2. Page | 2
Sr.
No.
Index
Particulars
Pg.
NO.
1 Acknowledgement 3
2 Executive summary 3
3 6 benefits of investment 5
4 What are the different investment alternatives 6
5 Fixed deposit 7
6 Types of FDs Available 8
7 Advantages of FD 12
8 Limitation of FD 13
9 Who should invest in FD 13
10 Bonds 13
11 Who can issue bonds and How does bonds work 14
12 Characteristics of Bond 15
13 Two features of bond and Categories of bond 16
14 Varieties of bond 17
15 Gold 20
16 5 ways of investing in gold 21
17 Advantage of investing in gold 22
18 Disadvantage of investing in gold 23
19 Stocks 23
20 What are the type of stocks 24
21 Advantage of investing in stocks 25
22 Disadvantage of investing in stocks 26
23 Mutual funds 27
24 What is Net Asset Value 28
25 Mutual fund schemes 29
26 Advantage and disadvantage of investing in mutual fund 32
27 Public provident fund 33
28 Advantage and disadvantage of investing in PPF 34
29 Exchange trade funds 35
30 How ETFs work 36
31 Types of ETFs 37
32 Advantage of investing in ETFs 38
33 Disadvantage of investing in ETFs 39
34 National pension scheme 39
35 Who should invest in NPS and Types of NPS account 41
36 Advantage and disadvantage of investing in NPS 41
37 Real estate 42
38 Advantage and disadvantage of investing in real estate 44
39 Conclusion 45
3. Page | 3
Acknowledgement
I would like to express my special thanks of gratitude to my teacher prof.
oberoi who gave me the golden opportunity to do this wonderful project on
the topic Alternative investment avenues, which also helped me in doing a
lot of Research and I came to know about so many new things I am really
thankful to them.
Executive summary
“The poor and the middle class work for money. The rich have money
work for them.”
If you wanna be rich learn how to make money work for you this
assignment will teach you about that i.e. where to invest your money
because it presents different alternative investment avenues in front of
you.
You will get to know about fixed deposits, Bonds, different types of
bonds,
It will put light on different ways to invest in gold
You will get to learn about stocks and Mutual funds different types of
mutual funds, you will be aware of what is PPF till the end
You will learn about an Emerging investment avenue i.e. ETFs types
of it
You will get to know about real estate as an investment avenue
Atlast you acquire knowledge about NPS which will really help you
after your retirement
I have discussed advantage and disadvantage of all investment
avenues also.
Hope you will be ready to invest your money after reading this
assignment
Start reading and enjoy learning
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In the long run, it’s not just how much money
you make that will determine your future
prosperity. It’s how much of that money you
put to work by saving it and investing it.
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Every investor has an objective, a specific goal behind
investing.
• Safety, growth, and income are the primary objectives of an
investor.
• Liquidity and Tax Savings are the secondary objectives of an
investor.
6 Benefits of investment
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Now let’s see where we can invest our money
OR
What are the different investment alternatives?
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So you can see the there are so many option to
invest but before investing you should know
about It in detail you should know its concept its
return and risk part
Don’t worry let me take you to all the
alternatives one by one in detail
Fixed deposit
In simple words fixed
deposit, also known as
an FD, is an
investment
instrument offered by
banks, as well as non-
banking financial
companies (NBFC) to their customers to help them save money.
With an FD account, you can invest a sizeable amount of money
at a predetermined rate of interest for a fixed period.
The rate of interest provided on FDs is much higher than that of
a regular savings bank account. Once the tenure of the deposit
ends, investors can withdraw their investment. On the other
hand, they have a choice of reinvesting their money for another
term.
All scheduled commercial banks and some NBFCs and HFCs in
India offer fixed deposit accounts. If you are to invest in FDs
provided by an NBFC or HFC, then check the ratings of the
financial institution provided by agencies, such as CRISIL. This is
to make sure that your money is safe.
What you will get as a return when invested in
FD?
In return, you will get a fixed rate of interest throughout the
investment tenure.
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Interest Compound Frequency
Monthly, Quarterly, or Annually
Partial and Mid-term Withdrawal
Allowed with Penalty
Premature Closure
Allowed with Penalty
Interest Rate
1.85% p.a. – 6.95% p.a.
Minimum Deposit Amount
Rs.1,000
Investment Tenure
7 days to 10 years
Types of FDs Available
Fixed deposit accounts can be distinguished into several categories
based on the benefits offered by the account, the account holder
type, and the purpose for which the account is opened. Here, I have
listed down some types of FD accounts:
Regular FD Account
The regular FD account is for individuals who are aged less than 60
years. The interest rates for such an FD account will be lesser than
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the one offered for senior citizens. Any Indian resident individual can
open this account.
FD Account for Senior Citizens
This account is dedicated to senior citizens, i.e. individuals aged
above 60 years. Such account holders get a higher interest rate
than usual and can access the monthly interest payout option,
which can be thought of as a means for the monthly expenses
for senior citizens.
