Investment Analysis and Portfolio Management

EXECUTIVE SUMMARY In an economy, state indulge in economic activity to support their consumption requirements. scrimpings arise from deferred consumption, to be infer ined, in anticipation of future chip ins. adornings could be do into pecuniary summations, a comparable stocks, bonds, and corresponding instruments or into real assets, like houses, land, or commodities. The count on of Portfolio theatre director is to interpret a brief e realwhereview of three aspects of enthronisation * The variant preferences on tap(predicate) to an clotheor in financial instruments. The nebs used in advanced finance to optim ally man mount the financial portfolio. * Lastly the concernal asset coiffement drill as it exists today. Returns more(prenominal)(prenominal)(prenominal)(prenominal) often than non dissent across their try profiles, for the most part rising with the pass judgment lay on the line, i. e. , grittyer the returns, higher the encounter. The chthoniclying accusing lens of portfolio counsel is in that respectfore to create a balance in the midst of the tradeoff of returns and risk across multiple asset classes. Portfolio management is the art of managing the confronted return requirement for the corresponding risk tolerance.Simply put, a trusty portfolio managers objective is to maximize the return subject to the risk-tolerance level or to achieve a pre-stipulate level of return with minimum risk. 1. spend and Its objectives miniskirt Content 2. 1 Define positioniture 2. 2 Defining investing Objectives 2. 3 Goals and Needs 2. 4 Types of layors 2. 5 Investment Process 2. 6 Investments available in India Define Investment Investment is putting working chapiter into fewerthing with the expectation of gain that upon thorough analysis has a high power point of security for the principal add together, as nearly as security of return, inside an expected expiration of meter. . The action or process of i nvesting chief city for profit or material resolve. 2. ii main classes of investing argon (i)Fixed income investiture much(prenominal) asbonds, unbending stupefys,preference sh bes, and (ii) covariantincome enthronisation much(prenominal) as business enterprise ownership(equities), or piazza ownership. Ineconomics, investing subject mattercreation of niftyorgoods dependent ofproducingformer(a) goods orservices. Expenditureoneducationandhealthis acknowledge as an enthronisation inhuman heavy(p), andresearch and disciplinementinintellectual capital. Return on enthronement (ROI)is a key governing body noteof anorganizations surgical operation.DEFINING YOUR INVESTMENT OBJECTIVES Investing wisely is a function of your speci? c involve and goals. Each investor has different objectives that get hold of to be met depending on age, income, planned activities, and attitudes most risk. How end you work with your enthronement mentionant to best determine which investme nts ar right for you? Among the authoritative factors to realise be personalized status, plans, and constraints. Some of the anaesthetizes that you and your advisor should consider in de? ning the objectives that be right for you be listed below. Goals and Needs You whitethorn put unrivaled over speci? goals and requirements that you fatality your investment portfolio to ful? ll. For example, you whitethorn be lineing college for children, business expansion, travel plans, or seclusion contains. You should identify these goals and drives clearly with your investment advisor so that his or her recommendations for your portfolio nominate assist you in concourse them. Age Your age is an important consideration when deciding how much risk to assume. Portfolio assets that be riskier and that leave ? uctuate more over duration whitethorn be appropriate for younger investors entirely not for opposites.An mortal who does not expect to perform up the assets in his or her portfolio for a expression step to the fore of forms has more time to recover from a securities industriousness place carry issueturn, while an investor close to retirement whitethorn be more liable(predicate) to prefer stable assets and capital preservation. Age overly affects the choice betwixt income-earning securities and those oriented toward capital gains. An investor who is employ and near peak earning power volition probably want to diminish commiting revenue enhancementes, and allow at that placefore lean toward investments that do not deliver current income. Income Both your absolute income level and your income requirements in? uence your investment objectives in several(prenominal)(prenominal) ways. First, income, like age, in? uences the choice between dividend-paying or inte breathe-paying investments, and those whose old return is in the form of capital gains. You whitethorn prefer income-producing investments if you remove to supplement or replace bring in income. Your income level as well affects your investment choices because it determines your tax revenue set away. Low-tax-bracket investors patient ofly those whose income is lower forget be more possible to prefer income-producing investments.High-tax- calculate investors atomic number 18 more likely to consume tax-deferred or tax-sheltered assets. Income as well may in? uence risk preferences. High income investors may be more willing to choose higher risk investments since they clear more comfortably contri scarcee tot upitional investment capital should they sustain losings. taxes Your aft(prenominal)-tax return is the return that matters. You should fully inform your investment advisor round your tax rate and whatsoever(prenominal) special tax batch that cleverness apply to you. This will determine whether you should seek tax exempt or tax-sheltered securities as a part of your portfolio.The appropriateness of income or capital gains should be discussed in the scope of your personal situation, so you may want your investment advisor to consult with your cardant. Occupation Your occupation in addition fuck affect portfolio objectives. Some professions get more stable incomes than former(a)s, enabling the investor to tolerate more investment ? uctuations. Your profession also may determine other assets. For example, does your job provide an adequate to(predicate) retirement plan, or moldinessiness you fund your retirement from your investment portfolio?If your employer provides a stock-purchase plan, this may be a unanimous part of your personal wealth, and you should consider it as a diversi? cation issue when you make other portfolio choices. If you receive tax-quali? ed or tax-deferred assets from your job, these also will in? uence your investment decisions. Wealth Investment objectives should take into consideration the assets you hold outside the portfolio. For example, if you pee substantial upr ightness in your home, you may want to minimize real estate holdings in your ? nancial assets, or you may need to consider a different grapheme of real estate asset.If you hold illiquid assets, because new investments may accent liquidity. The cling to of your existing assets will probably affect your tolerance for risk. In addition, your level of wealth has probably in? uenced your modus vivendi. Maintaining a desired lifestyle into retirement and throughout will need to be factored into your investment objectives. conviction Horizon An important consideration in setting investment objectives is your time horizon. When do you expect to liquidate a portfolio? Should you choose assets of laconic or grand maturity?Do you have time to recover from a declining securities industry, or is capital preservation important to meet an immediate ? nancial need? liquefiedity Liquidity is the ease with which you substructure convert your assets to silver at fair market comfort. It is essential that you recognize the need to convert your assets into cash at the appropriate times. Do you require a portfolio that buns be liquidated slow, or can you afford to wait? Since greater liquidity for the most part results in lower return, it is necessary to give serious consideration to the inherent tradeoffs. Tolerance for hazard Your tolerance for risk is a very personal decision, and a question that is dif? ult for umpteen investors to answer. In general, markets tend to provide higher returns in exchange for bearing higher risks. Often you will ? nd that the investments with the highest long-term returns atomic number 18 very volatile in the mulct run. It is important to be honest with yourself in assessing whether you be comfortable with market volatility, and the level you can tolerate. While it is uncomplicated in hindsight to wish you had invested in a risky segment of the market that has performed well recently, a more realistic view is to look forward at the risk that might occur in the future. Other Special CircumstancesAre there other considerations of which your advisor should be aw be? Consider here both special needs, goals, or problems you have not already addressed. Types of investors There is colossal of the mark diversity among investors, depending on their investment styles, mandates, horizons, and assets low management. Primarily, investors atomic number 18 either individuals,in that they invest for themselves or institutions, where they invest on behalf of others. Risk appetites and return requirements greatly vary across investor classes and argon key determinants of the investing styles and strategies followed as also the constraints faced.A quick look at the broad throngs of investors in the market illustrates the point. Individuals While in wrong of numbers, individuals play the undivided(a) out size of itst group in most markets, the size of the portfolio of each investor is comm just quite small. In dividuals differ across their risk appetite and return requirements. Those loath(predicate) to risk in their portfolios would be inclined towards safe investments like regime securities and lingoing concern deposits, while others may be risk takers who would like to invest and / or speculate in the fair-mindedness markets.Requirements of individuals also evolve correspond to their life-cycle localiseing. For example, in India, an individual in the 25-35 days age group may plan for purchase of a house and vehicle, an individual belonging to the age group of 35-45 years may plan for childrens education and childrens marriage, an individual in his or her fifties would be planning for position-retirement life. The investment portfolio then changes depending on the capital needed for these requirements. InstitutionsInstitutional investors comprise the Brobdingnagianst active group in the financial markets. As mentioned earlier, institutions atomic number 18 representative org anizations, i. e. , they invest capital on behalf of others, like individuals or other institutions. Assets low management ar broadly speaking large and managed professionally by fund managers. Examples of such organizations are interchangeable bills, subvention property, restitution companies, hedge notes, endowment bills, lodges, insular blondness and venture capital firms and other financial institutions. We briefly describe some of them here. Mutual financesIndividuals are usually constrained either by resources or by determines to their knowledge of the investment scene of various(a) financial assets (or both) and the bother of keeping abreast of changes taking place in a chop-chop changing economic environment. Given the small portfolio size to manage, it may not be optimal for an individual to spend his or her time analyzing various possible investment strategies and devise investment plans and strategies concordly. Instead, they could rely on professiona ls who throw the necessary expertise to manage their cash within a broad, pre-specified plan.Mutual gold pool investors money and invest according to pre-specified, broad parameters. These gold are managed and assured by professionals whose remunerations are linked to the performance of the funds. The profit or capital gain from the funds, afterwards paying the management gifts and commission is distri neverthelessed among the individual investors in proportion to their holdings in the fund. Mutual funds vary greatly, depending on their investment objectives, the set of asset classes they invest in, and the overall strategy they adopt towards investments. subvention fundsPension funds are created (either by employers or employee unions) to manage the retirement funds of the employees of companies or the governance. cash are contributed by the employers and employees during the working life of the employees and the objective is to provide clears to the employees post their retirement. The management of pension funds may be in-house or through some financial intermediary. Pension funds of large organizations are usually very large and form a substantial investor group for various financial instruments. Endowment fundsEndowment funds are in the main non-profit organizations that manage funds to generate a steady return to cooperate them fulfill their investment objectives. Endowment funds are usually initiated by a non-refundable capital contribution. The contributor generally specifies the purpose ( specialized or general) and appoints trustees to manage the funds. such(prenominal) funds are usually managed by charitable organizations, educational organization, non-Government organizations, etc. The investment policy of endowment funds needs to be approved by the trustees of the funds. redress companies ( keep and Non-life) redress companies, both life and non-life, hold large portfolios from premiums contributed by policy toters to policies that t hese companies chthonianwrite. There are many different kinds of policy policies and the premiums differ accordingly. For example, unlike term damages, assurance or endowment policies hold back a return of capital to the policyholder on maturity, along with the death get aheads. The premium for such policies may be higher than term policies. The investment strategy of policy companies depends on actuarial estimates of timing and amount of future claims. gift companies are generally conservative in their attitude towards risks and their asset investments are geared towards contact current cash flow needs as well as meeting perceived future liabilities. cashboxing concerns Assets of banks consist mainly of bestows to businesses and consumers and their liabilities comprise of various forms of deposits from consumers. Their main source of income is from what is called as the provoke rate spreadhead, which is the difference between the lending rate (rate at which banks earn) a nd the deposit rate (rate at which banks pay). lodges generally do not lend 100% of their deposits. They are statutorily necessary to maintain a certain portion of the deposits as cash and some other portion in the form of liquid and safe assets (generally Government securities), which abide a lower rate of return. These requirements, cognize as the Cash suspend Ratio (CRR ratio) and Statutory Liquidity Ratio (SLR ratio) in India, are de desexualiseated by the Reserve intrust of India and banks need to adhere to them. In addition to the broad categories mentioned above, investors in the markets are also categorise ground on the objectives with which they trade.Under this classification, there are hedgers, speculators and arbitrageurs. Hedgers invest to provide a cover for risks on a portfolio they already hold, speculators take surplus risks to earn supernormal returns and arbitrageurs take simultaneous mails (say in dickens equivalent assets or selfsame(prenominal) as set in two different markets etc. ) to earn risk little profits arising out of the price differential if they exist. Another category of investors include day-traders who trade in social club to profit from intra-day price changes.They generally take a specify at the beginning of the employment session and square off their position later during the day, ensuring that they do not carry any open position to the next trading day. Traders in the markets not only invest at a time in securities in the so called cash markets, they also invest in derivatives, instruments that derive their value from the underlying securities. Types of investment in Indian monetary securities industry Banking SectorIntroductionThe Reserve Bank of India ( rbi) is Indias central bank.Though the banking industry is currently prevail by customary orbit banks, numerous private and unconnected banks exist. Indias government-owned banks get over the market. Their performance has been mixed, with a few being consistently profitable. Several public empyrean banks are being restructured, and in some the government either already has or will reduce its ownership. Banks in India can be categorized into non- plan banks and scheduled banks. Scheduled banks constitute of mercantile banks and co-operative banks. There are about 67,000 branches of Scheduled banks spread across India.During the first phase of financial reforms, there was a nationalization of 14 study banks in 1969. This of the essence(p) step led to a shift from Class banking to Mass banking. Since then the growth of the banking industry in India has been a continuous process. As farther as the present scenario is pertain the banking industry is in a pitch contour phase. The Public Sector Banks (PSBs), which are the foundation of the Indian Banking system report card for more than 78 per cent of total banking industry assets. Unfortunately they are burdened with excessive Non Performing assets (NPAs), massive manpow er and lack of modern technology.On the other hand the nonpublic Sector Banks in India are witnessing great progress. They are ladderers in Internet banking, mobile banking, phone banking, ATMs. On the other hand the Public Sector Banks are still facing the problem of unhappy employees. There has been a decrease of 20 plow dish out in the employee strength of the private sector in the wake of the freewill Retirement projects (VRS). As far as overseas banks are concerned they are likely to succeed in India. Induslnd Bank was the first private bank to be set up in India.IDBI, ING Vyasa Bank, SBI Commercial and multinational Bank Ltd, Dhanalakshmi Bank Ltd, Karur Vysya Bank Ltd, Bank of Rajasthan Ltd etc are some Private Sector Banks. Banks from the Public Sector include Punjab matter bank, Vijaya Bank, UCO Bank, Oriental Bank, Allahabad Bank, Andhra Bank etc. ANZ Grindlays Bank, ABN-AMRO Bank, American Express Bank Ltd, Citibank etc are some strange banks direct in India. Private and foreign banksThe RBI has give uped operating approval to a few privately owned domestic banks of these many commenced banking business.Foreign banks operate more than 150 branches in India. The entry of foreign banks is based on reciprocity, economic and political bilateral relations. An inter-departmental committee approves applications for entry and expansion. RBI bankingThe Reserve Bank of India is the central banking institution. It is the sole authority for yield bank notes and the supervisory body for banking operations in India. It supervises and administers exchange control and banking regulations, and administers the governments monetary policy. It is also responsible for granting licenses for new bank branches. 5 foreign banks operate in India with full banking licenses. Several licenses for private banks have been approved. Despite sensibly broad banking amends coverage nationwide, the financial system remains inaccessible to the poorest people in India . Some of its main objectives are regulating the issue of bank notes, managing Indias foreign exchange reserves, operating Indias currency and credit rating system with a view to securing monetary st powerfulness and developing Indias financial structure in line with national socio-economic objectives and policies. Indian banking systemThe banking system has three tiers.These are the scheduled commercial-grade banks the regional plain banks which operate in rustic areas not covered by the scheduled banks and the cooperative and special purpose rural banks. Scheduled and non scheduled banksThere are ap immediately 80 scheduled commercial banks, Indian and foreign almost cc regional rural banks more than 350 central cooperative banks, 20 land development banks and a number of primary agricultural credit societies. In terms of business, the public sector banks, figure of speechly the State Bank of India and the nationalized banks, dominate the banking sector.RBI restrictionsThe Res erve Bank of India lays down restrictions on bank lending and other activities with large companies. These restrictions, popularly know as consortium guidelines seem to have outlived their usefulness, because they hinder the availability of credit to the non-food sector and at the same time do not foster competition between banks. Indian vs. Foreign banksMost Indian banks are well behind foreign banks in the areas of customer funds transfer and clearing systems. They are hugely over-staffed and are unlikely to be able to postulate with the new private banks that are now entering the market.While these new banks and foreign banks still face restrictions in their activities, they are well-capitalized, use modern equipment and realise high-caliber employees. Grey futureOne more reason being the opacity of the The Reserve Bank of India. This does not mean a forecast of doom for the Indian banking sector the kind that has washed out south east Asia. And also not because Indian banks a re healthy. We still have no clue about the real non-performing assets of financial institutions and banks. Many banks are now listed. That puts additional duty of sharing information.It is now clear that it was the financial sector that caused the sensational nuclear meltdown of some Asian nations. India is not Thailand, Indonesia and Korea. Borrowed investment in property in India is low and property prices have already fallen, letting out steam clean gently. Our micro-meltdown has already been happening. Bank stick strategys * Bank put forward Schemes for house physician Indians * Bank Deposit Schemes for Non Resident IndiansBank deposits are preferred more for theirliquidity and base hitthan for the returns thereon. Various banking and other facilities that one gets by opening a bank account namelyATM cards, ATM-cum-Debit cards, Credit Cards, On-line / Internet banking, collection / realization of cheques and other instruments, safe deposit lockers, better customer servic e etc. are also a major reason in favour of bank deposits vis-a-vis other options. The deposit accounts notched by banks fall broadly under following categories Bank Deposit Schemes for Resident IndiansFollowing deposit accounts are offered by banks to Resident Indians * Savings Bank depictsThese accounts are open for sparings, liquidity and rubber eraser of funds and convenience in making day to day expenses and also earning some disport income.These accounts inculcate the habit of thrift in account holders. fascinate prominent features of Savings Bank accounts. * accredit levelsThese accounts are undecided for liquidity and safety of funds and for meeting day to day expenses. Current accounts are opened and maintained primarily by business and commercial organizations. No income is earned on these deposits. Individuals usually open these accounts for availing overdraft facility as overdraft facility is not available in Savings Bank accounts. View undischarged feature s ofCurrent Accounts. * Recurring Deposit AccountsThese accounts are opened for livery purpose only.Some stubborn amount is deposited at monthly intervals for a pre-fixed term. These accounts generally earn higher divert than Savings Bank Accounts. View large features ofRecurring Deposit accountsin banks. * Fixed Deposit or bourn Deposit AccountsThese accounts are opened for investing funds for fixed terms to earn higher interests. Usually deposit for a longer detail of time earns higher please Rate. The account holders have option of getting periodic pay of interest at monthly/ quarterly intervals or re-investing the interest to be paid on maturity with the principal.View undischarged features of consideration / Fixed Deposit Accountsin banks. * Special Bank marge Deposit Scheme Bank Deposit Scheme under section 80CThis is the only revenue enhancement Saving Schemeavailable with banks. The accounts opened under this plan are eligible forrelief under Section 80Cof the I ncome levy, Act. View spectacular features ofBank Deposit Scheme for tax saving. Bank Deposit Schemes for Non-Resident IndiansFollowing deposit accounts are offered by banks to Non Resident Indians * Non-Resident External (NRE) AccountsThese Accounts can be opened by Non Resident Indians separately or jointly with other Non Resident Indian(s).The accounts can be opened in Savings Bank, Current Account, Term/Fixed Deposit with monthly/quarterly interest payment or Term/Fixed Deposit with interest reinvestment types. The account holders can grant Power of Attorney to Resident Indians to operate upon their Savings Bank or Current Accounts. The accounts are maintained in Indian Rupees. View salient features ofNRE Accounts * * Foreign Currency Non Resident (FCNR) AccountsThese Accounts can be opened by Non Resident Indians individually or jointly with other Non Resident Indian(s).The accounts can be opened as Term/Fixed Deposit with the option of monthly/quarterly Interest payment or of re-investing the interest for payment on maturity with the principal. The accounts are maintained in foreign currencies viz. US Dollars, Euros, Sterling Pounds, Canadian Dollars, Australian Dollars and Japanese Yen. View salient features ofFCNR accounts. * Non-Resident Ordinary (NRO) AccountsThese accounts can be opened by Non Resident Indians individually or jointly with other Non Resident or Resident Indian(s). These accounts can also be opened by Resident Indians by foreign inward remittance.The accounts are maintained in Indian Rupees. View salient features ofNRO Accounts. Mutual fundsMutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in unison with objectives as disclosed in offer document. 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 sam e proportion at the same time. Mutual fundissues units to the investors in accordance with quantum of money invested by them.Investors of vernacular funds are know asunit holders. The profits or sleddinges are servingd by the investors in proportion to their investments. The mutual funds normally come out with a number of purposes with different investment objectives which are launched from time to time. A mutual fund is required to be accounted with Securities and Exchange Board of India (SEBI) which regulates securities markets sooner it can collect funds from the public. Schemes according to maturity date PeriodA mutual fund abstract can be classified into un limit outline or close-ended dodging depending on its maturity period.Open-ended Fund/ SchemeAn unrestricted fund or scheme is one that is available for subscription and redemption on a continuous foundation. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at mak e Asset Value (NAV) related prices which are declared on a daily bum. The key feature of open-end schemes is liquidity. Close-ended Fund/ SchemeA close-ended fund or scheme has a stipulated maturity period e. g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme.Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit pass to the investors, some close-ended funds give an option of merchandising back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i. e. either repurchase facility or through listing on stock exchanges.These mutual funds schemes disclose NAV generally on weekly basis. Schemes according to Investment ObjectiveA scheme can also b e classified as growth scheme, income scheme, or balanced scheme considering its investment objective. much(prenominal) schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as followsGrowth / candour Oriented SchemeThe aim of growth funds is to provide capital sagaciousness over the median(a) to long- term. Such schemes normally invest a major part of their corpus in equities.Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital taste, etc. and the investors may choose an option depending on their preferences. The investors must(prenominal) indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time. Income / Debt Oriented SchemeThe aim of income funds is to provide regular an d steady income to investors.Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. TheNAVsof such funds are affected because of change in interest rates in the country. If the interest rates fall,NAVsof such funds are likely to attach in the short run and vice versa.However, long term investors may not bother about these fluctuations. Balanced FundThe aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However,NAVsof such funds are likely to be less volatile compared to pure equity funds.Money Market or Liquid FundThese funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods. Gilt FundThese funds invest exclusively in government securities.Government securities have no default risk. NAVsof these schemes also fluctuate due to change in interest rates and other economic factors as is the baptismal font with income or debt oriented schemes. Index FundsIndex Funds replicate the portfolio of a p articular indicator such as the bovine spongiform encephalitis Sensitive index, SP NSE 50 index (Nifty), etc These schemes invest in the securities in the sameweightagecomprising of an index. NAVsof such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors know as tracking error in technical terms.Necessary disclosures in this think are made in the offer document of the mutual fund scheme. There are also exchange traded index funds launched by the mutual funds which are traded on the stock exchanges. put forwardal nest egg Postal Services in India India possesses the largest postal network in the humans with 154,866post self-assurances, of which 139,040 (89. 78%) are in rural areas and 15,826 (10. 22%) are in urban areas. It has 25,464 departmental PO s and 129,402 ED BPOs. spread all over the country . Post offices in India play a vital role in the rural areas.They connect these rural areas with the rest of the country and also provide banking facilities in the absence of banks in the rural areas. Post Offices offer various types of schemes. These are * periodic Income Scheme * National Savings Certificate * Public longsighted Fund * Time Deposit Scheme * precedential Citizens Saving Scheme * Saving Account Monthly Income Scheme (MIS) This scheme appeals to conservative investors with traditional values, and for good reason. This scheme offers monthly income and is a safe, guaranteed-by-the-government option. For retirees, widows and others looking or a steady income, it can be ideal. Read on to learn more. The Post Office Monthly Income Scheme, or PO MIS, is offered by Indian Post Offices. A palooka sum amount is deposited with the post office and monthly interest earned each month is paid out to you. As the scheme is offered by post offices, it is backed by the government. Thus, the PO MIS is one of the safest investments available. large Features * Interest rat e of 8. 5% per annum payable monthly w. e. f. 01. 04. 2012 * Maturity period is 5 years. * No Bonus on Maturity w. e. f. 01. 12. 2011. * No tax significance at source (TDS). * No tax rebate is applicable. minimal investment amount is Rs. 1500/- or in multiple thereafter. * Maximum amount is Rs. 4. 50 lakhs in a single account and Rs. 9 lakhs in a joint account. * Auto credit facility of monthly interest to saving account if accounts are at the same post office. * Account can be opened by an individual, two/three freehandeds jointly, and a lowly through a guardian. * Non-Resident Indian / HUF cannot open an Account. * Minors have a separate limit of investment of Rs. 3 lakhs and the same is not clubbed with the limit of guardian. * Facility of premature closure of account after 1 year but on or before 3 years 2. 0% discount. * Deduction of 1% if account is closed prematurely at any time after three years. * Suitable scheme for retired employees/ senior citizens and for those who need regular monthly income. National Saving Certificate (NSC) National Savings Certificates (NSC) are certificates issued by Department of post, Government of India and are available at all post office counters in the country. This scheme is specially intentional for Government employees, Businessmen and other compensated classes who are IT assesses. It is a long term safe savings option for the investor.Trust and HUF cannot invest. The scheme combines growth in money with reductions in tax liability as per the provisions of the Income Tax Act, 1961. The duration of a NSC scheme is 5 years. Salient Features * NSC VIII anesthetise (5 years) Interest rate of 8. 6% per annum w. e. f. 01. 04. 2012 * NSC IX Issue (10 years) Interest rate of 8. 9% per annum w. e. f. 01. 04. 2012 * Minimum investment Rs. 100/-. No maximum limit for investment. * No tax proof at source. * Investment up to Rs 1,00,000/- per annum qualifies for Income Tax discount rate under NSC section 80C of IT A ct. Certificates can be kept as collateral security to get loan from banks. * Trust and HUF cannot invest. * A single holder type certificate can be purchased by an adult for himself or on behalf of a minor or to a minor. * The interest accruing annually but deemed to be reinvested will also qualify for discount under NSC section 80C of IT Act. Public Provident Fund (PPF) Public Provident Fund, popularly known as PPF, is a savings cum tax saving instrument. It also serves as a retirement planning tool for many of those who do not have any structured pension plan covering them.The balances in PPF account cannot be attached by any authority normally. Salient Features * Interest rate of 8. 8% per annum w. e. f. 01. 04. 2012. * Minimum deposit is 500/- per annum. Maximum deposit is Rs. 1,00,000/- per annum * The scheme is for 15 years. * Investment up to Rs 1,00,000/- per annum qualifies for Income Tax Rebate under section 80C of IT Act. * Interest is only tax-free. * Deposits can be made in lumpsum or in 12 installments. * One deposit with a minimum amount of Rs 500/- is mandatary in each financial year. * Withdrawal is permissible from 6th financial year. Loan facility available from 3rd financial year upto fifth financial year. The rate of interest charged on loan interpreted by the subscriber of a PPF account on or after 01. 12. 2011 shall be 2% p. a. However, the rate of interest of 1% p. a. shall continue to be charged on the loans already taken or taken up to 30. 11. 2011. * Free from court attachment. * Non-Resident Indians (NRIs) not eligible. * An individual cannot invest on behalf of HUF (Hindu united Family) or Association of persons. * Ideal investment option for both salaried as well as self employed classes.Time Deposit Scheme A Post-Office TimeDepositAccount(RDA) is abankingservice uniform to a Bank Fixed Deposit offered by Department of post, Government of India at all post office counters in the country. The scheme is meant for those investor s who want to deposit a lump sum of money for a fixed period say for a minimum period of one year to two years, three years and a maximum period of fin years. Investor gets a lump sum (principal + interest) at the maturity of the deposit. Time Deposits scheme return a lower, but safer, growth in investment. Salient Features 1 year, 2 year, 3 year and 5 year time deposits can be opened. * Interest payable annually but compounded quarterly PERIOD RATE OF INTEREST One course 8. 2% Two years 8. 3% Three Years 8. 4% Five Years 8. 5% * Minimum amount of deposit is Rs 200/- and in multiples of Rs 200/- thereafter. No maximum limit. * Investment up to Rs 1,00,000/- per annum qualifies for Income Tax Rebate under section 80C of IT Act. * Interest income is taxable. * Facility of redeposit on maturity of an account. * In issue of premature closure of 1 year, 2 Year, 3 Year or 5 Year account on or after 01. 12. 011 between 6 months to one year from the date of deposit, simple interest at t he rate applicable to from time to time to post office savings account shall be payable. * 2 year, 3 year or 5 year accounts on or after 01. 12. 2011 if closed after one year, interest on such deposits shall be calculated at a discount of 1% on the rate specified for several(prenominal) period as mentioned in the concerned table given under Rule 7 ofPost office Time Deposit Rules. * Account can be pledged as security against a loan to banks/ Government institutions. * each individual (a single adult or two adults jointly) can open an account. root Accounts, Institutional Accounts and Misc. account not permissible. * Trust, regimental Fund or Welfare Fund not permissible to invest. Senior Citizens Saving Scheme A new savings scheme called Senior Citizens Savings Scheme has been notified with effect from August 2, 2004. The Scheme is for the benefit of senior citizens and maturity period of the deposit will be quin years, extendable by another three years. Initially the scheme wil l be available through pictureated post offices through out the country. Salient Features * Interest 9. 3% per annum from the date of deposit on quarterly basis w. e. f. 1. 04. 2012 * Minimum deposit is Rs 1000 and multiples thereof. Maximum limit of 15 lakhs. * Maturity period is 5 years and can be extended for a further period of 3 years. * Age should be 60 years or more, and 55 years or more but less than 60 years who has retired under a Voluntary Retirement Scheme or a Special Voluntary Retirement Scheme on the date of opening of the account within three months from the date of retirement. * No age limit for the retired personnel of Defence services provided they fulfill other specified conditions. * The account may be opened in individual capacity or jointly with spouse. TDS is deducted at source on interest if the interest amount is more than Rs 10,000/- per annum. * Investment up to Rs 1,00,000/- per annum qualifies for Income Tax Rebate under section 80C of IT Act. * Inter est can be automatically credited to savings account provided both the accounts stand in the same post office. * Premature closure is allowed after one year on deduction of 1. 5% of the deposit and after 2 years on deduction of 1%. * No withdrawal permitted before the expiry of a period of 5 years from the date of opening of the account. * Non-resident Indians (NRIs) and Hindu Undivided Family (HUF) are not eligible to open an account.Saving Account Post office saving account is similar to a savings account in a bank. It is a safe instrument to park those funds, which you might need to liquidate fully or partially at very short notice. Post office savings accounts are especially suited for those living in rural and semi-rural areas where the reach of banks is very limited. Salient Features * Rate of interest 4. 0% per annum * Minimum amount Rs 50/- in case of non-cheque account, Rs. 500/- in case of cheque account. * Maximum balance permissible is Rs 1,00,000/- in a single account a nd Rs 2,00,000/- in a joint account. Interest Tax Free. * Any individual can open an account. * Cheque facility available. * Group Account, Institutional Account, other Accounts like Security Deposit account formalised Capacity account are not permissible. paleness Indian fairness Market The Indian Equity Market is also the other name for Indian share market or Indian stock market. The forces of the market depend on monsoons, global fundings flowing into equities in the market and the performance of various companies. The Indian market of equities is transacted on the basis of two major stock indices, National Stock Exchange of India Ltd. NSE) and The Bombay Stock Exchange (BSE), the trading being carried on in a dematerialized form. The physical stocks are in liquid form and cannot be interchange by the investors in any market. Two types of funds are there in the Indian Equity Market Venture Capital Funds and Private Equity Funds. The equity indexes are correlated beyond the bo undaries of different countries with their exposure to common calamities like monsoon which would affect both India and Bangladesh or trade integration policies and close familiarity with the foreign investors.From 1995 onwards, both in terms of trade integration and FIIs India has made an advance. All these have established a close relationship between the stock market indexes of India stock market and those of other countries. The Stock derivatives add up all futures and options on all individual stocks. This stock index derivative was found to have gone up from 12 % of NSE derivatives turnover rate in 2002 to 35 % in 2004. The Indian Equity Market also comprise of the Debt Market, dominated by primary dealers, banks and wholesale investors.Indian Equity Market at present is a lucrative field for the investors and investing in Indian stocks are profitable for not only the long and medium-term investors, but also the position traders, short-term swing traders and also very short term intra-day traders. In terms of market capitalization, there are over 2500 companies in the BSE chart list with the Reliance Industries Limited at the overstep. The SENSEX today has rose from 1000 levels to 8000 levels providing a profitable business to all those who had been investing in the Indian Equity Market.There are about 22 stock exchanges in India which regulates the market trends of different stocks. Generally the bigger companies are listed with the NSE and the BSE, but there is the OTCEI or the Over the Counter Exchange of India, which lists the medium and small sized companies. There is the SEBI or the Securities and Exchange Board of India which supervises the carrying into action of the stock markets in India. In the Indian market scenario, the large FMCG companies reached the top line with a double-digit growth, with their shares being attractive for investing in the Indian stock market.Such companies like the Tata Tea, Britannia, to name a few, have been provi ding a vigorous business for the Indian share market. Other leading houses offering equally beneficial stocks for investing in Indian Equity Market, of the SENSEX chart are the two-wheeler and three-wheeler maker Bajaj Auto and second largest software exporter Infosys Technologies. Other than some restricted industries, foreign investment in general enjoys a majority share in the Indian Equity Market. Foreign Institutional Investors (FII) need to register themselves with the SEBI and the RBI for operating in Indian stock exchanges.In fact from the Indian stock market analysis it is known that in some specific industries foreigners can have even 100% shares. In the last few years with the facility of the Online Stock Market Trading in India, it has been very convenient for the FIIs to trade in the Indian stock market. From an analysis on the Indian Equity Market it can be said that the add in the foreign investments over the years no doubt have accentuated the dynamism of the Indi an market of equities. Foreign investors are allowed to buy Indian equity for the purpose of converting the equity into ADR or GDR.Thus, the growing financial capital markets of India being encouraged by domestic and foreign investments is becoming a profitable business more with each day. If all the economic parameters are unchanged Indian Equity Market will be contributive for the growth of private equities and this will lead to an overall improvement in the Indian economy. Insurance Insuranceis a form ofrisk managementprimarily used tohedgeagainst theriskof a contingent,uncertainloss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment.An general agent, or insurance carrier, is a company selling the insurance the check, or policyholder, is the person or entity buying the insurance policy. The amount to be charged for a certain amount of insurance coverage is called the premium. Risk management, the practice ofappraisingand controlling risk, has evolved as a clear-cut field of study and practice. The transaction involves the insure assuming a guaranteed and known relatively small loss in the form of payment to the insurance company in exchange for the insurance firms promise to compensate (indemnify) the see in the case of a financial (personal) loss.The see receives acontract, called theinsurance policy, which details the conditions and circumstances under which the insured person will be financially compensated. The business of Insurance essentially means defraying risks attached to any activity over time (including life) and sharing the risks between various entities, both persons and organizations. Insurance companies (ICs) are important players in financial markets as they collect and invest large amounts of premium. Insurance growths are multipurpose and offer the following benefits Protection to the investors * Accumulate savings * Channelize savings into sectors needing huge long term investments. Insurance involvespoolingfunds frommanyinsured entities (known as exposures) to pay for the losses that some may incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the issue occurring. In order to be insurable, the risk insured against must meet certain characteristics in order to be aninsurable risk.Insurance is a commercial enterprise and a major part of the financial services industry, but individual entities can alsoself-insurethrough saving money for possible future losses. Insurability Risk which can be insured by private companies typically share seven common characteristics 1. Large number of similar exposure units Since insurance operates through pooling resources, the majority of insurance policies are provided for individual members of large classes, allowing general agents to benefit from thelaw of large numbersin which predicted losses are similar to the a ctual losses.Exceptions includeLloyds of London, which is famous for insuring the life or health of actors, sports figures and other famous individuals. However, all exposures will have particular differences, which may lead to different premium rates. 2. Definite loss The loss takes place at a known time, in a known place, and from a known cause. The classic example is death of an insured person on a life insurance policy. Fire,automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be certain(prenominal) in theory.Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable. Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with satisfactory information, could objectively verify all three elements. 3. Accidental loss The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be pure, in the sand that it results from an event for which there is only the chance for constitute.Events that contain speculative elements, such as ordinary business risks or even buying a lottery ticket, are generally not considered insurable. 4. Large loss The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter be may be several times the size of the expected cost of losses.There is hardly any point in paying such be unless the protection offered has real value to a buyer. 5. Affordable premium If the likeliness of an insured event is so high, or the cost of the event so large, that the resulting premium is large re lative to the amount of protection offered, it is not likely that the insurance will be purchased, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable see of a significant loss to the insurer.If there is no such casualty of loss, the transaction may have the form of insurance, but not the substance. 6. enumerable loss There are two elements that must be at least estimable, if not formally calculable the probability of loss, and the attendant cost. prospect of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably distinct and objective evaluation of the amount of the loss recoverable as a result of the claim. . Limited risk of catastrophically large losses insured los ses are ideallyindependentand non-catastrophic, meaning that the losses do not happen all at once and individual losses are not severe enough to bankrupt the insurer insurers may prefer to limit their exposure to a loss from a single event to some small portion of their capital base. Capitalconstrains insurers ability to sellearthquake insuranceas well as leading insurance inhurricanezones. In the US,flood riskis insured by the federal government.In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurers capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into thereinsurancemarket. Legal When a company insures an individual entity, there are basic levelheaded requirements. Several commonly cited legal principles of insurance include 1. Indemnity the insurance company indemnifies, or compensates, the insured in the case of certain losses only up to the insureds interest. . Insurable interest the insured typically must directly suffer from the loss. Insurable interest must exist whether property insurance or insurance on a person is twisty. The concept requires that the insured have a indorse in the loss or damage to the life or property insured. What that stake is will be determined by the kind of insurance involved and the nature of the property ownership or relationship between the persons. 3. level best good faith the insured and the insurer are bound by agood faithbond of honesty and fairness. Material facts must be disclosed. 4.Contribution insurers which have similar obligations to the insured contribute in the indemnification, according to some method. 5. Subrogation the insurance company acquires legal rights to pursue recoveries on behalf of the insured for example, the insurer may sue those liable for insureds loss. 6. Causa proxima, or proximate cause the cause of loss (the p eril) must be covered under the insuring agreement of the policy, and the dominant cause must not beexcluded 7. palliation In case of any loss or casualty, the asset owner must attempt to keep the loss to a minimum, as if the asset was not insured.Indemnification To indemnify means to make whole again, or to be reinstated to the position that one was in, to the extent possible, prior to the happening of a specified event or peril. Accordingly,life insuranceis generally not considered to be indemnity insurance, but rather contingent insurance (i. e. , a claim arises on the occurrence of a specified event). There are generally two types of insurance contracts that seek to indemnify an insured 1. an indemnity policy, and 2. a pay on behalf or on behalf ofpolicy. The difference is significant on paper, but rarely material in practice.An indemnity policy will neer pay claims until the insured has paid out of pocket to some triplet party for example, a visitor to your home slips on a f loor that you left wet and sues you for $10,000 and wins. Under an indemnity policy the homeowner would have to come up with the $10,000 to pay for the visitors fall and then would be indemnified by the insurance carrier for the out of pocket costs (the $10,000). 45 Under the same situation, a pay on behalf policy, the insurance carrier would pay the claim and the insured (the homeowner in the above example) would not be out of pocket for anything.Most modern liability insurance is compose on the basis of pay on behalf language. An entity seeking to transfer risk (an individual, corporation, or friendship of any type, etc. ) becomes the insured party once risk is assumed by an insurer, the insuring party, by means of a contract, called aninsurance policy. Generally, an insurance contract includes, at a minimum, the following elements identification of participating parties (the insurer, the insured, the beneficiaries), the premium, the period of coverage, the particular loss event covered, the amount of coverage (i. . , the amount to be paid to the insured or beneficiary in the event of a loss), and exclusions(events not covered). An insured is thus said to be indemnified against the loss covered in the policy. When insured parties experience a loss for a specified peril, the coverage entitles the policyholder to make a claim against the insurer for the covered amount of loss as specified by the policy. The fee paid by the insured to the insurer for assuming the risk is called the premium.Insurance premiums from many insureds are used to fund accounts silent for later payment of claims in theory for a relatively few claimants and foroverheadcosts. So long as an insurer maintains adequate funds set aside for anticipated losses (called reserves), the remaining margin is an insurersprofit. Types of Insurances * Life Insurance * General Insurance Life Insurance Life insuranceis a contract between aninsurance policy holderand aninsurer, where the insurer promi ses to pay a designatedbeneficiary sum of money (the benefits) upon the death of the insured person.Depending on the contract, other events such asterminal illnessor critical illnessmay also trigger payment. The policy holder typically pays a premium, either regularly or as a lump sum. Other expenses (such as funeral expenses) are also sometimes include in the benefits. The advantage for the policy owner is peace of mind, in knowing that the death of the insured person will not result in financial hardship for loved ones and lenders. Life policies are legal contracts and the terms of the contract describe the limitations of the insured events.Specific exclusions are often written into the contract to limit the liability of the insurer common examples are claims relating to suicide, fraud, war, wow and civil commotion. Life-based contracts tend to fall into two major categories * Protectionpolicies designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance. * Investmentpolicies where the main objective is to facilitate the growth of capital by regular or single premiums.Common forms (in the US) arewhole life, universal proposition lifeandvariable life policies. General Insurance General insuranceor non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance typically comprises any insurance that is not determined to belife insurance. It is calledpropertyand casualtyinsurancein theU. S. andNon-Life Insurancein Continental Europe. Commercial linesproducts are usually designed for relatively small legal entities.These would include workers comp (employers liability), public liability, product liability, commercial fleet and other general insurance products sold in a relatively standard fashion to many organisations. There are many companies that supply comprehensive commercial insurance packages for a wide range of different industries, including shops, restaurants and hotels. Personal linesproducts are designed to be sold in large quantities. This would includeautos(private car),homeowners(household), pet insurance, creditor insurance and others. ACORDwhich is the insurance industry global standards organisation.ACORD has standards for personal and commercial lines and has been working with the Australian General Insurers to develop those XML standards, standard applications for insurance, and certificates of currency. PORTFOLIO MANAGEMENT A good way to begin understanding what portfolio management is (and is not) may be to define the termportfolio. In a business context, we can look to the mutual fund industry to explicate the terms origins. Morgan StanleysDictionary of Financial Termsoffers the following explanation If you own more than one security, you have an investment portfolio.You build the portfolio by buying additional stocks, bonds, mutual f unds, or other investments. Your goal is to plus the portfolios value by selecting investments that you believe will go up in price. According to modern portfolio theory, you can reduce your investment risk by creating a alter portfolio that includes enough different types, or classes, of securities so that at least some of them may produce strong returns in any economic climate. line of business that this explanation contains a number of important ideas * A portfolio contains many investment vehicles. Owning a portfolio involves making choices that is, deciding what additional stocks, bonds, or other financial instruments to buy when to buy what and when to sell and so forth. Making such decisions is a form of management. * The management of a portfolio is goal-driven. For an investment portfolio, the specific goal is to increase the value. * Managing a portfolio involves inherent risks. Objectives of Portfolio Management- The objective ofportfolio managementis to invest in sec urities is securities in such a way that one maximizes ones returns and minimizes risks in order to achieve ones investment objective.A goodportfolioshould have multiple objectives and achieve a sound balance among them. Any one objective should not be given undue immenseness at the cost of others. Presented below are some important objectives of portfolio management. 1. steadfast Current Return Once investment safety is guaranteed, the portfolio should yield a steady current income. The current returns should at least match the opportunity cost of the funds of the investor. What we are referring to here current income by way of interest of dividends, not capital gains. 2. Marketability A good portfolio consists of investment, which can be marketed without difficulty. If there are too many unlisted or sluggish shares in your portfolio, you will face problems in encasing them, and switching from one investment to another. It is desirable to invest in companies listed on major sto ck exchanges, which are actively traded. 3. Tax Planning Since taxation is an important variable in total planning, a good portfolio should enable its owner to enjoy a favorable tax shelter. The portfolio should be developed considering not only income tax, but capital gains tax, and gift tax, as well.What a good portfolio aims at is tax planning, not tax evasion or tax avoidance. 4. Appreciation in the value of capital A good portfolio should appreciate in value in order to protect the investor from any erosion in purchasing power due to inflation. In other words, a balanced portfolio must consist of certain investments, which tend to appreciate in real value after adjusting for inflation. 5. Liquidity The portfolio should ensure that there are enough funds available at short notice to take care of the investors liquidity requirements.It is desirable to keep a line of credit from a bank for use in case it becomes necessary to participate in right issues, or for any other personal needs. 6. Safety of the investment The first important objective of a portfolio, no matter who owns it, is to ensure that the investment is absolutely safe. Other considerations like income, growth, etc. , only come into the picture after the safety of your investment is ensured. Investment safety or minimization of risks is one of the important objectives of portfolio management.There are many types of risks, which are associated with investment in equity stocks, including super stocks. Bear in mind that there is no such thing as a zero risk investment. More over, relatively low risk i