BY: PROF. MANOJ MISHRA YASH MEHRA SHREYA HANCHATE

USE OF INVESTMENT POLICIES

THEME: INNOVATIVE PRACTICES AND APPLICATION IN FINANCIALMANAGEMENT

TOPIC : USE OF INVESTMENT POLICIES

AUTHOR DETAILS:

Prof. Manoj Mishra- Contact No: : 9819010772Email ID :manojkumar321@rediffmail.comDesignation: Asst. Professor

ShreyaHanchate - Contact No: 9619380016Email ID: Shreyahanchate@gmail.comDesignation: Learner

YashMehra - Contact No: 9769165599Email ID :yashbmehra@gmail.comDesignation: Learner

COLLEGE: THAKUR COLLEGE OF SCIENCE AND COMMERCE , THAKUR VILLAGE ,

KANDIVALI-EAST , MUMBAI-400101

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Authors: Asst Prof. Manoj Mishra ,Tcsc

ShreyaHanchate ,Sybaf ,Tcsc

YashMehra , Sybaf , Tcsc

ABSTRACT:-

USE OF INVESTMENT POLICIES

Investment enables to put money in a variety of assets, eachwith the potential to increase in value at a level higher thanthe current interest rate. The key to invest is to make sureyou spread the risk to your money by investing in a number ofdifferent assets. Investment involves employment of funds withthe aim of achieving income or growth in values. There are awide range of investment policies, from the operation ofpassively-managed mutual funds with low fees to in-depthestate planning and consulting. Well-functioning financialmarkets are an essential part of any modern healthyeconomy. Through these markets the funds flow that allow forthe development of new products/ideas, the expansion of theproduction of existing products, and consumer spending on "bigticket" items like houses, cars, and college tuition. Withoutthese markets, firms may be unable to expand production orinvent new products and consumers will be unable to affordcertain products. There is not one financial market, butrather many markets, each dealing with a particular type offinancial instrument. But all financial markets performcrucial functions. By providing a mechanism for quickly andcheap buying and selling of securities, financial marketsoffer liquidity. Financial markets allow the interaction of

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buyers and sellers to determine the price and the price conveysimportant information about the prospects of the issuer. Finally,financial markets are the mechanism for buying and selling theinstruments that transfer risks between buyers and sellers. Thisresearch will help us to analyse the applications, innovationsand impacts of investment policies on public. Our aim isstudying its uses and people’s approach towards it. In thisresearch we have emphasized on both primary as well assecondary data.

KEYWORDS: Investment, Investments Policies , Financialmarkets.

OBJECTIVES

This research will help us to analyse the applications,innovations and impacts of investment policies on public.

Our aim is studying its uses and people’s approachtowards investment polices

To study the importance of Investment policies in thelives of people

To knowthe major type of investments people prefer toinvest in.

To know in depth about the concept and its relation withfinancial management.

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RESEARCH METHODOLOGY

This study has considered both the secondary data andprimary data.

The research study has focused on the uses of investmentpolicies and how investment helps to manage funds forpeople.

It covers the overview of the investment policy investorsin Mumbai, their view on investment policies, and theinnovations happening in various investment policies.

PRIMARY DATA

The primary data was collected by conducting the surveyand personal interviews with the people in selected area.

In this view an attempt was made to measure the people’sawareness about investment and its uses.

SECONDARY DATA

The secondary data has been mainly drawn from reliablesources such as from various newspapers, articles, dataavailable on web sites.

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INTRODUCTION

What is Financial Management?

Financial management refers to the efficient and effectivemanagement of money (funds) in such a manner as to accomplishthe objectives of the organization. It is the specializedfunction directly associated with the top management. Itincludes how to raise the capital, how to allocate it i.e.capital budgeting. Not only about long term budgeting but alsohow to allocate the short term resources like current assets.It also deals with the dividend policies of the share holders.

According to Dr. S. N. Maheshwari, “ Financial management isconcerned with raising financial resources and their effectiveutilisation towards achieving the organisational goals.”

What is investing?

Investing is the outlay of resources in order to gain moreresources. Resources may include anything of value, from moneyto shares in a company, or property, depending on where youwould like to invest and what you would like to achieve byinvesting.

