Investment Avenues and Road Ahead

Abstract
The paper studies the investment Avenues that are available to invest and the Investors behavior
towards them. After studying investment pattern, the approach of the investors and the risk
tolerance level decided. The investment intelligence was calculated. And accordingly, the
investment product was created to cater to the investors needs. The suggestion of TWO new
products were given for the betterment of the company and investors alike.

Objective of the Study:

1. To develop a profile of sample Indian individual investor in terms of their demographics. And
demographics based on occupation of the sample investor.
2. To identify the objective of savings of an investor.
3. To study the dependence/independences of the demographic factors (Age) of the investor and
his/her risk tolerance level.
4. To know about the factors that they consider before investing.

Value Addition
1. It can be used by the financial sector in designing better financial instrument customized to suit
the needs of the investor
2. It will provide knowledge to the investors about the various financial products which are
available for investment.
3. It will also help the company to understand what is the requirement and expectations of different
categories of investors

Various Investment Avenues

1. Savings Account
This account gives the customer a nominal rate of interest and he can withdraw money as and
when the need arises. As soon as one's savings accumulate to an amount which he can spare for a
certain period of time, shift this money to Fixed Deposit. The returns on the money kept in Savings
Bank account will be less but the freedom to withdraw is the highest. Before depositing, always
look at NIM (Net Interest Income) and NPA (Non-Performing Assets) to NIM ratio.
 2. Fixed Deposit
The term "fixed" in Fixed Deposits denotes the period of maturity or tenor. Normally, the rate is
highest for deposits for 3-5 years. This, however, does not mean that the depositor loses all his
rights over the money for the duration of the tenor decided. Deposits can be withdrawn before the
period is over. However, the amount of interest payable to the depositor, in such cases goes down.
One can invest in Tax Saving FD, under section 80c of income tax act. It has a 5-year lock in
period.

3. Post Office Savings

There are various investment schemes available in post offices, like KVP (Kisan Vikas Patra),
MIS (Monthly Income Scheme) and various others. All these schemes are completely risk-free,
and you do not need to have large sum of money to start investing in these post office schemes.
Some schemes offer Tax-saving benefits and some gives tax-free returns. So you need to find out
some scheme as per your requirements.
These are some of the safe and secure investments that you can opt for. Though the interest rates
are not so high, but still you must invest some part of your money into any of these investment
instruments. It is your hard-earned money, so better play safe and invests some part in secure funds
also.

4. PPF
PPF is a 30-year-old constitutional plan of the Central Government happening with the objective
of providing old age profits security to the unorganized division workers and self-employed
persons. Currently, there are almost 30 lakhs PPF account holders in India across banks and post
offices. Tax deductions under 80c up to 1.5 lakhs.

5. Mutual Funds
A mutual fund is a professionally-managed firm of collective investments that pools money from
many investors and invests it in stocks, bonds, short-term money market instruments, and/or other
securities. In a mutual fund, the fund manager, who is also known as the portfolio manager, trades
the fund's underlying securities, realizing capital gains or losses, and collects the dividend or
interest income. The investment proceeds are then passed along to the individual investors. The
value of a share of the mutual fund, known as the net asset value per share (NAV), is calculated
daily based on the total value of the fund divided by the number of shares currently issued and
outstanding.
Advantages of Mutual Funds
• Diversification
• Professional Management
• Regulatory oversight
• Liquidity
• Convenience

6. Insurance
Life insurance is a contract between the policy owner and the insurer, where the insurer agrees to
pay an amount of money upon the happening of the insured individual's or individuals' death or
other event, like terminal illness, critical illness. In return, the policy owner agrees to pay a fixed
amount called a premium at regular intervals or in bulge sum. Advantages of a Life Insurance
Policy-
• Financial Security
• Helps to diverts States Resources for Other Purpose
• Facilitates Economic Movements
• Helps to Avail Tax Exemptions under section 80c up to 1.5 lakhs and in 10 10(D) for future
annual income and/or on surrender value.

7. Bonds and Debentures

Bonds - Debt securities issued by Govt. or Public sector companies
Debentures - Debt securities issued by private sector companies
In other words, we can tell that a bond is a debt security, similar to an I.O.U. When you purchase
a bond, you are lending money to a government, municipality, corporation, or Public entity known
as the issuer. The issuer promises to pay you a specified rate of interest during the life of the bond,
in return for the loan. They also promise to repay the face value of the bond (the principal) when
it "matures”.
A debenture is similar to a bond except the securitization conditions are different. A debenture is
generally unsecured in the sense that there are no liens or pledges on specific assets. It is defined
as a certificate of agreement of loans which is given under the company's stamp and carries an
undertaking that the debenture holder will get a fixed return (fixed on the basis of interest rates)
and the principal amount whenever the debenture matures.

