UNIVERSITY OF MUMBAI

PROJECT REPORT ON

“A STUDY OF PATTERN OF INVESTMENT AMONG MIDDLE

CLASS EMPLOYEES IN MUMBAI”

IN PARTIAL FULFILLMENT FOR MASTER OF COMMERCE

(SEMESTER III)
2018-19

PROJECT GUIDE:
DR. SHAIKH FARHAT FATMA

SUBMITTED BY:
RUCHIKA PRABHAKAR PADYAL
Roll No: 7449

SPECIALISATION IN:
ACCOUNTANCY

MAHATAMA EDUCATION SOCIETY’S

PILLAI’S COLLEGE OF ARTS, COMMERCE & SCIENCE
NEW PANVEL

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 PILLAI COLLEGE OF ARTS, COMMERCE AND SCIENCE
DR K.M. VASUDEVAN PILLAI'S CAMPUS
SECTOR - 16, NEW PANVEL, 410206

CERTIFICATE
To whomsoever It May Concern,

This is to certify that Miss. RUCHIKA PRABHAKAR PADYAL has successfully

completed the project work titles A STUDY OF PATTERN OF INVESTMENT AMONG
MIDLLECLASS EMPLOYEES IN MUMBAI in partial fulfillment of requirement for the
award of MASTER OF COMMERCE (ACCOUNTANCY) prescribed by PILLAI COLLEGE
OF ARTS,COMMERCE AND SCIENCE.
This Project is the record of authentic work carried out during semester- III for the
Academic year 2018-19.

PRINCIPAL EXTERNAL EXAMINER

PROJECT GUIDE COORDINATOR OF MCOM

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 ACKNOWLEDGEMENT

I am thankful to Mumbai University for giving me an opportunity to showcase my talent

in this form of project. I am thankful to the College Principal Dr. Gajanan Wader and Vice
Principal Prof. A.N. Kutty of Pillai’s College of Arts, Commerce & Science for making all the
facilities available & espousing the cause of this research. This project A STUDY OF
PATTERN OF INVESTMENT AMONG MIDDLE CLASS EMPLOYEES IN MUMBAI
would not have been complete without the able support of my Project Guide Dr. SHAIKH
FARHAT FATMA who provided me valuable advice throughout this project work. I thank her
immensely for her guidance. I would also extend my thanks my coordinator Dr. Gajanan
Wader & teachers, friends, librarian and all those who guided and helped me in the completion
of this project. I am also grateful to my parents and almighty who have provided wisdom and
inspiration.

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 DECLARATION

I RUCHIKA PRABHAKAR PADYAL student of MASTER OF COMMERCE

(ACCOUNTANCY), 7449, MAHATMA EDUCATION SOCIETY’S PILLAI COLLEGE
OF ARTS COMMERCE & SCIENCE hereby, declare that I have completed the project
report on A STUDY OF PATTERN OF INVESTMENT AMONG MIDDLECLASS
EMPLOYEES IN MUMBAI in the academic year 2018-2019. The information submitted by
me is true & original to the best of my knowledge.

Signature

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 INDEX
CH. SUB CONTENTS PG.
NO. NO. NO
ACKNOWLEDGEMENT i
DECLARATION ii
EXECUTIVE SUMMARY 03
1. INTRODUCTION 04
2 RESEARCH METHODOLOGY 08
3 REVIEW OF LITERATURE 11
4 COMPANY PROFILE 16
5 CONCEPTUAL FRAMEWORK
5.1 CONCEPT OF INVESTMENT 23
5.2 TYPES OF INVESTMENT AVENUES- SHARES 25
5.3 DEBENTURES & BONDS 29
5.4 GOLD & SILVER 37
5.5 LIFE INSURANCE CORPORATION 38
5.6 PUBLIC DEPOSITS 43
5.7 MUTUAL FUND 47
5.8 REAL ESTATES 55
5.9 RISK FACTORS INVOLVED IN INVESTMENT 59
5.10 PERCEPTION LEVEL OF MIDDLECLASS EMPLOYEES 61
5.11 CURRENT PATTERN OF INVESTMENT OF MIDDLECLASS 62
EMPLOYEES
6. COLLECTION, ANALYSIS & INTERPRETATION OF 66
DATA
7. CONCLUSION, SUGGESTIONS& FINDINGS 83
BIBLOGRAPHY 87
APPENDIX 89

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 LIST OF TABLES
TABLE NO TABLE NAME PAGE NO
6.1 Age group 66
6.2 Annual Income 67
6.3 Awareness 68
6.4 Best option 69
6.5 Sector 70
6.6 Objectives 71
6.7 Factors 72
6.8 Preferences 73
6.9 Information 74
6.10 Analysis 75
6.11 Investment 76
6.12 Invest 77
6.13 Period 78
6.14 Return 79
6.15 Tax saving 80
6.16 Invested 80
6.17 Purpose 81

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 EXECUTIVE SUMMARY
Saving form an important part of any economy of any nation with saving invested
various option available to people. Investing money is a crucial and deciding the avenues
where to invest needs a lot of planning. In India people are more conservative and hence prefer
investments that are less risky. Similarly there are other demographic factors like age, income
level, gender which affect their decision
As the availability of financial products increase, perception of investors towards such
avenues changes over a period of time. It becomes important for a marketer to understand the
perception of investors towards investment avenues to successfully pitch the product. The
objective of this study is to understand the approaches that have been used by investors before
making any investment. We will also study the expectations of investors/salaried persons before
making an investment in any of the avenues, and to understand types of risk which has to be
consider before selecting any investment avenues.
Individuals are more aware about the different investment avenues. Among all
investments avenues individuals consider saving account, fixed deposit, public provident
.Salaried Individuals are aware about share market, mutual funds but they consider these
investments avenues as a high risk investments avenue.
It also consist of the factors considered by salaried persons and the perception level of
investors. The project comprises of different investment avenues available for investment. The
project consist of primary and secondary data.

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 1. INTRODUCTION
The concept of investment has many meanings. Investment is the employment of funds with
the aim of getting return on it. It is the commitment of funds which have been saved from
current consumption with the hope that some benefit will receive in future. Thus, it is reward for
waiting for money. Savings of the people are invested in assets depending on their risk and
return.
The money one earns is partly spent and the rest is saved for meeting future expenses,
instead of keeping savings idle one may like to use savings in order to get returns on it in the
future, this is called as investment. In an economic sense, an investment is the purchase of
goods that are not consumed today but are used in the future to create wealth. In finance, an
investment is a monetary asset purchased with the idea that the asset will provide income in the
future or appreciate and be sold at a higher price. Mere earning will not help one to secure the
future, so it becomes important to invest.
Investment avenues are the outlet of funds avenues. Investors can select any one or more
avenues depending upon their needs. All categories of investors are equally interested in safety,
liquidity and reasonable return on the funds invested by them. Investment avenues in India are
continuously increasing along with the new developments in the financial market. Thus, a wide
variety of investments or securities are available to the investors. However, the investors should
be very careful about their hard earned money. An investor can select the best avenues after
studying the merits and demerits of the different investment avenues.
Before making any investment in any of the avenues, one must ensure to: Obtain written
documents explaining the investment, Read and understand documents, Verify the legitimacy of
the investment, Find out the costs and benefits associated with the investment, Assess the risk
return profile of the investment, Know the liquidity and safety aspects of the investment,
ascertain if it is appropriate for your specific goals, compare these details with other investment
opportunities available, examine if it fits in with other investments you are considering or you
have already made, deal only through an authorized intermediary, seek all clarifications about
the intermediary and the investment, explore the options available to you if something were to
go wrong and then if satisfied make the investment.

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 There are varieties of investment avenues or alternatives. Investment is now possible in
corporate securities, public provident fund, mutual fund etc. Following are the some investment
avenues which investor can select for investment:

debentures

bonds shares

types of
investment
avenues
gold and
mutual fund
silver

public
Lic
deposits

Investing is a wide spread practice and many have made their fortunes in the process. The
starting point in this process is to determine the characteristics of the various investments and
then matching them with the individual needs and preferences. All personal investing is
designed in order to achieve certain objectives. These objectives may be tangible such as buying
a car, house, etc. and intangible objective such as social status, security, etc. Similarly, these
objectives may be classified as financial or personal objectives.
Financial objectives are safety, profitability and liquidity. Personal or individual objectives
may be related to personal characteristics of individual such as family commitments, status,
dependents, educational requirements, income, consumption and provision for retirement etc.
Every investor has certain specific objectives to achieve through his long term/ short term
investment. Such objectives may be monetary/ financial or personal in character. The objectives
include safety and security of the funds invested (principal amount), profitability (through
interest, dividend and capital appreciation) and liquidity (convertibility into cash as and when
required). These objectives are universal in character as every investor will like to have a fair
balance of these three financial objectives. An investor will not like to take undue risk about his
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principal amount even when the interest rate offered is extremely attractive. These objectives or
factors are known as investment attributes.
There are personal objectives which are given due consideration by every investor while
selecting suitable avenues for investment. Personal objectives may be like provision for old age
and sickness, provision for house construction, provision for education and marriage of children
and finally provisions for dependents including wife, parents or physically handicapped member
of the family.
The three golden rules for all investors are:
• Invest early • Invest regularly • Invest for long term and not for short term
Indian financial industry is considered as one of the strongest financial sectors among
the world markets. Many industry experts may give various reasons for such Indian financial
industry reputation, but there is only one answer which no one can deny, is the effective control
and governance of the country s supreme monetary authority the RESERVE BANK OF INDIA
(RBI). Financial sector in India has experienced a better environment to grow with the presence
of higher competition. The financial system in India is regulated by independent regulators in
the field of banking, insurance, and mortgage and capital market.
Government of India plays a significant role in controlling the financial market in India.
Ministry of Finance, Government of India controls the financial sector in India. Every year the
finance ministry presents the annual budget on 28th February. The Reserve Bank of India is an
apex institution in controlling banking system in the country. Its monetary policy acts as a major
weapon in India's financial market.

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 OBJECTIVES OF THE STUDY-
1. To find out the various factors consider by the middle class employees before making
investment
2. To study the different investment avenues available for investment.
3. To analyze the trend of investments in salaried class of investors.
4. To understand the perception level of investors towards different investment options.

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 2. RESEARCH METHODOLOGY
Introduction
Research refers to the search for practical knowledge, and it is a scientific investigation
for the search for relevant information. Research consists of comprising and redefining problem,
formulating, solutions, collecting, organizing, and evaluating data, making conclusions and
carefully testing conclusion clarify the accuracy of conclusion.
For the successful completion of this project apart from the guidance from various
people, two type of data collection was used viz. Primary data collection and secondary data
collection. My methodology of primary data collection was questionnaire consisting of 17
questions.
My methodology for secondary data collection was only internet search engines like
Google, website of the bank, etc. Thus, I would conclude by saying that this project is a mainly
based on secondary data but it’s also include Primary data.

RESEARCH INSTRUMENT-
After the research is selected, the data collection through questionnaire, which is
Designed by covering the objective is defined.
GEOGRAPHICAL SCOPE-
This study revolves around pattern of investment among middle class employees in
Mumbai.
THE PROBLEM-
The respondent of research study consist only those people who earning fixed Income as
salary so the study included only salaried group of people. The Investment pattern of the
salaried employees is different due to safety, regular flow of income, tax saving benefits,
security, Retirement benefits rather than professionals & businessman.

STATEMENT OF THE PROBLEM:-

The stock market is one of the most vital and dynamic sectors in the financial
system making an important contribution to the economic development of a country.
Investors are the backbone of the capital market and they are not alike. Institutional
investors are capable of understanding the stock market activities and trends but the small

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investors’ lack of adequate awareness about it. Large amount of savings emanate from the
households, and the small investor is still the only source of risk capital for upcoming
enterprises, to undertake new industrial activities, the capital market cannot grow without
their participation, directly or indirectly. As small investors find it difficult to participate
directly in the capital market to a significant extent, SEBI encourages them to offer
innovative products to suit the risk appetite of the small equity investors.

Household income, its consumption and its distribution are fundamental to any
economic analysis. These determine the nature and rate of saving in an economy which, in
turn, implies the rate of economic growth. Sustained research in this field thus becomes
imperative in order to understand the patterns of savings and capital formation in our
country. The performance of the capital markets will be determined and dominated by a
few large and wealthy players. High dependence on foreign institutional investor’s funds
will lead to a volatile and high risk market which will make the small equity investor the only
risk capital providers. This will hamper the total growth of the securities market and in turn
the economic growth of the nation. So bringing the small equity investors back into the
equity market would be a very healthy structural development for the nation itself.

METHOD OF DATA COLLECTION-

Primary Data: Data which has not been previously published i.e. the data is derived
from a new or original research study & collected directly from first hand sources by means of
surveys observation or experimentation is known as Primary Data. Primary research consists
of a collection of original primary data collected by the researcher. It is often undertaken after
researcher has gained some insight into the issue by reviewing secondary research or by
analyzing previously collected primary data. It can be accomplished through various methods,
including questionnaires and telephone interview in market research, or experiments and direct
observation in the physical sciences, amongst others. This term is widely used in academic
research, market research and competitive intelligence.

Secondary Data: Data which has already been collected by someone or an organization
for some other purpose or research study is known as Secondary Data. Secondary data analysis

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saves time that would otherwise be spent collecting data and particularly in case of quantitative
data, provides larger and higher-quality databases that would be unfeasible for any individual
researcher to collect on their own. Secondary Data was collected from various sources such as
books, internet, and newspapers.

Research
methodology

Secondary
Primary data
data

Books Newspapers Internet

HYPOTHESIS OF THE STUDY-

Hypothesis 1- There is a significant difference between Gender and level of awareness
about the investments.
Hypothesis 2- There is significant relationship between the income level & awareness of
the investments.
Hypothesis 3- Education qualification affects on the selection of investment avenues
LIMITATIONS OF THE STUDY-

a. The study is confined to Mumbai only. Hence the findings may not be generalized for the
other parts of the state and country.
b. The study is confined to the middle class employees alone.
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 3. REVIEW OF LITERATURE
Literature survey is a process of developing awareness about conceptual and research-
based studies available on the area and the topic selected for the proposed research. The
objective of such review is to understand the importance of the topic and find out research gaps,
if any, in the chosen area.

a. Levine (1991) studied the impact of stock markets on economic activity through the
creation of liquidity. The study revealed strong link between stock market liquidity and
economic growth even after controlling for other economic, social, political, and policy
factors that affect economic growth. Stock market liquidity is proved to be a good predictor
of future long-term growth. However, other measures of stock market development such as
stock market size and volatility do not significantly affect economic growth.
b. Arun Lawrence and Dr. Zajo Joseph101 (2013) in their study entitled “Factors leading
Stock investment: An Empirical Examination” had concluded that friends and media play a
key role in influencing the investors share trading decisions.
c. Henry Allen Latane, (1960), in his study, “Individual Risk Preference in Portfolio
Selection”, measured individual risk preference. The study was based on the choice between
the risky portfolio and the safe portfolio, carried out by three college investment classes. The
noteworthy result of the study is that the majority preferred to hold the safe portfolio rather
than risky portfolio. Students liked returns as measured by Geometric mean and disliked risk
as measured by Standard deviation. Results contradicted the hypothesis that people must be
paid a premium to induce them to undertake moderate risks instead of subjecting themselves
to either small or large risks.
d. Keller Frank R, (1970), in his study on, “The Behavior of Individuals in Security
Investment Decisions”, studied the common stock investment decision process to develop
data that would facilitate hypothesis formulation, concerning the determinants of security
values, stock holder satisfaction and the nature of successful investment practice. The study
was carried out with four individual investors comprising two sophisticated investors and
two unsuccessful investors. Personal interview was conducted and it was found that each
decision process was highly individualized, and it was possible to synthesize a multistep
general model. The expectation of desirable future ‘reported earnings’ to be generated from

15
 adequate company resources by a ‘good management’ was found the requisite to any
investment.

