CHAPTER 1

INTRODUCTION

An investment is essentially an asset formed with the goal of allowing money to grow. The money
generated can be used for a variety of purposes, including meeting income shortfalls, saving for
retirement, or fulfilling specified commitments such as debt repayment, tuition payment, or the
acquisition of other assets.

Investments can generate money for you in two ways. One, if you invest in a saleable asset, you
may be able to generate money through profit. Second, if you invest in a return-generating plan,
you will get income from the accumulation of gains. Investing is placing your resources into assets
that increase in value or generate income over time.

In financial terms, an investment is defined as an asset purchased with the purpose of enabling its
value to increase over time.

In finance, the benefit of investing is getting a return on your investment. The return could include
a gain or loss realized from the sale of a property or investment, unrealized capital appreciation
(or depreciation), or investment income like dividends, interest, rental income, and so on.

Many individuals, like you, use the markets to help them buy a house, send their children to
college, or save for retirement. However, unlike in the banking industry, where deposits are
protected by federal deposit insurance, the value of stocks, bonds, and other securities varies with
market conditions. Nobody can promise that you'll profit from your investments, and they may
lose value.

The phrase "investment" is commonly used in economics, business management, and

finance.

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DEFINITION

Investment refers to putting your money in an asset with the aim of generating income. Financial
investments come in different forms, such as mutual funds, unit linked investment plans,
endowment plans, stocks, bonds and more. The role of investment refers to the contribution and
influence that investment activities exert on economic development, growth, and prosperity within
a given context. It encompasses the deployment of financial resources, assets, or capital into
various ventures, projects, or assets with the objective of generating returns or benefits over time.
In essence, the role of investment is instrumental in fueling economic progress, improving living
standards, a nd achieving long-term development goals.

MEANING

Investment generally refers to the act of allocating money or resources with the expectation of
generating income or profit in the future. It involves committing funds into assets such as stocks,
bonds, real estate, or businesses with the goal of earning a return on the investment over time. The
purpose of investment is to grow wealth, preserve capital, or meet financial objectives such as
retirement savings or funding education. In essence, investment involves sacrificing present
resources in anticipation of future benefits. It's like planting seeds in a garden, expecting them to
grow into bigger plants that will yield fruits or flowers later on. You invest your money in things
like stocks, bonds, real estate, or businesses, aiming to earn a profit over time.

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 HISTORY
Investment has been a cornerstone of India's economic journey. Before independence, India's
economy relied heavily on agriculture, with limited industrialization. However, after gaining
independence, the government shifted its focus towards building industries through Five-Year
Plans. This period saw the establishment of numerous state-owned enterprises across key sectors
such as steel, coal, and oil. While these initiatives helped kickstart industrialization, private
investment faced challenges due to bureaucratic hurdles and stringent regulation

In recent years, India has continued its efforts to attract investment through initiatives like Make
in India, which aims to boost manufacturing and create jobs. The government has also focused on
improving the ease of doing business, streamlining regulations, and investing in infrastructure to
create a conducive environment for investment. Today, investment remains a vital engine of India's
economic growth, powering innovation, entrepreneurship, and development across the country.
nvestment has been super important for India's economy. Back before we got independence, most
of our economy was about farming, and there weren't many big industries. But after we got
independence, the government started making plans to build more industries. They set up a bunch
of companies run by the government to make things like steel and oil. However, it was tough for
regular people to invest because of lots of rules.

In the 1990s, things changed. The government decided to make it easier for businesses to invest.
They got rid of many rules and made it simpler for foreign companies to invest in India. This
brought in a lot of money from both inside and outside the country. Suddenly, there were lots of
new factories and businesses popping up everywhere, and the economy started growing faster.

Today, the government still wants more investment. They're doing things like encouraging
companies to make their products in India and making it easier to start new businesses. Investment
is like fuel for our economy—it helps create jobs, build new things, and make the country better
for everyone.

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INVESTMENT IN TERMS OF ECONOMIC

Economic investment means the net additions to the capital stock of the society which consists of
goods and services that are used in the production of other goods and services. Addition to the
capital stock means an increase in building, plants, equipment and inventories over the amount of
goods and services that existed.
The financial and economic meanings are related to each other because investment is a part of the
savings of individuals which flow into the capital market either directly or through institutions,
divided in new and second-hand capital financing. Investors as suppliers and investors as users of
long-term funds find a meeting place in the market.

An investment is an asset or item acquired with the goal of generating income or appreciation.
Appreciation refers to an increase in the value of an asset over time. When an individual purchases
a good as an investment, the intent is not to consume the good but rather to use it in the future to
create wealth

Investment is a component of aggregate demand (AD). Therefore, if there is an increase in

investment, it will help to boost AD and short-run economic growth. If there is spare capacity,
then increased investment and a rise in AD will increase the rate of economic growth

Investment plays six macroeconomics role;

1. It contributes to current demand of capital goods, thus it increases domestic expenditure;

2. It enlarges the production base (installed capital), increasing production capacity effectiveness;

3. It modernizes production processes, improving cost effectiveness;

4. It reduce the labour needs per unit of output, thus potentially producing higher

productivity And lower employment;

5. It allows for the production of new improved, products, increasing value added in production;

6. It incorporates international world-class innovations and quality standards, brings the gap
with more advanced countries and helping exports and an active participation to international
trade.

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INVESTMENT IN TERMS OF BUSINESS MANAGEMENT

According to business management theories, investment refers to the handling of financial assets
and other investments-not only buying and selling them. Management includes devising a short-
or long- term strategy for acquiring and disposing of portfolio holdings. It can also include
banking, budgeting, and tax services and duties, as well.

Investment management is the professional asset management of various securities (shares, bonds
,and other securities ) and other assets (e.g., real estate)in order to meet specified investment goals
for the benefit of the investors ,investors may be institutional (insurance companies
,pension funds, corporations, charities, educational establishment etc.) or private investors (both
directly via investment contracts and more commonly via collective investment schemes e.g.
mutual funds or exchange –traded funds ).

Running an investment management business involves many responsibilities. The firm must hire
professional managers to deal, market, settle, and prepare reports for clients. Other duties include
conducting internal audits and researching individual assets-or asset classes and industrial sectors.

Before anyone makes a decision to invest in business, they should be able to answer the question,
―What does it mean to invest?‖ Investments are assets or items that are purchased with the goal
of creating more income or appreciating in value. They are a purchase made not for the present
but to be useful in the future. An investment is always purchased with the hope that its future
payoff will exceed its original cost.

What Are the Best Business Investments?

In general, the best investments have these qualities;

 Businesses with high returns on capital

 Durable competitive advantages

 Excellent scalability

 Assets available for a good price that is likely to offer returns

The advisers and accountants at Ignite Spot can help you diversify your investment portfolio,
assist you in getting started with investing, or teach you how to invest in a small business.

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INVESTMENT IN TERMS OF FINANCE

In finance, investment refers to the purchasing of securities or other financial assets from the
capital market. It also means buying money market or real properties with high market liquidity.
Some examples are gold, silver, real properties, and precious items.

A financial investment is an asset that you put money into with the hope that it will grow or
appreciate into a larger sum of money .The idea is that you can later sell it at a higher price or earn
money on it while you own it. You may be looking to grow something over the next year, such as
saving up for a car, or over the next30 years, such as saving for the retirement.

Financial investment refers to putting aside a fixed amount of money and expecting some kind of
gain out of it within a stipulated time frame. An investment is a purchase that is completed with
money that has the potential to produce income or a profit. Things that naturally lose value over
time and with use are not investments. An investor is a person or entity who outlays capital in
order to produce an income or to make profits. Investing is the act of putting forth capital with the
expectation of income or profit. Personal investing is buying financial securities or property for
the purpose of making a profit.

This lesson will focus on the finance definition of financial investment. Let‘s look at a few key
terms worth knowing when it comes to financial investment.

Appreciation: is the amount of an investment grows in value. For example, you buy a share of
stocks for $10, and a year later it is worth $15; the stock has appreciated $5.

Dividend: are usually cash payments that are paid out on financial investments based on the
success and earnings of a company. For example, you invest in Microsoft stock, and it may pay
you a dividend of $5 a share. If you owned 500 shares you would get paid 500*$5 which is
$2,500.

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What is investment?

To invest is to allocate money in the expectation of some benefit/return in the future. In

other words, to invest means owning an asset or an item with the goal of generating income from
the investment or the appreciation of your investment which is an increase in the value of the asset
over a period of time. When you invest it always requires a sacrifice of some present asset that
you own today such as time, money, or effort.

In finance, the benefit from an investing is when you receive a return on your investment. The
return may consist of a gain or a loss realized from the sale of a property or an investment,
unrealized capital appreciation (or depreciation), or investment income such as dividends, interest,
rental income etc., or a combination of capital gain and income. The return may also include
currency gains or losses due to changes in the foreign currency exchange rates.

Investors generally expect higher returns from riskier investments. When a low-risk investment is
made, the return is also generally low. Similarly, high risk comes with high returns.

Investors, particularly novices, are often advised to adopt a particular investment strategy
and diversify their portfolio. Diversification has the statistical effect of reducing overall risk.

The meaning of investment is simple and straightforward. It is an asset that‘s created to compound
your money for meeting various objectives. These objectives include expenses for children's
higher education, paying loans, saving for retirement, or creating an emergency corpus.
In financial terms, the meaning of investment is an asset obtained with the intention of appreciating
its value with time. Investment is an asset acquired or invested in to build wealth and save money
from the hard earned income or appreciation. Investment is primarily made to obtain an additional
source of income or gain profit from the investment over a specific period of time.

For example, an investor may purchase a monetary asset now with the idea that the asset will
provide income in the future or will later be sold at a higher price for a profit.

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 TYPES OF INVESTMENT

 Stocks
 Bonds
 Investment Funds
 Bank Products
 Options
 Annuities
 Retirement
 Saving for Education
 Alternative and Complex Products
 Initial Coin Offerings and Crypto currencies
 Commodity Futures
 Security Futures
 Insurance

1. Stocks:

When you invest in a stock, you become one of the owners of a corporation. Stocks represent
ownership shares, also known as equity shares. Whether you make or lose money on a stock
depends on the success or failure of the company, which type of stock you own, and what‘s going
on in the stock market overall and other factors. Stocks and stock mutual funds often can be an
important component of a diversified investment portfolio

2. Bonds:

A bond is a loan an investor makes to a corporation, government, federal agency or other

organization in exchange for interest payments over a specified term plus repayment of principal
at the bond‘s maturity date. There are a wide variety of bonds including Treasuries, agency bonds,
corporate bonds, municipal bonds and more. Likewise there are many types of bond mutual funds.

When you invest in bonds and bond mutual funds, you face the risk that your investment might
lose money, especially if you bought an individual bond and want or need to sell it before it
matures.

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Bond mutual fund prices can fluctuate, just as stock mutual funds do. Risk will also vary depending
on the type of bond you own. Bonds and bond mutual funds often can be an important component
of a diversified investment portfolio. Whether you are just starting out or a seasoned investor, we
have an array of articles, tools and resources to help learn more about bond investing

3. Investment fund:

Investment funds pool the money of many investors and invest according to a specific strategy.
Funds come in various types, each with differing features. Generally, publicly offered funds such
as mutual funds, exchange-traded funds, closed-end funds and unit investment trusts must be
registered with the Securities and Exchange Commission (SEC) as investment companies. Private
investment funds (often called hedge funds) are often exempt from registration.

Funds can offer diversification and professional management and they can feature a wide variety
of investment strategies and styles. As with any security, investing in a fund involves risk,
including the possibility that you may lose money. And how a fund performed in the past is not an
indication of how it will perform in the future.

4. Bank Products:

Banks and credit unions can provide a safe and convenient way to accumulate savings and some
banks offer services that can help you manage your money.
Deposits at banks and most credit unions are federally insured up to a limit set by Congress. And
transaction (or checking) accounts and deposit accounts offer liquidity, making it easy for you to
get to your funds for any reason from day-to-day expenses to a down payment or money for
unexpected emergencies. In addition to being insured by the FDIC, checking accounts let you
transfer money by check or electronic payment to a person or organization that you designate as
payee.

But remember, the interest you earn from bank products including certificates of deposit (CDs)
tends to be lower than potential returns from other investments.

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5. Options:

Options are contracts that give the purchaser the right, but not the obligation, to buy or sell a
security, such as a stock or exchange-traded fund, at a fixed price within a specific period of time.
Options can help investors manage risk. But buying and selling options also involves risk, and it
is possible to lose money. It pays to learn about different types of options, trading strategies and
the risks involved

6. Annuities:
An annuity is a contract between you and an insurance company in which the company promises
to make periodic payments to you, starting immediately or at some future time. You buy an annuity
either with a single payment or a series of payments called premiums.
Some annuity contracts provide a way to save for retirement. Others can turn your savings into a
stream of retirement income. Still others do both. If you use an annuity as a savings vehicle and
the insurance company delays your pay-out to the future, you have a deferred annuity. If you use
the annuity to create a source of retirement income and your payments start right away, you have
an immediate annuity.

The two most common types of annuities are fixed and variable. There is also a hybrid called an
indexed annuity, also referred to as an equity-indexed annuity or a fixed-index annuity. Variable
annuities are securities and under FINRA's jurisdiction. Annuities are often products investors
consider when they plan for retirement so it pays to understand them. They also are often marketed
as tax-deferred savings products. Annuities come with a variety of fees and expenses, such as
surrender charges, mortality and expense risk charges and administrative fees. Annuities also can
have high commissions, reaching seven percent or more.

7 .Retirement:
Saving for retirement, and managing income once you retire, are two important aspects of personal
financial management. When it comes to saving, tax-advantaged options such as a 401(k) or IRA
can be smart choices. In addition to potential tax benefits, there is an opportunity for your savings
to Compound over time. FINRA's Smart 401(k) resource provides valuable information about how
401(k) plans work, whether you're getting started or already retired.
Once you retire, the way you manage your income can mean the difference between living
comfortably in retirement and running short of money down the road. Whether you are in
retirement or still saving for it, there are actions you can take now to manage retirement income.

8. Saving for education:

Education funding begins with saving. While college and other educational costs continue to rise,
the good news is that there are many smart, tax-advantaged ways to save for education. We'll help
you navigate your options, and provide tips and tools along the way.

9. Alternative and Complex Products:

Investment products abound that offer alternatives to conventional stock and bond investments.
These products are sometimes referred to as structured products or non-conventional investments.
They tend to be both more complex—and more risky-than traditional investments, and often tempt
investors with special features and higher returns than offered by basic investments.

Some examples of complex products include notes with principal protection and high-yield bonds
that have lower credit ratings and higher risk of default, but offer more attractive rates of return.
Complex products may use futures and options, as well as complicated trading strategies, to
achieve investment objectives.

10. Initial Coin Offerings and Cryptocurrencies:

Digital assets like crypto currencies and ICOs continue to evolve and spark interest from Main
Street investors. With billions of dollars raised in ICO financings and over a thousand different
cryptocurrencies currently available, these rapidly changing markets are tempting for investors. It
is also difficult for most individual investors to make sense of these complex investment products
and to determine the risk levels associated with them.
11. Commodity futures:

Commodity futures contracts are agreements to buy or sell a specific quantity of a commodity at
a specified price on a particular date in the future. Commodities include metals, oil, grains and
animal

Products, as well as financial instruments and currencies. With limited exceptions, trading in
futures contracts must be executed on the floor of a commodity exchange.

The Commodity Futures Trading Commission (CFTC) is the federal government agency that
regulates the commodity futures, commodity options, and swaps trading markets. Anyone who
trades futures with the public or gives advice about futures trading must be registered with the
National Futures Association (NFA), the independent regulator for anyone who trades futures with
the public.

Before you invest in commodity futures, check to make sure the individual and firm are registered
and whether they are the subject of any disciplinary actions. Use the NFA‘s Background
Affiliation Status Information Center (BASIC).

12. Security features:

Federal regulations permit trading in futures contracts on single stocks (also known as single stock
futures or SSFs) and narrow-based security indices (see glossary below). This article describes
what security futures are, how they differ from stock options, some of the risks they can pose, and
how they are regulated.

Security futures involve a high degree of risk and are not suitable for all investors. As with any
investment, if you don't understand it, you shouldn't buy it.

With security futures, you may lose a substantial amount of money in a very short period of time.
The amount you may lose is potentially unlimited and can exceed the amount you originally
deposit with your broker. This is because trading in security futures typically involves a high
degree of leverage, with a relatively small amount of money controlling assets having a much
greater value. Investors who are uncomfortable with this level of risk should not trade security
futures.
 13. Insurance:

Life insurance products are often a part of an overall financial plan. They come in various forms,
including term life, whole life and universal life policies. There also are variations on these—
variable life insurance and variable universal life insurance-which are considered securities and
must be registered with the

Securities and Exchange Commission (SEC). FINRA has jurisdiction over the investment
professionals and firms that sell variable life and variable universal life products.

Insurance products often are developed to meet specific objectives. For example, long-term care
insurance is designed to help manage health care expenses as you age. As with other financial
products, insurance products can be complex and come with fees, so it pays to do your homework
before you buy.

 Insurance is a vital financial tool designed to mitigate risks and provide protection against
unforeseen events. It operates on the fundamental principle of risk sharing, where individuals or
businesses transfer the potential financial burden of certain risks to an insurance company in
exchange for payment of a premium.

 This premium is determined based on various factors such as the type of coverage, the level of
risk involved, and the individual's or business's history of claims. There are several types of
insurance available to address different needs and circumstances. Life insurance, for example,
provides financial support to beneficiaries in the event of the policyholder's death, ensuring that
loved ones are financially secure even in the absence of the primary breadwinner.

 Health insurance, on the other hand, covers medical expenses incurred due to illness or injury,
offering individuals access to necessary healthcare services without facing exorbitant out-of-pocket
costs.

 Property insurance safeguards against the loss or damage of assets such as homes, vehicles, or
businesses, providing compensation for repairs or replacements in the event of covered perils like
fire, theft, or natural disasters. Additionally, liability insurance protects individuals or businesses
from legal liabilities arising from third-party claims of bodily injury or property damage, covering
legal expenses and settlement costs. Insurance companies employ actuarial analysis and risk
assessment techniques to calculate premiums and ensure financial solvency. They also play a
crucial role in risk management by pooling resources and spreading risks across a large poolofof
policyholders.

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 CAPITAL MARKET

What Are Capital Markets?

Capital markets are venues where savings and investments are channeled between the suppliers
who have capital and those who are in need of capital. The entities that have capital include retail
and institutional investors while those who seek capital are businesses, governments, and people.

Capital markets are composed of primary and secondary markets. The most common capital
markets are the stock market and the bond market. Capital markets seek to improve transactional
efficiencies. These markets bring those who hold capital and those seeking capital together and
provide a place where entities can exchange securities.

Understanding Capital Markets

The term capital market broadly defines the place where various entities trade different financial
instruments. These venues may include the stock market, the bond market, and the currency and
foreign exchange markets. Most markets are concentrated in major financial centers including
New York, London, Singapore, and Hong Kong.

Capital markets are composed of the suppliers and users of funds. Suppliers include households
and the institutions serving them-pension funds, life insurance companies, charitable foundations,
and non-financial companies-that generate cash beyond their needs for investment. Users of funds
include home and motor vehicle purchasers, non-financial companies, and governments financing
infrastructure investment and operating expenses.

Capital markets are used to sell financial products such as equities and debt securities. Equities are
stocks, which are ownership shares in a company. Debt securities, such as bonds, are interest-
bearing IOUs. These markets are divided into two different categories: primary markets-where
new equity stock and bond issues are sold to investors-and markets, which trade existing securities.
Capital markets are a crucial part of a functioning modern

Economy because they move money from the people who have it to those who need it for
productive use.

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Capital Markets Expanded:

Capital markets can refer to markets in a broad sense for any financial asset.

Corporate Finance:

In this realm, the capital market is where investable capital for non-financial companies is
available. Investable capital includes the external funds included in a weighted average cost of
capital calculation-common and preferred equity, public bonds, and private debt-that are also used
in a return on invested capital calculation. Capital markets in corporate finance may also refer to
equity funding, excluding debt.

Financial Services:

Financial companies involved in private rather than public markets are part of the capital market.
They include investment banks, private equity, and venture capital (VC) firms in contrast to
broker- dealers and public exchanges.

Public Markets:

Operated by a regulated exchange, capital markets can refer to equity markets in contrast to debt,
bond, fixed income, money, derivatives, and commodities markets. Mirroring the corporate
finance context, capital markets can also mean equity as well as debt, bond, or fixed income
markets.

Capital markets may also refer to investments that receive capital gains tax treatment. While short-
term gains-assets held under a year-are taxed as income according to a tax bracket, there are
different rates for long-term gains. These rates are often related to transactions arranged privately
through investment banks or private funds such as private equity or venture capital.

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Primary vs. Secondary Markets:
Capital markets are composed of primary and secondary markets. The majority of modern primary
and secondary markets are computer-based electronic platforms. Primary markets are open to
specific investors who buy securities directly from the issuing company. These

Securities are considered primary offerings or initial public offerings (IPOs). When a company
goes public, it sells its stocks and bonds to large-scale and institutional investors such as hedge
funds and mutual funds.

The secondary market, on the other hand, includes venues overseen by a regulatory body like
the Securities and Exchange Commission (SEC) where existing or already-issued securities are
traded between investors. Issuing companies do not have a part in the secondary market. The New
York Stock Exchange (NYSE) and NASDAQ are examples of the secondary market

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 REASONS TO INVEST YOUR MONEY

In order to build your wealth, you will want to invest your money. Investing allows you to put
your money in vehicles that have the potential to earn strong rates of return.

If you don‘t invest, you are missing out on opportunities to increase your financial worth. Of
course, you have the potential to lose your money in investments, but if you invest wisely, the
potential to gain money is higher than if you never invest.

Short term goal:

Short-term goals can be going on a vacation, giving holiday gifts, upcoming family events or
celebrations or paying off a short-term debt like credit card loan. These usually have a horizon of
1- 2 years. Investing to meet short-term needs is important. Short-term needs can be met through
existing savings and investing

Grow your money:

Investing your money can allow you to grow it. Most investment vehicles, such as stocks,
certificates of deposit, or bonds, offer returns on your money over the long term. This return allows
your money to build, creating wealth over time.

Save for retirement:

As you are working, you should be saving money for retirement. Put your retirement savings into
a portfolio of investments, such as stocks, bonds, mutual funds, real estate, businesses, or precious
metals. Then, at retirement age, you can live off funds earned from these investments.

Based on your personal tolerance of risk, you may want to consider being riskier at a younger age
with your investments. Greater risk increases your chances of earning greater wealth. Becoming
more conservative with your investments as you grow older can be wise, especially as you near
retirement age.

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Earn higher returns

In order to grow your money, you need to put it in a place where it can earn a high rate of
return. The higher the rate of return, the more money you will earn. Investment vehicles tend to
offer the Opportunity to earn higher rates of return than savings accounts. Therefore, if you want
the chance to earn a higher return on your money, you will need to explore investing your
money.

Reach financial goals:

Investing can help you reach big financial goals. If your money is earning a higher rate of return
than a savings account, you will be earning more money both over the long term and within a
faster period. This return on your investments can be used toward major financial goals, such as
buying a home, buying a car, starting your own business, or putting your children through college.

Build on pre-tax dollars:

Some investment vehicles, like employer-sponsored 401(k) s, allow you to invest your pre-tax
dollars. This option allows you to save more money than if you could only invest your post-tax
dollars.

Qualify for employer-matching programs some employers offer to match the money you invest in
your 401(k) plan up to a certain amount. Of course, the only way you can qualify and earn these
matching funds is if you are actively investing in your 401(k) plan. Thus, many people invest in
their 401(k) s to gain the matching employer funds.

Start and expand a business:

Investing is an important part of business creation and expansion. Many investors like to support
entrepreneurs and contribute to the creation of new jobs and new products. They enjoy the process
of creating and establishing new businesses and building them into successful entities that can
provide them with a strong return on their investment.

