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  1. 1. A PROJECT REPORT ON“A STUDY ON SAVINGS AND INVESTMENT PATTERN OF SALARIED EMPLOYEES” SUBMITTED BY: DHWANI KISHOR SHAH (Roll No: F-66) UNDER THE GUIDANCE OF: Ms.Aakruti Shah The Maharaja Sayajirao University, Vadodara. SUBMITTED TO: K. R. Shah BBA Program Building The Maharaja Sayajirao University, Vadodara. SEMESTER VI (2011-12)
  2. 2. DECLARATION I,DHWANI KISHOR SHAH, the student of Bachelor of BusinessAdministration Studies – Semester VI (2011-12) hereby declare that I havecompleted this project on “A STUDY ON SAVINGS AND INVESTMENTPATTERN OF SALARIED EMPLOYEES” The information submitted is true & original to the best of myknowledge.Place: VadodaraDate: 10th April, 2012 DHWANI SHAH
  3. 3. CERTIFICATEThis is to certify that Ms.DHWANI SHAH, T.Y. B.B.A (Finance), Roll No: A-19 ofBachelor of Business Administration Studies – Semester VI (2011-12) hassuccessfully completed the project on “A STUDY ON SAVINGS ANDINVESTMENT PATTERN OF SALARIED EMPLOYEES”under theguidance of Ms.Aakruti Shah.Aakruti Shah Dr.Pragnesh Shah(Project Guidance) (Head of the Department)
  4. 4. ACKNOWLEDGEMENTBefore we get into thick of things, I would like to add a few words ofappreciation for the people who have been a part of this project right from itsinception. The writing of this project has been one of the significant academicchallenges I have faced and without the support, patience, and guidance of thepeople involved, this task would not have been completed. It is to them I owemy deepest gratitude.It gives me immense pleasure in presenting this project report on “A STUDYON SAVINGS AND INVESTMENT PATTERN OF SALARIEDEMPLOYEES”. It has been my privilege to have a team of project guide whoassisted me from the commencement of this project. The success of this projectis a result of sheer hard work, and determination put in by me with the help ofmy project guide. I hereby take this opportunity to add a special note of thanksfor AAKRUTI SHAH, who undertook to act as my mentor despite her manyother academic and professional commitments. Her wisdom, knowledge, andcommitment to the highest standards inspired and motivated me. Without herinsight, support, and energy, this project wouldn’t have kick-started and neitherwould have reached fruitfulness.I also feel heartiest sense of obligation to my library staff members & seniors,who helped me in collection of data & resource material & also in its processingas well as in drafting manuscript. The project is dedicated to all those people,who helped me while doing this project.
  5. 5. Table ContentSr. No. Particulars 1 Introduction 2 Objectives 3 Rationale 4 Limitations 5 Research Methodology 6 Concepts of savings and Investment 7 Characteristics of Investment 8 Need and Types of Investment 9 Industry Profile10 Data and Interpretation11 Summary and Conclusions12 Questionnaire attached
  6. 6. INTRODUCTION TO THE REPORT Savings form an important part of the economy of any nation. With thesavings invested in the various options available to the people, the money actsas he driver for growth of the company. Indian financial scene too presents aplethora of avenues to the investors. Though certainly not the best or thedeepest of markets in the world, it has reasonable options for an ordinary manto invest his savings. On needs to invest and earn return on their idle resources and generatea specified sum of money for a specific goal in life and make a provision for anuncertain future. One of the important reasons why one needs to invest wiselyis to meet the cost of inflation. Inflation is the rate at which the cost of livingincreases. The cost of living is simply what it cost to buy the goods and services youneed to live. Inflation causes money to lose value because it will not buy thesame amount of a good or service in the future as it does now or did in thepast. The sooner one starts investing the better. By investing early you allowyour investments more time to grow, whereby the concept of compoundingincreases your income, by accumulating the principal and the interest ordividend earned on it, year after year.The three golden rules for all investors are: Invest early Invest regularly Invest for long term and not for short term.
  7. 7. OBJECTIVE OF THE STUDY The purpose of the analysis is to determine the investment behaviour ofinvestors and investment preferences for the same. Investor’s perception willprovide a way to accurately measure how the investors think about theproducts and services provided by the company. Today’s trying economicconditions have forced difficult decisions for companies. Most are makingconservative decisions that reflect a survival mode in the business operations.During these difficult times, understanding what investors on an on-going basisis critical for survival. Executives need a third party understanding on whereinvestor’s loyalties stand. More than ever management needs on-goingfeedback from the investors, partners and employees in order to continue toinnovate and grow.“The main objective of the project is to find out the needs of the current andfuture investors.”For this analysis, customer perception and awareness level will be measured inimportant areas such as: To understand in depth about different investment avenues available in India. To find out how investors get information about the various financial instruments. The type of financial instruments, they would prefer to invest. The duration for which they would prefer to keep their money invested. What are the factors that they consider before investing? To give a recommendations to the investors that where they should invest. To know the risk tolerance level of the individual investor and suggest a suitable portfolio.
  8. 8. To develop a profile of sample Indian individual investor in terms of their demographics. And demographics based on occupation of the sample investor. To identify the objective of savings of an investor.NEED FOR THE STUDY Stock market has been subjected to speculations and inefficiencies,which are beached to the rationality of the investor. Traditional finance theoryis based on the two assumptions. Firstly, investors’ make rational decisions;and secondly investors are unbiased in their predictions about future returnsof the stock. However financial economist have now realised that the long heldassumptions of traditional finance theory are wrong and found that investorscan be irrational and make predictable errors about the return on investmenton their investments. This analysis on individual investors’ behaviour is an attempt to knowthe profile of the investor and also know the characteristics of the investors soas to know their preference with respect to the investments. The study alsotries to unravel the influence of demographic factors like age on risk tolerancelevel of the investor.
  9. 9. LIMITATIONS OF THE STUDY This analysis is based upon investors’ behaviour for investmentpreferences during normal time vis-à-vis recessionary period. This analysiswould be focusing on the information from the investors about theirknowledge, perception and behaviour on different financial products.The various limitations of the study are: The total number of financial instruments in the market is so large that it needs a lot of resources to analyse them all. There are various companies providing these financial instruments to the public. Handling and analysing such a varied and diversified data needs a lot of time and resources. As the analysis is based on primary as well as secondary data, possibility of unauthorized information cannot be avoided. Reluctance of the people to provide complete information about them can affect the validity of the responses. The lack of knowledge of customers about the financial instruments can be a major limitation. The information can be biased due to use of questionnaire.
  10. 10. RESEARCH METHODOLOGY SAMPLING TECHNIQUE:A rough draft would be prepared keeping in mind objective of the research. Apilot study will be undertaken in order to know the accuracy of thequestionnaire. Convenience sampling technique will be used for collecting thedata from different investors. The investors are selected by the conveniencesampling method. The selection of the population based on their availabilityand accessibility to the researcher is known as convenience sampling. It is thebest sampling method in surveying dealings with an exploratory purpose forgenerating ideas and hypothesis. SAMPLING UNIT:The respondents who will be asked to fill out the questionnaire are thesampling units. These comprise of salaried employees, professionals, otherregular investors. SAMPLING SIZE:The size would be restricted to only 100, which comprised of mainly peoplefrom different regions of Gujarat and Mumbai due to time constraints. SAMPLING AREA:The area of research is Gujarat and Mumbai. SOURCES OF INFORMATION
  11. 11. PRIMARY DATA: Information is collected by conducting a survey by distributing aquestionnaire to 100 people. These 100 people are of different age group ,different occupation, different income levels and different qualifications. Acopy of questionnaire is given in the last of the report. SECONDARY DATA:This data is collected by using the following means. Articles in financial newspapers (‘Economic Times ‘and’ Business Standard’). Investment magazines, business magazines, financial chronicles. Experts’ opinion published in various print media. Books written by various foreign and Indian authors on investment. Data available on internet through various websites.www.tax4india.comwww.economictimes.indiatimes.comwww.business-standard.comwww.indiamoney.comwww.moneymanagementideas.comwww.savingwala.com
  12. 12. CONCEPT OF SAVINGS ANDINVESTMENT HOW DO SAVINGS EMERGE?Savings are excess of income over expenditure for any economic unit. ThusS=Y-E where S is savings, Y is income and E is expenditure. Secondly excessfunds or surplus in profits or capital gains are also available for investment.Thus S=W2-W1 where W2 is wealth in period 2 and W1 is wealth in period 1and difference between them is capital gains or losses. WHY DO PEOPLE SAVE?Savings is abstaining from present consumption for a future use. Savings aresometimes autonomous coming from households a matter of habit. But bulk ofthe savings come for specific objectives like interest income, future needs,contingencies, precautionary purpose or growth in future wealth leading torise in standard of living, etc. IMPACT OF INFLATION:All investments lose in value due to inflation or rise in prices leading todepreciation of the rupee. When the rate of inflation is about 10%, the realvalue of money is lost by 10% every year. The investors have therefore toprotect themselves from these loses of real value of their assets by properinvestment planning and by securing returns, higher than the inflation rate.Some investments give only income like bank deposits, P.O.certificates,company deposits, etc. some assets show capital appreciation if they areshares in companies or bullion, land and building. Some are safe and liquid, likethe investments in government securities, bonds of PSU’s, etc. a fewinvestments like Indira Vikas Patre are easily transferable and marketable. Soalso the share and securities listed and traded on stock exchanges. But all the
  13. 13. above investment do not satisfy all the needs and objectives, referred to later,including securing a hedge against inflation. All objectives of income, capitalappreciation, safety, marketability and liquidity as also hedge against inflationcan be secured only by proper investment in corporate securities. INVESTMENT ACTIVITY:At the outset any study on investment activity should start with the questionof what is investment. It means many things to many persons. If one personhas advanced some money to another, it may be his loan which may beconsidered his investment for a return. If a person has purchased 1 kg of goldfor the purpose of price appreciation or a consumer durable like washingmachine for the flow of services, it is his investment. If he purchases aninsurance plan or a pension plan, it is an investment. Thus there are varioustypes of investment for various persons.For the individual, it is the exchange of the money or cash for a future claim onmoney or the purchase of security of a promise to pay at a later date alongwith regular income as in the case of a share, bond, debenture, etc. for thisissuer of security it is the use of money for fixed capital equipments, workingcapital or any other productive and unproductive activity. Sometimes, it is alsoa service like consultancy, construction, hotel or hospital or services in futureas the case of consumer durables. WHAT IS INVESTMENT ACTIVITY?Investment activity includes buying and selling or trading in the above claimson money and or promissory notes. An investment for one it may bedisinvestment of another as in the case of stock market trading or may be afresh investment in a new issue, in the new issue market, one can only buysecurities .All purchase of securities are thus investment although for the as a whole,some investments are offset by corresponding disinvestments. There are twoterms which are relevant for this context, namely, gross and net investment.Gross are total investments made from all sources by an economy. Netinvestments are those investment which are gross investments minus
  14. 14. disinvestment for an economic unit. Gross assets and investments minusdepreciation for the economy or a company or corporate sector orgovernment sector, is net investment, which is termed as capital formation. SAVINGS AND INVESTMENTS:Investors are savers but all savers are not investors, as investment is a scienceand an art. Savings are sometimes autonomous and sometimes induced b y theincentives like fiscal concessions or income or capital appreciation. Thenumber of investors is estimated about 50 million out of population of morethan one billion in India. Savers come from all classes except in the case of thepopulation who are poverty line. The growth of urbanization and literacy hasactivated the cult of investment. More recently, since the eighties theinvestment activity has become more popular with the change in thegovernment policies towards liberalisation and financial deregulation. Theprocess of liberalisation and privatization was accelerated by the governmentpolicy changes towards a market oriented economy, through economic andfinancial reforms started in July 1991.
  15. 15. CHARACTERISTIC OF INVESTMENTInvestment refers to invest money in financial physical assets andMarketable assets. Major investments feature such as risk, return, safety,liquidity, marketability Concealability, capital growth, purchasing power,stability and the benefits.• Risk• Return• Safety• Liquidity• Marketability• Concealability• Capital growth• Purchasing power stability• Stability of income• Tax benefits.RISKRisk refers to the loss of principal amount of an investment. It is one of themajor characteristics of an investment. The risk depends on the followingfactors:• The investment maturity period is longer; in this case, investor will takelarger risk.• Government or Semi Government bodies are issuing securities which haveless risk.• In the case of the debt instrument or fixed deposit, the risk of aboveinvestment is less due to their secured and fixed interest payable on them. Forinstance Debentures.
  16. 16. • In the case of ownership instrument like equity or preference shares, the riskis more due to their unsecured nature and variability of their return andownership character.• The risk of degree of variability of returns is more in the case of ownershipcapital compare to debt capital.• The tax provisions would influence the return of risk.RETURNReturn refers to expected rate of return from an investment• Return is an important characteristic of investment. Return is the majorfactor which influences the pattern of investment that is made by the investor.Investor always prefers to high rate of return for his investment.SAFETYSafety refers to the protection of investor principal amount and expected rateof return.Safety is also one of the essential and crucial elements of investment. Investorprefers safety about his capital. Capital is the certainty of return without loss ofmoney or it will take time to retain it. If investor prefers less risk securities, hechooses Government bonds. In the case, investor prefers high rate of returninvestor will choose private Securities and Safety of these securities is low.LIQUIDITYLiquidity refers to an investment ready to convert into cash position. In otherwords, it is available immediately in cash form. Liquidity means thatinvestment is easily realisable, saleable or marketable. When the liquidity ishigh, then the return may be low. For example, UTI units.An investor generally prefers liquidity for his investments, safety of fundsthrough a minimum risk and maximisation of return from an investment.MARKETABILITY
  17. 17. Marketability refers to buying and selling of Securities in market. Marketabilitymeans transferability or saleability of an asset. Securities are listed in a stockmarket which are more easily marketable than which are not listed. PublicLimited Companies shares are more easily transferable than those of privatelimited companies.CONCEALABILITYConcealability is another essential characteristic of the investment.Concealability means investment to be safe from social disorders, governmentconfiscations or unacceptable levels of taxation, property must be concealableand leave no record of income received from its use or sale. Gold and preciousstones have long been esteemed for these purposes, because they combinehigh value with small bulk and are readily transferable.CAPITAL GROWTHCapital Growth refers to appreciation of investment. Capital growth has todaybecome an important character of investment. It is recognising in connectionbetween corporation and industry growth and very large capital growth.Investors and their advisers are constantly seeking ‘growth stock’ in the rightindustry and bought at the right time.PURCHASING POWER STABILITYIt refers to the buying capacity of investment in market. Purchasing powerstability has become one of the import traits of investment. Investment alwaysinvolves the commitment of current funds with the objective of receivinggreater amounts of future funds.
  18. 18. STABILITY OF INCOMEIt refers to constant return from an investment . Another major characteristicfeature of the Investment is the stability of income. Stability of income mustlook for different path just as security of principal. Every investor alwaysconsiders stability of monetary income and stability of purchasing power ofincome.TAX BENEFITSA tax benefit is the last characteristic feature of the investment. Tax Benefitsrefer to plan an investment programme without regard to one’s status may becostly to the investor. There are actually two problems:• One concerned with the amount of income paid by the investment.• Another is the burden of income tax upon that income.
  19. 19. NEED AND IMPORTANCE OFINVESTMENTSAn investment is an important and useful factor in the context of present dayconditions. Some factors are important. They are as below:• Longer life expectancy or planning for retirement.• Increasing rates of taxation• High interest rates• High rate of inflation• Larger incomes• Availability of a complex number of investment outlets.6 InvestmentManagementLONGER LIFE EXPECTANCYInvestment decisions have become more significant as most people in Indiaretire between the ages of 56 to 60. So that, they are planned to save theirmoney. Saving by themselves do not increase wealth, saving must be investedin such a way that the principal and income will be adequate for a greaternumber of retirement years. Longer life expectancy is one reason for effectivesaving and further investment activity that help for investment decisions.INCREASING RATES OF TAXATIONWhen tax rate is increased, it will focus for generating saving by tax payer.When the tax payer invest their income into provident fund, pension fund, UnitTrust of India, Life Insurance, Unit Linked Insurance Plan, National SavingCertificates, Development Bonds, Post Office Cumulative Deposit Schemes etc.It affects the taxable income.
  20. 20. INTEREST RATESInterest rate is one of the most important aspects of a sound investment plan.The interest rate differs from one investment to another. There may bechanges between degree of risk and safe investments. They may also differ dueto different benefit schemes offered by the institutions.A high rate of interest may not be the only factor favouring the outlet forinvestment. Stability of interest is an important aspect of receiving a high rateof interest.INFLATIONInflation has become a continuous problem. It affects in terms of rising prices.Several problems are associated and coupled with a falling standard of living.Therefore, investor careful scrutiny of the inflation will make furtherinvestment process delayed. Investor ensures to check up safety of theprincipal amount, security of the investment. Both are crucial from the pointof view of the interest gained from the investments.INCOMEIncome is another important element of the investment. When governmentprovides jobs to the unemployed persons in the country, the ultimate result isensuring of income than saving the extra income. More incomes and moreavenues of investment have led to the ability and willingness of workingpeople to save and invest their funds.INVESTMENT CHANNELSThe growth and development of the country leading to greater economicprosperity has led to the introduction of vast areas of investment outlets.Investment channels means an investor is willing to invest in severalinstruments like corporate stock ,provident fund, life insurance , fixeddeposits in the corporate sector and unit trust schemes.
  21. 21. TYPES OF INVESTORS CAUTIOUS INVESTORSCautious Investors are very conservative; this type of investor has a need forfinancial security and will avoid high-risk ventures as well as listening toprofessional advice, preferring to conduct their own financial affairs. Theydon’t like to lose even small amounts of money and never rush intoinvestments, always giving financial opportunities a great deal of thought. EMOTIONAL INVESTORSEmotional Investors are easily attracted to fashionable investments or ‘hot’tips, these investors act with their heart and not their head. A whim or a gutfeeling leads their decisions, and they have great difficulty disengaging frompoor investments or cutting losses. They have an unreasonable belief thatthings will come right in the end and often put their trust in luck or‘providence’ to safeguard their financial assets. TECHNICAL INVESTORSTechnical Investors are hard facts - numbers - lead this type of investor toactive trading based on price movements. They are screen-watchers,sometimes obsessional, but their diligence can be rewarded if they spottrends. They may also have a tendency to ‘need’ and buy the latest technologyas they are always looking for some edge. BUSY INVESTORSBusy Investors need to be involved with the markets, it gives them a buzzwhen they check the latest price movements, which may be several times aday. They have to keep buying and selling - on rumours, on overheard gossip,from the mass of newspapers and magazines they collect. Any titbit ofinformation they can glean is imbued with significance and a cause to takefinancial action.
  22. 22. CASUAL INVESTORSCasual Investors are a laid-back attitude to investment, these individuals areoften hardworking and involved with work or family. They tend to believe thatonce an investment is made it will take care of itself, and that a good job or aprofession is the way to make real money. They easily forget that they owninvestment assets and rarely check on their financial affairs. And, though theymay leave the running of their investments to professional advisors, theyhaven’t been in contact with them for years. INFORMED INVESTORSInformed Investors use information from a variety of sources and keep anongoing watch on their investments, the markets and the economy. They listencarefully to financial opinions and expert assessments, and will only go againstmarket fashion, as a contrarian, after weighing up all the pros and cons. Theyare financially confident and have faith in their decisions, knowing thatknowledge and experience will always win out to give them long-term profits. PASSIVE INESTORSPassive Investors are characterised as individuals who have become wealthypassively - by inheriting, by a professional career or by risking the money ofothers rather than their own money. To these investors security is moreimportant than risk. In addition, certain classes of occupation are more likely tocontain passive investors. For example, non-surgical doctors, corporateexecutives, lawyers and accountants who work in companies. Reasons for thisare that these individuals are less likely to have high financial resources at anearly stage in their careers, having had to delay earning good salaries in orderto study or having to repay student loans. Once earning a decent wage, theyare then more careful with their money, having a greater need for security.Anyone, therefore, with reduced financial recourses is likely to be more riskconscious and hence, a passive investor. For these individuals it’s important tohang on to their money.Passive investors make good clients because they tend to trust their financialadvisor and are more likely to delegate the running of their financial affairs.