e. John Telesephore12, (1975), in the study, “The Expectations of Stock Market Participants
for Selected Stocks”, investigated the nature of 800 individual investors’ expectation of
financial return for common stocks. The investors belonged to 4 types of stock market
participants namely, buyers, sellers, owners and security analysts. The study led to the
conclusion that investors expect a higher return from risky stocks and sellers expect a lower
return than buyers or owners of stock.
f. Gooding Arthur E, (1975), in his study on, “Quantification of Investors Perception of
Common Stocks: Risk and Return Dimensions”, examined the role of expected risk and
return in making asset decisions. Three investor groups were asked to judge nine common
stocks in an investment context. Psychometric techniques were used to estimate each
investor group’s average stock perception. Three investor groups with potentially dissimilar
perceptions were identified on the basis of their investment related experience and
education. The most interesting finding of the study was that, each investor group’s average
uni-dimensional return perceptions were almost identical to the exposed return measures and
secondly their risk perceptions correlated significantly.
g. Lease Ronald C , (1976), in his study entitled, “Market Segmentation: Evidence on the
Individual Investor”, surveyed 972 investors grouped based on their investment goals, the
kind of information they used and the number and kind of assets in their portfolio. The study
revealed that older investors were more conservative in their investment behaviour, placed
less emphasis on capital gains and more on dividend income, relied less on brokers advice,
spent more time on security analysis and had a more diversified portfolio containing fewer
high risk assets.
h. Lewellen Wilbur G15, et.al. (1977), in their study, “Patterns of Investment Strategy and
Behaviour among Individual Investors”, ascertained the portfolio decision processes of
individual equity investors. Data was collected from 972 individual investors residing in the
US. The result shows that age has a strong influence on the portfolio goals of the investors.
Older investors have interest in long-term capital gains and young investors have a desire for
short-term capital gains. Age and risk-taking propensities were found to be inversely related.
Women investors were found to be broker-reliant unlike men.
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i. Lewellen W.G, et.al.,18 (1979), in their article entitled, “Investment Performance and
Investor Behavior”, paid particular attention to the question of whether there existed
investment strategies on investing entities, capable of producing consistently superior
investment performances. One thousand individual investors were surveyed. Multiple
Discriminate Analysis and Stepwise Multiple Discriminate Analysis were used for analyzing
data. The result showed that there existed no indication that investment skill improved with
age and investment experience. The only visible links between performance and
demographics were investor education and income brackets, but the relationship was
negative in each case.
j. Reckers and Stagliano19, (1980), conducted a survey entitled, “How Good are Investor’s
Data Sources?”, whereby the investors were asked to determine the type of data they
considered most useful in making investment decisions. These are the two major
conclusions: 91% of the investors indicated a somewhat thorough reading of the annual
report, but half of the respondents apparently disregarded the financial statement footnotes
and Forecasts generally were thought to possess some positive use of decision making.

k. Ledereich and Siegel22, (1988), in their study entitled, “Planning your Portfolio today and
Tomorrow”, emphasized the role of factors like age and health, marital status, family status,
objectives, risk tolerance, investment preferences, liquidity, employment stability and tax
rate in personal financial planning. This paper, though not an empirical one, explained the
need for accountant’s involvement in personal financial planning of their clients. It provides
a background of the variables to be analysed in a research concerned with individual
investors.

l. Nagy Robert A. and Robert W. Obenberger28, (1994), in their article entitled, “Factors
Influencing Individual Investor Behavior”, studied various utility maximization and
behavioral variables underlying individual investor behavior in understanding the
investment decision process. The data was collected from 133 experienced equity investors
through mailed questionnaire. The equity investors were asked to evaluate the importance of
34 variables identified as influencing equity investment decisions. The study revealed that
most of the variables ranked significant were classical wealth maximization related ones
such as expected earnings, diversification needs and minimizing risk.
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m. Bhagawati Prasad, Subhas M.S48, (1991), in their study entitled, “Problems Faced by the
Investors”, have examined the problems faced by the investors by surveying 200 small
investors belonging to Hubly and Dharwar districts. The study reveals that majority of the
investors were very active belonging to the middle income group. High returns motivated
them to invest in capital markets and majority of the shareholders were satisfied with the
content of the published information. Only some investors were not satisfied with the
content of the published information.
n. Barua and Srinivasan (1991)49 “Experiment on Individual Investment Decision making
Process” The investment decision making process of individuals has been explored through
experiments. They conclude that the risk perceptions of individuals are significantly
influenced by the skewness of the return distribution. This implies that while taking
investment decisions, investors are concerned about the possibility of maximum losses in
addition to the variability of returns. Thus the mean variance framework does not fully
explain the investment decision making process of individuals.
o. Brennan M.J29, (1995), in his article entitled, “The Individual Investor”, analyzed the
several phenomena that arose from the limited information possessed by the individual
investors. He studied the sources through which investors received information about
securities and found out the extent of information disseminated by brokers. An individual
investor who did not possess expert knowledge of financial markets had to venture unaided
into the treacherous waters of the market for primary securities, guided perhaps by the
sometimes-unreliable advice of friends or stock brokers.
p. Bloomfield, Libby and Nelson37, (2002), in their study entitled, “Confidence and the
Welfare of Less Informed Investors”, have indicated that less informed investors are over-
confident in investments. Providing more information to professional investors only could
harm the welfare of less informed investors if, less informed investors are not aware of the
extent of their informational disadvantage.
q. The National Council of Applied Economic Research (NCAER) 44 Survey of
households, (1964), entitled “Attitudes Towards and Motivations for Saving”, provides one
of the earliest attempts on the study of savings of households. The survey covered a sample
of 4650 households spread over India. It provides an insight into the attitude towards and
motivations for savings of individuals. One of the key findings was that the investment in
securities was preferred only by the high-income households.
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r. Gupta and Ramesh50, (1992), conducted a study entitled, “Portfolio Management for an
Individual Investor”, and studied the importance of considering individuals characteristics in
portfolio management. An analysis of an individual’s investment situation requires a study
of his personal characteristic such as age, health conditions, personal habits, family
responsibilities, business or professional situation, and tax status. All these factors affect the
investor’s willingness to assume risk.
s. Dash R.K and Panda. J56, (1996), in their paper entitled, “Investors Protection: An
Analysis”, had critically examined the need for investor protection. They found that
unincorporated bodies and Nidhis whose deposit acceptance activities did not come under
the guidelines of the Reserve Bank of India, shook the investor confidence for the past
several years. They stated that the poor growth level, dearth of innovative schemes, poor
marketing and unsatisfactory investor servicing etc., were the reasons for the low level of
confidence. They strongly emphasized the importance of instilling the confidence in the
minds of the investors.
t. Madhumathi, R60, (1998), in her study entitled, “Risk Perception of Individual Investors
and its Impact on Their Investment Decision”, examined the risk perception of 450
individual investors, selected at random from major metropolitan cites in India, dividing
them into three groups as risk seekers, risk bearers and risk avoiders. The major findings of
the study revealed that majority of the investors were risk bearers and they had the tendency
to use the company performance as a basic factor to take investment decisions. They also
depended on the advice of share brokers and investment consultants. The risk seekers
generally took decisions based on market conditions, industrial position and social changes.
They relied on newspapers and reports for information. Risk avoiders did not have any
specific traits. They were very objective and looked for facts and certainty in their
investment decisions. They relied on the advice of their friends and relatives

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 4. COMPANY PROFILE

INTRODUCTION TO KOTAK SECURITIES

Kotak Securities was founded in 1994 as a subsidiary of Kotak Mahindra Bank and is proud
to be the nation’s best broker* today. Kotak Securities has Rs 224 crore of Assets Under
Management (AUM) as on 31st March 2016, 11.95 Lakh customer accounts, Over 5
Lakh trades per day, 1209 branches, franchisees and satellite offices, 359 cities across India.
Kotak Securities are corporate members with the Bombay Stock Exchange and the National
Stock Exchange. We are also a depository participant with National Securities Depository
Limited (NSDL) and Central Depository Services Limited (CDSL). Kotak securities offer
following services -

 Stock broking services - Trade in the Stock Market, invest in IPOs, Mutual
Funds or Currency Derivatives using whichever mode that suits you best. Online, offline or
even on our stock trading app, we offer stock trading at your fingertips.

 Portfolio Management services

Not sure of what stocks to buy or sell? Unable to keep all your investments in one place?
Don’t know how to make your money work for you? Our Portfolio Management Service
with expert advice is just the answer for your woes.

 Dual benefit: Stock Brokers + Depository Participants

Kotak Securities is not just a stock broking firm. We are also participants with depositories
like the NSDL and the CSDL. That means you can now execute transactions using our stock
broking services and settle your trades using our depository services!

 Research Expertise
Benefit from in-depth stock market analysis thanks to our dedicated research division. We
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 publish various sector-specific research, company-specific research, macroeconomic studies,
fundamental and technical analysis of stocks that you can avail before investing your hard-
earned money.

 Updated Market Data

Apart from research that we offer, you benefit from the street smart tips, up-to-the-minute
market information and inside news that our extensive sales teams deliver on a daily basis.

 International Reach
Your financial interests go beyond India? Don’t worry, so do ours! Kotak Securities has a well-
entrenched presence in the Asia Pacific, European, Middle Eastern and American markets. You
can trust us with your money in any part of the globe.

HISTORY
Kotak Mahindra Group traces back its lineage to 1985. In 1995, the brokerage and
distribution business of Kotak Mahindra Group was incorporated into a separate company and it
was named as Kotak Securities.
In February 2003, Kotak Mahindra Finance Ltd. (KMFL), the Group’s flagship company,
received a banking license from the Reserve Bank of India (RBI). With this, KMFL became the
first non-banking finance company in India to become a bank – Kotak Mahindra Bank Limited.
The Group has businesses such as commercial banking, stock broking, mutual funds, life
insurance and investment banking and its customer base includes individual investors, NRI
investors and institutional investors. The brokerage house has branches and franchisees across
India, and international offices in London, New York, Dubai, Abu Dhabi, Mauritius and
Singapore.
Kotak Securities is headquartered in Mumbai, India. In 2014, Kotak Securities was ranked
as number 1 in India's Institutional Investor rankings by weighted average.
Kotak Securities is a well-known stock broker with professional traders for its
comprehensive online trading portal offerings. It has 1128 branches including franchisees and
satellite offices spread across 352 cities in the country.
Kotak Securities is a corporate member of both the Bombay Stock Exchange and the
National Stock Exchange of India. It is also a depository participant with National Securities
Depository Limited (NSDL) and Central Depository Services Limited (CDSL). The company

21
also has a research division to study the macroeconomic indicators, sectors, company-specific
equity research, which regularly publishes stock market analysis.
As of June 30, 2010, Kotak Securities has Rs. 2250 crore of "assets under management"
(AUM). The company also has a research division involved in macroeconomic studies, sectoral
research and company-specific equity research, which regularly publishes stock market analysis.
MILESTONES & AWARDS
i. MILESTONES
 1995: The brokerage and distribution businesses of Kotak Mahindra Bank are incorporated
into a separate company named Kotak Securities.
 2000: Kotak Securities launches its online broking site (www.kotaksecurities.com). Also,
the company commences private equity activity by setting up Kotak Mahindra Venture
Capital Fund.
 2006: Kotak Securities Launches Kotak Flat.
 2007: Kotak lines up PMS based on small caps.
 2008: Kotak Securities launches a GEMS portfolio.
 2009: Kotak Securities launches online trading in currency derivatives.
ii. AWARDS AND RECONITION-
Kotak securities have been awarded as the Best Broker in India by Finance Asia for two
consecutive years. Besides that, the stock broker has received several awards and recognitions
as follows:
 Broker of the Year (India) - The Asian Banker's Financial Markets Business
Achievement Awards 2014
 Overall best Equity Broking House by BSE IPF - D&B Equity Broking Awards for the
year 2013
 Depository Participant of the year by BSE IPF - D&B Equity Broking Awards for the
year 2013
 Top Performer in New Accounts Opened (Non-Bank Category) - NSDL Star Performers
Award 2013
 Fastest growing Equity Broking House by BSE IPF - D&B Equity Broking Awards for
the year 2012
 The Best Equity House in India by FinanceAsia for the year 2012

22
  Best Broker in India by FinanceAsia for 2012, 2010 & 2009
 UTI MF - CNBC TV18 Financial Advisor Awards - Best Performing Equity Broker
(National) for the year 2009
 Best Brokerage Firm in India by Asiamoney in 2009, 2008, 2007 & 2006
 Best Performing Equity Broker in India by CNBC Financial Advisor Awards for 2008
 Avaya Customer Responsiveness Awards for 2007 & 2006 in the Financial Services
Sector
 The Leading Equity House in India in Thomson Extel Surveys Awards for the year 2007
 Best Provider of Portfolio Management: Equities by Euromoney for 2007 & 2006
 Best Equities House In India by Euromoney Award for the year 2005
 Best Broker in India by FinanceAsia for the year 2005
 Best Equity House in India by Finance Asia for the year 2004

Here’s a list of some of kotak securities recent marketing awards:

 Bronze for Acquisition campaign in the category of Best Use of Data for New Business

& for PPC (HCGBB) in the search category awarded by Campaign India’s Digital Crest
Awards, 2016
 Bronze for Best Single Radio Commercial in Insurance, Banking & Financial services at

Golden Mikes Awards 2016 by Exchange4media

 Gold for Effective Use of Market research, Bronze for Effectiveness in Radio and

Bronze for Innovation in Cupshup campaign awarded to Agar Magar Campaign at Asia
Pacific Customer Engagement Award 2015 - 16
 Silver award Best SEO for Website at DMAI 2015

 Best SEO for Website at India Digital Media Awards (IDMA) 2015

 Favourite Analyst Awards at Research bytes IC Awards 2015 in Research House,

Financials, Materials and Multi Sector categories.

PRODUCTS OFFERED
Kotak Securities provides a wide range of products and services that fulfill a broad mix of
investment needs. Kotak Securities strives to enhance the product lineup in order to meet your
investment needs and to establish a solid presence as a firm trusted by our valued customers.
A capital market is a market for securities (debt or equity), where business enterprises and
the government can raise long-term funds. Capital market instruments, also known as financial
23
instruments, are responsible for generating these funds, which can be used by customers to
invest wisely.
Kotak Securities is a one stop solution, where you can trade in different types of
instruments. These instruments are available for trading on NSE and BSE and can be classified
as:
 EQUITY- Equities are traded on the stock market. These could be in the primary or
secondary market. In the primary market, companies get listed through an Initial Public
Offering. Thus, new securities are available in the primary market. In the secondary market,
investors buy or sell securities, which have already been issued. Currently, more than 1300
securities are available for trading on the National Stock Exchange (NSE) and over 6000 on
Bombay Stock Exchange (BSE).
 DERIVATIVES-Derivatives give you an avenue to boost your returns from equities, by
providing leverage through products like futures and options. Derivative instruments are
available for shares, indices, currencies as well as commodities. Their value is tied to the
underlying security.
 MUTUAL FUND-Mutual funds are ideal for investors who want to invest in Indian
equities, but do not have sufficient time and skills to choose winning sectors. Another advantage
of investing in mutual funds is that it provides the necessary diversification to the portfolio. The
money is invested across a wide variety of assets like stocks, bonds, gold, etc. to earn returns.
 INITIAL PUBLIC OFFERINGS (IPO) - An IPO is the first sale of a company’s equity
to the public. Existing shareholders can get an exit route or a better value for their investment.
One can also be the part of the growth story of the issuing company.
 CURRENCY DERIVATIVES- Currency derivatives are a contract between the seller
and buyer, whose value is to be derived from the underlying asset, the currency value. It offers
two advantages to the traders: an opportunity to benefit from currency value fluctuations, and a
chance to minimize loss from currency value fluctuations due to various factors.
 TAX FREE BOND- Bonds are a kind of debt instrument. By investing in this type of
asset, the investor gives a loan to the issuing entity. The investors will be repaid at the end of the
tenure. There are different kinds of bonds. Those bonds which are exempted from taxation on
the interest income under the Income Tax Act, 1961 are called tax-free bonds. These are usually
issued by government-backed entities.

