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7/29/2019 Chapter 5.2Alternative Forms of Investment
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Alternative forms of Investment
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Government securities
Promissory notes
Stock certificates
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Life insurance
Protection
investment
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Kinds of life policies
Whole life policy
Ordinary whole life policy
Limited payment whole life policy Single payment whole life policy
Special whole life policy
Convertible whole life policy
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Endowment policy
Ordinary
Pure Optional
Double
Anticipated Endowment combined with whole life policy
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Fixed term marriage endowment policy
Education endowment policy Joint-life endowment policy
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Term insurance
Straight term
Convertible Decreasing term
Renewable term
Yearly renewable
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New policies of LIC
Jeevan mitra
New jan raksha
Jeevan sathi
New money back policy
Bhavishya jeevan
Bima sandesh
Jeevan chhaya
Jeevan griha plan
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Jeevan sukanya
Jeevan akshy
Jeevan surabhi Jeevan sanchay
Jeevan asha
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Private insurance companies
Allianz Bajaj
Birla sun-life HDFC Standard
ICICI Prudential
ING VYSYA
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UTI Unit trust of India
Safety
Growth in dividends liquidity
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UTI SCHEMES
Unit scheme 1992
Capital growth unit scheme 1992 (master
gain)
Capital growth unit scheme 1991 ( GVS Master
gain)
Master equity plan 1991
Mutual fund unit scheme 1986 master share
Unit growth scheme 2000 (UGS 2000)
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Deferred income unit scheme DIUS 1991
Income unit scheme (IUS)
Seven year monthly scheme (MSIG)
Monthly income unit scheme (MIUS)
Bhopal gas victims monthly income plan 1992
Institutional invetsors special fund unit scheme
(IISFUS 1993) Scheme for charitable and religious trusts and
registered socities (CRTS 81)
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SENIOR CITIZEN PLAN 1993
GRIHALAKSHMI UNIT PLAN 1994 CHILDREN COLLEGE AND CARRIER FUND UNIT
PLAN (CCF 1993)
Rajlakshmi unit scheme 1992
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Commercial Banks
Savings bank account
Current accounts Recurring deposits
Fixed deposit
Mutual fund schemes
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Provident Fund
Statutory provident fund
Recognized provident fund Unrecognized provident fund
Public provident fund
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Post office schemes
Savings account
Recurring account Ten-year cumulative term deposit
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National saving schemes
GOI for economic development.
Operated by post offices.
Can be used as collateral for taking loans
Gets 12% compounded interest half-yearly.
Saving deposits, fixed deposits, recurringdeposits, monthly income with fixed investments,
national saving certificates, savings certificate,Indira Vikas Patra (IVS), Kisan Vikas Patra (KVS),National Saving Scheme (NSS)
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Fixed deposit schemes in companies
Deposit for a short term and higher interest than thecommercial banks.
Offered by public limited companies. Offered through news paper advertisement.
Fixed deposit scheme of Rs. 2000 is payable at Rs.3110on maturity after 3 years, if it is a cumulative deposit.
If it is non-cumulative, then interest is paid at 12.5%per annum in the first year, per annum for 2 years and15% per annum for 3 years.
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New instruments
Zero coupon bonds
Loyalty coupons Floating rate bonds
Warrants
Discount bonds Flexi bonds
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Financial engineering securities
Participating debentures
Convertible debentures redeemable at premium
Zero interest fully convertible debentures (FCD)
Floating rate bonds (FRB)
Zero interest coupon bonds
Deep discount bonds
Regular income bonds
Retirement bonds
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Non-Bank Finance Companies
NBFCs, Chit funds, MBFCs(NIDHIs)
Alternative avenue of investment in fixeddeposits.
Investor has to evaluate the rating, net worth
and deposits allowed for NBFCs.
There is a ceiling on the rate of interest at
16%.
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Mutual Funds
With exception of UTI, all MFs are under theregulatory framework of SEBI.
MFs are subject to market risk.
Even with risk, they are able to perform betterthan individual securities because a carefulselection of securities over a diversified portfoliocovering a large number of companies and
industries is made and the portfolio is constantlyrevised.
There are equity, debt and balanced MF Schemes.
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Assets of high intrinsic value, not
easily sold
Purchase value is high. People with
high income can think of investing inthese valuable investments.
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1. Land and House property
Also called Real Estate.
Investment helps in Hedging inflation rates, asthe investment is tied up for a minimum of 5
years. Cannot be sold at a very short notice.
Supervision of property is important.
If rented out requires maintenance.
Involves lot of pressures like capital gains tax andannual property tax.
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2. Gold
One of the most valuable assets in any economy.
Holding gives a sense of security and fixed asset.
Used as a hedge against inflation.
Investment can be in the form of gold coins, goldbars and gold jewellery.
It has been found that rate of return of goldmoves in the opposite direction with the rate ofreturn of common stocks.
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3. Silver
Silver is sold in form of weight by kilograms in India.
Silver may be owned in the form of coins, utensils, glasses,bowls, plates, trays or jewellery.
This is a hedge during inflation.
Price keeps on rising.
On resale wastage will be deducted, as expenses on polishand nonsilver used in it. Investor normally gets 60% of thevalue.
Silver coins fetch better resale value.
Silver bars are legal and can be sold at the price recordedfor pure silver.
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4. Coins and stamps collection
Old coins have antique value and can be sold
for higher prices.
Old stamps also increase in value.
Value increases only after holding them for a
large number of years.
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5. Diamonds
Diamonds purchased in raw form and through awholesaler may be the best investment potential.
Diamond is valued in carets.
Diamond is judged in terms of weight, size, shapeand luster.
Jeweller decides the value of the diamondaccording to his own judgement, the marked up
retail price is also very high.
Diamonds should be a long term investment.
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6. Antiques
Antiques may be paintings, coins, stamps, flowervases, watches or cars.
Sometimes sale of only one piece makes a
fortune. Demand more and supply rare.
Advantage is investor can sell it at any price thathe propounds, but very difficult to price antiques.
Antiques are very risky for long holding periodinvestment.
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Thankyou