Tax-Saving FD Account
Many risk-averse individuals utilise the tax-saving FD accounts
with a minimum lock-in period of five years to save income tax.
Such deposits gain tax deduction under section 80C of the
Income Tax Act, 1961.
NRO FD Account
Non-Resident Ordinary FD account can be opened by Overseas
Citizen of India (OCI), Person of Indian Origin (PIO), and Non-
Resident Indian (NRI). Any income earned in INR can be
deposited only in NRO FD accounts. This account can be jointly
held with an Indian resident as long as this person falls in one
of the categories of relatives specified under Section 6 of the
Companies Act, 1956.
FCNR FD Account
Foreign Currency Non-Repatriable FD account can be opened
by NRIs and can deposit money earned overseas in India. The
currencies generally accepted are US Dollars, Pounds Sterling,
Euro, Japanese Yen, etc. The account allows you to retain your
money in the same currency while earning good returns.
FD Account With Monthly Payout
This FD scheme pays out the interest accumulated on a
monthly basis. That is the interest accrued will not be added
back to the principal, and the interest will not be compounded
in this case. You can choose to get the interest component sent
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to your savings account on a monthly basis and utilise the sum
for any expenses.
FD Account With Maturity Payout
In this case, the interest gets accrued in the FD account over
the deposit tenure, gets compounded, and you will receive the
principal + interest components upon maturity of the FD
account.
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What Does Lock-in Period Mean for FDs?
In the case of an FD account, the lock-in period is the same as the
maturity period or deposit tenure. This simply means that you
cannot withdraw the amount deposited within this duration. Even if
you do, it comes with a penalty.
When it comes to tax-saver FD schemes, you strictly cannot
withdraw the funds within five years from the date of account
opening. In the case of other FD schemes, premature withdrawal is
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still allowed with certain penalty terms defined at the time of
opening the account. The terms may differ from bank to bank.
It is advised that you oblige to the lock-in period and let the principal
accrue interest without disturbing it to gain the maximum benefit.
Advantages of FD
• Saving Habit: Opening an FD account teaches you an important
financial lesson—saving. Once you get the taste of saving and
appreciate the magic of interest in addition to your savings, you
will learn to save more and more going forward.
• Guaranteed Returns: Many investment instruments give out
varied returns based on the market fluctuations; even the
payout of capital investment may not be guaranteed. In
contrast, the FD account assures to return both principal
amount and an interest component at the end of the deposit
tenure as promised.
• Flexibility: You can choose a deposit tenure based on your
requirement and convenience. You can deposit the money for a
duration as short as 7 days or as long as 10 years
• Safety: Consider that the bank with which you have deposited
money defaults. Don’t worry! You will be eligible for a
maximum compensation of Rs 5 lakh from Deposit Insurance
and Credit Guarantee Corporation (DICGC). This is applicable
from 4th February 2020. This arrangement makes FDs a safe
investment option.
• Tax Benefit: You can get a tax deduction under Section 80C of
up to Rs.1.5 lakh when you make an investment on a tax-saver
FD scheme with a minimum lock-in period of five years.
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Limitations of FD
• Fixed Returns: Though the returns will not go south and a
particular return percentage is guaranteed, the concept hinders
the possibility of earning higher returns.
• Lock-in Period: FD accounts come with a specific lock-in period
that is chosen by the customers themselves. The investment
can be liquidated before maturity only at the cost of a penalty
on the interest rate promised, which is nothing but a loss.
Who Should Invest in Fixed Deposit?
Fixed deposit accounts are an excellent investment vehicle for those
investors who don’t want to bear any risk. If you wish to sustain the
money over the years and are not looking for growing wealth or if
you are looking for steady returns, you can go for FD accounts.
Many pensioners, who have a lump sum resulting from retirement,
invest the money in FD accounts such that the monthly interest
payout from the account can be used as spending cash.
You can also set aside a lump sum for the sake of your children or
minors so they can utilise the sum at a later date for higher
education. You can also use FD accounts if you are planning to build
emergency funds.
Bonds
A bond is a fixed-income instrument that represents a loan made by
an investor to a borrower (typically corporate or
governmental). A bond could be thought of as an
I.O.U. between the lender and borrower
that includes the details of the loan
and its payments. Bonds are used by
companies, municipalities, states, and
sovereign governments to finance projects and
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operations. Owners of bonds are debtholders, or creditors, of the
issuer.
Bond details include the end date when the principal of the loan is
due to be paid to the bond owner and usually include the terms for
variable or fixed interest payments made by the borrower.
Who can issue bonds?
Governments (at all levels) and corporations commonly use bonds in
order to borrow money. Governments need to fund roads, schools,
dams, or other infrastructure. The sudden expense of war may also
demand the need to raise funds.
