Why Diversify? Because Market Leadership Continually Changes.

Perhaps nothing illustrates the need for an asset allocation plan better than Asset
Class Return tables. The historic performance figures for various asset classes are
ranked in Tables 1 & 2, based on year-by-year annual total returns. The best
performing asset class per year is listed at the top of each column. Of course, past
performance does not guarantee future returns.
Diversification really is the key to a successful investment plan. True
diversification is then achieved by determining the appropriate allocation to each
individual asset class. A quick review of the various asset groups in Tables 1 & 2
reveals constant change in market leadership over the 22-year test period. An index
that is “Hot” one year may find itself at or close to the bottom of the list the
following year. Identifying key classes is the first step in creating a well-balanced
portfolio. The goal, however, is mixing asset classes together to create a stable and
truly diversified portfolio.

Investment Avenues was created to help the small

Investor gain an advantage in the stock market. Born
from the belief that stocks gain and carry momentum
and that by trading stocks with positive momentum,
any investor can realize a profit. Investment Avenues gathers
information on over 11,000 stocks every day, using this data we
compile a daily list of stocks that can put cash in your pocket.

FOUR KEYS TO SUCCESSFUL TRADING

1. Daily List Of Stocks 2. Unbiased Stock Picks 3. Buy
and Sell Targets 4. InvestmentA venues Mentality
First made available in 200 I, InvestmentA venues was
created for part time traders who don’t have a lot of
time to research their investment decisions. Utilizing a
sophisticated computer program Investment Avenues
provides all the keys needed for successful trading.
THE INVESTMENT A VENUES MENTALITY
Trading Investment Avenues stocks is about being
simple and safe. We believe that each stock is unique
and that each stock has a story to tell. Telling that
story for us is a set of computer algorithms that look
at a stocks recent trading history then use that history
to project what the stock will do in the next few days.
The method is simple: buy stocks that have positive
momentum, hold them for a few days while that
momentum continues then sell them before the
momentum stops.
YOU DON’T NEED A LOT OF MONEY TO TRADE
Trading with stocks selected by Investment Avenues
does not require you to have a large amount of money
to trade. As you will see when you become a member,
Investment Avenu esestimates a stocks return based
on a $2000.00 investment. You can invest as much or
as little as you feel comfortable with. Below is an
illustration of the investment avenues provided by
some of the banks.
HDFC Bank offers a wide range of commercial and
transactional banking services and treasury products
to wholesale and retail customers

FACTORS WHICH INFLUENCE THE DECISION TO INVEST

Past market trends

Sometimes history repeats itself; sometimes markets learn from their
mistakes. You need to understand how various asset classes have
performed in the past before planning your finances.
Your risk appetite
The ability to tolerate risk differs from person to person. It depends on
factors such as your financial responsibilities, your environment, your basic
personality, etc. Therefore, understanding your capacity to take on risk
becomes a crucial factor in investment decision making.
Investment horizon
How long can you keep the money invested? The longer the time-horizon,
the greater are the returns that you should expect. Further, the risk element
reduces with time.
Investible surplus
How much money are you able to keep aside for investments? The
investible surplus plays a vital role in selecting from various asset classes
as the minimum investment amounts differ and so do the risks and returns.
Investment need
How much money do you need at the time of maturity? This helps you
determine the amount of money you need to invest every month or year to
reach the magic figure.
Expected returns
The expected rate of returns is a crucial factor as it will guide your choice of
investment. Based on your expectations, you can decide whether you want
to invest heavily into equities or debt or balance your portfolio.

Financial Instruments

Equities
Equities are a type of security that represents the ownership in a company.
Equities are traded (bought and sold) in stock markets. Alternatively, they
can be purchased via the Initial Public Offering (IPO) route, i.e. directly
from the company. Investing in equities is a good long-term investment
option as the returns on equities over a long time horizon are generally
higher than most other investment avenues. However, along with the
possibility of greater returns comes greater risk.
Mutual funds
A mutual fund allows a group of people to pool their money together and
have it professionally managed, in keeping with a predetermined
investment objective. This investment avenue is popular because of its
cost-efficiency, risk-diversification, professional management and sound
regulation. You can invest as little as Rs. 1,000 per month in a mutual fund.
There are various general and thematic mutual funds to choose from and
the risk and return possibilities vary accordingly.
Bonds
Bonds are fixed income instruments which are issued for the purpose of
raising capital. Both private entities, such as companies, financial
institutions, and the central or state government and other government
institutions use this instrument as a means of garnering funds. Bonds
issued by the Government carry the lowest level of risk but could deliver
fair returns.
Deposits
Investing in bank or post-office deposits is a very common way of securing
surplus funds. These instruments are at the low end of the risk-return
spectrum.
Cash equivalents
These are relatively safe and highly liquid investment options. Treasury
bills and money market funds are cash equivalents.

Non-financial Instruments

Real estate
With the ever-increasing cost of land, real estate has come up as a
profitable investment proposition.
Gold
The 'yellow metal' is a preferred investment option, particularly when
markets are volatile. Today, beyond physical gold, a number of products
which derive their value from the price of gold are available for investment.
These include gold futures and gold exchange traded funds.

RESEARCH DESIGN
Chapter 2
2.1. Problem Identification:
Analyze the investment pattern of people and the popularity of
different products (Fund Invest, RBI Bonds, Stock Direct,
Insurance
,mutual funds and other securities ) provided by the financial
institutions and banks for investment.
2.2 Objective of the study:
To study the investment pattern of people.
To study the investment decisions of different social class
people (in
term of age group, education, income level etc.)
To analyze the investment pattern of people who reside in an
economically developed area and economically developing area.
To study techniques and principles useful in systematic and
rational
investment management.
 To study the popularity of various products offered for
investment in
the market.
And, to study the role of brokerage firm as an intermediaries.
2.3 CONCEPTS
2.3.1 Investment:
Investment means buying securities or other monetary or paper
(financial) assets in the money markets or capital markets, or in
fairly
liquid real assets, such as gold as an investment, real estate, or
collectibles.
Investment is the commitment of a person's fund to derive future
income in the form of interest, dividend, premiums ,pension
benefits
or appreciation in the value of their capital .Valuation is the
method
for assessing whether a potential investment is worth its price.
Types
of financial investments include shares or other equity
investment, and
bonds (including bonds denominated in foreign currencies). These
investments assets are then expected to provide income or
positive
future cash flows, but may increase or decrease in value giving
the
investor capital gains or losses.
Essential nature of investment
Reduced current consumption
Planned later consumption
By saving money (instead of spending it), individuals tradeoff
present consumption for a larger future consumption.

AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
The three Qolden rules for all investors are:
~ Invest early
~ Invest regularly
~ Invest for long term and not short term
One needs to invest for
~ Earn return on your idle resources
~ Generate a specified sum of money for a specific goal in life
~ Make a provision for an uncertain future
~ To meet the cost of inflation
2.3.4 Types of Investment:
(i) Short term Investment- It is an investment made by the
investor
for very short period of time i.e. for one to three years. Such as
investment in bank, money market, liquid funds etc.
(ii) Long Term Investment - When investor invests money for
more than three to five years then it is called long term
investment.
Such as investment in bonds, mutual funds, fixed bank deposits,
PPF,
insurance etc
Various options available for investment
~ Physical assets
Real estate
Gold/jewelry
Commodities
Assets etc.
~ Financial assets
fixed deposits with banks
Small saving instruments with post offices
Insurance /provident /pension fund etc.
> Securities market
Share
Bonds
Debentures
Mutual fund
Derivatives etc.
2.3.5 Investor:
Investor is a person or an organization that invest money in
various
investment sources for specific objective. Attitude of investment
is
different in each alternative. E.g. financial market have different
attitude towards risk and return. Some investors are risk avers,
while
some have an affinity of risk. The risk bearing capacity of investor
is a
function of personal, economical, environment, and situational
factors
such as income, family size, expenditure pattern, and age. A
person
with higher income is assumed to have higher risk-bearing
capacity.
Thus investor can be classified as risk skiers, risk avoiders, or risk
bearers
Before making any investment, one must ensure to:
> Obtain written documents explaining the investment
> Read and understand such documents
> Verify the legitimacy of the investment
> Find out the costs and benefits associated with the investment
> Assess the risk-return profile of the investment
> Know the liquidity and safety aspects of the investment
> Ascertain if it is appropriate for your specific goals
> Compare these details with other investment opportunities
available
> Examine if it fits in with other investments you are considering
or you have
already made
> Deal only through an authorized intermediary
> Seek all clarifications about the intermediary and the
investment
> Explore the options available to you if something were to go
wrong,
and then, if satisfied, make the investment.
Portfolio
A Portfolio is a combination of different investment assets mixed
and
matched for the purpose of achieving an investor's goal. Items
that are
considered a part of your portfolio can include any financial asset
you
own, like shares, debentures, bonds, mutual fund units etc. and
real
assets like gold, art and even real estate etc. However, for most
investors a portfolio has come to signify an investment in financial
instruments like shares, debentures, fixed deposits, mutual fund
units.
Diversification
It is a risk management technique that mixes a wide variety of
investments within a portfolio. It is designed to minimize the
impact
of anyone security on overall portfolio performance.
Diversification is
possibly the best way to reduce the risk in a portfolio.
Advantages of having a diversified portfolio
A good investment portfolio is a mix of a wide range of asset
class.
Different securities perform differently at any point of time.
So with a mix of asset types, your entire portfolio does not suffer
the
impact of a decline of anyone security. When your stocks go
down,
you may still have the stability of the bonds in your portfolio.
There
have been all sorts of academic studies and formulas that
demonstrate
why diversification is important, but it's really just the simple
practice
of "not putting all your eggs in one basket. If you spread your
investments across various types of assets and markets, you'll
reduce
the risk of your entire portfolio getting affected by the adverse
returns
of any single asset class.
Investment Option
Money Market Account
Treasury Bills
Savings Account
Certificate of Deposit (CD)
Mutual Fund
Description
These work like checking accounts
but pay interest (usually more than a
savings account pays). You can take
your money out whenever you want.
But you may have a limit on how
many checks you can write and the
starting required balance is higher
than a regular checking account.
Risk: Low, Return Rate: 3-5%,
Liquidity: High
Debt obligations of the U.S.
Treasury that have maturities of one
year or less; however T-bills can be
sold before maturity. They are
backed by the government. Risk:
low, Return Rate: 3% Liquidity:
High
Money you put into a bank or credit
union for which they pay you a little
interest. Think of a savings account
as money you’re lending to the
bank/credit union. Typically there’s
no minimum balance and since the
government guarantees the safety of
these accounts, risk is low. Risk:
low, Return Rate: 1-2%,
Liquidity: High
With this investment, you are
lending money to a bank/credit
union for a specified amount of
time, such as 6 months or 2 years.
The financial institution pays you a
higher interest rate the longer the
term, and there’s a penalty if you
want to take your money back early.
Risk: Low Return Rate: 1-2%,
Liquidity: High to Low.
An investment company that pools
 money from several investors and
uses the money to buy a particular
type of investment, such as stocks
and bonds. Funds are professionally
managed and there are many
different kinds of funds. Risk: low
to moderate, Return Rate: low to
mod., Liquidity: High
Utility Stock Stock of a power company that
owns or operates facilities used for
the generation, transmission, or
distribution of electric energy,
which is regulated at state and
federal levels. Risk: low to mod.,
Return Rate: mod., Liquidity:
high
Collectibles Unique items that are relatively rare
in number, such as works of art or
antique cars. Risk: high. Return
Rate: mod-high Liquidity: low
Real Estate Investment Investment in a piece of property,
such as a land or a building. Risk:
mod.-high Return Rate: 9-12%
Liquidity: low
Stocks Investments that represent
ownership in a company. Stocks in
different types of companies (new
firms versus start-ups, big versus
small companies) carry different
levels of risk & return. Risk: mod.-
high Return Rate: mod.-high
Liquidity: mod.
Precious Metals Gold, silver, platinum, and
palladium.. Risk: very high, Return
Rate: very high, Liquidity: high

An investor is a party that makes an investment into one or

more categories of assets --- equity, debt securities , real estate,
currency, commodity, derivatives such as put and call options,
etc. --- with the objective of making a profit.
Who is investor?
An investor is a person or entity that purchases assets with the objective of
receiving
a financial return. The assets an investor may buy range widely, but include
stocks,
bonds, real estate, commodities, and collectibles (e.g. art). The portfolio of
an investor commonly includes a variety of assets that balance the rewards
and risks of each investment. An investor is distinguished from a
speculator, who seeks to make quick, large gains from price increases on
risky assets. Generally, an investor has a longer time horizon for achieving
a return, which may include regular cash payments from the income the
asset generates, capital appreciation from the rise in the asset price, or
both. A
young investor tends to buy assets with price appreciation potential,
because a 25-year- old investor has many years for the asset to appreciate
before the funds are needed for retirement. An older, retired investor
ordinarily seeks income and thus wants assets that offer regular cash
payments

Government’s small savings schemes have been

started with a view of social development as
well as the financial safety of public money.
These schemes offer attractive Interest along
with relief in Income Tax and other benefits.

On small savings the state receives funds from the Center as a

loan. This fund is utilized in the state’s development schemes.
Thus small savings investors also participate in the development
of the state.
Here are some of the investment options available in India for
everyone of us.

1. Savings Bank Account

Use only for short-term (less than 30 days) surpluses

The first banking product used by people, it offers low interest (4%-
5% p.a.), making them only marginally better than safe deposit
lockers.

2. Money Market Funds (also known as liquid funds)

It offers better returns than savings account without compromising

on the terms of liquidity

These liquid funds are a specialized form of mutual funds invested in

extremely short-term fixed income instruments. Unlike most mutual
funds, they are primarily oriented towards protecting the capital and
then later maximising the returns.

Money market funds usually yield better returns than savings

accounts, but lower than bank fixed deposits. With the flexibility to
issue cheques from a money market fund account now available, this
option can be explored before putting one's money in a savings
account.

3. Bank Fixed Deposit (Bank FDs)

For investors, who are ready to take low risk, Bank FDs are best for 6-
12 months investment period
Also known as term deposits, Bank FDs would be offered by all banks.
Minimum investment period for them is 30 days.

The ideal investment time for bank FDs is 6 to 12 months as normally

interest on bank less than 6 months bank FDs is likely to be lower
than money market fund returns.

It is very essential to plan one's investment time frame while

investing in this instrument because early withdrawals typically carry
a penalty.

4. Post Office Savings Schemes (POSS)

Low risk and no TDS

POSS are popular because they typically yield a higher return than
bank FDs. The monthly income plan could suit a retired individual or
the one's having regular income needs.

Besides the low (Government) risk, the other salient feature of POSS
is that there is no tax deducted at source (TDS).

The Post Office offers various schemes that include National Savings
Certificates (NSC), National Savings Scheme(NSS), Kisan Vikas
Patra, Monthly Income Scheme and Recurring and Fixed Deposit
Scheme.

5. Public Provident Fund (PPF)

Best fixed-income investment for high tax payers

PPF is a very attractive fixed income investment option for small

investors primarily because of -

1. An 11% post-tax return - effective pre-tax rate of 15.7% assuming a

30% tax rate

2. A tax-rebate - deduction of 20% of the amount invested from your

tax liability for the year, subject to a maximum Rs60,000 for a tax
rebate

3. Low risk - risk attached is Government risk

So, what's the catch? Lack of liquidity is a big negative. You can
withdraw your investment made in Year 1 only in Year 7 (although
there are some loan options that begin earlier).

If you are willing to live with poor liquidity, you should invest as
much as you can in this scheme before looking for other fixed income
investment options.

6. Company Fixed Deposits (FDs)

Option to maximise returns within a fixed-income portfolio

FDs are instruments used by companies to borrow from small

investors. Typically FDs are open throughout the year. Invest in FDs
only if you have surplus funds for more than 12 months. Select your
investment period carefully as most FDs are not encashable prior to
their maturity.

Just as in any other instrument, risk is an embedded feature of FDs,

more so because it is not mandatory for non-finance companies to get
a credit rating for this instrument.

Investors should consciously and judiciously select the companies

they invest in as quite a few small investors have lost their life's
savings by investing in FDs issued by companies that have run into
financial problems.

7. Bonds and Debentures

Option for large investments or to avail of some capital gains tax

rebates. Besides company FDs, bonds and debentures are the other
fixed-income instruments issued by companies. As a result of an
illiquid secondary market and a lack-lusture primary market,
investment in these instruments is largely skewed towards issues
from financial institutions.

While one might find some high-yielding options in the secondary

market, if one does not want the problems associated with bad
deliveries and the transfer process or if one wants to invest a large
sum of money, the primary market is the better option.

8. Mutual Funds

mutual funds are like investments made in partnership with someone

else, because more or less they work on same principles. Investors
pool together their money to buy stocks, bonds, or any other
investments.

Investing through mutual funds allows an investor to -

1. Avail the services of a professional money manager (who manages

the mutual fund)

2. Access a diversified portfolio despite making a limited investment

Our primer Investing in Mutual Funds should educate one a lot more
on the benefits of investing in mutual funds and strategies one could
employ.
9. Life Insurance Policies

We suggest not to buy life insurance solely as an investment

Life insurance premiums, depending upon the policy selected, include

the costs of -

1) death-benefit coverage

2) built-in investment returns (average 8.0% to 9.5% post-tax)

3) significant overheads, including commissions.

This implies that if one buys insurance solely as an investment, one is

incurring costs that one would not incur in alternate investment
options.

It is, however, important to insure one's life if your financial needs

and profile so require.

10. Equity Shares

Maximum returns over the long-term, invest funds you do not need
for at least five years

There are two ways in which one can invest in equities-

1. through the secondary market (by buying shares that are listed on
the stock exchanges)

2. through the primary market (by applying for shares that are offered
to the public)
Over the long term, equity shares have offered the maximum return
to investors. As an investment option, investing in equity shares is
also perceived to carry a high level of risk.

11. Gold :

This is the oldest investment option available in the world. The way
gold never looses its lusture, inesting in gold is never loss making
proposition in medium and long term. In the last 3 years this form of
investment has yielded highest return than any form of investment.
This form of invest is highly liquid, however in india, we purchase
mainly Gold ornaments and attach emotional values

12. New Pension Scheme

This is the latest entrant in the market. New Pension Scheme is the
first social security tool introduced by Government of India for all its
citizens. This is a lowest cost investment scheme which also gives us
the option to invest upto 50% in equities. You can get upto 80%
higher yield in NPS as compared to Ulip's and Mutual
Funds, provided the fund performance are same. There are 2 types of
account, Tier1 and Tier2

Tier 1 account doesnt have partial withdrawal option and one cannot
even withdraw till age of 60 is attained.

Tier 2 account can \be withdrawn anytime in parts or in full and

works as a very low cost mutual fund in which one can invest upto
50% in equities.

13. Real Estate

This form of investment has always outperformed any other form of

investment. However one has to invest huge amount as there is no
scope to invest small amount. Liquidity is the main concern in Real
estate investment as buying and selling of property is time taking
activity, however there are 2 benefits of investing in property

1. Capital appreciation

2. Rental income

SMALL SAVINGS SCHEMES:

Some important small savings schemes are as follows.

• National Saving Certificates (eighth

category)
• Kisan Vikas Patra
• Post Office Time Deposit
• FiveYearsPostOfficeRecurringDepositAccou
nt
• Post Office Monthly Income Scheme
• Post Office Savings Account

Where will you invest ?

One can invest in Post Offices in the Gujarat State. Investments

in P.P.F. can also be done in the Nationalised banks in the state.

6 Years National Savings Certificates (NSC) ( Eighth Issue)

• Available in the values of Rs. 1000, 5000 and 10,000

• On maturity after 6 years yearly for Rs. 100 you get Rs.
160.10
• Relief in Income Tax and Property Tax as per conditions.
• Every year the interest is reinvested as capital and becomes
eligible for tax relief.
• Investment can be done by trust.
 • Can appoint nominee.
• Can procure loan from bank against them.
• The certificate can be encashed only on maturity.

COMMISSION : 0.75 %

Kisaan Vikas Patra (KVP)

• The amount is doubled after 8years and seven months

means you are eligible to get Rs. 2000/- for every Rs
1000/- invested.
• Can be purchased in Rs. 1000/-, 5000/- and 10,000/-
amount.
• There is no upper limit to investment.
• Can appoint nominee
• After two and half years can be withdrawn in the post
Office.
• In the event of death amount can be withdrawn before the
investment tenure.

For the value of Rs. 1000/-

Period Amount Period Amount

Recievable Recievable
After 2 ½ After 5 ½
Rs. 1170.50 Rs. 1488.49
years years
After 3
Rs. 1207.95 After 6 years Rs. 1543.30
years
After 3 ½ After 6 ½
Rs. 1267.19 Rs. 1649.13
years years
After 4
Rs. 1310.80 After 7 years Rs. 1713.82
years
After 4 ½ After 7 ½
Rs. 1355.90 Rs. 1781.06
years years
 After 5 Before 8 years
Rs. 1466.63 Rs. 1850.93
years & 7 months

COMMISSION : 0.75 %

POST OFFICE MONTHLY SCHEME

• Money can be invested in the amount of Rs 1000/- or its

multiples.
• In individual case the limit is Rs. 3 Lacs, In Joint account
limit Rs. 6 Lacs.
• Monthly disbursement of the interest at 8% per year
interest rate.
• On maturity 10% bonus on the deposit amount.
• Tax free interest under section 80 L.
• Appointment of nominee & Passbook facility.
• After 3 years of opening the account, if the account is
closed, no deduction in the invested amount will be done.
But before 3 years if the account is closed a deduction of
5% will be done from the invested amount.
• Facility of transferring account from one Post Office to
another Post Office.

COMMISSION : 0.75%

FIVEYEARLY POST OFFICE RECURRING DEPOSIT ACCOUNT (R/D)

 • Minimum Rs. 10/- per month and every month in the
multiple of Rs. 5/- can be deposited.
• In the account of Rs. 10/- after five years on maturity Rs.
728.90
• No upper limit to investment.
• The account can be closed after 3 years of opening the
account. Interest at Post Office Savings account rate.
• Tax deductible under section 80 L.
• Six or Twelve month’s amount can be deposited in advance.
• After opening the account 50% amount of the deposit can
be withdrawn only once.