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Reduce taxable income:

As an investor, you may be able to reduce your taxable income by investing pre-tax dollars into a
retirement fund, like a 401(k). If you generate a loss from an investment, you may be able to apply
that loss against any gains from other investments, which lowers the amount of your taxable
income Be part of a new venture:

New ventures need the backing of money, and they look to investors for that backing. Some
investors may like the excitement of investing in a new, cutting-edge product or service, or being
part of something like a business or film that introduces them to a glamorous world.

The majority of people invest for retirement purposes. As most people rely on their salary income
for meeting their

Beat Inflation:

Investing is also important to beat inflation. If you don‘t invest your money but just leave it in
your checking or savings account, the money will decline in purchasing power as inflation will eat
away the value of your money. While the reported inflation is quite low nowadays, the actual
inflation is quite high as education and healthcare expenses are increasing much faster than
reported inflation. Canadian banks are not even paying 2% on your savings deposit which means
that if you do not invest, your money will lose value over time.

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 Types of Investing Styles

There are also different types of investing styles, also known as investment strategies, besides
the different types of investment. The mains ones are outlined below in order of knowledge /
effort. The investing style approach you choose will depends on your interest in the topic and
the amount of time you are willing to invest in.

None are better than the other for generating returns. It‘s really up to your skills and lady luck
since no one can predict the future.

Index Investing:

This strategy is based on John C. Bogle‘s investing approach where instead of focusing on beating
the index and paying high fees, you would mimic the index at very low fees. There is a huge
momentum nowadays with index investing. It allows for any investor to put their money At work
with little knowledge and still get good returns. It is also argued that over a really long period
of time, no investors

Can continuously beat the index. Why try to beat the index if professionals can‘t do it is their final
conclusion.

Dividend Investing:

This approach focuses on dividend stocks with the goal to earn an income and / or use the dividend
growth as a method to find high quality growth stocks. A dividend income stock will usually have
a higher dividend yield where as a dividend growth stock will have a lower dividend yield. Retirees
often seek high yield stocks to fund their retirement in an attempt to avoid depleting their portfolio.
This method provides a method to avoid running out of money and have more control over it.

Value Investing:

This approach is probably closer to Warren Buffett‘s investing method where he looks for strong
companies with an economic moat that is undervalued. Identifying an undervalued stock can be
very difficult but also profitable when you can spot them.

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Technical Trading:

This approach looks at trends from the stock price movement and volume. The patterns are
mostly based around how the general investors is approaching investing which leads to
recognizable patterns.

Risk Disclosure:

Dividend Earner will not accept any liability for loss or damage as a result of reliance on the
information contained within this website including data, quotes, charts and buy/sell signals.
Please be fully informed regarding the risks and costs associated with trading, it is one of the
riskiest investment forms possible.

19
 FINANCIAL INVESTMENT

ADVANTAGES OF FINANCIAL INVESTMENT

Financial investments are right now the most mainstream investment vehicle and give a few
favorable circumstances to speculators, including the accompanying:

Advanced Portfolio Management:

one need to pay an administration expense as a major aspect of the expense proportion, which is
utilized to employ an expert portfolio supervisor who guides you in purchasing and offering stocks,
bonds, and so forth. This is a generally little cost to pay for help in the administration of an
investment portfolio.

Dividend Reinvestment:

As profits and other premium wage is pronounced for the reserve, it can be utilized to
purchase extra offers in the common store, in this manner helping your investment develop.

Risk Reduction (Safety):

A decreased portfolio hazard is accomplished through the utilization of diversification, as most

shared assets will put resources into somewhere in the range of 50 to 200 distinct securities –
relying upon their core interest. A few record stock common finances claim at least 1,000
individual stock positions.

Convenience and Fair Pricing:

Shared assets are normal and simple to purchase. They ordinarily have less or low least investments
(some around $2,500) and they are exchanged just once every day at the closing net resource
value (NAV). This dispenses with value change for the duration of the day and different arbitrage
openings that informal investors hone.

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Odds of Good Returns in Short Time:

Indeed, even in the past individuals have increased great profits for their securities exchange
investments, and they generally have a decent opportunity to acquire enormous benefits when one
choose to put resources into securities exchange. In this way, when you put resources into
securities exchange India, in spite of the fact that you put yourself at a ton of dangers, you are
likewise in a position to acquire great returns in a brief timeframe.

Minority Ownership:

All things considered, it sounds like a misrepresentation, yet when one put his/her cash in a
rumored organization‘s stocks, one moves toward becoming turned into a section proprietor of the
organization, regardless of however littler offer they have. One can enhance remaining in the
market by placing cash in various organizations. In addition, you can exit at whatever point you
need to.

DISADVANTAGES OF FINANCIAL INVESTMENT

However, there are also disadvantages of financial investment, such as the following:

High expense ratio and sales charges:

If you‘re not paying attention to mutual fund expense ratios and sales charges; they can get out of
hand. Be very careful when investing in funds with expense ratios higher than 1.20%, as they will
be considered on the higher cost end. Be wary of 12b-1advertising fees and sales charges in
general. There are several good fund companies out there that have no sales charges. Fees reduce
overall investment returns.

Management abuses:

Churning, turnover and window dressing may happen if your manager is abusing his or her
authority. This includes unnecessary trading, excessive replacement and selling the losers prior to
quarter-end to fix the books.

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Tax inefficiency:

Like it or not, investors do not have any choice when it comes to capital gain pay outs in mutual
funds. Due to the turnover, redemptions, gains and losses in security holdings throughout the year,
investors typically receive distributions from the fund that are an uncontrollable tax event

Poor trade execution:

If you place your mutual fund trade any time before the cut-off time for same-day NAV, you‘ll
get the same closing price NAV is for buy or sell on the mutual fund. For investors searching for
faster execution times, maybe because of short investment horizons, day trading, or timing the
market, mutual funds provide a weak execution strategy.

Volatile Investments:

Investment in BSE is subjected to many risks since the market is volatile. The shares of a company
fluctuate so many times in just a single day. These price fluctuations are unpredictable most of the
times and the investor sometimes have to face severe loss due to such uncertainty.

Brokerage Commissions Kill Profit Margin

Every time an investor purchase or sells his shares; he has to pay some amount as a brokerage
commission to the broker, which kills the profit margin.

Time Consuming:

Investment in NSE is not as easy as investing in a lottery as you have to complete many
formalities in the process and hence is time consuming..

Losses:

There is no such thing as a total risk-free investment and there is always the risk of a loss of your
investment. Even government securities which are considered as the safest type of investment are
not totally risk-free. Governments can default on their debt and there are numerous instances of
such defaults in modern history.

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9. Requires Investing Knowledge:

Investing requires specialized knowledge about finance and different types of asset classes.
Experience is also very important in investing, as an investor who has seen a number of economic
cycles can, in general, navigate different types of situations better than a novice investor.

Since most individuals do not have training in finance, they may require the help of a financial
advisor. Choosing the right financial advisor is a difficult task due to the potential conflict of
interest on how they are paid. One of the primary reasons many DIY investors move away from
mutual funds

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 SORTS OF FINANCIAL INVESTMENTS

Bonds:

Converged under the general class called ‗settled pay‘ securities, the expression ―bond‖ is
ordinarily used to allude to any established on obligation. When you purchase a security, you are
giving credit (loaning) out your cash to an organization or government. Consequently, they consent
to give you enthusiasm on your cash and in the long run pay you back the sum you loaned out.

The primary fascination of bonds is their wellbeing. On the off chance that you are purchasing
bonds from a consistent government, your investment is for all intents and purposes ensured
(or
―chance free‖ in contributing speech). The security and steadiness, be that as it may, included
some major disadvantages. Since there is little hazard, there is minimal potential return. Therefore,
the rate of profit for securities is by and large lower than different securities.

Stocks:

When you purchase stocks (or ‗values‘), you turn out to be somewhat a proprietor of the business.
This gives you a privilege to vote at the shareholder‘s meeting and enables you to get any benefits
that the organization assigns to its owners–these benefits are alluded to as profits.

While bonds give a consistent stream of wage, stocks are unstable. That is, they vacillate in an
incentive every day. When you buy a stock, you aren‘t ensured anything. Many stocks don‘t pay
profits, profiting just by expanding in esteem and going up in price–which won‘t not occur.

As contrast with bonds, stocks give moderately high potential returns. Obviously, there is a cost
for this potential: you should accept the danger of losing a few or the greater part of your
investment.

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Shared Funds
A shared store is a mix or blend of stocks and bonds. When you buy a shared reserve, you are
pooling your cash with various different financial specialists, which thusly empowers you (as a
component of a gathering) to pay an expert administrator to choose particular securities for you.
Common assets are good to go up on account of a particular methodology, and their territory of
center can be about anything: extensive stocks, little stocks, bonds from governments, bonds from
organizations, stocks and bonds, stocks in specific enterprises, stocks in specific nations, and the
rundown goes on.

The essential favorable position of a common store is that one can contribute one‘s cash without
the time or the involvement in picking investments.

Elective Investments: Options, Futures, FOREX, Gold, Real Estate, Etc.

There are two fundamental securities: value and obligation, also called stocks and securities. While
many (if not most) investments can be categorized as one of these two classes, there are numerous
option vehicles, which speak to more confounded sorts of securities and contributing techniques.

The uplifting news is one presumably don‘t have to stress over option investments toward the
begin of your contributing profession. They are by and large high-hazard/high-remunerate
securities that are significantly more unpredictable than plain old stocks and securities. Yes, there
is the open door for huge benefits, yet they require some specific information. So in the event that
one doesn‘t realize what they are doing, you could get yourself into a great deal of inconvenience.

Mutual funds

A mutual fund is a pool of many investors‘ money that is invested broadly in a number of
companies. Mutual funds can be actively managed or passively managed. An actively managed
fund has a fund manager who picks securities in which to put investors‘ money. Fund managers
often try to beat a designated market index by choosing investments that will outperform such an
index. A passively managed fund, also known as an index fund, simply tracks a major stock market
Index like the Dow Jones Industrial Average or the S&P 500. Mutual funds can invest in a broad
31odities, currencies and derivatives.
array of securities: equities, bonds, comm
 TYPES OF STOCKS

1. Classification based on stock classes

2. Classification based on market capitalization
3. Classification based on ownership
4. Classification based on dividend payment
5. Classification based on fundamentals
6. Classification based on Risk
7. Classification based on price trends

1. Classification based on stock classes:

This is one of the primary factors used to classify stocks and is based on the voting rights of the
shareholders. There are some stocks that do not give the shareholders the power to vote at the
annual meetings where the decisions regarding the management of the company and such issues
take place. Unlike these stocks, there are some other stocks that allow shareholders to participate
in the decision making in the company matters, by casting their votes. Another kind of stocks offer
shareholders the opportunity to cast multiple votes in matters pertaining to different aspects of the
company.

2. Classification based on market capitalization:

Stocks can be classified on the basis of the market capitalization of the company, which is the total
shareholding of a company. This is calculated by multiplying the current price of the company
stock with the total number of shares outstanding in the market. Listed below are the types of
stocks based on market capitalization.

I. Large Cap Stocks

These are often stocks of Blue-chip companies which are established enterprises with large
reserves of cash at their disposal. It is interesting to note that the larger size of the large cap
companies does Not mean that they grow more rapidly. In fact it is the small stock companies that
tend to outperform them over the longer time frame. But large cap stocks do come with the
benefit of allowing theInvestors to reap higher dividends in comparison to the smaller and
mid cap companies stocks, ensuring that the ca p3i2t al is preserved over the long term period.
Ii. Mid Cap Stocks

These are the stocks of medium sized companies that have a market capitalization of INR 250
Crore to about INR 4000 crore. These companies have a well recognize name in the market which
brings along the benefit of potential for growth, as well as the stability that is usually accompanied
with being a seasoned player in the market. Mid cap companies have a good track record of steady
growth and are very similar to blue chip stocks barring their size. In the long term these stocks do
and grow well.

iii. Small Cap Stocks

As is suggestive of the name, small cap stocks have the smallest value in the market as compared
to its counterparts. These are small sized companies that have a market capitalization of up to INR
250 and have the potential to grow at a good pace in the future. Investors who are willing to commit
to a long term and are not very particular about the current dividends, and are willing to stand their
ground during price volatility, can make significant gains in the future. As an investor you can buy
these stocks when they are available at a cheap price during the initial stage of the company. There
is no surety about the how the company will perform in the market since they are relatively new.
Because these small cap companies are new they are highly volatile and their growth impacts the
value and revenue of the company to a huge extent.

3. Classification based on ownership

Based on wonder ship, there are three types of stocks that investors can own which offer them
different rights and growth potential.

i. Preferred & common stocks

Preferred stocks offer investors a fixed amount of dividend every year unlike common stocks.
The price of preferred stocks is not as volatile as a common stock but it is common stock that
gets the

33
Benefit of priority when the company has surplus money to distribute. At the time of company
liquidation, it is the company‘s creditors, its bond holders, debenture holders who get

Priority over the preferred shareholders. Common stockholders have voting rights, a privilege
preferred shareholders do not enjoy.

ii. Hybrid Stocks

There are companies that offer preferred shares with the option of converting them to common
shares, with conditions, at a certain point in time. These are known as hybrid stocks or convertible
preferred shares and may or may not have voting rights.

iii. Stocks with embedded derivative options

Stocks that come with the embedded derivative option means that they can be ‗callable‘ or
‗putable‘ and are not as commonly available. A ‗callable‘ stock has the option of being bought
back by the company for a certain price at a certain point in time. Similarly, a ‗putable‘ stock
offers its holder to sell it to the company at a certain price and time.

4. Classification based on dividend payment:

i. Growth Stocks

These stocks do not pay high dividends as the company prefers to reinvest the earnings to enable
it to grow faster, hence, the name growth stocks. The value of the shares of the company rise with
the fast growth rate which in turn allows investors to profit through higher returns. It is best suited
for those investors who seek long term growth potential and not an immediate second source of
income. Growth stocks carry higher risk than their counterpart.

ii. Income Stocks

In comparison to growth stocks, income stocks hand out a higher dividend in relation to the price
of the share. Higher dividends translates to higher income, hence, the name Income Stocks. Income
stocks are indicative of a stable company that can afford consistent dividends but these are also
companies that do not promise very high growth. This means that the stock‘s price of such

34
companies may not rise much. Income stocks also includes preferred stocks. IT is a good
investment for those investors who seek a secondary source of income through relatively low risk

Stocks. The dividend income in income stocks is not taxed and thus is great for investors of low
risk profile who want long term investment. You may want to use the dividend yield measure to
find such stocks that offer high dividends. Dividend yield is a

Measure of your earning as an investors (earning per share) from your investment, by means of
the total dividends earned. This figure can be derived by dividing the dividend by the share price
that was announced. It is then written in the form of a percentage. For instance, if the stock price
is INR 100 and it offers a dividend of INR 5 per share, its yield will be 5 percent.

5. Classification based on fundamentals:

Investors who believe that a share price must equal the intrinsic value of the company‘s share, the
value investing investors, compare the share prices with components like per share earnings,
profits, etc. to reach at an intrinsic value per share.

i. Overvalued Shares

These are shares with prices that exceed the intrinsic value and are considered overvalued.

ii. Undervalued Shares

These types of shares are popular amongst the value investors as they believe that the price of
the share would rise in the future.

6. Classification based on Risk:

The risk level of stocks differ depending on the share price fluctuations. Stocks with higher risk
reward the investor with higher returns, while low risk stocks generate low returns.

i. Beta Stocks

The beta or the measure of risk is derived by calculating the price volatility of the stock. Beta can
be positive or negative which denotes whether it moves in sync with the market or against it. The
higher the beta, higher is the risk quotient of the stock. If the beta value is more than 1 it means
that

35
the stock is more volatile than the market. A lot of investors with knowledge of this measure use
it to make their investment decisions.

ii. Blue Chip Stocks

Blue chip stocks are stocks of those companies that have lower liabilities and stable earnings and
which pay regular dividends. These very large and well-recognised companies that have a long
history of sound financial performance are a good bet for Investors who seek safer avenues of
investment.

7. Classification based on price trends:

This classification is based on the movement of stock prices in tandem with or against the company
earnings.

i. Defensive Stocks

These are stocks that are somewhat unfazed by economic conditions and are preferred when the
market conditions are poor. Food and beverage companies are a common example.

ii. Cyclical Stocks

Stocks of companies that are greatly affected by economic conditions and see high price
fluctuations with market changes are cyclical stocks. These types of stocks grow rapidly during
the boom cycle but the growth is slowed down in the slow economy. Automobile stocks fall in
this category.

36
 ROLE OF INVESTMENT BANKS IN ECONOMIC DEVELOPMENT

When the company holds its IPO investment banks will buy all or, much of that company‘s share
directly by acting as an intermediary and subsequently sell the shares into the public market
creating immediate liquidity

Advice businesses and governments on how to meet their financial challenges and to help them
procure financing from stock offering, bond issues or derivative products.

1. Helps to determine how to price these instruments by utilizing different financial models.

2. Investment banks act as middlemen between a company that wants to issue new securities and
the public who buy the securities.

3. Investment banks like JP Morgen and Goldman Sachs manage huge portfolio for pension funds
foundation and insurance companies through their management department. Their financial
experts assist in selecting the right mix of stocks, debt instrument, and real estate to achieve their
clients‘ unique goals.

4. Foreign currency revenue plays an important role for a country. It reflects the country‘s overall
financial strength. Investment banking plays indirectly in the foreign currency revenue as they
help to enhance export through their investment activities.

Investment bank services:

Investment banks are often times confused with the investment banking division of a normal bank.
What sets them apart is the services the amount of services they offer. In this face off, investment
banks come out on top with a lot more on their plate.

Let’s go over the typical services provided by an investment bank:

1. Arranging finance

If a business or government is looking to finance a big project for which they need more capital,
they will seek guidance from an investment banker. This is the basic job duty of any investment
banker: they will plan when to issue corporate bonds, price them to muster up demand, and help
sell them. 37
If a business is interested in going public to raise funds and needs to come up with an
appropriate initial public offering (IPO), an investment banker can help with coming up with the
perfect price.

2. Underwriting

Underwriting is the process of taking on a financial risk for a fee. Investment banks will buy
the stocks and bonds of the business they are working for and then market and sell those to other
investors. The investment bankers are compensated for taking on the risk of the stock not selling.
This is usually done by marking up the price at which they bought the stock to generate a profit
as opposed to just breaking even. There are certain situations where the investment bankers do not
buy the stock but market and sell it. In this case, they are compensated on the basis of commission,
meaning the more they sell, the more profit they see.

3. Mergers and acquisitions

Investment banks can also assist entities when they are looking to buy another business. With their
extensive networks and relationships with clients, investment banks are a great resource for finding
and evaluating the worth of a potential acquisition. They can offer advice to parties on both sides
of the acquisition. For the business looking to acquire another, they can advise them in valuing
the company and coming up with a realistic price. For the business being acquired, investment
bankers can help evaluate the asking price.

4. Private placement

Investment bankers can also help clients raise capital funds through private placements, which is
the selling of securities to a smaller group of investors. Raising capital through private placements
avoids the step of registering with the SEC. This is the opposite of an IPO, where the securities
are sold publicly.

38
5. Sales and trading

Investment banks also take care of sales and trading. They match up buyers and sellers looking to
buy and sell securities they already own. They can even act as an agent for the client, conducting
all of the activities of the trading on their own.

ORGANIZATION STRUCTURE OF INVESTMENT BANKS

Investment banks are broadly split into three sections: front office, middle office and back office.
This division is necessitated partly by the operational needs, allowing the common functions to be
grouped together, thus functioning more efficiently. However there is also a statutory requirement
to separate investment-making divisions from the compliance, control and risk management
departments. This ensures the impartiality and objectivity of all reporting lines.

There is a common perception that the most interesting jobs can be found in the front office, but
each investment bank department plays a crucial part in the successful business operation

Front Office:

Think you want to be an investment banker? Chances are the role you are imagining is a front
office role. The front office generates the bank‘s revenue and consists of three primary divisions:
investment banking, sales & trading, and research. Investment banking is where the bank helps
clients raise money in capital markets and also where the bank advises companies on mergers &
acquisitions. At a high level, sales and trading is where the bank (on behalf of the bank and its
clients) buys and sells products. Traded products include anything from commodities to
specialized derivatives. Research is where banks review companies and write reports about future
earnings prospects. Other financial professionals buy these reports from these banks and use the
reports for their own investment analysis.

Other potential front office divisions that an investment bank may have include: commercial
banking, merchant banking, investment management, and global transaction banking.

39
Middle Office

Typically includes risk management, financial control, corporate treasury, corporate strategy, and
compliance. Ultimately, the goal of the middle office is to ensure that the investment bank doesn‘t
engage in certain activities that could be detrimental to the bank‘s overall health as a firm. In
capital raising, especially, there is significant interaction between the front office and middle office
to ensure that the company is not taking on too much risk in underwriting certain securities.

Back Office

Typically includes operations and technology. The back office provides the support so that the
front office can do the jobs needed to make money for the investment bank.

40
 FOREIGN DIRECT INVESTMENT (FDI) –IMPACT ON ECONOMY

Foreign direct market is the investment of funds by an organization from one country into another,
with the intent of establishing ‘lasting interest‘. According to OECD (Organization for Economic
Co- operation and Development), lasting interest is determined when the organization acquires a
minimum of 10% of voting power in another organization.
Reinvestment of profits from overseas operations, as well as intra - organizational loans and
borrowings to overseas subsidiaries are also categorized as FDI.
The meaning of FDI is not restricted only to international movement of capital. Its definition also
encompasses the international movement of elements that are complementary to capital - such as
skills, processes, management, technology etc.
There is a difference between FDI and FPI (Foreign Portfolio Investments), wherein the investor
purchases equity of foreign companies. FPI means only equity infusion, and does not imply the
establishment of a lasting interest.
FDI can be Greenfield, wherein an organization creates a subsidiary concern in another country
and builds its business operations there from the ground up. Greenfield investments provide the
highest degree of control to the organization. It can construct the production plant as per its
specifications, employ and train human resources as per company standards, as well as design and
monitor its operational processes.
Alternatively, FDI can be brownfield - wherein an organization expands by way of cross-border
mergers, acquisitions and joint ventures - by either leasing or purchasing existing facilities for its
production.

There are many ways in which FDI benefits the recipient nation:

1. Increased Employment and Economic Growth

Creation of jobs is the most obvious advantage of FDI. It is also one of the most important reasons
why a nation, especially a developing one, looks to attract FDI. Increased FDI boosts the
manufacturing as well as the services sector. This in turn creates jobs, and helps reduce

41
Unemployment among the educated youth - as well as skilled and unskilled labor - in the country.
Increased employment translates to increased incomes, and equips the population with enhanced
buying power. This boosts the economy of the country.

2. Human Resource Development

This is one of the less obvious advantages of FDI. Hence, it is often understated. Human Capital
refers to the knowledge and competence of the workforce. Skills gained and enhanced through
training and experience boost the education and human capital quotient of the country. Once
developed, human capital is mobile. It can train human resources in other companies, thereby
creating a ripple effect.

3. Development of Backward Areas

This is one of the most crucial benefits of FDI for a developing country. FDI enables the
transformation of backward areas in a country into industrial centers. This in turn provides a boost
to the social economy of the area. The Hyundai unit at Sriperumbudur, Tamil Nadu in India
exemplifies this process.

4. Provision of Finance & Technology

Recipient businesses get access to latest financing tools, technologies and operational practices
from across the world. Over time, the introduction of newer, enhanced technologies and processes
results in their diffusion into the local economy, resulting in enhanced efficiency and effectiveness
of the industry.

5. Increase in Exports

Not all goods produced through FDI are meant for domestic consumption. Many of these products
have global markets. The creation of 100% Export Oriented Units and Economic Zones have
further assisted FDI investors in boosting their exports from other countries.

42
6. Exchange Rate Stability

The constant flow of FDI into a country translates into a continuous flow of foreign exchange.
This helps the country‘s Central Bank maintain a comfortable reserve of foreign exchange. This
in turn ensures stable exchange rates.

7. Stimulation of Economic Development

This is another very important advantage of FDI. FDI is a source of external capital and higher
revenues for a country. When factories are constructed, at least some local labor, materials and
equipment are utilized. Once the construction is complete, the factory will employ some local
employees and further use local materials and services. The people who are employed by such
factories thus have more money to spend. This creates more jobs. These
factories will also create additional tax revenue for the Government that can be infused into
creating and improving physical and financial infrastructure.

8. Improved Capital Flow

Inflow of capital is particularly beneficial for countries with limited domestic resources, as well
as for nations with restricted opportunities to raise funds in global capital markets.

9. Creation of a Competitive Market

By facilitating the entry of foreign organizations into the domestic marketplace, FDI helps create
a competitive environment, as well as break domestic monopolies. A healthy competitive
environment pushes firms to continuously enhance their processes and product offerings, thereby
fostering innovation. Consumers also gain access to a wider range of competitively priced
products.

For a multinational corporation, FDI in India is a means to access new consumption and production
markets, and thereby expand its influence and business operations. It can gain access not only to
limited resources such as fossil fuels and precious metals, but also skilled and unskilled labor,
management expertise and technologies. FDI also enables an organization to lower its cost of

43
Production- by accessing cheaper resources, or going directly to the source of raw materials rather
than buying them from third parties. Often, there are various tax advantages that accrue to a
company undertaking FDI. This can occur when the home country allows tax deduction on foreign
income, or when the recipient country allows tax deductions and benefits for organizations
incurring FDI in that country. Additionally, this can happen when the recipient country has a more
beneficial tax code than the home country.

44
 MUTUAL FUNDS

What Is a Mutual Fund?

A mutual fund is a type of financial vehicle made up of a pool of money collected from many
investors to invest in securities like stocks, bonds, money market instruments, and other assets.
Mutual funds are operated by professional money managers, who allocate the fund's assets and
attempt to produce capital gains or income for the fund's investors. A mutual fund's portfolio is
structured and maintained to match the investment objectives stated in its prospectus.

Mutual funds give small or individual investors access to professionally managed portfolios of
equities, bonds, and other securities. Each shareholder, therefore, participates proportionally in the
gains or losses of the fund. Mutual funds invest in a vast number of securities, and performance is
usually tracked as the change in the total market cap of the fund—derived by the aggregating
performance of the underlying investments.

ROLE OF MUTUAL INVESTMENT

The purpose of mutual funds, like any for-profit enterprise, is to provide a product or service people
need, for a fee. Mutual funds provide several important benefits to small investors: diversification,
professional management, strategy, low cost, access to specific markets and ease of investing.
Most importantly, they help investors achieve their financial objectives by making them money.
When you buy a mutual fund, your money is combined with the money from other investors, and
allows you to buy part of a pool of investments. A mutual fund holds a variety of
investments which can make it easier for investors to diversify than through ownership of
individual stocks or bonds.

A mutual fund is a pool of collective investment in stocks, bonds, and other short term investments.
The investors in mutual funds are individuals and institutions. This fund is usually managed by a
fund manager who charges money from the investors for taking care of their investments.

45
How Mutual Funds Work?
A mutual fund is both an investment and an actual company. This dual nature may seem strange,
but it is no different from how a share of AAPL is a representation of Apple Inc. When an investor
buys Apple stock, he is buying partial ownership of the company and its assets. Similarly, a mutual
fund investor is buying partial ownership of the mutual fund company and its assets. The difference
is that Apple is in the business of making innovative devices and tablets, while a mutual fund
company is in the business of making investments.

Investors typically earn a return from a mutual fund in three ways:

1. Income is earned from dividends on stocks and interest on bonds held in the fund's portfolio. A
fund pays out nearly all of the income it receives over the year to fund owners in the form
of a distribution. Funds often give investors a choice either to receive a check for distributions or
to reinvest the earnings and get more shares.

2. If the fund sells securities that have increased in price, the fund has a capital gain. Most funds
also pass on these gains to investors in a distribution.

3. If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase
in price. You can then sell your mutual fund shares for a profit in the market.

If a mutual fund is construed as a virtual company, its CEO is the fund manager, sometimes called
its investment adviser. The fund manager is hired by a board of directors and is legally obligated
to work in the best interest of mutual fund shareholders. Most fund managers are also owners of
the fund. There are very few other employees in a mutual fund company. The investment adviser
or fund manager may employ some analysts to help pick investments or perform market research.
A fund accountant is kept on staff to calculate the fund's NAV, the daily value of the portfolio that
determines if share prices go up or down. Mutual funds need to have with government regulations.

Most mutual funds are part of a much larger investment company; the biggest have hundreds of
separate mutual funds. Some of these fund companies are names familiar to the general public,
such as Fidelity Investments, The Vanguard Group, T. Rowe Price, and Oppenheimer.

46
 ADVANTAGES OF MUTUAL FUNDS

There are a variety of reasons that mutual funds have been the retail investor's vehicle of choice
for decades. The overwhelming majority of money in employer-sponsored retirement plans goes
into mutual funds. Multiple mergers have equated to mutual funds over time.

Diversification

Diversification, or the mixing of investments and assets within a portfolio to reduce risk, is one of
the advantages of investing in mutual funds. Experts advocate diversification as a way of
enhancing a portfolio's returns, while reducing its risk. Buying individual company stocks and
offsetting them with industrial sector stocks, for example, offers some diversification. However,
a truly diversified portfolio has securities with different capitalizations and industries and bonds
with varying maturities and issuers. Buying a mutual fund can achieve diversification cheaper and
faster than by buying individual securities. Large mutual funds typically own hundreds of different
stocks in many different industries. It wouldn't be practical for an investor to build this kind of a
portfolio with a small amount of money.

Easy Access

Trading on the major stock exchanges, mutual funds can be bought and sold with relative ease,
making them highly liquid investments. Also, when it comes to certain types of assets, like foreign
equities or exotic commodities, mutual funds are often the most feasible way-in fact, sometimes
the only way-for individual investors to participate.

Economies of Scale

Mutual funds also provide economies of scale. Buying one spares the investor of the numerous
commission charges needed to create a diversified portfolio. Buying only one security at a time
leads to large transaction fees, which will eat up a good chunk of the investment. Also, the $100
to
$200 an individual investor might be able to afford is usually not enough to buy a round lot of the
stock,

47
But it will purchase many mutual fund shares. The smaller denominations of mutual funds allow
investors to take advantage of dollar cost averaging.

Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are
lower than what an individual would pay for securities transactions. Moreover, a mutual fund,
since it pools money from many smaller investors, can invest in certain assets or take larger
positions than a smaller investor could. For example, the fund may have access to IPO placements
or certain structured products only available to institutional investors.

Professional Management

A primary advantage of mutual funds is not having to pick stocks and manage investments. Instead,
a professional investment manager takes care of all of this using careful research and skillful
trading. Investors purchase funds because they often do not have the time or the expertise to
manage their own portfolios, or they don't have access to the same kind of information that a
professional fund has. A mutual fund is a relatively inexpensive way for a small investor to get a
full-time manager to make and monitor investments. Most private, non- institutional money
managers deal only with high-net- worth individuals-people with at least six figures to invest.
However, mutual funds, as noted above, require much lower investment minimums. So, these
funds provide a low-cost way for individual investors to experience and hopefully benefit from
professional money management.

Variety and Freedom of Choice

Investors have the freedom to research and select from managers with a variety of styles and
management goals. For instance, a fund manager may focus on value investing, growth investing,
developed markets, emerging markets, income, or macroeconomic investing, among many other
styles. One manager may also oversee funds that employ several different styles. This variety
allows investors to gain exposure to not only stocks and bonds but also commodities, foreign assets,
and real estate through specialized mutual funds. Some mutual funds are even structured to profit
from a falling market (known as bear funds). Mutual funds provide opportunities for foreign and
domestic investment that may not otherwise be directly accessible to ordinary investors.

48
 DISADVANTAGES OF MUTUAL FUNDS

Liquidity, diversification, and professional management all make mutual funds attractive options
for younger, novice, and other individual investors who don't want to actively manage their money.
However, no asset is perfect, and mutual funds have drawbacks too.

Fluctuating Returns

Like many other investments without a guaranteed return, there is always the possibility that the
value of your mutual fund will depreciate. Equity mutual funds experience price fluctuations, along
with the stocks that make up the fund. The Federal Deposit Insurance Corporation (FDIC) does
not back up mutual fund investments, and there is no guarantee of performance with any fund. Of
course, almost every investment carries risk. It is especially important for investors in money
market funds to know that, unlike their bank counterparts, these will not be insured by the FDIC.

Cash Drag

Mutual funds pool money from thousands of investors, so every day people are putting money into
the fund as well as withdrawing it. To maintain the capacity to accommodate withdrawals, funds
typically have to keep a large portion of their portfolios in cash. Having ample cash is excellent
for liquidity, but money that is sitting around as cash and not working for you is not very
advantageous. Mutual funds require a significant amount of their portfolios to be held in cash in
order to satisfy share redemptions each day. To maintain liquidity and the capacity to
accommodate withdrawals, funds typically have to keep a larger portion of their portfolio as cash
than a typical investor might. Because cash earns no return, it is often referred to as a "cash drag."

High Costs

Mutual funds provide investors with professional management, but it comes at a cost—those
expense ratios mentioned earlier. These fees reduce the fund's overall payout, and they're assessed
to mutual fund investors regardless of the performance of the fund. As you can imagine,
in years when the fund doesn't make money, these fees only magnify losses. Creating,
49
distributing, and running a mutual
Fund is an expensive undertaking. Everything from the portfolio manager's salary to the investors'
quarterly statements cost money. Those expenses are passed on to the investors. Since fees vary
widely from fund to fund, failing to pay attention to the fees can have negative long- term
consequences. Actively managed funds incur transaction costs that accumulate over each year.
Remember, every dollar spent on fees is a dollar that is not invested to grow over time.

Diversification and Dilution

"Diversification"- a play on words is an investment or portfolio strategy that implies too much
complexity can lead to worse results. Many mutual fund investors tend to overcomplicate matters.

That is, they acquire too many funds that are highly related and, as a result, don't get the risk-
reducing benefits of diversification. These investors may have made their portfolio more exposed.
At the other extreme, just because you own mutual funds doesn't mean you are automatically.

Diversified. For example, a fund that invests only in a particular industry sector or region is still
relatively risky.

In other words, it's possible to have poor returns due to too much diversification. Because mutual
funds can have small holdings in many different companies, high returns from a few investments
often don't make much difference on the overall return. Dilution is also the result of a successful
fund growing too big. When new money pours into funds that have had strong track records, the
manager often has trouble finding suitable investments for all the new capital to be put to good
use.

One thing that can lead to diversification is the fact that a fund's purpose or makeup isn't always
clear. Fund advertisements can guide investors down the wrong path. The Securities and Exchange
Commission (SEC) requires that funds have at least 80% of assets in the particular type of
investment implied in their names. How the remaining assets are invested is up to the fund
manager. However, the different categories that qualify for the required 80% of the assets may be
vague and wide-ranging. A fund can, therefore, manipulate prospective investors via its title. A
fund that focuses narrowly on Congolese stocks, for example, could be sold with a far-ranging title
like "International High-Tech Fund." 50
Active Fund Management

Many investors debate whether or not the professionals are any better than you or I at picking stocks.
Management is by no means infallible, and even if the fund loses money, the manager still gets paid.
Actively managed funds incur higher fees, but increasingly passive index funds have gained popularity.
These funds track an index such as the S&P 500 and are much less costly to hold. Actively managed funds
over several time periods have failed to outperform their benchmark indices, especially after accounting for
taxes and fees.

Lack of Liquidity

A mutual fund allows you to request that your shares be converted into cash at any time, however, unlike
stock that trades throughout the day, many mutual fund redemptions take place only at the end of each
trading day.

Taxes

When a fund manager sells a security, a capital-gains tax is triggered. Investors who are concerned
about the impact of taxes need to keep those concerns in mind when investing in mutual funds.
Taxes can be mitigated by investing in tax-sensitive funds or by holding non-tax sensitive mutual
funds in a tax-deferred account, such as a 401(k) or IRA.

Evaluating Funds

Researching and comparing funds can be difficult. Unlike stocks, mutual funds do not offer
investors the opportunity to juxtapose the price to earnings (P/E) ratio, sales growth, earnings per
share (EPS), or other important data. A mutual fund's net asset value can offer some basis for
comparison, but given the diversity of portfolios, comparing the proverbial apples to apples can
be difficult, even among funds with similar names or stated objectives. Only index funds tracking
the same markets tend to be genuinely comparable.

51
 INVESTING IN GOLD

Gold is one of the most preferred investments in India. High liquidity and inflation-beating
capacity are its strong selling points, not to mention charm, prestige, and so on. Gold prices shoot
up when the markets face turbulence. Though there are phases when markets witness a fall in gold
prices, it won‘t last for long, and always makes a strong comeback.

1. Why Should You Invest in Gold?

Safety, liquidity, and returns are the three criteria most risk-averse investors look for before
investing. While gold meets the first two criteria without any hiccups, it doesn‘t perform poorly at
the last one either. Here is why you should invest in gold:

a. Investing in gold is worthwhile because it is an inflation-beating investment. Over time, the

return on gold investment has been in line with the rate of inflation.

b. Gold has an inverse relation with equity investments. For example, if the equity markets start
going down, gold would perform well. Considering gold as an investment option in your
investment portfolio will be a buffer to the overall volatility of your portfolio.

2. How to Invest in Gold?

The ‗golden question‘ here is – how does one invest in gold? Traditionally, it was by buying
physical gold in the form of coins, bullions, artifacts, or jewelry. However, there are newer forms
of gold investments nowadays, such as gold ETFs (exchange-traded funds) and gold mutual funds.

Gold ETFs are similar to buying an equivalent sum of physical gold but without the hassles of
having to store the physical gold. Hence, there is no risk of theft/burglary as the gold is stored in
Demit (paper) form. Gold funds involve investing in gold mining companies.

3. What are Gold Funds?

By investing in gold funds, you invest in stocks of companies operating in gold and gold-related
activities. Gold mutual funds include silver, platinum, and other metals in their investment basket.
A mutual fund manager on behalf of an asset management company manages the gold fund, unlike
gold ETFs. They make use of the fundamental trading analysis to buy and sell stocks to maximize
returns 52
 For investors. Returns from gold funds depend on market conditions to an extent. Gold mutual
funds eliminate the risk of returns considerably by distributing investments over a wide range of
investment options.

4. Gold Investment v/s Mutual Funds

Particulars Gold Investment Mutual Fund

Definition Gold is a precious high-value metal that is Pools investors‘ money in equities,
liquid in nature debts and other market instruments
to multiply the money

Management Investments are made and managed by the Experts manage the
investor investment professionally to create
wealth and reduce risks

Risk Physical carrying and storage of gold Investment in mutual funds can be
Involved involves high risks of theft and burglary made with safe and secure methods

Returns Gold does not pay any dividends Mutual funds yield substantial
returns to the investor

Investment Taking an average cost of Rs.31,000 per 10 Mutual fund investment is

Cost grams, one needs to carefully think before affordable and flexible. One can
making an initial investment in gold; start investments from Rs.1,000
considering the high price to begin investing

All investments have their own set of pros and cons. investing in physical gold needs safety and
security to preserve the same from theft. Investing in gold comes with a bunch of disadvantages;
the other viable investment option that one can consider is mutual funds. They are also more tax-

53
Efficient as compared to traditional investments, and have the potential to provide much higher
returns when the markets are favorable.

Role of banks in growth of Indian economy

Investment banking skill:

When it comes to understanding ―what do investment bankers do?‖ it‘s important to look at the
skills required for the job. An investment banker has a wide array of responsibilities, ranging from
conducting industry research to tracking financial trends and handling a pile of administrative
duties. The exact responsibilities depend on the firm, division, and industry category. Investment
bankers should expect to perform the following activities.

1. Research and analysis

Investment bankers spend hours analysing market reports and databases to get relevant
information to aid in decision-making. The research may range from finding and comparing stock
performances for several companies to building company profiles for reports. On a given day, they
may spend countless hours finding the latest technology in healthcare, the size of oil fields in
Nigeria, or studying emerging market economies in Asia.

2. Financial modeling & valuation

Doing company valuations, performing financial modelling, and calculating financial metrics
requires people who are good with numbers, and this is one of the responsibilities that investment
bankers should expect to fulfil on a daily basis.

An investment banker needs to be an Excel Power user, and know his or her way around valuation
multiples to predict company performance.

3. Preparing Investment Presentations

New investment bankers are required to prepare pitch book presentations that outline proposals,
benefits, risks, and timelines. They are required to do the majority of the work, from preparing
slides to making presentations, after factoring in comments and mark-ups from the seniors.

54
Investment analysts should be prepared for sudden and unreasonable deadlines for the pitches and
presentation materials.

4. Administrative Tasks

Apart from the usual responsibilities, investment bankers may be required to organize meetings,
make travel arrangements, prepare notes, print documents, edit reports, and send updates to team
members. On several occasions, they may find themselves making coffee, booking a restaurant for
a group dinner, fixing printers, and running other minor errands. Some investment analysts call
themselves
mini-admins due to the many administ rative roles that theyperform every day.

55
 CHAPTER 2. RESEARCH AND METHODOLOGY

OBJECTIVES
1. Exploratory research design is used to perform the study. The random sampling method used to
collect the primary data from the customers in Kaylan city .The sample of 57 respondents was
collected. Both primary and secondary data is used to perform the study. A questionnaires was
prepared for customer‘s survey. Introductory question included all multiple choice /multiple
response type of questions. Main body of the customer questionnaire included objective of the
research study. Clearly define the objectives of your project. Determine whether you want to
focus on a specific aspect of investment, such as FDI, infrastructure investment, or startup
funding, or if you want to provide a comprehensive overview of investment across various
sectors.
2.

The study falls under the category of descriptive research and uses survey method. Descriptive
research includes survey and fact finding enquiries of different kinds. As far as other information
is concerned I had visited the college library and met the people who are experienced in accounting
department and I also took the help of Google. And it helped me get the information about the
scope of investment in Indian economy

1. To find the role of investment in finance sector , business management ,and economic sector
2. To find out the various functions performed by the banks and companies
regarding investment.
3. To understand the role of investment in capital formation and economic growth.
4. To know the flow of investment in India.
5. To find out how investment banks increase the resources in the country.
6. To study the overall view of the Indian investment banks.
7. To study about the stock market.
8. To know about the how investment affects the Indian economy
9. To study of role of investment bank in growth of Indian company
10. To know the impact of foreign investment in Indian economy
11. To analyse how common people can invest in banks and companies.

56
SCOPE

Investment is allocating money towards assets in the hope of making our future better. Investment
are made with the view of earning returns, which grows your amount invested to a higher sum.

I have provided this information so that we can get accurate information about investing .it helps
us understand how investing in a foreign country. You can see the role of banks in investing
.there are many investment options in our country and I have explained the options from this
information .this project tries to tell you what steps you should take if you want to invest in the
future .
SIGNIFICANCE OF STUDY

Investment plays a key role in the economic growth of a country. Without making investments the
country would not progress. Investments expand infrastructure, enable production, increase
manufacturing, etc., all of which lead to asset creation and generation of employment.increase in
saving, use of increased saving for increased capital formation, use of increased capital formation
for increased saving for a further increase in capital formation constituted the strategy behind
economic growth. This study will enhance in knowing the importance of financial investment, what
percentage and where it has to be invested and also its relation to the growth of the Indian economy.
LIMITATIONS OF STUDY

The limitations of a study are its flaws or shortcomings which could be the result of unavailability
of resources, small sample size, flawed methodology, etc. No study is completely flawless or
inclusive of all possible aspects. Listing the limitations of your study reflects honesty and
transparency and also shows that you have a complete understanding of the topic.
Some limitations of the study are as follows:

 Could reach to a limited number of respondents.

 To conduct research we often required additional software which are sometimes not available,
due to that might not cover each and every aspect of the study.
 Due to limited time could not study each an 5d7ev ery facet of growing importance of Role of
investment
 SAMPLE SIZE

The sample size is a term used in market research for defining the number of subjects included in a
sample size. By sample size, we understand a group of subjects that are selected from the general
population and are considered a representative of the real population for that specific study. For the
present study, 30 college going students from Thane region were surveyed to collect primary data.
For secondary data, the researcher has collected data using Google Scholar, ProQuest that are
reliable websites.
Also from various other sources data was collected such asjournals, newspaper articles, research
papers which were published after 2016 were referred so that latest information can be studied.

SAMPLE DESIGN

The sample of the study is collected from Simple Random Sampling. Simple random sampling is known as a
sampling technique where every item in the population has an even chance and likelihood of being selected in
the sample. Here the selection of items entirely depends on luck or probability, and therefore this sampling
technique is also sometimes known as a method of chances. In short, in random sampling the complete list of
the universe istaken out but the selection is made ‘at random’ from this list. It is an ideal method in the
surveys of specialized nature.

ADVANTAGES OF SIMPLE RANDOM SAMPLING METHOD:

 It offers a chance to perform data analysis that has less risk of carrying an error.

 There is an equal chance of selection.

 It requires less knowledge to complete the research.

 It is the simplest form of data collection.

 Multiple types of randomness can be included to reduce researcher bias.

58
 DISADVANTAGES OF SIMPLE RANDOM SAMPLING METHOD:

 It is a complex and time-consuming method of research.

 Researchers are required to have experience and a high skill level.

 There is an added monetary cost to the process.

 No guarantee that the results will be universal is offered.

METHODS OF DATAANALYSIS
The data collected were classified and tabulated for analysis. The analytical tool used in this
study. The study employs the following analytical tools:
 Graphs and Pie Charts
 Ratio analysis
 Laptop with Internet Access
 MS Word 2007

59
DATA COLLECTION METHOD

Primary data:

Primary data are those which are collected for the first time and which could be original in
character, there are several methods of data collection, be particularly in descriptive researches.
This includes the following methods. Observation method, interview method, collection of data
through questionnaires, such as warranty cards, contract analysis, projective techniques, depth
interview and systems audits etc., a structured questionnaires as build in correlation with objective
of research and hypothesis . Thus data using questionnaire was collected from people.

The total sample size decided by researcher was 57 across Kaylan city. All clusters namely,
students, service class, business class, professional and others was considered for the same.
Research had made an attempt that the sample size was adequate, representative and estimator
with sufficiently high precision

Ihad collected the primary data by survey and questionnaire method.

60
 Secondary data

Secondary data represents a very powerful tool for the researcher as entire research work is
carried out on the basis of secondary data. It is nothing but the backbone of research work.
Secondary data

Is the one which has already been collected and analysed by someone else. Usually this analysed
data is available in the published from.

The concept regarding consumer behaviour and other literature were taken from the different
reference books and text books. The articles which were based on the related topic were taken
from newspaper and magazine which were published. Literature from the research journals were
taken on have an insight of the research problem so that the gap in this research was identified and
hypotheses was formed. Last but not least literature from website was also envied.

The data will be collected from experienced people. Thus the research adopted for the study will
be quantitative descriptive cross- sectional design to cover the various factors of the study.

SAMPLING UNIT:

The sampling unit was identified by the researcher before selection of a sample. A sampling unit
may a natural geographical unit such as sate, district, a village .it may be a social entity such as a
family or a school. It may also be an individual

I had collected the primary data by using 57 sampling units.

61
 CHAPTER 3. REVIEW OF LITERATURE

The literature review is a written overview of major writings and other sources on selected
topic. Sources covered in the review may include scholarly journals, articles, books,
government reports, Web sites etc.A literature review is a summary, description, and critical
evaluation of scholarly works on a specific topic. It involves researching, reading,
analyzing, evaluating, and summarizing scholarly literature.
A literature review can be a comprehensive summary of previous research on a topic. It can
also be a survey of scholarly sources on a specific topic. A literature review can help
determine the nature of research and provide a theoretical base. It can also provide an
overview of current knowledge, allowing the identification of relevant theories, methods,
and gaps in the existing research. A literature review can be part of an article, thesis,
dissertation, or grant proposal.
A good literature review doesn't just summarize the literature, but also discusses it
critically, identifies methodological problems, and points out research gaps. A systematic
review is a type of literature review that is undertaken in a systematic, scientific way. It
involves creating a research methodology of how searching is to be done in a systematic
and repeatable way.
A systematic review is focused on a specific research question. It tries to identify, appraise,
select, and synthesize all high-quality research evidence and arguments relevant to that
question. Systematic reviews are used in research and policymaking to inform evidence-
based decisions and practice. Producing a literature review is often a part of graduate and
post-graduate student work, including in the preparation of
a thesis dissertation or a journal article.
Literature reviews are also common in a research proposal or prospectus (the document that
is approved before a student formally begins a dissertation or thesis).

62
Mrs.V. Sasikala and Dr. A. Lakshmi (Jan 2023) have studied The Mutual Fund
Performance Between 2022 And 2023: Comparative Analysis. The paper entitled “comparative
analysis of mutual fund performance between 2022 & 2023. The paper was undertaken to know the
after meltdown period risks and returns of 2022 top hundred mutual funds and compare with 2023 top
hundred mutual funds published in Business today. The analysis of alpha, beta, standard deviation,
Sharpe ratio and R-squared are declare high, low, average, above average and below average of risks
and return of funds.

S. Palani and P. Chilar Mohamed (Dec 2022) have done study of Public and Private
Sector Mutual Fund in India. Development of capital market in a country is an important prerequisite
which only would enable industrial development, Business growth and there by contribution towards
economic development. Without any doubt it could be stated that economic development, measured
in the form of growth in GDP or NNP is one of the objectives of every country in the world. A well
integrated Financial System alone could hasten economic growth which it does through channelizing
productive resources towards industrial growth and development.

Jafri Arshad Hasan, (2022), has studied The Performance Evaluation of Indian Mutual Fund
Industry past, Present and Future. This article will discuss the past performance of the Indian mutual
fund industry and the pace of growth it achieved after being succumbed to regulatory changes by
SEBI, international factors and its non performance that affected the industry and its sentiments. It
will also analyse the future implications of the current changes that are being implemented by the
regulator.

Dr.S. Vasantha, Uma Maheswari and K.Subashini, (Sep 2020), Evaluating the
Performance of some selected open ended equity diversified Mutual fund in Indian mutual fund
Industry. The main objective of this research paper is to evaluate the performance of selective open
ended equity diversified Mutual fund in the Indian equity market. For the purpose of conducting this
study HDFC top 200 fund(g).Reliance top 200(g).ICICI Prudential top 200(g). Canara Robeco equity
diversified fund(g).Birla Sun Life frontline equity (g) mutual funds have been studied over the period
of 60 months data which is from January 2022 to December 2023.The analysis has been made on the
basis of Sharpe ratio, Treynor ratio and Jenson .

Dr. K. Mallikarjuna Rao and H. Ranjeeta Rani, have studied Risk Adjusted Performance
Evaluation of Selected Balanced Mutual Fund Schemes in India. In this paper, an attempt has been
made to study the performance of selected balanced schemes of mutual funds based on risk-return
relationship models and various measures. Balanced schemes of mutual funds are the ones which are
mostly preferred by Indian investors because of their balanced portfolio in equity and debt. A total of
10 schemes offered by various mutual funds

Dr. Sandeep Bansal, Deepak Garg and Sanjeev K Saini (2012), have studied Impact of
Sharpe Ratio & Treynor’s Ratio on Selected Mutual Fund Schemes. This paper examines the
performance of selected mutual fund schemes, th a6t3 the risk profile of the aggregate mutual fund
universe can be accurately compared by a simple market index that offers comparative monthly
liquidity, returns, systematic & unsystematic risk and complete fund analysis by using the special
reference of Sharpe ratio and Treynor’s ratio.

Dr. K. Veeraiah and Dr. A. Kishore Kumar (Jan 2014), conducted a research on
Comparative Performance Analysis of Select Indian Mutual Fund Schemes. This study analyzes the
performance of Indian owned mutual funds and compares their performance. The performance of
these funds was analyzed using a five year NAVs and portfolio allocation. Findings of the study
reveals that, mutual funds out perform naïve investment. Mutual funds as a medium-to-long term
investment option are preferred as a suitable investment option by investors.

Dr. Yogesh Kumar Mehta (Feb 2012), has studied Emerging Scenario of Mutual Funds in
India: An Analytical Study of Tax Funds. The present study is based on selected equity funds of
public sector and private sector mutual fund. Corporate and Institutions who form only 1.16% of the
total number of investors accounts in the MFs industry, contribute a sizeable amount of Rs.
2,87,108.01 crore which is 56.55% of the total net assets in the MF industry. It is also found that MFs
did not prefer debt segment.

Dr Surender Kumar Gupta and Dr. Sandeep Bansal (Jul 2012), have done a
Comparative Study on Debt Scheme of Mutual Fund of Reliance and Birla Sunlife. This study
provides an overview of the performance of debt scheme of mutual fund of Reliance, and Birla
Sunlife with the help of Sharpe Index after calculating Net Asset Values and Standard Deviation.
This study reveals that returns on Debt Schemes are close to Benchmark return (Crisil Composite
Debt Fund Index: 4.34%) and Risk Free Return: 6% (average adjusted for last five year)
.

Prof. V. Vanaja and Dr. R. Karrupasamy (2013), have done a Study on the Performance
of select Private Sector Balanced Category Mutual Fund Schemes in India. This study of performance
evaluation would help the investors to choose the best schemes available and will also help the
AUM’s in better portfolio construction and can rectify the problems of underperforming schemes.
The objective of the study is to evaluate the performance of select Private sector balanced schemes on
the basis of returns and comparison with their bench marks and also to appraise the performance of
different category of funds using risk adjusted measures as suggested by Sharpe, Treynor and Jensen.

E. Priyadarshini and Dr. A. Chandra Babu (2011), have done Prediction of The Net
Asset Values of Indian Mutual Funds Using Auto- Regressive Integrated Moving Average (Arima).
In this paper, some of the mutual funds in India had been modeled using Box-Jenkins autoregressive
integrated moving average (ARIMA) methodology. Validity of the models was tested using standard
statistical techniques and the future NAV values of the mutual funds have been forecasted.
64
Dr. Ranjit Singh, Dr. Anurag Singh and Dr. H. Ramananda Singh (August 2011),
have done research on Positioning of Mutual Funds among Small Town and Sub-Urban Investors. In
the recent past the significant proportion of the investment of the urban investor is being attracted by
the mutual funds. This has led to the saturation of the market in the urban areas. In order to increase
their investor base, the mutual fund companies are exploring the opportunities in the small towns and
sub-urban areas. But marketing the mutual funds in these areas requires the positioning of the
products in the minds of the investors in a different way. The product has to be acceptable to the
investors, it should be affordable to the investors, it should be made available to them and at the same
time the investors should be aware of it. The present paper deals with all these issues. It measures the
degree of influence on acceptability, affordability, availability and awareness among the small town
and sub-urban investors on their investment decisions.

Prof. Kalpesh P Prajapati and Prof. Mahesh K Patel (Jul 2012), have done a
Comparative Study On Performance Evaluation of Mutual Fund Schemes Of Indian Companies. In
this paper the performance evaluation of Indian mutual funds is carried out through relative
performance index, risk-return analysis, Treynor's ratio, Sharp's ratio, Sharp's measure, Jensen's
measure, and Fama's measure. The data used is daily closing NAVs. The source of data is website of
Association of Mutual Funds in India (AMFI). The study period is 1st January 2007 to 31st
December, 2011. The results of performance measures suggest that most of the mutual fund have
given positive return during 2007 to 2011.

65
 CHAPTER 4 : DATAANALYSIS AND INTERPRETATION

GENDER DISTRIBUTION OF THE RESPONDENT

GENDER NO. OF RESPONDENTS PERCENTAGE

Male 22 38.6%

Female 34 59.6%

Other 1 1.8%

OBSERVATION:

Response to my research questions were answered mostly by female that is 59.6%followed

by males that is 38.6% and others is 1.8%.
66
AGE DIFFERNCE BETWEEN RESPONDENT

AGE NO OF RESPONDENT PERSENTAGE

20 years 30 52.6%

20-40 years 27 47.4%

40-60 years 0 0

60 above 0 0

OBSERVATION:

According to above pie- chart the more number of 20 years age group respondent, response to my
research questions i.e. 52.6% and 20-40 years age group respond 47.4%.

67
QUALIFICATION RESPONDENT

QUALIFICATION NO. OF RESPONDENT PERCENTAGE

SSC 4 7%

HSC 8 14%

Under graduate 32 56.1%

Graduate 13 22.8%

OBSERVATION:

Response to my questions were answered mostly by under graduates that is 56.1% followed by
graduates 22.8% and the 14% response from the HSC students and then the SSC students
responded by 7%

68
Q. IN WHICH SECTOR DO YOU PREFER TO INVEST YOUR MONEY?

OPTIONS NO.OF RESPONDENT PERCENTAGE

Private sector 14 24.6%

Government sector 37 64.9%

Public sector 3 5.3%

Foreign sector 3 5.3%

OBSERVATION:

According to the above pie-chart the more number of investment is done in government sector.
I.e. 64.9%.while the less numbers in the public sector and foreign sector that is 5.3% and 5.3%
respectively. And 24.6% investment in the private sector.

69
Q WHAT ARE YOUR SAVING OBJECTIVE?

OPIONS NO.OF RESPONDENT PERDENTAGE

Children education 2 3.5%

Retirement 8 14%

Home purchase 25 43.9%

Children marriage 2 8.8%

Health care 17 29.8%

OBSERVATION:

According to the pie chart the people more respondent ,saving for the home purchase ,that is 43.9%
and 29.8% respondent response for the saving for health care .then the respondent answered for
retirement and children‘s education for 14% and 8.8% respectively .and the less response for the
children‘s marriage .

70
Q .WHAT ARE YOUR INVESTMENT OBJECTIVES?

OPTIONS NO .OF RESPONDENTS PERCENTAGE

Income and capital 7 12.3%

preservation

Long term growth 19 33.3%

Growth and income 30 52.6%

Short term growth 1 1.8%

OBSERVATION:

According to my research questions mostly 52.6% answered in favour of growth and income
.and 33.3% people responds for the long term growth. Less response for the income and capital
preservation and short term growth that is 12.3% and 1.8% respectively.

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Q. WHAT IS THE PURPOSE BEHIND INVESTMENT?

NO OF RESPONDENT PERCENTAGE
OPTIONS

Wealth creations 9 15.8%

Tax savings 3 5.3%

Earn returns 12 21.1%

Future expenses 33 57.9%

OBSERVATION:

According to the pie chart the more number of investments purpose is a future expenses i.e. 57.9%.
According to my research the people are more careful about their future. The peoples who are
invested their money for the purpose of wealth creation is 15.8%. And purpose behind earn return
is 21.1%. While the less numbers is tax savings i.e 5.3%

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Q DO YOU HAVE A FORMAL BUDGET FOR FAMILY EXPENDITURE?

OPTIONS NO OF RESONDENT PERCENTAGE

Yes 38 66.7%

No 19 33.3%

OBSERVATION:

According to my research questionnaires answered the more people have budget for family
expenditure i.e. 66.7%.the reason is that when people are earning money they are also plans or
budget of the family. While less number is 33.3% like, students people who are above the 60

73
Q. AT WHICH RATE DO YOU WANT YOUR INVESTMENT TO GROW?

NO.OF RESPONDENTS PERCENTAGE

OPTIONS

Steadily 11 19.3%

At an average rate 33 57.9%

Fast 13 22.8%

OBSERVATION:

According to the above pie chart the more number of respondent want their growth of investment
to be at an average rate i.e. 57.9%. While the less number of peoples want their growth of
investment to be steadily i.e. 19.3%. 22.8% peoples want their growth of investment to be fast.

74
Q. WHICH FACTOR DO YOU CONSIDER BEFORE INVESTING?

OPTIONS NO .OF RESPONDENTS PERCENTAGE

Safety of principle 34 59.6%

low risk 12 21.1%

High risk 0 0

Maturity period 11 19.3%

OBSERVATION:

According to the above pie chart the more number of factor before investing is a safety of principle
i.e. 59.6 % .responses for the factor of low risk and maturity period is a 21.1% and 19.3%
respectively. While the less number of factors before investing is high risk i.e. 0

75
Q. DO YOU INVEST YOUR MONEY IN SHARE MARKET?

OPTIONS NO. OF RESPONDENTS PERCENTAGE

No 32 56.1%

Yes 25 43.9%

OBSERVATION:

According to my research questionnaire the people who are answered NO is more i.e. 56.1% it
means the 32 people are not interested in investing their money in share market. While the people
who want to invested share market i.e. 43.9%.

76
Q. WHAT IS SOURCE OF INVESTMENT ADVICE?

OPTIONS NO.OF RESPONDENT PERCENTAGE

newspaper 2 3.5%

News channel 3 5.3%

Family 27 47.4%

Internet 18 31.6%

Advisor 7 12.3%

OBSERVATION:

According to my research questionnaires the more peoples had source of investment advice from
family and friends I.e. 47.4% .generally a people get advice from internet also i.e. 31.6%. From
the advisors get 12.3%, while the less number is of news channels and newspaper i.e. 5.3% and
3.5% respectively.

77
Q. DO YOU MAKE INVESTMENT YOURSELF? OR TAKE HELP OF INVESTMENT
BANKERS?

OPTIONS NO .OF RESPONDENT PERCENTAGE

By yourself 25 43.9%

Take help of investment 32 56.1%

bankers

OBSERVATION:

According to the above pie –chart the more number of peoples takes help of investment bankers
i.e. 56.1% ,while the less number of peoples invest themselves in market i.e. 43.9% , generally
this situation creates when respondent have specific knowledge about the investment

78
Q. HOW DID YOU COME TO KNOW ABOUT ADVISOR? (HIM/HER)

OPTIONS NO.OF RESPONDENT PERCENTAGE

By internet 17 29.8%

By friends and family 36 63.2%

By newspaper 2 3.5%

By news channel 2 3.5%

OBSERVATION:

According to the above pie chart the more number of people get to know about the advisor or
investment banker from friends and family i.e. 63.2%. 29.8% people know about advisor by
internet while the less numbers from newspaper and news channel i.e. 3.5%

79
Q. DO YOU FEEL INVESTMENT BANKERS ARE HELPFUL IN MAKING GOOD
INVESTMENT?

OPTIONS NO. OF RESPONDENT PERCENTAGE

Yes 19 33.3%

No 3 5.3%

May be 35 61.4%

OBSERVATION:

According to the above pie chart the more number i.e. 61.4% people not sure about that the
investments bakers are helpful or not .and the 33.3% people feel investment bankers are
helpful.5.3% people think that the investment bankers are not helpful in making good investment.

80
Q. DO YOU HAVE ANY FUTURE PLANS REGARDING INVESTMENT?

OPTIONS NO.OF RESPONDENT PERCENTAGE

Yes 19 33.3%

No 3 5.3%

Maybe 35 61.4%

OBSERVATION:

According to my research questionnaire mostly 56.1% respondents were thinking that investing in
future and 17.5% respondents answered no and rest of these not sure in investing in future and
they were not aware about the investment.

81
Q. WHICH SECTION WOULD YOU LIKE TO INVEST IN?

OPTIONS NO. OF RESPONDENT PERCENTAGE

Equity shares 31 54.4%

Bonds 11 19.3%

Preference shares 15 26.3%

OBSERVATION:

According to my research questionnaire mostly 54.4% answered Equity shares with above
statement. And 26.3% responses for the preference shares and less response for the bonds as
compare to other.

82
 CHAPTER 5 : FINDINGS, CONCLUSIONS AND SUGGESTIONS

FINDING

 Infrastructure Investment Impact: Investigate the impact of infrastructure investment on economic

development in India. Focus on specific projects or sectors such as transportation, energy, or
telecommunications, and assess how infrastructure development has contributed to regional growth, trade
facilitation, and competitiveness.
 Startup Ecosystem: Explore the role of investment in nurturing India's startup ecosystem. Examine the
growth of venture capital and private equity investments in Indian startups, and analyze their contribution to
innovation, job creation, and economic dynamism.
 Government Policies: Evaluate the effectiveness of government policies and initiatives aimed at attracting
investment in key sectors such as manufacturing, agriculture, and services. Assess the impact of policy
reforms such as Make in India, Digital India, and Startup India on investment inflows and economic
outcomes.
 Regional Disparities: Investigate regional disparities in investment and economic development across
different states in India. Compare investment patterns, infrastructure development, and growth indicators
between economically advanced states and less-developed regions to identify disparities and potential
policy interventions.
 Impact of COVID-19: Assess the impact of the COVID-19 pandemic on investment flows and economic
activities in India. Analyze how investment patterns have changed in response to the pandemic, and
evaluate government measures to revive investment and stimulate economic recovery.
 Sustainable Investment: Examine the growing trend of sustainable investment in India, including green
finance, renewable energy projects, and sustainable infrastructure development. Assess the environmental
and social impacts of sustainable investments and their contribution to long-term economic sustainability.
 Investment Climate: Survey investor perceptions and attitudes towards the investment climate in India.
Identify key factors influencing investment decisions, such as regulatory environment, ease of doing
business, access to finance, and political stability.
 Bilateral Investment Treaties (BITs): Investigate the role of Bilateral Investment Treaties (BITs) in
promoting investment flows between India and other countries. Analyze the impact of BITs on investor
protection, dispute resolution, and cross-border investment strategies.
 Future Outlook: Provide a forward-looking analysis of investment prospects in India, considering
emerging trends, policy reforms, and global economic dynamics. Assess potential risks and opportunities
for investment in key sectors and regions, and offer recommendations for policymakers and investors.

83
 CONCLUSION

To attain a strong economy the people of the country should work towards it and the primary
activity what they should concentrate is investment within the country making an achievement of
the same
.this article has made an attempt to understand clearly of what saving and investment is and its
importance in the economic growth and also it has tried to give some clear picture of different
factors to be considered before investing.

The advantages of investing in risky assets and consideration of inflation rate was also discussed
in the article with its affects and role in the economic growth. These factors will definitely help in
the development of the economy. Investment is allocating money towards assets in the hope of
making our future better. Investment are made with the view of earning returns, which grows your
amount invested to a higher sum.

As we know various investment options are available in India i.e. small savings schemes,
insurance, mutual funds, equity, real estate, etc., but its selection depends upon various factors.

The analysis and the interpretations very clearly shows that the investors have different views like
investment pattern by market movement , factors influencing their decision , frequency of
investment, alternative available and investment preferences truly influence their perception
towards different products and services of the company.

Thus, the study says that the Indian investment community has shown much interest in investing
in different financial products available in the market, better performance by the companies, liberal
rules and regulations by the authority like SEBI to protect the investors‘ interest and this process
will grow much more quickly in the future. There might be a chance that the perceptions of the
investors of different nature are varied due to diversity in social life, living pattern, income level
etc. That needs to be studied further

The facts with regard to the several factors such as relationship between age and risk tolerance
level of individual investor‘s etc. It has important implications for investment manager as it came
out with certain interesting facts of an individual investor. The individual investor still prefer to
invest in financial products which give risk free returns. Hence it concludes that Indian investors
even if they are of high income, well educated, salaried, independent are conservative investors
and prefer to play safe.
84
 SUGGESTIONS

 Analyze sector-specific investment trends and their impact on economic growth and employment
in India.
 Evaluate the relationship between Foreign Direct Investment (FDI) inflows and economic
development indicators in India.
 Investigate the dynamics of India's startup ecosystem and its contribution to innovation and job
creation.
 Assess the socio-economic benefits and sustainability of infrastructure investment projects in
India.
 Conduct a policy evaluation to identify reforms aimed at enhancing the investment climate in
India.
 Examine regional disparities in investment and propose strategies for promoting inclusive growth.
 Explore trends in sustainable investing and their impact on environmental and social outcomes in
India.
 Analyze the implications of global economic trends on investment patterns and economic
resilience in India.
 Develop strategies for managing investment risks and enhancing economic stability in India.
 Investigate investor perceptions and confidence levels to inform policies aimed at attracting
investment in India.

85
 BIBLOGRAPHY

1. www.google.com

2. www.investopedia.com
3. https://www.google.com/forms/about/
4. https://www.etmoney.com/blog/india-investment-report-2020-a-look-at-how-india-invests/
5. www.irdaindia.org
6. www.investmentbank.com

86
 QUESIONNAIRES

Q. IN WHICH SECTOR DO YOU PREFER TO INVEST YOUR MONEY?

1 .Private sector

2. Government sector

3. Public sector

4. Foreign sector

Q. WHAT ARE YOUR SAVING OBJECTIVES?

1 .Children education

2. Retirement

3. Home purchase

4. Children‘s marriage

5. Health care

Q. WHAT ARE YOUR INVESTMENT OBJECTIVES?

1. Income and capital preservation

2. Long term growth

3. Growth and income

4. Short term growth

87
Q. WHAT IS THE PURPOSE BEHIND INVETMENT?

1. Wealth creation

2. Tax savings

3. Earn returns

4. Future expenses

Q. DO YOU HAVE A FORMAL BUDGET FOR FAMILY EXPENDITURE?

1. Yes

2. No

Q. AT WHICH RATE DO YOU WANT YOUR INVESTMENT TO GROW?

1. Steadily

2. At an average rate

3. Fast

Q WHICH FACTOR DO YOU CONSIDER BEFORE INVESTING?

1. Safety of principle
2. Low risk
3. High risk
4. Maturity period

Q. DO YOU INVEST YOUR MONEY IN SHARE MARKET?

1. Yes

2. No

88
Q. WHAT IS YOUR SOURCE OF INVETSMENT ADVICE?

1. Newspaper

2. News channel

3. Family and friends

4. Internet

5. Advisors

Q. DO YOU MAKE INVESTMENT YOURSELF? OR TAKE HELP OF INVESTMENT

BANKERS?

1. By yourself

2. Take help of an investment bankers

Q. HOW DID YOU COME TO KNOW ABOUT ADVISOR? (HIM / HER)

1. By internet

2. By friends and family

3. By newspaper

4. By news channels

Q. DO YOU FEEL INVESTMENT BANKERS ARE HELPFUL MAKING GOOD

INVESTMENT?

1. Yes

2. No

3. May be

89
Q. DO YOU HAVE ANY FUTURE PLANS REGARDING INVESTMENT?

1. Yes

2. No

3. May be

Q. WHICH SECTION WOULD YOU LIKE TO INVEST IN?

1. Equity shares

2. Bonds

3. Preference shares

90
 Date: 05-03-2025

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Words 176
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0% Sentences 9

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Content Checked For Plagiarism

An investment is essentially an asset formed with the goal of allowing money to grow. The money generated
can be used for a variety of purposes, including meeting income shortfalls, saving for retirement, or fulfilling
specified commitments such as debt repayment, tuition payment, or the acquisition of other assets.

Investments can generate money for you in two ways. One, if you invest in a saleable asset, you may be able
to generate money through profit. Second, if you invest in a return-generating plan, you will get income from
the accumulation of gains. Investing is placing your resources into assets that increase in value or generate
income over time.

In financial terms, an investment is defined as an asset purchased with the purpose of enabling its value to
increase over time.

In finance, the benefit of investing is getting a return on your investment. The return could include a gain or
loss realized from the sale of a property or investment, unrealized capital appreciation (or depreciation), or
investment income like dividends, interest, rental income, and so on.

Matched Source

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