangalore.
2000
RBI clears setting up of ING Vysya Life Insurance Company
2001 ING-Vysya commenced life insurance business.
The Bank launched a range of products & services like the
Vys Vyapar Plus, the range of loan schemes for traders, ATM
services, Smartserv, personal assistant service, Save &
2002
Secure, an account that provides accident hospitalization and
insurance cover, Sambandh, the International Debit Card and
the mi-b@nk net banking service.
ING takes over the Management of the Bank from October 7th
2002
, 2002
RBI clears the new name of the Bank as ING Vysya Bank Ltd,
2002
vide their letter of 17.12.02
Introduced customer friendly products like Orange Savings,
2003
Orange Current and Protected Home Loans
2004 Introduced Protected Home Loans - a housing loan product
Introduced Solo - My Own Account for youth and Customer
2005
Service Line – Phone Banking Service
Bank has networked all the branches to facilitate ‘AAA’
2006
transactions i.e. Anywhere, Anytime & Anyhow Banking

Rs. in millions
In terms of pure numbers, the performance over the decades can better be appreciated from the
following table:
Year Networth Deposits Advances Profits Outlets
1940 0.001 0.400 0.400 0.001 4
1950 1.40 5.30 3.80 0.09 16
1960 1.60 20.10 13.50 0.13 19
1970 3.00 91.50 62.80 0.74 39
 1980 11.50 1414.30 813.70 1.13 228
1990 162.10 8509.40 4584.80 50.35 319
2000 5900.00 74240.00 39380.00 443.10 481
2001 6527.00 81411.10 43163.10 371.90 484
2002 6863.24 80680.00 44180.00 687.50 483
2003 7067.90 91870.00 56120.00 863.50 456
2004 7473.20 104780.00 69367.30 590.01 523
2005 7094.00 125693.10 90805.90 (381.80) 536
2006 10196.70 133352.50 102315.20 90.6 562
2007 11101.90 154185.70 119761.70 889.0 626
2008 14260.00 204980.00 146500.00 1569.00 677
2009 15940.00 248900.00 167510.00 1888.00 857
2010 22229.10 258650.00 185070.00 2422.00 866*

Outlets comprises of 468 branches, 13 ECs, 28 Satellite Offices and

357 ATMs as of March 31st 2010. Additionally the bank also has
Internet Banking, Mobile Banking and Customer Service Line for
Phone Banking Service.

ING Vysya Bank Ltd., is an entity formed with the coming together of
erstwhile, Vysya Bank Ltd, a premier bank in the Indian Private Sector
and a global financial powerhouse, ING of Dutch origin, during Oct
2002.
The origin of the erstwhile Vysya Bank was pretty humble. It was in
the year 1930 that a team of visionaries came together to form a bank
that would extend a helping hand to those who weren't privileged
enough to enjoy banking services.

It's been a long journey since then and the Bank has grown in size and
stature to encompass every area of present-day banking activity and
has carved a distinct identity of being India's Premier Private Sector
Bank.
In 1980, the Bank completed fifty years of service to the nation and
post 1985; the Bank made rapid strides to reach the coveted position
of being the number one private sector bank. In 1990, the bank
completed its Diamond Jubilee year. At the Diamond Jubilee
Celebrations, the then Finance Minister Prof. Madhu Dandavate, had
termed the performance of the bank ‘Stupendous’. The 75th
anniversary, the Platinum Jubilee of the bank was celebrated during
2005.
The long journey of seventy-five years has had several milestones…

1930 Set up in Bangalore

1948 Scheduled Bank
1985 Largest Private Sector Bank
1987 The Vysya Bank Leasing Ltd. Commenced
1988 Pioneered the concept of Co branding of Credit Cards
1990 Promoted Vysya Bank Housing Finance Ltd.
1992 Deposits cross Rs.1000 crores
1993 Number of Branches crossed 300
Signs Strategic Alliance with BBL., Belgium. Two National
1996 Awards by Gem & Jewellery Export Promotion Council for
excellent performance in Export Promotion
Cash Management Services, & commissioning of VSAT.
Golden Peacock Award - for the best HR Practices by Institute
1998
of Directors. Rated as Best Domestic Bank in India by Global
Finance (International Financial Journal - June 1998)
State -of - the -art Date Centre at ITPL, Bangalore.
2000
RBI clears setting up of ING Vysya Life Insurance Company
2001 ING-Vysya commenced life insurance business.
The Bank launched a range of products & services like the
Vys Vyapar Plus, the range of loan schemes for traders, ATM
services, Smartserv, personal assistant service, Save &
2002
Secure, an account that provides accident hospitalization and
insurance cover, Sambandh, the International Debit Card and
the mi-b@nk net banking service.
ING takes over the Management of the Bank from October 7th
2002
, 2002
RBI clears the new name of the Bank as ING Vysya Bank Ltd,
2002
vide their letter of 17.12.02
 Introduced customer friendly products like Orange Savings,
2003
Orange Current and Protected Home Loans
2004 Introduced Protected Home Loans - a housing loan product
Introduced Solo - My Own Account for youth and Customer
2005
Service Line – Phone Banking Service
Bank has networked all the branches to facilitate ‘AAA’
2006
transactions i.e. Anywhere, Anytime & Anyhow Banking

Rs. in millions
In terms of pure numbers, the performance over the decades can better be appreciated from the
following table:
Year Networth Deposits Advances Profits Outlets
1940 0.001 0.400 0.400 0.001 4
1950 1.40 5.30 3.80 0.09 16
1960 1.60 20.10 13.50 0.13 19
1970 3.00 91.50 62.80 0.74 39
1980 11.50 1414.30 813.70 1.13 228
1990 162.10 8509.40 4584.80 50.35 319
2000 5900.00 74240.00 39380.00 443.10 481
2001 6527.00 81411.10 43163.10 371.90 484
2002 6863.24 80680.00 44180.00 687.50 483
2003 7067.90 91870.00 56120.00 863.50 456
2004 7473.20 104780.00 69367.30 590.01 523
2005 7094.00 125693.10 90805.90 (381.80) 536
2006 10196.70 133352.50 102315.20 90.6 562
2007 11101.90 154185.70 119761.70 889.0 626
2008 14260.00 204980.00 146500.00 1569.00 677
2009 15940.00 248900.00 167510.00 1888.00 857
2010 22229.10 258650.00 185070.00 2422.00 866*

Outlets comprises of 468 branches, 13 ECs, 28 Satellite Offices and

357 ATMs as of March 31st 2010. Additionally the bank also has
Internet Banking, Mobile Banking and Customer Service Line for
Phone Banking Service.

The origen of ING Group

On the other hand, ING group originated in 1990 from the merger
between Nationale – Nederlanden NV the largest Dutch Insurance
Company and NMB Post Bank Groep NV. Combining roots and
ambitions, the newly formed company called “Internationale
Nederlanden Group”. Market circles soon abbreviated the name to I-N-
G. The company followed suit by changing the statutory name to “ING
Group N.V.”.

Profile:-

ING has gained recognition for its integrated approach of banking,

insurance and asset management. Furthermore, the company
differentiates itself from other financial service providers by
successfully establishing life insurance companies in countries with
emerging economies, such as Korea, Taiwan, Hungary, Poland, Mexico
and Chile. Another specialisation is ING Direct, an Internet and direct
marketing concept with which ING is rapidly winning retail market
share in mature markets. Finally, ING distinguishes itself
internationally as a provider of ‘employee benefits’, i.e. arrangements
of nonwage benefits, such as pension plans for companies and their
employees.

Mission:-

ING`s mission is to be a leading, global, client-focused, innovative and

low-cost provider of financial services through the distribution
channels of the client’s preference in markets where ING can create
value.

The new identity

The immediate benefit to the bank, ING Vysya Bank, has been the
pride of having become a Member of the global financial giant ING. As
at the end of the year December 2010, ING's total assets exceeded
1247 billion uros, with a underlying net profit of 3893 million euros,
employed around 105000 people, serves over 85 million customers,
across 40 countries. This global identity coupled with the back up of a
financial power house and the status of being the first Indian
International Bank, would also help to enhance productivity,
profitability, to result in improved performance of the bank, for the
benefit of all the stake holders.
 CHAPTER - 2

INTRODUCTION TO PROJECT

Introduction of Project

Introduction to Investment
In the present day financial markets, investing money has become a very complex
task. Most of the investors are unaware of the fact that investing is both an art and a
science. Majority of people irrespective of their education, status, occupation etc, are
fascinated by investments. Investment is an economic activity in which every person
is engaged in one form or another. Even though the basic objective of making
investment is earning profit. All investments are risky to some degree or other as risk
and return go together. The art of investment is to see that the return is maximized
with the minimum degree of risk.

