Investment

Why to study Investment and Portfolio Management?

1. One can able to design their investment portfolio in best suitable way
2. One can also work as investment consultant
3. For placement in various areas
The Individual investor should act consistently as an
investor and not as a speculator. -Benjamin Graham
Investment: Meaning
Investment is defined as the current commitment of rupees for a period of time in
order to deliver future payments that will compensate the investor for

Time for which funds are committed

Expected return of Inflation

Uncertainty of future payment

 Time

Three
dimensions Today’s Sacrifice
of Investment

Prospective gain
 Difference between investor & speculator

Area if Difference Investor Speculator

Planning Horizon Longer Shorten

Risk Disposition Moderate High
Return expectation Modest Rate of return High Rate of return
Basis of Decisions Fundamental factors & evaluation of prospects Technical charts & market psychology
Leverage Own Funds & Borrowed funds Borrowed funds
Gambling
Result can known quickly
For fun, not for income
Not an economic activity
Creates risk without any return
Investment Evaluation criteria
Liquidity

Risk Tax Shelter

Investment
Evaluation
criteria

Rate of
Convience
Return
Classification of Financial Assets

Nature of claim Debt Market and Equity Market

Maturity of claim Money Market and Capital Market

Seasoning of claim Primary Market and Secondary Market

Cash or spot Market and Forward or future

Timing of delivery Market

Organisational Exchange traded Market and Over the counter

Structure Market
Portfolio Management Process
Specification of investment objectives and constraints

Quantification of capital market expectations

Investment policy and
strategy
Asset Allocation

Formulation of portfolio strategy

Selection of securities

Portfolio execution Investment

implementation and
review
Portfolio revision

Portfolio evaluation
Investment Alternative
 Non marketable financial assets
Bank Deposits:-
Very safe
Insurance up to Rs.100000
Interest is paid quarterly
Interest decided by bank
Interest rate varies from bank to bank & depends upon duration
Interest rate remain higher for senior citizens
Other than FD, saving account can also be used as investment tool
Post office saving account
Interest rate 4%
Interest tax exempt
Minimum deposits Rs. 500, maximum Rs. 50000 for single & Rs. 100000 for Joint
Account
Rate of interest is decided by Central Government
Interest is calculated on monthly balances and credited annually
Interest earned is Tax Free up to INR 10,000/- per year from financial year 2012-13
Account can be opened in the name of minor and a minor of 10 years and above age
can open and operate the account
Joint account can be opened by two or three adults
Post office time deposits
Minimum INR 200/- and in multiple thereof. No maximum limit.
Interest payable annually but calculated quarterly.
Account opened by individual and in joint also.
Account can be opened by cash/cheque
Nomination facility is available at the time of opening and also after opening of account.
Account can be transferred from one post office to another.
Year 1 2 3 5
Rate of Interest 6.9% 7.0% 7.2% 7.8%

