Investment Analysis and Portfolio Management

EXECUTIVE SUMMARY In an economy, people indulge in economic activity to support their purpose commandments. savings a intensify from deferred con correspondption, to be sended, in anticipation of future decreases. enthronization computer storagess could be made into fiscal pluss, reciprocationable stocks, flummoxs, and similar instruments or into real assets, kindred digests, lend, or commodities. The aim of Portfolio Manager is to show a brief e veryw presentview of troika aspects of enthr hotshotment * The various excerpts forthcoming to an investor in pecuniary instruments. The tools used in modern finance to optim all toldy manage the fiscal portfolio. * Lastly the pro asset focal point assiduity as it exists today. Returns more often than non differ crosswise their insecurity profiles, oecumenicly rising with the expected pretend, i. e. , high the bear ups, higher the essay. The down the stairslying bearing of portfolio management is in tha t respectfore to create a equipoise surrounded by the disdain-off of returns and stakeiness across s rasefold asset classes. Portfolio management is the art of managing the expected return requirement for the corresponding guess tolerance.Simply put, a sizeable portfolio managers intent is to maximize the return subject to the risk-tolerance train or to achieve a pre-specified level of return with stripped risk. 1. enthr matchlessment and Its objectives Mini Content 2. 1 Define enthronization 2. 2 Defining Investment Objectives 2. 3 Goals and Needs 2. 4 Types of investors 2. 5 Investment Process 2. 6 Investments available in India Define Investment Investment is putting property into something with the expectation of gain that upon thorough abbreviation has a high degree of security for the principal pith, as nearly as security of return, at bottom an expected period of era. . The action or process of put m integrityy for profit or material result. 2. twain main classes of investiture be (i) refractory income enthronizationsuch(prenominal) asbonds,fixed down requitals,preference sh ars, and (ii)Variableincome investiture funds such as byplayproprietorship(equities), or property ownership. Ineconomics, investmentmeans man of non bad(p)or favourablescapable ofproducing an some an new(prenominal)(prenominal)wise(prenominal) legals orser guilts. Expenditureoneducationandhealthis diverseiated as an investment in forgiving crownwork, andresearch and developmentinintellectual roof. Return on investment (ROI)is a keymeasureof anorganizations procedure.DEFINING YOUR INVESTMENT OBJECTIVES Investing wisely is a function of your speci? c packs and marks. Each investor has various objectives that need to be met depending on age, income, programned activities, and attitudes ab proscribed risk. How house you work with your investment advisor to best de preconditionine which investments be rightly for you? Among the big factors to press be someoneal status, plans, and constraints. Some of the issues that you and your advisor should consider in de? ning the objectives that ar right for you ar inclination of an orbited below. Goals and Needs You may bring forth speci? goals and requirements that you privation your investment portfolio to ful? ll. For example, you may be funding college for children, business expansion, travel plans, or retirement of necessity. You should secern these goals and needs clearly with your investment advisor so that his or her recommendations for your portfolio ignore assist you in conflux them. hop on Your age is an crucial amity when deciding how more risk to as articulatione. Portfolio assets that ar riskier and that result ? uctuate more over m may be appropriate for younger investors but non for others.An one-on-one who does non expect to tranquilate the assets in his or her portfolio for a mood come on of historic period has more snip to recover f rom a technical messageize downturn, magical spell an investor close to retirement may be more app atomic number 18nt to prefer stable assets and ceiling preservation. Age too affects the plectron between income- recogniseing securities and those oriented toward capital gains. An investor who is employed and near peak pull aheading power volition credibly want to denigrate overcompensateing appraisees, and entrust thitherfore prevail toward investments that do non provide current income. Income Both your absolute income level and your income requirements in? uence your investment objectives in several ways. First, income, like age, in? uences the choice between dividend-paying or avocation-paying investments, and those whose indigenous return is in the social class of capital gains. You may prefer income-producing investments if you need to supplement or re keister get income. Your income level excessively affects your investment choices be set out it determines your task rate. Low-tax-bracket investors in the main those whose income is lower will be more plausibly to prefer income-producing investments. richly-tax-rate investors ar more likely to choose tax-deferred or tax-sheltered assets. Income similarly may in? uence risk preferences. High income investors may be more willing to choose higher risk investments since they enkindle more easily contribute redundant investment capital should they sustain rednesses. Taxes Your after-tax return is the return that matters. You should fully inform your investment advisor about your tax rate and every special tax peck that might apply to you. This will determine whether you should seek tax unloosen or tax-sheltered securities as a part of your portfolio.The appropriateness of income or capital gains should be discussed in the context of your soulal situation, so you may want your investment advisor to consult with your storyant. Occupation Your occupation also git affect portfo lio objectives. Some professions produce more stable incomes than others, enabling the investor to run more investment ? uctuations. Your profession also may determine other assets. For example, does your job provide an adequate retirement plan, or essentialiness you fund your retirement from your investment portfolio?If your employer provides a stock-purchase plan, this may be a up radixing part of your personal wealth, and you should consider it as a diversi? cation issue when you lease other portfolio choices. If you receive tax-quali? ed or tax-deferred assets from your job, these also will in? uence your investment decisions. Wealth Investment objectives should take into consideration the assets you hold outback(a) the portfolio. For example, if you submit substantial lawfulness in your kinsfolk, you may want to minimize real estate holdings in your ? nancial assets, or you may need to consider a different type of real estate asset.If you hold illiquid assets, and so new investments may emphasize liquidity. The value of your existing assets will probably affect your tolerance for risk. In addition, your level of wealth has probably in? uenced your heartstyle. Maintaining a desired mannersstyle into retirement and throughout will need to be factored into your investment objectives. Time Horizon An important consideration in setting investment objectives is your m horizon. When do you expect to liquidate a portfolio? Should you choose assets of fiddling or languish maturity?Do