ANALYSIS OF INVESTMENT DECISIONS.doc

8/9/2019 ANALYSIS OF INVESTMENT DECISIONS.doc

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ANALYSIS OF INVESTMENT DECISIONS

SubmittedBy

T.DINESH

(HT.NO. 011060128)

Project submitted in !rti!" #u"#i""ment #or t$e !%!rd o# de&ree o#

' STE O* +,SINESS D'INIST TION

+-

I E/ N ND S HOO O* P ST,DIESOS' NI ,NI E SIT3

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DE TION

I hereby declare that this r!"ect re !rt titled N 3SIS O* IN EST'ENT DE ISIONS

submitted by me t! the De artme#t !$ I E/ N ND S HOO O* POST D, TE

ST,DIES is a b!#a$ide %!r& u#derta&e# by me a#d it is #!t submitted t! a#y !ther '#i(ersity

!r I#stituti!# $!r the a%ard !$ a#y de)ree di l!ma * certi$icate !r ublished a#y time be$!re+

T .DINESH

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ABST-ACT

The r!"ect .ANANLYSIS OF INVESTMENT O/TIONS0 )i(es the brie$ idea re)ardi#) the

(ari!us i#(estme#t ! ti!#s that are re(aili#) i# the $i#a#cial mar&ets i# I#dia+ ith l!ts !$

i#(estme#t ! ti!#s li&e ba#&s2 Fi3ed De !sits2 4!(er#me#t b!#ds2 st!c& mar&et2 real estate2

)!ld a#d mutual $u#ds the c!mm!# i#(est!r e#ds u m!re c!#$used tha# e(er+ Each a#d e(ery

i#(estme#t ! ti!# has its !%# merits a#d demerits+ This r!"ect I ha(e discussed ab!ut $e%

i#(estme#t ! ti!#s a(ailable+

A#y i#(est!r be$!re i#(esti#) sh!uld ta&e i#t! c!#siderati!# tae sa$ety2 li5uidity2 retur#s2

e#try*e3it barriers a#d ta3 e$$icie#cy arameters+ e #eed t! e(aluate each i#(estme#t ! ti!# !#

the ab!(e6me#ti!#ed basis a#d the# i#(est m!#ey+ T!day i#(est!r $aces t!! much c!#$usi!# i#

a#aly7i#) the (ari!us i#(estme#t ! ti!#s a(ailable a#d the# selecti#) the best suitable !#e+ I# the

rese#t r!"ect2 i#(estme#t ! ti!#s are c!m ared !# the basis !$ retur#s as %ell as !# the

arameters li&e sa$ety2 li5uidity2 term h!ldi#) etc+ thus assisti#) the i#(est!r as a )uide $!r

i#(estme#t ur !se+

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AC9NO LED4EMENT

I %!uld li&e t! )i(e s ecial ac!%led)eme#t t! Dr+/+V+-a!2 direct!r2 Vi(e&a#a#da Sch!!l !$

/!st 4raduate Studies $!r his c!#siste#t su !rt a#d m!ti(ati!#+I am )rate$ul t! Mr+V+-a)hu#adh2 Ass!ciate r!$ess!r i# $i#a#ce2 Vi(e&a#a#da Sch!!l !$ /!st

4raduate Studies2 $!r his tech#ical e3 ertise2 ad(ice a#d e3celle#t )uida#ce+ :e #!t !#ly )a(e

my r!"ect a scru ul!us critical readi#)2 but added ma#y e3am les a#d ideas t! im r!(e it+

I am i#debted t! my !ther $aculty members %h! )a(e time a#d a)ai# re(ie%ed ! ti!#s !$ this

r!"ect a#d r!(ide ma#y (aluable c!mme#ts+

I %!uld li&e t! e3 ress my a reciati!# t!%ards my $rie#ds $!r their e#c!ura)eme#t a#d su !rt

thr!u)h!ut this r!"ect+

A $i#al %!rd !$ tha#&s )!es t! e(ery!#e else %h! made this r!"ect !ssible+ Y!ur c!#tributi!#s

ha(e bee# m!st a reciated+

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TABLE OF CONTENETS

CONTENTS /A4E NO+

List !$ tables <

List !$ Fi)ures =

C:A/TE-61

1+INT-OD'CTION >

,+OB?ECTIVE OF T:E ST'DY @

8+MET:ODOLO4Y 1

;+LIMITATIONS OF T:E ST'DY 11

C:A/TE-6,

+INT-OD'CTION TO INVESTMENT DECISIONS 1,

+ALL ABO'T BONDS INVESTMENT ,1

@+ALL ABO'T 4OLD INVESTMENT ,=

1 +ALL ABO'T M'T'ALF'ND INVESTMENT 81

11+ALL ABO'T -EAL ESTATE INVESTMENT 8=

1,+ALL ABO'T LIFE INS'-ANCE INVESTMENT ;1C:A/TE-6;

18+/E-FO-MANCE ANALYSIS OF -ET'-NS ;=

C:A/TE-6

1;+FINDIN4S OF T:E ST'DY =

1 +CONCL'SION


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LIST OF TABLES

TABLE /A4E NO+

1+ B!#d -ati#) ,8

,+ Asset 4rid @

8+ /arameters Table


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LIST OF FI4'-ESFI4'-ES /A4E NO+

1+ Se#se3 Chart ;=

,+ BSE 1 Chart ;>

8+ BSE , Chart ;@

;+ BSE Chart

+ 4!ld Chart 1


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INT-OD'CTION TO INVESTMENTS

There are ma#y di$$ere#t de$i#iti!#s !$ %hat i#(estme#t a#d i#(esti#) actually mea#s+ O#e !$

the sim lest %ays !$ describi#) it is usi#) y!ur m!#ey t! try a#d ma&e m!re m!#ey+ This ca#

ha e# i# ma#y di$$ere#t %ays+

All i#(est!rs are di$$ere#t+ The c!mm!# $act!r is that y!u %!uld li&e t! i#(est m!#ey t! aim t!

ma&e it )r!% !r t! recei(e a re)ular i#c!me $r!m it+ e %!uld li&e t! sh!% y!u that ch!!si#) the

m!st suitable i#(estme#t $!r y!u d!es #!t #eed t! be di$$icult+ All y!u #eed is the ri)ht hel

al!#) the %ay+

The act c!mmitti#) m!#ey !r ca ital t! a# e#dea(!r %ith the e3 ectati!# !$ !btai#i#) a#additi!#al i#c!me !r r!$it is !%# as i#(estme#t+ I#(esti#) mea#s utti#) y!ur m!#ey t! %!r&

$!r y!u+

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OB?ECTIVE OF T:E ST'DY

The rimary !b"ecti(e !$ the r!"ect is t! ma&e a# a#alysis !$ (ari!us i#(estme#t decisi!#+ The

aim is t! c!m are the retur#s )i(e# by (ari!us i#(estme#t decisi!#+ T! cater the di$$ere#t #eeds

!$ i#(est!r2 these ! ti!#s are als! c!m ared !# the basis !$ (ari!us arameters li&e sa$ety2

li5uidity2 ris&2 e#try*e3it barriers2 etc+

The r!"ect %!r& %as u#derta&e# i# !rder t! ha(e a reas!#able u#dersta#di#) ab!ut the

i#(estme#t i#dustry+ The r!"ect %!r& i#cludes !%i#) ab!ut the i#(estme#t DECISIONS li&e

e5uity2 b!#d2 real estate2 )!ld a#d mutual $u#d+ All i#(estme#t DECISIONS are discussed %ith

their ty es2 %!r&i#)s a#d retur#s+

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MET:ODOLO4Y

E5uities2 B!#ds2 -eal Estate2 4!ld2 Mutual Fu#ds a#d Li$e I#sura#ce %ere ide#ti$ied as ma"!r

ty es !$ i#(estme#t decisi!#+

The rimary data $!r the r!"ect re)ardi#) i#(estme#t a#d (ari!us i#(estme#t DECISIONS %ere

c!llected thr!u)h i#teracti!#s had %ith Mr+-a)hu#adh Sir+

The sec!#dary date $!r the r!"ect re)ardi#) i#(estme#t a#d (ari!us i#(estme#t DECISIONS

%ere c!llected $r!m %ebsites2 te3tb!!&s a#d ma)a7i#es+

The# the a(era)es !$ retur#s !(er a eri!d !$ years are c!#sidered $!r the ur !se !$

c!m aris!# !$ i#(estme#t ! ti!#s+ The#2 critical a#alysis is made !# certai# arameters li&e

retur#s2 sa$ety2 li5uidity2 etc+ 4i(i#) %ei)hta)e t! the di$$ere#t ty e !$ #eeds !$ the i#(est!rs a#d

the# multi lyi#) the same %ith the (alues assi)#ed d!es this+

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INVESTMENT DECISIONS

I#tr!ducti!#

These days alm!st e(ery!#e is i#(esti#) i# s!methi#) e(e# i$ it s a sa(i#)s acc!u#t at the l!cal

ba#& !r a chec&i#) acc!u#t the ear#s i#terest !r the h!me they b!u)ht t! li(e i#+

:!%e(er2 ma#y e! le are !(er%helmed %he# they bei#) t! c!#sider the c!#ce t !$ i#(esti#)2

let al!#e the lau#dry list !$ ch!ices $!r i#(estme#t (ehicles+ E(e# th!u)h it may seem the

e(ery!#e a#d their br!thers !%s e3actly %h!2 %hat a#d %he# t! i#(est i# s! they ca# ma&e

&illi#)2 lease d!# t be $!!led+ Ma"!rities !$ i#(est!r ty ically "um !# the latest i#(estme#t

ba#d%a)!# a#d r!bably d!# t !% as much ab!ut %hat s !ut there as y!u thi#&+

Be$!re y!u ca# c!#$ide#tly ch!!se a# i#(estme#t ath that %ill hel y!u achie(e y!ur ers!#al

)!als a#d !b"ecti(es2 it s (itally im !rta#t that y!u u#dersta#d the basics ab!ut the ty es !$

i#(estme#ts a(ailable+ 9#!%led)e is y!ur str!#)est ally %he# it c!mes t! %eedi#) !ut bad

i#(estme#t ad(ice a#d is crucial t! success$ul i#(esti#) %hether y!u )! at it al!#e !r use a

r!$essi!#al+

The i#(estme#t ! ti!# be$!re y!u are ma#y+ /ic& the ri)ht i#(estme#t t!!l based !# the ris&

r!$ile2 circumsta#ce2 time a(ailable etc+ i$ y!u $eel the mar&et (!latility is s!methi#)2 %hich y!u

ca# li(e %ith the# buy st!c&s+ I$ y!u d! #!t %a#t ris&2 the (!latility a#d sim ly desire s!me

i#c!me2 the# y!u sh!uld c!#sider $i3ed i#c!me securities+ :!%e(er2 remember that ris& a#d

retur#s are directly r! !rti!#al t! each !ther+ :i)her the ris&2 hi)her the retur#s+

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#et asset (alue2 %hich is determi#ed at the e#d !$ each tradi#) sessi!#+ The a(era)e rate !$

retur# as a c!mbi#ati!# !$ all mutual $u#ds ut t!)ether is #!t $i3ed but is )e#erally m!re tha#

%hat ear# is $i3ed de !sits+ :!%e(er2 each mutual $u#d %ill ha(e its !%# a(era)e rate !$ retur#

based !# se(eral schemes that they ha(e $l!ated+ I# the rece#t ast2 Mutual Fu#s ha(e )i(e# a

retur# !$ 1> J 8 K+

-eal Estate G F!r the bul& !$ i#(est!rs the m!st im !rta#t asset i# their !rt$!li! is a reside#tial

h!use+ I# additi!# t! a reside#tial h!use2 the m!re a$$lue#t i#(est!rs are li&ely t! be i#terested i#

either a)ricultural la#d !r may be i# semi6urba# la#d a#d the c!mmercial r! erty+

/reci!us /r!"ects G /reci!us !b"ects are items that are )e#erally small i# si7e but hi)hly(aluable i# m!#etary terms+ S!me im !rta#t reci!us !b"ects are li&e the )!ld2 sil(er2 reci!us

st!#es a#d als! the u#i5ue art !b"ects+

Li$e i#sura#ce G I# br!ad se#se2 li$e i#sura#ce may be re(ie%ed as a# i#(estme#t+ I#sura#ce remiums re rese#t the sacri$ice a#d the assured the sum the be#e$its+ The im !rta#t ty es !$

i#sura#ce !licies i# I#dia areG

E#d!%me#t assura#ce !licy+M!#ey bac& !licy+

h!le li$e !licy+

Term assura#ce !licy+

'#it6li#&ed i#sura#ce la#+

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I#dia I#$!li#e %as Lau#ched !# 11 May 1@@@ %ith SEBI -E4N+ NO+ G

INB ,81 @= 8= CODE NO+ G 1 @= 2 -e)d+ Deali#) O$$ice G Buildi#) N!+

,;2 1st Fl!!r2 Nirl!# Limited C!m !u#d2 ester# E3 ress :i)h%ay2 4!re)a!#

HE 2 Mumbai 6 ;


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ision

Its (isi!# is t! be the m!st res ected c!m a#y i# the $i#a#cial ser(ices s ace I#dia

I#$!li#e Ltd+ I#dia I#$!li#e Ltd is listed !# b!th the leadi#) st!c& e3cha#)es i#

