Investment Avenues

1. Investment Avenues
Securities
Stocks
Fixed
Income
Securities
G-securities
Money
market
instruments
Derivative
Mutual
Funds
Deposits
Bank
Deposits
NBFC
Deposits
Postal
Schemes
Monthly
Income
Scheme
National
Savings
Certificate
Vikas Patra
PPF
Insurance
Life
Insurance
policies
ULIP
Real
Estate
Real Estate
Precious
Metals
Art and
antiques

2. Securities
 Equity Shares:-
 Large-cap, Mid-cap, Small-cap stocks:
categorized by market capitalization. Market
Capitalization is calculated by multiplying the
current price of the stock with the no. of
outstanding shares in the market.
 Blue Chip Shares: The shares of Cos. which
have a consistent track record and are doing
exceedingly well compared with other Cos.
 They are market leaders and have the potential to
influence the market.

3.  Growth shares: Stocks that have a higher rate of
growth in profitability than the industry growth rate
 Income shares: These stocks belong to Cos. that
have stable operations and pay regular dividend
 Defensive shares: relatively unaffected by
market movements.

4.  Cyclical shares: The business cycle affects
cyclical shares eg. Automotive sector shares
 Speculative shares: shares that have a lot of
speculative trading in them are referred to as
speculative shares.

5. Fixed Income Securities
 Preference shares: are hybrid. Their claims on
the Cos. income are limited and they receive a
fixed dividend like bonds.
 In the event of liquidation of the Co., their claims
on the assets of the firm are also fixed.
 Like equity, it is a perpetual liability of the Co.
 The decision to pay dividend is discretionary
unlike in bonds where it is mandatory.
 Preference dividend is tax exempt.

6.  Debentures: Investors have to hold on till
maturity.
 These reasons contribute towards high coupon
rates on debentures.

7.  Bonds: They are issued by PSUs.
 The value of the bond in the market depends
upon the interest rate and the maturity.
 The coupon rate is the nominal interest rate
offered on the bonds.
 Being contractual it cannot be changed during the
tenure of the instrument.

8. Government Securities
 Securities issued by the central govt, state govt
and quasi-govt agencies are known as govt
securities or gilt-edged securities.
 The rate of interest on these securities is
relatively lower because of their high liquidity and
safety.

9. Money market securities
 Money market securities have a short term
maturity say less than a year.
 Treasury bill: It is an instrument of short-term
borrowing by the Govt. of India.
 Generally T-bills are of 91 days.
 Interest rates are low

10.  Commercial papers: It is a short term negotiable
instrument with a fixed maturity period.
 It is an unsecured promissory note issued by the
Co. either directly or through banks.
 CP can be issued for maturities between min 7
days and a max of up to one yr .
 The CPs are sold at discount and redeemed at
their face value.
 The denomination of commercial paper is high
and hence mostly favored by Cos. and
institutional investors.

11.  Certificate of deposit: It is a marketable receipt
of funds deposited in a bank for a fixed period at
a specified rate of interest.
 It is a readily negotiable instrument.
 The denominations of the CD and the interest
rate on them are high.
 It is mainly preferred by institutional investors and
Cos. more than by individuals.
 Min deposit that could be accepted from a single
subscriber should not be less than Rs. 1 lakh and
in multiples of Rs. 1 lakh thereafter.

12.  The maturity period of CDs issued by banks
should not be less than 7 days and not more than
1 year.
 The FIs can issue CDs for a period not less than
1 yr. and not exceeding 3 yrs from the date of
issue.

13. Deposits
 They earn a fixed rate of return.
 They are not negotiable instruments.
 Bank Deposits: Risk averse investors prefer
bank deposits.
 Current A/c does not offer any interest.
 Savings A/c offers very low interest rate
 Fixed deposit A/c carries high interest rate but
money maybe locked in for a fixed period.
 They are considered safe because of RBI
regulation.

14.  NBFC Deposits: comes under the purview of RBI
 In spite of strict rules and regulations laid down
by RBI the default rate is high.
 To improve liquidity the percentage of liquid
assets required to be maintained by them has
been enhanced by RBI.

15. Post office Monthly Income Account
Scheme
 From 1.4.2017, interest rates are as follows:-
 7.60% per annum payable monthly.
 In multiples of INR 1500/-
 Maximum investment limit is INR 4.5 lakhs in single account and INR 9
lakhs in joint account.
 An individual can invest maximum INR 4.5 lakh in MIS (including his
share in joint accounts)
 For calculation of share of an individual in joint account, each joint
holder have equal share in each joint account.
 Account may be opened by individual.
 Account can be opened by cash/cheque and in case of cheque the date
of realization of cheque in Govt. account shall be date of opening of
account.
 Nomination facility is available at the time of opening and also after
opening of account.

16. • Account can be opened in the name of minor and a minor of 10
years and above age can open and operate the account.
• Joint account can be opened by two or three adults.
• All joint account holders have equal share in each joint account.
• Maturity period is 5 years from 1.12.2011.
• Can be prematurely en-cashed after one year but before 3
years at the discount of 2% of the deposit and after 3 years at
the discount of 1% of the deposit. (Discount means deduction
from the deposit.)
• A bonus of 5% on principal amount is admissible on maturity in
respect of MIS accounts opened on or after 8.12.07 and up to
30.11.2011. No bonus is payable on the deposits made on or
after 1.12.2011.

17. 15 year Public Provident Fund
A/c
 From 1.4.2017, interest rates are as follows:- 7.9% per annum
(compounded yearly).
 Minimum INR. 500/- Maximum INR. 1,50,000/- in a financial
year.
 Deposits can be made in lump-sum or in 12 installments.
 An individual can open account with INR 100/- but has to deposit
minimum of INR 500/- in a financial year and maximum INR
1,50,000/-
 Joint account cannot be opened.
 Account can be opened by cash/cheque and In case of cheque,
the date of realization of cheque in Govt. account shall be date of
opening of account.
 Nomination facility is available at the time of opening and also
after opening of account. Account can be transferred from one
post office to another.

18.  Maturity period is 15 years but the same can be extended within
one year of maturity for further 5 years and so on.
 Maturity value can be retained without extension and without
further deposits also.
 Premature closure is not allowed before 15 years.
 Deposits qualify for deduction from income under Sec. 80C of IT
Act.
 Interest is completely tax-free.

19.  Withdrawal is permissible every year from 7th
financial year from the year of opening
account..
 Loan facility available from 3rd financial year.
 No attachment under court decree order.
 The PPF account can be opened in a Post
Office which is Double handed and above.

20. Senior Citizen’s Savings Scheme
 From 1.4.2016, interest rates are as follows:-
 8.6 % per annum, payable from the date of deposit of 31st March/30th
Sept/31st December in the first instance & thereafter, interest shall be
payable on 31st March, 30th June, 30th Sept and 31st December.
 There shall be only one deposit in the account in multiple of INR.1000/-
maximum not exceeding INR 15 lakh.
 An individual of the Age of 60 years or more may open the account.
 An individual of the age of 55 years or more but less than 60 years who
has retired on superannuation or under VRS can also open account
subject to the condition that the account is opened within one month of
receipt of retirement benefits and amount should not exceed the amount
of retirement benefits.
 Maturity period is 5 years.

21. • A depositor may operate more than one account in individual capacity or jointly
with spouse (husband/wife).
• Account can be opened by cash for the amount below INR 1 lakh and for INR 1
Lakh and above by cheque only.
• Nomination facility is available at the time of opening and also after opening of
account.
• Joint account can be opened with spouse only and first depositor in Joint
account is the investor.
• In case of SCSS accounts, quarterly interest shall be payable on 1st working
day of April, July, October and January.
• Premature closure is allowed after one year on deduction of an amount equal
to1.5% of the deposit & after 2 years 1% of the deposit.
• After maturity, the account can be extended for further three years within one
year of the maturity by giving application in prescribed format. In such cases,
account can be closed at any time after expiry of one year of extension without
any deduction.
TDS is deducted at source on interest if the interest amount is more than INR
10,000/- p.a.
Investment under this scheme qualifies for the benefit of Section 80C of the
Income Tax Act, 1961 from 1.4.2007

22. Kisan Vikas Patra
Amount Invested doubles in 110 months (9 years & 2 months)
• Available in denominations of Rs 1,000, 5000, 10,000 and Rs
50,000. Minimum deposit Rs 1000/- and no maximum limit.
• Certificate can be purchased by an adult for himself or on
behalf of a minor or by two adults.
• KVP can be purchased from any Departmental Post office.
• Facility of nomination is available.
• Certificate can be transferred from one person to another and
from one post office to another.
• Certificate can be encashed after 2 & 1/2 years from the date of
issue.

23. National Savings Certificate 5 years(VIII Issue)
 From 1.4.2016, interest rates are as follows:-
 8.1% compounded six monthly but payable at
maturity. INR. 100/- grows to INR 147.61 after 5
years.
 Minimum INR. 100/- No maximum limit available
in denominations of INR. 100/-, 500/-, 1000/-,
5000/- & INR. 10,000/-..
 A single holder type certificate can be purchased
by, an adult for himself or on behalf of a minor or
by a minor.
 Deposits qualify for tax rebate under Sec. 80C of
IT Act.
 The interest accruing annually but deemed to be
reinvested under Section 80C of IT Act.

24. Post office Time deposit scheme
 Interest payable annually but calculated
quarterly.
From 1.4.2016, interest rates are as follows:-
Period Rate
1yr.A/c 7.1%
2yr.A/c 7.2%
3yr.A/c 7.4%
5yr.A/c 7.9%
 Minimum INR 200/- and in multiple thereof. No
maximum limit.
 Account may be opened by individual.

