PROJECT REPORT

DIFFERENT INVESTMENT AVENUES

By : Ratikanta Giri Chittaranjan Pati

Objectives
To determine the saving behavior and investment preference of customers
To understand the thinking of the customers'

about various investment plans of companies

Meaning of Investment

The employment of funds with the aim of getting return on it Parting with one's own money to be used by another person, for

productive activity
According to Willam F. Sharpe, Investment is sacrifice of current

dollar for future dollars

The art of investment is to see that the return is maximised with the

minimum of risks.

Why should one invest

Stopping the blockage of money in an economy Getting good return on the invested money Getting tax benefits For safe keeping of money Enhance future planning

Different Concepts of Investment

1- Economic investment:
Investment in economic terms means an increase in building, equipment & inventory Indicates additions to the capital stock of the society Investment implies the formation of new & productive capital in the form of new

construction & producer's durable instrument such as Plant & Machinery

2-Financial Investment:
Allocation of monetary resources to assets that are expected to yield some gain or

return over a given period of time

Involves contract written on pieces of paper such as shares and debentures Indicates exchange of financial claims such as shares, bonds, real estate etc

Types of Investment
Shares
Mutual Fund Debentures & Govt. Bonds Public Deposits Public Provident Fund Insurance Commodities Real Estate

Shares
A share in the share capital of a company registered under Indian

Companies Act 1956

The share capital of a company is divided into a no. of equal parts &

each part is known as a 'Share'

The shares can be issued at par, premium or discount The shares can be sold in stock market & money can be collected

within 3 to 4 days
There are two types of shares a. Equity shares b. preference shares Investment in shares is not tax saving investment.

Mutual fund

Mutual fund is a pool of money collected from investors and is invested according to stated investment objectives It mobilizes the savings of the general public and invest them in Stock Market securities The MFs in India are registered as a Trusts under Indian Trust Act. More than 63MFs are operating in India It is a popular investment due to low risk and high returns

Debentures & Govt. bonds

A debenture is a document issued by a company as an evidence of a

debt.
It is a certificate issued by a company under its seal, acknowledging

a debt due by it to its holders.

The debenture holder becomes the creditor of the company, who

gets the rate of return which is fixed at the time of issue

Bonds are issued by the govt. companies & the debentures are

issued by the private sector companies

Bonds may be tax saving but debentures are not tax saving

investments.

Public deposits
The companies are allowed to accept deposits from the public under

Indian companies act, 1956.

However cannot accept the deposits for a period of less than 6

months & more than 36 months.

Companies were offering attractive interest rates at present it is 9%-

12%.
The depositor can renew his deposit for further period of 1-3 years

at his option.

Public Provident Fund

Introduced in 1969, it is an attractive tax sheltered investment

scheme as a provision for old age or expenses such as marriage of a son/a daughter, purchase of flat etc.
A/c can be opened in post office/ any branch of the SBI or its

subsidiaries / at specified branches of nationalised banks.

A/c is for a period of 15 years but can be extended at the desire of

the depositor
Nomination facility is available
The depositor is expected to make a minimum deposit of Rs. 500

every year
A compound interest of 8.8% p.a. is paid which is tax-free.

Life Insurance
It was introduced in India in 1956 ad run by Life Insurance

Corporation of India. It protects the family members through financial support in case of death of policyholder It serves as a provision for old age (maintenance, medical expenses etc.) Provides loan facility from banks LIC gives Bonus to the policyholder on yearly basis which adds to the maturity value of policy It gives tax benefits The return on investment is reasonably low i.e. 6% p.a. due to risk covered & tax incentive. The amount of premium paid is exempted for taxable income under section 80C of the Income Tax Act.

Commodities

Gold and silver are useful as a store of value The investment is highly liquid as it can be sold any time The return on investment is increasing due to continuous increase in

their market price

The investment in gold and silver is risky due to chances of theft The import of gold is not free There is no tax saving on this investment

Real Estate

It includes properties like building, industrial land, plantations, farm

houses, agricultural land near cities, flats etc

It is an attractive investment generating higher return over short

period of time
The investment in residential house is tax saving investment since

the principal amount repayment during a year is exempted from income tax up to an amount of Rs. 1,00,000
The investment in real estate is risky and has low liquidity

Risk in investment
The risk in investment may be related to the non-payment of

principal amount or interest thereon

It also involves liquidity risk, inflation risk, market risk, business

risk, political risk etc

The risk is more if the period of investment is longer and vice-

versa

Thank You