Anuradha Saini Project Report

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SUMMER TRAINING REPORT ON “CHANGING PATTERN OF INVESTMENT PREFRENCES’’- A STUDY OF RETAIL INVESTORS IN LUDHIANA With special reference to In partial fulfillment of the Degree of master of buissness administration Submitted to Ms. DEEPIKA ARORA Faculty,PCTE Submitted by Anuradha Saini MBA-2A session(2009-10) University roll no. 94972238147 1

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Page 1: Anuradha Saini Project Report






With special reference to

In partial fulfillment of the

Degree of master of buissness administration

Submitted to



Submitted by

Anuradha Saini

MBA-2A session(2009-10)

University roll no. 94972238147

Punjab College of Technical Education, Baddowal, Ludhiana

Affilliated to Punjab technical University, Jalandhar


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Although I have put in my best efforts to bring out a good

blend of my theoretical knowledge with the practicality of the Project,

however it is well said and proved that an individual can never be perfect.

Therefore, I look forward for any suggestions for which I would strive to

improve upon in future. However, I must say, this report is not the work

of excellence by scholar; it is a result of assignment to improve myself &

gain confidence. So there is chance of some mistakes, also a critical

appraisal by anyone will be heartily welcomed.


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The summer Training Report is a result of cumulative effort of

over a period of one months in the course of which I have received

eternal inspiration and intellectual support from various sources. It is my

pleasure to express my great sense of gratefulness to all those who have

contributed richly to this project and has been conductive in making a


On completion of my study, it gives me great pleasure in expressing my

indebtness to my revered guide Mr. Bikramjit Singh for his unstinted co-

operation, continuous encouragement, valuable guidance and support at

all stages of work.

My sincere thanks are also due to Ms. Deepika Arora for providing the

necessary departmental assistance and support.

I would be failing in my duty if I do not express my thanks to all my

family members, particularly to my father for their inspiration, moral

support and cooperation.



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Management ideas without any action based on them mean nothing. That

is why practical experience is vital for any management studies.

Theoretical studies in the class room are not sufficient to understand the

functioning climate and the real problems coming in the way of

management. So, practical exposures are indispensable to such courses.

Thus, practical experience acts as a supplement to the classroom studies.

This report deals with “Changing Pattern of Investment

preferences – A study of retail investors in Ludhiana” has been

completed. I have learnt a lot of new things which could never been

learnt from theory classes.

Main objectives of this project is to find out the investment pattern of

investor’s in Mutual Fund & Life Insurance, to find out what factors

influence them more to choose a particular investment option, particular

company & to find out whether they are satisfied with their investment

decision or not.

In this study I used non-probability sampling technique and

collected data from primary and secondary source. In this study

descriptive research design is used. Area of study is Ludhiana. It is find

out that out of 100 people 60 invest their money while 40 do not invest at

all because of inadequate funds, lack of interest and lack of knowledge.

Majority of people invest their money in both Mutual Funds & Life

insurance .Majority of people take the investment decision on the basis of

brand name and track record and are satisfied from their decision.


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This is to certify that the project report title “Changing pattern of investment

preferences-a study of retail investors in Ludhiana” is submitted to Punjab College of

Technical Education, Baddowal in the partial fulfillment of the degree of Masters of

Business Administration of session (2009-2011) affiliated to Punjab Technical

University, Jalandhar is a bonafide research work carried on by Anuradha saini, roll

no 94972238147 in Money Matter Inc. as a summer trainee for six weeks under my

supervision. The assistance and help received during the course of investigation has

been fully acknowledged.

Major Advisor

Ms.Deepika Arora

Faculty Member

PCTE(Baddowal) Ludhiana


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This is to certify that the project report title “Changing pattern of investment

preferences-a study of retail investors in Ludhiana” is submitted to Punjab College of

Technical Education, Baddowal in the partial fulfillment of the degree of Masters of

Business Administration of session (2009-2011) affiliated to Punjab Technical

University, Jalandhar is a bonafide research work carried on by Anuradha saini, roll

no 94972238147 in Money Matter Inc. as a summer trainee for six weeks under my

supervision. The assistance and help received during the course of investigation has

been fully acknowledged.

Major Advisor

Mr.bikramjeet singh

(branch manager)

Money Matter Inc.


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Sr. No. Contents Page No.

1.1 Introduction of the topic 12

1.1.1 investment 12

1.1.2 investor 12

1.1.3 Types of investors 12-13

1.2 Introduction of company 13

1.3 Historical backround of the company 14

1.4 Money matter inc- key value differerentation 14

1.5 Mision and vision 14-15

1.6 Name and location of branches 15

1.7 products 15-16

1.8 In life insurance 16

1.9 In general insurance 16

1.10 markets 17

1.11 Top executives:

Money matter management team 17

1.12 Other relevant information 18

1.12.1 India- a key market for money matter inc. 18

1.12.2 Next five year goal 18

1.13 Introduction to particular branch 18

1.14 objectives 18

1.15 Their products 18-19

1.16 Their tie up with companies 19

1.17 Market served 20

1.18 Organization chart of the traning unit 20

1.18.1 positions 20

1.18.2 department 20 Heads of department 20

1.19 Objectives of sales department 21

1.20 Swot analysis of money matter 21

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List of Figure and table:-




4.1 Showing the age of respondents 70

4.2 Showing the sex of respodents 71

4.3 Showing the income of respondents 72

4.4 Showing the occupation of respodents 73

4.5 Showing the qualification of respodents 74

4.6 Showing the marital status of respodents 75

4.7 Showing respondents having investment private vs govt.






Contents Page No.

1 Introduction to topic 21-56

2. Review of Literature

Objective of study

Need of study

Limitations of study





3. Research Methodology 64-67

4. Data Analysis and Interpretation 68-88

5 Recommendation

Findings and results





Bibliography 92

Annexure 93-94

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4.8 Showing respondents prefer for field of investment. 77

4.9 Showing respondents having duration of investment



4.10 Showing the factors that effect the respondents

investment scheme


4.11 Showing respondents prefer investment funds 80

4.12 Showing respodents interested investment scheme. 81

4.13 Showing the environmental factors that effect the

respondents mutual fund investment.


4.14 Showing the types of communication modes that prefer

respondents for their portfolio investment.


4.15 Showing respondents prefer long term investment plans 84

4.16 Showing respondents taking different risk in investment




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List of Figure and table:-




4.17 Showing respondents use mutal fund before investment 86

4.18 Showing respondents taking inflation as a risk 87

4.19 Showing respondents taking stock market as a buying

opportunity in a down period


4.20 Showing investment having others investment policy. 89

4.21 Showing respondents shift one investment option to

others investment option.



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Investment or investing is a term with several closely-related meanings in

business management, finance and economics, related to saving or deferring

consumption. An asset is usually purchased, or equivalently a deposit is made

in a bank, in hopes of getting a future return or interest from it.

1.1.2 Investor

An investor is any party that makes an Investment.

However, the term has taken on a specific meaning in finance to describe

the particular types of people and companies that regularly purchase equity or

debt securities for financial gain in exchange for funding an expanding

company. Less frequently the term is applied to parties who purchase real

estate, currency, commodity derivatives, personal property, or other assets.

The term implies that a party purchases and holds assets in hopes of achieving

capital gain, not as a profession or for short-term income.

1.1.3 Types of investors

Individual investors (including trusts on behalf of individuals, and

umbrella companies formed for two or more to pool investment funds)

Collectors of art, antiques, and other things of value

Angel investors, either individually or in groups

Venture capital funds, which serve as investment collectives on behalf

of individuals, companies, pension plans, insurance reserves, or other


Investment banks.


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Businesses that make investments, either directly or via a captive fund

Investment trusts, including real estate investment trusts

Mutual funds, hedge funds, and other funds, ownership of which may or

may not be publicly traded.


Money Matter Inc.

• A Company which believes in Customer Delight

• A Company that offers a Complete Basket of Financial Solutions.

• A Company with a belief of Changing the Finance Industry in India

MONEY MATTER What Investment Can Be

Money Matter Inc. take pleasure in introducing themselves as marketing and

Distribution Company for Various Financial Products. The major activities and

offerings of the company today are Equity broking, Portfolio Management

Services, Equity Analysis & Research, Distribution of Financial Products, etc.

Money matter are having a Corporate Tie-Ups with Various Companies

Like ICICI Prudential, HDFC Standard Life, Kotak Life Insurance, Aviva, Tata

Aig, LIC etc for life insurance business; Bajaj Allianz, Oriental, United, IFFCO

Tokyo, etc for General Insurance, and almost with all the Leading AMC’s in

India for mutual funds. To broaden the gamut of services offered to the

investors, the company has also recently added Credit Cards, Personal Loans,

Home Loans, and Auto Loans to its basket.


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Money matter are opening their branches in Punjab and Rajasthan in the

first phase and are planning to open 20 branches across Punjab and Rajasthan

within a year. And for the same we are having openings at various levels in the

field of Marketing/Sales and HR.

1.3 Historical Background of the Group:-

Money Matter Inc. was started by Mr. Prem Pal Sharma in 2002 in Rajasthan. In Rajasthan they work under the name of Money Matter Wealth Advisors Pvt. Ltd. It has its head office in Delhi. It Has six branches in Rajasthan. In Punjab, Money Matter Inc. start their services in 5th September 2008. Right now they have four branches in Punjab. For Punjab Region they have their head office in Mohali

1.4 Money Matter Inc. - Key Value Differentiation

Great Leadership

– Passionate, Balanced, Disciplined

Customer-centric Business Models

– Relationship v/s Product Positioning

Want to be a Leader in Commercial / SME, Mass Consumer &

Mass Self-employed segments

Enabling management model and culture

Empowerment within defined boundaries

Embed the right values & behavior across the organization

1.5 vision and mission:

vision Enabling Success, Enriching Lives,

Spread Smiles Mission To create superior long-term shareholder value in

financial sectors across Emerging Markets

Organic Growth


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Acquire and Transform

Improve Productivity

Optimize Capital

Risk-Reward Balance



1.6 Name and location of braches

Locations:– Mohali (Punjab)– Sri Ganganagar (Rajasthan)– AnupGarh (Rajasthan)– Suratgarh (Rajasthan)– Ramsinghpur (Rajasthan)– Ludhiana (Punjab)

Upcoming Branches:

– Jalandhar (Punjab)– NawanShahar (Punjab)– Amritsar (Punjab)– Jalandhar (Punjab



• Mutual Funds


Caring ; Honesty ; Passion to Excel ; Team Work ; Disciplined Professionalism

Right peopleOrganizational

AlignntExecution Discipline


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• Share

• Corporate FD’s & Corporate Loans

• Portfolio Management Services

• Gold

• Bonds


Tata AIG

Kotak Life Insurance

Aviva Life Insurance

ICICI Prudential


Bajaj Allianz

Birla Sun Life

HDFC Standard Life


Reliance Life

1.9 In General Insurance

Tata AIG General Insurance

Reliance General Insurance

Bajaj Allianz General Insurance

Royal Sundram




New India

Iffco Tokyo

ICICI Lombard

Star Health

1.10 Markets:-


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Money Matter Inc. focuses Domestic Market only. They give their services mainly in

two states Rajasthan and Punjab.



• Prem Pal Sharma, Chief Operating Officer

Experience: 24 yrs

Having a rich experience of working at various levels with various renowned


Dunlop India Ltd.: Manager Operations (for Gujrat, M.P, Punjab, J&K,


Marketing Manager- Industrial Products Division

Indag Rubber Ltd.: Manager Administration/ CFA- BDM

Gates India : Manager Sales

Birla Tyres Ltd.: Zonal Coordinator Logistics. (for Punjab, J&K, H.P.,

Haryana, U.P, & Delhi )

• Gaurav Sharma, Strategic Unit Head

Experience: 6yr 6 Months

Worked with ICICI Prudential Life Insurance Co. Ltd, Kotak Life


AVIVA Life Insurance.

Shallu, Head Administration & Finance- Strategic Unit

Experience : 7 yrs

Worked with ICICI Prudential, Reliance Industries & Chandigarh


• Santosh Kumar Dubey, Head Sales- Strategic Unit

Experience: 8 yrs

Worked with SBI LIFE,HDFC SLIC, ICICI Prudential

1 .12 Other Relevant Information :


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1.12.1 India - A key market for Money Matter Inc.

Provides MMI with access to one of the most rapidly growing


Large under and un-served segments.

Banking intermediation is still at low levels provides significant

opportunity for a new entrant.

Availability of talent, state-of-art lower cost technology, and steadily

improving infrastructure.

Foreign Direct Investment inflows expected to double to $11Bln.

Increasing levels of foreign trade .

1.12.2 Next Five Year Goal

Achieve market share of 5% (top own-branch players) within target


Serve a satisfied customer base of ~2 million customers.

Be the best employer in financial services industry in India,

attracting diverse talent due to its unique business model and wide

product range

1.13 Introduction to Particular Branch:-

Money Matter Inc.

SCF – 1C, Urban Estate, Phase – 1

Dugri, Ludhiana

1.14 Objective:-


Monet matter a wealth Management inc. which deals in all the almost all

investment option present in market.


“Money Matter Inc. wants to be the Preferred Partner for all Financial Needs of the Customer”

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Demat Account

Mutual Funds




Corporate FD’s


1.16 Their realation with companies:

• Tata AIG

• Kotak Life Insurance

• Aviva Life Insurance

• ICICI Prudential


• Bajaj Allianz

• Birla Sun Life

• HDFC Standard Life


• Reliance Life

• Star Health

• ICICI Lombard

• Tata AIG General Insurance

• Reliance General Insurance

• Bajaj Allianz General Insurance

• Royal Sundram

• United

• National

• Oriental

• New India

• Iffco Tokyo


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1.17 Market Served:-

The Money Matter Inc. serves domestic market only in Punjab

1.18 Organization Chart of the Training Unit

1.18 .1 Positions

Relationship Manager / Branch Manager – Mr. Bikramjeet Singh

Assistant Relation Manager - Mr. Veer Davinder Singh and Mr. Yashpal Sharma

1.18.2 Departments:-

There are basically two departments are there in Money Matter Inc.

1) Human Resource / Administration

2) Sales Heads of Department:-

For Human Resource / Administration Ms. Navjeet Kaur and Mr. Amandeep Singh

are HOD’s.For Sales Mr. Bikramjeet Singh


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1.19 Objectives of Sales Department:-

1. To improve sales strategies.

2. To make the people aware about the new products.

3. To give the best possible services

1.19.1 Objectives of HR Department:-

1. To provide best working environment.

2. To handle the grievances of the employees

3. To retain the employees..



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ER – 1



An investors is a person or entity that purchases assets with the objective of

receiving a finiancial return. The assets an investors may buy range widely but

include stocks, bonds, real estate,commodities and collectibles. The portfolio of

an investors commonly include a variety of assets that balance the rewards and

risks of each investment. An investotrs is distinguished from a speculator who

seeks to make quick ,large gains from the price increase on risky

assets.generally, an investor has a longer time horizon for achieving a return,

which may include regular cash payments from the income the assets generates




Contents Page No.

1 Introduction to topic 21-56

2. Review of Literature

Objective of study

Need of study

Limitations of study





3. Research Methodology 64-67

4. Data Analysis and Interpretation 68-88

5 Recommendation

Findings and results





Bibliography 92

Annexure 93-94

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capital appreciation from the rise in the asset price or both a young investors

tends to buy assets with price appreciation potential, because a 25 years old


An investor who invests small amounts of money for himself/herself rather than on behalf of anyone else. Retail investors are the polar opposite of institutional investors, which are large firms who invest on behalf of clients. Some investment vehicles require minimum investments so as to discourage retail investors from them. Retail investors are thought to be risk-averse and poorly informed compared to other investors, though there is disagreement as to how true that is. See also: Odd-Lot Theory.


Individual investors (including trusts on behalf of individuals, and

umbrella companies formed for two or more to pool investment funds)

Collectors of art, antiques, and other things of value

Angel investors, either individually or in groups

Venture capital funds, which serve as investment collectives on behalf

of individuals, companies, pension plans, insurance reserves, or other


Investment banks.

Businesses that make investments, either directly or via a captive fund

Investment trusts, including real estate investment trusts

Mutual funds, hedge funds, and other funds, ownership of which may or

may not be publicly traded.


Savings form an important part of the economy of any nation. With the

savings invested in various options available to the people, the money acts as

the driver for growth of the country. Indian financial scene too presents a

plethora of avenues to the investors. Though certainly not the best or deepest of

markets in the world, it has reasonable options for an ordinary man to invest his



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An investment can be described as perfect if it satisfies all the needs of Fll

investors. So, the starting point in searching for the perfect investment would

be to examine investor needs. If all those needs are met by the investment, then

that investment can be termed the perfect investment. Most investors and

advisors spend a great deal of time understanding the merits of the thousands of

investments available in India. Little time, however, is spent understanding the

needs of the investor and ensuring that the most appropriate investments are

selected for him.

Three golden rules used by investors:

Invest early

Invest regularly

Invest for long term not for short term

The project will help you to understand the investment fact before investing in

any of investment tools and thus to scrutinize the important aspects of investors

before investing that further help in analyzing the relation between the features

of the products and investment requirements.


The term "investment" is used differently in economics and in finance.

Economists refer to a real investment (such as a machine or a house), while

financial economists refer to a financial asset, such as money that is put into a

bank or the market, which may then be used to buy a real asset.

Business Management

The investment decision (also known as capital budgeting) is one of the

fundamental decisions of business management: managers determine the assets

that the business enterprise obtains. These assets may be physical (such as

buildings or machinery), intangible (such as patents, software, goodwill), or


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financial (see below). The manager must assess whether the net present value

of the investment to the enterprise is positive; the net present value is

calculated using the enterprise's marginal cost of capital.


In economics, investment is the production per unit time of goods, which are

not consumed but are to be used for future production. Examples include

tangibles (such as building a railroad or factory) and intangibles (such as a year

of schooling or on-the-job training). In measures of national income and

output, gross investment I is also a component of Gross domestic product

(GDP), given in the formula GDP = C + I + G + NX. I is divided into non-

residential investment (such as factories) and residential investment (new

houses). "Net" investment deducts depreciation from gross investment. It is the

value of the net increase in the capital stock per year.


In finance, investment is buying securities or other monetary or paper

(financial) assets in the money markets or capital markets, or in fairly liquid

real assets, such as gold, real estate, or collectibles. Valuation is the method

for assessing whether a potential investment is worth its price.

Personal Finance

Within personal finance, money used to purchase shares, put in a collective

investment scheme or used to buy any asset where there is an element of capital

risk is deemed an investment. Saving within personal finance refers to money

put aside, normally on a regular basis. This distinction is important, as

investment risk can cause a capital loss when an investment is realized; unlike

saving(s) where the more limited risk is cash devaluing due to inflation.

In many instances the terms saving and investment are used interchangeably,

which confuses this distinction. For example many deposit accounts are labeled


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as investment accounts by banks for marketing purposes. Whether an asset is a

saving(s) or an investment depends on where the money is invested: if it is cash

then it is savings, if its value can fluctuate then it is investment.


In real estate, investment is money used to purchase property for the sole

purpose of holding or leasing for income and where there is an element of

capital risk. Unlike other economic or financial investment, real estate is


Broad of speaking, a person can make use of his income in three alto

natives. They are saving, investment and expenditure. If he saves more then he

will have to reduce on his expenses and vice versa. To meet the current and

future financial requirement of the person, a right combination of these is

essential. These few lines explain the importance of a right combination of the

three activities. This is what we mean by investor investment pattern & thus

comes the need of awareness initiatives for this concept.

An Investor has many objects for doing the investment some are doing

investment for security purpose some are doing for high return purpose and

some for tax benefits. Same income and age group people follow different

pattern of investment and to understand this pattern is very complex.

Researchers try to find out the investment pattern of Investor’s in Mutual Fund

& Life Insurance.


1.6.1 primary objectives

The options for investing our savings are continually increasing, yet every

single investment vehicle can be easily categorized according to three

fundamental characteristics - safety, income and growth - which also

correspond to types of investor objectives. While it is possible for an investor


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to have more than one of these objectives, the success of one must come at the

expense of others. Here we examine these three types of objectives, the

investments that are used to achieve them and the ways in which investors can

incorporate them in devising a strategy.


Perhaps there is truth to the axiom that there is no such thing as a completely

safe and secure investment. Yet we can get close to ultimate safety for our

investment funds through the purchase of government-issued securities in

stable economic systems, or through the purchase of the highest quality

corporate bonds issued by the economy's top companies. Such securities are

arguably the best means of preserving principal while receiving a specified

rate of return.

The safest investments are usually found in the money market and include such

securities as Treasury bills (T-bills), certificates of deposit, commercial paper

or bankers' acceptance slips; or in the fixed income (bond) market in the form

of municipal and other government bonds, and in corporate bonds. The

securities listed above are ordered according to the typical spectrum of

increasing risk and, in turn, increasing potential yield. To compensate for their

higher risk, corporate bonds return a greater yield than T-bills.


However, the safest investments are also the ones that are likely to have the

lowest rate of income return, or yield. Investors must inevitably sacrifice a

degree of safety if they want to increase their yields. This is the inverse

relationship between safety and yield: as yield increases, safety generally goes

down, and vice versa.

Most investors, even the most conservative-minded ones, want some level of

income generation in their portfolios, even if it's just to keep up with the

economy's rate of inflation. But maximizing income return can be an

overarching principle for a portfolio, especially for individuals who require a


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fixed sum from their portfolio every month. A retired person who requires a

certain amount of money every month is well served by holding reasonably

safe assets that provide funds over and above other income-generating assets,

such as pension plans.

Growth Of Capital

This discussion has thus far been concerned only with safety and yield as

investing objectives, and has not considered the potential of other assets to

provide a rate of return from an increase in value, often referred to as a capital

gain. Capital gains are entirely different from yield in that they are only

realized when the security is sold for a price that is higher than the price at

which it was originally purchased. (Selling at a lower price is referred to as a

capital loss.) Therefore, investors seeking capital gains are likely not those who

need a fixed, ongoing source of investment returns from their portfolio, but

rather those who seek the possibility of longer-term growth.

Growth of capital is most closely associated with the purchase of

common stock, particularly growth securities, which offer low yields but

considerable opportunity for increase in value. For this reason, common stock

generally ranks among the most speculative of investments as their return

depends on what will happen in an unpredictable future. Blue-chip stocks, by

contrast, can potentially offer the best of all worlds by possessing reasonable

safety, modest income and potential for growth in capital generated by long-

term increases in corporate revenues and earnings as the company matures. Yet

rarely is any common stock able to provide the near-absolute safety and

Income-generation of government bonds.


Tax Minimization

An investor may pursue certain investments in order to adopt tax minimization

as part of his or her investment strategy. A highly paid executive, for example,


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may want to seek investments with favorable tax treatment in order to lessen

his or her overall income tax burden. Making contributions to an IRA or other

tax-sheltered retirement plan, such as a 401k, can be an effective tax

minimization strategy.

Marketability Liquidity

Many of the investments we have discussed are reasonably illiquid, which

means they cannot be immediately sold and easily converted into cash.

Achieving a degree of liquidity, however, requires the sacrifice of a certain

level of income or potential for capital gains. Common stock is often

considered the most liquid of investments, since it can usually be sold within a

day or two of the decision to sell. Bonds can also be fairly marketable, but

some bonds are highly illiquid, or non-tradable, possessing a fixed term.

Similarly, money market instruments may only be redeemable at the precise

date at which the fixed term ends. If an investor seeks liquidity, money market

assets and non-tradable bonds aren't likely to be held in his or her portfolio.

In brief, choosing a single strategic objective and assigning weightings to all

other possible objectives is a process that depends on such factors as the

investor's temperament, his or her stage of life, marital status, family situation,

and so forth. Out of the multitude of possibilities out there, each investor is sure

to find an appropriate mix of investment opportunities. You need only be

concerned with spending the appropriate amount of time and effort in finding,

studying and deciding on the opportunities that match your objectives.


A Partner in Achieving Your Financial Goals.

vestment Advisor

For years, most people who wanted to invest in the stock market worked with a

traditional stockbroker who provided advice for free and was compensated, via

commission, when a product was sold. Each stockbroker had access to a limited array

of investment products, so many of them conducted capital markets research, picked


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securities and managed client portfolios themselves. Although this arrangement is still

the dominant business model in the insurance industry and at many major brokerage

firms, the model is changing.

Developments in the field of information technology have led to efficiencies that now

enable investment advisors to access some of the country’s most successful

investment specialists in every area of the business from small cap stocks and

municipal bonds to blue chip stocks and hedge funds. They can also access firms that

specialize in capital markets research, the construction of asset allocation models, the

evaluation of money management firms and the creation of investment portfolios

designed to meet specific objectives (e.g.. long-term growth, current income, etc.).

Many of these services are provided on a fee-basis. The fee is generally a percentage

of the amount invested. If the assets grow, the advisor is rewarded for the success

because the fee percentage is now calculated on a larger asset base. If difficult

markets reduce the assets, the advisor’s fee falls because the fee percentage is now

calculated on a smaller asset base. So, in a reversal of the traditional model, advisors

are paid to give advice and, in many cases, earn nothing from the sale of a specific

investment product.


Bajaj Allianz

Equity India

Indian Investment Centre

Merc Holding Pvt. Ltd.

Sarabhai Holding Pvt. Ltd.

Shah Financial Group

Stanrose Mafatlal Investment and Finance Ltd.

Tata Investment Corporation Ltd.

Toss Financial Services Pvt. Ltd.

Veronica Financial Services Ltd.



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While some plans accrue short term profits some are long term deposits. The first step towards investing in Indian market is to evaluate individual requirements for cash, competence to undertake involved risks and the amount of returns that the investor is expecting. Below are Top 10 Investment Options in India which assure safe and satisfactory returns.

Investments in Bank Fixed Deposits (FD)Fixed Deposit or FD is accrues 8.5% of yearly profits, depending on the bank's tenure and guidelines, which makes it's widely sought after and safe investment alternative. The minimum tenure of FD is 15 days and maximum tenure is 5 years and above. Senior citizens are entitled for exclusive rate of interest on Fixed Deposits.

Investments in Insurance policiesInsurance features among the best investment alternative as it offers services to indemnify your life, assets and money besides providing satisfactory and risk free profits. Indian Insurance Market offers various investment options with reasonably priced premium. Some of the popular Insurance policies in India are Home Insurance policies, Life Insurance policies, Health Insurance policies and Car Insurance policies.

Some top Insurance firm in India under whom you can buy insurance scheme are LIC, SBI Life, ICICI Prudential, Bajaj Allianz, Birla Sunlife, HDFC Standard Life, Reliance Life, Max NewYork Life, Metlife, Tata AIG, Kotak Mahindra Life, ING Life Insurance, etc.

Investments in National Saving Certificate (NSC)National Saving Certificate (NSC) is subsidized and supported by government of India as is a secure investment technique with a lock in tenure of 6 years. There is no utmost limit in this investment option while the highest amount is estimated as Rs 100. The investor is entitled for the calculated interest of 8% which is forfeited two times in a year. National Saving Certificate falls under Section 80C of IT Act and the profit accrued by the investor stands valid for tax deduction up to Rs 1, 00,000.

Investments in Public Provident Fund (PPF)Like NSC, Public Provident Fund (PPF) is also supported by the Indian government. An investment of minimum Rs 500 and maximum Rs 70, 000 is required to be deposited in a fiscal year. The prospective investor can create it PPF account in a GPO or head post office or in any sub-divisions of the centralized bank.

PPF also falls under Section 80C of IT Act so investors could gain income tax deduction of up to Rs 1, 00,000. The rate of interest of PPF is evaluated yearly with a lock in tenure of maximum 15 years. The basic rate of interest in PPF is 8%.

Investments in Stock MarketInvesting in share market yields higher profits. Influenced by unanticipated turn of market events, stock market to some extent cannot be considered as the


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safest investment options. However, to accrue higher gains, an investor must update himself on the recent stock market news and events.

Investments in Mutual FundsMutual Fund firms accumulate cash from willing investors and invest it in share market. Like stock market, mutual fund investment are also entitled for various market risks but with a fair share of profits.

Investments in Gold Deposit SchemeControlled by SBI, Gold Deposit Scheme was instigated in the year 1999. Investments in this scheme are open for trusts, firms and HUFs with no specific upper limit. The investor can deposit invest minimum of 200 gm in exchange for gold bonds holding a tariff free rate of interest of 3% - 4% on the basis of the period of the bond varying with a lock in period of 3 to 7 years.

Moreover, Gold bonds are not entitled of capital gains tax and wealth tariff. The sum insured can be accrued back in cash or gold, as per the investor's preference.

Investments in Real EstateIndian real estate industry has huge prospects in sectors like commercial, housing, hospitality, retail, manufacturing, healthcare etc. Calculated realty demand for IT/ITES industry in 2010 is estimated at 150mn sq.ft. around the chief Indian cities. Termed as the "money making industry", realty sector of India promises annual profits of 30% to 100% through real estate investments.

Investments in EquityPrivate Equity is expanding at a fast pace. India acquired US $13.5 billion in 2008 under equity shares and featured among the top 7 nations in the world. In 2010, the total equity investment is predicted to increase upto USD 20 billion. Indian equities promise satisfactory returns and have more than 365 equity investments firms functioning under it.

Investments in Non Resident Ordinary (NRO) fundsInvesting in domestic (NRO) is one of the best investment alternatives for NRIs who wish to deposit their income accrued abroad and maintain it in Indian rupees. The deposited amount along with the interest is completely repatriable. Investment can be done in Indian financial institutions including the Non Banking Finance Companies which are listed with RBI. The interest returns accrued on in this account is entitled under IT Act and is subject to 30% tax reduction at source including the appropriate surcharge and education cess. The NRI investor can repatriate upto USD 1 million every year, for genuine reasons, by forfeiting valid tariffs.





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1.10.1 Mutual funds:

A Mutual Fund is a trust that pools the savings of a number of investors who

share a common financial goal. The money thus collected is then invested in

capital market instruments such as shares, debentures and other securities. The

income earned through these investments and the capital appreciations realized

are shared by its unit holders in proportion to the number of units owned by

them. Thus a Mutual Fund is the most suitable investment for the common man

as it offers an opportunity to invest in a diversified, professionally managed

basket of securities at a relatively low cost.



Open-Ended Schemes

Close-Ended Schemes

Interval Schemes



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Growth Schemes

Income Schemes

Balanced Schemes

Money Market Schemes


Tax Saving Schemes

Special Schemes

Index Schemes

Sector Specific Schemes



If mutual funds are emerging as the favorite investment vehicle, it is because of

the many advantages they have over other forms and avenues of investing,

particularly for the investor who has limited resources available in terms of

capital and ability to carry out detailed research and market monitoring. The

following are the major advantages offered by mutual funds to all investors.

Portfolio diversification: Mutual Funds normally invest in a well-

diversified portfolio or securities. Each investor in a fund is a part owner

of all of the fund’s assets. This enables him to hold a diversified

investment portfolio even with a small amount of investment that would

otherwise require big capital.

Professional management; Even if an investor has a big amount of

capital available to him, he lacks the professional attitude that is

generally present in the experienced fund manager who, ensures a much

better return than what an investor can manage on his own. Few

investors have the skills and resources of their own to succeed in today’s

fast moving, global and sophisticated markets.

Reduction/ diversification of risk: An investor in a mutual fund

acquires a diversified portfolio, no matter how small his investment.


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Diversification reduces the risk of loss, as compared to investing directly

in one or two shares or debentures or other instruments. When an

investor invests directly, all the risk of potential loss is his own. A fund

investor also reduces his risk in another way. While investing in the pool

of funds with other investors any loss on one or two securities is also

shared with other investors. This risk reduction is one of the most

important benefits of a collective investment vehicle like the mutual


Reduction of transaction costs: What is true of risk is also true of the

transaction costs. A direct investor bears all the costs of investing such

as brokerage or custody of securities. When going through a fund, he

has the benefit of economies of scale; the funds pay lesser costs because

of larger volumes, a benefit passed on to its investors.

Liquidity: Often, investors hold shares or bonds they cannot directly,

easily and quickly sell. Investment in a mutual fund, on the other hand,

is more liquid. An investor can liquidate the investment by selling the

units to the fund if open-end, or selling them in the market if the fund is

closed-end, and collect funds at the end of a period specified by the

mutual fund or the stock market.

Convenience and flexibility: Mutual fund management companies

offer many investor services that a direct market investor cannot get.

Investors can easily transfer their holdings from one scheme to the other,

get updated market information

But roses have thorns as well…

While the benefits of investing through mutual funds far outweigh the

disadvantages, an investor and his advisor will do well to be aware of a few

shortcomings of using the mutual funds as investment vehicles.

No Control over Costs: an investor in a mutual fund has any control

over the overall cost of investing. He pays investment management fees


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as long as he remains with the fund, albeit in return for the professional

management and research. Fees are usually payable as a percentage of

the value of his investments. Whether the fund value is rising or

declining. A mutual fund investor also pays fund distribution costs,

which he would not incur in direct investing. However, this shortcoming

only means that there is a cost to obtain the benefits of mutual fund

services. However, this cost is often less than the cost of direct investing

by the investors.

No Tailor-made Portfolios: Investors who invest on their own can

build their own portfolios of shares, bonds and other securities.

Investing through funds means he delegates this decision to the fund

managers. The very high-net-worth individuals or large corporate

investors may find this to be a constraint in achieving their objectives.

However. Most mutual funds help investors overcome this constraint by

offering families of schemes-a large number of different schemes –

within the same fund. An investor can choose from different investment

plans and construct a portfolio of his choice.

Poor Reach: Lack of deeper distribution networks and channels is

hurting the growth of the industry. This is an area of concern for the MF

industry, which has not been able to penetrate deeper into the country

and has been limited to few metros.

Banks still dominate: The biggest hindrance to the growth of the

mutual fund industry lies in its inability to attract the savings of the

public, which constitutes the major source of investment in the other

developed countries. A large pool of money in the savings in India is

still with the state –run and private banks.

1.10.4 The structure and organization of Mutual Funds as per SEBI

guidelines is as follows:


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(a) Sponsor

Sponsor is the company which sets up the Mutual Fund e.g. Kothari Pioneer

Mutual Fund have sponsor Pioneer Investment Management, Inc., USA and the

Investment Trust Of India Ltd. (ITI). The Investment Trust Of India (Pvt.) Ltd.

was established in 1946 and is one of the India well known Financial Services

Companies. To promote the Mutual Fund, the sponsor has to meet the criteria

laid down by SEBI. The criteria broadly deal with sufficient experience, net

worth, and past record in terms of fair dealing & integrity. Those who qualify

these criteria are permitted by SEBI to setup Mutual Funds.

(b) Asset Management Company (AMC)

AMC manages the funds of various Schemes: AMC employs a large number of

professional for investment and research. It plays a key role in the running of a

Mutual Fund and it operates under the supervision and guidance of the trustee.

For example, Kothari Pioneer AMC Ltd. has been appointed as the investment

manages Kothari Pioneer Mutual Fund and operates its various schemes under

the provisions of the investment Management Agreement entered into with


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Kothari Pioneer Mutual Fund on July 29,1993. The AMC can be a private or

public limited company either listed or not. The AMC may be a new or

existing, should have a minimum 40 percent stake paid up in the paid-up equity

of the AMC to be set up the sponsor. The minimum net worth of the AMC is

stipulated at Rs. 5 crore. The Memorandum and Articles Of Association of the

AMC Company should have the approval of SEBI. AMC is authorized to do

business, if the following condition of SEBI are fulfilled.

(1) AMC, which are already existing, should have a sound track record,

general reputation and fairness in all other business transactions.

(2) The directors of AMC should be persons of high repute and standing

having at least 10 years of professional experience in the relevant fields

such as portfolio management, investment analysis, and in financial


(3) At least 50 percent of the Board of AMC should be independent director

not connected with sponsoring organization.

(4) The AMC should at all times have a minimum net worth of Rs. 5 crore.

Except in the case of Bank sponsored AMC where the Prior concurrence of

RBI is required. SEBI may withdraw the authorization granted to any AMC, if

it is not serving in the interest of investors. The board of trustees, of a Mutual

Fund, will appoint another AMC or liquidate the Mutual Fund as may be

necessary with in there months of withdrawal.

(c) Trustee

The trustees are an important link in the working of a Mutual Fund. Trustees

are people with long experience and who have earned a name for themselves

for integrity and excellence in their fields. It is the responsibility of the trustees


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to see that AMC always act in the best interest in the investors. Thus they carry

the crucial responsibility of safe guarding the interest of the investors. They do

this by constant monitoring of the operations of the scheme. AMC supplies all

information demanded by trustees on a regular basis i.e. quarterly.

Establishing a separate trust company should carry out trusteeship functions. At

least 50 percent of the Board of Trustee shall be independent and should not

have any affiliation with the sponsoring institution or any of its subsidiaries.

The trustees have to submit a six monthly report to the SEBI and an annual

report to the investors in the fund.

(d) Custodian

The SEBI while granting the authorization for setting up of a Mutual Fund,

would also approve the custodian as part of the package. The custodian should

be different from the AMC. The sponsor and trustee companies cannot act as

custodian. If the sponsor has a custodian division, it can act for other Mutual

Fund not set up by the sponsor. The approval of any agency as custodian would

depend upon its track record, experience, and qualify of service,

computerization and other infrastructure facilities. The approval of Mutual

Fund involves the approval of sponsor, AMC, trustee and custodian all

together, who are responsible for the management of fund. Each scheme

floated by Mutual Fund should have prior registration with SEBI. The AMC

should prepare a proportion/letter of offer for each to decide the proposal

within 30 days of its receipt, filing within SEBI before inviting public. SEBI

has to decide the proposal within 30 days of its receipt, failing which SEBI

clearance is presumed. Mutual Funds are allowed to start and operate both

open-ended and close-ended schemes.

1.10.5 History of the Indian Mutual Fund Industry


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The mutual fund industry in India started in 1963 with the formation of Unit

Trust of India, at the initiative of the Government of India and Reserve Bank

the. The history of mutual funds in India can be broadly divided into four

distinct phases

First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It

was set up by the Reserve Bank of India and functioned under the Regulatory

and administrative control of the Reserve Bank of India. In 1978 UTI was de-

linked from the RBI and the Industrial Development Bank of India (IDBI) took

over the regulatory and administrative control in place of RBI. The first scheme

launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700

crores of assets under management

Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public

sector banks and Life Insurance Corporation of India (LIC) and General

Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI

Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec

87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund

(Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC

established its mutual fund in June 1989 while GIC had set up its mutual fund

in December 1990.

At the end of 1993, the mutual fund industry had assets under management of

Rs.47, 004 crores

Third Phase – 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian

mutual fund industry, giving the Indian investors a wider choice of fund

families. Also, 1993 was the year in which the first Mutual Fund Regulations


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came into being, under which all mutual funds, except UTI were to be

registered and governed. The erstwhile Kothari Pioneer (now merged with

Franklin Templeton) was the first private sector mutual fund registered in July


The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

comprehensive and revised Mutual Fund Regulations in 1996. The industry

now functions under the SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign

mutual funds setting up funds in India and also the industry has witnessed

several mergers and acquisitions. As at the end of January 2003, there were 33

mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India

with Rs.44,541 crores of assets under management was way ahead of other

mutual funds.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI

was bifurcated into two separate entities. One is the Specified Undertaking of

the Unit Trust of India with assets under management of Rs.29,835 crores as at

the end of January 2003, representing broadly, the assets of US 64 scheme,

assured return and certain other schemes. The Specified Undertaking of Unit

Trust of India, functioning under an administrator and under the rules framed

by Government of India and does not come under the purview of the Mutual

Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and


It is registered with SEBI and functions under the Mutual Fund Regulations.

With the bifurcation of the erstwhile UTI which had in March 2000 more than

Rs.76,000 crores of assets under management and with the setting up of a UTI

Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with

recent mergers taking place among different private sector funds, the mutual


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fund industry has entered its current phase of consolidation and growth. As at

the end of September, 2004, there were 29 funds, which manage assets of

Rs.153108 crores under 421 schemes.


Insurance, in law and economics, is a form of risk management primarily used

to hedge against the risk of a contingent loss. Insurance is defined as the

equitable transfer of the risk of a potential loss, from one entity to another, in

exchange for a premium. Insurer, in economics, is the company that sells the

insurance. Insurance rate is a factor used to determine the amount, called the

premium, to be charged for a certain amount of insurance coverage. Risk

management, the practice of appraising and controlling risk, has evolved as a

discrete field of study and practice.

1.10.7 Principles of insurance

Commercially insurable risks typically share seven common characteristics.

1. A large number of homogeneous exposure units. The vast majority of

insurance policies are provided for individual members of very large

classes. Automobile insurance, for example, covered about 175 million

automobiles in the United States in 2004. The existence of a large

number of homogeneous exposure units allows insurers to benefit from

the so-called “law of large numbers,” which in effect states that as the

number of exposure units increases, the actual results are increasingly

likely to become close to expected results. There are exceptions to this

criterion. Lloyds of London is famous for insuring the life or health of

actors, actresses and sports figures. Satellite Launch insurance covers

events that are infrequent. Large commercial property policies may

insure exceptional properties for which there are no ‘homogeneous’


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exposure units. Despite failing on this criterion, many exposures like

these are generally considered to be insurable.

2. Definite Loss. The event that gives rise to the loss that is subject to

insurance should, at least in principle, take place at a known time, in a

known place, and from a known cause. The classic example is death of

an insured on a life insurance policy. Fire, automobile accidents, and

worker injuries may all easily meet this criterion. Other types of losses

may only be definite in theory. Occupational disease, for instance, may

involve prolonged exposure to injurious conditions where no specific

time, place or cause is identifiable. Ideally, the time, place and cause of

a loss should be clear enough that a reasonable person, with sufficient

information, could objectively verify all three elements.

3. Accidental Loss. The event that constitutes the trigger of a claim should

be fortuitous, or at least outside the control of the beneficiary of the

insurance. The loss should be ‘pure,’ in the sense that it results from an

event for which there is only the opportunity for cost. Events that

contain speculative elements, such as ordinary business risks, are

generally not considered insurable.

4. Large Loss. The size of the loss must be meaningful from the

perspective of the insured. Insurance premiums need to cover both the

expected cost of losses, plus the cost of issuing and administering the

policy, adjusting losses, and supplying the capital needed to reasonably

assure that the insurer will be able to pay claims. For small losses these

latter costs may be several times the size of the expected cost of losses.

There is little point in paying such costs unless the protection offered

has real value to a buyer.

5. Affordable Premium. If the likelihood of an insured event is so high, or

the cost of the event so large, that the resulting premium is large relative

to the amount of protection offered, it is not likely that anyone will buy

insurance, even if on offer. Further, as the accounting profession

formally recognizes in financial accounting standards (See FAS 113 for


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example), the premium cannot be so large that there is not a reasonable

chance of a significant loss to the insurer. If there is no such chance of

loss, the transaction may have the form of insurance, but not the


6. Calculable Loss. There are two elements that must be at least estimate

able, if not formally calculable: the probability of loss, and the attendant

cost. Probability of loss is generally an empirical exercise, while cost

has more to do with the ability of a reasonable person in possession of a

copy of the insurance policy and a proof of loss associated with a claim

presented under that policy to make a reasonably definite and objective

evaluation of the amount of the loss recoverable as a result of the claim.

7. Limited risk of catastrophically large losses. The essential risk is

often aggregation. If the same event can cause losses to numerous

policyholders of the same insurer, the ability of that insurer to issue

policies becomes constrained, not by factors surrounding the individual

characteristics of a given policyholder, but by the factors surrounding

the sum of all policyholders so exposed. Typically, insurers prefer to

limit their exposure to a loss from a single event to some small portion

of their capital base, on the order of 5%. Where the loss can be

aggregated, or an individual policy could produce exceptionally large

claims, the capital constraint will restrict an insurers appetite for

additional policyholders. The classic example is earthquake insurance,

where the ability of an underwriter to issue a new policy depends on the

number and size of the policies that it has already underwritten. Wind

insurance in hurricane zones, particularly along coastlines, is another

example of this phenomenon. In extreme cases, the aggregation can

affect the entire industry, since the combined capital of insurers and

reinsures can be small compared to the needs of potential policyholders

in areas exposed to aggregation risk. In commercial fire insurance it is

possible to find single properties whose total exposed value is well in

excess of any individual insurer’s capital constraint. Such properties are


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generally shared among several insurers, or are insured by a single

insurer who syndicates the risk into the reinsurance market.


You think twice before taking the plunge into buying insurance. Is buying

insurance a necessity now? Spending an 'extra' amount as premium at regular

intervals where you do not see immediate benefits does not seem a necessity at

the moment.

Well you could be wrong. Buying Insurance cannot be compared with

any other form of investment. Insurance gives you a life long benefit and the

returns will definitely come but only when you need it the most i.e. at the right

time. Besides buying insurance early in life is one of the wise decisions you

could take. Because the premium you would be paying would be comparatively


Insurance is not about how much more it can offer you when the stock

market is at its peak. It may not be an attractive investment option. But weigh

the pros and cons and consider how much more it offers at a small price.

Most important of all it provides you with that unique sense of security

that no other form of investment provides. It gives you a sense of financial

support especially during that time of crisis irrespective of the fluctuations in

the stock market. Insurance provides for your career goals right from your

childhood years.

If the earning member of the family is no more your child's educational

needs will not suffer. In fact his higher education too will be provided for. You

need not spend sleepless nights thinking about how to save for your child's

marriage. Life Insurance will take care of that typical once-in-a-life-time

spending on marriages.


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An accident or a disability may be devastating but an insurance policy

can be of utmost support for the family during such times too. Besides it

provides for additional benefits such as bonuses. You need not worry about

your retirement years. The rising prices, taxes, and your lifestyle will be taken

care of easily. And you can relax and spend your old age in comfort and peace.

Life insurance today plays a major role in ones life at various stages.

Considering the benefits it offers one cannot but give a thought to buying an

insurance policy at the earliest.


The need for life insurance comes from the need to safeguard our family. If you

care for your family’s needs you will definitely consider insurance.

Today insurance has become even more important due to the disintegration of

the prevalent joint family system, a system in which a number of generations

co-existed in harmony, a system in which a sense of financial security was

always there as there were more earning members.

Times have changed and the nuclear family has emerged. Apart from other

pitfalls of a nuclear family, a high sense of insecurity is observed in it today

besides, the family has shrunk. Needs are increasing with time and fulfillment

of these needs is a big question mark.

Insurance provides a sense of security to the income earner as also to the

family. Buying insurance frees the individual from unnecessary financial

burden that can otherwise make him spend sleepless nights. The individual has

a sense of consolation that he has something to fall back on.

From the very beginning of your life, to your retirement age insurance can take

care of all your needs. Your child needs good education to mould him into a

good citizen. After his schooling he needs to go for higher studies, to gain a


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professional edge over the others - a necessity in this age where cutthroat

competition is the rule. His career needs have to be fulfilled.


1. Understand Why You Need It: - While most people may need life

insurance at some point in their life, don't buy a policy just because you heard it

was a good idea. Life insurance is designed to provide families with financial

security in the event of the death of a spouse or parent. Life insurance

protection can help pay for mortgages, a college education, help to fund

retirement, provide charitable bequests and of course is a key element in estate

planning. In short, if others depend on your income for support, you should

strongly consider life insurance. Even if you don't have any of these needs

immediately, you still may want to consider purchasing a small "starter" policy,

if you anticipate you will have them in the future. The reason: the younger you

are, the less expensive life insurance will be.

2. Determine the Amount of Coverage You Need: - The amount of money

your family or heirs will receive after your death is called a death benefit. To

determine the proper amount of life insurance an online calculator, like the one

available at this site, can be helpful. You can also get a ballpark figure using

any number of formulas. The easiest way is to simply take your annual salary

and multiply by 8. A more detailed method is to add up the monthly expense

your family will incur after your death. Remember to include the one-time

expenses at death and the ongoing expenses such as a mortgage or school bills.

Take the ongoing expenses and divide by .07.That indicates you'll want a lump

sum of money earning approximately 7% each year to pay those ongoing

expenses. Add to that amount any money you'll need to cover one-time

expenses and you'll have a rough estimate of the amount of life insurance you

need. As useful as calculators and rough estimates are, there are some things

they don't do.


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They cannot provide you with any final answers. Calculators only allow you to

perform "hypothetically," recalculating and generating new results as you make

and input new assumptions. Using these tools and educating yourself on the

workings of life insurance and other financial products, however, can help you

feel more comfortable when discussing your needs with such professionals as a

New York Life agent.

3. Find the Right Type of Policy:-Once you've got an estimate of how much

insurance you'll need, it's time to think about the type of policy that best fits

your needs. Today life insurance comes in many varieties, but there are four

basic type’s term, whole life, universal life, and variable life. As a first-time

buyer, one will more than likely fit your needs.

.4. Look at the Quality of the Company: - An insurance policy is only as

good as the company that backs it. You want to know for certain that the

company that issues your policy will be around to service it and eventually pay

the death claim. To help you discern the strongest companies, there are several

ratings agencies that rate insurance companies on the quality of their fiscal

fitness, quality of investments, and overall financial soundness. A credit rating

represents an independent assessment of the insurer's ability to pay its claims

on time and meet all its other financial obligations, the bottom line for any life

insurance company.

5. Consult an Agent: - Agents provide an invaluable service. First, an agent

can help you factor in the other "human' elements into your insurance equations

to help you determine the right amount of insurance. The relationship you

develop with an agent can last a lifetime. Second, an agent can help you update

your coverage as your needs change. They can help you guide you through a

lifetime of financial decisions, giving you one less thing to worry about.

6. Increase Your Vocabulary: - Any discussion of insurance will probably

include words such as cash value, premium, dividends, death benefit and more.


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To discuss life insurance knowledgeably, it will help to understand the terms.

Below is a brief summary of some common terms. This site offers a complete

glossary of insurance terms.


A stock market or equity market is a public market (a loose network of economic transactions, not a physical facility or discrete entity) for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.

The size of the world stock market was estimated at about $36.6 trillion US at the beginning of October 2008.[1] The total world derivatives market has been estimated at about $791 trillion face or nominal value,[2] 11 times the size of the entire world economy.[3] The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Moreover, the vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring). Many such relatively illiquid securities are valued as marked to model, rather than an actual market price.

The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. The largest stock market in the United States, by market cap, is the New York Stock Exchange, NYSE. In Canada, the largest stock market is the Toronto Stock Exchange. Major European examples of stock exchanges include the London Stock Exchange, Paris Bourse, and the Deutsche Börse. Asian examples include the Tokyo Stock Exchange, the Hong Kong Stock Exchange, the Shanghai Stock Exchange, and the Bombay Stock Exchange. In Latin America, there are such exchanges as the BM&F Bovespa and the BMV.


In 12th century France the courratiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. Because these men also traded with debts, they could be called the first brokers. A common misbelief is that in late 13th century Bruges commodity traders gathered inside the house of a man called Van der Beurze, and in 1309 they became the "Brugse Beurse", institutionalizing what had been, until then, an informal meeting, but actually, the family Van der Beurze had a building in Antwerp where those gatherings occurred;[6] the Van der Beurze had Antwerp, as most of the merchants of that period, as their primary place for trading. The idea quickly spread around Flanders and neighboring counties and "Beurzen" soon opened in Ghent and Amsterdam.


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In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351 the Venetian government outlawed spreading rumors intended to lower the price of government funds. Bankers in Pisa, Verona, Genoa and Florence also began trading in government securities during the 14th century. This was only possible because these were independent city states not ruled by a duke but a council of influential citizens. The Dutch later started joint stock companies, which let shareholders invest in business ventures and get a share of their profits - or losses. In 1602, the Dutch East India Company issued the first share on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds.

The Amsterdam Stock Exchange (or Amsterdam Beurs) is also said to have been the first stock exchange to introduce continuous trade in the early 17th century. The Dutch "pioneered short selling, option trading, debt-equity swaps, merchant banking, unit trusts and other speculative instruments, much as we know them".[7] There are now stock markets in virtually every developed and most developing economies, with the world's biggest markets being in the United States, United Kingdom, Japan, India, China, Canada, Germany, France, South Korea and the Netherlands.


The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate.

History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. An economy where the stock market is on the rise is considered to be an up-and-coming economy. In fact, the stock market is often considered the primary indicator of a country's economic strength and development. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison d'être of central banks.

Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction.

Riskier long-term saving requires that an individual possess the ability to manage the associated increased risks. Stock prices fluctuate widely, in marked contrast to the


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stability of (government insured) bank deposits or bonds. This is something that could affect not only the individual investor or household, but also the economy on a large scale. The following deals with some of the risks of the financial sector in general and the stock market in particular. This is certainly more important now that so many newcomers have entered the stock market, or have acquired other 'risky' investments (such as 'investment' property, i.e., real estate and collectables).

With each passing year, the noise level in the stock market rises. Television commentators, financial writers, analysts, and market strategists are all overtaking each other to get investors' attention. At the same time, individual investors, immersed in chat rooms and message boards, are exchanging questionable and often misleading tips. Yet, despite all this available information, investors find it increasingly difficult to profit. Stock prices skyrocket with little reason, then plummet just as quickly, and people who have turned to investing for their children's education and their own retirement become frightened. Sometimes there appears to be no rhyme or reason to the market, only folly.

This is a quote from the preface to a published biography about the long-term value-oriented stock investor Warren Buffett. Buffett began his career with $100, and $100,000 from seven limited partners consisting of Buffett's family and friends. Over the years he has built himself a multi-billion-dollar fortune. The quote illustrates some of what has been happening in the stock market during the end of the 20th century and the beginning of the 21st century.

1.10.14 Leveraged strategies:

Stock that a trader does not actually own may be traded using short selling; margin buying may be used to purchase stock with borrowed funds; or, derivatives may be used to control large blocks of stocks for a much smaller amount of money than would be required by outright purchase or sale.

Short selling

In short selling, the trader borrows stock (usually from his brokerage which holds its clients' shares or its own shares on account to lend to short sellers) then sells it on the market, hoping for the price to fall. The trader eventually buys back the stock, making money if the price fell in the meantime and losing money if it rose. Exiting a short position by buying back the stock is called "covering a short position." This strategy may also be used by unscrupulous traders in illiquid or thinly traded markets to artificially lower the price of a stock. Hence most markets either prevent short selling or place restrictions on when and how a short sale can occur. The practice of naked shorting is illegal in most (but not all) stock markets.

Margin buying

In margin buying, the trader borrows money (at interest) to buy a stock and hopes for it to rise. Most industrialized countries have regulations that require that if the borrowing is based on collateral from other stocks the trader owns outright, it can be a maximum of a certain percentage of those other stocks' value. In the United States,


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the margin requirements have been 50% for many years (that is, if you want to make a $1000 investment, you need to put up $500, and there is often a maintenance margin below the $500).

A margin call is made if the total value of the investor's account cannot support the loss of the trade. (Upon a decline in the value of the margined securities additional funds may be required to maintain the account's equity, and with or without notice the margined security or any others within the account may be sold by the brokerage to protect its loan position. The investor is responsible for any shortfall following such forced sales.)

Regulation of margin requirements (by the Federal Reserve) was implemented after the Crash of 1929. Before that, speculators typically only needed to put up as little as 10 percent (or even less) of the total investment represented by the stocks purchased. Other rules may include the prohibition of free-riding: putting in an order to buy stocks without paying initially (there is normally a three-day grace period for delivery of the stock), but then selling them (before the three-days are up) and using part of the proceeds to make the original payment (assuming that the value of the stocks has not declined in the interim).

1.11The different factors that effecting the investors investment pattern

• Security of original capital: The chance of losing some capital has been a

primary need. This is perhaps the strongest need among investors in India, who

have suffered regularly due to failures of the financial system.

• Wealth accumulation: This is largely a factor of investment performance,

including both short-term performance of an investment and long-term

performance of a portfolio. Wealth accumulation is the ultimate measure of the

success of an investment decision.

• Comfort factor: This refers to the peace of mind associated with an

investment. Avoiding discomfort is probably a greater need than receiving

comfort. Reputation plays an important part in delivering the comfort factor.

• Tax efficiency: Legitimate reduction in the amount of tax payable is an

important part of the Indian psyche. Every rupee saved in taxes goes towards

wealth accumulation.

• Life Cover: Many investors look for investments that offer good return with

adequate life cover to manage the situations in case of any eventualities.

• Income: This refers to money distributed at intervals by an investment, which

are usually used by the investor for meeting regular expenses. Income needs

tend to be fairly constant because they are related to lifestyle and are well


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understood by investors.

• Simplicity: Investment instruments are complex, but investors need to

understand what is being done with their money. A planner should also deliver

simplicity to investors.

• Ease of withdrawal: This refers to the ability to invest long term but

withdraw funds when desired. This is strongly linked to a sense of ownership.

It is normally triggered by a need to spend capital, change investments or cater

to changes in other needs. Access to a long-term investment at short notice can

only be had at a substantial cost.

• Communication: This refers to informing and educating investors about the

purpose and progress of their investments. The need to communicate increases

when investments are threatened.• Security of original capital is more

important when performance falls.• Performance is more important when

investments are performing well.• Failures engender a desire for an increase in

the comfort factor.Perfect investment would have been achieved if all the

above-mentioned needs had been met to satisfaction. But there is always a

trade-off involved in making investments. As long as the investment strategy

matches the needs of investor according to the priority assigned to them, he

should be happy.The Ideal Investment strategy should be a customized one for

each investor depending on his risk-return profile, his satisfaction level, his

income, and his expectations. Accurate planning gives accurate results. And for

that there must be an efficient and trustworthy roadmap to achieve the ultimate

goal of wealth maximization. 1.12 METHOD USED BY


CONDITION; 1.    Technical analysisThis method of analysis is used

by a "momentum" investor. Technical analysis looks at the price fluctuations

that occur in the stock market. The investor bases the decision to buy or sell on

what he feels the price will do next.      2.    Fundamental analysis#1

Fundamental analysis is used by the "growth" investor. This type of analysis

decides if a certain company is a good investment based on the earnings of the

company, growth sales, and margins of profit.  3.    Fundamental analysis


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#2. A "value" investor uses this type of analysis. This method of analysis is

similar to the analysis that a growth investor uses but is slightly different. A

value investor takes a close look at those companies in the stock market that

have a low value. The investor looks at stocks that are currently cheap and low

but that have the potential to make a good comeback. Most stock investment

clubs use the fundamental method of analysis to make most of their investing

decisions.They find companies that are listed on the stock market that show

good growth, profit, and earnings but that are still cheap to buy and haven’t yet

reached their potential.Members of the investment club buy this

stock and hold on to it for several years so long as the

fundamentals, as listed previously, continue to hold strong. This

type of investment strategy is called "buy and hold".



In investing parlance, risk refers to the probability of a monetary loss or

actual returns from an investment being lower than the expected returns. There is an

inverse relationship between investing risk and return. Investment options that are risky

need to offer higher returns than those that are less risky in order to attract investors and

make it worthwhile to take on the additional risk.

A US Treasury bond is considered to be among the safest investments and

equities. are associated with higher risks. However, every investment involves

risk, the difference being in the degree and the type.Capital risk: This refers to

the risk of losing the capital invested.Currency risk: If one holds assets in a

foreign currency, changes in the exchange rate can cause fluctuations in the

asset value. A decline in the value of the foreign currency vis-à-vis the

investor’s domestic currency will result in a reduction in the value of the asset

in terms of the home currency. This is known as currency risk or exchange rate

risk.Liquidity risk: The risk associated with a delay in the trade of an asset is

known as liquidity risk. An asset sale may be difficult due to the small size of


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the market or low demand, preventing the owner from converting the asset into

cash.Credit risk: The risk associated with the inability of the borrower to

repay the principal is known as credit risk. For instance, the owner of a

corporate bond could suffer losses in case the issuing company declares

bankruptcy and is unable to redeem the bond.Inflation risk: Inflation erodes

the value of a currency. The possibility of the value of an asset declining due to

contraction in the purchasing power of a currency is called inflation

risk.Interest rate risk: The possibility of devaluation of an interest-baring

asset (such as bonds, stocks and loans) due to a change in the interest rate is

known as interest rate risk.MARKET RISK: This refers to the possibility of a

decline in the value of an investment due to a change in price. Price

fluctuations may be caused by changes in the interest rate, foreign exchange

rate , inflation or demand and supply situation.Legal risk: The risk associated

with changes in laws and regulations is called legal risk.Counterparty risk:

This refers to the risk of the other party in an agreement defaulting. For

instance, the risk faced by an option owner of the other party not selling the

underlying asset as agreed is called their counterparty risk.There are a number

of other risks that an investor may be exposed to. Before making a choice of

investment, it is critical to understand the risk involved and ways in which one

can minimize risk exposure. CHAPTER -2 2.1

LITERATURE REVIEW The process of reading, analyzing, evaluating, and

summarizing scholarly materials about a specific topic. The results of a literature

review may be compiled in a report or they may serve as part of a research article,

thesis, or grant proposal. The literature review includes the academic books,

journals, internet access, magazines etc.Business Statistics by “S.P Gupta

&M.P. Gupta”- The information regarding the statistical tools and their

limitations in different fields the research is given in this section. This section

explains why to use correlation and what are the situations in which correlation

can be used, and what does correlation means.


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Research Methodology by “C.R. Kothari” The information regarding

the basics of research and research methodology , what are the different

types of research designs, what is problem statement, what are the

sources of data collection and what are the methods of data collection is

given in this section

Financial Management by “I.M. Pandey”- The information regarding

nature of financial management, portfolio management, risk-return

relationship,options,derivatives and valuation of shares have been

understood from this book.

WORK BOOK by “Association Of Mutual Funda In India”-The

information about the basic knowledge and working of mutual funds in

India is taken from this book.

Daniel Kahneman and Amos Tversky (1979) originally described

“ Prospect Theory” and found that

individuals were much more distressed by prospective losses than they

were happy by equivalent gains.

Some economists have concluded that investors typically consider the

loss of $1 twice as painful as the

pleasure received from a $ gain. Individuals will respond differently to

equivalent situations depending

on whether it is presented in the context of losses or gains.

Ippolito (1992) and Bogle (1992) reported that fund selection

by investors is based on past performance

of the funds and money flows into winning funds more rapidly than

they flow out of losing funds.


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Robert J. Shiller (1993) reported that many investors do not

have data analysis and interpretation skills.

This is because, data from the market supports the merits of index

investing, passive investors are more

likely to base their investment choices on information received from

objective or scientific sources.

Goetzman (1993) and Grubber (1996) studied the ability of

investors to select funds and found evidence

to support selection ability among active fund investors.

Grinblatt and Titman, 1992; Brown and Goetzman, 1997; Lunde et

al., 1999; Chevalier and Ellison, 1999; Kothari and Warner, 2001),

although others have focused on the risk-return characteristics of bond

mutual funds (Philpot et al., 2000; Blake et al., 1993). Some studies

(Indro et al., 1999; Morey and Morey, 1999; Sirri and Tufano, 1998)

have also investigated the different methods of predicting fund

performance by using tools, such as neural networks or benchmarking.

Recent literature, however, proposes the use of integrated or hybrid

models for predicting fund performance. Tsaih et al. (1998), for

example, develop a hybrid artificial intelligence technique to implement

trading strategies in the S & P 500 stock index futures market. Their

empirical results show that their system outperformed the passive buy-

and-hold investment strategy during the six-year testing period. The

authors suggest that the hybrid approach facilitates the development of

more reliable intelligent systems than standalone expert systems models.

Phillip (1995) reported that there is a change in financial

decision-making and investor behaviour as a

result of participating in investor education programmes

sponsored by employees.


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Mittra (1995) discussed factors that were related to individuals risk

tolerance, which included years until retirement, knowledge

sophistication, income and net worth.

Berhein and Garnette (1996) affirmed Philip’ s findings and

further stated that a serious national

campaign to promote savings through education and information

could have a measurable impact on financial behaviour.

Malkiel (1996) suggested that an individual’s risk tolerance

is related to his/her household situation, lifecycle stage and

subjective factors.

Guiso, Jappelli and Terlizzese (1996), Bajtelsmit and VenDerhei

(1997), Powell and Ansic (1997), Jianakoplos and Bernasek (1998),

Hariharan, Chapman and Domain (2000), Hartog, Ferrer-I-

Carbonell and Jonker (2002) concluded that males are more risk

tolerant than females.

