InvestmentInvestment Investment involves employment of funds Investment involves employment of funds

with the aim of achieving additional income or with the aim of achieving additional income or growth in value of an asset. growth in value of an asset.

Investment may be defined as “a commitment Investment may be defined as “a commitment of funds made in the expectation of some of funds made in the expectation of some positive rate of returnpositive rate of return”. ”.

Characterstics of InvestmentCharacterstics of Investment

1.1. ReturnReturn2.2. RiskRisk3.3. SafetySafety4.4. LiquidityLiquidity5.5. Tax purposeTax purpose

Objectives of an investor can be stated as Objectives of an investor can be stated as follows: - follows: -

Maximization of return.Maximization of return. Minimization of risk.Minimization of risk. Hedge against inflationHedge against inflation..

InvestmentInvestment1.1. Commits funds to low Commits funds to low

risk Investment risk Investment 2.2. Purchase of securities is Purchase of securities is

done with proper done with proper investigation and investigation and analysis to receive stable analysis to receive stable returns and capital returns and capital appreciation over a appreciation over a period of time.period of time.

3.3. Investment is long term Investment is long term in naturein nature

SpeculationSpeculation1.1. Commits funds to Commits funds to

higher risk Investmenthigher risk Investment2.2. It is related with It is related with

buying low and selling buying low and selling high with the hope of high with the hope of making high capital making high capital gains.gains.

3.3. speculation is only speculation is only short-term. short-term.

Types of InvestorsTypes of Investors Individuals : large in number – Investable Individuals : large in number – Investable

resources are lowerresources are lower Institutions : Mutual Funds, Investment Institutions : Mutual Funds, Investment

Companies, Banking &NBFC’s and Insurance Companies, Banking &NBFC’s and Insurance companies.- Less in number – Investable companies.- Less in number – Investable resources are higherresources are higher

Engage professional fund manager to carry out Engage professional fund manager to carry out extensive analysis extensive analysis

Investment Avenues

Non Marketable Financial Assets Equity Shares

Mutual Fund Schemes

Money MarketInstruments

Bonds

Life InsurancePolicies

Real Estate Precious Objects

Financial Derivatives

Investment AvenuesInvestment Avenues Non Marketable Financial Assets: Non Marketable Financial Assets: A good portion A good portion

of financial assets is represented by non- marketable of financial assets is represented by non- marketable financial assets. These can be classified into the financial assets. These can be classified into the following broad categories:following broad categories:

Bank Deposits (current,savings,fixed,Recurring)Bank Deposits (current,savings,fixed,Recurring) Post office Deposits (Recurring ,Senior citizen Post office Deposits (Recurring ,Senior citizen

scheme,Kisan Vikas patra,Time deposit scheme,Kisan Vikas patra,Time deposit account,Monthly income scheme,National savings)account,Monthly income scheme,National savings)

Company Deposits Company Deposits Provident Fund Deposits Provident Fund Deposits

Bonds: Bonds:

Savings BondsSavings Bonds PSU Bonds PSU Bonds Debentures of Private Sector Companies Debentures of Private Sector Companies Preference Shares Preference Shares

Money market Instruments: Money market Instruments: Debt Debt instruments which have a maturity of less than instruments which have a maturity of less than one year at the time of issue are called money one year at the time of issue are called money market instruments. The important money market instruments. The important money market instruments are:market instruments are:

Treasury Bills Treasury Bills Commercial PaperCommercial Paper Certificate of DepositCertificate of Deposit Call moneyCall money Inter corporate loan MarketInter corporate loan Market

Mutual Funds: Mutual Funds: Instead of directly buying equity Instead of directly buying equity shares and/or fixed income instruments, you can shares and/or fixed income instruments, you can participate in various schemes floated by mutual participate in various schemes floated by mutual funds which, in turn, invest in equity shares and fixed funds which, in turn, invest in equity shares and fixed income securities. There are three broad types of income securities. There are three broad types of mutual fund schemes:mutual fund schemes:

Equity Schemes Equity Schemes Debt Schemes Debt Schemes Balanced SchemesBalanced Schemes MMMF schemesMMMF schemes

Life Insurance: Life Insurance: In a broad sense, life In a broad sense, life insurance may be viewed as an investment.insurance may be viewed as an investment.

Insurance premiums represent the sacrifice, Insurance premiums represent the sacrifice, and the assured sum, the benefit. The and the assured sum, the benefit. The important types of insurance policies in India important types of insurance policies in India are:are: Endowment Assurance Policy Endowment Assurance Policy Money Back PolicyMoney Back Policy Whole Life Policy Whole Life Policy Term Assurance Policy Term Assurance Policy

Real Estate: Real Estate: For the bulk of the investors the For the bulk of the investors the most important asset in their portfolio is a most important asset in their portfolio is a residential house. In addition to a residential residential house. In addition to a residential house, the more affluent investors are likely to house, the more affluent investors are likely to be interested in the following types of real be interested in the following types of real estates:estates:

Agriculture Land Agriculture Land Semi-Urban Land Semi-Urban Land Commercial PropertyCommercial Property

Precious Objects: Precious Objects: Precious objects are items Precious objects are items that are generally small in size but highly that are generally small in size but highly valuable in monetary terms. Some important valuable in monetary terms. Some important precious objects are:precious objects are:

Gold and SilverGold and Silver Precious Stones Precious Stones Art Objects Art Objects

Financial Derivatives: Financial Derivatives: A financial derivative A financial derivative is an instrument whose value is derived from is an instrument whose value is derived from the value of an underlying asset. The most the value of an underlying asset. The most important financial derivatives from the point important financial derivatives from the point of view of investors are:of view of investors are:

ForwardsForwards FuturesFutures OptionsOptions swapsswaps