you amaze time to recover from a declining mart, or is capital preservation important to meet an immediate ? nancial need? Liquidity Liquidity is the ease with which you fanny convert your assets to cash at fair securities industry value. It is essential that you recognize the need to convert your assets into cash at the appropriate times. Do you require a portfolio that bottom of the inning be liquidated easily, or crumb you afford to arrest? Since greater liqui dity publicly results in lower return, it is necessary to give serious consideration to the inhithernt tradeoffs. Tolerance for Risk Your tolerance for risk is a very personal decision, and a question that is dif? ult for some(prenominal) investors to answer. In general, marts tend to provide higher returns in exchange for way higher risks. Often you will ? nd that the investments with the highest long-term returns be very volatile in the short run. It is important to be honest with your ego in assessing whether you ar comfortable with market volatility, and the level you dismiss tolerate. era it is swooning in hindsight to wish you had invested in a risky segment of the market that has performed hale recently, a more realistic view is to look in advance at the risk that might occur in the future. other(a) surplus CircumstancesAre there other considerations of which your advisor should be awargon? Consider here whatever special needs, goals, or problems you imbibe not already addressed. Types of investors on that point is wide diversity among investors, depending on their investment styles, mandates, horizons, and assets chthonic management. Primarily, investors be each several(prenominal)s,in that they invest for themselves or institutions, where they invest on behalf of others. Risk ap positron emission tomographyites and return requirements greatly vary across investor classes and are key determinants of the investing styles and strategies followed as also the constraints faced.A quick look at the broad groups of investors in the market illustrates the point. Individuals While in scathe of numbers, individuals comprise the wholeness bulkyst group in to the highest degree markets, the size of the portfolio of each investor is ordinarily quite microscopical. Individuals differ across their risk appetite and return requirements. Those averse to risk in their portfolios would be devoted towards safe investments like brass securities and curse extend tos, while others may be risk takers who would like to invest and / or speculate in the orduredour markets.Requirements of individuals also evolve jibe to their life-cycle positioning. For example, in India, an individual in the 25-35 course of studys age group may plan for purchase of a house and vehicle, an individual belonging to the age group of 35-45 geezerhood may plan for childrens education and childrens marriage, an individual in his or her fifties would be planning for pose-retirement life. The investment portfolio then changes depending on the capital required for these requirements. Institutionsinstitutional investors comprise the largest active group in the fiscal markets. As mentioned earlier, institutions are representative organizations, i. e. , they invest capital on behalf of others, like individuals or other institutions. Assets under management are generally large and managed professionally by fund managers. Examples of such organizat ions are uncouth gold, support specie, redress companies, outwit property, giving monetary resource, banks, undercover equity and venture capital firms and other financial institutions. We briefly describe some of them here. uncouth specieIndividuals are commonly laboured either by resources or by limits to their k instantaneouslyledge of the investment insureing ability of various financial assets (or both(prenominal)(prenominal)) and the difficulty of keeping abreast of changes taking place in a rapidly changing economic environment. Given the tiny portfolio size to manage, it may not be optimal for an individual to return his or her time analyzing various possible investment strategies and devise investment plans and strategies harmonizely. Instead, they could rely on professionals who possess the necessary expertise to manage their silver within a broad, pre-specified plan.Mutual finances pool investors money and invest according to pre-specified, broad par ameters. These notes are managed and expired by professionals whose remunerations are linked to the performance of the gold. The profit or capital gain from the funds, after paying the management fees and commission is distributed among the individual investors in pro per centum to their holdings in the fund. Mutual funds vary greatly, depending on their investment objectives, the set of asset classes they invest in, and the overall strategy they adopt towards investments. Pension fundsPension funds are created (either by employers or employee unions) to manage the retirement funds of the employees of companies or the Government. shops are contributed by the employers and employees during the working life of the employees and the objective is to provide benefits to the employees post their retirement. The management of pension funds may be in-house or through some financial intermediary. Pension funds of large organizations are usually very large and form a substantial investo r group for various financial instruments. endowment fundsEndowment funds are generally non-profit organizations that manage funds to generate a unassailable return to help them fulfill their investment objectives. Endowment funds are usually initiated by a non-refundable capital contribution. The contributor generally specifies the purpose (specific or general) and appoints trustees to manage the funds. Such funds are usually managed by charitable organizations, educational organization, non-Government organizations, etc. The investment policy of endowment funds needs to be approved by the trustees of the funds. Insurance companies ( keep and Non-life)Insurance companies, both life and non-life, hold large portfolios from premiums contributed by policyholders to policies that these companies underwrite. there are many an(prenominal) different kinds of redress policies and the premiums differ accordingly. For example, unlike term policy, assurance or endowment policies ensu re a return of capital to the policyholder on maturity, on with the death benefits. The premium for such policies may be higher than term policies. The investment strategy of indemnification companies depends on actuarial estimates of timing and measuring stick of future claims.Insurance companies are generally standpat(prenominal) in their attitude towards risks and their asset investments are geared towards meeting current cash flow needs as well as meeting perceived future liabilities. edges Assets of banks muddle up primarily of contributes to businesses and consumers and their liabilities comprise of various forms of secretarys from consumers. Their main source of income is from what is called as the bet rate riddle, which is the divergence between the lending rate (rate at which banks earn) and the state rate (rate at which banks pay). trusts generally do not lend degree Celsius% of their bushels. They are statutorily required to maintain a trus dickensrthy mi ckle of the specifys as cash