Amount receivable under Five Yearly Recurring Deposit Account

Sr.No. Monthly Deposited Amount Recievable

On Maturity Rs.
Amount Rs.
1. 10.00 728.90
2. 50.00 3,644.50
3. 100.00 7289.00
4. 150.00 10,933.50
5. 200.00 14,578.00
6. 250.00 17,222.50
7. 300.00 21,867.00
 8. 350.00 25,511.50
9. 400.00 29,156.00
10. 450.00 32,800.50
11. 500.00 36,445.00
12. 550.00 40,089.50
13. 600.00 43,734.00
14. 650.00 47,378.50
15. 700.00 51,023.00
16. 750.00 51,023.00
17. 800.00 58,312.00
18. 850.00 61,956.50
19. 900.00 65,601.00
20. 950.00 69,245.50
21. 1,000.00 72,890.00
22. 1500.00 1,09,335.00
23. 2000.00 1,45,780.00
24. 2500.00 1,82,225.00
25. 3000.00 2,18,670.00
26. 3500.00 2,55,115.00
27. 4000.00 2,91,560,00
28. 5000.00 3,64,450.00

COMMISSION : 0.30%

POST OFFICE TIME DEPOSIT (TD) :

• Investment for 1, 2, 3, and 5 years in the multiple of Rs.

50/-
• Rate of Interest ( Interest calculated every 3 months )

% %
YEAR (From 1 – 3 – YEAR (From 1 – 3 –
2003 ) 2003 )
 1 year 6.25 % 3 years 7.25 %
2 years 6.50 % 5 years 7.50 %

• Proof of Annual interest available for Income Tax.

• After one year of opening the 2, 3, 5 years accounts, the
account can be closed with proper withdrawal
• Facility of pass book and appointment of nominee.
• Account can be transferred from one post office to another
post office.
• The option of depositing the interest earned in the post
office savings account.
• The account can be closed without interest between 6
months to 1 year from the investment date.
• Account can be hypothecated.
• Free from Property Tax.

COMMISSION : 0.75%
Post Office Saving Schemes National Saving Schemes

Fixed Income Savings Recurring Time Deposit Monthly

Alternatives Account Deposit Ac. Account Income

Eligibility Individuals Individuals Individuals Individuals

Invest Amount : Rs. 100 per Rs. 500 Rs. 6000

Rs.500
Minimum month No Limit Rs. 300000/-
Rs.50.000/-
Maximum No Limit Singal A/c.
(single A/c)
(Advance Rs.600000/-(Jt.)
Rs.100000 Jt. Deposit
(In one or more Allowed)
A/c)

Face Value/Issue Price N.A. N.A.. N.A. N.A.

(Denomination)

Return : Interest 3.5%(Tax 8% 8% P.A.

@ 6.25% for - 1
rate/Yield (%) Free) Yr. +10%bonus at
 @ 6.50% for - 2 the end of term
Yrs.
@ 7.25% for - 3
Yrs.
@ 7.50% for - 5
Yrs. and above
Interest compounding
Annually Quarterly Quarterly Monthly
Periodicity

Interest payment Paid annually Paid annually Paid annually Paid monthly

Cumulative / Non-
Cumulative Cumulative Cumulative N. Cumulative
cumulative

Maturity/Redemption Any time 5 years Resp. term 6 years

Amount of
10% bonous on
Rs.100
Credit balance Credit balance maturity if no
Maturity Terms/Value denomination
in the account in the account withdrawal is
Maturity at Rs.
made
7300

a) 6months -
Repurchase Facility N.A. After 1 year 12months a) After 1 Years
b) after b) After 3 Years
12months

Once, upto 50% a) No interest a) 5% deposit

Repurchase Terms Any time deducted
of balance b) 2% penal
interest b) No penalty
Liquidity /
Very Good Good Good Average
Marketability

Safety Very high Very high Very high Very high

Secured / Unsecured Secured Secured Secured Secured

At Post Offices Transfer facility

Convenience At Post Offices At Post Offices
Cheque books to any Post Office
Low balance
Can pledge as
Loan facility Not Applicable ---------- -------
security for loan

Totally free U/s

Taxability of Income Taxable No TDS Taxable No TDS Taxable No TDS
10(15) (i)
Interest is tax-free Yes Sec.10(15)
U/S 10 of the IT ACT (i) Noti. No.
G.S.R.607(E) Qualifying for Qualifying for Qualifying for
deduction U/S deduction U/S deduction U/S
Dt.9-6-89(178
80L within limits 80L within limits 80L within limits
ITR(ST143)
of Rs. 12000/- of Rs. 12000/- of Rs. 12000/-
No
No No No
Wealth- tax Benefit

Nomination Facility Available Available Available Available

Qualified U/S 88. No No No No

National Saving Schemes

Top

Fixed Income NSC VIII-I

PPF KVP
Alternatives (Issue)

Eligibility Individuals Individuals HUFs Individuals

Invest Amount : Rs.500pa Rs.1000 Rs. 1000

Minimum Rs.70000pa No Limit No Limit
Maximum

Face Value/Issue
N.A. 1,000/5,000/10,000 1,000/5,000/10,000/50,000
Price (Denomination)

Return : Interest
8% 8.16%
rate/Yield (%) 8.41%.

Interest
compounding Annually Half Yearly Annually
Periodicity

Interest payment On Maturity On Maturity On Maturity

Cumulative / Non-
Cumulative Cumulative Cumulative
cumulative

Maturity/Redemption 15 years 6 years 8 years & 7 months

from the
year after
opening of
 account or
extended

Entire
Amount Outstanding
balance can Double the amount Invested
Maturity Terms with interest Rs.
be Rs.2000.00
1601
withdrawn

From 6th to
Repurchase Facility Exceptionally
15th year Only for KVP after 2.5 years

Once per
year upto
50% of bal. KVP early exit at fixed rates 2
Repurchase Terms in 4th 1/2 , 3 , 3 1/2 , 4 ,4 1/2 , 5 , 5
preceding or 1/2 , 6 ,
preceding 6 1/2 , 7 , 7 1/2 years
yr.(Lower)

Liquidity /
Good Good Poor
Marketability

Safety Very high Very high Very high

Balance in
account
cannot be
Secured / Unsecured Secured Secured
attached
even by
Court

At Post
Convenience Office / At Post Offices At Post Office
some nat.
bank
From 3rd - Can pledge as
Loan facility Can pledge as security
6th year security

Interest is
Taxability of Income Taxable No TDS Taxable No TDS
tax free

Interest is tax-free Yes Sec. Qualifying for Dedu. No tax benefits

U/S 10 of the IT ACT 10(11) U/S 80 L within No.
Limit of Rs.12,000
No.
Wealth- tax Benefit
No.
Nomination Facility Available Available Available

Yes (Upto
Yes (Upto
Aggretgate
Qualified U/S 88. Aggretgate of Rs. No
of Rs.
70,000)
70,000)

Cheque should be drawn in favour of "The Senior PostMaster Dadar H.O."

Created/updated on:
Public Provident fund

• The Public Provident Fund Scheme is a statutory scheme of the

Central
Government of India.
• The Scheme is for 15 years.
• The rate of interest is 8% compounded annually.
• The minimum deposit is 500/- and maximum is Rs. 70,000/- in a
financial year.
• One deposit with a minimum amount of Rs.500/- is mandatory in
each financial year.
• The deposit can be in lumpsum or in convenient installments, not
more than 12 Installments in a year or two installments in a month
subject to total deposit of Rs.70,000/-.
• It is not necessary to make a deposit in every month of the year. The
amount of deposit can be varied to suit the convenience of the
account holders.
• The account in which deposits are not made for any reasons is
treated as discontinued account and such account can not be closed
before maturity.
• The discontinued account can be activated by payment of minimum
deposit of Rs.500/- with default fee of Rs.50/- for each defaulted
year.
• Account can be opened by an individual or a minor through the
guardian.
• Joint account is not permissible.
• Those who are contributing to GPF Fund or EDF account can also
open a PPF account.
• A Power of attorney holder can neither open or operate a PPF
account.
• The grand father/mother cannot open a PPF behalf of their minor
grand son/daughter.
• The deposits shall be in multiple of Rs.5/- subject to minimum
amount of Rs.500/-.
• The deposit in a minor account is clubbed with the deposit of the
 account of the Guardian for the limit of Rs.70,000/-.
• No age is prescribed for opening a PPF account.
• Interest is not contractual but rate is notified by Ministry of Finance,
Govt. of India, at the end of each year.
• The facility of first withdrawal in the 7th year of the account subject
to a limit of 50% of the amount at credit preceding three year
balance. Thereafter one Withdrawal in every year is permissible.
• Pre-mature closure of a PPF Account is not permissible except in
case of death.
• Nominee/legal heir of PPF Account holder on death of the account
holder can not continue the account, but account had to be closed.
• The account holder has an option to extend the PPF account for any
period in a block of 5 years on each time.
• The account holder can retain the account after maturity for any
period without making any further deposits. The balance in the
account will continue to earn interest at normal rate as admissible on
PPF account till the account is closed.
• One withdrawal in each financial year is also admissible in such
account.
• The PPF scheme is operated through Post Office and Nationalized
banks.
• PPF account can be opened either in Post Office or in a Bank.
• Account is transferable from one Post office to another and from
Post office to Bank and from Bank to Post office.
• Account is transferable from one Bank to another bank as well as
within the bank to any branch.
• Deposits in PPF qualify for rebate under section 80-C of Income Tax
Act.
• The interest on deposits is totally tax free.
• Deposits are exempt from wealth tax.
• The balance amount in PPF in PPF account is not subject to
attachment under any order or decree of court in respect of any debt
or liability.
• Nomination facility available.
• Best for long term investment.

Why should you invest in Updated on:

Post Office Schemes
 • These schemes are offered by the Government of India.
• Safe, secure and risk-free investment options.
• No Tax Deduction at Source (TDS).
• Nomination facility is available.
• Nomination can be changed at any time
• The instruments are transferable to any Post Office anywhere in
India.
• Attractive rates of interest.
Created/updated on:
Kisan Vikas Patra

• Minimum Investment Rs. 500/- No maximum limit.

• Rate of interest 8.40% compounded annually.
• Money doubles in 8 years and 7 months.
• Two adults, Individuals and minor through guardian can purchase.
• Companies, Trusts, Societies and any other Institution not eligible to purchase.
• Non-Resident Indian/HUF are not eligible to purchase.
• Facility of encashment from 2 ½ years.
• Maturity proceeds not drawn are eligible to Post office Savings account interest for a
maximum period of two years.
• Facility of reinvestment on maturity.
• Patras can be pledged as security against a loan to Banks/Govt. Institutions.
• Patras are encashable at any Post office before maturity by way of transfer to desired
Post office.
• Patras are transferable to any Post office in India.
• Patras are transferable from one person to another person before maturity
• Duplicate can be issued for lost, stolen, destroyed, mutilated and defaced patras.
• Nomination facility available.
• Facility of purchase/payment of Kisan vikas Patras to the holder of Power of attorney.
• Rebate under section 80 C not admissible.
• Interest income taxable but no TDS
• Deposits are exempt from Wealth tax.
Created/updated on:
National Savings Certificate
 • Minimum investment Rs. 500/- No maximum limit.
• Rate of interest 8% compounded half yearly.
• Rs. 1000/- grow to Rs. 1601/- in six years.
• Two adults, Individuals, and minor through guardian can purchase.
• Companies, Trusts, Societies and any other Institutions not eligible to purchase.
• Non-resident Indian/HUF can not purchase.
• No pre-mature encashment.
• Annual interest earned is deemed to be reinvested and qualifies for tax rebate for first 5 years
under section 80 C of Income Tax Act.
• Maturity proceeds not drawn are eligible to Post Office Savings account interest for a maximum
period of two years.
• Facility of reinvestment on maturity.
• Certificate can be pledged as security against a loan to banks/ Govt. Institutions.
• Facility of encashment of certificates through banks.
• Certificates are encashable any Post office in India before maturity by way of transfer to desired
post office.
• Certificates are transferable from one Post office to any Post office.
• Certificates are transferable from one person to another person before maturity.
• Duplicate Certificate can be issued for lost, stolen, destroyed, mutilated or defaced certificate.
• Nomination facility available.
• Facility of purchase/payment to the holder of Power of attorney.
• Tax Saving instrument - Rebate admissible under section 80 C of Income Tax Act.
• Interest income is taxable but no TDS
• Deposits are exempt from Wealth tax.

Scout the Best Investment Option in India

IndianGround.Com brings you a ‘Comparison Chart’ to help you scout the

best investment option available in India.
NRI Investment Opportunities - A Comparative Study
Hot Investment Investment Return on Risk of Liquidity Repatriation
Options for NRI Restrictions Investment Loss Income &
sale
proceeds
(Post tax)

Mutual Funds No Equity Equity Medium- Free

 Restriction Based: Based: High
High High
Debt Based:

5-10%
Money Debt
Market Based:
Based: 3- Low
6%
Shares/Debentures Through
stock
exchange
(Facilities
are granted
on both
repatriation
and non
repatriation
basis).

Real Estate No Tax Low Low-

Restriction exemption Medium
available on
re-
investment
of long term
(> 36
months)
capital gains
in specified
avenues

Bank Deposit No 1-5% (for Low High Free

Restriction NRE/FCNR
based on
term and
currency)

Business Up to 100% No specific No Low Free

in majority % as it specific %
of sectors varies acc. as it
to business varies acc.
model and to
sector business
model and
sector
 4

Tax saving options under section 80C

InvestmentYogi: Tells you all about Income Tax section 80C and various investment options and deductions
available in easy to understand graphical format

As the end of financial year approaches investors are suddenly woken up to the existence of Income Tax department.
If you haven’t done the tax planning in advance then this is the time to carefully select the investment products
under section 80C. A wise investment will not only lessen the tax burden but also give some good returns.

What is Section 80C?

Under section 80C of the Income Tax Act, certain investments are deductible (up to a maximum of Rs 1 lakh) from
gross total income. This tax exemption is available across individual tax slabs. If you earn Rs 4 lakhs per annum and
make investments of Rs 1 lakh in 80c instruments then the taxable amount will be Rs 3 lakhs. It is not at all
complicated and the following chart simplifies even more.

Fixed Income instruments, which offer fixed returns, are suitable for risk averse investors who want to protect
their investment from the uncertainties of the market. All these instruments are backed by the Government and
hence they are risk free. But the returns may just beat the inflation and you should not expect any meaningful
appreciation in investments. Per annum returns will vary from 6% to 10% depending upon the instrument you
choose.

Market Linked: Market linked products are ELSS (Equity Linked Saving Scheme) and ULIPs (Unit Linked
Insurance Plan). These instruments invest the money in equities (Except some debt based ULIPs) and hence there is
an inherent market risk. However it has been seen that over a long period return from equities beat inflation by a
comfortable margin and create wealth for the investor.
ELSS is similar to mutual fund except that it has a lock in period of 3 years. The money is invested into diversified
stocks by a fund manager/AMC. On the other hand ULIPs are a form of life insurance where a part of the premia is
invested into equity or debt market (or combination of two). ULIPs usually have longer lock-in periods.

ELSS: ELSS has some advantages over other investments and people with moderate to high risk appetite should
consider them seriously. Some key features of ELSS are:

· Lock-in period of 3 years.

· SIP (Systematic Investment Planning) available
· Diversified equity investments
· Different funds for different risk profiles in terms of exposure to large cap, mid cap and small cap
· Dividend paid out is tax exempt
· At maturity the proceeds are exempt from long term capital gains tax

Here is the list of best ELSS (Tax Saving Mutual Funds) to invest this financial year.

To sum up
Section 80C benefit has been provided to encourage long term savings and investments. You should choose a
combination of fixed income and market linked investments depending on your age and risk profile. For example if
you are in your 20s, give a higher allocation to ELSS whereas if you are nearing retirement, concentrate more on
fixed income investments.

But remember that Investment is to be done keeping your overall financial situation and future goals. Tax advantage
is just an add-on benefit. Never make investments just for saving tax.

GOLD
Gold Investment
Gold investment is a long-term investment scheme involving low risks.
People willing to invest in gold have a natural advantage because the
demand for gold is much more than its actual supply.

The price of gold is generally in a continual rise. However, investors

should not invest all their funds in one kind of gold investment. The gold
industry is huge and has many facets, and a savvy investor can exploit this.
Money can be invested directly in gold mines, for example, which can be
more lucrative than investing in physical gold.

Benefits of gold investment:

• Gold is a popular form of saving
• Gold is indestructible
• Gold is a major requirement in the jewelry industry
• The malleability and ductility of gold make it very useful
• Gold can be transported easily
• Gold is the universal standard against which the value of any object can be
assessed
• It retains as well as appreciates in value

Benefits

1. Stable and steady wins. While paper money and stocks

are preferred over bulky gold, gold is relatively stable over
both. Using a horticultural simile, stocks are like expensive
fruit trees. They bear nice, juicy fruit but only when
pampered with constant ‘just right’ politics, absent of pesky
little uprisings and a stable strong economy for them to
grow. Stocks of gold on the other hand are a little like
dandelions; able to flourish in all seasons but not exactly
amounting to much value.
2. Rising demand. As stated earlier, more countries are
joining in the group looking to increase gold deposits. Gold
seems to have a security effect on people. The fear of having
a repeat of the Great Depression has made the market a
gold bazaar.
3. Rising prices. Gold prices spring up when the currency
decreases its value. The deflation of the American dollar, as
historians and economists understand, is bound to happen.
One theory is that a currency suffers a breakdown every
century, perhaps even losing most of its monetary worth in
the process. In fact, gold’s worth has topped over the US
dollar three times since 2001. This refers to gold in bullion
(gold made into coins, ingots or bars) but rare gold coins
have even better options. As the gold price increases, so will
these coins, and will certainly do so long after the gold prices
start to drop again.
Risks

1. Seize the gold! In the rush of gold trading, US gold

investors are wary of having the past repeating itself. It was
during President Nixon’s time that gold bullion and ordinary
coins were seized to pay the national debt. Only rare (read:
old) gold coins remained untouched. A wiser alternative in
gold trading, thus, is to buy rare gold coins.
2. What? Is that all? Rare gold coins are indeed rare. Not all
of them circulate in the market freely, simply because some
of them are heirlooms, destined only to be circulated within
family circles. Not only that, but also these coins are made
even rarer by enthusiastic private coin collectors and by gold
investors themselves.
3. Too expensive. Not everyone can afford gold stocks or gold
funds. The price of gold has increased significantly to about
$937 US dollars per Troy ounce. Silver investment is
probably more in line with the ordinary Joe’s budget—silver
costs about $13.49, which means for the price of gold for a
mere Troy ounce you would get 69 ounces of silver.
But if you still want to give gold a try, get a good capital from
your funds and invest about a fourth of that capital to buy gold.
Take caution, though because of such a demand for gold, the
market may display no discretion in putting up items for sale.
Without an expert background, you could fall prey to
unscrupulous sellers selling doubtful gold items. Buy only bullion
coins and bars or even rare gold coins duly recognized by
legitimate companies. For more expert advice, you may secure
the services of an experienced and trustworthy gold investor.

There’s no doubt that gold investment is now in bloom.

Remember: start smart and buy

Gold investors prefer to buy gold in its cheapest forms such as

krugerrands, sovereigns and bars. Gold bars are the cheapest while gold
sovereigns, because of their smaller size, are worth paying an extra
premium for.
Investors generally buy gold as a hedge or safe haven against any
economic, political, social, or fiat currency crises (including
investment market declines, burgeoning national debt, currency
failure, inflation, war and social unrest). The gold market is also
subject to speculation as other commodities are, especially
through the use of futures contracts and derivatives. The history
of the gold standard, the role of gold reserves in central banking,
gold's low correlation with other commodity prices, and its pricing
in relation to fiat currencies during the financial crisis of 2007–
2010, suggest that gold behaves more like a currency than a
commodity

Trade
World US
Gold Weight
Yea DJIA GDP Debt
USD/ozt ed US
r [4] USD[5] USD USD
dollar
tn[6] bn[7]
Index[8]
197
37 839 3.3 370
0
197
140 852 6.4 533 33.0
5
198
590 964 11.8 908 35.7
0
198
327 1,547 13.0 1,823 68.2
5
199
391 2,634 22.2 3,233 73.2
0
199
387 5,117 29.8 4,974 90.3
5
200
273 10,787 31.9 5,662 118.6
0
 200
513 10,718 45.1 8,170 111.6
5
201
1,410 11,578 ... 14,025 99.9
0
1970 to 2010 net change, %
3,792 1,280 ... 3,691 ...
1975 (post US off gold standard) to 2010
net change, %
929 1,259 ... 2,531

Today, like most commodities, the price of gold is driven by

supply and demand as well as speculation. However unlike most
other commodities, saving and disposal plays a larger role in
affecting its price than its consumption

Investment goals
Short term investors belong in gold bullion and long term investors belong in certified rare gold coins. The risk of
buying rare coins short term is that the investor may not be in the investment long enough to recoup investment cost.
The risk of investing long term in bullion is twofold. It may not do as well as a gold coin investment and it may be
confiscated (see below).

History as a guide to the risk in gold investing

Markets rise and market fall. The investor does not need to be steeped in esoteric theories such as Elliot Waves and
the like to see this. Over the last ten years when gold rose four fold it also dropped back substantially in both 2006
and 2008 before moving up again. Having a clear idea about how gold moves and how it correlated with the US dollar
will help the investor improve the chances of profit and reduce the risk of gold investing.

A long time ago, but in the memory of some still alive, is the confiscation of gold in 1933 by the United States
government. Economic times were even worse than today and president issued an executive order against
“hoarding” gold. But rare gold coins were exempted! This precedent has led many to invest in certified rare gold coins
for the long term as they believe this reduces the risk of their gold investments being confiscated when the
government comes again for your gold