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Report on comparative study of different investment avenues for investment

Investment means putting your money to work to earn more money or simply speaking it is sacrificing of money today for future return.

One of the most successful way to make financial provisions for the future, where most of the conditions are uncertain and unpredictable.

With well planned investment one can get the satisfaction of safety and surety in life. We are familiar with investment from very early days of civilization.

Initially the term saving was more popular, and was considered as safest way of making money stable. Investment may be said as keeping a sum of money aside from the present savings with the view of earning returns on it.

It is done on the cost of sacrifice of present consumption of that part of money. The dictionary meaning of investment is to commit money in order to earn financial return or to make use of the money for future benefits or advantages.

People commit money to investments with an expectation to increase their future wealth by investing money to spend in future years. All investments have some risk, whether in stock, capital market, banking, financial sector, real estate, bullion, gold etc. The degree of risk however varies on the basis of the features of the assets, investments instrument, the mode of investment, time frame or the issuer of the security etc.

Investment benefits both economy report on comparative study of different investment avenues for investment the society. It is an outgrowth of economic development and the maturation of modern capitalism.

For the economy as a whole, aggregate investment sanctioned in the current period is a major factor in determining aggregate demand and, hence, the level of employment. Financial reasons Other Reasons 1. To generate on your idle resources 1. To protect and increase capital. Ease of Withdrawal 4. To have money for important events. Make a provision for future uncertainties.

Investing is not a game but a serious subject that can have a major impact on investor's future wellbeing. Virtually everyone makes investments. Even if the individual does not select specific assets such as stock, investments are still made through participation in pension plan, and employee saving programme or through purchase of life insurance or a home or by some other mode of investment like investing in Real Estate Property or in Banks or in saving schemes of post offices.

Each of this investment has common characteristics such as potential return and the risk you must bear. The future is uncertain, and you must determine how much risk you are willing to bear since higher return is associated with accepting more risk.

Lopes, The individual should start by specifying investment goals. Once these goals are established, the individual should be aware of the mechanics of investing and the environment in which investment decisions are made. Page 3 Today the field of investment is even more dynamic than it was only a decade ago.

World event rapidly events that alter the values of specific assets the individual has so many assets to choose from, and the amount of information available to the investors is staggering and continually growing.

The key to a successful financial plan is to keep apart a larger amount of savings and invest it intelligently, by using a longer period of time.

The turnover rate in investments should exceed the inflation rate and cover taxes as well as allow you to earn an amount that compensates the risks taken. Savings accounts, money at low interest rates and market accounts do not contribute significantly to future rate accumulation. While the highest rate come from stocks, bonds and other types of investments in assets such as real estate. Nevertheless, these investments are not totally safe from risks, so one should try to understand what kind of risks are related to them before taking action.

The lack of understanding as how stocks work makes the Furthermore, inflation has served to increased awareness of the importance of financial planning and wise investing. More Inflation is a worry for each and every individual.

Due to Inflation, value of your money in future will decrease. To Cope up this, Investors wants to invest their money and earn certain rate of return which is more then rate of Inflation. Amount available for investment 2. Available time period for investment. Investors risk bearing Capacity. Page 5 Investment in Banking Banking in India originated in the last decades of the 18th century.

Investment in banking is most popular way of investment in India. Majority of the Indian invest their money in banks. It is safest but not risk free mode of investment and provide us moderate return from our investment. Maximum wealth of the Indians is deposited in banks due to the less risk appetite of investor. They are not willing to take risk to invest in share market or other financial instrument apart from banking.

Page 6 Investment in Stock market Stock markets refer to a market place where investors can buy and sell stocks. The price at which each buying and selling transaction takes is determined by the market forces. In earlier times, buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT, most of the operations are done electronically and the stock markets have report on comparative study of different investment avenues for investment almost paperless.

Anticipating future price movements using historical prices. Trading volume, open interest, and other trading data to study price patterns. The Indian Financial system is regulated by two governing agencies under the Ministry of Finance. It regulates the financial and banking system.

It formulates monetary policies and prescribes exchange control norms.

  • To know whether respondents know the procedure to invest in share market Investment Decision No;
  • A study of upcoming stakeholders' preferences towards various investment avenues in Salem District.

The capital markets division of the Department of Economic Affairs regulates capital markets and securities transactions. The capital markets division has been entrusted with the responsibility of assisting the Government in framing suitable policies for the orderly growth and development of the securities markets with the SEBI, RBI and other agencies. Page 8 Investment Alternatives The problem of surplus gives rise to the question of where to invest in the past, investment options were limited to real assets, banks and schemes of the post office.

At present a wide variety of investment avenues are open in the investors to suit their needs and nature. Negotiable Securities The negotiable securities are financial securities are transferable. The negotiable securities may yield variable income of fixed income. Securities like equity share are variable income securities.

Securities, and money market securities yield a fixed income. An equity investment generally refers to the buying and holding of shares of stock on a stock market by individuals and firms in anticipation of income from dividends and capital gains, as the value of the stock rises.

Typically equity holders receive voting rights, meaning that they can vote on candidates for the board of directors as well as certain major transactions, and residual rights, meaning that they share the company's profits, as well as recover some of the company's assets in the event that it folds, although they generally have the lowest priority in recovering their investment.

It may also refer to the acquisition of equity ownership participation in a private unlisted company or a startup company. When the investment is in infant companies, it is referred to as venture capital investing and is generally regarded as a higher risk than investment in listed going-concern situations.

Capital stock which provides a specific dividend that is paid before any dividends are paid to common stock holders, and which takes precedence over common stock in the event of a liquidation.

Like common stock, preference shares represent partial ownership in a company, although preferred stock shareholders do not enjoy any of the voting rights of common stockholders.

Also unlike common stock, preference shares pay a fixed dividend that does not fluctuate, although the company does not have to pay this dividend if it lacks the financial ability report on comparative study of different investment avenues for investment do so. The main benefit to owning preference shares are that the investor has a greater claim on the company's assets than common stockholders.

Preferred shareholders always receive their dividends first and, in the event the company goes bankrupt, preferred shareholders are paid off before common stockholders. In general, there are four different types of preferred stock: A debenture is a document that either creates a debt or acknowledges it, and it is a debt without collateral. In corporate finance, the term is used for a medium- to long- term debt instrument used by large companies to borrow money.

In some countries the term is used interchangeably with bond, loan stock report on comparative study of different investment avenues for investment note. A debenture is thus like a certificate of loan or a loan bond evidencing the fact that the company is liable to pay a specified amount with interest and although the money raised by the debentures becomes a part of the company's capital structure, it does not become share capital. Senior debentures get paid before subordinate debentures, and there are varying rates of risk and payoff for these categories.

Debentures are generally freely transferable by the debenture holder. Debenture holders have no rights to vote in the company's general meetings of shareholders, but they may have separate meetings or votes e. The interest paid to them is a charge against profit in the company's financial statements. A bond is an instrument of indebtedness of the bond issuer to the holders. Interest is usually payable at fixed intervals semiannual, annual, sometimes monthly. Very often the bond is negotiable, i.

Bonds and stocks are both securities, but the major difference between the two is that capital stockholders have an equity stake in the company i. Another difference is that bonds usually have a defined term, or maturity, after which the bond is redeemed, whereas stocks may be outstanding indefinitely. Commercial Papers In the global money market, commercial paper is an unsecured promissory note with a fixed maturity of 1 to days. Commercial paper is a money-market security issued sold by large corporations to get money to meet short term debt obligations for example, payrolland is only backed by an issuing bank or corporation's promise to pay the face amount on the maturity date specified on the note.

Since it is not backed by collateral, only firms with excellent credit ratings from a recognized rating agency will be able to sell their commercial paper at a reasonable price.

Commercial paper is usually sold at a discount from face value, and carries higher interest repayment rates than bonds. Typically, the longer the maturity on a note, the higher the interest rate the issuing institution must pay.

Interest rates fluctuate with market conditions, but are typically lower than banks' rates. Non Negotiable Securities 1. A deposit account is a savings account, current account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the bank, and represent the amount owed by the bank to the customer.

Some banks charge a fee for this service, while others may pay the customer interest on the funds deposited. Like the banks, post office also provide fixed deposit facility and recurring deposit facility.

It is one of the old and popular way of collect saving of rural and semi urban people.

Depending on the various issues of investment, the review has been discussed in brief as follows: