Chapter I INTRODUCTION TO STUDY

INTRODUCTION
As I studied and experienced all investments carry risk in some form or the other. Risk, liquidity and return are the so called factors which are considered before making an investment. But there is a trade off between risk and return. Higher the risk higher the return. Lower the risk and lower the return. The decision of which mode of investment to choose largely depends upon the investors necessity and the factors which according to him is the most vital one. People with more security concern choose fixed investment and investments in government securities and various post office savings. The main reason for choosing such an investment mode is that the amount invested in the above stated securities seems to be very secure and hence they seemed to be more preferred one where security is the prime concern. People whom returns are most important are ready to take risk to earn fairer risk. The preferred mode of investment over here is shares and mutual fund. The risk factor in these modes of investment is basically the returns are basically performance based. If the company performs well the investors can accept fairer returns but if the company fails to perform then there can be a threat to the invested amount. Hence the returns are very volatile with the changes in the market conditions. Hence it is up to the investors to decide that which is the best kind of investment that would cater his need. The hypothesis of the study was Investors still prefer the traditional funds for investment instead the more modern methods like mutual fund.

Needs and Importance of Studies

y The project study shows the different Investment option available in the market to the investors.

The study of this project evaluate the risk involved in the different investment instrument to the investors

The study covers different Investment Instrument with specific reference to Future market.

The study shows the return calculation for the purpose of measuring the risk and variability of different Commodity future.

The study also shows how an investor can maximize investment through different investment instrument.

The study is undertaken to understand the Investment instruments market

Product & Services y Tax Planning y Insurance y Mutual Funds y P.O.S.B A/c y Bonds y S.B A/c y Fixed Deposits y Real Estate(land& building) y Stock Market y Others(pl.specify)

CHAPTER III OBJECTIVES OF THE STUDY

1. To study needs and scope of the Investment Instruments to the investors.

2. To find out awareness level of the investors about Investment instrument

3. To study one of the main objectives of the investment is to earn highest possible return for a given level of risk. A return may be in form of dividend, interest or through capital appreciation.

4. During the study of investment instruments I found out some risk in case of investment, one tries to minimize the difference between the expected and the actual return. The risk in case of investment in securities can be by forming portfolio i.e. group of security.

5. Another important objective of investment instrument is liquidity which an investor has to keep in to account while investing in his funds.

6. There are so many investment plans are available which provides the tax benefit to the investors in their Income Tax Return which is known as Under section 80-C e.g. Mutual fund

7. To study the purchasing power stability of the investors

8. To understand the safety of principal against the risk

MUTUAL FUNDS
WHAT IS A MUTUAL FUND?

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. Anybody with an investible surplus of as little as a few hundred rupees can invest in Mutual Funds. These investors buy units of a particular Mutual Fund scheme that has a defined investment objective and strategy.

The money thus collected is then invested by the fund manager in different types of securities. These could range from shares to debentures to money market instruments, depending upon the schemes stated objectives. The income earned through these investments and the capital appreciation realised by the scheme are shared by its unit in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost holder.

TYPES OF MUTUAL FUND SCHEMS

(A) By Structure
 Open-Ended Schemes  Close-Ended Schemes  Interval Schemes

(B) By Investment Objective

 Growth Schemes  Income Schemes  Balanced Schemes  Money Market / Liquid Schemes

Other Schemes
 Tax Saving Schemes (Equity Linked Saving Scheme - ELSS) (C) Special Schemes

(D) Fixed Maturity Plans

(E) Exchange Traded Funds (ETFs)

(F) Capital Protection Oriented Schemes

(G) Gold Exchange Traded Funds (GETFs)

(H) Quantitative Funds

(I) Funds Investing Abroad

(J) Fund of Funds (FOFs)

ADVANTAGES OF INVESTING IN MUTUAL FUNDS

1. Professional Management 2. Diversification 3. Convenient Administration 4. Return Potential 5. Low Costs 6. Liquidity 7. Transparency 8. Flexibility 9. Choice of Schemes 10. Well Regulated

1. MUTUAL FUND PERFORMANCE CALCULATING RETURNS: Formula: rt = {(NAVt- NAVt-1) +It + Gt}/ NAVt-1 Where rt = return at time t

It = income Gt = capital gain distribution at time t

(heading)

The information regarding nature of financial management, Financial Planning in India portfolio management, risk-return relationship, options, derivatives and valuation of shares have been understood from the above sites. And also Following data have been collected from Internet sites.

Category Insurance agent

Products for sales and advice Insurance Policies

Mutual Fund distributor Equity share broker/sub-broker Income tax consultant Distributor/Advisor of multiple financial products & services

Mutual Funds Share trading, IPOs Tax Planning, Employee Benefits MFs, Insurance, Post

Chapter V METODOLOGY OF STUDY

RESEARCH
With liberalization, privatization and globalization there has been a major change in the Indian Mutual Funds Industry. The momentum is on and one is sure to see similar hectic activity at the offices of the new entrants especially after the 90s as private sector gained entry in the Indian markets. With the private sector penetration, a large number of schemes have also been introduced due to which the average consumer has become very sensitive to the new schemes coming its way. So to ensure about the various consumer attitudes, a survey was undertaken. De facto, to ensure what the consumer thinks & what it thinks the best we undertook a consumer survey, to get a clear picture of the future of the Financial Investment companies who are busy wooing the customers, with their lucrative schemes, to survive the rat race & emerge as no.1 in this field.