Saving involves the outlay of money for later use. The maindifference between investment and saving is that withinvestment there is the expectation that you will receive morethan your initial outlay in return. Some people regardinvesting as a form of gambling because, although there is anexpectation of receiving more money than you outlaid, it isalso possible to lose money in investments.

As an investor, you become the lending party and the moneythat you outlay goes towards a 'borrower' who will make use ofit and pay back a return, much like the principal and interestinstallment a debtor might repay if they took out a loan. The

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borrower may be a business, such as a financial institution ora for-profit company, or an asset such as a property that youhope will return more money in the future.

TYPES OF INVESTMENTS:

How and where you invest your hard-earned money is animportant decision. When you invest, you buy something thatyou expect will grow in value and provide a profit, either inthe short term or over an extended period. You can chooseamong a vast universe of investment alternatives, from art toreal estate. When it comes to financial investments, mostpeople concentrate on three core categories: stocks, bonds,and cash equivalents. You can invest in these assetclassesdirectly or through mutual funds and exchange-traded funds(ETFs).they are explained below:

CashThis involves putting your money into a savings account, witha bank, building society or credit union. Your money may nothold its spending power if inflation is higher than theinterest rate.

BondsA bond is a loan to a government or company. In return for theloan, you receive interest and the amount you invested back atan agreed future date.

Shares

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You can invest in a company by buying shares.  In return youmay get a proportion of any profit the company makes(depending on how many shares you hold). Shareholders areentitled to have a say on the way the company operates,including voting at company general meetings.

PropertyBecoming a landlord is a well-known way to invest in property.The aim is to get an income from the rent you charge and thatthe house or flat increases in value after expenses so youmake a profit if you sell it.  Land and commercial buildings,such as shopping centers, are other forms of propertyinvestments.

Mutual fund

An investment vehicle that allows you to invest your money ina professionally-managed portfolio of assets that, dependingon the specific fund, could contain a variety of stocks,bonds, market-related indexes, and other investmentopportunities.

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Money market account

A type of savings account that offers a competitive rate ofinterest (real rate) in exchange for larger-than-normaldeposits.

Exchange-Traded Fund (ETF)

ETFs are funds – sometimes referred to as baskets orportfolios of securities – that trade like stocks on anexchange. When you purchase an ETF, you are purchasing sharesof the overall fund rather than actual shares of theindividual underlying investments.

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RATIONALE

Reasons for Investing

People invest in order to get more from their money in thefuture than its current value. The 'future' may be in a coupleof weeks or a couple of decades depending on the term ofinvestment and the investor's intent.

Some people use their investment as a form of saving so thatthey can eventually make a major purchase. In this case, theyexpect that while they are not using the money it is earningmore than if they had just put it aside. If, however, youinvested the money in a basic savings account, it would earninterest corresponding with the rise in inflation, meaningthat it would at least be worth the same amount as when youdeposited it. Investments are also a source of income,especially if you receive money on a regular basis from them.Many people own investment property that they rent out tobusiness or residential tenants, where the rent they receiverepresents all or part of their income. Shares in a companypay regular returns called dividends when the company makes aprofit. these are just a couple of examples where investorsoutlay money in order to earn an income.

Many people like to invest for retirement, which is acombination of investment as a type of saving and a type ofincome. In addition to compulsory superannuation, where thesuperannuation company invests money on your behalf and youreceive a return upon retirement, you might choose to makeprivate investments to boost your finances for retirement.Investors in superannuation want to ensure financial securitywhen they are no longer working and the extra return may meanthat they can maintain a reasonable standard of living.

In some cases you may wish to help others with your investmentas well as make money for yourself. This is especially true ofventures that require capital to start a business, such as if

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you invest in a company via shares or debentures, where acompany assumes a debt to the investor. In this instance, yourinvestment helps start the company in the hope that you willreceive a return if they succeed.

There are a number of reasons to invest in stocks and otherfinancial instruments:

To make money. Stocks can help shareholders gain a returnon their investment in two ways: with capital gains fromthe stock’s price rise; and with dividends, whichcompanies may distribute to shareholders depending onannual income. Investors in bonds are repaid throughinterest, typically paid annually.

Financial flexibility. You can buy or sell your sharesanytime during the trading day. They are liquid assets,unlike other investments such as real estate. Thefinancial structure of equities can give ownersflexibility to be able to sell when cash is neededquickly such as during financial emergencies.

Tax advantages. Stock investments and related investmentsmay offer tax rebates or other benefits. Tax benefitsdiffer by European country and are governed by laws thatare subject to change. While tax benefits for some mayprove important to some investors, they are generally notconsidered the primary reason for investing in equities.

Portfolio diversity. Generally, the more potentiallyprofitable an investment, the higher its risk. Stocks maygenerate huge earnings for a certain period of time, but

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can also present a high risk for financial loss. Whenbuilding investment portfolio, They also consider aninvestment horizon: The longer the investment period, themore attractive it can be to invest in relatively riskyassets, such as stocks, whose profits tend to exceedlosses over time.

To help spur a company’s or an economy’s growth. Byinvesting in company shares, individual investors cancontribute to their development; savvy investors oftenchoose companies that show great promise.

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HYPOTHESIS

Hₒ: People do not prefer to use investment policies to managetheir funds whether business or service class.

Ha: There is a use of Investment policies by maximum peoplewhether business or service people but are unaware of the newinnovations happening in the policies they have chosen toinvest in.

APPROACH

Sample Size: 100 respondants.

Sample Type: Businessmen or service people (mostly males).

Technique: Convenient and Random Sampling Method.

Method of data collection: Pre-structured Questionare byconducting personal interview (primary data).

Area covered : In Mumbai western suburbs: Malad, Kandivali,Borivali.

Prospective: The survey was conducted to know that how manypeople prefer investing to manage their funds , and also tostudy their knowledge about investment.

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DATA ANALYSIS : PRIMARY DATA

1. Do you prefer investing your money & which type ofinvestment do you prefer?

31%

36%11%

23%

InvestmentsShares

Property/Estate

Bonds

Some other Investment

2. Were you aware about the risks before investing?

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49%

19%

32%

Aware about Risks

Yes

No

Not completely

3. Are you aware of the Innovations happening in the type ofInvestment you have chosen to invest in ?

22%

26%

52%

Aware about Innovations

Yes

No

Not Completely

4. Does the Investment you are considering meet yourInvestment Objective & Needs ?

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47%

23%

30%

Investments Meet your Objective & Needs

Yes

No

Not Completely

FINDINGS / RESULTS

For most people, the only way to attain financial security isto save and invest over a long period of time. You just needto have your money work for you. As on conducting the survey,it was found that maximum respondents were males, consideringservice people or business owners all preferred investingtheir money in order to fulfil their future requirements, toget timely good returns on their income with minimum risk forthe efficient use of idle money. When they were interviewedand asked about the type of Investment they preferred , out of100 respondents maximum number with 36% people preferredinvesting in property or Real Estate Investment Funds as thelevel of risk was low as compared to Investments in StockMarket which was 31% due to high risk of loss. Somerespondents also preferred investing in some other investmentlike investing in Gold, LIC policies, Mutual funds and others. Around just 10% people prefer investing in Bonds (fig. 1).When they were asked on whether they were aware about therisks before investing, to which around 49% respondents knewabout the risks before and are comfortable with it. But there

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were also people who were not completely aware about the riskbefore investing and are later not completely comfortablewith the risk that comes with investments (fig. 2). To knowmore about their knowledge, they were further questioned thatwere they aware about the innovations happening in theinvestment policies they have chosen to invest in. To whichthere was a shocking response, where 52% respondents were notcompletely aware about them and also 26% of people were notaware at all about the innovations in the investment policies(fig. 3). While knowing about their knowledge and views on theuse of investments, We also wanted to know that does theinvestment they are considering meet their investmentobjective and needs to which there was a very positiveresponse by the respondents 47% of those agreed that thechosen investment by them does meet their investment objectiveand needs. (fig. 4).

People have chosen investments a better way to manage theirfunds and earn some Passive income, by putting their money towork. The respondents had a view that if the investmentpolicies if understood well, if applied in common practices itwill give good returns. The investment policies give them taxbenefits and also insure the money against turbulent swings inthe market.

Hence, the following survey satisfies our hypothesis Ha

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CONCLUSION

Everybody wants more money. It's pretty easy to understandthat people invest because they want to increase theirpersonal freedom, sense of security and ability to afford thethings they want in life. However, investing is becoming moreof a necessity. The days when everyone worked the same job for30 years and then retired to a nice fat pension are gone. Foraverage people, investing is not so much a helpful tool as theonly way they can retire and maintain their presentlifestyle. A prudent investor can have their money work forthem to earn more money, rather than having to earn that extramoney themselves.  This gives them the benefit of enjoying ahigher standard of living for roughly the same amount of work.People invest in many types of investments like stock, bond,certificate of deposit, commodity, real estate or anotherinvestment vehicle with the expectation of earning a positivefinancial return over time. The survey shows that majoritypeople investing are service people or businessmen and most ofthem prefer investing in property and shares.

The Investments in India have shown many innovations lately.The mutual fund industry has come up with severalinteresting innovations and measures in the last few years.Some of these include the use of mobile phones to carry outmutual fund transactions; allowing easier redemptions bylinking funds to a debit card; allowing investment in goldexchange traded funds even without a demat account as wellas bringing in a protection angle to investments to take onrivals in the insurance space.

Investments do give returns and benefits but they come alongwith calculated risks. In the survey it was found that manypeople are aware about the risks involved in investments. Apotential shareholder should take into account the risksinvolved before investing. . Due to intrinsic volatility instock prices, their risk can be higher than bonds. In

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trading in warrants, you can lose the entire value of yourinitial investment. In financial markets, many find the mostdifficult circumstance is not buying but selling. Investingin stocks or in financial products requires an investment inknowledge about financial products, markets and economies.

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SCOPE

CURRENT SCENARIO : The current market scenario has not onlymade investors jittery, but also sent many of them scurryingfor safer havens. A majority of investors, however, are stillin a fix over their next move. Should they still stay investedfor the long haul or make an exit with whatever losses orgains they have had in the equity market? Is this the righttime to start cherry picking from a longer-term perspective orshould one still wait in anticipation of the market going togive more attractive levels to get in? Although the answer mayvary from individual to individual, depending upon one's riskappetite and investment goal.

REAL ESTATE INVESTMENT: India Real Estate Investment hasrising demand in every sector like commercial, residential,retail, industrial and hospitality. But maximum demand isobserved in the booming IT sector. Real Estate Investment is asignificant feature of the Indian realty market under theinitiation of the investors and developers, leading to futurereal estate development in India. The development of privateownership of property real estate in India has become a majorarea of business with India Real Estate Investment playing thevital role. India Real Estate Investment involves minimum riskfor getting maximum return. Currently in the Real EstateInvestment. India in the year 2007 there has been aninteractive discussion on the dynamic growth of the growingIndia real estate market and the strong growth opportunitiesin rising sectors like financial services, pharmaceuticals,telecommunications, and biotechnology will further enhance thescope for India Real EstateInvestment

SECURITY INVESTMENT: Security investment scenario in India isalso bright. While several industries in India are grapplingwith the impact of global meltdown and recent Mumbai attacksby terrorists, the one industry which is predicted to registerprofits in near future is the Indian security industry. The

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private security business in India is expected tobecome ` 50,000 crore (` 500 billion) worth industry.

GOLD INVESTMENT: Is gold worth investing in at its currenthigh prices?

Investors were also betting on gold. According to AMFI data,value of gold holdings in gold exchange traded funds (ETFs)have gone up from Rs 5,463 crore to Rs 10,312 crore in thelast one year. India has been the leader when it comes toconsumption demand for the yellow metal. However, things arechanging. As price climbs, the Indian appetite for gold goesdown. According to data for 2012, India's gold demand forjewellery, and bars and coins fell by 29% in tonnage terms, itstood at 207.6 tonnes against 290.6 tonnes in 2011.

SUGGESTIONS

Some suggestions which may help you stay clear of the mess andchart out some winning strategies in these times of crisis andworld-wide panic:

Research properly before investing  Look at stock-specific opportunities Stick to your asset allocation Make the best use of investment policies in order to let

your money work for you Money cannot be earned within less time , thus invest for

a long period of time to get good returns in future. Make yourself flexible to market conditions.

REFERENCES

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www.moneysense.gov.sg www.investinginfunds.org www.investopedia.com www.slideshare.com www.Moneycontrol.com business.mapsofindia.com The economic times Articles.economictimes.timesofindia.com www.liffeinvestor.com www.investorguide.com www.businessstandard.com

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