8. Stock Market
Stock market trading is normally done by brokers. As a result, the first step is to seek a reliable
investment broker. Benefits of Stock Market Trading
• It promotes economic growth.
• It helps companies raise capital and handle financial issues.
• It ensures that money is invested in businesses to enhance profit potential.
• It helps investors realize substantial profits

9. Forex Market
Forex trading is the immediate trade of one currency and the selling of another.
Currencies are traded through an agent or dealer and are traded in pairs. For example, Euro (EUR),
US dollar (USD), British pound (GBP) or Japanese Yen (JPY).
Here you are not buying anything physical; this type of trading is confused. Think of buying a
currency as buying a share of a particular country. When you purchase say Japanese Yen, you are
in effect buying a share in the Japanese financial system, as the price of the currency is a direct
reflection of what the market thinks about the current and future health of the Japanese economy.
In common, the exchange rate of a currency versus other currencies is a reflection of the condition
of that country's financial system compared to the other countries financial system.

10.Commodity Trading
The terms "commodities" and "futures" are often used to depict commodity trading or futures
trading. It is similar to the way "stocks" and "equities" are used when investors talk about the stock
market. Commodities are the actual physical goods like gold, crude oil, corn, soybeans, etc.
Futures are contracts of commodities that are traded at a commodity exchange like MCX. Apart
from numerous regional exchanges, India has three national commodity exchanges namely, Multi
Commodity Exchange (MCX), National Commodity and Derivatives Exchange (NCDEX) and
National Multicommodity Exchange (NMCE). Forward Markets Commission (FMC) is the
regulatory body of commodity market.

11.REIT’s
REITs are investment vehicles that own, operate and manage a portfolio of income-generating
properties for regular returns. These are usually commercial properties (offices, shopping centers,
hotels etc.) that generate rental income. An REIT works very much like a mutual fund. It pools
funds from a number of investors and invests them in rent-generating properties. SEBI requires
Indian REITs to be listed on exchanges and to make an initial public offer to raise money. Just like
MFs, REITs are subject to a three-tier structure — the sponsor who is responsible for setting up
the REIT, the fund management company which is responsible for selecting and operating the
properties, and the trustee who ensures that the money is managed in the interest of unit-holders.
one can invest in REITs in primary and secondary market and exit any time you want. But they
will have a minimum investment requirement of ₹2 lakh. Also, the minimum offer size of an REIT
is ₹250 crore. Though countries such as the US and Singapore have seen REITs providing good
returns, in India, issues such as lower rental yields and an illiquid and opaque property market
have discouraged REITs.

12.Investment in Gold
Gold has got lot of emotional value than monetary value in India. India is the largest consumer of
gold in the world. In western countries, you can find most of their gold in their central banks. But
in India, we use gold mainly as jewels. If you look at gold in a business sense, you will understand
that gold is one of the all-time best investment tools.

Gold has given 11% CAGR. While benchmark Indices had given 15% CAGR, From year 1978
till date.

13.Government Securities
Government securities (G-secs) are supreme securities which are issued by the Reserve Bank of
India on behalf of Government of India in lieu of the Central Government's market borrowing
program.
The term Government Securities includes:
• Central Government Securities.
• State Government Securities
• Treasury bills
The Central Government borrows funds to finance its 'fiscal deficit'. The market borrowing of the
Central Government is increased through the issue of dated securities and 364 days treasury bills
either by auction or by floatation of loans. In addition to the above, treasury bills of 91 days are
issued for managing the temporary cash mismatches of the Government. These do not form part
of the borrowing program of the Central Government.

14.Emerging Investment Avenues

A hedge fund is a private investment fund, charging a performance fee and is open to only a
limited number of investors. These funds are like mutual funds, which collect money from
investors and use the proceeds to buy stocks and bonds. They can invest on almost any type of
opportunity; in any market where in good returns are expected with low risk levels.
Over the last 15 years, hedge funds have become increasingly popular with high net worth
individuals, as well as institutional investors. The number of hedge funds has risen by about 20%
per year and the rate of growth in hedge fund assets has been even more rapid.
Private equity investments are usually derived from a high net-worth individual who represents
an essential source of funding for early stage, high-risk ventures. It is estimated that one-seventh
of the 300,000 + start/early growth firms in the US receive funding from angel investors. This
translates into over $20 billion of investment in approximately 50,000 deals each year. This
investment group exceeds venture capital sources which are estimated at $5 - $7 billion spread
over 1,000 venture capital investments each year.
A cryptocurrency is a digital or virtual currency designed to work as a medium of exchange. It
uses cryptography to secure and verify transactions as well as to control the creation of new units
of a particular cryptocurrency. Essentially, cryptocurrencies are limited entries in a database that
no one can change unless specific conditions are fulfilled. There are various cryptocurrencies like
Litcoin, Ethereum etc, famous one being Bitcoin. It is just like investing in Stocks with technical
analysis. One can invest in it through applications like Unocoin, Paxful etc.
The above avenues can be further classifying as: -
Safe/Low Risk Avenues:
• Savings Account
• Bank Fixed Deposits.
• Public Provident fund (PPF’s)
• Post office savings.
• Government Securities.
Moderate Risk Avenues:
• Mutual Funds.
• Life Insurance.
• Debentures.
• Bonds.
High Risk Avenues:
• Equity Share Market.
• Commodity Market.
• FOREX Market.
Traditional Avenues:
• Real Estate (property).
• Gold/Silver.
• Chit Funds.
Emerging Avenues:
• Virtual Real Estate.
• Hedge Funds/Private Equity Investments
From the data collected approx. 78% of the adults (over age of 53) prefer to invest in safe avenues
while the millennials prefer to invest in Mutual funds, Alternate investment options. As the
information and the inflation are rising so does the need for the more prudent investment options.
There is shortage of risk management among the investors in all demographics. The diversification
is only upto the above three avenues. There is need for the market to find new investment avenue,
to mitigate the risk and the product can lure all the investors type.
It is found that, people want to invest but do not have enough money or are scared that it might not
be safe. The pessimism by the investors is not at all good for the markets and for the country. There
are some avenues, which the investors are not aware about. Only 23% of them knew about
investment in arts, private equity and cryptocurrency. The cryptocurrency is not a legal tender, but
government never said about trading is ban or it is punishable by law. Same way private equity is
the new way for millennials to take the risk and gain more.