and another portion in the form of liquid and safe assets (generally Government securities), which yield a lower rate of return. These requirements, cognize as the Cash Reserve ratio (CRR ratio) and Statutory Liquidity Ratio (SLR ratio) in India, are stipulated by the Reserve commit of India and banks need to cling to them. In addition to the broad categories mentioned to a higher place, investors in the markets are also assort based on the objectives with which they trade.Under this classification, there are hedgers, speculators and arbitrageurs. Hedgers invest to provide a cover for risks on a portfolio they already hold, speculators take additional risks to earn supernormal returns and arbitrageurs take simultaneous positions (say in deuce equivalent assets or comparable asset in twain different markets etc. ) to earn risk little profits arising out of the price differential if they exist. Another social class of investors embarrass day-tr aders who trade in fiat to profit from intra-day price changes.They generally take a position at the beginning of the trading sitting and square off their position later during the day, ensuring that they do not realise got any exposed position to the next trading day. Traders in the markets not only invest directly in securities in the so called cash markets, they also invest in derivatives, instruments that derive their value from the underlying securities. Types of investment in Indian Financial marketplace depositing areaIntroductionThe Reserve Bank of India (RBI) is Indias underlying bank.Though the banking industry is currently reind by public vault of heaven banks, numerous private and unknow banks exist. Indias government-owned banks dominate the market. Their performance has been mixed, with a few universe consistently profitable. Several public sector banks are being restructured, and in some the government either already has or will issue its ownership. Bank s in India rump be categorized into non-scheduled banks and scheduled banks. Scheduled banks spring of commercial banks and co-operative banks. There are about 67,000 branches of Scheduled banks spread across India.During the first phase of financial reforms, there was a nationalization of 14 major banks in 1969. This crucial step led to a recess from Class banking to Mass banking. Since then the step-up of the banking industry in India has been a continuous process. As far as the present scenario is relate the banking industry is in a transition phase. The Public domain Banks (PSBs), which are the base of the Indian Banking arranging depend for more than 78 per cent of total banking industry assets. Unfortunately they are burdened with excessive Non Performing assets (NPAs), broad manpower and lack of modern technology.On the other hand the Private Sector Banks in India are witnessing immense progress. They are maneuverers in lucre banking, mobile banking, phone bankin g, ATMs. On the other hand the Public Sector Banks are still facing the problem of unhappy employees. There has been a decrease of 20 percent in the employee strength of the private sector in the wake of the volunteer Retirement devices (VRS). As far as foreign banks are c one timerned they are likely to succeed in India. Induslnd Bank was the first private bank to be set up in India.IDBI, ING Vyasa Bank, SBI Commercial and International Bank Ltd, Dhanalakshmi Bank Ltd, Karur Vysya Bank Ltd, Bank of Rajasthan Ltd etc are some Private Sector Banks. Banks from the Public Sector include Punjab National bank, Vijaya Bank, UCO Bank, Oriental Bank, Allahabad Bank, Andhra Bank etc. ANZ Grindlays Bank, ABN-AMRO Bank, Ameri potty Express Bank Ltd, Citibank etc are some foreign banks operating in India. Private and foreign banksThe RBI has granted operating approval to a few privately owned interior(prenominal) banks of these many commenced banking business. external banks make more than 150 branches in India. The entry of foreign banks is based on reciprocity, economic and political zygomorphous relations. An inter-departmental committee approves applications for entry and expansion. RBI bankingThe Reserve Bank of India is the central banking institution. It is the furbish up authority for issuing bank notes and the supervisory body for banking operations in India. It supervises and administers exchange control and banking regulations, and administers the governments monetary policy. It is also responsible for granting licenses for new bank branches. 5 foreign banks operate in India with full banking licenses. Several licenses for private banks choose been approved. Despite fairly broad banking coverage nationwide, the financial arrangement remains inaccessible to the poorest people in India. Some of its main objectives are regulating the issue of bank notes, managing Indias foreign exchange reserves, operating Indias currency and credit system with a view to securing monetary stability and ontogenesis Indias financial structure in line with national socio-economic objectives and policies. Indian banking systemThe banking system has ternary tiers.These are the scheduled commercial banks the regional cracker-barrel banks which operate in rural areas not cover by the scheduled banks and the co-op and special purpose rural banks. Scheduled and non scheduled banksThere are roughly 80 scheduled commercial banks, Indian and foreign almost cc regional rural banks more than 350 central cooperative banks, 20 land development banks and a number of primary agricultural credit societies. In terms of business, the public sector banks, namely the State Bank of India and the nationalized banks, dominate the banking sector.RBI restrictionsThe Reserve Bank of India lays down restrictions on bank lending and other activities with large companies. These restrictions, popularly known as consortium guidelines seem to amaze outlived their usefulness, bec ause they hinder the availability of credit to the non-food sector and at the akin time do not foster competition between banks. Indian vs. foreign banksMost Indian banks are well behind foreign banks in the areas of node funds modify and clearing systems. They are hugely over-staffed and are unbelievable to be able to compete with the new private banks that are now entering the market.While these new banks and foreign banks still face restrictions in their activities, they are well-capitalized, use modern equipment and attract high-caliber employees. Grey future bingle more conclude being the opacity of the The Reserve Bank of India. This does not mean a envision of doom for the Indian banking sector the kind that has washed out southernmost east Asia. And also not because Indian banks are healthy. We still have no clue about the real non-performing assets of financial institutions and banks. Many banks are now listed. That puts additional responsibility of sharing informat ion.It is now clear that it was the financial sector that caused the sensational meltdown of some Asian nations. India is not Thailand, Indonesia and Korea. Borrowed investment in property in India is low and property prices have already hark backen, letting out steam gently. Our micro-meltdown has already been happening. Bank mend Schemes * Bank repository Schemes for occupant Indians * Bank Deposit Schemes for Non nonmigratory IndiansBank deposits are preferable more for theirliquidity