Investment is the process of,’ sacrificing something now for the prospect of gaining
something later.' there are three dimensions to an investment- time, today's sacrifice
and prospective gain. Investment means putting one's money to work to earn more
money. Done wisely, it can help one meet his financial goals like buying a new house,
paying for college education of children, enjoying a comfortable retirement, or
whatever is important to him.

Investment is an economic activity which involves creation of asset or exchange of

assets with profit motive. It is the employment of funds with the purpose of earning
additional income or growth in value. The person making investment has to part with
his funds. The funds may be converted into monetary assets or a claim on future
money for a return. The return is an award for abstaining from present consumption
for parting with the money or liquidity and for taking a risk. The risk may be about
the return on investment, time of waiting, cost of getting back funds, safety of funds,
variability of the return etc.

Investment Definitions
Investment aims at multiplication of money at higher or lower rates.

Many investors give their own views regarding investment.

 Views of Sharpe Alexander: "Sacrifice of certain present values for

uncertain future gain".

 Views of F. Amling: "Purchase of a financial asset that produces a yield

that is proportional to the risk assumed over some future investment period".

“The main aim of investment is to multiplication of money at higher or lower rates

depending up on whether it is a long term or short term investment, and whether it is
risky or risk free investment.”

Investment planning
Investment planning is necessary for every one who whishes to achieve any financial
goal. a person has to plan his limited recourses among multiple choices to avail the
maximum benefit out of them . One should plan his investments to fulfill major needs
like:

 Creating wealth over the long term

 Acquiring assets like a dream house or a dream car

 Fulfilling his needs for financial security

Thus investment planning is nothing but a holistic approach to meet one's life's goal.

Meaning of investment planning

Investment planning is the process of identifying and implementing effective
investment strategies to create and accumulate the financial recourses for achieving
financial planning goals.

There are six steps that you should follow when you are developing your investment
plan,

1. The means to invest

2. Investment time horizon

3. Investment selection

4. Risk and Return

5. Evaluate performance

6. Adjust your portfolio

The discussion of these six steps is below;

1. The means to invest

In order to begin forming investment plan, you must determine that you are ready to
save. In this step you are determine if you are going to use the money of some goods
or service or if you will invest or save the money.

2. Investment time horizon

In this step, you will be determining how long you plan to invest and when you will
need the funds to meet your financial objectives. you must decide, based on the time
horizon of your objectives, among short term investments, long term investments, or
some combination. In this step you are going to be determining what you will be
saving for, which should give some indication of your time horizon.

3. Investment selection
It based on 1, 2 and 3 above; investments should be selected to meet your goals.
These investments must satisfy your time horizon and your risk tolerance.

4.Risk and Return

You will need to determine what your level of risk tolerance is. As the level of risk
tolerance increases so does the potential for higher returns as well as larger losses.

5. Evaluate performance
Once investments are chosen and exactions are established, the performance of your
investments should be determined by comparing the actual realized returns against the
expected returns. The returns should also be compared to a benchmark, such as the
S&P 500 index. In addition the investments should be reevaluated to determine if they
continue to meet your investment criteria.

6. Adjust your portfolio

Your portfolio should be adjusted to maintain your goals and your investment criteria.
If your goals change your investment should be reviewed to determine if they
continue to meet your objectives.

General investment objectives

Normally the three objectives of the investment are

 Safety

 Return

 Liquidity

1. Safety: Another important consideration in making investment is that the funds so

invested should be safe and secure. The investment should be capable for redemption
as and when due.

2. Return: total return on a particular investment is the combination of periodic cash

receipts and capital gain made on investments.

3. Liquidity: The investors generally prefer securities which ensure liquidity and
marketability.

It is the need of an investment to be absolutely safe, while it generates handsome

return and high liquidity. It is difficult to achieve all the three objectives
simultaneously. Typically, one objective trades of against another. E.g. if one want
high returns, he or she may have to take some risk, or if one want high liquidity, he or
she may have to compromise on returns. The objective therefore depends on the
investor's profile.
What are the aims of investors?
The aims of the investors are following bellow

 Income

 Capital appreciation

 Safety

 Liquidity

 A method of tax planning

1. Income: The main aim of investors is to earn more income in the form of
dividend or interest.

2. Capital appreciation: The investment should provide for appreciation in the

capital invested over a period of time. Capital appreciation can be achieved in the
following three ways: like conservative growth, aggressive growth, and speculation.

3. Safety: Another important consideration in making investment is that the funds so

invested should be safe and secure. The investment should be capable for redemption
as and when due.

4. Liquidity: The investors generally prefer securities which ensure liquidity and
marketability.

5. A method of tax planning: Before making the investments the investors

should also take into consideration the provisions of income tax, capital gain tax,
wealth tax, and gift tax acts, to minimize his tax burden and avail all tax exemptions
available to him.

When do people invest?

Saving essentially means storing your money; investing means using your money to
earn more money. You don't have to be wealthy invest. What you have to invest if you
ever want to be wealthy, or even have enough money to live well and retire well.

As with saving, when you are considering investing you first need to set your goals.
You need to be clear about what you are trying to achieve, and how long you have
got.

Factors infusing the investment decision

 Risk and Return
  Diversification

 Timeframes

 Borrowing to invest

The discussion of these factors is discussed in bellow;

1. Risk and Return

Every investor entails a degree of risk. The larger the potential return on any
investment, generally the higher the risk it has. This means the greater the chance of
large fluctuations in its value over time - from significant gains to possibly the loss of
some or all of your initial investment.

If your investment is classed as 'low risk' it means that its return will be lower, but the
risk is less. However, if the return of the investment is lower than the inflation rate,
the buying power of your money will also decrease. So even 'low risk' investments
carry a significant degree of risk.

Everyone's tolerance of risk is different, and it will vary depending on your stage in
life, as well as your circumstances.

2. Diversification

If all this information about risk leads you to the conclusion you do not want to put all
your money into the one investment but instead several, than you have started to think
about diversification.

Diversification is when you divide your investments into different areas to reduce the
overall level of risk. Like the truism: 'don't put all your eggs in one basket',

Diversification is a fundamental aspect of investing well.

For instance: a balanced investment portfolio can include a range of high risk,
moderate risk and low risk investments such as property, shares, managed funds,
and other investments.

3. Timeframes

Imagine that your goal is to travel the world. You want to leave in six months' time
and you have not saved nearly enough money yet, so you decide to invest to try and
make up some of the difference.

You could punt on high return investments, but as they carry a higher risk, if they fell
in value, there may not have enough time to make up the loss. So if you were prudent
you would generally choose a lower risk investment with lower returns, or a mix of
both high and lower risk investments, to balance out the risk and returns.
If you planned to travel in three years time, you would have the luxury of being able
to choose a greater proportion of higher risk investments with higher returns, because
you would have more time to make up any temporary falls in their values.

4. Borrowing to invest

If you don't have all the money you need for an investment, you may be able to take
out a loan from a financial institution. Don’t forget to shop around for the best loan
option for your needs, and make sure you will be able to manage the repayments. You
should seek the professional advice before borrowing, and try to have some money in
reserve in case things go wrong. Because if your investment doesn't go the way you
planned, or you lose your job, you'll still need to meet the loan repayments!

Care to be undertaken while investing

Before making any investment one must ensure to:

 Obtain written documents explaining the investment,

 Read and understand such documents

 Verify the legitimacy of the investment

 Find out the cost and benefit associated with the investment

 Assess risk-return profile of the investment

 Know the liquidity and safety aspect of the investment

 Compare these details with the other investments opportunities available

 Examine if it fits with other investments already made

 Seek all the clarifications about the intermediary and the investment

 Explore the options available and make the investment after being satisfied.

All these steps are taken care by the investment intermediaries working as advisors at
individual, firm or at company level. One of the intermediaries company under which
project is undertaken;

Investment scenario

Investors Habits
The nature of investment is differ from individual and is unique to each one because it
depends on various parameters like future financial goals, the present and the future
income model, capacity to bear the risk, the present requirements and lot more. As an
investor progresses on his/her life stage and as his financial goals change, so does the
unique investor profile.

Investment preferences among household investors have important socio-economic

implications. Such preferences influences the direction in which, and the channels
through which, household financial savings would flow. a developing economy, like
India, needs a growing amount of household savings to flow to corporate enterprises.
Such flow can grow on a sustained basis if, and only if, there is an effective system to
ensure that the enterprises receiving the flow are sound and will make proper use of
the money provided. in the absence of effective checks on mismanagement and
misappropriation at the corporate enterprises level the saver's investment preferences
is turned away from corporate share and securities towards other savings instruments.

The focus on the investment preference3s of middle class households more especially
on the extent to which they use shares and other govt, non govt capital market
instruments as vehicles for accumulating their hard-earned savings. At the outset any
study on investment activity should start with the question is what investment is.

It means many things to many persons. if one person has advance some money to
another, it may be his loan that may be considered as his investment for a return. if a
person has purchased 1 kg of gold for the purpose of price appreciation or a consumer
durable like a washing machine for the flow of services, it is his investment. If the
purchases an insurance plan or pensions plan, it is an investment. Thus there are
various types of investments, for various persons. for the individual it is the exchange
of money for a future claim on money or the purchase of a security of a promise to
pay at a later date along with a regular income as in the case of a share, bond,
debentures etc. for the issuers of security it is the use of money for the fixed capital
equipments, working capital or any other productive and unproductive activity.
Investment activity includes buying and selling or trading in the above claims on
money. Investors are the savers nut all the savers cannot be good investors, since
investment is more a science than an art. the number of investors is about 50million
out of population of more than 1 billion in India. Savers came from all classes except
in the case of population who are below the poverty line.

The growth of urbanization and literacy has activated the cult of investment.
Investment avenues are multifold and each has its own risk return characteristics. risk
less investment in the common parlance are bank deposits, govt securities, bond of
govt. and semi govt. bodies, post office saving schemes etc. commercial and co-
operative banks accept deposits from public in the form of current accounts, saving
accounts and fixed deposits. The interest rate varies from bank to bank but the ceiling
rates are fixed by the RBI up to 1-year deposits at present. These deposits are also
incurred with the deposits insurance and credit Guarantee Corporation. Beside the
operations if the bank, being regulated and inspected by RBI, the deposit kept with
them are supported to be safer and risk free. Although the returns are lower, the risk is
also lower and risk adverse investors will prefer investment in these avenues. Next to
keeping in cash most savings generally flow into some form of the bank deposits. The
average house hold in India keep about 10% of their savings in financial form in
cash and nearly 30% in a bank deposits in various forms. but these avenues of
investment give a return which is zero in the case of cash or return less than or equal
to inflation rate of about 8% per annum that is the average annual rate of inflation in
eighties and nineties.

Types of investments
 Stoke Exchange

 Bonds

 Mutual Funds

 Real Estate

 Bullions

 Derivatives

 Public Provident Fund

 Commodities

 Others

These types of investment are discussed in bellow;

1. Stoke Exchange
A stoke exchange, share market is a corporation or mutual organization which
provides facilities for stock brokers and traders, to trade company stocks and other
securities. Stock exchange also provides facility for the issue and redemption of
securities, as well as, other financial instruments and capital events including the
payment of income and dividends. The security traded on a stock exchange include:
shares issued by companies, unit trusts and other pooled investment products and
bonds. To be able to trade a security on a certain stock exchange, it has to be listed
there. Usually there is a local & central location at least for recordkeeping, but trade is
less and less linked to such a physical place, as modern markets are electronic
networks, which gives them advantages of speed and cost of transactions. a stock is
often the most important component of a stock market. Supply and demand in stock
market is driven by various factors which, as in all free markets, affect the price of
stocks.

There is usually no compulsion to issue stock via the stock exchange itself, nor must
stock be subsequently traded on the exchange. Such trading is said to be off exchange
or over- the- counter.
Why Invest In Shares?

 Income

 Growth

 Tax

 Liquid Investment

 Worth

 Diversification

The discussion of these factors is discussed in below;

 Income: Over medium to long term periods, shares can provide higher overall
returns than other investments.

 Growth: They can increase in value.

 Tax: Many companies pay tax on their profits, meaning that some investors
can receive tax credits on their dividends. Also, if a loan is used to purchase
shares, the portion of the loan repayments that is the interest, can be tax
deductible.

 Liquid Investment: That is, they can be easily bought and sold as required.

 Worth: It is easy to determine the true value of shares by simply checking

their stock market prices.

 Diversification: This can minimize any losses from a downturn in any

particular sector.

Advantages of stock exchange

The stock exchange is key financial institution in any free-market economy. It lets
individual investors and investment firms exchange capital and move resources to
places where there are most needed. Stock exchanges can also serve as a savings tool.
 Economies of Scale

One of the advantages of the stock exchange is that is enjoys economies of scale
because so much money passes through it. This helps to keep costs low, making it less
expensive to buy and sell stocks.A stock exchange can use millions of transactions to
spread fixed costs of setting up and maintaining orderly and secure trading, whether
it's done on the computer or the exchange floor. The bigger a stock exchange is, the
cheaper it is to trade an individual stock on it.

In the U.S., the two biggest exchanges are the New York Stock Exchange, or the
NYSE, and the Nasdaq Stock Market, usually referred to as the Nasdaq.

 Investor Protection

Stock exchanges require listed companies to meet strict regulatory requirements with
regard to financial reporting, corporate governance and disclosure. In the U.S., the
regulatory agency is the Securities and Exchange Commission. Investors get access to
all relevant information about the listed companies so they can make informed
decisions about whether to buy or sell shares.

 Secure Clearing

A stock exchange provides a reliable and secure clearing mechanism. You can be sure
that the stocks you buy will be delivered to you, no matter what happens to the party
you bought them from.

Disadvantages of stock exchange:

 Market fluctuations - your business may become vulnerable to market

fluctuations beyond your control - including market sentiment, economic
conditions or developments in your sector.
 Cost - the costs of flotation can be substantial and there are also ongoing costs
of being a public company, such as higher professional fees.
 Responsibilities to shareholders - in return for their capital, you will have to
consider shareholders' interests when running the company - which may differ
from your own objectives.
 The need for transparency - public companies must comply with a wide
range of additional regulatory requirements and meet accepted standards of
corporate governance including transparency, and needing to make
announcements about new developments.
 Demands on the management team - managers could be distracted from
running the business during the flotation process and through needing to deal
with investors afterwards.
 Investor relations - to maximize the benefits of being a public company and
attract further investor interest in shares, you will need to keep investors
informed.
 Risk In Stock Market

All investment has risk. With stocks there is the risk that a particular company will
experience difficulties due to mismanagemenent, competition, declining market
demand, changes in technology, lack of innovation, labor strife, or other problems that
keep it from doing well. There is also the possibility that an industry will be affected
by an adverse economic cycle or market conditions will result in diminished demand,
or that competition will reduce profitability.

2. Bonds
Bonds don't enjoy the same allure as stocks, but high quality bonds should be an
essential part of your financial plan. Bonds promise a steady income stream, typically
at a fixed coupon rate (interest rate). Bond is a debt instrument that is issued by the
govt, semi-govt, and an agency. it is a amount that is issued by the issuer to the
investor or bondholders. a bondholder make a promise to repay this amount at fixed
period of the time on a real interest.

What are bonds?

Bonds are debts that an entity (company, municipality, etc.) incurs in exchange for a
sum of borrowed money. For example, a company might need funds to help finance
its expansion. A city might need money to make needed repairs to its streets or
municipal buildings.
Usually, the fastest way to raise the money needed is to sell bonds. In exchange for
the money, the company or city promises to repay the debt at a fixed interest rate for a
set period of time.
Advantages of investing in bonds:
 Bonds are predictable. You know how much interest you can expect to
receive, how often you'll receive it, and when your principal (the bond's face
value) will be repaid (maturity date).
 Bonds are more steady then stocks (which can fluctuate wildly short-term).
Nervous investors usually sleep better by buying bonds instead of equity
investments.
 People on a fixed income and/or in retirement will receive a predictable
amount of regular income from bonds.
 The interest rates paid by bonds typically exceed those paid by banks on
savings accounts, especially short-term bonds.

Disadvantages of bonds:
 Companies and municipalities can and do go bankrupt, and if they do, your
bonds will lose value and possibly even become worthless.
 Long-term bonds will have your money tied up in low yielding bonds should
interest rates go up.
  Unlike stocks, bonds don't offer the possibility of high long-term returns.
Younger investors and those with several years to go until retirement would be
better served by limiting their bond purchases and opting for equity buys
instead.

When should you buy bonds?

