Newproject 160624075440

Investors’ perception towards investment avenues
INTRODUCTION:
Capital is a crucial factor in the development of an economy. The pace of
economic development is conditioned, among other things, by the rate of
capital formation. And capital formation is conditioned by the mobilization
and channelization of investible funds. The role of the financial system is to
channel funds from surplus sectors to deficit sectors. Facilitating such flows
on a national level increases the level of investment and effective demand
and thus accelerates economic development.
Capital market development has been closely related to an economy's
overall development. At low levels of development, commercial banks tend
to dominate the financial system. As an economy develops, the indirect
lending by savers to investors tends to become more efficient. As economy
grows further, specialialised financial intermediaries and securities markets
develop. As securities markets mature, investors, especially individual
investors, can invest their funds directly in financial assets issued by firms.
There are number of financial assets or investment avenues are available
in India. Each investment alternative has its own strengths and weaknesses.
Some options seek to achieve superior returns but with corresponding higher
risk. Other provide safety but at the expense of liquidity and growth. Other
options such as FDs offer safety and liquidity, but at the cost of return.
Mutual funds seek to combine the Advantages of investing in arch of these
alternatives while dispensing with the shortcomings. Indian stock market is
semi-efficient by nature and, is considered as One of the most respected
stock markets, where information is quickly and widely disseminated,
thereby allowing each security's price to adjust rapidly in an unbiased
manner to new information so that, it reflects the nearest investment value.
Savings form an important part of the economy of any nation. With the
savings invested in various options available to the people, the money acts as
the driver for growth of the country. Indian financial scene too presents a
Page 1
plethora of avenues to the investors. Though certainly not the best or deepest
of markets in the world, it has reasonable options for an ordinary man to
invest his savings.
One 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.
PROBLEM STATEMENT:
This project attempts to know the preferences and analyze the
significance of demographic factors that influence the investor's decision
towards making investments. This study attempts to find out the significance
of demographic factors of population such as gender, age, education,
occupation, income, savings and family size over several elements of
investment decisions like priorities based on characteristics of investments,
period of investment, reach of information source, frequency of investment
and analytical abilities. The hypotheses have been developed considering its
relevancy to the research objectives. Investment decision making behavior in
risky situation has been taken as dependent variable. Demographic factors
(age and gender) are considered as independent variables. Risk perception
considered as mediators. Individuals’ risk preferences are taken as an
intervening variable between demographic factors and risk perception. Data
Page 2
were classified; tabulated and tested Statistical inferences were drawn by the
use of Hypothesis and Pearson's Chi-square technique.
OBJECTIVE OF THE PROJECT:

The purpose of the analysis is to determine the investment behavior of
investors and investment preferences for the same. Investors 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 has 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
ongoing basis is critical for survival. Executives need a third party
understanding on where investor’s loyalties stand. More than ever
management needs ongoing 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:
1. To understand in depth about different investment avenues available in
India.
2. To find out how investors get information about the various financial
instruments.
3. The type of financial instruments, they would prefer to invest.
4. To know the awareness about the different avenues among the
investor.
5. To give a recommendations to the investors that where they should
invest.
Page 3
HYPOTHESIS:
 There is no significant relation between risk tolerance level and
gender.
 There is no significant relation between risk tolerance level and age
group.
 There is no significant relation between risk tolerance level and
income level.
LITERATURE REVIEW:
Behavioral finance is a new emerging science that studies the irrational
behavior of the people. Vanish Kumar Singh (2006) the study entitled
"Investment Pattern of People" has been undertaken with the objective, to
analyze the investment pattern of people in diversified city analysis of the
study was undertaken with the help of survey conducted .After analysis and
interpretation of data it is concluded those investors are more aware about
various investment avenues & the risk associated with that. All the age
groups give more important to invest in equity &except people those who are
above 50 give important to insurance, fixed deposits and tax saving benefits.
Generally those investors, who are invested in equity, are personally follow
the stock market frequently i.e. in daily basis. But those who are invested in
mutual funds are watch stock market weekly or fortnightly. Major investors
are more aware about various investment avenues and the risk associated
with that. But many investors are more conservative in nature and they
prefer to invest in those avenues where risk is less like bank deposits, small
savings, and post office savings etc.
Sudalaimuthu and senthil Kumar (2008) Mutual fund is the one of
investment avenues the researcher research in this area about investors
perception towards mutual fund investments has been analyzed effectively
taking into account the investors reference towards the mutual fund sector,
Page 4
scheme type, purchase of mutual fund units, level of risks undertaken by

investors, source of information about the market value of the units,
investor’s opinion on factors influenced to invest in mutual funds, the
investor’s satisfaction level towards various motivating factors, source of
awareness of mutual fund schemes, types of plan held by the investors,
awareness of risk category by investors, problems faced by mutual fund
investors. Running a successful mutual fund requires complete
understanding of the peculiarities of the Indian Stock market and also the
awareness of the small investor. The study has made an attempt to
understand the financial behavior of mutual fund investors in connection
with the scheme preference and selection. An important element in the
success of a marketing strategy is the ability to fulfill investor expectation.
The result of these studies through satisfactory on the investor’s perception
about the mutual funds and the factors determining their investment
decisions and preferences. The study will be useful to the mutual fund
industry to understand the investor’s perception towards mutual funds
investments and the study would also be informative to the investors.
Sunil Gupta (2008) the investment pattern among different groups in
city had revealed a clear as well as a complex picture. The complex picture
means that the people are not aware about the different investment avenues
and they did not respond positively, probably it was difficult for them to
understand the different avenues. The study showed that the more investors
in the city prefer to deposit their surplus in banks, post offices, fixed
deposits, saving accounts and different UTI schemes, etc. The attitude of the
investors towards the securities in general was bleak, though service and
professional class is going in for investment in shares, debentures and in
different mutual fund schemes. As far as the investments are concerned,
people put their surplus in banks, past offices and other government
agencies. Most of the cities though being rich have a tendency of investing
Page 5
then surpluses in fixed deposits of banks, provident funds, Post Office

savings, real estates, etc. for want of safety and suitability of returns.
Manish Mittal and Vyas (2008) Investors have certain cognitive and
emotional weaknesses which come in the way of their investment decisions.
Over the past few years, behavioral finance researchers have scientifically
shown that investors do not always act rationally. They have behavioral
biases that lead to systematic errors in the way they process information for
investment decision. Many researchers have tried to classify the investors on
the basis of their relative risk taking capacity and the type of investment they
make. Empirical evidence also suggests that factors such as age, income,
education and marital status affect an individual's investment decision. This
paper classifies Indian investors into different personality types and explores
the relationship between various demographic factors and the investment
personality exhibited by the investors.
Madhumathi.R (1998) in her study entitled “Risk Perception of
Individual Investors and its Impact on their Investment Decisions” examined
the risk perception of 450 individual investors, selected at random from
major metropolitan cities in India, dividing them into three groups as risk
seekers, risk bearers and risk avoiders. The major findings of the study
revealed that majority of the investors were risk bearers and they had the
tendency to use the company’s performance as a basic factor to take
investment decisions. They also depend on the advice of share brokers and
investment consultants. The risk seekers generally took decisions based on
market conditions, industrial positions and social changes. They relied on
newspapers and reports for information. Risk avoiders did not have any
specific traits. They were very objective and looked for facts and certainty in
their investment decisions. They relied on the advice of their friends and
relatives.
Page 6
Nayak, M. K. (2010), analyze the significance of difference between the

various demographic variable and investor`s knowledge of grievances,
awareness of functions of redressed agencies, loading of complain are some
of the factors which affect their satisfaction level. He concludes that
professionals and servicemen being more educated are expected to be more
rational in their decisions, where as business man are more daring, risk
bearing, and instinctively investment-minded. Agriculturists are generally
less informed and passive to making investment so that they suffer from all
the traits of being prone to grievances.
RESEARCH DESIGN AND METHODOLOGY:

The present study consists of all those individuals who invest and those
who intend to invest in financial instrumentin near future. This study is
based on sample survey method. This study mainly assesses the level of
awareness, to know the perceived opinion and to measure the attitude of
individual investors toward financial instruments.
The study of research method provides you with the knowledge and
skills you need to solve the problem and meet the challenges of the fast-
based decision. Marketing environment we define Business Research as a
systematic inquiry whose objective is to provide information to solve
managerial problem.
Definition of the population:

Since the study is mainly related to know the investors’ perception
toward various investment avenues specially in Mangalore City, therefore
here population means investor of Mangalore City.
Page 7
Sample Technique:
Convenience sampling technique has used for collecting the data from
different investors. The investors are selected by the convenience sampling
method. The selection of units from the population based on their easy
availability and accessibility to the researcher is known as convenience
sampling. Convenience sampling is at its best in surveys dealing with an
exploratory purpose for generating ideas and hypothesis.
Sample Unit:
The respondents who asked to fill out the questionnaires are the sampling
units. These comprise of students, salaried employees, Business people,
Home Maker, Professionals, Retired persons and other investor in Mangalore
city.
Sample Size:
The sample size was 100, which comprised of people from Mangalore
city.
Primary Data:
Information is collected by conducting a survey by distributing a
questionnaire to 100 investor in Mangalore city. These investors are of
different age group, different occupation, different income levels, and
different status (Married or not)
Secondary Data:
This data is collected by using the following means.
1. Investment Magazines, Business Magazines, Financial chronicles.
2. Expert’s opinion published in various print media.
3. Data available on internet through various websites
4. Books
Page 8
SCOPE OF THE STUDY:

In a developing country like India, the emphasis on domestic savings and
its mobilization by the organized sector cannot be belittled and is an
important one not only from the individual point of view but also from the
point of view of the economic development of the nation. But many agencies
both private and government such as bank, NBFCs,Private financial
instructor, chit funds, mutual fund compete with each other for mobilizing
the household savings through various attractive schemes. Hence
Government of India have also introduced certain financial instrument like
shares debenture and bonds etc, to mobilize the saving.
The present study is a beginning towards this end and in this study an
attempt has been made to find out the level of awareness and attitude of the
individual towards investment in various financial instruments, besides
eliciting their opinion about the features of the various saving instruments.
Further an attempt has also been made to suggest an effective mechanism to
government for executing the schemes more effectively and to the fullest
satisfaction of individual saving in financial instrument.
The study is derived from an assortment of attributes considered by the
investors towards their investments on shares of different companies. The
age categories of the investors, educational qualification of the investors,
Occupation of the investors, Income of the investors and frequency of
investments have been studied to explore the relationship among them.
Besides, the opinions of investors towards risks and return on investments on
shares are also examined. The area of study is confined to Mangalore city
only.
Finally it would also make an evaluation on the trend of saving
instruments, so as to relate the same to the opinion of individual investor to
draw some useful conclusions. It is hoped that discussion made in this study
would not only help the Government, but also the official agents and public
Page 9
in understanding the problems faced by the individual investors. Such an

understanding will to a larger extent be useful in the removal of investment
problems and for the better and effective operation on the part of official and
agents. Some of the suggestions given at the end will help the smooth growth
of the savings through various financial instruments in future. Besides, it will
also provide chances for further research work in this field.
Limitations of the study:

This analysis is based upon investors’ perception toward various
investments avenues during normal time vis-à-vis recessionary period .This
analysis would be focusing on the information from the investor about their
knowledge, perception and behaviour on different financial products.
The various limitations of the study are:

 Only 100 investors have been considered for this study.
 The total number of financial instruments in the market is so large that
it needs a lot of resources to analyze them all.There are various
companies providing these financial instrument to the public.Handling
and analyzing such a varied and diversified data needs a lot of time
and resources.
 A few respondents might have furnished the required information
from their momentary memory and invented temper and hence the
collected data might be subject to bias.
 As the analysis is based on primary as well as secondary data,
possibility of unauthorized information cannot be avoided.
 The size of the sample compared to the population is small and hence
it might not signify the ideas of entire population.
 The geographical area of this study is confined to Mangalore city
alone.
Page 10
 Few respondents are not willing to express their opinion and views on
their investment and have expressed common view on investment
practices.
 The lack of knowledge of customer about the financial instrument can
be a major limitation
Scheme of the study:

 Chapter 1 covers the core areas of the report: The introduction,
Objectives, Literature review, Scope of the study, limitations and
research design and Methodology.
 Chapter 2 covers the Concept and related issues of the study.
 Chapter 3 covers the industry profile.
 Chapter 4 covers data analysis and interpretation part. Analysis is
made from the data obtained through questionnaires.
 Chapter 5 covers the findings and suggestions drawn from the data
analysis and interpretations.
 Chapter 6 covers the summary and conclusion of the report.
Page 11
Concept and Related issues:

An efficient allocation of capital is the most important finance function
in the modern items. It involves decisions to commit the firm’s funds to the
long term. Capital budgeting decisions are of considerable importance to the
firm since they tend to determine its value by influencing its growth,
profitability and risk. The capital budgeting decisions of a firm are generally
known as the investment appraisal, or capital expenditure decisions. A
capital budgeting decision may be define as the firm’s decisions to invest its
current funds most efficiently in the long term assets in anticipation of an
expected flow of benefits over a series of years.
Investor’s Behaviour:
Investor’s behavior refers to the selection, purchase and consumption of
goods and services for the satisfaction of their wants. There are different
processes involved in the investor behavior. Initially the investor tries to find
what securities he would like to consume, then he selects only those security
that promise greater utility. After selecting the security, the investor makes an
estimate of the available money which he can spend. Lastly, the investor
analyzes the prevailing prices of security and takes the decision about the
security he should consume.
Impact of Demographic Factors on Investors’ Investment Decisions:

An investment is saving of current money and other resources for the
future benefit. There are various investment avenues available for retail
investors and depending upon ones' risk appetite, he/she can choose between
bank deposits, government /private bonds, shares and stocks, exchange
traded funds (ETF), mutual funds,insurance, commodities, currencies, etc.
Risk is an important factor to be considered while making an investment in
Page 12
the stock markets. This paper reveals that demographic factors have an
impact on retail investors' investment decisions. Consumer behavior is
deeply influenced by cultural factors such as: buyer culture, sub culture, and
social class.
Culture: Basically, culture is the part of every society and is the important
cause of person wants and behavior. The influence of culture on buying
behavior varies from country to country therefore marketers have to be very
careful in analyzing the culture of different groups, regions.
A. Social Factors: There are important factors affecting the consumer

buying behavior.
Age: Age and life-cycle have potential impact on the consumer buying
behavior. It is obvious that the consumers change the purchase of goods and
services with the passage of time.
Occupation: The occupation of a person has significant impact on his
buying behavior. For example a marketing manager of an organization will
try to purchase business suits, whereas a low level worker in the same
organization will purchase rugged work clothes.
B. Psychological Factors:
There are four important psychological factors affecting the consumer
buying behavior. These are: perception, motivation, learning, beliefs and
attitudes.
 Motivation: The level of motivation also affects the buying behavior

of customers. Every person has different needs such as physiological
needs, biological needs, social needs etc.
Page 13
 Perception: Selecting, organizing and interpreting information in a

way to produce a meaningful experience of the world is called
perception.
INVESTORS’ PERCEPTION:
Perception is the process of attaining awareness or understanding of the
environment by organizing and interpreting sensory information. All
perception involves signals in the nervous system, which in turn result from
physical stimulation of the sense organs. Investor perception about an
investment would mean how the investor envisions or sees the different
investment avenues. Knowledge of Investor Perception is important because
the perceptions of investors can influence the investment pattern and his
investment behavior like risk tolerance level, investment preference on the
basis of occupation, marital status etc. So in order to know the perception of
individual investor we have to know the behavior of individual investor and
what risk is and factors which influence investment decision.
Even though the fundamental investment rules and principles remain the
same, investment climate and investor behavior change from time to time
and place to place. Individual investor behavior in the capital market is
factored by their income, education, reading habits, cognition levels, etc.
Investor preferences differ with respect to alternative investment avenues,
assets and market segments in the securities market. The track records of
companies and of the promoters have a telling influence on investment
decisions. The investment motives also vary through capital gains,
dividends, bonus, rights, tax benefits and other relevant factors.
Page 14
Investor Behaviour:
Economists have developed behavioral models to explain the decision-
making process of individuals. The interdependence of the inherent risk and
uncertainty about any course of action are provided by the theory of games.
Game theorists call the stock market a `positive sum game'. But the money
game of the stock market may not yield uniform returns to all its
participants. There are various investment avenues. When one investment
opportunity is chosen, other opportunities may be given up. So, opportunity
cost of an investment is the possible income from the next best alternative.
Rational decision-making demands technical knowledge and practical
experience. Investor behaviour approaches investing as a rational decision -
making process in which the investor attempts to select a portfolio of
securities. Rational investors form rational expectations about asset returns,
motivated by the maximising principle. They collect available and relevant
information for making decisions. Some investors make decisions on
inadequate information and such decisions may go wrong.
Behaviour of Individual Investors:

Greed and fear have been recognised as the two dominant emotions that
characterise market behaviour. Greed makes individuals grasp and grab
when they buy shares, and fear leads to panic (Jawaharlal 202).
Page 15
Behavioral Phases of Individual Investors:
Greed
Hope
Caution Fear Caution
Selling on balance
Buying aggressively
Buying on Panic Selling on balance
balance selling
When share prices increase, small individual investors become sellers on

balance. When share prices are at peak, they become greedy and buy
securities aggressively. At the point of decline, they do not give up hope and
tend to buy more shares than they sell. But when the market depresses and
reaches the bottom, small investors develop fear and sell most of their
securities.
In totality, small investors occasionally make right decisions, and they try
to earn profit by selling securities when share prices are rising and by buying
securities when their prices are declining. Most often, small investors make
incorrect decisions at turning points and other crucial junctures in share price
movements.
Page 16
Factors Influencing Investment Decisions:

The investor has various alternative avenues of investment for his savings
to flow, in accordance with his preferences. Savings are invested in assets
depending mainly on their return, liquidity and risk characteristics. The
prime objective of the investor is to minimise the risk involved in investment
and maximise the return. A security market exists to provide the facilities of
a market place where potential investors can put their money to work,
purchasing securities and those who already own securities can equally
freely and speedily turn them into cash. An effective security market requires
qualities like choice, efficiency and regulation in order attract investors.
A security market exists to provide the facilities of a market place where
potential investors can put their money to work, purchasing securities and
those who already own securities can equally freely and speedily turn them
into cash. An effective security market requires qualities like choice,
efficiency and regulation in order attract investors.
Every individual is different from others due to various factors which
include demographic factors, age, race and sex, education level, social and
economic background; same is the situation with the investors. The most
critical challenge faced by them is the investment decision; they act in a
rational manner and usually follow their instincts and emotional biases while
making investment decisions. The investigation of previous studies reveals
the importance of various psychological factors which affect their investment
decision. Keeping this in view, a study model has been developed to describe
the how the investor takes the various investment avenues available in
market. While taking investment decision he has to consider certain
important factor they are;
1. Return Factor:
Page 17
Genuine investors are those who always try to seek equilibrium between
risk and return. How do investors make an assessment about the return on
securities? What return is expected on an average? It is the expected value of
the return, which is the sum of each possible return multiplied by the chance
of its occurrence. The sum of the chances must add up to one. (Barua, et al
227)
If the return on a security is expected to be r, with a chance of p1 with a
chance of p2, and rn, with a chance of pn, then the overall assessment of
investors is based on the expected value of returns, which is computed as:
Expected Return, E = P1 r1 + P2 r2 +...+ Pn rn
Whereas the overall portfolio return would be the weighted average of
expected return on securities and is computed as:
EP =W, xEl +W2 xE2+...+WnxEn
Where, EP is the expected portfolio return

W1, is the proportion of money invested in security I
E1 is the expected return on security I
W2 is the proportion of money invested in security 2
E2 is the expected return on security 2
Genuine investors, by and large, hold medium and long- term investments
and the return aspect assumes larger importance. There are two types of
security analysis, namely, Technical Analysis and Fundamental Analysis.
The technical analysts believe that important information about future
stock price movements can be obtained by studying the historical price
movement of stock prices. Financial data are recorded on graph paper and
the data are scrutinized in search of respective patterns and then deduced
from that pictured history the probable future trend.
Page 18
Fundamental analysts believe that the true intrinsic value of a security can
be ascertained by studying such items as the company's earnings, its
products, its management, financial statements and other fundamental facts.
The present value of future dividends, computed at an appropriate discount
rate to reflect the real return from the share, is called the intrinsic or
fundamental value of the share. The analysts attempt to find under-priced or
over-priced shares for the investors' investment decisions.
2. Liquidity Factor
A security must possess the attribute of liquidity to be attractive as an
investment for the ordinary investors. Liquidity refers to easy convertibility
without loss. Liquidity of an investment is measured in terms of the speed
and ease with which an investment can be converted in to cash whenever the
investor wants it. Liquid investments give the investor a feeling of security
because they enable one to change one's mind and correct one's mistakes.
A genuine investor is supposed to invest for a relatively long period for
the sake of income as distinguished from a purely trading profit arising from
short-run price fluctuations induced by shifts in market sentiments. A
prudent long term investor would have provided for his immediate cash
needs by holding cash balances and near cash assets like fixed deposits and
only if he has surplus of cash, would he consider it wise to hold long term
investment such as equities. This assumption is in argument with the usual
threefold classification of the motives of holding liquid cash viz., the
transaction motive, the precautionary motive and the speculative motive. If
so, a genuine investor would normally expect moderate liquidity and not
'instant' liquidity.
A prudent investor should be prepared to tide over prolonged periods of
stock market depression, which no amount of liquidity can eliminate. It is the
Page 19
speculator, who wants instant liquidity because he wants to be in and out of a

security during the same day.
3. Risk Factor:
The words 'risk' and ‘uncertainty’ are used inter - changeably. But
technically their meanings are different. Risk suggests that a decision- maker
know possible consequences of a decision and their likelihood at the time he
makes the decision. Uncertainly on the other hand, involves a situation about
which the likelihood of the possible outcomes is not known. On the basis of
the degree of risk perception, investors could be classified into risk takers,
risk averters and risk neutrals.
The risk takers pay more than the expected value of an asset or an
uncertain future and mostly invest in common stocks and convertible
securities. Risk averters show their preference for investments of low risk
and prefer Government securities, insurance policies, unit trust certificates,
etc. Risk neutrals are willing to pay for making an investment provided they
get a return of an equal value. The majority of the investors accept medium
risk.
Securities that have risk and return characteristics of their-own, in
combination makes up a portfolio. Portfolio selection entails choosing the
one best portfolio to suit the risk-return preferences of the investor. And
portfolio management is the dynamic function of evaluating and revising the
portfolio in terms of stated investor objectives (Fischer &Jordan 2).
In academic parlance, the mathematical measure of investment risk is
called ‘beta’. The market as a whole has a `beta ' of one. If a particular stock
has a ‘beta’ of two then it is twice as risky as the market. It means that if the
market goes up by 20 per cent, the stock price rises by 40 per cent, and if the
market falls by 20 per cent, the stock price falls by 40 per cent. High `beta'
stocks are considered more risky than low beta stocks.
Page 20
People who believe that `beta' measures risk, disdain examining what a
company produces or may even prefer not to know the company's name .
The true investor is risk averse but may welcome volatility. The more
volatile a market becomes, the more the opportunities to the value oriented
investor (Bakshi 36).
4. Investment Horizon:
Investment horizon is the total length of time that an investor expects to
hold a security or portfolio. The investment horizon is used to determine the
investor’s income needs and desired risk exposure, which is then used to aid
in security selection.
5. Tax Exposure:
Investors in higher tax brackets prefer such investments where the return
is tax exempt, others will have no such preference.
6. Market Trends:
You need to understand how various asset classes have performed in the
past before planning your finances.
7. Investment Needs:
How much money do you need at the time of maturity? Purpose of
investment also influences the investment decision of investor. Some people
invest their funds in such avenues where they can get tax benefits.
8. Risk Coverage:
A type of insurance coverage that can exclude only risks that have been
specifically outlined in the contract.
Page 21
9. Dependents:
People who relies on another person, especially a family member, for
financial support. More number of dependents have more responsibility
therefore they invest in such avenues which have low risk.
Risk:
The word ‘risk’ has a definite financial meaning. It refers to possibility of
incurring a loss in a financial transaction. In a broad sense, investment is
considered to involve limited risk and is confined to those avenues where the
principal is safe. ‘Speculation’ is considered as an involvement of funds of
high risk. An example may be cited of stock brokers’ lists of securities which
labels and recommends securities separately for investment and speculation
purposes. Risk, however, is a matter of degree and no-clear-cut lines of
demarcation can be drawn between high risk and low risk and sometimes
these distinctions are purely arbitrary. No investments are completely risk
free. Even if it safety of principal and interest are considered, there are
certain non manageable risk which are beyond the scope of personal power.
These are (a) the purchasing power risk-In other words, it is the fall in real
value of the interest and the principal and (b) the money rate risk or the fall
in market value when interest rate rises.
These risks affect both the speculator and the investor. High risk and low
risk are, therefore, general indicators to help and understanding between the
terms investments and speculation.
What causes the risks?

The risks are caused by the following factors:
1) Wrong decision of what to invest in.
2) Wrong timing of investment.
3) Nature of the instrument invested say, the category of assets like
Page 22
corporate shares or bonds, Chit funds, Niches; Benefit funds etc. are
highly risky, as they are in the unorganized sector. Some instruments
as bank deposits or P.O Certificates are less risky, due to their certainty
of payment of principal and interest.
4) Creditworthiness of the issuer: The securities of Government end
semi-Government bodies are more credit worthy than those issued by
the corporate sector and much less secure are those in the unorganized
sector like indigenous bankers, shroffs,chit funds etc, Private limited
companies share and shares of unlisted companies are more risky.
5) Maturity period are length of investment: The longer the period, the
more risky is the investment normally.
6) Amount of investment: The higher the amount invested in any security
the larger is the risk, while a judicious mix of investment in small
quantities may be less risky.
7) Method of investment, namely, secured by collateral or not.
8) Terms of lending such as periodicity of servicing, redemption periods
etc.
9) Nature of the industry or business in which the company is operating.
10) National and international factors, acts of god etc.
Generally there are two types of investment risk they are as follows,
 Systematic Risks
 Unsystematic Risk
I. Systematic Risk:
Systematic Risk is out of external and uncontrollable factors, arising out
of the market, nature of the industry and state of the economy and a host of
other factors. In other words systematic risk refers to that portion of the total
variability of the return caused by common factor affecting the prices of all
Page 23
securities alike through economic, political and social factors.
II. Unsystematic Risks:

Unsystematic Risks emerge out of the known and controllable factors,
internal to the issuer of the securities or companies. In other words
unsystematic risk refers to that portion of the total variability of the return
caused due to unique factors, relating that firm or industry, through such
factors as management failure, labour management failure, labour strikes,
raw material scarcity etc.
While the systematic risk is common to all companies and has to be
borne by the investor and compensated by the risk premium, the systematic
risk can be reduced by the investor through proper diversification and
planning a proper investment strategy for the purpose.
Examples of systemic risk

 Market risk:
This arises out of changes in demand and supply pressures in the
markets, following the changing flow of the information or
expectation. The totality of the investor perception and subjective
factors influence the events in the market which are unpredictable and
give rise to risk, which is not controllable.
 Interest rate risk:

The return on investment depends on the interest rate promised on it
and changes in market rates of interest from time to time. The cost of
funds borrowed by companies or stock broker depends on interest
rates. The market activity and investor perceptions change with the
changes in interest rates. This interest rate depend on nature of
instruments, stocks, bonds, loaned etc maturity of the periods and
Page 24
credit worthryness of the issuer of securities. But basically the

monitory and credit policy, which is not controllable by investor,
affects the riskiness of investments due their effects on returns,
expectations, and the total principal due to be refunded.
 Purchasing power risk:

Inflation or rise in prices led to rise in cost production, lower margins,
wage rises and profit squeezing etc. the expected by the investor will
change due to change in real value of returns. Cost pushed inflation is
caused by rise in the cost, due to wage rise or rise in input prices.
Demand-pull forces operate to increase prices due to inadequate
supplies and rising demand. The increase in demand may be caused by
changing expectation of future interest rates and inflation or due to
increase in money supply or creation of currency to finance deficits of
the government. This element of purchasing power risk is inherent in
all investment and cannot be controlled by him.
Example of unsystemic risks

 Business risk:
This relates to variability of business, sales income, profits etc, which
in turn depend on the market conditions for the product mix, input
supplies, strength of competitors etc. this business risk is some time
external to the company due to changes in government policy or
strategy of competitors or unforeseen market conditions. They may be
internal due to fall in production, labour problem, row material
problem or inadequate supply of electricity etc the internal business
risk leads to fall in revenues and in profits of the company, but can be
corrected by certain changes in the company’s polices.
Page 25
 Financial risk:
This relates to method of financing, adopted by company, high
leverage leading to larger debt serving problems or short term liquidity
problems due to bad debts, delayed receivables and fall in current
asserts or rise in current liabilities. These problems could no doubt to
be solved, but they m may lead to fluctuations in earnings, profits and
dividends to share holders. Sometimes, if the company runs in two
losses or reduced profits, these may lead to fall in returns to investors
or negative returns. Proper financial planning and other financial
adjustments can be used to correct this risk and as such it is
controllable.
 Default or insolvency risk:

The barrower or issuer of securities may become insolvent, or may
default, or delay the payments due, such as interest installments or
principal repayments the barrower’s credit rating might have fallen
suddenly he became default prone and he needs extreme form it may
lead to insolvency or bankruptcies. In such cases the investor may get
no return or negative return. And investment in a healthy company’s
share might turn out to be a waste paper, if within a short span, but the
deliberate mistakes of management or acts of God, the company
became sick and its share price tumbled below its face value.
Other risk:
In addition to the above major risks both in controllable and
uncontrollable categories, there are many more risks, which can be
listed, but in actual practices, they may vary in form, size and effect.
Page 26
Some of such identifiable risks are:

 Political risks:
Political risks, following the changes in government, or its policy
shown in fiscal or budgetary aspects etc., through changes in tax rates,
imposition of controls are administrative regulations etc.
 Management risks:
Management risks, due to errors are inefficiencies of management,
causing losses to the company.
 Marketability risks:
Marketability risks, involving loss of liquidity or loss of value in
conversions from one asset to another say, from stocks to bonds, or
vice versa. Such risky may arise due to some feature of securities,
such as capability; or lack of sinking fund or debenture redemption
reserve fund,, for repayment of principal or due to conversion terms,
attached to security, which may go adverse to the investor.
All the above types of risks are of varying degrees, resulting in
uncertainty or variability of return, loss of income and capital losses,
or erosion of real value of income and wealth of the investor.
Normally the higher risk taken, the higher is the return. But sometimes
the risk is caused by acts of God and there may be no return at all.
Page 27
Investor:
Investor is a person or an organization that money in various investment
sources for specific objective. Attitude of investment is different in each
alternative. E.g. financial market have different attitude towards risk and
return. Some investor is averse, while some have an affinity of risk. The risk
bearing capacity of investor is a function of personal, econopmical,
environment, and situational factors such as income, family size, expenditure
pattern, and age. A person with higher income is assumed to have higher
risk-bearing capacity. Thus investor can be classified as risk skiers, risk
avoiders, or risk bearers.
Categories of investors:
While there are as many investing style as there are investors, most
people fall more or less into one of three broad categories: Conservative,
moderate, aggressive.
 Conservative investors:
Generally, conservative investor feel that safeguarding what they have is
their top priority. These investors want to avoid risk-particularly the risk of
losing any principal (their original investment)- even if that means they’ll
have to settle for very modest returns.
Conservative investors allocate most of their portfolios to bonds, such as
treasury notes or high-rated municipal bonds, and cash equivalents, such as
CDs and money market accounts. They’re generally reluctant to invest in
stocks, which may lose value, especially over the short term. When
conservative investors do venture into stocks they’re often inclined to choose
blue chips or other large-cap stocks with well-known brands because they
tend to change value more slowly than other types of stock and often pay
dividend income.
Page 28
 Moderate investors:
Moderate investor wants to increase the value of their portfolios while
protecting g their assets from the risk of major losses.
For example, a moderate investor might use an allocation model that has
60% in stock, 30% in bonds, and 10% in cash equivalents. While they will
tend to favor blue chip and other large-cap stocks, they may be willing to
invest a modest portion of their principal in higher risk securities-such as
international stock, small-caps, and volatile sector funds-in order to increase
their potential for higher returns.
 Aggressive investors:
Aggressive investors concentrate on investments that have the potential
for significant growth. They are willing to take the risk of losing some of
their principal, with the expectation that they will realize greater returns.
Aggressive investors might allocate from 75 to 95% of their portfolios to
individual stocks and stock mutual funds. While large and small-cap stocks
and funds may make a long-term commitment to the stocks they buy. But
history has shown that an aggressive investing approach, combined with a
well diversified portfolio, and the patience to stick to a long-term buy-and-
hold investing strategy through inevitable market downturns, can be the most
profitable in the long run.
Page 29
INVESTMENT AVENUES IN INDIA:

Saving means not spending all of your current income on consumption.
Investing on the other hand is choosing what assets to hold. We may choose
to invest in safe assets, risk assets, or a combination of both. In the common
usage, however, the term saving is often take to mean investing in safe asset
such as an insured bank account. It is easy to confuse saving with safe
investing. An investor’s portfolio is simply his collection of investment
assets. Once the portfolio is established, it is updated or rebalanced by
selling existing securities and using the proceeds to buy new securities, by
investing additional funds to increase the overall size of the portfolio, or by
selling securities to decrease the size of the portfolio.
Investment is the sacrifice of certain present value for the uncertain
future reward. It entails arriving at numerous decisions such as type, mix,
amount, timing, grade etc. of investment and disinvestment. Further, such
decision making has not only to be continuous but rational too. Broadly
speaking, an investment decision is a tradeoff between risk and return. All
investment choices are made at points of time in accordance with the
personal investment ends and in contemplation of an uncertain future. Since
investments in securities are revocable, investment ends are transient and
investment environment is fluid, the reliable bases for reasoned expectations
become more and vaguer as one conceives of the distant future. Investors
insecurities will, therefore, from time to time, reappraise and re-evaluate
their various investment commitments in the light of new information,
changed expectations and ends.
Traditionally, investment is defined as the current commitment of
resources in order to achieve later benefits. If resources and benefits take the
form of money, investment is the present commitment of money for the
purpose of receiving money later. In some cases, such as the purchase of a
bank certificate of deposit, the amount of money to be obtained later is
Page 30
known exactly. However, in most situations the amount of money to be

obtained later is uncertain. There is no broader view point of investment –
based on the idea of flows of expenditures and receipts spanning a period of
time. From this view point, the objective of investment is to tailor the pattern
of these flows over time to be as desirable as possible. When expenditures
and receipts are denominated in cash, the net receipts at any time period are
termed cash flow, and the series of flows over several periods is termed a
cash flow stream.
The investment objective is that of tailoring this cash flow stream to be
more desirable than it would be otherwise. There is also an art to investment.
Part of this art knows what to analyse and how to go about it. However, there
is also an intuitive art of being able to evaluate an investment from an
assortment of qualitative information, such as personality characteristics of
the people involved, whether a proposed new product will sell well and so
forth.
The word investment has many interpretations. It means different things
to different persons. For a person who has lent money to another, it may be
an investment for a return. Similarly, if a person purchases shares of a
company, bullion or real estate for the purpose of price appreciation, it is
also an investment for him. Likewise, an insurance plan or a pension plan is
an investment to its purchaser. From these illustrations, it is clear that
investment is a commitment of funds for earning additional income. In other
words, investment is considered the sacrifice of certain present value of
money in anticipation of reward.
Investment is parting with one’s fund, to be used by another party or user
of fund for productive activity. It can mean giving an advance or loan or
contributing to the equity (ownership capital) or debt capital of a corporate
or non corporate business unit. Generalized, investment means conversion of
savings, parting with saving or liquidity and lastly taking a risk involving
Page 31
uncertainty about the actual return, time of waiting and cost of getting back
funds, safety of funds, and risk of the variability of return. For making
proper investment involving both risk and return, the investor has to make a
study of the alternative avenues of investment their risk and return
characteristics and make proper projection or expectations of his preferences.
Investing is a term with several closely-related meanings in business
management, finance and economics, related to saving or deferring
consumption. An asset is usually purchased, or equivalently a deposit made
in a bank, in hopes of getting a future return or interest from it.
“An investment is a commitment of funds made in the expectation of
some positive return. If the investment is properly undertaken, the returns
will be commensurate with the risk the investor assumes” – (Donald
E.Fischer and Ronald J.Jordon).
Investment is “the purchase by an individual or institutional investor of a
financial or real asset that produces a return in proportion to the risk assumed
over some future investment period” – (F.Amling).
Classification of Investments:
Investment can be classified as financial investment and economic
investment.
Financial Investment: It means employment of funds in the form of assets

with the object of earning additional income or appreciation in the value of
investment in future. Assets which are the subject matter of investment may
be varying between safe and risky ones.
Economic Investment: Economic investment is different from financial

investment. The term ‘economic investment’ signifies net additions to the
capital stock of the society. Capital stock of the society in turn, means those
Page 32
goods and services which are used in the production of goods and services
which are used in the production of other goods and services.
FACTORS DETERMINING INVESTMENT:

The activities related to investment consist of acquisition of assets, their
maintenance and the liquidation of assets. A good investment should
facilitate these investment activities and foster their growth. There are certain
factors which are conducive to the growth of investment. As investment is
the result of savings, the government should introduce adequate measures to
encourage savings accumulation. The rights of the investors who have
invested their surplus in assets should be protected against any possible
infringement.
a) Well organized monetary system:

The existence of a well organized monetary system is essential for the
growth of the investment market. Investment consists of channelization of
surplus funds in specific form of assets. Payment for these assets in terms of
currency of the country calls for the existence of a proper monetary policy.
Such a policy should protect the investments against the evil effects of
inflation. In fact, it should generate a stable price level, which in turn will
contribute to a disciplined investment market.
b) Role of financial institutions:

Financial institutions mobilize savings and channelize them for
productive use in industry. There are two types of financial institutions in the
Indian capital market, namely developmental institutions and investment
institutions. Developmental institutions include IDBI, IFCI, ICICI, etc.,
which have been organized on an all India basis and state level bodies such
as State Finance and Development Corporations. The national level bodies
Page 33
provide assistance to all India projects and regional projects. The state level
bodies promote industrial growth in the respective states. Investment
institutions include UTI, LIC, and GIC etc. Apart from these, commercial
banks accept deposits from the public and make them available for
productive use. These financial institutions encourage capital formation
which is essential for savings and investment.
c) Forms of business organization:

Most of the businesses are organized in the form of joint stock
companies. Perhaps the public limited companies are regarded as the most
useful form for the perpetual succession and free transferability of shares.
Other forms of organizations such as sole proprietorship carry unlimited
liability. Further, the life of sole proprietary concerns and partnership firms
are comparatively short. Proprietary concern may come to an end on the
death of the proprietor. Similarly, events such as death, retirement and
insanity of partners may result in dissolution of the firm. So, investors do not
wish to invest in these unstable forms of business. The partnership firms are
unstable, they also restrict free transferability of investment in them from
one person to another. In view of these constraints in these forms of
organization, investors prefer to invest in the wide range of securities offered
by joint stock companies.
d) Macro – Household Savings and Investment:

As per the RBI data, published from time to time total financial savings
and physical assets held by households are available for discussion. During
recent years the data shows that the net investments in financial assets and
net physical assets are in the ratio of about 45% and 55%, respectively.
Page 34
e) Modes of Investment:
There are different types of securities conferring different sets of rights
on the investors and different sets of conditions under which these rights can
be exercised. The various avenues for investment, ranging from risk less to
high risk investment opportunities consist of both security and non security
forms of investment. All securities listed below are marketable.
1. Private Sector
2. Life Insurance Policies
3. Post Office savings bank accounts:
a) Recurring
b) Time
c) Monthly Income Scheme
d) Senior citizen savings scheme
4. Real Estate Investment
5. Gold, Silver
6. Others:
a) Kisan Vikas Patra
b) Chits, Nidhis etc
f) Objectives of Investment:
The options for investing and savings are continually increasing, yet
every single investment vehicle can be easily categorized according to three
fundamental characteristics - safety, income and growth - which also
correspond to types of investment objectives. While it is possible for an
investor to have more than one of these objectives, the success of one must
come at the expense of others. The objectives of investment are listed below:
Page 35
i) Safety:
Perhaps there is truth in the axiom that there is no such thing as a
completely safe and secure investment. Yet one can get close to ultimate
safety for our investment funds through the purchase of government-issued
securities in stable economic systems, or through the purchase of the highest
quality corporate bonds issued by the economy's top companies. Such
securities are arguably the best means of preserving principal while receiving
a specified rate of return. The safest investments are usually found in the
money market and include such securities as Treasury bills (T-bills),
certificates of deposit, commercial paper or bankers' acceptance slips; or in
the fixed income (bond) market in the form of municipal and other
government bonds, and in corporate bonds. The securities listed above are
ordered according to the typical spectrum of increasing risk and, in turn,
increasing potential yield. To compensate for their higher risk, corporate
bonds return a greater yield than T-bills.
ii) Income:
However, the safest investments are also the ones that are likely to have
the lowest rate of income return or yield. Investors must inevitably sacrifice
a degree of safety if they want to increase their yields. Here is an inverse
relationship between safety and yield: as yield increases, safety generally
goes down, and vice versa. Most investors, even the most conservative-
minded ones want some level of income generation in their portfolios, even
if it's just to keep up with the economy's rate of inflation. But maximizing
income return can be an overarching principle for a portfolio, especially for
individuals who require a fixed sum from their portfolio every month. A
retired person who requires a certain amount of money every month is well
served by holding reasonably safe assets that provide funds over and above
other income-generating assets, such as pension plans.
Page 36
iii) Growth of Capital:

This refers to the considered the potential of assets to provide a rate of
return from an increase in value, often referred to as a capital gain. Capital
gains are entirely different from yield in that they are only realized when the
security is sold for a price that is higher than the price at which it was
originally purchased. (Selling at a lower price is referred to as a capital loss.)
Therefore, investors seeking capital gains are most likely not those who need
a fixed, ongoing source of investment returns from their portfolio, but rather
those who seek the possibility of longer-term growth. Growth of capital is
most closely associated with the purchase of common stock, particularly
growth securities, which offer low yields but considerable opportunity for
increase in value. For this reason, common stock generally ranks among the
most speculative investments, as their return depends on what will happen in
an unpredictable future. Blue-chip stocks, by contrast, can potentially offer
the best of all worlds by possessing reasonable safety, modest income and
potential for growth in capital generated by long-term increases in corporate
revenues and earnings as the company matures. Yet rarely is any common
stock able to provide the near-absolute safety and Income-generation of
government bonds.
iv) Tax Minimization:

An investor may pursue certain investments in order to adopt tax
minimize taxes as part of his or her investment strategy. A highly paid
executive, for example, may want to seek investments with favorable tax
benefits in order to lessen his or her overall income tax burden. Making
contributions to tax-sheltered retirement plan can be an effective tax
minimization strategy.
v) Marketability/Liquidity:
Page 37
Many of the investments discussed are reasonably illiquid, which means

they cannot be immediately sold and easily converted into cash. Achieving a
degree of liquidity, however, requires the sacrifice of a certain level of
income or potential for capital gains. Common stock is often considered the
most liquid of investments, since it can usually be sold within a day or two
of the decision to sell. Bonds can also be fairly marketable, but some bonds
are highly illiquid, or non-tradable, possessing a fixed term. Similarly,
money market instruments may only be redeemable on the precise date at
which the fixed term ends. If an investor seeks liquidity, money market
assets and nontradable bonds aren't likely to be held in his or her portfolio. In
brief, choosing a single strategic objective and assigning weightings to all
other possible objectives is a process that depends on such factors as the
investor's temperament, his or her stage of life, marital status, family
situation, and so forth. Out of the multitude of possibilities out there, each
investor is sure to find an appropriate mix of investment opportunities.
g) Sources of Investment Information:

A lookout for new investment opportunities helps investors to beat the
market. Investors can gather the required information from many sources.
Most often investment information is available from the following categories
 Institutions floating financial securities: Corporate houses,
Government bodies and mutual funds are the main sources of
investment information. Many of these enterprises have their own
websites and post investment related information on the site.
 Financial markets: Stock exchanges and regulatory bodies also
provide information useful for making their investment decisions.
With reference to the secondary market, the SEBI uses various modes
to promote investor education and takes great efforts to achieve an
investor friendly secondary market in India. The RBI also provides
Page 38
useful information relating to the prevalent interest rates on non-

banking financial intermediaries that mobilize money through deposit
scheme.
 Financial service intermediaries: Intermediaries promote securities
among the public.Many of these intermediaries are agencies of
specific instruments, especially tax savings instruments. These
intermediaries offer to share their commission from the concerned
organization with the individual investors. Thus, investors get an
additional advantage while investing through intermediaries.
 Media: Press sources, such as financial newspapers, financial
magazines, internet web sites, and so on, provide investment
information to the public. In addition to information on securities,
these sources also provide, to some extent, an analysis of information
and, in certain instances, suggest suitable investment decisions to be
made by the investors. Investment advices, especially in media, tend
to behave erratically and might result in herd behavior in the market.
Herd behavior does not lead to profitable investment decisions,
especially to small investors, who would benefit a lot by
understanding and analyzing information on their own.
h) Investment Process:
Generally the investment process can be analysed in four stages namely,
i) Investment Policy ii) Investment analysis iii) Valuation of securities and
iv) Portfolio construction.
i) Investment policy: The first and foremost stage in the investment process
is the preparation of a suitable investment policy. Before investing, the
investor should carefully decide the objectives of investment. The objectives
of investment may relate to return, capital appreciation, safety, liquidity,
Page 39
hedge against inflation and tax planning. So, the investor should be aware of
the available options and their potential to fulfil his investment objectives.
Practically, no two investments are totally identical in their capacity to fulfil
an investor’s expectations. Only through an evaluation of objectives, the
investor can realize his objectives. If the investor stresses liquidity and safety
of investment, he should compromise on potential return. When investor’s
wealth is growing and when he also becomes liable to taxation, tax saving
investments are advisable for him.
ii) Investment analysis: After formulating the investment policy and

deciding on the securities to be bough, the investor should take up an
investment analysis. He should scrutinize the securities by anlaysing the
securities, the investor should take into consideration a) the type of industry,
b) kind of security c) the nature of income from security. The investment
analysis also involves a detailed study on the future behavioural pattern of
prices and stock, expected returns and risks.
iii) Valuation of securities: The third important step in the process of

investments is valuation of securities. Valuation helps the investor to know
more about the return and risk expected from an investment. The valuation
of securities is done in terms of future benefits from investments. Future
value of securities may be determined with the help of a simple statistical
technique such as trend analysis. The analysis of behaviour of price in the
past helps predict the future value. However, the intrinsic value of securities
such as shares is determined through the book value of shares and price
earnings ratio. Recently, the stock market analysts have developed certain
advance models to value the shares. Only after valuing each asset on its
individual merit, the portfolio can be constructed.
iv) Construction of Portfolio: Generally speaking, a portfolio is a
Page 40
combination of securities. The objective of portfolio construction is to realize

the investor’s goals and objectives. Construction of portfolio calls for a
thorough knowledge of securities. Modern portfolio theory involves a more
scientific approach. It is based on estimates of risk and returns of portfolio
and the attitude of the investor towards a risk return pattern.
INVESTMENT AVENUES FOR EMPLOYEES:

Many individuals find investments to be fascinating because they can
participate in the decision making process and see the results of their
choices. Not all investments will be profitable, as investors do not always
make the correct investment decisions. Investing is not a game but a serious
subject that can have a major impact on the investor's future well
being.virtually everyone makes investments. Even if the individual does not
select specific assets such as stock, investments are still made through
participation in pension plan, and employee saving programme or through
purchase of life insurance or a home or plot. All these investments have
common characteristics such as potential return and risk. The future is
uncertain, and one must determine how much risk a person is willing to bear
since higher returns are associated with accepting more risk.
The individual should start by specifying investment goals. Once these
goals are established, one should be aware of the mechanics of investing and
the environment in which investment decisions are made. These include the
process by which securities are issued and subsequently bought and sold, the
regulations and tax laws that have been enacted by various levels of
government, and the sources of information concerning investment avenues
that are available to the individual. An understanding of this financial
background leads to three important general financial concepts that apply to
investing. Today the field of investment is even more dynamic than it was a
decade ago. World events rapidly change and alter the value of specific
Page 41
assets. The individual has so many assets to choose from, and the amount of
information available to the investors is staggering and continually growing.
Furthermore, inflation has served to increase awareness of the importance of
financial planning and wise investing. Important fallout one can expect due
to rising inflation is higher interest rates. The central banks aims to reduce
demand in the economy by raising the cost of money. When making fresh
investments or evaluating existing holdings in potentially inflationary times
one has to keep two things in mind, the possibility of higher interest rates
and the erosion in the value of the currency. It is an added advantage that
conventional investments help us save on tax. Section 80C and 80CCF and
that we provide for tax deduction on certain investments such as the
Employees' Provident Fund (EPF), Public Provident Fund (PPF), Unit
Linked Insurance Plan (ULIP), National Savings Certificate (NSC), Tax
saver Bank Deposits (FD) and Equity Linked Saving Scheme (ELSS)
Insurance products and the like. Apart from providing decent and stable
returns these savings options also help to plan and save tax. However, the
aggregate of deductions under section 80C and 80CCC cannot exceed
Rs.100,000. There are number of investment avenues available. They are as
follows :
I. Employees Provident fund:

It includes the following benefits.
a) PF Benefits
b) Pension Benefits
a) Provident Fund benefits:
 Employer also contributes to Members PF @ 12% (10% in case of
certain companies).
 EPFO guarantees the Employer contribution and credits interest at
such rates as determined by the Central Government.
Page 42
 Member can withdraw from these accumulations to cater to financial

exigencies in life - No need to refund unless misused.
 On resignation, the member can settle the account. i.e., the member
gets his PF contribution, Employer Contribution and Interest.
b) Pension Benefits:
i. Pension to Member
ii. Pension to Family (on death of member)
iii. Scheme Certificate:
 This Certificate shows the service & family details of a member
 This is issued if the member has not attained the age of retirement
while leaving an establishment and applies for this certificate
 Member can surrender this certificate while joining another
establishment and the service stated in the certificate is added with the
service one is gaining from the new establishment.
 After attaining the age of 50 or above, the member can apply for
Pension by surrendering this scheme certificate (if total service is
atleast 10 years).
 This is a better choice than Withdrawal Benefit, as members dies
holding a valid scheme certificate, his or her family will get pension
(Death when not in service).
iv. Withdrawal Benefit
 Member may withdraw the amount accumulated in his or her pension
account subject to certain conditions.
 The calculation of this amount is based only on (i) Last average salary
and (ii) Service (Not based on actual amount available in Pension
Fund Account).
II. Public Provident Fund: (PPF)

Under PPF the duration is 15 years, the rate of interest for investment is
8%. It can be done in any Head post office or selection grade sub post office
or in any nationalized bank. Any individual above 18 years can invest in PPF
Page 43
schemes. The amount invested must be minimum of Rs.500/- and maximum

of Rs.70, 000 p.a. One can avail loan from the 3rd year to 6th year upto 25%
of the amount available in the preceeding second year, one withdrawal
during any one year at any time after 6 years. The amount of withdrawal is
limited upto the 50% of the balance on credit. Nomination facility is
available. Interest is fully exempted from tax. Balance in the PPF account is
completely exempted from wealth tax. The account can be extended for any
block period of 5 years; the entire interest income earned is exempt from tax.
Investment in EPF can be made by way of a monthly contribution from
salary. The amount contributed is 12% of the total of basic salary and
dearness allowance. Over and above this 12%, some companies allow their
employees, with certain ceilings (a certain amount above which money can't
be invested), to contribute an additional amount towards EPF. EPF serves as
a retirement planning tool for many of those who do not have any structured
pension plan covering them. The account can be opened by an individual in
his own name, on behalf of a minor of whom he is a guardian, or by a Hindu
Undivided Family. Maximum number of deposits is twelve in a financial
year. The account matures for closure after 15 years. Account can be
continued with or without subscriptions after maturity for block periods of
five years. Premature withdrawal is permissible every year after completion
of 5 years from the end of the year of opening the account. Loans from the
amount at credit in PPF amount can be taken after completion of one year
from the end of the financial year of opening the account and before
completion of the 5th year.
III. Unit Linked Insurance Plan:

Unit linked insurance plan (ULIP) is a life insurance solution that
provides for the benefits of protection and flexibility in investment. The
investment is denoted as units and is represented by the value that it has
Page 44
attained called as Net Asset Value (NAV). The policy value at any time
varies according to the value of the underlying assets at the time. There are a
variety of insurance products available. The traditional plans such as money
back, cash back, endowment, whole life, children’s plans are considered
relatively safe. However, the returns thereon vary between 4% per annum to
6% per annum. For most of these plans premium has to be paid monthly,
quarterly, semi-annually or annually during the term of the policy. The risk
categorization of ULIPs depends on the type of fund opted for. The fund that
invests its corpus mainly in equity (stocks) is considered riskier while the
one investing chiefly in bonds/debentures is considered relatively safer. The
riskier funds offer potential for high returns while safe funds offer moderate
returns. Tax deduction can be claimed on the premium paid in respect of life
insurance policy of self, spouse or children. If the annual life insurance
premium were more than 20% of the sum assured then the deduction would
be restricted to 20% of the sum assured. The death benefits of the life
insurance policy are exempt from tax. If the annual insurance premium does
not exceed 20% of the sum assured, the survival benefits are also exempt
from tax under section 10(10D) of the Income Tax Act. ULIP provides
multiple benefits to the consumer. The benefits include:
 Life protection
 Investment and Savings
 Flexibility
 Adjustable Life Cover
 Investment Options
 Transparency
 Options to take additional cover against
 Death due to accident
 Disability
 Critical Illness
 Surgeries
 Liquidity
 Tax planning
Page 45
IV. Life Insurance:

Life insurance is a contract for payment of a sum of money to the person
who is insured with the insurance company on the happening of even insured
against. Generally, it is a contract between the insurance company and the
insured for a number of years. Though the primary aim of taking a life
insurance policy is coverage of risk, of late, the policy partakes all the
characteristics of an investment. The annual bonus which is accruing to the
policy holders gets accumulated into a substantial amount over a period of
time. The important advantages of life insurance are,
i) Protection: The contract for life insurance provides for the payment of an
amount on the date of maturity or on the death of policy holder, which ever
is earlier. Thus, life insurance provides a protection against risk of early
death. If a person dies before the maturity of the policy, the insurance
corporation undertakes to pay the assured sum to the representative of the
deceased.
ii) Facility for savings: Life insurance contract facilitates mobilization of
savings from among the investors. The insured pay the premium in easy
installments such as monthly, quarterly, half yearly or yearly. To ensure
convenience to the salaried class, the insurance company offers the salary
savings scheme. Provision for easy payment of premium encourages people
to take insurance cover.
iii) Liquidity: The investment in the form of insurance policy is considered
to be liquid as it can be surrendered with the insurance company at a pre
determined value, depending upon the amount of insurance premium paid so
far. However, such a surrender of policy with the insurance company results
in loss to the policy holder. Another advantage is that a policy holder can
avail a loan against the policy from the insurance company. The interest
charged by the company for such a loan is nominal.
iv) Tax benefits: The assessees who are liable to pay income tax can reduce
Page 46
their tax liability by making investments in the form of insurance policies.

The premium paid by the policy holder qualifies for rebate from income tax
under section 88. Moreover, the amount deposited under an annuity plan of
the Life Insurance Corporation by the individual tax payer is deductible from
gross total income, subject to a maximum of Rs.10, 000.
V. Post Office Schemes:

Generally, post office schemes are also like the commercial bank
schemes. Originally institutions called trustee savings banks were operating
the savings bank account. These institutions became extinct gradually and
the postal department took up the task of providing a facility to save through
their post savings accounts. As this account became popular, the Government
of India could collect crores of rupees through this account. Apart from this
savings bank account, post office offers various schemes which prove to be
attractive for the investors who attach utmost importance to safety aspect.
i) Post Office Monthly Income Scheme (POMIS): Under the post office
monthly income scheme, an individual can invest between Rs.1, 000 and
Rs.3, 00,000 or jointly by two individual’s upto Rs.6, 00,000. The period
of deposit is 6 years and this scheme carries benefit in the form of
interest at 8% and 10% bonus at the time of maturity of deposit amount.
The investor is also entitled to tax benefit in the form of deduction under
section 80L in respect of interest earned by him.
ii) National Savings Certificates: National Savings Certificates, popularly
known as NSC, is a time-tested tax saving instrument that combines
adequate returns with high safety. National Savings Certificates can be
purchased by the following:
 An adult in his own name or on behalf of a minor,
 A minor,
 A trust
 Two adults jointly,
 Hindu Undivided Family
Page 47
National Savings Certificates are available in the denominations of Rs.

100, Rs500, Rs. 1000, Rs. 5000, & Rs. 10,000. There is no maximum limit
on the purchase of the certificates. Period of maturity of a certificate was six
years. Presently, maturity value of a certificate of Rs. 100 denomination is
Rs. 160.10. Maturity value of a certificate of any other denomination is at a
proportionate rate. Premature encashment of the certificate is not permissible
except at a discount in the case of death of the holder(s), forfeiture by a
pledge and when ordered by a court of law. National Savings Certificates
(NSC) is also a very safe investment avenue. The certificate has a maturity
period of 6 years. The current interest rate is 8.16% per annum. The interest
rate is fixed in a sense that subsequent changes to the interest rates do not
affect the investment. That is, any increase/decrease in interest rates will not
have any impact on investment or interest earned. One major drawback of
NSC is that the interest is taxable. If a person is in the highest tax bracket
then the post-tax return could be as less as 5.44% per annum instead of
8.16%. NSCs’ can be purchased at any post office. Section 80C also allows
deduction on earned interest on NSC during the first five years. However, no
deduction on accrued interest is available in the year in which the NSC
matures. Interest accrued on the certificates every year is liable to income tax
but is deemed to have been reinvested. Income Tax rebate is available on the
amount invested and interest accruing under Section 88 of Income Tax Act,
as amended from time to time.
iii) Recurring Deposit: The Recurring deposit account can be opened at any
post office Period of maturity of account is 5 years. Sixty equal monthly
deposits shall be made in an account in multiples of Rs. 5 subject to a
minimum of ten rupees. Premature closure of accounts is permissible after
expiry of three years. In case of premature closure of account, the interest at
the rate applicable to post office savings account shall be payable.
iv) Kisan Vikas Patra (KVP): It is a popular scheme operated by post
Page 48
offices. This has a face value of Rs.100, Rs.1, 000, Rs.5, 000 and Rs.10, 000
and gives compound interest. The investment doubles in 8 years and 7
months. The encashment of the Kisan Vikas Patra is permitted after the
holding period of 2 years and 6 months. Individuals and trusts can purchase
these investments and these instruments are not transferable from one person
to another.
v) Post Office Time Depostis (POTD): Fixed deposits are accepted by Post
offices for a period varying between 1 and 5 years. Depending upon the
period of deposit, the interest offered by the POTD varies between 6.25%
and 7.50%. (1st year 6.25%, 2nd year 6.50%, 3rd year 7.25% and 4th year
7.50%).
vi) Deposit schemes for retired Govt. employees or Public sector
undertaking (DSRGE /DSRPSU): Under the above scheme, the retired
employees from Govt. Service and Public sector undertakings can open an
account in certain nationalized banks like SBI, situated in the district
headquarters. It carries an interest of 7% and Retirement benefits can be
invested within 3 years from the date of retirement.
Savings schemes for Senior Citizens: The Government of India has

introduced a new Savings scheme for senior citizens. The salient features of
the scheme are as follow:
a) Person who have attained 60 years of age are eligible to join the
scheme.
b) Person who have availed voluntary retirement scheme (VRS) are also
eligible to join the scheme.
c) The amount of investment may vary between Rs. 1,000 and Rs.
15,00,000.
d) The scheme carries a rate of interest of 9% per annum. The due dates
for payment of interests are March 31, June 30, September 30 and
Page 49
December 31,
e) The deposit amount matures after the expiry of 5 years. However, the
period of deposit can be further extended by another 3 years.
f) The deposit account is transferable from one post office to another.
VI. Equity Linked Savings Schemes:

Investing in ELSSs gets investors a tax rebate for the amount invested.
ELSSs are growth mutual funds, with a lock in period of three years. ELSSs
have a risk higher than PPF and NSC’s; however, they have the potential to
yield higher returns5. Equity Linked Saving Schemes (ELSS) is an
investment option that provides tax saving benefits as well as capital gains.
Now, the investor can invest in ELSS Rs.1, 00,000/- under Section 80C.
These schemes have a lock-in period of three years. Hence the investor is
benefited the most as he gets good returns by investing periodically. The
reasons for choosing ELSS were money is invested over a longer period as
the ELSS funds have a lock-in period of three years.
 Better returns are achieved as the investment in equity is over a long-
term and it prevents unnecessary withdrawals.
 Apart from tax savings, the investor receives Capital gains or high
returns.
 Small amounts even Rs.500 can be invested in ELSS through
Systematic Investments plan.
 Involves less risk - Investing in ELSS, one cannot run away from
equity market risk as equity market is very volatile and fluctuating.
One option to minimize risk is to invest in Diversified funds and
another option is to trust the fund manager for Systematic Investments
Plan.
 Dividends that are earned are tax free.
Systematic Investment Plan in ELSS:
Page 50
There are very beneficial for an investor as one can invest as low as
Rs.500/- per month in ELSS through the Systematic Investment Plan. The
theory of SIP is that it makes sure that the investor buys more when the
market is declining and buys less when the market value is rising. The main
reason behind the success of SIP route is that if an investor does not want to
buy when the market is falling, he cannot back out from the market. The
investor who has faith in SIP always lands up in profit. Normally, one will
not buy when the market is falling and he or she might end up buying more
when the market is at peak. This results in his or her buying at high rate and
selling at low rate and thus he or she ends up in loss. So one should continue
with SIP irrespective of the market rise or fall.
Mutual Fund Problem - The Fund Manager is a human being and so
liable mistakes he might not always select the best stocks.
 Commissions - Fund Manager is trying to help the investor so he will
charge some commission. Even if the Fund Manager makes the
investor invest in the best funds, the investor has to pay high
commissions and this reduces the profits of the investor.
 A Fund Manager cannot perform better than the market, hence might
miss out on one year and if that happens to be the last year, the
maturity value will be reduced. Investor might invest fewer amounts
every year but has to pay commission to the Fund manager and there
is no guarantee that it will perform better next year.
 Apart from the Fund Manager the Investor also has to learn the
market changes, and then alone he will be able to do profit and loss
calculations.
 The investor might land up in the worst performing ELS Scheme. In
that case the investor might not be interested in tax savings and
capital gain, and would want the principal amount to be given back.
 There is always a risk involved when the market goes down.
Page 51
Advantages of ELSS:
 Maturity period of NSC is 6 years and PPF is 15 years while that of
ELSS is 3 years. So with a lesser lock-in period, one can withdraw the
amount
 Earning potential is very high as it is an equity linked scheme.
 Investor gains money during the lock-in period and also has the
option of dividend.
 Systematic Investment Plan is a part of ELSS.
 Accident death cover insurance is offered in some ELSS funds.
 NSC and PPF gives return of 8% and ELSS gives return of 30-40%.
VII. Savings bank account:

 Commercial banks like ICICI, HDFC, co-operative banks like
COSMOS, public sector banks like SBI, IOB etc and postal
departments accept deposits by way of opening savings bank account
with them. The savings account is generally opened in bank by
salaried persons or by the persons who have a fixed regular income.
This facility is also given to students, senior citizens, pensioners, and
so on. Savings accounts are opened to encourage the people to save
money and collect their savings. In India, savings account can be
opened by depositing Rs.100 to Rs.5000. The savings account holder
is allowed to withdraw money from the account as and when required.
The interest which is given on savings account is sometime attractive,
but often nominal. At present, the rate of interest ranges between 4 to
6% per annum in India. The interest rates vary as per the amount of
money deposited in the savings bank account, scheme opted, and its
maturity range. It is also subject to current trend of banking policies in
the country. The features of savings account are
 The main objective of savings account is to promote savings.
Page 52
 There is no restriction on the number and amount of deposits.

However in India, mandatory PAN details are required to be furnished
for doing cash transactions exceeding Rs.50, 000.
 Withdrawals are allowed subject to certain restrictions.
 The money can be withdrawn either by cheque or withdrawal slip of
the respective bank.
 The rate of interest payable is very nominal on savings accounts.
 Savings account is of continuing nature. There is no maximum period
of holding.
 A minimum amount has to be kept in savings account to keep it
functioning.
 No loan facility is provided against savings account.
 Electronic clearing system (ECS) or e-banking are available to pay
electricity bill, telephone bill, and other routing household expenses.
 Generally equated monthly installments (EMI) for housing loan,
personal loan, car loan etc., are paid through savings bank account.
The advantages of savings account are as follows:
 Savings account encourages savings habit among salary earners and
others who have fixed income.
 It enables the depositor to earn income by way of savings bank
interest.
 Savings account helps the depositor to make payment by way of
issuing cheques.
 It shows income of salaried and other persons earned during the year.
 Savings account passbook acts as an identity and residential proof of
the account holder.
 It provides a facility such as Electronic fund transfer (EFT) to other
people’s accounts.
 It helps to do online shopping via facility like internet banking.
 It aids to keep records of all online transactions carried on by the
account holder.
 It provides immediate funds as and when required through ATM.
 The bank offers number of services to the savings account holders.
VIII. Fixed Deposits:

Page 53
A fixed deposit is meant for those investors who want to deposit a lump
sum of money for a fixed period starting from a minimum period of 15 days
to five years and above, thereby earning a higher rate of interest in return.
The investor gets a lump sum (principal + interest) on the maturity of the
deposit. Bank fixed deposits are one of the most common savings scheme
open to an average investor. Fixed deposits also give a higher rate of interest
than a savings bank account. The facilities vary from bank to bank. Some of
the facilities offered by banks are overdraft facility on the amount deposited,
premature withdrawal before maturity period (which involves a loss of
interest) etc. Bank deposits are fairly safe because banks are subject to the
control of the Reserve Bank of India.
Features:
Bank deposits are fairly safe because banks are subject to the control of
the Reserve Bank of India (RBI) with regard to several policy and
operational parameters. The banks are free to offer varying interests on fixed
deposits of different maturities. Interest is compounded once in a quarter,
leading to a somewhat higher effective rate. The minimum deposit amount
varies with each bank. It can range from as low as Rs.100 to an unlimited
amount with some banks. Deposits can be made in multiples of Rs.100/-.
Before opening a FD account, it is good to check the rates of interest in
different banks for different periods. It is advisable to keep the amount in
five or ten small deposits instead of making one big deposit. In case of any
need for premature withdrawal then only one or two deposits need be
prematurely encashed. The loss sustained in interest will, thus, be less than if
one big deposit were to be encashed or it is better to borrow. Check deposit
receipts carefully to see that all particulars have been properly and accurately
filled in. The thing to consider before investing in an FD is the rate of
interest and the inflation rate. A high inflation rate can simply chip away real
Page 54
returns.
Returns:
The rate of interest for Bank Fixed Deposits varies between 4 and 11 per
cent, depending onthe maturity period (duration) of the FD and the amount
invested. Interest rate also varies between banks. A Bank FD does not
provide regular interest income, but a lump-sum amount on maturity. Some
banks have facility to pay interest every quarter or every month, but the
interest paid may be at a discounted rate in case of monthly interest. The
Interest payable on Fixed Deposit can also be transferred to the Savings
Bank or Current Account of the customer. The deposit period can vary from
15days to 10 years.
Advantages:
Bank deposits are the safest investment after Post office savings because
all bank deposits are insured under the Deposit Insurance & Credit
Guarantee Scheme of India. It is possible to get loan up to 75- 90% of the
deposit amount from banks against fixed deposit receipts. The interest
charged will be 2% more than the rate of interest earned by the deposit, with
effect from A.Y. 1998-99, investment on bank deposits, along with other
specified incomes, is exempt from income tax up to a limit of Rs.12, 000/-
under Section 80L. Also, from A.Y. 1993-94, bank deposits are totally
exempt from wealth tax. The 1995 Finance Bill Proposals introduced tax
deduction at source (TDS) on fixed deposits on interest incomes of Rs.5000/-
and above per annum.
Procedure:
One can open a FD account at any bank, be it nationalised, private, or
foreign. However, some banks insist that the customers must maintain a
Page 55
savings account with them to operate a FD. When a depositor opens an FD

account with a bank, a deposit receipt or an account statement is issued to
him or her, which can be updated from time to time, depending on the
duration of the FD and the frequency of the interest calculation.
IX. Company Fixed Deposits:

Many companies have come up with fixed deposit schemes to mobilize
money for their needs. The company fixed deposit market is a risky market
and ought to be looked at with caution. The RBI has issued various
regulations to monitor the company fixed deposit market. However, credit
rating services available to rate the risk of company fixed deposit schemes.
The maturity period varies from three to five years. Fixed deposits in
companies have a high risk because they are unsecured; however they
promise higher returns than bank deposits. Fixed deposit in non banking
financial companies is another investment avenue open to savers. NBFC, s
includes leasing companies, hire purchase companies, investment
companies, chit funds and so on. Deposits in NBFC’s carry higher returns
with higher risk compared to bank deposits.
X. Shares:
The capital of the company can be divided into different units with
definite value called shares. Holders of these shares are called shareholders
or members of the company. There are two types of shares which a company
may issue (i) Preference Shares (ii) Equity shares.
(i) Preferences Shares:
Shares which enjoy the preferential rights as to dividend and repayment
of capital in the event of winding up of the company over the equity shares
are called preference shares. The holder of preference shares will get a fixed
rate of dividend. Preference shares may be,
Page 56
Cumulative Preference Shares: If the company does no earn adequate

profit in any year, dividends on preference shares may not be paid for that
year. But if the preference shares are cumulative such unpaid dividends on
these shares go on accumulating and become payable out of the profits of the
company, in subsequent years. Only after such arrears have been paid off,
any dividend can be paid to the holder of quality shares. Thus a cumulative
preference shareholder is sure to receive dividend on his shares for all the
years our of the earnings of the company.
Non-cumulative Preference Shares: The holders of non-cumulative

preference shares no doubt will get a preferential right in getting a fixed
dividend it is distributed to quality shareholders. The fixed dividend is to be
paid only out of the divisible profits but if in a particular year there is no
profit as to distribute it among the shareholders, the non-cumulative
preference shareholders, will not get any dividend for that year and they
cannot claim it in the next year during which period there might be profits. If
it is not paid, it cannot be carried forward. These shares will be treated on the
same footing as other preference shareholders as regards payment of capital
in concerned.
Redeemable Preference Shares: Capital raised by issuing shares, is not to
be repaid to the shareholders (except buy back of shares in certain
conditions) but capital raised through the issue of redeemable preference
shares is to be paid back by the raised thought the issue of redeemable
preference shares is to be paid back to the company to such shareholders
after the expiry of a stipulated period, whether the company is wound up or
not. As per section (80) 5a, a company after the commencement of the
Companies (Amendment) Act, 1988 cannot issue any preference shares
which are irredeemable or redeemable after the expiry of a period of 10
years from the date of its issue. It means a company can issue redeemable
Page 57
preference share which are redeemable within 10 years from the date of their
issue.
Participating Preference Shares: The preference shares which are entitled
to a share in the surplus profit of the company in addition to the fixed rate of
preference dividend are known as participating preference shares. After the
payment of the dividend a part of surplus is distributed as dividend among
the quality shareholders at a particulate rate. The balance may be shared both
by equity shareholders at a particular rate. The balance may be shared both
by equity and participating preference shares. Thus participating preference
shareholders obtain return on their capital in two forms (i) fixed dividend (ii)
share in excess of profits.
Non Participating Preference Shares: Those preference shares which do
not carry the right of share in excess profits are known as non-participating
preference shares.
(ii) Equity Shares:
Equity shares will get dividend and repayment of capital after meeting
the claims of preference shareholders. There will be no fixed rate of dividend
to be paid to the equity shareholders and this rate may vary form year to
year. This rate of dividend is determined by directors and in case of larger
profits; it may even be more than the rate attached to preference shares. Such
shareholders may go without any dividend if no profit is made.
XI. Bond/Debentures:
A debt investment in which an investor loans money to an entity
(corporate or governmental) that borrows the funds for a defined period of
time at a fixed interest rate. Debentures are divided into different categories
on the basis of: (i) Convertibility of the instrument (ii) Security.
i) On the basis of convertibility debentures can be classified into:
Page 58
 Non Convertible Debentures (NCD): These instruments retain the debt

character and cannot be converted in to equity shares.
 Partly Convertible Debentures (PCD): A part of these instruments are
converted into equity shares in the future at notice of the issuer. The
issuer decides the ratio for conversion. This is normally decided at the
time of subscription.
 Fully convertible Debentures (FCD): These are fully convertible into
Equity shares at the issuer's notice. The ratio of conversion is decided
by the issuer. Upon conversion the investors enjoy the same status as
ordinary shareholders of the company.
 Optionally Convertible Debentures (OCD): The investor has the
option to either convert these debentures into shares at price decided
by the issuer/agreed upon at the time of issue.
ii) On basis of Security, debentures are classified into:
 Secured Debentures: These instruments are secured by a charge on
the fixed assets of the issuer company. So if the issuer fails on
payment of either the principal or interest amount, his assets can be
sold to repay the liability to the investors.
iii) Unsecured Debentures: These instrument are unsecured in the sense
that if the issuer defaults on payment of the interest or principal
amount, the investor has to be along with other unsecured creditors of
the company.
XII. Mutual Funds:

Recently, mutual funds have become popular all over the world, mutual
funds carry benefits in the form of safety of principal, capital appreciation
and interest or dividend. Under mutual fund scheme an investor even with a
little money can be a participant in investing in big companies, which are
otherwise inaccessible to him because of his small investment. Mutual funds
collect the savings of small investors, invest them in Government and other
corporate securities and earn income in the form of interest and dividend.
Page 59
The income and capital appreciation arising out of investment are shared
among the investors by careful selection of securities over a diversified
portfolio, covering large number of companies and industries. Mutual funds
are able to perform better than an individual investor. When mutual funds
select a large share of equities, the investment in mutual funds select a large
share of equities, the investment in mutual funds is exposed to greater risks.
So, the investor should be aware of the risks of these growth schemes while
making an investment decision. When mutual funds have income schemes,
then investment is made in securities of a guaranteed return. Under income
schemes, mutual funds select a large share of fixed income securities like
debentures and bonds. A mutual fund is an investment that spreads its money
across a diversified portfolio of securities including stocks, bonds, or money
market instruments. Shareholders who invest in a fund each own a
representative portion of those investments, less any expenses charged by the
fund. Mutual fund investors make money either by receiving dividends and
interest from their investments, or by the rise in value of the securities.
Dividends, interest and profits from the sale of any securities (capital gains)
are passed on to the shareholders in the form of distributions. And
shareholders generally are allowed to sell their shares at any time for the
closing market price of the fund on that day.
There are a variety of of reasons why investors might choose mutual funds
over other investments, such as individual stocks and bonds. The number
one reason is diversity, which can both increase potential returns and
decrease overall risk. Mutual funds allow an investor to spread out his or her
money across many companies. Funds can be especially advantageous for
small investors who would be forced to pay enormous transaction fees if
they bought the securities individually, and for investors who either don't
have the time to research their own investments or who don't trust their own
investment expertise. Mutual funds aren't necessarily low-cost investments.
Page 60
Many of them charge one-time "load fees" to new purchasers that cannot
exceed 5 percent of the investment, and all mutual funds take on an average
1.3 percent of assets a year for operating expenses, expressed as the
"expense ratio." As a result, "index" funds have surged in popularity in
recent years because, on an average, they provide a much lower expense
ratio than managed funds. Also an index fund's risk is limited to that of the
benchmark index that it tracks, such as the Standard & Poor 500.
Professional management can be both a benefit and a liability of actively
managed mutual funds. Several studies show that, over time, the average,
actively managed fund has under performed the overall stock market. Still,
by picking funds with good long-term track records, managers trust and low
expenses, investors can build a portfolio with the potential for steady, long-
term returns that match their own investment goals and tolerance for risk.
Liquidity – the ability to readily access your money -- is another benefit of
mutual funds. Funds can be sold on any business day at that day's closing
price – or at the following day’s close if the sell order is placed after the
market closes. The price per share at any given time is known as the net asset
value, or NAV, which is the current market value of all the fund's assets,
minus liabilities, divided by the total number of outstanding shares. As new
investors buy into a fund, the number of outstanding shares goes up, as does
the market value of assets, but the NAV remains the same.
Types of Mutual Fund Investment in India:

There are varieties of funds available for investment. Some of them are:
1. Closed-end funds: A closed-end mutual fund bears a number of shares
which are issued to the public by an initial public offering (IPO).
2. Open-end funds: Open end funds are managed by mutual fund houses
for raising money from shareholders and they invest in a group of
assets.
Page 61
3. Large cap funds: Large cap funds are those mutual funds, which look
for capital appreciation by way of investing in blue chip stocks.
4. Mid-cap funds: Mid cap funds invest in small/medium sized
companies, but with no proper definition of classifying a company.
5. Equity funds: Equity mutual funds, also known as stock mutual funds
invest pooled amounts of money in public company stocks.
6. Balanced funds: Balanced funds are also known as hybrid fund,
buying a combination of common stock, preferred stock, bonds, and
short-term bonds.
7. Growth funds: Growth funds are mutual funds that target at capital
appreciation by investing in growth stocks.
8. Exchange traded funds: Exchange Traded Funds (ETFs) are a basket
of securities being traded on an exchange, just similar to that of a
stock. They are not like the conventional mutual funds.
9. Sector funds: These funds are funds that restrict the investments to a
specific segment or sector.
10. Index funds: An index fund aims to replicate the actions of an index
of a specific financial market.
XIII. Real Estate Investment:

Real estate includes land and house property. It is true to say that real
estate offer a rate of return which is superior to avenues such as company
deposits on a long term basis. Now-a daysmore and more investments are
made in the form of real estates for the following reasons:
Real estate ensures high capital appreciation as compared against gold
and silver particularly in the urban area.
Loans are available on liberal terms for purchase of land site and
construction of houses. In India, apex banks like Housing and Urban
Development Bank encourage mortgage loans in the form of housing
Page 62
loans. The rates of interest are not only cheaper but also the payment
of interest and principal sum qualify in the form of tax concessions to
the assessees.
Ownership of a house gives an investor a secured feeling and
enhances his/her status in the society.
Real Estate Investment is now treated as a major case of capital budgeting
on the basis of the income it may generate and the associated risk
adjustments. It has been the highlight of the investment literature since the
1970’s when investment theorists extended techniques such as probability,
time value of money and utility into its analysis. Real estate is basically
defined as immovable property such as land and everything permanently
attached to it like buildings. Real property as opposed to personal or
movable property is characterized by the right to transfer the title to the land
whereas title to personal property can be retained. The investment in real
estate essentially depends on the risks associated with it, and the alternative
investment opportunities. Real estate investment can be attractive if viewed
as a business opportunity; it can generate rental income, using it as collateral
to secure a loan for a business venture, to offset otherwise taxable income
through cash savings on tax-deductible interest rate losses, or simply from
the profits garnered from its resale. Notable, in this context is the gains
reaped by real estate speculators who trade in real estate futures. Common
examples of real estate investment are individuals owning multiple pieces of
real estate’s one of which is his primary residence and others are occupied by
tenants from where the rental income accrues. Real estate investment is also
associated with appreciation in the value of property thereby having the
potential for capital gains. Tax implications differ for real estate investment
and residential real estates. Real estate investment is long term in nature and
investment professionals routinely maintain that one’s investment portfolio
should have at least 5%-20%. A Real Estate Investment Trust (REIT) is a
Page 63
corporation or body investing in real estate that has the property to reduce or
eliminate corporate income taxes. In return, REIT’s are required to distribute
90% of their income among the investors. These incomes are often taxable.
REIT’s perform a similar function as do that Mutual Funds provide for
stocks in the share market. The key statistics to study about the REIT’s are
the NAV (Net Asset Value) and AFFO (Adjusted Funds from Operation).
using state-of-the-art investment analysis which incorporates the future
stream. The Indian Government is yet to introduce REIT’s in the country.
The government and the SEBI (Securities and Exchange Board of India) are
planning to bring in legislations for the smooth functioning of the real estate
market in India. With Initial Public Offers (IPO’s) streaming in from various
listed real estate companies, it will be the best time to have REIT which can
help capture the current boom in the real estate market. Various online real
estate investment sites have also emerged in the last decade as fallout of the
surge in realty business. Real estate investing involves the purchase,
ownership, management, rental and/or sale of real estate for profit.
Improvement of realty property as part of a real estate investment strategy is
generally considered to be a sub-specialty of real estate investing called real
estate development. Real estate is an asset form with limited liquidity
relative to other investments, it is also capital intensive (although capital may
be gained through mortgage leverage) and is highly cash flow dependent. If
these factors are not well understood and managed by the investor, real estate
becomes a risky investment. The primary cause of investment failure for real
estate is that the investor goes into negative cash flow for a period of time
that is not sustainable, often forcing them to resell the property at a loss or go
into insolvency. A similar practice known as flipping is another reason for
failure as the nature of the investment is often associated with short term
profit with less effort. Real estate markets in most countries are not as
organized or efficient as markets for, more liquid investment instruments.
Page 64
Individual properties are unique to themselves and not directly

interchangeable, which presents a major challenge to an investor seeking to
evaluate prices and investment opportunities. For this reason, locating
properties in which to invest can involve substantial work and competition
among investors to purchase individual properties may be highly variable
depending on knowledge of availability. Information asymmetries are
commonplace in real estate markets. This increases transactional risk, but
also provides many opportunities for investors to obtain properties at bargain
prices. Real estate investors typically use a variety of appraisal techniques to
determine the value of properties prior to purchase.Once an investment
property has been located, and preliminary due diligence (investigation and
verification of the condition and status of the property) completed, the
investor will have to negotiate a sale price and sale terms with the seller, then
execute a contract for sale. Most investors employ real estate agents and real
estate attorneys to assist with the acquisition process, as it can be quite
complex and improperly executed transactions can be very costly. During the
acquisition of a property, an investor will typically make a formal offer to
buy including payment of "earnest money" to the seller at the start of
negotiation to reserve the investor's rights to complete the transaction if price
and terms can be satisfactorily negotiated. This earnest money may or may
not be refundable, and is considered to be a signal of the seriousness of the
investor to purchase. The terms of the offer will also usually include a
number of contingencies which allow the investor time to complete due
diligence and obtain financing among other requirements prior to final
purchase. Within the contingency period, the investor usually has the right to
rescind the offer with no penalty and obtain a refund of earnest money
deposits. Once contingencies have expired, rescinding the offer will usually
require forfeit of earnest money deposits and may involve other penalties as
well. Though investment in real estate ensures speedy capital appreciation,
Page 65
investors do not invest in more than one or two houses. The reasons being to
purchase a house or land in the urban area, investor needs money not in
thousands but in lakhs. But it is easy for them to buy equity, gold or other
forms of investment which do not require much investment.
Investors have to be very cautious while purchasing land. They may
be cheated in the purchase of land for want of a clear title.
The Land Ceiling Act restricts the purchase of agricultural land
beyond a limit.
The investor who has invested his money in the form of real estate
cannot immediately realize his money.
In view of these limitations, investor while buying the real estate should
take the following precautions:
The investor should ensure that the plots which he intends to buy are
approved by the local authority.
The investor should be convinced that there is a possibility of capital
appreciation in real estate.
The investor should seek proper legal advice with regard to the title
deeds of the real estate. To ensure that it is free from encumbrances,
he should get an encumbrance certificate for the latest 15 years from
the Registrar office.
The investor should verify the correctness of the plinth area in the
case of a flat.
Tax savings for investment in house property:

Deduction under section 80C of the Income tax Act is available up to
Rs.1,00,000 for investment in house property subject to the satisfaction of
the conditions of that section in regard to qualifying amounts in the
following circumstances to the individuals/Hindu undivided families.
Payments made towards the cost of purchase/construction of new residential
house property during the previous year are eligible for deduction under
section 80C and Sec.54 also. Section 80C provides that in computing the
Page 66
total income of an assessee, deduction shall be provided in respect of various

payments/investments made as included in the aforesaid Section subject to a
ceiling of Rs.1 lakh on the aggregate amount of such payments/investments.
Section 80C(5) stipulates that in case an assessee transfers the house
property referred to above before the expiry of five years from the end of the
financial year in which possession of such property is obtained by him, or
receives back, whether by way of refund or otherwise, any sum specified
above, then no deduction shall be allowed with reference to any of the sums
referred to above and the aggregate amount of deductions of income already
allowed in respect of the previous year or years shall be deemed to be the
income of the assessee of such previous year and shall be liable to tax in the
assessment year relevant to such previous year.
Real estate investment law in India:

 Transfer of Property Act
 Indian Registration Act, 1908
 Indian Urban Land (Ceiling & Regulation) Act, 1976
 Stamp Duty
 Property Tax
XIV. Depository Receipts:

Global Depository Receipts (GDR) are instruments in the form of a
depositary receipt or certificate created by the overseas depository bank
outside India and issued to non-resident investors against ordinary shares or
Foreign Currency Convertible Bonds (FCCB) of an issuing company. A
GDR issued in America is an American Depository Receipt (ADR). Indian
companies are permitted to raise resources in foreign currency through the
issue of FCCBs and/or issue of ordinary equity shares through GDR/ADR to
foreign investors. – institutional investors or individuals residing abroad.
GDR’s are designated in US Dollars and are not subject to any ceilings on
Page 67
investment. There is no restriction on the number of euro issues that can be

floated by a company or a group of companies in a financial year. The
proceeds of GDR can be used for financing capital goods imports; capital
expenditure including domestic purchase or installation of plant, equipment
and building and investment in software development, prepayment or
scheduled repayment of earlier external borrowings; equity investment in
joint ventures or wholly owned subsidiaries in India. Companies may retain
the proceeds abroad or may remit the funds into India in anticipation of the
approved end uses. Among Indian companies, Reliance Industries Limited
was the first company to raise funds through a GDR issue. In addition to
GDR’s ADR are also popular in the capital market.
XV. Gold:
Of all the precious metals, gold is the most popular as an investment.
Investors generally buy gold as a hedge or harbor against economic,
political, or social fiat currency crises (including investment market declines,
burgeoning national debt, currency failure, inflation, war and social unrest).
The gold market is subject to speculation as are other markets, especially
through the use of futures contracts and derivatives. The history of the gold
standard, the role of gold reserves in central banking, gold's low correlation
with other commodity prices, and its pricing in relation to fiat currencies
during the 2007–2012 global financial crisis, suggest that gold behaves more
like a currency than a commodity. Gold has been used throughout history as
money and has been a relative standard for currency equivalents specific to
economic regions or countries, until recent times. Many European countries
implemented gold standards in the latter part of the 19th century until these
were temporarily suspended in the financial crises involving World War I.
After World War II, the Bretton Woods system pegged the United States
dollar to gold at a rate of US$35 per troy ounce. The system existed until the
Page 68
1971 Nixon Shock, when the US unilaterally suspended the direct

convertibility of the United States dollar to gold and made the transition to a
fiat currency system. The last currency to be divorced from gold was the
Swiss Franc in 200012. Gold is the oldest currency in the world and is
coveted across continents and cultures for a variety of reasons.
 Maintains long term value: Market cycles have their ups and downs,
but gold has maintained its long term value. Paper currencies may rise
and fall but gold always endures. Gold has demonstrated its capacity
to store value for centuries.
 Safe refuge: During times of calamities like war or economic crisis,
there may be a negative effect on investments like currencies, bonds
and equities, but may have an opposite effect on the value of gold.
Also gold is not a liability of any Government or corporation and
hence it does not run a risk of becoming worthless due to unexpected
events.
 Inflation hedge: The value of gold, in terms of real goods and services
that it can buy, has remained remarkably stable whereas the
purchasing power of many currencies has generally declined.
 Effective diversifier: Diverse investments help protect the portfolio
against fluctuations in the value of any single asset class. Gold is an
excellent portfolio diversifier because its performance tends to move
independently of other investments and key economic factors.
 Both tangible and liquid: Gold is an asset that is both tangible and
liquid, unlike real estate which is tangible but not liquid, or company
shares and bonds which are liquid but not tangible.
Page 69
Analysis in this report:

An analysis is made on the responses received from 100 sample
investors. The objective of the report is to find out the investor’s behavior on
various investment avenues, to find out the investors’ perception towards
various investment avenues, to find out the needs of the current and future
investors.
The questionnaire contains various questions on the investor’s financial
experience, based on these experiences an analysis is made to find out a
pattern in their investments.
Based on these investment experiences of the 100 sample investors an
analysis is made and interpretations are drawn. Interpretations are made on a
rational basis, these interpretations may be correct or may not be correct but
care is taken to draw a valid and approvable interpretation.
Analysis is made only from the information collected through
questionnaires no other data or information is taken in to consideration for
purpose of the analysis.
Page 70
Analysis of the survey:

4.1 Gender Profile
In Mangalore city males are highest in number than females. This
tendency is also show in the present study. The Male population of the
present study exceeds to female population. The following table illustrates
the gender distribution of the respondents of the study.
Table 4.1 Gender Profile
Page 71
Gender No. of respondents Percentage of respondents

Male 62 62%
Female 38 38%
Total 100 100%
Figure 4.1 Gender profile
The above chart and table shows gender wise distribution. Out of 100
sample investors 62% males and 38% are females. Generally males bear the
financial responsibility in Indian society, and therefore they have to make
investment (and other) decisions to fulfill the financial obligations.
4.2 Age group profile of sample investor
Information was collected from all age group of investor. The age group
of investor is also major factor which influence investment decision. The
following table illustrates the age profile of the respondents of the study.
Table 4.2 Age Group sample investor
Page 72
Age group No. of respondents Percentage of respondents

Less than 20 years 5 5%
Between 20- 30 years 53 53%
Between 30-40 years 17 17%
Between 40-50 years 11 11%
Above 50 years 14 14%
Total 100 100%
Figure 4.2 Age group
Above table and chart shows the age group profile of investor. 5% of
investor are below 20 years age and majority of investors (53%) are between
20-30 years age group.17% of investors are between 30-40 years and 11% of
investors are between 40-50 years.14% of investors are above 50 years.
4.3 Occupation
Here occupation means position of the investor in the society. It may be
students, home maker, self employed or business people and other
occupations like peasants etc. The following table shows the occupation of
sample investor.
Table 4.3 Occupation of sample investor
Page 73
Occupation No. of respondents Percentage of

respondents
Student 22 22%
Home Maker
10 10%
Self employed (Business/profession)
Employee (Government/Private) 23 23%
Retired
21 21%
Other
8 8%
16 16%
Total 100 100%
Figure 4.3 Occupation of sample investor

Occupation also influences investment decisions of individual investor.
The preferred investment avenues of students are differ from home maker
and preferred investment avenues self employed persons differ from retired
persons. The above table shows the occupation of sample investor.22% 0f
investors were students and 10% of investors were home maker and 23% of
investors were self employed and 21% of employers were employees either
private or government institution and 8% of investors were retired persons
and remaining investors are other occupations like cooley, agriculture etc.
4.4 Status of sample investor:
Page 74
Table 4.4 Status of sample investor

Status No. of respondents Percentage of respondents
Single 58 58%
Married 42 42%
Total 100 100%
Figure 4.4 Status of sample investor

Above chart and table shows that 42% of employees are married and
58% of investors are not married. The marital status of individual influences
the perception of individual investor. We might observe that married people
have more responsibility than non married people. So their investment
pattern also differs.
4.5 Children
A person who relies on another person, especially a family member, for
financial support is influence investment decision or perception of individual
investor. Here in order to know the preference of investment avenues of
investor those having children and investor those who are not having
children.
Table 4.5 Children
Page 75
Having children No. of respondents Percentage of respondents

Yes 34 58%
No 66 42%
Total 100 100%
Figure 4.5 Children
The above chart and table shows that 66% of investors are not having
children and 34% of investors are having children.
4.6 Income level of sample investor:

The important factor which influences the whole investment decisions
and attitude of individual investor is income level of investor. When level of
income increases the risk tolerance level of investor also increases. The
following table shows the income distribution among sample investor.
Table 4.6 Income distribution of Investor
Page 76
Annual Income No. of respondents Percentage of respondents

Below 100000 50 50%
Between 1 lakhs and 2 lakhs 21 21%
Between 2 lakhs and 3 lakhs 17 17%
Above 3 lakhs 12 12%
Total 100 100%
Figure 4.6 Income distribution of sample investor

Above table shows that 50% of investors are below 100000 income level
and 21% of investors are between 1lakhs and 2lakhs income level and 17%
of investors are between 2 lakhs and 3 lakhs income level and 12% of
investors are above 3 lakhs income level.
4.7 Percentage of savings from total income

Investors are asked to state their percentage of savings from total income.
Because this factor explains the savings attitude of investor therefore the
investigator asked percentage of savings from their total income. The
following table and chart shows the percentage of savings from total income.
Table 4.7: Percentage of savings from total income
Page 77
Percentage of savings No. of respondents Percentage of respondents
from total income

Below 20% 47 47%
Between 20-40% 40 40%
Between 40-60%
11 11%
Above 60%
2 2%
Total 100 100%
Figure 4.7 Percentage of savings from total income

The above table and charts shows that 47% of investors were saved 20%
of their total income and 40% of investors are saved between 20-40% of
their total income. 11% of investors were saved between 40-60% of their
total income. Only 2% of investors were saves more than 60% of their total
income.
4.8 Percentage of investment in different investment avenues from
savings
Saving is different from investment because in savings investor may or
may not get return but in investment investor will get return either positive
or negative. For this reason the investigator asked the question about
percentage of investment in different investment avenues from their total
savings. The following table and chart shows the percentage of investment
from total savings.
Page 78
Table 4.8: Percentage of investment from total savings

Percentage of No. of respondents Percentage of respondents
investment from savings

Below 20% 60 60%
Between 20-40%
21 21%
Between 40-60%
Above 60% 12 12%
7 7%
Total 100 100%
Figure 4.8 Percentage of investment from savings

From the above table and charts we can easily analyze that 60% of
respondents were invested less than 20% of their savings. 21% of
respondents were invested between 20-40% of their savings and 12% of
respondents are invested between 40-60% of their savings. 7% of
respondents invested more than 60% of their savings.
4.9 Purpose of investment:
Page 79
There is some specific purpose to investor to invest their savings. There

are many purposes to investor to invest their savings like education purpose,
home purchase, healthcare, marriage and retirement planning etc. For this
purpose investigator asked to specify their main purpose of their investment.
Table 4.9: Purpose of investment

Purpose of investment No. of respondents Percentage of respondents
Education 25 25%
Home Purchase
20 20%
Healthcare
Marriage 18 18%
Retirement Planning
9 9%
Other
14 14%
14 14%
Total 100 100%
Figure 4.9 Purpose of investment
From the above table and chart we can analyze that 25% of respondents
were invested for the purpose of education either for themselves or for their
children or other family member. 20% of investor invested their savings for
Page 80
the purpose of purchase of house and 18% of respondents invest their

savings for the purpose healthcare that is to insure their health. 9% of
respondents are invested for the purpose of getting the money at the time of
marriage and 14% of respondents were invested for the purpose of
retirement planning.
4.10 Objectives of investments:

The main objective of investment is to get better return. But return is not
only the objective of investment, there are some other objectives are there
which motivate investors to invest their funds they are safety, liquidity and
tax benefits.
Table 4.10: Objectives of investments

Objectives of investments No. of respondents Percentage of
respondents
High return 34 34%
Moderate return 18 18%
Safety of investment principle 30 30%
Liquidity 10 10%
Tax benefits
8 8%
Total 100 100%
Page 81
Figure 4.10 Objectives of investment
As indicated above chart and table 30% of investors were invested with
the objective of safety principle and 34% of investors were invested with the
objectives of get higher return.18% of respondents were invested with the
objective of get moderate return. 10% of respondents were invested with
objective of liquidity that means invested in such avenues which can be
easily converted into cash. 8% of investor were invested with the objective
of getting tax benefits.
4.11 Period of investments

Duration of investment is called period of investment. Time horizon of
investment is important factor which influence the investment decision of
investor. There are two types in duration of investment that is short period
and long period. The following table and chart shows the period of
investment of the investor.
Table 4.11: Period of investment

Period of investment No. of respondents Percentage of respondents
Page 82
Short term 37 37%

Long term
25 25%
Both
38 38%
Total 100 100%
Figure 4.11 Period of investment
It’s interesting to know that many of the investors prefer to invest their
money for medium term (both) i.e. from 1-5 yrs, instead of short term or
long term.37% of investor preferred short term, 25% preferred long term.
4.12 Awareness about different investment avenues available in the

market among the sample investor
In market there are number of investment avenues are available. So in
order to know the awareness of investment avenues investigator asked about
their knowledge or awareness of some particular investment avenues. The
fallowing table shows the investors’ awareness about different investment
avenues.
Table 4.12: Awareness about different investment avenues

Investment avenues No. of respondent Percentage of
Page 83
respondent
Safe/low Risk investment avenues:
96 96%
61 61%
Saving Account
Bank Fixed Deposits 32 32%
Public Provident Fund
23 23%
National Saving Certificate
68 68%
Post office Saving
19 19%
Government securities
Moderate Risk Investment Avenues
Mutual Funds 27 27%
Life Insurance
79 79%
Debentures
Bonds 17 17%
17 17%
High Risk Investment Avenues
Equity Share Market 56 56%
Commodity Market
19 19%
FOREX Market
12 12%
Traditional Investment Avenues:
Real Estate (Property) 56 56%
Gold/ Silver
19 19%
Chit Funds
12 12%
Emerging Investment Avenues
Virtual Real Estate 22 22%
Hedge Funds 10 10%
Private Equity Investments 23 23%
Art and Passion 16 16%
The above table shows that awareness of sample investor about

investment avenues available in the market. Among the safe investment
avenues 96% of sample investor have aware about saving account and 61%
Page 84
of sample investor are aware about bank fixed deposits. 32% of investors are
aware about public provident fund.
Among the moderate risk investment avenues 79% of investors have aware
about life insurance and 27% of investors are aware about mutual funds.
17% of investors are aware about the debentures and bonds.
Among the high risk investment avenues 56% of investors are aware
about the equity share market and 19% of investors are aware about
commodity market. Only 12% of investors are aware about FOREX market.
Among Traditional investment avenues 56% of investors have awareness
about real estate and 19% of investors are aware about investment in gold or
silver. Only 12% of investors have awareness about chit funds.
Among emerging investment avenues 22% of investor are aware about
virtual real estate and 10% of investors are aware about hedge funds and
23% of investors are aware about private equity investments.16% of
investors have knowledge about art and passion.
4.13 Preferable investment sector

Generally investors are very much concerned about in which sector
should invest their funds. In market there are many sectors are there for
investment like banking sector, Insurance sector, IT sector and FMCG sector
and other sector. Investors were invested their fund by considering trend in
different sector. In order to know the preference of investor in different
investment sector investigator asked about their preference in different
sector.
Table 4.13: Investors’ preferable investment sector
Investment Sector No. of respondent Weights Ranking
Banking Sector 90 54.22 1
Page 85
Insurance Sector 38 22.89 2

IT Sector 22 13.25 3
FMCG Sector 10 6.02 4
Other Sector 6 3.62 5
Total 166 100
Figure 4.12 Preferable investment sectors

Table 4.13 shows the preferable investment sector of sample investors,
investors are given option to select one or more preferable investment sector,
since there may be one or more answers, weights are given for each
parameter bases on the votes given by investors, the maximum weightage
represents many investor have that as preferable investment sector. Based on
the weights calculated ranks are given in the order of maximum weightage
given by investors. First rank given to banking sector because majority
investor opinions that investment in banking sector is safer. Here majority of
sample investors are come under below 1lakh annual income so their first
preference is safety therefore they preferred for banking sector. The second
preference is given by the investor is given to insurance sector. Investor may
be planning for life insurance and health insurance therefore their second
Page 86
preference is given to insurance sector. IT sector and FMCG sector are

occupied third and fourth ranks in the minds of sample investor.
From the above chart it clearly understood that 90 respondent showed
interest in invest their fund in banking sector and 38 investors and 22
investors were preferred to invest insurance and IT sector respectively.10
investors were preferred to invest in FMCG sector and 6 investors were
preferred invest other sectors.
4.14: Factor influencing the investment decision

The investor has various alternative avenues of investment for his
savings to flow, in accordance with his preferences. Savings are invested in
assets depending mainly on their return, liquidity and risk characteristics.
There are some factor which influences their investment decision like return,
safety, diversification, progressive value and maturity period etc. To know
the major factor which influences the investment decision investigator asked
about factors which guide investment decision.
Table 4.14: Factors guiding investment decision

Factors which influence No. of respondents Weights Ranking
investment decision
Return 57 32.02 2
Safety of principle 76 42.70 1
Diversification 12 6.74 4
Progressive value 13 7.30 3
Maturity period 12 6.74 4
Other factors 8 4.49 5
Total 178 100
Page 87
Figure 4.13 Factors guiding investment decision
When the investor asked about the factors considering before investment
many of them have voted for more than one factor therefore weights are
given for each parameter bases on the votes given by investors the maximum
weightage represents many investor influenced by many factor before
investing. Based on the weights calculated ranks are given in the order of
maximum weightage given by investors. First rank (with 42.70%weights) is
given to safety of principal and 2nd to return (with 32.02% weights).This data
shows that the sample investor give preference to safety and return which is
contradictory in nature. Investment believes in a proved principle, “higher
the risk higher the returns, lower the risk lower the returns”. Investors need
to know about this principle before investing. 3rd and 4th rank is given to
progressive value and diversification and maturity period respectively. Few
investors’ investment decisions were influenced by other factors.
4.15 Frequency of investment

Frequency of investment means how often investment was made by the
investor. Generally the frequency of investment is depending on various
Page 88
factor like total income, time and other factor. So in order to know the
frequency of investment the investigator asked about the frequency of
investment.
Table 4.15: Frequency of investment.

Frequency of investment No. of respondent Percentage of
respondent
Daily 7 7%
Monthly 36 36%
Occasionally 57 57%
Total 100 100%
Figure 4.14 Frequency of Investment
Due to the busy life schedule, many of the investors are not able to spend
time in monitoring their investments, only 7% of the investors are
monitoring their investments daily, 36% are monitoring on a monthly basis,
57%, the majority investors are monitoring their investment occasionally.
Many of them who have invested in safe investment avenues do not bother
Page 89
about their investments, some of them forget about the investment for many
years.
4.16: Risk tolerance level of investor

Risk tolerance is the degree of variability in investment returns that an
individual is willing to withstand. Risk tolerance is an important component
in investing. An individual should have a realistic understanding of his or her
ability and willingness to stomach large swings in the value of his or her
investments. So in order to know the risk tolerance level a question was
asked about their risk tolerance level.
Table 4.16: Risk tolerance level of investor

Risk tolerance level No. of respondent Percentage of respondent
High 43 43%
Moderate 28 28%
Low 29 29%
Total 100 100%
Figure 4.15 Risk tolerance level of investor

Page 90
The above chart shows that 43% of investors are ready to take high risk
and 28% of investors have moderate risk tolerance level and 29% of
investors have low risk tolerance level.
4.17 Sources of investment advice

With a bit of information, you can gather a wealth of knowledge. So it is
necessary to investor to have the knowledge about investment avenues
before investing particular investment avenue. For this purpose investor goes
for various sources in order get best investment advice. So in order to know
the sources of investment advice investigator asked about their sources of
investment advice.
Table 4.17: Sources of investment advice
Sources of investment No. of respondent Percentage of respondent
advice
Media 14 14%
19
Advisor 19%
15
Family or Friend 7 15%
45
Internet 7%
Financial Planners 45%
Total 100 100%
Page 91
Figure 4.16 Sources of investment advice

“Stock market discount everything” therefore investors have to get
information or advice in order to survive in the market; therefore they get
advice from various sources. 45% of investors were getting the advice from
financial planners because they don’t want take any risk therefore they go for
financial experts. 19% of investors were getting the investment advice from
the advisor. 15% of investors are getting investment advice from their family
or friends because of easy availability. 14% of investors are getting
investment advice from the media. 7% of investors were getting advice from
internet.
4.18 Satisfaction level about their investment
An investment satisfaction means how investment of individual investor
meets or surpasses his or her expectation in terms of return or growth. To
know the satisfaction level of individual investor investigator asked about in
what level they satisfied with their investment. The following table and chart
shows the satisfaction level of individual investor.
Table 4.18: Satisfaction level about their investment

Satisfaction level No. of respondent Percentage of respondent
Satisfied 55 55%
Page 92
Partially satisfied 40 40%

Dissatisfied 5 5%
Total 100 100%
Figure 4.17 Satisfaction level of Investments
From the above table and chart it clearly shows that 55% of investors
were satisfied with their investment. 40% of investors were partially satisfied
with their investment and 5% of investors were dissatisfied with their
investment.
I. INVESTMENT PREFERENCE BASED ON OCCUPATION
Table 4.19: Preferred investment avenues of students

Investment avenues Votes Weights Rank
Savings Bank account 22 16.18 1
Bank Fixed Deposits 11 8.09 7
Post office saving 20 14.71 2
Life insurance 16 11.76 3
Gold/ Silver 16 11.76 4
Real estate 12 8.82 6
Equity share market 9 6.6 9
Page 93
Public Provident Fund 14 10.29 5

Mutual Funds 10 7.35 8
National Saving Certificate 6 4.44 10
Total 136 100
Since the investor has an option to invest in more than one investment
Avenue, weights are given on the basis of preference to investment avenues.
The avenue which is given maximum weightage by the investor is ranked
first. First ten ranks are given to the first ten preferred investment avenues.
First preference is given to Savings and second preference is given to the
bank fixed deposits. Tenth preference is given to National saving certificate.
Table 4.20: Preferred investment avenues of Home maker

Gold/Silver 9 16.67 1
Bank Fixed Deposits 6 11.11 4
Government Securities 4 7.41 8
National Saving certificate 3 5.55 9
Page 94
Mutual Fund 2 3.70 10

Equity Share market 1 1.85 11
Debenture 1 1.85 12
54 100
Here home maker voted many investments as their preference according

highest vote certain weights are assigned. On the basis weights ranks are
given which states their preference. First ranks are given to investment in
gold and second ranks given to life insurance and 8 th ranks are given to
govern securities. Here important point which we should noted that they
invested in safest or low risk avenues.
Table 4.21: Preferred investment avenues of Self employed/ Business

people
Bank fixed deposits 19 12.18 2
Gold/ Silver 15 9.6 5
Public Provident fund 12 7.69 7
Government securities 11 7.05 9
Mutual funds 9 5.77 10
Page 95
Debenture 5 3.2 11
Private equity investment 3 2 12
Virtual real estate 2 1.23 13
156 100
Even though business people were rich and risk taker but from the above
table we can observed that they invested in life insurance, bank fixed
deposits. Real estate is one of the oldest investment avenues which acquired
3rd rank in the preferable investment avenues of self employed or business
people. 6th rank is given to the public provident fund and 10 th and 11th ranks
are given to the mutual funds and debenture respectively.
Table 4.22: Preferred investment avenues of employees

Equity Share market 17 14.16 1
Gold / Silver 12 10 5
Private equity investment 9 7.5 7
Public Provident fund 8 6.67 8
Bonds 6 5 9
Debenture 5 4.17 10
Mutual funds 4 3.33 11
Page 96
National Savings certificate 2 1.67 12

120 100
Employees are earning regular income therefore they invested in some

risky investment avenues and expected higher return. First rank is given to
the equity share market and 7th rank is given to the private equity investment.
10th and 11th ranks are given to bonds and debenture. 13 th rank is given to the
government securities which is more safety investment avenues.
Table 4.23: Preferred investment avenues of retired persons

Life insurance 8 25 1
Public provident fund 5 15.625 3
National saving certificate 5 15.625 4
Saving bank account 4 12.5 5
Total 32 100
Retired persons always planned for their old age life. So in order to lead
the old age life with comfort they invested in such investment avenues which
gives benefits after retirement. So first rank is given to life insurance and
Page 97
second rank is given to bank fixed deposits. 4 th rank is given to the National
saving certificate.
Table 4.24: Preferred investment avenues of overall

Saving Account 64 12.85 2
Equity Share Market 41 8.23 7
Post Office Savings 39 7.83 8
Private equity investment 12 2.41 12
Debenture 11 2.02 13
Bonds 6 1.20 14
Virtual Real estate 2 0.62 15
Total 498 100
While considering overall votes of sample investor the preferable

investment avenues were as the above. Interestingly the first rank is given to
the life insurance because everybody much cares about their life. The second
preference was given to the saving account. Even though real estate is
traditional investment avenues it positioned 5 th rank in preferable investment
avenues. Majority of sample investor were below income level so debenture
positioned 13th rank in preferable investment avenues. Government securities
which are less risky and less return when compared to the equity and it
Page 98
positioned 10th rank in preferable investment avenues. Public provident fund

positioned 6th rank in preferable investment avenues.
II. Investment preference based on marital status
Table 4.25 Preferred investment avenues of married people

Saving account 28 15.38 1
Bank Fixed deposits 20 10.99 6
Debentures 14 7.69 7
Government securities 9 4.95 9
182 100
The above table shows that preferred investment avenues of married

people.28 investors preferred to invest in saving account and 26 investors
preferred to invest in public provident fund. Investment in gold/silver
occupied 5th rank in preferable investment avenues of married people.
Page 99
National saving Certificate positioned 8th rank and government securities

positioned 9th rank in preferable investment avenues of married people.
Equity share market investment positioned 10th rank in preferable investment
avenues of married people.
Table 4.26 Preferred investment avenues of unmarried people

Saving Account 38 15.02 2
Equity Share Market 17 6.72 7
Post Office Savings 17 6.72 8
Total 253 100
The above table shows that first rank positioned by life insurance and
second rank positioned by saving account. Gold/silver occupied 3rd rank in
the preferred investment avenues of unmarried people. Mutual funds and
Government securities positioned last two places from the point of view of
unmarried people as preferable investment avenues.
Table 4.27 Preferred investment avenues of investor those who having

children
Page 100

Gold /silver 28 20 3
Total 140 100
The above table shows that preferred investment avenues of investor
those who having children. First rank is given to the life insurance and
second position occupied by saving account. 4th and 5th rank are given to the
post office saving and public provident fund respectively.
Table 4.28 Preferred investment avenues of investor those not having

children
Total 145 100
The above table shows that preferred investment avenues of investor

those not having children. The preferred investment avenues of married
people and unmarried people are more or less similar. The first rank
positioned by life insurance and second rank positioned by saving account.
3rd rank occupied by bank fixed deposits. 4th and 5th ranks are given to real
estate and public provident fund.
Page 101
HYPOTHESIS TESTING:
1. Ho : There is no significant relation between risk tolerance level and
gender
H1 : There is significant relation between risk tolerance level and
gender
Table 4.29 Hypothesis Testing
Gender
Male Female Total
High 35 8 43
Risk
Moderate 19 9 28
tolerance Low 8 21 29
level Total 62 38 100
Source: Primary Data
Chi-Square Test
O E O-E ( O-E)2 ( O-E)2/E
35 26.56 8.34 69.5 2.61
19 17.36 1.64 2.69 0.15
8 17.98 -9.98 99.60 5.54
8 16.34 -8.34 69.56 4.26
9 10.64 -1.64 2.69 0.25
21 11.02 9.98 99.6004 9.04
21.85
ᵡ2
X-squared = 21.851, df = 2, p-value = 0.00001799
Interpretation: Tabulated value of chi square at 5% level of significance

and 2 degree of freedom is 5.991 and the calculated value is 42.502. On the
other hand the p-value is 0.00001799 with level of significance 0.05; here p-
value is less than level of significance.
Page 102
Result: Calculated value is more than tabulated value therefore null

hypothesis is rejected.
Conclusion: There is significant relationship between gender and risk
tolerance level.
GRAPHICAL REPRESENTATION OF THE DATA
Figure 4.18 Risk tolerance level and gender
Above chart clearly explains that male investors (35) take high risk when
compared to female investor (8) .In additions to these male investors (19)
also take moderate risk. Female investors are low risk takers may be because
of earning low income or other economical problems. And important point is
that there is significant relationship between risk tolerance level and gender.
Male investors were take high risk than the female investor.
Page 103
2. H0 : There is no significant relation between risk tolerance level and age

group.
H1 : There is significant relation between risk tolerance level and age
group.
Age group ( in years )
Below Between Between Between Above Total
20 20-30 30-40 40-50 50
Risk High 4 32 4 1 2 43
Moderate 1 13 10 1 3 28
Tolerance
Low 0 8 3 9 9 29
Level
Total 5 53 17 11 14 100
Source: Primary Data
Chi-Square Test
O E O-E ( O-E)2 ( O-E)2/E
4 2.15 1.85 3.42 1.59
1 1.4 -0.4 0.16 0.11
0 1.45 -1.45 2.10 1.45
32 22.79 9.21 84.82 3.72
13 14.84 -1.84 3.39 0.23
8 15.37 -7.37 54.32 3.53
4 7.31 -3.31 10.96 1.50
10 4.76 5.24 27.46 5.77
3 4.93 -1.93 3.72 0.75
1 4.73 -3.73 13.91 2.99
1 3.08 -2.08 4.33 1.41
9 3.19 5.81 33.76 10.58
2 6.02 -4.02 16.16 2.68
3 3.92 -0.92 0.85 0.22
9 4.06 4.94 24.40 6.01
42.502
ᵡ2
X-squared = 42.502, df = 8, p-value =0.00000109
Page 104

Conclusion: There is significant relationship between age group and risk
tolerance level.
Figure 4.19 Risk tolerance level and age group

From the above chart we can understood that there is significant
relationship between age group and risk tolerance level and age group. Age
group below 20 years were take less risk because more of this class people
were not earning their own money and also they were not much knowledge
about investment avenues. So they don’t go for risky investment avenues
they invested in savings bank account and post office savings account. Age
group between 20-30 years were very much risk takers because they are
Page 105
young and earning their own income and they have capacity to bear any
losses occurred from their investment .Age group between 40-50years were
risk avoiders. Important point is that there is significant relationship between
risk tolerance level and age group. When age group increases the risk
tolerance level decreases.
3. H0 : There is no significant relation between risk tolerance level and

income level.
H1 : There is significant relation between risk tolerance level and income
level.

Income level (Rs.)
Below Between Between Above Total
1lakh 2lakh-3lakh 3lakh-5lakh 5lakh
Risk High 21 4 9 9 43
Moderate 7 15 4 2 28
Tolerance
Low 22 2 4 1 29
Level
Total 50 21 17 12 100
Chi-Square Test
O E O-E (O-E)2 ( O-E)2/E
21 21.5 -0.5 0.25 0.0116
7 14 -7 49 3.5
22 14.5 7.5 56.25 3.88
4 9.03 -5.03 25.3009 2.802
15 5.88 9.12 83.17 14.14
2 6.09 -4.09 16.73 0.027
9 7.31 1.69 2.86 0.39
4 4.76 -0.76 0.5776 0.121
4 4.93 -0.93 0.8649 0.175
Page 106
9 5.16 3.84 14.7456 2.86

2 3.36 -1.36 1.8496 0.55
1 3.48 -2.48 6.1504 1.767
30.223
X-squared = 30.223, df = 6, p-value =0.00001073

Conclusion: There is significant relationship between income level and risk
tolerance level.
Figure 4.20 Risk tolerance level and Income level
Page 107
The above chart shows that there is mix opinion in risk tolerance level of
investor those come under below one lakh income level. But chi-square test
proved that there is significant relationship between income level and risk
tolerance level. Therefore as and when income level increases the risk
tolerance level also increases. But in this case there is opposite opinion that
low income people take high risk. This may be because number of low
income group people is higher than high income people. But p-value proved
that happening of these type of circumstances are minor and negligible.
Above 5 lakh income level people take higher risk when compared to people
come under between 3lakh-5lakh income level group and between 2lakh and
3 lakh income levels.
Note: In chi-square test expected frequency is calculated with the fallowing
formula,
Expected frequency = (Total of the correspondent column X Total of the
correspondent row) / Grand total
FINDINGS, SUGGESTIONS AND CONCLUSION
 FINDINGS:
After the analysis of collected data investigator has listed the major
findings are study is listed below:
1. Majority of the respondents (62%) are male.
2. Most of the respondents (53%) are of the age group 20-30years.
3. Most of the respondents are self employed (23%) and fallowed by
students (22%).
4. Most of the respondents (50%) are having an Income level below 1lakh
followed by respondents having income level 1lakh-2lakhs (21%).
Page 108
5. 42% of respondents are married and 58% of respondents are

unmarried.
6. 34% of respondents are having children.
7. Majority of the respondents (47%) are saves only 20% of their total
income and 40% of respondents are saves between 20-40% of their
total income.
8. Interesting point found that majority of respondents (60%) is investing
only 20% of their savings.
9. Most investors opt for two or more sources of information to make
investment decisions.
10.The main purpose of sample investors is to finance the education either
for self or for their family member.
11.Most of the investors discuss with their family and friends before
making an investment decision.
12.Most Investors prefer to park their funds in avenues like Savings
account, Life insurance, FD, Gold and Real Estate.
13.Most of the investors get their information related to investment
through electronic media (TV) next to print media (News paper/
Business news paper/ Magazines)
14.Percentage of income that they invest depend on their annual income,
more the income more percentage of income they invest.
15.Majority of respondents (38%) preferred to invest both short term and
long term period of investment.
16.96% of respondents are aware about the savings account and only 12%
of respondents are aware about the FOREX market.
17.27% of respondents are aware about mutual funds and 56% of
respondents have the knowledge about equity share market.
18.Majority of respondents (90%) are preferred to invest in banking
sector.
Page 109
19.Majority of respondents are opinions that safety of principle is main

factors guiding investment decision.
20.Majority of investors (57%) are like to invest on occasionally.
21.Majority of respondents (55%) are satisfied with their investment.
22.Women are attracted towards investing gold than any other investment
avenue. Students are interested towards investing in saving account and
employees preferred to invest in equity share market. Retired people
preferred to invest in life insurance.
23.Investment preference of married people different from investment
preference of unmarried people. Married people invest on low and
moderate risk avenues but unmarried people invest on high and
moderate risk avenues.
24.Investment preference of investors those who having children are more
similar to the preference of investor those who are not having children.
25.There is significant relation between gender and risk tolerance level.
26.There is significant relation between age group and risk tolerance level.
27.There is significant relation between income level and risk tolerance
level.
SUGGESTIONS:
The following suggestions are based on the individual investors’
response which may be considered by the policy markers, the finance
institutions and the investors.
1. While investing on shares, the investors must consider a variety of
factors comprise of appropriate portfolio constructions to maximize
the return and minimize the risk. Thus, the investors should always
invest their money in different companies by subscribing its shares
rather than investing in a particular company.
2. Some business people know the awareness about investment avenues
but most of the respondents they don’t have sufficient knowledge.
Page 110
Financial institutions should create awareness about available avenues

for investment and have to tell the people what is the meaning of risk
and how it could be mitigated.
3. Government should stress the financial institutions to conduct investor
guidance workshops about available avenues for investment.
4. Financial sector i.e., banking, financial services and life insurance
industries will have to work with government.
5. There is a need for financial literacy and instilling confidence among
investors.
6. Industry associations and NGOs to educate the investor on the need
for savings and savings wisely
7. They should also educate the Indian population both on ways of
meeting their financial objectives through financial protection and
wealth creation.
8. To overcome the problem faced by the investors, adequate policy
reforms in financial sector is the need of the hour.
9. Government should introduce special investment avenues especially
for the students and organize investment awareness programmes in
colleges.
10.The investors who want to avoid risk should invest in treasury notes or
high rated municipal bonds and debentures etc.
CONCLUSIONS:
The study concludes that investment done in various investment avenues
with the expectation of capital appreciation and short and long term earnings.
The basic idea behind investment of all government, private, self-employed
and retired person in this study is to utilize the surplus money in favorable
plans so that the money will be rolled back as well as it will give high returns
also. When a common men thinks about investment he will never go for any
Page 111
risky plan. In the present scenario the share and gold market is highly
uncertain and unpredictable, so the investor should analyze the market
cautiously and then make investment decision.
In order to understand irrational behaviors of investors in the investment
decisions, a risk perception mediated model has been developed to test the
impact of different behavioral variables on the investment decisions. On the
basis of previous studies it can be concluded that the asymmetry of
information, risk taking behavior and decision context affect the perceptions
of risk associated in a particular investment situation.
Considering risk propensity as an influential factor, it is valid to believe
that a risk-averse individual is more likely to avoid risky decisions than a
risk-seeking individual, who is more likely to make risky decisions.
Psychological studies have shown that risk perception can be greatly
influenced by the framework in which investors are when they make
investment decisions. Thus it can be said that stock market and investment
situation influences the perceived risk of the investor; especially, information
asymmetry is retained as an important explanatory factor of risk perception.
Flow of information like decisions made by government bodies, media news
etc. causes the stock prices to move up or down. Due to this behavior of
stock market and due to new information, stock investors make their
investment decisions. The study can be further expanded in the future by
using various other behavioral and psychological factors such as heuristics,
emotional biases etc which may have behavior.
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 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.
Page 112
BIBLIOGRAPHY
Books
1. Avadhani, V.A. (2007), “Investment Management”, Himalayan
Publishing Publication House, New Delhi.
2. Bhole, L.M. (2005), “Financial Institutions & Markets structure,
Growth & Innovations”, Tata McGraw- Hill Publishing Co. Ltd., New
Delhi.
3. Dr. Preeti Singh, Investment Management, Himalaya Publishing
House, sixteenth edition, 2008
4. Prasanna Chandra, Investment analysis and portfolio management, 3rd
edition, Tata McGraw-hill publication, 2010
Page 113
Journals:
1. Ajmi Jy. A. (2008), “Risk Tolerance of Individual Investors in an
Emerging Markets”, International Research Journal of Finance and
Economics, Issue 17, 15-26.
2. Al-Tamimi, H. A. (2006). Individual Investor Behaviour: An empirical
study of the UAE Financial Markets”,. The Business Review,
Cambridge, 5(2), 225 - 232.
3. Desigan et al. (2006), “Women Investor’s Perception towards
Investment: An empirical study”, Indian Journal of Marketing.
Retrieved from: http://www. google.com.(accessed on 22nd May
2010)
4. Dohmen, T. F. (2005). Individual Risk, attitudes. New evidence from a
large representative, experimentally - validated survey,. discussion
paper, institute of economic research, DIW Berlin 511, Berlin.
5. Sahoo J. Shankar (2012)., “Customer Perception Towards Secondary
Market Trading In India”, International Journal of Business and
Management Tomorrow, Vol. 2 No. 3,
6. Shafi, H. et al. (2011), “Relationship between Risk Perception and
Employed Investment Behavior”, Journal of Economics and
Behavioral Studies, Vol. 3, No. 6, December 2011, pp 345-355
7. Singh, B. K. and Jha, A.K. 2009, “An empirical study on awareness &
acceptability of mutual fund”, Regional Students Conference, ICWAI,
49-55.
8. Singh, R. and A. Bhowal, 2008. Risk Perception.The Theoretical
Kaleidoscope. Vanijya, 18: 54-63.
9. Singh, R. and A. Bhowal, 2010. Risk Situations Perception of
Employees with Respect to Journal of Finance, Equity Shares. Journal
of Behavioral Finance,. 11(3): 177-183.
Page 114
10.Sultana Syed Tabbassum (2010) “An empirical study of Indian

Individual Investor Behaviour,” Global Journal of Finance and Mgt.”
Vol 2 No.1, 19-33
Websites:
1. www.business-standard.com
2. www.investopedia.com
3. www.investorguide.com
4. www.moneycontrol.com
5. www.moneymanagementideas.com
6. www.msnmoney.com
QUESTIONNAIRE
Respected Respondent,
I Abhinandan, student of M.Com studying in Mangalore University.
As a part of my curriculum I am doing project on “A study on investors’
perception towards investment avenues with reference to Mangalore city”.
So please take some time out of your schedule to fill this questionnaire.
Kindly fill up the following questionnaire.
1 Name (Optional):
2. Gender
Male
Female
Page 115
3. Age Group :( in years)

Below 20
Between 20-30
Between 30-40
Between 40-50
Above 50
4. Status
Single
Married
5. Children
Yes
No
6. Occupation (what category do you come under)
Student
Home Maker
Self employed(Business/profession)
Employee (Government/Private)
Retired
Other(please specify)
7. Annual Incomes
< 1,00,000
1-2 Lakhs
2-3 Lakhs
Above 3 Lakhs
8. Percentage of savings from your total income:
Below 20%
Between 20-40%
Between 40-60%
Above 60%
9. Percentage of investment in different avenues from your saving:
Below 20%
Between 20-40%
Between 40-60%
Above 60%
10. Purpose of your Investment:
Education
Page 116
Home Purchase
Healthcare
Marriage
Retirement Planning
Other (please specify)…………………………………………
11. Main objective of your Investment:
High return
Moderate return
Safety of investment principle
Liquidity
Tax benefits
12. Preferable period of investment?

Short term
Long term
Both
13. Are you aware of the fallowing investment avenues? (Tick which ever
applicable in the boxes)
Safe/low Risk investment avenues : High Risk Investment Avenues

Saving Account Equity Share Market
Bank Fixed Deposits Commodity Market
Public Provident Fund FOREX Market
National Saving Certificate
Post Office saving Traditional Investment Avenues:
Government Securities. Real Estate (Property)
Gold/ Silver
Chit Funds
Moderate Risk Investment Avenues:
Mutual Funds Emerging Investment Avenues :
Life Insurance Virtual Real Estate
Debentures Hedge Funds
Bonds Private Equity Investments
Art and Passion
14. What do you think are the best option for investing your money?
(Choose from above list)
Page 117
(Rank in the order of preference)

1…………………… 2…………………… 3………………………
4…………………… 5…………………… 6 ………………………
15. In which sector do you prefer to invest your money?
Banking Sector
Insurance Sector
IT Sector
FMCG Sector
Other (please specify)……………………………………….
16. Important factor guiding your investment decisions:
Return
Safety of principle
Diversification
Progressive value
Maturity period
Other…………………………..
17. How often do you monitor your investment?
Daily
Monthly
Occasionally
18. Tolerance for risk is:
High
Moderate
Low
19. Sources of your investment advice:
Media
Advisor
Family or Friend
Internet
Financial Planners
20. Are you satisfied with your investment?
Satisfied
Partially satisfied
Dissatisfied
Page 118

Newproject 160624075440

Enviado por

Dados do documento

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

Newproject 160624075440

Enviado por

Direitos autorais:

Formatos disponíveis

Investors’ perception towards investment avenues

OBJECTIVE OF THE PROJECT:

scheme type, purchase of mutual fund units, level of risks undertaken by

then surpluses in fixed deposits of banks, provident funds, Post Office

Nayak, M. K. (2010), analyze the significance of difference between the

RESEARCH DESIGN AND METHODOLOGY:

Definition of the population:

SCOPE OF THE STUDY:

in understanding the problems faced by the individual investors. Such an

Limitations of the study:

The various limitations of the study are:

Scheme of the study:

Concept and Related issues:

Impact of Demographic Factors on Investors’ Investment Decisions:

A. Social Factors: There are important factors affecting the consumer

 Motivation: The level of motivation also affects the buying behavior

 Perception: Selecting, organizing and interpreting information in a

Behaviour of Individual Investors:

Behavioral Phases of Individual Investors:

Caution Fear Caution

When share prices increase, small individual investors become sellers on

Factors Influencing Investment Decisions:

Where, EP is the expected portfolio return

speculator, who wants instant liquidity because he wants to be in and out of a

What causes the risks?

securities alike through economic, political and social factors.

II. Unsystematic Risks:

Examples of systemic risk

 Interest rate risk:

credit worthryness of the issuer of securities. But basically the

 Purchasing power risk:

Example of unsystemic risks

 Default or insolvency risk:

Some of such identifiable risks are:

INVESTMENT AVENUES IN INDIA:

known exactly. However, in most situations the amount of money to be

Financial Investment: It means employment of funds in the form of assets

Economic Investment: Economic investment is different from financial

FACTORS DETERMINING INVESTMENT:

a) Well organized monetary system:

b) Role of financial institutions:

c) Forms of business organization:

d) Macro – Household Savings and Investment:

iii) Growth of Capital:

iv) Tax Minimization:

Many of the investments discussed are reasonably illiquid, which means

g) Sources of Investment Information:

useful information relating to the prevalent interest rates on non-

ii) Investment analysis: After formulating the investment policy and

iii) Valuation of securities: The third important step in the process of

combination of securities. The objective of portfolio construction is to realize

INVESTMENT AVENUES FOR EMPLOYEES:

I. Employees Provident fund:

 Member can withdraw from these accumulations to cater to financial

II. Public Provident Fund: (PPF)

schemes. The amount invested must be minimum of Rs.500/- and maximum

III. Unit Linked Insurance Plan:

IV. Life Insurance:

their tax liability by making investments in the form of insurance policies.

V. Post Office Schemes:

National Savings Certificates are available in the denominations of Rs.

Savings schemes for Senior Citizens: The Government of India has

VI. Equity Linked Savings Schemes: