INDUSTRY OVERVIEW:

History of banking and finance goes back to the early stage of the human civilization, when it was
growing in the cradles
 EXECUTIVE SUMMARY

The project “ANALYSIS OF INVESTMENT OPTIONS” gives the brief idea regarding the
various investment options that are prevailing in the Financial markets in India. With lots of
investment options like banks, fixed deposits, Government Bonds, Stock market, Real estate,
Gold, and mutual funds the common investor ends up more confused than ever. Each & every
investment option has its own merit and demerits. In this project I have taken few investment
options in IIFL like mutual funds, Insurance, Equity

Any investor before investing should take into consideration some parameters like safety,
Liquidity, Returns, entry/exit barriers and tax efficiency parameters. We need to evaluate
each investment option on the above-mentioned basis and then invest money. Today investor
faces too much confusion in analyzing the various investment options available and then
selecting the best suitable one.

In the present project, investment options are compared based on returns as well as on the
parameters like safety, liquidity, term holding etc. thus assisting the investor as a guide for
investment purpose.

IIFL is tie up with ICICI companies and suggest various ICICI prudential insurance schemes
to their customers
 INTRODUCTION

There are many different definitions of what is “Investment” and “Investing” means.
One of the simplest ways of describing it is using money to try and make more money. This
can happen in many ways.

All investors are different. The common factor is that investor would like to invest money to
aim to make it grow or to receive a regular income from it. From this choosing the most
suitable investment for an investor does not need to be difficult. All they need is the right
help along the way.

These days almost everyone is investing in something even if it’s a savings account at local
bank or home they bought to live in. So, Investor should choose an investment path that will
help to achieve their long-term goals. It’s important that investor should understand the basics
about the types of investments available.

Investor should pick the right investment tool based on the risk profile, returns, maturity etc.
if investor is risk taker, can invest in stock markets. If they do not want to take risk and
simply desire some income, then investor should consider fixed income securities. However,
risk and returns are directly proportional to each other. Higher the risk, higher the returns.

Types of investment options:

1. Equities
2. Mutual funds
3. Life insurance

Equity investment:
Stocks are investments that represent ownership or equity in a corporation. When a person buys
a stock, that means that person have an ownership share in that corporation and are entitled to
part of that corporation’s earnings and assets. Stock investors are called shareholders and they
make money when the stock increases in value or when the company pays dividends to its
shareholders.
Some companies are privately held, which means the shares are available to a limited number
of people, such as company’s founders, its employees and investors who funds for its
development. Other than private companies, are publicly traded, which means their shares are
available to any investor who wants to buy them.

THE IPO:
A company may decide to sell stock to the public for several reasons such as providing liquidity
for its original investor or raising money. The first time a company issues stock is the initial
public offering and the company receives the proceeds from that sale. After that shares of the
stock are traded or brought and sold on the securities markets among investors, but the
corporation gets no additional income. The price of the stock moves up or down depending on
how much investors are willing to pay for it.
Occasionally a company will issue additional shares of its stocks called a secondary offering
to raise additional capital

TYPES OF STOCKS:
With thousands of different stocks trading on Indian and international securities markets, there
are stocks to suit every investor and to complement every portfolio for e.g. some stocks stress
growth while others provide income. Some stocks flourished during boom time while others
may help in insulate your portfolio’s value against turbulent or depressed markets. Some stocks
are pricey, while others are comparatively inexpensive and some stocks are inherently volatile,
while others tend to be more stable in value

Growth & Income:

Some stocks are considered growth investments while others are considered value investments.
From an investing perspective, the best evidence of growth is an increasing price over time.
Stocks of companies that reinvest their earnings rather than paying them out as dividends are
often considered potential growth investments.
Value stocks in contrast are the stocks of companies that problems, have been under performing
their potential, or out of favor with investors. As a result, their prices tend to be lower than it
seems, though they may be paying dividends. Investors who seek out value stocks expect them
to stage a comeback
Market capitalization:
One of the main ways to categorize stocks is by their market capitalization, sometimes known
as market value. Market capitalization is calculated by multiplying a company’s current stock
price by the number of its existing shares. For example, a stock with current market value of
Rs.30 a share and a hundred million shares of existing stock would have a market cap of 3
billion

P/E ratio:
A popular indicator of a stock’s growth potential is price to earnings ratio, can help you gauge
the price of a stock in relation to its earnings.

Stock Research and Evaluation:

Before investing in a stock, its important to research the issuing company and understand how
the investment is likely to perform, for example, you will want to know a head of time whether
you should anticipate a high degree of volatility or more stable slower growth
A good place to start is the company annual report, which it must file with the securities and
exchange commission each year. It’s extremely detailed. You will want to pay attention to the
footnotes as well as the main text, since they often provide hints of potential problems.

Company news and reports:

Companies are required to follow law to keep shareholders up to date on how the business is
doing. Some of that information is provided in the firm’s annual report, which summarizes the
company’s operations for individual investors. A summary of current performance is also
provided in the company’s quarterly reports.

Buying and selling Stocks:

To buy or sell a stock investor usually have to go through a broker. Generally, the more
guidance you want from your broker the higher the broker’s fee. Some brokers usually called
full-service brokers provide a range of service beyond filling buy and sell orders for clients
such as researching investments and helping you develop long and short-term investment goals.
Discount brokers carry out transactions for clients at lower fees than full-service brokers but
typically offer more limited services and experienced investors who trade often and in large
blocks of stock there are deep-discount brokers whose commissions are even lower
Online trading is the cheapest way to trade stocks. Online brokerage firms offer substantial
discounts while giving you fast access to your accounts through their websites. You can
research stocks, track investments, and can trade before and after trade hours. However, the
ease of making trades and the absence of advice may tempt some investors to trade in and out
of stocks too quickly and magnify possibility of locking in short term losses.

Volatility:
One of the risks you will need to plan for as a stock investor is volatility. Volatility is the speed
with which an investment gains and losses value. The more volatile an investment is the more
you can potentially make or lose in the short term.

Managing Risk:
One thing for certain your stock investment will drop in value at some point. That’s what risk
is all about. Knowing how to tolerate risk and avoid selling your stocks off in a panic is all part
of a smart investment strategy
Selling realistic goals allocating and diversifying your assets appropriately and taking a long-
term view can help offset many of the risks of investing in stocks. Even the most speculative
stock investment with its potential for large gains may play an important role in a well-
diversified portfolio.
Mutual fund Investment:

A mutual fund is an entity that pools the money of many investors to invest in different
securities. Investments may be in shares, debt securities, money market securities or
combination of these. Those securities are professionally managed on behalf of the unit-
Holder and each investor hold a pro-rata share of the portfolio i.e. entitled to any profits when
the securities are sold but subject to any losses in value as well.

Role of mutual funds:

The primary role is to assist investors in earning an income or building their wealth by
participating in the opportunities available in various securities and markets. It is possible for
mutual funds to structure a scheme for different kinds investment objective.

The money that is raised from investors, ultimately benefits governments, companies and
other entities, directly or indirectly to raise money to invest in various projects or pay for the
expenses. As the large investors, the mutual funds can keep a check on the operations of the
investee company and their corporate Governance and ethical standards. The projects that are
facilitated through such as financing, offer employment to people the income they earn helps
the employees buy goods and services offered by the other companies. Thus, overall
economic development is promoted.

The mutual fund itself offers livelihood to many employees of mutual funds distributors,
registrars and various other service providers. Higher employment, income and output in the
economy boost the revenue collection of the government through taxes and other means.
When these are spent prudently, it promotes further economic development and nation
building.

Types of mutual funds:

There are many different types mutual funds categorised based on structure, assets class and
investment objectives. Choosing the right fund depends on the investment objective of the
investor. The types of mutual funds are categorized as below:

A. Based on structure
1. Open ended funds: The funds are open for investors to enter or exit at any point of
time. The unit holders may exit from the scheme wholly or partly, the scheme
continues operations with remaining investors. The scheme does not have any kind of
 time frame in which it is to be closed. The on-going entry and exit of investors
implies that the unit capital in an open-ended fund would keep changing on regular
basis.
2. Close ended fund: These are funds in which units can be purchased only during the
initial offer period. Units can be redeemed at a specified maturity date. To provide the
liquidity these schemes often listed for trade in the stock exchange. Once the units are
bought, they cannot be sold back to the mutual fund instead they can sell through
stock market.
3. Interval funds: These funds have the features of open ended and close ended funds in
that they are open for repurchase of shares at different intervals during the tenure of
the fund.
B. Based on investment objective:
1. Growth funds: Under these schemes the money invested primarily in the equity stock
with the objective of capital appreciation of the stock. These funds are risky funds and
ideal for investors with long-term investment timeline. These funds are ideal for the
investors who seeking the maximum returns from the funds
2. Income funds: Under these schemes the money is primarily invested in fixed income
securities with purpose of capital protection and regular income to the investors. The
fixed income securities included bonds, debentures etc.
3. Liquid funds: Under these schemes’ money is primarily invested in short-term or very
short-term instruments such as T-Bills, CPs etc. with the purpose of providing
liquidity. They are considered to be low risk with moderate returns and are ideal for
investors with short-term investment timelines.
4. Equity linked savings scheme (ELSS): These schemes are diversified equity funds
that offer tax benefits to investors under section 80C of the income tax act up to an
investment limit of RS.150000 a year. ELSS are required to hold at least 80% of its
portfolio in equity instruments. The investment is subject to lock in for a period of 3
years during which cannot be redeemed, transferred or pledged.
5. Capital protection funds: The funds were divided between investment in fixed income
instruments and equity markets. This is done to ensure protection of the principal that
has been invested. The main aim of its fund is to protect the principal by investing a
part of it in fixed income instruments such as bonds, T-bills and certificate of deposits
and the rest is invested in equity
6. Fixed maturity funds: In these funds the assets are invested in debt and money market
instruments where the maturity date is either the same as that of the fund or earlier
than it
7. Pension funds: The mutual funds that are invested in with a long-term goal in mind.
They are primarily meant to provide regular returns around the time that the investors
are ready to retire. The investments in such a fund may be spilt between equities and
debt markets balance the risk and provide lower but steady returns. The returns from
these funds can be taken in lumpsum as a pension or a combination of the two.

C. Based on speciality:
1. Sector funds: these funds that invest in a particular sector of the market e.g.
Infrastructure funds invest in those instruments or companies that relate to the
Infrastructure sector. Returns are tied to the performance of the chosen sector. The
risk involved in these schemes depends on the nature of the sectors.
2. Index funds: These are the funds that invest in instruments that represent a particular
index on an exchange to mirror the movement and the returns of the index e.g. buying
shares representatives of the BSE Sensex.
3. Funds of Funds: These are funds invest in other mutual funs and returns depends on
the performance of the target fund. These funds can be also be referred to as multi
manger funds. These investments can be considered relatively safe because the funs
that investors invest in actually hold other funds under them thereby adjusting for risk
from anyone fund.
4. Emerging market funds: These are funs where investments are made in developing
countries that show good prospects for the future. They do come with higher risks as a
result of the dynamic political and economical situations prevailing in the country.
5. International funds: These funds are also known as foreign funds and offer
investments in companies located in other parts of the world. These companies could
also be in emerging economies. The only companies that won’t be invested in will be
those located in the investor’s own country.
6. Exchange traded funds: These are funds are mixture of both open and close ended
mutual funds and are traded on the stock markets. These funds are managed passively
and can offer a lot of liquidity. Because of their passive nature, they tend to have
lower service charges associated with them
7. Gift funds: Gift funds are mutual funds where the funds are invested in government
securities for a long term. Since they are invested in government securities, they are
virtually risk free and can be the ideal investment to those who don’t want to take
risks
8. Real estate funds: These are the funds that invest in companies that operate in the real
estate sectors. These funds can invest in realtors, builders, property management
companies and even in companies providing loans. The investment in the real estate
can made at any stage, including projects that are in the planning phase, partially
completed and are completed.
D. Based on Risk:
1. Low risk: The amount invested in mutual funds have low risk and the return on
investment is also low. The investment in such cases are made in places like the debt
market and tend to have a long-term investment. These mutual funds are suitable for
those who do not want to take risk with their money.
2. Medium risk: These are the investment that come with a medium amount of risk to
the investors. They are ideal for those who are willing to take some risk with the
investment and tend to offer higher returns. These funds can be used as an investment
to build wealth over a long period of time.
3. High risk: These mutual funds are ideal for those who are willing to take higher risks
with their money and are looking to build their wealth. Even though the risks are high
with these funds they also offer higher returns.
Organisation of mutual funds:

Life insurance investment:

Life insurance is income protection in the event of your death. The person you name as your
beneficiary will receive proceeds from an insurance company to offset the income lost as a
result of your death. You can think of life insurance as a morbid form of gambling, if you
lived longer than the insurance company expected you to then you would lose the bet. But if
you died early, then you would win because the insurance company would have to Pay out
your beneficiary.

Insurers (or underwriters) look carefully at decades worth of data to try to predict exactly
how long you will live. Insurance underwriters classify individuals based their height, weight,
Life style (i.e. whether they smoke or not) and medical history (i.e. if they had any serious
health complications) all these variables will be determined what rate class category a person
fits in to. This doesn’t mean that smokers and people who have had serious health problems
can’t be insured, it just means they’ll pay different premiums.

There are two very common kind of life insurance term life and permanent life insurances.
Term life insurance is usually for a relatively short period of time, whereas a permanent life
policy is one that you pay in to throughout your entire life. These payments are usually fixed
from the time you purchase your policy. Basically, the younger you are when you sign-up for
this type of insurance the cheaper your monthly payments will be.

Types of Life insurance:

Most of the products offered by Indian life insurers are developed and structured around these
basic policies and are usually an extension or a combination of these policies. So, the
different types of insurance policies are

Term insurance policy:

A term insurance policy is a pure risk cover for a specified period of time. What this means is
that the sum assured is payable only if the policyholder dies within the policy term. For
instance, if a person buys Rs.2 lakh policy for 10-year period then he is not entitled to any
payment, the insurance company keeps the entire premium paid during the 10-year period.

What if he survives the 10-year period? Well, then he is not entitled to any payment, the
insurance company keeps the entire premium paid during the 10-year period

So, there is no element of savings or investment in this policy. It is a 100% risk cover. It
means that a person pays a certain premium to the period of the policy. This explains why the
term insurance policy comes at the lowest cost.

This is only for the income holders.

Age should be under 60 years.

Benefits under this plan:

Death (any reason) sum assured will be given as follows

Age 30-40: annual income * 30times

Age 40-50: annual income * 25times

Age 50-60: annual income * 10times

Accidental death (add on)

If there is a critical illness, then rs.500000 is being given. ( add on)

Terminal illness (it should be known before the death of 6 months)

Waiver of premium due to disability.

Deduction u/s 80c up to 1.5L and 80D individual – 25k, parent – 50k

Endowment policy:

Combining risk cover with financial savings, an endowment policy is the most popular
policies in the world of life insurance

1) In an endowment policy, the sum assured is payable even if the insured survives the
policy term
2) If the insured dies during the tenure of the policy, the insurance firm has to pay the sum
assured just as any other pure risk cover
3) A pure endowment policy is also a form of financial saving whereby if the person
covered remains alive beyond the tenure of the policy, he gets back the sum assured with
some other investment benefits.
4) In addition to the basic policy, insurers offer various benefits such as double endowment
and marriage/ education endowment plans. The cost of such a policy is slightly higher
but worth its value.

Whole life policy:

As the name suggests, a whole life policy is an insurance cover against death, irrespective of
when it happens

Under this plan, the policyholder pays regular premiums until his death, following which
money is handed over to his family

This policy fails to address the additional needs of the insured during his post-retirement
years. It doesn’t take in to account a person’s increasing needs either. While the insured buys
the policy at young age, his requirements increase over time. By the time he dies, the value of
the sum assured is too low to meet his family’s needs. As a Results these drawbacks,
insurance firms now offer either a modified whole life policy or combine with another type of
policy.

Money back policy:

These policies are structured to provide sums required as anticipated expenses (marriage,
education etc.) over a stipulated period of time. With inflation becoming a big issue,
companies have realized that sometimes the money value of the policy is eroded. that is why
with profit policies are also being introduced to offset some of the losses incurred on account
of inflation

A portion of the sum assured is payable at regular intervals. On survival the remainder of the
sum assured is payable.

In case of death, the full sum assured is payable to the insured.

The premium is payable for a particular period

Investment plan:
 It is also known as traditional plan and future perfect.
 Under this plan the amount of the premium paid is invested according to the following
conditions
o 40% of premium is invested in the EQUITY market (10-12% returns).
o 60% of premium is invested in DEBT market (min. Returns 8% returns).
 Only on miximiser5, blue chip funds, multicap fund, ICICI prudential fund.
 Premium payment term as follows:
o 5pay
o 7 pay
o 10pay
 Under every pay there will be waiting period of the 5 years.
 Returns to client is whichever is higher
o Fund calculated according to the returns.
o Life coverage = Annual premium * 10times.
 Deduction u/s 80c is availed.
 Under this SAVING’S SURAKSHA is plan where the total premium is invested in
DEBT market where no risk.
Unit linked insurance:

Life insurance returns:

Insurance is an attractive option for investment, while most people recognize the risk hedging
and tax saving potential of insurance, many are not aware of its advantages as an investment
option as well. Insurance products yield is more when compared to regular investment
options and this is besides the added incentives offered by insurers.

You cannot compare an insurance product with other investment schemes for the simple
reason that it offers financial protection from risks something that is missing in non-
insurance products.

In fact, the premium you pay for an insurance policy is an Investment against risk. Thus,
before comparing with other schemes, you must accept that a part of the total amount
invested in insurance goes towards providing for the risk cover, while the rest is used for
savings.

In life insurance expect term insurance, unlike non-life products you get maturity benefits on
survival at the end of the term. In other words, if you take a life insurance policy for 20 years
and survive the term, the amount invested as premium in the policy will come back to you
with added returns. In the unfortunate event of death within the tenure of the policy the
family of the deceased will receive the sum assured.

Now let us compare insurance as an investment’s options. If you invest Rs.10000 in PPF,
your money grows to 10950 at 9.5% interest over a year. But in this case, the access to your
funds will be limited. One can withdraw 50%of the initial deposit only after 4 years. The
same amount of 10000rs can give you an insurance cover of up to approximately 5-11 lakhs
(depending upon the plan, age, and medical condition of the life insured etc) and this amount
can become immediately available to the nominee of the policy holder on death. Thus,
insurance is a unique investment avenue that delivers sound returns in addition to protection.
Objective of Study:

The primary objective is to make an analysis of various investment decision. The aim is to
compare the returns given by various investment decision.

To cater the different needs of investor, these options are also compared on the basis of
various parameters like safety, liquidity, risk, entry/exit barriers, etc

The project work was under taken in order to have a reasonable understanding about the
investments Industry.

The project work includes knowing about the investment options like Equity, mutual funds,
life insurance. All these investments options are discussed with their types, workings and
returns.

Methodology:

Limitations:

1)The study is limited to only 3 investment options

2)Most of the information collected is secondary data

3)The data is compared and analysed based on performance of the investment options over
the past five years

4) while considering the returns from mutual funds only top performing schemes were
analysed

Findings: