9/16/2019 Investment Alternatives - Securities, Mutual Funds, Real Assets Notes

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Investment refers to employment of funds on assets with the aim of Subscribe Now
earning income or capital appreciation.It is essentially a sacrifice of current
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money or other resources for future benefits.There are various Investment
Alternatives available with an investor. An investor has to carefully choose
between different investment alternatives like negotiable securities (Can be
freely traded in the market) and non-negotiable securities(cannot be traded
in the market), Mutual Funds and Non-Financial Instruments or Real
Assets. Negotiable securities can be fixed income (bring fixed returns) or
variable income securities (brings variable returns).

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9/16/2019 Investment Alternatives - Securities, Mutual Funds, Real Assets Notes

The chart below attempts to show a basic investment strategy of an investor. Percentage of total income
to be spent on various investment alternatives are:

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Advertising Management (20)

Articles (240)
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Blog (34)
Business & Entrepreneurship (6)
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Business Environment (21)
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Different Investment Alternatives
Business Law (1)
Business Statistics (49)
(1) Negotiable Instruments / Securities –  Company Law (14)
Computer Applications (9)
These investment alternatives can be traded in the market.
Consumer Behaviour (22)
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9/16/2019 Investment Alternatives - Securities, Mutual Funds, Real Assets Notes

(i) Variable Income Securities Financial Accounting (2)

Financial Management (23)
Financial Services (19)
Human Resource Management (18)
• Equity Shares: Shares which do not carry any preferential rights in Income Tax (2)
repayment of capital and dividend payments are equity shares. The rate of International Business (13)
dividend is not fixed and varies depending upon the profitability, financial Investment Analysis & Portfolio Management
position and business objectives of a company. The owners of equity (10)
shares are the owners of the company and have voting rights in the IT & Technical Skills (5)
management of the company. Macro-Economics (9)
Management Accounting (5)
Management Information System (4)
Managerial Economics (2)
Classification on the basis of nature of shares: Marketing & Advertising (7)
Marketing Management (18)

Growth Shares: These stocks have a higher growth rate than the Marketing of Services (6)

industry growth rate on the basis of profitability. E.g. HCL Micro-Economics (2)
Operations Management (2)
Income Shares: These stocks have a relatively stable operations and
Organizational Behaviour (7)
limited growth opportunities. E.g. Banks, FMGC, Cadbury, nestle,
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Hindustan lever
Principles of Management (9)
Defensive Shares: These shares are normally not affected by the
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movements in the market. E.g. Pharma Stocks
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Cyclical Shares: These stocks are affected by the business cycles. The
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upward and downward movements of business cycles affect the
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profitability of the company and also the share price of a company. E.g. Rural Marketing (1)
Automobile stocks Strategic Management (14)
Speculative Shares: These shares have a lot of speculative trading.
They attract the investors in bull and bear phases of the market.

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9/16/2019 Investment Alternatives - Securities, Mutual Funds, Real Assets Notes

(ii) Fixed Income Securities

• Preference Shares – Shares which carry preferential rights in respect of

dividend payment and repayment of capital are preference shares. These
shares carry a fixed rate of divided and preference over equity
shareholders in dividend payment and payment of capital at the time of
liquidation. They do not carry any voting rights.

• Debentures – These are capital market instruments used to raise RECENT POSTS
medium and long term capital funds from the public. It comprises of
Periodic interest payments over the life of the instrument and principle Investment Analysis – Introduction,
Objectives, Process
payment at time of its redemption. These are for investors who wish to May 5, 2018
sacrifice liquidity for high returns.
Social Exchange, Equity & Balance Theory,
Interpersonal competence
April 16, 2018

• Bonds – They are similar to debentures but are issued by public sector IRDAI – Insurance Regulatory Development
companies. Its value in the market depends upon the interest rate and and Authority of India
maturity of the bond. The coupon rate is the nominal interest rate offered April 1, 2018

on the bond which cannot be changed till its maturity. E.g. Education
Learning Theories – Cognitive,
benefit bond, retirement benefit bond. Conditioning, Social Learning Theories
March 31, 2018

Leadership Styles – Types of Leadership

Styles
• IVP`s and KVP`s – These are savings certificates issues by the post
March 27, 2018
office with the name Indra Vikas Patra and Kisan Vikas Patra. IVPs have a
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9/16/2019 Investment Alternatives - Securities, Mutual Funds, Real Assets Notes

face value of 500,1000, 5000 and KVPs have a face value of 1000, 5000, Inventory, Inventory Control – Theory Notes
January 13, 2018
10000. The capital is doubled in 5.5 years with 13.47% rate of return. They
do not carry any tax benefits but are transferable just like bearer bonds.
Organization Design – Types of
Organization Structure
January 2, 2018

