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Different Investment Avenues

An Investment is a commitment of funds made in the expectation of some positive rate of return. Investors expectations:
1. 2. 3. 4. 5. 6. Security of Original Capital Tax Efficiency Life Cover Income High Returns Safety

Five step investment plan:

1. Need Analysis 2. Evaluating the Available Avenues 3. Mapping and Matching the risk-return Profile 4. Designing the Portfolio 5. Continuous Monitoring and Portfolio Management

India Investment Trends

Bank Fixed Deposits Life Insurance Real Estate/Property Postal Saving Schemes Shares National Saving Certificate Public Provident Fund. Kissan Vikas Patra Mutual Funds ULIP (UNIT LINK INSURANCE POLICY)


Interest 8 % p.a. Compounded half yearly and payable at Maturity. Certificates can be purchased by an adult for himself or on behalf of a minor, jointly by two adults, a minor and a Trust, Lock in period 6 years No Tax deduction at source.


An ideal investment option for the salaried class as well as the self employed. Interest 8.0 % p.a. Compounded, yearly . Deposits can be made in lump sum or in convenient installments. Interest is fully exempt from I.T. Withdrawals permitted on completion of 7 full financial years. NRIs can also invest in this scheme. No Tax deduction at source.


Money doubles in 8 years and 7 months Certificate can be purchased by an adult for himself or on behalf of a minor, jointly by two adults, a minor and a Trust. Certificates can be encashed any time after expiry of 2 years from the date of issue of the certificate. Certificate can be kept as collateral security to get loan from Banks. Investment can be made by cash or cheque. No Tax deduction at source.


ULIP is one in which the customer is provided with a life insurance cover and the premium paid is invested in either debt or equity products or a combination of the two. KEY FEATURES Premiums paid can be single, regular or variable. The risk charge (mortality rate) varies with age The maturity benefit is not typically a fixed amount The policyholder can switch between schemes, for instance, balanced to debt . The costs in ULIP are higher ULIP products are exempted from tax

Mutual Funds are essentially investment vehicles where people with similar investment objective come together to pool their money and then invest accordingly . Features: Number of available options Diversification Professional Management Potential of Returns

A type of bond that can be converted into shares of stock in the issuing company, usually at some pre-announced ratio. From the issuer's perspective, the key benefit of raising money by selling convertible bonds is a reduced cash interest payment.

Convertibility affects the performance of the bond in certain ways:

Tend to have lower interest rates than non-convertibles because they also accrue value as the price of the underlying stock rises. Convertibles can offer protection against a decline in stock price as earn interest even when the stock is trading down or sideways.

Exchangeable (XB) are bonds which may be exchanged into shares other than those of the issuer. Strictly speaking, they are not convertibles, but they share certain common evaluation characteristics. Mandatory convertibles are short duration securitiesgenerally with yields higher than found on the underlying common shares that are mandatorily convertible upon maturity into a fixed number of common shares. Mandatory exchangeable are short duration securitiesgenerally with yields higher than found on the underlying common shares that are mandatorily exchangeable upon maturity into a fixed number of common shares. ADVANTAGES: Tax advantages. Lower fixed-rate borrowing costs.


Real estate investment has attracted lot of people. The prospects are increasing day after day. Real Estate Investment Trust (REIT) Structure is a corporate structure, which collects money from the investors and invests in real estate assets to earn money in the form of rentals and leases. CHARACTERISTICS: (1) pooling of resources (2) organisational structure: Varies between companies and trusts depending on local regulations and eligibility criteria. (3) funds may be both close ended and open ended. (4) leveraging: Normally allowed to raise debt; (5) tax Advantages

(1) enhancing liquidity of the sector; (2) institutionalization: enhanced competition with institutional investors competing in a bigger way with the unorganized sector for market dominance. (3) greater acceptability for real estate as an investment asset class; (i) opportunities to retail investors to participate in the real estate sector; and (ii) asset diversification to corporate investors. (4) improve sector transparency.


An REMF is like a mutual fund for real estate assets. Investors may buy shares in those funds which are traded on a daily basis on stock exchanges. The value of the shares depends on the value of the underlying real estate assets. REMFs have many advantages over direct investment in real estate. (1) it allows investors to invest according to their income and financial circumstances; (2) the portfolio of real estate assets will be a lot more diversified than a single home with assets ranging from office space to residential properties all around the country as well as securities based on the real estate sector; and (3) investors dont have to deal with the legal and maintenance hassles of owning property and may instead rely on the professional expertise of the AMCs. Finally if they need quick money, these funds are liquid assets, which may be sold conveniently and rapidly.

HDFC India Real Estate Fund

Housing Development Finance Corporation Ltd, has forayed into the real estate fund business with the launch of 'HDFC Property Fund' in association with the State Bank of India a seven-year close-ended fund which would be privately placed. The scheme would have a minimum contribution of Rs 5 crore per investor and would target banks, insurance companies, corporate and high net worth individuals.

What's in it for investors?

Liquidity Affordability Tax advantages Professional management

Comparison of Different Investment Options

Investment Option
Bank FDs





Very low risk and low liquidity.

Low returns, but assured.

returns are fully taxable

Good for very low risk investors and those in the nil or low tax brackets. Good for very low risk investors and those in the nil or low tax brackets. Good tax saving investment option.

Post Office Schemes

Low risk and low Liquidity.

MIS scheme give 8% interest. Time deposit 6.25-7.5%. assured returns.

Since returns are taxable, the posttax returns will be still lower. Interest is taxfree.


Low risk with very low liquidity (15-year lockin period. Partial withdrawal allowed after 6 years).


Low risk with low liquidity (6 years lockin).

assured returns.

Interest fully taxable

Not very attractive vis--vis other options like 5-year Bank FDs.


High risk and high liquidity.

Market linked returns. Good potential.

No Long Term Capital Gain Tax and 10% Short Term Capital Gains Tax. Tax free returns. .

Needs high risk appetite.


Low to High Risk depending on the investment option i.e. Pure Debt or Mixed or Pure Equity. Low Liquidity (3-5 years lock-in period). Variable risk and variable liquidity depending on the type and location of property.

Low to high depending on the investment option.

Not an attractive option due to high charges, low flexibility and low diversification.

Real Estate

Market linked returns. Good potential.

No tax advantages, except attractive tax benefits on the home loans.

High initial investment ,high transactions costs like registration brokerage etc.; and cannot be partly liquidated.. Not an attractive investment option.


Low long-term risk. But hedge against volatile in short term. inflation. So High Liquidity. returns could be around inflation levels.

No tax advantages.