INTRODUCTION

Savings form an important part of the economy of any nation. With savings
are invested in many forms of investment options available, the money acts
as the driver for growth of the country. Indian financial scene too presents a
plethora of avenues to the investors.

We, Indians work hard for our entire life to earn our living. Out of that we
save some part in a hope that it will be used for our future to make it happy
and reliable. These savings are generally invested with a hope to get good
returns from it. So, this invested money earns us profit in a regular course.
These profit margins depend upon the different investment options available
in the market. Below are mentioned some of the basic and most opted for
investment options to suit all financial situations.

Investment options:

We can divide investment options in two categories. They are mainly, real
investments and financial investments. Real investments include investments
made to buy house, car or machinery which are real assets. Financial
investments include investing funds in buying some shares, mutual funds or
bonds which are financial assets.

In a more generalized form there are the below mentioned investment

options available.

• PERSONAL INVESTMENTS: These are a type of financial

investments wherein we can save our money as savings in a bank and
get interest on the invested amount. These are very general form of
investments.
• STOCK MARKET INVESTMENTS: In these form of investments we
can invest our money in stocks and earn profits or make losses
depending on the stock's performance in the market. It is a complex
form of investment wherein we are continuously required to keep an
eye on the market performance.
• REAL ESTATE INVESTMENTS: These are a type of property
investments wherein we can invest our money in buying a house or a
piece of land. We can use the real estate for personal residential or
commercial use or can rent or lease it for commercial or residential
purposes. Here we get a good profit margin and at the same time our
assets are increased.
 • BUSINESS INVESTMENTS: We can invest our money in our own
business instead of investing it with some other source. This is a good
method of investing our money and at the same time setting
something for ourselves.

INVESTMENT
OPTIONS

There are many investment options available for the people in the market,
but there are mainly five investment options, which are considered to be as
most popular and most effective investment options available in the current
market scenario. In general, almost 95-98% people do invest in these, since
the Expected Rate of Return is much higher than any other investment
options, irrespective of the amount of risk is very high in some of the cases.
These investment options are:
FIXED DEPOSITS:
This investment option is most popular and safest option available in the
market. With almost every working people invest in fixed deposits; this
investment option leads the chart of four investment options because of its
safety and popularity. Though the amount of return is much lesser than the
other three options, this option heads the table as it has almost no risk of
losing the invested amount. Also, it is the oldest among the other three, so
the trust factor of people is very high.

There are mainly three types of fixed deposits available in the market,
namely, viz.

1. Fixed deposits offered by Banks

2. Fixed deposits offered by Post Offices

3. Company fixed deposits

Now, we’ll see these three fixed deposit schemes in details.

1. Fixed deposits offered by Banks:

Considered as the safest of all options, banks have been the roots of the
financial systems in India. Promoted as the means of social development,
banks in India have indeed played an important role in not only urban
areas, but also in rural upliftment. For an ordinary person though, banks
have acted as the safest avenue wherein a person deposits money and
earns interest on it. The two main modes of investment in banks, savings
accounts and fixed deposits have been effectively used by one and all.

However, today the interest rate structure in the country is headed

southwards, keeping in line with global trends. With the banks offering
just above in their fixed deposits for one year, the yields have come down
substantially in recent times. Add to this, inflammatory pressure in the
economy and we have a position where the savings are not earning. The
inflation is creeping up almost 8% at times, this means the value of
money saved goes down instead of going up. This effectively mars any
chance of gaining investments from the banks.
Banks in India can be categorized into non-scheduled banks and scheduled
banks. Scheduled banks constitute of commercial banks and co-
operative banks. There are about 67,000 branches of Scheduled banks
spread across India. During the first phase of financial reforms, there was a
nationalization of 14 major banks in 1969.

As far as the present scenario is concerned the banking industry is in a

transition phase. The Public Sector Banks (PSBs), which are the foundation of
the Indian Banking system account for more than 78 per cent of total banking
industry assets.

On the other hand the Private Sector Banks in India is witnessing immense
progress. They are leaders in Internet banking, mobile banking, phone
banking, ATMs. On the other hand the Public Sector Banks are still facing the
problem of unhappy employees. There has been a decrease of 20 percent in
the employee strength of the private sector in the wake of the Voluntary
Retirement Schemes (VRS).

List of the banks and their fixed deposit rates:

Name of the Banksnnn Fixed deposit

rates
ABN AMRO Bank 5-6.75%
Allahabad Bank 5.5-6%
Andhra Bank 5.5-6%
Axis Bank 6.5-7.3%
Bank of Baroda 6-7%
Bank of India 6.75-7%
Barclays Bank 5-5.5%
Canara Bank 7-7.5%
Citi Bank 4.25-4.5%
Corporation Bank 5-5.5%
Dena Bank 6.75-7.5%
Deutsche Bank 3-4.5%
Dhanalakshmi Bank 6.5-8%
Federal Bank 6.5-7.5%
HDFC Bank 5.5-7%
Hongkong Sanghai Banking 8-8.75%
Corp. Ltd.
ICICI Bank 5.25-7.5%
IDBI Bank 7-7.75%
Indian Overseas Bank 6-7.5%
Indusind Bank 7-8.25%
ING Vysya Bank 5.75-7.75%
Jammu and Kashmir Bank 5.5-6%
Karnataka Bank 7-8%
Karur Vysya Bank 7-8.25%
Kotak Mahindra Bank 6-7%
Oriental Bank of Commerce 5.5-6%
Punjab National Bank 5.5-6.5%
SBI 6.25-7%
Standard Chartered Bank 4.5-7.25%
State Bank Of B&J 6.75-7.5%
State Bank of Hyderabad 6.5-7.5%
State Bank of Indore 6.75-7.5%
State Bank of Mysore 6.5-7.25%
State Bank of Travankore 4.25-5.75%
Syndicate Bank 7-7.5%
UCO Bank 6.5-7%
Union Bank of India 5.50%
United Bank Of India 6.5-7.5%
Vijaya Bank 5.5-6%
YES Bank 7.25-7.75%

Source: various bank’s websites

2. Fixed deposits offered by Post Offices:

Just like banks, post offices in India have a wide network. Spread across the
nation, they offer financial assistance as well as serving the basic
requirements of communication. Among all saving options, Post office
schemes have been offering the highest rates. Added to it is the fact that the
investments are safe with the department being a Government of India
entity. So the two basic and most sought features, those of return safety and
quantum of returns were being handsomely taken care of.

Though certainly current market position is not the most efficient systems in
terms of service standards and liquidity; these have still managed to attract
the attention of small, retail investors. However with the government
investing its intention of reducing the interest rates in small savings options,
this avenue is expected to lose some of the investors. Public Provident Funds
act as options to save for the post retirement period for most people and
have been considered good option largely due to the fact that returns were
higher than most other options and also helped people gain from tax benefits
under various sections. This option too is likely to lose some of its sheen on
account of reduction in the rates offered.

3. Company fixed deposits:

Another oft-used route to invest has been the fixed deposit schemes floated
by companies. Companies have used fixed deposit schemes as a means of
mobilizing funds for their options and have paid interest on them. The safer a
company is rated, the lesser the return offered has been the thumb rule.

However, there are several potential roadblocks are there.

Firstly, of all the danger of financial positions of the company not being
understood by the investor lurks. The investors rely on intermediaries who
more often than not, don’t reveal the entire truth.

Secondly, liquidity is a major problem with the amount being received

months after the due dates. Premature redemption is generally not
entertained without cuts in the returns offered and though they present a
reasonable option to counter interest rate risk (especially when the economy
is headed for a low interest regime), the safety of amount has been found
lacking. Many cases like the Kuber Group and DCM Group fiascoes have
resulted in low confidence in this option.
STOCK MARKET:
Now let us look at the Indian Stock Market in details.

The Indian Stock Market is also the other name for Indian Equity Market or
Indian Share Market. The forces of the market depend on the monsoons,
global funding flowing into equities in the market and the performance of
various companies. The market of equities is transacted on the basis of two
major stock indices, National Stock Exchange of India Ltd. (NSE) and The
Bombay Stock Exchange (BSE), the trading being carried on in a
dematerialized form. The physical stocks are in liquid form and cannot be
sold by the investors in any market.