I#dia2 (i7+ the St!c& E3cha#)e2 Mumbai HBSE a#d the Nati!#al St!c& E3cha#)e

HNSE + The I#dia I#$!li#e )r!u 2 c!m risi#) the h!ldi#) c!m a#y2 I#dia I#$!li#e

Ltd a#d its subsidiaries2 straddles the e#tire $i#a#cial ser(ices s ace %ith !$$eri#)s

ra#)i#) $r!m E5uity research2 E5uities a#d deri(ati(es tradi#)2 C!mm!dities

tradi#)2 /!rt$!li! Ma#a)eme#t Ser(ices2 Mutual Fu#ds2 Li$e I#sura#ce2 Fi3ed

de !sits2 4!I b!#ds a#d !ther small sa(i#)s i#strume#ts t! l!a# r!ducts a#d

I#(estme#t ba#&i#)+ I#dia I#$!li#e als! !%#s a#d ma#a)es the %ebsites2

%%%+i#diai#$!li#e+c!m a#d %%%+ aisa+c!m+

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I#dia I#$!li#e Ltd2 bei#) a listed e#tity2 is re)ulated by SEBI HSecurities a#d E3cha#)e B!ard !$ I#dia + It u#derta&es e5uities research%hich is ac!%led)ed by #!#e !ther tha# F!rbes as Best !$ the eb a#d a must read $!r i#(est!rs i# Asia + I#dia I#$!li#e s research isa(ailable #!t "ust !(er the i#ter#et but als! !# i#ter#ati!#al %ire ser(ices li&e Bl!!mber) HC!deG IILL 2 Th!ms!# First Call a#d I#ter#etSecurities %here it is am!#)st the m!st read I#dia# br!&ers+

Its (ari!us subsidiaries are i# di$$ere#t li#es !$ busi#ess a#d he#ce are )!(er#ed by di$$ere#t re)ulat!rs+ The subsidiaries !$ I#dia I#$!li#e

Ltd are I#dia I#$!li#e Securities /(t Ltd is a 1 K subsidiary !$ I#dia I#$!li#e Ltd2 %hich is e#)a)ed i# the busi#esses !$ E5uities br!&i#)a#d /!rt$!li! Ma#a)eme#t Ser(ices+ It h!lds membershi s !$ b!th the leadi#) st!c& e3cha#)es !$ I#dia (i7+ the St!c& E3cha#)e2 MumbaiHBSE a#d the Nati!#al St!c& E3cha#)e HNSE + It !$$ers br!&i#) ser(ices i# the Cash a#d Deri(ati(es se)me#ts !$ the NSE as %ell as theCash se)me#t !$ the BSE+A SEBI auth!ri7ed /!rt$!li! Ma#a)er2 it !$$ers /!rt$!li! Ma#a)eme#t Ser(ices t! clie#ts+ These ser(ices are!$$ered t! clie#ts as di$$ere#t schemes2 %hich are based !# di$$eri#) i#(estme#t strate)ies made t! re$lect the (aried ris&6retur# re$ere#ces!$ clie#t

I#dia I#$!li#e C!mm!dities /(t Ltd

I#dia I#$!li#e C!mm!dities /(t Ltd is a 1 K subsidiary !$ I#dia I#$!li#e

Ltd2 %hich is e#)a)ed i# the busi#ess !$ c!mm!dities br!&i#)+ Our e3 erie#ce i#

securities br!&i#) em !%ered us %ith the re5uisite s&ills a#d tech#!l!)ies t!all!% us !$$er c!mm!dities br!&i#) as a c!#tra6cyclical alter#ati(e t! e5uities

br!&i#)+ e e#"!y membershi s %ith the MC a#d NCDE 2 t%! leadi#) I#dia#

c!mm!dities e3cha#)es2 a#d rece#tly ac5uired membershi !$ D4C + e ha(e a

multi6cha##el deli(ery m!del2 ma&i#) it am!#) the select $e% t! !#li#e as %ell as

!$$li#e tradi#) $acilities+

I#dia I#$!li#e Distributi!# C! Ltd HIILD

I#dia I#$!li#e+c!m Distributi!# C! Ltd is a 1 K subsidiary !$ I#dia

I#$!li#e Ltd a#d is e#)a)ed i# the busi#ess !$ distributi!# !$ Mutual Fu#ds2 I/Os2

Fi3ed De !sits a#d !ther small sa(i#)s r!ducts+ It is !#e !$ the lar)est (e#d!r6

i#de e#de#t distributi!# h!uses a#d has a %ide a#6I#dia $!!t ri#t !$ !(er ,8,

bra#ches c!u led %ith a hu)e #umber !$ $eet6!#6street 2 %hich hel s!urce a#d

ser(ice cust!mers acr!ss the le#)th a#d breadth !$ I#dia+ Its u#i5ue (alue

r! !siti!# !$ $ree d!!rste e3 ert ad(ice c!u led %ith $ree ic&6u a#d deli(ery

!$ che5ues has bee# met %ith a# e#thusiastic res !#se $r!m cust!mers a#d $u#d

h!uses ali&e+ Our busi#ess has e3 a#ded t! i#clude the !#li#e distributi!# !$

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mutual $u#ds2 %herei# users ca# (ie% a#d c!m are di$$ere#t r!duct !$$eri#)s a#d

d!%#l!ad a licati!# $!rms %hich they ca# later submit t! the r!duct r!(ider

M!rt)a)es L!a#s IILD has als! e#tered the busi#ess !t distributi!# !$

m!rt)a)es a#d l!a# r!ducts duri#) the year , 6,


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ALL ABO'T E 'ITY INVESTMENT

St!c&s are i#(estme#ts that re rese#t !%#ershi 666 !r e5uity 666 i# a c!r !rati!#+ he# y!u buy

st!c&s2 y!u ha(e a# !%#ershi share 666 h!%e(er small 666 i# that c!r !rati!# a#d are e#titled t!

art !$ that c!r !rati!# s ear#i#)s a#d assets+ St!c& i#(est!rs 666 called shareh!lders !r

st!c&h!lders 666 ma&e m!#ey %he# the st!c& i#creases i# (alue !r %he# the c!m a#y the issued

the st!c& ays di(ide#ds2 !r a !rti!# !$ its r!$its2 t! its shareh!lders+

S!me c!m a#ies are ri(ately held2 %hich mea#s the shares are a(ailable t! a limited #umber !$

e! le2 such as the c!m a#y s $!u#ders2 its em l!yees2 a#d i#(est!rs %h! $u#d its de(el! me#t+

Other c!m a#ies are ublicly traded2 %hich mea#s their shares are a(ailable t! a#y i#(est!r %h!

%a#ts t! buy them+

The I/OA c!m a#y may decided t! sell st!c& t! the ublic $!r a #umber !$ reas!#s such as r!(idi#)

li5uidity $!r its !ri)i#al i#(est!r !r raisi#) m!#ey+ The $irst time a c!m a#y issues st!c& is the

i#itial ublic !$$eri#) HI/O 2 a#d the c!m a#y recei(es the r!ceeds $r!m that sale+ A$ter that2

shares !$ the st!c& are treaded2 !r br!u)ht a#d s!ld !# the securities mar&ets am!#) i#(est!rs2

but the c!r !rati!# )ets #! additi!#al i#c!me+ The rice !$ the st!c& m!(es u !r d!%#

de e#di#) !# h!% much i#(est!rs are %illi#) t! ay $!r it+Occasi!#ally2 a c!m a#y %ill issue additi!#al shares !$ its st!c&s2 called a sec!#dary !$$eri#)2 t!

raise additi!#al ca ital+

Ty es O$ St!c&s

ith th!usa#ds !$ di$$ere#t st!c&s tradi#) !# '+S+ a#d i#ter#ati!#al securities mar&ets2 there are

st!c&s t! suit e(ery i#(est!r a#d t! c!m leme#t e(ery !rt$!li!+

F!r e3am le2 s!me st!c&s stress )r!%th2 %hile !thers r!(ide i#c!me+ S!me st!c&s $l!urished

duri#) b!!m time2 %hile !thers may hel i#sulate y!ur !rt$!li! s (alue a)ai#st turbule#t !r

de ressed mar&ets+ S!me st!c&s are ricey2 %hile !thers are c!m arati(ely i#e3 e#si(e+ A#d

s!me st!c&s are i#here#tly (!latile2 %hile !thers te#d t! be m!re stable i# (alue+

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4r!%th I#c!me

S!me st!c&s are c!#sidered )r!%th i#(estme#ts2 %hile !thers are c!#sidered (alue i#(estme#ts+

Fr!m a# i#(esti#) ers ecti(e2 the best e(ide#ce !$ )r!%th is a# i#creasi#) rice !(er time+St!c&s !$ c!m a#ies that rei#(est their ear#i#)s rather tha# ayi#) them !ut as di(ide#ds are

!$te# c!#sidered !te#tial )r!%th i#(estme#ts+ S! are st!c&s !$ y!u#)2 5uic&ly e3 a#di#)

c!m a#ies+ Value st!c&s2 i# c!#trast2 are the st!c&s !$ c!m a#ies that r!blems2 ha(e bee# u#der

er$!rmi#) their !te#tial2 !r are !ut !$ $a(!r %ith i#(est!rs+ As result2 their rices te#d t! be

l!%er tha# seems "usti$ied2 th!u)h they may still be ayi#) di(ide#ds+ I#(est!rs %h! see& !ut

(alue st!c&s e3 ect them t! sta)e a c!mebac&+

Mar&et Ca itali7ati!#

O#e !$ the mai# %ays t! cate)!ri7e st!c&s is by their mar&et ca itali7ati!#2 s!metimes !%# as

mar&et (alue+ Mar&et ca itali7ati!# Hmar&et ca is calculated by multi lyi#) a c!m a#y s

curre#t st!c& rice by the #umber !$ its e3isti#) shares+ F!r e3am le2 a st!c& %ith a curre#t

mar&et (alue !$ Q8 a share a#d a hu#dred milli!# shares !$ e3isti#) st!c& %!uld ha(e a mar&et

ca !$ Q8 billi!#+

/*E rati!

A ! ular i#dicat!r !$ a st!c& s )r!%th !te#tial is its rice6t!6ear#i#)s rati!2 !r /*E J !r

multi le J ca# hel y!u )au)e the rice !$ a st!c& i# relati!# t! its ear#i#)s+ F!r i#sta#ce2 a st!c&

%ith a /*E !$ , is tradi#) at a rice , times hi)her tha# its ear#i#)s+

A l!% /*E may be a si)# that a c!m a#y is a !!r i#(estme#t ris& a#d that its ear#i#)s are d!%#+

But it may als! i#dicate that the mar&et u#der(alues a c!m a#y because its st!c& rice d!es# t

re$lect its ear#i#)s !te#tial+ Similarly2 a st!c& %ith a hi)h /*E may li(e u t! i#(est!r e3 ectati!#s !$ c!#ti#ui#) )r!%th2 !r it may be !(er(alued+

,1


22/69

I#(est!r dema#d

/e! le buy a st!c& %he# they belie(e it s a )!!d i#(estme#t2 dri(i#) the st!c& rice u + But i$

e! le thi#& a c!m a#y s !utl!!& is !!r a#d either d!# t i#(est !r sell shares they already !%#2

the st!c& rice %ill $all+ I# e$$ect2 i#(est!r e3 ectati!#s determi#e the rice !$ a st!c&+

F!r e3am le2 i$ l!ts !$ i#(est!rs buy st!c& A2 its rice %ill be dri(e# u + The st!c& bec!mes m!re

(aluable because there is dema#d $!r it+ But the re(erse is als! true+ I$ a l!t !$ i#(est!rs sell st!c&

R2 its rice %ill lummet+ The $urther the st!c& rice $alls2 the m!re i#(est!rs sell it !$$2 dri(i#)

the rice d!%# e(e# m!re+

The Di(ide#ds

The risi#) st!c& rice a#d re)ular di(ide#ds that re%ard i#(est!rs a#d )i(e them c!#$ide#ce are

tied directly t! the $i#a#cial health !$ the c!m a#y+

Di(ide#ds2 li&e ear#i#)s2 !$te# ha(e a direct i#$lue#ce !# st!c& rices+ he# di(ide#ds are

i#creased2 the messa)e is that the c!m a#y is r!s eri#)+ This i# tur# stimulates )reater

e#thusiasm $!r the st!c&2 e#c!ura)i#) m!re i#(est!rs t! buy2 a#d ri(i#) the st!c& s rice u %ard+

he# di(ide#ds are cut2 i#(est!rs recei(e the ! !site messa)e a#d c!#clude that the c!m a#y s

$uture r!s ects ha(e dimmed+ O#e ty ical c!#se5ue#ce is a# immediate dr! i# the st!c& s

rice+

C!m a#ies !%# as leaders i# their i#dustries %ith si)#i$ica#t mar&et share a#d #amerec!)#iti!# te#d t! mai#tai# m!re stable (alues tha# #e%er2 y!u#)er2 smaller2 !r re)i!#al

c!m etit!rs+

Ear#i#)s a#d /er$!rma#ce

I#(est!r e#thusiasm $!r a st!c& ca# s!metimes ta&e !# a m!me#tum !$ its !%#2 dri(i#) rices u

i#de e#de#t !$ a c!m a#y s actual $i#a#cial !utl!!&+ Similarly2 disi#terest ca# dri(e rices

d!%#+ But t! a lar)e e3te#t2 i#(est!rs base their e3 ectati!#s !# a c!m a#y s sales a#d ear#i#)sas e(ide#ce !$ its curre#t stre#)th a#d $uture !te#tial+

he# a c!m a#y s ear#i#)s are u 2 i#(est!r c!#$ide#ce i#creases a#d the rice !$ the st!c&

usually rises+ I$ the c!m a#y is li@si# ) m!#ey !r #!t ma&i#) as much as a#tici ated 66 the

st!c& rice usually $alls2 s!metimes ra idly+

,,


23/69

I#tri#sic Value

A c!m a#y s i#tri#sic (alue2 !r u#derlyi#) (alue2 is cl!sely tied t! its r!s ects $!r $uture

success a#d i#creased ear#i#)s+ F!r that reas!#2 a c!m a#y s $uture as %ell as its curre#t assets

c!#tributes t! the (alue !$ its st!c&+

Y!u ca# calculate i#tri#sic (alue by $i)uri#) the assets a c!m a#y e3 ects t! recei(e i# the $uture

a#d subtracti#) its l!#)6term debt+ These assets may i#clude r!$its2 the !te#tial $!r i#creased

e$$icie#cy2 a#d the r!ceeds $r!m the sale !$ #e% c!m a#y st!c&+ The !te#tial $!r #e% shares

a$$ects a c!m a#y s i#tri#sic (alue because !$$eri#) #e% shares all!%s the c!m a#y t! raise

m!re m!#ey+

A#alysts l!!&i#) at i#tri#sic (alue di(ide a c!m a#y s estimated $uture ear#i#)s by the #umber