25. Post office savings A/c
 Salient Features:
 Rate of interest 4.0% per annum
 Minimum amount Rs 20/- for opening.
 Account can be opened by cash only.
 Min balance to be maintainedin a non-cheque facility
account is INR 50/-.
 Cheque facility available if an account is opened with
INR 500/- and for this purpose minimum balance of
INR 500/-in an account is to be maintained.
 Interest earned is Tax Free up to INR 10,000/- per
year from financial year 2012-13.
 Nomination facility is available

26. Sukanya Samriddhi Account
 Rate of interest 8.6% Per Annum(w.e.f 1-4-
2016),calculated on yearly basis ,Yearly
compounded.
 Minimum INR. 1000/-and Maximum INR.
1,50,000/- in a financial year. Subsequent deposit
in multiple of INR 100/- Deposits can be made in
lump-sum No limit on number of deposits either in
a month or in a Financial year m No limit on
number of deposits either in a month or in a
Financial year

27.  A legal Guardian/Natural Guardian can open account in
the name of Girl Child.
• A guardian can open only one account in the name of
one girl child and maximum two accounts in the name of
two different Girl children.
• Account can be opened up to age of 10 years only from
the date of birth. For initial operations of Scheme, one year
grace has been given. With the grace, Girl child who is
born between 2.12.2003 &1.12.2004 can open account up
to1.12.2015.
• If minimum Rs 1000/- is not deposited in a financial year,
account will become discontinued and can be revived with
a penalty of Rs 50/- per year with minimum amount
required for deposit for that year.

28.  Partial withdrawal, maximum up to 50% of
balance standing at the end of the preceding
financial year can be taken after Account holder’s
attaining age of 18 years.
• Account can be closed after completion of 21
years.
• Normal Premature closure will be allowed after
completion of 18 years /provided that girl is
married.

29. Life Insurance
 Life Insurance is a contract for payment of a sum
of money to the person assured (or to the person
entitled to receive the same) on the happening of
the event insured against.
 Ususally , the contract provides for the payment
of an amount on the date of maturity or at a
specified dates at regular intervals or if death
occurs.

30. Life Insurance
 Major advantages :
 Protection: full protection against risk of death of
the saver. The full assured sum is paid.
 Easy payments: Premiums can be paid in easy
installments through monthly, quarterly, half
yearly or yearly mode.
 Liquidity: Loans can be raised on the security of
the policy
 Tax relief: Premiums paid are tax free (max. upto
Rs 1 lakh)

31. Endowment Policy
 It covers the risk for a period specified by the
insurer.
 A certain portion of the premium gets invested
and generates a certain return every year. This
return is declared as bonus.
 At the end of the specified period, the sum
assured is paid back to the policy holder, along
with the bonus accumulated during the term of
the policy.
 Unlike whole life, an endowment life insurance
policy is designed primarily to provide a living
benefit during the lifetime of the individual and
secondarily to provide for life insurance

32.  Therefore, it is more of an investment than a
whole life policy.
 The premium for an endowment life policy is
higher than that for a whole life policy.

33. Whole life policy
 It remains in force as long as the policy holder is
alive.
 The risk is covered for the entire life of the policy
holder.
 The whole life policy amount and the bonus are
payable to the nominee of the beneficiary upon
the death of the policy holder.
 The policy holder is not entitled to receive any
money during his lifetime i.e. there is no survival
benefit.

34. Term life policy
 It is the purest form of life insurance.
 If the insured person passes away, the family is
protected by a certain amount.
 The policy is taken for a chosen period and the risk is
covered for that period only.
 A term plan meets the needs of people who are
initially unable to pay the larger premium required for
a whole life or an endowment assurance policy.
 If the premium is not paid within the grace period, the
policy will lapse without acquiring any paid-up value.
 The policy holder may survive the term, but the risk
cover comes to an end.

35. Money back policy
 A portion of the sum assured is paid to the
policyholder in the form of survival benefit at fixed
intervals before the maturity date.
 If the policy holder survives till the end of the
policy term, the survival benefits would be
deducted from the maturity value.
 In the event of death at any time within the policy
term, the death claim comprises the full sum
assured without dedcution of survival benefit
amounts that might have already been paid .
 Bonus is calculated on the full sum assured.

36. ULIP
 It is a market linked insurance plan.
 In ULIP premium gets invested in equity along
with corporate bonds and G-secs.
 Life insurance premium deductible under Sec
80C

37. Mutual Funds
 Mutual funds are a vehicle to mobilize moneys
from investors, to invest in different markets and
securities, in line with the investment objectives
agreed upon, between the mutual fund and the
investors.
 Mutual fund schemes announce their investment
objective and seek investments from the public.
 Depending on how the scheme is structured, it
may be open to accept money from investors,
either during a limited period only, or at any time.