Source: Indian Post-office Database

Post office time deposits
Who Can Open Account
An adult
Joint account can be opened by two adults.
Single account can be converted into Joint and Vice Versa
A minor with minimum age of 10 years.
A guardian on behalf of a minor / a person of unsound mind.
Tax exemption on five years time deposit account can be availed under U/S
80C of IT act.
Monthly income scheme of post office
Interest rate is 7.80% per annum payable monthly.
In multiples of INR 1500/-
Maximum investment limit is INR 4.5 lakhs in single account and INR 9 lakhs
in joint account.
Term is 5 years
No TDS
All joint account holders have equal share in each joint account.
Single account can be converted into Joint and Vice Versa.
Minor after attaining majority has to apply for conversion of the account in his name.
 Kishan Vikas Patra
Interest rate is 7.6% compounded annually
Amount Invested doubles in 113 months (9 years & 5 months)
Available in denominations of Rs 1,000, 5000, 10,000 and Rs 50,000.
Minimum deposit Rs 1000/- and no maximum limit.
Certificate can be purchased by an adult for himself or on behalf of a minor or by two
adults.
KVP can be purchased from any departmental post office. Facility of nomination is
available.
Certificate can be transferred from one person to another and from one post office to
another.
Certificate can be encashed after 2 & 1/2 years from the date of issue.
National Saving Certificate
Minimum of Rs. 100/- and in multiples of Rs. 100/-, No maximum limit for investment.
No Tax deduction at source.
Certificates can be kept as collateral security to get loan from banks.
Investment up to INR 1,00,000/- per annum qualifies for IT Rebate under section 80C of
Income Tax Act.
Trust and HUF cannot invest.
Rate of interest 7.90%., Compounded annually but payable at maturity.
Term 5 years
The interest accruing annually but deemed to be reinvested under Section 80C of IT Act.
Public provident fund scheme
• Minimum INR. 500/- Maximum INR. 1,50,000/- in a financial year. From
1.10.2018, interest rates are as follows:- 7.90% per annum (compounded yearly).
• Deposits can be made in lump-sum or in 12 installments.
• An individual can open account with INR 100/- but has to deposit minimum
of INR 500/- in a financial year and maximum INR 1,50,000/-
• Nomination facility is available at the time of opening and also after opening
of account.
The Account can be transferred from one post office to the another post-
office.
Public provident fund scheme
Maturity period is 15 years but the same can be extended within one year of
maturity for further 5 years and so on.
Deposits qualify for deduction from income under Sec. 80C of IT Act.
Premature closure is not allowed before 15 years.
Withdrawal is permissible every year from 7th financial year from the year of
opening account.
Loan facility available from 3rd financial year.
Employee Provident fund scheme
Provident fund is calculated as 12% of his/her basic salary & the same
amount is contributed by the employer. Employer’s contribution of 12% of
basic salary is totally deposited in provident fund account whereas out of
employees contribution of 12%
The amount invested in an employees provident fund is exempt from tax
under Section 80C of the Income Tax Act.
EPF accounts will now yield a return of 8.65 per cent annually. Return on
EPF does not attract tax.
In the case of a change of one’s job, the amount can be transferred from
the old company to the new one.
Company deposits
Term for Mfg. company 1 to 3 years, for Non-Banking company 25 months
to 5 years
High interest rate as compare to bank FDs
No tax benefit to the depositors
Interest rate normally remains 8 to 15%, Depend on company and
Duration of Investment
Government Securities (Gilt-Edged Securities)
Short term government securities are Treasury bills. They have a maturity of
less than one year. There are three main treasury bills in India – 91 days, 182
days and 364 days.
Long term government securities are known as government bonds or dated
securities. They have a maturity period of five years, ten years, fifteen years etc.
Treasury Bills
Treasury Bills are money market instruments to finance the short term
requirements of the Government of India.
The return to the investor is the difference between the maturity value and
issue price.
In India, at present, the Treasury Bills are of 91 days, 182 days and 364 days
The benefits include-
No tax deducted at source, Zero default risk, Highly liquid, Better returns
especially in the short term, Transparency, Simplified settlement.
Treasury Bills
Government Securities Market
91 day T-bills 4.98%
182 day T-bills 5.12%
364 day T-bills 5.14%
Source: RBI Database
Equity Shares
•Authorized capital •Subscribed Capital
•Issued Capital •Book Value & Market Value

•Rights of equity shareholders:

Right issue
Residual claim on income
Voting right
Residual claim on assets if company goes to
Liquidation
 Financial Derivatives
A derivative is an instruments whose value depends on the value of some underlying asset.

Futures:

A futures contract is an agreement between two parties to exchange an asset for cash at a
predetermined future date for a price that is specified today.

Options:

An option gives its owner the right to buy or sell an underlying asset on or before a given date
at a predetermined price.
Sukanya Samriddhi Accounts
Minimum Deposit - INR. 1000/- in a financial year.
Maximum Deposit - INR. 1,50,000/- in a financial year.
Rate of interest 8.4% Per Annum
A legal Guardian/Natural Guardian can open account in the name of Girl Child.
A guardian can open only one account in the name of one girl child and maximum two
accounts in the name of two different Girl children.
Account can be closed after completion of 21 years.
Partial withdrawal, maximum up to 50% of balance standing at the end of the preceding
financial year can be taken after Account holder’s attaining age of 18 years.
Normal Premature closure will be allowed after completion of 18 years/provided that
girl is married.
Real Estate
1. Agricultural Land
2. Suburban Land
3. Residential House
4. Commercial Property
Precious Objects
1. Art Objects
2. Precious Stones
3. Gold and Silver
4. Painting
Some Android App
1. Retirement Planner
2. Personal Finance
3. PPF Calculator
4. Banking Calculator
5. Appslabz Indian Tax
6. Bank IFSE Code
Thank You