RESEARCH OBJECTIVE
Research Objectives addresses the purpose of the investigation. It is here that you layout exactly what is being planned by the proposed research. The Research Objectives flows naturally from

the problem statement, giving the sponsor specific, concrete, and achievable goals. It is best to list the objectives either in order of importance or in general terms first, moving to specific terms. Research Objective is the basis for judging the Research process. It is the final step giving exact definition of problem. Analyzing Investment Instrument awareness in retail investors of Reva Financial Services Pvt. Ltd. Pune

RESEARCH METHODOLOGY
Research methodology is a systematic plan or schedule or program of the research done. It describes all the procedures of the research.

RESEARCH DESIGN
Research design can be described as an outline of a research project working or a pattern. In a research design there are series of prior decision that together provide a master plan for completing a research project. Research design is proved to be a bridge between what has been established and what is to be done in conduct of the studies. Research design should be compressive and it should provide which method to be used and what work to be done. Research design describes as a master plan a series of key decisions that serves a model for conducting a research project. There are the main components of research design.

OBJECTIVE OF RESEARCH
  Data inputs Analysis of data collected

The research design was exploratory type and the focus was on getting Investment Instruments employees views for various products, expectations from market.

Exploratory Research:
Exploratory study goes beyond description and attempts to explain the reasons for the phenomenon that the descriptive study only observed. The researcher uses theories or at least hypotheses to account for the forces that caused a certain phenomenon to occur.

SOURCES OF DATA
The gathering of data may range from a simple observation at one location to a grandiose survey of multinational corporations at sites in different parts of the world. The method selected will largely determine how the data are collected. DATA is the facts presented to the researcher from the studys environment. Characteristics of the data are as follows: y y Data are more metaphorical than real Data are processed by our senses-often limited in comparison to the senses of other living organisms. y y Capturing data are said to be trustworthy because they may be verified. Data classify their verity by closeness to the phenomena

There are two kinds of data that can be collected for research purpose. Based on the requirement in the research appropriate data is collected.

1) Primary data source

Primary data are collected and gathered for the first time. Primary data are sought for their proximity to the truth and controls over error. Advantages of primary data are: y y Researchers can collect precisely the information they want. They usually can specify the operational definitions used and can eliminate, or at least monitor and record the extraneous influences on the data as they are Gathered.

2) Secondary data source

Someone else collects secondary data. So, it becomes secondary information for the research. Secondary data have had least one level of interpretation inserted between the event and its recording. Reasons for using the secondary data are listed below:

y y y

They fill a need for specific reference or citation on some point Secondary data are an integral part of a larger research study Secondary data may be used as the sole basis for a research study, since In many research situations one cannot conduct primary research Because of physical, legal, or cost influences.

Analyzing the requirement of data, it was found that primary data is more important for achieving Research Objective. Primary data is collected with the help of Interviews.

Methods of Data Analysis

This step involves making a very specific plan about how you will conduct your research and collect your data.

Surveys & Questionnaires

y Survey The means by which quantitative research is conducted.

Questionnaire A prepared set of questions designed to generate data necessary for accomplishing

the objectives of the research project. I used survey method for data collection. Information was collected by personal interviews through questionnaire.

Following types of measurement scales were used in the questionnaire. y y y Simple category scale: - (Q-2, Q-4, Q-8, Q-9) Multiple choice single response scales: - (Q-6) Multiple choice multiple response scale:-(Q-1, Q-3, Q-5, Q-7)

Sampling Plan

Collecting the required information from the right source is very important. Sources from which the data are collected differ as per the required of researcher. Basically there are two types of data collection sources:

Sampling Unit:

The sampling unit primarily consisted of investors like businessman, professionals, Salaried employees and others. The sample unit is taken from the Vishakhapatnam city of Andhra Pradesh region.

Sample Size:

Though large sample give more reliable results than small samples but increases the cost, time and non-sampling error. Keeping in view these constraints 50 respondents were chosen. Attempts have been made to see that samples are chosen from different areas of Vishakhapatnam. I have taken 50 responds as a sample size for this particular project.

The following table shows area wise distribution of sample size. AREA
Kothrud Deccan Koregoan Park Shivaji Nagar Karve Nagar Pune Station Sinhgad Road Swargate S.B. Road Aundh Hinjewadi

SAMPLE
17 3 15 17 5 5 8 2 2 4 4

Viman Nagar Yerawada Kharadi Kondhwa Dhole Patil Road Bavdhan Pune University Camp

4 2 6 2 1 1 1 1

TOTAL

100

Tools & Techniques of Data collection

Tool / technique A. Questionnaire (preformatted) B. Key informant discussions

Respondents / interviewees Businessman, Professionals, Students Investment Criteria and Investment Instrument awareness Discussions on the awareness

Location 50 Respondents From The Area Vishakapatnam City

Vishakapatnam City

C. Group discussions

of the Investment Instrument Through Questionnaire

D. Participatory observation/investigation

Research with the intermediaries and at each of the Investors

Vishakapatnam City

E. Rapid appraisal

Individual visits to collect the data

Different Areas From Srikakulam & Vishakapatnam City

Chapter VI Data Analysis & Interpretation

Introduction on Various Investment Instruments Point of Discussion
y y y y y Non-Corporate, domestic investments Only Investments and not Insurance Savings Inherited or self-generated wealth Lump sum or Systematic Investments

Criteria for Evaluation

y Risk -Return -Capital y y y Lock-in Ease of Investment and Disinvestment Flexibility -Recurrence of investment payments -Withdrawals -Taxation y Post Tax Returns

Debt Instruments
y y y y y y y Savings Bank A/c Bank Fixed Deposits Public Provident Fund Equity Linked Saving Schemes(ELSS) Government Bonds Monthly Income Plans(MIPs) Debt Mutual Funds

y y

Growth Funds Traditional Insurance Plans

Equity Instruments
y y y y Direct Equity Investments Equity/Balanced - Mutual Funds ULIPS Portfolio Management Services

Real Estate
y y y Direct Real Estate Investments Real Estate Investment Trusts Real Estate Mutual Funds

Commodities
y y y y Gold Gold ETF Gold Mutual Funds Silver

Others
y y Arts and Artefacts Off-Shore investments

INVESTMENTS
The dictionary meaning of investment is to commit money in order to earn a financial return or to make use of the money for future benefits or advantages. People commit money to investments with expectations to increase their future wealth by investing money to spend in future years. For example, if you invest Rs. 1000 today and earn 10% over the next year, you will have Rs.1100 one year from today. An investment can be described as perfect if it satisfies all the needs of all investors. So, the starting point in searching for the perfect investment would be to examine investor needs. If all those needs are met by the investment, then that investment can be termed the perfect investment. Most investors and advisors spend a great deal of time understanding the merits of the thousands of investments available in India. Little time, however, is spent understanding the needs of the investor and ensuring that the most appropriate investments are selected for him.

The Investment Needs of an Investor

By and large, most investors have eight common needs from their investments: 1. Security of Original Capital 2. Wealth Accumulation 3.. Higher Studies of Children 4..Old age Need 5.Future Celebration(Marriages etc) 6.To acqurire land & Buildings in future 7.To support Unforeseen Events 8.Others(pleace specify)

Types of investment

Non Marketable Financial Assets

1. 2. 3. 4. 1. 2. 3. 4. 5. 6.

Bonds

Bank Deposits Post office Deposits Co-Operative Deposits Public Provident Fund Deposits Government Securities GOI Relief Bonds Govt. Agency securities PSU Bonds Debenture of private sector companies Preference Scheme Equity Share Debt Scheme Balanced Scheme Agriculture Land Semi Urban Land Time Share in a Holiday Resort

1. 2. 3. 4. 5. 1. 2. 3.

Blue Chip Shares Growth Share Income Share Cyclical Share Speculative Share Treasury Bill Commercial Purpose Certificate of Deposits

Equity Share Financial Assets

Money Market Investment

1. 2. 3. 4.

Mutual Funds schemes

1. 2. 3. 1. 2. 3.

Endowment Assurance Policy Money Back Policy Whole Life Policy Premium Back Term Assurance Policy Equity Share Debt Scheme Balanced Schemes

LIC Policies Financial Assets

Real Estate

1. 2. 3.

Precious Object

Financial Derivatives

Option

Futures

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, riskdiversification, 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.
Mutual Funds are subject to market risk. Please read the offer document carefully before investing. Terms and Conditions apply.

Growth of Capital This discussion has thus far been concerned only with safety and yield as investing objectives, and has not considered the potential of other assets to provide a rate of return from an increase in value, often referred to as a capital gain. Capital gains are entirely different from yield in that they are only realized when the security is sold for a price that is higher than the price at which it was originally purchased. Selling at a lower price is referred to as a capital loss. Therefore, investors seeking capital gains are likely not those who need a fixed, ongoing source of investment returns from their portfolio, but rather those who seek the possibility of longer-term growth. Growth of capital is most closely associated with the purchase of common stock, particularly growth securities, which offer low yields but considerable opportunity for increase in value. For this reason, common stock generally ranks among the most speculative of investments as their return depends on what will happen in an unpredictable future. Blue-chip stocks, by contrast, can potentially offer the best of all worlds by possessing reasonable safety, modest income and potential for growth in capital generated by long-term increases in corporate revenues and earnings as the company matures. Yet rarely is any common stock able to provide the near-absolute safety and income-generation of government bonds. It is also important to note that capital gains offer potential tax advantages by virtue of their lower tax rate in most jurisdictions. Funds that are garnered through common stock offerings, for example, are often geared toward the growth plans of small companies, a process that is extremely important for the growth of the overall economy. In order to encourage investments in these areas, governments choose to tax capital gains at a lower rate than income. Such systems serve to encourage entrepreneurship and the founding of new businesses that help the economy grow. Safety Perhaps there is truth to the axiom that there is no such thing as a completely safe and secure investment. Yet we can get close to ultimate safety for our investment funds through the purchase of government-issued securities in stable economic systems, or through the purchase of the highest qualitycorporate bonds issued by the economy's top companies. Such securities are arguably the best means of preserving principal while receiving a specified rate of return. The safest investments are usually found in the money market and include such securities as Treasury bills (T-bills), certificates of deposit (CD), commercial paper or bankers' acceptance slips; or in the fixed income (bond) market in the form of municipal and other government bonds, and in corporate bonds. The securities listed above are ordered according to the typical spectrum of increasing risk and, in turn, increasing potential yield. To compensate for their higher risk, corporate bonds return a greater yield than T-bills. (For