• Government Securities – These are secured securities issues by the Marketing Information System –
central and state government. The rate of interest on these securities is Components, Importance

relatively low but they are highly liquid and safe. December 20, 2017

Budget, Budgeting, Budgetary Control

December 20, 2017

• Money Market Securities – These securities have very short term

Resistance to change – Levels, Overcoming
maturity usually less than a year. E.g. Treasury bills, Commercial paper,
Resistance
Certificate of Deposit December 18, 2017

(2) Non Negotiable Instruments / Securities – These investment

alternatives cannot be traded in the market.

• Deposits: Deposits earn a fixed rate of return.

Bank Deposits – Banks usually offer three traditional facilities, they are;
current account facility (no interest is paid), savings account (4-5%
interest is paid) and fixed account (7-8% interest is paid).

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9/16/2019 Investment Alternatives - Securities, Mutual Funds, Real Assets Notes

Post Office Deposits – Fixed deposit and Income schemes at Post

offices provide around 13% to 15% interest rate.
NBFC Deposits – NBFC`s having bet owned funds over 25 lakh can
accept deposits with maturity ranging from 3-5 years and provide interest
rate higher than commercial banks.

• Tax Sheltered Savings Scheme – These are beneficial for tax-paying

Investors. They offer tax relief to its participants according to the taxation
laws. E.g. Public Provident Fund Scheme, National savings scheme,
National Saving Certificate, Public Provident Fund Scheme, National
Savings Scheme, National Savings Certificate

• Life Insurance – It is a contract for payment of a sum of money to the

person assured or entitled on happening of an insured event or at maturity.
It also provides tax benefits to the person buying the insurance scheme.
E.g. Basic Life Insurance: Whole Life Assurance Plan, Endowment
Assurance Plan, Term Assurance Plans, Plans for Children, Pension Plans

(3) Mutual Funds

A mutual fund is a professionally-managed investment scheme, usually run

by an asset management company that brings together a group of people
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9/16/2019 Investment Alternatives - Securities, Mutual Funds, Real Assets Notes

and invests their money in stocks, bonds and other securities.

An investor can buy mutual fund ‘units’ which represent his/her share in a
particular scheme. These units can be purchased or redeemed as needed
at the fund’s current net asset value (NAV). These NAVs keep fluctuating,
according to the fund’s holdings. All the mutual funds are registered with
SEBI.

• Open Ended Mutual Fund Schemes – These offer its units on

continuous basis and accept funds from investors continuously. There are
no restrictions on buying or selling funds. These schemes do not have a
maturity period and are not listed on the stock exchange. These provide
liquidity to investors since repurchase facility is available.

• Closed Ended Mutual Fund Schemes – These have a fixed maturity

period and are kept open for a limited period. Once closed the units are
listed on the stock exchange. The demand and supply factors influence the
price of the units.

Types of Mutual Fund Schemes

Growth Schemes – These funds invest money in equities and offer high
returns.

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9/16/2019 Investment Alternatives - Securities, Mutual Funds, Real Assets Notes

Income Schemes – These funds invest money in fixed securities and

provide a regular return to its holders.
Balanced Schemes – These funds provide a steady return as well as a
reasonable growth. The money is generally invested in equity and debt
instruments.
Money Market Schemes – These funds invest money in money market
instruments like TB, CP.
Tax Savings Schemes – These offer tax rebate to its investors. Equity
linked saving schemes and pension schemes provide exemption from
capital gains on specific investment.
Index Schemes – These funds invest on equities of the index. The
returns are approx. equal to the return of the Index.

(4) Non-Financial Instruments or Real Assets

These Investment alternatives usually form the major part of the investor`s
portfolio. They include:

Gold and Silver – They provide best protection against inflationary

tendencies in an economy.
Real Estate – They provide high returns to investors but require high
investment and long term commitment. This investment alternative
includes investment on land, buildings, any personal and property.
Antiques – They usually guarantee safety of investment. A price rise is
generally due to increased interest of collectors or increased social
importance.

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9/16/2019 Investment Alternatives - Securities, Mutual Funds, Real Assets Notes

BY: BBAMANTRA / IN: ARTICLES, FINANCIAL SERVICES, INVESTMENT ANALYSIS & PORTFOLIO
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