  23. 23. And because they are risk averse, they tend to like diversified portfolios ofinvestments in quality companies or investment products. However, they canbelieve that an investment is more risky than it is which may keep them out ofpotentially lucrative opportunities. Passive investors are also more likely toneed the approval of others and are unlikely to take a first step into unknowninvestment territory by being a contrarian. Consequently, they are more likelyto follow the investment herd when it comes to stock market investment andstick to following the trend. ACTIVE INVESTORSAccording to Barnwell, Active Investors are those who have achievedsignificant wealth, or earned well, during their own lifetime. They are morelikely to take risks in investing because they have previous experience of takingrisks in their previous wealth creation. These individuals have a high-risktolerance and less of a need for security. They also need to feel in control oftheir own abilities. Once they feel they are losing control of an investmentsituation, their risk tolerance reduces. By being actively involved and in control,these investors feel they are reducing risk. However, such involvement mayactually be detrimental as it is likely to be a source of irritation to theirinvestment advisor who cannot get on with the business of running theirclients affairs due to constant questioning and harassment. The classes ofoccupation that are likely to be active investors include: small business ownerswho have developed their own businesses rather than inherited, medicalsurgeons, independent professionals, such as lawyers or accountants, whowork for themselves rather than a large firm,entrepreneurs, and self-employedconsultants. Active investors are more likely to get personally involved with therunning of their financial affairs, and may believe they know more than theiradvisor does. They are less likely to delegate the maintenance of those parts oftheir investment portfolio in which they believe they have experience or havehad personal success. However, these individuals are more likely to becontrarian in their stock picking habits and have less need to be completelydiversified. Age tends to soften their need to be constantly in control, so thatolder clients may be more malleable and open to their advisors suggestions.
  24. 24. INDUSTRY PROFILEIndian financial industry is considered as one of the strongest financial sectorsamong the world markets. M Concealability means investment to be safe fromsocial disorders, government confiscations or unacceptable levels of taxation,property must be concealable and leave no record of income received from itsuse or sale. Gold and precious stones have long been esteemed for thesepurposes, because they combine high value with small bulk and are readilytransferable. any industry experts may give various reasons for such Indianfinancial industry reputation, but there is only one answer which no one candeny, is the effective control and governance of the country’s suprememonetary authority the “RESERVE BANK OF INDIA”Financial sector in India has experienced a better environment to grow withthe presence of higher competition. The financial system in India is regulatedby independent regulators in the field of banking, insurance, mortgage andcapital market. Government of India plays a significant role in controlling thefinancial market in India.Ministry of finance, government of India controls the financial sector in India.Every year the finance ministry presence the annual budget on the 28thFebruary. The reserve bank of India is an apex institution in controlling bankingsystem in the country. Its monetary policy acts as a major weapon in India’sfinancial market.Various governing bodies in financial sectors:1. RBI- It is the supreme authority and regulatory body for all the monetarytransactions in India. RBI is the regulatory body for various Banking and Non-Banking financial institutions in India.2. SEBI- Securities and exchange board of India is one of the regulatoryauthorities for India’s capital market.3. IRDA- Insurance regulatory and development authority in India regulates allthe insurance companies in India
  25. 25. 4. AMFI- Association of mutual funds in India regulates all the mutual fundscompanies in India.5. FIPB- foreign investment promotion board regulates all the foreign directinvestments made in India.Investments are normally categorized using the risk involved in it, risk isdependent on various factors like the past performance, its governing body,involvement of the government etc., in this scenario Indian investments areclassified into 3 categories based on risk . they are: Low risk/ no risk investments. Medium risk investments. High risk investments.Apart from these are traditional investment avenues and emerging investmentavenues.Various investment avenues available in indiaSafe /low risk avenues: Savings account Bank fixed deposits Public provident fund. National saving certificate Post office savings Government securitiesModerate risk avenues: Mutual funds Life insurance Debentures Bonds.High risk avenues: Equity share market.
  26. 26. Commodity market FOREX market.Traditional avenues: Real estate Gold/silver Chit fundsEmerging avenues: Virtual real estate Hedge funds/private equity investments Art and passionSavings AccountAs the name denotes, this account is perfect for parking your temporarysavings. These accounts are one of the most popular deposits for individualaccounts. These accounts provide cheque facility and a lot of flexibility fordeposits and withdrawal of funds from the account. Most of the banks haverules for the maximum number of withdrawals in a period and the maximumamount of withdrawal, but no bank enforces these. However, banks haveevery right to enforce such boundaries if it is felt that the account is beingmisused as current account. At present the interest is regulated by RBI.Presently Indian banks are offering 3.5% p.a. interest rate on such deposits.This account gives the customer a nominal rate of interest and he canwithdraw money as and when the needs arise. The position of account isdepicted in a small book known as pass book. Such accounts should be treatedas a temporary parking area because the rate of interest is much less thanfixed deposit. As soon as once savings accumulate to an amount which he canspare for a certain period of time, shift this money to fixed deposit. The returnson the money kept in savings bank account will be less but the freedom towithdraw is the highest.
  27. 27. Fixed depositThe term fixed in fixed deposit denotes the period of maturity or tenor. Fixeddeposit, therefore, pre plans a length of time for which a depositor decides tokeep the money with the bank and the rate of interest payable to thedepositor is decided by the tenure. Rate of interest differs from bank to bank.Normally, the rate is highest for 3-5 years. This, however, does not mean thatthe depositor loses all his rights over the money for the duration decided ofthe tenor. Deposits can be withdrawn before the period is over. However, theamount of interest is payable to the depositor, in such cases goes down.Every bank offers fixed deposit schemes with a wide range of tenors for theperiod of 7 days to 10 years. Therefore, the depositors are supposed tocontinue such fixed deposits for the duration of time for which the depositordecided to keep the money with the bank. However, in case of need, thedepositor can ask for closing the fixed deposit by paying a penalty.Public provident fund (PPF)It is a 30 year old constitutional plan of the Central Government happeningwith the objective of providing old age profits security to the unorganiseddivisions workers and self employed persons. Currently, there are almost 30lakh PPF account holders in India across banks and post offices.Eligibility:Any invidual salaried or no salaried open an PPF account. He may also pledgeon behalf of a minor, HUF, AOP, BOI. Even NRIs can open PPF account. APerson can contain only 1 PPF account. Also two adults cannot open a PPFaccount.Subscription:The yearly contribution to PPF account ranges from a least of rs.500 to amaximum of Rs. 70000 payable in multiple of Rs.5 either in lump sum or inconvenient instalments, not exceeding 12 in a year.
  28. 28. Penalty in case of non-subscription:The account will happen to obsolete if the required minimum of rs.500 is notdeposited in any year. The amount before now deposited will continue to earninterest but with no facility of taking loan or making withdrawals. The accountcan be regularised by depositing for each year of default, arrears of rs.500along with penalty of rs.100.When to open:A PPF account can be opened at any branch of SBI or its subsidiaries or in fewnational banks or post offices. On opening of account a pass book will beissued wherein all amounts of deposits, withdrawals, loans and repaymenttogether with interest due shall be entered.Interest rate:Deposits in the account earn interest rate at the rate notify by the centralgovernment from time to time. Interest is designed on the lowest balanceamong the fifth day and last day of the calendar month and is attributed to theaccount on 31st march every year. So to drive the maximum, the depositsshould be made between 1st and 5th day of the month, as it also enables you toearn interest on your Savings Bank A/c for the previous month.Tenure:Even though PPF is P15 year scheme but the effectual period works out of 16years i.e. the year of opening the account and adding 15 years to it. The summade in the 16th financial year will not earn any interest but one can takeadvantage of the tax rebate.Withdrawal:The investor is allowed to make one removal every year beginning from theseventh financial year of an amount not more than 50% of the balance at theend of the fourth year or the financial year immediately preceding thewithdrawal, whichever is less. This facility of making partial withdrawalsprovide liquidity and the withdrawal amount can be used for any purpose.