24
  GOLD FUNDS- Gold ETFs are open-ended Mutual Funds that invest in Standard Gold
Bullion of 99.5% purity. Instead of buying physical gold bullion, you can buy units of Gold
ETFs that are equivalent to buying the real thing. The units you buy are stored in your demat
account. This is why Gold ETFs are also called 'Paper Gold'.
 STOCK LENDING AND BORROWING (SLB)- SLB is a system in which a trader can
borrow shares that they do not already own, or can lend the stocks that they own. An SLB
transaction has a rate of interest and a fixed tenure. SLBM helps reduce potential risks and
losses.
 INTEREST RATE FUTURES (IRF) - An IRF is an agreement to buy, or sell, a debt
instrument at a future date for a price fixed today. The underlying security for IRFs is usually a
government bond or a treasury bill. In India, National Stock Exchange and Bombay Stock
Exchange offer trading in interest rate futures.
Account Types
 Trinity account - Trinity account is a seamless investment platform that integrates a

savings account, a demat account and an online trading account into one great service.
 2-in-1 account - The 2-in-1 trading account gives you the dual benefit of a share trading

account and a demat account rolled into one account.

 Demat account - A dematerialized or demat account is a facility that allows customers to

hold shares in an electronic format. You need a demat account before you start to trade
on India’s stock exchanges.
 Equity trading account - When you trade on the stock markets, you are securing your

financial well-being. Equity trading account allows you to invest in equity, initial public
offerings or IPOs, mutual funds, equity and currency derivatives instruments.
 Linked account – A linked account is essentially, a 3-in-1 trading account that links your

existing savings and demat account with the partner bank and trading account at Kotak
Securities.
 NRI account - Living outside India, but still want to play in the Indian stock markets?

Here’s an account that lets you enjoy the triple benefits of a savings account, a demat
account and a trading account all in one place. So be it buying equities, futures or
options or even doing some good old-fashioned research into the stock markets, Kotak
Securities’ NRI account puts the power in your hands

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 Qualified Foreign Investors (QFI) - If you reside outside India and like many other look

at India as an interesting option for investment, here is your chance to invest in the ever
buzzing financial markets of India. On 1 January 2012, the GOI issued a press note
stating that Qualified Foreign Investors (QFIs) will now be allowed to invest in the
equity shares of Indian companies
 RGESS - If you are new to the equity markets, and don’t know where to start, fear not;

you are at the right place. The Rajiv Gandhi Equity Savings Scheme or the RGESS is an
investment option that allows you to enjoy the benefits of equity investments along with
tax exemptions up to Rs. 25,000
 PMS - The stock market is highly volatile. Investment in the market, therefore,
requires time, knowledge, and constant monitoring. It also needs a solid experience and
strong research to make the right decision.

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 5. CONCEPTUAL FRAMEWORK
Each investment alternative has its own strengths and weaknesses. Some options seek to
achieve superior returns but with corresponding higher risk. Other provide safety but at the
expense of liquidity and growth. Other options such as FDs offer safety and liquidity, but at the
cost of return. Mutual funds seek to combine the advantages of investing in arch of these
alternatives while dispensing with the shortcomings. Indian stock market is semi-efficient by
nature and, is considered as one of the most respected stock markets, where information is
quickly and widely disseminated, thereby allowing each security's price to adjust rapidly in an
unbiased manner to new information so that, it reflects the nearest investment value.
Savings form an important part of the economy of any nation. With the savings invested
in various options available to the people, the money acts as the driver for growth of the
country. Indian financial scene too presents a plethora of avenues to the investors. Though
certainly not the best or deepest of markets in the world, it has reasonable options for an
ordinary man to invest his savings. One needs to invest and earn return on their idle resources
and generate a specified Sum of money for a specific goal in life and make a provision for an
uncertain future. One of the important reasons why one needs to invest wisely is to meet the cost
of inflation. Inflation is the rate at which the cost of living increases.
The cost of living is simply what it cost to buy the goods and services you need to live.
Inflation causes money to lose value because it will not buy the same amount of a good or
service in the future as it does now or did in the past. The sooner one starts investing the better.
By investing early you allow your investments more time to grow, whereby the concept of
compounding increases your income, by accumulating the principal and the interest or dividend
earned on it, year after year.
Various governing bodies in financial sector:
1. RBI - Reserve Bank of India is the supreme authority and regulatory body for all the
monetary transactions in India. RBI is the regulatory body for various Banking and Non
Banking financial institutions in India.
2. SEBI - Securities and Exchange Board of India is one of the regulatory authorities for India's
capital market.
3. IRDA Insurance regulatory and development authority in India regulates all the insurance
companies in India.

27
4. AMFI Association of mutual funds in India regulates all the mutual fund companies in India.
5. FIPB Foreign investments promotion board regulates all the foreign direct investments made
in India.
6 Investments in gold is governed by the world gold council, in India we do not have any
regulatory authority for investments in gold. Ministry of Finance, Government of India has a
control over all the financial bodies in India. Government securities, Public Provident Fund
(PPF), National Savings Certificate NSC), Post Office Savings are all under the control of
the central government. Investment are normally categorized using the risk involved in it,
risk is dependent on various factors like the past performance, its governing body,
involvement of the government etc., in this scenario Indian investments are classified in to 3
categories based on risk. They are
 Low Risk/ No Risk Investments.
 Medium Risk Investments.
 High Risk Investments.
Apart from these, there are traditional investment avenues and emerging investment avenues.
Safe/Low Risk Moderate High Risk Traditional Emerging
Avenues Risk Avenues: Avenues: Avenues Avenues
Savings Account Mutual Funds. Equity Share Real Estate Virtual Real
Market. (property). Estate.
Bank Fixed Life Insurance. Commodity Gold/Silver. Hedge
Deposits. Market. Funds/Private
Equity
Investments.
Public Provident Debentures. FOREX Market. Chit Funds. Art and
fund. Passion.
National Bonds.
savings certificates.
Post office
savings.
Government
Securities.

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 Saving and investing are the two pillars of financial stability. While we all work hard to
earn money, saving and investment is an art to master. While saving is done to meet unplanned
and planned expenses, Investment is all about making your money earn for you, and give you
the rewards through future returns. Investment planning needs a careful analysis of the return
and time frame to be done before the actual investment process. To make it an easier decision
for you, here is a compilation of the Best Investment Avenues across categories that you can
invest in 2018.
5.1 TYPES OF INVESTMENT AVENUES- SHARES
The term ‘shares’ is defined by Section 2(46) of the Companies Act 1956 as-
“Share means share in the share capital of a company and includes the stock where a
distinction between stock and shares is expressed or implied.” Joint stock companies collect
their long term/ fixed capital by issuing shares (equity and preference). This is called “stock
financing”. Shares constitute the ownership securities and are popular among the investing
class. Investment in shares is risky as well as profitable. The shares available for investment are
classified into different categories such as blue chip shares, growth shares, speculative shares,
income shares and so on.

BENEFITS OF INVESTMENT IN SHARES-

 Equity shareholders get income in the form of dividend. Companies offer attractive
dividend to shareholders even when the rate of dividend is flexible. Profitable and stable
companies offer good reward to their investors in the form of high rate of dividend.
 The liability of Equity shareholders is limited only to the extent of their investment.
Naturally, the shareholder is not required to pay anything more than the face value of the
share purchased.
 Shares are easily transferable and this facilitates easy transfer of ownership at the option
of the shareholder. The transfer facility also brings liquidity to the investment in shares.
 The Equity shareholders get an opportunity to participate in the profitability of their
company in course of time. The profitable companies issue bonus shares and also right
shares from time to time. This gives benefit to shareholders. Even the new shares issued
by the company are first offered to existing shareholders.

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 Listed Equity shares are actively quoted and traded on stock exchanges. This
marketability of Equity shares brings liquidity to the investment in shares and also
convenience to investors.
 Equity shares carry tax benefit and also dividend on shares of Indian companies has been
made tax-free. However the position may change as per the government policy.
 Equity shareholders are the owners of their company with certain powers and voting
rights. This enables them to exercise some control over the policies of their company.
 Capital gain to the equity investor is possible in the case of shares as the prices of shares
fluctuate along with future prospectus of the company. Due to rise in the share prices,
there is capital appreciation and this offers extra benefit to the shareholders.
LIMITATIONS OF INVESTMENT IN SHARES-
 There is uncertainty of income/ return in shares. The return as regard investment in
shares is uncertain as it is linked with the profitability of the company. The investment
in shares may prove to be unremunerative if the profit earned by the company is less.
 In the case of shares, there is an element of risk as regards changing market values. The
share price may go down due to various reasons. This is bound to affect the investor
seriously. Secondly, selling at a low price is bound to bring financial loss. This suggests
that investment in shares is always risky.
 Speculative activities are quite common as regards shares. However, such speculative
deals affect genuine investors and they may suffer loss even when they are not directly
involved in such speculative activities.
 In the case of shares, the future of the shareholder is linked with the future of the
company. The return on investment will be attractive, if the company makes good profit.
However a shareholder may not get any return on his investment if his company fails to
get reasonably high profit.
TYPES OF SHARE:
1. Equity shares - Equity shares were earlier known as ordinary shares. The holders of
these shares are the real owners of the company. They have a voting right in the
meetings of holders of the company. They have a control over the working of the
company. Equity shareholders are paid dividend after paying it to the preference
shareholders. The rate of dividend on these shares depends upon the profits of the

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 company. They may be paid a higher rate of dividend or they may not get anything.
These shareholders take more risk as compared to preference shareholders. Equity
capital is paid after meeting all other claims including that of preference shareholders.
They take risk both regarding dividend and return of capital. Equity share capital cannot
be redeemed during the life time of the company.
Advantages of Equity Shares:
 Equity shares give greater returns if the company makes profits.
 There is a tremendous amount of capital appreciation if the shares are of a good
performing company.
 The equity shares are easily transferable.
 The equity shares are traded at the stock exchanges so they can be bought and sold
easily. These can be easily liquidated.
 The equity share holders have got the right to vote in the annual general meeting.
 Only the equity share holders have the right to choose the board of directors.
 Equity share holders have the right to oppose any of the decisions taken by the board of
directors.
Disadvantages of Equity Shares:
 If only equity shares are issued, the company cannot take the advantage of trading on
equity.
 As equity capital cannot be redeemed, there is a danger of over capitalisation.
 Equity shareholders can put obstacles for management by manipulation and organising
themselves.
 During prosperous periods higher dividends have to be paid leading to increase in the
value of shares in the market and it leads to speculation.
 Investors who desire to invest in safe securities with a fixed income have no attraction
for such shares.
2. Deferred ordinary shares- A company can issue shares which will not pay a dividend
until all other classes of shares have received a minimum dividend. Thereafter they will
usually be fully participating. On a winding up they will only receive something once
every other entitlement has been met.

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3. Non-voting ordinary shares- Voting rights on ordinary shares may be restricted in some
way – e.g. they only carry voting rights if certain conditions are met. Alternatively, they
may carry no voting rights at all. They may also preclude the shareholder even attending
a General Meeting. In all other respects they will have the same rights as ordinary
shares.
4. Redeemable shares- The terms of redeemable shares give the company the option to buy
them back in the future; occasionally, the shareholder may (also) have the option to sell
them back to the company, although that’s much less common. The option may arise at
or after a specific date, between two dates or be effective at any time the shares are in
issue. The redemption price is usually the same as the issue price, but can be set
differently. A company can only redeem shares out of profits or the proceeds of a new
share issue, which may restrict its ability to redeem shares even if the directors would
like to exercise the option. If a company chooses to have redeemable shares, it must also
have non-redeemable shares in issue. At no point can all of its share capital be made up
of redeemable shares.
5. Preference shares- These shares are called preference or preferred since they have a right
to receive a fixed amount of dividend every year. This is received ahead of ordinary
shareholders. The amount of the dividend is usually expressed as a percentage of the
nominal value. So, a £1, 5% preference share will pay an annual dividend of 5p. The
full entitlement will be paid every year unless the distributable reserves are insufficient
to pay all or even some of it. On a winding up, the holders of preference shares are
usually entitled to any arrears of dividends and their capital ahead of ordinary
shareholders. Preference shares are usually non-voting (or only have a vote only when
their dividend is in arrears).
Advantages of Preference Shares
 It earns a fixed rate of dividend.
 Preference is given compared to equity share holders while distributing the dividends
and once the company is dissolved.
 As preference share capital is generally regarded as part of company’s net worth, it
enhances the credit worthiness of a firm.

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 There is no legal obligation to pay dividend on preference shares. Preference dividend is
payable only out of distributable profits at the discretion of the management. Hence, a
company does not face a financial burden or legal action if it does not pay dividend.
 Preference shares provide a long-term capital for the company.
 Preference shares although carry no voting rights, but the holders of such shares can vote
on matters directly affecting their rights as well as on all resolutions if the dividend due
on their shares is remaining unpaid.
 Preference shares provides preferential rights in regard to payment of dividends and
repayment of capital at the time of liquidation of the company. Hence, such investors
who prefer safety of their capital and want to earn income with greater certainty always
prefer to invest in preference shares.
Disadvantages of Preference Shares
 It is an expensive source of finance as compared to debt because generally the investor’s
expect a higher rate of dividend on preference shares as compared to the rate of interest
on debentures. This is so because of high risk factor as compared to debt.
 Preference shareholders do not have any charge on the assets of the company while
debentures, usually, provide a charge on all the assets of the company.
 For company Cumulative preference shares become a permanent burden so far as the
payment of dividend is concerned.
 When the earnings of the company are high, fixed dividend on preference shares
becomes unattractive.
6. Cumulative preference shares- If the dividend is missed or not paid in full then the
shortfall will be made good when the company next has sufficient distributable reserves.
It follows that ordinary shareholders will not receive any dividends until all the arrears
on cumulative preference shares have been paid. By default, preference shares are
cumulative but many companies also issue non-cumulative preference shares.
7. Redeemable preference shares- Redeemable preference shares combine the features of
preference shares and redeemable shares. The shareholder therefore benefits from the
preferential right to dividends (which may be cumulative or non-cumulative) while the
company retains the ability to redeem the shares on pre-agreed terms in the future.

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 5.2 DEBENTURES & BONDS
Financing is the basic requirement of every big and small-sized organization. Funds can be
raised by issuing debt or equity instruments. When it is about debt instruments, two major
sources of raising finance are used by the companies; they are Bonds and Debentures. In many
countries, they are supposed to be one but the two terms differ in many regards. Bonds are
generally issued by government agencies and large corporations ,but companies issue
debentures.
If a company needs funds for extension and development purpose without increasing its
share capital, it can borrow from the general public by issuing certificates for a fixed period of
time and at a fixed rate of interest. Such a loan certificate is called a debenture. Debentures are
offered to the public for subscription in the same way as for issue of equity shares. Debenture is
issued under the common seal of the company acknowledging the receipt of money.
A debenture is a debt instrument used for supplementing capital for the company. It is an
agreement between the debenture holder and issuing company, showing the amount owed by the
company towards the debenture holders. The capital raised is the borrowed capital; that is why
the status of debenture holders is like creditors of the company.
Debentures carry interest, which is to be paid at periodic intervals. The amount borrowed is
to be repaid at the end of the stipulated term, as per the terms of redemption. The issue of
debentures publicly requires credit ratings.
A financial instrument which shows the obligation of the borrower towards the lender is
known as Bond. They are created to raise funds for the company or government. It is a
certificate, signifying a contract of indebtedness of the issuing company, for the amount lent by
the bondholders.
In general, bonds are secured by collateral, i.e. an asset is pledged as security that if the
company fails to pay the sum within stipulated time, the holders can discharge their debts by
seizing and selling the asset secured.
Bonds are issued for a fixed period, which carries interest known as ‘coupon.’ The interest
needs to be paid at regular intervals, or it will accrue over time. They are issued by public sector
undertaking, government firms, large corporations, etc. The issue of government bonds is done
in auctions where members bid for the bonds. The principal amount of the bonds is to be paid at
a future specified date known as maturity date.

34
BASIC DIFFERENCE BETWEEN BOND AND DEBENTURE-

35
36
Features of Debentures:
The important features of debentures are as follows:
 Debenture holders are the creditors of the company carrying a fixed rate of interest.
 Debenture is redeemed after a fixed period of time.
 Debentures may be either secured or unsecured.
 Interest payable on a debenture is a charge against profit and hence it is tax deductible
expenditure.
 Debenture holders do not enjoy any voting right.
 Interest on debenture is payable even if there is a loss.
 It is in the form of certificate issued under the seal of the company (called Debenture
Deed). It usually shows the amount & date of repayment of the loan.
 Debentures can be secured against the assets of the company or may be unsecured.
 Debentures are generally freely transferable by the debenture holder. Debenture holders

have no rights to vote in the company’s general meetings of shareholders, but they may
have separate meetings or votes e.g. on changes to the rights attached to the debentures.

Advantage of Debentures:
Following are some of the advantages of debentures:
(a) Issue of debenture does not result in dilution of interest of equity shareholders as they
do not have right either to vote or take part in the management of the company.
(b) Interest on debenture is a tax deductible expenditure and thus it saves income tax.
(c) Cost of debenture is relatively lower than preference shares and equity shares.
(d) Issue of debentures is advantageous during times of inflation.
(e) Interest on debenture is payable even if there is a loss, so debenture holders bear no risk.
Disadvantages of Debentures:
Following are the disadvantages of debentures:
(a) Payment of interest on debenture is obligatory and hence it becomes burden if the
company incurs loss.
(b) Debentures are issued to trade on equity but too much dependence on debentures
increases the financial risk of the company.
(c) Redemption of debenture involves a larger amount of cash outflow.

37
(d) During depression, the profit of the company goes on declining and it becomes difficult
for the company to pay interest.
Different Types of Debentures:
 Ordinary Debenture: Such debentures are issued without mortgaging any asset, i.e.
this is unsecured. It is very difficult to raise funds through ordinary debenture.
 Mortgage Debenture: This type of debenture is issued by mortgaging an asset and
debenture holders can recover their dues by selling that particular asset in case the
company fails to repay the claim of debenture holders.
 Non-convertible Debentures: A non-convertible debenture is a debenture where there
is no option for its conversion into equity shares. Thus the debenture holders remain
debenture holders till maturity.
 Partly Convertible Debentures: The holders of partly convertible debentures are
given an option to convert part of their debentures. After conversion they will enjoy the
benefit of both debenture holders as well as equity shareholders.
 Fully Convertible Debenture: Fully convertible debentures are those debentures
which are fully converted into specified number of equity shares after predetermined
period at the option of the debenture holders.
 Redeemable Debentures: Redeemable debenture is a debenture which is
redeemed/repaid on a predetermined date and at predetermined price.
 Irredeemable Debenture: Such debentures are generally not redeemed during the
lifetime of the company. So, it is also termed as perpetual debt. Repayment of such
debenture takes place at the time of liquidation of the company.
 Registered Debentures: Registered debentures are those debentures where names,
address, serial number, etc., of the debenture holders are recorded in the register book
of the company. Such debentures cannot be easily transferred to another person.
 Unregistered Debentures: Unregistered debentures may be referred to those
debentures which are not recorded in the company’s register book. Such a type of
debenture is also known as bearer debenture and this can be easily transferred to any
other person.

BONDS
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 A bond is a debt investment in which an investor loans money to an entity (typically
corporate or governmental) which borrows the funds for a defined period of time at a variable
or fixed interest rate. Bonds are used by companies, municipalities, states and sovereign
governments to raise money and finance a variety of projects and activities. Owners of bonds
are debt holders, or creditors, of the issuer.
Advantages of Bonds
 Bonds have a clear advantage over other securities. The volatility of bonds (especially short
and medium dated bonds) is lower than that of equities (stocks). Thus bonds are generally
viewed as safer investments than stocks.
 Bonds do suffer from less day-to-day volatility than stocks, and the interest payments of
bonds are sometimes higher than the general level of dividend payments.
 Bonds are often liquid. It is often fairly easy for an institution to sell a large quantity of
bonds without affecting the price much, which may be more difficult for equities.
 Bonds are attractive because of the comparative certainty of a fixed interest payment twice a
year and a fixed lump sum at maturity.
 Bondholders also enjoy a measure of legal protection: under the law of most countries, if a
company goes bankrupt, its bondholders will often receive some money back (the recovery
amount), whereas the company's equity stock often ends up valueless.
 Furthermore, bonds come with indentures (an indenture is a formal debt agreement that

establishes the terms of a bond issue) and covenants (the clauses of such an agreement).
Covenants specify the rights of bondholders and the duties of issuers, such as actions that
the issuer is obligated to perform or is prohibited from performing.
 Bonds are a debt security under which the issuer owes the holders a debt and, depending on
the terms of the bond, is obliged to pay them interest (the coupon) and or repay the principal
at a later date, which is termed the maturity.
 The volatility of bonds (especially short and medium dated bonds) is lower than that of
equities (stocks). Thus bonds are generally viewed as safer investments than stocks.
 Bonds are often liquid – it is often fairly easy for an institution to sell a large quantity of
bonds without affecting the price much.

39
 Bondholders also enjoy a measure of legal protection: under the law of most countries, if a
company goes bankrupt, its bondholders will often receive some money back (the
recovery amount).
 There are also a variety of bonds to fit different needs of investors.
Disadvantages of Bonds
 Bonds are also subject to various other risks such as call and prepayment risk, credit risk,
reinvestment risk, liquidity risk, event risk, exchange rate risk, volatility risk, inflation
risk, sovereign risk, and yield curve risk.
 Price changes in a bond will immediately affect mutual funds that hold these bonds. If the
value of the bonds in a trading portfolio falls, the value of the portfolio also falls. This can
be damaging for professional investors such as banks, insurance companies, pension
funds, and asset managers (irrespective of whether the value is immediately "marked to
market" or not).
 If there is any chance a holder of individual bonds may need to sell his bonds and "cash
out", the interest rate risk could become a real problem.
 Bond prices can become volatile depending on the credit rating of the issuer – for instance
if credit rating agencies like Standard and Poor's and Moody's upgrade or downgrade the
credit rating of the issuer.
 An unanticipated downgrade will cause the market price of the bond to fall. As with
interest rate risk, this risk does not affect the bond's interest payments (provided the issuer
does not actually default), but puts at risk the market price, which affects mutual funds
holding these bonds, and holders of individual bonds who may have to sell them.
 A company's bondholders may lose much or all their money if the company goes
bankrupt. Under the laws of many countries (including the United States and Canada),
bondholders are in line to receive the proceeds of the sale of the assets of a liquidated
company ahead of some other creditors.
 Bank lenders, deposit holders (in the case of a deposit taking institution such as a bank)
and trade creditors may take precedence. There is no guarantee of how much money will
remain to repay bondholders.

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  In a bankruptcy involving reorganization or recapitalization, as opposed to liquidation,
bondholders may end up having the value of their bonds reduced, often through an
exchange for a smaller number of newly issued bonds.
 Some bonds are callable, meaning that even though the company has agreed to make
payments plus interest toward the debt for a certain period of time, the company can
choose to pay off the bond early. This creates reinvestment risk, meaning the investor is
forced to find a new place for his money. As a consequence, the investor might not be able
to find as good a deal, especially because this usually happens when interest rates are
falling.
Types of bonds-
 Zero-Coupon Bonds: This is a type of bond that makes no coupon payments but instead is
issued at a considerable discount to par value. For example, lets say a zero-coupon bond with
a $1,000 par value and 10 years to maturity is trading at $600; you’d be paying $600 today
for a bond that will be worth $1,000 in 10 years. The issue price of Zero Coupon Bonds is
inversely related to their maturity period, i.e. longer the maturity period lesser would be the
issue price and vice-versa. These types of bonds are also known as Deep Discount Bonds.
 High-Yield Bonds: High yield (non-investment grade) bonds are from issuers that are
considered to be at greater risk of not paying interest and/or returning principal at maturity.
As a result, the issuer will offer a higher yield than a similar bond of a higher credit rating
and, typically, a higher coupon rate to entice investors to take on the added risk.
 Corporate Bonds: These are issued by large corporations and have higher yields because
there is a higher risk of a company defaulting as compared to government bonds.
 Government Bonds: These are the bonds issued by government in its own currency. They are
usually referred to as risk-free bonds. Bonds issued by national governments in foreign
currencies are referred to as sovereign bonds.
 Convertible Bonds: The holder of a convertible bond has the option to convert the bond into
equity (in the same value as of the bond) of the issuing firm (borrowing firm) on pre-
specified terms. Convertible bonds may be fully or partly convertible. For the part of the
convertible bond which is redeemed, the investor receives equity shares and the non-
converted part remains as a bond.

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  Inflation-indexed (or inflation-linked) Bond: It provides protection against inflation, and is
designed to cut out the inflation risk of an investment.
 Extendible and Retractable Bonds: Extendible and Retractable bonds have no fixed maturity
date. While the maturity period of extendible bonds can be extended on the demand of the
buyer of these bonds, the maturity period of retractable bond can be reduced and the principal
amount returned to the buyer if he feels so.
 Floating Rate Bonds: Floating Rate Notes are bonds in which interest rate depends on the
interest rate prevailing in the market. The interest rate paid to the bondholder at regular
intervals comprises of the interest rate prevailing in the market and ‘spread’, which is a rate
that is fixed when the prices of the bond are being fixed and it remains constant till the
maturity period of the bond.
 Perpetual Bonds: Perpetual Bonds, which are also known as the name of Consol, are the
bonds which have no maturity period and keep on paying interest to the investors regularly.
The issuer of Perpetual Bonds is not required to redeem these bonds. They are generally
treated as equity and not as loan / debt. Some other Types of bonds: Asset Backed Securities,
subordinated bonds, Bearer Bonds, Municipal Bonds, Lottery Bonds and War Bonds.
5.3 GOLD & SILVER
In India there is attraction for gold and silver since the early historical period. In India gold
is an obsession, deep-rooted, religious rites and its very psyche. These two precious metals are
used for making ornaments and also for investment of surplus funds over a long period. In every
family, at least a little quantity of gold and silver is available. There is also general tendency to
purchase gold or silver or gold ornaments as and when surplus money is available. The prices of
both the metals are continuously increasing. Moreover, they are easily saleable (liquidity) at the
market price. This brings safety, profitability and liquidity to the investment in gold and silver.
As a result, investment in gold and silver is popular in India. It is one avenue for investment.
Merits of investment in gold and silver-
 Gold and silver are useful as a store of wealth. They even act as secret assets.
 Both the metals are highly liquid. This facilitates easy convertibility into cash at any time and
that too without incurring any loss.
 The market price of both the metals is continuously rising. This makes investment normally
profitable. Investment in gold/silver acts as a hedge against inflation.

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 Investment in gold and silver provides a sense of security to the investor as it has immediate
liquidity.
 There is a high degree of prestige value for gold and silver in the society. The benefit of capital
appreciation is also available.
 Investment in gold and silver is quite safe and secured. The possibility of loss in the investment
is practically nil in the case of the metals.
Demerits of investment in gold and silver-
 Such investment is risky due to thefts, etc.
 It is a dead type of investment as profit will be available only when it is sold out and people
rarely sell gold.
 Regular income from the investment is not available.
 Huge amount of money is required for investment in gold/silver. The general trend is not
favourable for selling these metals. In this sense, investment in gold and silver is a dead
investment.
 Investment in gold and silver is not useful for capital formation and economic growth. Even the
traditional attraction for gold and silver is gradually reducing in India.
5.4 LIFE INSURANCE CORPORATION
Life insurance business was nationalized in India since long (1956) and is run by Life
Insurance Corporation of India. In addition, we have also Postal Life Insurance Scheme run by
the Postal Department. LIC is responsible for the expansion of life insurance business in India.
In addition, it plays an important role in collecting the savings of the people. It gives protection
and acts as a method of compulsory savings. LIC is one avenue for investment of money out of
regular income. It also gives protection to the family members of the policy holder. Life
insurance business is no more the monopoly of LIC. Private sector is now allowed to participate
in the insurance business.
Advantages of investment in Life Insurance Schemes-
 Protection to family members through financial support in the case of death of policyholder.
 Investment in life insurance scheme serves as a provision for old age (maintenance, medical
expenses, etc)
 It acts as a method of compulsory saving over a long period out of regular income.
 Investment in life insurance provides loan facility from banks.

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 LIC now gives bonus to policyholders on yearly basis. This adds to maturity value of policy.
 Investment in life insurance scheme gives tax benefit. This tax benefit is available even when
the policy is taken on the name of investor’s wife, son or daughter.
 Investment in life insurance scheme gives mental peace to investors in this age when our life
is exposed to various risks, uncertainties and danger.
 Investment in life insurance provides comfortable and financially independent life after
retirement. This is a special benefit during the old age to life insurance policyholders.
 LIC issues different life policies such as whole life policy, endowment policy, money back
policy, etc.
An investor can select any policy considering his age, monthly/ annual income and capacity
to save. Investment in LIC has wider significance. It is not merely for monetary benefit but
for security of investor and his family members.
Features of life insurance –
 Contract- life insurance is a contract between 2 parties namely insurer and the assured. This
contract is govern by Indian Contract Act, 1872. Hence it must contain the essentials of valid
contract-
1. Who has attained the age of majority according to the law.
2. Who is of sound mind
3. Who is not disqualified from contracting or entering into contract by law.
 Insurable interest- The insured must have an insurable interest in the life to be insured. The
insurable interest must exist at the time of contract. The risk against this policy is the death of
the insured. Insurable interest in life can be for his own in life or others life.
 Utmost good faith- The principle of utmost good faith should be observed by the both the
parties in the life insurance. At the time of taking the policy, the policyholder should disclose
all the material facts. Similarly the insurer is also bound to disclose all information about the
policy.
 Warranties – warranties is an important feature of life insurance contract they form the bases
of the contract. The contract shall become null and void if any statement whether material or
non- material is untrue.
 Assignment and nomination- When the right to receive the sum assured is transferred to any
other individual or institution is known as assignment of the policy. The right may be

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 transferred because of some legal consideration or out of love and affection. In case of
nomination a person or persons to whom the sum assured is payable on the death of the
insured is specified at the time of taking the policy.
 Premium- The amount of premium in life insurance depends on the age of the insured, value
of the policy, term of the policy, occupation, life style of the insured.
 Certainty of event- Life insurance covers the risk of death which is sure to happen in the life
of any person. Hence the insurer has to pay the sum assured either on the death or on maturity,
whichever is earlier.

Life insurance types (products)-

 Term insurance- Term insurance provides protection for a limited period only against the
risk of death. The sum assured (compensation) would be payable only if the insured dies
during the specific period, if the insured survives the insurer does not pay anything, the
premium for term insurance is relatively lower compare to other life insurance products.
A term policy may be convertible permitting the policyholder to convert it into whole life
policy or endowment policy without having to undergo medical examination, since medical
Examination is already undergone by taking term insurance. Many term insurance contract
contain an option to renew the policy for a limited number of additional years. In this case
the premium increase with each renewal depending on the age of the insured at the time of
renewal. Term insurance can be of following categories-
a) Straight term- The Corporation issues term insurance for two years which is also called as
temporary insurance policy. A single premium is required to be paid at the outset. The sum
assured will be payable only in the event of the death of life assured occurring within two
years from the commencement of the policy. The policy cannot be converted into other
plans. The policy is not entitled for surrender value or loan.
b) Renewable term policy- The term policies are renewable at the expiry of the term for an
additional period without medical examination. The premium will be altered according to
the age attained at the time of renewal.
c) Convertible term policy- under this plan options to convert it into whole life or endowment
policy is available. The policy can be converted without having to under go fresh medical
examination, at any time during the specified term except the last two years.

