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BY: PROF. MANOJ MISHRA YASH MEHRA SHREYA HANCHATE
BY: PROF. MANOJ MISHRA
YASH MEHRA
SHREYA HANCHATE
USE OF INVESTMENT POLICIES
USE OF INVESTMENT POLICIES
THEME: INNOVATIVE PRACTICES AND APPLICATION IN FINANCIAL MANAGEMENT
TOPIC : USE OF INVESTMENT POLICIES
AUTHOR DETAILS:
Prof. Manoj Mishra- Contact No: : 9819010772
Email ID :
[email protected]
Designation: Asst. Professor
ShreyaHanchate - Contact No: 9619380016
Email ID:
[email protected]
Designation: Learner
YashMehra - Contact No: 9769165599
Email ID :
[email protected]
Designation: Learner
COLLEGE:
THAKUR COLLEGE OF SCIENCE AND COMMERCE , THAKUR VILLAGE , KANDIVALI-EAST , MUMBAI-400101
Authors: Asst Prof. Manoj Mishra ,Tcsc
ShreyaHanchate ,Sybaf ,Tcsc
YashMehra , Sybaf , Tcsc
ABSTRACT:-
USE OF INVESTMENT POLICIES
Investment enables to put money in a variety of assets, each with the potential to increase in value at a level higher than the current interest rate. The key to invest is to make sure you spread the risk to your money by investing in a number of different assets. Investment involves employment of funds with the aim of achieving income or growth in values. There are a wide range of investment policies, from the operation of passively-managed mutual funds with low fees to in-depth estate planning and consulting. Well-functioning financial markets are an essential part of any modern healthy economy. Through these markets the funds flow that allow for the development of new products/ideas, the expansion of the production of existing products, and consumer spending on "big ticket" items like houses, cars, and college tuition. Without these markets, firms may be unable to expand production or invent new products and consumers will be unable to afford certain products. There is not one financial market, but rather many markets, each dealing with a particular type of financial instrument. But all financial markets perform crucial functions. By providing a mechanism for quickly and cheap buying and selling of securities, financial markets offer liquidity. Financial markets allow the interaction of buyers and sellers to determine the price and the price conveys important information about the prospects of the issuer. Finally, financial markets are the mechanism for buying and selling the instruments that transfer risks between buyers and sellers. This research will help us to analyse the applications, innovations and impacts of investment policies on public. Our aim is studying its uses and people's approach towards it. In this research we have emphasized on both primary as well as secondary data.
KEYWORDS: Investment, Investments Policies , Financial markets.
OBJECTIVES
This research will help us to analyse the applications, innovations and impacts of investment policies on public.
Our aim is studying its uses and people's approach towards investment polices
To study the importance of Investment policies in the lives of people
To knowthe major type of investments people prefer to invest in.
To know in depth about the concept and its relation with financial management.
RESEARCH METHODOLOGY
This study has considered both the secondary data and primary data.
The research study has focused on the uses of investment policies and how investment helps to manage funds for people.
It covers the overview of the investment policy investors in Mumbai, their view on investment policies, and the innovations happening in various investment policies.
PRIMARY DATA
The primary data was collected by conducting the survey and personal interviews with the people in selected area.
In this view an attempt was made to measure the people's awareness about investment and its uses.
SECONDARY DATA
The secondary data has been mainly drawn from reliable sources such as from various newspapers, articles, data available on web sites.
INTRODUCTION
What is Financial Management?
Financial management refers to the efficient and effective management of money (funds) in such a manner as to accomplish the objectives of the organization. It is the specialized function directly associated with the top management. It includes how to raise the capital, how to allocate it i.e. capital budgeting. Not only about long term budgeting but also how to allocate the short term resources like current assets. It also deals with the dividend policies of the share holders.
According to Dr. S. N. Maheshwari, " Financial management is concerned with raising financial resources and their effective utilisation towards achieving the organisational goals."
What is investing?
Investing is the outlay of resources in order to gain more resources. Resources may include anything of value, from money to shares in a company, or property, depending on where you would like to invest and what you would like to achieve by investing.
Saving involves the outlay of money for later use. The main difference between investment and saving is that with investment there is the expectation that you will receive more than your initial outlay in return. Some people regard investing as a form of gambling because, although there is an expectation of receiving more money than you outlaid, it is also possible to lose money in investments.
As an investor, you become the lending party and the money that you outlay goes towards a 'borrower' who will make use of it and pay back a return, much like the principal and interest installment a debtor might repay if they took out a loan. The borrower may be a business, such as a financial institution or a for-profit company, or an asset such as a property that you hope will return more money in the future.
TYPES OF INVESTMENTS:
How and where you invest your hard-earned money is an important decision. When you invest, you buy something that you expect will grow in value and provide a profit, either in the short term or over an extended period. You can choose among a vast universe of investment alternatives, from art to real estate. When it comes to financial investments, most people concentrate on three core categories: stocks, bonds, and cash equivalents. You can invest in these assetclasses directly or through mutual funds and exchange-traded funds (ETFs).they are explained below:
Cash
This involves putting your money into a savings account, with a bank, building society or credit union. Your money may not hold its spending power if inflation is higher than the interest rate.
Bonds
A bond is a loan to a government or company. In return for the loan, you receive interest and the amount you invested back at an agreed future date.
Shares
You can invest in a company by buying shares. In return you may get a proportion of any profit the company makes (depending on how many shares you hold). Shareholders are entitled to have a say on the way the company operates, including voting at company general meetings.
Property
Becoming a landlord is a well-known way to invest in property. The aim is to get an income from the rent you charge and that the house or flat increases in value after expenses so you make a profit if you sell it. Land and commercial buildings, such as shopping centers, are other forms of property investments.
Mutual fund
An investment vehicle that allows you to invest your money in a professionally-managed portfolio of assets that, depending on the specific fund, could contain a variety of stocks, bonds, market-related indexes, and other investment opportunities.
Money market account
A type of savings account that offers a competitive rate of interest (real rate) in exchange for larger-than-normal deposits.
Exchange-Traded Fund (ETF)
ETFs are funds – sometimes referred to as baskets or portfolios of securities – that trade like stocks on an exchange. When you purchase an ETF, you are purchasing shares of the overall fund rather than actual shares of the individual underlying investments.
RATIONALE
Reasons for Investing
People invest in order to get more from their money in the future than its current value. The 'future' may be in a couple of weeks or a couple of decades depending on the term of investment and the investor's intent.
Some people use their investment as a form of saving so that they can eventually make a major purchase. In this case, they expect that while they are not using the money it is earning more than if they had just put it aside. If, however, you invested the money in a basic savings account, it would earn interest corresponding with the rise in inflation, meaning that it would at least be worth the same amount as when you deposited it. Investments are also a source of income, especially if you receive money on a regular basis from them. Many people own investment property that they rent out to business or residential tenants, where the rent they receive represents all or part of their income. Shares in a company pay regular returns called dividends when the company makes a profit. these are just a couple of examples where investors outlay money in order to earn an income.
Many people like to invest for retirement, which is a combination of investment as a type of saving and a type of income. In addition to compulsory superannuation, where the superannuation company invests money on your behalf and you receive a return upon retirement, you might choose to make private investments to boost your finances for retirement. Investors in superannuation want to ensure financial security when they are no longer working and the extra return may mean that they can maintain a reasonable standard of living.
In some cases you may wish to help others with your investment as well as make money for yourself. This is especially true of ventures that require capital to start a business, such as if you invest in a company via shares or debentures, where a company assumes a debt to the investor. In this instance, your investment helps start the company in the hope that you will receive a return if they succeed.
There are a number of reasons to invest in stocks and other financial instruments:
To make money. Stocks can help shareholders gain a return on their investment in two ways: with capital gains from the stock's price rise; and with dividends, which companies may distribute to shareholders depending on annual income. Investors in bonds are repaid through interest, typically paid annually.
Financial flexibility. You can buy or sell your shares anytime during the trading day. They are liquid assets, unlike other investments such as real estate. The financial structure of equities can give owners flexibility to be able to sell when cash is needed quickly such as during financial emergencies.
Tax advantages. Stock investments and related investments may offer tax rebates or other benefits. Tax benefits differ by European country and are governed by laws that are subject to change. While tax benefits for some may prove important to some investors, they are generally not considered the primary reason for investing in equities.
Portfolio diversity. Generally, the more potentially profitable an investment, the higher its risk. Stocks may generate huge earnings for a certain period of time, but can also present a high risk for financial loss. When building investment portfolio, They also consider an investment horizon: The longer the investment period, the more attractive it can be to invest in relatively risky assets, such as stocks, whose profits tend to exceed losses over time.
To help spur a company's or an economy's growth. By investing in company shares, individual investors can contribute to their development; savvy investors often choose companies that show great promise.
HYPOTHESIS
H : People do not prefer to use investment policies to manage their funds whether business or service class.
Ha: There is a use of Investment policies by maximum people whether business or service people but are unaware of the new innovations happening in the policies they have chosen to invest in.
APPROACH
Sample Size: 100 respondants.
Sample Type: Businessmen or service people (mostly males).
Technique: Convenient and Random Sampling Method.
Method of data collection: Pre-structured Questionare by conducting personal interview (primary data).
Area covered : In Mumbai western suburbs: Malad, Kandivali, Borivali.
Prospective: The survey was conducted to know that how many people prefer investing to manage their funds , and also to study their knowledge about investment.
DATA ANALYSIS : PRIMARY DATA
Do you prefer investing your money & which type of investment do you prefer?
Were you aware about the risks before investing?
Are you aware of the Innovations happening in the type of Investment you have chosen to invest in ?
Does the Investment you are considering meet your Investment Objective & Needs ?
FINDINGS / RESULTS
For most people, the only way to attain financial security is to save and invest over a long period of time. You just need to have your money work for you. As on conducting the survey, it was found that maximum respondents were males, considering service people or business owners all preferred investing their money in order to fulfil their future requirements, to get timely good returns on their income with minimum risk for the efficient use of idle money. When they were interviewed and asked about the type of Investment they preferred , out of 100 respondents maximum number with 36% people preferred investing in property or Real Estate Investment Funds as the level of risk was low as compared to Investments in Stock Market which was 31% due to high risk of loss. Some respondents also preferred investing in some other investment like investing in Gold, LIC policies, Mutual funds and others . Around just 10% people prefer investing in Bonds (fig. 1). When they were asked on whether they were aware about the risks before investing, to which around 49% respondents knew about the risks before and are comfortable with it. But there were also people who were not completely aware about the risk before investing and are later not completely comfortable with the risk that comes with investments (fig. 2). To know more about their knowledge, they were further questioned that were they aware about the innovations happening in the investment policies they have chosen to invest in. To which there was a shocking response, where 52% respondents were not completely aware about them and also 26% of people were not aware at all about the innovations in the investment policies (fig. 3). While knowing about their knowledge and views on the use of investments, We also wanted to know that does the investment they are considering meet their investment objective and needs to which there was a very positive response by the respondents 47% of those agreed that the chosen investment by them does meet their investment objective and needs. (fig. 4).
People have chosen investments a better way to manage their funds and earn some Passive income, by putting their money to work. The respondents had a view that if the investment policies if understood well, if applied in common practices it will give good returns. The investment policies give them tax benefits and also insure the money against turbulent swings in the market.
Hence, the following survey satisfies our hypothesis Ha
CONCLUSION
Everybody wants more money. It's pretty easy to understand that people invest because they want to increase their personal freedom, sense of security and ability to afford the things they want in life. However, investing is becoming more of a necessity. The days when everyone worked the same job for 30 years and then retired to a nice fat pension are gone. For average people, investing is not so much a helpful tool as the only way they can retire and maintain their present lifestyle. A prudent investor can have their money work for them to earn more money, rather than having to earn that extra money themselves. This gives them the benefit of enjoying a higher standard of living for roughly the same amount of work. People invest in many types of investments like stock, bond, certificate of deposit, commodity, real estate or another investment vehicle with the expectation of earning a positive financial return over time. The survey shows that majority people investing are service people or businessmen and most of them prefer investing in property and shares.
The Investments in India have shown many innovations lately. The mutual fund industry has come up with several interesting innovations and measures in the last few years. Some of these include the use of mobile phones to carry out mutual fund transactions; allowing easier redemptions by linking funds to a debit card; allowing investment in gold exchange traded funds even without a demat account as well as bringing in a protection angle to investments to take on rivals in the insurance space.
Investments do give returns and benefits but they come along with calculated risks. In the survey it was found that many people are aware about the risks involved in investments. A potential shareholder should take into account the risks involved before investing. . Due to intrinsic volatility in stock prices, their risk can be higher than bonds. In trading in warrants, you can lose the entire value of your initial investment. In financial markets, many find the most difficult circumstance is not buying but selling. Investing in stocks or in financial products requires an investment in knowledge about financial products, markets and economies.
SCOPE
CURRENT SCENARIO : The current market scenario has not only made investors jittery, but also sent many of them scurrying for safer havens. A majority of investors, however, are still in a fix over their next move. Should they still stay invested for the long haul or make an exit with whatever losses or gains they have had in the equity market? Is this the right time to start cherry picking from a longer-term perspective or should one still wait in anticipation of the market going to give more attractive levels to get in? Although the answer may vary from individual to individual, depending upon one's risk appetite and investment goal.
REAL ESTATE INVESTMENT: India Real Estate Investment has rising demand in every sector like commercial, residential, retail, industrial and hospitality. But maximum demand is observed in the booming IT sector. Real Estate Investment is a significant feature of the Indian realty market under the initiation of the investors and developers, leading to future real estate development in India. The development of private ownership of property real estate in India has become a major area of business with India Real Estate Investment playing the vital role. India Real Estate Investment involves minimum risk for getting maximum return. Currently in the Real Estate Investment. India in the year 2007 there has been an interactive discussion on the dynamic growth of the growing India real estate market and the strong growth opportunities in rising sectors like financial services, pharmaceuticals, telecommunications, and biotechnology will further enhance the scope for India Real EstateInvestment
SECURITY INVESTMENT: Security investment scenario in India is also bright. While several industries in India are grappling with the impact of global meltdown and recent Mumbai attacks by terrorists, the one industry which is predicted to register profits in near future is the Indian security industry. The private security business in India is expected to become ` 50,000 crore (` 500 billion) worth industry.
GOLD INVESTMENT: Is gold worth investing in at its current high prices?
Investors were also betting on gold. According to AMFI data, value of gold holdings in gold exchange traded funds (ETFs) have gone up from Rs 5,463 crore to Rs 10,312 crore in the last one year. India has been the leader when it comes to consumption demand for the yellow metal. However, things are changing. As price climbs, the Indian appetite for gold goes down. According to data for 2012, India's gold demand for jewellery, and bars and coins fell by 29% in tonnage terms, it stood at 207.6 tonnes against 290.6 tonnes in 2011.
SUGGESTIONS
Some suggestions which may help you stay clear of the mess and chart out some winning strategies in these times of crisis and world-wide panic:
Research properly before investing
Look at stock-specific opportunities
Stick to your asset allocation
Make the best use of investment policies in order to let your money work for you
Money cannot be earned within less time , thus invest for a long period of time to get good returns in future.
Make yourself flexible to market conditions.
REFERENCES
www.moneysense.gov.sg
www.investinginfunds.org
www.investopedia.com
www.slideshare.com
www.Moneycontrol.com
business.mapsofindia.com
The economic times
Articles.economictimes.timesofindia.com
www.liffeinvestor.com
www.investorguide.com
www.businessstandard.com
Investments Meet your Objective & Needs