The equity indexes are correlated beyond the boundaries of different

countries with their exposure to common calamities like monsoon which
would affect both India and Bangladesh or trade integration policies and close
connection with the foreign investors. From 1995 onwards, both in terms of
trade integration and FIIs India has made an advance.

Indian Equity Market at present is a lucrative field for the investors and
investing in Indian stocks are profitable for not only the long and medium-
term investors, but also the position traders, short-term swing traders and
also very short term intra-day traders. In terms of market capitalization, there
are over 2500 companies in the BSE chart list with the Reliance Industries
Limited at the top. The SENSEX today has rose from 1000 levels to 8000
levels providing a profitable business to all those who had been investing in
the Indian Equity Market. There are about 22 stock exchanges in India which
regulates the market trends of different stocks. Generally the bigger
companies are listed with the NSE and the BSE, but there is the OTCEI or the
Over the Counter Exchange of India, which lists the medium and small sized
companies.

In the Indian market scenario, the large FMCG companies reached the top
line with a double-digit growth, with their shares being attractive for investing
in the Indian stock market. Such companies like the Tata Tea, Britannia, to
name a few, have been providing a bustling business for the Indian share
market. Other leading houses offering equally beneficial stocks for investing
in Indian Equity Market, of the SENSEX chart are the two-wheeler and three-
wheeler maker Bajaj Auto and second largest software exporter Infosys
Technologies.

Thus, the growing financial capital markets of India being encouraged by

domestic and foreign investments is becoming a profitable business more
with each day. If all the economic parameters are unchanged Indian Equity
Market will be conducive for the growth of private equities and this will lead
to an overall improvement in the Indian economy.

Now apart from all these, the first question that comes in our mind is,

Why do so many people invest in shares?

Simply put, you want to invest in order to create wealth. While investing is
relatively painless, its rewards are plentiful. To understand why you need to
invest, you need to realize that you lose when you just save and do not
invest. That is because the value of the rupee decreases every year due to
inflation. Historically shares have outperformed all the other investment
instruments and given the maximum returns in the long run. In the twenty-
five year period of 1980-2005 while the other instruments have barely
managed to generate returns at a rate higher than the inflation rate (7.10%),
on an average shares have given returns of about 17% in a year and that
does not even take into account the dividend income from them. Were we to
factor in the dividend income as well, the shares would have given even
higher returns during the same period.

[Inflation: general rise in prices and wages caused by an increase in the

money supply and demand for goods, and resulting in a fall in the value of
money. Inflation occurs when most prices rise by some degree across the
economy.]

Investment options Returns per annum

Stock market 17%
Bank fixed deposits 9%
Gold 5.7%

Advantages of investing in shares:

There are lots of advantages of investment in share market. Some of these
are:

Dividend income: investments in shares are attractive as much for the

appreciation in the share prices as for the dividends their companies pay out.

Tax advantages: shares appear as the best investment option if you also
consider the unbeatable tax benefits that they offer. First, the dividend
income is tax-free in the hands of investors. Second, you are required to pay
only a 10% short term capital gains tax on the profits made from investments
in shares, if you book your profits within a year of making the purchase.
Third, you don't need to pay any long-term capital gains tax on the profits if
you sell the shares after holding them for a period of one year. The capital
gains tax rate is much higher for other investment instruments: a 30% short-
term capital gains tax (assuming that you fall in the 30% tax bracket) and a
10% long-term capital gains tax.

Easy liquidity: shares can also be made liquid anytime from anywhere (on
sharekhan.com you can sell a share at the click of a mouse from anywhere in
the world) and the gains can be realized in just two working days.
Considering the high returns, the tax advantages and the highly liquid nature,
shares are the best investment option to create wealth.

How people earn from the investment in shares?

Shares can give us returns in two forms.

A. Appreciation in share prices: You buy shares with the belief that their
price will increase and that when this happens you will be able to sell off your
shares and earn profit. For example, if you bought a share for Rs100 three
years ago and it is Rs500 today, then you have earned Rs400 in three years.

B. Dividend: when a company makes profits, it can choose to share part of

its profits with its shareholders by paying out dividend. This dividend is paid
as a percentage of the face value of the share. For example, a company may
declare a dividend of 25%. Then if the face value of its share is Rs10 you will
get Rs2.50 for every share you own of that company, irrespective of the
market price. In itself this might not be much, but over a longer period of
time or if you have a lot of shares, you could earn quite a bit from the
dividend itself. The best thing about dividends is that they are tax-free in the
hands of investors. Dividend yield stocks are known to give returns higher
than fixed deposits [dividend yield = (dividend per share / market price of the
share) x 100].
What are the expenses during transaction?
Every share transaction attracts some tax or the other. Some of the main
expenses are as follows.

A. Capital gains tax: If you purchase a share and sell it at a price higher
than the purchase price and if this sale is within a year of the purchase, then
a 10% capital gains tax is levied on the profit that you make. For example, if
you bought a share for Rs100 on January 1, 2005 and sold it for Rs150 on July
1, 2005, then you have to pay a tax of 10% on the Rs50 profit that you make.
If you sell after a year of purchase, there is no tax on the long-term gains.

B. Securities transaction tax: Securities transaction tax (STT) is levied by

the government on every transaction you do on a stock exchange. You don’t
have to pay this separately; it’s collected by your broker. As per the Union
Budget 2005 the STT will be 0.10% on delivery-based transactions and 0.02%
on intra-day transactions.

C. Brokerage: Brokers get a commission on every trade that they do for

you. This commission varies from broker to broker; at sharekhan.com the
brokerage is 0.5% for delivery-based transactions and 0.10% for intraday
transactions. On the brokerage amount you are required to pay a service tax
to the government (to be collected by the broker). The brokerage varies
depending on the service that the broker provides you. Some brokers, such
as Sharekhan, offer its clients regular updates on companies, multiple means
to transact and customer service support.

D. Depository fees: Since most of the shares exist in a dematerialized form,

every time you buy or sell shares the transactions are being noted by your
DP. The DPs normally levy a charge which is an annual charge or a charge on
each transaction.

Risks ---the only disadvantage in investing in shares:

There are two types of risk associated with this kind of investment: company
specific risk and market risk.

Set of risks that deals with a company and its sector are referred to as
company specific risk.
Examples of company specific risk: bad management, bad marketing
strategies, sector disturbances that have an impact on industry etc.

External factors (economic, global factors) that affect the market as a whole
are referred to as market risk.
Examples of market risk: political instability, high inflation, rupee
depreciation, rising interest rates, global incidents like wars and disasters
that throttle the nation's economy etc.

How company specific risk can be identified?

With careful scrutiny and proper homework, it might be easy to identify and
be forewarned of the risks a company may be carrying. Specifically check out
for the mergers and acquisitions that do not have a real synergy or are a
nightmare after reconciliation (A O L - Time Warner, Hewlett Packard-
Compaq).

Also is suspicious of diversifications that do not really add value to a

company's core offering. A third kind of risk would be with the companies
that have bet their stakes on a single product offering and are high on debt.
Likewise companies that depend on research could be prone to higher risk, if
the research doesn't come to fruition.
How to identify sector driven risk?
If steel prices rise, auto companies get affected. If low cost Chinese products
invade the country's market, then local fast moving consumer goods
companies might find no takers for their products. The changing nature of the
industry itself may lead to dipping stock prices; a print publication may see
revenue loss if everyone moves to reading on the Internet.

How to predict market risk?

It is difficult to predict market risks. The only thing we can say here is that
start noticing all the small signs early. If the election results are feared to
lead to a fall in the stock market, notice the signals beforehand. Read Sebi's
bulletins and track companies whose shares prices are very volatile.

How people can minimize their risk and maximize their return?
Buy when stocks are falling, sell when these are rising. This works well when
you are a long-term investor and there is an extended bear or Bull Run. Don't
try to second guess or predict that the market will fall today and rise
tomorrow. Even seasoned investors cannot do that!

2. Don't try to guess the market's favorites

Your instincts might tell you that pharma or technology stocks are hot due to
certain policies or events, but remember millions of investors have already
guessed that and bought these stocks. The prices of these stocks would
therefore be at a higher level when you buy them. Instead focus on the long
term and don't get swayed by short-term events.

3. Aim for the long haul

Short-term investing is prone to higher risks. When investing in stocks, aim to
get good returns after a period of three to five years at the minimum. Also
churn your portfolio periodically and based on the progress that a company
makes in a quarter or in six months, decide whether to hold the stock or get
out of it.

4. Avoid hot tips

You may have overheard some news about a stock or your friend may advise
that a particular stock is all geared to move up. Avoid such tips like the
plague and your investments will remain safe.

5. Blue-chips are safe bets

Blue-chip companies are there because they have done well in the past and
have a high market capitalization. It is a likely guess that they will maintain
their track record and give you higher returns even in future. Therefore invest
in companies that have a good track record.

6. Slow and steady stream of investments

Set aside a certain portion of your earnings every month and invest that sum
in shares irrespective of the market conditions. This way, over a period of
time you can amass a substantial number of shares of the stocks in your
portfolio.

7. Think portfolio
Don't put all your earnings in a single stock. Try to have a diverse portfolio of
stocks. This way even if one stock doesn't do well, you are still well protected.
Also invest across sectors, since any problem in one sector would affect all
stocks in the sector. As a thumb rule, if you have investments of up to Rs50,
000 invest in two to three stocks. For about Rs150, 000 invest in three to five
stocks, for around Rs500, 000 have five to seven stocks and around ten
stocks for higher amounts.

8. Don’t invest all your savings

Always maintain a core set of reserves. You should never touch these
reserves for investing, so that even in the worst case you still have some
money. Typically these reserves should be your salary of about six months.

9. Be level-headed
Invest wisely, don't get swayed by rumors and allow Sharekhan to be your
guide at all times. Investment success won't happen overnight, so avoid
overreacting to short term market swings.
Mutual funds:
Mutual Funds are essentially investment vehicles where people with similar
investment objective come together to pool their money and then invest
accordingly. Each unit of any scheme represents the proportion of pool
owned by the unit holder (investor).

Mutual Funds in India are financial instruments. These funds are collective
investments which gather money from different investors to invest in stocks,
short-term money market financial instruments, bonds and other securities
and distribute the proceeds as dividends. The Mutual Funds in India are
handled by Fund Managers, also referred as the portfolio managers. The
Securities Exchange Board of India regulates the Mutual Funds In India. The
share value of the Mutual Funds in India is known as net asset value per
share (NAV). The NAV is calculated on the total amount of the Mutual Funds
in India, by dividing it with the number of shares issued and outstanding
shares on daily basis.

Mutual funds in India – advantages:

 • The Mutual Funds in India offer flexibility by means of dividend
reinvestment, systematic investment plans and systematic withdrawal
plans.
• These funds are available in small units, so they are affordable to the
small investors.
• The fees charged for to the custodial, brokerage and others services
are very low in case of Mutual Funds in India.
• These funds have the option of redeeming or withdrawing money at
any point of time.
• The Mutual Funds in India have low risk as it is managed
professionally.

Like most developed and developing countries the mutual fund cult has been
catching on in India. The important reasons for this interesting occurrence are:

• Mutual funds make it easy and less costly for investors to satisfy their need for
capital growth, income and/or income preservation.
• Mutual fund brings the benefits of diversification and money management to the
individual investor, providing an opportunity for financial success that was once
available only to a select few.
Understanding Mutual funds is easy as it's such a straightforward concept. A mutual fund is a
company that pools the money of many investors, its shareholders to invest in a variety of
different securities.
Investments may be in stocks, bonds, money market securities or some combination of these.
For the individual investor, mutual funds propose the benefit of having someone else manage
your investments and diversify your money over many different securities that may not be
available or affordable to you otherwise. A mutual fund, by its very nature, is diversified -- its
assets are invested in many different securities. Beyond that, there are many different types of
mutual funds with different objectives and levels of growth potential, furthering your odds to
diversify.
Benefits of
mutual funds:

Investing in mutual has various benefits, which makes it an ideal investment

avenue.

Professional investment management :

One of the primary benefits of mutual funds is that an investor has access to
professional management. A good investment manager is certainly worth the fees
you will pay. Good mutual fund managers with an excellent research team can do a
better job of monitoring the companies they have chosen to invest in than you can,
unless you have time to spend on researching the companies you select for your
portfolio. That is because Mutual funds hire full-time, high-level investment
professionals. Funds can afford to do so as they manage large pools of money. The
managers have real-time access to crucial market information and are able to
execute trades on the largest and most cost-effective scale. When you buy a mutual
fund, the primary asset you are buying is the manager, who will be controlling
which assets are chosen to meet the funds' stated investment objectives.

Diversification :

A crucial element in investing is asset allocation. It plays a very big part in the
success of any portfolio. However, small investors do not have enough money to
properly allocate their assets. By pooling your funds with others, you can quickly
benefit from greater diversification. Mutual funds invest in a broad range of
securities. This limits investment risk by reducing the effect of a possible decline in
the value of any one security. Mutual fund unit-holders can benefit from
diversification techniques usually available only to investors wealthy enough to buy
significant positions in a wide variety of securities.

Low Cost :

A mutual fund let's you participate in a diversified portfolio for as little as Rs.5, 000,
and sometimes less.

Convenience and Flexibility :

Investing in mutual funds has its own convenience. While you own just one security
rather than many, you still enjoy the benefits of a diversified portfolio and a wide
range of services. Fund managers decide what securities to trade collect the
interest payments and see that your dividends on portfolio securities are received
and your rights exercised. It also uses the services of a high quality custodian and
registrar. Another big advantage is that you can move your funds easily from one
fund to another within a mutual fund family.

Liquidity :

In open-ended schemes, you can get your money back promptly at net asset value
related prices.
Transparency :

Regulations for mutual funds have made the industry very transparent. You can
track the investments that have been made on your behalf and the specific
investments made by the mutual fund scheme to see where your money is going. In
addition to this, you get regular information on the value of your investment.

Variety :

There is no shortage of variety when investing in mutual funds. You can find a
mutual fund that matches just about any investing strategy you select. There are
funds that focus on blue-chip stocks, technology stocks, bonds or a mix of stocks
and bonds. The greatest challenge can be sorting through the variety and picking
the best for you.

Mutual fund risks:

Having understood the basics of mutual funds the next step is to build a successful
investment portfolio. Before you can begin to build a portfolio, one should
understand some other elements of mutual fund investing and how they can affect
the potential value of your investments over the years. The first thing that has to be
kept in mind is that when you invest in mutual funds, there is no guarantee that you
will end up with more money when you withdraw your investment than what you
started out with.
That is the potential of loss is always there. Even so, the opportunity for investment
growth that is possible through investments in mutual funds far exceeds that
concern for most investors. Here's why.

At the cornerstone of investing is the basic principal that the greater the risk you
take, the greater the potential reward. Risk then, refers to the volatility -- the up
and down activity in the markets and individual issues that occurs constantly over
time. This volatility can be caused by a number of factors -- interest rate changes,
inflation or general economic conditions. It is this variability, uncertainty and
potential for loss, that causes investors to worry. We all fear the possibility that a
stock we invest in will fall substantially. Different types of mutual funds have
different levels of volatility or potential price change, and those with the greater
chance of losing value are also the funds that can produce the greater returns for
you over time. You might find it helpful to remember that all financial investments
will fluctuate. There are very few perfectly safe havens and those simply don't pay
enough to beat inflation over the long run.

Number of available options:

• Diversification
• Professional Management
• Potential of returns
• Liquidity

Besides these important features, mutual funds also offer several other key traits.
Important among them are:

Well Regulated
Transparency
Flexible, Affordable and a Low Cost affair

Structure of the Indian mutual fund industry:

The Indian mutual fund industry is dominated by the Unit Trust of India, which has a
total corpus of Rs. 700bn collected from more than 20 million investors. The UTI has
many schemes in all categories i.e. equity, balanced, income etc with something
open ended and some being closed ended. The unit scheme 1964 commonly
referred to as US 64, which is a balanced fund, is the biggest scheme with a corpus
of about Rs. 200bn. UTI was floated by financial institution and is govern by a
special act of parliament. Most of its investors believe that the UTI is government
owned and controlled, which, while legally uncorrected, is true for all practical
purposes.

Recent trends in mutual fund industry:

The most important trend in the mutual fund industry is the aggressive expansion of
the foreign owned mutual fund companies and the decline of the companies floated
by nationalized banks and smaller private sector players. Many nationalized banks
got into the mutual fund business in the early nineties and got off to a good start
due to the stock market boom prevailing them. These banks did not really
understand the mutual fund business and they just viewed it as another kind of
banking activity. Few hired specialized staff and generally chose to transfer staff
from the parent organizations. The performance of most of the schemes floated by
these funds was not good. Some schemes had offered guaranteed returns and their
parent organizations had to bail out these AMCs by paying large amounts of money
as the difference between the guaranteed and actual returns. The service levels
were also very bad. Most of these AMCs have not been to retain staff, float new
schemes etc, and it is doubtful whether, barring a few exceptions, they have serious
plans of continuing the activity in a major way.
The foreign owned companies have deep pockets and have come in here with the
expectation of a long haul. They can be credited with introducing many new
practices such as new product innovation, sharp
Improvement in service standards and disclosure, usage of technology, broker
education and support etc. In fact, they have forced the industry to upgrade itself
and service levels of organizations like UTI have improved dramatically in the last
few years in response to the competition provided by these.

Schemes of a Mutual Fund:

• The asset management company shall launch no scheme unless the trustees
approve such scheme and a copy of the offer document has been filed with the
Board.

• Every mutual fund shall along with the offer document of each scheme pay filing
fees.

• The offer document shall contain disclosures which are adequate in order to
enable the investors to make informed investment decision including the disclosure
on maximum investments proposed to be made by the scheme in the listed
securities of the group companies of the sponsor A close-ended scheme shall be
fully redeemed at the end of the maturity period. “Unless a majority of the unit
holders otherwise decide for its rollover by passing a resolution”.

Rules Regarding Advertisements:

• The offer document and advertisement materials shall not be misleading or
contain any statement or opinion, which are incorrect or false.

Investment Objectives and Valuation Policies:

• The price at which the units may be subscribed or sold and the price at which
such units may at any time be repurchased by the mutual fund shall be made an
available to the investors.

Restrictions on Investments:
• A mutual fund scheme shall not invest more than 15% of its NAV in debt
instrument issued by a single issuer, which are rated not below investment grade by
a credit rating agency authorized to carry out such activity under the Act. Such
investment limit may be extended to 20% of the NAV of the scheme with the prior
approval of the Board of Trustees and the Board of Asset Management Company.

• A mutual fund scheme shall not invest more than 10% of its NAV in unrated debt
instruments issued by a single issuer and the total investment in such instruments
shall not exceed 25% of the NAV of the scheme. All such investments shall be made
with the prior approval of the Board of Trustees and the Board of Asset
Management Company.
• No mutual fund under all its schemes should own more than ten percent of any
company’s paid up capital carrying voting rights.

• Such transfers are done at the prevailing market price for quoted instruments on
spot basis. The securities so transferred shall be in conformity with the investment
objective of the scheme to which such transfer has been made.

INSURANCE:

Introduction to insurance:

The business of insurance is related to the protection of the economic values of the
assets. Every asset has a value. The asset would have been created through the
efforts of the owner. The asset is valuable to the owner, because he expects some
benefits from it. It is a benefit because it meets some of his needs. But every asset
is expected to last for a certain period of time during which it will provide the
benefits. After that the benefit may not be available. The owner is aware of this and
he can so manage his affairs that by the end of that period or life-time, a substitute
made available. Thus he makes sure that the benefit isn’t lost. Here comes the
thought of insurance.

Risk and Return Analysis

There are two kinds of returns in finance

a) Historical returns b) Anticipated returns (future prospective).

We must remember that calculations of risk differ with these two returns. Historical
returns are based on the previously recorded data whereas anticipated returns are future
projections about “would be realized returns” based on certain assumptions, trends or
expectations.
Risk, as it stands, is the quantified value of the uncertainty in the returns (Anticipated
return).It pertains to the probability of earning a return less than that expected. So greater
is the chance of a return far below the expected return, greater is the risk.
A second school of thought defines risk as the variance (fluctuation, deviation) in the
return from a mean, stated, expected or most likely return. Hence, as long as your returns
in future (anticipated) are distant from your measurement, you are in a more risky zone.

QUESTIONAIRE

Do u hv a demat a/c

What types of securities do u actually deal in

What is ur basic priority – high risk n high returns “or” low risk n low returns

Which is ur most preferred broking firm