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 Endowment policy- Under this policy the insured has to pay premiums for an agreed period
of time. The sum assured would be payable by the insurance company either on death or
maturity whichever is earlier. The premiums are to be paid regularly for the agreed term in
this case premiums would be higher than term policy. There are many types of endowment
policy-
a) Pure endowment policy- The sum assured is payable only if the life assured survives the
endowment term. This is for the benefit of the policyholder. In the event of death premium
may or may not be returnable.
b) Ordinary endowment insurance policy- In this case the sum assured would be payable
either on death or on maturity, whichever is earlier. This policy provides for family
protection and investment.
c) Double endowment policy- In this case if the life assured dies during the endowment
period, the basic sum assured is payable and if he survives till the end of the term double of
the sum assured is payable.
d) Joint life endowment policy- This policy covers more than one life under a single policy.
The sum assured is payable at the end of the endowment term or on death on either of two,
whichever is earlier. This policy is beneficial for the married couple.
e) Marriage endowment plan- Under this plan, the sum assured is payable only at the end of
specified period. Even if the assured dies earlier. The period of insurance is fixed
corresponding to the likely period when the daughter may get married.
f) Education annuity plan – Under this policy the education purpose of the child is met. The
sum assured is payable to the policyholder in equal installments over a period of 5 years
and not in lump sum.
 Whole life policy- Whole life insurance provides for the payment of the sum assured
regardless of when death occurs, in this case insurance cover extense to the whole life of
the insured premium is payable till death. There are 2 types of whole life policies-
a) Limited payment- Under this policy the premiums are limited to a specified number of
years as per the contract this enables the insure to pay all the premiums during the
productive years of the insured. Under this plan the premium rate is higher.
b) Single premium whole life- A single premium is paid at the beginning of the policy for
which the insured receives protection for his entire life. This policy is available both with

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 and without profits. With profit single premium policies do not stop participating in profits
even after the completion of the period. For which the premium has been paid.
 Money back policy- These types of policy provides money back at regular intervals during
the term of the policy. It provides cash flow at regular intervals in case of death of the
policyholder during the term of the policy. The nominees will receive full sum assured
along with accumulated bonus. On the survival of life assured during the term he will
receive survival benefits at periodic intervals.
For e.g.- In the case of 20 year money back policy 20 % of the sum assured becomes
payable each after 5, 10, 15 years and the balance of 40% + the accumulated bonus
becomes payable at the 20th year.
 Group life insurance- Group life insurance scheme provide insurance coverage to a
group of people under one contract. This thing is provided for employees, associations,
societies, etc. Individual’s insurance policies are not drawn for each employee. LIC
provides protection through this scheme to various groups such as employees, employers,
professionals, co- operatives and weaker section of the society at subsidized rates of
premium.
 j. Annuities and pensions- Annuities mean an annual payment. It can also be described as
periodical payments depending on the status, age of the life assured. Annuity is the reverse
of the life insurance principle. If a person buy’s an annuity policy, he pays the insurer a
specified lump sum and in return the insurer pay insurers. Pays annuities (periodical
payment) at regular interval during the life time of the insured. A pension is also an
annuity it is commonly associated with old age financial securities. The pension is
provided by the employer to the employees or their dependant’s inconsideration of the
services rendered. There are 2 types of annuities depending on the time when the annuity
payment begin they are-
1. Immediate annuity- Immediate annuity starts from the date of purchase of the annuity. The
first premium starts at the end of the month, quarter, half year or a year as the case may be.
This annuity is always purchased with a single premium.
2. Deferred annuity- Deferred payment can be purchase in single premium or periodical
premium more. The annuity payment starts after the expiry of selected period called
deferred period.

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  Universal life insurance- Universal life insurance is a variation of whole life plan it was
introduced in the year 1979. Under this plan the policyholder can pay premium of
whatever amount and whenever they desire subject to the companies rule on minimum and
maximum. This plan has several feature which provide considerable flexibility. For e.g.-
1. Premium can be increased or decreased.
2. The mode of payment can be changed.
3. Partial surrender is allowed.
4. Policy loans are also permitted.
 Unit Link Insurance Plan (ULIP)- ULIP provide the benefit of protection and flexibility
in investment. The allocated premiums will be used to purchase units as specified by the
policyholder. The investment is denoted as units and is represented by net as a value. The
values of the units in the unit fund may increase or decrease depending on the returns. The
various funds includes debts fund, bond fund, secured fund, balanced fund and growth
fund.
 Child plan- Child plan are specially designed to meet the increasing educational and other
means of growing children. This is insurance cum investment plan that serves two
purposes-
1. To financially secure the child futures.
2. To finance the turning points in the child’s life such as higher education and marriage.
In the case of these policies premiums would be payable by the proposer (parent). In case
the proposer dies, the remaining premium would be paid by the insurance company to
keep the policy in force.
E.g. the child/ children plans of LIC are Jeevan Anurag, Jeevan Kishore, Jeevan Ankur,
Jeevan Chaya, Komal Jeevan, etc.
5.5 PUBLIC DEPOSITS
The term "fixed" in Fixed Deposits denotes the period of maturity or tenor. Fixed Deposit,
therefore, pre plans a length of time for which the depositor decides to keep the money with the
Bank and the rate of interest payable to the depositor is decided by this tenure. Rate of interest
differs from Bank to Bank. Normally, the rate is highest for deposits for 3-5 years. This,
however, does not mean that the depositor loses all his rights over the money for the duration of
the tenor decided. Deposits can be withdrawn before the period is over. However, the amount of
interest payable to the depositor, in such cases goes down.
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 Every Banks offer fixed deposits schemes with a wide range of tenures for periods from 7
days to 10 years. Therefore, the depositors are supposed to continue such Fixed Deposits for
the duration of time for which the depositor decides to keep the money with the bank. However,
in case of need, the depositor can ask for closing the fixed deposit in advance by paying a
penalty. Soon some banks have even introduced variable interest fixed deposits. The rate of
interest in such deposits will keep on varying with the prevalent market rates i.e. it will go up if
market interest rate goes and it will come down if the market rates fall.
The rate of interest for Fixed Deposits (FD) differs from bank to bank. When the interest
rates were regulated by RBI all banks used to have the same interest rate structure. The present
trends indicate that private sector and foreign banks offer higher rate of interest.
In order to meet, temporary financial needs, companies accept deposits from the investors.
Such deposits are called public deposits or company fixed deposits and are popular particularly
among the middle class investors. All most all companies collect crores of rupees through such
deposits. Companies were offering attractive interest rates previously. However, the interest
rates are now reduced considerably. At present, the interest rate offered is 9 to 12 per cent.
On maturity, the depositor has to return the deposit receipt ( duly discharged to the
company and the company pays back the deposit amount. The depositor can renew his deposit
for further period of one to three years at his option. Many companies are now supplementing
their fixed deposit scheme by cumulative time deposit scheme under which the deposited
amount along along with interest is paid back in lumpsum on maturity. Companies, now
appoint managers (collecting agents) to their fixed deposit schemes. The managers are usually
reputed share brokers. They help companies in collecting the deposits and also look after the
administrative work in connection with such deposits.
At present, along with private sector companies, even public sector companies and public
utilites also accept such deposits in order to meet their working capital needs. This source is
popular and used extensively by the companies.
The popularity of public deposits is due to the following advantages:
1. Public deposits are available easily and quickly, provided the company enjoys public
confidence.

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2. This method of financing is simple and cheaper than obtaining loans from commercial
banks. This makes public deposits attractive and agreeable to companies and also to
depositors.
3. Public deposits enable the companies to trade on equity and pay higher dividends on equity
shares.
4. The depositors receive interest on their deposits. This rate is higher than the interest rate
offered by banks. The interest is also paid regularly by reputed companies.
5. The formalities to be completed for depositing money are easy and simple. There is no
deduction of tax at source where interest does not exceed a particular limit.
Various important terms
 Tax deduction-Banks should deduct tax at source on interest paid in excess of Rs. 5000 per
annum to any depositor. This is not per deposit but per individual. Therefore if an individual
has 5 deposits and the aggregate interest earned on these is Rs. 7000 though in each
individual deposit, interest should not exceed Rs. 2000, tax must be deducted at source.
 Operation-While opening a fixed deposit account, the bank must issue a fixed deposit that
should state the following things on its face: Date of issue, Due date, Amount, Rate of
interest, Period of deposit and Amount at maturity.
 Early withdrawal-Sometimes a customer may want to withdraw his deposit before
maturity. In such case, the customer would have to request the bank to do so. Banks are
permitted, at their discretion, to allow early withdrawal and they can charge a penal interest
for early encashment. The Reserve Bank states that penal interest must not be charged if the
deposit is reinvested in a fresh deposit immediately. The rate of interest that will be paid is
the rate for the period the deposit has been with the bank. Banks may prohibit premature
withdrawal of large deposits held by entities other than individuals and HUFs if such
depositors have been so advised at the time the account was opened.
 Renewal-Deposits can be renewed on maturity on the request of the depositor. Deposits
may be renewed before maturity in the following cases:
1. If the deposit is renewable before the date of maturity
2. If the period of renewal is longer than the remaining period of the original deposit.

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 Interest on renewal: Interest on renewal will be on the original deposit at the rate
applicable to the period for which the deposit has actually run. Interest for the period from
the date of renewal will be allowed at the rate existing on the date of renewal.
 Maturity- The deposit matures at the end of the period for which it has been placed. On
maturity, the depositor should instruct the bank to renew the deposit. The bank cannot do so
without the customer’s instruction. If the depositor does not want to renew the deposit, he
can ask for it to be paid to him either by a cheque/ draft or credited to an account he has.
Normally this instruction would be in the account opening instructions. If the depositor does
not renew or claim the deposit on its maturity, the deposit will be designated as an overdue
deposit in the books of the bank. The bank cannot close and repay the deposit if the
depositor does not make a demand. If the deposit matures on a Sunday/ holiday/ any
nonworking days, the bank should pay interest at the originally contracted rate on the
deposit amount for the Sunday/ holiday/ non business day. The deposit would be paid back
on the succeeding working day.
 Renewal of overdue deposits-Banks can renew deposits at an interest rate prevailing on the
date of maturity provided the depositor approaches the bank within 14 days from the date of
maturity of the deposit; if the application is made after 14 days the rate of interest must be
the rate prevailing on the date of renewal of deposit. Banks are free to decide the rate of
interest between the date of maturity and the date of renewal. The policies on all aspects of
renewal of overdue interest are to be decided by the respective boards of banks. This policy
should be non discretionary and non discriminatory.
 Advance on Fixed Deposits- Banks may grant loans on the security of the fixed deposit but
they should maintain a reasonable margin on any advance or facility given against the
security of a term deposit. Banks are free to charge a rate of interest on such lending without
reference to its prime lending rate (BPLR). If the term deposit is withdrawn before
completion of the prescribed minimum maturity period it must not be treated as an advance
against the term deposit and interest must be charged at the rates prescribed by the RBI. On
advances given on the security of fixed deposits to third parties up to Rs. 2, 00,000 banks
can charge interest without reference to its BPLR. If it exceeds Rs. 2 lakhs it must be at the
rates prescribed by the Reserve Bank (RBI). All the transactions must be rounded to the
nearest rupee. Fractions of 50 paisa and above will be rounded up and fractions below 50

51
 paisa will be rounded down. Cheques issued by a customer, which containing fractions of a
rupee should not be rejected or dishonored.
 Joint Holdings-Fixed deposits may be in the name of an individual or in the joint names of
two or more persons. In case of joint holdings, if one of the joint depositors requests for
premature withdrawal, it should be done only after getting the approval of the other
depositors. At the same time if one of the joint depositor wants a loan against a fixed
deposit, it should be given only after all the other joint holders have signed the request. Any
one joint depositor’s request should not be entertained in such accounts; all the requests
should be signed by all the joint holders.
 Loss of Fixed Deposit Receipt-A fixed deposit receipt is not negotiable or transferable. If
the receipt is lost, customers can ask for a duplicate. This is because banks are firm on fixed
deposit receipts to be discharged and surrendered before payment is affected. Therefore in a
joint holding account, all the holders should request for a duplicate receipt in writing and
execute a letter of indemnity to issue a duplicate. A note should also be made in the bank’s
records that a duplicate has been issued.
 Repayment-If the deposit with interest is Rs. 20,000 or more the repayment must be by an
account payee cheque. It can also be made by crediting to the current/ savings account of the
depositor. Repayment of interest or principal should not be made to the account of another
person and it is usually made in the name of the first named person.

5.6 MUTUAL FUND

A mutual fund is a professionally managed investment fund that pools money from many
investors to purchase securities. While there is no legal definition of the term "mutual fund", it
is most commonly applied to open-end investment companies, which are collective investment
vehicles that are regulated and sold to the general public on a daily basis. They are sometimes
referred to as "investment companies" or "registered investment companies". Hedge funds are
not mutual funds, primarily because they cannot be sold to the general public. Once a small
player in financial markets, due to their meteoric growth in the late 1980s and early 1990s,
mutual funds now play a large and decisive role in the valuation of tradeable assets such as
stocks and bonds.

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 In the United States mutual funds must be registered with the U.S. Securities and Exchange
Commission, overseen by a board of directors or board of trustees, and managed by
a Registered Investment Advisor. Mutual funds are subject to an extensive and detailed
regulatory regime set forth in the Investment Company Act of 1940. Mutual funds are not taxed
on their income and profits if they comply with certain requirements under the U.S. Internal
Revenue Code.
Mutual funds have both advantages and disadvantages compared to direct investing in
individual securities. Today they play an important role in household finances, most notably
in retirement planning.
Mutual funds are generally classified by their principal investments. The four main
categories of funds are money market funds, bond or fixed income funds, stock or equity funds,
and hybrid funds. Funds may also be categorized as index (or passively managed) or actively
managed.
Investors in a mutual fund pay the fund’s expenses, which reduce the fund's returns and
performance. There is controversy about the level of these expenses.
Features
1. Mobilizing small savings: mutual funds mobilize funds by selling their own shares known
as units. This gives the benefit of convenience and satisfaction of owning shares in many
industries. Mutual funds invest in various securities and pass on the returns to the investors.
2. Investment Avenue: the basic characteristic of a mutual fund is that it provides an ideal
avenue for investment for investors and enables them to earn a reasonable return with better
liquidity. It offers investors a proportionate claim on the portfolio of assets that fluctuate in
value.
3. Professional management: mutual fund provides investors with the benefit of professional
and expert management of their funds. Mutual fund employees professionals/experts who
manage the investment portfolios efficiently and profitably. Investors are relieved from the
responsibility of following the markets on a regular basis.
4. Diversified investment: mutual fund has the advantage of diversified investment of funds in
various industries and sectors. This is beneficial to small investors who cannot afford to buy
shares of established companies at high prices. Mutual fund allows millions of investors
who have investments in variety of securities of different companies.

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5. Better liquidity: Mutual funds have the distinct advantage of better liquidity of investment.
There is always a market available for mutual funds. In case of mutual funds it is obligatory
that units are listed and traded thus offering our secondary markets for the funds. A high
level of liquidity is possible for the fund holders because of more liquid securities in the
mutual fund portfolio.
6. Reduced risks: the risk on mutual fund is minimum. This is because of expert management
diversification, liquidity and economies of scale in transaction cost.
7. Investment protection: mutual funds are regulated by guidelines and legislative provisions
put in place by regulatory agencies such as SEBI in order protect the investor interest the
mutual funds are obligated to follow the provisions laid down by the regulators.
8. Switching facility: mutual funds provide investors with the flexibility to switch from one
scheme to another, this flexibility enables investors to switch from income scheme to growth
scheme and from close ended scheme to open ended scheme.
9. Tax benefits: mutual funds offer tax shelter to the investors by investing in various tax
saving schemes under the provisions provided by the income tax act.
10. Low transaction cost: the cost of purchase and sale of MF’s is relatively lower.
11. Economic development: MF’s contribute to economic development by mobilizing savings
and channelizing them to more productive sectors of the economy.
12. Convenience: MF units can be traded easily with little or no transaction cost.