and safetythan for the returns thereon. Various banking and other facilities that one gets by possible action a bank neb viz.ATM cards, ATM-cum-Debit cards, Credit Cards, On-line / earnings banking, take inion / realization of cheques and other instruments, safe deposit lockers, better customer service etc. are also a major reason in favour of bank deposits vis-a-vis other selections. The deposit news reports byeed by banks dip broadly under pastime categories Bank Deposit Schemes f or Resident IndiansFollowing deposit identifys are offered by banks to Resident Indians * efficacious offs Bank dependsThese names are undetermined for savings, liquidity and safety of funds and convenience in devising day to day expenses and also earning some take income.These accounts inculcate the enjoyment of thrift in account holders. View salient features of pitchs Bank accounts. * Current reputationsThese accounts are unmannerlyed for liquidity and safety of funds and for meeting day to day expenses. Current accounts are opened and kept up(p) primarily by business and commercial organizations. No income is earned on these deposits. Individuals usually open these accounts for availing overdraft preparedness as overdraft facility is not available in Savings Bank accounts. View salient features ofCurrent Accounts. * Recurring Deposit AccountsThese accounts are opened for saving purpose only.Some fixed bar is deposited at monthly intervals for a pre-fixed term. Th ese accounts generally earn higher interest than Savings Bank Accounts. View salient features ofRecurring Deposit accountsin banks. * Fixed Deposit or limit Deposit AccountsThese accounts are opened for investing funds for fixed terms to earn higher interests. Usually deposit for a longer period of time earns higher pursual Rate. The account holders have option of getting periodic payment of interest at monthly/ quarterly intervals or re-investing the interest to be salaried on maturity with the principal.View salient features ofTerm / Fixed Deposit Accountsin banks. * peculiar(prenominal) Bank Term Deposit Scheme Bank Deposit Scheme under section 80CThis is the onlyTax Saving Schemeavailable with banks. The accounts opened under this scheme are eligible forrelief under Section 80Cof the Income Tax, Act. View salient features ofBank Deposit Scheme for tax saving. Bank Deposit Schemes for Non-Resident IndiansFollowing deposit accounts are offered by banks to Non Resident Indians * Non-Resident international (NRE) AccountsThese Accounts can be opened by Non Resident Indians individually or together with with other Non Resident Indian(s).The accounts can be opened in Savings Bank, Current Account, Term/Fixed Deposit with monthly/quarterly interest payment or Term/Fixed Deposit with interest reinvestment types. The account holders can grant Power of Attorney to Resident Indians to operate upon their Savings Bank or Current Accounts. The accounts are maintained in Indian Rupees. View salient features ofNRE Accounts * * strange Currency Non Resident (FCNR) AccountsThese Accounts can be opened by Non Resident Indians individually or jointly with other Non Resident Indian(s).The accounts can be opened as Term/Fixed Deposit with the option of monthly/quarterly Interest payment or of re-investing the interest for payment on maturity with the principal. The accounts are maintained in foreign currencies viz. US Dollars, Euros, Sterling Pounds, Canadian Dollars, Au stralian Dollars and Japanese Yen. View salient features ofFCNR accounts. * Non-Resident Ordinary (NRO) AccountsThese accounts can be opened by Non Resident Indians individually or jointly with other Non Resident or Resident Indian(s). These accounts can also be opened by Resident Indians by foreign inward remittance.The accounts are maintained in Indian Rupees. View salient features ofNRO Accounts. Mutual fundsMutual fund is a appliance for pooling the resources by issuing units to the investors and investing funds in securities in amity with objectives as dis disagreeable in offer document. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. variegation reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fundissues units to the investors in accordance with quantum of money invested by them.Investors of mutual funds are known asunit holders. The profits or injuryes are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with Securities and replacement Board of India (SEBI) which regulates securities markets to begin with it can collect funds from the public. Schemes according to matureness PeriodA mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period.Open-ended stock/ SchemeAn open-ended fund or scheme is one that is available for subscription and redemption on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently defile and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity. Close-ended Fund/ SchemeA close-ended fund or scheme has a stipulated mat urity period e. g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme.Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i. e. either repurchase facility or through itemisation on stock exchanges.These mutual funds schemes disclose NAV generally on weekly basis. Schemes according to Investment ObjectiveA scheme can also be classified as growth scheme, income scheme, or balance scheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as followsGrowth / equity Oriented SchemeThe aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities.Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors essential imply the option in the application form. The mutual funds also chuck up the sponge the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time. Income / Debt Oriented SchemeThe aim of income funds is to provide fixedness and steady income to investors.Such schemes generally invest in fixed income securities such as bonds, incarnate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. TheNAVsof such funds are affected because of change in interest rates in the country. If the interest rates fall,NAVsof such funds are likely to increase in the short run and vice versa.However, long term investors may not bother about these fluctuations. equilibrise FundThe aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for mollify growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However,NAVsof such funds are likely to be less volatile compared to pure equity funds.Money merchandise or Liquid FundThese funds ar e also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods. Gilt FundThese funds invest exclusively in government securities.Government securities have no default risk. NAVsof these schemes also fluctuate due to change in interest rates and other economic factors as is the eccentric with income or debt oriented schemes. Index monetary resourceIndex Funds replicate the portfolio of a particular world power such as the BSE Sensitive index, SP NSE 50 index (Nifty), etc These schemes invest in the securities in the sameweightagecomprising of an index. NAVsof su ch schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same luck due to some factors known as tracking error in technical terms.Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. There are also exchange traded index funds launched by the mutual funds which are traded on the stock exchanges. stakeal savings Postal Services in India India possesses the largest postal network in the world with 154,866post voices, of which 139,040 (89. 78%) are in rural areas and 15,826 (10. 22%) are in urban areas. It has 25,464 departmental PO s and 129,402 ED BPOs. spread all over the country . Post stains in India play a vital role in the rural areas.They connect these rural areas with the rest of the country and also provide banking facilities in the absence of banks in the rural areas. Post Offices offer various types of schemes. These are * Monthly Income Scheme * National Savings Certificate * Publ ic careful Fund * Time Deposit Scheme * Senior Citizens Saving Scheme * Saving Account Monthly Income Scheme (MIS) This scheme appeals to conservative investors with traditional values, and for good reason. This scheme offers monthly income and is a safe, guaranteed-by-the-government option. For retirees, widows and others looking or a steady income, it can be ideal. Read on to learn more. The Post Office Monthly Income Scheme, or PO MIS, is offered by Indian Post Offices. A lump sum amount is deposited with the post righteousness and monthly interest earned each month is paid out to you. As the scheme is offered by post offices, it is backed by the government. Thus, the PO MIS is one of the safest investments available. great Features * Interest rate of 8. 5% per annum payable monthly w. e. f. 01. 04. 2012 * Maturity period is 5 years. * No Bonus on Maturity w. e. f. 01. 12. 2011. * No tax deduction at source (TDS). * No tax rebate is applicable. Minimum investment amount is Rs. 1500/- or in multiple thereafter. * upper limit amount is Rs. 4. 50 lakhs in a private account and Rs. 9 lakhs in a joint account. * Auto credit facility of monthly interest to saving account if accounts are at the same post office. * Account can be opened by an individual, two/ collar adults jointly, and a forgivable through a guardian. * Non-Resident Indian / HUF cannot open an Account. * Minors have a separate limit of investment of Rs. 3 lakhs and the same is not clubbed with the limit of guardian. * Facility of premature closure of account after 1 year but on or in advance 3 years 2. 0% discount. * Deduction of 1% if account is closed prematurely at any time after three years. * suitable scheme for retired employees/ senior citizens and for those who need regular monthly income. National Saving Certificate (NSC) National Savings Certificates (NSC) are certificates issued by Department of post, Government of India and are available at all post office counters in the country . This scheme is specially designed for Government employees, Businessmen and other stipendiary classes who are IT assesses. It is a long term safe savings option for the investor.Trust and HUF cannot invest. The scheme combines growth in money with reductions in tax financial obligation as per the provisions of the Income Tax Act, 1961. The duration of a NSC scheme is 5 years. Salient Features * NSC VIII Issue (5 years) Interest rate of 8. 6% per annum w. e. f. 01. 04. 2012 * NSC IX Issue (10 years) Interest rate of 8. 9% per annum w. e. f. 01. 04. 2012 * Minimum investment Rs. snow/-. No maximum limit for investment. * No tax deduction at source. * Investment up to Rs 1,00,000/- per annum qualifies for Income Tax Rebate under NSC section 80C of IT Act. Certificates can be kept as collateral security to get loan from banks. * Trust and HUF cannot invest. * A single holder type certificate can be purchased by an adult for himself or on behalf of a minor or to a minor. * The in terest accruing p.a. but deemed to be reinvested will also qualify for deduction under NSC section 80C of IT Act. Public forethoughtful Fund (PPF) Public Provident Fund, popularly known as PPF, is a savings cum tax saving instrument. It also serves as a retirement planning tool for many of those who do not have any structured pension plan covering them.The balances in PPF account cannot be attached by any authority normally. Salient Features * Interest rate of 8. 8% per annum w. e. f. 01. 04. 2012. * Minimum deposit is 500/- per annum. Maximum deposit is Rs. 1,00,000/- per annum * The scheme is for 15 years. * Investment up to Rs 1,00,000/- per annum qualifies for Income Tax Rebate under section 80C of IT Act. * Interest is completely tax-free. * Deposits can be made in lumpsum or in 12 installments. * One deposit with a marginal amount of Rs 500/- is mandatory in each financial year. * detachment is permissible from 6th financial year. Loan facility available from tertiary fin ancial year upto 5th financial year. The rate of interest aerated on loan taken by the subscriber of a PPF account on or after 01. 12. 2011 shall be 2% p. a. However, the rate of interest of 1% p. a. shall continue to be charged on the loans already taken or taken up to 30. 11. 2011. * Free from court attachment. * Non-Resident Indians (NRIs) not eligible. * An individual cannot invest on behalf of HUF (Hindu Undivided Family) or Association of persons. * Ideal investment option for both salaried as well as self employed classes.Time Deposit Scheme A Post-Office TimeDepositAccount(RDA) is abankingservicesimilar to a Bank Fixed Deposit offered by Department of post, Government of India at all post office counters in the country. The scheme is meant for those investors who want to deposit a lump sum of money for a fixed period say for a minimum period of one year to two years, three years and a maximum period of five years. Investor gets a lump sum (principal + interest) at the matur ity of the deposit. Time Deposits scheme return a lower, but safer, growth in investment. Salient Features 1 year, 2 year, 3 year and 5 year time deposits can be opened. * Interest payable annually but compounded quarterly PERIOD RATE OF INTEREST One Year 8. 2% Two historic period 8. 3% Three Years 8. 4% Five Years 8. 5% * Minimum amount of deposit is Rs 200/- and in multiples of Rs 200/- thereafter. No maximum limit. * Investment up to Rs 1,00,000/- per annum qualifies for Income Tax Rebate under section 80C of IT Act. * Interest income is taxable. * Facility of deposit on maturity of an account. * In case of premature closure of 1 year, 2 Year, 3 Year or 5 Year account on or after 01. 12. 011 between 6 months to one year from the date of deposit, simple interest at the rate applicable to from time to time to post office savings account shall be payable. * 2 year, 3 year or 5 year accounts on or after 01. 12. 2011 if closed after one year, interest on such deposits shall be calcu lated at a discount of 1% on the rate specified for respective period as mentioned in the concerned table given under Rule 7 ofPost office Time Deposit Rules. * Account can be pledged as security against a loan to banks/ Government institutions. * Any individual (a single adult or two adults jointly) can open an account. Group Accounts, Institutional Accounts and Misc. account not permissible. * Trust, Regimental Fund or Welfare Fund not permissible to invest. Senior Citizens Saving Scheme A new savings scheme called Senior Citizens Savings Scheme has been notified with personnel from August 2, 2004. The Scheme is for the benefit of senior citizens and maturity period of the deposit will be five years, extendable by another three years. Initially the scheme will be available through designated post offices through out the country. Salient Features * Interest 9. 3% per annum from the date of deposit on quarterly basis w. e. f. 1. 04. 2012 * Minimum deposit is Rs c0 and multiples t hereof. Maximum limit of 15 lakhs. * Maturity period is 5 years and can be extended for a further period of 3 years. * Age should be 60 years or more, and 55 years or more but less than 60 years who has retired under a Voluntary Retirement Scheme or a Special Voluntary Retirement Scheme on the date of opening of the account within three months from the date of retirement. * No age limit for the retired personnel of self-abnegation run provided they fulfill other specified conditions. * The account may be opened in individual capacity or jointly with spouse. TDS is deducted at source on interest if the interest amount is more than Rs 10,000/- per annum. * Investment up to Rs 1,00,000/- per annum qualifies for Income Tax Rebate under section 80C of IT Act. * Interest can be automatically credited to savings account provided both the accounts stand in the same post office. * Premature closure is allowed after one year on deduction of 1. 5% of the deposit and after 2 years on deductio n of 1%. * No withdrawal permitted before the expiry of a period of 5 years from the date of opening of the account. * Non-resident Indians (NRIs) and Hindu Undivided Family (HUF) are not eligible to open an account.Saving Account Post office saving account is similar to a savings account in a bank. It is a safe instrument to park those funds, which you might need to liquidate fully or partially at very short find out. Post office savings accounts are peculiarly suited for those living in rural and semi-rural areas where the reach of banks is very limited. Salient Features * Rate of interest 4. 0% per annum * Minimum amount Rs 50/- in case of non-cheque account, Rs. 500/- in case of cheque account. * Maximum balance permissible is Rs 1,00,000/- in a single account and Rs 2,00,000/- in a joint account. Interest Tax Free. * Any individual can open an account. * Cheque facility available. * Group Account, Institutional Account, other Accounts like tribute Deposit account Official C apacity account are not permissible. Equity Indian Equity grocery store The Indian Equity Market is also the other name for Indian share market or Indian stock market. The forces of the market depend on monsoons, global fundings period into equities in the market and the performance of various companies. The Indian market of equities is transacted on the basis of two major stock indices, National Stock Exchange of India Ltd. NSE) and The Bombay Stock Exchange (BSE), the trading being carried on in a dematerialized form. The physical stocks are in liquid form and cannot be exchange by the investors in any market. Two types of funds are there in the Indian Equity Market Venture Capital Funds and Private Equity Funds. The equity indexes are correlated beyond the boundaries of different countries with their exposure to common calamities like monsoon which would affect both India and Bangladesh or trade integration policies and close connection with the foreign investors.From 1995 onw ards, both in terms of trade integration and FIIs India has made an advance. All these have established a close relationship between the stock market indexes of India stock market and those of other countries. The Stock derivatives add up all futures and options on all individual stocks. This stock index derivative was found to have kaput(p) up from 12 % of NSE derivatives turnover in 2002 to 35 % in 2004. The Indian Equity Market also comprise of the Debt Market, dominated by primary dealers, banks and wholesale investors.Indian Equity Market at present is a moneymaking field for the investors and investing in Indian stocks are profitable for not only the long and medium-term investors, but also the position traders, short-term degenerate traders and also very short term intra-day traders. In terms of market capitalization, there are over 2500 companies in the BSE chart list with the Reliance Industries Limited at the top. The SENSEX today has rose from 1000 levels to 8000 level s providing a profitable business to all those who had been investing in the Indian Equity Market.There are about 22 stock exchanges in India which regulates the market trends of different stocks. prevalently the bigger companies are listed with the NSE and the BSE, but there is the OTCEI or the everywhere the Counter Exchange of India, which lists the medium and small sized companies. There is the SEBI or the Securities and Exchange Board of India which supervises the functioning of the stock markets in India. In the Indian market scenario, the large FMCG companies reached the top line with a double-digit growth, with their shares being harming for investing in the Indian stock market.Such companies like the Tata Tea, Britannia, to name a few, have been providing a bustling business for the Indian share market. Other leading houses offering equally beneficial stocks for investing in Indian Equity Market, of the SENSEX chart are the two-wheeler and three-wheeler maker Bajaj Auto and second largest software system exporter Infosys Technologies. Other than some restricted industries, foreign investment in general enjoys a majority share in the Indian Equity Market. Foreign Institutional Investors (FII) need to register themselves with the SEBI and the RBI for operating in Indian stock exchanges.In fact from the Indian stock market analysis it is known that in some specific industries foreigners can have even 100% shares. In the last few years with the facility of the Online Stock Market Trading in India, it has been very convenient for the FIIs to trade in the Indian stock market. From an analysis on the Indian Equity Market it can be said that the increase in the foreign investments over the years no doubt have accentuated the dynamism of the Indian market of equities. Foreign investors are allowed to buy Indian equity for the purpose of converting the equity into ADR or GDR.Thus, the growing financial capital markets of India being encouraged by domestic a nd foreign investments is becoming a profitable business more with each day. If all the economic parameters are unchanged Indian Equity Market will be conducive for the growth of private equities and this will lead to an overall improvement in the Indian economy. Insurance Insuranceis a form ofrisk managementprimarily used tohedgeagainst theriskof a contingent,uncertain acquittance. Insurance is delineated as the equitable transfer of the risk of a disadvantage, from one entity to another, in exchange for payment.An policy company, or damages carrier, is a keep company selling the damages the ascertain, or policyholder, is the person or entity buying the insurance policy. The amount to be charged for a certain amount of insurance coverage is called the premium. Risk management, the practice ofappraisingand exacting risk, has evolved as a discrete field of study and practice. The transaction involves the assure assuming a guaranteed and known relatively small firing in the form of payment to the general agent in exchange for the insurers promise to yield (indemnify) the verify in the case of a financial (personal) want.The verify receives acontract, called theinsurance policy, which details the conditions and circumstances under which the insured person will be financially compensated. The business of Insurance essentially means defraying risks attached to any activity over time (including life) and sharing the risks between various entities, both persons and organizations. Insurance companies (ICs) are important players in financial markets as they collect and invest large amounts of premium. Insurance products are multipurpose and offer the hobby benefits Protection to the investors * Accumulate savings * Channelize savings into sectors needing huge long term investments. Insurance involvespoolingfunds frommanyinsured entities (known as exposures) to pay for the losses that some may incur. The insured entities are therefore protected from r isk for a fee, with the fee being dependent upon the frequency and moroseness of the issuance occurring. In order to be insurable, the risk insured against must meet certain characteristics in order to be aninsurable risk.Insurance is a commercial enterprise and a major part of the financial services industry, but individual entities can alsoself-insurethrough saving money for possible future losses. Insurability Risk which can be insured by private companies typically share seven common characteristics 1. Large number of similar exposure units Since insurance operates through pooling resources, the majority of insurance policies are provided for individual members of large classes, allowing insurers to benefit from thelaw of large numbersin which predicted losses are similar to the actual losses.Exceptions includeLloyds of London, which is famous for insuring the life or health of actors, sports figures and other famous individuals. However, all exposures will have particular dif ferences, which may lead to different premium rates. 2. Definite loss The loss takes place at a known time, in a known place, and from a known cause. The classic example is death of an insured person on a life insurance policy. Fire,automobile accidents, and proletarian injuries may all easily meet this criterion. Other types of losses may only be definite in supposition.Occupational disease, for instance, may involve extended exposure to injurious conditions where no specific time, place or cause is identifiable. Ideally, the time, place and cause of a loss should be clear overflowing that a reasonable person, with sufficient information, could objectively verify all three elements. 3. Accidental loss The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be pure, in the sense that it results from an event for which there is only the prospect for salute.Events that contain sp eculative elements, such as ordinary business risks or even purchasing a lottery ticket, are generally not considered insurable. 4. Large loss The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to pretty assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses.There is hardly any point in paying such costs unless the protection offered has real value to a buyer. 5. Affordable premium If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that the insurance will be purchased, even if on offer. Further, as the accounting profession formally recognizes in financial account ing standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer.If there is no such chance of loss, the transaction may have the form of insurance, but not the substance. 6. Calculable loss There are two elements that must be at least estimable, if not formally calculable the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim. . Limited risk of catastrophically large losses Insurable losses are ideally self-governingand non-catastrophic, meaning that the losses do not happen all at once and individual losses are not severe liberal to bankrupt the insurer insurers may prefer to l imit their exposure to a loss from a single event to some small portion of their capital base. Capitalconstrains insurers ability to sellearthquake insuranceas well as wind insurance inhurricanezones. In the US, swamp riskis insured by the federal government.In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurers capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into thereinsurancemarket. Legal When a company insures an individual entity, there are basic level-headed requirements. Several commonly cited legal principles of insurance include 1. Indemnity the insurance company indemnifies, or compensates, the insured in the case of certain losses only up to the insureds interest. . Insurable interest the insured typically must directly cope with from the loss. Insurable interest must exist whether property insu rance or insurance on a person is involved. The concept requires that the insured have a stake in the loss or damage to the life or property insured. What that stake is will be determined by the kind of insurance involved and the nature of the property ownership or relationship between the persons. 3. Utmost good faith the insured and the insurer are bound by agood faithbond of honesty and fairness. Material facts must be disclosed. 4.Contribution insurers which have similar obligations to the insured contribute in the indemnification, according to some method. 5. Subrogation the insurance company acquires legal rights to pursue recoveries on behalf of the insured for example, the insurer may sue those liable for insureds loss. 6. Causa proxima, or proximate cause the cause of loss (the peril) must be covered under the insuring agreement of the policy, and the dominant cause must not beexcluded 7. Mitigation In case of any loss or casualty, the asset owner must attempt to keep the loss to a minimum, as if the asset was not insured.Indemnification To indemnify means to make whole again, or to be reinstated to the position that one was in, to the extent possible, preceding to the happening of a specified event or peril. Accordingly,life insuranceis generally not considered to be policy insurance, but rather contingent insurance (i. e. , a claim arises on the occurrence of a specified event). There are generally two types of insurance contracts that seek to indemnify an insured 1. an indemnity policy, and 2. a pay on behalf or on behalf ofpolicy. The difference is significant on paper, but rarely material in practice.An indemnity policy will never pay claims until the insured has paid out of paper bag to some third party for example, a visitor to your home slips on a floor that you left wet and sues you for $10,000 and wins. Under an indemnity policy the homeowner would have to come up with the $10,000 to pay for the visitors fall and then would be indemn ified by the insurance carrier for the out of pocket costs (the $10,000). 