more insight on treasuries, read Buy Treasuries Directly From The Fed.) It is important to realize that there's an enormous range of relative risk within the bond market. At one end are government and high-grade corporate bonds, which are considered some of the safest investments around; at the other end are junk bonds, which have a lower investment grade and may have more risk than some of the more speculative stocks. In other words, it's incorrect to think that corporate bonds are always safe, but most instruments from the money market can be considered very safe. Income The safest investments are also the ones that are likely to have the lowest rate of income return, or yield. Investors must inevitably sacrifice a degree of safety if they want to increase their yields. This is the inverse relationship between safety and yield: as yield increases, safety generally goes down, and vice versa. In order to increase their rate of investment return and take on risk above that of money market instruments or government bonds, investors may choose to purchase corporate bonds or preferred shares with lower investment ratings. Investment grade bonds rated at A or AA are slightly riskier than AAA bonds, but presumably also offer a higher income return than AAA bonds. Similarly, BBB rated bonds can be thought to carry medium risk but offer less potential income than junk bonds, which offer the highest potential bond yields available, but at the highest possible risk. Junk bonds are the most likely to default. Most investors, even the most conservative-minded ones, want some level of income generation in their portfolios, even if it's just to keep up with the economy's rate of inflation. But maximizing income return can be an overarching principle for a portfolio, especially for individuals who require a fixed sum from their portfolio every month. A retired person who requires a certain amount of money every month is well served by holding reasonably safe assets that provide funds over and above other income-generating assets, such as pension plans, for example.

Fixed Deposits :
They cover the fixed deposits of varied tenors offered by the commercial banks and other nonbanking financial institutions. These are generally a low risk prepositions as the commercial banks are believed to return the amount due without default. By and large these FDs are the preferred choice of risk-averse Indian investors who rate safety of capital & ease of investment

above all parameters. Largely, these investments earn a marginal rate of return of 6-8% per
annum.

Government Bonds :
The Central and State Governments raise money from the market through a variety of Small Saving Schemes like national saving certificates, Kisan Vikas Patra, Post Office Deposits, Provident Funds, etc. These schemes are risk free as the government does not default in payments. But the interest rates offered by them are in the range of 7% - 9%.

Money-back Insurance:
Insurance in India is mostly sold and bought as investment products. They are preferred because of their add-on benefits like financial life-cover, tax-savings and satisfactory returns. Even if one does not manage to save money and invest regularly in financial instruments, with insurance, the policyholder has no choice. If he does not pay his premiums on time, his insurance cover will lapse. Money-back Insurance schemes are used as investment avenues as they offer partial cashback at certain intervals. This money can be utilized for childrens education, marriage, etc.

Endowment Insurance:
These policies are term policies. Investors have to pay the premiums for a particular term, and at maturity the accrued bonus and other benefits are returned to the policyholder if he survives at maturity.

Bullion Market:
Precious metals like gold and silver had been a safe haven for Indian investors since ages. Besides jewellery these metals are used for investment purposes also. Since last 1 year, both Gold and Silver have highly appreciated in value both in the domestic as well as the international markets. In addition to its attributes as a store of value, the case for investing in gold revolves around the role it can play as a portfolio diversifier.

Stock Market:
Indian stock markets particularly the BSE and the NSE, had been a preferred destination not only for the Indian investors but also for the Foreign investors. Although Indian Markets had been through tough times due to various scams, but history shows that they recovered very fast. Many types of scrip had been value creators for the investors. People have earned fortunes from the stock markets, but there are people who have lost everything due to incorrect timings or selection of fundamentally weak companies.

Real Estate:Returns are almost guaranteed because property values are always on the rise due to a growing world population. Residential real estate is more than just an investment. There are more ways than ever before to profit from real estate investment.

Mutual Funds:
There is a collection of investors in Mutual funds that have professional fund managers that invest in the stock market collectively on behalf of investors. Mutual funds offer a better route to investing in equities for lay investors. A mutual fund acts like a professional fund manager, investing the money and passing the returns to its investors. All it deducts is a management fee and its expenses, which are declared in its offer document.

Unit Linked Insurance Plans:

ULIPs are remarkably alike to mutual funds in terms of their structure and functioning; premium payments made are converted into units and a net asset value (NAV) is declared for the same. In

traditional insurance products, the sum assured is the corner stone; in ULIPs premium payments is the key component.

ULIPs : An Introduction

Most importantly, what are ULIPs? Here, you will find all the information you need to set your mind at ease about how to invest in ULIPs, and which ULIP is right for you. ULIPs are a category of goal-based financial solutions that combine the safety of insurance protection with wealth creation opportunities. In ULIPs, a part of the investment goes towards providing you life cover. The residual portion of the ULIP is invested in a fund which in turn invests in stocks or bonds; the value of investments alters with the performance of the underlying fund opted by you. Simply put, ULIPs are structured in such that the protection element and the savings element are distinguishable, and hence managed according to your specific needs. In this way, the ULIP plan offers unprecedented flexibility and transparency.

Working of ULIPs
It is critical that you understand how your money gets invested once you purchase a ULIP: When you decide the amount of premium to be paid and the amount of life cover you want from theULIP, the insurer deducts some portion of the ULIP premium upfront. This portion is known as the Premium Allocation charge, and varies from product to product. The rest of the premium is invested in the fund or mixture of funds chosen by you. Mortality charges and ULIP administration charges are thereafter deducted on a periodic (mostly monthly) basis by cancellation of units, whereas the ULIPfund management charges are adjusted from NAV on a daily basis. Since the fund of your choice has an underlying investment either in equity or debt or a combination of the two your fund value will reflect the performance of the underlying asset classes. At the time of maturity of your plan, you are entitled to receive the fund value as at the time of maturity. The pie-chart below illustrates the split of your ULIP premium:

ULIPs for health solutions

When you are young and working you save for various goals like marriage, education, retirement etc. but saving for health care is never considered or left for later. During these years we have various sources of income or savings on which we can rely for health emergencies. But with increasing cost of healthcare, proportion of this spend is increasing at an alarming pace. This is forcing families to borrow or sell assets to meet expenses during medical emergencies. And during old age health care expenses increase due to health deterioration because of age and higher incidence of chronic illness. Thus it is important for you to invest in health insurance today so that tomorrow you are fully prepared to meet rising healthcare expenses, which would be incurred during old age, with the right health insurance plan. Health ULIP is a recent innovation from the health insurance industry. In a health ULIP part of your premiums are allocated for investment designed specifically to build a health fund to meet future health related expenses. It aims to create a health savings kitty by investing in a long term flexible savings plan with multiple fund options. The health fund thus created allows you to claim for health related expenses of any kind and also fund your future health insurance charges. You can also avail of tax benefit on premium paid u/s 80D.

ULIPs for child education

One of the most important responsibilities you have as a parent is to ensure that your child gets the best possible education that can be provided. Apart from conventional schooling, it becomes important to expose your child to different activities such as dance, painting and sports training for holistic development. As a parent, you want to ensure that their development is not hampered either due to rising costs or unforeseen circumstances. Today there are ULIPs that offer money at key milestones of your child's education thus ensuring that your childs education continues unhampered even if something unfortunate happens to you. While, the death of a parent is an irreparable emotional loss, child education plans safeguard the child against the financial ramifications of the death of a parent. Apart from above mentioned benefit, child plans also offers below mentioned features. Flexibility of adding on various riders like Income benefit rider, disability rider etc to get additional benefits .For e.g. In case of income benefit rider, In the event of the death of the parent, the child will receive a regular pre-determined amount every year to meet the educational expenses. In case of unfortunate incidence of the death of a parent, not only will the child receive the sum assured immediately but will also continue to receive money at the key educational milestones.

Why buy ULIPs?

The ULIP edge ULIPs are dynamic plans and are flexible by nature and hence allow for changes and high degree of customization in the plan as opposed to most of the financial plans which once purchased cannot be modified. It is because of embedded characteristics of transparency, flexibility, liquidity & goal based

savings that ULIPs have emerged as preferred investment option today. The following subsections will not only help you to understand various attributes of ULIPs but also guide you to use these features to manage your policy. Flexibility

Flexibility to change your life cover : ULIPs give you the flexibility to choose your sum assured (insurance cover) at the time of policy inception. Moreover, some ULIPs allow you to increase your sum assured over the term of the plan. This is crucial as your protection needs keep on changing with time .Typically, greater the financial liabilities you have such as repayment of a home loan, greater will be your need for protection. Flexibility to change premium amount : With ULIPs you can easily change premium amount as most ULIPs provide you the option to increase or reduce premiums after a certain period of time to match your premium paying capability. Another distinguishing feature of ULIP is Top up which is an additional contribution over & above regular premium so that if you receive extra money today you can invest the amount in your policy & maximize your investment gains. Flexibility to opt for a rider : ULIPs also enable you to customize the policy with optional riders to enjoy additional protection. Riders are additional or supplementary benefits that are bought along with the main insurance policy. Some of the commonly offered riders by most insurance companies are critical illness benefit rider, accident & disability benefit rider, waiver of premium rider etc. For ex. a critical illness rider cover major critical illnesses like heart attack etc. In case of contracting any of the above illness, the insurance company pays the insured amount. Flexibility to choose your fund option : Most of the ULIPs come with an in - built range of fund options to choose from ranging from aggressive funds to conservative funds so that you can decide to invest your money in line with your investment preferences and needs. Whats more, ULIPs even come with the option of switching between different fund options so that you are able to reap maximum benefits from your investments.

Transparency

One of the key advantages that ULIPs offer is complete transparency which makes the working of a ULIP abundantly clear to the investor. Thus, you are empowered to make informed decisions on how to best use your ULIP. Benefit Illustration As a customer it is your right to ask for a sales benefit illustration. Sales benefit illustration will help you understand how premium paid by you is utilized & what are the charges deducted year by year, by the insurance company for the term of the plan . It will also illustrate how your policy will grow in accordance with the choosen sum assured & premium. In fact IRDA has mandated that all insurance companies use two scenarios with 6 % & 10 % return rate to depict future returns. Brochures and key feature documents While benefit Illustrations play a significant role in explaining the quantitative aspects of ULIPs, it is also important for you to know the other features and benefits which the ULIP offers. All insurance companies come out with brochures for prospective customers to go through & understand the plan thoroughly. You should ask your insurance advisor to provide brochure of the ULIP you intend to purchase.

