6. SHORT TERM INVESTMENT
1. Savings Bank Account
Use only for short-term (less than 30 days) surpluses
Often the first banking product people use, savings accounts offer low
interest (4%-5% p.a.), making them only marginally better than safe deposit
lockers.
2. Money Market Funds (also known as liquid funds)
Offer better returns than savings account without compromising liquidity
Money market funds are a specialized form of mutual funds that invest in
extremely short-term fixed income instruments. Unlike most mutual funds,
money market funds are primarily oriented towards protecting your capital
and then, aim to maximise returns
3. Bank Fixed Deposit (Bank FDs)
For investors with low risk appetite, best for 6-12 months investment period
Also referred to as term deposits, this product would be offered by all
banks. Minimum investment period for bank FDs is 30 days.
It is important to plan your investment time frame while investing in this
instrument because early withdrawals typically carry a penalty.
7. LONG TERM INVESTMENT
1. Post Office Savings Schemes (POSS)
Low risk and no TDS
POSS are popular because they typically yield a higher return than bank FDs. The monthly
income plan could suit you if you are a retired individual or have regular income needs.
Besides the low (Government) risk, the fact that there is no tax deducted at source (TDS) in a
POSS is amongst the key attractive features.
The Post Office offers various schemes that include National Savings Certificates (NSC), National
Savings Scheme(NSS), Kisan Vikas Patra, Monthly Income Scheme and Recurring Deposit
Scheme.
2. Public Provident Fund (PPF)
Best fixed-income investment for high tax payers
PPF is a very attractive fixed income investment option for small investors primarily because of
-
1. An 11% post-tax return - effective pre-tax rate of 15.7% assuming a 30% tax rate.
2. A tax-rebate - deduction of 20% of the amount invested from your tax liability for the year,
subject to a maximum Rs60,000 for a tax rebate.
3. Low risk - risk attached is Government risk .
3. Company Fixed Deposits (FDs)
Option to maximise returns within a fixed-income portfolio
FDs are instruments used by companies to borrow from small investors. Typically FDs are open
throughout the year. Invest in FDs only if you have surplus funds for more than 12 months.
Select your investment period carefully as most FDs are not encashable prior to their maturity.
Just as in any other instrument, risk is an embedded feature of FDs, more so because it is not
8. 4. Bonds and Debentures
Option for large investments or to avail of some capital gains tax rebates
Besides company FDs, bonds and debentures are the other fixed-income instruments issued by
companies. As a result of an illiquid secondary market and a lack-lustre primary market, investment in
these instruments is largely skewed towards issues from financial institutions.
While you might find some high-yielding options in the secondary market, if you do not want the
problems associated with bad deliveries and the transfer process or you want to invest a large sum of
money, the primary market is the better option.
5. Mutual Funds
Unless you rate high on our Investment IQ Test, use mutual funds as a vehicle to invest
Have you ever made an investment in partnership with someone else? Well, mutual funds work on
more or less the same principles. Investors pool together their money to buy stocks, bonds, or any
other investments.
Investing through mutual funds allows an investor to -
1. Avail the services of a professional money manager (who manages the mutual fund)
2. Access a diversified portfolio despite making a limited investment .
6. Life Insurance Policies
Don't buy life insurance solely as an investment
Life insurance premiums, depending upon the policy selected, include the costs of -
1) death-benefit coverage
2) built-in investment returns (average 8.0% to 9.5% post-tax)
3) significant overheads, including commissions.
This implies that if you buy insurance solely as an investment, you are incurring costs that you
9. 7. Equity Shares
Maximum returns over the long-term, invest funds you do not need for at least five years
There are two ways in which you can invest in equities-
1. through the secondary market (by buying shares that are listed on the stock exchanges)
2. through the primary market (by applying for shares that are offered to the public)
Over the long term, equity shares have offered the maximum return to investors. As an investment option, investing in
equity shares is also perceived to carry a high level of risk.
Learn more about building an equity portfolio in Investing in Equities
18. MARKET CAPITAL AS ON DATE : 13MAY 2015
Company CMP Volume Equity FV MKT CAP (Cr)
Tata Consultancy 2,519.95 77717 195.87 1 4,93,582.61
Reliance Inds. 884.8 437437 3,236.00 10 2,86,321.28
ONGC 311.75 345043 4,277.76 5 2,66,718.34
ITC Ltd. 327.4 338984 799.54 1 2,61,769.40
HDFC Bank 990.25 207099 501.3 2 2,48,206.16
Coal India Ltd. 368.25 318968 6,316.36 10 2,32,599.96
Infosys 1,955.95 1676667 574 5 2,24,543.06
SBI 274.15 1689584 746.57 1 2,04,672.17
Sun Pharma. 955.4 178983 207.12 1 1,97,882.45
HDFC 1,219.50 153538 314.94 2 1,92,034.67
ICICI Bank 317.45 1246948 1,158.51 2 1,83,884.50
Hindustan Unilever L 843.05 250918 216.35 1 1,82,393.87
Tata Motors Ltd. 519.55 444514 643.78 2 1,67,237.95
Bharti Airtel 382.5 893108 1,998.70 5 1,52,900.55
L & T 1,591.10 207872 185.77 2 1,47,789.32
Wipro Ltd 542.15 83079 493.7 2 1,33,829.73
Axis Bank Ltd. 559.1 1040790 474.1 2 1,32,534.66
HCL Technologies 937.45 93682 281.14 2 1,31,777.35
NTPC 138 560093 8,245.46 10 1,13,787.35
Maruti Suzuki India 3,601.05 42582 151.04 5 1,08,780.52
Kotak Mahindra Bank 1,339.70 230881 386.18 5 1,03,473.07
Indian Oil Corp 334.45 151005 2,427.95 10 81,202.79
Adani Enterprises Lt 720.55 812832 109.98 1 79,246.09
UltraTech Cement 2,792.90 91238 274.4 10 76,637.18
Lupin Ltd. 1,690.60 345214 89.84 2 75,941.75
Bharti Infratel Ltd. 394.8 320252 1,893.80 10 74,767.22
Power Grid Corpo 140.35 419105 5,231.59 10 73,425.37
Hind. Zinc 173.75 59332 845.06 2 73,414.59
DEFINITION of 'Market
Capitalization‘
The total dollar market value of all
of a company's outstanding shares.
Market capitalization is calculated
by multiplying a company's shares
outstanding by the current market
price of one share. The investment
community uses this figure to
determine a company's size, as
opposed to sales or total asset
figures.
Frequently referred to as "market
cap."
19. Asian Paints Ltd. 763 76502 95.92 1 73,186.96
Mahi. & Mahi 1,205.40 52241 295.4 5 71,215.03
Bosch Ltd. 22,546.05 3682 31.4 10 70,794.60
Adani Ports & Speci 340.85 180957 414.01 2 70,557.65
Vedanta 217.9 1028814 296.5 1 64,607.35
Nestle India 6,696.25 8290 96.42 10 64,565.24
Bajaj Auto Ltd. 2,126.00 28181 289.37 10 61,520.06
Idea Cellular Ltd. 168.2 203303 3,597.84 10 60,515.67
Dr. Reddy's Labs 3,492.90 29406 85.19 5 59,512.03
Bharat Heavy Ele 227.7 333352 489.52 2 55,731.85
Cipla 676.6 154708 160.58 2 54,324.21
Bharat Petroleum 739.4 74079 723.08 10 53,464.54
NMDC Ltd. 132.15 204566 396.47 1 52,393.51
United Spirits Ltd. 3,600.40 102130 145.33 10 52,324.61
Hero MotoCorp 2,502.10 63589 39.94 2 49,966.94
Eicher Motors 18,062.70 20236 27.11 10 48,967.98
GAIL (India) Ltd. 378.05 62777 1,268.48 10 47,954.89
Siemens Ltd. 1,298.55 30815 71.22 2 46,243.96
Dabur India 260.55 53686 175.65 1 45,765.61
MothersonSumiSystems 500.8 794983 88.19 1 44,165.55
IndusInd Bank 817.7 218791 529.45 10 43,293.13
Aurobindo Pharma 1,340.00 97298 29.15 1 39,061.00
Shree Cement 11,121.75 5614 34.84 10 38,748.18
Cairn India Ltd. 202.15 221954 1,874.85 10 37,900.09
Godrej Consumer Prod 1,086.00 5672 34.04 1 36,967.44
Ranbaxy Labs. 859.9 308222 212.24 5 36,501.72
Ambuja Cements Ltd. 233.2 88018 310 2 36,146.00
Bank of Baroda 162.45 1227423 443.56 2 36,028.16
YES Bank Ltd. 840.7 529964 417.74 10 35,119.40
Container Corpor 1,792.50 10465 194.97 10 34,948.37
Power Finance Co 264.6 199031 1,320.04 10 34,928.26
Tata Steel 359.55 873915 971.41 10 34,927.05
Cadila Healthcar 1,618.00 11121 102.37 5 33,126.93
Titan Company 367.3 97262 88.78 1 32,608.89
Grasim Inds. 3,516.80 41959 91.87 10 32,308.84
Sterlite Indus. 90.2 4166952 336.12 1 30,318.02
'Market Capitalization'
If a company has 35 million shares
outstanding, each with a market value of $100,
the company's market capitalization is $3.5
billion (35,000,000 x $100 per share).
Company size is a basic determinant of asset
allocation and risk-return parameters for
stocks and stock mutual funds. The term
should not be confused with a company's
"capitalization," which is a financial statement
term that refers to the sum of a company's
shareholders' equity plus long-term debt.
The stocks of large, medium and small
companies are referred to as large-cap, mid-
cap, and small-cap, respectively. Investment
professionals differ on their exact definitions,
but the current approximate categories of
market capitalization are:
Large Cap: $10 billion plus and include the
companies with the largest market
capitalization.
Mid Cap: $2 billion to $10 billion
Small Cap: Less than $2 billion