Project On:

“INVESTMENT OPPORTUNITIES IN VARIOUS

SECURITIES”

UNIVERSITY OF MUMBAI

GURU NANAK KHALSA COLLEGE OF ARTS, SCIENCE,

COMMERCE(AUTONOMOUS), MATUNGA, MUMBAI - 19

SUBMITTED BY

JATIN DEEPAK PUJARI

ROLL NO. 26

SEMESTER - 3

UNDER THE GUIDANCE OF CA.

PROF. ASHISH DIWADKAR.

2018-19.

CERTIFICATE

I, Prof. Ashish Diwadkar, hereby certify that Mr. Jatin D Pujari from MCOM of
Guru Nanak Khalsa College of Arts, Science And Commerce completed this
Research

Project on banking titled ―IVESTMENT OPPORTUNITIES IN VARIOUS

1
SECURITIES‖ in semester 3 of the academic year 2022-2023.

The information submitted here is true and original to best of my

knowledge.

Signature of Signature of

External examiner Internal examiner

Signature of Signature of

Project guider principal

Date of Submission:

ACKNOWLEDGEMENT

There are many people who have helped me directly and indirectly to complete this

project successfully.

First I would like to thank my project guide Prof. ASHISH DWADKAR for guiding

me throughout the project. Without her help it would have been impossible for me to

complete this project.

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I am also thankful to all my friends who helped me to understand the technical aspects

of the project and I would also like to thank the principal SEEMA SAPHALE,

VicePrincipal and Coordinator of BMS Dept. and all the faculty members of BMS

dept. and rest of the college for giving me the opportunity to work in the form of

project and to help and to guide me in this project.

EXECUTIVE SUMMARY

This project is about Investment Opportunities in various Securities.There are many

types of investments and investing styles to choose from. Mutual funds, ETFs,
individual stocks and bonds, closed-end mutual funds, real estate, various alternative
investments and owning all or part of a business are just a few examples are stocks,
bonds, mutual fund, ETF, real estate.

There are many different ways you can go about investing, including putting money
into stocks, bonds, mutual funds, ETFs, real estate (and other alternative investment
vehicles), or even starting your own business.

Every investment vehicle has its positives and negatives, which we'll discuss in a later
section of this tutorial. Understanding how different types of investment vehicles
work is critical to your success. For example, what does a mutual fund invest in? Who
is managing the fund? What are the fees and expenses? Are there any costs or
penalties for accessing your money? These are all questions that should be answered
before making an investment. While it is true there are no guarantees of making
money, some work on your part can increase your odds of being a successful investor.
Analysis, research and even just reading up on investing can all help.

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Now that you have a general idea of what investing is and why you should do it, it's
time to learn about how investing lets you take advantage of one of the miracles of
mathematics: compound interest

INDEX
CHAPTER SUB- TITLE AND CONTENTS PAGE
NO. CHAPTER NO.

NO.
1. Introduction to study(Secondary
Data)
1.1 Introduction 2
1.2 Objective of study 3
1.3 Important terms of investing 4
1.4 Benefits of financial planning 7
1.5 Investment planning process 9
2. Introduction to the topic
2.1 Formulation of goals & need 13
assessment

2.2 Investor profile & behavior 17

2.3 Conducting risk assessment 19
2.4 Need of financial planner 23
2.5 Investment avenues 24
2.6 Factors that affect investment 27
decisions

3. Research methodology
3.1 Introduction 29
3.2 Insurance planning 31
3.3 Investment planning 33
3.4 Retirement planning 36
3.5 Income tax planning 38
3.6 Estate planning 39
3.7 Mutual funds 42
3.8 Fixed income securities 43

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4. Review of literature 45
5. Analysis & findings(Primary Data) 53
6. Conclusion 70
7. Annexure 72
Questionnaire and bibliography 72&75

Secondary Data 1.1 INTRODUCTION

An investment is an asset or item that is purchased with the hope that it will
generate income or will appreciate in the future. In an economic sense, an investment
is the purchase of goods that are not consumed today but are used in the future to
create wealth. In finance, an investment is a monetary asset purchased with the idea
that the asset will provide income in the future or will be sold at a higher price for a
profit.

To invest is to allocate money (or sometimes another resource, such as time)

in the expectation of some benefit in the future, for example, investment on durable
goods such as real estate for service industry and factory for manufacturing product
development, which are two common types for micro-economic output in modern
economy. Investment on research and development occurs mainly on innovation of
consumer products.

Investors are the persons who generally invest in various investments.

Investors generally expect higher returns from riskier investments. Financial assets
range from low-risk and higher expected commensurate reward, such as emerging
markets stock investments.

Investors, particularly novices, are often advised to adopt an investment

strategy and diversify their portfolio. Diversification has the statistical effect of
reducing overall risk.

There are many investment avenues in which a person can invest to make a
future income i.e.

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 1. Debentures
2. Gold and Silver
3. Mutual funds
4. Life insurance
5. Real estate
6. Preference shares etc.

1.2 OBJECTIVE OF THE STUDY

1. To study various investment avenues.

2. To study investment decisions of people while investing.
3. To study that what are the factors that affect the investment decisions of the
people.
4. To study whether people will prefer to invest in private sector or
government sector.
5. To study what is the investment objective of people.
6. To make people aware about taxation benefits from various investment
opportunities.

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 1.3 IMPORTANT TERMS OF INVESTING

In investment it is very important to understand that money is put to use wisely.

Customers always want to invest money in such a way that they earn more the rate at
which prices of goods increase. Some of the important terms to remember are:

 Investing

In financial terms, Investing is:

 Commitment of money or capital in a business, project or enterprises to gain a

profit after thoroughly analyzing the past performance and future prospects of
business, project or enterprise.

 Stocks, bonds, cash equivalents and mutual funds are the most common form
of investment.

 Stocks, bonds, mutual funds and certificate of deposits are commonly termed
as securities.

 Investments in each of these securities is possible either through the primary

or the secondary market route through financial intermediaries and distributors
such as investment banks, brokerage house and now banks as well.

 Speculation
 Speculation implies the act whereby people make an investment in a risky
asset, hoping to obtain profits from future changes in the prices of the asset.
This hope could be based on reports that people may have heard but they may
not have checked the credentials of the assts.

 Investors speculate every time they money to something they do not

understand. We have learnt that investment making involves understanding the

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 financial strength, future prospects, expected returns and the corresponding
risk. The detailed analysis helps in taking a considered view.

 Speculation involves taking a short term view based on the volatilities of the
market in order to benefit from the price movements. A speculator works on
the assumption of favorable price movements which may or may not be
happen. A speculator may use technical charts and analysis to predict price
movement but the same will lack scientific rigor.

 Gambling
 It may mean taking a pot-shot that may or not yield result. There is no real
basis for taking such actions except for some sort of hunch or tip and without
any kind of in-depth analysis of the company or its shares. A dart board
investment style will fall under this category.

 This is an interesting story to share. A group of people tested this in 1967

through the Forbes magazine in New York. They threw darts at the stock
markets quotations page and picked in all 28 shares. A notional equal amount
was invested in each of the selected shares. Fifteen years after the experiment,
it was found that their notional portfolio had outperformed the stock market
average.

 Shorting
 There is time lag between the deal for sale and the delivery (say of shares), this
allows a person to sell something that he or she does not possess. During the
time lag, the investor buys the requisite quantity and if able to do so at a
cheaper price that that of the sale price, he or she is able to book a profit. This
transaction is called short selling or shorting.

 Hedging
 Every investment has an inherent risk and an investor takes steps to reduce
this risk. This technique is called hedging which may involve cover operations

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 such as buying a call or selling a put or taking forward cover against foreign
exchange exposure etc.

 Another variation could be immunization. Especially in case of debt securities

where the investment may be balanced against liability such as loans by
holding contra position. This ensures that any movement in interest rates is
automatically offset.

 Diversification
 Diversified portfolio the return is the weighted average return but the risk of
the portfolio is lower as compared to the risk in the individual securities.

 Individual investment should be so chosen that there is not much correlation

amongst investment. It should be remembered that the diversification also
reduces the probability of making higher than expected returns.

 Arbitrage
 Arbitrage involves taking advantage of price differential in different markets.
An arbitrageur continuously monitors different markets with the help of
sophisticated tools and seeing an opportunity buys and sells in different
markets to make large profits.

 Such price differentials tend to exist for every short period due to
inefficiencies but equally correct fast. However, such techniques are not as
risk free as they may appear due to timing and settlement differences.

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 1.4 BENEFITS OF FINANCIAL PLANNING

Financial Planning helps you give direction and meaning to your financial decisions.
It allows him to understand how each financial decision affects other areas of finance.
For example, buying a particular investment product may help your client to pay off
his mortgage faster or may buying a particular investment product may help your
client to pay off his mortgage faster or may delay his retirement significantly. By
viewing each financial decision as a part of a whole, you may help your client
consider the long term and the short term effects on his life goals.

 Tips to achieve the best results from your financial planning:-

 Set measurable financial goals:-

Set specific targets of what you want to achieve and when you want to achieve
results. E.g. Instead of saying you want to be "comfortable" when you retire or
that you want your children to attend "good" schools, you need to quantify what
"comfortable" and "good" mean so that you'll know when you've reached your
goals.

 Understand the effect of each financial decision:-

Each financial decision you make can affect several other areas of your life. E.g.
an investment decision may have tax consequences that are harmful to your
estate plans. Or a decision about your child's education may affect when and how
you meet your retirement goals. Remember that all of your financial decisions
are interrelated.

 Re-evaluate your financial situation periodically:-

Financial planning is a dynamic process. Your financial goals may change over
the years due to things like an inheritance, marriage, birth, house purchase or
change of job status. Revisit and revise your financial plan to stay on track with
your financial goals.

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 Start planning as soon as you can:-
People who save or invest small amounts of money early and often tend to do
better than those who wait until later in life. By developing good financial
planning habits such as saving, budgeting, investing and regularly reviewing
your finances early in life, you will be better prepared to meet life changes and
handle emergencies.

 Be realistic in your expectations:-

Financial planning won’t change your situation overnight; it is a lifelong process.

Remember that events beyond your control such as inflation or changes in the
stock market or interest rates will affect your financial planning results.

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 1.5 INVESTMENT PLANNING PROCESS

Introducing Investment Planning Process:-

Most of us would like to look at life as a continuum from the cradle to the grave
where all phase of life are joyful and well taken care of financially. While most
people spend to satisfy their immediate needs, they would also like to save and invest
so as to take care of their future needs and emergencies. People also desire to have a
reasonable return and create a corpus.

However, different people have different perceptions of risk in investing. Some

people are aggressive investors, whereas, other people may be moderate or
conservative investors. As the needs evolve or undergo a change through various
phases of life, the financial behavior of people too undergoes corresponding changes.

 Some of the needs of people at different phase of life are:

• Protection against premature Death.
• Retirement planning.
• Protection form disability and is health.
• Education and marriage of children.
• Wealth creation.
• Wealth Preservation.

 Steps involved in Planning Process:-

The various stages in the process of planning are as follows:

1. Goal setting:

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 

Plans are the means to achieve certain ends or objectives. Therefore,

establishment of organizational or overall objectives is the first step in
planning. Setting objectives is the most crucial part of planning. The
organizational objectives should be set in key areas of operations.

• They should be verifiable i.e., they should as far as possible be specified in

clear and measurable terms. The objectives are set in the light of the
opportunities perceived by managers. Establishment of goals is influenced by
the values and beliefs of executives, mission of the organization,
organizational resources, etc.

• The objectives must be clear, specific and informative. Major objectives

should be broken into departmental, sectional and individual objectives. In
order to set realistic objectives, planners must be fully aware of the
opportunities and problems that the enterprise is likely to face.

2. Developing the planning premises:

• Before plans are prepared, the assumptions and conditions underlying them
must be clearly defined these assumptions are called planning premises and
they can be identified through accurate forecasting of likely future events.

• They are forecast data of a factual nature. Assessment of environment helps to

reveal opportunities and constraints. Analysis of internal (controllable and
external uncontrollable) forces is essential for sound planning premises are the
critical factors which lay down the bounder for planning.

• They are vital to the success of planning as they supply per tenant facts about
future. They need revision with changes in the situation. Contingent plans may
be prepared for alternate situations.

3. Reviewing Limitations:

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 

• In practice, several constraints or limitations affect the ability of an

organization to achieve its objectives. These limitations restrict the smooth
operation of plans and they must be anticipated and provided for.
The key areas of Imitations are finance," human resources, materials, power
and machinery. The strong and weak points of the enterprise should be
correctly assessed.

4. Deciding the planning period:

• Once the broad goals, planning premises and limitations are laid down, the
next step is to decide the period of planning. The planning period should be
long enough to permit the fulfillment of the commitments involved in a
decision.

• This is known as the principle of commitment. The planning period depends

on several factors e.g., future that can be reasonably anticipated, time required
to receive capital investments, expected future availability of raw materials,
lead time in development and commercialization of a new product etc.

5. Formulation of policies and strategies:

• After the goals are defined and planning premises are identified, management
can formulate policies and strategies for the accomplishment of desired
results. The responsibility for laying down policies and strategies lies usually
with management. But, the subordinates should be consulted as they are to
implement the policies and strategies

• Alternative plans of action should be developed and evaluated carefully so as

to select the most appropriate policy for the organization. Imagination,
foresight, experience and quantitative techniques are very useful in the
development and evaluation of alternatives.

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 

• Available alternatives should be evaluated in the light of objectives and

planning premises. If the evaluation shows that more than one alternative is
equally good, the various alternatives may be combined in action.

6. Preparing operating plans:

After the formulation of overall operating plans, the derivative or supporting
plans are prepared. Several medium range and short-range plans are required
to implement policies and strategies.

• These plans consist of procedures, programmers, schedules, budgets and rules.

Such plans are required for the implementation of basic plans. Along with the
supporting, plans, the timing and sequence of activities is determined to ensure
continuity in operations.

7. Integration of plans:

• Different plans must be properly balanced so that they support one another.
Review and revision may be necessary before the plan is put into operation.
Moreover, the various plans must be communicated and explained to those
responsible for putting them into practice.

• The participation and cooperation of subordinates is necessary for successful

implementation of plans. Established plans should be reviewed periodically so
as to modify and change them whenever necessary.

• A system of continuous evaluation and appraisal of plans should be devised to

identify any shortcomings or pitfalls of the plans under changing situations.

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

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 2.1 FORMULATION OF GOALS & NEED ASESSMENT

Formulation of Goals

Financial goals are the milestones that the client hopes to reach with the help of his
financial resources.

1. These milestones could be concerning different aspects of life like:-

 Saving for marriage / childbirth

 Buying a new car / house / electronic equipment
 Creating a corpus for retirement
 Creating a corpus for children's education
 Adequately insuring self and family
 Creating cash reserves for emergency usage etc.
 The financial planner should ensure that the goals are:
• Specific.

• Realistic.

 Measurable / Quantifiable in money terms.

 To be achieved within a specific time period.
Once the client has stated clear, quantifiable goals for financial planning, the next step
is to rank those goals in order of importance. This is necessary because most clients
do not have the resources to fulfill all their goals. The financial planner must make it
clear to the client that less important goals must be sacrificed or postponed to achieve
the more important ones. This done, the financial planner needs to work out the
amount of money available for achieving these goals. To achieve most financial goals,
the client would need to start saving and investing appropriately. Therefore it is
important for the financial planner to know where the money to invest will be coming
from.

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2. Analyze investor objectives, needs and current financial situation
Preparation of the investor's Personal:-

Financial Statements Preparation of the Cash flow Statement and the Budget
Prioritizing Goals, The next step is to prioritize the financial goals of the client and
work out the amounts that are required to be invested towards achieving these goals
Evaluate Qualitative Factors.

Qualitative factors have a significant bearing on the financial plan for a client. The
client's Tolerance towards risk, investment preferences, current health status etc. need
to be kept in mind while evaluating alternative Strategies.

3. Developed appropriate strategies and present the financial plan:-

A financial planner needs to develop appropriate strategies for the client in the
following areas:-

 Cash flow management

 Insurance planning
 Investment planning
 Retirement planning  Income tax planning
 Estate planning  Need Analysis

Identifying needs of protection, retirement, health, wealth creation, and preservation.

In this step, growth of the economy and the progress of the society are essential for all
round development of an individual. Individuals invest in various financial
instruments, which in turn reap returns not only from the individual investments but
also from the overall economic growth.

Inflation is one of the major concerns of a central bank while formulating monetary
policies of the country. Among its many adverse influences, inflation can take away
gains from any investment. An investor would like to gain more than the inflation rate
to have a real return from the investment.
Another concern is longevity and after retirement life spans, coupled with small
nucleus family norms. Therefore, any financial plan has to take care of this concern,
which is a crucial need. Of course, a wise financial planner would always first take

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 care of the general and life insurance needs of an individual before commencing
financial planning for other needs and investment.

 Planning the investment involves lot of Preparation Before

investors invest their money, they need to answer the following
questions:-
 What are their investment goals? Do they expect short term benefits or long term
benefits?
 For how long they want to invest or what is the time horizon of investment? Is it 3
years, 5 years or 10 years?
 How much money do they have to invest? Can they realistically achieve their
investment goals without any strain?
 Do they have any short term financial needs, for example a housing loan, whereby
they may not be able to invest as much as they would like?
 Do they need to live off the return on their investments, in later years? If yes, will
the investments provide enough profits for them to live comfortably?
 Should they invest in stocks, bonds, mutual funds or pension funds?
Saving too little money or investing erratically is a drain on the investor’s financial
resources. A wise investor would introspect before saving or investing. When
investors have completed the initial plan, they should decide on specific goals. For
this they should consider if their investment would pay for their goals.

 Some of the common goals of investor are:-

 Children’s education
 A down payment for a house  Retirement

 The answer to the preceding goals would lead to information related to:-
 How much money they require?
 How much time do they have to get there?
 What are the investment vehicles that they may be appropriate for them?
 What are the kinds of returns they can expect?
The more specific are the investors, the more likely they can plan and achieve
reasonable goals.

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 2.2 INVESTOR PROFILE AND BEHAVIOUR

Motive of investor both rational and irrational are considered under the behavioral
fiancé as defining the long run price formation in the financial markets. The

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traditional finance on the other hand seeks to understand the financial markets by
using models based on rational behavior of the investors.

It is expected from rational investor that they update their beliefs correctly on
receiving new information and make choices in tune with expected utility. A crucial
component of any model of financial markets is a specification of how investors form
expectations. Some of these are:

 Optimism and wishful thinking:-

Most people display unrealistically rosy views of their abilities and prospects.

 Representativeness:-
People try to determine the probability if an item belongs to a set or a model
generates a data set.

 Conservatism:-
People may be reluctant to search for evidence that contradicts their beliefs, they
tend to treat such evidence with excessive scepticism, and they may misinterpret
evidence that goes against their hypothesis.

 Belief perseverance:-
People often cling to their beliefs tightly and for too long.

 Anchoring:-
People often start with an initial, possibly some arbitrary value or belief and then
adjust away from it.

 Availability bias:-
When judging the probability of an event, people often search their own
memories for relevant information.

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 2.3 CONDUCTING RISK ASESSMENT

 Assessment of risk is conducted by:-

 Risk profile
 Recommending appropriate asset allocation

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 The planner needs to understand the risk appetite of the investor. Generally,
investors are asked to fill in a form to ascertain their risk appetite. This helps to
categories the investor into aggressive, moderate and conservative investors
based on their risk profile.

There is always a correlation between the risk appetites of the investors and the
returns they expect. Higher the risk, higher is the return expected. This is known
as risk return trade off. Concepts such as portfolio, diversification, risk and
return and techniques for reducing and hedging risk are some of the tools for
financial planning.

For example:- equity shares by their nature are riskier as compared to a fixed
deposit or government securities. Higher returns are expected from the equity
shares.

Therefore, keeping a portion of the surplus in the form of fixed deposits or

government securities reduces the risk of the portfolio comprising equity share
(though it may also lower returns).

 Types of Investors
As the investment option for each of the investor types is different, it becomes
essential to determine the style of investor before they invest.
The various investor types are:
 Aggressive investor: is an investor who likes to take risks to earn an extra
but of return.

 Moderate investor: is an investor who is content and believes in earning

slow and steady gains and is not interested in making quick money. A long
term investor is one who does not mind taking some occasional risk so as to
optimize returns and achieve continuous growth

 Conservative investor: is risk adverse investor whose primary objective is

capital preservation. Such investors want a steady growth in income and are

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 not capable of taking shocks, in terms of losses in investment. In other
words, they are passive investors.

 Some of the high net worth individuals can be segmented as follows:-

 Wealth builders: are individuals, who are actively adding to their asset base,
are fairly risk seeking and expect the best possible returns for every unit
invested, they have a high current income and financial equipment.

Typically, they would be owners of business or top level employees in

corporate. They invest actively and are competitive, demanding and
fickleminded. On the other hand, they also tend to be receptive to new ideas
and schemes.

 Wealth preserves: are individual, whose main focus is to protect whatever

wealth they already have. They do not tend to try out new products until they
have enough data on its performance.

Typically, they are at retirement stage or already retired with low current
income, they tend to be risk averse and relatively passive investors. They
could also be inheritors of wealth whose main objective is wealth
conservation.

 Types of Variables for determining an investor style:

There are two major variables, which help the investors in determining their
investment style:
 Risk tolerance 
Time

 Risk tolerance:-
Investors with distinct investment styles invest in different types of products
having varying risk return relationships. There are various degrees of risk
across the investment spectrum, from government savings bonds, which are
the least risky to equities, commodities and options which are the risk.

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 The former, carrying only sovereign risk are considered risk free because of
the government guarantees. Although the government of India saving bonds
and bank fixed deposits (FDs) are the safest, the returns offered are not very
attractive.
Although stocks have historically increased in the price over the long term
investment in equities however could be volatile and very risky over a
shorterterm period.

Investor should remember that they do not lose until they sell what they have
invested in. for example, if an investor in united states did not panic and sell
his stocks in October 1987, he would have done quite well because the market
rebounded in the subsequent years.

