The document is a project report submitted by Dhwani Kishor Shah to The Maharaja Sayajirao University in Vadodara, Gujarat, India. The report examines the savings and investment patterns of salaried employees. It includes sections on the introduction, objectives, rationale, limitations, research methodology, concepts of savings and investment, characteristics of investment, need and types of investment, industry profile, data and interpretation, summary and conclusions, and an attached questionnaire. The overall aim is to analyze how salaried employees in India save and invest their money.

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. DECLARATION
I,DHWANI KISHOR SHAH, the student of Bachelor of Business
Administration Studies – Semester VI (2011-12) hereby declare that I have
completed this project on “A STUDY ON SAVINGS AND INVESTMENT
PATTERN OF SALARIED EMPLOYEES”
The information submitted is true & original to the best of my
knowledge.
Place: Vadodara
Date: 10th April, 2012 DHWANI SHAH

3. CERTIFICATE
This is to certify that Ms.DHWANI SHAH, T.Y. B.B.A (Finance), Roll No: A-19 of
Bachelor of Business Administration Studies – Semester VI (2011-12) has
successfully completed the project on “A STUDY ON SAVINGS AND
INVESTMENT PATTERN OF SALARIED EMPLOYEES”under the
guidance of Ms.Aakruti Shah.
Aakruti Shah Dr.Pragnesh Shah
(Project Guidance) (Head of the Department)

4. ACKNOWLEDGEMENT
Before we get into thick of things, I would like to add a few words of
appreciation for the people who have been a part of this project right from its
inception. The writing of this project has been one of the significant academic
challenges I have faced and without the support, patience, and guidance of the
people involved, this task would not have been completed. It is to them I owe
my deepest gratitude.
It gives me immense pleasure in presenting this project report on “A STUDY
ON SAVINGS AND INVESTMENT PATTERN OF SALARIED
EMPLOYEES”. It has been my privilege to have a team of project guide who
assisted me from the commencement of this project. The success of this project
is a result of sheer hard work, and determination put in by me with the help of
my project guide. I hereby take this opportunity to add a special note of thanks
for AAKRUTI SHAH, who undertook to act as my mentor despite her many
other academic and professional commitments. Her wisdom, knowledge, and
commitment to the highest standards inspired and motivated me. Without her
insight, support, and energy, this project wouldn’t have kick-started and neither
would 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 processing
as well as in drafting manuscript. The project is dedicated to all those people,
who helped me while doing this project.

6. Table Content
Sr. 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 Profile
10 Data and Interpretation
11 Summary and Conclusions
12 Questionnaire attached

7. INTRODUCTION TO THE REPORT
Savings form an important part of the economy of any nation. With the
savings invested in the various options available to the people, the money acts
as he driver for growth of the company. Indian financial scene too presents a
plethora of avenues to the investors. Though certainly not the best or the
deepest of markets in the world, it has reasonable options for an ordinary man
to invest his savings.
On needs to invest and earn return on their idle resources and generate
a specified sum of money for a specific goal in life and make a provision for an
uncertain future. One of the important reasons why one needs to invest wisely
is to meet the cost of inflation. Inflation is the rate at which the cost of living
increases.
The cost of living is simply what it cost to buy the goods and services you
need to live. Inflation causes money to lose value because it will not buy the
same amount of a good or service in the future as it does now or did in the
past. The sooner one starts investing the better. By investing early you allow
your investments more time to grow, whereby the concept of compounding
increases your income, by accumulating the principal and the interest or
dividend 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.

8. OBJECTIVE OF THE STUDY
The purpose of the analysis is to determine the investment behaviour of
investors and investment preferences for the same. Investor’s perception will
provide a way to accurately measure how the investors think about the
products and services provided by the company. Today’s trying economic
conditions have forced difficult decisions for companies. Most are making
conservative decisions that reflect a survival mode in the business operations.
During these difficult times, understanding what investors on an on-going basis
is critical for survival. Executives need a third party understanding on where
investor’s loyalties stand. More than ever management needs on-going
feedback from the investors, partners and employees in order to continue to
innovate and grow.
“The main objective of the project is to find out the needs of the current and
future investors.”
For this analysis, customer perception and awareness level will be measured in
important 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.

9. 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 theory
is based on the two assumptions. Firstly, investors’ make rational decisions;
and secondly investors are unbiased in their predictions about future returns
of the stock. However financial economist have now realised that the long held
assumptions of traditional finance theory are wrong and found that investors
can be irrational and make predictable errors about the return on investment
on their investments.
This analysis on individual investors’ behaviour is an attempt to know
the profile of the investor and also know the characteristics of the investors so
as to know their preference with respect to the investments. The study also
tries to unravel the influence of demographic factors like age on risk tolerance
level of the investor.

10. LIMITATIONS OF THE STUDY
This analysis is based upon investors’ behaviour for investment
preferences during normal time vis-à-vis recessionary period. This analysis
would be focusing on the information from the investors about their
knowledge, 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.

11. RESEARCH METHODOLOGY
SAMPLING TECHNIQUE:
A rough draft would be prepared keeping in mind objective of the research. A
pilot study will be undertaken in order to know the accuracy of the
questionnaire. Convenience sampling technique will be used for collecting the
data from different investors. The investors are selected by the convenience
sampling method. The selection of the population based on their availability
and accessibility to the researcher is known as convenience sampling. It is the
best sampling method in surveying dealings with an exploratory purpose for
generating ideas and hypothesis.
SAMPLING UNIT:
The respondents who will be asked to fill out the questionnaire are the
sampling units. These comprise of salaried employees, professionals, other
regular investors.
SAMPLING SIZE:
The size would be restricted to only 100, which comprised of mainly people
from different regions of Gujarat and Mumbai due to time constraints.
SAMPLING AREA:
The area of research is Gujarat and Mumbai.
SOURCES OF INFORMATION

12. PRIMARY DATA:
Information is collected by conducting a survey by distributing a
questionnaire to 100 people. These 100 people are of different age group ,
different occupation, different income levels and different qualifications. A
copy 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.com
www.economictimes.indiatimes.com
www.business-standard.com
www.indiamoney.com
www.moneymanagementideas.com
www.savingwala.com

13. CONCEPT OF SAVINGS AND
INVESTMENT
HOW DO SAVINGS EMERGE?
Savings are excess of income over expenditure for any economic unit. Thus
S=Y-E where S is savings, Y is income and E is expenditure. Secondly excess
funds 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 1
and difference between them is capital gains or losses.
WHY DO PEOPLE SAVE?
Savings is abstaining from present consumption for a future use. Savings are
sometimes autonomous coming from households a matter of habit. But bulk of
the savings come for specific objectives like interest income, future needs,
contingencies, precautionary purpose or growth in future wealth leading to
rise in standard of living, etc.
IMPACT OF INFLATION:
All investments lose in value due to inflation or rise in prices leading to
depreciation of the rupee. When the rate of inflation is about 10%, the real
value of money is lost by 10% every year. The investors have therefore to
protect themselves from these loses of real value of their assets by proper
investment 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 are
shares in companies or bullion, land and building. Some are safe and liquid, like
the investments in government securities, bonds of PSU’s, etc. a few
investments like Indira Vikas Patre are easily transferable and marketable. So
also the share and securities listed and traded on stock exchanges. But all the

14. above investment do not satisfy all the needs and objectives, referred to later,
including securing a hedge against inflation. All objectives of income, capital
appreciation, safety, marketability and liquidity as also hedge against inflation
can be secured only by proper investment in corporate securities.
INVESTMENT ACTIVITY:
At the outset any study on investment activity should start with the question
of what is investment. It means many things to many persons. If one person
has advanced some money to another, it may be his loan which may be
considered his investment for a return. If a person has purchased 1 kg of gold
for the purpose of price appreciation or a consumer durable like washing
machine for the flow of services, it is his investment. If he purchases an
insurance plan or a pension plan, it is an investment. Thus there are various
types of investment for various persons.
For the individual, it is the exchange of the money or cash for a future claim on
money or the purchase of security of a promise to pay at a later date along
with regular income as in the case of a share, bond, debenture, etc. for this
issuer of security it is the use of money for fixed capital equipments, working
capital or any other productive and unproductive activity. Sometimes, it is also
a service like consultancy, construction, hotel or hospital or services in future
as the case of consumer durables.
WHAT IS INVESTMENT ACTIVITY?
Investment activity includes buying and selling or trading in the above claims
on money and or promissory notes. An investment for one it may be
disinvestment of another as in the case of stock market trading or may be a
fresh investment in a new issue, in the new issue market, one can only buy
securities .
All purchase of securities are thus investment although for the as a whole,
some investments are offset by corresponding disinvestments. There are two
terms which are relevant for this context, namely, gross and net investment.
Gross are total investments made from all sources by an economy. Net
investments are those investment which are gross investments minus

15. disinvestment for an economic unit. Gross assets and investments minus
depreciation for the economy or a company or corporate sector or
government 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 science
and an art. Savings are sometimes autonomous and sometimes induced b y the
incentives like fiscal concessions or income or capital appreciation. The
number of investors is estimated about 50 million out of population of more
than one billion in India. Savers come from all classes except in the case of the
population who are poverty line. The growth of urbanization and literacy has
activated the cult of investment. More recently, since the eighties the
investment activity has become more popular with the change in the
government policies towards liberalisation and financial deregulation. The
process of liberalisation and privatization was accelerated by the government
policy changes towards a market oriented economy, through economic and
financial reforms started in July 1991.

16. CHARACTERISTIC OF INVESTMENT
Investment refers to invest money in financial physical assets and
Marketable 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.
RISK
Risk refers to the loss of principal amount of an investment. It is one of the
major characteristics of an investment. The risk depends on the following
factors:
• The investment maturity period is longer; in this case, investor will take
larger risk.
• Government or Semi Government bodies are issuing securities which have
less risk.
• In the case of the debt instrument or fixed deposit, the risk of above
investment is less due to their secured and fixed interest payable on them. For
instance Debentures.

17. • In the case of ownership instrument like equity or preference shares, the risk
is more due to their unsecured nature and variability of their return and
ownership character.
• The risk of degree of variability of returns is more in the case of ownership
capital compare to debt capital.
• The tax provisions would influence the return of risk.
RETURN
Return refers to expected rate of return from an investment
• Return is an important characteristic of investment. Return is the major
factor which influences the pattern of investment that is made by the investor.
Investor always prefers to high rate of return for his investment.
SAFETY
Safety refers to the protection of investor principal amount and expected rate
of return.
Safety is also one of the essential and crucial elements of investment. Investor
prefers safety about his capital. Capital is the certainty of return without loss of
money or it will take time to retain it. If investor prefers less risk securities, he
chooses Government bonds. In the case, investor prefers high rate of return
investor will choose private Securities and Safety of these securities is low.
LIQUIDITY
Liquidity refers to an investment ready to convert into cash position. In other
words, it is available immediately in cash form. Liquidity means that
investment is easily realisable, saleable or marketable. When the liquidity is
high, then the return may be low. For example, UTI units.
An investor generally prefers liquidity for his investments, safety of funds
through a minimum risk and maximisation of return from an investment.
MARKETABILITY

18. Marketability refers to buying and selling of Securities in market. Marketability
means transferability or saleability of an asset. Securities are listed in a stock
market which are more easily marketable than which are not listed. Public
Limited Companies shares are more easily transferable than those of private
limited companies.
CONCEALABILITY
Concealability is another essential characteristic of the investment.
Concealability means investment to be safe from social disorders, government
confiscations or unacceptable levels of taxation, property must be concealable
and leave no record of income received from its use or sale. Gold and precious
stones have long been esteemed for these purposes, because they combine
high value with small bulk and are readily transferable.
CAPITAL GROWTH
Capital Growth refers to appreciation of investment. Capital growth has today
become an important character of investment. It is recognising in connection
between corporation and industry growth and very large capital growth.
Investors and their advisers are constantly seeking ‘growth stock’ in the right
industry and bought at the right time.
PURCHASING POWER STABILITY
It refers to the buying capacity of investment in market. Purchasing power
stability has become one of the import traits of investment. Investment always
involves the commitment of current funds with the objective of receiving
greater amounts of future funds.

