INTRODUCTION
TO INVESTMENTS
There are many different definitions of what
‘investment’ and ‘investing’ actually means. One of the simplest ways of
describing it is using your money to try and make more money. This can happen
in many different ways.
All investors
are different. The common factor is that you would like to invest money to aim
to make it grow or to receive a regular income from it. We would like to show
you that choosing the most suitable investment for you does not need to be
difficult. All you need is the right
help along the way.
The act
committing money or capital to an endeavor with the expectation of obtaining an
additional income or profit is known as investment. Investing means putting
your money to work for you.
OBJECTIVE OF THE STUDY
The primary objective of the project is to make an
analysis of various investment decision.
The aim is to compare the returns given by various investment decision.
To cater the different needs of investor, these options are also compared on
the basis of various parameters like safety, liquidity, risk, entry/exit
barriers, etc.
The project work was
undertaken in order to have a reasonable understanding about the investment
industry. The project work includes
knowing about the investment DECISIONS like equity, bond, real estate, gold and
mutual fund. All investment DECISIONS
are discussed with their types, workings and returns.
METHODOLOGY
Equities, Bonds, Real Estate, Gold, Mutual Funds and
Life Insurance were identified as major types of investment decision.
The primary data
for the project regarding investment and various investment DECISIONS were
collected through.
The secondary data for
the project regarding investment and various investment DECISIONS were
collected from websites, textbooks and magazines.
Then the
averages of returns over a period of 5 years are considered for the purpose of
comparison of investment options. Then, critical analysis is made on certain
parameters like returns, safety, liquidity, etc. Giving weightage to the
different type of needs of the investors and then multiplying the same with the
values assigned does this.
LIMITATIONS OF THE STUDY
§ The study was limited to only six investment options.
- Most of the information collected is secondary data.
- The data is compared and analyzed on the basis of performance of the investment options over the past five years.
- While considering the returns from mutual funds only top performing schemes were analyzed.
- It was very difficult to obtain the date regarding the returns yielded by real estate and hence averages were taken.
INVESTMENT DECISIONS
Introduction
These days
almost everyone is investing in something… even if it’s a savings account at
the local bank or a checking account the earns interest or the home they bought
to live in.
However, many
people are overwhelmed when they being to consider the concept of investing,
let alone the laundry list of choices for investment vehicles. Even though it
may seem the everyone and their brothers knows exactly who, what and when to
invest in so they can make killing, please don’t be fooled. Majorities of
investor typically jump on the latest investment bandwagon and probably don’t
know as much about what’s out there as you think.
Before you can
confidently choose an investment path that will help you achieve your personal
goals and objectives, it’s vitally important that you understand the basics
about the types of investments available. Knowledge is your strongest ally when
it comes to weeding out bad investment advice and is crucial to successful
investing whether you go at it alone or use a professional.
The investment
option before you are many. Pick the
right investment tool based on the risk profile, circumstance, time available
etc. if you feel the market volatility is something, which you can live with
then buy stocks. If you do not want risk, the volatility and simply desire some
income, then you should consider fixed income securities. However, remember
that risk and returns are directly proportional to each other. Higher the risk,
higher the returns.
TYPES OF INVESTMENT OPTIONS
A brief preview of
different investment options is given below:
Equities:
Investment in shares of companies is investing in equities.
Stocks can be
brought/sold from the exchanges (secondary market) or via IPO’s – Initial
Public Offerings (primary market). Stocks are the best long-term investment
options wherein the market volatility and the resultant risk of losses, if
given enough time, are mitigated by the general upward momentum of the economy.
There are two streams of revenue generation from this from of investment.
1.Dividend:
Periodic payments made out of the company’s profits are termed as dividends.
2.Growth:
The price of the stock appreciates commensurate to the growth posted by the
company resulting in capital appreciation.
On an average an
investment in equities in India has a return of 25%. Good portfolio management,
precise timing may ensure a return of 40% or more. Picking the right stock at
the right time would guarantee that your capital gains i.e. growth in market
value of stock possessions, will rise.
Bonds:
It is a fixed income (debt) instrument issued for a period of more than one
year with the purpose of raising capital. The central or state government,
corporations and similar institutions sell bonds. A bond is generally a promise
to repay the principal along with fixed rate of interest on a specified date,
called as the maturity date. Other fixed income instruments include bank
deposits, debentures, preference shares etc.
The average rate
of return on bond and securities in India has been around 10-13% p.a.
Mutual
Fund: These are open and close-ended funds operated by an investment
company, which raises money from the public and invests in a group of assets,
in accordance with a stated set of objectives. It is a substitute for those who
are unable to invest directly in equities or debt because of resource, time or
knowledge constraints. Benefits include
diversification and professional money management. Shares are issued and
redeemed on demand, based on the funs net asset value, which is determined at
the end of each trading session. The
average rate of return as a combination of all mutual funds put together is not
fixed but is generally more than what earn is fixed deposits. However, each mutual
fund will have its own average rate of return based on several schemes that
they have floated. In the recent past,
Mutual Funs have given a return of 18 – 35%.
Real Estate:
For the bulk of investors the most important asset in their portfolio is a residential
house. In addition to a residential house, the more affluent investors are
likely to be interested in either agricultural land or may be in semi-urban
land and the commercial property.
Precious
Projects: Precious objects are items that are generally small in size
but highly valuable in monetary terms. Some important precious objects are like
the gold, silver, precious stones and also the unique art objects.
Life
insurance: In broad sense, life insurance may be reviewed as an
investment. Insurance premiums represent the sacrifice and the assured the sum
the benefits. The important types of insurance policies in India are:
- Endowment assurance policy.
- Money back policy.
- Whole life policy.
- Term assurance policy.
- Unit-linked insurance plan.
ALL ABOUT EQUITY INVESTMENT
Stocks are
investments that represent ownership --- or equity --- in a corporation. When
you buy stocks, you have an ownership share --- however small --- in that
corporation and are entitled to part of that corporation’s earnings and assets.
Stock investors --- called shareholders or stockholders --- make money when the
stock increases in value or when the company the issued the stock pays
dividends, or a portion of its profits, to its shareholders.
Some companies
are privately held, which means the shares are available to a limited number of
people, such as the company’s founders, its employees, and investors who fund
its development. Other companies are publicly traded, which means their shares
are available to any investor who wants to buy them.
The IPO
A company may decided to
sell stock to the public for a number of reasons such as providing liquidity
for its original investor or raising money. The first time a company issues
stock is the initial public offering (IPO), and the company receives the
proceeds from that sale. After that, shares of the stock are treaded, or
brought and sold on the securities markets among investors, but the corporation
gets no additional income. The price of the stock moves up or down depending on
how much investors are willing to pay for it.
Occasionally, a company
will issue additional shares of its stocks, called a secondary offering, to
raise additional capital.
Types Of Stocks
With thousands of
different stocks trading on U.S. and international securities markets, there
are stocks to suit every investor and to complement every portfolio.
For example, some stocks
stress growth, while others provide income. Some stocks flourished during boom
time, while others may help insulate your portfolio’s value against turbulent
or depressed markets. Some stocks are pricey, while others are comparatively
inexpensive. And some stocks are inherently volatile, while others tend to be
more stable in value.
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