Investment pattern v25_jul2012

of 74
A Project Report on
“Investment Pattern among ITES Employees”
TOWARDS FULFILLMENT OF THE PROJECT REQUIREMENTS FOR
JUNIOR MANAGEMENT LEADERSHIP PROGRAM, 2012
SUBMITTED BY:
NAME IBPO EMP ID E-mail Address
BHAVANI KARINJA 926410 bkarinja@gmail.com
KRISHNA NARAYANA 904630 krish.narayana@gmail.com
MERLIN SHOBHA 926438 merlin.shobhaagnes@gmail.com
SUNIA MUKHERJEE 925688 sunia_mukherjee@infosys.com
UNDER THE GUIDANCE OF
Prof. HEMA DORESWAMY
Prin. L. N. WELINGKAR INSTITUTE OF MANAGEMENT DEVELOPMENT AND
RESEARCH, BANGALORE

of 74
STUDENT DECLARATION
We, Ms. Bhavani Karinja, Mr. Krishna Narayana, Ms. Merlin Shobha,
and Ms. Sunia Mukherjee; enrolled for the Junior Management
Leadership Program of Welingkar Institute of Management Studies,
Electronic City, Bangalore, hereby declare that we have completed the
project titled “INVESTMENT PATTERN AMONG ITES EMPLOYEES” as a
part of the course requirements for JMLP Programme.
We further declare that the information presented in this project is true
and original to the best of our knowledge.
Team Members Signature
BHAVANI KARINJA
KRISHNA NARAYANA
MERLIN SHOBHA
SUNIA MUKHERJEE
Date: July 28, 2012
Place: Bangalore, India

of 74
CERTIFICATE FROM THE INTERNAL GUIDE
I, Prof. Hema Doreswamy hereby certify that Ms. Bhavani Karinja, Mr.
Krishna Narayana, Ms. Merlin Shobha, and Ms. Sunia Mukherjee;
enrolled for the Junior Management Leadership Program of Welingkar
Institute of Management Studies, Electronic City, Bangalore, have
completed a project on “Investment Pattern among ITES employees”
under my guidance during the course.
Their work has been found to be satisfactory.
Date: July 28, 2012
Place: Bangalore, India
(Signature of the Guide)

of 74
ACKNOWLEDGEMENTS
We would like to thank Infosys BPO Management for having started such a wonderful
program – JMLP – Junior Management Leadership Program – wherein we are able to learn
while earning.
We would like to thank all the WE School Professors for making this program very
interesting and putting their passion for teaching in every session which enabled us to
increase our knowledge and skill sets.
We would like to thank all other JMLP students for making this program more interesting
with each other’s interaction and support.
We would like to thank our reporting managers and other colleagues at work for providing
their support to us to complete this work.
We would like to thank to all the sources from where we referred the content and prepared
this report.
We would like to thank all the respondents for having taken time & providing their inputs.
Without their inputs, we would not have been able to proceed further on the data analysis.
We would like to thank our project mentor, Prof. Hema Doreswamy, for guiding us in
every step of the project.

of 74
Contents & Index Page
Chapter One – Research Design 06 to 18
1.1 Introduction to ITES Industry 06
1.2 Importance of the Study 08
1.3 Statement of the problem 09
1.4 Scope of the Study 09
1.5 Review of the Literature 10
1.6 Objectives of the Study 16
1.7 Period of the Study 17
1.8 Limitations 17
1.9 Methodology 17
1.10 Chapter Scheme 18
Chapter Two – Profile 19 to 45
2.1 Profile of Savings and Investments 19
2.2 Profile of ITES Companies 39
Chapter Three – Data Analysis and Interpretation 46 to 67
Chapter Four – Summary of Findings & Suggestions 68 to 74
Findings & Suggestions 68
Conclusion 73
Bibliography (References) 74

of 74
CHAPTER 1: RESEARCH DESIGN
1.1 Introduction to ITES Industry
The word ITES stands for Information Technology Enabled Services. What a layman can
understand by the term is that any service which is given to the customer by virtue of IT
can be classified under ITES. Another name for this industry is BPO (Business Process
Outsourcing). Any non-core activity of an organization being done by a different party is
termed as ‘Outsourcing’. When the same work is being done at a different location in
another country, it is termed as ‘Off-shoring’.
Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting
of the operations and responsibilities of specific business functions (or processes) to a
third-party service provider. Originally, this was associated with manufacturing firms, such
as Coca Cola that outsourced large segments of its supply chain. In the contemporary
context, it is primarily used to refer to the outsourcing of business processing services to an
outside firm, replacing in-house services with labour from an outside firm.
BPO is typically categorized into back office outsourcing - which includes internal business
functions such as human resources or finance and accounting, and front office outsourcing -
which includes customer-related services such as contact centre services.
Often the business processes are information technology-based, and are referred to as
ITES-BPO, where ITES stands for Information Technology Enabled Service. Knowledge
process outsourcing (KPO) and legal process outsourcing (LPO) are some of the sub-
segments of business process outsourcing industry.
Benefits and limitations:
An advantage of BPO is the way in which it helps to increase a company’s flexibility.
However, several sources have different ways in which they perceive organizational
flexibility. Therefore business process outsourcing enhances the flexibility of an
organization in different ways. Outsourcing may provide a firm with increased flexibility in
its resource management and may reduce response times to major environmental changes.

of 74
Another way in which BPO contributes to a company’s flexibility is that a company is able
to focus on its core competencies, without being burdened by the demands of bureaucratic
restraints.
Key employees are herewith released from performing non-core or administrative
processes and can invest more time and energy in building the firm’s core businesses. The
key lies in knowing which of the main value drivers to focus on – customer intimacy,
product leadership, or operational excellence. Focusing more on one of these drivers may
help a company create a competitive edge.
A third way in which BPO increases organizational flexibility is by increasing the speed of
business processes. Supply chain management with the effective use of supply chain
partners and business process outsourcing increases the speed of several business
processes, such as the throughput in the case of a manufacturing company.
Finally, flexibility is seen as a stage in the organizational life cycle: A company can maintain
growth goals while avoiding standard business bottlenecks. BPO therefore allows firms to
retain their entrepreneurial speed and agility, which they would otherwise sacrifice in
order to become efficient as they expanded. It avoids a premature internal transition from
its informal entrepreneurial phase to a more bureaucratic mode of operation.
A company may be able to grow at a faster pace as it will be less constrained by large
capital expenditures for people or equipment that may take years to amortize, may become
outdated or turn out to be a poor match for the company over time.
Although the above-mentioned arguments favour the view that BPO increases the
flexibility of organizations, management needs to be careful with the implementation of it
as there are issues, which work against these advantages. Among problems, which arise in
practice are: A failure to meet service levels, unclear contractual issues, changing
requirements and unforeseen charges, and a dependence on the BPO which reduces
flexibility. Consequently, these challenges need to be considered before a company decides
to engage in business process outsourcing.

of 74
A further issue is that in many cases there is little that differentiates the BPO providers
other than size. They often provide similar services, have similar geographic footprints,
leverage similar technology stacks, and have similar Quality Improvement approaches.
Threats:
Risk is the major drawback with Business Process Outsourcing. Outsourcing of an
Information System, for example, can cause security risks both from a communication and
from a privacy perspective. For example, security of North American or European company
data is more difficult to maintain when accessed or controlled in the Sub-Continent. From a
knowledge perspective, a changing attitude in employees, underestimation of running costs
and the major risk of losing independence, outsourcing leads to a different relationship
between an organization and its contractor.
Risks and threats of outsourcing must therefore be managed, to achieve any benefits. In
order to manage outsourcing in a structured way, maximizing positive outcome,
minimizing risks and avoiding any threats, a Business continuity management (BCM)
model is set up. BCM consists of a set of steps, to successfully identify, manage and control
the business processes that are, or can be outsourced.
1.2 Importance of the Study
Savings are the excess of Income over expenditure for any economic unit.
Thus: S=Y- E, where S is the savings, Y is the income and E is the expenditure.
Excess funds or surplus in profits or capital gains are also available for investment. Savings
is abstaining from present consumption for a future use. Savings are something
autonomous coming from households as a matter of habit. But bulk of the savings come for
specific objectives like interest income, future needs, contingencies, precautionary
purposes or growth in future wealth leading to rise in the standard of living etc.
Let us learn more about how people earn, how they spend, how they keep money for future
needs, and how they use their earnings to get some return.

of 74
1.3 Statement of the Problem
Few years ago, people would have hardly heard about BPO industry, or at least, they would
have so many notions on the BPO industry as such. BPO is a sunrise industry which started
to spread its wings just close to a decade ago. Initially, this industry provided voice support
to the customers in English-speaking nations like United States & United Kingdom. One of
the major requirements for hiring folks was good communication skills in English &
graduation was not considered as one of the criteria.
To attract talent, pay package in this Industry was way above the normal expectations.
Also, this was considered as an easy route to get into highly-paid jobs for people who
couldn’t complete even graduation. Higher pay packages led to a different lifestyle for
these employees.
As the industry started to mature, pay packages stabilized over a period of time in
comparison with other industries. Due to a mismatch between higher expenses due to a
different lifestyle versus the income, few people started to get into the debt trap as well.
Hence, it was felt appropriate to conduct a study & understand the financial aspects of an
employee working in the ITES industry. This study tries to unearth the answers to the
questions on whether the employees of this industry invest. If so, what are the options
exercised to invest their money.
1.4 Scope of the Study
This study covers investment pattern of the employees of some of the major ITES
organizations operating from Bangalore. Collection of primary data includes the inputs
from the employees of following organizations:
Infosys BPO (IBPO)
Accenture BPO
IBM
Hewlett-Packard
Fidelity BPO
GENPACT

of 74
ANZ BPO
Dell BPO
& Others
Profiles of these organizations have been covered at a later stage of this document.
1.5 Review of Literature
Following literature was reviewed and highlights have been provided below:
1. Factors Influencing Investment Decision of Generations in India: An Econometric
Study
This study was undertaken by Gaurav Kabra, Prashant Kumar Mishra, & Manoj Kumar
Dash. This study was conducted to gain knowledge about key factors that influence
investment behaviour and ways these factors impact investment risk tolerance and
decision making process among men and women among different age groups.
Today the field of investment is even more dynamic than it was only a decade ago. There is
a rapid change in the events that alter the values of specific assets. Individuals have so
many assets to choose from, and the amount of information available to the investors is
staggering and continually growing. The turnover rate in investments should exceed the
inflation rate and cover taxes as well as allow you to earn an amount that compensates the
risks taken. Savings accounts, money at low interest rates and market accounts do not
contribute significantly to future rate accumulation. While the highest rate come from
stocks, bonds and other types of investments in assets such as real estate. Nevertheless,
these investments are not totally safe from risks, so one should try to understand what
kind of risks are related to them before taking action.
In this paper, researchers focussed their study in trying to find out the factors which affect
individual investment decision, difference in perception of investors in the decision of the
basis of the age, & difference in perception of the investors in the decision of the basis of
the gender.
At the end of the study it was concluded that the modern investor is a mature and
adequately groomed person. In spite of the phenomenal growth in the security market and

of 74
quality Initial Public Offerings (IPOs) in the market, the individual investors prefer
investments according to their risk preference. For e.g. risk-averse people choose life
insurance policies, fixed deposits with banks and post office, PPF, and NSC. Occasions of
blind investments are scarce, as a majority of investors are found to be using some source
and reference groups for taking decisions. Though they are in the trap of some kind of
cognitive illusions such as overconfidence and narrow framing, they consider multiple
factors and seek diversified information before executing some kind of investment
transaction. The purpose of this study was to determine whether the variables such as
demographic characteristics (age, gender) and investment patterns could be used
individually or in combination to both differentiate among levels of men and women
investment decisions and risk tolerance and develop some guidelines to the investment
managers to design their investment schemes by considering these views of individuals.
2. Investment Patterns and its Strategic Implications for Fund Managers: An
Empirical Study of Indian Mutual Funds Industry
This study was conducted by D N Rao & S B Rao and was published in January, 2010. The
mutual fund industry in India presents an interesting scenario of 48 million investors at the
time of the study, a large variety of product offerings and coexistence of private, public and
foreign Asset Managing Companies. The study, adopting the classification of investors and
categorization of funds by Association of Mutual Funds in India (AMFI) empirically
researches the investment patterns of the five investor groups in the eight fund categories;
examines the portfolios of the investor groups to identify their propensity for specific fund
categories and identifies the dominant investor groups in terms of quantum of investment
and investor folios.
The significant findings of the study have been that (a) Corporates are the dominant
investor group in the Indian Mutual Fund Industry and they account for almost 48% of the
total investment (AUM) in the industry and they are more oriented towards non-equity
funds which offer high security & liquidity and hence their propensity towards
Liquid/Money Market and Debt-oriented funds; The second dominant group in the
industry is the Retail investors’ group which accounts for almost 24% of the total
investment (AUM) in the industry, while they account for 98% of the 48 million investors in

of 74
the industry at the time of the study. The portfolio of this group is highly skewed towards
equity oriented schemes (almost 80%) which offer high return, capital appreciation
coupled with high risk and 18% of the portfolio accounts for Debt-oriented and Balanced
funds.
3. Changing Trend of Investment Pattern in India and Emergence of Mutual Fund
Industry
This study was done by Sheeba Lole. This project is about how the Investor's behaviour is
changing and they are now leaving behind the sacred investment options like the fixed
deposits, company deposits, gold etc. Investors are now looking towards equity linked
investment options.
Like most developed and developing countries the mutual fund cult has been catching on in
India. There are various reasons for this.
Mutual Fund makes it easy and less costly for investors to satisfy their need for capital
growth & income preservation. In addition to this, a mutual fund brings the benefit of
diversification and money management to the individual investor, providing an
opportunity for financial success that was once available only to a select few.
In this project the researcher has given a brief about economy, inflation, and equity and
debt market. Then it is explained how to cope with the inflation and how mutual fund is
one of the best investment options today.
A mutual fund is a pool of money, collected from investors, and is invested according to
certain investment objectives. The term mutual means that investors contribute to the
pool, and also benefit from the pool. There are no other claimants to the funds. The pool of
fund mutually invested in by investors is the mutual fund. A mutual fund's business is to
invest the funds thus collected, according to the wishes of the investors who created the
pool. In many markets these wishes are articulated as ‘investment mandates’. Usually, the
investors appoint professional investment managers, to manage their product, and offer it
for investment to the investor. A Mutual fund belongs to the investors who have pooled
their funds. The ownership of the mutual fund lies in the hands of the investors. Investment

of 74
professional and other service providers, who earn a fee for their services, from the fund,
manage the mutual fund.
The researcher had done a comparison of different instruments and provides a comparison
based on the features of each of the instruments. The researcher has found that Mutual
funds are good instruments and provide good returns to the investors. The researcher has
provided the detailed benefits of investing in Mutual Funds and the winning features of this
instrument over other forms of traditional investment avenues. Finally, it has been
concluded that Mutual Funds offers product which combines low-risk of capital loss along
with potential to earn reasonable returns in even an uncertain environment.
Table from this study has been reproduced below for quick reference:
Table 1.1: Comparison of instruments over various factors
4. Working Papers on International Investment – Investment Patterns in a longer-
term perspective
This study was done by Stephen Thomsen and was published in April 2000 and focuses on
the macroeconomic investments. The author has focused on long-term patterns and has
demonstrated how FDI (Foreign Direct Investment) has evolved from an activity largely
undertaken by large multinational enterprises (MNEs) located in a handful of countries
into a global phenomenon.
FDs FI Bonds Mutual Fund
Accessibility Low Low Low
Tenor Fixed (medium) Fixed (Long) No lock in period
Tax Benefit None Under Section 80C None
Liquidity Low Very Low None
Convince Medium Tedious Very High
Transparency None None Very High

of 74
Both trade and investment have grown rapidly during the late 90s relative to economic
growth more broadly. There have been periods of rapid FDI growth before, such as at the
beginning and end of the 1980s, which were subsequently interrupted by economic
recessions in major economies.
The upward trend in FDI flows can also be interrupted temporarily by a decline in global
growth. Like any form of investment, FDI is affected by the business cycle. Slower growth in
home countries reduces investor profits at home which could have been used for
acquisitions abroad. Economic growth influences both the “supply” and “demand” for FDI.
Slower growth in the home country reduces both earnings and equity prices and hence
limits the pool of capital available for expansion abroad. Similarly, recession in host
countries lowers the short-term profitability of a potential investment.
To conclude what we can say is evidence on long-term trends suggests that the 1990s
represented not so much a watershed as an acceleration of trends already underway. Many
firms from developing countries are now important foreign investors in their own right.
Though this study does not focus on individual investors, it makes a good reading to
understand the trends of investment patterns of large companies and mid-sized companies
in different geographies and different economic status.
5. On Being a Woman: How Our Differences Shape Our Investment Techniques
This study was conducted by Nicole Alper and focuses on the difference in the investment
pattern based on the gender.
According to Ruth Hayden, author of ‘How to Turn Your Life Around: The Money Book For
Women’, many of the more appealing ‘female’ characteristics, such as patience, tenacity,
and pragmatism make women better investors than men, once they actually get started.
"Women have an intuitive sense. They are practical and understand that things work in
stages and are therefore comfortable with volatility. And once they're in the market, they'll
stay put."
If a woman's patience is her virtue, then riding out the peaks and valleys of an ever-
changing market should be her pay off. After all, according to most financial planners, it is
those investors who stay in it for the long-term who reap the full benefits of the market.

of 74
Women normally do not believe in rapid return philosophy. They do not invest in risky
instruments which might yield profits overnight; however sometimes lose out on lucrative
opportunities.
But according to a survey on women's investment patterns conducted by Merrill Lynch,
women are not doing what they need to for total financial independence and retirement. In
fact, it is far from it. The statistics are worrying: 48% of women vs. 38% of men do not feel
knowledgeable when selecting between investment options; and only 49% of women (vs.
62% of men) say the total amount of their savings and investments are greater than the
total amount they own on any consumer debt.
Women, because they earn less and live longer, need to be planning for retirement early
and aggressively. Ruth says this is more common than people think. "Men jump in fast.
Women often just don't jump. There are two things that prevent a woman from getting
started: experience and knowledge."
Professor Hersh Shefrin, the Mario L Belotti Professor of Finance at Santa Clara University
and author of ‘Beyond Greed and Fear: Understanding Behavioural Finance and the
Psychology of Investing’, agreed that popular psychology studies depict women as "more
collaborative" and "sharing" by nature. Hence women invest much better if they are in a
group, and they exchange information. Also if their partners are accommodative, then
women invest much better.
According to Professor Shefrin, "women should pick a sensible mix of index funds,
including bonds and foreign stocks, in order to achieve their goals. They need to invest for
the long-term and limit the amount invested in individual stocks to under-10% of their
portfolio."
Though this paper was based on Ruth Hayden’s book and surveys done by Merrill Lynch
and Professor Hersh Shefrin, however, this gives us an insight of the investment patterns of
women.
6. Savings and Investment pattern of IT Employees of Bangalore
This research study paper was conducted by Hema Doreswamy, who also happens to be
our mentor for this study. The study tries to understand the behaviour of people while

of 74
making investment decisions by studying the behaviour of software professionals in
Bangalore city.
Objectives: In the research paper, objectives of the study have been clearly outlined:
To examine history, growth and development of investment avenues in the city
To analyze investment pattern of software professionals in Bangalore city.
To find out the most accepted investment option in the city.
To offer suggestions on the basis of findings with reference to profitability, tax
benefits, liquidity and risk.
Methodology: This study was conducted by using both the primary data as well as the
secondary data. The primary source of data was collected through direct interview with
the employees as well as through questionnaires. The random sampling technique was
used pertaining to the primary data.
Key Findings: Overall growth of the investment options available is very good. There are
lots of investment avenues available through which the investors can maximize their
returns and minimize their risk. The researcher has found that investing in real estate, life
insurance, and Jewellery rank high in respondent’s portfolio. It is evident from the study
that the savings of the respondents is less compared to their income level. Factors which
predominantly affect respondents while investing are risk, return, and tax exceptions.
Conclusion: The researcher has concluded on the basis of analysis done that there are lots
of investment options available for all kinds of investors like risk averse, risk takers,
moderate investors etc. The investors should rightly select the investments in such a way
that the risk is hedged properly and the return is also maximized. The investors should
update themselves to properly analyze the investment options before going for investing.
1.6 Objectives of the Study
This study has been made with the following objectives:
This study focuses on understanding the investment behaviour of employees of ITES
Industry – which predominantly employs youngsters
To understand how ITES employees manage their ‘Finance’

of 74
To understand investment avenues available based on different type of investors
To get an understanding on the preference of investments by ITES employees
Take experts’ opinion and suggest the various investment opportunities available
1.7 Period of the Study
This study was conducted over a period of six months.
1.8 Limitations
The findings of this study are based on sample size, so they can’t be generalized.
The research period is very short. So time constraint was a limiting factor.
Limited knowledge of respondents about the topic of the study.
All are working members, and hence, time & efforts put in this study is very limited.
1.9 Methodology
This study was conducted based on both primary data and secondary data.
1.9 (A) Primary Data
Primary data was collected based on preparing a ‘questionnaire’ – a popular data collection
tool to get the answers to our questions. This questionnaire was floated to ITES employees
based at Bangalore on a ‘random sample’ basis.
This study covers a sample size of 202 employees working in ITES industry.
1.9 (B) Secondary Data
We have made extensive use of resources available in the Internet & other print media to
gather the information, do the analysis, and arrive at the conclusion. Information from
various sources has been used to understand more about various investment alternatives
& to provide suggestions for choosing better investment portfolio.
1.9 (C) Analytical Tools
As mentioned earlier, ‘Questionnaire’ (a technique or a method used for obtaining specific
information about a defined topic) was used to collect the primary data. This questionnaire
contains both close-ended (questions wherein respondent has to select based on the

of 74
options provided) as well as open-ended questions (respondent has to provide his / her
personal opinion). Questionnaire that was floated has been attached.
1.10 CHAPTER SCHEME
First chapter titled ‘Research Design’ consists of introduction, importance of study,
statement of the problem, review of literature, objectives of the study, scope of the study,
limitations of the study, methodology, and the chapter scheme.
Second chapter titled ‘Profile’ provides details on the research problem and other
information pertaining to the topic.
Third chapter titled ‘Data Analysis and Interpretation’ provides analysis on the topic of our
study. Findings of the answers of the respondents have been provided both in table format
and have been put as charts for pictorial representation. Hence, 17 such tables and charts
could be found in this chapter.
Fourth chapter titled ‘Summary of Findings and Suggestions’ provides the key findings of
this study in a nutshell. Suggestions have been made and incorporated in this chapter. We
believe everyone would benefit by following some of the simple suggestions. This chapter
provides the conclusion drawn from this study. Also, this chapter consists of list of
references and finally ends with acknowledgements.

of 74
CHAPTER 2: PROFILE OF THE STUDY
2.1.1: Savings and Investments
Savings are the excess of Income over expenditure for any economic unit.
Thus: S=Y- E, where S is the savings, Y is the income and E is the expenditure.
Excess funds or surplus in profits or capital gains are also available for investment. Savings
is abstaining from present consumption for a future use. Savings are something
autonomous coming from households as a matter of habit. But bulk of the savings come for
specific objectives like interest income, future needs, contingencies, precautionary
purposes or growth in future wealth leading to rise in the standard of living etc.
When people start saving they search for various investment options to invest their
savings. During this process they consider various factors like risk, return, duration,
liquidity, tax planning, hedge against inflation, safety etc.
In earlier days the investment options available to investors were very limited like
insurance, jewellery, fixed deposits, debentures, shares etc.
But in the liberalized economy there are many investment options, which promise very
high returns. After private players started operating in Insurance, there are many policies
available which not only cover the risk, but they also promise high return with good capital
appreciation.
Individuals engage themselves in such activities to earn money. The money they earn is
normally spent on meeting daily needs like buying vegetables, groceries, clothes, giving
school fees, telephone bills etc. People also generally try to keep aside a part of their
earnings to meet future needs like marriage of their sons and daughters, buying a house,
health care, etc. People also use part of their earning to deposit in banks or in buying
shares, property or gold. By doing so, these people are also able to generate some extra
earnings for themselves.
2.1.2 Income
As we know, individuals engage in one or the other occupations to earn their livelihood. For
example, a person may be employed in Bank and draw salary, a person may engage in

of 74
selling books and earn a profit, a doctor or a lawyer may do the private practice and get
fees for their services. The earning from all these sources is called income. Sometimes we
find people earn from more than one source. For example, a teacher can write books for
schools and he gets some money from the publishers. If he is a singer, he can sing for All
India Radio (AIR) for which AIR gives him some money. Thus, one individual can engage in
different occupations to earn money. The earnings from different sources are collectively
called as his total income. This total income in a month is called as his monthly income and
in a year is annual income.
Sources of Income:
Some may earn from a single source and others may have multiple sources. Let us learn
about the various sources from which people earn their income.
 Business: Individuals engaged in business earn income by way of profit.
 Employment: People who are in employment earn their income by way of salary or
wages.
 Profession: You have seen doctors, lawyers and chartered accountants. They
provide personal services of special nature and charge fees for their services. This
fee is the source of income for professionals.
 Vocation: As we know vocation is the application of one’s special skill or knowledge
to earn money. For example, a good cook can cook food at marriage parties and earn
some income. A carpenter can make or repair furniture and earn income.
 Agriculture: When we cultivate land we produce crops, paddy, vegetables etc. All or
a part of it can be sold which gives us a return. This earning is called agricultural
income.
 Property: Normally owning land or a home is considered as owning property. This
property can be given on rent or lease to someone for use and we get a return on it.
Thus, it becomes a source of income for us.
 Other Income: People keep a part of their earning either in banks, post office or they
can buy shares and debentures, government bonds etc. All these give them some
return in the form of interest/dividend. These are also called their income.

of 74
2.1.3 Expenditure
When we buy goods or products we pay money for them. Similarly when we avail of some
services like consulting a doctor during illness or getting water and electricity for use, we
also pay for them. Normally we pay for all these goods and services since we use them.
Sometimes we present some gift items to our friends and relatives for their use. Besides
this, we also spend money on charity and donation to the poor persons and also to the
cyclone or earthquake victims. In these cases, we do not earn any money out of such
spending. These are our expenditure. Sometimes we spend money and use it for other
purposes to get some additional income. That spending is a type of expenditure through
which we generate further income. This is called investment. To clarify the concepts
further let us observe the activities of a housewife and a restaurant owner. Both of them
buy vegetables. A housewife buys them for consumption of her family and the restaurant
owner buys them to prepare different dishes and sells them at a profit.
In the first case the housewife does not get any monetary return. Thus, it is expenditure for
her. In the second case i.e., in case of restaurant owner, spending on vegetable can be
termed as investment, because the spending on vegetables finally generates additional
income for him. Thus, the term ‘Expenditure’ refers to spending of money on any item,
which does not give any additional monetary income in return to the person who spends
that amount.
Avenues of Expenditure:
Generally, most of us spend a major portion of our income on buying goods and services for
daily consumption. Besides spending on goods and services there are also many other
areas in which we spend money like expenditure on celebrations, on entertainment, charity
and donation, etc. The different areas in which we spent our earnings are called avenues of
expenditure.
 Expenditure on Goods and Commodities: We may spend money on various types of
goods and commodities needed for use in our daily living. These may be perishable
goods like vegetables, milk, fish, etc. or may be consumer durables like television,
radio, furniture etc.

of 74
 Expenditure on Services: We also spend money for availing of different types of
services. It may be for availing banking services, postal services, transport services,
communication services etc.
 Expenditure on Celebrations: In our daily life we find several occasions for
celebration. It may be a birthday, an anniversary, a festival, a marriage ceremony
etc. On such occasions we spend a lot of money.
 Expenditure on Entertainment: In our busy life we often feel like taking a break for
some sort of enjoyment through entertainment programs. This may include going to
watch a movie or drama or dance or cricket match or even going for a picnic or tour.
 Expenditure on Charity and Donation: Sometimes people spend money by donating
to individuals or institutions engaged in social services or charitable work. These
are called expenditure on charity and donation.
 Expenditure on Health and Education: In a family people usually spend some money
on health and education of their children. When individuals go for higher education
it requires more money. Thus, money spent on health and education may be termed
as expenditure.
 Other Expenditure: The modern age has paved newer avenues of expenditure for
people. For example, now-a-days people go to a gymnasium to keep themselves
physically fit, go to beauticians to take care of their body and beauty, surf the
Internet to gather information and also send e-mails, etc.
2.1.4: Savings
Savings refer to the amount of money which is kept aside from the current income for
future use. We may be able to keep aside this money either by reducing our expenditure or
by increasing our income or by doing both.
Investors are savers but all savers cannot be good investors as an investment is a science
and an art. Savings are sometimes autonomous and sometimes induced by the incentives
like fiscal concessions or income or capital appreciation. Savers come from all classes
except in the case of the population who are below the poverty line. The growth of
urbanization and literacy has activated the cult of investment. More recently, since the
eighties the investment activity has become more popular with the change in the govt.