45 Under the same situation, a pay on behalf policy, the insurance carrier would pay the claim and the insured (the homeowner in the above example) would not be out of pocket for anything.Most modern liability insurance is written on the basis of pay on behalf language. An entity seeking to transfer risk (an individual, corporation, or association of any type, etc. ) becomes the insured party once risk is assumed by an insurer, the insuring party, by means of a contract, called aninsurance policy. Generally, an insurance contract includes, at a minimum, the following elements identification of active parties (the insurer, the insured, the beneficiaries), the premium, the period of coverage, the particular loss event covered, the amount of coverage (i. . , the amount to be paid to the insured or beneficiary in the event of a loss), and exclusions(events not covered). An insured is thus said to be indemnified a gainst the loss covered in the policy. When insured parties experience a loss for a specified peril, the coverage entitles the policyholder to make a claim against the insurer for the covered amount of loss as specified by the policy. The fee paid by the insured to the insurer for assuming the risk is called the premium.Insurance premiums from many insureds are used to fund accounts reserved for later payment of claims in theory for a relatively few claimants and foroverheadcosts. So long as an insurer maintains adequate funds set aside for anticipated losses (called reserves), the remaining margin is an insurersprofit. Types of Insurances * Life Insurance * General Insurance Life Insurance Life insuranceis a contract between aninsurance policy holderand aninsurer, where the insurer promises to pay a designatedbeneficiary sum of money (the benefits) upon the death of the insured person.Depending on the contract, other events such asterminal illnessor critical illnessmay also trigg er payment. The policy holder typically pays a premium, either regularly or as a lump sum. Other expenses (such as funeral expenses) are also sometimes included in the benefits. The advantage for the policy owner is peace of mind, in knowing that the death of the insured person will not result in financial hardship for love ones and lenders. Life policies are legal contracts and the terms of the contract describe the limitations of the insured events.Specific exclusions are often written into the contract to limit the liability of the insurer common examples are claims relating to suicide, fraud, war, riot and civil commotion. Life-based contracts tend to fall into two major categories * Protectionpolicies designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance. * Investmentpolicies where the main objective is to facilitate the growth of capital by regular or single premiums.Common forms (in the U S) arewhole life,universal lifeandvariable life policies. General Insurance General insuranceor non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance typically comprises any insurance that is not determined to belife insurance. It is calledpropertyand casualtyinsurancein theU. S. andNon-Life Insurancein Continental Europe. Commercial linesproducts are usually designed for relatively small legal entities.These would include workers comp (employers liability), public liability, product liability, commercial fleet and other general insurance products sold in a relatively standard sort to many organisations. There are many companies that supply comprehensive commercial insurance packages for a wide range of different industries, including shops, restaurants and hotels. Personal linesproducts are designed to be sold in large quantities. This would includeautos(private car),ho meowners(household), pet insurance, creditor insurance and others. ACORDwhich is the insurance industry global standards organisation.ACORD has standards for personal and commercial lines and has been working with the Australian General Insurers to develop those XML standards, standard applications for insurance, and certificates of currency. PORTFOLIO MANAGEMENT A good way to begin understanding what portfolio management is (and is not) may be to define the termportfolio. In a business context, we can look to the mutual fund industry to explain the terms origins. Morgan StanleysDictionary of Financial Termsoffers the following explanation If you own more than one security, you have an investment portfolio.You bring in the portfolio by buying additional stocks, bonds, mutual funds, or other investments. Your goal is to increase the portfolios value by selecting investments that you believe will go up in price. According to modern portfolio theory, you can reduce your investment ris k by creating a diversified portfolio that includes enough different types, or classes, of securities so that at least some of them may produce strong returns in any economic climate. Note that this explanation contains a number of important ideas * A portfolio contains many investment vehicles. Owning a portfolio involves making choices &8212 that is, deciding what additional stocks, bonds, or other financial instruments to buy when to buy what and when to sell and so forth. Making such decisions is a form of management. * The management of a portfolio is goal-driven. For an investment portfolio, the specific goal is to increase the value. * Managing a portfolio involves inherent risks. Objectives of Portfolio Management- The objective ofportfolio managementis to invest in securities is securities in such a way that one maximizes ones returns and minimizes risks in order to achieve ones investment objective.A goodportfolioshould have multiple objectives and achieve a sound balance among them. Any one objective should not be given undue importance at the cost of others. Presented below are some important objectives of portfolio management. 1. Stable Current Return Once investment safety is guaranteed, the portfolio should yield a steady current income. The current returns should at least match the opportunity cost of the funds of the investor. What we are referring to here current income by way of interest of dividends, not capital gains. 2. Marketability A good portfolio consists of investment, which can be marketed without difficulty. If there are too many unlisted or inactive shares in your portfolio, you will face problems in encasing them, and switching from one investment to another. It is desirable to invest in companies listed on major stock exchanges, which are actively traded. 3. Tax Planning Since taxation is an important variable in total planning, a good portfolio should modify its owner to enjoy a favorable tax shelter. The portfolio should b e essential considering not only income tax, but capital gains tax, and gift tax, as well.What a good portfolio aims at is tax planning, not tax evasion or tax avoidance. 4. Appreciation in the value of capital A good portfolio should appreciate in value in order to protect the investor from any erosion in purchasing power due to inflation. In other words, a balanced portfolio must consist of certain investments, which tend to appreciate in real value after adjusting for inflation. 5. Liquidity The portfolio should ensure that there are enough funds available at short notice to take care of the investors liquidity requirements.It is desirable to keep a line of credit from a bank for use in case it becomes necessary to participate in right issues, or for any other personal needs. 6. Safety of the investment The first important objective of a portfolio, no matter who owns it, is to ensure that the investment is absolutely safe. Other considerations like income, growth, etc. , only c ome into the picture after the safety of your investment is ensured. Investment safety or minimization of risks is one of the important objectives of portfolio management.There are many types of risks, which are associated with investment in equity stocks, including super stocks. control in mind that there is no such thing as a zero risk investment. More over, relatively low risk i