 Bonds are a good option for those who need a steady and relatively
dependable source of income, including the elderly and disabled. After
retirement, bonds will provide a regular interest check to live on.
 As you progress from middle age and get within a few years of retirement, you
should start gradually switching your assets from equity holdings (stocks) into
bonds. As you get closer to retirement you want to reduce your investment
risk.
 Many people buy bonds for reasons other than the investment potential. For
example, the alumni of a university might buy the school's bonds to help out
the old alma mater. And many people consider buying US Savings Bonds to be
a patriotic duty.

Risk in Bond Investment

Credit risk: The possibility those companies or other issuers whose bonds are owned
by the fund may fail to pay their debts.

Interest Rate Risk: The risk that the market value of the bond will go down when
interest rate go up. Funds that invest in longer-term bonds tend to have higher interest
rate risk.

Prepayment Risk: The chance that a bond will be paid off early.

For instance, if interest rates fall, a bond issuer may decide to pay off (''or retire'') its
debt and issue new bonds that pay a lower rate. When this happens, the fund may not
be able to reinvest the proceeds in an investment with as high a return or yield.

Rating of bonds:
A grade that is given to the bond is indicating its quality and value a measure of safety
and quality of bond is based on issuer’s financial condition.

3. Mutual Funds:
A mutual fund is an investment company that takes cash from investors and invests it
into diversified securities, providing investors with both diversification and
professional management of their funds. A mutual fund invests in stocks, bonds,
options, money market security, and commodities, to name a few, depending on the
funds investment objectives. An investor may choose from many different mutual
funds currently in the market based on his or her risk profile and investment criteria.
Mutual funds are essentially investment vehicles where people with similar
investment objective come together to pool their money and then invest accordingly.

Why Invest In Mutual Funds?

 Ease: the investment is managed for you by an investment expert.

 Growth: they can increase in value.

 Income: over medium to long-term periods, can provide higher overall returns
than other investments.

 Diversification: enable investment in a range of companies across different

industry sectors.

 Cost: you can invest small amounts yet gain the benefits of diversification.

 Tax: many companies pay tax on their profits, meaning that investor can
receive tax credit on their dividends. Also, if a loan is used to purchase
managed funds, the portion of the loan repayments that is the interest, can be
tax deductible.

 Liquid Investment: that is, they can be easily bought and sold as required.

Advantages of mutual funds:

What are the key advantages of mutual fund investing?

Diversification

Using mutual funds can help an investor diversify their portfolio with a minimum
investment. When investing in a single fund, an investor is actually investing in
numerous securities. Spreading your investment across a range of securities can help
to reduce risk. A stock mutual fund, for example, invests in many stocks - hundreds
or even thousands. This minimizes the risk attributed to a concentrated position. If a
few securities in the mutual fund lose value or become worthless, the loss maybe
offset by other securities that appreciate in value. Further diversification can be
achieved by investing in multiple funds which invest in different sectors or
categories. This helps to reduce the risk associated with a specific industry or
category. Diversification may help to reduce risk but will never completely eliminate
it. It is possible to lose all or part of your investment.

Professional Management:
Mutual funds are managed and supervised by investment professionals. As per the
stated objectives set forth in the prospectus, along with prevailing market conditions
and other factors, the mutual fund manager will decide when to buy or sell securities.
This eliminates the investor of the difficult task of trying to time the market.
Furthermore, mutual funds can eliminate the cost an investor would incur when
proper due diligence is given to researching securities. This cost of managing
numerous securities is dispersed among all the investors according to the amount of
shares they own with a fraction of each dollar invested used to cover the expenses of
the fund. What does this mean? Fund managers have more money to research more
securities more in depth than the average investor.

Convenience:

With most mutual funds, buying and selling shares, changing distribution options, and
obtaining information can be accomplished conveniently by telephone, by mail, or
online.

Although a fund's shareholder is relieved of the day-to-day tasks involved in

researching, buying, and selling securities, an investor will still need to evaluate a
mutual fund based on investment goals and risk tolerance before making a purchase
decision. Investors should always read the prospectus carefully before investing in
any mutual fund.

Liquidity:

Mutual fund shares are liquid and orders to buy or sell are placed during market
hours. However, orders are not executed until the close of business when the NAV
(Net Average Value) of the fund can be determined. Fees or commissions may or may
not be applicable. Fees and commissions are determined by the specific fund and the
institution that executes the order.

Minimum Initial Investment:

Most funds have a minimum initial purchase of $2,500 but some are as low as
$1,000. If you purchase a mutual fund in an IRA, the minimum initial purchase
requirement tends to be lower. You can buy some funds for as little as $50 per month
if you agree to dollar-cost average, or invest a certain dollar amount each month or
quarter.

Disadvantages of mutual funds:

 Risks and Costs:

Changing market conditions can create fluctuations in the value of a mutual fund
investment.

There are fees and expenses associated with investing in mutual funds that do not
usually occur when purchasing individual securities directly.

As with any type of investment, there are drawbacks associated with mutual funds.

 No Guarantees. The value of your mutual fund investment, unlike a bank

deposit, could fall and be worth less than the principle initially invested.
And, while a money market fund seeks a stable share price, its yield
fluctuates, unlike a certificate of deposit. In addition, mutual funds are not
insured or guaranteed by an agency of the U.S. government. Bond funds,
unlike purchasing a bond directly, will not re-pay the principle at a set
point in time.

 The Diversification "Penalty." Diversification can help to reduce your risk

of loss from holding a single security, but it limits your potential for a "home
run" if a single security increases dramatically in value. Remember, too, that
diversification does not protect you from an overall decline in the market.

 Costs. In some cases, the efficiencies of fund ownership are offset by a

combination of sales commissions, 12b-1 fees, redemption fees, and operating
expenses. If the fund is purchased in a taxable account, taxes may have to be
paid on capital gains. Keep track of the cost basis of your initial purchase and
new shares that are acquired by reinvesting distributions. It's important to
compare the costs of funds you are considering. Always look at "net"
returns when comparing fund performances. Net return is the bottom
line; an investment's true return after all costs are deducted.

Risk Factors in Mutual Funds:

 Mutual funds and securities are subject to market risks and there is no
assurance and no guarantee that the objectives of the mutual fund will be
achieved.

 The sponsor is not libel for any loss resulting from the operation of the scheme
beyond the initial contribution made by it for an amount of rupees 2 crores
toward setting up of the mutual fund.

 Investors in the scheme are not being offered any assured/guaranteed returns.
4. Real Estate
Real Estate or Immovable property is a legal term that encompasses land along with
anything permanently affixed to the land, such as buildings. real estate is often
considered synonymous with real property, in contrast with personal property. The
term real estate and real property usually refer to immovable property.

Advantages to real estate:

1. Diversification Value - The positive aspects of diversifying your portfolio in terms

of asset allocation are well documented. Real estate returns have relatively low
correlations with other asset classes (traditional investment vehicles such as stocks
and bonds), which adds to the diversification of your portfolio. (To read more about
diversifying, see Achieving Optimal Asset Allocation,Introduction To Diversification,
The Importance Of Diversification and A Guide To Portfolio Construction.)

2. Yield Enhancement - As part of a portfolio, real estate allows you to achieve

higher returns for a given level of portfolio risk. Similarly, by adding real estate to a
portfolio you could maintain your portfolio returns while decreasing risk.

3. Inflation Hedge - Real estate returns are directly linked to the rents that are
received from tenants. Some leases contain provisions for rent increases to be indexed
to inflation. In other cases, rental rates are increased whenever a lease term expires
and the tenant is renewed. Either way, real estate income tends to increase faster in
inflationary environments, allowing an investor to maintain its real returns. (To find
out more about inflation, see All About Inflation, The Importance Of Inflation And
GDP and Curbing The Effects Of Inflation.)

3. Ability to Influence Performance - In previous chapters we've noted that real

estate is a tangible asset. As a result, an investor can do things to a property to
increase its value or improve its performance. Examples of such activities include:
replacing a leaky roof, improving the exterior and re-tenanting the building with
higher quality tenants. An investor has a greater degree of control over the
performance of a real estate investment than other types of investments.

Disadvantages to real estate:

1.Lack of Liquidity : Liquidity in finance refers to the ability of an asset to be
exchanged for cash without loss of value. Publicly traded stocks have good liquidity.
Commercial real estate investments typically do not. If you have invested in a small
office building and the time has come to liquidate that investment, it cannot be done
over night, or, at least, it cannot be done overnight without great loss of value.

2. Difficulties in Determining Property Value: When investors are selling a

commercial property, they are really selling a stream of income. Valuing this stream of
income requires two factors to be considered. First, one must quantify the stream of
income itself, and secondly, one must determine the risk associated with that stream
of income. The value of a commercial real estate property depends on how much
income it will generate, the appropriate rate at which that income should be
discounted, and how much that future is likely to grow in the future.

