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FINANCIAL BASICS

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What is Investment

Investment means putting yourmoney to work to earn more money

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Drivers of Investment

Objective

Risk Appetite

Time Horizon

Taxation

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Why should People Invest ?

Achieve Financial goals in life

Provision for an uncertain future

To meet Inflation

Earn return on idle resource

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Early investing

Why early investing?

Time to Grow

Concept of Compounding

Accumulation of Principal & Dividend

WHEN TO START INVESTING ?

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Invest early

Invest regularly

Invest for long term and not short term

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Investment options available in the Market

o Goldo Real Estateo Shareso Equityo Mutual Fundo Public Provident Fundo Government Bond & Securitieso National Savings Certificateo Post Office Savings Schemeo Insuranceo Banks Savings account & Fixed deposits

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Gold

Commodities like gold are a hedge against inflation.

Gold is a storehouse of value. When uncertaintyafflicts global markets, investors prefer to take refugein gold because in times of inflation (i.e. fall inpurchasing power), gold prevents erosion in thevalue of the purchasing power

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Real Estate

Real estate investment is traditionally consideredto be an effective hedge against inflation

High capital is required , Not for the smallinvestor

Liquidity is an issue

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Equity

Ownership in a companyListed and traded on marketsInvestment return depends on future profitability ofthe companyHigh growth and high liquidityHistorical return and risk are highest amongstinvestment optionsNot for the risk averse investorMore than the money, it involves investing a lot oftime and effort, which is beyond most lay investors

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Bonds

Bonds are long-term debt securities issued byGovernment of India or any of state Governments orundertakings owned by them or by developmentfinancial institutions

The two major categories of Bonds areGovernment BondsCorporate Bonds

They are meant especially for investors withrelatively less appetite for risk.

Bonds are suitable for regular income purposes

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Fixed Deposits

A specific sum of money deposited in a financialinstitution for a fixed term earning a pre-agreed

interest rate.

A Fixed Deposit is like loaning the bank yourmoney. In return, they pay you interest.

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Public Provident FundThis is a 15 year deposit product of government offeredthrough banks. Thereafter this can be extended by aperiod of five-five years

Current interest rate is 8%

Tax benefit under section 80C of income tax 1961 areavailable

Both interest receipts and withdrawal of principalexempt from tax

Limited liquidity is available. Investors can draw up-to50% of their 4 th year balances, from the 7 th yearonwards

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National Savings Certificate (NSC)

o Scheme maintained by the Govt. and sold through Post

Offices

o Denominations of Rs. 100, 500, 1000, 5000 and 10,000o Can be purchased singly or jointly and also for minors

o Lock-in period of 6 years

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Kisan Vikas Patra & Indra Vikas Patra

Instruments with fixed interest issued by centralgovernment.

Sold by post offices

Investor identity is protected

Investment in cash is possible

Interest is taxable

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