of 74
policies towards liberalization and financial deregulation. The process of liberalization and
privatization was accelerated by the govt. policy changes towards a market oriented
economy, through economic and financial reforms started in July 1991.
Need for Savings:
Savings are essential not only for individuals, family or businessmen but it is also very
much required for a nation. Growth is practically impossible without savings. Individuals
save because of several reasons. Let us discuss why we all require savings.
Savings help us to meet future requirements: We need money in future for various
purposes like spending money on higher education, on marriages and other celebrations,
owning some immovable assets like house, land, farms etc. With savings at hand we, can
meet all these expenses.
Savings help us to meet expenses during emergencies: There are events which are
uncertain and may occur in future. All these events may require some amount of money to
be spend, which we can have from our savings. For example, we may require money during
emergencies like sudden illness, accidents, etc.
Savings help us to raise our standard of living: Savings accumulated over a period of time
become a substantial amount, which enables us to buy something, which is better,
comfortable or even luxurious. For example, you can buy a vehicle of your own, home, good
furniture; you can use generators/inverters at home to avoid power cut, etc. All these
improve your standard of living.
Savings help us to generate further income: We can use our savings or part of it in buying
shares, debentures or bonds, in buying property and renting it out or even in keeping
money in a bank for a fixed period. All of these can give us an assured return in terms of
dividend, rent or interest. This is an additional income for us.
Savings help the nation in its economic development: When we keep our savings in a bank
or in a post office, we get interest in return. But have you ever thought what they do with
our money? How do they generate more money from our savings? Actually they utilize our
money for various productive purposes. For instance, banks may give our money to the
business houses as loan and charge more interest from them. Similarly, government may

of 74
use our savings in various industrial activities, by taking it from the post offices or banks.
Thus, our savings help in development of business activities, which ultimately contributes
to the overall economic development of the country.
Impact on Inflation:
All the investments lose in value due to inflation or rise in prices leading to depreciation of
the rupee. When the rate of inflation or rise in prices leading to depreciation of the rupee.
When the rate of inflation is about 10%, the real value of money is lost by 10% every year.
The investors have therefore to protect themselves from this loss of real values of their
assets by proper investment planning and by securing returns, higher than the inflation
rate.
Some investments give only income like bank deposits, Post Office certificates, company
deposits etc. Some assets show capital appreciation if they are shares in companies or
bullion, land and buildings. Some are safe and liquid, like the investments in government
securities, bonds of PSU, etc. A few investments like Indira Vikas Patra are easily
transferable and marketable. So also the shares and securities listed and traded on the
stock exchanges. But all the above investments do not satisfy all the needs and objectives of
investors, referred to later, including securing a hedge against inflation. All objectives of
income, capital appreciation, safety, marketability, liquidity, & hedge against inflation can
be secured only by proper investment in corporate securities.
Tips on Saving:
We have learnt that savings are required for every individual. Let us learn some tips so that
we will be able to save.
Keep a record of your total income and its sources: This is essential as you get to know
when and how much you earn and to plan your expenditure accordingly. Keep a record of
your current expenditure: As you know there are certain expenses which you have to incur
regularly and the amount you spend is almost certain. For example, expenditure on food,
tuition fee for children, electricity and water bill, expenses on newspaper, house rent, etc.
These are your current expenditure. Once you know about these expenditures which you
cannot avoid, you can plan for other expenses keeping current expenditure in mind.

of 74
Plan your expenditure: There are certain expenses which do not occur regularly. For
example, buying a TV, refrigerator, washing machine, computer, etc… To spend on these
you have to make a priority list and then you can defer the expenditure, which is least
important.
For example, suppose you plan your expenditure on 25th December and fix your
requirements as a refrigerator, a computer and a washing machine. You prioritized your
requirements in the following order – washing machine, refrigerator, and computer. This is
so because you find that a computer shall be most useful during the next academic session,
a refrigerator shall be most useful during summer (next March) and washing machine is
urgent as it is becoming difficult to wash cloth manually in winters. So naturally you will
spend on the washing machine and defer your expenditure on the refrigerator for three
months and the computer for six months.
Here, we would like to highlight on one of the aspects that we have recently noticed. Most
of the youngsters working in the ITES industry spend on having latest expensive mobile
phones by changing their mobile phones quite often. Thanks to the rapid changes
happening in the technology front, we have new versions of mobile phones every now and
then. Many of the youngsters grab the new phones for snobbish appeal, sometimes, going
to the extent of buying it on debt. If they could resist the temptation of going for the latest
expensive gadgets, they could use that amount of money to invest for the future.
Cut down on expenditure: There are certain expenses which one may incur in an
unplanned way. For example, suppose you have gone to Shimla on a tour in the month of
March and got some winter clothes. You may use them at Shimla but coming back from
Shimla you may not be requiring all those winter clothes. This sort of expenditure may be
cut short.
Try to generate additional income and don’t spend it. This is a very good way of savings.
Whatever we earn from a regular source we can spend it on our livelihood. But the extra
earnings that we make from other sources can be kept aside for future use. For example,
suppose one of your articles is published in the newspaper or magazine and you are paid
some money for that. You can keep aside this money for future use.

of 74
2.1.5: Investment
We have already learnt that sometimes people spend some money on buying shares, bonds,
properties, etc… which gives them some monetary return. Sometimes people also keep
their savings or a part of it as a recurring or fixed deposit in the banks or post offices and
earn interest on it. Similarly some people deposit their money in Mutual Funds, Public
Provident Fund Account etc. some buy National Savings Certificates from the post office
and some take Life Insurance Policies etc. All these give them some additional income.
These types of expenditures are called investment. Thus, the term ‘investment’ refers to
depositing or spending money on some items that generate additional income either
immediately or in the future. For example, if you deposit money in Public Provident Fund
Account it will give you some amount of return in the form of interest. So, this is your
investment.
Objectives of Investor:
 Income
 Appreciation of capital
 Safety
 Liquidity
 Hedge against inflation
 A method of tax planning
The mix of these objectives may also depend on the time frame of the investment.
 Short-term/day to day trading gains
 Short term capital gain up to one year
 Long term appreciation of more than 1 to 3 years
Investment preferences of public may be set out in terms of their savings for:
 Transaction purpose (for daily needs or regular payment)
 Precautionary purpose (for contingencies or special needs)
 Speculation or asset purposes (for capital gain or building of assets)
Let us learn about avenues available for investment.

of 74
Deposits in Banks and Post Offices: These are the most common, popular, risk-free, and
trustworthy investments. In banks and post offices, individuals deposit their money in
savings account, where they can withdraw the money whenever required. They can also
deposit money for a fixed period on one-time basis or a recurring basis. All these
investments are safe and give an assured return. There is something known as recurring
deposits. That means in Banks we can open recurring deposit accounts, and every
month/quarter, we can deposit the fixed amount and the bank will give a fixed interest on
that money which is usually higher than the regular interest rates in the banks.
Other Schemes/Certificates of Bank, Post Office: Apart from deposits, the banks and post
offices also offer various other schemes like Monthly Income Scheme, National Savings
Scheme, Public Provident Fund, National Savings Certificates, Kissan Vikas Patra etc., which
provide assured return and are risk-free.
National Savings Certificates (NSC) Ninth (IX) Issue
 No maximum limit for investment
 INR 100 grows to INR 234.35 after 10 years
 Minimum INR 100; No maximum limit available in denominations of INR 100, 500,
1000, 5000, & 10,000
 A single holder type certificate can be purchased by an adult for himself or on behalf
of a minor or to a minor
 Rate of interest: 8.90%
 Maturity value of a certificate of INR 100 purchased on or after 1.4.2012 shall be
INR. 238.87 after 10 years
Kissan Vikas Patra
 Minimum Investment of INR 500; No maximum limit
 Rate of interest 8.40% compounded annually
 Money doubles in 8 years and 7 months
Provident Fund
Employee Provident fund scheme came into effect in 1952, and this was done on a
mandatory basis so that employees save on a monthly basis through a government scheme.

of 74
The Government gives interest on the money which is deducted in PF. All the employees
(including casual, part time, Daily wage contract etc.) other than an excluded employee are
required to be enrolled as members of the fund the day, the Act comes into force in such
establishment. Ideally when someone attains the age of 55, or over and retires from his
duties, then s/he is eligible to withdraw the PF.
Public Provident Fund
Public Provident Fund (PPF) is a savings-cum-tax-saving instrument. It also serves as a
retirement-planning tool for many of those who do not have any structured pension plan
covering them.
The account can be opened in designated post offices, State Bank of India branches, and
branches of some nationalised bank. ICICI Bank is the first private sector bank which has
been authorized to open PPF account.
 Minimum yearly deposit of INR 500 is required
 Limit of subscription: INR 70,000 in a year
 Rate of Return on PPF is 8.6 % p.a. (Compounded annually)
 The minimum tenure of the PPF account is 15 years
 The subscription, which shall be in multiples of INR 5, for any year, be paid into the
account in one lump sum, or instalments not exceeding twelve in a year
Government Bonds: Sometimes government and semi-government organizations accept
deposits from individuals for a fixed period and promise to pay a fixed amount after the
stipulated period. These are in the form of bonds, which are also risk-free and provide
assured return.
Life Insurance policies: Post offices, Life Insurance Corporation of India, and other private
sector life insurance companies insure the life of individuals for a specific amount for a
specified period upon payment of a premium amount. The individual who is insured gets a
good return on maturity of the policies. This is a very important form of investment. People
should look if they are adequately covered. A person’s net worth plays a huge role in
determining the amount of policy s/he should have. If a person’s earnings are high, then the
lifestyle changes accordingly. Hence individuals should ensure that they buy enough

of 74
coverage so that if case of their unfortunate death, their family can survive well on that
insurance money.
UTI and other mutual funds schemes: There are some financial institutions (may be
government, semi-government or private) which raise money from individuals and invest
the collected amount in securities and deposits and thereby earn a good return. This return
is then distributed among the investors as dividend. These types of investments are risky. It
may give you very good return or it may also lead to losses.
Here, to avoid some of the disadvantages associated with Mutual Funds, Systematic
Investment Plan (SIP) has been introduced.
A systematic investment plan or SIP (as it is more commonly known) is a way to invest in
mutual funds regularly.
The idea is to set apart a sum every month or quarter, and use that to buy units of a
particular mutual fund, regardless of its price. People like such a system because it helps
them save regularly and build up an investment.
Benefits of SIP:
 Regular saving habit: Perhaps the best benefit of setting up a SIP is that it forces us
to set apart some money every month and enforces saving discipline.
 Protects from timing the market: If we commit an amount of money to a SIP, we
would most likely continue to invest, regardless of a big fall or huge gains in the
market. This in turn will enable us to invest regularly rather than try to time the
market, which not many small investors can do successfully.
Corporate securities and deposits: There are companies which accept deposits from public
for a fixed period. People can invest their savings in these companies. This is bit risky as
your money goes into private hands. But if the company is good and a reputed one, you can
get assured return. Similarly people sometime invest in buying shares of the company. If
the company is performing well the shareholders get good return otherwise the
shareholders may not get anything. These investments are again risky.

of 74
Real estate: Sometimes people spend money on buying a plot of land, an apartment or a
house etc., the value of which appreciates over a period of time. By giving it on rent, they
can earn money. These types of investments are less risky.
Business activities: You must have observed that some people invest money to carry on
various business activities. They may start the business individually i.e., in the form of sole
proprietorship, or by inviting others to invest money with them i.e., they can start
partnership form of business. By investing their money and putting their best effort then
can get return in the form of profit.
Investment in the share market: A person can invest his money in the share market by
purchasing shares. A share market is a public institution and it serves the growth of the
capital market. In a stock market, purchase and sale of shares are made in conditions of
free competition. It is organized as voluntarily, non-profit making association of brokers to
regulate and protect their interests. Whenever a company raises capital through public
issue of securities, its securities are required to be listed on the stock exchange within ten
weeks of the closing of the subscription list mainly to provide liquidity to the investors.
Gold, Silver, Precious Metals, and Precious Stones: All these items vary as per the market
rates. And in the past few years, the rates of them have only increased.
Now if we see the gold price per 10 gram on Jan 2009, it was INR 13,664. And it was INR
27,322 on Jan 1, 2012. So in 3 years it went up by INR 13,658, which is almost 100%. So if
someone had invested in gold at the right time, then it brings in good results.
The same goes for silver too. Silver price on Jan 1, 2009 was INR 13,753 per kilogram and it
went up to INR 51,043 per kilogram on Jan 1, 2011. So the increase was INR 37,290 per
kilogram that means the increase was 271%. Hence, people who had invested in silver had
reaped a better return than investing in gold. In fact on May 1, 2011 it went up to INR
71,576 per kilogram.
Venture Capital: Venture capital (VC) is financial capital provided to early-stage, high-
potential, high risk, growth start-up companies. The venture capital fund makes money by
owning equity in the companies it invests in, which and usually have a novel technology or
business model in high technology industries, such as biotechnology, IT, software, etc. The

of 74
typical venture capital investment occurs after the seed funding round as growth funding
round (also referred to as Series A round) in the interest of generating a return through an
eventual realization event, such as an IPO or trade sale of the company. Venture capital is a
subset of private equity. Therefore, all venture capital is private equity, but not all private
equity is venture capital.
In addition to angel investing and other seed funding options, venture capital is attractive
for new companies with limited operating history that are too small to raise capital in the
public markets and have not reached the point where they are able to secure a bank loan or
complete a debt offering. In exchange for the high risk that venture capitalists assume by
investing in smaller and less mature companies, venture capitalists usually get significant
control over company decisions, in addition to a significant portion of the company's
ownership (and consequently value).
This option is usually applicable for High Net-worth Individuals (HNIs) to consider who
have a huge risk-appetite.
New developments in Investment avenues:
Exchange traded funds: (ETFs) are a new variety of mutual funds that first became
available in 1993. ETFs have grown rapidly and now hold nearly $80 billion in assets. ETFs
are sometimes described as more 'tax efficient' than traditional equity mutual funds, since
in recent years, some large ETFs have made smaller distributions of realized and taxable
capital gains than most mutual funds.
REIT (Real estate investment trust): REITs are companies which own properties such as
office buildings, shopping complexes, and hotels etc, which are giving continuous income.
As these companies pass most part of their income to the shareholders, they get tax
benefits from their income. Like other stocks that are traded in the stock exchanges, REIT
can also be traded in the stock exchange. REITs give a new opportunity to the retail and
institutional investors to diversify their portfolio.
Classification of Investments:
There are different methods of classifying the investment avenues.

of 74
A major classification is:
Physical investment: Example of physical investments is land, property, flats, house, gold,
precious metals and stones, paintings, etc…
Financial investment: Examples are Fixed Deposits, Bonds, Shares, and Mutual Funds etc.
Most of the financial assets, barring cash are used for production or consumption, or
further creation of assets, useful for production of goods and services.
Among different types of investments, some are marketable and transferable and others
are not. Examples of marketable assets are shares and debentures of public limited
companies, particularly the listed companies on stock exchanges, bonds of P.S.Us,
Government securities, etc. Non-marketable securities or investments are bank deposits,
provident fund and pension funds, insurance certificates, post office deposits, NSC bonds,
company deposits, private limited companies shares etc.
Difference between Savings and Investments:
Savings are money or other assets kept over a long period of time, usually in a bank
without any risk of loss or making profit. Investments are money or other assets purchased
with the hope that it will generate income, reduce costs, or appreciate in the future. 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. And usually it has also a risk of some loss.
As far as we are talking about investment then it is certain amount of money which is saved
or used in some projects where we can take profit more than the money we have saved or
invested. In general terms investment means the use of money to make more money.
Features of investment avenues:
The investor has various alternative avenues of investment for his / her savings to flow in
accordance with his / her preferences. All investments involve some risk or uncertainty.
The objective of the investor is to minimize the risk involved in investment and maximize
the return.

of 74
1. Risk: The risk depends on the following factors:
 The longer the maturity period, the larger is the risk.
 The more the creditworthiness of the borrower or agency issuing securities, the less
is the risk.
 The nature of instrument, namely, the debt instrument or fixed deposit or
ownership instrument like equity or preference share, also determines risk.
 The risk of variability of returns is more in the case of ownership capital as the
return varies with the net profits after all commitments are met.
 The nature of tax liability on the instrument
2. Return: A major factor influencing the pattern of investment is its return, which is its
return and capital appreciation, if any. The difference between the purchase price and the
sale price is capital appreciation and the yield is the interest or dividend divided by its
purchase price.
3. Safety: The safety of the capital is the certainty of return on capital without loss of money
or time involved. In all cases of money lent, some transaction costs and time are involved in
getting the funds back.
4. Liquidity: If a capital asset is easily realizable, saleable or marketable, then it is said to be
liquid. An investor generally prefers liquidity for his /her investments, safety of his /her
funds, a good return with a minimum risk or minimization of risk and maximization of
return (dividend and capital appreciation).
5. Marketability: This refers to transferability or saleability of an asset. Those listed in stock
market are more easily marketable than those that are not listed.
6. Tax benefits: Some instruments enjoy good tax benefits; hence their net return is higher.
Risk-return Relationships:
Risk and return are directly correlated with each other, when the risk is high; return is also
high, and vice versa.
The relationship between risk and return is a fundamental financial relationship that
affects expected rates of return on every existing asset investment. The Risk-Return

of 74
relationship is characterized as being a ‘positive’ or ‘direct’ relationship meaning that if
there are expectations of higher levels of risk associated with a particular investment, then
greater returns are required as compensation for that higher expected risk. Alternatively,
if an investment has relatively lower levels of expected risk then investors are satisfied
with relatively lower returns.
This risk-return relationship holds for individual investors and business managers.
Greater degrees of risk must be compensated for with greater returns on investment. Since
investment returns reflects the degree of risk involved with the investment, investors need
to be able to determine how much of a return is appropriate for a given level of risk. This
process is referred to as ‘pricing the risk’. In order to price the risk, we must first be able to
measure the risk (or quantify the risk) and then we must be able to decide an appropriate
price for the risk we are being asked to bear.
Think Before Making an Investment:
When we are investing money, we must look into some factors to reduce the risk involved
in investment. Following factors determine where to invest the money:
 Ability to save: Some of the investments require regular contributions of certain
amount of money like payment of LIC premium or instalments in a recurring
deposit. We need to assess our ability to save before taking such decision.
 Safety: We must look into the various risks or drawbacks of the instruments where
we are going to invest to ensure safety of our investments.
 Easy Liquidity: Any investment we make must be capable of being converted into
cash, whenever necessary.
 Rate of Interest: Rate of interest is more important than the amount of return we
get. Savings and Investment normally, for larger deposits, higher rates of interest
are fixed.
 Tax relief: One must take into consideration the various tax benefits we can avail of
through our investments.
Personal Tax planning for an Individual

of 74
Some people have a wrong notion that tax planning is useful only once we are well settled
in life. Rather, the best time to start tax planning is right from the day we start earning any
income in our name.
For any individual, tax planning occupies a prominent position in the investment planning
process.
Tax Planning: Everyone is entitled to arrange his / her affairs to reduce his / her tax
liability, but the arrangement must be real and genuine, and not a sham. Thus tax planning
ensures not only the accrual of tax benefits within the four corners of law but also that the
tax obligations are properly discharged to avoid penal provisions. It should not be mixed
with tax evasion and tax avoidance.
Tax planning at different stages of life through various Investments:
When a person starts earning by default the company s/he works for deducts the PF which
is exempted from tax. Also, Insurance policy (life Insurance, medical insurance u/s 80D and
retirement plans) can be planned as deduction can be availed u/s 80C.
Next stage is to own a house. The biggest advantage of putting your money in residential
house property is tax haven in one hand while on the other hand; you get a secure place of
your own to live in. The repayment of principal is deductible up to one lakh in a year u/s
80C.
Usually, a person has to spend a lot on the education of children. Tax planning can be used
as effective tool in this respect as it may ensure that the capital base is not eroded or
adversely affected. Sec 10(14) and rule 2BB provides for certain allowances that are
exempt according to the limit specified in respect of each such allowances.
Senior citizens can invest special Senior Citizens schemes launched by govt. of India.
Tax planning brings fiscal discipline in the functioning of a taxpayer and reduces the
transfer of money, from the person who has earned it by hard labor, to the govt. for waste
and ostentation. Thus the amount invested enhances the capacity of the taxpayers for
expansion and growth, which in turn increases the tax revenue of the govt.
Wealthy Investors

of 74
According to a study undertaken jointly by Merrill Lynch, CapGemini, Ernst and Young,
High Net worth Individuals [HNIs] or wealthy investors are proactive in portfolio
management, risk management, consolidation of financial assets and use of diversification
strategies as actively as large institutions. HNIs are proactive in identifying new investment
options and take inputs from professional advisors in volatile market conditions.
HNIs are dynamic in modifying their asset allocation and were among the first investors to
move from equities to fixed income during 2001-2002 period of downturn in equity
markets. They shifted back to equities when they identified favourable market trends.
Needs of wealthy investors
Wealthy investors being aware of the emerging investment opportunities use sophisticated
investment strategies such as:-
 Leveraging on the professional advisors' capability to analyse market trends and
make appropriate investments
 Searching for innovative products to enhance value
 Diversifying across various types of assets
 Investing across emerging geographies
 Consolidating financial information and assets
Investment products and avenues
 Managed products: Managed product service is the most popular investment
strategy adopted by wealthy investors globally.
 Real Estate: Wealthy investors have found this asset class very attractive and have
invested directly in real estate and indirectly through real estate investment trusts.
 Art and passion: Wealthy investors also have their investment in art, wine, antiques,
and collectibles.
 Precious Metals: Gold and other precious metals are attractive investment options
to balance the asset allocation.
 Commodities: Wealthy investors have turned to commodities to offset the lower
returns from fixed income securities.

of 74
 Alternative investments: Hedge funds and Private equity investments such as
venture funds are becoming increasingly popular with wealthy investors to reduce
the investment risks related to stock market fluctuations.
This is because these alternative instruments have low correlation with equity asset
class performance. Investment in non correlated assets, such as commodities helps to
improve diversification of the portfolio amidst volatile market conditions.
Characteristics of wealthy investor
The wealthy investor of today is:-
 Young, educated and knowledgeable
 Well informed about global trends
 Willing to take risks
 Demanding and quality conscious
 Performance oriented in taking decisions and less loyal
 Techno savvy and seeks information from various sources
 Smart in looking for the best deal
 Not attracted by traditional status symbols that do not add value
 Hands on in checking investments, making deals and getting personally involved
Special needs of wealthy investors
The strategies and characteristics of wealthy investors have led to financial institutions
innovating and expanding their product range to meet the growing demands of such
investors.
A financial advisor should keep in mind the following special needs and expectations of the
wealthy clients:
Demand broader range of services and skills: Wealthy clients not only are on the lookout
for multiple investment avenues, unlike other clients, but are also ready to face the risks
associated with newer products.
Net worth and goals need to be matched and assets need to be planned tax effectively:
Since wealthy investors have surplus funds that can be passed on to the next generations

of 74
and also come into the high tax-paying category, investors need to advise them on the best
methods to transfer their assets after death as well as on the best tax saving investments.
Estate planning and tax planning: In-depth knowledge about tools of estate planning such
as wills, trusts, and power of attorney is necessary. It is also important to know the
succession rules and tax rules to do effective tax planning resulting in minimal/no tax on
transfer of assets.
Educate the client: Educating the client on various and different types of investment
avenues that will suit him the best will prove very beneficial for the financial advisor.
Wealthy clients, especially those who are self made, may assume that if they can make
wealth in one industry they can manage their own portfolio as well. In such cases it is best
to educate the client about the best investment options rather than trying to push a
product; because if one is trying to push a product, the client is unlikely to get interested
since he/she will be having enough people chasing him/her for investments.

of 74
PROFILE 2: Profile of ITES Industry
The Indian information technology (IT) / IT enabled Services (ITeS) industry has played a
key role in putting India on the global map. Over the past decade, the Indian IT-BPO sector
has become the country’s premier growth engine, crossing significant milestones in terms
of revenue growth, employment generation and value creation, in addition to becoming the
global brand ambassador for India.
The Indian IT-BPO sector including the domestic and exports segments continue to gain
strength, experiencing high levels of activity both onshore as well as offshore. The
companies continue to move up the value-chain to offer higher end research and analytics
services to their clients.
The Indian IT-BPO industry has grown by 6.1 percent in 2010, and is expected to grow by
19 percent in 2011 as companies coming out of recession harness the need for information
technology to create competitive advantage.
India’s fundamental advantages—abundant talent and cost—are sustainable over the long
term. With a young demographic profile and over 3.5 million graduates and postgraduates
that are added annually to the talent base, no other country offers a similar mix and scale of
human resources.
Realizing the wealth of potential in the IT-ITES sector, the central and state governments
are also working towards creating a sound infrastructure for the IT-ITES sector. CII aims to
make the Indian IT and ITES industry world class by continuously providing a platform for
understanding and adoption of the new developments & best practices worldwide in this
sector, taking up issues and concerns of the Indian industry with the relevant ministries at
National and State level, coming up with studies, reports and surveys to help understand
the potential of Indian IT and ITES market and the issues faced.
As one of the key growth engines of the economy, the Indian IT/ITES industry has been
contributing notably to the economic growth accounting for around 5.6% of the country’s
GDP and providing direct employment to about 2.3 million people and indirect
employment to many more.

of 74
Profile of ITES Companies (in alphabetic order)
Before we proceed with the profiles of the companies, we need to understand and
differentiate between two types of BPO:
Captive BPO: This is a type of BPO wherein work would be off-shored to its wholly-owned
subsidiary instead of a third-party vendor. The benefit of doing such an arrangement
would be to leverage the cost savings of using offshore resources, while maintaining
complete control over process and delivery. The costs of such an arrangement are
generally higher than using a vendor.
Third-party BPO: This is a type of BPO wherein work is outsourced to a third-party vendor
who would run the operations.
It is interesting to note that the captive business model was the pioneer of BPO services but
many of the captives are reconsidering the decision by preferring third-party vendors.
Third-party vendors are usually preferred over captive outfits because of substantially
lower costs, flexibility, and the ability to enforce price and quality competition.
From this project point of view, getting further information from official sources is a
challenge as it is not usually disclosed.
Accenture BPO: Accenture is a global management consulting, technology services and
outsourcing company, with more than 249,000 people serving clients in more than 120
countries.
Initially called Andersen Consulting, Accenture was formally established in 1989 when a
group of partners from the Consulting division of the various Arthur Andersen firms
around the world formed a new organization focused on consulting and technology
services related to managing large-scale systems integration and enhancing business
processes.
In April 2001, Accenture’s partners voted overwhelmingly to pursue an initial public
offering, and Accenture became a public company on July 19, 2001, when it listed on the
New York Stock Exchange under the symbol ACN.

of 74
The majority of Accenture employees are organized in one of four ‘workforces’ (Consulting,
Services, Solutions and enterprise) and they chose to open their BPO Wing in Bangalore in
April 2003. The company generated net revenues of US$25.5 billion for the fiscal year
ended Aug. 31, 2011.
ANZ BPO: Captive BPO Unit of ANZ is known by the name ‘ANZ Support Services India Pvt.
Ltd.’ and is located in Bangalore.
ANZ stands for Australia and New Zealand – one of the premier banking institutions.
In Bangalore, ANZ currently employs close to 5000 people in technology development,
operations and shared services roles. The group has been servicing ANZ’s technology needs
for more than 21 years and has in recent years extended its capabilities to include
operations and support functions.
Dell BPO: Dell BPO is a captive BPO unit of Dell.
Dell Inc. (NASDAQ: DELL) is an American multinational computer technology corporation
based in Texas. Dell is listed as one of the top 50 companies in the Fortune 500 list.
Revenues of the Dell Group stand at US $ 63.07 billion. It was founded by Michael Dell, and
bears the surname of the founder. It is the third-largest PC vendor in the world after HP
and Lenovo.
Dell started its operations in India by incorporating as Dell Computer India Private Ltd. in
Bangalore in 1996, Dell has been among the fastest growing technology companies in India
and continues to be among the top three today. Dell employs more than 110,000
employees.
Dell’s first India-based contact centres opened in Bangalore and Hyderabad in 2003;
Chandigarh was added in 2005 and Gurgaon contact centre opened in 2006. Dell India
accounts for the company's largest employee base outside of the United States.
Fidelity: FMR LLC (Fidelity Management and Research) or Fidelity Investments is an
American multinational financial services corporation. It is one of the largest mutual fund
and financial services groups in the world. It was founded in 1946 and serves North
American investors. Fidelity Ventures is its venture capital arm. Fidelity International

of 74
Limited (FIL) was an international affiliate founded in 1969, serving most countries in the
rest of the world. In September 2011, FIL was rebranded as 'Fidelity Worldwide
Investment'.
Fidelity Investments manages a large family of mutual funds, provides fund distribution
and investment advice services, as well as providing discount brokerage services,
retirement services, wealth management, securities execution and clearance, life insurance
and a number of other services.
Fidelity is a privately held company founded by Edward C. Johnson II in 1946, which is
owned by employees and the Johnson family. Fidelity Management & Research Company,
the US investment management division of Fidelity Investments, acts as the investment
adviser to Fidelity's family of mutual funds. FMR Co has three fund divisions: Equity
(headquartered in Boston, Massachusetts), High-Income (Boston) and Fixed-Income
(Merrimack, New Hampshire). The company's subsidiaries serve as distributors and
transfer agents to the entire Fidelity fund family.
Fidelity has headquarters in Boston, Massachusetts, U.S.
Genpact: Genpact Limited (NYSE: G) is a global provider of business process and
technology management services, offering a portfolio of enterprise and industry-specific
services. It was formerly a GE owned company called GE Capital International Services or
GECIS. It operates from India, China, Guatemala, Hungary, México, Morocco, the Philippines,
Poland, the Netherlands, Romania, Spain, South Africa, Australia, UAE, Brazil and the United
States.
Genpact went public on NYSE on August 2, 2007 under the symbol "G". It currently employs
around 55,000-plus employees and has revenues of $1.6 Billion.
The NYSE symbol "G" was initially allocated to the Gillette Company. After the Gillette
Company was acquired by Procter and Gamble, the symbol became free and Genpact and
Google booked it. It was Genpact in the end that got to keep G as its stock symbol.
Foundation of GENPACT:

of 74
Pramod Bhasin started GE Capital International Services (GECIS) in 1997 as the in-house
BPO division of General Electric (GE) when K.P. Singh convinced Jack Welch, the former
CEO of GE, to outsource certain services to India at Gurgaon. It was under Pramod that GE
hired Raman Roy, pioneered business process outsourcing in India, and expanded its
operations from India to countries like China, Hungary, Guatemala, Poland, Mexico,
Morocco, the Philippines, Romania, South Africa and the United States.
GENPACT began in 1997 as a business unit within GE and this lineage has contributed to
the company’s deep understanding of process. Starting first with the business of GE Capital
and then expanding scope across GE businesses, to providing business process
management capabilities that delivered outstanding business impact for the company.
Hewlett-Packard: HP BPO started off as a captive BPO unit of Hewlett-Packard.
Hewlett-Packard Company (NYSE: HPQ) or HP is an American multinational hardware and
software corporation headquartered in Palo Alto, California, United States. It provides
products, technologies, software, solutions and services to consumers, small- and medium-
sized businesses (SMBs) and large enterprises, including customers in the government,
health and education sectors.
The company was founded in a one-car garage in Palo Alto by William (Bill) Redington
Hewlett and Dave Packard. HP is the world's leading PC manufacturer. It specializes in
developing and manufacturing computing, data storage, and networking hardware,
designing software and delivering services. Major product lines include personal
computing devices, enterprise, and industry standard servers, related storage devices,
networking products, software and a diverse range of printers, and other imaging products.
HP markets its products to households, small- to medium-sized businesses and enterprises
directly as well as via online distribution, consumer-electronics and office-supply retailers,
software partners and major technology vendors. HP also has strong services and
consulting business around its products and partner products.
Worldwide, it has approximately 349,600 employees and has revenues of US $ 127.24
billion.
 HP was founded in 1939.

of 74
 Corporate headquarters are in Palo Alto, California.
 Meg Whitman is CEO and President.
 HP is the world's largest IT Company, with revenue totalling $127.2 billion for fiscal
2011 ending October 31, 2011.
 HP's 2011 Fortune 500 ranking (in US): No. 11 & Fortune 28 (in Global).
IBM: International Business Machines Corporation, or IBM, is an American multinational
technology and consulting corporation headquartered in Armonk, New York, United States.
IBM manufactures and sells computer hardware and software, and it offers infrastructure,
hosting and consulting services in areas ranging from mainframe computers to
nanotechnology.
The company was founded in 1911 as the Computing Tabulating Recording Corporation
through a merger of three companies: the Tabulating Machine Company, the International
Time Recording Company, and the Computing Scale Corporation. CTR adopted the name
International Business Machines in 1924, using a name previously designated to CTR's
subsidiary in Canada and later South America. Its distinctive culture and product branding
has given it the nickname Big Blue.
In 2012, Fortune ranked IBM the #2 largest U.S. firm in terms of number of employees
(433,362), the #4 largest in terms of market capitalization, the #9 most profitable, and the
#19 largest firm in terms of revenue.
Globally, the company was ranked the #31 largest in terms of revenue by Forbes for 2011.
Other rankings for 2011/2012 include #1 company for leaders (Fortune), #1 green
company worldwide (Newsweek), #2 best global brand (Interbrand), #2 most respected
company (Barron's), #5 most admired company (Fortune), and #18 most innovative
company (Fast Company).
IBM’s revenues has crossed US $ 100 billion and stood at US $ 106.91 billion.
Infosys BPO: Initially, BPO subsidiary of Infosys Limited was started as Progeon. Progeon
was established in April 2002 and today is among the top third-party BPOs in India
according to NASSCOM. It was started as a 74% and 26% joint venture between Infosys and
Citibank Investments. In 2006 Infosys bought out Citibank's share at a price of Rs 592 per

of 74
share. Today it has operations in Bangalore, Chennai, Gurgaon, Jaipur, and many other
Indian Cities along with international centres like Monterrey (Mexico), Lodz (Poland), Brno
(Czech Republic), Atlanta (USA), Hangzhou (China), Manila (Philippines), and Brazil.
Infosys BPO, the Business Process Outsourcing subsidiary of Infosys Limited (NASDAQ:
INFY), is an end-to-end outsourcing services provider.
Infosys BPO is a global company operating in the Americas, APAC, Australia and Europe
with over 21,421 employees and revenues of $494.9 million as of March 31, 2012.
KPMG: KPMG is one of the largest professional services networks in the world and one of
the Big Four auditors, along with Deloitte, Ernst & Young (EY) and PwC. Its global
headquarters is located in Amstelveen, Netherlands.
KPMG employs 145,000 people and has three lines of services: audit, tax, and advisory. Its
advisory services are further divided into three service groups - Management Consulting,
Risk Consulting, and Transaction & Restructuring.
It has revenues of US $ 22.7 billion and employs 145,000.
KPMG was established in India in September 1993, and has built a significant competitive
presence in the country. The firm operates from its offices in Mumbai, Pune, Delhi, Kolkata,
Chennai, Bangalore, Hyderabad, Kochi, Chandigarh and Ahmedabad, and offers its clients a
full range of services, including financial and business advisory, tax and regulatory, and risk
advisory services.

of 74
CHAPTER 3: DATA ANALYSIS AND INTERPRETATION
This study is being conducted to know the investment pattern of ITES professionals in
Bangalore city. Questionnaire was floated to a sample size of 202 employees. Following
parameters are being used for the analysis:
 Sample Size: 202
 Age Group
 Income level
 Percentage of Salary being invested
 Investment Horizon
 Preferred Investment Avenues
 Reasons for Investment
 Total Investment
 Risk Profile
 & other factors
Analysis & interpretation for this study is being carried on based on the answers provided
by our respondents to the questionnaire.

of 74
Age Group of the Respondents
First question in our survey was pertaining to their age. This was probably one of the
easiest questions and there was no Finance-knowledge string attached to this question.
We all are aware that ITES is a young industry and employs lot of youngsters including
students directly out of college. 41% of our respondents are in the age group of 25 to 30
years, followed closely by age group of 30 to 40 years at 36%. Overall, it is interesting to
note that almost all of our respondents (whooping 98%) are within 40 years of their age.
Table 3.1: Age Group of the respondents
Age Group Count Percentage
Below 25 42 21%
25 to 30 Years 82 41%
30 to 40 Years 73 36%
40 to 50 Years 04 02%
Above 50 Years 01 00%
Out of 202 respondents, 5 respondents were above 40 years but only one respondent was
more than 50 years old.
Chart 3.1: Age Group of the respondents
21% of our respondents were aged below 25 who started their career.

of 74
Annual Income
Initially, when we had thought of taking this topic as our study, we had perplexing
questions that were posed as ITES employees usually complain that their salaries are
lesser, and hence, they would not have any investment. This might be true for the career-
starters but find that 44% of our respondents are earning more than INR 500,000 per
annum.
Table 3.2: Annual Income of the respondents
Annual Income Count Percentage
Below 100,000 0 0%
100,000 - 200,000 41 20%
200,000 - 400,000 52 26%
400,000 - 500,000 20 10%
More than 500,000 89 44%
Chart 3.2 displays the annual income of the respondents in a graphical representation.

of 74
Insurance Cover
Over 90% of our respondents have insurance cover. However, majority of the respondents
have the insurance cover provided by the organization they work.
Table 3.3A – Whether respondents have insurance cover?
Insurance Cover Count
Yes 181
No 21
Chart 3.3A provides the information in a graphical format.
Table 3.3B provides the information on the type of insurance cover they have. At least
around half of our respondents have personal life insurance.
Type of Insurance Cover Count
Company Life 121
Company Health 129
Personal Life 97
Personal Health 31
Car Insurance 9
Property Insurance 10

of 74
Chart 3.3B displays the type of insurance cover respondents have.

of 74
Percentage of salary being invested
Fourth question in our survey pertained to percentage of the salary being invested & table
3.4 depicts the same
Percentage of salary being invested
Below 5% 46 23%
5% to 15% 75 37%
15% to 25% 49 24%
25% to 40% 16 8%
Above 40% 16 8%
More than one-thirds (37%) of our respondents invest between 5% and 15% of their
salary. Close to one-fourths (24%) of our respondents invest between 15% and 25% of
their salary.
Chart 3.4: Percentage of Salary Being Invested

of 74
Investment Horizon
Fifth question in our survey pertains to the horizon of their investments. More than half of
our respondents are long-term oriented. As majority of our respondents are youngsters, it
looks like they invest having long-term horizon in mind to create wealth.
Table 3.5 displays the investment horizon of the respondents
Investment Horizon Count Percentage
Short-Term 23 11%
Mid-Term 61 30%
Long-Term 114 56%
Not Yet Invested 4 2%
30% of our respondents invest keeping medium-term goals in mind.
Chart 3.5: Investment Horizon

of 74
Investment Options
Sixth question in our survey tried to find out the type of investments that our respondents
make the investments. This is one of the important questions which provide an eye-opener
on the topic: ‘Investment pattern’.
No investment instrument emerged as the clear winner. In fact, none of the instrument
crossed even a one-quarter (25%) mark milestone.
Table 3.6 displays the preference among the investment options available
Investment Options Count Percentage
PPF 30 8%
Government Bonds 12 3%
Fixed Deposits 88 22%
Property & Real Estate 50 13%
Gold / Silver / Precious Metals 46 12%
Mutual Funds 38 10%
Equities 18 5%
Insurance 95 24%
Others 18 5%
Insurance is the top choice. However, Fixed Deposits comes very close to the top spot. If
Insurance is considered as a necessity to guard against any contingencies, Fixed Deposit
would occupy the top slot as the preferred investment instrument amongst ITES
employees.

of 74
Chart 3.6: Preference of Investment by Respondents
Many of the experts on the Investing advise youngsters to have equity exposure, especially
through Mutual Funds. However, we could find that only 5% invest in the Equity market,
and only 10% have investments in Mutual Funds.

of 74
Reasons (Events) for Investment
Table 3.7 displays the reasons for which respondents invest.
Events (Multiple choice) Count Percentage
Property 82 19%
Retirement 73 17%
Career Planning 86 20%
Education 40 9%
Tax Planning 71 16%
Increasing Wealth 72 17%
Others 10 2%
There is no single answer given by all the respondents. Here, we could understand that
respondents invest for the following reasons: Career Planning, Property, to plan for
retirement, to increase wealth, tax planning, & others.
Chart 3.7 displays the reasons for the Investment
Most of the respondents invest for multiple reasons. Some of them invest not only to
increase their wealth but simultaneously plan for reduction of tax as well.

of 74
Loan Taken
Our eighth question was designed to understand whether loan has been taken, if yes, the
reasons for taking the loan.
Table 3.8A depicts the answer to close-ended question: whether loan has been taken?
Loan Taken Count
No 99
Yes 103
Chart 3.8A: Whether Loan has been taken?

of 74
Table 3.8B depicts the reason for taking a loan
Type of Loan Count
Home Loan 37
Vehicle Loan 33
Personal Loan 28
Others 15
Chart 3.8B: Type of Loan Taken

of 74
Total Investment
Table 3.9 provides the details of the total investment
Total Investment Count Percentage
Within INR 100,000 71 35%
100,000 to 500,000 53 26%
500,000 to 1,000,000 (a Million) 10 5%
1 Million to 2 Millions 12 6%
2 Millions to 5 Million 5 2%
5 Million to 10 Million 2 1%
More than 10 Millions 3 1%
Do not wish to disclose 46 23%
35% of respondents have investments within INR 100,000. 61% of respondents has
investments lesser than half-a-million mark.
As the size of the investment increases, count of respondents decreases. At least 11% of
our respondents had investments crossing a million. This has been considered by adding
investment range starting from a million.
Around 23% of respondents did not wish to disclose their total investments.

of 74
Chart 3.9: Total Investment

of 74
How often are Investments being made?
Table 3.10
Period Count Percentage
Once a month 73 26%
Once in 6 months 94 33%
Once in a year 106 38%
No Investment 8 3%
Around 38% of the respondents make an investment once a year. Another 33% of the
respondents invest once in six months. However, only 26% of the respondents invest once
in a month.
This question answers whether investment has been made as a habit or not.
Chart 3.10:

of 74
Risk Profile
Table 3.11: Risk Profile of the Respondents
Risk Profile Count Percentage
High Risk 24 12%
Medium Risk 107 53%
Low Risk 28 14%
No Risk 43 21%
53% of respondents have medium risk appetite. 12% of respondents have high-risk
appetite. Though most of our respondents are youngsters, however, 14% have a low-risk
appetite. 21% of respondents prefer traditional methods of investments and looks like
they do not want to venture into Equity markets or invest through Mutual Funds.
Chart 3.11: Risk Profile

of 74
Investment Losses
Table 3.12: Investment Losses encountered by respondents
Whether Investment Losses were suffered? Count Percentage
Yes 71 35.1%
No 131 64.9%
Investment Losses have been suffered by 35% of our respondents. Sometimes, when
investors encounter losses during their first tryst with investment, probably, they are taken
back and try to be risk-averse and reduce their risk-appetite.
Chapter 3.12

of 74
Since how long are the investments being made?
Table 3.13 has been provided below which provides the details from the responses
received by the respondents to our survey on how long are they investing.
Investments Since Count Percentage
Within 2 Years 27 13%
2 Years - 5 Years 30 15%
5 Years - 10 Years 96 48%
10 Years - 20 Years 33 16%
More than 20 Years 1 0%
Not Yet Invested 15 7%
Close to half of our respondents stated that they have been investing since five to ten years
period. This is a positive trend as people have been investing from quite some time. 16%
of our respondents have been investing for more than ten years now.
Chart 3.13: How long are the investments being made?

of 74
Advantages
Fourteenth question in our survey tried to unearth the answer to what are the advantages
that our respondents thought of on investing. Table 3.14 displays the results.
40% of our respondents felt that investing helps in securing their future. It is heartening to
note that ITES employees (though the majority of the employees are of young age) have
thought about the future. 22% of our respondents see it as a way to grow wealth.
Advantages Count Percentage
Secured Future 138 40%
To increase wealth 74 22%
To meet educational expenses 32 9%
Alternate sources of Income 16 5%
Contingencies 39 11%
Good habit 14 4%
Increases the knowledge of the market 4 1%
Tax Saving 19 6%
Others 8 2%
Government lures citizens to make investment by offering tax saving advantages; however,
only 6% of our respondents think tax saving as an advantage for investing.
Chart 3.14: Advantages of Investing – as perceived by respondents

of 74
Disadvantages
Fifteenth question tries to find out the perception of our respondents on whether they find
any disadvantages of investing. Table 3.15 provides the disadvantages of investing, as
perceived by respondents of our questionnaire.
Disadvantages Count Percentage
None 80 33%
Reduction in Liquidity 52 22%
Less expenditure 25 10%
Risk Attached 64 27%
Lesser than expected returns 19 8%
As above table provides the details, 33% of our respondents do not feel any disadvantages
of investing. However, 27% feel that there are risky investments which act as a deterrent
to investing, & another 22% find that their liquidity reduces when they invest.

of 74
Difficulties
Table 3.16 lists the difficulties faced by our respondents while investing.
Difficulties Count Percentage
None 82 29%
Lack of proper guidance 89 31%
Suitable instrument not available 21 7%
Limited earnings & Inflation 18 6%
Lump sum Investment not possible 38 13%
Not sure about optimum investment 9 3%
Not enough clarity 12 4%
Legal implications 3 1%
Unable to save 12 4%
This table clearly illustrates that lack of proper guidance is one of the important reasons
which shies away the potential investors from investing. Appropriate financial awareness
sessions are required to plug the gap between one’s understanding and the reality.
Chart 3.16: Difficulties faced while investing

of 74
Monthly Maintenance Expenses
Table 3.17 lists the percentage of salary being spent on monthly maintenance expenses.
Monthly Maintenance Expenses
Percentage Count Percentage
Below 25% 33 16%
25% - 35% 41 20%
35% - 50% 56 28%
50% - 75% 39 19%
More than 75% 33 16%
28% of respondents spent between 35% and 50% on monthly maintenance expenses. 35%
of respondents spend more than 50% of their salary on monthly maintenance expenses.
Chart 3.17: Monthly Maintenance Expenses as a percentage of Salary

of 74
CHAPTER 4: Summary of Findings, Suggestions, and Conclusion
Overall findings of the study are:
 62% of our respondents are aged within 30 years
 44% of our respondents earn more than half-a-million Indian Rupees per annum
 90% of the respondents have an insurance cover
 Most of the respondents are being provided with an insurance cover by the
organization they work
 37% of our respondents invest between 5% and 15% of their salary
 56% of our respondents have long-term investment horizon
 Insurance is the preferred investment with 24% followed by Fixed Deposit at 22%
 Equity preference revolves at 5% for our respondents
 10% of our respondents prefer Mutual Funds
 Around 50% of our respondents have taken a loan
 18% of our respondents have taken home loan
 61% of respondents have a total investment of within INR 500,000
 11% of respondents have a total investment of more than a million INR
 38% of respondents invest once in a year
 53% of respondents have medium-risk appetite
 35% of respondents have incurred investment losses
 64% of respondents have been investing at least since 5 years
 40% of respondents feel that biggest advantage of investing is that it provides
secured future
 33% believe that there are no disadvantages for investing
 27% of the respondents feel that the risk of investing is the biggest disadvantage
 31% of respondents feel that they do not have proper guidance which acts as a
biggest difficulty to invest
 36% of respondents spend more than 50% of their income in the maintenance
expenses while 28% of respondents spend between 35% and 50% of their salary on
monthly maintenance expenses

of 74
Suggestions
We feel that since the higher education policy is very good in the BPO industry, all the
employees should avail it. Instead of complaining that the salaries are lower in the ITES
industry compared to the IT industry, they should avail the courses of their choice. All the
companies give 50-100% concession in the course fees and the management gives full
support (like the employee is not engaged in work during the class hours, some companies
provide transport if the classes happen in the University Campus, leaves for preparation for
the exams etc.). They should look at the cost of these courses in the market and the
concession they are getting because of being an employee of such MNCs. Also most of the
companies give promotion and progression/ role change to the employees who go for
higher education through the company’s HEP/Executive MBA programs. Thus, we can
pursue the studies without hampering our earning capability. In short, we could refer it as
‘Learn while you Earn’.
Employees should look at buying a separate life insurance the moment they start earning.
They can look at term insurance where the premiums are low, but the returns are very high
in case of the unfortunate death of the employee. This gives a huge security to the family,
especially if s/he is the only bread earner.
Employees should look at health insurance for sure. Many employees shared their
unfortunate experience of losing their savings or selling their assets during any major
illness of self/ family. Many employees had not added their parents in the health insurance
policy and had to pay huge sums during hospitalization. Employees should not depend only
on the health insurance through office, but should take separate health insurance for the
entire family. And since the premiums are low at young age, employees should look at that
option. It saves tax under 80C/CC/CCC.
All the employees should save from their first pay check. They may look at the option of RD
or PPF and make small investments there. By the power of compounding, it will grow over
the years.

Investment pattern v25_jul2012

Investment pattern v25_jul2012

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (7)

Similar to Investment pattern v25_jul2012

Similar to Investment pattern v25_jul2012 (20)

Recently uploaded

Recently uploaded (20)

Investment pattern v25_jul2012