  29. 29. National savings certificate (NSC)NSC is a fixed interest, long term instrument for investment. NSC’s are issuedby the department of Post, Government of India. Since they are backed by thegovernment of India, NSCs are a practically risk free avenue of investment.They can be bought from authorised post offices. NSCs have a 6 years ofmaturity. They offer a rate of 8% per annum. This interest is calculated every 6months, and is merged with the principal. That is, the interest is reinvested,and is paid along with the principal at the time of maturity. For every yearrs.100 invested , you receive rs.160.10 at maturity.Features of NSC Minimum investment rs.500 and no maximum limit. Rate of interest 8% compounded half yearly. Rs. 1000 grow to rs.1601 in six years. Two adults, individuals, and minor through guardian can purchase. Companies, trusts, societies and any other institutions not eligible to purchase. Non-resident Indian/HUF cannot purchase. No pre-mature encashment.Post office savingsThere are various investment schemes available in post offices, like KISANVIKAS PATRA, MONTHLY INCOME SCHEME and various others. All theseschemes are completely risk-free, and you do not need to have large sum ofmoney to start investing in these post office schemes. Some scheme offers tax-savings benefit and some gives tax free returns. So you need to find out somescheme as per your requirements.These are some of the safe and secure investments that you can opt for.Though the interest rates are not so high, but still you must invest some part ofyour money into any of these investment instruments. It is your hard-earnedmoney, so better play safe and invests some part in secure funds also.
  30. 30. Government securitiesGovernment securities are supreme securities which are issued by the RBI onbehalf of government of India in lieu of the Central Government’s marketborrowing program.The term government Securities includes: Central Government securities State government securities Treasury bills.Features Issued at face value No default risk as the securities carry sovereign guarantee Ample liquidity as the investor can sell the security in the secondary market Interest payment on a half yearly basis on face value No tax deducted at source Can be held in Demat form Redeemed at face value on maturity Maturity ranges from of 2-30 years Securities qualify as SLR investmentsBenefits of investing in government securities No tax deducted at source Additional income tax benefit u/s 80L of the income tax act for individuals Qualifies for SLR purpose Zero default risk being sovereign paper Highly liquid Transparency in transactions and simplified settlement procedures through CSGL/NSDL.Mutual funds
  31. 31. A mutual fund is a professionally-managed firm of collective investments thatpools money from many investors and invests it in stocks, bonds, short-termmoney market instruments, and/or other securities. Here the fund manager isalso known as portfolio manager, trades the fund’s underlying securities,realising capital gains or losses, and collects the dividend or interest income.The investment proceeds are then passed along to the individual investors. Thevalue of a share of the mutual fund, known as the net asset value per share(NAV), is calculated daily based on the total value of the fund divided by thenumber of shares currently issued and outstanding.Advantages: Diversification Professional management Regulatory oversight Liquidity Convenience Transparency Flexibility Choice of schemes Tax benefits Well regulated Drawbacks of mutual fundsDrawbacks: No guarantees Fees and commissions Taxes Management riskLife Insurance:Insurance can be an attractive option for investment. A lot of Insuranceproducts yield more compared to regular investment options, with the addedadvantages of providing incentives. No other investment schemes can offerfinancial protection from risks.
  32. 32. The premium you pay for an insurance policy is an investment against risk.Before comparing it with other schemes, one must remember that a part ofthe total amount invested in life insurance goes towards providing for the riskcover, while the rest is used for savings.Also life insurance provides you get maturity benefits on survival at the end ofthe term. i.e. if you take a life insurance policy for 20 years and survive theterm, the amount invested as premium in the policy will come back to you withadded returns. In case of death or disability within the tenure of the policy, thefamily/insured will receive the sum assured.Now, let us compare insurance as an investment options. If you invest Rs.10,000 in other investment options like PPF or Bonds, your money might givebetter returns but you cannot access your funds. One can withdraw 50 percent of the initial deposit only after 4 years. The same amount can give you aninsurance cover of up to approximately Rs 5-10 lakh (depending upon the plan,age health, etc) and this amount would be immediately available to thenominee of the policyholder on death.Thus insurance provides sound returns in addition to risk cover.DEBENTURESThese NCDs are investment instrument issued by companies or NBFCs to raisecapital. As the name suggests NCDs are non-convertible to shares. Some ofthese NCDs are secure, which means that they have an underlying asset thatgives value to the debenture. If there the company cannot repay, they can sellthis asset and pay the creditors. Then there are debentures that have nounderlying assets.Debentures work more or less like bonds. It is a debt instrument, which meansthe company receives money from investors as loan. It means that theinvestors are entitled to receive the interest on the loan given to thecompany. Coupon rates are the interest received from a debenture. They areissued for a period up to 10 to 20 years.
  33. 33. You can buy and sell these debentures from secondary market. It is traded likeshares. If the market interest rate is higher than the coupon rate of debenturesthen the value of debentures fall in value as people prefer to invest in bankdeposits rather than in debentures. On the other hand if the interest rate islower then people will opt for debentures with high interest rate thus raisingits value.Some of the companies and NBFCs which have come out with NCDs areShriram Transport Finance Corporation, Muthoot Finance, ManappuramFinance, IFCI, and L&T Finance.REAL ESTATEOne of the most consistently returning asset classes as an investment over thelong term; and the one that the majority of us can profit from is real estate.However, good management skills on your part are a prerequisite.Having made the bold and glorious decision to sack the boss and go it aloneyou are one of the few who have what it takes to succeed. You have anentrepreneurial spirit and a strong will and these are rare and valuableattributes that will guide you throughout your professional and personal life.Now that your business is up and running and youre profiting from yourefforts, its time to turn your attentions to investing the profits from yourhome based business wisely and for maximum gain.Understanding market cycles. Now, youre most likely aware that propertymarkets are cyclical; this is because there is a direct correlation between theunderlying price of real estate in relation to individual buying power.Simply explained: When property prices rise above what first time buyers canafford to pay the market slows down, stagnates and sometimes readjusts butas soon as purchasing power increases again, either with a drop in interestrates or an increase in GDP, the property prices begin rising again. And thereare even ways to make money from real estate during a market downturn!Investing in real estate for income: Depending on the nature of your homebased business your monthly income may be slightly erratic, some monthsbeing better than others! If you invest in property assets in a buy-to-let or evenjet-to-let capacity you can secure yourself a consistent monthly income whichmay afford you an added degree of financial security.