3. Overextended Borrowing: Leverage is a good thing, but too much leverage can be
a bad thing. Leverage increases the potential return on a project, while at the same
time increasing the risk associated with that project. This is why it is better to
optimize leverage than maximize it. Too much borrowing jeopardizes the success of a
real estate investment as surely as too little leverage. It is a matter of balance to be
decided by the investor's taste and preference for the trade-off between risk and
return.

4. Management Expertise Required: Commercial real estate investment requires

active, focused, intense participation or things are likely to go terribly wrong.
Commercial real estate investment is not for the detached.
Where ownership of the property is direct, the commercial real estate investor is going
to need to be involved with searching for the project, evaluating the project, financing
the project, and (if acquired) managing the project. Even where the commercial real
estate investment involves a sale-lease-back arrangement and there is no property to
search for, and the evaluation is cut and dry, the project will still not manage itself.

Why invest in real estate?

 Growth: It can increase in value.

 Income: Can provide income from rental returns.

 Tangible: It is solid asset you can see.

 Add Value: By building or renovating you can add value to it yourself.

Risk factors in real estate

  Property Depreciation: One of the biggest risks of investing in real estate is
the risk of property depreciation during slump in the market.

 Tenant Credit Risk: The value of the building is a function of the rental
income that you can expect to receive from owning it. if the tenant defaults
then the owner loses the rental income.

 Liquidity: All property investment is relatively illiquid to most bonds and

equities.

 Distress Sales: Less liquidity of the real estate market also brings in the risk
of lower returns losses in the event of an urgent need to divest.

 Tax Implications: apart from income tax which is to be paid on rental income
and capital gains, there are two more levies which have to be paid by the
investor i.e. property tax and stamp duty.

5. Bullions:
Bullions are refers to the trading of precious metals. A precious metal is a rare
metallic chemical element of high economic value. A metal is deemed to be precious
if it is rare. The discovery of new sources of one or improvements in mining or
refining processes may cause the value of a precious metal to diminish. The status of a
'precious' metal can also be determined by high demand or market value.

Historically, precious metals were important as currency, but are now regarded mainly
as investment and industrial commodities. Gold, silver, diamonds and some such
other metals are called as precious metals and are an important source of investment
today. Investment in precious metals today is known as investment in bullions.

Advantages of bullions:
 Easier form of investment

 Purity that is minimum value of loss

Disadvantages of bullions:
 Making charges

 Storage and locker charges

 Insurance

 Denomination

6. Derivatives:
The value of derivatives is based on the underlings. A derivative is a financial product
which has been derived from other financial products. Derivatives have become very
common due to the gradual, liberalization, globalization of business and securities
markets.

The main function of derivative is to transfer price, risk associated with fluctuations in
asset values.

Types of derivatives:

1. Forward contracts:
Forward contracts are traded off the stock exchanges and OTC markets. It is a direct
contract between two parties.

2. Futures contracts:
A future contract is an agreement between two parties to buy or sell an assets at a
certain time in future at a certain price. These are basically exchange traded,
standardized contracts.

3. Option contracts:
An option is a contractual right given to an individual allowing him to buy or sell the
assets at a specific price on a certained date.

4. Swaps:
Swaps are private agreements between two parties to exchange cash flows in the
future according to a prearranged formula. They can be regarded as portfolios of
forward contracts.

Advantages to derivatives

Derivatives serve an important function in the market. They are a very good tool to
hedge your risk. Remember that you may lose chance to make extra money if things
turn out extremely well. This is important for you to understand because derivatives
are tools for hedging. If you are willing to take risk and speculate, you make big
money but there is equal chance of losing big money.

Secondly, derivatives help discover price of an asset. How will you decide what price
to pay for a stock of a company? The price of a stock in Capital Market segment
follows the price of a derivative on the stock of the same company. However,
sometimes vice-versa is also true.

Thirdly, derivatives have become a very important tool in today’s market where
businesses, exchanges, banks, and financial centers are connected. The trade among
countries has multiplied but that has also given rise to risk of currency, inflation, and
interest rate. Derivatives can be used to hedge many of these risks.

Lastly (and there will be certainly more), derivatives are an innovative financial
products. There is no risk, no scenarios, which derivatives cannot take care. The sheer
opportunity for product innovation in the area of derivatives has given it a formidable
size in today’s market. As an estimate, in the peak time of 2008, there were more than
$60 trillion derivatives in the market. This is much more than the GDP of the world.

7. Public Provident Funds

 The public provident fund scheme is a statutory scheme of the central govt of
India.

 The scheme is for 15 years.

 The rate of interest is 8% compounded annually.

 The minimum deposit is 500/- maximum is Rs. 70000/- in a financial year.

 One deposit with a minimum amount of Rs. 500/- is mandatory in each

financial year.

 It is not necessary to make a deposit in every month of the year.

 Account can be opened by an individual or a minor through the guardian.

 Joint account is not permissible.

 Those who are contributing to GPF or EDF account can also open a PPF
account.

 A power of attorney holder can neither open nor operate a PPF account.

 The grandfather/mother cannot open a PPF behalf of their minor

grandson/daughter.

 The deposits shall be in multiple of RS.5/- subject to minimum amount of

RS.500/-.

 No age is prescribed for opening a PPF account.

 The PPF scheme is operated through post office and nationalized banks.

 PPF account can be opened either in post office or in a bank.

 Deposit in PPF quality for rebate under section 80-c of income tax act.

 The interest on deposits is totally tax free.

  Deposits are exempt from wealth tax.

 Nominal facility available.

 Best for long term investment.

Public Provident Fund F (PPF) is a savings-cum-tax-saving instrument in India. It

also serves as a retirement-planning tool for many of those who do not have any
structured pension plan covering them. Individuals and Hindu Undivided Families can
open the PPF account. Even in the name of a minor account can be opened. A person
can have only one account in his name. The account can be opened in designated post
offices, State Bank of India branches and branches of some nationalised bank.

Non-resident Indians (NRIs) are not eligible to open an account under the Public
Provident Fund Scheme. If a resident who subsequently becomes NRI during the
currency of maturity period prescribed under Public Provident Fund Scheme, may
continue to subscribe to the fund till its maturity on a non-repatriation basis.

Rate of Return on PPF is 8.8 % p.a. (Compounded annually). Interest is calculated on

the lowest balance between the close of the fifth day and the last day of every month.

The contribution to the account can vary from year to year, from a minimum of Rs
500 to a maximum of Rs 100,000 in any given year.

Investments in a PPF account can be made in multiples of Rs 5, either lumpsum, or in

installments (not exceeding 12 in a year and more than one deposit can be made in a
month). The credit to the PPF account is made on the date of presentation of the
cheque and not on the date of its clearance. This allows flexibility in savings.

The tenure of the PPF account is 15 years, which can be further extended in blocks of
5 years each for any number of blocks. The extension can be with or without
contribution. An account holder, continuing with fresh subscription, can withdraw up
to 60% of the balance to his credit at the commencement of each extended period in
one or more installments but only once in a year.

Every subscription shall be made in cash or through a crossed check or draft or postal
order, in favor of the accounts office, at the place at which that office is situated. In
case of any check, draft or postal order should be drawn at a bank or post office at that
place.

Nomination facility is available. In the case of joint nominees, it is possible to allocate

the percentage of benefits to each nominee.

A loan repayable in 36 months can be obtained in or after the 3rd year, up to 25 per
cent of the balance at the end of the preceding financial year. The interest charged on
the loan is 1 per cent higher for the first 36 months, and thereafter, 6 per cent on the
outstanding amount. A second loan can be obtained before the end of the 6th financial
year if the first one is fully repaid.

Withdrawals from PPF account

A withdrawal is permissible every year from the 7th financial year of the date of
opening of the account. Only if the amount does not exceed 50% of the balance at the
end of the 4th preceding year, or the year immediately preceding the year of the
withdrawal, whichever is lower, less the amount of loan if any. There is no tax on the
amount withdrawn. The withdrawal can be used to reinvest in the PPF account.