The same was true in the Indian market. If investors had not have panicked
and sold post the 800 points fall in a single day on may 17, 2004 at the
Bombay stock exchange (BSE) Sensex level of 4227.5, they would have done
quite well because the market rebounded sharply from its bottom to trade at
6000 level by mid November 2004.

Therefore, when investors invest in the stock market, they should think
longterm. Investors should not invest in stocks any money that they would
need in the short term.

 Time:-
The time the investors want to spend on investing determines how active they
can be as investors for managing their money. If they want to spend 15
minutes a month on investing, then they should consider using passive
strategies.

However, if they plan to set out eight hours a week to devote to investing, then
they can consider researching companies and pouring over financial
statements to pick lucrative individual stocks.

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 2.4 NEED FOR FIANANCIAL PLANNER

 Professional Financial Advisory:-

 Due to higher wealth creation, there is a big demand and growing appetite for
offering professional financial planning service in India expert advice is
required because of the shift in the investor attitude towards alternative
investment options and the desire for sophisticated and focused products.

 As investors have become well informed about financial markets financial

planner have to be knowledge and skillful, regulatory changes have also lead

26
 to higher competition and service standards. Competition in the financial
planning and wealth management is expected to become more intense in
future.

 Need for Professional financial advisory:-

 In today’s scenario where there is a huge expansion of middle class with lot
of disposable income, there are financial institutions that are aggressively
looking to enhance the share of the wallet.

 The opening up of Indian market and the entry of the private players the
product range has widened and a lot of choice is available with the Indian
consumer. For example organizations such as insurance companies offer a
wider choice of products today unlike in past where only LIC was opening.

 For a consumer it is a difficult task to take an informed decision as he has

neither required knowledge not the time to continuously track the market.
Thus there is a need for professional financial advice to enable the consumer
to choose the investment product that suits his requirement and will enable
him to need his goal in creation of wealth.

 Emergence of the new age financial planner:-

 The financial planning process for individuals gets redefined in the emerging
scenario. The financial planner of today needs to posses knowledge of the
basic foundations blocks of financial services sector. This should be backed
by an in-depth understanding of the various products and services, financial
planning and wealth management process.

 Use of technology for this would enable the financial planner to be more
productive on the job. Most importantly the modern day financial planner
needs to understand his/her customer with respect to their financial position,
their risk appetite and their future financial needs to be able to recommend
suitable investments.

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 2.5 INVESTMENT AVENUES

 Equity

Please note that investments in equity should only be done for the long term
(anything more than 5 years) to earn decent returns. Risk of investing in equities is
high and so the returns are also high. You could dabble in the stock market broadly in
three ways.
1. Directly by buying and selling shares on the stock exchanges BSE/NSE

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 2. Take the plunge via the Mutual Fund route – wherein the options available
are : equity diversified, balanced, tax saving ELSS funds, thematic, exchange
traded or index funds
3. Investing in ULIPs (insurance plans) via their equity funds.

 Debt

Debt investment can be done for the short term and long term as well. Risk here is
very low and so return is low as well. Investing in debt can be done by the following
ways.
1. Fixed Deposits, POMIS, NSC, PPF, NPS, Bonds, Kisan Vikas Patra, Senior
Citizen Saving Schemes
2. Debt mutual funds (balanced, floating rate, gilt, liquid and liquid plus) also
offer another way to do so.
3. Traditional insurance policies (money back, whole life, endowment) and the
debt portions of ULIPs can be a mechanism as well.

 Real Estate

This is again for the long term with a high risk and very low liquidity factor. Liquidity
is defined as the ease with which you could sell your investment for cash quickly.
Investing in property can be done by :
1. Buying apartments and plots in either residential or commercial areas
2. Or buying Real Estate Mutual Funds.

 Commodities

For small investors, exposure to gold is the right step to invest into commodities. The
risk is moderate/high in this class of investment and it is highly volatile as well. 1.
One could buy gold and silver bars/coins or jewelry and
2. Invest in Gold exchange traded mutual funds.

29
  Art

Investment into Arts is not every small investor’s first dream but having invested into
the first four, one could think of putting their money into art as well. This should be
on less priority as compared to the above four.
These broadly define the options available with investors for investing their hard
earned money.

2.6 FACTORS THAT AFFECTS INVESTMENT DECISIONS

There are many factors which directly or indirectly influence capital investment
decisions. Some of the factors that influence the selection of investment alternatives
are as follows:

 Returns
Investments are made with the primary objective of deriving returns out of it.
Thus, a good rate of return from an investment is the first and foremost

30
 conditions for effective investment. The returns may be received in the form
of annual incomes as well as capital gains or loss.

 Risk
Risk of an investment is related with the probability of actual returns
becoming less than the expected returns. It can be termed as the variability in
the expected return. Risk may relate to loss of capital, loss of
interest/dividend, delay in repayment of capital, variability of returns, etc. Risk
and returns of an investment are related to each other.

 Safety
Safety in an investment implies the certainty of return of capital without loss
of money or time. Safety in another feature which an investor desires from his
investment. Every investor expects to get back his capital on maturity without
loss without delay.

 Liquidity
Liquidity means marketability of an investment. Liquidity in an investment
refers to the ability an investment to be converted in cash by sale or transfer.
In simple terms, liquidity means to get your money whenever you need it.

 Tax Benefits
The investor may also desire to get the benefits of tax exemption from the
investments. Some investments offer tax benefits while others do not. Tax
benefits available to an investment can be in one of the following form:
Investments can offer tax benefits at the time of initial deposits.
Investments can offer tax benefits on returns generated.
Investments can offer tax benefits when it is redeemed on maturity.

 Duration
The duration of an investment – particularly how long it may take to generate
a healthy rate of return is a vital consideration for the investor. The investment
horizon should match the period that your funds must be invested for or how
long it would take to generate a desired return.

31
 Past Market Trends
At times, past market trends may also influence selection of investment
alternatives. Sometimes history repeats itself, sometimes markets learn from
their mistakes.
All above are the factors that affects investment decisions of the people in the
society.

3.1 CASH FLOW MANAGEMENT (INTRODUCTION)

 Cash flow management is the process of monitoring, analyzing, and adjusting

your business' cash flows for small businesses.

 The most important aspect of cash flow management is avoiding extended cash
shortages, caused by having too great a gap between cash inflows and

32
 outflows. You won't be able to stay in business if you can't pay your bills for
any extended length of time.

Cash Flow Plan

A Personal cash flow statement measures yours cash inflows and outflows in order to
show you your net cash flow for a specific period of time. Cash inflows generally
include the following:

• Salaries
• Interest from investments
• Dividends from investments
• Capital gains from the sale of financial securities like stocks and bonds

Cash inflow can also include money received from the sale of assets like houses or
cars. Essentials, your cash inflows consist of anything that brings in money.

Cash outflow represents all expenses, regardless of size. Cash outflows include the
following types of costs

• Rent or mortgage payments

• Utility bills
• Groceries
• Gas
• Entertainment (book, movie tickets, restaurants meals, etc.)

A cash flow plan will function best if it reflects your goals, whether long-term or
short-term. There four factor that will help you establish control over money.

1. Income/Expenses
Identity and isolate income and expenses. You will need to consider whether
income is gross, or net (the amount you actually have available); if it is gross,
you need to set aside an expenses category for taxes.

33
2. Category
Define the kinds of income you receive and the kinds of expenses you incur.
Categorize them according to the fixed or flexible nature of the item.

3. Time
Your system should be based on a monthly structure, and you should quantify
your income and expense within a 12-month format.

