project raja&prasad

8/6/2019 Project Raja&Prasad

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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 ofinvestment 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.


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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

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 StockMarket

y Others(pl.specify)


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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


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MUTUAL FUNDS

WHAT IS A MUTUAL FUND?

AMutual 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 particularMutual 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


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(B) By Investment Objective

Growth Schemes

Income Schemes

Balanced Schemes

MoneyMarket / 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)


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ADVANTAGES OF INVESTING IN MUTUAL FUNDS

1. ProfessionalManagement

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 = incomeGt = 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.


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Category Products for sales and advice

Insurance agent Insurance Policies

Mutual Fund distributor Mutual Funds

Equity share broker/sub-broker Share trading, IPOs

Income tax consultant Tax Planning, Employee Benefits

Distributor/Advisor of multiple financial

products & services

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 Indianmarkets.

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


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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.


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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 Data are more metaphorical than real

y Data are processed by our senses-often limited in comparison to the senses of other living

organisms.

y Capturing data are said to be trustworthy because they may be verified.

y 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 Researchers can collect precisely the information they want.

y 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:


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y They fill a need for specific reference or citation on some point

y Secondary data are an integral part of a larger research study

y 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.

y 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 Simple category scale: - (Q-2, Q-4, Q-8, Q-9)

y Multiple choice single response scales: - (Q-6)

y Multiple choice multiple response scale:-(Q-1, Q-3, Q-5, Q-7)

Sampling Plan


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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:

y 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.

y 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 SAMPLE

Kothrud 17

Deccan 3

Koregoan Park 15

Shivaji Nagar 17

Karve Nagar 5

Pune Station 5

Sinhgad Road 8

Swargate 2

S.B. Road 2

Aundh 4

Hinjewadi 4


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Tools & Techniques of Data collection

Tool / technique Respondents / interviewees Location

A. Questionnaire (pre-

formatted)

Businessman, Professionals,

Students

50 Respondents From

The Area

B. Key informant discussions Investment Criteria and

Investment Instrument

awareness

Vishakapatnam City

C. Group discussions

Discussions on the awareness

of the Investment Instrument

Through Questionnaire

Vishakapatnam City

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

Viman Nagar 4

Yerawada 2

Kharadi 6

Kondhwa 2

Dhole Patil Road 1

Bavdhan 1

Pune University 1

Camp 1

TOTAL 100


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Chapter VI

Data Analysis & Interpretation

Introduction on Various Investment Instruments

Point of Discussion

y Non-Corporate, domestic investments

y Only Investments and not Insurance

y Savings

y Inherited or self-generated wealth

y Lump sum or Systematic Investments

Criteria for Evaluation

y Risk

-Return

-Capital

y Lock-in

y Ease of Investment and Disinvestment

y Flexibility

-Recurrence of investment payments

-Withdrawals

-Taxation

y Post Tax Returns

Debt Instruments

y Savings Bank A/c

y Bank Fixed Deposits

y Public Provident Fund

y Equity Linked Saving Schemes(ELSS)

y Government Bonds

y Monthly Income Plans(MIPs)

y Debt Mutual Funds


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y Growth Funds

y Traditional Insurance Plans

Equity Instruments

y Direct Equity Investments

y Equity/Balanced -Mutual Funds

y ULIPS

y Portfolio Management Services

Real Estate

y

Direct Real Estate Investmentsy Real Estate Investment Trusts

y Real EstateMutual Funds

Commodities

y Gold

y Gold ETF

y GoldMutual Funds

y Silver

Others

y Arts and Artefacts

y Off-Shore investments


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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 toinvestments 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)


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Types of investment

Equity Share Financial

AssetsNonMarketable

Financial Assets

1. Blue Chip Shares

2. Growth Share

3. Income Share

4. Cyclical Share

5. S eculative Share

1. Bank Deposits

2. Post office Deposits

3. Co-Operative

Deposits

4. Public Provident Fund

1. Treasury Bill

2. Commercial Purpose

3. Certificate of

De osits

1. Government Securities

2. GOI Relief Bonds

3. Govt. Agency securities

4. PSU Bonds

5. Debenture of private

sector companies

6. Preference Scheme

MoneyMarket

InvestmentBonds

1. EndowmentAssurance Policy

2. Money Back Policy

3. Whole Life Policy

4. Premium Back Term

Assurance Policy

LIC Policies

Financial Assets

1. Equity Share

2. Debt Scheme

3. Balanced Scheme

Mutual Funds

schemes

1. Agriculture Land

2. Semi Urban Land

3. Time Share in a Holiday

Resort

Precious ObjectReal Estate1. Equity Share

2. Debt Scheme

3. Balanced Schemes

Financial Derivatives

Option Futures


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Financial Instruments

EquitiesEquities are a type of security that represents the ownership in a company. Equities are traded (bought and sold) instock markets. Alternatively, they can be purchased via the Initial Public Offering (IPO) route, i.e. directly from thecompany. Investing in equities is a good long-term investment option as the returns on equities over a long timehorizon are generally higher than most other investment avenues. However, along with the possibility of greaterreturns comes greater risk.

Mutual fundsA mutual fund allows a group of people to pool their money together and have it professionally managed, in keepingwith 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 amutual fund. There are various general and thematic mutual funds to choose from and the risk and return possibilitiesvary accordingly.

BondsBonds are fixed income instruments which are issued for the purpose of raising capital. Both private entities, such ascompanies, financial institutions, and the central or state government and other government institutions use thisinstrument as a means of garnering funds. Bonds issued by the Government carry the lowest level of risk but coulddeliver fair returns.

DepositsInvesting in bank or post-office deposits is a very common way of securing surplus funds. These instruments are atthe low end of the risk-return spectrum.

Cash equivalentsThese are relatively safe and highly liquid investment options. Treasury bills and money market funds are cashequivalents.

Non-financial Instruments

Real estateWith the ever-increasing cost of land, real estate has come up as a profitable investment proposition.

GoldThe 'yellow metal' is a preferred investment option, particularly when markets are volatile. Today, beyond physicalgold, a number of products which derive their value from the price of gold are available for investment. These includegold 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.


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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 entirelydifferent 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 ofcommon 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 ofreturn.

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 orbankers'

acceptance slips; or in the fixed income (bond) market in the form ofmunicipal and other

government bonds, and in corporate bonds. The securities listed above are ordered

according to the typical spectrum of increasing riskand, in turn, increasing potentialyield.

To compensate for their higher risk, corporate bonds return a greater yield than T-bills. (For


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more insight on treasuries, readBuy 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 arejunk 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 moneymarket 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 thanAAA 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 ofinflation.

But maximizing income return can be an overarching principle for a portfolio, especially forindividuals 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 non-

banking 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


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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 cash-

back 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.


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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.

StockMarket:

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


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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 withwealth creation opportunities. In ULIPs, a part of the investment goes towards providing you life cover. Theresidual portion of the ULIP is invested in a fund which in turn invests in stocks or bonds; the value ofinvestments 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 aredistinguishable, and hence managed according to your specific needs. In this way, the ULIP plan offersunprecedented 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 PremiumAllocation 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 deductedon 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 ofthe 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-chartbelow illustrates the split of your ULIP premium:


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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. Andduring old age health care expenses increase due to health deterioration because of age and higherincidence of chronic illness. Thus it is important for you to invest in health insurance today so thattomorrow you are fully prepared to meet rising healthcare expenses, which would be incurred duringold age, with the right health insurance plan.

Health ULIP is a recent innovation from the health insurance industry. In a health ULIP part of yourpremiums are allocated for investment designed specifically to build a health fund to meet futurehealth related expenses. It aims to create a health savings kitty by investing in a long term flexiblesavings plan with multiple fund options. The health fund thus created allows you to claim for healthrelated 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 thebest possible education that can be provided. Apart from conventional schooling, it becomesimportant to expose your child to different activities such as dance, painting and sports training forholistic development. As a parent, you want to ensure that their development is not hampered eitherdue to rising costs or unforeseen circumstances.