ADVANTAGES OF MUTUAL FUNDS:

1. Portfolio Diversification: Each investor in the fund is a part owner of all the fund’s
assets, thus enabling him to hold a diversified investment portfolio even with a small
amount of investment that would otherwise require big capital.
2. Professional Management: Even if an investor has a big amount of capital available to
him, he benefits from the professional management skills brought in by the fund in the
management of the investor’s portfolio. The investment management skills, along with the
needed research into available investment options, ensure a much better return than what an
investor can manage on his own. Few investors have the skill and resources of their own to
succeed in today’s fast moving, global and sophisticated markets.

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3. Reduction/Diversification of Risk: When an investor invests directly, all the risk of
potential loss is his own, whether he places a deposit with a company or a bank, or he buys a
share or debenture on his own or in any other from. While investing in the pool of funds
with investors, the potential losses are also shared with other investors. The risk reduction is
one of the most important benefits of a collective investment vehicle like the mutual fund.
4. Reduction of Transaction Costs: What is true of risk as also true of the transaction
costs. The investor bears all the costs of investing such as brokerage or custody of securities.
When going through a fund, he has the benefit of economies of scale; the funds pay lesser
costs because of larger volumes, a benefit passed on to its investors.
5. Liquidity: Often, investors hold shares or bonds they cannot directly, easily and quickly
sell. When they invest in the units of a fund, they can generally cash their investments any
time, by selling their units to the fund if open-ended, or selling them in the market if the
fund is close-end. Liquidity of investment is clearly a big benefit.
6. Convenience and Flexibility: Mutual fund management companies offer many investor
services that a direct market investor cannot get. Investors can easily transfer their holding
from one scheme to the other; get updated market information and so on.
7. Tax Benefits: Any income distributed after March 31, 2002 will be subject to tax in the
assessment of all Unit holders. However, as a measure of concession to Unit holders of
open-ended equity- oriented funds, income distributions for the year ending March 31, 2003,
will be taxed at a concessional rate of 10.5%. In case of Individuals and Hindu Undivided
Families a deduction upto Rs. 9,000 from the Total Income will be admissible in respect of
income from investments specified in Section 80L, including income from Units of the
Mutual Fund. Units of the schemes are not subject to Wealth-Tax and Gift-Tax.
8. Choice of Schemes: Mutual Funds offer a family of schemes to suit your varying needs
over a lifetime.
9. Well Regulated: All Mutual Funds are registered with SEBI and they function within
the provisions of strict regulations designed to protect the interests of investors. The
operations of Mutual Funds are regularly monitored by SEBI.
10. Transparency: You get regular information on the value of your investment in addition
to disclosure on the specific investments made by your scheme, the proportion invested in
each class of assets and the fund manager's investment strategy and outlook.

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 DISADVANTAGES OF INVESTING THROUGH MUTUAL FUNDS:
1. No Control Over Costs: An investor in a mutual fund has no control of the overall costs
of investing. The investor pays investment management fees as long as he remains with the
fund, albeit in return for the professional management and research. Fees are payable even if
the value of his investments is declining. A mutual fund investor also pays fund distribution
costs, which he would not incur in direct investing. However, this shortcoming only means
that there is a cost to obtain the mutual fund services.
2. No Tailor-Made Portfolio: Investors who invest on their own can build their own
portfolios of shares and bonds and other securities. Investing through fund means he
delegates this decision to the fund managers. The very-high-net-worth individuals or large
corporate investors may find this to be a constraint in achieving their objectives. However,
most mutual fund managers help investors overcome this constraint by offering families of
funds- a large number of different schemes- within their own management company. An
investor can choose from different investment plans and constructs a portfolio to his choice.
3. Managing A Portfolio Of Funds: Availability of a large number of funds can actually
mean too much choice for the investor. He may again need advice on how to select a fund to
achieve his objectives, quite similar to the situation when he has individual shares or bonds to
select.
4. The Wisdom of Professional Management: That's right, this is not an advantage. The
average mutual fund manager is no better at picking stocks than the average nonprofessional,
but charges fees.
5. No Control: Unlike picking your own individual stocks, a mutual fund puts you in the
passenger seat of somebody else's car
6. Dilution: Mutual funds generally have such small holdings of so many different stocks
that insanely great performance by a fund's top holdings still doesn't make much of a difference
in a mutual fund's total performance.
7. Buried Costs: Many mutual funds specialize in burying their costs and in hiring
salesmen who do not make those costs clear to their clients.

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 TYPES OF MUTUAL FUNDS SCHEMES IN INDIA
 BY STRUCTURE
o Open - Ended Schemes: An open-end fund is one that is available for subscription all
through the year. These do not have a fixed maturity. Investors can conveniently buy and
sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes
is liquidity.
o Close - Ended Schemes: A closed-end fund has a stipulated maturity period which
generally ranging from 3 to 15 years. The fund is open for subscription only during a
specified period. Investors can invest in the scheme at the time of the initial public issue and
thereafter they can buy or sell the units of the scheme on the stock exchanges where they are
listed. In order to provide an exit route to the investors, some close-ended funds give an
option of selling back the units to the Mutual Fund through periodic repurchase at NAV
related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided
to the investor.
o Interval Schemes: Interval Schemes are that scheme, which combines the features of open-
ended and close- ended schemes. The units may be traded on the stock exchange or may be
open for sale or redemption during pre-determined intervals at NAV related prices.
 BY NATURE
o Equity Fund: These funds invest a maximum part of their corpus into equities holdings.
The structure of the fund may vary different for different schemes and the fund manager’s
outlook on different stocks. The Equity Funds are sub-classified depending upon their
investment objective, as follows: Diversified Equity Funds, Mid-Cap Funds, Sector Specific
Funds and Tax Savings Funds (ELSS) Equity investments are meant for a longer time
horizon, thus Equity funds rank high on the risk-return matrix.
o Debt Funds: The objective of these Funds is to invest in debt papers. Government
authorities, private companies, banks and financial institutions are some of the major issuers
of debt papers. By investing in debt instruments, these funds ensure low risk and provide
stable income to the investors. Debt funds are further classified as:
 Gilt Funds: Invest their corpus in securities issued by Government, popularly known as
Government of India debt papers. These Funds carry zero Default risk but are associated

57
 with Interest Rate risk. These schemes are safer as they invest in papers backed by
Government.
 Income Funds: Invest a major portion into various debt instruments such as bonds,
corporate debentures and Government securities.
 MIPs: Invests maximum of their total corpus in debt instruments while they take minimum
exposure in equities. It gets benefit of both equity and debt market. These scheme ranks
slightly high on the risk-return matrix when compared with other debt schemes.
 Short Term Plans (STPs): Meant for investment horizon for three to six months. These
funds primarily invest in short term papers like Certificate of Deposits (CDs) and
Commercial Papers (CPs). Some portion of the corpus is also invested in corporate
debentures.
 Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity
and preservation of capital. These schemes invest in short-term instruments like Treasury
Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term
cash management of corporate houses and are meant for an investment horizon of 1day to 3
months. These schemes rank low on risk-return matrix and are considered to be the safest
amongst all categories of mutual funds.
o Balanced Funds: As the name suggest they, are a mix of both equity and debt funds. They
invest in both equities and fixed income securities, which are in line with pre-defined
investment objective of the scheme. These schemes aim to provide investors with the best of
both the worlds. Equity part provides growth and the debt part provides stability in returns.
Further the mutual funds can be broadly classified on the basis of investment parameter viz,
Each category of funds is backed by an investment philosophy, which is pre-defined in the
objectives of the fund. The investor can align his own investment needs with the funds
objective and invest accordingly
 BY INVESTMENT OBJECTIVE:
• Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these
schemes is to provide capital appreciation over medium to long term. These schemes
normally invest a major part of their fund in equities and are willing to bear short-term
decline in value for possible future appreciation.

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• Income Schemes: Income Schemes are also known as debt schemes. The aim of these
schemes is to provide regular and steady income to investors. These schemes generally
invest in fixed income securities such as bonds and corporate debentures. Capital
appreciation in such schemes may be limited.
• Balanced Schemes: Balanced Schemes aim to provide both growth and income by
periodically distributing a part of the income and capital gains they earn. These schemes
invest in both shares and fixed income securities, in the proportion indicated in their offer
documents (normally 50:50).
• Money Market Schemes: Money Market Schemes aim to provide easy liquidity,
preservation of capital and moderate income. These schemes generally invest in safer, short-
term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-
bank call money.
• Load Funds: A Load Fund is one that charges a commission for entry or exit. That is, each
time you buy or sell units in the fund, a commission will be payable. Typically entry and
exit loads range from 1% to 2%. It could be worth paying the load, if the fund has a good
performance history.
• No-Load Funds: A No-Load Fund is one that does not charge a commission for entry or
exit. That is, no commission is payable on purchase or sale of units in the fund. The
advantage of a no load fund is that the entire corpus is put to work

 OTHER SCHEMES
• Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax laws
prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to
any Equity Linked Savings Scheme (ELSS) are eligible for rebate.
• Index Schemes: Index schemes attempt to replicate the performance of a particular index
such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only
those stocks that constitute the index. The percentage of each stock to the total holding will
be identical to the stocks index weightage. And hence, the returns from such schemes would
be more or less equivalent to those of the Index.
• Sector Specific Schemes: These are the funds/schemes which invest in the securities of
only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals,

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 Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in
these funds are dependent on the performance of the respective sectors/industries. While
these funds may give higher returns, they are more risky compared to diversified funds.
Investors need to keep a watch on the performance of those sectors/industries and must exit
at an appropriate time.
• NET ASSET VALUE (NAV): Since each owner is a part owner of a mutual fund, it is
necessary to establish the value of his part. In other words, each share or unit that an
investor holds needs to be assigned a value. Since the units held by investor evidence the
ownership of the fund’s assets, the value of the total assets of the fund when divided by the
total number of units issued by the mutual fund gives us the value of one unit. This is
generally called the Net Asset Value (NAV) of one unit or one share. The value of an
investor’s part ownership is thus determined by the NAV of the number of units held.
5.7 REAL ESTATES
Investment in the real estate is popular due to high saleable value after some years. Such
properties include buildings, commercial premises, industrial land, plantations, farmhouses,
agricultural land near cities and so on. Such properties attract the attention of affluent investors
and builders. They purchase such properties at low prices and do not sale the same unless there
is substantial increase in the market prices. The property owners are willing to wait even for 20
to 30 years for attractive return. During this period, it is a type of dead investment for the
owners. However, the resale price will be attractive in due course when they can recover four
times (or even more) the price paid. This is how real estate is one attractive as well as profitable
avenue for investment provided the property to be purchases is selected with proper care and
foresight.
Liquidity in the case of such properties is limited as quick sale (like sale of shares or
debentures) is neither possible nor profitable. Similarly, documentation formalities are also
lengthy and costly in the case of purchase and sale of real estate properties.
A residential home/building represents the most attractive real estate property for large
majority of investors. Such investment is attractive due to the following reasons:
 Ownership of a residential house provides owned accommodation and gives
satisfaction to the head as well as family members. It acts as one useful family asset
with saleable value.

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  There is capital appreciation of residential buildings particularly in the urban areas.
 Loans are available from different agencies like banks, HDFC and so on for buying,
construction or renovation of owned residential building.
 Interest on such loans is tax deductible within certain limits
 Wealth tax benefit is available in the case of residential building as the value is
reckoned at its historical cost and not at its present market price.
The term ‘real estate is defined as land including the air above it and the ground below
it,and any buildings or structures on it. It is also referred to as reality. It covers residential
housing, commercial offices,trading spaces such as theaters, hotels and resturants, retail outlets,
industrial buildings such as factories and government buildings. Real estate involves the
purchase, sale, and development of land, residential and non-residential buildings. The main
players in the real estate are the landlords, developers, builders, real estate agents, tenants,
buyers etc. the activities of the real estate sector encompass the housing and construction sectors
also.
Advantages of investment in real estate’s-
 Real estate like house is a necessity of life and provides pleasure to all family members.
 Real estate property acts as an asset (financial security) which can be used in case of
need. Moreover, the asset value increases year after year.
 Profit in the real estate investment is substantial provided the owner is willing to wait till
appropriate time.
 The chances of capital appreciation are usually bright in the case of real estate properties
 Real estate properties can be used as security for raising loan. In addition tax benefit and
protection against inflation are available.
Disadvantages of investment in real estate’s-
 Investment in real estate properties is normally substantial. Due to huge investment in
one item, the benefits of diversification of investment are not available.
 In real estate property, profitability is available at the cost of liquidity. Thus, liquidity is
low.
 The risk in the investment is more as compared to investment in banks, UTI, etc.
 Tax burden in the form of stamp duty, capital gains, tax, etc. is heavy as and when the
property sold out.

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 Repairs, maintenance, etc. constitute additional expenditure and botheration to the
owner.
 Government rules and regulations regarding buying and selling are troublesome in the
case of real estate properties.
TYPES OF REAL ESTATE INVESTMENT OPTION:
 Residential real estate investments are properties such as houses, apartment buildings,
known as the townhouses, and vacation houses where a person or family pays you to
live in the property. The length of their stay is based upon the rental agreement, or the
agreement they sign with you, lease agreement.
 Commercial real estate investments consist mostly of things like office buildings and
skyscrapers. If you were to take some of your savings and construct a small building
with individual offices, you could lease them out to companies and small
business owners, who would pay you rent to use the property.
 Industrial real estate investments consist of storage units, car washes and other special
purpose real estate that generates sales from customers who temporarily use the facility.
Industrial real estate investments often have significant fee and service revenue streams,
such as adding coin-operated vacuum cleaners at a car wash, to increase the return on
investment for the owner.
 Retail real estate investments consist of shopping malls, strip malls, and other retail
storefronts. In some cases, the landlord also receives a percentage of sales
generated by the tenant store in addition to a base rent to incentivize them to keep
the property in top-notch condition.
 Mixed-use real estate investments are those that combine any of the above categories
into a single project. I know of an investor in California who took several million
dollars in savings and found a mid-size town in the Midwest. He approached a bank
for financing and built a mixed-use three-story office building surrounded by retail
shops. The bank, which lent him the money, took out a lease on the ground floor,
generating significant rental income for the owner. The the other floors were leased to
a health insurance company and other businesses. The surrounding shops were quickly
leased by a Panera Bread, a membership gym, a quick service restaurant, an upscale
retail shop, a virtual golf range, and a hair salon. Mixed-use real estate investments are

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 popular for those with significant assets because they have a degree of built-in
diversification, which is important for controlling risk.
 Real Estate Investment Trusts or REITs trade like stocks and own a portfolio of
underlying real estate or real estate mortgages.
 Technically, lending money for real estate is also considered real estate investing but I
think it is more appropriate to consider this as a fixed income investment, just like
a bond, because you are lending money with property securing the debt. You have no
underlying interest in the appreciation or profitability of a property beyond the interest
income to which you are entitled.
 Likewise, buying a piece of real estate or a building and then leasing it back to a tenant,
such as a restaurant, is more akin to fixed income investing rather than a true real estate
investment. You are essentially financing a property, although this somewhat straddles
the fence of the two because you will eventually get the property back and presumably
the appreciation belongs to you.
REASONS TO INVEST IN REAL ESTATE:
o Mortgage Interest Rates Are Low Again -Several years back when the mortgage rates
hit an all-time low, people went crazy buying homes and investment properties. Some of
the same people ended up getting greedy and borrowed against their newfound equity,
which eventually contributed to the downturn of the real estate market. Don’t repeat
these mistakes.
o The High Volume of Recent Foreclosures-Many former homeowners have been
displaced due to foreclosure, so there are a lot more renters in the market, making it
optimal for investors to buy rental properties without the burden of the mortgage
payment.
o People Prefer Houses to Apartments- Right or wrong, there is often a stigma
associated with finding an apartment for rent. If someone has owned a home, they might
see it as a step backwards to move into an apartment. This creates a great opportunity for
you as a real estate investor. Also, those who have owned homes prior generally will
make better tenants because they tend to treat rental homes as they are used to treating
their own home.
o Tenants Often Prefer Private Landlords- I believe most people would prefer to rent from
a good private landlord as opposed to a property management company. For some, it is the
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 security of knowing that only your landlord has the key to your home. Others might feel that
there is an opportunity to eventually purchase the home through a lease with option to buy, or
lease-purchase contract.If you have a short-term investment strategy and can buy the property
at a low enough price, a lease purchase or lease with option arrangement with your tenant
might make sense. It also increases the likelihood that the tenant will keep the place in good
shape since they are going to buy it.
o Real Estate Prices Are at a Low-In many markets, real estate is pretty cheap. Some of
the best places to buy are Arizona, Florida, California, Michigan, and Nevada.
Considering that housing is generally your biggest expense, you might want to consider
relocating to an area where you can get a nice property for a reasonable price. When I
moved to Arizona from Maryland, my housing payment was cut by 66%, although we
did also downsize our home a little.
o The Short Sale Market- The short sale market in many areas has also created some
great opportunities for getting a non-foreclosure home at a great price. In my opinion, a
short sale is a better option than buying a foreclosure, because you never know what the
history of the house is or what has happened while it has been sitting vacant.
o Real Estate is a Great Long-Term Investment-Regardless of the recent crisis, real
estate is still a good, long-term investment. If you look back 30 years, real estate is still
valued much higher than it was. And if you have tenants paying your mortgage, it makes
the investment that much more profitable.

