36962972 unit i supplementary info investment avenues

8/2/2019 36962972 Unit I Supplementary Info Investment Avenues

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Different Investment

Avenues


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INVESTMENTS

An Investment is a commitment of funds made in the

expectation of some positive rate of return.

Investors expectations:1. Security of Original Capital

2. Tax Efficiency

3. Life Cover

4. Income

5. High Returns

6. Safety


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Five step investment plan:

1. Need Analysis

2. Evaluating the Available Avenues

3. Mapping and Matching the risk-returnProfile

4. Designing the Portfolio

5. Continuous Monitoring and PortfolioManagement


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India Investment Trends

Bank Fixed Deposits

Life Insurance

Real Estate/Property

Postal Saving Schemes Shares

National Saving Certificate

Public Provident Fund.

Kissan Vikas Patra

Mutual Funds

ULIP (UNIT LINK INSURANCE POLICY)


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NATIONAL SAVINGS CERTIFICATE

Interest 8 % p.a. Compounded half yearly and payableat Maturity.

Certificates can be purchased by an adult for himselfor on behalf of a minor, jointly by two adults, a minorand a Trust,

Lock in period 6 years

No Tax deduction at source.


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PUBLIC PROVIDENT FUND

An ideal investment option for the salaried class as well as the self

employed.

Interest 8.0 % p.a. Compounded, yearly .

Deposits can be made in lump sum or in convenient installments.Interest is fully exempt from I.T.

Withdrawals permitted on completion of 7 full financial years.

NRIs can also invest in this scheme.



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KISAN VIKAS PATRA

Money doubles in 8 years and 7 months

Certificate can be purchased by an adult for himself or on behalf of a

minor, jointly by two adults, a minor and a Trust.

Certificates can be encashed any time after expiry of 2 years fromthe date of issue of the certificate.

Certificate can be kept as collateral security to get loan from Banks.

Investment can be made by cash or cheque.



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ULIP (UNIT LINK INSURANCE POLICY)

ULIP is one in which the customer is provided with a life insurance

cover and the premium paid is invested in either debt or equity

products or a combination of the two.

KEY FEATURES

Premiums paid can be single, regular or variable.

The risk charge (mortality rate) varies with age

The maturity benefit is not typically a fixed amountThe policyholder can switch between schemes, for instance,

balanced to debt .

The costs in ULIP are higher

ULIP products are exempted from tax


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MUTUAL FUNDS

Mutual Funds are essentially investment vehicles where people with

similar investment objective come together to pool their money and

then invest accordingly .

Features:

Number of available options

Diversification

Professional ManagementPotential of Returns


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CONVERTIBLE BONDS

A type of bond that can be converted into shares of stock in the issuingcompany, usually at some pre-announced ratio.

From the issuer's perspective, the key benefit of raising money by

selling convertible bonds is a reduced cash interest payment.

Convertibility affects the performance of the bond in certain ways:

Tend to have lower interest rates than non-convertibles because they

also accrue value as the price of the underlying stock rises.Convertibles can offer protection against a decline in stock price as

earn interest even when the stock is trading down or sideways.


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TYPES OF BONDS

Exchangeable (XB) are bonds which may be exchanged into shares other thanthose of the issuer. Strictly speaking, they are not convertibles, but they share

certain common evaluation characteristics.

Mandatory convertiblesare short duration securitiesgenerally with yields higher

than found on the underlying common sharesthat are mandatorily convertible

upon maturity into a fixed number of common shares.

Mandatory exchangeableare short duration securitiesgenerally with yields

higher than found on the underlying common sharesthat are mandatorily

exchangeable upon maturity into a fixed number of common shares.

ADVANTAGES:Tax advantages.

Lower fixed-rate borrowing costs.


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REAL ESTATE FUNDS Real estate investment has attracted lot of people. The prospects are

increasing day after day. Real Estate Investment Trust (REIT) Structure is a corporate structure,

which collects money from the investors and invests in real estate assets toearn money in the form of rentals and leases.

CHARACTERISTICS:

(1) pooling of resources

(2) organisational structure: Varies between companies and trusts dependingon local regulations and eligibility criteria.

(3) funds may be both close ended and open ended.(4) leveraging: Normally allowed to raise debt;

(5) tax Advantages


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KEY AREAS IN WHICH REAL ESTATE FUNDS MAYPOSITIVELY IMPACT INDIAS REAL ESTATE SECTOR

(1) enhancing liquidity of the sector;

(2) institutionalization: enhanced competition with institutional investors

competing in a bigger way with the unorganized sector for market dominance.

(3) greater acceptability for real estate as an investment asset class;

(i) opportunities to retail investors to participate in the real estate sector; and

(ii) asset diversification to corporate investors.

(4) improve sector transparency.


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REAL ESTATE MUTUAL FUND

An REMF is like a mutual fund for real estate assets.

Investors may buy shares in those funds which are traded on a daily basis on stock

exchanges.

The value of the shares depends on the value of the underlying real estate assets.

REMFs have many advantages over direct investment in real estate.(1) it allows investors to invest according to their income and financial circumstances;

(2) the portfolio of real estate assets will be a lot more diversified than a single home

with assets ranging from office space to residential properties all around the country as

well as securities based on the real estate sector; and

(3) investors dont have to deal with the legal and maintenance hassles of owningproperty and may instead rely on the professional expertise of the AMCs. Finally if they

need quick money, these funds are liquid assets, which may be sold conveniently and

rapidly.


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HDFC India Real Estate Fund

Housing Development Finance Corporation Ltd, has forayed into the real estatefund business with the launch of 'HDFC Property Fund' in association with the StateBank of India

a seven-year close-ended fund which would be privately placed.

The scheme would have a minimum contribution of Rs 5 crore per investor and

would target banks, insurance companies, corporate and high net worth individuals.

What's in it for investors?

Liquidity

Affordability

Tax advantages

Professional management


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Investment

Option

Risks/Liquidity Returns Taxation Suitability

Bank FDs Very low risk and lowliquidity.

Low returns, but

assured.

returns are fully

taxableGood for very low

risk investors and

those in the nil or

low tax brackets.

Post Office

SchemesLow risk and low

Liquidity.MIS scheme give

8% interest. Time

deposit 6.25-7.5%.

Since returns are

taxable, the post-

tax returns will

be still lower.

Good for very low

risk investors and

those in the nil or

low tax brackets.

PPF Low risk with very lowliquidity (15-year lock-

in period. Partial

withdrawal allowed

after 6 years).

assured returns. Interest is tax-free.

Good tax saving

investment option.

NSC Low risk with lowliquidity (6 years lock-

in).

assured returns. Interest fullytaxable

Not very attractive

vis--vis other

options like 5-year

Bank FDs.

Comparison of Different Investment Options


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Equity High risk and high

liquidity.Market linked

returns. Good

potential.

No Long Term

Capital Gain Tax

and 10% Short

Term CapitalGains Tax.

Needs high risk

appetite.

ULIPs Low to High Risk

depending on the

investment option i.e.

Pure Debt or Mixed or

Pure Equity. Low

Liquidity (3-5 years

lock-in period).

Low to high

depending on the

investment option.

Tax free returns.

.Not an attractive

option due to high

charges, low

flexibility and low

diversification.

Real Estate Variable risk andvariable liquidity

depending on the type

and location of

property.

Market linked

returns. Good

potential.

No tax

advantages,

except attractive

tax benefits on

the home loans.

High initial

investment ,high

transactions costs

like registration

brokerage etc.; andcannot be partly

liquidated..

Gold Low long-term risk. Butvolatile in short term.

High Liquidity.

hedge against

inflation. So

returns could be

around inflationlevels

No tax

advantages.

Not an attractive

investment option.

36962972 unit i supplementary info investment avenues

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