Today there are ULIPs that offer money at key milestones of your child's education thus ensuring thatyour 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 childagainst 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 additionalbenefits .For e.g. In case of income benefit rider, In the event of the death of the parent, the child willreceive 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 sumassured 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


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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 yoursum assured over the term of the plan. This is crucial as your protection needs keep on changingwith 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 asmost ULIPs provide you the option to increase or reduce premiums after a certain period of time tomatch your premium paying capability. Another distinguishing feature ofULIP is Top up which is anadditional contribution over & above regular premium so that if you receive extra money today youcan 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 toenjoy additional protection. Riders are additional or supplementary benefits that are bought alongwith the main insurance policy. Some of the commonly offered riders by most insurance companiesare 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 ofthe 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 fundoptions to choose from ranging from aggressive funds to conservative funds so that you can decideto invest your money in line with your investment preferences and needs. Whats more, ULIPs evencome with the option of switching between different fund options so that you are able to reapmaximum benefits from your investments.

Transparency

One of the key advantages that ULIPs offer is complete transparency which makes the working of aULIP abundantly clear to the investor. Thus, you are empowered to make informed decisions on howto best use your ULIP.

Benefit IllustrationAs a customer it is your right to ask for a sales benefit illustration. Sales benefit illustration will helpyou 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 inaccordance with the choosen sum assured & premium. In fact IRDA has mandated that all insurancecompanies use two scenarios with 6 % & 10 % return rate to depict future returns.

Brochures and key feature documentsWhile benefit Illustrations play a significant role in explaining the quantitative aspects of ULIPs, it isalso important for you to know the other features and benefits which the ULIP offers. All insurancecompanies come out with brochures for prospective customers to go through & understand the planthoroughly. You should ask your insurance advisor to provide brochure of the ULIP you intend topurchase.


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

Free-look periodULIPs also offer you a distinct feature that no other financial product offers as of now. It is calledFree-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 theproduct.

Net Asset ValueIt is critical that you monitor the performance of your policy on a regular basis. This will help youascertain whether you are on right financial track or not. To help you do so all lifeinsurance companies publish the NAV of different fund options on their website on a daily basis sothat you can track the performance of your policy on a regular basis. This will also help you makeinformed 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 byinvesting in ULIPs which are long-term systematic investment options designed to address keyfinancial goals. ULIPs help you cultivate a disciplined savings pattern which ensures that the moneybeing set aside will go towards the fulfillment of the specific objective. In the absence of such afocused approach, there is a high possibility of savings towards one objective getting utilized for animmediate short-term requirement, thus jeopardizing the long-term goal. ULIPs are a potentsafeguard against such a tendency.

Tax Benefits

ULIPs are an efficient tax saving instrument too .The tax benefits that you can avail in case youinvest 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 oflife insurance policies are exempt under Sec 10(10D),subject to norms prescribed in that section


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Data interpretation of Investment Instrument According to Customer


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Return Safety Volatility Liquidity convenience

Equity High Low High High Moderate

Bonds Moderate High Moderate Moderate High

CO.

Debentures

CO. FDs

Moderate

Moderate

Moderate

Low

Moderate

Low

Low

Low

Low

Moderate

Bank

Deposits

Low High Low High High

PPF

Life

Insurance

Gold

Real Estate

Mutual

Funds

Moderate

Low

Moderate

High

High

High

High

High

Moderate

High

Low

Low

Moderate

High

Moderate

Moderate

Low

Moderate

Low

High

High

Moderate

Gold

Low

High

MUTUAL FUND

Introduction to Mutual Fund & Its Various Aspects


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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


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Concept Of utual Funds

Many Investors with common financial objectives

Pool their mone

Any capital gains or losses from such investments

are passed on to the investors in proportion of the

number of unit held by them

Investors, on a proportionate basis, get mutual fund

units for the sum contributes to the pool

TheMoney 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


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ADVANTAGES OF MUTUAL FUND

y Portfolio Diversification

y Professional management

y Reduction / Diversification of Risk

y Liquidity

y Flexibility & Convenience

y Reduction in Transaction cost

y Safety of regulated environment

y Choice of schemes

y Transparency

DISADVANTAGE OF MUTUAL FUND

y No control over Cost in the Hands of an Investor

y No tailor-made Portfolios

y Managing a Portfolio Funds

y Difficulty in selecting a Suitable Fund Scheme

Type ofMutual Fund Schemes


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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.


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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 redemptionduring 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:


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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 Diversified Equity Funds

y Mid-Cap Funds

y Sector Specific Funds

y Tax Savings Funds (ELSS)


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Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk-

return 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.


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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.


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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?


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GRAPH OF DIFFERENT FUNDS RISK V/S RETURN

Unit Holders

Units

Trust

AMC

Investment

Returns

Savings

Custodian AMC

Trust

Registrar

SEBI


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Source: Fundamentals of Investment

Management

Y. P. Singh

Date: 22/10/2010


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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 86 29.55%OTHER INSTRUMENT 11 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 thoseinvestors who are more invest in NSC, PPF and fixed deposits.

Q-2 do you invests in mutual fund?

YES NO

97 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.


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Q-3 If yes, in which assets class do you want to invest in Mutual Fund?

TYPES OF SCHEMES RESPONSE PERCENTAGE

EQUITY 86 72.27%

DEBT 27 22.69%

LIQUID 6 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 No Total

56 44 100

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.


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Q-5 If yes, in which scheme would you invest in Reva Financial Services

Company?

Schemes of Reva Financial

Services

No of Investers

Insurance 35

Tax Planning 17

Mutual Funds 16

Postal Schemes 2

Bonds 10

HDFC Deposits 9

Equity Funds 43

Other Funds 5

Growth Funds 16

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?


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Medium of Investment No. OfPeople

Distributors 8

Banks 48

Online 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 Number

Better Fund House 43

Excellent customer Service provider 15

Consistent Return 44

Other 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


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Q-8 In which type of product /schemes would you prefer while invested in

Equity schemes of Reva financial Services Company?

Types of Schemes Response

Open Ended 53

Closed Ended 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 NUMBER PERCENTAGE

Yes 58 58%

No 42 42%

Total 100 100%

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.


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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 Almost 56% are investing in Reva financial Services Companys schemes.

y 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


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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.

y Out of the total respondents almost 48 responds are investing through bank, only

responds investing their money by distributor and nobody invested by online.

y 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.

y 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 entireMutual 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 Due to small market and time limit I could take only 100 responses.

y Another limitation is that due to lack of knowledge and education many investors dont

know the basic ideas behind mutual fund.

y Due to Time constraint I could not analyze more.

y My own inexperience in research area might have affected the study.


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CHAPTER VIII

CONCLUSION & SUGGESTIONS

CONCLUSIONS

y Half of the respondents are investing in different schemes of mutual fund Companies.

y 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 Majority of investors invested in open-ended schemes.

y 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 The banks mostly make the investments through the agents followed.

y Professional and Business class, which is considered to be the most knowledgeable class

of the region prefersMutual Funds less compare to service class.

y

The time frame of the investment by majority of the investors is open-ended schemes inwhich their money is not locked for 3 to 5 years.


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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, socompany has opportunity to launch online services for their distributors and retail

investors.

y Companys core and satellite fund, Bonds, Postal Schemes, HDFC Deposits &Balancedfund, 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 deposits

so company has to focus on these investors


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APPENDICES

QuestionnaireNAME: -.................................................................................................................

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

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

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

1) Which investment avenues are you aware of?

Equity /Mutual fund Post Office (NSC, PPF)

Fixed Deposits 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?


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Equity Bonds Mutual Fund

Tax saver Postal Schemes HDFC Deposits

Balanced fund Growth 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 FinancialMutual 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: -......................................................................................

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

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


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Thank you for your time.

project raja&prasad

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