Raja Rajan (1997, 1998) highlightened segmentation of

investors on the basis of their characteristics, investment size,

and the relationship between stage in life cycle of the investors

and their investment pattern.

Some recent studies have begun to address the issue of

understanding investor behavior (e.g., Zheng, 1999; Harliss and

Peterson, 1998; Goetzmann and Peles, 1997; Alexander et al. 1997,

1998; Bogle, 1992). These studies have aroused scholarly interest in

understanding how investors make investment decisions. A study by

Alexander et al. (1998) examines responses of randomly selected


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mutual fund investors. Their findings show that employees investing

in mutual funds through their employer-sponsored pension plans [e.g.,

401(k)] are generally younger, more likely to own stock funds, and

less likely to own certificate of deposits and money market accounts.

In addition, individuals investing in mutual funds via nonemployer

channels are significantly more experienced than individuals investing

in employer-sponsored pension plans. Both types of mutual fund

holders (those investing through employers and those investing in

nonemployer plans) are well educated, with 55% having at least a

college degree, and do not consider the operating expenses of the

mutual fund to be an important factor in their purchasing decision.

Guiso, Jappelli and Terlizzese (1996), Bajtelsmit and VenDerhei

(1997), Powell and Ansic (1997), Jianakoplos and Bernasek (1998),

Hariharan, Chapman and Domain (2000), Hartog, Ferrer-I-

Carbonell and Jonker (2002) concluded that males are more risk

tolerant than females.

Benartzi (2001) reports that approximately one third of the assets of

large retirement savings plans have been invested in the stocks issued by

the employing firm. Investors may decide to switch investments

between funds or within a fund family as a result of the investment

strategy they have chosen. Specifically, investors may switch funds to

follow an investment strategy that reduces risk (RRED), locks-in capital

gains (LGAINS), widens diversification (WDIV), obtains a better mix

of equity versus bonds or U.S. versus foreign securities (IMIX), and

makes better decisions based on self-analysis of existing information


Hirshleifer (2001) categorized different types of cognitive

errors that investors make i.e. self-deception, occur because

people tend to think that they are better than they really are;


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heuristic simplification, which occurs because individuals

have limited attention, memory and processing capabilities;


effect, individuals are prone to sell their winners too quickly and

hold on to their losers too.

Shanmugham (2001) conducted a survey of 201 individual

investors to study the information sourcing

by investors, their perception of various investment strategy

dimensions and the factors motivating share investment decisions, and

reported that, psychological and sociological factors dominated economic

factors in share investment decisions.

Prior studies suggest that large gains and losses affect investor risk

behavior (see Baker and Nofsinger, 2002; Shefrin, 2000; Thaler and

Johnson, 1990). After earning large gains, the investment behavior of

investors tends to become riskier; after experiencing large losses,

investors may become overly cautious or even reckless with their

investment decisions. Hartman and Smith (1990) in a microlevel study

found that the level of risk perceived by investors affected investment

behavior. Harliss and Peterson (1998) found that investors do not

consider investment risk on choosing a fund; instead, they tend to focus

on fund performance.

Fountas and Segredakis (2002) investigate monthly seasonal

anomalies in eighteen major emerging equity markets,

including the Indian stock market. They examined the

monthlIndian stock market, they found August returns were

significantly greater than April, May, October and November

returns. However, they did not find evidence consistent with


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hypothesized tax-loss selling in the Indian stock market, as the

tax-year in India commences in April.

Rajeshwari T.R and Rama Moorthy V.E (2002) studied the financial

behaviour and factors influencing

fund/scheme selection of retail investors by conducting Factor

Analysis using Principal Component Analysis, to identify the investor’ s

underlying fund/scheme selection criteria, so as to group them int

specific market segment for designing of the appropriate marketing


Patel (2003) examined the relationship between the U.S. stock market

and ten emerging stock markets of Asia. He found that the Indian

stock market and other South Asian markets were distinct from other

emerging stock markets of Asia. In a later study, Patel (2006) focused

exclusively on the Indian and the U.S. stock markets. He utilized three

Indian stock indexes, namely, the BSE 30, BSE 100 and BSE 200

stock indexes, while the DJIA, S&P 500 and NASDAQ were utilized

as representative U.S. stock indexes. He found that the Indian stock

market has International Business & Economics Research offered

important return and diversification benefits to U.S. investors,

particularly during those periods when the U.S. market generated

relatively lower returns.

Keppler and Xue (2003) document seasonal price behavior for

eighteen equity markets in developed countries over the period 1970

to 2001. The authors found that these markets generated substantially

higher returns from November through April than over the months

May through October. Keppler and Xue refer to the November-April


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sub-period as “Good Months” and the period May-October as “Bad

Months” for stock market investing.

Kiran D. and Rao U.S. (2004) identified investor group segments

using the demographic and

psychographic characteristics of investors using two statistical

techniques, namely – Multinomial

Logistic Regression (MLR) and Factor Analysis

Personal fn for Business India August 2, 2004 with the title,

“The Golden Nest Egg”, reported that, investor’ s age could be used as a

benchmark to determine the nature of the portfolio.


Whenever a study is conducted, it is done based on certain objectives

in mind. This study is based on following objectives:

To analyze the different strategies adopted by investors during and after

economic slowdown based on their demographic profile

To compare and analyze selected investment instruments


The report title is “Changing pattern of investment preferences- a study of retail

investors in Ludhiana”. Need of this study to know how investors investment

preferences changing acc. to their demographic profile,market stretigies. and This study

was conducted through a structured questionnaire. For this purpose sample size of 100

was taken. The data collected, is analyzed thoroughly and presented in the form of

charts .


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In every research there are chances of errors and constraints. I have

found following limitations in my study.

Sample size, which I have taken, is very small, on the basis of

which efficient decision can’t be taken.

Respondents were biased in their responses because they were

more in favor of the brand they were using.

Co-operation from respondents, this was the major problem.

Most of the people were at their work. So they did not have enough

time to give all replies.

The population surveyed was not open to questions related to their

personal income i.e. either they fell hesitant in disclosing the facts

about their incomes or they were simply not interested.

The respondents were not in the favor to disclose their address and

contact number because they believed that they would be contacted

through telemarketing.



Research is a systematic and continues method of defining a problem,

collecting the facts and analyzing them, reaching conclusion forming


Research methodology is a way to systematically solve the problem. It

may be understood has a science of studying how research is done

scientifically. In it we study the various steps that all generally adopted

by a researcher in studying his research problem along with the logic

behind them.


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The scope of research methodology is wider than that of research method.

Thus when we talk of research methodology we not only talk of research

methods but also consider the logic behind the method we use in the

context of our research study and explain why we are using a particular


So we should consider the following steps in research methodology

Problem statement

Objective of study

Research design

Data collection

Sample design

Statistical tool

Limitation of study


The research problems, in general refers to sum difficulty with a

researcher experience in the contest of either a particular a theoretical

situation and want to obtain a salutation for same, there are so many

investment options available for the investors, how they invest or choose

a particular investment option and what factor they consider more for

investing or choosing a particular investment option and also to find out

are they satisfied with their investment decision.


A research design is the arrangement of the conditions for the collections

and analysis of the data in a manner that aims to combine relevance to the

research purpose with economy in procedure. In fact, the research design

is the conceptual structure within which research is conducted; it


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constitutes the blue print of the collection, measurement and analysis of

the data. As search design includes an outline of what the researcher will

do from writing the hypothesis and its operational implication to the final

analysis of data. I used descriptive research design in this project.

discruptive sample design is used for collecting primary data. . The major

purpose of Descriptive research is description of the state of affairs, as it

exists at present.

The research design focus on the following .

o What is the study about?

o Why is the study being made?

o Where will the study be carried out?

o What type of data is required?

o Where can be required data be found?

o What period of time will the study include?

o What will be sample design?

o What techniques of data collection will be used?

o How will the data be analyzed?

o In what style will the report be prepared?


The task of data collection is begins after a research problem has been

defined and research designed/ plan chalked out. Data collection is to

gather the data from the population. The data can be collected of two


Primary data

Secondary data

3.5 Primary data


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The Primary data are those, which are collected afresh and for the first

time, and thus happened to be original in character.

Methods of collection of Primary data are as follows:

o Interview

o Questionnaire

3.6 Secondary data

The Secondary data are those which have already been collected by some

one else and which have already been passed through the statistical tool.

Methods of collection of Secondary data are Journals, Websites and



A sample design is a definite plan for obtaining a sample from a given

population. It refers to the technique or the procedure and the researcher

would adopt in selecting items of sample. Sample design may as well lay

down the number of items to be included in the sample i.e. the size of the

sample. Sample design is determined before data are collected.

Universe - all respondents who invest money in lic,mutual

funds etc

Population - all respondents of Ludhiana city who invest

. money in mutual funds, lic etc

Sampling area - Ludhiana

Sample Size – 100

Sampling Technique - Non-Probability

Sample unit - a single retail investor who invest money in

In bonds,mutual funds. .


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4.1 Age Below 30 20%

30-40 40%

40-50 30%

50 and above 10%

Age Group Of Respondents::

Figure 1.1


From the above data shows that 40% respondents falls in the category 30-40

age, 30% falls in 40-50, age below 30 in 20% and 50 and above in 10%.


This show different age groups of respondents.


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4.2. Gender

Male 80%

Female 20%Male vs Female

Figure 1.2


From the above data shows that 80% respondents are Male and 20% are



This show gender of respodents .


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4.3. Income

< 2,00,000 8%

2,00,000 – 3,00,000 12%

3,00,000-4,00,000 35%

4,00,000 45%

Income group of respondents

Figure 1.3


From the above data shows that 45% respondents have 4,00,000 and above

income , 35% have 3,00,000 -4,00,000, 12% have 2,00,000-3,00,000 and 8% have

< - 2,00,000.


This show different income groups respondents.


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4.4 Occupation

Salaried 30%

Businessman 40%

Professional 17%

Retired 13%

Occupation of respondents:

Figure 1.4


From the above data shows that 40% respondents are Businessman, 30% are

Salaried, 17% are Professional and 13% are Retired.


This show different occupation of respondents.


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4.5 Qualification :

Below Graduate 10%

Graduate 50%

Above Graduate 40%

Qualification of respodents

Figure 1.5


From the above data shows that 50% respondents are Graduate, 40% are Above

Graduate and 10% are Below Graduate.


this show that graduate respondent more invest money.


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4.6 Marital status :

Married 60%

Unmarried 40%

Marital status of respondents

Figure 1.6


From the above data shows that 60% are Married and 40% are Unmarried.


this show marital status of respondents.


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4.7 In which Sector do you prefer to invest your money?

Government Sector 35%

Private Sector 65%

Investment private vs govt. sector

Figure 1.7 Analysis

From the above data shows that 65% are invest their money in Private Sector

and 35% are in Government Sector.

Interpretation this show that


Page 75: Anuradha Saini Project Report

4.8. Which of the following do you prefer for investment?

Mutual funds 25%

Fixed Deposits 10%

Life Insurance 15%

Stock market 35%

Postal savings 10%

Others 5%

Field of investment

Figure 1.8


From the above data shows that 35% respondents invest their money in Stock

Market, 25% in Mutuals Funds, 15% in Life Insurance, 10% in Fixed deposits and

Postal Savings and 5% in other sectors.


investors mostly prefer invest in life insurance plan and stock market.its

give them tax benefits andothers benefits


Page 76: Anuradha Saini Project Report

4.9 How much term of Investment Plans do you like most?

0-3 years 25%

3-6 years 35%

6-10 years 28%

Above 10 years 12%

Duration of investment plan

Figure 1.9


25% respondents 0-3 years ,35% respodents3-6 years ,28% respodents 6 -10 years,12 % above 10 years investment plan prefers.


Most Respondents choose 3-6 years investment plans usually.


Page 77: Anuradha Saini Project Report

4.10 What were the most important factors while selecting an Investment Schemes?

Liquidity 8%

Risk Factor 22%

Returns 30%

Growth 15%

Tax Benefits 25%

Factors for slecting investment scheme

Figure 1.10


From the above data shows that 30% notices mostly Returns, 25% for Tax

benefits, 22% for Risk Factors, 15% for Growth and 8% for Liquidity.


this show that return and tax benefits most effect respondents investment



Page 78: Anuradha Saini Project Report

4.11. Which funds do you prefer for investment?

Open-Ended Funds 25%

Closed –Ended Funds 30%

Interval Funds 35%

Preferences for fund investment

Figure 1.11


From the above data shows that 35% respondents prefer their funds for invest

in Interval Funds, 30% in Closed-Ended Funds and 25% in Open-Ended Funds.


respondents mostly prefer to investment in interval funds.


Page 79: Anuradha Saini Project Report

4.12 Which Schemes you are interested to invest in?

Equity 30%

Debt 20%

Balanced 25%

Sector Specific 25%

Scheme of investment

Figure 1.12


From the above data shows that 30% respondents select Equity Schemes, 25% select

both Balance and Sector Specific Schemes and 20% select debt Schemes.


this show that investors mostly interested invest in equity .


Page 80: Anuradha Saini Project Report

4.13 Which Environmental Forces influenced you the most to invest in mutual


Friendly / Family 20%

Commercials 35%

Advisors 30%

Self-evaluation 15%

Forces influencing mutual funds investment

Figure 1.13


From the above data shows that 35% influences while investing in mutual

funds are Commercials, 30% are Advisors, 20% are Friendly/Family and 15% are



this show that respondents when invested in any instrument then

envirionmental factors effect on it.


Page 81: Anuradha Saini Project Report

4.14 Which Mode of communication do you prefer most for receiving updates and

performance of your scheme / portfolio of investment?

Telephone 35%

internet / E-mail 25%

Direct Mail 18%

Self –Visit 22%

Types of communication modes


figure 1.1


From the above data shows that 35% is Telephone for communication purpose

prefers, 25% is Internet/E-mail, 22% is Self-Visit and 18% is Direct Mail.


communication modes like direct mail,telephone etc. effect investors

portfolio investment.


Page 82: Anuradha Saini Project Report

4.15 What do you see in long term Investment plans?

Growth 25%

Risk Cover 15%

Tax Benefit 20%

All of the above 40%

Need for long term investment

Figure 1.14


From the above data shows that 40% respondents see all of the above, 25%

Growth, 20% Tax Benefits and 15% Risk Cover.


long term investment plan is useful for investors. its give tax benefits,

growth of their income,risk cover benefits.thatwhy mostly people invest

long term plans.


Page 83: Anuradha Saini Project Report

4.16 How much risk do you prefer in Investment Plans?

High Risk 40%

Moderate Risk 35%

Low Risk 25%

Risk involve in investment scheme:

Figure 1.15


From the above data shows that 40% respondents prefer High Risk for High

Returns, 35% prefers Moderate Risk and 25% Prefers Low Risk.


investors prefers mostly moderate risk in investment plans.


Page 84: Anuradha Saini Project Report

4.17. Have you ever used Mutual Fund as an Investment before?

Yes 70%

No 30%

Respodents invest in mutual funds

Figure 1.16


70% respondents used mutual funds as investment before and others 30 % not used.


Most respondents have used Mutual funds as an Investment before investing in other

Investment Plans


Page 85: Anuradha Saini Project Report

4.18. Do you consider Inflation a significant risk?

Yes 40%

No 60% Repondents take inflation a significant risk:

Figure 1.17


40% respondents says that inflation is significant risk and others 60% not agree it.


Mostly Respondents not consider Inflation as a Significant Risk Factors.


Page 86: Anuradha Saini Project Report

4.19. Is a down period in the Stock Market a buying opportunity?

Yes 70%

No 30%

Respondents buying opportunity in down period:



70% respondents agree that stock market is buying opportunity in down period but other 30% not agree it.


Mostly respondents says Yes for Buying Opportunity in Down period stock Market.


Page 87: Anuradha Saini Project Report

4.20 Do you have any other Investment/Insurance policy?

Yes 90%

No 10%

Respondents invest in others instrument:



90% have other investment policy and 10% not investment policy.


Mostly respondents have another Investment / Insurance Policy.


Page 88: Anuradha Saini Project Report

4.21 Do you want to shift from?

Shares to mutual funds 35%

Mutual funds to LIC 20%

LIC to fixed deposits 20%

Fixed deposits to postal saving 15%

Any others 10%

Investment pattern of respodents



From the above data shows that 35% respondents want to shift from Shares to

Mutual Funds, 30% from Mutual funds to LIC, 20% from LIC to fixed Deposits, 15%

from Fixed Deposits to Postal Savings and 10% from Any others.


mostly respondents want to shift from shares to mutual funds because shares have high risk involve but mutual funds less risk involve.


Page 89: Anuradha Saini Project Report



Most investors read two or more sources of information to make

investment Decisions.

Investors mostly prefer to invest their money in mutual funds ,stock

market,LIC than postal savings and fixed deposit..


Investors prefer invest money that instrument which have high risk but

also high return.

Most of the investors get their information related to investment

through Direct mail, self visit etc.

Investors if not satisfied their investment option then they change their

investment preferences .

Mostly graduate and above graduate person involve in investment sector.


Page 90: Anuradha Saini Project Report


Investors should make the investment with proper planning

keeping in mind their investment objectives.

Investors should read the offer document carefully before investing

in any scheme of the mutual funds and life insurance and others.

Investors should also consults the brokers or agents to seek

information and advice but their decision should not merely be

based on agents advice rather the decision should be based on their

careful investigation.

The investors should select a particular investment option on basis

of their need and risk tolerance.

The investors should diversify their investment portfolio in order to

reduce the risk.

The investors should continuously monitor their investments.

The companies should provide all relevant information to the



Page 91: Anuradha Saini Project Report


The individual investor still prefers to invest in financial products

which give risk free returns.

Investors invest money acc. to their demographic profile.

Nowdays investors have more knowledge about investment option.

Male tolerate more risk than female.

Investors prefer to invest money in govt sector.

Three factors effect their investment schemes tax , risk, returns.

Investors prefer to invest money in long term investment. Reason is

that in a short term investment they have to pay high tax but in short

term less tax.

Inflation also effect investors investment schewmes.


Page 92: Anuradha Saini Project Report


Page 93: Anuradha Saini Project Report



Financial Management 9th edition by “I.M. Pandey.” Vicas

publication house pvt ltd.

Research Methodology 2nd edition by “C.R. Kothari” .New age

international publication,

Business Statistics 14th edition by “S.P. Gupta

&M.P.Gupta.”Sultan Chand & Sons publication.

Workbook 3rd edition May 2006 by “Association of Mutual

Funds in India.”






Page 94: Anuradha Saini Project Report


QUESTIONNAIRE Title “Changing Pattern of Investment Preferences – A Study of Retail Investors

in Ludhiana”Name _______________________E-Mail _______________________

Please tick marks:I. Age Below 30 [ ] 30-40 [ ] 40-50 [ ] 50 and above [ ]

II. Gender Male [ ] Female [ ]

III. Income < 2,00,000 [ ] 2,00,000 – 3,00,000 [ ]3,00,000-4,00,000 [ ] 4,00,000 [ ]

IV. Occupation Salaried [ ] Businessman [ ]Professional [ ] Retired [ ]

V. Qualification : Below Graduate [ ] Graduate [ ]Above Graduate [ ]

VI. Marital status : Married [ ] Unmarried [ ]

Please Fill in: Savings = Rs. _________________ /- Year

What % of your savings are invested for 5 years and above __________ (approx.)

What % of your savings are invested for 3-5 years and above_________ (approx.)

What % of your savings are invested for 1-3 years and above ________ (approx.)

What % of your savings are invested for Less than one year _________ (approx.)

1. In which Sector do you prefer to invest your money? Government Sector [ ]Private Sector [ ]

2. Which of the following do you prefer for investment? [ ] Mutual funds [ ] Fixed Deposits [ ] Life Insurance [ ] Stock market [ ] Postal savings [ ] Others

3. How much term of Investment Plans do you like most?[ ] 0-3 years [ ] 3-6 years [ ] 6-10 years[ ] Above 10 years


Page 95: Anuradha Saini Project Report

4. What were the most important factors while selecting a Investment Schemes?[ ] Liquidity [ ] Risk Factor [ ] Returns [ ] Growth [ ] Tax Benefits

5. Which funds do you prefer for investment? [ ] Open-Ended Funds [ ] Closed –Ended Funds [ ] Interval Funds

6. Which Schemes you are interested to invest in? [ ] Equity [ ] Debt [ ] Balanced [ ] Sector Specific

7. Which Environmental Forces influenced you the most to invest in mutual fund?

[ ] Friendly / Family [ ] Commercials [ ] Advisors [ ] Self-evaluation

8. Which Mode of communication do you prefer most for receiving updates and performance of your scheme / portfolio of investment? [ ] Telephone [ ] internet / E-mail [ ] Direct Mail [ ] Self –Visit

9. What do you see in long term Investment plans?[ ] Growth [ ] Risk Cover [ ] Tax Benefit[ ] All of the above

10. How much risk do you prefer in Investment Plans?[ ] High Risk [ ] Moderate Risk [ ] Low Risk

11. Have you ever used Mutual Fund as an Investment before?[ ] Yes [ ] No

12. Do you consider Inflation a significant risk?[ ] Yes [ ] No

13. Is a down period in the Stock Market a buying opportunity?[ ] Yes [ ] No

14 Do you have any other Investment/Insurance policy?[ ] Yes [ ] No

15 Do you want to shift from? Shares to mutual funds [ ] Mutual funds to LIC [ ]

LIC to fixed deposits [ ] Fixed deposits to postal saving [ ] Any others [ ]