Similarly, corporations will often borrow to grow their business, to
buy property and equipment, to undertake profitable projects, for
research and development, or to hire employees. The problem that
large organizations run into is that they typically need far more
money than the average bank can provide
How Do Bonds Work?
Bonds are a type of security sold by governments and corporations,
as a way of raising money from investors. From the seller’s
perspective, selling bonds is therefore a way of borrowing money.
From the buyer’s perspective, buying bonds is a form of investment
because it entitles the purchaser to guaranteed repayment of
principal as well as a stream of interest payments. Some types of
bonds also offer other benefits, such as the ability to convert the
bond into shares in the issuing company’s stock.
Most bonds can be sold by the initial bondholder to other investors
after they have been issued. In other words, a bond investor does
not have to hold a bond all the way through to its maturity date. It is
also common for bonds to be repurchased by the borrower if
interest rates decline, or if the borrower’s credit has improved, and it
can reissue new bonds at a lower cost.
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Where can we buy or sell issued bonds?
The government recently launched a platform—RBI Retail Direct Gilt
Account— that will allow retail investors to buy and sell government
securities on their own.
Characteristics of Bonds
• Face value: A bond’s face value refers to how much a bond will
be worth on its maturity date. In other words, it’s the value
that the bondholder will receive when their investment fully
matures (assuming that the issuer doesn’t call the bond or
default). Most bonds are issued in $1,000 denominations, so
typically the face value of a bond will be just that – $1,000. You
might also see bonds with face values of $100, $5,000 and
$10,000.
• The coupon rate: is the rate of interest the bond issuer will pay
on the face value of the bond, expressed as a percentage. For
example, a 5% coupon rate means that bondholders will
receive 5% x $1000 face value = $50 every year.
• Coupon dates: are the dates on which the bond issuer will
make interest payments. Payments can be made in any
interval, but the standard is semi-annual payments.
• The maturity date: is the date on which the bond will mature
and the bond issuer will pay the bondholder the face value of
the bond.
• The issue price: is the price at which the bond issuer originally
sells the bonds.
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Corporate
bonds
issued by
companies.
Municipal
bonds
are issued by
states and
municipalities.
Some
municipal
bonds offer
tax-free
coupon income
for investors.
Government
bonds
Government
bonds issued
by national
governments
may be
referred to as
sovereign debt.
Agency
bonds
issued by
government-
affiliated
organizations
Two features of a bond
• credit quality
If the issuer has a poor credit rating, the risk of default is
greater, and these bonds pay more interest.
• time to maturity
Bonds that have a very long maturity date also usually pay a
higher interest rate. This higher compensation is because the
bondholder is more exposed to interest rate and inflation risks
for an extended period.
Categories of Bonds
There are four primary categories of bonds sold in the markets.
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Varieties
of Bonds
Zero-
Coupon
Bonds
Convertible
Bonds
Callable
Bonds
Puttable
Bond
Varieties of Bonds
The bonds available for investors come in many different varieties.
They can be separated by the rate or type of interest or coupon
payment, by being recalled by the issuer, or because they have other
attributes.
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Zero-Coupon Bonds
Zero-coupon bonds do not pay coupon payments and instead are
issued at a discount to their par value that will generate a return
Convertible Bonds
Convertible bonds are debt instruments with an embedded option
that allows bondholders to convert their debt into stock (equity) at
some point, depending on certain conditions like the share price. For
example, imagine a company that needs to borrow ₹1 million to fund
a new project. They could borrow by issuing bonds with a 12%
coupon that matures in 10 years. However, if they knew that there
were some investors willing to buy bonds with an 8% coupon that
allowed them to convert the bond into stock if the stock’s price rose
above a certain value, they might prefer to issue those.
The investors who purchased a convertible bond may think this is a
great solution because they can profit from the upside in the stock if
the project is successful. They are taking more risk by accepting a
lower coupon payment, but the potential reward if the bonds are
converted could make that trade-off acceptable.
Callable Bonds
Callable bonds also have an embedded option but it is different than
what is found in a convertible bond. A callable bond is one that can
be “called” back by the company before it matures. Assume that a
company has borrowed $1 million by issuing bonds with a 10%
coupon that mature in 10 years. If interest rates decline (or the
company’s credit rating improves) in year 5 when the company could
borrow for 8%, they will call or buy the bonds back from the
bondholders for the principal amount and reissue new bonds at a
lower coupon rate.
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A callable bond is riskier for the bond buyer because the bond is
more likely to be called when it is rising in value.
Puttable Bond
A puttable bond allows the bondholders to put or sell the bond back
to the company before it has matured. This is valuable for investors
who are worried that a bond may fall in value, or if they think
interest rates will rise and they want to get their principal back
before the bond falls in value.
KEY TAKEAWAYS
• Bonds are units of corporate debt issued by companies and
securitized as tradeable assets.
• A bond is referred to as a fixed-income instrument since bonds
traditionally paid a fixed interest rate (coupon) to debtholders.
Variable or floating interest rates are also now quite common.
• Bond prices are inversely correlated with interest rates: when
rates go up, bond prices fall and vice-versa.
• Bonds have maturity dates at which point the principal amount
must be paid back in full or risk default.
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Gold
Everybody knows the meaning of gold and in your childhood your
parents have obviously invested in gold in some or other way it the
very old form of investing
Gold is one of the most popular precious metals for investment
today. It can be passed on from one generation to the other by way
of inheritance, bought for consumption purpose or as an investment
avenue.
Thus, we can attach following 3 values to Gold:
Emotional Value: Gold in the form of Inheritance / gift on special
occasions like marriage, birthdays, etc.
Consumption Value: For self-consumption or for future generations
for their consumption or gifts.
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Purchase of
physical gold
investment through
gold mutual funds
Investment through
Gold Exchange
Traded Funds
(ETFs)
Investment through
Derivative Markets
Electronic Gold (E-
Gold)
Investment Value: As a hedge against inflation & during economic
uncertainties as a medium of exchange.
5 ways
of investing
in gold
Purchase of physical gold
It’s the most conventional way of buying gold. It includes buying gold
from our age old family jeweler in the form of readymade jewelry,
made to order jewelry or coins, rings, and so on. Nowadays banks
too, sell gold coins, biscuits, bars.
Investment through Gold Mutual Funds
Investing in gold mutual funds is like investing in any mutual fund
actively managed by a fund manager through SIPs. In this, the funds
are invested in gold mines to reap the benefits.
Investment through Gold Exchange Traded Funds (ETFs)
Exchange Traded Funds or ETF is like trading shares on a stock
exchange but treated as mutual funds.
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In case of Gold ETFs, Gold is a security under consideration. One can
purchase units of gold in multiples of 1 unit. 1 Unit = 1 gram of gold.
(A few fund houses also trade ½ gram gold as one unit.) As one
invests in mutual funds by way of SIPs or lump sum payments, in the
same fashion investments in ETFs can also be done on a periodic
basis. The units of ETFs like share trading can be traded on a stock
exchange by opening a Demat A/c. The NAV of the gold ETF varies
according to the variations in the gold prices.
Gold ETFs are considered as debt mutual funds for tax purpose. The
gains from sale of units held for a period of less than 12 months are
treated as Short Term Capital Gains & taxed as per individual’s tax
slab (it can be as high as 30.9% if one falls under highest tax slab). If
units are sold after a year then the long term capital gain is taxed @
10.3% with indexation & 20.6% without indexation.
Investment through Derivative Markets
A gold future means gold bought at the price and quantity decided
today, at a future date. Advantage is one doesn’t have to pay the full
consideration now and the seller too need not part with the gold
today. Gold future can be good form of hedge in rising gold prices as
one need to pay the price today. However if the prices fall in future
as compared to today’s prices then it turns out to be a business of
loss. There are certain exchanges like MCX, NCDEX who deal in gold
futures.
Electronic Gold (E-Gold)
It is a new way of investing in gold, invented and implemented by
National Spot Exchange Ltd. (NSEL). Like ETFs, one can invest in E-
gold through demat a/c and purchase as small as 1 gm of gold.
Advantage of investing in Gold
• Liquidity
• Diversification
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• Holds its value over long period of time
• Most desired commodity
Disadvantage of investing in Gold
• Gold is not a passive investment (gets profit only when sold in
short not get income like interest dividend)
• Risky to store
• Price correction can lead to losses
Stocks
A stock is an investment. When you purchase a company's stock,
you're purchasing a small piece of that company, called a share.
Investors purchase stocks in companies they think will go up in value.
If that happens, the company's stock increases in value as well. The
stock can then be sold for a profit.
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A stock (also known as equity) is a security that represents the
ownership of a fraction of a corporation. This entitles the owner of
the stock to a proportion of the corporation's assets and profits
equal to how much stock they own. Units of stock are called
"shares."
Stocks are bought and sold predominantly on stock exchanges
Now a days people are so interested in doing this investment many
people has entered in stock market in the time of COVID pandemic
because all the business were closed people had nothing to do so
they started earning money through this also after release of the
scam 1992 series people got crazy about stock market and all wanted
to know how stock market works
What Are the Types of Stock?
Broadly speaking, there are two main types of stocks, common and
preferred.
• Common Stock – Stock issued in majority is known as Common
Stock of the company. Common stock is divided into smaller
segments representing the ownership of the shareholders in a
company and the shareholders have the right to receive the
dividends from the profits of the company in portion of their
holdings. If we talk about the voting rights the investor gets one
25. Page | 25
vote per share to vote for the board of directors, who is
capable is taking the major decisions of the company.
• Preferred Stock - The purchasers of the preferred stock are also
the stockholder of the company, which represents such
ownership in a company that does not have the same voting
rights as the common stockholders. The preferred stockholders
get the fixed dividend on their entire investment. Feature of
fixed dividend to preferred stockholders is different from
common stocks because common stockholders get variable
dividends according to the profits earned by the company.
Another advantage is that in case of liquidation of the company
preferred shareholders are paid off before the common
shareholder.
How Do You Buy a Stock?
Most often, stocks are bought and sold on stock exchanges, such as
National stock exchange (NSE) and Bombay stock exchange (BSE)
After a company goes public through an initial public offering (IPO),
its stock becomes available for investors to buy and sell on an
exchange. Typically, investors will use a brokerage account to
purchase stock on the exchange, which will list the purchasing price
(the bid) or the selling price (the offer). The price of the stock is
influenced by supply and demand factors in the market, among other
variables.
Advantages of investing in stocks
Takes advantage of a growing economy
As the economy grows, so do corporate earnings. That's because
economic growth creates jobs, which creates income, which creates
sales.
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Best way to stay ahead of inflation
Historically, stocks have averaged an annualized return of 10%.
Easy to buy and sell (liquidity)
The stock market makes it easy to buy and sell shares of companies.
You can purchase them through a broker and some banks also act as
a broker e.g.:- angle broking, upstocks, zerodha etc.
Make money in two ways
Most investors intend to buy low then sell high. They invest in fast-
growing companies that appreciate in value. They purchase stocks of
companies that pay dividends. Those companies grow at a moderate
rate.
Disadvantages of investing in stocks
Risk
You could lose your entire investment. If a company does poorly,
investors will sell, sending the stock price plummeting. When you
sell, you will lose your initial investment. If you can't afford to lose
your initial investment, then you should buy bonds.
Stockholders paid last
Preferred stockholders and bondholders or creditors get paid first if a
company goes broke. Equity shareholders get paid last
Time consuming
If you are buying stocks on your own, you must research each
company to determine how profitable you think it will be before you
buy its stock. You must learn how to read financial statements and
annual reports and follow your company's developments in the
news. You also have to monitor the stock market itself
Emotional roller coaster
27. Page | 27
Stock prices rise and fall second by second. Individuals tend to buy
high out of greed, and sell low out of fear. The best thing to do is not
constantly look at the price fluctuations of stocks, and just check in
on a regular basis.
Professional competition
Institutional investors and professional traders have more time and
knowledge to invest. They also have sophisticated trading tools,
financial models, and computer systems at their disposal. Find out
how to gain an advantage as an individual investor.
Key Takeaways
• Investing in the stock market can offer several benefits,
including the potential to earn dividends or an average
annualized return of 10%.
• The stock market can be volatile, so returns are never
guaranteed.
• You can decrease your investment risk by diversifying your
portfolio based on your financial goals.
Mutual Funds
28. Page | 28
In simple words a mutual fund is a company that brings together
money from many people and invests it in stocks, bonds or other
assets. The combined holdings of stocks, bonds or other assets the
fund owns are known as its portfolio.
Mutual funds are operated by professional money managers, who
allocate the fund's assets and attempt to produce capital gains or
income for the fund's investors.
Mutual funds give small or individual investors access to
professionally managed portfolios of equities, bonds, and other
securities. Each shareholder, therefore, participates proportionally in
the gains or losses of the fund.
Mutual fund is better option for common man because a typical
individual is unlikely to have the knowledge, skills, inclination and
time to keep track of events, understand their implications and act
speedily. An individual also finds it difficult to keep track of
ownership of his assets, investments, brokerage dues and bank
transactions etc.
A draft offer document is to be prepared at the time of launching the
fund. Typically, it pre specifies the investment objectives of the fund,
the risk associated, the costs involved in the process and the broad
rules for entry into and exit from the fund
What is Net Asset Value (NAV) of a scheme?
The performance of a particular scheme of a mutual fund is denoted
by Net Asset Value (NAV).Mutual funds invest the money collected
from investors in securities markets. In simple words, NAV is the
market value of the securities held by the scheme. Since market
value of securities changes every day, NAV of a scheme also varies on
day to day basis. The NAV per unit is the market value of securities of
a scheme divided by the total number of units of the scheme on any
29. Page | 29
Mutual
fund
schemes
Open-ended
Fund/Scheme
Close-ended
Fund/Scheme
Growth/Equity
Oriented Scheme
income/Debt
Oriented Scheme
Balanced/Hybrid
Scheme
Money Market or
Liquid Schemes
Gilt Funds
Index Funds
particular date. For example, if the market value of securities of a
mutual fund scheme is INR 200 lakh and the mutual fund has issued
10 lakh units of INR 10 each to the investors, then the NAV per unit
of the fund is INR 20 (i.e.200 lakh/10 lakh). NAV is required to be
disclosed by the mutual funds on a daily basis. The NAV per unit of all
mutual fund schemes have to be updated on AMFI‟s website
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Open-ended Fund/Scheme
An open-ended fund or scheme is one that is available for
subscription and repurchase on a continuous basis. These schemes
do not have a fixed maturity period. Investors can conveniently buy
and sell units at Net Asset Value (NAV) per unit which is declared on
a daily basis. The key feature of open-end schemes is liquidity.
Close-ended Fund/Scheme
A close-ended fund or scheme has a stipulated maturity period e.g.
3-5 years. The fund is open for subscription only during a specified
period at the time of launch of the scheme. In order to provide an
exit route to the investors, some close-ended funds give an option of
selling back the units to the mutual fund through periodic repurchase
at NAV related prices.
Growth/Equity Oriented Scheme
The aim of growth funds is to provide capital appreciation over the
medium to long- term. Such schemes normally invest a major part of
their corpus in equities. Such funds have comparatively high risks.
These schemes provide different options to the investors like
dividend option, growth, etc. and the investors may choose an
option depending on their preferences.
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Income/Debt Oriented Scheme
The aim of income funds is to provide regular and steady income to
investors. Such schemes generally invest in fixed income securities
such as bonds, corporate debentures, Government securities and
money market instruments. Such funds are less risky compared to
equity schemes. However, opportunities of capital appreciation are
also limited in such funds.
Balanced/Hybrid Scheme
The aim of balanced schemes is to provide both growth and regular
income as such schemes invest both in equities and fixed income
securities in the proportion indicated in their offer documents. These
are appropriate for investors looking for moderate growth. They
generally invest 40-60% in equity and debt instruments.
Money Market or Liquid Schemes
These schemes are also income schemes and their aim is to provide
easy liquidity, preservation of capital and moderate income. These
schemes invest exclusively in short-term instruments such as
treasury bills, certificates of deposit, commercial paper and inter-
bank call money, government securities, etc. Returns on these
schemes fluctuate much less compared with other funds.
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Gilt Funds
These funds invest exclusively in government securities. Government
securities have no default risk. NAVs of these schemes also fluctuate
due to change in interest rates and other economic factors as is the
case with income or debt oriented schemes.
Index Funds
Index Funds replicate the portfolio of a particular index such as the
BSE Sensitive index (Sensex), NSE 50 index (Nifty), etc. These
schemes invest in the securities in the same weightage comprising of
an index. NAVs of such schemes would rise or fall in accordance with
the rise or fall in the index
33. Page | 33
Public Provident fund (PPF)
Public Provident Fund (PPF) has always been lucrative investment
avenue for those who wish to earn stable return without any risk.
However the interest rate is subject to revision every quarter, but
the returns are assured because investment in PPF is not market
linked. The current rate of interest is 7.1%
Salaried employees have the benefits of provident fund which are
statutorily maintained by their employers. To extend the benefits of
PPF to people other than salaried employees, Public Provident Fund,
1969 was framed by the central government.
Who can open PPF Account and how much is the
contribution amount?
Individuals are allowed to open their accounts under PPF scheme.
NRI, HUF, AOP, BOI are prohibited to operate PPF account. In a
financial year, the minimum contribution to the PPF Account is Rs.
500 and maximum contribution can be made to the tune of Rs.
1,50,000. The number of instalments in a FY cannot exceed 12.
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Advantage
risk free
gaurenteed
retrns
multiple
mode of
deposit
loan facility
tax benefit
extension is
possible
Disadvantage
long tenure
lack of
liquidity
inflation
overpowers
interest
closure of
account only
on maturity
no joint
account
However the number of instalments in a month can exceed more
than one. Contribution in excess of 1.5 lakh will not earn interest. If
the contribution in one FY is below Rs, 500, the account will become
dormant and which can be made active again by paying Rs. 50.
Maturity period
The PPF account matures in 15 years. The account can be continued
for a further block of 5 years and can be continued for number of
blocks of 5 years. The account holder can make premature
withdrawal after 5 years in extreme circumstances like medical
treatment, higher education of children etc.
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Exchange traded fund
Let me explain you ETF’s in simple words with diagram
So, ETF is a combination of stock and mutual fund i.e. a basket of
securities that can be traded on stock exchange
ETF's
(diversified
fund that
trade like
stock)
Stock
(tradable
during the
day)
Mutual fund
(diversified)
36. Page | 36
In the simple terms, ETFs are funds that track indexes such as CNX
Nifty or BSE Sensex, etc. When you buy shares/units of an ETF, you
are buying shares/units of a portfolio that tracks the yield and return
of its native index. The main difference between ETFs and other
types of index funds is that ETFs don't try to outperform their
corresponding index, but simply replicate the performance of the
Index. They don't try to beat the market, they try to be the market.
The traded price of an ETF changes throughout the day like any other
stock, as it is bought and sold on the stock exchange. The trading
value of an ETF is based on the net asset value of the underlying
stocks that an ETF represents. ETFs typically have higher daily
liquidity and lower fees than mutual fund schemes, making them an
attractive alternative for individual investors.
How do Exchange Traded Funds (ETFs) Work?
They are generally traded in the stock market in the form of shares
produced via creation blocks. ETF funds are listed on all major stock
exchanges and can be bought and sold as per requirement during the
equity trading time.
Changes in the share price of an ETF depend on the costs of the
underlying assets present in the pool of resources. If the price of one
or more asset rises, the share price of the ETF rises proportionately,
and vice-versa.
The value of the dividend received by the share-holders of ETFs
depends upon the performance and asset management of the
concerned ETF Company
They can be actively or passively managed, as per company norms.
Actively managed ETFs are operated by a portfolio manager, after
carefully assessing the stock market conditions and undertaking a
calculated risk by investing in the companies with high potential.
Passively managed ETFs, on the other hand, follow the trends of
37. Page | 37
specific market indices, only investing in those companies listed on
the rising charts.
Types of ETFs
• Equity ETF – These represent companies investing in shares and
other forms of equity of various organisations.
E.g.: Nippon India ETF Nifty BeES
Nippon India ETF Bank BeES
Motilal Oswal Midcap 100
Motilal Oswal Nasdaq 100
• Gold ETF – This is a commodity exchange-traded fund primarily
involving physical gold assets. Purchasing shares of this
company allows you to become the owner of gold on paper,
without the burden of asset protection.
E.g.: HDFC Gold Exchange Traded Fund
UTI Gold Exchange Traded Fund
Nippon India ETF Gold BeES
• Debt ETF – Enterprises trading in fixed return securities such as
debentures and government bonds are often called Debt ETFs.
E.g.: Reliance ETF Long Term Gilt
LIC Nomura MF G-Sec Long Term ETF - Reg - Growth
• Currency ETF – Currency ETF funds mainly profit due to the
fluctuation of the exchange rates. They purchase the currency
of different countries based on calculated predictions about the
future performance of that currency. Currency ETFs follow not
only the stock exchange trends but also the political and
economic scenario of the respective countries.
E.g.: Market Vectors-Rupee/USD ETN
VelocityShares Short LIBOR ETN
ProShares Short Euro
Invesco DB US Dollar Index Bullish
38. Page | 38
Advantages of investing in ETF’s
Benefits over Investing in Companies: A Diversified Pool of
Securities – Purchasing shares of a company keeps you limited
to the performance of that company itself, subjecting you to a
higher degree of risk. On the other hand, investing in exchange
traded funds allow you to keep your finances spread over
equities of different companies – diluting your risk significantly.
Even if one asset underperforms in the pool of resources in an
ETF, it can be compensated by the exceptional growth of other
assets.
Benefits over Mutual Funds: One of the significant benefits of
investing in an ETF over mutual funds is the reduced expenses.
There are various charges involved in mutual funds, such as
entry and exit load, management fees, etc. This increases your
total cost incurred, and thereby the total expense ratio of
mutual funds. As ETFs are traded like shares in the stock
market, its expense ratio is considerably lower.
Tradable security: Any changes in the value of an ETF can be
observed instantly and can be bought and sold throughout the
business day. Thus, we can conclude that ETFs have much
higher liquidity than mutual funds. This enables you to have
flexibility in your choices of investing, allowing you to shift to
another security with ease in case a particular asset is not
generating adequate profits.
Passively managed: Investing in ETFs is generally less risky than
mutual funds as they are passively managed. They only invest
in the best-performing companies listed in a particular stock
exchange, while mutual funds thoroughly assess all the
businesses with a potential for growth. This subjects mutual
funds to a greater risk as newly formed small scale companies
have higher chances of incurring a loss.
39. Page | 39
Disadvantage of investing in ETF’s
The volatility of the stock market: ETF companies listed on a
stock exchange are subject to price fluctuations as per market
trends. They are not stable like government bonds. Earning a
profit or incurring a loss depends heavily on the stock market
conditions.
Diversification: Exchange traded funds have moderate
diversity. As most ETFs are passively managed, they generally
invest in best-performing companies listed on a particular stock
exchange. ETF organisations often overlook small scale
companies with huge potential.
National pension scheme
National Pension System (NPS) is a pension cum investment scheme
launched by Government of India to provide old age security to
Citizens of India. It brings an attractive long term saving avenue to
effectively plan your retirement through safe and regulated market-
based return.
40. Page | 40
The National Pension Scheme is a social security initiative by the
Central Government. This pension programme is open to employees
from the public, private and even the unorganised sectors except
those from the armed forces.
The scheme encourages people to invest in a pension account at
regular intervals during the course of their employment. After
retirement, the subscribers can take out a certain percentage of the
corpus. As an NPS account holder, you will receive the remaining
amount as a monthly pension post your retirement.
Earlier, the NPS scheme covered only the Central Government
employees. Now, however, the PFRDA has made it open to all Indian
citizens on a voluntary basis.
What will you get in return when invested in NPS?
NPS and NPS returns come under the Pension Fund Regulatory and
Development Authority (PFRDA). It is managed by NPS pension fund
managers who are responsible for NPS returns. NPS funds allocate
investments in 4 different asset classes: equity, corporate bonds,
government bonds, and alternative assets. Investors can choose NPS
pension fund managers to manage their investment.
The amount of National Pension System returns depends upon the
performance of the scheme you invest in. NPS does not guarantee a
fixed return. Instead, returns depend on the market performance of
the schemes you invest in. Therefore, the earlier you begin investing
41. Page | 41
advantages
Tax Benefits
Control on Asset
Allocation
Dependable source of
Pension Income
Low maintenance
expense
Disadvantages
Extensive Lock-in period
Compulsory Annuity
Purchase
in NPS, the higher your retirement corpus and pension amounts will
be.
Who should invest in the NPS?
The NPS is a good scheme for anyone who wants to plan for their
retirement early on and has a low-risk appetite. A regular pension
(income) in your retirement years will no doubt be a boon, especially
for those individuals who retire from private-sector jobs.
A systematic investment like this can make a massive difference to
your life post-retirement. In fact, Salaried people who want to make
the most of the 80C deductions can also consider this scheme.
Types of NPS account
42. Page | 42
Real estate
For the majority of our lives, we tend to see real estate as way to
create wealth, a house we can live in or pass on to our future
generations. However, looking at it from an investment perspective
opens up a lot of options for us. It can act as a source of passive
income which can potentially, help build our wealth.
When we think of Real Estate as an investment, there are 3 main
ways to go about it:
• Flipping - This means you buy undervalued properties and
resell them when they appreciate or by artificially appreciating
its value by enhancing the property (such properties are often
termed as "Fixer-Uppers")
• Renting - Buying less capital intensive properties that can be
put up on rent to build a steady source of income
• Investment Trusts - A relatively new, hassle free method
picking up pace in India that allows people to invest in real
estate while avoiding all the groundwork.
43. Page | 43
The graph here depicts housing price trends across the top 8
cities in India.
You may have understand flipping and renting but investment trust is
something new let’s look into it.
There are 2 kinds of investments trusts here:
A. Real Estate Investment Trust (REIT)
B. Infrastructure Investment Trust (InvIT)
• Both are similar in nature (work a lot like mutual funds) but
different in their actual investment outlook.
• REITs have been around for over 5 decades in the international
markets (Originating in the US). However, they have only
recently (2014) been given the nod by SEBI in India. The way
they work is that it invites investments from a large group of
investors which forms a pool of funds. This pool is then used to
acquire real estate assets that would further be put for
rent/leased out and the income thereby generated, is
distributed amongst the investors, much like the dividends we
may receive from mutual funds. While internationally, REIT
exist in the residential domain as well, they have been
restricted to commercial real estate in India for the time being.
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• InvITs work quite like REIT but the area of investments is more
industrial within the commercial domain. As the name
suggests, Infrastructure investment trusts invest in infra
projects such as pipelines, factories, roads/highway projects,
power projects and the like. These are more operational
investments wherein the income is generated more so from the
business generated in these projects, although indirectly. For
the most part, the other workings of InvITs are similar to REITs.
• In a nutshell, both of them offer us a chance to own a stake in
real estate properties and earn a fairly regular income while
avoiding the nitty-gritties of the business.
Advantages
• Easier to
Understand
• Hedge Against
Inflation
• Can Be Financed
and Leveraged
Disadvantages
• Higher
Transaction Costs
• Low Liquidity
• Requires
Management and
Maintenance
45. Page | 45
Conclusion
Investment decision are never easy but going through this whole
assignment you at least get to know about different investment alternatives
in which you can invest beat the inflation and enjoy fruits of you profit
From the above project we learned about how fixed deposits works, types of
FD accounts we also get to know about FD rates of many banks
We go through the bonds, types of the bond, how bonds work, what is
NAV, we learnt various types of bond
We obtained that investing in gold is not only through buying physical
gold we can also invest in gold through electronic gold, through mutual
fund, derivative market etc.
Then we dived into stocks, mutual fund, mutual funds schemes like open
ended scheme, close ended etc.
We got to know that PPF can be good investment if you want to safe your
money for long term and beat inflation
We learned about the emerging investment avenue ETFs how it works it is
bit technical but a nice investment option
We obtained that not only the people with govt. job can get pension but a
lay person like us also can get pension through NPS investment which will
benefit us after retirement
We get to know that In real estate we can not get profit by flipping method
but there are ways like real estate investment trust, INVITS
I have given advantages and disadvantages of all investment avenues you
can choose your investment according to you requirements
Keep investing and to get rich in future
46. Page | 46
This to certify that, Mr. Aum Rathod
of SYBFM (2021-22) has successfully
completed project
On
Alternative investment avenues
Under the guidance of prof. Oberoi
(Signature of subject professor)