4. Amount
Income and expenses should be expresses in Rupees

In Short, Cash flow management system should examine all financial

transactions over a year-long period, with income and expected expenses for
each category broken down on a month-to-month basis.

Setting up a cash flow management system to help you live within your budget
can help put you back on track toward meeting your goals. With a proper
system in place, you will be well on the way to controlling your cash flow,
rather than letting in control you.

3.2 INSURANCE PLANNING

Insurance is essentially the means to financially compensate for losses that life
throws at people, corporate, and otherwise. Insurance can be used as a tool to
shield an individual against potential risks like travel accidents, death,
unemployment, theft, property destruction by natural calamities, fire mishaps,
etc.
Functions of Insurance

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 The functions of insurance can be categorized as:

• Primary Function:
The following are the primary functions of insurance:

• Provide Protection: The primary function of insurance is to provide protection

against future risk, accidents, and uncertainty. Insurance is actually a protection
against economic loss by sharing the risk with others.

• Collective bearing of risk: Insurance is a means by which few losses are

shared among larger number of people. Insurance is a device to share the
financial loss of few among many others.

• Assessment of risk: Insurance determines the probable volume of risk by

evaluating various factors that give rise to risk.

• Provide certainty: Insurance is a device, which helps to change from

uncertainty to certainty. In the sense that the insured can make provisions
against the happening of an uncertain event and protect against the same.

 Secondary Function:-
The following are the secondary functions of insurance:

• Prevention of losses: Prevention of loss causes lesser payment to the assured by

the insurer by the insurer and this will encourage for more savings by way of
premium. Reduced rate of premiums stimulate for more business and better
protection to the insured.

• Small capital to cover larger risk: Insurance relieves the businessmen from
security investments by paying small amount of premium against larger risk and
uncertainty.

35
• Contributes towards the development of larger industries: Insurance provides
development opportunity to those larger industries having more risks in their
setting up.

 Other Function:-

The following are the other functions of insurance:

• Means of savings and investment: Savings and investment through insurance is a

disciplined way of savings and it restricts the necessary expenses by the insured.

• Source of earning foreign exchange: The country can earn foreign exchange by
way of issue of marine insurance policies and various other ways.

• Risk free trade: Insurance promotes exports insurance, which makes the foreign
trade risk free with help of different types of policies under marine insurance
cover.

 Characteristics of Insurance:-

The basic characteristics of insurance are:

• Pooling of losses: Spreading of losses incurred by a few over the entire group, so
that in the process, average loss is substituted for actual loss.

• Payment of fortuitous losses: A fortuitous loss is unforeseen, unexpected, and

occurs as a result of chance. This could be accidental and random.

• Risk transfer: Pure risk is transferred from insured to insurer, who typically is in
a stronger financial position to pay the loss than the insured.

• Indemnification: Insured is restored to his or her approximate financial position

prior to the occurrence of the loss.

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 3.3 INVESTMENT PLANNING

 Definition:-
The placing of funds into the proper investment vehicles based on the investor's future
goals, time horizon, and priorities. This also takes into account the safety of the
investments as well as liquidity and level of return. Ideally, proper investment
planning will allow the investor's funds to produce financial rewards over time.

37
• Investment Plans: - Investment plans help beat inflation and build a large corpus.
We at Policybazaar.com help you compare investment plans offered by all life
insurance companies in India and select the best suited investment plan for you.
An investment plan should be selected keeping in mind 3 main goals:

• Risk Profile:-if you are a young customer and are willing to take financial risks, a
ULIP is better suited for you while if you’re a conservative investor, then a
traditional endowment or money-back plan will suite your needs.

• Investment Tenure:-Insurance plans offer a mid-to-long term investment

horizon. Unit Linked Insurance Plans or ULIPs are very good long term
instruments.

• Final Goal:-you want to build the corpus for retirement or child’s education.

 Top Investment Product Categories in Insurance:-

• Unit Linked Insurance Plans:-the easiest way for a consumer to enter the stock
market with an added advantage of life cover. As these products provide tax
benefits and market linked returns, they are very good for long-term investment.
ULIPs offer many investment funds to choose from which allow you flexibility to
shift between equity and debt, based on the market conditions and risk profile.

• Traditional Endowment plans:-regular saving plans which help build a corpus

and give guaranteed maturity benefits along with bonuses. These products give
you returns equivalent to a fixed yield/deposit but also combine insurance risk
cover and add-on riders to primarily build the safety cushion in case something
goes wrong.

• Money back Plans:-type of endowment plans which give periodic cash payouts to
investors. As they help build regular large capsules of fund; they are very useful
for salaried class who wish to save for buying large assets every 3-5years

38
 Child Plans are saving instruments which help parents build a protected asset
for their child’s future. They also provide many insurance features which
protect the intent or reason for corpus building; primarily for child’s future
education and expenses.

 Key things to remember while investing:-

• Set financial goals - both short term and long term.

• Maintain balance between risk and returns- allocate amount accordingly.

• Investments should be both liquid and fixed-This enables you to use them in
emergencies as well as avoiding overspending.

• Start small and gradually increase invested amount- Choose premium payment
options ranging from monthly to annual to single premium.

• Research a lot before investing- use help of financial planner if need be.

• Review portfolio each year and make changes accordingly.

• Ask questions - Resolve all your doubts before investing. Use investment
calculator to calculate exact premium before buying.

 Other Investment Options to choose from:-

• Mutual Funds:- This is a professionally managed trust in which investment is

pooled from retail investors. The accumulated amount is invested in different
financial instruments like shares, securities etc. As the income is earned on
these instruments, it is shared proportionally among investors. Mutual Fund is
considered a very good investment option due to its very low charge structure.

39
 • Investments in Gold:- The value of gold has been appreciating steadily.
Looking at the last few years, there has been more than 22% annualized
returns; this makes gold a very good investment option. For people interested in
investing in gold, there are various methods which include physical gold, egold
and gold ETF.

• Bank Fixed Deposits and Postal Schemes:- These 3 options are most suitable
for making safe investments. The interest rate on PPF account is presently at
8.8% per annum and keeps changing every year; different banks offer different
interest rates. There are also many postal investment schemes which can be
bought.

3.4 RETIREMENT PLANNING

The main goal of a successful retirement planning is ensuring that one will have
sufficient financial resources to maintain or improve one’s lifestyle during his/her
retirement years. According to some financial experts, to do so, one will need to save
enough.

 Ascertain requirements Post Retirements:-

• One popular approach to retirement planning starts by determining how much

finance one will need for their retirement.
• This is usually based on projected increase in cost of living, the no. of years one
is likely to spend in retirement.

40
 • The years one spends in retirement may be more or less than one projected. The
same may go for the increase in cost of living.
• However a comprehensive outlook and some thought will help to provide
realistic projections.

• Steps to Retirement Planning:

• The longest of journeys start with single step. We are not sure who said that,
but being in the financial planning space, we think it most aptly describes what
retirement planning is all about.

• Planning for retirement is one long journey but a resolute and systematic step by
step approach makes it a lot less laborious.

 Start early:-
• A well prepared approach towards any goal is usually the result of an early start.
Retirement planning is no different. We hear financial planners say that it’s
never too early to start saving for retirement and they are right.

• Make no mistake that an early start helps and one will surprised at just how
much it helps. A friend or colleagues, who started saving for retirement even
five year earlier than another with the same quantum of investment

• Even if one doesn’t have the requisite amount of money required to start, the
key lies in starting with whatever is available and making up for the deficit at a
later stage.