5.8 RISK FACTORS INVOLVED IN INVESTMENT

Risk is uncertainty of the income /capital appreciation or loss or both. Every investment
(equity, debt, property, etc.) carries an element of risk that is unique to it. Though risk cannot be
totally eliminated, it can be managed by undertaking effective risk management. To manage
risk, one first need to identify different kinds of risks involved in investing and then takes
appropriate steps to reduce it.
Risk and return share a direct relationship with one another. Therefore, an investment which
carries negligible risk, will offer a low return (viz. bonds issued by the Reserve Bank of India)
while an investment which carries a higher risk, also offers the potential of higher returns
(stocks).All investments are a ‘trade off’ between risk and returns.

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 Investing comes with risks. Sometimes those risks are minimal, as is the case with
treasury bonds, but other times, such as with stocks, options and commodities, the risk can be
substantial. The more risk the investor is willing to take, the more potential for high returns. But
great investors know that managing risk is more important than making a profit, and proper risk
management is what leads to profitable investing.

Types of Risks -
All investments carry their unique set of risks. Though there are several types of risks, the
important ones are - market risk, credit risk, interest rate risk, inflation risk, currency risk and
liquidity risk. These are briefly explained below:
1. Market Risk: A share may rise or fall depending on the fortunes of the company, the
industry it is in, or in response to investor sentiment.
2. Credit Risk: This risk is attributed to debt investments wherein the borrower may
default on interest and/or principal repayment.
3. Interest Rate Risk: When interest rates rise, fixed income investments lose value. This
is because the investor will continue to earn the same (lower) interest rate until the
investment matures while market interest rates have already gone up. In order to
compensate for a lower interest rate compared to the market rate, the fixed income
investment will thus have to be priced at a lower rate.
4. Inflation Risk: Rising inflation will erode the value of your income and asset. Due to
inflation, the cost of products and services will rise and consequently, your future
income and assets will be worth less than what they are worth today.
5. Currency Risk: Changes in exchange rates between currencies could lead to decline in
value of your investments. With Indian investors now being allowed to invest in other
countries, you will now be exposed to currency risk i.e. a fall in the value of the currency
in which you are investing vis-à-vis your home currency i.e. the Rupee.
6. Liquidity Risk: Certain investments carry the risk of poor liquidity either due to the
nature of the asset or regulatory reasons. For example, property is inherently an illiquid
investment as it cannot be sold as simply as selling stocks. Certain investments like the
Reserve Bank of India bonds are not transferable till maturity. Investments in Equity

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 Linked Savings Schemes are illiquid for a period of 3 years and in case you redeem from
such schemes, your tax benefit is withdrawn.
7. Business Risk-Business risk may be the best known and most feared investment risk. It's
the risk that something will happen with the company, causing the investment to lose
value. These risks could include a disappointing earnings report, changes in leadership,
outdated products or wrongdoing within the company. Because of the large amount of
possible risks that come with owning stock in a company, investors know that
forecasting these risks is nearly impossible. Purchasing a put option to guard against a
large decline or setting automatic stops are the best ways to guard against business risk.

5.9 PERCEPTION LEVEL OF MIDDLECLASS EMPLOYEES

 Stability of income- An investor considers stability of income from his investment. He also
considers the stability of purchasing power of income.
 Capital growth- Capital appreciation has become an important investment principle.
Investors seek growth stocks which provide a very large capital appreciation by way of
rights, bonus and appreciation in the market price of a share.
 Liquidity- An investment is a liquid asset. It can be converted into cash with the help of a
stock exchange. Investment should be liquid as well as marketable. The portfolio should
contain a planned proportion of high-grade and readily saleable investment.
 Safety- Safety means protection for investment against loss under reasonable variations. In
order to provide safety, a careful review of economic and industrial trends is necessary. In
other words, errors in portfolio are unavoidable and it requires extensive diversification.
Even investor wants that his basic amount of investment should remain safe.
 Tax benefit- Investors try to minimise their tax liabilities from the investments. The
portfolio manager has to keep a list of such investment avenues along with the return risk,
profile, tax implications, yields and other returns. An investment programme without
considering tax implications may be costly to the investor.
 Past market trends-Sometimes history repeats itself, sometimes markets learn from their
mistakes. The investors need to understand how various asset classes have performed in the
past before planning for their finances.

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 Risk appetite-The ability to tolerate risk differs from person to person. It depends on factors
such as the individual financial responsibilities, environment, basic personality, etc.
Therefore, understanding the investor’s capacity to take on risk becomes a crucial factor in
investment decision making.
 Investment horizon-It is the period that the investor can keep his money invested. The
longer the time-horizon, the greater are the returns that should be accepted. Further, the risk
element reduces with time.
 Investible surplus- It basically refers to how much money is the individual able to keep
aside for investments. The investible surplus plays a vital role in selecting from various state
classes as the minimum investment amounts differ and so do the risks and returns.
 Investment need-It refers to how much money does the investor needs at the time of
maturity. This helps the investor to determine the amount of money that they need to invest
every month or year to reach the magic figure.
 Expected returns-The expected rate of returns is a crucial factor as it will guide the choice
of investment. Based on the investor’s expectations, the investor can decide whether they
want to invest heavily into equities or debt or balance their portfolio.

5.10 CURRENT PATTERN OF INVESTMENT OF MIDDLECLASS

EMPLOYEES
The study has been undertaken to analyze the saving pattern and investment preferences of
households. The main reasons behind the study is to study the demographic factors like income,
gender, age, occupation, education and the risk covering nature of the household.
The developing countries like India face the enormous task of finding sufficient capital in
their development efforts. Most of these countries find it difficult to get out of the vicious circle
of poverty of low income, low saving, low investment, low employment etc. With high capital
output ratio, India needs very high rates of investments to make leap forward in her efforts of
attaining high levels of growth. Since the beginning of planning, the emphasis was on
investment as the primary instruments of economic growth and increase in national income. In
order to have production as per target, investment was considered the crucial determinant and
capital formation had to be supported by appropriate volume of saving. Investment is the
sacrifice of certain present value for the uncertain future reward. Investments are always

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interesting, challenging and rewarding. Generally where there is a high risk, more rate of return
is assured. Risk and reward go together. The major features of an investment are safety of
principal amount, liquidity, income stability, appreciation and easy transferability. A variety of
investment avenues are available such as shares, bank, companies, gold and silver, real estate,
life insurance, postal savings and so on. All the investors invest their surplus money in the
above mentioned avenues based on their risk taking attitude.
The money salaried persons earn is partly spent and the rest saved for meeting future
expenses. Instead of keeping the savings idle salaried persons may like to use savings in order to
get return on it in the future, which is known as 'investment'. There are various investment
avenues such as public deposits, real estate, shares, life insurance schemes, gold and silver,
debentures and bonds, mutual funds, etc. A Portfolio is a combination of different investment
assets mixed and matched for the purpose of achieving an investor's goal. The two key aspects
of investment are preferences and pattern. Benefit is expected in the future and tends to be
uncertain. In some investments (like stock options) risk element is dominant attribute while in
some investment (like govt. bonds) time is dominant attribute .There are various factors which
affects salaried persons' portfolio such as annual income, government policy, natural calamities,
economical changes etc.
One needs to invest and earn return on salaried persons idle resources and generate sum of
money for a specific goal in life and make a provision for an uncertain future .One of the
important reason why people needs to invest wisely is to meet the cost of inflation. Inflation is
the rate at which the cost of living increases.
An investment can be described as perfect if it satisfies all the needs of all salaried persons.
So, the starting point in searching for the perfect investment would be to examine investor
needs. If all those needs are met by the investment, then that investment can be termed the
perfect investment. Most salaried persons and advisors spend a great deal of time understanding
the merits of the thousands of investments available in India. Little time, however, is spent
understanding the needs of the investor and ensuring that the most appropriate investments are
selected for him.
As per the current pattern of investment, middleclass employees expects
following terms-
By and large, most salaried persons have eight common needs from their investments:

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  Security of original capital: The chance of losing some capital has been a primary
need. This is perhaps the strongest need among salaried persons in India, who have
suffered regularly due to failures of the financial system.
 Wealth accumulation: This is largely a factor of investment performance, including
both short-term performance of an investment and long-term performance of a portfolio.
Wealth accumulation is the ultimate measure of the success of an investment decision.
 Comfort factor: This refers to the peace of mind associated with an investment.
Avoiding discomfort is probably a greater need than receiving comfort. Reputation plays
an important part in delivering the comfort factor.
 Tax efficiency: Legitimate reduction in the amount of tax payable is an important part
of the Indian psyche. Every rupee saved in taxes goes towards wealth accumulation.
 Life Cover: Many salaried persons look for investments that offer good return with
adequate life cover to manage the situations in case of any eventualities.
 Income: This refers to money distributed at intervals by an investment, which are
usually used by the investor for meeting regular expenses. Income needs tend to be fairly
constant because they are related to lifestyle and are well understood by salaried persons.
 Ease of withdrawal: This refers to the ability to invest long term but withdraw funds
when desired. This is strongly linked to a sense of ownership. It is normally triggered by
a need to spend capital, change investments or cater to changes in other needs. Access to
a long-term investment at short notice can only be had at a substantial cost.
 Communication: This refers to informing and educating salaried persons about the
purpose and progress of their investments. The need to communicate increases when
investments are threatened.
 Security of original capital is more important when performance falls.
 Performance is more important when investments are performing well.
 Failures engender a desire for an increase in the comfort factor.
Perfect investment would have been achieved if all the above-mentioned needs had been met to
satisfaction. But there is always a trade-off involved in making investments. As long as the
investment strategy matches the needs of investor according to the priority assigned to them, he
should be happy.
The Ideal Investment strategy should be a customized one for each investor depending on
his risk-return profile, his satisfaction level, his income, and his expectations. Accurate planning
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gives accurate results. And for that there must be an efficient and trustworthy roadmap to
achieve the ultimate goal of wealth maximization.
After understanding the concept of investment, the salaried persons would like to know how
to go about the task of investment, how much to invest at any moment and when to buy or sell
the securities, This depends on investment process as investment policy, investment analysis,
valuation of securities, portfolio construction and portfolio evaluation and revision. Every
investor tries to derive maximum economic advantage from his investment activity.
This report is a reflection of the awareness and factors considering, risk taking ability of the
various categories of salaried individuals. Selection of the perfect investment avenue is a
difficult task to an individual. An effort is made to identity the taste and preference of
a sample of individuals selected by connivance and snowball sampling. Identifying the
factors considered individuals before investment, awareness level of salaried individuals
towards various investment avenues are identified based on their occupations, salaried
person’s risk in selecting a particular avenue. The presents study has important implication for
investment manager as it has come out with certain interesting facets of salaried individual. The
individual investor still prefers to invest in financial products which give risk free returns. This
confirms that individuals even if they are of high income, well educated, independent are
conservative individual prefer to play safe.

70
 6. COLLECTION AND ANALYSIS OF DATA
1. What is your age?

TABLE NO- 6.1

AGE NO. OF RESPONDENTS

20-30 13

30-40 14

40-50 13

ABOVE 50 20

TOTAL 60

AGE in %
20-30 30-40 40-50 Above 50

22%
33%

23%

22%

INTERPRETAION- Age group of 30- 40 and above 50 are more aware about various
investment options whereas age group of 20-30 and 40-50 are almost know about various
investment options.

71
 2. Annual income

TABLE NO-6.2

ANNUAL INCOME NO. OF RESPONDENTS

1,00,000-2,00,000 05

2,00,000-3,00,000 22

4,00,000-5,00,000 16

ABOVE 5,00,000 17

TOTAL 60

annual income
1 lakhs- 2 lakhs 2 lakhs - 3 lakhs 4 lakhs- 5 lakhs Above 5 lakhs

8%

28%

37%

27%

INTERPRETAION- According to the survey, people of annual income 1 lakhs-2 lakhs give less
importance to the investment services and 2 lakhs- 3 lakhs are ready to investment but people of 4
lakhs and 5 lakhs above are willingly to do investment.

72
 3. Do you know about the following Financial Instrument?

TABLE NO-6.3

AWARENESS YES NO NO.OF

RESPONDENTS

Life insurance 59 1 60

Real estate 53 7 60

Gold and Silver 58 2 60

Mutual fund 54 6 60

Debenture 47 13 60

Shares 55 5 60

Public deposits 46 14 60

Bonds 44 16 60

awareness
70
59 58
60 53 54 55
50 47 46 44
40
30
16 yes
20 13 14
no
10 7 6 5
1 2
0

73
 INTERPRETAION- According to survey, people are more aware about life insurance, real estate,
gold and silver, mutual fund and shares whereas on other hand people are less aware about
debentures, public deposits and bonds.
4. What do you think are the best options for investing your money?

TABLE NO-6.4

BEST OPTION YES NO NO. OF

RESPONDENTS

Life insurance 44 16 60

Real estate 44 16 60

Gold and Silver 54 06 60

Mutual fund 25 35 60

Debenture 25 35 60

Shares 40 20 60

Public deposits 32 28 60

Bonds 26 34 60

best option
60 54
50 44 46
40
40 35 32 34
35
25 25 28 26
30
20
20 16 16 yes
no
10 06
0

74
 INTERPRETAION- According to survey, people believes that gold and silver are best option for
investment and life insurance, real estates and shares are good investment option but on other
hand people believes that mutual fund, debentures, public deposits and bonds are not much good
investment option.
5. In which sector do you prefer to invest your money?

TABLE NO-6.5

SECTORS NO. OF RESPONDENTS

PRIVATE SECTOR 25

PUBLIC SECTOR 18

BOTH 17

TOTAL 60

sectors
private sector public sector both

28%
42%

30%

INTERPRETAION- According to survey, 42% people are more preferred to invest their money in
private sector than people public sector because they think that private sectors come up with new
ideas, innovations, services offered by them are better than public sector. 28% people choose to invest
in both the sectors.

75
 6. What are your savings objectives?

TABLE NO-6.6

OBJECTIVES NO.OF RESPONDENTS

Children education 07

Retirement 18

Children marriage 20

Other 15

TOTAL 60

objectives
children educations retirement children marriage others

12%
25%

30%

33%

INTERPRETAION- According to survey, 33% people’s main objectives for saving is children
marriage and 30% people’s main objective for saving is retirement and 12% people’s main objective
for saving is children education and 25% people have other planning’s.

76
 7. What are the factors which you consider while investing in any Financial
Instrument?

TABLE NO-6.7

FACTORS YES NO NO.OF RESPONDENTS

Return 57 03 60

capital appreciation 54 06 60

Tax Saving 48 12 60

Liquidity 51 09 60

Safety 55 05 60

Risk 56 04 60

factors
60 57 55 56
54
51
48
50
40
30
20 12
9 yes
10 6 5 4
3 no
0

INTERPRETAION- According to survey, the factors that are more preferred is return, capital
appreciations, liquidity, safety, risk than tax savings.