PPF defaults and revival

If the PPF account-holder fails to deposit the minimum Rs 500 in a given financial
year, the account is considered as discontinued but the interest will continue to accrue
and be paid at the end of the term. Loans and withdrawals are not allowed. This
account can be revived on payment of a fee of Rs 50 for each year of default, along
with the arrears of subscription of Rs 500 for each such year

PPF tax concessions

Interest earned is fully exempt from tax without any limit. Annual contributions
qualify for tax rebate under Section 80C of Income tax Act. Contributions to
PPF accounts of the spouse and children are also eligible for tax deduction.
Balance in PPF account is not subject to attachment under any order or decree
of court. But, Income Tax authorities can attach the account for recovering tax
dues. The highets amount that can be deposited is 1,00,000

Interest rates over time

 01.04.1986 to 14.01.2000.............................. 12%

 15.01.2000 to 28.02.2001............................. 11%
 01.03.2001 to 28.02.2002 ............................ 9.5%
 01.03.2002 to 28.02.2003............................. 9%
 01.03.2003 to 30.11.2011.............................. 8%
 01.12.2011 to 31.03.2012.............................. 8.6%
 01.04.2012 onwards.................................... 8.8%

8. Commodities:
Investor’s interest in commodities has increased dramatically in recent years as the
asset class has outperformed traditional assets such as stocks and bonds. The
performance of commodities as an assets class is usually measured by the returns on a
commodity index. Commodity prices have been driven higher by a number of factors,
including increased demand from emerging countries that need oil, steel and other
commodities to support manufacturing and infrastructure development.

Commodities are the real assets, unlike stocks and bonds, which are financial assets.
Commodities, therefore, tend to react to changing economic fundamentals in different
ways than traditional financial assets. For example commodities are one of the few
assets classes that tend to benefit from rising inflation. As demand for goods and
services increases, the price of those goods and services usually goes up as well as do
the prices of the commodities used to produce those goods and services. Because
commodities price usually rise when inflation is accelerating, investing in
commodities may provide portfolios with a hedge against inflation. commodities also
give the investor the ability to participate in virtually all sectors of the world economy
and have the potential to produce return that tend to be independent of other market.

What Is Commodity Trading?

Commodity futures markets allow commercial producers and commercial consumers

to offset the risk of adverse future price movements in the commodities that they are
selling or buying.

In order to work a futures contract must be standardised. They must have a standard
size and grade, expire on a certain date and have a preset tick size. For example, corn
futures trading at the Chicago Board of Trade are for 5000 bushels with a minimum
tick size of 1/4cent/bushel ($12.50/contract).

A farmer may have a field of corn and in order to hedge against the possibility of corn
prices dropping before the harvest he might sell corn futures. He has locked in the
current price, if corn prices fall he makes a profit from the futures contracts to offset
the loss on the actual corn. On the other hand, a consumer such as Kellogg may buy
corn futures in order to protect against a rise in the cost of corn.

In order to facilitate a liquid market so that producers and consumers can freely buy
and sell contracts , exchanges encourage speculators. The speculators objective is to
make a profit from taking on the risk of price fluctuation that the commercial users do
not want. The rewards for speculators can be very large precisely because there is a
substantial risk of loss.
Advantages of commodity trading

Leverage. Commodity futures operate on margin, meaning that to take a position only
a fraction of the total value needs to be available in cash in the trading account.

Commission Costs. It is a lot cheaper to buy/sell one futures contract than to buy/sell
the underlying instrument. For example, one full size S&P500 contract is currently
worth in excess off $250,000 and could be bought/sold for as little as $20. The
expense of buying/selling $250,000 could be $2,500+.

Liquidity. The involvement of speculators means that futures contracts are reasonably
liquid. However, how liquid depends on the actual contract being traded.
Electronically traded contracts, such as the e-minis tend to be the most liquid whereas
the pit traded commodities like corn, orange juice etc are not so readily available to
the retail trader and are more expensive to trade in terms of commission and spread.

Ability to go short. Futures contracts can be sold as easily as they are bought
enabling a speculator to profit from falling markets as well as rising ones. There is no
uptick rule for example like there is with stocks.

No Time Decay. Options suffer from time decay because the closer they come to
expiry the less time there is for the option to come into the money. Commodity futures
do not suffer from this as they are not anticipating a particular strike price at expiry.

Disadvantages of commodity trading

Leverage. Can be a double edged sword. Low margin requirements can encourage
poor money management, leading to excessive risk taking. Not only are profits
enhanced but so are losses!

Speed of trading. Traditionally commodities are pit traded and in order to trade a
speculator would need to contact a broker by telephone to place the order who then
transmits that order to the pit to be executed. Once the trade is filled the pit trader
informs the broker who then then informs his client. This can take some take and the
risk of slippage occurring can be high. Online futures trading can help to reduce this
time by providing the client with a direct link to an electronic exchange.

You might find a truck of corn on your doorstep! Actually, most futures contracts are
not deliverable and are cash settled at expiry. However some, like corn, are
deliverable although you will get plenty of warning and opportunity to close out a
position before the truck turns up.
Tim Wreford operates Online Futures Trading, a website that provides information
and resources for traders. Tim also provides an article detailing the development of a
day trading system, the results of which are updated daily on the site.

How To Decide Which Is Right Choice Of Investment

As there are lot of investment options that have flooded the Indian markets with
varying risk and returns, making the right choice of investment has become a very
difficult task. Managing financial portfolio for an individual has become a very tough
job. One way to overcome this is to consult a portfolio manager to manage the
portfolio.

Portfolio management involves deciding what assets to include in the portfolio, given
the goal of the portfolio owner and changing economic conditions. Selections
involves deciding what assets to purchase, how many to purchase, when to purchase
them, and what asset to divest. These decisions always involve some sort of
performance measurement, most typically expected return on the portfolio, and the
risk associated with this return.

All investment needs and goals can therefore be translated into short-term, medium-
term, and long-term. While making the right choice of investment a reason should
bear in his mind that risk and returns go hand in hand. Higher the risk, higher the
possibility of earning a good return.

The options one chooses to put his money in will strongly depend on his risk taking
ability. The ability to take risks depends on largely on personal circumstances and
factors like age, past experiences with investing, level of responsibility, etc.
depending on this ability a person can go for following approaches:

 Conservative

 Moderate

 Aggressive

The discussion of these approaches is discussed in bellow;

Conservative
These investors take only limited risk by concentrating on secure, fixed-income
investment etc.

Moderate
Such investors take moderate risk by investing in mutual funds, bonds, blue chip
stocks etc.

Aggressive
These are investors who take major risk on investments in order to have high returns
like speculative or unpredictable equity shares, etc.Investment planning also helps to
decide upon the right investment strategy would also depend upon your age, personal
circumstances and your risk appetite. These aspects are typically taken care of during
investment planning.

What Investors Should Do To Achieve Financial Benefits

1. Risk is inevitable-manage it

Once you decide to put your money to build long-term wealth, you have to decide, not
weather to take risk, but what kind of risk you wish to take. Determining your risk
appetite involves measuring the impact of a loss on your financial health and mental
well being too.

Money in a saving account is safe. But inflation will erode its' value, a risk that would
almost ensure your failure to reach your goal of long-term wealth.

2. Start early-benefit from compounding

There is no truth to statements like ' I am too young to start saving'.

For example: if you want to be crorepati by 45, you would need to invest only RS.1.6
lakh per year if you start at the age of 25. But if you start at the age of 35 you will
need to invest RS. 5.7 lakh per year to achieve your crorpati at 45' objective.

If you start saving and investing early, it will set the stage for significant financial
growth later in your life.

3. Have realistic expectations- greed is bad

Most people invest in stocks and expect them to double in quick time. If you want to
double your money, either buys a lottery or go to a casino. Stock market is not a
gambling.

4. Invest regularly-use time not timing

Market time is impossible. You may be lucky once or twice but history has not
produced a single investor who has made money regularly by timing the market.

Don't panic when the market is dropping and don't become greedy when prices are
rising. Emotions can be the greatest enemy to your long term investment plan.

5. Stay invested- be a marathon runner

The market has seen lots of ups and downs, but history shows that over time the value
of a well-diversified portfolio will increase. That’s because prices do not rise every
day-they spurt only during the few short intervals of time.

Stay invested for longer periods. it will keep you from making common mistakes such
as timing the market, picking bad stocks, speculating on stocks that are worthless,
investing on borrowed money, trying to make a killing in some fad-of-the-day socket.

6. Don't churn your investments-it only increases costs

Don't buy stocks. Buy businesses and that too after due research. and since businesses
generally don't change fortunes overnight, there is no need to get in/out frequently as
and when some short-term events play out in the market.

7. Asset allocation-each investment class is important

Build a portfolio that is diversified among different types of investments. because

different sectors of the market move at different times in different patterns, asset
allocations tends to reduce the risk of huge losses and improves the chances of stable
returns. Lack of a well diversified portfolio, would leave you vulnerable to
fluctuations of a particular investment.

8. Sell your loser-hold the winner

Historically it is seen that investors book profits by selling the stocks, which have
appreciated, but continue to hold on to stocks that have declined, in hopes of a bounce
back. This one single fact has been the reason why most investors don't get the true
benefit of the markets.

9. Hot tips usually burn your investments-stay away from them

Relying on so called hot tips from someone, be it your friend, broker, neighbors or
anyone else, is akin to gambling. Sure you may sometimes be lucky with tips, but they
will never make you an informed investor, which is what you need to be to be
successful in the long run. Focus on the future of the company whose stocks you plan
to acquire and not on the share price or some hot news. If you have got some
information, chances are that so have many others and so the information is already
factored into the market price.

10. Taxes are important-but not that important

The primary goal of investing is long-term growth of your money through sound
investment decisions. Tax implications are important, and you should always try to
minimize taxes thereby maximizing your after-tax returns. But putting taxes above all
else can often lead to poor decisions.

For instance: People invest in insurance because it gives tax sops. But in the process
they forgo opportunities of earning good returns and end-up compromising on the
achievements of their financial objective.

when you keep above rules in mind chances are that you will more often than not
turn your dreams into reality.
 CHAPTER-3
REVIEW
OF LITERATURE

Review Of The Literature

VilasShortriya (2007) explored the importance of personal investment and factors to
be considered while investing and creating portfolio. Vilas shrotriya (2007) said there
could be different investment motives for making investment motives for making
investment depending on need and circumstances of individual.
The various motives for investing are:

 Capital Appreciation

 Income

 Liquidity

 Hedge for inflation

Factors infusing investment decisions are

 Required Return

 Risk taking Capability

 Time Frames

 Safety

 Taxable Income

Mohan Shivanand (2007) gave 12 investment most availed by young Indians. Some
of them are:

Types of investment: %Age of people who invest

 Life Insurance: 90%

 BankFDs: 76%

 Property: 44%

 Postal saving schemes: 40%

 Gold: 38%

Most men said equity shares were the riskiest investment while most women said it
was chit funds. Men invest to save taxes while women for kids education. 70% of
young people had never taken loans.

Shubangi pandey (2006) conducted a study on fixed deposits and revealed that it has
become a favorite investment options for large group of investment community. Time
has again come back for investors who prefer investment in fixed deposits and banks
have started different schemes to attract customers for investing in fixed deposits.

Rajan (1998) highlighted investor's characteristics primarily on their investment size

of life cycle of the investors and their investment pattern.

The study undertaken by Srivastava, et al (1995) is generic in nature, and segmented

mutual funds investors based on for criteria
  Investors Motives

 Investor Loyalty

 Investment Decision

 Product Innovation

Khurshid Ali (2003) gave parameters that must be considered by prospective investor
so that investment suits his requirements. the parameters were investor's objectives,
investment risk involvement, management quality and many more.

Pooja Meswani (2007) said that Indian real estate has become hot property for
investors worldwide. It is an opportunistic investment; bas Indian real estate offers
better returns than similar markets such as Brazil and Russia. The high expected rate
of return comes from the high expected demand from varied sectors in the economy.
Organized retail, for instance, is growing at 30% a year. Also companies from sectors
such as automobiles are setting up manufacturing hubs leading to more demand for
commercial space. At present, real estate firm's account for 2.5-3.5% of the aggregate
market capitalization. Funds have also started investing in infrastructure development
as infrastructure is a constraint and may hamper growth of real estate to some extent.
if opportunities are rightly identified, it will boost real estate.
 CHAPTER-4
OBJECTIVES
OF THE STUDY

Objectives of the study

Whenever a study is conducted, it is done on the basis of certain objectives in mind. A
successful completion of a project is based on the objectives of the study that could be
stated as under: -
 To study the perception and preferences of individuals towards various
investment avenues and most preferable alternative of investment.
 To know the factors that affects the investor while investing in various
investment schemes.
 To analyze the satisfaction level of the investors.
 CHAPTER-5
RESEARCH
METHODOLOGY

Research Methodology

Research methodology is a way to systematically solve the research problem. it may

be understood as a science of studying how research is done scientifically. it consists
of various steps adopted in the study of the research problem.
Research Design

Research Design is an arrangement of conditions for collection of and analysis of data

in a manner that aims to combine relevance to research purpose with economy of
producer. The research design is exploratory in nature.

Data Collection

1. Primary Data

Primary Data is defined as the data collected for the first time. it is new in nature. The
primary data for this study will be collected by questionnaire method.

In questionnaire method, a structured and non-disguised questionnaire will be

personally produced do the respondent with a request to answer the question given
therein and then return it to the researcher.

2. Secondary Data

This type of data has already been collected by someone else and has already passed
through statistical process. The source of secondary data are:- books, websites,
magazines, journals and newspapers etc.

For this study Primary and Secondary data both were used.

Sampling plan

The data was collected from various investors by the use of sample survey method.

The following factors have to be decided within the scope of sampling plan:-

1. Defining the Universe

The universe comprises of investors residing in Chandigarh city who invest in

various securities of secondary markets.

2. Sampling Units

A sampling unit is the basic unit containing the elements of the population to be
sampled. In this case it is the investors randomly taken.

3. Sample Size

It indicates the number of units to be surveyed. Though a large sample gives more
reliable results than a small sample but due to constraints of times, the sample size is
restricted to 50 investors.
 CHAPTER-6
LIMITATIONS
OF THE STUDY

Limitations of the Study

Although the survey has been conducted very cautiously but due to small sample size,
some limitations are there. The main limitations are:

1. Area of study is limited to the one city only and the findings may not hold true
 for large cross section of population.

2. The sample size is small for the accurate study of the customer.

3. The investor's behavior is influenced by number of conscious and unconscious

factors governing their investment decisions that are not fully covered.

4. The study is limited to the general investments available, not the full scenario
has been considered.

5. The method of convenient sampling has been used to study the behavior, but
the chosen sample might not be the true representation of the whole universe.

6. Some time the respondents were not interested in survey, so they did not find
it necessary to answer, or they may provide the wrong information just to fill
the questionnaire.

7. There may be biasness due to convenience sampling.

 CHAPTER-7
DATA ANALYSIS AND
INTERPRETATION

1. Occupation of respondent…………………..

Table 1.1
 Occupation

Occupation Number of respondents Percentages

Businessmen 25 50%
Servicemen 19 38%
Student 6 12%
Total 50 100%

Graph 2.1
Occupation

Interpretation: This figure show that most of the people are businessmen that is 25,
servicemen are 19, and students are 6.

2. What is your annual income………………………

Table 1.2

Annual Income

Income Number of respondents Percentages

Below 2 lakh 19 38%
2-5 lakh 18 36%
 More then 5 lakh 13 26%
Total 50 100%

Graph 2.2

Annual income

Interpretation: This figure show that most of the people’s annual income is below 2
lakh that is 19,2-5 lakh that is 18, and more then 5 lakh are 13.

3. Which type of investment you prefer……………………

Table 1.3

Investment period

Time period Number of respondents Percentages

Long term 6 12%
Medium term 18 36%
Short term 26 52%
 Total 50 100%

Graph 2.3

Investment period

Interpretation: this figure shows that more people prefer to invest in short investment
period that is 26, 18, in medium term, and 6 in long term investment period.

4. Where do you invest your money………………………..

Table 1.4

Investment instrument

Instruments Number of respondents Percentages

Mutual funds 3 6%
Insurance 6 12%
Property 6 12%
Share market 18 36%
Bank 5 10%
Bonds 12 24%
Any other 0 0
Total 50 100%
 Graph 2.4

Investment instruments

Interpretation: this figure show that most of the people invest there money in share
market that is 18, and then bonds 12, insurance and property is 6, bank is 5 and then
mutual fund is 3.

5. What percentage of annual income you prefer for making an

investment………………………….

Table 1.5

Percentage of annual income

Annual income Number of respondents Percentages

Less then 10% 21 42%
10-20% 10 20%
20-30% 10 20%
More them 30% 9 18%
Total 50 100%
 Graph 2.5
Percentage of annual income

Interpretation: The investors investing, invests varying amounts in the instruments.

Here we have studied that the proportion of income invested by the investor is mostly
less then 10 that is 21, after that the people investing 10-20, are comparatively less in
number.

6. The main purpose of your investment is………………………….

Table 1.6
Investment purpose

Investment purpose Number of respondents Percentages

Future needs 16 32%
Risk protection 9 18%
Tax advantage 17 34%
Speculative 8 16%
Total 50 100%
 Graph 2.6

Investment purpose

Interpretation; this figure show that the main purpose of many people to invest the
money for the tax advantage that is 17 after then for future needs that is 16 and then
some people ‘s purpose is risk protection that is 9 and the speculative is 8.

7. What would be your expected rate of return per annum……………………

Table 1.7

Expected rate of return

Rate of return Number of respondents Percentage

Less then 10% 13 26%
10%-15% 9 18%
15%-25% 15 30%
More then 25% 13 26%
Total 50 100%
 Graph 2.7

Expected rate of return

Interpretation: this figure show that expected rate of return of people refers to 15%-
25% that is 15%, after then more then 25%, that is 13, and less then 10 that is 13, and
then 10-15% that is 9.

8. What criteria you consider for selecting investment

decision…………………..

Table 1.8

Investment decision

Investment decision Number of respondents Percentages

Brand name of the company
Annual report of the company
Quarterly report of the company
Word of mouth
Financial media
Personal preferences
9 18%
15 30%
5 10%
6 12%
8 16%
7 14%
others - -
Total 50 100%

Graph 2.8

Investment decision

Interpretation: this figure show the selecting investment decision regarding the
investors, the investor much based on the annual report of the company that is 15, for
their investment decision, after then they are based on other situation of investment
decision.

9. Whom you consult while investing………………………………

Table 1.9

Medium

Medium Number of respondents Percentages

Your friends and relatives 12 24%
Financial consultants 20 40%
News papers and magazines 18 36%
Total 50 100%
 Graph 2.9

Medium

Interpretation: This figure shows that medium that consults the people that
invest in the different securities. They are consult by the friends and relatives,
that’s 12, financial consultant that is very high then others like 20, and news
papers and magazine are 18.

10. Are you satisfied with the amount of return generated by your investment
avenues…………………………..

Table 1.10

Level of satisfaction

Level of satisfaction Number of respondents Percentages

Highly satisfied 8 16%
Satisfied 21 42%
Neutral 20 40%
Dissatisfied - -
Highly dissatisfied 1 2%
Total 50 100%
 Graph 2.1

Level of satisfaction

Interpretation: About half of the investors are satisfied by their investments, 1 are
dissatisfied and 20 are Neutral.

11. Do you agree that Government Securities are less risky as compare to other
investment instruments…………………………….

Table 1.11

Compare govt security to another

Investment instrument

Investment instruments Number of respondents Percentages

Yes 27 54%
No 23 46%
Total 50 100%
 Graph 2.11

Compression of Investment instruments

Interpretation: The above figure show that 27 person agree to that the Govt security
is less risky then other investment instruments, and 23 are not agree with this.

12. Do you want to shift your investment to another investment

tool…………………………………………

Table 1.10

Decision of investment

Decision of investment Number of respondents Percentages

Yes 28 56%
No 22 44%
Total 50 100%
 Graph 2.11

Decision of investment

Interpretation: The people who are interested in shifting from the investment
alternative are 28, in number and the not interested in shifting are 22.
 CHAPTER-8
FINDINGS OF THE STUDY

Findings of the Study

 In this research our objectives was to know the awareness level of investors
regarding various investment tools: we found that the awareness about shares,
fixed deposits and govt securities is the highest in all, i.e. all the 57
respondents are aware of these particular instruments.

 To compare the potential of different investment tools as per investors’'

preferences was another objective of the study. In this we found the investors
have been investing in various instruments, the highest number of people are
investing in fixed deposits i.e. 23. In insurance and govt. securities, it is 17 and
19. 16 in mutual funds, 14 in shares and last in real estate it is 11.

 Different factors considered by investors while investing are risk, return, tax
benefits and capital appreciation. Out of these factors considered by the
investor before investing into any type of instrument, the return on investment
 factor is the prominent one, because 35% of the respondents. After that there
are risk, capital appreciation and tax benefits.

 By studying about the most preferred time span of investment we found that
the investment period for which the investor invest, is more then three year in
most of the cases, where the people investing for the short period is less.
Around 35% respondents were of the view that people invest for longer
period.
 CHAPTER-9
CONCLUSION

Conclusion
The basic purpose of making the analysis from the viewpoint of general investors was
to know the basic differences between the investments patterns followed, that signify
the awareness of an investor, so as to analyze the clear study of the overall investors'
habits. There are various factors considered by the investor while making investment
like risk, return, safety, and liquidity.

In this we have also studied that which type of investment tools are mostly preferred
by the investor, the time span for which he invest and whether they are satisfied with
their current portfolio or they want to shift to some other type of investment
alternative.
 CHAPTER-10
SUGGESTIONS FOR THE
STUDY

Suggestions
All these suggestions are drawn on the basis of self-analysis at the time of interview
of respondents as well as from the analysis of the study.

 The indifferent attitude of the people toward security market especially to the
stock market needs attentions through more promotions, better customer
services and the specialized services.

 Keeping in view of the factors that have been outlined, the specific portfolio of
the concerned investor viz. business or service investor should be such that it
 leads to achieve his investment objectives.

 More business can be taped by education of the people about the online
trading that will help them to invest in stock market after the age of their
retirement as well as for the persons who have the capital but due to little
amount cannot setup a business can have their business of investing in shares
and securities.

 The company should concentrate more on the service class investors for stock
market options since it is difficult to tap the business people who do not invest
in shares, since they have the least time to consider about the shares.

 The USP (unique selling preposition) i.e. 5 paisa the commission on the share
broking needs to be more promoted and to hold the campaigns for this
purpose.

 If the business in terms of awareness level of the company is less than that of
the actual business taped in the specific cities then there is a need to develop
the strategies to bring the business from other competitors.
 CHAPTER-11
BIBLIOGRAPHY

BIBILIOGRAPHY

BOOKS:
1. Shashi K. Gupta-Rosy Joshi "Security Analysis Portfolio & Investment
Management.

2. V.A Avadhani, Investment Management, Himalaya Publishing House, Mumbai, 3rd

edition 1999.

3. Francis, J.C Management of Investments, McGraw-hill Book Company, 2nd

edition.

INTERNET WEBSITES:
 www.wickypedia.com

 www.yahoo.com

 www.ask.com

 www.investopedia.com

Articles:
Rajan, R.V. (1998),"Stages in life cycle and investment patter." The Indian journal of
commerce, vol.51nos.2&3

Vikas Shrotria (2006),"Fundamentals of safe investment" Portfolio organizer ICFAI

university press, April

Shubhangi Pandey (2006),"The come back of FD" portfolio organizer ICFAI

university press, October

Khurshid Ali (2003),"Factors influencing investment decisions" The business review,

vol.10 no.1, September

Srivastava, et al (1995),"Indian Mutual Funds: Investors segmentation" Development

of stock market in India, New Delhi.

.
 CHAPTER-12
ANNEXURE

Annexure

Questionnaire
Dear Sir/Madam,
This information provided by you will be utilized in completion of my BBA
project.
I will be thankful for the time & effort you will spend in filling the questionnaire.

NAME : ____________________________

QUALIFICATION : Undergraduate Graduate

Post Graduate Doctorate
 CONTACT NO : _____________________________

1. Occupation of respondent?

Businessmen

Servicemen

Student

2. What is your annual income?

Below 2 Lakh

2-5 Lakh

More than 5 Lakh

3. Which type of investment you prefer?

Long term

Medium term

Short term

4. Where do you invest your money? (Can Tick More than One)

Mutual funds Insurance Property

Share market Bank Bonds

Any other___________________

5. What percentage of annual income you prefer for making an investment?

Less than 10% 10% - 20%

20% - 30% More than 30%

6. The main purpose of your investment is

Future Needs Risk Protection

Tax advantage Speculative

Others, please specify______________________

7. What would be your expected rate of return per annum?

Less than 10% 10% - 15%

15% - 25% More than 25%

8. What criteria you consider for selecting investment decision?
Brand name of the company Annual reports of the company

Quarterly reports of the company Word of mouth

financial media Personal preference
others, please specify______________________

9. Whom you consult while investing.

Your friends and relatives

Financial Consultants

News papers and magazines

10. Are you satisfied with the amount of return generated by your investment
avenues?
Highly Satisfied

Satisfied

Neutral

Dissatisfied

Highly Dissatisfied

11. Do you agree that Government Securities are less risky as compare to other
investment instruments?
Yes
No
12. Do you want to shift your investment to another investment tool?
Yes
No