 Implementing the plant:-

• Having an investment plan in place sets the ball rolling for an investor and the
investment advisor who will implement the plan by making investment in stock,
mutual funds, bonds, small saving schemes.

41
• The most important reference point for the investment plan is the objective to
invest in avenues that lower risk and maximize returns and do so in line with
one’s risk profile.

• This is where the investment advisor’s expert advice will play a crucial role.
Typically a retirement portfolio should be well diversified across pension plans,
mutual funds, equities, EPF/PPF and fixed deposit.

35 INCOME TAX PLANNING

One of the important considerations in making any investment choice across asset
classes is tax implication of investment decision. Tax planning plays an important
role in portfolio management especially in the current scenario of complex tax
structure.

• Tax Planning has been described as a form of arrangement of a taxpayer’s

financial affairs in such a way that the tax liability is reduced. This is achieved
by taking full advantage of all the tax exemptions, deductions, concessions,
rebates, relief, allowances and any other benefits granted by the tax laws.

• Every person, whose total income of the previous year exceeds the maximum
amount that is not chargeable to income tax, is an assessed.

42
 • An income can be taxed under the head ―Salaries‖ where there exists an
Employers-Employee relationship between the payer and the payee.

• The annual value of property consisting of any buildings or lands appurtenant

thereto of which the assessed is the owner shall be chargeable to income-tax
under the head ―Income from house property‖.

• The gain on sale of a capital asset is called capital gain. The following are
various types of capital gains:

- Capital gains arising on the transfer of short-term capital asset

- Capital gains arising on the transfer of long-term capital asset

3.6 ESTATE PLANNING

Estate planning refers to the process by which an individual or his/her family arranges
the transfer of assets to the legal heirs in the event of death or disability of the
individual.

It includes the distribution of the real and personal property of an individual to his/her
heirs. An estate plan aims to preserve the maximum amount of wealth possible for
beneficiaries and flexibility for the individual prior to his death.

The objectives of estate planning are:-

• Asset Transfer to beneficiaries: Every individual wishes that his/her

accumulated wealth should reach the hands of the beneficiary of his/her choice.
A beneficiary can be his/her children, parents, friends, or any other person.

43
• Tax-effective transfer: To ensure least tax deduction on such transfer of wealth.

• Planning in case of disabilities: It ensures smooth functioning of asset

management within the family in case an individual gets disabled.

• Time of distribution can be pre-decided: Individuals having minor children

may wish to transfer the assets only after the children attain a certain age, to
avoid misuse that may happen due to lack of maturity and discretion.

• Business succession: organized succession or winding up can be defined in case

of an individual handling a business.

• Selection of the Trustee/Guardian or the executor: An individual needs to be

appointed to carry out the functions such as:
- Distribution of assets to the beneficiaries as per the individual’s wish.

- To pay testamentary and funeral expenses.

- Applying for a probate.

- Paying all the expenses and outstanding debts.

- Ensuring all the benefits due to the deceased, such as life insurance,
pension, and other benefits are received.

- Arranging for filing of tax returns.

• Tools of Estate Planning:

During the
Lifetime

Power of
Trust Gift Partition
Attorney

44
• Trust: A trust is an entity created to hold assets for the benefits of certain person
or entities.

• Power of Attorney: It is a formal arrangement by which one person gives

another person authority to act on his/her behalf and in his/her name.

• Gift: It is a relinquishment without consideration of one’s own right in property

and the creation of the right of another.

• Partition: It is the process by which the property held in undivided shares by

joint tenants or coparceners is divided among them. A partition does not involve
transfer in law; hence partition does not attract liability to tax on capital gains.

• Will: it is a legal document through which, one can allocate one’s assets and
property to the loved ones after death.

• Intestate Succession: The Indian Succession Act states that any attempt to set
out the exact share of each such person and its fluctuation depends on various
factors.
The share taken by each sharer will fluctuate in different circumstances.

• Life Insurance: It is a good estate planning tool. The main reason for a life
insurance is that when the insured name his beneficiaries, the money passes to
them directly, without probate.

Post -death

Life
Will Succession
Insurance

45
 3.7 MUTUAL FUNDS

• A mutual fund is a type of professionally managed collective investment vehicle

that pools money from many investors to purchase securities while there is no
legal definition of the term "mutual fund" it is most commonly applied only to
those collective investment vehicles that are regulated and sold to the general
public.
• They are sometimes referred to as "investment companies" or registered
investment companies. Most mutual funds are "open-ended," meaning investors
can buy or sell shares of the fund at any time. Hedge funds are not considered a
type of mutual fund.
• The term mutual fund is less widely used outside of the United States and
Canada. For collective investment vehicles outside of the United States, see
articles on specific types of funds including open-ended investment companies,
SICAVs, unitized insurance funds, unit trusts and Undertakings for Collective
Investment in Transferable Securities which are usually referred to by their
acronym UCITS.
• Mutual funds have both advantages and disadvantages compared to direct
investing in individual securities. They have a long history in the United States.
Today they play an important role in household finances, most notably in
retirement planning.
• There are 2 types of U.S. mutual funds: open-end and closed-end. The most
common type, the open-end fund, must be willing to buy back shares from
investors every business day. Open-end funds or unit investment trusts that trade
on an exchange. Open-end funds are most common.

46
 3.8 FIXED INCOME SECURIETIES

Fixed income securities are essentially of two types. These are:

• Tradable securities: It means they have a secondary market where they can be
sold or tradable securities. An example of tradable securities is debentures. The
various types of tradable securities are:
- Government securities

- Corporate bonds

• Non-tradable securities: The securities cannot be traded and have to be held by

the investor until the maturity. An example of non-tradable securities is bank
deposits. Non-tradable securities are of the following types: - Post Office /
Monthly Income Schemes

- N.S.C.

- P.P.F.

- Company deposits

• Features of Fixed Income Securities:

• Safety: Fixed income investments generally have two features associated with them.
Return of capital at the end of a specified period and/or a specified rate of return for
a specified period.

• Income Expectation: With the exception of Floating Rate Securities, the coupon is
set at issuance and remains the same until maturity.

• Choice: The different fixed-income instruments in the market allow you to choose
from a range of credit ratings and maturity periods.

• Accessibility: Fixed-income securities provide the flexibility and liquidity needed to

structure a portfolio tailored to specific investment objectives.
• Risk Profile: The prices of debt securities display a lower average volatility as
compared to the prices of other financial securities. This does give fixed income
securities a low risk profile.

47
 CHAPTER 4

REVIEW OF LITERATURE

Article 1: A review of literature on financial investment decisions of

individual investor: Behavioral and risk related explanations

F. Akhtar · K.S. Thyagaraj · N. Das

Abstract: In the present scenario, everybody needs investment, even if one does not
participate directly in selection of any particular investment regime, participation still
occurs through pension plans, saving schemes of banks and post offices and life
insurance policies. With the advent of globalization and diversification of financial
markets, investment opportunities for the retail investors have increased. Investor's
decision making capacity is highly influenced by many factors such as the return he
would be getting for holding any particular financial security. Therefore in order to
understand the individual investor behavior many factors have to be considered such
as stock preferences, risk tolerance, objective and pattern of investment etc. Insight
about the desire, socio-demographic profile, financial know-how and nurturing
environment play a very crucial role in understanding the movements of financial
markets. In the present study, the enormous literature related to investor behavior have
been analyzed and explored. The study tries to propose a conceptual framework by
exploring the various empirical studies done on investor behavior. Despite the
enormous wealth of existing research, there is still a scope for future research.

Article · Jan 2015

Article 2: The Effect of Demographics on Investment Choice among

Investors

Amutha

Abstract: The economic boom in India has boon to many in terms of increased job and
business prospects. The past decade has witnessed changes in consumer lifestyle and
has influenced many activities, including investment activity. People used to invest
savings in various avenues. There are considerable variations in the availability of

48
investment avenues in pre-liberalization and post-liberalization period. Even changes
in demographic profile of India substantiate these changes in investment avenues,
their growth and a spurt in the new avenues. This article tries to study the relationship
between demographic profiles and investment choice of the investors. Show less

Article · Mar 2014

Article 3: An intertemporal asset pricing model with stochastic

consumption and investment opportunities

PanelDouglas T.Breeden Reference:

www.sciencedirect.com

Abstract:

This paper derives a single-beta asset pricing model in a multi-good, continuous-time

model with uncertain consumption-goods prices and uncertain investment
opportunities. When no riskless asset exists, a zero-beta pricing model is derived.
Asset betas are measured relative to changes in the aggregate real consumption rate,
rather than relative to the market. In a single-good model, an individual's asset
portfolio results in an optimal consumption rate that has the maximum possible
correlation with changes in aggregate consumption. If the capital markets are
unconstrained Pareto-optimal, then changes in all individuals' optimal consumption
rates are shown to be perfectly correlated.

Article 4: Broadband investment and regulation

Carlo Cambini, Yanyan Jiang Reference:

www.sciencedirect.com

Abstract:

Investment in broadband communications and its infrastructures (the so-called Next

49
Generation Networks) is receiving extraordinary attention from policy makers all over
the world, due to the significant impact of high-speed Internet access on the whole
economy and society. However, even before the recent financial crises, a dramatic
downward trend in telecommunications investment has occurred, mainly due – at least
according to incumbent operators – to excessively intrusive regulatory intervention.
The typical conflict between regulation, competition and investment emerges. It is
therefore important, for both future research and regulatory and practitioners’
references, to review the specialized but growing branch of the literature on this
interesting and policy-relevant issue. The purpose of this paper is therefore to survey
the relevant theoretical and empirical literature on the relationship between regulation,
at both retail and wholesale level, and investment in telecoms infrastructures. The
picture that emerges is not conclusive, and further research is still needed, both
theoretically and empirically, to better understand the real impact of regulatory
incentives on investments.

Article 5: Do organizations adopt sophisticated capital budgeting

practices to deal with uncertainty in the investment decision?

Frank H.M. Verbeeten

Reference: www.sciencedirect.com

Abstract:

This study examines the impact of uncertainty on the sophistication of capital

budgeting practices. While the theoretical applications of sophisticated capital
budgeting practices (defined as the use of real option reasoning and/or game theory
decision rules) have been well documented, empirical evidence on the factors that
affect the importance and use of these sophisticated capital budgeting practices is
scarce. I investigate the relation between specific uncertainties and sophisticated
capital budgeting practices in 189 Dutch organizations. The empirical results show
that sophisticated capital budgeting involves the use of multiple tools and procedures
(such as Monte Carlo simulations, certainty equivalents, Game Theory decision rules
and Real Option Reasoning). An increase in financial uncertainty is associated with
the use and importance of sophisticated capital budgeting practices. Finally, size and

50
industry are also related to the use and importance of sophisticated capital budgeting
practices.

Article 6: Corporate social and environmental reporting: a review of

the literature and a longitudinal study of UK disclosure

Rob Gray, Reza Kouhy, Simon Lavers

Reference: www.emeraldinsight.com

Abstract:

Takes as its departure point the criticism of Guthrie and Parker by Arnold and the
Tinker et al.critique of Gray et al. Following an extensive review of the corporate
social reporting literature, its major theoretical preoccupations and empirical
conclusions, attempts to re‐examine the theoretical tensions that exist between
―classical‖ political economy interpretations of social disclosure and those from more
―bourgeois‖ perspectives. Argues that political economy, legitimacy theory and
stakeholder theory need not be competitor theories but may, if analyzed appropriately,
be seen as alternative and mutually enriching theories from alternative levels of
resolution. Offers evidence from 13 years of social disclosure by UK companies and
attempts to interpret this from different levels of resolution. There is little doubt that
social disclosure practice has changed dramatically in the period. The theoretical
perspectives prove to offer different, but mutually enhancing, interpretations of these
phenomena.

Article 7: Investment appraisal techniques for advanced manufacturing

technology (AMT)

F.T.S. Chan, M.H. Chan, H. Lau Reference:

www.emeraldinsight.com

Abstract:

This paper presents an overview and guidance for manufacturing companies which are
preparing to invest in advanced manufacturing technology (AMT). The purpose of

51
this paper is to explain the reasons why the company may encounter problems while
adopting AMT, and to look at the many suggestions offered by the relevant literature
for improving the performance of evaluation in AMT investment. According to the
four major steps in adopting AMT (i.e. strategic planning, justification, training and
installation, and reutilization and implementation), the research work here aims to
assist managers or investors to recognize problems at each step, thus offering
appropriate ways to avoid and/or solve those problems. It is believed that improved
justification methods will encourage more firms to invest in AMT and to realize the
benefits these investments can offer.

Article 8: NARRATIVE CORPORATE SOCIAL DISCLOSURES:

HOW MUCH OF A DIFFERENCE DO THEY MAKE TO
INVESTMENT DECISION-MAKING?

Markus J. Milne, Christian C.C. Chan

Reference: www.sciencedirect.com

Abstract:

This paper reports the results of a study on the usefulness of typical social disclosures
from corporate annual reports for investment decision-making. Rather than seek to
solely survey respondents about their stated behavior, the present study also seeks to
examine if narrative social disclosures in the annual report actually impact on the
behavior of how investors allocate their investment funds. The experiment provides a
basis for assessing the magnitude of any decision impacts. The results indicate that
from a sample of sophisticated users (accountants and investment analysts) social
disclosures from annual reports do not elicit any more than a 15% switch in
investment funds. Furthermore, the switch in funds is not always in favor of the
company providing the information. Consistent with these behavioral reactions the
survey evidence also reveals moderate attitudes to the decision usefulness of narrative
social disclosures for investment decision making.

Article 9: The potential of actuarial decision models: Can they improve

the venture capital investment decision?

52
Andrew L. Zacharakis, G. Dale Meyer

Reference: www.sciencedirect.com

Abstract:

Venture capitalists (VCs) are considered experts in identifying high-potential new

ventures—gazelles. VC-backed ventures survive at a much higher rate than those
ventures backed by other sources (Kunkel and Hofer 1991; Sandberg 1986; Timmons
1994). Thus, the VC decision process has received tremendous attention within the
entrepreneurship literature. Nonetheless, VC-backed firms still fail at a surprisingly
high rate (20%). Moreover, another 20% of the VC's portfolio fails to provide any
return to the VC. Therefore, there is room for improvement in the VC investment
process.

The three staged investment process often begins with venture screening. First, VCs
screen the hundreds of proposals they receive to assess which deserve further
consideration. Those ventures that survive the initial stage are then subjected to
extensive due diligence. Finally, the VC and entrepreneur negotiate terms of the
investment. Considering the amount of time that due diligence and negotiation of
terms may take, it is imperative that VCs minimize their efforts during screening so
that only those ventures with the most potential proceed to the next stage. Yet, at the
same time, the screening process should also be careful not to eliminate gazelles
prematurely. VCs are in a quandary. How can they efficiently screen venture
proposals without unduly rejecting high potential investments? The answer may be to
use actuarial decision aides to assist in the screening process.

Actuarial decision aides are models that decompose a decision into component parts
(or cues) and recombine those cues to predict the potential outcome. For example, an
actuarial model about the VC decision might decompose a venture proposal into
decisions about the entrepreneurial team, the product, the market, etc. The
subcomponent decisions are than recombined to reach an overall assessment of the
venture's potential. Such models have been developed in a number of decision
domains (e.g., bank lending, psychological evaluations, etc.) and been found to be
very robust. Specifically, these models often outperform the very experts that they are
meant to mimic.

53
The current study had 53 practicing VCs participate in a policy capturing experiment.
The participants examined 50 ventures and judged each venture's success potential;
would the venture ultimately succeed or fail. Likewise, identical information about
each venture was input into two different types of actuarial models. One actuarial
model—a bootstrap model—used information factors that VCs had identified as being
most important to making a good investment decision. The second actuarial model
was derived by Roure and Keeley (1990). The Roure and Keeley model best
distinguished between success and failure in a study of 36 high-technology ventures.
The bootstrap model outperformed all but one participating VC (he achieved the same
accuracy rate as the bootstrap model). The Roure and Keely model, although less
successful than the bootstrap model, outperformed over half of the participating VCs.

The implications of this study are that properly developed actuarial models may be
successful screening decision aides. The success of the actuarial models may be
attributed to their consistency across different proposals and time. The models always
weight the information cues the same. VCs, as are all human decision makers, may
often be biased by differing salient information cues that cause them to misinterpret or
ignore other important cues. For example, a VC may overlook product weaknesses if
(s)he is familiar with the entrepreneur putting forth a particular proposal. Although the
current study developed a generalized actuarial model, each VC firm could create
screening models that fit it's particular decision criteria. The models could then be
used by junior associates or lower level employees to perform an initial screen of
received venture proposals thereby freeing senior associates' time.

Article 10: Past and Present Methods of Manufacturing Investment

Evaluation: A Review of the Empirical and Theoretical Literature

Michael D. Proctor, John R. Canada

Reference: www.tandfonline.com

Abstract:

As early as the 1950's, capital budgeting processes based on discounted cash flow
served as the principal tools for evaluating capital investment proposals for American
firms. Buffeted during the late 1970's and 1980's by overseas competition, American

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firms, supported by innovative researchers, reconsidered capital investment evaluation
practices. This paper briefly discusses both past and present manufacturing investment
evaluation methods.
Primary Data

CHAPTER 5

ANALYSIS & FINDINGS

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 DATA ANALYSIS

From the above survey of 100 people, 70% of people have knowledge about
investment avenues and rest of 30% does not even know about investment avenues.
So, there is a need of awareness about investment avenues in the society.

As per analysis, 50% people had invested before in any of the investment avenues and
50% people do not invested yet.
While investing every person check below mentioned factors:

• Returns
• Risk
• Other

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 Out of 100, 65% people going for Returns; 27% people checks the Risk; and rest of
people going for other things which includes (Tax benefits, Past market trends,
Liquidity etc.).

While investing every person prefer to invest there money in following sectors:

• Private Sector
• Government Sector
• Public Sector
• Foreign Sector

From the above sector maximum amount of people selecting government sector
than any other sector.

While investing people have there saving objectives of:

• Children’s Education
• Retirement
• Home Purchase
• Children’s Marriage
• Healthcare
• Others

So, people going for the objective of home purchase other than any other objective
of investment and after that people going to prefer Healthcare so, people have
saving objectives.

While investing people have a investment objective of:

• Income and Capital Preservation

• Long-term Growth
• Short-term Growth
• Growth and income
• Other

Maximum amount of people have Long-term Growth investment objective then

any other investment objective.

While investing people have a purpose behind investment:

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 • Wealth Creation
• Tax saving
• Earn Returns
• Future Expenses
• Other

So, people have wealth creation objective behind investment then any other
objective of investment.

People want there investment to grow:

• Steadily
• At an Average rate  Fast

So, 47% of people want there investment to grow at an average rate, 30% of
people want there invest at an fast rate, and rest of people want there investment to
grow at steadily rate.

People invest there income in following rate of percentage:

• 0-15%
• 15-30%
• 30-50%

So, Maximum amount of people going for 15-30% of there income for investment
after that maximum amount of people going for 0-10% of there income for
investment.
Out of 100, 46% of people are preferring Long-term investment than any other type of
investment.

The source of investment advice is most through internet i.e. 28%, 22% people are
looking for financial planners to invest in various securities. Rest of the people are
going for other sources for investment advice.

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 CHAPTER 6

CONCLUSION

Through the various sections of this tutorial, we’ve introduced and discussed a
number of investing concepts and investing vehicles. Among them are:

· Stocks

· Bonds

· Mutual Funds

· Passive index mutual funds and ETFs

· Active management

· ETFs

· Real estate and alternative investing

Moreover, we stressed the idea that investing is not one size fits all. Different
strategies work for different investors and different situations. Additionally, an

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investor might employ more than one strategy, or choose a variety of investment
vehicles depending upon their goals.

Have a plan and a strategy

Just like going on trip in your car, it is important that investors have a plan and a
destination in mind before investing their money. Your goals-whether planning for
retirement or buying a home-dictate your time horizon, which dictates your tolerance
for risk. Additionally, you want to make sure that you diversify your investments so
that some do well when the rest of your portfolio might not. This approach allows an
investor to construct a portfolio that is in line with their risk tolerance and that
balances potential return with some downside risk protection.

Hopefully our tutorial has provided some insights and good ideas as you invest for
your future.
Your journey is just beginning, however. Your challenge is to keep learning and stay
informed.

So, from this project we can conclude that investment of people is decided on there
financial planning, Tax saving planning & future goals etc.

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 CHAPTER 7

ANNEXURE

 QUESTIONNAIRE (BLANK)
Your age group
• 10-20
• 21-30
• 31-40
• 41-50
Gender
• Male
• Female
What is your profession?
• Businessmen
• Employee
• Student  Other
Do you know about investment avenues?
• Yes
• No

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Whether you invested before in any investment avenues?
• Yes
• No
What factors do you see while investing in securities?
• Returns
• Risk
• Other
In which sector do you prefer to invest your money?
• Private Sector
• Government Sector
• Public sector
• Foreign Sector
What are your saving objectives?

• Children’s Education
• Retirement
• Home purchase
• Children’s marriage
• Healthcare
• Others
What is your investment objective?
• Income and Capital Preservation
• Long-term Growth
• Short-term Growth
• Growth and income
• Other
What is the purpose behind investment?
• Wealth creation
• Tax saving
• Earn returns
• Future expenses

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 • Other
At which rate you want your investment to grow?
• Steadily
• At an average rate
• Fast
What percentage of your income do you invest?
• 0-15%
• 15-30%
• 30-50%
What is the time period you prefer to invest?
• Short-term(0-1yrs)
• Medium-term(1-5yrs)
• Long-term(>5yrs)
What is your source of investment advice?
• News papers
• News channels
• Family or Friends
• Books
• Internet
• Magazines
• Advisor
• Financial Planner

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 BIBLIOGRAPHY
Reference sites
www.researchgate.com
www.sciencedirect.com
www.wikipidia.com
www.investopedia.com
www.googlescholer.co.in
www.tandfonline.com
www.emeraldinsight.com
www.googledocs.com
www.googleforms.com

Newspapers
• Times Of India
• Economics Times

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