!$ it s e3isti#) shares t! determi#e %hether a st!c& s curre#t rice is a bar)ai#+ This measure

all!%s i#(est!rs t! ma&e decisi!#s based !# a c!m a#y s $uture !te#tial i#de e#de#t !$ sh!rt6

term e#thusiasm !r mar&et hy e+

St!c& S lits

I$ a st!c& s rice i#creases dramatically the issui#) c!m a#y may s lit the st!c& t! bri#) the

rice er share d!%# t! a le(el that stimulates m!re tradi#)+ F!r e3am le2 a st!c& selli#) at Q1

a share may be s lit , $!r 1 d!ubli#) the #umber !$ e3isti#) shares a#d cutti#) the rice i# hal$+The s lit d!es# t cha#)e the (alue !$ y!ur i#(estme#t2 at least i#itially+ I$ y!u had 1 shares

%he# the rice %as Q1 a share2 y!u ll ha(e , shares %!rth Q a share a$ter the s lit+ Either

%ay2 that s Q1 + But i$ the rice er share m!(es bac& t!%ard the re6s lit rice2 as it may d!

y!ur i#(estme#t %ill i#crease i# (alue+ F!r e3am le i$ the rice )!es u t! Q= a share y!ur

st!c& %ill be %!rth Q1 2 a K i#crease+

I#(est!rs %h! h!ld a st!c& !(er ma#y years2 thr!u)h a #umber !$ s lits2 may e#d u %ith a

substa#tial i#(estme#t e(e# i$ the rice er share dr! s $!r a time+

A st!c& may be s lit , $!r 12 8 $!r 12 !r e(e# 1 $!r 1 i$ the c!m a#y %ishes2 th!u)h , $!r 1 is the

m!st c!mm!#+

,8


24/69

St!c& -esearch a#d E(aluati!#

Be$!re i#(esti#) i# a st!c&2 its im !rta#t t! research the issui#) c!m a#y a#d u#dersta#d h!%

the i#(estme#t is li&ely t! er$!rm2 $!r e3am le2 y!u ll %a#t t! !% ahead !$ time %hether y!u

sh!uld a#tici ate a hi)h de)ree !$ (!latility2 !r m!re stable sl!%er )r!%th+

A )!!d lace t! start is the c!m a#y s 1 & re !rt2 %hich it must $ile %ith the Securities a#d

E3cha#)e C!mmissi!# HSEC each year+ Its e3tremely detailed a#d 5uite dry2 but it is thr!u)h+

Y!u ll %a#t t! ay atte#ti!# t! the $!!t#!tes as %ell as the mai# te3t2 si#ce they !$te# r!(ide

hi#ts !$ !te#tial r!blems+

C!m a#y Ne%s a#d -e !rts

C!m a#ies are re5uired by la% t! &ee shareh!lders u t! date !# h!% the busi#ess is d!i#)+

S!me !$ that i#$!rmati!# is r!(ided i# the $irm s a##ual re !rt2 %hich summari7es the

c!m a#y s ! erati!#s $!r i#di(idual i#(est!rs+ A summary !$ curre#t er$!rma#ce is als!

r!(ided i# the c!m a#y s 5uarterly re !rts+

Buyi#) a#d Selli#) St!c&

T! buy !r sell a st!c& y!u usually ha(e t! )! thr!u)h a br!&er+ 4e#erally the m!re )uida#ce y!u

%a#t $r!m y!ur br!&er the hi)her the br!&er s $ee+ S!me br!&ers usually called $ull6ser(ice

br!&ers r!(ide a ra#)e !$ ser(ice bey!#d $illi#) buy a#d sell !rders $!r clie#ts such as

researchi#) i#(estme#ts a#d hel i#) y!u de(el! l!#) a#d sh!rt6term i#(estme#t )!als+

Disc!u#t br!&ers carry !ut tra#sacti!#s $!r clie#ts at l!%er $ees tha# $ull6ser(ice br!&ers but

ty ically !$$er m!re limited ser(ices+ A#d $!r e3 erie#ced i#(est!rs %h! trade !$te# a#d i# lar)e

bl!c&s !$ st!c& there are dee 6disc!u#t br!&ers %h!se c!mmissi!#s are e(e# l!%er+

O#li#e Tradi#) is the chea est %ay t! trade st!c&s+ O#li#e br!&era)e $irms !$$er substa#tial

disc!u#ts %hile )i(i#) y!u $ast access t! y!ur acc!u#ts thr!u)h their eb Sites+ Y!u ca#

research st!c&s trac& i#(estme#ts a#d y!u t! trade be$!re a#d a$ter #!rmal mar&et h!urs+ M!st !$ t!day s leadi#) $ull6ser(ice a#d disc!u#t br!&era)e $irm ma&e !#li#e tradi#) a(ailable t! their

cust!mers+ O#li#e tradi#) is a# e3tremely c!st6e$$ecti(e ! ti!# $!r i#de e#de#t i#(est!rs %ith a

s!lid strate)y %h! are %illi#) t! u#derta&e their !%# research+ :!%e(er the ease !$ ma&i#)

trades a#d the abse#ce !$ ad(ice may tem t s!me i#(est!rs t! trade i# a#d !ut !$ st!c&s t!!

5uic&ly a#d ma)#i$y the !ssibility !$ l!c&i#) i# sh!rt6term l!sses+

,;


25/69

V!latility

O#e !$ the ris&s y!u ll #eed t! la# $!r as a st!c& i#(est!r is (!latility+ V!latility is the s eed %ith

%hich a# i#(estme#t )ai#s !r l!ses (alue+ The m!re (!latile a# i#(estme#t is the m!re y!u ca#

!te#tially ma&e !r l!se i# the sh!rt term+

Ma#a)i#) -is&

O#e thi#) $!r certai#G Y!ur st!c& i#(estme#t %ill dr! i# (alue at s!me !i#t+ That s %hat ris& is

all ab!ut+ 9#!%i#) h!% t! t!lerate ris& a#d a(!id selli#) y!ur st!c&s !$$ i# a a#ic is all art !$ a

smart i#(estme#t strate)y+

Setti#) realistic )!als all!cati#) a#d di(ersi$yi#) y!ur assets a r! riately a#d ta&i#) a l!#)6

term (ie% ca# hel !$$set ma#y !$ the ris&s !$ i#(esti#) i# st!c&s+ E(e# the m!st s eculati(e

st!c& i#(estme#t %ith its !te#tial $!r lar)e )ai#s may lay a# im !rta#t r!le i# a %ell6

di(ersi$ied !rt$!li!+

,


26/69

All ABO'T BONDS INVESTMENT

:a(e y!u e(er6b!rr!%ed m!#ey O$ c!urse y!u ha(e %hether %e hit !ur are#ts u $!r a $e%

buc&s t! buy ca#dy as childre# !r as&ed the ba#& $!r a m!rt)a)e m!st !$ us ha(e b!rr!%edm!#ey at s!me !i#t i# !ur li(es+

?ust as e! le #eed m!#ey s! d! c!m a#ies a#d )!(er#me#ts+ A c!m a#y #eeds $u#ds t! e3 a#d

i#t! #e% mar&ets2 %hile )!(er#me#ts #eed m!#ey $!r e(erythi#) $r!m i#$rastructure t! s!cial

r!)rams+ The r!blem lar)e !r)a#i7ati!#s ru# i#t! is that they ty ically #eed $ar m!re m!#ey

tha# the a(era)e ba#& ca# r!(ide+ The s!luti!# is t! raise m!#ey by issui#) b!#ds H!r !ther debt

i#strume#ts t! a ublic mar&et+ Th!usa#ds !$ i#(est!rs the# each le#d a !rti!# !$ the ca ital

#eeded+ -eally a b!#d is #!thi#) m!re tha# a l!a# $!r %hich y!u are the le#der+ The !r)a#i7ati!#

that sells a b!#d is !%# as the issuer+ Y!ur ca# thi#& !$ a b!#d as a# IO' )i(e# by a b!rr!%er

Hthe issuer t! a le#der Hthe i#(est!r +

O$ c!urse2 #!b!dy %!uld l!a# his !r her hard6ear#ed m!#ey $!r #!thi#)+ The issuer !$ a b!#d

must ay the i#(est!r s!methi#) e3tra $!r the ri(ile)e !$ usi#) his !r her m!#ey+ This e3tra

c!mes i# the $!rm !$ i#terest ayme#ts2 %hich are made at a redetermi#ed rate a#d schedule+

The i#terest rate is !$te# re$erred t! as the c!u !#+ The date !# %hich the issuer has t! re ay theam!u#t b!rr!%ed H!%# as $ace (alue is called the maturity date+ B!#ds are !%# as $i3ed6

i#c!me securities because y!u !% the e3act am!u#t !$ cash y!u ll )et bac& i$ y!u h!ld the

security u#til maturity+ F!r e3am le2 say y!u buy a b!#d %ith a $ace (alue !$ Q1 a c!u !# !$

>K a#d a maturity !$ 1 years+ This mea#s y!u ll recei(e a t!tal !$ Q> HQ1 U>K !$ i#terest

er year $!r the #e3t 1 years+ Actually because m!st b!#ds ay i#terest semi6a##ually y!u ll

recei(e t%! ayme#ts !$ Q; a year $!r 1 years+ he# the b!#d matures a$ter a decade2 y!u ll

)et y!ur Q1 bac&+

Face Value * /ar Value

The $ace (alue Hals! !%# as the ar (alue !r ri#ci al is the am!u#t !$ m!#ey a h!lder %ill

)et bac& !#ce a b!#d matures+ Ne%ly issued b!#d usually sells at the ar (alue+ C!r !rate b!#ds

#!rmally ha(e a ar (alue !$ Q1 but this am!u#t ca# be much )reater $!r )!(er#me#t b!#ds+

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27/69

hat c!#$uses ma#y e! le is that the ar (alue is #!t the rice !$ the b!#d+ A b!#d s rice

$luctuates thr!u)h!ut its li$e i# res !#se t! a #umber !$ (ariables Hm!re !# this later + he# a

b!#d trades at a rice ab!(e the $ace (alue2 it is said t! be selli#) a remium+ he# a b!#d sells

bel!% $ace (alue it is said t! be selli#) at a disc!u#t+

C!u !# HThe I#terest -ate

The c!u !# is the am!u#t the b!#dh!lder %ill recei(e as i#terest ayme#ts+ It s called a c!u !#

because s!metimes there are hysical c!u !#s !# the b!#d that y!u tear !$$ a#d redeem $!r

i#terest+ :!%e(er this %as m!re c!mm!# i# the ast+ N!%adays rec!rds are m!re li&ely t! &e t

electr!#ically+

As re(i!usly me#ti!#ed m!st b!#ds ay i#terest e(ery si3 m!#ths but it s !ssible $!r them t!

ay m!#thly2 5uarterly !r a##ually+ The c!u !# is e3 ressed as a erce#ta)e !$ the ar (alue+ I$

a b!#d ays a c!u !# !$ 1 K a#d its ar (alue is Q1 the# it ll ay K1 !$ i#terest a year+ A

rate that stays as a $i3ed erce#ta)e !$ the ar (alue li&e this is a $i3ed6rate b!#d+ A#!ther

!ssibility is a# ad"ustable i#terest ayme#t !%# as a $l!ati#)6rate b!#d+ I# this case the

i#terest rate is tied t! mar&et rates thr!u)h a# i#de3 such as the rate !# Treasury bills+

Y!u mi)ht thi#& i#(est!rs %ill ay m!re $!r a hi)h c!u !# tha# $!r a l!% c!u !#+ All thi#)s

bei#) e5ual a l!%er c!u !# mea#s that the rice !$ the b!#d %ill $luctuate m!re+

Maturity

The maturity date is the date i# the $uture !# %hich the i#(est!r s ri#ci al %ill be re aid+

Maturities ca# ra#)e $r!m as little as !#e day t! as l!#) as , years Hth!u)h terms !$ 1 years

ha(e bee# issued +

A b!#d that matures i# !#e year is much m!re redictable a#d thus less ris&y tha# a b!#d that

matures i# , years+ There$!re i# )e#eral the l!#)er the time t! maturity the hi)her the i#terest

rate+ Als! all thi#)s bei#) e5ual a l!#)er6term b!#d %ill $luctuate m!re tha# a sh!rter6term b!#d+

Issuer

The issuer !$ a b!#d is a crucial $act!r t! c!#sider2 as the issuers stability is y!ur mai# assura#ce

!$ )etti#) aid bac&+ F!r e3am le2 the '+S )!(er#me#t is $ar m!re secure tha# a#y c!r !rati!#+

Its de$ault ris& Hthe cha#ce !$ the debt #!t bei#) aid bac& is e3tremely small J s! small that '+S

,=


28/69


29/69

curre#t yield !# the b!#d lus a#y )ai# Hi$ y!u urchased at disc!u#t !r l!ss Hi$ y!u urchased

at a remium +

9#!%i#) h!% t! calculate YTM is# t im !rta#t ri)ht #!%+ I# $act2 the calculati!# is rather

s! histicated a#d bey!#d the sc! e !$ this tut!rial+ The &ey !i#t here is that YTM is m!re

accurate a#d e#ables y!u t! c!m are b!#d %ith di$$ere#t maturities c!u !#s+

The li#& bet%ee# /rice a#d yield

The relati!#shi !$ yield t! rice ca# be summari7ed as $!ll!%sG %he# rice )!es u 2 )!es d!%#

a#d (ice (ersa+ Tech#ically2 y!u d say the b!#ds a#d its yield are i#(ersely related+

:ere s a c!mm!#ly as&ed 5uesti!#G :!% ca# hi)h yield a#d hi)h rices b!th be )!!d %he# they

ca# t ha e# at the same time The a#s%er de e#ds !# y!ur !i#t !$ (ie%+ I$ y!u are a b!#d

buyer2 y!u %a#t hi)h yields+ A buyer %a#ts t! ay Q> $!r the Q12 b!#d2 %hich )i(es the

b!#d2 a hi)h yield !$ 1,+ K+ O# the !ther ha#d2 i$ y!u already !%# a b!#d2 y!u (e l!c&ed i#

y!ur i#terest rate2 s! y!u h! e the rice !$ the b!#d )!es u + This ca# cash !ut by selli#) y!ur

b!#d i# the $uture+

/rice i# the Mar&et

S! $ar %e (e discussed the $act!rs !$ $ace (alue2 c!u !#2 maturity2 issuers a#d yield+ All i$ these

characteristics !$ a b!#d lay a r!le i# its rice2 :!%e(er2 the $act!r that i#$lue#ces a b!#d m!retha# a#y !ther is the le(el !$ re(aili#) i#terest rates i# the ec!#!my+ he# i#terest rates rise2

the rices !$ b!#ds i# the mar&et $all2 thereby raisi#) the yield !$ !lder b!#ds a#d bri#)i#) them

i#t! li#e %ith #e%er b!#ds bei#) issued %ith hi)her c!u !#s+ he# i#terest rates $all the rices

!$ b!#ds i# the mar&et rise2 thereby l!%eri#) the yield !$ the !lder b!#ds a#d bri#)i#) them i#t!

li#e %ith #e%er b!#ds bei#) issued %ith l!%er c!u !#s+

Di$$ere#t Ty es !$ B!#ds

4!(er#me#t B!#ds

I# )e#eral2 $i3ed6i#c!me securities are classi$ied acc!rdi#) t! the le#)th !$ time be$!re maturity+

These are the three mai# cate)!riesG

Bill J debt securities maturi#) i# less tha# !#e year2

,@


30/69

N!tes J debt securities maturi#) i# !#e t! 1 years+

B!#ds 6 debt securities maturi#) i# m!re tha# 1 years+

Mu#ici al B!#dsMu#ici al b!#ds2 !%# as .mu#is02 are the #e3t r!)ressi!# i# terms !$ ris&+ Cities d!# t )!

ba#&ru t that !$te#2 but it ca# ha e#+ The ma"!r ad(a#ta)e t! mu#is is that the retur#s are $ree

$r!m $ederal ta3+ Furtherm!re2 l!cal )!(er#me#ts %ill s!metimes ma&e their debt #!#6ta3able $!r

reside#ts2 thus ma&i#) s!me mu#ici al b!#ds c!m letely ta36$ree+ Because !$ these ta3 sa(i#)s2

the yield !# a mu#i a usually l!%er tha# that !$ a ta3able b!#d+ De e#di#) !# y!ur ers!#al

situati!#2 a mu#i ca# be )reat i#(estme#t !# a# i#(estme#t !# a# a$ter6ta3 basis+

C!r !rate B!#ds

A c!m a#y ca# issued b!#ds "ust as it ca# issue st!c&+ Lar)e c!r !rati!#s ha(e a l!t !$ $le3ibility

as t! h!% much debt they ca# issueG the limit is %hate(er the mar&et %ill bear+ 4e#erally2 a

sh!rt6term c!r !rate b!#d is less tha# $i(e years i#termediate is $i(e t! 1, years2 a#d l!#) term

is !(er 1, years+

C!r !rate b!#ds are characteri7ed by hi)her yi>eld because there is a hi)her ris& !$ a c!m a#y

de$aulti#) tha# a )!(er#me#t+ The u side is that they ca# als! be the m!st re%ardi#) $i3ed6

i#c!me i#(estme#ts because !$ the ris& the i#(est!r must ta&e !#+ The c!m a#y s credit 5uality

is (ery im !rta#tG the hi)her the 5uality2 the l!%er the i#terest rate the i#(est!r recei(es+

Other (ariati!#s !# c!r !rate b!#ds i#clude c!#(ertible b!#ds2 %hich the h!lder ca# c!#(ert i#t!

st!c&2 a#d callable b!#ds2 %hich all!% the c!m a#y t! redeem a# issue ri!r t! maturity+

-is&s

As %ith a#y i#(estme#t2 there are ris&s i#here#t i# buyi#) e(e# the m!st hi)hly related b!#ds+

F!r e3am le2 y!ur b!#d i#(estme#t may be called2 !r redeemed by the issuer2 be$!re the maturity

date+ Ec!#!mic d!%#tur#s a#d !!r ma#a)eme#t !# the art !$ the b!#d issuer ca# als!

#e)ati(ely a$$ect y!ur b!#d i#(estme#t+ These ris&s ca# be di$$icult t! a#tici ate2 but lear#i#)

h!% t! better rec!)#i7e the %ar#i#) si)#s a#d !%i#) h!% t! res !#d %ill hel y!u succeed as

a b!#d i#(est!r+

8


31/69

ALL ABO'T 4OLD INVESTMENT

4!ld is the !ldest reci!us metal !%# t! ma#+ There$!re2 it is a timely sub"ect $!r se(eral

reas!#s+ It is the ! i#i!# !$ the m!re !b"ecti(e mar&et e3 erts that the traditi!#al i#(estme#t

(ehicles !$ st!c&s a#d b!#ds are i# the areas !$ their all6time hi)hs a#d may due $!r a se(ere

c!rrecti!#+

hy )!ld is .)!!d as !ld0 is a# i#tri)ui#) 5uesti!#+ :!%e(er2 %e thi#& that the m!re ra)matic

a#cie#t E)y tia#s %ere erha s m!re accurate i# !bser(i#) that )!ld s (alue %as a $u#cti!# !$

its leasi#) hysical characteristics its scarcity+

O-LD 4ODL IND'ST-Y• 4!ld is rimarily m!#etary asset a#d artly a c!mm!dity+

• The 4!ld mar&et is hi)hly li5uid a#d )!ld held by ce#tral ba#&s2 !ther ma"!r i#stituti!#s

a#d retail ?e%eler &ee c!mi#) bac& t! the mar&et+

• Ec!#!mic $!rces that determi#e the rice !$ )!ld are di$$ere#t $r!m2 a#d i# ma#y cases

! !sed t! the $!rces that i#$lue#ce m!st $i#a#cial assets+

• I#dia# is the %!rld s lar)est )!ld c!#sumer %ith a# a##ual dema#d !$ > t!#s+

!rld 4!ld Mar&ets/hysical 6 L!#d!#2 Rurich2 Ista#bul2 Dubai2 Si#)a !re2 :!#) 9!#)2 Mumbai+

Futures J NYME i# Ne% Y!r&2 TOCOM i# T!&y!+

I#dia# 4!ld Mar&et

• 4!ld is (alued i# I#dia as a sa(i#)s a#d i#(estme#t (ehicle a#d is the sec!#d re$erred

i#(estme#t a$ter ba#& de !sits+

• I#dia is the %!rld s lar)est c!#sumer !$ )!ld i# "e%eler as i#(estme#t+

•

I# ?uly 1@@= the -BI auth!ri7ed the c!mmercial ba#&s t! im !rt )!ld $!r sale !r l!a# t! "e%elers a#d e3 !rter+ At rese#t2 18 ba#&s are acti(e i# the im !rt !$ )!ld+

• This reduced the dis arity bet%ee# i#ter#ati!#al a#d d!mestic rices !$ )!ld $r!m =

erce#t duri#) 1@>< t! 1@@1 t! >+ erce#t i# , 1+

• The )!ld h!ardi#) te#de#cy is %ell i#)rai#ed i# I#dia# s!ciety+

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• D!mestic c!#sum ti!# is dictated by m!#s!!#2 har(est a#d marria)e seas!#+ I#dia#

"e%ellery !$$ ta&es is se#siti(e t! rice i#crease a#d e(e# m!re s! t! (!latility+

• I# the cities )!ld is $aci#) c!m etiti!# $r!m the st!c& mar&et a#d a %ide ra#)e !$

c!#sumer )!!ds+

• Facilities $!r re$i#i#)2 assayi#)2 ma&i#) them i#t! sta#dard bars i# I#dia2 as c!m ared t!

the rest !$ the %!rld2 are i#si)#i$ica#t2 b!th 5ualitati(ely+

:!% )!ld stac&s u as i#(estme#t ! ti!#

4!ld a#d sil(er ha(e bee# ! ular i# I#dia because hist!rically these acted as a )!!d hed)e

a)ai#st i#$lati!#+ I# that se#se these metals ha(e bee# m!re attracti(e tha# ba#& de !sits !r )ilt6

ed)ed securities+

Des ite rece#t hiccu s2 )!ld is a# im !rta#t a#d ! ular i#(estme#t $!r ma#y reas!#sG

• I# ma#y c!u#tries )!ld remai#s a# i#te)ral art !$ s!cial a#d reli)i!us cust!ms2 besides

bei#) the basic $!rm !$ sa(i#)+ Sha&es eare called it the sai#t6seduci#) )!ld +

• Su erstiti!# ab!ut the heali#) !%ers !$ )!ld ersists+ Ayur(edic medici#e i# I#dia

rec!mme#ds )!ld !%der a#d ills $!r ma#y ailme#ts+

• 4!ld is i#destructible+ It d!es #!t tar#ish a#d is als! #!t c!rr!ded by acid6e3ce t by a

mi3ture !$ #itric a#d hydr!chl!ric acids+

• 4!ld is s! malleable that !#e !u#ce !$ the metal ca# be beate# i#t! a sheet c!(eri#)

#early a hu#dred s5uare $eet+

• 4!ld is s! ductile that !#e !u#ce !$ it ca# be dra%# i#t! $i$ty miles !$ thi# )!ld %ire+

• 4!ld is a# e3celle#t c!#duct!r !$ electricity a micr!sc! ic circuit !$ li5uid )!ld ri#ted

!# a ceramic stri sa(es miles !$ %iri#) i# a c!m uter+

• 4!ld is s! hi)hly (alued that a si#)le smu))ler ca# carry )!ld %!rth -s+ la&h

u#der#eath his shirt+

• 4!ld is s! de#se that all the @ 2 t!#es estimated t! ha(e bee# mi#ed thr!u)h hist!ry

c!uld be tra#s !rted by !#e si#)le m!der# su er ta#&er+

• Fi#ally2 )!ld is scam6$ree+ S! $ar2 there ha(e bee# #! Mu#dra6ty e !r Mehta6ty e scams

i# )!ld+

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Thus the lure !$ this yell!% metal c!#ti#ues+

O#e the !ther ha#d2 it is i#teresti#) t! #!te that a art $r!m its aesthetic a eal )!ld has #!

i#tri#sic (alue+ Y!u ca##!t eat it2 dri#& it2 !r e(e# smell it+ This as ect !$ )!ld c!m elled :e#ry

F!rd2 the $!u#der !$ F!rd M!t!rs2 t! c!#clude that )!ld is the m!st useless thi#) i# the %!rld+

hy /e! le Buy 4!ld

HA I#dustrial a licati!#s ta&e ad(a#ta)e !$ )!ld s hi)h resista#ce t! c!rr!si!#2 its

malleability2 hi)h electrical c!#ducti(ity a#d its ability t! adhere $irmly t! !ther metals+

There is a %ide ra#)e !$ i#dustries $r!m electr!#ic c!m !#e#ts t! !rcelai#2 %hich use

)!ld+ De#tistry is a# im !rta#t user !$ )!ld+ The "e%ellery i#dustry is a#!ther+

HB Ac5uisiti!# !$ )!ld because !$ its l!#)6 r!(e# ability t! retai# (alue a#d t! a reciate i#

(alue+

HC /urchases by the ce#tral ba#&s a#d i#ter#ati!#al m!#etary !r)a#i7ati!#s li&e the

I#ter#ati!#al M!#etary Fu#d HIMF +

I#(estme#t O ti!#s

There has bee# a shi$t i# dema#d $r!m "e%ellery H!r#ame#tati!# t! c!i#s a#d bars

Hi#(estme#ts + C!i#s c!st less %he# c!m ared t! "e%ellery H%hich has additi!#al ma&i#)

char)es + Assayed2 certi$ied c!i#s a#d bars are a(ailable thr!u)h auth!ri7ed ba#&s+ Dema#d $!r "e%ellery remai#s str!#) i# traditi!#al circles th!u)h )!ld6 lated "e%ellery is als! bec!mi#)

! ular+

4!ld $uturesG -i)ht #!%2 = K !$ I#dia#s dema#d is $!r "e%ellery2 the rest is $!r c!i#s a#d bars+

I#(est!rs ca# als! dabble i# )!ld $utures %ith demat deli(ery !# st!c& e3cha#)es+ This is l!%

c!st a#d hysical deli(ery is at +@@ urity+ 4!ld $utures tradi#) cl!c&ed a rece#t tur#!(er !$

-s;2 8 cr!re+

4!ld ETFsG M!re s! histicated i#(estme#t r!ducts %ill c!me+ O#e !ssibility is e3cha#)e

traded $u#ds HETFs %here )!ld is the u#derlyi#) asset+ I#(est!rs ca# trade ETF u#its %ith real

time 5u!tes+ 4!ld ETF is l!#) !(erdue2 says Na(ee# 9umar2 :ead !$ Fi#a#cial I#itiati(es2 !rld

4!ld C!u#cil+ 4!ld ETFs c!uld be lau#ched s!!# it is a a%aiti#) cleara#ce $r!m the Fi#a#ce

Mi#istry+

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ALL ABO'T M'T'AL F'ND INVESTMENT

A Mutual Fu#d is a# e#tity that !!ls the m!#ey !$ ma#y i#(est!rs its '#it6:!lders 66 t! i#(est

i# di$$ere#t securities+ I#(estme#ts may be i# shares2 debt securities2 m!#ey mar&et securities !r

a c!mbi#ati!# !$ these+ Th!se securities are r!$essi!#ally ma#a)ed !# behal$ !$ the '#it6:!lder

a#d each i#(est!r h!ld a r!6rata share !$ the !rt$!li! i+e+ e#titled t! a#y r!$its %he# the

securities are s!ld but sub"ect t! a#y l!sses i# (alue as %ell+

Mutual Fu#ds a#d sell st!c&s2 b!#ds !r !ther securities+ A Fu#d raises m!#ey t! ma&e its

urchases2 !%# as its u#derlyi#) i#(estme#ts by selli#) shares i# the $u#d+ Ear#i#)s the $u#d

reali7es !# its i#(estme#t !rt$!li!2 a$ter the tradi#) c!sts a#d e3 e#ses !$ ma#a)i#) a#d

admi#isteri#) the $u#d are subtracted are aid !ut t! the $u#ds shareh!lders+

Mutual Fu#d Set '

A Mutual Fu#d is set u i# the $!rm !$ a trust2 %hich has S !#s!r2 Trustees2 Asset Ma#a)eme#t

C!m a#y HAMC 2 a#d cust!dia#+ The trust is established by a s !#s!r !r m!re tha# !#e s !#s!r

%h! is li&e r!m!ter !$ a c!m a#y+ The trustees !$ the mutual $u#d h!ld its r! erty $!r the

be#e$it !$ the u#it h!lders+ Asset Ma#a)eme#t C!m a#y HAMC a r!(ed by SEBI ma#a)es the

$u#ds by ma&i#) i#(estme#ts i# (ari!us ty es !$ securities+ Cust!dia#2 %h! is re)istered %ith

SEBI2 h!lds the securities !$ (ari!us schemes !$ the $u#d i# its cust!dy+ The trustees are i#(ested%ith the )e#eral !%er !$ su eri#te#de#ce a#d directi!# !(er AMC+ They m!#it!r the

er$!rma#ce a#d c!m lia#ce !$ SEBI -e)ulati!#s by the mutual $u#d+

SEBI -e)ulati!#s re5uire that at least t%! thirds !$ the direct!rs !$ Trustee C!m a#y !r b!ard !$

trustee must be i#de e#de#t+ I+e+ they sh!uld #!t be ass!ciated %ith the s !#s!rs+ Als! K !$

the direct!rs !$ ANC must be i#de e#de#t+ All mutual $u#ds are re5uired t! be re)istered %ith

SEBI be$!re they lau#ch a#y scheme+ :!%e(er2 '#it Trust !$ I#dia H'TI is #!t re)istered %ith

SEBI Has !# ?a#uary 1 2 , , +

Ty es !$ Fu#ds• St!c& $u#ds als! called e5uity $u#ds6 i#(est rimarily i# st!c&s+

• B!#d $u#ds i#(est rimarily i# c!r !rate !r )!(er#me#t b!#ds

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• Bala#ced $u#ds i#(est i# b!th st!c&s a#d b!#ds+

• M!#ey mar&et $u#ds ma&e sh!rt6term i#(estme#t a#d try t! &ee their share (alue $i3ed

at Q1 a share+

E(ery $u#d i# each cate)!ry has a rice !%# as its #et asset (alue HNAV a#d each NAV di$$ers

based !# the (alue !$ the $u#ds h!ldi#)s a#d the #umber !$ shares i#(est!rs !%#+ The rice

cha#)es !#ce a day2 at a ; m EST2 %he# the mar&ets cl!se $!r the day+ All tra#sacti!#s $!r the

day J buys a#d sells Jare e3ecuted at that rice+

Schemes Acc!rdi#) t! Maturity /eri!d

A mutual $u#d scheme ca# be classi$ied i#t! ! e#6e#ded scheme !r cl!se6e#ded scheme

de e#di#) !# its maturity eri!d+

O e# JE#ded Fu#d*Scheme

A# ! e#6e#ded $u#d !r scheme is !#e that is a(ailable $!r subscri ti!# a#d re urchase !#e

c!#ti#u!us basis+ These schemes d! #!t ha(e a $i3ed maturity eri!d+ I#(est!rs ca# c!#(e#ie#tly

buy a#d sell u#its at Net Asset Value HNAV related rices2 %hich are declared !# a daily basis+

The &ey $eature !$ O e#6E#d Schemes is li5uidity+

Cl!se6E#ded Fu#d * Scheme

A Cl!se6E#ded Fu#d !r Scheme has a sti ulated maturity eri!d e+)+ 6= years+ The $u#d is ! e#

$!r subscri ti!# !#ly duri#) a s eci$ied eri!d at the time !$ lau#ch !$ the scheme+ I#(est!rs ca#

i#(est i# the scheme at the time !$ the i#itial ublic issue a#d therea$ter they ca# buy !r sell the

u#its !$ the scheme !# the st!c& e3cha#)es %here the u#its are listed+ I# !rder t! r!(ide a# e3it

r!ute t! the i#(est!rs2 s!me cl!se6e#ded $u#ds )i(e a# ! ti!# !$ selli#) bac& the u#its t! the

mutual $u#d thr!u)h eri!dic re urchase at NAV related rices+ SEBI -e)ulati!#s sti ulate that

at least !#e !$ the t%! e3it r!utes is r!(ided t! the i#(est!r i+e+ either re urchase $acility !r thr!u)h listi#) !# st!c& e3cha#)es+ These mutual $u#ds schemes discl!se NAV )e#erally !#

%ee&ly basis+

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Schemes acc!rdi#) t! I#(estme#t Ob"ecti(e

A Scheme ca# als! be classi$ied a )r!%th scheme2 i#c!me scheme !r bala#ced scheme

c!#sideri#) its i#(estme#t !b"ecti(e+ Such schemes may be ! e#6e#ded !r cl!se6e#ded schemes

as described earlier+ Such schemes may be classi$ied mai#ly as $!ll!%s+

4r!%th * E5uity Orie#ted Scheme

The aim !$ )r!%th $u#ds is t! r!(ide ca ital a reciati!# !(er the medium t! l!#)6term+ Such

schemes #!rmally i#(est a ma"!r art !$ their c!r us i# e5uities+ Such $u#ds ha(e c!m arati(ely

hi)h ris&s+ These schemes r!(ide di$$ere#t ! ti!#s t! the i#(est!rs li&e di(ide#d ! ti!#2 ca ital

a reciati!# etc+ A#d the i#(est!rs may ch!!se a# ! ti!# de e#di#) !# their re$ere#ce+ The

i#(est!rs must i#dicate the ! ti!# i# the a licati!# $!rm+ The mutual $u#ds als! all!% the

i#(est!rs t! cha#)e the ! ti!#s at a later date+ 4r!%th schemes are )!!d $!r i#(est!rs ha(i#) a

l!#)6term !utl!!& see&i#) a reciati!# !(er a eri!d !$ time+

I#c!me *Debt Orie#ted Scheme

The aim !$ i#c!me $u#ds is t! r!(ide re)ular a#d steady i#c!me t! i#(est!rs+ Such schemes

)e#erally i#(est i# $i3ed i#c!me securities such as b!#ds2 c!r !rate debe#tures2 4!(er#me#t

securities a#d m!#ey mar&et i#strume#ts+ Such $u#ds are less ris&y c!m ared t! e5uity schemes+

These $u#ds are #!t a$$ected because !$ $luctuati!#s i# e5uity mar&ets+ :!%e(er ! !rtu#ities !$

ca ital a reciati!# are als! limited i# such $u#ds+ The NAVs !$ such $u#ds are a$$ected because

!$ cha#)e i# i#terest rates i# the c!u#try+ I$ the i#terest rates $all2 NAVs !$ such $u#ds are li&ely

t! i#crease i# the sh!rt ru# a#d (ice (ersa+ :!%e(er l!#) term i#(est!rs may #!t b!ther ab!ut

these $luctuati!#s+

Bala#ced Fu#d

The aim !$ bala#ced $u#ds is t! r!(ide b!th )r!%th a#d re)ular i#c!me as such schemes i#(est

b!th i# e5uities a#d $i3ed i#c!me securities i# the r! !rti!# i#dicated i# their !$$er d!cume#ts+

These are a r! riate $!r i#(est!rs l!!&i#) $!r m!derate )r!%th+ They )e#erally i#(est ; K6

< K i# e5uity a#d debt i#strume#ts+ These $u#ds are als! a$$ected because !$ $luctuati!#s i#

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share rices i# the st!c& mar&ets+ :!%e(er2 NAVs !$ such $u#ds are li&ely t! be less (!latile

c!m ared t! ure e5uity $u#ds+

Sect!r s eci$ic Fu#ds*Wschemes

These are the $u#ds*schemes2 %hich i#(est i# the securities !$ !#ly th!se sect!rs !r i#dustries as

s eci$ied i# the !$$er d!cume#ts+ E+)+ /harmaceuticals2 S!$t%are2 Fast M!(i#) C!#sumer 4!!ds

HFMC4 2 /etr!leum st!c&s etc+ the retur#s i# these $u#ds are de e#de#t !# the er$!rma#ce !$

the res ecti(e sect!rs*i#dustries+ hile these $u#ds may )i(e hi)her retur#s2 they are m!re ris&y

c!m ared t! di(ersi$ied $u#ds+ I#(est!rs #eed t! &ee a %atch !# the er$!rma#ce !$ th!se

sect!rs*i#dustries a#d must e3it at a# a r! riate time+ They may als! see& ad(ice !$ a# e3 ert+

Ta3 Sa(i#) Schemes

These schemes !$$er ta3 rebates t! the i#(est!rs u#der s eci$ic r!(isi!#s !$ the I#c!me Ta3 Act2

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Di(ersi$icati!#

M!st e3 ert a)rees that it s m!re e$$ecti(e t! i#(est i# a (ariety !$ st!c&s a#d b!#ds tha# t!

de e#d !# a str!#) er$!rma#ce !$ "ust !#e !r t%! securities+ But di(ersi$yi#) ca# be a challe#)e

because buyi#) a !rt$!li! !$ i#di(idual st!c&s a#d b!#ds ca# be e3 e#si(e+ A#d !%i#) %hat

t! buy J a#d %he# J ta&e# time a#d c!#ce#trati!#+

Mutual $u#ds ca# !$$er s!luti!#+ he# y!u ut m!#ey i# t! a $u#d2 it s !!led %ith m!#ey $r!m

!ther i#(est!rs t! create much )reater buyi#) !%er tha# y!u build a di(ersi$ied !rt$!li!+ Si#ce

a $u#d may !%# hu#dreds !$ di$$ere#t securities2 its success is# t de e#de#t !# h!% !#e !r t%!

h!ldi#) d!+

I#(estme#t !b"ecti(es

T! achie(e its i#(estme#t !b"ecti(e J %hether it is l!#) J term )r!%th !r ca ital reser(ati!# !r

a#ythi#) i# bet%ee# J the $u#d s ma#a)er i#(ests i# securities he !r she belie(es %ill r!(ide the

result the $u#d see&s+ T! ide#ti$y th!se securities2 a $u#d s research sta$$ !$te# uses %hat s !%#

as a b!tt!m J u style2 %hich i#(!l(es a detailed a#alysis !$ the i#di(idual c!m a#ies issui#) the

securities+ he# the !b"ect is smallJ c!m a#y )r!%th !r the $!cus is !# emer)i#) mar&ets2 the

r!cess ca# be m!re di$$icult because there s limited i#$!rmati!# a(ailable+

Y!u may ch!!se mutual $u#ds %ith s eci$ic i#(estme#t !b"ecti(es t! r!u#d !ut y!ur !rt$!li! !$ i#di(idual h!ldi#)s+ Or y!u may ch!!se a #umber !$ mutual $u#ds %ith di$$ere#t !b"ecti(es

creati#) a di(ersi$ied !rt$!li! i# that %ay+

/r!$essi!#al ma#a)eme#t

A#!ther reas!# i#(est!rs are attracted t! mutual $u#ds is that each $u#d has a r!$essi!#al

ma#a)er %h! sets its i#(estme#t buyi#) style a#d directs the &ey buy a#d sell decisi!#s+

A buyi#) style de$i#es the articular i#(estme#ts !r ty es !$ i#(estme#ts a $u#d ma&es $r!m the !!l that may be a r! riate $!r meeti#) its !b"ecti(e+ F!r e3am le2 i# see&i#) l!#)6term ca ital

a reciati!#2 s!me e5uity $u#d ma#a)ers stress (alue i#(estme#ts2 %hich mea# they buy st!c&s

%h!se rices are l!%er tha# mi)ht be e3 ected+ Others stress )r!%th i#(estme#ts !$te# y!u#)er2

dy#amic c!m a#ies the ma#a)er belie(es %ill bec!me ma"!r layers i# their i#dustry !r i# the

ec!#!my as a %h!le+

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S!me e3 erts belie(e that a $u#d s ma#a)er has a ma"!r r!le i# determi#i#) the results a $u#d

achie(es+ They ad(ise that y!u c!#$irm that a success$ul ma#a)er is still %ith the $u#d be$!re y!u

i#(est a#d that y!u c!#sider selli#) y!ur shares i$ that ma#a)er lea(es+

-ei#(estme#t

Bei#) able t! rei#(est y!ur distributi!#s t! buy additi!#al shares is a#!ther ad(a#ta)e !$

i#(esti#) i# mutual $u#ds+ Y!u ca# ch!!se that ! ti!# %he# y!u ! e# a #e% acc!u#t2 !r at a#y

time %hile y!u !%# shares+ A#d !$ c!urse y!u als! ha(e the ! ti!# t! recei(e y!ur distributi!#s

i$ y!u #eed the i#c!me the $u#d %!uld r!(ide+

By i#(esti#) re)ularly2 y!u build the i#(estme#t base !# %hich $uture ear#i#)s %ill be able t!

accumulate2 a r!cess !%# as c!m !u#di#)+ The m!re y!u ha(e i#(ested2 the )reater y!u re

!te#tial $!r $uture )r!%th+ A#d because the $u#d ha#dles the r!cess2 r!lli#) !(er distributi!#s

i#t! #e% shares as they are aid2 y!u d!# t ha(e t! bud)et $!r i#(esti#) !r remember t! %rite the

chec&+

-is&

There is al%ays the ris& that a mutual $u#d %!#t meet its i#(estme#t !b"ecti(e !r r!(ide the

retur# y!u are see&i#)+ A#d s!me $u#ds are by de$i#iti!#2 ris&ier tha# !thers+ F!r e3am le a $u#d

that i#(ests i# small #e% c!m a#ies6%hether $!r )r!%th !r (alue Je3 !ses y!u t! the ris& thatthe c!m a#ies %ill #!t er$!rm as %ell as the $u#d ma#a)er e3 ects+ A#d i# mar&et d!%#tur#s2

$alli#) rices $!r a $u#ds u#derlyi#) i#(estme#t may r!duce a l!ss rather tha# a )ai# $!r the

$u#d+

Sh!rt6Term 4ai#s

Each time a mutual $u#d sells a# i#(estme#t $!r m!re tha# the $u#d aid t! buy it2 the $u#d

reali7es a ca ital )ai#+ A#d th!se )ai#s are assed al!#) t! the $u#ds i#(est!rs i# r! !rti!# t!

the #umber !$ shares i# the $u#d that i#(est!r !%#s+M!st acti(ely ma#a)ed $u#ds d!# t %ait m!re tha# a year be$!re selli#) i#(estme#ts+ That mea#s

that a#y r!$it !# the sale is a sh!rt6term ca ital )ai#2 %hich is ta3ed at y!ur re)ular ta3 rate+ A#d

si#ce a $u#d ty ically d!es# t %ithh!ld ta3ed !# y!ur behal$2 as a# em l!yer d!es2 y!u must

c!me u %ith the am!u#t y!ur !%e $r!m !ther s!urces i$ y!u d!# t %a#t t! sell shares6at a

!te#tial additi!#al )ai# J t! raise the m!#ey y!u !%e+

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ALL ABO'T -EAL ESTAES INVESTMENT

Be$!re the st!c& mar&et a#d mutual $u#ds became ! ular laces $!r e! le t! ut their

i#(estme#t d!llars2 i#(esti#) i# real estate %as e3tremely ! ular+ e still mai#tai# that

i#(esti#) i# real estate is #!t "ust $!r la#d bar!#s !r the rich a#d $am!us+ As a matter !$ $act2 the

h!me %e buy a#d li(e i# is !$te# !ur bi))est i#(estme#t+

Flyi#) hi)h !# the %i#)s !$ b!!mi#) real estate2 r! erty i# I#dia has bec!me a dream $!r e(ery

!te#tial i#(est!r l!!&i#) $!r%ard t! di) r!$its+ All are eyei#) I#dia# r! erty mar&et $!r a %ide

(ariety !$ reas!#s It s e(er )r!%i#) ec!#!my2 %hich is !# a c!#ti#u!us rise %ith >+1 erce#t

i#crease %it#essed i# the last $i#a#cial year+ The b!!m i# ec!#!my i#creases urchasi#) !%er

!$ its e! le a#d creates dema#d $!r real estate sect!r

O#ce y!u ha(e made the decisi!# t! bec!me a h!me!%#er2 it usually mea#s y!u %ill ha(e t!

b!rr!% the lar)est am!u#t y!u ha(e e(er b!rr!%ed t! urchase s!methi#)+ This reali7ati!# may

ma&e y!u %a#t t! bury y!ur head i# the sa#d a#d si)# !# the d!tted li#e2 but y!u sh!uld# t+ F!r

m!st e! le2 this is the lar)est urchase they %ill e(er ma&e duri#) their li$etime2 a#d this ma&es

it all the m!re im !rta#t t! )ather as much !%led)e as !ssible ab!ut %hat they re )etti#)

i#t!+

e )i(e y!u the i#$!rmati!# y!u #eed2 i#cludi#) ma&i#) the decisi!# !# %hether2 %he# a#d

%hat y!u sh!uld urchase $i#di#) the ty es !$ m!rt)a)es a#d $i#a#ci#) a(ailable ha#dli#) the

cl!si#) a#d !%i#) %hat y!u ll #eed %he# its time t! sell y!ur h!me+ e als! e3 lai# the

i#c!me ta3 c!#se5ue#ces a#d asset r!tecti!# ad(a#ta)es !$ h!me !%#ershi +

Y!u ca# als! use real estate2 %hether la#d !r buildi#) strictly as i#(estme#t (ehicles2 a#d

de e#di#) !# y!ur i#di(idual situati!#2 y!u ca# d! it !# a )ra#d !r smaller scale+ Let s l!!& at

the %!rld !$ real estate a#d the i#(esti#) ! ti!#s a(ailable+

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• :!me as a# I#(estme#t G O%i#) a h!me is the m!st c!mm!# $!rm !$ real estate i#(esti#)+

Let us sh!% y!u h!% y!ur h!me is #!t "ust the lace y!u li(e2 but its als! erha s y!ur

lar)est a#d sa$est i#(estme#t as %ell +

• I#(estme#t -eal Estate G The i# a#d !uts !$ i#(esti#) i# real estate a#d %hether it s theri)ht i#(estme#t (ehicle $!r y!u+ hether y!u are thi#&i#) i# terms !$ re#ti#) !ut y!ur $irst

h!me %he# y!u m!(e !# t! a bi))er !#e !r i#(esti#) i# a buildi#) $ull !$ a artme#ts %e %ill

e3 lai# %hat y!u #eed t! !%+

-eal Estate /r! erty

'sually2 the $irst thi#) y!u l!!& at %he# y!u urchase a h!me is the desi)# a#d the lay!ut+ But i$

y!u l!!& at the h!use as a# i#(estme#t2 it c!uld r!(e (ery lucrati(e years d!%# the r!ad+ F!r thema"!rity !$ us2 buyi#) a h!me %ill be the lar)est si#)le i#(estme#t %e ma&e i# !ur li$etime+ -eal

estate i#(esti#) d!es# t "ust mea# urchasi#) a h!use6 it ca# i#clude (acati!# h!mes2

c!mmercial r!s erities2 la#d Hb!th de(el! ed a#d u#de(el! ed 2 c!#d!mi#iums a#d ma#y !ther

!ssibilities+

he# buyi#) r! erty $!r the ur !se !$ i#(esti#)2 the m!st im !rta#t $act!r t! c!#sider is the

l!cati!#+ '#li&e !ther i#(estme#ts2 real estate is dramatically a$$ected by the c!#diti!# !$ the

immediate area surr!u#di#) the r! erty a#d !ther l!cal $act!rs+ Se(eral $act!rs #eed t! be

c!#sidered %he# assessi#) the (alue !$ real estate+ This i#cludes the a)e a#d c!#diti!# !$ the

h!me2 im r!(eme#ts that ha(e bee# made2 rece#t sales i# the #ei)hb!rh!!d2 cha#)es t! 7!#i#)

re)ulati!#s etc+ Y!u ha(e t! l!!& at the !te#tial i#c!me a h!use ca# r!duce a#d h!% it

c!m ares t! !thers h!uses i# the area+

Ob"ecti(es a#d -is&s

-eal estate i#(esti#) all!%s the i#(est!r t! tar)et his !r her !b"ecti(es+ F!r e3am le2 i$ y!ur

!b"ecti(e is ca ital a reciati!#2 the# buyi#) a r!misi#) iece !$ r! erty i# a #ei)hb!rh!!d

%ith )reat !te#tial %ill hel y!u achie(e this+ O# the !ther ha#d i$ %hat y!u see& is i#c!me the#

buyi#) a re#tal r! erty ca# hel r!(ide re)ular i#c!me+

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There are si)#i$ica#t ris&s i#(!l(ed i# h!ldi#) real estate+ /r! erty ta3es mai#te#a#ce e3 e#ses

a#d re air c!sts are "ust s!me !$ the c!sts !$ h!ldi#) the asset+ Furtherm!re real estate is

c!#sidered t! be (ery illi5uid J it ca# s!metimes be hard t! $i#d a buyer i$ y!u #eed t! sell the

r! erty 5uic&ly+

:!% t! Buy !r Sell it+

-eal estate is alm!st e3clusi(ely b!u)ht thr!u)h real estate a)e#ts !r br!&ers their c!m e#sati!#

usually is a erce#ta)e !$ the urchase rice !$ the r! erty+ -eal estate ca# als! be urchased

directly= $r!m the !%#er2 %ith!ut the assista#ce !$ a third arty+ I$ y!u $i#d buyi#) r! erty t!!

e3 e#si(e2 the# c!#sider i#(esti#) i# real estate i#(estme#t trusts H-EITs %hich are discussed i#

the #e3t secti!#+

Let s ta&e a l!!& at the di$$ere#t ty es !$ i#(estme#t real estate y!u mi)ht c!#tem late !%i#)+

Fi3er6' ers

Y!u ca# ma&e m!#ey thr!u)h i#(esti#) i# real estate i$ y!u buy h!uses2 c!#d!mi#iums2

buildi#)s etc+2 %hich #eed s!me %!r& at a bar)ai# rice a#d $i3 them u + Y!u ca# r!bably sell

the real estate $!r a hi)her rice tha# y!u aid a#d ma&e a r!$it+ :!%e(er2 d!# t u#derestimate

the %!r&2 time a#d m!#ey that )!es i#t! buyi#)2 re airi#) a#d selli#) a h!me %he# y!u are

determi#i#) %hether it %ill be r!$itable $!r y!u t! i#(est+ Als! remember that di$$ere#t ta3 rules

%ill a ly t! the urchase a#d sale !$ a h!me i$ it is #!t y!ur ri#ci al reside#ce+

-e#tal /r! erty

Y!u ca# buy real estate $!r re#tal ur !ses a#d recei(e a# i#c!me stream $r!m re#ters+ Y!u may

als! be able t! e(e#tually sell the r! erty $!r m!re tha# y!u b!u)ht it $!r a#d ma&e a )!!d

r!$it+ Alth!u)h2 d!# t $!r)et that y!u %ill #!% be a la#dl!rd %h! may ha(e t! deal %ith

#!# ayi#) te#a#ts a#d destructi(e te#a#ts+ E(e# i$ y!u ha(e the %!rlds best te#a#ts2 y!u still

ha(e t! deal %ith u &ee !$ the r! erty a#d a#y r!blems that c!me u + S!me i#(est!rs hire a

r! erty ma#a)er !r ma#a)eme#t c!m a#y t! ma#a)e their i#(estme#t real estate+ This is $i#e

but d!# t $!r)et t! $act!r i# the ma#a)eme#t $ees %he# y!u are calculati#) y!ur r!$it $r!m the

i#(estme#t+

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/lease remember that re#tal real estate is sub"ect t! di$$ere#t ta3 rules tha# the h!me y!u reside

i#+ y!u may be able t! ta&e ta3 deducti!#s $!r l!sses2 ca ital e3 e#diture a#d de reciati!# i$ y!u

meet certai# re5uireme#ts2 but !ther deducti!#s s eci$ic t! ri#ci le reside#ce may #!t be

a(ailable t! y!u+

'#im r!(ed La#d

'#im r!(ed la#d is di$$icult i#(estme#t t! ma&e a r!$it i#+ '#less y!u ma#a)e t! buy a iece !$

la#d that is e3tremely desirable at a )!!d rice a#d are certai# that it is #!t barred $r!m r!$itable

use $!r the #ei)hb!rh!!d it is l!cated i# Hbecause !$ 7!#i#) !r !ther issues 2 it %ill r!bably c!st

y!u m!re t! !%# the r! erty tha# y!u %ill e(er ma&e selli#) it+ H-emember y!u %ill still ha(e

t! ay r! erty ta3es a#d %ill als! li&ely i#cur !ther u &ee c!sts !# the la#d a#d y!u %!# t be

recei(i#) a#y i#c!me $r!m re#ts +

I$ y!u ha(e s!me s!rt !$ i#side sc!! !# a iece !$ la#d H$!r e3am le the ers!# i# the h!use !#

the l!t #e3t t! the la#d is a %ealthy recluse a#d d!es #!t %a#t the r! erty built u !# s! y!u ca#

#ame y!ur rice t! sell it t! him !r la# !# de(el! i#) it y!ursel$ Hbuildi#) y!u h!me !# a iece

!$ r! erty #e3t t! a la&e 2 i# that case it may be a )!!d i#(estme#t+

Sec!#d :!mes

Sec!#d :!mes !r (acati!# h!mes sh!uld be urchased rimarily $!r (acati!# ur !ses #!t

i#(estme#t ur !ses+ M!st e! le e#d u %ith a l!ss !# their (acati!# h!me r! erties because

e(e# i$ y!u ca# ma#a)e t! re#t the h!me2 the c!sts !$ !%#i#) the h!me alm!st al%ays e3ceed the

re#tal i#c!me it bri#) i#+

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ALL ABO'T LIFE INS'-ANCE INVESTMENT

Li$e I#sura#ce is i#c!me r!tecti!# i# the e(e#t !$ y!ur death+ The ers!# y!u #ame2 as y!ur

be#e$iciary %ill recei(e r!ceeds $r!m a# i#sura#ce c!m a#y t! !$$set the i#c!me l!st as a result!$ y!ur death+ Y!u ca# thi#& !$ li$e i#sura#ce as a m!rbid $r!m !$ )ambli#)G i$ y!u li(ed l!#)er

tha# the i#sura#ce c!m a#y e3 ected y!u t! the# y!u %!uld .l!se0 the bet+ But i$ y!u died early2

the# y!u %!uld .%i#0 because the i#sura#ce c!m a#y %!uld ha(e t! ay !ut y!ur be#e$iciary+

I#surers H!r u#der%riters l!!& care$ully at decades %!rth !$ data t! try t! redict e3actly h!%

l!#) y!u %ill li(e+ I#sura#ce u#der%riters classi$y i#di(iduals based !# their hei)ht2 %ei)ht2

li$estyle Hi+e+ %hether !r ! #!t they sm!&e a#d medical hist!ry Hi+e+ i$ they ha(e had a#y seri!us

health c!m licati!#s + All these (ariables %ill determi#e %hat rate class cate)!ry a ers!# $its

i#t!+ This d!es# t mea# that sm!&ers a#d e! le %h! ha(e had seri!us health r!blems ca# t be

i#sured2 it "ust mea#s they ll ay di$$ere#t remiums+

There are t%! (ery c!mm!# &i#ds !$ li$e i#sura#ce term li$e a#d erma#e#t li$e+ Term li$e

i#sura#ce is usually $!r a relati(ely sh!rt eri!d !$ time2 %hereas a erma#e#t li$e !licy is !#e

that y!u ay i#t! thr!u)h!ut y!ur e#tire li$e+ These ayme#ts are usually $i3ed $r!m the time y!u

urchase y!ur !licy+ Basically2 the y!u#)er y!u are %he# y!u si)#6u $!r this ty e !$ i#sura#ce2 the chea er y!ur m!#thly ayme#ts %ill be+

Need $!r li$e i#sura#ce

-is&s a#d u#certai#ties are art !$ li$e s )reat ad(e#ture J accide#t2 ill#ess2 the$t #atural disaster

J they re all built i#t! the %!r&i#) !$ the '#i(erse2 %aiti#) t! ha e#+ I#sura#ce the# is ma# s

a#s%er t! the (a)aries !$ li$e+ I$ y!u ca##!t beat ma#6made a#d #atural calamities2 %ell at least

be re ared $!r them a#d their a$termath+

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Ty es !$ li$e I#sura#ce

M!st !$ the r!ducts !$$ered by I#dia# Li$e i#surers are de(el! ed a#d structured ar!u#d these

.basic0 !licies a#d are usually a# e3te#si!# !r a c!mbi#ati!# !$ these !licies+ S!2 the di$$ere#t

ty es !$ i#sura#ce !licies are

Term I#sura#ce /!licy• A term i#sura#ce !licy is a ure ris& c!(er $!r a s eci$ied eri!d !$ time+ hat this

mea#s is that the sum assured is ayable !#ly i$ the !licyh!lder ides %ithi# the !licy

term+ F!r i#sta#ce2 i$ a ers!# buys -s+, la&h !licy $!r 1 6years eri!d ell2 the# he is

#!t e#titled t! a#y ayme#t the i#sura#ce c!m a#y &ee s the e#tire remium aid duri#)

the 1 6year eri!d+

• hat i$ he sur(i(es the 1 6year eri!d ell2 the# he is #!t e#titled t! a#y ayme#t the

i#sura#ce c!m a#y &ee s the e#tire remium aid duri#) the 1 6year eri!d+

• S!2 there is #! eleme#t !$ sa(i#)s !r i#(estme#t i# such a !licy+ It is a 1 erce#t ris&

c!(er+ It sim ly mea#s that a ers!# ays a certai# remium t! r!tect his $amily a)ai#st

his sudde# death+ :e $!r$eits the am!u#t i$ he !utli(es the eri!d !$ the !licy+ This

e3 lai#s %hy the Term I#sura#ce /!licy c!mes at the l!%est c!st+

E#d!%me#t /!licy

C!mbi#i#) ris& c!(er %ith $i#a#cial sa(i#)s2 a# e#d!%me#t !licy is the m!st ! ular !licies

i# the %!rld !$ li$e i#sura#ce+

• I# a# E#d!%me#t /!licy2 the sum assured is ayable e(e# i$ the i#sured sur(i(es the

!licy term+

• I$ the i#sured dies duri#) the te#ure !$ the !licy2 the i#sura#ce $irm has t! ay the sum

assured "ust as a#y !ther ure ris& c!(er+

• A ure e#d!%me#t !licy is als! a $!rm !$ $i#a#cial sa(i#) %hereby i$ the ers!#

c!(ered remai#s ali(e bey!#d the te#ure !$ the !licy he )ets bac& the sum assured %ith

s!me !ther i#(estme#t be#e$its+

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I# additi!# t! the basic !licy2 i#surers !$$er (ari!us be#e$its such as d!uble e#d!%me#t a#d

marria)e * educati!# e#d!%me#t la#s+ The c!st !$ such a !licy is sli)htly hi)her but %!rth its

(alue+

h!le Li$e /!licy• As the #ame su))ests2 a h!le Li$e /!licy is a# i#sura#ce c!(er a)ai#st death2

irres ecti(e !$ %he# it ha e#s+

• '#der this la#2 the !licyh!lder ays re)ular remiums u#til his death2 $!ll!%i#) %hich

the m!#ey is ha#ded !(er t! his $amily+

This !licy2 h!%e(er $ails t! address the additi!#al #eeds !$ the i#sured duri#) his !st6

retireme#t years+ It d!es# t ta&e i#t! acc!u#t a ers!# s i#creasi#) #eeds either+ hile the

i#sured buys the !licy at y!u#) a)e2 his re5uireme#ts i#crease !(er time+ By the time he dies2

the (alue !$ the sum assured is t!! l!% t! meet his $amily s #eeds+ As a result !$ these

dra%bac&s2 i#sura#ce $irms #!% !$$er either a m!di$ied h!le Li$e /!licy !r c!mbi#e i# %ith

a#!ther ty e !licy+

M!#ey Bac& /!licy• These !licies are structured t! r!(ide sums re5uired as a#tici ated e3 e#ses Hmarria)e2

educati!# etc !(er a sti ulated eri!d !$ time+ ith i#$lati!# bec!mi#) a bi) issue2

c!m a#ies ha(e reali7ed that s!metimes the m!#ey (alue !$ the !licy is er!ded+ That is

%hy %ith J r!$it !licies are als! bei#) i#tr!duced t! !$$set s!me !$ the l!sses i#curred

!# acc!u#t !$ i#$lati!#+

• A !rti!# !$ the sum assured is ayable at re)ular i#ter(als+ O# sur(i(al the remai#der !$

the sum assured is ayable+

• I# case !$ death2 the $ull sum assured is ayable t! the i#sured+• The remium is ayable $!r a articular eri!d !$ time+

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'NIT6li#&ed i#sura#ce

Bima /lus is a u#it6li#&ed e#d!%me#t la#+ The la# is a(ailable !(er a durati!# !$ 1 years+

/remium ca# be aid either yearly2 hal$6yearly2 !r at !#e sh!t+

The remium is used t! urchase u#its i# a $u#d !$ !#e s ch!ice2 a$ter the #ecessary deducti!#s+

The (alue !$ the u#its (aries %ith the i#(estme#t er$!rma#ce !$ the assets i# the $u#d+

I#(estme#ts ca# be made i# !#e !$ three ty es !$ $u#dsG Secured $u#d2 %hich i#(ests

red!mi#a#tly i# debt a#d m!#ey mar&et i#strume#ts -is& $u#d2 i# %hich the tilt is t!%ards

e5uities a#d a Bala#ced Fu#d2 a ble#d !$ the t%!+

S%itchi#) bet%ee# $u#ds is all!%ed t%ice duri#) the !licy term2 sub"ect t! the c!#diti!# that

they are at least t%! years a art+ Char)es $!r s%itchi#) are , er ce#t !$ the $u#d s cash (alue+

:$!t t$e bene#ici!r- recei4es de ends on %$en t$e de!t$ o# t$e o"ic-$o"der occurs.

• I$ death !ccurs %ithi# the $irst si3 m!#ths !$ the !licy2 the ay!ut is 8 er ce#t !$ the

sum assured lus the cash (alue !$ the u#its+

• Bet%ee# m!#ths se(e# a#d 1, !$ the !licy2 the ay!ut is < er ce#t !$ the sum assured

lus cash (alue !$ u#its+

• A$ter $irst year2 the sum assured a#d cash (alue !$ the u#its is aid+

• Duri#) the 1 th year2 1 er ce#t !$ the sum assured a#d cash (alue !$ u#its is aid !ut+

• I$ death !ccurs due t! a# accide#t2 a sum e5ual t! the sum assured2 !(er a#d ab!(e the

be#e$it me#ti!#ed ab!(e is aid+

• O# sur(i(al u t! maturity2 the !licyh!lder %ill recei(e er ce#t !$ the sum assured

lus the cash (alue !$ the u#its+

As is the case %ith u#it6li#&ed la#s2 this la#2 t!!2 c!mes %ith a set !$ char)es+ This i#cludes a

le(el a##ual m!rtality char)e2 the 5ua#tum !$ %hich is a $u#cti!# !$ the !licyh!lder s e#try a)eaccide#t be#e$it char)e at -s+ + er th!usa#d sum assured a##ual admi#istrati(e a#d

c!mmissi!# char)es a#d a $u#d ma#a)eme#t char)e+

O# surre#deri#) the !licy2 the cash (alue !$ the u#its2 sub"ect t! certai# deducti!#s that de e#d

!# the year surre#dered2 is aid !ut t! the !licyh!lder+

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eaesses• I$ y!u li(e a l!#) li$e2 y!ur $amily li&ely %!# t )et the $ull (alue !ut !$ y!ur !licy+

• Cash (alue $u#ds ca# $luctuate de e#di#) !# the $i#a#cial mar&ets+

Three Mai# 'ses• I#c!me /r!tecti!#

• Ca ital A reciati!#

• Ta36De$erred Sa(i#)s+

-eality Chec&

hat s the (erdict D! y!u ha(e the time2 disci li#e a#d $i#a#cial a%are#ess t! ta&e char)e !$

y!ur $i#a#ces a#d #!t c!u#t !# the l!%ly retur#s $r!m e#d!%me#t la#s D! y!u %a#t

abs!lutely certai#ty i# y!ur i#(estme#ts I$ the a#s%er t! the $irst 5uesti!# is a #! a#d the

sec!#d a yes 2 y!ur ! ti!#s %ill be se(erely limited+ There are a $e% e#d!%me#t la#s that !$$er

)uara#teed retur#s a#d the best it )ets is ab!ut < erce#t+ I$ !# the !ther ha#d2 y!u are %illi#) t!

ta&e calculated ris&s2 y!u ca# certai#ly d! better tha# that %ith a mi3 !$ !st !$$ice schemes a#d

ba#& de !sits at the (ery l!%6ris& e#d !$ the s ectrum t! e5uity $u#ds a#d st!c& s at the !ther

e#d2 %ith debt $u#ds a#d bala#ced $u#ds $eaturi#) s!me%here i# the middle+ Fi#e y!ur c!m$!rtle(el a#d y!u %ill !% i$ i#sura#ce la#s ca# d!uble u y!ur i#(estme#ts $!r y!u+

1


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/E-FO-MANCE ANALYSIS OF -ET'-NS

E5uity retur#s at a )la#ce

I$ %e ha(e a l!!& at e5uity retur#s !$ the ast = years it is li&e thisG

SENSE

YEA- INDIE U ABSOL'TE

C:AN4E

/E-CENTA4E

C:AN4E HK, < 8@=,, = 8,>, > 88== 11 8+ ,, @ >8> ,;>, 1 < ;8>@ ; 1,, +>>, 1; , 8,8


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BSE1

YEA- INDE ABSOL'TE

C:AN4E

/E-CENTA4E

C:AN4E HK, < , 8,, = 1 @ 6;== 6,8+8>, > 1;+=;, 1 8 > < 1+8,, 1, , , ,@ ; +@<, 18 = ,< ;; +<, 1; @18, ,1 < ,8+ <

8


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BSE,

YEA- INDE U ABSOL'TE

C:AN4E

/E-CENTA4E

C:AN4E HK, < ;8=, = 8; 6@ 6,1+@<, > 8@; 8 1 + ;, @ =>; 11> 1 +< 8 88+><, 1, 1< ;


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BSE

YEA- INDE U ABSOL'TE

C:AN4E

/E-CENTA4E

C:AN4E HK, < 18 ;

, = 1 6,@@ 6,,+@8, > 11=< 1=1 1=+ 1, @ ,8 11@, 1 1+,, 1 ,==@ ;18 1=+;<, 11 8=@ 1 1< 8+><, 18 ,@ , +;=, 1; >8 1 >> ,8+ =


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Ma)#um Ta3 4ai# ;=+= 1 =+= @8+; 11,+8

/ri#ci al Ta3 Sa(i#)s =;+< @1+, @+8 =8+=

:DFC Ta3 Sa(er 18>+ 1 ;+< >8+< @1+<

020

40

60

80

100

120140

NAV 1 YR 2 YR 3 YR

MAGNUM TAX GAIN PRINCIPAL TAX GAIN

HDFC TAX SAVER

=


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E 'ITY BALANCED NAV 1 Y- , Y- , Y-

Ma)#um Bala#ced

8,+; =;+< 8+; =1+1 ;@+1 ,+>

:DFC /rude#tial@


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-eal Estate -etur#s

-eal Estate i#dustry i# I#dia has c!me !$ a)e a#d c!m etes %ith !ther i#(estme#t ! ti!#s i# the

structured mar&ets+ C!mmercial real estate c!#ti#ues t! be a desirable i#(estme#t ! ti!# i#

I#dia+ O# a# a(era)e the retur#s $r!m re#tal i#c!me !# a# i#(estme#t i# c!mmercial r! erty i#

metr!s is ar!u#d 1 + K2 %hich is the hi)hest i# the %!rld+ I# case !$ !ther i#(estme#t

! !rtu#ities li&e ba#& de !sits a#d b!#ds2 the retur#s are i# the ra#)e !$ + K 6 m!#ths acr!ss ma"!r metr!s i# I#dia+

4rade6A !$$ice r! erty #et yields ha(e c!me d!%# $r!m 1,K 61 K i# , 8 a#d curre#tly

a(era)e ar!u#d 1 + K 6 11K +a+ The $all i# yields has resulted $r!m decreasi#) i#terest rates

a#d i#creasi#) a etite $r!m i#(est!rs+ This has i# tur# resulted $r!m abu#da#t li5uidity ! ti!#sa(ailable c!u led %ith the acce tability !$ real estate as a c!#(e#ti!#al class !$ asset+ L!%er

i#terest rates2 easy a(ailability !$ h!usi#) $i#a#ce2 escalati#) salaries a#d "!b r!s ects ha(e

bee# le#di#) bu!ya#cy t! the reside#tial sect!r+ The #et yields Ha$ter acc!u#ti#) $!r all

!ut)!i#)s !# reside#tial r! erty are curre#tly at ;K 6 m!#ths+ The retail mar&et i# I#dia has

bee# )r!%i#) due t! i#creasi#) dema#d $r!m retailers2 hi)her dis !sable i#c!mes a#d dearth !$

5uality s ace as !# date+ Th!u)h the #et yields !# retail r! erty ha(e re)istered a $all $r!m 1 K

6 18K +a+ re !rted earlier t! @K 6 1 + K +a+ curre#tly2 the ca ital a reciati!# i# this sect!r is

cl!se t! , K ; K +a+ :!%e(er2 the ris&s ass!ciated %ith this sect!r are hi)her as retailers are

r!#e t! cyclical cha#)es ty ical !$ a busi#ess cycle+ Cha#)i#) c!#sumer sych!)ra hics

@


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c!mbi#ed %ith i#creasi#) dis !sable i#c!mes %ill e#sure $urther )r!%th !$ the retail sect!r i#

I#dia+

Li$e I#sura#ce retur#s at a )la#ce

Li$e I#sura#ce as .I#(estme#t0

I#sura#ce is a# attracti(e ! ti!# $!r i#(estme#t+ hile m!st e! le rec!)#i7e the ris& hed)i#)

a#d ta3 sa(i#) !te#tial !$ i#sura#ce2 ma#y are #!t a a%are !$ its ad(a#ta)es as a# i#(estme#t

! ti!# as %ell+ I#sura#ce r!ducts yield m!re c!m ared t! re)ular i#(estme#t ! ti!#s a#d this is

besides the added i#ce#ti(es Hb!#uses !$$ered by i#surers+

Y!u ca##!t c!m are a# i#sura#ce r!duct %ith !ther i#(estme#t schemes $!r the sim le reas!#

that it !$$ers $i#a#cial r!tecti!# $r!m ris&s s!methi#) that is missi#) i# #!#6i#sura#ce r!ducts+

I# $act2 the remium y!u ay $!r a# i#sura#ce !licy is a# i#(estme#t a)ai#st ris&+ Thus2 be$!re

c!m ari#) %ith !ther schemes2 y!u must acce t that a art !$ the t!tal am!u#t i#(ested i# li$e

i#sura#ce )!es t!%ards r!(idi#) $!r the ris& c!(er2 %hile the rest is used $!r sa(i#)s+

I# li$e i#sura#ce e3ce t $!r term i#sura#ce2 u#li&e #!#6li$e r!ducts y!u )et maturity be#e$its !#

sur(i(al at the e#d !$ the term+ I# !ther %!rds2 i$ y!u ta&e a li$e i#sura#ce !licy $!r , years

a#d sur(i(e a#d sur(i(e the term2 the am!u#t i#(ested as remium i# the !licy %ill c!me bac&

t! y!u %ith added retur#s+ I# the u#$!rtu#ate e(e#t !$ death %ithi# the te#ure !$ the !licy the

$amily !$ the deceased %ill recei(e the sum assured+ N!% let us c!m are i#sura#ce as a# i#(estme#t ! ti!#s+ I$ y!u i#(est IN- 1 i# //F2 y!ur

m!#ey )r!%s t! -s+1 @ at @+ K i#terest !(er a year+ But i# this case2 the access t! y!ur $u#ds

%ill be limited+ O#e ca# %ithdra% K !$ the i#itial de !sit !#ly a$ter ; years+

The same am!u#t !$ -s+1 ca# )i(e y!u a# i#sura#ce c!(er !$ u t! a r!3imately -s+ J

11 la&h Hde e#di#) u !# the la#2 a)e a#d medical c!#diti!# !$ the li$e i#sured etc a#d this

am!u#t ca# bec!me immediately a(ailable t! the #!mi#ee !$ the !licyh!lder !# death+ Thus

i#sura#ce is a u#i5ue i#(estme#t a(e#ue that deli(ers s!u>#d retur#s i# additi!# t! r!tecti!#+


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Li$e I#sura#ce as .Ta3 /la##i#)0

I#sura#ce ser(es as a# e3celle#t ta3 sa(i#) mecha#ism t!!+ The 4!(er#me#t !$ I#dia has !$$ered

ta3 i#ce#ti(es t! li$e i#sura#ce r!ducts i# !rder t! $acilitate the $l!% !$ $u#ds i#t! r!ducti(e

assets+ '#der secti!# >> !$ i#c!me ta3 act 1@


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a ch!ice !$ i#(estme#t+ A care$ul l!!& at th!se $i)ures bel!% re$lects that i#(esti#) i# mutual

sta#d at a# ad(a#ta)e !(er the !thers+

E5uity B!#ds 4!ld -eal Estate E5uity MF Debt MF/rimary

Needs

,+88 1+@ ,+88 ,+ ; ,+@1 ,+


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F!r li5uidity mutual $u#ds a#d )!ld are ra#&ed the hi)hest as these ca# be c!#(erted i#t! cash

immediately as a#d %he# the i#(est!r %ishes t! d! s!+ :!%e(er that is #!t the case %ith the real

estate !r //F acc!u#t as the $!rmer is #!t easy t! dis !se a#d the later has a l!c& i# eri!d !$ 1

years+ E(e# i# case !$ e#try barrier2 e5uity a#d mutual $u#ds are ra#&ed the hi)hest at they ca#

be b!u)ht at a#y !i#t !$ time %ith mi#imal i#(estme#t+ But2 it s is #!t the same %ith the real

estate2 si#ce y!u ca##!t buy the la#d y!u %ish t! u#til a#d u#less there is s!me!#e %ishi#) t!

sell it+

Ta&i#) i#t! c!#siderati!# the ta3 a#)le !$ a# i#(estme#t2 the# the m!st ad(a#ta)e!us are the real

estate a#d e5uity mutual $u#ds+ I# case !$ real estate2 a ma3imum am!u#t !$ -s+1+ la&hs is

all!%ed as deducti!# $!r the i#terest aid $!r the l!a# ta&e# t! either buy a h!use !r c!#struct it+

E(e# i# case !$ mutual $u#ds2 i$ the u#its are held $!r m!re tha# a year2 !#ly 1 K !$ the ca itala reciati!# is ta3ed a#d #!t at the ea& rates+ Ba#& FD s are the %r!#) ch!ice i$ !#e is l!!&i#)

$!r the ta3 as ect because2 $irstly the am!u#t !$ i#terest aid is less a#d sec!#dly TDS is

a licable+ There are a $e% ! ti!#s2 %hich meet !ur l!#)6term )!als+ The systematic i#(estme#t

la#2 a s ecial $eature i# mutual $u#ds is the best ! ti!# t! meet y!ur l!#)6term re5uireme#ts $!r

the same mutual $u#ds has the hi)hest sc!re i# the asset )rid+ The same thi#) is e(e# a licable

t! the real estate2 as there is a hi)h !ssibility !$ a reciati!# !(er time a#d e(ery cha#ces !$

de reciati!#+ Ba#& FD s are ra#&ed the least because the ca ital a reciati!# is #!t hu)e+


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I#(estme#t

Needs

ei)ht

HK

E5uity B!#ds 4!ld -eal

Estate

E5uity

MF

Debt MF

Sa$ety ; , = = > =

-etur#s ; > ; >Li5uidity , = ; > , = @E#try barrier < @ 1 > =Ta3

E$$icie#cy

, 8 < 8 @ = >

Cash Fl!%

E$$ecti(e#ess

, > 8 @ ; > @

L!#) Term

4!als

; ; < @ @ =

:!ldi#) *

Li5uidati!#

c!st

< @ 8 , = >

N!teG @ J i#dicates hi)hest !siti(e (alue !# a arameter a#d 1 J i#dicates the l!%est !siti(e

(alue !# a arameter+


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CONCL'SION

There are se(eral i#(estme#ts t! ch!!se $r!m these i#clude e5uities2 debt2 real estate a#d )!ld+

Each class !$ assets has its eculiarities+ At a#y i#sta#t2 s!me !$ th!se assets %ill !$$er )!!d

retur#s2 %hile !thers %ill be l!sers+ M!st i#(est!rs i# search !$ e3tra!rdi#ary i#(estme#ts try

hard t! $i#d a si#)le asset+ S!me l!!& $!r the #e3t i#$!sys2 !ther buys real estate !r )!ld+ Ma#y

!$ them de !sit their sa(i#)s i# the /ublic /r!(ide#t Fu#d H//F !r !st !$$ice de !sits2 !thers

lum $!r debt mutual $u#ds+ Very $e% buy acr!ss all asset classes !r di(ersi$y %ithi# a# asset

class+ There$!re it has bee# %idely said that .D!# t ut all y!ur e))s i# !#e bas&et0+ The idea

is t! create a !rt$!li! that i#cludes multi le i#(estme#ts i# !rder t! reduce ris&+

Thi#)s cha#)ed i# early may , < si#ce the# the st!c& mar&et m!(ed u m!re tha# = K2 %hile

ma#y st!c&s ha(e m!(ed m!re+ -eal estate rices are als! s%i#)i#) u 2 alth!u)h it is di$$icult t!

ma i# this $ra)me#ted mar&et+ 4!ld a#d Sil(er rices ha(e s urted+

B!#ds c!#ti#ue t! )i(e reas!#able retur#s but it is #! l!#)er leads i# the c!m arati(e ra#&i#)s+

-i)ht #!% e5uity l!!&s the best bet2 %ith real state c!mi#) i# sec!#d+ The 5uesti!# is h!% l!#)

%ill this last I$ it is a sh!rt6term he#!me#!#2 )!i#) thr!u)h the hassle !$ s%itchi#) !(er $r!m

debt may #!t be %!rth it+ I$ it s a l!#)6term situati!#2 assets sh!uld be m!(ed i#t! e5uity a#d realestate+ This may be l!#)6term situati!#+ The retur#s $r!m the mar&et %ill be )!!d as l!#) as

r!$itability i#creases+ Si#ce the ec!#!my is "ust )etti#) i#t! rec!(ery m!de2 that c!uld h!ld

true $!r se(eral years+ -eal estate (alues2 es ecially i# suburba# areas !r small t!%#s c!uld

im r!(e $urther+ The im r!(eme#t i# r!ad #et%!r&s %ill ush u the (alue !$ $ar6$lu#)

de(el! me#t+ There is als! s!me attem t t! ame#d te#a#cy la%s a#d li$t urba# ceili#)s2 %hich

ha(e stu#ted the real estate mar&et+

My )ut $eeli#) is that a lar)e %ei)hta)e i# e5uity a#d i# real estate %ill ay !$$ duri#) , =6

, >+ But d!# t e3it debt !r sell !$$ y!ur )!ld+ Try a#d buy m!re i# the %ay !$ e5uity a#d

research real estate ! ti!#s i# small t!%#s*suburbs+

-e)ardless !$ y!ur mea#s !$ meth!d2 &ee i# mi#d that there is #! )e#eric di(ersi$icati!# m!del

that %ill meet the #eeds !$ e(ery i#(est!r+ Y!ur ers!#al time h!ri7!#2 ris& t!lera#ce2 i#(estme#t


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)!als2 $i#a#cial mea#s2 a#d le(el !$ i#(estme#t e3 erie#ce %ill lay a lar)e r!le i# dictati#) y!ur

i#(estme#t e3 erie#ce %ill lay a lar)e r!le i# dictati#) y!ur i#(estme#t mi3+ Start by $i)uri#)

!ut the mi3 !$ st!c&2 b!#ds a#d cash that %ill be re5uired t! meet y!ur #eeds+ Fr!m there

determi#e e3actly %hich i#(estme#ts t! i# c!m leti#) the mi32 substituti#) traditi!#al assets $!r

alter#ati(es as #eeded+


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