  34. 34. Buy-to-let is when you purchase property for rental purposes, this maybe anapartment you let to a corporate, it could be a house you let to studentsstudying in a nearby university; or even a family home you rent out long term.Jet-to-let is similar but it involves purchasing overseas property for short termweekly or fortnightly rental to tourists. This type of letting is usually verylucrative indeed during peak holiday periods but may mean you have aproperty that is empty for a few months out of season.Both types of property investment return you a regular income and at thesame time the physical real estate asset will grow in value over the long term;and if ever you wish to release the profits from your investment you can sell onthe property and take the gains you have accrued.Investing in real estate for profit: The alternative to building up a real estate(or property) portfolio for income generation purposes is purchasing propertyand selling it on relatively quickly to realize the gains the asset has accrued.You can do this in a number of ways; firstly you can purchase run downproperty in need of renovation, tidy up the property and turn it into a homebefore selling it on at a higher price and reaping the profits gained.Alternatively you could seek to beat the curve by buying into up and comingareas, waiting for prices to boom and then selling on for profit. This is quite arisky strategy for a first time investor as timing the market is hard!An alternative to this is looking overseas for the latest emerging propertymarkets worldwide and buying properties to renovate or properties off planand then flipping them on for maximum gains in the short term.Financing your investment: As a self-employed individual it can be tricky to geta mortgage unless you have audited accounts, bank references and otherdocuments required for the purpose. If you dont have all of these requisitedocuments there are other options available to you.A winning attitude: You have already proved you have what it takes tosucceed against the odds by establishing a profitable home based business,now apply the same steely determination to your real estate investments andyou will succeed in making the maximum gains. Start small, begin gently, testthe market and your understanding of it and slowly build up a profitable real
  35. 35. estate portfolio from the profits of your home based business for maximumfinancial gain.GOLDTHE KEY ADVANTAGES IN INVESTING IN GOLD1.Diversification Benefit. Overall portfolio risk can be potentially reduced byadding "Gold" to investor portfolio because "Gold" has a very low or negativecorrelation with other asset classes. Hence it offers a maximum benefit.2.. Inflation Hedge. It has been noticed that gold has consistently beaten theinflation rate and helps to preserve purchasing power over the past .Gold hasover many centuries , maintained its value against inflation.3. Low volatility asset. Gold is comparatively less volatile to other securitiesover a long period of time. It has been noticed that investment in gold hascontributed to stability in the overall portfolio.4. Protection against currency weakness. Gold helps to protect value ofmoney against currency weakness especially against US dollar. Since gold isdenominated internationally in US dollars, US interest rates have a greatimpact on prices.5. Hedge against event risk. Gold has always been tended to be the bestagainst event risk.DIFFERENT WAYS OF INVESTING IN GOLD
  36. 36. The various options /ways to invest in gold are as under. Table: 2 indicated thecomparative analysis of different options of investing in gold.1. Direct ownership. It is buying physical gold like coins, jewelry or gold barsfrom the bullion market or the jewelry shops at the market prices. There aremany security, safety and impurity concerns of holding gold physically.2. Gold Exchange Traded Fund. Gold ETFs are the passively managed mutualfund schemes that track the benchmark index and reflect the performance ofthat index. The return of these funds corresponds to the return of physicalgold.3. Gold Mutual Fund. These are the funds managed by the professional fundmanagers that invest in the stocks of companies that mine precious metals likegold. But here the risk is same as of equity, since ultimately it amounts tohaving equity exposure in a listed company.4. Gold Fund of Funds. These are the mutual Funds that typically invest in goldETFs. There are two main advantages of this being investor can opt forsystematic approach for investment and secondly investor need not to open orhold a demat or a trading account for this.5. Stocks of Gold Mining Companies. Directly buying the stocks of thecompanies that mine for gold. For this investor should have adequateknowledge ofsuch companies.6. Gold options and Futures. These are investment products which use gold asan underlying asset. This is mainly for more sophisticated, experienced andhigh risk appetite investors.PROS AND CONS OF INVESTING IN GOLDPROS OF INVESTING IN GOLD
  37. 37. 1. The basic pros of investing in gold are that it provides easy liquiditycompared to other investment options. Gold can be bought and sold throughbanks and jewelry outlets any time.2. Although gold prices have fallen in the past, the rarity of the metal andlimited supply ensures that it will never suffer from total devaluation, though itmay go through ups and downs. In times of recession, gold is invested inheavily, which invariably leads to a rise in valuation. This makes it one of thebest investment options to hedge against inflation, though better options likeTIPS (Treasury Inflation-Protected Securities) exist now.3. You can benefit from the price rise in gold that is expected to continue in thenear future.CONS OF INVESTING IN GOLD1. One of the cons of gold investing is the fact that its a speculative investmentand predicting its future value is difficult. The price is entirely dependent onmarket demand and supply, as well as investor expectations all over the world.2. As an investment, gold cannot provide you with any returns in the form ofdividends, which securities like stocks may provide. Storing gold involvesadditional costs, which the investor must bear. However, options like goldcertificates and exchange traded funds exist that do not require you tophysically store the gold.3.The most basic disadvantage of investing in gold lies in the fact that it freezesyour investment and cannot provide periodic returns, besides being subject toa high degree of speculation.EIGHT COMMON MYTHS ABOUT NOT TO INVEST IN GOLD· Gold is an emotional instrument.· Gold prices can be manipulated easily.· Gold has no cash flow.
  38. 38. · Gold can never become currency again.· Gold bugs just rely on historical performance of gold.· Commissions on gold are very high.· Physical gold has a wide risk of impurity.· Physical gold investment has safety and security measures.CONCLUSIONHigher demand for gold has been expected from emerging market economieslike India, China etc. as well as inflation related concerns due to high oil prices,support gold prices in the short to medium term. One needs to have at least 5to 10% allocation to gold as part of their long term asset allocation. Finally,gold is certainly a good investment to have as a small part of your as its valuehas been continuously rising for many months now. Strategy underlyinginvesting in gold should be very systematic in approach - one can invest a smallpercentage of savings in it, hold till the price appreciates substantially and thensell it for a considerable profit, before it starts falling in value, However, thiscourse of action is only recommended if you are ready to take the inherent riskof price fall. If you are a defensive investor, a period of rising prices is certainlynot the best time to buy. Overall it depends upon the end investor analysis anddegree of willingness to take risk in any investment avenue.Gold is considered the most preferred metal for hedging against inflation,deflation or currency devaluation.Chit fundsDifferent chit funds operate in different ways; and there are also manyfraudulent tactics practiced by many private firms. The basic necessity ofconducting a Chitty is a group of needy people called subscribers. Theforeman - the company or person conducting the chitty - brings these peopletogether and conducts the chitty. Foreman is also the person responsible for
  39. 39. collecting the money from subscribers, presiding the auctions and keepingrecords of subscribers. He is compensated a fixed amount (generally 5% ofgross chitty amount) monthly for his efforts; other than that the foreman doesnot have any specific privileges, he is just a subscriber of the chitty.The general pattern of the chitty can be readily noticed by a simple formula:Monthly Premium × Duration in Months = Gross AmountE.g.: 1000 * 50 = 50,000/-. Where 1000 is the maximum monthly contributionneeded from a subscriber, 50 is the duration of the chitty in months and50,000 is the maximum sum assured. The duration also equals the number ofsubscribers, as there must be (not more or less) one subscriber to receive theprice money every month.The chitty starts on an announced date, every subscriber come together forthe auction/lot. As per Kerala chit act, the minimum prize money of an auctionis limited to 70% of the gross sum assured that is 35,000 in the above example.When there are more than one person willing to take this minimum sum, lotare conducted and the Lucky subscriber get the prize money for the month. Ifthere is no person is willing to take the minimum sum, then a reverse auctionis conducted where subscribers open-bid for lower amounts; that is from50,000 >> 49,000 >> 48,000, and so on. The person bidding lowest sum get bidamount.In both the cases the auction discount, that is the difference between the grosssum and auction amount, is equally distributed among subscribers or isdeducted from their monthly premium. For example if the auction is settled ona sum of 40,000, then the auction discount of 10,000 (50,000 - 40,000) isdivided by 50 (the total number of subscribers) and every one gets a discountof 200. The same practice is repeated every month and every subscriber gets achance of receiving some money.Organised chit fundsIn North India common type of chit fund is where small slips with eachmembers name are written and gathered in a box. When all members gatherfor a monthly or weekly meeting then concern incharge in front of all memberswill pick up one slip from the box and who so evers name comes that personwill be entitled to get the collection of that day. Afterwards that persons name
  40. 40. slip is torn and thereafter he comes for meetings regularly and gives his kittysshare but his name wont be there in the slips of box as he has alreadycollected his share.Special purpose fundsSome chit funds may be conducted as a savings scheme for specific purpose.An example is the Deepavali sweets fund, which has a specific end date - abouta week before Deepavali. Neighbourhood ladies will get together to pool theirsavings each week. This fund will be used to prepare sweets in bulk just beforethe Deepavali festival, and the sweets will be distributed to all members.Preparation of Deepavali sweets may be a time consuming and costly activityfor individuals. Such a chit will reduce the cost, and relieve the members fromexcess work from an already tense festival season. Nowadays, such specialpurpose chits are conducted by jewellery shops, kitchenware shops, etc. topromote their products.Online Chit FundWith the advent of ecommerce in India, Chit funds have also started goingonline. Online chit funds conduct auctions online and subscribers can pay theirmonthly dues and receive prize amount online through online transactionsincluding electronic fund transfers. Each member will have an online accountthrough which they can manage their chit funds.Equity sharesEquity shares or ordinary shares are those shares which are not preferenceshares. Dividend on these shares is paid after the fixed rate of dividend hasbeen paid on preference shares. The rate of dividend on equity shares is notfixed and depends upon the profits available and the intention of the board. Incase of winding up of the available and the intention of the board. In case ofwinding up of the company, equity capital can be paid back only after everyother claim including the claim of preference shareholders has been settled.The most outstanding feature of equity capital is that its holders control theaffairs of the company and have an unlimited interest in the companys profitsand assets. They enjoy voting right on all matters relating to the business ofthe company. They may earn dividend at a higher rate and have the risk ofgetting nothing. the importance of issuing ordinary shares is that no
  41. 41. organisation for profit can exist without equity share capital. This is also knownas risk capital.Advantages of equity shares:Advantages of company: The advantages of issuing equity shares may besummarized as below:I. Long-term and Permanent Capital: It is a good source of long-term finance.A company is not required to pay-back the equity capital during its life-timeand so, it is a permanent source of capital.II. No Fixed Burden: Unlike preference shares, equity shares suppose no fixedburden on the companys resources, because the dividend on these shares aresubject to availability of profits and the intention of the board of directors.They may not get the dividend even when company has profits. Thus theyprovide a cushion of safety against unfavorable developmentIII. Credit worthiness: Issuance of equity share capital creates no change onthe assets of the company. A company can raise further finance on the securityof its fixed assets.IV. Risk Capital: Equity capital is said to be the risk capital. A company cantrade on equity in bad periods on the risk of equity capital.V. Dividend Policy: A company may follow an elastic and rational dividendpolicy and may create huge reserves for its developmental programmes.Advantages to Investors: Investors or equity shareholders may enjoy thefollowing advantages:I. More Income: Equity shareholders are the residual claimant of the profitsafter meeting all the fixed commitments. The company may add to the profitsby trading on equity. Thus equity capital may get dividend at high in boomperiod.
  42. 42. II. Right to Participate in the Control and Management: Equity shareholdershave voting rights and elect competent persons as directors to control andmanage the affairs of the company.III. Capital profits: The market value of equity shares fluctuates directly withthe profits of the company and their real value based on the net worth of theassets of the company. An appreciation in the net worth of the companysassets will increase the market value of equity shares. It brings capitalappreciation in their investments.IV. An Attraction of Persons having Limited Income: Equity shares are mostlyof lower denomination and persons of limited recourses can purchase theseshares.V. Other Advantages: It appeals most to the speculators. Their prices insecurity market are more fluctuating.Disadvantages of equity shares:Disadvantages to company: Equity shares have the following disadvantagesto the company:I. Dilution in control: Each sale of equity shares dilutes the voting power of theexisting equity shareholders and extends the voting or controlling power to thenew shareholders. Equity shares are transferable and may bring aboutcentralization of power in few hands. Certain groups of equity shareholdersmay manipulate control and management of company by controlling themajority holdings which may be detrimental to the interest of the company.II. Trading on equity not possible: If equity shares alone are issued, thecompany cannot trade on equity.III. Over-capitalization: Excessive issue of equity shares may result in over-capitalization. Dividend per share is low in that condition which adverselyaffects the psychology of the investors. It is difficult to cure.
  43. 43. IV. No flexibility in capital structure: Equity shares cannot be paid back duringthe lifetime of the company. This characteristic creates inflexibility in capitalstructure of the company.V. High cost: It costs more to finance with equity shares than with othersecurities as the selling costs and underwriting commission are paid at a higherrate on the issue of these shares.VI. Speculation: Equity shares of good companies are subject to hecticspeculation in the stock market. Their prices fluctuate frequently which are notin the interest of the company.Disadvantages to investors: Equity shares have the following disadvantagesto the investors:I. Uncertain and Irregular Income: The dividend on equity shares is subject toavailability of profits and intention of the Board of Directors and hence theincome is quite irregular and uncertain. They may get no dividend even threeare sufficient profits.II. Capital loss During Depression Period: During recession or depressionperiods, the profits of the company come down and consequently the rate ofdividend also comes down. Due to low rate of dividend and certain otherfactors the market value of equity shares goes down resulting in a capital lossto the investors.III. Loss on Liquidation: In case, the company goes into liquidation, equityshareholders are the worst suffers. They are paid in the last only if any surplusis available after every other claim including the claim of preferenceshareholders is settled. It is evident from the advantages and disadvantages ofequity share capital discussed above that the issue of equity share capital is amust for a company, yet it should not solely depend on it. In order to make itscapital structure flexible, it should raise funds from other sources also.
  44. 44. Commodity marketCommodities, a known avenue for investment, had always generatedeconomic interest, especially among investors. In recent years, commoditieshave emerged as an asset class on their own, and are currently perceived to bein the Peers of stocks and shares, bonds, other securities and real estate.On many occasions, commodities have outperformed other asset classes andare becoming distinctive in the investment basket of tactical investors. Theyare also part of the asset diversification strategy of investors.Indian Commodity market, having its roots dating back a century ago, got itsnew global face with the development of nationalized commodity exchangesand has now become the best place to park your investment money.With India being a franchiser of global commodity market, there is renewedinterest in derivatives trading. Burgeoning volumes on the nationwide futuresexchanges are testimony to the rising interest among hedgers and speculators.Indian investors are also availing benefits of such Bull Run. The organizedIndian Commodity Market is at its nascent stage and has a large potential toprovide enormous opportunities to the investors and other marketparticipants.Features:• A major portfolio diversifier tool• A hedge against inflation• Lower margins and Highly Leveraged returns• Growing variety of commodities: Electricity, Coal, etc.• Regulated with lesser intervention• Linked with International market scenario• Mutual Funds and Options on the anvil
  45. 45. • Arbitrage & Hedging Opportunity• Leads to price discovery• Improves cropping patterns• Integrated players and markets• A smart investment choiceForex Market:Investing in foreign currencies is a relatively new avenue of investing. Thereare considerably fewer people are aware of this market than there are peopleaware of several other avenues of investing. Trading foreign currency, alsoknown as forex, is the most lucrative investmentmarket that exists. There areseveral factors that make this true among which, successful forextraders earnrealistic profits of one hundred plus percent each month. Compared to someof the better known investment markets such as corporate stocks, this is anunheard of return oninvestment. Its very necessary to mention here that aperson who invests in forex must, without exception, make it a point to learnthe detailed, but simple strategies and information surrounding the market.This very fact is what makes the difference between successful forextradersand other traders..A few additional points, which create such powerful leverage for investorswithin the forexmarket are: The amount of capital required to begin investingin the market is only three hundred dollars. For the most part, anyother investment market is going to demand thousands of dollars of theinvestor in the beginning. Also, the market offers opportunities to profitregardless what the direction of the market may be; In most commonly knownmarkets investors sit and wait for the market to begin an up trend beforeentering a trade. Even then, investors, as a rule must sit and wait some moreto be able to exit the trade with a nice profit. Given that the forex marketproduces several up, down, and sideways trends in a single day, it can easily beseen that forex stands head and shoulders above other markets. Additionallythere are trading strategies, which are taught that provide for compoundedprofits; these are profits on top of profits. In addition, free demo accounts areavailable within the industry of forextrading, which facilitate the sharpening of
  46. 46. skills without the risk losing any capital. And the advantage regarding the timefactor in trading foreign currency is a very attractive point for any investor.Compared to one of the most sought after avenues of investing, which oftenrequires forty or more hours each week, namely in the real-estate market,the forex market requires a much smaller demand on the investorstime. Forex trading requires approximately ten to fifteen hours each week toearn a full time income. Its easy to see that the advantages and great leveragethat exist in the forex market make it among the most lucrative, timeliberating, and easy to enter by far.
  47. 47. DATA AND INTERPRETATIONPreferred investment avenues for Salaried PeopleInvestment Avenues Votes RankLife Insurance 16 1Gold 12 2Bank Fixed Deposits 11 3Mutual Funds 11 4Real Estate 11 5Post Office Savings 9 6PPF 8 7NSC 8 8Equity Shares 7 9Savings Account 7 10Total 100Since the investor has an option to invest in more than one investmentavenue, the votes are been considered in conclusion part. The avenue which isgiven maximum weightage by the investors is ranked first. First ten ranks aregiven to the first ten preferred investment avenues. First preference is given toLife Insurance, second to investing in gold, and Tenth preference is given tobank savings account.Finding relationship between age group and level of risk toleranceRisk tolerance of age group 20-30Parameter 20-30 age groupLevel of Risk No. of Investors PercentageLow risk 13 37%Medium risk 17 49%High risk 5 14%Total 35 100%
  48. 48. Risk tolerance of age group 30-40Parameter 30-40 age groupLevel of Risk No. of Investors PercentageLow risk 20 57%Medium risk 11 32%High risk 4 11%Total 35 100%Risk tolerance of age group 40 aboveParameter Above 40 age groupLevel of Risk No. of Investors PercentageLow risk 21 70%Medium risk 6 20%High risk 3 10%Total 30 100%From the above observations we can conclude that there is a strong inverse ornegative relationship between risk tolerance and age group.
  49. 49. SUMMARY AND CONCLUSIONSSummary This report is a reflection of the behavior of various behaviors of salariedemployees. Selection of a perfect investment avenue is a difficult task to anyinvestor. An effort is made to identify the tastes and preferences of a sampleof investors selected randomly out of a large population. Despite of manylimitations to the study I was successful in identifying some investmentpatterns, there is some commonness in these investors and many of themresponded positively to the study. This report concentrated in identifying the needs of current and futuresalaried employees, their preferences towards various investment avenues areidentified based on their occupation. Investors risk in selecting a particularavenue is dependent on the age of that investor.Conclusion This study confirms the earlier findings with regard to the relationshipbetween age and risk tolerance level of individual investors. The present studyhas important implications for investment managers as it has come out withcertain interesting facets of an individual investor. The individual investor stillprefers to invest in financial products which give risk free returns. Thisconfirms that Indian investors even if they are of high income, well educated,salaried, independent are conservative investors prefer to play safe. Theinvestment product designers can design the products which can cater to theinvestors who are low risk tolerant and use TV as a marketing media as theyseem to spend long time watching TVs
  50. 50. QuestionnaireQ1. Are you aware of the following investment avenues?Safe /low risk avenues: Moderate risk avenues: Savings account Mutual funds Bank fixed deposits Life insurance Public provident fund Debentures National saving certificate Bonds Post office savings Government securitiesHigh risk avenues: Traditional avenues: Equity share market Real estate Commodity market Gold/silver FOREX market Chit fundsEmerging avenues: Virtual real estate Hedge funds/private equity investments Art and passionQ2.What do you think are the best options for investing your money?(Choose from the above list) (Any 5)1. 4.2. 5.3.Q3. Mention the reasons for selecting these options.
  51. 51. Q4. In past you have invested in? Q5. In which sector you prefer to invest your money? Private Sector Government Sector Public Sector Foreign SectorQ6.What is the important factors guiding your investment decisions? Q7.What are your savings objectives? Children’s education Home purchase Retirement Marriage Health care othersQ8. What are your investment objectives? Income and Capital Preservation Long-term Growth Growth and Income Short-term Growth Others_________________________________________Q9. Do you have a formal budget for family expenditure? Yes No
  52. 52. Q10. Do you have a savings and investment target amount you aim for eachyear? Yes No Amount_________Q11. Do you invest in Share market? Yes No If yes: Imagine that stock market drops after you invest in it then whatwill you do? Withdraw your money wait to increase Invest more in itQ12. What percentage of your salary do you invest? 0-15% 15-30% 30-50%Q13. What is the time period you prefer to invest? Short-term medium-term Long-termQ14. What is your source of investment advice? Newspapers News channels Family or Friends Books Internets Magazines Advisors Financial plannersThank you for your precious time.