Once a policy gets issued, your insurer will send you a key feature document capturing all the essential features of the plan. This is to ensure complete comprehension of the plan purchased.

Free-look period ULIPs also offer you a distinct feature that no other financial product offers as of now. It is called Free-look period which is a 15 day window during which you can close the policy & get paid back the entire premium less charge borne by company in issuing the policy in case you are unhappy with the product. Net Asset Value It is critical that you monitor the performance of your policy on a regular basis. This will help you ascertain whether you are on right financial track or not. To help you do so all life insurance companies publish the NAV of different fund options on their website on a daily basis so that you can track the performance of your policy on a regular basis. This will also help you make informed decisions when it comes to comparing fund performances.

Goal Based Savings

Everyone needs to save for their important life goals. One of the prudent ways to do so is by investing in ULIPs which are long-term systematic investment options designed to address key financial goals. ULIPs help you cultivate a disciplined savings pattern which ensures that the money being set aside will go towards the fulfillment of the specific objective. In the absence of such a focused approach, there is a high possibility of savings towards one objective getting utilized for an immediate short-term requirement, thus jeopardizing the long-term goal. ULIPs are a potent safeguard against such a tendency.

Tax Benefits

ULIPs are an efficient tax saving instrument too .The tax benefits that you can avail in case you invest in ULIPs are described below: Life insurance plans are eligible for deduction under Sec. 80C Pension plans are eligible for a deduction under Sec. 80CCC Health insurance plans and critical illness riders are eligible for deduction under Sec. 80D The maturity proceeds or withdrawals of life insurance policies are exempt under Sec 10(10D), subject to norms prescribed in that section

Data interpretation of Investment Instrument According to Customer

Return Equity High

Safety Low

Volatility High

Liquidity High

convenience Moderate

Bonds

Moderate

High

Moderate

Moderate

High

CO. Debentures

Moderate

Moderate

Moderate

Low

Low

CO. FDs

Moderate

Low

Low

Low

Moderate

Bank Deposits

Low

High

Low

High

High

PPF

Moderate

High

Low

Moderate

High

Life Insurance
Low High Low Low Moderate

Gold
Real Estate

Moderate

High

Moderate

Moderate

Gold

High

Moderate

High

Low

Low

Mutual Funds High High Moderate High High

MUTUAL FUND
Introduction to Mutual Fund & Its Various Aspects

Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. This pool of money is invested in accordance with a stated objective. The joint ownership of the fund is thus Mutual, i.e. the fund belongs to all investors. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fund is an investment tool that allows small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The funds Net Asset value (NAV) is determined each day. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in

accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund.

Mutual Funds Investment and return Cycle

Concept Of

utual Funds

Many Investors with common financial objectives Pool their money

Investors, on a proportionate basis, get mutual fund units for the sum contributes to the pool

The Money collected from investors is invested into shares, debentures and other securities by the fund manager

The fund manager realized gains or losses, and collected dividend or interest income

Any capital gains or losses from such investments are passed on to the investors in proportion of the number of unit held by them

ADVANTAGES OF MUTUAL FUND

y y y y y y y y y Portfolio Diversification Professional management Reduction / Diversification of Risk Liquidity Flexibility & Convenience Reduction in Transaction cost Safety of regulated environment Choice of schemes Transparency

DISADVANTAGE OF MUTUAL FUND

y y y y No control over Cost in the Hands of an Investor No tailor-made Portfolios Managing a Portfolio Funds Difficulty in selecting a Suitable Fund Scheme

Type of Mutual Fund Schemes

BY Constitution Open Ended Schemes

An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity.

Close Ended Schemes

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. 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 they 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.

Interval Schemes
Interval Schemes are that scheme, which combines the features of open-ended and close-ended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices.

By Nature
Under this the mutual fund is categorized on the basis of Investment Objective. By nature the mutual fund is categorized as follow:

1. Equity fund:
These funds invest a maximum part of their corpus into equities holdings. The structure of the fund may vary different for different schemes and the fund managers outlook on different stocks. The Equity Funds are sub-classified depending upon their investment objective, as follows: y y y y Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds rank high on the riskreturn matrix.

2. Debt funds:
The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are further classified as:

Gilt Funds:

Invest their corpus in securities issued by Government, popularly known as

Government of India debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government.

Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities.

MIPs: Invests maximum of their total corpus in debt instruments while they take minimum exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes.

Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures.

Liquid Funds:

Also known as Money Market Schemes, These funds provides easy liquidity

and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter- bank call money market, CPs and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months.

These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds.

3. Balanced funds:
As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and fixed income securities, which are in line with pre-defined investment objective of the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part provides growth and the debt part provides stability in returns. Further the mutual funds can be broadly classified on the basis of investment parameter viz, Each category of funds is backed by an investment philosophy, which is pre-defined in the

objectives of the fund. The investor can align his own investment needs with the funds objective and invest accordingly.

BY INVESTMENT OBJECTIVE
Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these
schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation.

Income Schemes:

Income Schemes are also known as debt schemes. The aim of these

schemes is to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited.

Balanced Schemes:

Balanced Schemes aim to provide both growth and income by

periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50).

Money Market Schemes:

Money Market Schemes aim to provide easy liquidity,

preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money.

OTHER SCHEMES
Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax
laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.

Index Schemes: Index schemes attempt to replicate the performance of a particular

index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each stock to the total holding will be identical to the stocks index weightage. And hence, the returns from such schemes would be more or less equivalent to those of the Index.

How does a Mutual Fund work?

AMC Savings Trust Units Investment

Unit Holders

Returns

Registrar

Trust Custodian SEBI AMC

GRAPH OF DIFFERENT FUNDS RISK V/S RETURN

Source: Fundamentals of Investment

Management Y. P. Singh

Date: 22/10/2010

Questionnaire for Data Analysis and Interpretation

Q-1 which investment avenues are you aware of?
INVESTMENT AVANUES FREQUENCY PERCENTAGE

EQUITY/MUTUAL FUND

100

34.36%

POST OFFICE

94

32.30%

FIX DEPOSITES OTHER INSTRUMENT

86 11

29.55% 3.79%

Interpretation: From the above table we can interpret that awareness of equity/mutual fund, post office (NSC, and PPF), fixed deposits is more compare to others like GOVT ISSUED Instrument, GOVT Bonds, Real Estate, gold etc. so Reva Financial Services Company needs to focus more on those investors who are more invest in NSC, PPF and fixed deposits.

Q-2 do you invests in mutual fund?

YES 97 NO 3

Interpretation: From the above table it is getting clear that now a days people are like to invest their money in mutual fund of different assets management company, out of 100 people sampled 97 are investing in the mutual fund.

Q-3 If yes, in which assets class do you want to invest in Mutual Fund?
TYPES OF SCHEMES EQUITY RESPONSE 86 PERCENTAGE 72.27%

DEBT LIQUID

27 6

22.69% 5.04%

Interpretation: From the above details it is getting clear that from 100 peoples sample 86(72.27%) people are invest in equity assets class and 27(22.69%) people choose to invests in debt class but only just 6(5.04%) peoples choose to invests in liquid class.

Q-4 Do you invest in Reva Financial Services Company Limited?

Yes 56

No 44

Total 100

Interpretation: From the above details it is getting clear that out of 100 people sampled, 56 peoples are invest in Reva Financial Services company and 44 peoples are not invests in Reva Financial Services company.

Q-5

If yes, in which scheme would you invest in Reva Financial Services

Company?
Schemes of Reva Financial Services Insurance Tax Planning Mutual Funds Postal Schemes Bonds HDFC Deposits Equity Funds Other Funds Growth Funds 35 17 16 2 10 9 43 5 16 No of Investers

Interpretation:From the above details we can see that in Reva financial Services Companys Equity Funds maximum number (43) of people are investing. In tax Saver Schemes 17 number of people invests. in both Growth Funds and Mutual Fund 16 number of people are invest but in other fund, Postal Scheme, HDFC Deposits only 5,2 & 9 people are invest so investors are not invested in these Three Schemes. In Insurance, Bonds there are 35 & 10 people are invested.

Q-6 By which medium you invest in Reva Financial Services Company?

Medium of Investment Distributors Banks Online

No. Of People 8 48 0

Interpretation :From the above details its getting cleared that most of the peoples (48) are invest by bank and only 8 peoples are invest by distributors. Nobody invests through online. So here Reva Financial Services Company has to provide facility by which investors invest their money without any middle man in different investment schemes through online. Notes: - here out of 100 responds, 44 responds are not invest in Reva Financial Services Company. These responds are not considered in these questions.

Q-7 why do you prefer investing in Reva financial Services company limited?
Preference Criteria Better Fund House Excellent customer Service provider Consistent Return Other Number 43 15 44 1

Interpretation :From the above details it can be seen that majority of the people that is 44 peoples give first rank to consistent return and 43 peoples invest in Reva financial Services company because Reva financial Services company is a better fund house and 15 peoples believes that Reva financial Services company provides EXCELLENT CUSTOMER SERVICE

Q-8 In which type of product /schemes would you prefer while invested in Equity schemes of Reva financial Services Company?

Types of Schemes Open Ended Closed Ended

Response 53 3

Interpretation:From the above chart it is getting clear that most of peoples (53) prefer to invest in OPEN ENDED equity schemes and only just 3 peoples want to invest in CLOSE ENDED equity schemes of Reva financial Services Company. Notes: - here out of 100 responds, 44 responds are not invest in Reva financial Services Company. These responds are not considered in these questions

Q-9 Do you know about ongoing new fund offer of Reva financial Services Company?

AWARENESS OF NFO Yes No Total

NUMBER 58 42 100

PERCENTAGE 58% 42% 100%

Interpretation:The above details shows that around 58% people aware of ongoing new fund offer of Reva financial Services Company and only 42% people are unaware from ongoing new fund offer of Reva financial Services Company.

CHAPTER VII OBSERVATIONS & FINDINGS

OBSERVATIONS
y The project study shows the different Investment option available in the market to the investors. y The study of this project evaluate the risk involved in the different investment instrument to the investors y The study covers different Investment Instrument with specific reference to Future market. y The study shows the return calculation for the purpose of measuring the risk and variability of different Commodity future. y The study also shows how an investor can maximize investment through different investment instrument. y The study is undertaken to understand the Investment instruments market

FINDINGS
y y Almost 56% are investing in Reva financial Services Companys schemes. Out of the total respondent almost 30% said that they invest in fixed deposit and Insurance. Whereas 34% said that they invest in Shares and mutual funds, whereas 32% says that they invest in post office schemes. y 97% of the investor was found who is invested their savings in different schemes of mutual fund. y 53 respondents prefer to invest in a open ended schemes of Reva financial Services company, where as remaining only 3 respondents prefer to invest in a close ended of Reva financial Services company. y It is found that awareness level about Mutual Funds is 97% in Pune city of Maharashtra. y Out of the total respondent 72.27% are investing in equity schemes. Whereas remaining 22.69% prefer debt and 5.04% prefer to invest in liquid schemes. Reva financial Services

Company are also highly popular for their consistent return and 43 responds believes that Reva financial Services Company is better fund house. While only just 15 responds believes that Reva financial Services Company provides EXCELLENT CUSTOMER SERVICE.

Out of the total respondents almost 48 responds are investing through bank, only responds investing their money by distributor and nobody invested by online.

The 58% of the respondent were aware about the ongoing NFO(New Fund Offer) of Reva financial Services company and 42% were not aware about the ongoing NFO of Reva financial Services Company.

In Reva financial Services Companys EQUITY FUND maximum number (43) of people are invested and In TAX SAVER FUND 35 numbers of people are invests.

LIMITATIONS
Limitations of Research
y This exploratory research is done focusing on the investment scenario of Pune city of Maharashtra region only and therefore findings and suggestions given on the basis of this research and cannot be considered for the entire Mutual Fund Industry of India. y Some of the people, out of various sectors that I had visited for study, did not give me cooperative response. y y Due to small market and time limit I could take only 100 responses. Another limitation is that due to lack of knowledge and education many investors dont know the basic ideas behind mutual fund. y y Due to Time constraint I could not analyze more. My own inexperience in research area might have affected the study.

CHAPTER VIII CONCLUSION & SUGGESTIONS

CONCLUSIONS
y y Half of the respondents are investing in different schemes of mutual fund Companies. The investors prefer investing more in banks and post office, which shows that investors want security, and assured returns. y Others than Banks and post office the next preference of investors who go for risky preposition in shares and Mutual Funds. That is basically due to misconception that Mutual Fund Companies usually invest in equity market, which shakes trust of people in Mutual Fund. y y Majority of investors invested in open-ended schemes. The awareness level about Reva Financial Services Company is moderate but still the awareness should be created because 44% peoples still not invest in Reva Financial Services Company. y As the investor prefers safe investment and want consistent return, they invest in debt schemes (22.69%). y The investors prefer Reva Financial Services Company more because of the tax benefit and consistent return. y Mutual funds are also preferred because of the cost effectiveness and higher income by investing in equity schemes. y y The banks mostly make the investments through the agents followed. Professional and Business class, which is considered to be the most knowledgeable class of the region prefers Mutual Funds less compare to service class. y The time frame of the investment by majority of the investors is open-ended which their money is not locked for 3 to 5 years. schemes in

RECOMMENDATIONS
y The company should try to make aware people about their different schemes through the road show; seminars and presentation that it is not just equity based schemes but also debt and liquid or balanced schemes also promoted by company. Company has to put hoardings, banners, pamphlets in that area where peoples can watch easily. y The customers should be made aware that if the time frame of the investment is more than 3 years Equity option is the best tool for investing in mutual fund by this investors getting good and high returns for their investments. y The company should be conducting special training and motivation Programme for their distributors and also for investors so that they are being motivated to work, their quality of performance and contribution in sales is maintained. y Company has to provide application forms and other promotional materials to their distributors time to time and company has to maintain better relationship with their distributors by these they can give good contribution in investments. y None of responds invest their money in different schemes of company By Online, so company has opportunity to launch online services for their distributors and retail investors. y Companys core and satellite fund, Bonds, Postal Schemes, HDFC Deposits & Balanced fund, preferred by very few investors because this schemes not perform well so company has to think about their companies in which they invest investors money so they have to change portfolio of investments. y Most of the people still preferred to invest in post office schemes and fixed so company has to focus on these investors deposits

APPENDICES
Questionnaire
NAME: -.................................................................................................................

ADDRESS: -............................................................................................................

.............................................................................................................

CONTACT NO: (O) (R) (M)

1) Which investment avenues are you aware of? Equity /Mutual fund Fixed Deposits Post Office (NSC, PPF) Others

If others please specify: ...............................................................................................

2) Do you invest in mutual funds? Yes No

3) If yes, in which assets class do you want to invest in mutual funds? Equity Debt Liquid

4) Do you invest in Reva Financial Investment Schemes? Yes No

5) If yes, in which scheme would you invest in Reva Financial Investment Schemes?

Equity Tax saver Balanced fund

Bonds Postal Schemes Growth

Mutual Fund HDFC Deposits Others

6) By which medium do you invest in Reva Financial Services Investment Schemes? Distributor Bank Online

7) Why do you prefer investing in Reva Financial Services? Better fund house Excellent customer service provider Consistent return Other

If other please specifies:-........................................................................................... ..................................................................................................

8) Which type of product/scheme would you prefer while investing in Equity Scheme of Reva Financial Mutual Fund? Open-ended Close ended

9) Do you know about ongoing new fund offers of Reva Financial Services? Yes No

Remarks if any other please specifies: -...................................................................................... ....................................................................................... ........................................................................................

Thank you for your time.