77
 8. Please rate the Financial Instruments as per your Preference.

TABLE NO-6.8

PREFERENCES More preferred Moderate Less preferred NO.OF

RESPONDENTS
Life insurance 29 23 8 60
Mutual fund 16 16 13 60
Shares 32 17 11 60
Debentures 25 23 12 60
Bonds 30 15 15 60
Real estate 29 19 12 60
Gold and silver 33 20 7 60
Public deposits 21 24 15 60

preferences
40
34
35 32 32 31
29 29
30
26
23 23 24
25
20 21
18 19
20
16 1514 15 more preferred
15 12 12
11 moderate
10
10 8 less preferred
6
5

78
 INTERPRETAION- According to survey, people give more preference to life insurance, mutual
fund, shares, bonds, gold and silver, real estate’s than debentures and public deposits

9. How do you get information regarding these financial instruments?

TABLE NO-6.9

INFORMATION NO.OF RESPONDENTS

Advertisement 22

Company Sales force 6

Friends / Relatives 14

Magazines /Newspaper 18

TOTAL 60

information
advertisement company sales force
friends/ relatives magazines/ newspapers

30%
37%

23% 10%

INTERPRETAION- According to survey, 37% people are getting more information through
advertisements whereas 30% from magazines/newspapers than 23% from friends/relatives and
10% from company sales force.

79
 10. On what basis you will invest in any particular financial instruments ?

TABLE NO-6.10

ANALYSIS NO.OF RESPONDENTS

Past Performance 13

Portfolio 11

Fund Manager 18

Fundamental/Technical Analysis 9

Market Sentiment 9

TOTAL 60

analysis

past performance
15%
21.70%
portfolio

15% fund manager

18.30%
fundament/technical
analysis
market sentiment
30%

INTERPRETAION- According to survey, 30% people invest on the basis of fund manager
whereas 21.70% on the basis of past performance of the company and 18.30% people invest on the
basis of portfolio, 15% on the basis of fundamental/technical analysis and 15% on the basis of
market sentiment.

80
 11. How will you invest your money in any financial instrument?

TABLE NO-6.11

Invest NO.OF RESPONDENTS

Yourself 04

Through any stock broking company. 18

Sub broker/ Agents 21

Through Banks 17

TOTAL 60

invest
yourself through any stock broking sub broker/ agents through banks

7%

28%

30%

35%

INTERPRETAION- According to survey, 30% people are preferred to invest through stock
broking company and 35% through sub broker/agents, 7% through themselves and 28% through
banks.

81
 12. How much of your money you invest in any financial instrument?

TABLE NO-6.12

INVEST NO.OF RESPONDENTS

10% to 20% 06

20% to 30% 15

30% to 50% 27

More than 50% 12

TOTAL 60

invest
10 % to 20% 20 % to 30 % 30 % to 50 % more than 50 %

10%
20%

25%

45%

INTERPRETAION- According to survey, people want to invest 30% to 50% of their money in
various investment avenues.

82
 13. How long you prefer to keep your money in any financial instrument?

TABLE NO-6.13

PERIOD NO.OF RESPONDENTS

Less than 6 months 12

6 months to 1 year 18

1 year to 3 year 21

More than 3 years 9

TOTAL 60

period

15%
20%

less than 6 months

6 months to 1 year
1 year to 3 year

35% more than 3 years

30%

INTERPRETAION- According to survey, people are more preferred to keep their money for 1
year to 3 year in various investment avenues.

83
 14. How much return you expect from any financial instrument?

TABLE NO-6.14

RETURN NO.OF RESPONDENTS

10% to 20% 2

20% to 30% 14

30% to 50% 26

More than 50% 18

TOTAL 60

return
10% to 20% 20% to 30% 30% to 50% more than 50%

5%

29% 23%

43%

INTERPRETAION- According to survey, more people expects 30% to 50% of return from their
investment avenues.

84
 15. Will you invest your money for saving the tax in any financial instrument?

TABLE NO-6.15

Tax saving YES NO NO. OF

RESPONDENTS

TOTAL 36 24 60

tax saving
yes no

40%

60%

INTERPRETAION- According to survey, 60% people invest their money for tax saving.

16. In the past you have invested?

TABLE NO-6.16

INVESTED YES NO NO. OF

RESPONDENTS

TOTAL 40 20 60

85
 invested
yes no

33%

67%

INTERPRETAION- According to survey, 67% of the people had made investments in past.

17. What is the purpose behind investment?

TABLE NO-6.17

PURPOSE NO. OF RESPONDENTS

Wealth creation 27

Tax saving 15

Earn return 18

TOTAL 60

86
 PURPOSE

earn returm
30%
wealth creation
45%

tax saving
25%

INTERPRETAION- According to survey, for some people the main purpose behind investment
for wealth creation is 45% , earning return 30% and tax saving is 25%

87
 7. CONCLUSION
The male investors dominate the stock market. After incurring losses most of the investors
exit the market, consequently, the number of experienced investor’s declines. There is waning
interest of investors in the stock market. As the investors gain experience in the stock market
operations, they can keep themselves away from the market during a crisis. Long run investing
is the safe and sure path to wealth creation.
The study on preferred investment avenues among salaried people has been undertaken with
the key objectives such as to find preferred investment avenues & also to know the awareness
level of investors. Analysis of the study was undertaken with the help of survey conducted.
After the analysis & interpretation of data it is concluded that Investors are aware about
investment avenues available in India but still investors are preferred to invest in lic, real estate,
gold and silver. The data analysis reveals that the safety is important factor while doing
investment so remaining avenues is less considerable while doing investment by investors.
Awareness programmes has to be conducted by stock broking firms, because most of the
respondents are thinking these avenues are loss making & having no good return on it. „No Pain
No gain' is the best principle of investment management and salaried investors are following
this principle only.
Thus if you wish to reap substantial benefits from your various investment and want your
small pile of investment to grow, the right information and analysis of market has to be done
correctly.

7.1 SUGGESTIONS
Financial literacy among unmarried class of persons, especially regarding investment,
should be increased so that they are more inclined to invest. Importance of savings and
investment should be explained through the curriculum of education, especially in or before
higher secondary education and to persons of age groups of 21-30. Investment seeking
companies may target to persons who are graduates. Postgraduates may also be targeted to be
motivated towards investments. Persons falling in income brackets of 2-5 Lacs and 5-10 Lacs
should be targeted by investment seeking organizations. Income tax provisions should be more
relaxed regarding investment its returns more over first exemption limit of income should be
increased and more relaxation is expected regarding filling of income tax return by salaried
persons. Savings capacity of salaried persons should be tried to be increased so that they may
88
tend more towards investment after gaining feeling of secured against contingencies. Composite
investment plan covering total investment between 1-2 Lacs and 2-4 Lac may be introduced;
Customized portfolio of the ranges may be targeted by portfolio managers. For outperformance
of salaried investors, it is essential to make them more knowledgeable regarding investment,
investment products, investment information and portfolio skills. Reason for investment suggest
that people expect more tax benefit from government; it is further suggested that tax burden
should be less on salaried persons so as to make investment for its other genuine reasons that are
higher returns or safety or liquidity or any other appropriate reason. Salaried persons should be
made very clear about the risk impact upon their investment and its returns well before they
really invest into any investment avenue; portfolio approach may be given priority.
It is suggested that investment should be made as per financial plans which usually differs
from individual to individual taking into consideration once own specific need. After financial
planning, investments plans are to be prepared to obtain capital growth and return appreciation.
For safe and secured life and investment medium term investment should be done. People may
take peer advice for it. Investments are instruments through which capital growth can be assured
and inflation can be fought against with the help of financial advisors. To earn profit and to have
profitability, investments may be done for long term also. One may take help of relatives while
investing. Family needs should not be ignored out and one should be ready enough to dispose of
investment against family needs because the investment are not meant for joy of seeing
appreciating and increasing them only. Persons should invest according to their gender, marital
status, age groups, educational level, annual income level, filing of income tax return, annual
savings level, total annual investment, return on investment, reason for investment, etc.
considering different factors that determine their personal investments decisions.
7.2 FINDINGS
8. INTERPRETATION OF THE DATA
9. (OVERALL)
To invest is to allocate money (or sometimes another resource, such as time) in the
expectation of some benefit in the future. In finance, the expected future benefit from
investment is called a return (to investment). The return may consist of capital gain and/or
investment income, including dividends, interest, rental income etc. The economic return to an
investment is the appropriately discounted value of the future returns to the investment.

89
 Investment generally results in acquiring an asset, also called an investment. If the asset
is available at a price worth investing, it is normally expected either to generate income, or to
appreciate in value, so that it can be sold at a higher price (or both). Investors generally expect
higher returns from riskier investments. Financial assets range from low-risk, low-return
investments, such as high-grade government bonds, to those with higher risk and higher
expected commensurate reward, such as emerging markets stock investments. Investors,
particularly novices, are often advised to adopt an investment strategy and diversify their
portfolio. Diversification has the statistical effect of reducing overall risk.
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. Investment is involved in many areas of the
economy, such as business management and finance whether for households, firms, or
governments. Investment comes with the risk of the loss of the principal sum. The investment
that has not been thoroughly analyzed can be highly risky with respect to the investment owner
because the possibility of losing money is not within the owner's control.
Investing money is a stepping stone to manage spending habits and prepare for the future
expenses. Most people recognize the need to put their money away for events or circumstances
that may occur in future. People invest money to manage their personal finances some of them
invest to plan for retirement, while others invest to accumulate wealth. Every investor has
certain specific objectives to achieve through his long term/ short term investment. Such
objectives may be monetary/ financial or personal in character. The objectives include safety
and security of the funds invested (principal amount), profitability (through interest, dividend
and capital appreciation) and liquidity (convertibility into cash as and when required). These
objectives are universal in character as every investor will like to have a fair balance of these
three financial objectives. An investor will not like to take undue risk about his principal amount
even when the interest rate offered is extremely attractive. These objectives or factors are
known as investment attributes.
Salaried persons receive a definite amount out of which they are to spend for
maintenance and provident for future with the help of investment. It is very difficult to decide
about to investment because investment depends upon so many factors like gender, age, family
background, profession, educations, health status, taxation, number of dependent members,
90
number of other earning members, ancestral property, retirement age, type of employer, etc. So,
the study aims to decide about investment by salaried persons and the problem is that how much
amount, at what stage, at what income level, for what time period, in which portfolio assets,
with what objective, with what risk assumption, should be invested in taking care of risk and
return, maturity period, earnings and appreciations, safety and security, liquidity, lock in period,
cost of transaction, return, capital appreciation, etc. In the field of behavioral finance investment
is not done only on profit earning motive but it has inputs of psychological needs, aspirations
and satisfactions.
.

91
 8. BIBLOGRAPHY
 www.scribd.com
 www.slideshare.net
 www.kotaksecurites.com
 en.wikipedia.org/wiki/Share_(finance)
 Arun Lawrence, Dr. Zajo Joseph “Factors leading stock investment: An
Empirical Examination” Southern Economist, June 1, 2013 pp. 45- 47.
 Henry Allen Latane, “Individual Risk Preference in Portfolio Selection”, The
Journal of Finance, Vol. xv, No.1, 1960, pp: 45-53.
 Keller Frank R, “The Behaviour of Individuals in Security Investment
Decisions”, The Journal of Finance, Vol. XXV, No.4, 1970, pp : 942-943
 Gooding Arthur E, “Quantification of Investors’ Perceptions of Common
Stocks: Risk and Return Dimensions”, The Journal of Finance, Vol. XXX,
No.5, 1975, pp: 1301-1317.
 Lease Ronald C, Willbur G. Lewellen and Gary G. Schlarbaum, “Market
Segmentation: Evidence on the Individual Investor”, Financial Analyst
Journal, Vol. VIII, 1976, pp: 53-60.
 Lewellen Wilbur G, Ronald C. Lease and Gary G. Schalarbaum, “Patterns of
Investment Strategy and Behaviour among Individual Investors”, Journal of
Business, Vol. X, 1977,
PP:296-333.
 Lewellen Wilbur G, Ronald C. Lease and Gary G. Schlarbaum, “Investment
Performance and Investor Behaviour”, The Journal of Financial and
Quantitative Analysis, Vol. XIV No.1, 1979, pp: 29-57.
 Reckers M.R. Philip and Stagliano A.J, “How Good are Investor’s Data
Sources?” Financial Executive, April 1980, p:26.

92
 Lederich, Leonard and Joel G. Siegel, “Planning your Portfolio Today and
Tomorrow”, The Management Accountant, June 1988.
 Nagy Robert A. and Robert W. Obenberger, “Factors Influencing Individual
Investor Behaviour”, Financial Analysts Journal, Vol. II, July-Aug 1994, pp:
63-68.
 Brennan M.J, “The Individual Investor”, The Journal of Financial Research,
Vol. XVIII, No.1, 1995, pp: 59-74.
 Bloomfield, Robert J, Libby, Robert and Nelson, Mark W., “Confidence and
the Welfare of less Informed Investors”, Social Science Research Network,
2002.
 NCAER survey, “Attitudes Towards and Motivations for Saving”, (1964),
New Delhi.
 Bhagawati Prasad such has M.S, “Problems faced by the Investors”, The
Management Accountant, Vol. XIX, No. 7, 1991, pp: 35-40.
 Barua S K & Srinivasan G (1991), "Experiment on Individual Investment
Decision Making Process", Sankhya, Vol. 53, Series B, p. 74-88 .
 Gupta and Ramesh, “Portfolio Management for an Individual Investor”, The
Management Accountant, March 1992, pp: 175-179.
 Madhumathi R, “Risk Perception of Individual Investors and its Impact on
their Investment Decision”, Doctoral Dissertation, 1998.

93
 9. APPENDIX
1. What is your age?
o 20-30
o 30-40
o 40-50
o Above 50

2.What is your annual income?

o 1 lakh-2 lakh
o 2 lakh- 3 lakh
o 4 lakh- 5 lakh
o Above 5 lakh
3.Do you know about the following Financial Instrument?
o Life insurance
o Real estate
o Gold and Silver
o Mutual fund
o Debentures
o Shares
o Public deposits

4. What do you think are the best options for investing your money?
o Life insurance
o Real estate
o Gold and Silver
o Mutual fund
o Debentures
o Shares
o Public deposits

94
5. In which sector do you prefer to invest your money?
o Private sector
o Public sector
o Both

6. What are your savings objectives?

o Children education
o Retirement
o Children marriage
o Other

7. What are the factors which you consider while investing in any Financial Instrument?
○ Return (capital appreciation)
○ Tax Saving
○ Liquidity
○ Regular income flow
○ Safety
○ Risk

8. Please rate the Financial Instruments as per your Preference.

Investment Avenues More preferred Moderate Less preferred
Life insurance
Mutual fund
Shares
Debentures
Real estate
Gold and silver
Public deposits

95
9. How do you get information regarding these Financial Instrument?
○ Advertisement
○ Company Sales force
○ Friends / Relatives
○ Magazines /Newspaper

10. On what basis you will invest in any particular Financial Instrument?
○ Past Performance
○ Portfolio
○ Fund Manager
○ Fundamental/Technical Analysis
○ Market Sentiment

11. How will you invest your money in any Financial Instrument?
○ Yourself
○ Through any stock broking company.
○ Sub broker/ Agents
○ Through Banks

12. How much of your money you invest in any Financial Instrument?
○ 10% to 20%
○ 20% to 30%
○ 30% to 50%
○ More than 50%

13. How long you prefer to keep your money in any Financial Instrument?
○ Less than 6 months
○ 6 months to 1 year
○ 1 year to 3 year
○ More than 3 years

96
14. How much return you expect from any Financial Instrument?
○ 10% to 20%
○ 20% to 30%
○ 30% to 50%
○ More than 50%

15. Will you invest your money for saving the Tax in any Financial Instrument?
o Yes
o No

16. In the past, you have invested ?

o Yes
o No

17. What is the purpose behind investment?

o Wealth creation
o Tax saving
o Earn return

97
98