Facts and Opinion

Form research, one thing became clear that, those who want to invest want more and those who
are hesitant, they want the assurance. There are some macro factors behind this pessimism like: -
1) News related to banking sector
2) Coronavirus
3) Fall in the financial markets
But let’s get some perspective on all of the above.
1) News related to banking sector
Since the fall of IL&FS, Indian economy is facing some liquidity crunch. Then the sudden fall in
the consumption levels and so-called economists, who don’t even know about the system are
creating panic among the people. When you select the bank to deposit your money, one must check
their viability. We do check it on all the other things then why not on the institute where we are
going to deposit our savings. One must check for banks NIM and NPA to NIM ratio before
depositing. Further to add, RBI will try to protect the banking system at any cost as it is now a
national problem.
2) Coronavirus
Coronavirus or Covid-19 is the virus which has taken approx. 20,000 lives within 40 days. With
around 7 lakhs tested positive around the world for the same. So, the fatality rate is approx. 3% till
mow. Yes, it is severe for the old age people but for the demographics between 18-45, fatality rate
is 1-2%. It is mostly catching the people with some medical history. We can compare it with the
virus of the recent past, ‘Swine Flu’. It infected approx.1.4 billion people around the world with
fatality rate approx. 6%. If we observed closely, the nations are facing this huge problem has an
average age above 45 years. Let’s think practically for a moment, if the virus was not originated
in China- the Supply chain of the world but somewhere in the African country, do you think
there would have been this much panic?
3) Fall in the share market
This is the elephant in the room, isn’t it? All the people, all over the world are talking about how
Dow jones fall 10000 points in weeks, how Nifty is at the levels of 2013. What if I tell you that
this fall was bound to happen? Here putting analysis-
1) In every decade, indices fall severely. it’s the technicality of the market nothing new.
1991- Indian Economic Crisis
1997- Asian Financial Crisis
2000-01- Enron Scandal
2008- Lehman brothers’ crisis
2015- Chinese stock market crash
2017- IL&FS crisis
2020- Coronavirus pandemic
2) The P/E ratio of the index was too high and it needed correction. Historically the P/E of
the index was around 15-16 times but in past few years, it sky rocketed to 28-30 times.
(P/E ratio 28 simply means for a commodity having actual value Rs 1, you are willing to
pay Rs 28.)
3) Overall financial health of the world. According to IMF’s website, the world is in debt of
approx. 200 trillion dollars and counting. It is leverage. And as they say, Leverage is a
two-edged sword. During boom period, this will bring you all the riches but in downturn,
same is the curse.
4) Mutual fund, FPI, FII’s selling in bulk. FPI’s and FII’s have withdrawn approx. 60000
crores from the market in the month of march till 25th March,2020. Due to this the value
of the rupee fall to past 10 years low of 76 and to prevent rupee from falling further, RBI
has to sell 12 Billion dollar of Forex reserve.
One should have patience; this will not be the situation all the time. And stock market should not
be the parameter to judge the countries welfare.
Suggestion
Now that all the situation is clear, here are some options which could benefit both the investors
and the Company alike
1) Inverse Index Funds
An index fund is a type of mutual fund with a portfolio constructed to match or track the
components of a financial market index. So, when index goes up your NAV also goes up and you
are in profit. But recent events have made investors skeptical towards the market. So, by
introducing Inverse Index Funds, Investors can be well protected.
Inverse Index Funds, as the name suggest, will do exact opposite of the Index Funds. Means you
are making money out of loss as well. This is a golden perspective for the investors as in last 3-5
years Index funds have given negative return.

As we can see, this loss could be avoided and the trust of the investors can be bought back.
2) Mixed Funds
Second most query of the investors was that we want to not only invest in the Share market but
also in other avenues. But with limited money, we have to let go off some of the avenues.
This query will be solved by ‘Mixed Funds’.
Mixed funds are just like hybrid mutual funds, but it will invest in commodities, Forex, REIT’s,
Alternate investments as well. This will allow the investors to customize the options as per their
needs. They will have plethora of options to choose from. But the heavy lifting like which stock
to choose, in which commodity to invest etc. will be done by the Asset Management Company.
This option will change the way investment been done and for good.