AWARNESS ABOUT VARIOUS TYPES OF INVESTMENT AVENUES

AMONG INDIAN INVESTORS.

A Project Submitted to
University of Mumbai for partial completion of the degree of
Bachelor in Commerce (Accounting and Finance)

By

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 INDEX
CHAPTER SUB- TITLE AND CONTENTS PAGE
NO. CHAPTER NO.
NO.
1. Introduction 6
1.1 Abstract 6
1.2 Preface 7
1.3 Historical Background 9
1.4 Features of Investment 13
1.5 Important Terms of Investing 15
1.6 Benefits of Financial Planning 18
1.7 Investment Planning Process 20
1.8 Formulation of Goals & Need Assessment 24
1.9 Investor Profile & Behaviour 28
1.10 Conducting Risk Assessment 29
1.11 Need of Financial Planner 33
1.12 Investment Avenues 35
1.13 Factors that Affect Investment Decisions 42
1.14 Insurance Planning 44
1.15 Investment Planning 47
1.16 Retirement Planning 50
1.17 Income Tax Planning 52
1.18 Estate Planning 53
1.19 Fixed Income Securities 56
2. Research & Methodology 58
2.1 Data Source 58
2.2 Objectives of the Study 59
2.3 Sample Size 60
2.4 Sample Design 60
2.5 Limitation 60
3. Review of Literature 61
4. Data Analysis, Interpretation & Presentation 67
5. Conclusion & Suggestions 84
5.1 Conclusions & Findings 84
5.2 Suggestions 86
Bibliography 89

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 CHAPTER 1
INTRODUCTION

1.1 ABSTRACT

The nature of financial market has changed drastically. Investing money has
become a very complex task because of huge number of savings and investment
companies and products offered by them, terms and conditions of investment and
prevalent complex rules and regulations.

Most of the investors are found unaware about investment avenues and rules and
regulations. In spite of remarkable growth of economy and increasing income levels of
people, the pace of saving mobilization is lower in India. Savings are not mobilized and
invested properly. Investment is an economic activity which creates capital required for
various sectors of economy. So, every earning person should be motivated to save and
invest his/her money.

The study attempted to find out the awareness of investors about various
investment avenues, their preferences and considerations for investing money. The major
focus of the study was on investigating whether there was difference between investment
awareness level and educational qualifications of male and female investors.

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 1.2 PREFACE

The capital market plays a major role in the development of an economy through
the acceleration of industrial growth. The Indian capital market is one of the oldest capital
markets since it has been in existence from 19th century and in terms of number of listed
companies, it ranks first globally.

The capital market in India which was a dormant segment of the financial system
has undergone a metamorphic transformation from the mid-eighties involving multi-
dimensional growth. The magnitude of growth has been rapid and high in terms of funds
mobilized, the amount of market capitalization and expansion of investor population. In
order to effectively tackle the problems associated with the massive growth, the
regulatory framework of the capital markets has been strengthened and streamlined.

India is one of the few developing countries with a long history of stock exchanges,
the oldest one being established in Bombay (Mumbai) as early as in 1875. During the
pre-independence period, stock exchanges had a chequered career. But development in
the corporate sector as well as stock exchanges gained momentum with India going in
for a planned economy since 1951. It was during the 1990s the process of economic
reforms got a thrust. A survey conducted by the SEBI in 2000 reveals that the 1990s was
the decade of reforms in the Indian economy. It was a period of 1 transformation of the
Indian securities market, and it was the age of the emergence of the securities market
from the backwards to the mainstream of the Indian Financial System. The balance of
payment crisis in 1991 and various other factors compelled the government to introduce
for reaching economic policy changes.

An investment is an asset or item that is purchased with the hope that it will
generate income or will appreciate in the future. In an economic sense, an investment is
the purchase of goods that are not consumed today but are used in the future to create
wealth. In finance, an investment is a monetary asset purchased with the idea that the
asset will provide income in the future or will be sold at a higher price for a profit.

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 To invest is to allocate money (or sometimes another resource, such as time) in the
expectation of some benefit in the future, for example, investment on durable goods such
as real estate for service industry and factory for manufacturing product development,
which are two common types for micro-economic output in modern economy.
Investment on research and development occurs mainly on innovation of consumer
products.

Investors are the persons who generally invest in various investments. Investors
generally expect higher returns from riskier investments. Financial assets range from
low-risk and higher expected commensurate reward, such as emerging markets stock
investments.

Investors, particularly novices, are often advised to adopt an investment strategy

and diversify their portfolio. Diversification has the statistical effect of reducing overall
risk.

There are many investment avenues in which a person can invest to make a future
income i.e.

➢ Debentures
➢ Gold and Silver
➢ Mutual Funds
➢ Life Insurance
➢ Real Estate
➢ Preference Shares
➢ Equity Shares, etc.

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 1.3 HISTORICAL BACKGROUND

Indian stock market marks to be one of the oldest stock market in Asia. It dates to
the close of the 18th century when the East India Company used to transact loan
securities. In the 1830s, trading on corporate stocks and shares in Bank and Cotton
presses took place in Bombay.

Though the trading was broad but the brokers were hardly half dozen during 1840
and 1850. An informal group of 22 stock brokers began trading under a banyan tree
opposite the Town Hall of Bombay from the mid-1850, each investing a (then) princely
amount of Rupee 1. This banyan tree still stands in the Horniman Circle Park, Mumbai.
In 1860, the exchange flourished with 60 brokers. In fact, the ‘Share Mania’ in India
began with the American Civil War broke and the cotton supply from the US to Europe
stopped.

Further the brokers increased to 250. The informal group of stockbrokers organized
themselves as the Native Share and Stockbrokers Association which, in 1875, was
formally organized as the Bombay Stock Exchange (BSE). BSE was shifted to an old
building near the Town Hall. In 1928, the plot of land on which the BSE building now
stands (at the intersection of Dalal Street, Bombay Samachar Marg and Hanuman Street
in downtown Mumbai) was acquired, and a building was constructed and occupied in
1930.

Premchand Roychand was a leading stockbroker of that time, and he assisted in

setting out traditions, conventions and procedures for the trading of stocks of 14 at
Bombay Stock Exchange and they are still being followed. Several stock broking firms
in Mumbai were family run enterprises and were named after the heads of the family.
The following is the list of some of the initial members of the exchange, and who are still
running their respective business:

• D.S. Prabhudas & Company (now known as DSP)

• Jamnadas Morarjee (now known as Jamnadas Morarjee Securities Ltd.)
• Champaklal Devidas (Now called Cifco Finance)
• Brijmohan Laxminarayan.

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 In 1956, the Government of India recognized the Bombay Stock Exchanges as the
first stock exchange in the country under the Securities Contracts (Regulation) Act. The
most decisive period in the history of the BSE stock place after 1992. In the aftermath of
a major scandal with market manipulation involving BSE member named Harshad
Mehta, BSE responded to calls for reform with intransigence.

The foot-dragging by the BSE helped radicalize the position of the government,
which encouraged the creation of the National Stock Exchange (NSE), which created an
electronic marketplace. NSE started trading on 4th November 1994. Within less than a
year NSE turnover exceeded the BSE. BSE rapidly automated, but it never caught up
with NSE spot market turnover. The second strategic failure at BSE came in the
following two years. NSE embarked on the launch of equity derivatives trading. BSE
responded by political effort, with a friendly SEBI chairman (D. R. Mehta) aimed at
blocking equity derivatives trading. The BSE & D. R. Mehta succeeded in dealing the
onset of equity derivative trading by roughly five years. But this trading and the
accompanying shift of the spot market to rolling settlement, did come along in 2000 &
2001 – helped by another major scandal at BSE involving then the President Mr. Anand
Rathi. NSE scored nearly 100% market share in the runaway success of equity derivative
trading, thus consigning BSE into clearly second place. Today NSE has roughly 66%
equity spot turnover and roughly 100% of equity derivatives turnover. Stock Exchange
provides a trading platform, where buyers & sellers can meet to invest or to sell.

SE and NSE are not the only stock exchanges in India. After the country gained
independence, 23 stock exchanges added not including the BSE. However, at present,
there are only seven recognized stock exchanges. Apart from the BSE and NSE they are:

• Calcutta Stock Exchange Ltd.

• Metropolitan Stock Exchange of India Ltd.
• Multi Commodity Exchange of India Ltd.
• National Commodity & Derivatives Exchange Ltd.
• Indian Commodity Exchange Ltd.

All other exchanges have been granted exit by SEBI.

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Progress of Stock Exchange in Years

By 1875, an organisation known as ‘The Native Share and Stock Broker’s Association’
came into being. This was the predecessor of the BSE.

In 1894, the Ahmedabad Stock Exchange came into being primarily with the objective of
enabling dealing in the shares of textile mills in the city.

The Calcutta Stock Exchange was formed in 1908 with the intention of facilitating a market
for shares of plantations and jute mills.

It was in 1920 that the Madras Stock Exchange took shape.

In 1957, the BSE was the first stock exchange to be recognized by the Government of India
under the Securities Contracts Regulations Act.

The SENSEX was launched in 1986 followed by the BSE National Index in 1989.

The Securities and Exchange Board of India (SEBI) was constituted in 1988 to monitor and
regulate the securities industry and stock exchanges. In 1992, it became an autonomous
body with completely independent powers.

In 1992, the NSE was formed as the first demutualized electronic exchange in the country
with the intention of ensuring transparency in the markets.

NSE began operations in the Wholesale Debt Market (WDM) segment in 1994, the equities
segment in 1994, and the derivatives segment in 2000.

It was in 1955, that the BSE made the switch to an electronic system of trading from the
open-floor system.

In 2015, SEBI was merged with the Forward Markets Commission (FMC) with the aim of
strengthening regulation of the commodities market, facilitating domestic and foreign
institutional participation, and launch of new products.

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Today, the BSE is measured as the world's 11th largest stock exchange and the market
capitalization is likely to be around $1.7 trillion. The market capitalization of the NSE is
estimated to be over $1.65 trillion.

Over 5,000 companies are listed on the BSE and 1,500 figures on the NSE. In terms of share
trading volumes, still, both the exchanges are on parity. Nowadays people are able to
conduct online trading sitting in the comfort of their home. Facilities such as zero brokerage
demat and live updates are all available with the help of internet.

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 1.4 FEATURES OF INVESTMENT

1) Return:

All investments are characterized by the expectations of a return. In fact, investments

are made with the primary objective of deriving a return. The return may be received in
the form of yield plus capital appreciation. The return from an investment depends upon
the nature of the investment, the maturity period and a host of other factors.

➢ Return = Capital Gain + Yield (Interest, Dividend etc.)

2) Risk:

Risk refers to the loss of principal amount of an investment. It is one of the major
characteristics of an investment. The risk depends on the following factors:

• The investment maturity period is longer; in this case, investor will take larger risk.
• Government or Semi Government bodies are issuing securities which have less risk.
• In the case of the debt instrument or fixed deposit, the risk of above investment is
less due to their secured and fixed interest payable on them. For instance, debentures.

3) Liquidity:

Liquidity refers to an investment ready to convert into cash position. In other words, it
is available immediately in cash form. Liquidity means that investment is easily
realizable, saleable or marketable. When the liquidity is high, then the return may be
low. For example, UTI units. An investor generally prefers liquidity for his investments,
safety of funds through a minimum risk and maximization of return from an investment.

4) Capital Growth:

One of the important principles of investment is capital appreciation. A company

flourishes when the industry to which it belongs is sound. So, the investors, by
recognizing the connection between industry growth and capital appreciation should
invest in growth stocks. In short, right issue in the industry should be brought at the right
time.

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5) Legality:

All investments should be approved by law. Law relating to minors, estates, trusts,
shares and insurances be studied. Illegal securities will bring out many problems for the
investor. One way of being free from care is to invest in securities like Unit Trust of
India, Life Insurance Corporation or Savings Certificates.

The management of securities is then left to the care of the Trust who diversifies the
investments according to safety, stability and liquidity with the consideration of their
investment policy. The identity of legal securities and investments in such securities will
also help the investor in avoiding many problems.

6) Tangibility:

Intangible securities have many times lost their value due to price level inflation,
confiscatory laws or social collapse. Some investors prefer to keep a part of their wealth
invested in tangible properties like building, machinery and land. It may, however, be
considered that tangible property does not yield an income apart from the direct
satisfaction of possession or property.

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 1.5 IMPORTANT TERMS OF INVESTING

In investment it is very important to understand that money is put to use wisely.

Customers always want to invest money in such a way that they earn more the rate at
which prices of goods increase. Some of the important terms to remember are:

❖ Investing

In financial terms, Investing is:

➢ Commitment of money or capital in a business, project or enterprises to gain a profit

after thoroughly analysing the past performance and future prospects of business,
project or enterprise.
➢ Stocks, bonds, cash equivalents and mutual funds are the most common form of
investment.
➢ Stocks, bonds, mutual funds and certificate of deposits are commonly termed as
securities.
➢ Investments in each of the securities is possible either through the primary or the
secondary market route through financial intermediaries and distributors such as
investment banks, brokerage house and now banks as well.

❖ Speculation

➢ Speculation implies the act whereby people make an investment in a risky asset,
hoping to obtain profits from future changes in the prices of the asset. This hope
could be based on reports that people may have heard but they may not have checked
the credentials of the assets.
➢ Speculative investors tend to be active traders. This means that they're attempting to
beat the market average and have more of a hands-on approach, especially during
short-term swings in the market.
➢ We have learnt that investment making involves understanding the financial
strength, future prospects, expected returns and the corresponding risk. The detailed
analysis helps in taking a considered view.

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➢ Speculation involves taking a short-term view based on the volatilities of the market
in order to benefit from the price movements. A speculator works on the assumption
of favourable price movements which may or may not be happen. A speculator may
use technical charts and analysis to predict price movement but the same will lack
scientific rigor.

❖ Gambling

➢ It may mean taking a pot-shot that may or may not yield result. There is no real basis
for taking such actions except for some sort of hunch or tip and without any kind of
in-depth analysis of the company or its shares. A dart board investment style will
fall under this category.

➢ This is an interesting story to share. A group of people tested this in 1967 through
the Forbes magazine in New York. They threw darts at the stock markets quotations
page and picked in all 28 shares. A notional equal amount was invested in each of
the selected shares. Fifteen years after the experiment, it was found that their
notional portfolio had outperformed the stock market average.

❖ Shorting
➢ There is time lag between the deal for sale and the delivery (say of shares), this
allows a person to sell something that he or she does not possess. During the time
lag, the investor buys the requisite quantity and if able to do so at a cheaper price
that of the sale price, he or she is able to book a profit. This transaction is called
short selling or shorting.

❖ Hedging

➢ Every investment has an inherent risk and an investor takes steps to reduce this risk.
This technique is called hedging which may involve cover operations such as buying
a call or selling a put or taking forward cover against foreign exchange exposure etc.

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➢ Another variation could be immunization. Especially in case of debt securities where
the investment may be balanced against liability such as loans by holding contra
position. This ensures that any movement in interest rates is automatically offset.

❖ Diversification

➢ Diversified portfolio the return is the weighted average return but the risk of the
portfolio is lower as compared to the risk in the individual securities.
➢ Individual investment should be so chosen that there is not much correlation amongst
investment. It should be remembered that the diversification also reduces the
probability of making higher than expected returns.

❖ Arbitrage

➢ Arbitrage involves taking advantage of price differential in different markets. An

arbitrageur continuously monitors different markets with the help of sophisticated
tools and seeing an opportunity buys and sells in different markets to make large
profits.
➢ Such price differentials tend to exist for every short period due to inefficiencies but
equally correct fast. However, such techniques are not as risk free as they may appear
due to timing and settlement differences.

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 1.6 BENEFITS OF FINANCIAL PLANNING

Financial Planning helps us give direction and meaning to our financial decisions.
It allows us to understand how each financial decision affects other areas of finance. For
example, buying a particular investment product may help your client to pay off his
mortgage faster or may delay his retirement significantly. By viewing each financial
decision as a part of a whole, you may help your client consider the long-term and the short-
term effects on his life goals.

❖ Tips to achieve the best results from your financial planning:

➢ Set Measurable Financial Goals:

Set specific targets of what you want to achieve and when you want to achieve
results. E.g., Instead of saying you want to be “comfortable” when you retire or that
you want your children to attend “good” schools, you need to quantify what you
“comfortable” and “good” mean so that you’ll know when you have reached your
goals.

➢ Understand the Effect of Each Financial Decision:

Each financial decision you make can affect several other areas of your life. E.g., an
investment decision may have tax consequences that are harmful to your estate plans
or a decision about your child’s education may affect when and how you meet your
retirement goals. Remember that all of your financial decisions are interrelated.

➢ Re-Evaluate Your Financial Situation Periodically:

Financial planning is dynamic process. Your financial goals may change over the
years due to things like an inheritance, marriage, birth, house purchase or change of
job status. Revisit and revise your financial plan to stay on track with your financial
goals.

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➢ Start Planning as Soon as You Can:
People who save or invest small amounts of money early and often tend to do better
than those who wait until later in life. By developing good financial planning habits
such as saving, budgeting, investing and regularly reviewing your finances early in
life, you will be better prepared to meet life changes and handle emergencies.

➢ Be Realistic in Your expectations:

Financial planning won’t change your situation overnight; it is a lifelong process.
Remember that events beyond your control such as inflation or changes in the stock
market or interest rates will affect your financial planning results.

➢ Measure and Improve Asset Allocation:

Asset allocation is a critical element of managing your money. There has to be a fine
balance struck between managing risk and returns, and the right assets need to be
chosen for the same. Financial planning helps in selecting the right asset allocation
mix depending on your risk and return preferences.

➢ Future Visibility:
Planning is for the future. While we have often heard quotes saying that you should
live the present and not dwell on the past or worry about the future, when it comes
to money, considering the future becomes very important. Financial planning helps
you get visibility for next 15-20 years. You are able to get comfort on retirement and
planning your money during emergency situations. This helps in achieving peace of
mind and also helps you plan in case there is a gap.

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 1.7 INVESTMENT PLANNING PROCESS

Introducing Investment Planning Process:

Most of us would like to look at life as a continuum from the cradle to grave where all phase
of life is joyful and well taken care of financially. While most people spend to satisfy their
immediate needs, they would also like to save and invest so as to take care of their future
needs and emergencies. People also desire to have a reasonable return and create a corpus.

However, different people have different perceptions of risk in investing. Some people are
aggressive investors, whereas, other people may be moderate or conservative investors. As
the needs evolve or undergo a change through various phases of life, the financial behaviour
of people too undergoes corresponding changes.

❖ Some of the Needs of People at Different Phases of Life are:

• Protection against premature death.
• Retirement planning.
• Protection from disability and health.
• Education and marriage of children.
• Wealth creation.
• Wealth preservation.

❖ Steps Involved in Planning Process:

The various stages in the process of planning are as follows:

1) Goal Setting:
• Plans are the means to achieve certain ends or objectives. Therefore, establishment
of organizational or overall objectives is the first step in planning. Setting objectives
is the most crucial part of planning. The organizational objectives should be set in
key areas of operations.

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• They should be verifiable i.e., they should as far as possible be specified in clear and
measurable terms. The objectives are set in the light of the opportunities perceived
by managers. Establishment of goals is influenced by the values and beliefs of
executives, mission of the organization, organizational resources, etc.

2) Developing The Planning Premises:

• Before plans are prepared, the assumptions and conditions underlying them must be
clearly defined. These assumptions are called planning premises and they can be
identified through accurate forecasting of likely future events.
• They are forecast data of a factual nature. Assessment of environment helps to reveal
opportunities and constraints. Analysis of internal (controllable and external
uncontrollable) forces is essential for sound planning premises are the critical factors
which lay down the bounder for planning.
• They are vital to the success of planning as they supply per tenant facts about future.
They need revision with changes in the situation. Contingent plans may be prepared
for alternate situations.

3) Reviewing Limitation:
• In practice, several constraints or limitations affect the ability of an organization to
achieve its objectives. These limitations restrict the smooth operation of plans and
they must be anticipated and provided for.
• The key areas of limitations are finance, human resources, materials, power and
machinery. The strong and weak points of the enterprise should be correctly
assessed.

4) Deciding the Planning Period:

• Once the broad goals, planning premises and limitations are laid down, the next step
is to decide the period of planning. The planning period should be long enough to
permit the fulfilment of the commitments involved in a decision.

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• This is known as the principle of commitment. The planning period depends on
several factors, e.g., future that can be reasonably anticipated, time required to
receive capital investments, expected future availability of raw materials, lead time
in development and commercialization of a new product, etc.

5) Formulation of Policies and Strategies:

• After the goals are defined and planning premises are identified, management can
formulate policies and strategies for the accomplishment of desired results. The
responsibility for laying down policies and strategies lies usually with management.
But the subordinates should be consulted as they are to implement the policies and
strategies.
• Alternative plans of action should be developed and evaluated carefully so as to
select the most appropriate policy for the organization. Imagination, foresight,
experience and quantitative techniques are very useful in the development and
evaluation of alternatives.
• Available alternatives should be evaluated in the light of objectives and planning
premises. If the evaluation shows that more than one alternative is equally good, the
various alternatives may be combined in action.

6) Preparing Operating Plans:

• After the formulation of overall operating plans, the derivative or supporting plans
are prepared. Several medium range and short-range plans are required to implement
policies and strategies.
• These plans consist of procedures, programmers, schedules, budgets and rules. Such
plans are required for the implementation of basic plans. Along with the supporting,
plans, the timing and sequence of activities is determined to ensure continuity in
operation.

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7) Integration of plans:
• Different plans must be properly balanced so that they support one another. Review
and revision may be necessary before the plan is put into operation. Moreover, the
various plans must be communicated and explained to those responsible for putting
them into practice.
• The participation and cooperation of subordinates is necessary for successful
implementation of plans. Established plans should be reviewed periodically so as to
modify and change them whenever necessary.
• A system of continuous evaluation and appraisal of plans should be devised to
identify any shortcomings or pitfalls of the plans under changing situations.

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 1.8 FORMULATION OF GOALS AND NEED ASSESSMENT

Formulation of Goals:

Financial goals are the milestones that the client hopes to reach with the help of his financial
resources.

1) These Milestones Could be Concerning Different Aspects of Life

Like:
➢ Savings for marriage/ childbirth.
➢ Buying a new car/ house/ electronic equipment.
➢ Creating a corpus for retirement.
➢ Creating a corpus for children’s education.
➢ Adequately insuring self and family.
➢ Creating cash reserves for emergency usage, etc.
➢ The financial planner should ensure that the goals are:
a) Specific.
b) Realistic.
➢ Measurable/ Quantifiable in money terms.
➢ To be achieved within a specific time period.

Once the client has stated clear, quantifiable goals for financial planning, the next step is to
rank those goals in order of importance. This is necessary because most clients do not have
the resources to fulfil all their goals. The financial planner must make it clear to the client
that less important goals must be sacrificed or postponed to achieve the more important
ones. The financial planner needs to work out the amount of money available for achieving
these goals. To achieve most financial goals, the client would need to start saving and
investing appropriately. Therefore, it is important for the financial planner to know where
the money to invest will be coming from.

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2) Analyse Investor Objectives, Needs and Current Financial
Situation:
a) Preparation of the investor’s personal

Financial Statement preparation of the Cash Flow Statement and the Budget
Prioritizing Goals is the first step. The next step is to prioritize the financial goals of
the client and work out the amounts that are required to be invested towards
achieving these goals.

b) Evaluative qualitative factors

Qualitative factors have a significant bearing on the financial plan for a client. The
client’s tolerance towards risk, investment preferences, current health status, etc.,
need to be kept in mind while evaluating alternative strategies.

3) Developed Appropriate Strategies and Present the Financial Plan:

A financial planner needs to develop appropriate strategies for the client in the following
areas:

➢ Cash flow management

➢ Insurance planning
➢ Investment planning
➢ Retirement planning
➢ Income tax planning
➢ Estate planning
➢ Need analysis

Identifying needs of protection, retirement, health, wealth creation and preservation. In

this step, growth of the economy and the progress of the society are essential for all
round development of an individual. Individuals invest in various financial instruments,
which in turn reap returns not only from the individual investments but also from the
overall economic growth.

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 Inflation is one of the major concerns of a Central Bank while formulating monetary
policies of the country. Among its many adverse influences, inflation can take away
gains from any investment. An investor would like to gain more than the inflation rate
to have a real return from the investment.

Another concern is longevity and after retirement life spans, coupled with small
nucleus family norms. Therefore, any financial plan has to take care of this concern,
which is a crucial need. Of course, a wise financial planner would always first take
care of the general and life insurance needs of an individual before commencing
financial planning for other needs and investment.

Planning the investment involves lot of preparation before investors invest

their money, they need to answer the following questions: -

➢ What are their investment goals? Do they expect short term benefits or long-term
benefits?
➢ For how long they want to invest or what is the time horizon of investment? Is it 3
years, 5 years or 10 years?
➢ How much money do they have to invest? Can they realistically achieve their
investment goals without any stain?
➢ Do they any short-term financial needs, for example a housing loan, whereby they
may not be able to invest as much as they would like?
➢ Do they need to live off the return on their investments, in later years? If yes, will
the investments provide enough profits for them to live comfortably?
➢ Should they invest in stocks, bonds, mutual funds or pension funds?

Saving too little money or investing erratically is a drain on the investor’s financial
resources. A wise investor would introspect before saving or investing. When investors
have completed the initial plan, they should decide on specific goals. For this they should
consider if their investment would pay for their goals.

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▪ Some of the common goals of investor are:
➢ Children’s education
➢ A down payment for a house
➢ Retirement

▪ The answer to the preceding goals would lead to information related

to: -
➢ How much money they require?
➢ How much time do they have to get there?
➢ What are the investment vehicles that they may be appropriate for the them?
➢ What are the kinds or returns they can expect?
➢ The more the specific are the investors, the more likely they can plan and achieve
reasonable goals.

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 1.9 INVESTOR PROFILE AND BEHAVIOUR

Motive of investor both rational and irrational are considered under the behavioural finance
as defining the long run price formation in financial markets. The traditional finance on the
other hand seeks to understand the financial markets by using models based on rational
behaviour of the investors.

It is expected from rational investor that they update their beliefs correctly on receiving new
information and make choices in tune with expected utility. A crucial component of any
model of financial markets is a specification of how investors from expectations. Some of
these are:

➢ Optimism and Wishful Thinking:

Most people display unrealistically rosy view of their abilities and prospects.

➢ Representativeness:

People try to determine the probability if an item belongs to a set or a model generates
a data set.

➢ Conservatism:

People may be reluctant to search for evidence that contradicts their beliefs, they tend
to treat such evidence with excessive scepticism, and they may misinterpret evidence
that goes against their hypothesis.

➢ Belief Perseverance:

People often cling to their beliefs tightly and for too long.

➢ Availability Bias:

When judging the probability of an event, people often search their own memories for
relevant information.

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 1.10 CONDUCTING RISK ASSESSMENT

❖ Assessment of risk is conducted by: -

➢ Risk profile
➢ Recommending appropriate asset allocation

The planner needs to understand the risk appetite of the investor. Generally, investors are
asked to fill in a form to ascertain their risk appetite. This helps to categorize the investor
into aggressive, moderate and conservative investors based on their risk profile.

There is always a correlation between the risk appetites of the investors and the returns they
expect. Higher the risk, higher is the return expected. This is known as risk return trade off.
Concepts such as portfolio, diversification, risk and return and techniques for reducing and
hedging risk are some of the tools for financial planning.

For example: equity shares by their nature are riskier as compared to a fixed deposits or
government securities. Higher returns are expected from the equity shares.

Therefore, keeping a portion of the surplus in the form of fixed deposits or government
securities reduces the risk of the portfolio comprising equity shares (though it may also
lower returns).

❖ Types of Investors

As the investment option for each of the investor types is different, it becomes essential
to determine the style of investor before they invest. The various investor types are:

➢ Aggressive Investor:

An aggressive investor commonly has a higher risk tolerance and is willing to risk more
money for the possibility of better, yet unknown, returns. An aggressive investor
focuses on capital appreciation instead of creating a stream of income or a financial
safety net.

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➢ Moderate Investor:

Moderate investor is an investor who is content and believes in earning slow and steady
gains and is not interested in making quick money. A long-term investor is one who
does not mind taking some occasional risk so as to optimize returns and achieve
continuous growth.

➢ Conservative Investor:

Conservative investor is a risk adverse investor whose primary objective is capital

preservation. Such investors want a steady growth in income and are not capable of
taking shocks, in terms of losses in investment. In other words, they are passive
investors.

❖ Some of the high-net-worth individuals can be segmented as follows:

➢ Wealth Builders:

Wealth builders are individuals, who are actively adding to their asset base, are fairly
risk seeking and expect the best possible returns for every unit invested, they have a high
current income and financial equipment.

Typically, they would be owners of business or top-level employees in corporate. They

invest actively and are competitive, demanding and fickle-minded. On the other hand,
they also tend to be receptive to new ideas and schemes.

➢ Wealth Preservers:

Wealth preservers are individuals, whose main focus is to protect whatever wealth they
already have. They do not tend to try out new product until they have enough data on its
performance.

Typically, they are at retirement stage or already retired with low current income, they
tend to be risk adverse and relatively passive investors. They could also be inheritors of
wealth whose main objective is wealth conservation.

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Types of Variables for Determining an Investor Style:

There are two major variables, which help the investors in determining their investment
style:

• Risk Tolerance
• Time

➢ Risk Tolerance:

Investors with distinct investment style invest in different types of products having
varying risk return relationships. There are various degrees of risk across the investment
spectrum, from government savings bonds which are the least risky to equities,
commodities and options which are the risk.

The former, carrying only sovereign risk are considered risk free because of the
government guarantees. Although the government of India saving bonds and bank fixed
deposits (FDs) are the safest, the returns offered are not very attractive. Although stocks
have historically increased in the price over the long-term investment in equities
however, could be volatile and very risky over a shorter-term period.

Investor should remember that they do not lose until they sell what they have invested
in. For e.g., if an investor in United States did not panic and sell his stocks in October
1987, he would have done quite well because the market rebounded in the subsequent
years.

The same was true in the Indian market. If investors had not have panicked and sold post
the 800 points fall in a single day on May 17, 2004 at the Bombay Stock Exchange
(BSE) SENSEX level of 4227.5, they would have done quite well because the market
rebounded sharply from its bottom to trade at 6000 level by mid-November 2004.

Therefore, when investors invest in the stock market, they should think long-term.
Investors should not invest in stocks any money that they would need in the short-term.

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➢ Time:

The time the investors want to spend on investing determines how active they can be as
investors for managing their money. If they want to spend 15 minutes a month on
investing, then they should consider using passive strategies.

However, if they plan to set out eight hours a week to devote to investing, then they can
consider researching companies and pouring over financial statements to pick lucrative
individual stocks.

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 1.11 NEED FOR FINANCIAL PLANNER

❖ Professional Financial Advisory:

➢ Due to higher wealth creation, there is a big demand and growing appetite for
professional planning service in India expert advice is required because of the shift
in the investor attitude towards alternative investment options and desire for
sophisticated and focused products.

➢ As investors have become well informed about financial markets, financial planner
has to be knowledgeable and skilful, regulatory changes have also led to higher
competitions and service standards. Competitions in the financial planning and
wealth management is expected to become more intense in future.

❖ Need for Professional Financial Advisory:

➢ In today’s scenario where there is a huge expansion of middle class with lot of
disposable income, there are financial institutions that are aggressively looking to
enhance the share of the wallet.

➢ The opening up of Indian market and entry of the private players the product range
has widened, and a lot of choice is available with the Indian consumers. For e.g.,
organization such as insurance companies offer a wider choice of products today
unlike in past where only LIC was opening.

➢ For a consumer it is a difficult task to take an informed decision as he has neither

required knowledge nor the time to continuously track the market. Thus, there is a
need for professional financial advisor to enable the consumer to choose the
investment product that suits his requirements and will enable him to need his goal
in creation of wealth.

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❖ Emergence of the New Age Financial Planner:

➢ The financial planning process for individuals gets redefined in the emerging
scenario. The financial planner of today needs to process knowledge of the basic
foundations blocks of financial services sectors. This should be backed by an in-
depth understanding of the various products and services, financial planning and
wealth management process.

➢ Use of technology for this would enable the financial planner to be more productive
on the job. Most importantly, the modern-day financial planner needs to understand
his/her customers with respect to their financial position, their risk appetite and their
future financial needs to be able to recommend suitable investment.

❖ Weeding Out Inefficient Financial Products:

➢ Sometimes people land up taking multiple insurance policies such as Endowment,

Money Back, ULIPs, Pension Plans, etc. Due to the incomplete knowledge or mis-
selling of products through agents. Many a times, these policies do not solve the
purpose of the insured and only result in filling the pockets of the agents who sold
you that policies.

➢ Some policies which promise you a life cover plus returns (market linked) may fail
to do both. Often, these policies provide a very low cover and also low returns due
to the number of charges involved. A financial planner can help you understand
which insurance policy suits you the best and which ones are best avoided.

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 1.12 INVESTMENT AVENUES

❖ EQUITY: “The value of the shares issued by a company.”

What is Equity?

Equity is typically referred to as shareholder equity (also known as shareholder’s equity)

which represents the amount of money that would be returned to a company’s shareholders
if all of the assets were liquidated and all of the company’s debt was paid off.

Equity is found on a company’s balance sheet and is one of the most common financial
metrics employed by analysts to assess the financial health of a company. Shareholder
equity can also represent the book value of a company.

Equity should only be done for the long-term (anything more than 5 years) to earn decent
returns. Risk of investing in equities is high and so the returns are also high. You could
dabble in the stock market broadly in three ways:

1) Directly by buying and selling shares on the stock exchanges- BSE/NSE.

2) Take the plunge via the Mutual Fund route- wherein the options available are: equity
diversified, balanced, tax saving ELSS funds, thematic, exchange traded index
funds.
3) Investing in ULIPs (insurance plans) via their equity funds.

• Book Value:

It literally means the value of the business according to its “books” or financial
statements. In this case, book value is calculated from the balance sheet and it is the
difference between a company’s total assets and total liabilities. Note that this is also the
term for shareholder’s equity.

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 • Market Value:

It is the value of a company according to the stock market. Market value is calculated
by multiplying a company’s shares outstanding by its current market price. If company
XYZ has 1 million shares outstanding and each share trades for $50 million. Market
value is most often the number analysts, newspapers and investors refer to when they
mention the value of the business.

❖ PREFERENCE SHARES

Preference shares are a long-term source of finance for a company. They are neither
completely similar to equity nor equivalent to debt. The law treats them as shares but they
have elements of both equity shares and debt. Preference shares, more commonly referred
to a preference stock, are shares of a company’s stock with dividends that are paid out to
shareholders before common stock dividends are issued. If the company enters bankruptcy,
preferred stock holders are entitled to be paid from company assets before common
stockholders. Most preference shares have a fixed rate of dividend, while common stocks
generally do not. Preferred stock shareholders also typically do not hold any voting rights,
but common shareholders usually do.

• Types of Preference Shares

➢ Convertible Preference Shares:

Convertible preference shares are those shares that can be easily converted into equity
shares.

➢ Non-Convertible Preference Shares:

Non-Convertible preference shares are those shares that cannot be converted into equity
shares.

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➢ Redeemable Preference Shares:

Redeemable preference shares are those shares that can be repurchased or redeemed by
the issuing company at a fixed rate and date. These types of shares help the company by
providing a cushion during times of inflation.

➢ Non-Redeemable Preference Shares:

Non-redeemable preference shares are those shares that cannot be redeemed or

repurchased by the issuing company at a fixed date. Non-redeemable preference shares
help companies by acting as a lifesaver during times of inflation.

➢ Participating Preference Shares:

Participating preference shares help shareholders demand a part in the company’s

surplus profit at the time of the company’s liquidation after the dividends have been paid
to other shareholders.

However, these shareholders receive fixed dividends and get part of the surplus profit
of the company along with equity shareholders.

➢ Non-Participating Preference Shares:

These shares do not benefit the shareholders the additional option of earning dividends
from the surplus profits earned by the company, but they receive fixed dividends offered
by the company.

➢ Cumulative Preference Shares

Cumulative preference shares are those type of shares that gives shareholders the right
to enjoy cumulative dividend payout by the company even if they are not making any
profit.
These dividends will be counted as arrears in years when the company is not earning
profit and will be paid on a cumulative basis the next year when the business generates
profits.

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 ➢ Non - Cumulative Preference Shares

Non - Cumulative Preference Shares do not collect dividends in the form of arrears. In
the case of these types of shares, the dividend pay-out takes place from the profits made
by the company in the current year.

So, if a company does not make any profit in a single year, then the shareholders will not
receive any dividends for that year. Also, they cannot claim dividends in any future profit
or year.

❖ DEBT: “a sum of money that is owed or due”

What is Debt?

Debt is an amount of money borrowed by one party from another. Debt is used by many
corporations and individuals as a method of making large purchases that they could not
afford under normal circumstances. A debt arrangement gives the borrowing party
permission to borrow money under the condition that it is to be paid back at a later date,
usually with interest.

Debt investment can be done for the short-term as well as for the long-term. Risk here is
very low and so return is low as well. Investing in debt can be done by the following ways:

1) Fixed Deposits, POMIS, NSC, PPF, NPS, Bonds, Kisan Vikas Patra, Senior Citizen
Saving Schemes.
2) Debt mutual funds (balanced, floating rate, gilt, liquid and liquid plus) also offer
another way to do so.
3) Traditional insurance policies (money back, whole life, endowment) and the debt
portions of ULIPs can be a mechanism as well.

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 ❖ REAL ESTATE: “property consisting of land or buildings.”

What is Real Estate?

Real Estate is a property made up of land and buildings on it, as well as the natural resources
of land, including uncultivated flora and fauna, farmed crops and livestock, water and
mineral deposits. Although, media often refers to the “real estate market” from the
perspective of residential living. Real estate can be grouped into three broad categories
based on its use:

• Residential.
• Commercial
• Industrial

Examples of residential real estate include undeveloped land, houses, condominiums

(commonly owned apartment house) and town houses.

Examples of commercial real estate are office buildings, warehouses and retail store
buildings.

Examples of industrial real estate include factories, mines and farms.

This again for the long-term with a high risk and very low liquidity factor. Liquidity is
defined as the ease with which you could sell your investment for cash quickly. Investing in
property can be done by:

1) Buying apartments and plots in either residential or commercial areas.

2) Buying Real Estate Mutual Funds.

❖ COMMODITIES

A commodity market is a physical market or virtual marketplace for buying, selling and
trading raw or primary products, and there are currently about 50 major commodity markets
worldwide that facilitate investment trade in approximately 100 primary commodities.

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Commodities are split into two types:

• Hard commodities
• Soft commodities

Hard commodities are typically natural resources that must be mined or extracted (such as
gold, rubber and oil).

Soft commodities are agricultural products or livestock (such as corn, wheat, coffee, sugar,
soybeans and pork).

❖ DERIVATIVE

What is a Derivative?

A derivative is a financial security with a value that is reliant upon or derived from an
underlying asset or group of assets. The derivative itself is a contract between two or more
parties, and its price is determined by fluctuations in the underlying asset. The most common
underlying asset include stocks, bonds, commodities, currencies, interest rates and market
indexes.

For example, on 6th October, 2022 Company A buys a futures contract for oil at a price of
$62.22 per barrel that expires on 19th December, 2022. The company wants to do this
because it needs oil in December and is concerned that the price will rise before the company
needs to make the purchase. Buying an oil futures contract hedges the company’s risk
because the seller on the other side of the contract is obligated to deliver oil to Company A
for $62.22 per barrel once the contract has expired. Assume oil prices rise to $80 per barrel
by 19th December, 2022, Company A can accept delivery of the oil from seller of the futures
contract, but if it no longer needs the oil, it can also sell the contract before expiration and
keep the profits.

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Particulars Risk Returns Capital Liquidity Tax
Appreciation Benefit

Equity High Low High High High

Shares

Debentures Low High Very Low Very Nil

Low

PPF Nil Nil Low Low Moderate

Life Nil Nil Low Low Moderate

Insurance

Real Estate Low Low High in Long Moderate Changes

Term According
to the
Law

Gold/Silver Low Nil High in Long Moderate Nil

Term

Bank Low Low Nil High Nil

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 1.13 FACTORS THAT AFFECT INVESTMENT DECISIONS

There are many factors which directly or indirectly influence capital investment decisions.
Some of the factors that influence the selection of investment alternatives are as follows:

❖ Returns:

Investments are made with the primary objective of deriving returns out of it. Thus, a
good rate of return from an investment is the first and foremost conditions for effective
investment. The returns may be received in the form of annual incomes as well as capital
gains or loss.

❖ Risk:

Risk of an investment is related with the probability of actual returns becoming less than
the expected returns. It can be termed as the variability in the expected return. Risk may
relate to loss of capital, loss of interest/dividend, delay in repayment of capital,
variability of returns, etc. Risk and returns of an investment are related to each other.

❖ Safety:

Safety in an investment implies the certainty of return of capital without loss of money
or time. Safety is another feature which an investor desires from his investment. Every
investor expects to get back his capital on maturity without loss and without further
delay.

❖ Liquidity:

Liquidity means marketability of an investment. Liquidity in an investment refers to the

ability of an investment to be converted in cash by sale or transfer. In simple terms,
liquidity means to get your money whenever you need it.

❖ Tax Benefits:

The investor may also desire to get the benefits of tax exemption from the investments.
Some investments offer tax benefits while others do not. Tax benefits available to an
investment can be in one of the following forms:

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• Investments can offer tax benefits at the time of initial deposits.
• Investments can offer tax benefits on returns generated.

❖ Duration:

The duration of an investment- particularly how long it may take to generate a healthy
rate of return is a vital consideration for the investor. The investment horizon should
match the period that your funds must be invested for or how long it would take to
generate a desired return.

❖ Past Market Trends:

At times, past market trends may also influence selection of investment alternatives.
Sometimes history repeat itself, sometimes markets learn from their mistakes.

❖ Government Policies:

Some government regulations can make investment more difficult. For example, strict
planning legislation can discourage investment. On the other hand, government
subsidies/tax breaks can encourage investment. In China and Korea, the government has
often implicitly guaranteed– supported the cost of investment. This has led to greater
investment- though it can also affect the quality of investment as there is less incentive
to make sure the investment has a strong rate of return.

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 1.14 INSURANCE PLANNING

Insurance is essentially the means to financially compensate for losses that life throws at
people, corporate and others. Insurance can be used as a tool to shield an individual against
potential risks like travel accidents, death, unemployment, theft, property destruction by
natural calamities, fire mishaps, etc.

Insurance policies are used to hedge against the risk of financial losses, both big and small,
that may result from damage to the insured or her property, or from liability for damage or
injury caused to a third party.

Functions of Insurance

The functions of insurance can be categorized as:

❖ Primary Functions:

The following are the primary functions of insurance:

• Provides Protection:

The primary function of insurance is to provide protection against future risk, accidents,
and uncertainty. Insurance is actually a protection against economic loss by sharing the
risk with others.

• Collective Bearing of Risk:

Insurance is a means by which few losses are shared among larger number of people.
Insurance is a device to share the financial loss of few among many others.

• Assessment of Risk:

Insurance determines the probable volume of risk by evaluating various factors that give
rise to risk.

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 • Provides Certainty:

Insurance is a device, which helps to change from uncertainty to certainty. In the sense
that the insured can make provisions against the happening of an uncertain event and
protect against the same.

❖ Secondary Functions:

The following are the secondary functions of insurance:

• Prevention of losses:

Prevention of loss causes lesser payment to the assured by the insurer and this will
encourage for more savings by way of premium. Reduced rate of premiums stimulate
for more business and better protection to the insured.

• Small Capital to Cover Larger Risk:

Insurance relieves the businessmen from security investments by paying small amount
of premium against larger risk and uncertainty.

• Contributes Towards the Development of Larger Industries:

Insurance provides development opportunity to those larger industries having more risks
in their setting up.

❖ Other Functions:

The following are the other functions of insurance:

• Means of Savings and Investment:

Savings and investment through insurance is a disciplined way of savings and it restricts
the necessary expenses by the insured.

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 • Source of Earning Foreign Exchange:

The country can earn foreign exchange by way of issue of marine insurance policies and
various other ways.

• Risk Free Trade:

Insurance promotes exports insurance, which makes the foreign trade risk free with help
of different types of policies under marine insurance cover.

❖ Characteristics of Insurance:

The basic characteristics of insurance are:

• Pooling of Losses:

Spreading of losses incurred by a few over the entire group, so that in the process,
average loss is substituted for actual loss.

• Payment of Fortuitous Losses:

A fortuitous loss is unforeseen, unexpected, and occurs as a result of chance. This could
be accidental and random.

• Risk Transfer:

Pure risk is transferred from insured to insurer, who typically is in a stronger financial
position to pay the loss than the insured.

• Indemnification:

Insured is restored to his or her approximate financial position prior to the occurrence
of the loss.

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 1.15 INVESTMENT PLANNING

❖ Definition:

The placing of funds into the proper investment vehicles based on the investor’s future goals,
time horizon and priorities. This also considers the safety of the investments as well as
liquidity and level of return. Ideally, proper investment planning will allow the investor’s
funds to produce financial rewards over time.

❖ Investment Plans:

Investment plans help beat inflation and build a large corpus. Proper investment planning
helps to compare investment plans offered by all life insurance companies and select the
best suited investment plan for you. An investment plan should be selected keeping in mind
3 main goals:

• Risk Profile:

If you are a young customer and are willing to take financial risks, a ULIP is better suited
for you while if you’re a conservative investor, then a traditional endowment or money-
back plan will suite your needs.

• Investment Tenure:

Insurance plans offer a mid-to-long term investment horizon. Unit Linked Plans or
ULIPs are very good long-term instruments.

• Final Goal:

When you want to build the corpus for retirement or child’s education.

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❖ Top Investment Product Categories in Insurance:

• Unit Linked Insurance Plan:

The easiest way for a consumer to enter the stock market with an added advantage of
life cover. As these products provide tax benefits and market linked returns, they are
very good for long-term investment. ULIPs offer many investment funds to choose from,
which allow you flexibility to shift between equity and debt, based on the market
conditions and risk profile.

• Traditional Endowment Plans:

Regular savings plans which help build a corpus and give guaranteed maturity benefits
along with bonuses. These products give you returns equivalent to a fixed yield/deposit
but also combine insurance risk cover and add-on riders to primarily build the safety
cushion in case something goes wrong.

• Money Back Plan:

Type of endowment plans which give periodic cash payouts to investors. As they help
build regular large capsules of fund; they are very useful for salaried class who wish to
save for buying large assets every 3-5 years.

Child Plans are saving instruments which help parents build a protected asset for their
child’s future. They also provide many insurance features which protect the intent or
reason for corpus building; primarily for child’s future education and expenses.

❖ Key Things to Remember While Investing:

➢ Set financial goals- both short-term and long-term.
➢ Maintain balance between risk and returns- allocate amount accordingly.
➢ Investments should be both liquid and fixed- this enables you to use them in
emergencies as well as avoiding overspending.
➢ Start small and gradually increase invested amount- choose premium payment
options ranging from monthly to annual to single premium.

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➢ Research a lot before investing- use help of financial planner if need be.
➢ Review portfolio each year and make changes accordingly.
➢ Ask questions- resolve all your doubts before investing. Use investment calculator
to calculate exact premium before buying.

❖ Other Investment Options to Choose from:

• Mutual Funds:

This is a professionally managed trust in which investment is pooled from retail

investors. The accumulated amount is invested in different financial instruments like
shares, securities, etc. As the income is earned on these instruments, it is shared
proportionally among investors. Mutual Fund is considered a very good investment
option due to its very low charge structure.

• Investment in Gold:

The value of gold has been appreciating steadily. Looking at the last few years, there
has been more than 22% annualized returns; this makes gold a very good investment
option. For people interested in investing in gold, there are various methods which
include physical gold, e-gold and gold ETF.

• Bank Fixed Deposits and Postal Schemes:

These 3 options are most suitable for making safe investments. The interest rate on PPF
account is presently at 8.8% per annum and keeps changing every year; different banks
offer different interest rates. There are also many postal investment schemes which can
be bought.

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 1.16 RETIREMENT PLANNING

The main goal of a successful retirement planning is ensuring that one will have sufficient
financial resources to maintain or improve one’s lifestyle during his/her retirement years.
According to some financial experts, to do so, one will need to save enough.

❖ Ascertain Requirements Post Retirements:

• One popular approach to retirement planning starts by determining how much
finance one will need for their retirement.
• This is usually based on projected increase in cost of living, the number of years one
is likely to spend in retirement.
• The years one spends in retirement may be more or less than one projected. The
same may go for the increase in cost of living.
• However, a comprehensive outlook and some thought will help to provide realistic
projections.

❖ Steps to Retirement Planning:

• The longest of journeys start with single step. We are not sure who said that, but
being in the financial planning space, we think it most aptly describes what
retirement planning is all about.
• Planning for retirement is one long journey but a resolute and systematic step by step
approach makes it a lot less laborious.

❖ Start Early:
• A well-prepared approach towards any goal is usually the result of an early start.
Retirement planning is no different. We hear financial planners say that it’s never
too early to start saving for retirement and they are right.
• Make no mistake that an early start helps, and one will be surprised at just how much
it helps. A friend or colleagues, who started saving for retirement even five year
earlier than another with the same quantum of investment.
• Even if doesn’t have the requisite amount of money required to start, the key lies in
starting with whatever is available and making up for the deficit at a later stage.

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❖ Implementing the Plan:
• Having an investment plan in place sets the ball rolling for an investor and the
investment advisor who will implement the plan by making investment in stock,
mutual funds, bonds, small saving schemes.
• The most important reference point for the investment plan is the objective to invest
in avenues that lower risk and maximize returns and do so in line with one’s risk
profile.
• This is where the investment advisor’s expert advice will play a crucial role.
Typically, a retirement portfolio should be well diversified across pension plans,
mutual funds, equities, EPF/PPF and fixed deposit.

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 1.17 INCOME TAX PLANNING

One of the important considerations in making any investment choice across asset classes is
tax implication of investment decision. Tax planning plays an important role in portfolio
management especially in the current scenario of complex tax structure.

• Tax Planning has been described as a form of arrangement of a taxpayer’s financial

affairs in such a way that the tax liability is reduced. This is achieved by taking full
advantage of all the tax exemptions, deductions, concessions, rebates, relief,
allowances and any other benefits granted by the tax laws.

• Every person, whose total income of the previous year exceeds the maximum
amount that is not chargeable to income tax, is an assessed.

• An income can be taxed under the head “Salaries” where there exists an employer-
employee relationship between the payer and the payee.

• The annual value of property consisting of any buildings or lands appurtenant thereto
of which the assessed is the owner shall be chargeable to income-tax under the head
“Income from House Property”.

• The gain on sale of a capital asset is called capital gains. The following are various
types of capital gains:
a) Capital gains arising on the transfer of short-term capital asset.
b) Capital gains arising on the transfer of long-term capital asset.

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 1.18 ESTATE PLANNING

Estate planning refers to the process by which an individual or his/her family arranges the
transfer of assets to the legal heirs in the event of death or disability of the individual.

It includes the distribution of the real and personal property of an individual to his/her heirs.
An estate plan aims to preserve the maximum amount of wealth possible for beneficiaries
and flexibility for the individual prior to his death.

The objectives of estate planning are:

➢ Asset Transfer to Beneficiaries:

Every individual wish that his/her accumulated wealth should reach the hands of the
beneficiary of his/her choice. A beneficiary can be his/her children, parents, friends, or
any other person.

➢ Tax-Effective Transfer:

To ensure least tax deduction on such transfer of wealth.

➢ Planning in Case of Disabilities:

It ensures smooth functioning of asset management within the family in case an

individual gets disabled.

➢ Time of Distribution can be pre-decided:

Individuals having minor children may wish to transfer the assets only after the children
attain a certain age, to avoid misuse that may happen due to lack of maturity and
discretion.

➢ Business Succession:

Organized succession or winding up can be defined in case of an individual handling a

business.

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➢ Selection of the Trustee/Guardian or the Executor:

An individual need to be appointed to carry out the function such as:

• Distribution of assets to the beneficiaries as per the individual’s wish.

• To pay testamentary and funeral expenses.
• Applying for a probate.
• Paying all the expenses and outstanding debts.
• Ensuring all the benefits due to the deceased, such as life insurance, pension and
other benefits are received.
• Arranging for filing of tax returns.

❖ Tools of Estate Planning:

• Trust:

A trust is an entity created to hold assets for the benefits of certain person or entities.

• Power of Attorney:

It is a formal arrangement by which one person gives another person authority to act on
his/her behalf and in his/her name.

• Gift:

It is a relinquishment without consideration of one’s own right in property and the

creation of the right of another.

• Partition:

It is the process by which the property held in undivided shares by joint tenants or
coparceners is divided among them. A partition does not involve transfer in law; hence
partition does not attract liability to tax on capital gains.

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• Will:

It is a legal document through which, one can allocate one’s assets and property to the
loved ones after death.

• Intestate Succession:

The Indian Succession Act states that any attempt to set out the exact share of each such
person and its fluctuation depends on various factors. The share taken by each sharer
will fluctuate in different circumstances.

• Life Insurance:

It is a good estate planning tool. The main reason for a life insurance is that when the
insured name has beneficiaries, the money passes to them directly, without probate.

55
 1.19 FIXED INCOME SECURITIES

❖ Fixed Income Securities are essentially of two types:

• Tradable Securities:

It means they have a secondary market where they can be sold or tradable securities. An
example of tradable securities is debentures. The various types of tradable securities are:

➢ Government Securities
➢ Corporate Bonds

• Non-Tradable Securities:

The securities cannot be traded and have to be held by the investor until maturity. An
example of non-tradable securities is bank deposits. Non-tradable securities are of the
following types:

➢ Post Office/ Monthly Income Schemes

➢ N.S.C.
➢ P.P.F.
➢ Company Deposits

❖ Features of Fixed Income Securities:

• Safety:

Fixed income investments generally have two features associated with them. Return of
capital at the end of a specified period and/or a specified rate of return for a specified
period.

• Income Expectation:

With the exception of Floating Rate Securities, the coupon is set as issuance and remains
the same until maturity.

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• Choice:

The different fixed income instruments in the market allow you to choose from a range
of credit ratings and maturity periods.

• Risk Profile:

The prices of debt securities display a lower average volatility as compared to the prices
of other financial securities. This does give fixed income securities a low risk profile.

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 CHAPTER 2
RESEARCH METHOLOLOGY

The validity of any research depends on the systematic method of collecting the data and
analysing the same in a sequential order. In the present study the required data was used in
primary nature. Questionnaire method has been used to collect the data.

2.1 DATA SOURCE

• Primary Data:
Primary Data refers to the data that the investigator collects for the very first time. This
type of data has not been collected either by this or any other investigator before. A
primary data will provide the investigator with the most reliable first-hand information
about the respondents. For this research the Primary data has been collected through
Questionnaire method.

• Secondary Data:
Secondary Data refers to the data that the investigator collects from another source. Past
investigators or agents collect data required for their study. For this research the
secondary data has collected through various Journals, Books and Internet.

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 2.2 OBJECTIVE OF THE STUDY

➢ To study awareness about various investment avenues among Indian investors.

➢ To study investment decisions of people while investing.
➢ To study that what are the factors that affect the investment decisions of the people.
➢ To study whether people will prefer to invest in private sector or government
➢ sector.
➢ To study what is the investment objective of people.
➢ To make people aware about taxation benefits from various investment
opportunities.
➢ To study the reason why the people are not investing their money.
➢ To ascertain investors behaviour and problems faced by them.
➢ To suggest suitable measures to enhance the level of awareness of investors.

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 2.3 SAMPLE SIZE
Sample size means the total number of respondents for particular research. For this research
Sample size is limited to 50 Respondents only.

2.4 SAMPLE DESIGN

The sample design used in this research is Pie Diagram.

2.5 LIMITATION
• The time available for the research was less, also the respondents were very less.
Therefore, much information is not gathered.
• Respondents may have given wrong information from their side.
• No of respondents were only 50

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 CHAPTER 3
REVIEW OF LITERATURE

❖ Article 1: A Review of Literature on Financial Investment Decisions

of Individual Investor: Behavioural and Risk Related Explanations

F. Akhtar, K.S. Thyagaraj, N. Das

Abstract:
In the present scenario. everybody needs investment. even if one does not
participate directly in selection of any particular investment regime, participation still occurs
through pension plans, saving schemes of banks and post offices and life insurance policies.
With the advent of globalization and diversification of financial markets, investment
opportunities for the retail investors have increased. Investor's decision-making capacity is
highly influenced by many factors such as the return he would be getting for holding any
particular financial security. Therefore, in order to understand the individual investor
behaviour many factors have to be considered such as stock preferences, risk tolerance.
objective and pattern of investment etc. Insight about the desire, socio-demographic profile,
financial know-how and nurturing environment play a very crucial role in understanding the
movements of financial markets.

In the present study, the enormous literature related to investor behaviour have been
analysed and explored. The study tries to propose a conceptual framework by exploring the
various empirical studies done on investor behaviour. Also, the economic boom in India has
boon to many in terms of increased job and business prospects. The past decade has
witnessed changes in consumer lifestyle and has influenced many activities, including
investment activity. People used to invest savings in various avenues. There are considerable
variations in the availability of investment avenues in pre-liberalization and post-
liberalization period. Even changes in demographic profile of India substantiate these
changes in investment avenues, their growth and a spurt in the new avenues. This article
tries to study the relationship between demographic profiles and investment choice of the
investors.

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 ❖ Article 2: The Potential or Actuarial Decision Models: Can they
Improve the Venture Capital Investment Decision?

Andrew L. Zacharakis, G. Dale Meyer

Abstract:
Venture capitalists (VCs) are considered experts in identifying high-potential new
ventures-gazelles. VC-backed ventures survive at a much higher rate than those ventures
backed by other sources (Kunkel and Hofer 1991; Sandberg 1986; Timmons 1994). Thus,
the VC decision process has received tremendous attention within the entrepreneurship
literature. Nonetheless, VC-backed firms still fail at a surprisingly high rate (20%).
Moreover, another 20% of the VC’s portfolio fails to provide any return to the VC.
Therefore, there is room for improvement in the VC investment process.

The three staged investment process often begins with venture screening. First,
VCs screen the hundreds of proposals they receive to assess which deserve further
consideration. Those ventures that survive the initial stage are then subjected to extensive
due diligence. Finally, the VC and entrepreneur negotiate terms of the investment.
Considering the amount of time that due diligence and negotiation of terms may take, it is
imperative that VCs minimize their efforts during screening so that only those ventures with
the most potential proceed to the next stage. Yet, at the same time, the screening process
should also be careful not to eliminate gazelles prematurely. VCs are in a quandary. How
can they efficiently screen venture proposals without unduly rejecting high potential
investments? The answer may be to use actuarial decision aides to assist in the screening
process,

Actuarial decision aides are models that decompose a decision into component
parts (or cues) and recombine those cues to predict the potential outcome. For example, an
actuarial model about the VC decision might decompose a venture proposal into decisions
about the entrepreneurial team, the product, the market, etc. The sub-component decisions
are then recombined to reach an overall assessment of the venture's potential. Such models
have been developed in a number of decision domains (e.g., bank lending, psychological
evaluations, etc.) and been found to be very robust. Specifically, these models often
outperform the very experts that they are meant to mimic.

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 The current study had 53 practicing VCs participate in a policy capturing
experiment. The participants examined 50 ventures and judged each venture's success
potential; would the venture ultimately succeed or fail. Likewise, identical information
about each venture was input into two types of actuarial models. One actuarial model—a
bootstrap model—used information factors that VCs had identified as being most important
to making a good investment decision. The second actuarial model was derived by Roure
and Keeley (1990). The Roure and Keeley model best distinguished between success and
failure in a study of 36 high-technology ventures. The bootstrap model outperformed all but
one participating VC (he achieved the same accuracy rate as the bootstrap model). The
Roure and Keely model, although less successful than the bootstrap model, outperformed
over half of the participating VCs.

The implications of this study are that properly developed actuarial models may be
successful screening decision aides. The success of the actuarial models may be attributed
to their consistency across different proposals and time. The models always weight the
information cues the same. VCs, as are all human decision makers, may often be biased by
differing salient information cues that cause them to misinterpret or ignore other important
cues. For example, a VC may overlook product weaknesses if he/she is familiar with the
entrepreneur putting forth a particular proposal. Although the current study developed a
generalized actuarial model, each VC firm could create screening models that fit its
particular decision criteria. The models could then be used by junior associates or lower-
level employees to perform an initial screen of received venture proposals thereby freeing
senior associates' time.

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 ❖ Article 3:

Investor’s perceptions and attitudes towards savings and investment avenues are
deeply influenced by socio-economic environment. Education, income level, values, and
beliefs and accessibility to financial services determine the investor's behaviour. Agrawal
(2009) noted that there is no significant difference between male and female investors in the
expected rate of return.

Sivakumar and others (2012) explained that awareness about investment avenues
is very low among rural people compared to urban people. The research scholars suggested
that educational status should be improved in the rural sector. Reddy S. G. (2005) observed
that the investors invest their funds on the basis of rate of return. Most of the investors
studied by him had preferred to invest in pension policies in hope of getting tax benefits.

Syed Tabssum Sultana and Pardhasaradhi S, (2011) concluded in their empirical

study that Indian individual investors are conservative investors. Marital status, earnings,
occupation and number of dependents are significant factors associated with risk tolerance.
Rasika Tejashree (2013) suggested that investors need investment education and well
informed about investment avenues through TV, internet, newspapers and professional
journals in order to enhance the awareness level.

Priyalaxmi and Dhanlaxmi (2014) examined investors' preferences towards various

forms of investment viz., shares, bank deposits, gold, real estate. life insurance, postal
savings and mutual funds and found that bank deposits were popular among the investors.
The researchers concluded that there was no significant association between income level
and investment awareness level.

Kathuria and Singhania (2010) found that print media and websites are two most
important sources of information that helped investors to make investment decisions. The
investors had given preference to postal deposits, insurance and public provident funds.
Kasilingam and Jayapal (2010) pointed out that the choice of individual investors is affected
by family income. timing of investment and savings motives.

64
 In contrast to this, Keshvan, Chidambaram and Ramchandran (2012) noticed that
age, gender, educational qualification, occupation and annual income do not influence the
type of investment avenues. It is to be noted that not much research studies have been
conducted on the awareness level of rural investors and their pattern of investment in India.
Finding the gap, the present study was designed to understand the association between
education and investment awareness level and preferences of rural investors.

65
 ❖ Article 4
Tina Vohra, Rustozee

Individuals across the globe have become increasingly active in financial markets.
The advent of new technology, the availability of various financial products, the
liberalization of the economy and the support of an efficient banking system have all
facilitated the participation of investors in Indian financial markets. Household savings form
a significant part of investments in any economy. In Indian context, the percentage of
savings is quite high. The high percentage of savings in India is primarily on account of the
savings made by women in India. The role of women in investment decision-making in
India cannot be ignored. Therefore, the objective of the study is to provide insights into the
characteristics that act as strengths and weaknesses of women and to bring out the
opportunities and threats faced by them as investors.

In the present study. the diverse literature available worldwide on investment

decisions of women has been explored and analysed. The findings of the study revealed that
women are holistic thinkers, balanced, intuitive and quality conscious. They adopt a
futuristic approach and perform in-depth research prior to investing. They are good savers
and at the same time self-controlled. All these characteristics acts as their strengths while
undertaking investment decisions. On the other hand. risk aversion, conservative attitude,
lower levels of financial knowledge, lack of confidence, too much dependence on guidance
from others, reluctant to cause unnecessary change in status quo, poor health and
religiousness are their weaknesses. The microfinance, financial literacy and women
empowerment initiatives intend to provide opportunities for their growth and development
whereas a lesser amount of pay, shorter and interrupted employment history, and exclusion
from informal networks act as threats to women's financial well-being. The study suggests
that the endeavours made by women and the support from the society is needed in order to
convert the weaknesses and threats of women into their strengths and opportunities for them,
thereby improving their participation in finance.

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 CHAPTER 4

DATA ANANLYSIS, INTERPRETATION AND PRESENTATION

1) Gender of the Respondent.

Gender Male Female

Respondents 29 21

GENDER

Female
42%

Male
58%

Male Female

Interpretation:
According to this chart out of 50 respondents 21 are Females & 29 are Males.

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 2) Age of the Respondents.

Age Group 11-20 21-30 31-40 41-50

Respondents 12 28 6 4

AGE
Above 40
8%
11-20
31-40 24%
12%

21-30
56%
11-20 21-30 31-40 Above 40

Interpretation:
According to this chart out of 50 respondents, 24% are between the age group of 11-20,
whereas 56% fall in the age group of 21-30, followed by 12% in 31-40 age group and 8%
in Above 40 age group respectively.

68
 3) What is your Profession?

Profession Respondents

Employed 15

Unemployed 6

Student 25

Businessmen 4

PROFESSION
Businessmen
8%

Employed
30%

Student
50% Unemployed
12%

Employed Unemployed Student Businessmen

Interpretation:
According to above pie chart, 30% of the respondents are Employed, 12% are Unemployed,
followed by 50% Students and 8% businessmen respectively.

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 4) Are you aware about various types of investment avenues?

Particulars Respondents

Yes 38

No 12

AWARNESS

No
24%

Yes
76%

Yes No

Interpretation:
According to the above pie chart, 76% of the respondents are aware about various types of
investment avenues while 24% are not aware.

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 5) If yes, who told you about various investment avenues?

Particulars Respondents

Advertisement 17

Family/Friends 15

Banks 10

Financial Advisors 8

SOURCES
Financial Advisors
16%

Advertisement
34%

Banks
20%

Family/Friends
30%
Advertisement Family/Friends Banks Financial Advisors

Interpretation:
The above pie chart suggests that Advertisement (34%) is the most influenceable source of
getting knowledge of investments followed by Friends/Family (30%), Banks (20%) and
Financial Advisors (16%) respectively.

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 6) Have you ever invested your money in share market?

Invested in Share Market Respondents

Yes 32

No 18

INVESTMENT IN SHARE MARKET

No
36%

Yes
64%

Yes No

Interpretation:
According to the above pie diagram 64% of the respondents have invested their money in
share market whereas 36% of the respondents haven’t invested.

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 7) If not invested, then why?

Reason for not Investing Respondents

High risk 9

Not aware of how to invest 5

Not any specific reason 4

REASON FOR NOT INVESTING

Not any specific
reason
22%

High risk
50%

Not aware of how

to invest
28%

High risk Not aware of how to invest Not any specific reason

Interpretation:
According to the above pie chart 50% of the respondents haven’t invested in shares because
of high risk and 28% of the respondents does not know how to invest, followed by 22% who
don’t have any specific reason to invest.

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 8) In which market do you invest?

Market in which you invest Respondents

Primary 8

Secondary 19

Both 23

MARKET IN WHICH YOU INVEST

Primary
16%

Both
46%

Secondary
38%

Primary Secondary Both

Interpretation:
According to the above pie chart 16% of the respondents invest in primary markets whereas
38% invest in secondary markets followed by 46% which invest in both (primary and
secondary markets).

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 9) What are the areas in which you would like to invest from the following:

Kind of Investments Respondents

Equity Shares 12
Fixed Deposits 11
Insurance Policies 6
Gold 15
Debentures/Bonds 4
Real Estate 2

Kinds of Investment

16 15
14 12
12 11
10
8 6
6 4
4 2
2
0

Number of Respondents

Interpretation:
According to the above bar diagram respondents tend to invest more in form of Equity
Shares (30%), followed by Gold (24%), Fixed Deposits (22%), Insurance Policies (12%),
Debentures (8%) and Real Estate (4%) respectively.

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 10) In which sector do you prefer to invest your money?

Preferable Sector for Investment Respondents

Private Sector 12

Public Sector 28

Foreign Sector 10

SECTORS
Foreign Sector
Private Sector
20%
24%

Public Sector
56%
Private Sector Public Sector Foreign Sector

Interpretation:
In the above pie chart 56% of the respondents tend to invest in public sector followed by
private sector 24% and foreign sector 20% respectively.

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 11) What are your investment objectives?

Investment Objectives Respondents

Wealth creation 14

Tax saving 12

Earn high returns 14

Future expenses 10

OBJECTIVES
Future expenses
20% Wealth creation
28%

Earn high returns

28%
Tax saving
24%

Wealth creation Tax saving Earn high returns Future expenses

Interpretation:
According to the above pie diagram 28% of the respondents opted for wealth creation and
for earning high returns followed by tax saving purposes (24%) and future expenses (20%)
respectively.

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 12) How much percentage of money do you invest?

Investment (%) Respondents

0-10 26

11-20 12

21-30 7

Above 30 5

INVESTMENT (%)
5

26

12

0-10 11-20 21-30 Above 30

Interpretation:
According to this chart out of 50 respondents, 26 respondents tend to invest between (0-
10%) while 12 respondents would invest between (11-20%), whereas 7 respondents would
invest between (21-30%) and 5 respondents would invest 31% and above.

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 13) What is the time period do you prefer to invest?

Preferable Investment Period Respondents

Short-term (0-1 year) 7

Medium-term (1-5 years) 15

Long-term (more than 5 years) 28

PERIOD OF INVESTMENT
Short-term
14%

Long-term
Medium-term
56%
30%

Short-term Medium-term Long-term

Interpretation:
According to the above pie diagram (14%) of the investors tend to invest in short-term (up
to 1 year) while (30%) invest in medium-term (1-5 years) and (42%) invest in long-term
(above 5 years) respectively.

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 14) What is your source of investment advice?
Sources Respondents
Newspaper 9

Friends/Family 7
Internet 19
Magazines 6
Financial Advisors 9

Sources
20
18
16
14
12
10
19
8
6
4 9 9
7 6
2
0
Newspaper Friends/Family Internet Magazines Financial Advisors

Number of Respondents

Interpretation:
According to the above bar diagram internet (38%) is the best source of advice followed by
newspaper and financial advisor (18%), friends/family (14%) and magazines (12%)
respectively.

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 15) Do you watch investment related programmes/news on TV or internet?

Particulars Respondents

Regularly 17

Occasionally 28

Not at all 5

PROGRAMMES/NEWS
Not at all
10%

Regularly
34%

Occasionally
56%

Regularly Occasionally Not at all

Interpretation:
Among all the 50 respondents, 17 respondents regularly watched investment related
programmes while 28 watch it occasionally followed by 5 respondents who don’t watch at
all.

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 16) While investing do you go through the prospectus of the company?

Particulars Respondents

Regularly 35

Sometimes 15

PROSPECTUS

Sometimes
30%

Regularly
70%

Regularly Sometimes

Interpretation:
Among all the 50 respondents, 35 go through the prospectus regularly while 15 go through
it sometimes.

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 17) To what extent you are prepared to assume risk?

Particulars Respondents

High Risk 8

Medium Risk 30

Low Risk 12

RISK
High Risk
Low Risk 16%
24%

Medium Risk
60%
High Risk Medium Risk Low Risk

Interpretation:
Among all the 50 respondents, 8 respondents prefer high risk for high returns while 30
respondents prefer medium risk followed by 12 respondents of low risk.

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 CHAPTER 5
CONCLUSIONS AND SUGGESTIONS

5.1 CONCLUSIONS AND FINDINGS

• Investors were mostly from the age group of 21-30 which was followed by age group
of 11-20 while the age composition of 31-40 and 41-50 had least number of
investors.
• Most of the respondents were employed and almost all of the employed respondents
were potential investors, those who did not invested were unemployed and some of
them were students.
• Only 76% of the respondents were aware about Investment avenues while 24% were
unaware.
• Advertisement acts as a very influenceable source of spreading awareness about
investment while word of mouth comes second.
• Awareness spread through Banks and Financial Advisors were comparatively lower.
• Out of 50 respondents. 32 respondents had actually invested their money in the Stock
Market while 18 did not invested at all.
• Maximum of the people did not invest their money in stock exchange due to the risk
factor while 28% of the people were not aware that how to invest their money.
• Uttermost of the investors preferred to invest in both of the market (Primary &
Secondary) which was followed by investing in Secondary market.
• Only a tiniest share of respondents were investors in the Primary market.
• Most of the respondents had invested in Equity shares.
• There were also good number of Investors in Gold and Fixed Deposits whereas only
a small group of respondents preferred to invest in the Debentures/Bonds and Real
Estate sector.
• Most of the investors invest their money in the public sector which was followed by
the private sector and foreign sector.
• 28% of the respondents invested their money with an objective to generate wealth
and to earn high returns.

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• Some of the respondent’s objective for investing was to save tax while some of them
invested to bear future expenses.
• 26 of the respondents invested only 0-10% of their money(savings) which is very
low this shows that high amount of awareness needs to be done in public.
• The general public tend to invest in medium-term securities followed by long-term
securities only a tiniest bit of people invests in short-term securities.
• Most of the people get their investment advice from the Internet while some rely on
Newspaper and Financial Advisors whereas some get advice from their
Friends/Family and Magazines.
• Only some of the people are actually watching or reading investment related stuff.
• Maximum number of people go through the company’s prospectus when they are
investing in that particular company.
• Most of the people tend to invest in the medium risk securities.

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 5.2 SUGGESTIONS

Securities market is known for tax-free returns, an effortless, easy entry into the stock
market, higher returns, any time liquidity and to deliver higher real returns than any other
investments. Based on the findings, following suggestions are given to Investors, Brokers
and SEBI to overcome the problems faced by them.

Suggestions to Investors:

• Indian securities market is a promising one as the market indicators SENSEX and
Nifty are in uptrend.
• If an individual wants to take a risk in the volatile market, he has to invest only the
surplus money which he can afford to lose in the market which will not disturb his
daily living.
• Investor adopting Systematic Investment Plan is able to average the price fluctuation
of the stock. Discipline and patience in monitoring their portfolio enables them to
generate great returns. Hence it is prudent to have a disciplined investment plan.
• Investors step in to the market with the investment objective of quick returns.
Securities market will give fruitful returns only if the investors are patient.
• Making huge investments in a single stock is not advisable and buying in a single
stroke or selling in a single stroke is not advisable. It is suggested to buy or sell at
periodic intervals based on the market volatility.
• The prices start falling at much faster rate than they have risen, in such situations
holding the stock is better option, the prices may rise back soon.
• Investors are not going to lose money on the purchased stocks until they are selling
them off. Often investors do the mistake of selling the stocks as soon as the price
starts falling.
• Investors and traders mostly stick on to blue chip stock and it is advisable to buy
fundamentally strong stocks and suggested not to chase a stock based on the past
performance of the stock and past experience of the investor.
• Many prefer blue chip stocks, but it is suggested to invest in companies with proven
management.

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 • An investor can minimize the risk associated with the stock trading by holding
diversified stocks in their portfolio.
• One can diversify their portfolio in many ways like holding stocks of companies
operating in different sectors so that even if one industry is down performing, other
sector stocks in the portfolio will pull it to profit.
• The key for successful trading is to select the stocks that are most likely to appreciate
in the future. The best way to understand the potential of a certain stock is to judge
the annual and quarterly reports that are published by all the publicly traded
companies.
• Investors or traders who are not expert in judging the market performance and those
who don't find time to track the market can prefer mutual fund as it is managed by
financial experts and market experts.

Suggestions to Brokers:

• Youth people dominates the stock market, retired persons hesitate to step in to the
market and their active participation can be assured if the brokers often discuss with
them and guide them regarding the market run.
• Youth are tech savvy and are aware of the changing scenario but even the importance
of market alerts can be brought to the notice of the market participants by the brokers
by arranging group discussions with successful investors.
• Brokers can retain their clients only if they are efficient in guiding the investors in
the right path. Brokers must insist on the benefits of decent and disciplined trading.
• Brokers can create an investors group in WhatsApp and spread awareness about the
benefits of SIP to their clients and furnish current details regarding the market.
• Women are reluctant to enter into the stock market and it must be insisted that it is
well suited for home makers. Women market participants can be motivated by
emphasizing that it is a path to women empowerment.
• Awareness programmes can be organized to home makers by the brokers stressing
that instead of wasting time by watching serials in T.V they can be motivated to
invest in stock market.

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Suggestions to Policy Makers and SEBI:

• Financial literacy must be imparted in the minds of young Indians and boost them to
save and invest from their earlier age.
• Policy makers can draw the attention of young investors by opening demat accounts
free of cost, issue PAN cards free of cost, train them in paper trading.
• Securities market is an opportunity to make huge profit, so it is advisable to include
securities market as a part of the curriculum.
• Awareness programmes for the rural market participants must be convened
periodically stock market CNBC, NDTV Profit, ET-Now are the channels
telecasting market news around the clock in English. SEBI can make arrangements
to telecast market news in regional languages also.
• Awareness programmes must be conducted by SEBI at regular intervals by targeting
the college students.
• SEBI can conduct seminars and workshops to students to impart financial literacy.
• SEBI can boost students’ active participation by conducting quiz on financial
market. Encourage them to adopt SIP by educating them on the benefits of SIP.
• The Investor Education and Protection Fund (IE & PF) should be utilized for
conducting direct selection programmes, organizing seminars, conducting specific
projects for investor protection including research activities and providing legal
assistance to genuine investor.

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 ❖ BIBLIOGRAPHY

Reference sites

www.researchgate.com

www.sciencedirect.com

www.wikipidia.com

www.investopedia.com

www.googlescholer.co.in

www.tandfonline.com

www.googledocs.com

www.googleforms.com

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