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Mr. Verma
I

have 2Lakh to
Invest.
But Where???
Should I go for
Banking/MF?
What if Stock
Market crash?
How safe is MF?

Who is a Conservative
Investor?
Conservative investor have risk
tolerance ranging from low to moderate.
Those who have low risk tolerance are
often extremely uncomfortable with the
stock market and wish to Avoid it
entirely. However, although this strategy
may protect against inflation in short
term. It will not earn the value over time.

Conservative investor

Conservative Investment

Aninvestment strategythat

emphasizesCapital Preservation andRisk

Minimization through a

Diversification and Balanced

PortfolioofLowRiskInvestments

CURRENT ECONOMIC
SITUATION
Interest

Rate Cycle is closely related to

economic cycle.

Interest Rate Expected To Fall

Present Monetary policy which target inflation
at 6% and giving more weightage to inflation
over growth indicated by keeping interest rate
stable despite the inflation at 23 months low at
7.8%.
Government indicated lower fiscal deficit target
and small borrowing program for FY2014-15.
It is Right time to lock-in the present interest
rate. When the inflation eases further investor
gain from increased Real Interest
Return(nominal interest Inflation)

INVESTMENT
OPTIONS
Public provident fund
Money market funds
Bank fixed deposits
National savings certificate
Senior citizen savings
scheme
Investment in mutual funds
Govt bonds
Investment in insurance
policies
Monthly income plans
Investing in a residential
property
Guilt and Debt funds

PPF(public provident fund )

Individuals who are residents of India are eligible
to open their account under public provident fund
scheme .NRIs are not eligible.
Minimum investment 500Rs/-.
Maximum investment 1,50,000Rs/-.
Interest rate 8.7% per Annum.
Duration 15 years.
Principal Contribution is Tax Deductible U/S 80c
Interest Earned - Tax Free
Nomination facility is available
Suitable for Self employed, not covered under EPF.
PPF account is not subject to attachment in any
order.

Bank Fixed Deposits

High level of Capital protection.
Tenure 1-10 years.
Interest rate - 7% - 9.75%;

Interest are compounded

Annually;

Quarterly*; Semi

Annually.

Interest option Withdrawal or Reinvestment.

Tax benefit if invested for more than 5 years.

Tax can be based on Accrual Basis or Cash Basis.
Early withdrawal has a penalty.
Deposits Covered by DICGC.
Additionally investor can also consider Corporate Bonds
but are risky.

Conservative Approach to MF
Investor

can Select MF based on their risk

appetite Represented as
Low Risk
Medium Risk High Risk
Tax Implication U/S 80c, Indexation benefit.
Past Performance of the Fund (old Fund).
Past Performance of the Fund Manager.
Cost of the Fund Management.
Other Cost like Entry load and Exit Load can also
lower the returns if not considered.

Mutual Fund
A

Professionally managed
investment vehicle that pool of funds
from Small Investors for the purpose
of investing in securities such as
stocks, bonds, money market
instruments and similar assets with a
Common objective.
Kinds of MF

Open Ended
Close Ended
Interval Fund

Gilt Fund and Debt Fund

Offers higher returns than savings accounts.
Returns range from 6 to 20% based on period and risk
category.

Debt fund are fairly safe investments as they invest

in fixed income securities of governments and corporates.
Indexation Benefit is available under Income Tax Law.

It is advisable to choose
a long term investor.

Dividend reinvestment

for

Debt fund Perform Better in the interest rate down cycle

as interest rate and bond prices move in tandem(this was
the case during 2004-08).
One of the largest pie of the mutual fund industry.

What conservative investor look for

while SELECTING THE MF
Investment

philosophy - Value investment

strategy i.e. buy undervalued stock and sell
when market find the potential. Some of the
Famous people who use this strategy are
Warren Buffett.
Diversified Fund and High Dividend Yield.
Low Volatility (additionally LOW Beta and HIGH
Sharp, lower volatility of returns).
Diversified asset allocation.
Investor must allocate more towards Large cap
and minimize investing in mid cap.
MF Category Dividend Yield Fund; Contra Fund;
Value Funds.

Our Suggestion To Mr.

Verma
Allocates

Based on the assumption Long term;

Expected Inflation - 8%; He is Fairly Insured.
Liquid Fund 20000 Principal money Market
Fund (G) or Escorts Liquid Plan (G)
Bank Deposit PNB Housing 50000 For 10 Years.
(15% annualized interest)
Debt Fund 50000 for 3 Years (expected return
20%) ICICI Pru Long Term (G)/Franklin
Corporate Bond-Direct (G)
Value and Contra Fund 80000 - Religare
Invesco Contra Fund.

Now Mr. is a Confident to take the investment

Decision and Happy with the choice.

Q&A

BY
SUSHMITHA
SHILPA REDDY
BHARGAVA DATTA
RAMESH