Use of Investment By Common People

Chapter I
Investment By Common People Introduction:The innocence about the capital market has caused the
region dearly. Due to the investment in the equities, people used to put
their savings into the bank. It results in an adverse credit deposit ratio.
For many people, their home is the single largest investment they will
ever make. Though a home is one of the largest investments the average
investor will purchase, there are other types of real estate investments
worth investing in. The most common type is income producing real
estate. Income producing properties are also purchased by individual
investors in the form of smaller apartment building or even a single
family homes that are rented.

Purpose of Investment by common people :1) Uncomfortable investment some people find that they are unable to
stop thinking about their investments because they are worried
about losing money.
2) Heightened expectation due to constantly being led to believe
returns of eight, nine or ten percent are a regular occurrence can
lead to skewed decision making regarding where & how money is
invested.
3) Purchasing 10 shares worth of stock when the stock price is 10 a
share, even if the investment takes off, might not make a
significant difference in your overall portfolio.
4) Remember the old adage, if it sound too good to be true, it
probably is.

5) If can be easy to get caught up in the excitement of an investment.

Objective of the study :1) There is a truth to the axiom that there is no such thing as a
completely safe & secure investment.
2) There is a funding college for children, business expansion, travel
plans or retirement needs. It should be identify these goals & needs
clearly with your investment.
3) Some people age is an important consideration when deciding how
much risk to assume.
4) To study the difference in perception of an individual related to
various investment alternatives.
5) To provide insight into factors considered for an appropriate
investment.

Scopes of the study :1) A part form the people who bring in the money (marketers) and the
people who direct investment (the fund managers), there are
compliance staff (to ensure accord with legislative & regulatory
constrains, internal auditors & financial controllers.

Hypothesis :There are no difference in the consumption & saving pattern of

sample test.

Limitations :1) The study shall be limited to salaried people who are employed in

private sector.
2) The study is limited to Sangli city only.

Methodology :1) It is an exploratory research.

2) It is an guide by Mrs. Vinaya Damate.
3) It is an book reference.

Chapter II
Meaning & Definition :Investment is an activity that is engaged in by people who have
savings i.e. investments are made from savings, or in other words people
invest their savings but all saving are not investment.
Investment may be defined as a commitment of funds made in the
expectations of some positive rate of return, expectation of returns is an
essential element of an investment.

Advantages :1)

Deliver large gains :Common people have the capacity of bringing ultimately large
gains unlike deposit certificates, bonds & other alternatives.

2)

Serve as ideal investment :The possible loss from common people that are purchased on
cash basis is limited to entire amount of initial investment. This
seems to be better than leavera transactions where in maximum
loss exceeds the entire amount of money invested.

3)

Offer restricted legal liability :Passive common stocks holder or those are not taking active
part in running the company are safe guarded from any liability
branching from companys actions beyond the stockholders
financial investment in that company.

4)

Can be sold & bought easily :Common stocks are liquid so these can be sold and purchased at
fair price easily & quickly.

Disadvantages :1)

Getting the last payments :One of the disadvantages of common stocks is the during events
that the company liquidates, common stock holders get the
payment last.

2)

Difficult to control :Common stock can be impossible or difficult to control unlike

your other investment Investing in these types of stock also means
subjecting yourself to the decisions & will off other stockholders.

3) Risky :Common stock carry get risky as compare other options for
investment. Though common stock have successfully outperformed
other types of investment, this still linked to considerable amount
of risks when not handled well.

4) Cost Despite negative return :Investors must pay sales charges, annual fees & other exp.
Regardless of how the fund perform.

Types :1) Bonds :Grouped under the general category called fixed income
securities, the term bond is commonly used to refer to any founded
on debt. When you purchase a bond, you are lending out your
money to a company or government. In return, they return to give
you interest on your money & eventually pay you back the amount
you tent out.
The main attraction of bonds is their relative safely. If you are
buying bonds from a stable government, your investment is
virtually guaranteed. The safety & stability however come at a cost.
Because there is little risk, there is little potential return; As a
result, the rate of return on bonds is generally lower than other
securities.

Making Money with bonds :You can make money with bonds two ways.

1)

Interest :It is payments from the bond normally provide with a

fixed source of income for the bonds term.

2)

Capital gains :You might also make a profit by selling a bond before
maturity at a higher price than you paid for it.

Types of bonds :1) Corporate bonds are issued by companies to raise capital for
their business activities.
2) Municipal bonds also known as munis are issued by
municipalities local govt. at the state or city level either to
supplement tax revenues or to pay for public projects such as a
building a new hospital or maintaining roads or bridges.
3) Agency bonds are issued both by govt. agencies & by govt.
sponsored enterprises, which are entities like the Tennessee
valley authority, a power utility owned by the federal govt. that
operate like corporations but have charter from the govt. to
provide some public service.

2) Mutual funds :Mutual funds are a popular way to invest in securities.

Because mutual funds can offer built in diversification &
professional mgmt. they offer certain advantages our purchasing
individual stocks & bonds. But like investing in any security,
investing in a mutual fund involves certain risks, including the
possibility that you may lose money.

3) Stock :When you invest in a stock, you buy ownership shares in a

company also known as equity shares. Your return on investment,
or what you get back in relation to what you put in, depends on the

success or failure of that company. Then are two main ways to

make money with stocks.

i)

Dividend :When publicly owned companies are profitable they can

choose to distribute some of those earnings to shareholders
by paying a dividend.

ii)

Capital gains :Stocks are bought & sold constant throughout each trading
day & their prices change all the time.

4) Gold :Gold is the most malleable & ductile metal which makes it
very easy to work with. It never furnishes & is unaffected by most
chemicals. However, it can discolor by exposure to chlorine bleach
& certain detergents. The kart measurement determines the
percentage of gold to other metals on a scale of 1 to 24, with 24
karats being pure gold. Pure 24 kt. Gold is never used in jewelry as
it too & flexible & will be bent & misshaped even by minor
touches.
Gold is one of the heaviest substances on earth. When pure,
it has a specific gravity of 19.3. The international weight
measurement of gold is the troy ounce. One try ounce of gold
equals 31.1 grams.

5) Post office saving schemes :Minimum balanced to be maintained in a non-cheque facility

a/c is INR 50/- cheque facility can be taken in an existing a/c also.
Inter post office transactions can be done between CBS post
offices. ATM/debit cards can be issued to saving a/c holders of
CBS post offices. Cheque facility availability if an account is
opened with INR 500/- & for this purpose minimum balance of
INR 500/- in an account is to be maintained Account can be
transferred from one post office to another.

6) Public Provident fund :The scheme introduced by the national savings organization
in 1968 to mobilize small savings. The schemes offers an
investment avenue with decent returns coupled with income tax
benefits. Salient features of schemes are as follows.

i)

Eligibility
Individuals in their own name as well as on behalf of a
minor can open the account at any branch.

ii)

Investment limits :A minimum of Rs. 500 subject to a maximum of Rs.

1.50 lac per annum may be deposited.

iii)

Duration of scheme :Original duration is 15 years. It can be for 1 or more

blocks of 5 years each.

iv)

Rate of interest :Interest will be paid on 31 st March every year. Interest

is calculated on the minimum balance between 5th day & end
of the month.

v)

Loans & withdrawals :Loans & withdrawals are permitted depending upon
the age of account & balances as on the specified dates.

vi)

Transfer of account :The account can be transfer to other branches/other

banks or post offices. The service is free of charges.

7) Fixed Deposit :The term fixed deposit refers to a saving account of

certificate of deposit that pays a fixed rate of interest until a given
maturity date. Funds placed in a fixed deposit usually cannot be
withdrawn prior to maturity or they can perhaps only be withdrawn
with advanced noticed or by having penalty assessed. A fixed
deposit will often be used by individuals businesses & financial
institution around the world as a means of storing their liquid funds
for a fixed period of time for future used.

8) National saving certificates :Scheme specially designed for government employees,

businessmen. No maximum limit for investment. No tax deduction
at source. Rate of interest 8.50%.

9) Real Estate :In India the mood is upbeat after the IT boom. It is
witnessing the real estate boom. At present India ranks fifth in the
30 emerging retail markets in the world. Realty plus is a complete
guide for real estate sector in India. A real estate of service
providers, besides information on India property sale, home loans
bungalows, office, builders, flat, apartment, plots etc.

Government Bonds :When you buy a govt. bond you lend money to the govt. that
has issued that bond. In return for that money, the govt. provides
you with a bond & promises to repay the value of the bond when it
matures. The govt. also promises to pay a specified rate of interest
on the money you have invested. Govt. bond are often referred to
as a low risk investment.