19. STABILITY OF INCOME
It refers to constant return from an investment . Another major characteristic
feature of the Investment is the stability of income. Stability of income must
look for different path just as security of principal. Every investor always
considers stability of monetary income and stability of purchasing power of
income.
TAX BENEFITS
A tax benefit is the last characteristic feature of the investment. Tax Benefits
refer to plan an investment programme without regard to one’s status may be
costly 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.

20. NEED AND IMPORTANCE OF
INVESTMENTS
An investment is an important and useful factor in the context of present day
conditions. 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 Investment
Management
LONGER LIFE EXPECTANCY
Investment decisions have become more significant as most people in India
retire between the ages of 56 to 60. So that, they are planned to save their
money. Saving by themselves do not increase wealth, saving must be invested
in such a way that the principal and income will be adequate for a greater
number of retirement years. Longer life expectancy is one reason for effective
saving and further investment activity that help for investment decisions.
INCREASING RATES OF TAXATION
When 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, Unit
Trust of India, Life Insurance, Unit Linked Insurance Plan, National Saving
Certificates, Development Bonds, Post Office Cumulative Deposit Schemes etc.
It affects the taxable income.

21. INTEREST RATES
Interest rate is one of the most important aspects of a sound investment plan.
The interest rate differs from one investment to another. There may be
changes between degree of risk and safe investments. They may also differ due
to different benefit schemes offered by the institutions.
A high rate of interest may not be the only factor favouring the outlet for
investment. Stability of interest is an important aspect of receiving a high rate
of interest.
INFLATION
Inflation 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 further
investment process delayed. Investor ensures to check up safety of the
principal amount, security of the investment. Both are crucial from the point
of view of the interest gained from the investments.
INCOME
Income is another important element of the investment. When government
provides jobs to the unemployed persons in the country, the ultimate result is
ensuring of income than saving the extra income. More incomes and more
avenues of investment have led to the ability and willingness of working
people to save and invest their funds.
INVESTMENT CHANNELS
The growth and development of the country leading to greater economic
prosperity has led to the introduction of vast areas of investment outlets.
Investment channels means an investor is willing to invest in several
instruments like corporate stock ,provident fund, life insurance , fixed
deposits in the corporate sector and unit trust schemes.

22. TYPES OF INVESTORS
CAUTIOUS INVESTORS
Cautious Investors are very conservative; this type of investor has a need for
financial security and will avoid high-risk ventures as well as listening to
professional advice, preferring to conduct their own financial affairs. They
don’t like to lose even small amounts of money and never rush into
investments, always giving financial opportunities a great deal of thought.
EMOTIONAL INVESTORS
Emotional Investors are easily attracted to fashionable investments or ‘hot’
tips, these investors act with their heart and not their head. A whim or a gut
feeling leads their decisions, and they have great difficulty disengaging from
poor investments or cutting losses. They have an unreasonable belief that
things will come right in the end and often put their trust in luck or
‘providence’ to safeguard their financial assets.
TECHNICAL INVESTORS
Technical Investors are hard facts - numbers - lead this type of investor to
active trading based on price movements. They are screen-watchers,
sometimes obsessional, but their diligence can be rewarded if they spot
trends. They may also have a tendency to ‘need’ and buy the latest technology
as they are always looking for some edge.
BUSY INVESTORS
Busy Investors need to be involved with the markets, it gives them a buzz
when they check the latest price movements, which may be several times a
day. They have to keep buying and selling - on rumours, on overheard gossip,
from the mass of newspapers and magazines they collect. Any titbit of
information they can glean is imbued with significance and a cause to take
financial action.

23. CASUAL INVESTORS
Casual Investors are a laid-back attitude to investment, these individuals are
often hardworking and involved with work or family. They tend to believe that
once an investment is made it will take care of itself, and that a good job or a
profession is the way to make real money. They easily forget that they own
investment assets and rarely check on their financial affairs. And, though they
may leave the running of their investments to professional advisors, they
haven’t been in contact with them for years.
INFORMED INVESTORS
Informed Investors use information from a variety of sources and keep an
ongoing watch on their investments, the markets and the economy. They listen
carefully to financial opinions and expert assessments, and will only go against
market fashion, as a contrarian, after weighing up all the pros and cons. They
are financially confident and have faith in their decisions, knowing that
knowledge and experience will always win out to give them long-term profits.
PASSIVE INESTORS
Passive Investors are characterised as individuals who have become wealthy
passively - by inheriting, by a professional career or by risking the money of
others rather than their own money. To these investors security is more
important than risk. In addition, certain classes of occupation are more likely to
contain passive investors. For example, non-surgical doctors, corporate
executives, lawyers and accountants who work in companies. Reasons for this
are that these individuals are less likely to have high financial resources at an
early stage in their careers, having had to delay earning good salaries in order
to study or having to repay student loans. Once earning a decent wage, they
are then more careful with their money, having a greater need for security.
Anyone, therefore, with reduced financial recourses is likely to be more risk
conscious and hence, a passive investor. For these individuals it’s important to
hang on to their money.
Passive investors make good clients because they tend to trust their financial
advisor and are more likely to delegate the running of their financial affairs.

24. And because they are risk averse, they tend to like diversified portfolios of
investments in quality companies or investment products. However, they can
believe that an investment is more risky than it is which may keep them out of
potentially lucrative opportunities. Passive investors are also more likely to
need the approval of others and are unlikely to take a first step into unknown
investment territory by being a contrarian. Consequently, they are more likely
to follow the investment herd when it comes to stock market investment and
stick to following the trend.
ACTIVE INVESTORS
According to Barnwell, Active Investors are those who have achieved
significant wealth, or earned well, during their own lifetime. They are more
likely to take risks in investing because they have previous experience of taking
risks in their previous wealth creation. These individuals have a high-risk
tolerance and less of a need for security. They also need to feel in control of
their own abilities. Once they feel they are losing control of an investment
situation, their risk tolerance reduces. By being actively involved and in control,
these investors feel they are reducing risk. However, such involvement may
actually be detrimental as it is likely to be a source of irritation to their
investment advisor who cannot get on with the business of running their
clients affairs due to constant questioning and harassment. The classes of
occupation that are likely to be active investors include: small business owners
who have developed their own businesses rather than inherited, medical
surgeons, independent professionals, such as lawyers or accountants, who
work for themselves rather than a large firm,entrepreneurs, and self-employed
consultants. Active investors are more likely to get personally involved with the
running of their financial affairs, and may believe they know more than their
advisor does. They are less likely to delegate the maintenance of those parts of
their investment portfolio in which they believe they have experience or have
had personal success. However, these individuals are more likely to be
contrarian in their stock picking habits and have less need to be completely
diversified. Age tends to soften their need to be constantly in control, so that
older clients may be more malleable and open to their advisors suggestions.

25. INDUSTRY PROFILE
Indian financial industry is considered as one of the strongest financial sectors
among the world markets. M Concealability means investment to be safe from
social disorders, government confiscations or unacceptable levels of taxation,
property must be concealable and leave no record of income received from its
use or sale. Gold and precious stones have long been esteemed for these
purposes, because they combine high value with small bulk and are readily
transferable. any industry experts may give various reasons for such Indian
financial industry reputation, but there is only one answer which no one can
deny, is the effective control and governance of the country’s supreme
monetary authority the “RESERVE BANK OF INDIA”
Financial sector in India has experienced a better environment to grow with
the presence of higher competition. The financial system in India is regulated
by independent regulators in the field of banking, insurance, mortgage and
capital market. Government of India plays a significant role in controlling the
financial 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 28th
February. The reserve bank of India is an apex institution in controlling banking
system in the country. Its monetary policy acts as a major weapon in India’s
financial market.
Various governing bodies in financial sectors:
1. RBI- It is the supreme authority and regulatory body for all the monetary
transactions 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 regulatory
authorities for India’s capital market.
3. IRDA- Insurance regulatory and development authority in India regulates all
the insurance companies in India

26. 4. AMFI- Association of mutual funds in India regulates all the mutual funds
companies in India.
5. FIPB- foreign investment promotion board regulates all the foreign direct
investments made in India.
Investments are normally categorized using the risk involved in it, risk is
dependent on various factors like the past performance, its governing body,
involvement of the government etc., in this scenario Indian investments are
classified 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 investment
avenues.
Various investment avenues available in india
Safe /low risk avenues:
Savings account
Bank fixed deposits
Public provident fund.
National saving certificate
Post office savings
Government securities
Moderate risk avenues:
Mutual funds
Life insurance
Debentures
Bonds.
High risk avenues:
Equity share market.

27. Commodity market
FOREX market.
Traditional avenues:
Real estate
Gold/silver
Chit funds
Emerging avenues:
Virtual real estate
Hedge funds/private equity investments
Art and passion
Savings Account
As the name denotes, this account is perfect for parking your temporary
savings. These accounts are one of the most popular deposits for individual
accounts. These accounts provide cheque facility and a lot of flexibility for
deposits and withdrawal of funds from the account. Most of the banks have
rules for the maximum number of withdrawals in a period and the maximum
amount of withdrawal, but no bank enforces these. However, banks have
every right to enforce such boundaries if it is felt that the account is being
misused 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 can
withdraw money as and when the needs arise. The position of account is
depicted in a small book known as pass book. Such accounts should be treated
as a temporary parking area because the rate of interest is much less than
fixed deposit. As soon as once savings accumulate to an amount which he can
spare for a certain period of time, shift this money to fixed deposit. The returns
on the money kept in savings bank account will be less but the freedom to
withdraw is the highest.

28. Fixed deposit
The term fixed in fixed deposit denotes the period of maturity or tenor. Fixed
deposit, therefore, pre plans a length of time for which a depositor decides to
keep the money with the bank and the rate of interest payable to the
depositor 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 that
the depositor loses all his rights over the money for the duration decided of
the tenor. Deposits can be withdrawn before the period is over. However, the
amount 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 the
period of 7 days to 10 years. Therefore, the depositors are supposed to
continue such fixed deposits for the duration of time for which the depositor
decided to keep the money with the bank. However, in case of need, the
depositor 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 happening
with the objective of providing old age profits security to the unorganised
divisions workers and self employed persons. Currently, there are almost 30
lakh PPF account holders in India across banks and post offices.
Eligibility:
Any invidual salaried or no salaried open an PPF account. He may also pledge
on behalf of a minor, HUF, AOP, BOI. Even NRIs can open PPF account. A
Person can contain only 1 PPF account. Also two adults cannot open a PPF
account.
Subscription:
The yearly contribution to PPF account ranges from a least of rs.500 to a
maximum of Rs. 70000 payable in multiple of Rs.5 either in lump sum or in
convenient instalments, not exceeding 12 in a year.

29. Penalty in case of non-subscription:
The account will happen to obsolete if the required minimum of rs.500 is not
deposited in any year. The amount before now deposited will continue to earn
interest but with no facility of taking loan or making withdrawals. The account
can be regularised by depositing for each year of default, arrears of rs.500
along with penalty of rs.100.
When to open:
A PPF account can be opened at any branch of SBI or its subsidiaries or in few
national banks or post offices. On opening of account a pass book will be
issued wherein all amounts of deposits, withdrawals, loans and repayment
together with interest due shall be entered.
Interest rate:
Deposits in the account earn interest rate at the rate notify by the central
government from time to time. Interest is designed on the lowest balance
among the fifth day and last day of the calendar month and is attributed to the
account on 31st march every year. So to drive the maximum, the deposits
should be made between 1st and 5th day of the month, as it also enables you to
earn 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 16
years i.e. the year of opening the account and adding 15 years to it. The sum
made in the 16th financial year will not earn any interest but one can take
advantage of the tax rebate.
Withdrawal:
The investor is allowed to make one removal every year beginning from the
seventh financial year of an amount not more than 50% of the balance at the
end of the fourth year or the financial year immediately preceding the
withdrawal, whichever is less. This facility of making partial withdrawals
provide liquidity and the withdrawal amount can be used for any purpose.

30. National savings certificate (NSC)
NSC is a fixed interest, long term instrument for investment. NSC’s are issued
by the department of Post, Government of India. Since they are backed by the
government of India, NSCs are a practically risk free avenue of investment.
They can be bought from authorised post offices. NSCs have a 6 years of
maturity. They offer a rate of 8% per annum. This interest is calculated every 6
months, 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 year
rs.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 savings
There are various investment schemes available in post offices, like KISAN
VIKAS PATRA, MONTHLY INCOME SCHEME and various others. All these
schemes are completely risk-free, and you do not need to have large sum of
money 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 some
scheme 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 of
your money into any of these investment instruments. It is your hard-earned
money, so better play safe and invests some part in secure funds also.

31. Government securities
Government securities are supreme securities which are issued by the RBI on
behalf of government of India in lieu of the Central Government’s market
borrowing 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 investments
Benefits 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

32. A mutual fund is a professionally-managed firm of collective investments that
pools money from many investors and invests it in stocks, bonds, short-term
money market instruments, and/or other securities. Here the fund manager is
also 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. The
value 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 the
number 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 funds
Drawbacks:
No guarantees
Fees and commissions
Taxes
Management risk
Life Insurance:
Insurance can be an attractive option for investment. A lot of Insurance
products yield more compared to regular investment options, with the added
advantages of providing incentives. No other investment schemes can offer
financial protection from risks.

33. 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 of
the total amount invested in life insurance goes towards providing for the risk
cover, while the rest is used for savings.
Also life insurance provides you get maturity benefits on survival at the end of
the term. i.e. if you take a life insurance policy for 20 years and survive the
term, the amount invested as premium in the policy will come back to you with
added returns. In case of death or disability within the tenure of the policy, the
family/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 give
better returns but you cannot access your funds. One can withdraw 50 per
cent of the initial deposit only after 4 years. The same amount can give you an
insurance cover of up to approximately Rs 5-10 lakh (depending upon the plan,
age health, etc) and this amount would be immediately available to the
nominee of the policyholder on death.
Thus insurance provides sound returns in addition to risk cover.
DEBENTURES
These NCDs are investment instrument issued by companies or NBFCs to raise
capital. As the name suggests NCDs are non-convertible to shares. Some of
these NCDs are secure, which means that they have an underlying asset that
gives value to the debenture. If there the company cannot repay, they can sell
this asset and pay the creditors. Then there are debentures that have no
underlying assets.
Debentures work more or less like bonds. It is a debt instrument, which means
the company receives money from investors as loan. It means that the
investors are entitled to receive the interest on the loan given to the
company. Coupon rates are the interest received from a debenture. They are
issued for a period up to 10 to 20 years.

34. You can buy and sell these debentures from secondary market. It is traded like
shares. If the market interest rate is higher than the coupon rate of debentures
then the value of debentures fall in value as people prefer to invest in bank
deposits rather than in debentures. On the other hand if the interest rate is
lower then people will opt for debentures with high interest rate thus raising
its value.
Some of the companies and NBFCs which have come out with NCDs are
Shriram Transport Finance Corporation, Muthoot Finance, Manappuram
Finance, IFCI, and L&T Finance.
REAL ESTATE
One of the most consistently returning asset classes as an investment over the
long 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 alone
you are one of the few who have what it takes to succeed. You have an
entrepreneurial spirit and a strong will and these are rare and valuable
attributes that will guide you throughout your professional and personal life.
Now that your business is up and running and you're profiting from your
efforts, it's time to turn your attentions to investing the profits from your
home based business wisely and for maximum gain.
Understanding market cycles. Now, you're most likely aware that property
markets are cyclical; this is because there is a direct correlation between the
underlying price of real estate in relation to individual buying power.
Simply explained: When property prices rise above what first time buyers can
afford to pay the market slows down, stagnates and sometimes readjusts ' but
as soon as purchasing power increases again, either with a drop in interest
rates or an increase in GDP, the property prices begin rising again. And there
are even ways to make money from real estate during a market downturn!
Investing in real estate for income: Depending on the nature of your home
based business your monthly income may be slightly erratic, some months
being better than others! If you invest in property assets in a buy-to-let or even
jet-to-let capacity you can secure yourself a consistent monthly income which
may afford you an added degree of financial security.

35. Buy-to-let is when you purchase property for rental purposes, this maybe an
apartment you let to a corporate, it could be a house you let to students
studying 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 term
weekly or fortnightly rental to tourists. This type of letting is usually very
lucrative indeed during peak holiday periods but may mean you have a
property that is empty for a few months out of season.
Both types of property investment return you a regular income and at the
same 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 on
the 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 property
and 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 down
property in need of renovation, tidy up the property and turn it into a home
before 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 coming
areas, waiting for prices to boom and then selling on for profit. This is quite a
risky strategy for a first time investor as timing the market is hard!
An alternative to this is looking overseas for the latest emerging property
markets worldwide and buying properties to renovate or properties off plan
and then flipping them on for maximum gains in the short term.
Financing your investment: As a self-employed individual it can be tricky to get
a mortgage unless you have audited accounts, bank references and other
documents required for the purpose. If you don't have all of these requisite
documents there are other options available to you.
A winning attitude: You have already proved you have what it takes to
succeed against the odds by establishing a profitable home based business,
now apply the same steely determination to your real estate investments and
you will succeed in making the maximum gains. Start small, begin gently, test
the market and your understanding of it and slowly build up a profitable real

36. estate portfolio from the profits of your home based business for maximum
financial gain.
GOLD
THE KEY ADVANTAGES IN INVESTING IN GOLD
1.Diversification Benefit. Overall portfolio risk can be potentially reduced by
adding "Gold" to investor portfolio because "Gold" has a very low or negative
correlation with other asset classes. Hence it offers a maximum benefit.
2.. Inflation Hedge. It has been noticed that gold has consistently beaten the
inflation rate and helps to preserve purchasing power over the past .Gold has
over many centuries , maintained its value against inflation.
3. Low volatility asset. Gold is comparatively less volatile to other securities
over a long period of time. It has been noticed that investment in gold has
contributed to stability in the overall portfolio.
4. Protection against currency weakness. Gold helps to protect value of
money against currency weakness especially against US dollar. Since gold is
denominated internationally in US dollars, US interest rates have a great
impact on prices.
5. Hedge against event risk. Gold has always been tended to be the best
against event risk.
DIFFERENT WAYS OF INVESTING IN GOLD

37. The various options /ways to invest in gold are as under. Table: 2 indicated the
comparative analysis of different options of investing in gold.
1. Direct ownership. It is buying physical gold like coins, jewelry or gold bars
from the bullion market or the jewelry shops at the market prices. There are
many security, safety and impurity concerns of holding gold physically.
2. Gold Exchange Traded Fund. Gold ETF's are the passively managed mutual
fund schemes that track the benchmark index and reflect the performance of
that index. The return of these funds corresponds to the return of physical
gold.
3. Gold Mutual Fund. These are the funds managed by the professional fund
managers that invest in the stocks of companies that mine precious metals like
gold. But here the risk is same as of equity, since ultimately it amounts to
having equity exposure in a listed company.
4. Gold Fund of Funds. These are the mutual Funds that typically invest in gold
ETF's. There are two main advantages of this being investor can opt for
systematic approach for investment and secondly investor need not to open or
hold a demat or a trading account for this.
5. Stocks of Gold Mining Companies. Directly buying the stocks of the
companies that mine for gold. For this investor should have adequate
knowledge of
such companies.
6. Gold options and Futures. These are investment products which use gold as
an underlying asset. This is mainly for more sophisticated, experienced and
high risk appetite investors.
PROS AND CONS OF INVESTING IN GOLD
PROS OF INVESTING IN GOLD

38. 1. The basic pros of investing in gold are that it provides easy liquidity
compared to other investment options. Gold can be bought and sold through
banks and jewelry outlets any time.
2. Although gold prices have fallen in the past, the rarity of the metal and
limited supply ensures that it will never suffer from total devaluation, though it
may go through ups and downs. In times of recession, gold is invested in
heavily, which invariably leads to a rise in valuation. This makes it one of the
best investment options to hedge against inflation, though better options like
'TIPS (Treasury Inflation-Protected Securities)' exist now.
3. You can benefit from the price rise in gold that is expected to continue in the
near future.
CONS OF INVESTING IN GOLD
1. One of the cons of gold investing is the fact that it's a speculative investment
and predicting its future value is difficult. The price is entirely dependent on
market 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 of
dividends, which securities like stocks may provide. Storing gold involves
additional costs, which the investor must bear. However, options like gold
certificates and exchange traded funds exist that do not require you to
physically store the gold.
3.The most basic disadvantage of investing in gold lies in the fact that it freezes
your investment and cannot provide periodic returns, besides being subject to
a 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.

39. · 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.
CONCLUSION
Higher demand for gold has been expected from emerging market economies
like 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 5
to 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 value
has been continuously rising for many months now. Strategy underlying
investing in gold should be very systematic in approach - one can invest a small
percentage of savings in it, hold till the price appreciates substantially and then
sell it for a considerable profit, before it starts falling in value, However, this
course of action is only recommended if you are ready to take the inherent risk
of price fall. If you are a defensive investor, a period of rising prices is certainly
not the best time to buy. Overall it depends upon the end investor analysis and
degree 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 funds
Different chit funds operate in different ways; and there are also many
fraudulent tactics practiced by many private firms. The basic necessity of
conducting a 'Chitty' is a group of needy people called subscribers. The
foreman - the company or person conducting the chitty - brings these people
together and conducts the chitty. Foreman is also the person responsible for

40. collecting the money from subscribers, presiding the auctions and keeping
records of subscribers. He is compensated a fixed amount (generally 5% of
gross chitty amount) monthly for his efforts; other than that the foreman does
not 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 Amount
E.g.: 1000 * 50 = 50,000/-. Where 1000 is the maximum monthly contribution
needed from a subscriber, 50 is the duration of the chitty in months and
50,000 is the maximum sum assured. The duration also equals the number of
subscribers, as there must be (not more or less) one subscriber to receive the
price money every month.
The chitty starts on an announced date, every subscriber come together for
the auction/lot. As per Kerala chit act, the minimum prize money of an auction
is 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, lot
are conducted and the 'Lucky subscriber' get the prize money for the month. If
there is no person is willing to take the minimum sum, then a reverse auction
is conducted where subscribers open-bid for lower amounts; that is from
50,000 >> 49,000 >> 48,000, and so on. The person bidding lowest sum get bid
amount.
In both the cases the auction discount, that is the difference between the gross
sum and auction amount, is equally distributed among subscribers or is
deducted from their monthly premium. For example if the auction is settled on
a sum of 40,000, then the auction discount of 10,000 (50,000 - 40,000) is
divided by 50 (the total number of subscribers) and every one gets a discount
of 200. The same practice is repeated every month and every subscriber gets a
chance of receiving some money.
Organised chit funds
In North India common type of chit fund is where small slips with each
members name are written and gathered in a box. When all members gather
for a monthly or weekly meeting then concern incharge in front of all members
will pick up one slip from the box and who so ever's name comes that person
will be entitled to get the collection of that day. Afterwards that persons name

41. slip is torn and thereafter he comes for meetings regularly and gives his kitty's
share but his name won't be there in the slips of box as he has already
collected his share.
Special purpose funds
Some 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 - about
a week before Deepavali. Neighbourhood ladies will get together to pool their
savings each week. This fund will be used to prepare sweets in bulk just before
the Deepavali festival, and the sweets will be distributed to all members.
Preparation of Deepavali sweets may be a time consuming and costly activity
for individuals. Such a chit will reduce the cost, and relieve the members from
excess work from an already tense festival season. Nowadays, such special
purpose chits are conducted by jewellery shops, kitchenware shops, etc. to
promote their products.
Online Chit Fund
With the advent of ecommerce in India, Chit funds have also started going
online. Online chit funds conduct auctions online and subscribers can pay their
monthly dues and receive prize amount online through online transactions
including electronic fund transfers. Each member will have an online account
through which they can manage their chit funds.
Equity shares
Equity shares or ordinary shares are those shares which are not preference
shares. Dividend on these shares is paid after the fixed rate of dividend has
been paid on preference shares. The rate of dividend on equity shares is not
fixed and depends upon the profits available and the intention of the board. In
case of winding up of the available and the intention of the board. In case of
winding up of the company, equity capital can be paid back only after every
other claim including the claim of preference shareholders has been settled.
The most outstanding feature of equity capital is that its holders control the
affairs of the company and have an unlimited interest in the company's profits
and assets. They enjoy voting right on all matters relating to the business of
the company. They may earn dividend at a higher rate and have the risk of
getting nothing. the importance of issuing ordinary shares is that no

42. organisation for profit can exist without equity share capital. This is also known
as risk capital.
Advantages of equity shares:
Advantages of company: The advantages of issuing equity shares may be
summarized 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-time
and so, it is a permanent source of capital.
II. No Fixed Burden: Unlike preference shares, equity shares suppose no fixed
burden on the company's resources, because the dividend on these shares are
subject to availability of profits and the intention of the board of directors.
They may not get the dividend even when company has profits. Thus they
provide a cushion of safety against unfavorable development
III. Credit worthiness: Issuance of equity share capital creates no change on
the assets of the company. A company can raise further finance on the security
of its fixed assets.
IV. Risk Capital: Equity capital is said to be the risk capital. A company can
trade on equity in bad periods on the risk of equity capital.
V. Dividend Policy: A company may follow an elastic and rational dividend
policy and may create huge reserves for its developmental programmes.
Advantages to Investors: Investors or equity shareholders may enjoy the
following advantages:
I. More Income: Equity shareholders are the residual claimant of the profits
after meeting all the fixed commitments. The company may add to the profits
by trading on equity. Thus equity capital may get dividend at high in boom
period.

43. II. Right to Participate in the Control and Management: Equity shareholders
have voting rights and elect competent persons as directors to control and
manage the affairs of the company.
III. Capital profits: The market value of equity shares fluctuates directly with
the profits of the company and their real value based on the net worth of the
assets of the company. An appreciation in the net worth of the company's
assets will increase the market value of equity shares. It brings capital
appreciation in their investments.
IV. An Attraction of Persons having Limited Income: Equity shares are mostly
of lower denomination and persons of limited recourses can purchase these
shares.
V. Other Advantages: It appeals most to the speculators. Their prices in
security market are more fluctuating.
Disadvantages of equity shares:
Disadvantages to company: Equity shares have the following disadvantages
to the company:
I. Dilution in control: Each sale of equity shares dilutes the voting power of the
existing equity shareholders and extends the voting or controlling power to the
new shareholders. Equity shares are transferable and may bring about
centralization of power in few hands. Certain groups of equity shareholders
may manipulate control and management of company by controlling the
majority holdings which may be detrimental to the interest of the company.
II. Trading on equity not possible: If equity shares alone are issued, the
company 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 adversely
affects the psychology of the investors. It is difficult to cure.

44. IV. No flexibility in capital structure: Equity shares cannot be paid back during
the lifetime of the company. This characteristic creates inflexibility in capital
structure of the company.
V. High cost: It costs more to finance with equity shares than with other
securities as the selling costs and underwriting commission are paid at a higher
rate on the issue of these shares.
VI. Speculation: Equity shares of good companies are subject to hectic
speculation in the stock market. Their prices fluctuate frequently which are not
in the interest of the company.
Disadvantages to investors: Equity shares have the following disadvantages
to the investors:
I. Uncertain and Irregular Income: The dividend on equity shares is subject to
availability of profits and intention of the Board of Directors and hence the
income is quite irregular and uncertain. They may get no dividend even three
are sufficient profits.
II. Capital loss During Depression Period: During recession or depression
periods, the profits of the company come down and consequently the rate of
dividend also comes down. Due to low rate of dividend and certain other
factors the market value of equity shares goes down resulting in a capital loss
to the investors.
III. Loss on Liquidation: In case, the company goes into liquidation, equity
shareholders are the worst suffers. They are paid in the last only if any surplus
is available after every other claim including the claim of preference
shareholders is settled. It is evident from the advantages and disadvantages of
equity share capital discussed above that the issue of equity share capital is a
must for a company, yet it should not solely depend on it. In order to make its
capital structure flexible, it should raise funds from other sources also.

45. Commodity market
Commodities, a known avenue for investment, had always generated
economic interest, especially among investors. In recent years, commodities
have emerged as an asset class on their own, and are currently perceived to be
in the Peers of stocks and shares, bonds, other securities and real estate.
On many occasions, commodities have outperformed other asset classes and
are becoming distinctive in the investment basket of tactical investors. They
are also part of the asset diversification strategy of investors.
Indian Commodity market, having its roots dating back a century ago, got its
new global face with the development of nationalized commodity exchanges
and has now become the best place to park your investment money.
With India being a franchiser of global commodity market, there is renewed
interest in derivatives trading. Burgeoning volumes on the nationwide futures
exchanges are testimony to the rising interest among hedgers and speculators.
Indian investors are also availing benefits of such Bull Run. The organized
Indian Commodity Market is at its nascent stage and has a large potential to
provide enormous opportunities to the investors and other market
participants.
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

46. • Arbitrage & Hedging Opportunity
• Leads to price discovery
• Improves cropping patterns
• Integrated players and markets
• A smart investment choice
Forex Market:
Investing in foreign currencies is a relatively new avenue of investing. There
are considerably fewer people are aware of this market than there are people
aware of several other avenues of investing. Trading foreign currency, also
known as forex, is the most lucrative investmentmarket that exists. There are
several factors that make this true among which, successful forextraders earn
realistic profits of one hundred plus percent each month. Compared to some
of the better known investment markets such as corporate stocks, this is an
unheard of return oninvestment. It's very necessary to mention here that a
person who invests in forex must, without exception, make it a point to learn
the detailed, but simple strategies and information surrounding the market.
This very fact is what makes the difference between successful forextraders
and other traders.
.
A few additional points, which create such powerful leverage for investors
within the forexmarket are: The amount of capital required to begin investing
in the market is only three hundred dollars. For the most part, any
other investment market is going to demand thousands of dollars of the
investor in the beginning. Also, the market offers opportunities to profit
regardless what the direction of the market may be; In most commonly known
markets investors sit and wait for the market to begin an up trend before
entering a trade. Even then, investors, as a rule must sit and wait some more
to be able to exit the trade with a nice profit. Given that the forex market
produces several up, down, and sideways trends in a single day, it can easily be
seen that forex stands head and shoulders above other markets. Additionally
there are trading strategies, which are taught that provide for compounded
profits; these are profits on top of profits. In addition, free demo accounts are
available within the industry of forextrading, which facilitate the sharpening of

47. skills without the risk losing any capital. And the advantage regarding the time
factor in trading foreign currency is a very attractive point for any investor.
Compared to one of the most sought after avenues of investing, which often
requires forty or more hours each week, namely in the real-estate market,
the forex market requires a much smaller demand on the investor's
time. Forex trading requires approximately ten to fifteen hours each week to
earn a full time income. It's easy to see that the advantages and great leverage
that exist in the forex market make it among the most lucrative, time
liberating, and easy to enter by far.

48. DATA AND INTERPRETATION
Preferred investment avenues for Salaried People
Investment Avenues Votes Rank
Life Insurance 16 1
Gold 12 2
Bank Fixed Deposits 11 3
Mutual Funds 11 4
Real Estate 11 5
Post Office Savings 9 6
PPF 8 7
NSC 8 8
Equity Shares 7 9
Savings Account 7 10
Total 100
Since the investor has an option to invest in more than one investment
avenue, the votes are been considered in conclusion part. The avenue which is
given maximum weightage by the investors is ranked first. First ten ranks are
given to the first ten preferred investment avenues. First preference is given to
Life Insurance, second to investing in gold, and Tenth preference is given to
bank savings account.
Finding relationship between age group and level of risk tolerance
Risk tolerance of age group 20-30
Parameter 20-30 age group
Level of Risk No. of Investors Percentage
Low risk 13 37%
Medium risk 17 49%
High risk 5 14%
Total 35 100%

49. Risk tolerance of age group 30-40
Parameter 30-40 age group
Level of Risk No. of Investors Percentage
Low risk 20 57%
Medium risk 11 32%
High risk 4 11%
Total 35 100%
Risk tolerance of age group 40 above
Parameter Above 40 age group
Level of Risk No. of Investors Percentage
Low 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 or
negative relationship between risk tolerance and age group.

50. SUMMARY AND CONCLUSIONS
Summary
This report is a reflection of the behavior of various behaviors of salaried
employees. Selection of a perfect investment avenue is a difficult task to any
investor. An effort is made to identify the tastes and preferences of a sample
of investors selected randomly out of a large population. Despite of many
limitations to the study I was successful in identifying some investment
patterns, there is some commonness in these investors and many of them
responded positively to the study.
This report concentrated in identifying the needs of current and future
salaried employees, their preferences towards various investment avenues are
identified based on their occupation. Investors risk in selecting a particular
avenue is dependent on the age of that investor.
Conclusion
This study confirms the earlier findings with regard to the relationship
between age and risk tolerance level of individual investors. The present study
has important implications for investment managers as it has come out with
certain interesting facets of an individual investor. The individual investor still
prefers to invest in financial products which give risk free returns. This
confirms that Indian investors even if they are of high income, well educated,
salaried, independent are conservative investors prefer to play safe. The
investment product designers can design the products which can cater to the
investors who are low risk tolerant and use TV as a marketing media as they
seem to spend long time watching TVs

51. Questionnaire
Q1. 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 securities
High risk avenues: Traditional avenues:
Equity share market Real estate
Commodity market Gold/silver
FOREX market Chit funds
Emerging avenues:
Virtual real estate
Hedge funds/private equity investments
Art and passion
Q2.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.

52. 
Q4. In past you have invested in?

Q5. In which sector you prefer to invest your money?
Private Sector Government Sector
Public Sector Foreign Sector
Q6.What is the important factors guiding your investment decisions?

Q7.What are your savings objectives?
Children’s education Home purchase
Retirement Marriage
Health care others
Q8. 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

53. Q10. Do you have a savings and investment target amount you aim for each
year?
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 what
will you do?
Withdraw your money wait to increase
Invest more in it
Q12. 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-term
Q14. What is your source of investment advice?
Newspapers News channels Family or Friends
Books Internets Magazines
Advisors Financial planners
Thank you for your precious time.