INVESTMENT ALTERNATIVES 1

• INVESTMENT ALTERNATIVES 1
  FUNDAMENTAL OF INVESTMENT
  SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT
• MEANING
• INVESTMENT IS THE EMPLOYMENT OF FUND WITH THE AIM OF ACHIEVING ADDITIONAL INCOME OR GROWTH IN VALUE, INVESTMENT INVOLVE WAITING FOR REWARD,IT INVOLVES THE COMMITMENT OF RESOURCES WHICH HAVE BEEN SAVED OR PUT AWAY FROM CURRENT CONSUMPTION IN THE HOPE THAT SOME BENEFIT WILL ACCRUE.

1. INVESTOR INVEST THEIR SURPLUS MONEY INTO VARIOUS AVAILABLE ALTERNATIVES AS PER THEIR RISK APPETITE AND AVAILABLE FUNDS.
2. RISK AVERSE INVESTOR PREFER TO INVEST IN SAFE AVENUE FROM WHERE THEY GET REGULAR FIXED INCOME
3. RISK TAKING INVESTOR PREFER TO INVEST IN STOCKS,DEBENTURES AND OTHER EXCHANGE TRADED FUNDS TO EARN HIGHER RATE OF RETURN

• INVESTMENT AVENUES

1. VARIABLE INCOME SECURITIES
2. FIXED INCOME SECURITIES
3. DEPOSITS
4. TAX SAVING SCHEMES
5. MUTUAL FUNDS
6. OTHER INVESTMENT ALTERNATIVE

• VARIABLE INCOME SECURITIES
• EQUITY SHARES: REFERRED AS COMMON STOCK OR ORDINARY SHARES, THE CAPITAL REPRESENTED BY THE ORDINARY SHARES IS CALLED SHARE CAPITAL OR EQUITY CAPITAL. IS ASLO KNOWN AS VARIABLE INCOME SECURITY. THE HOLDERS OF EQUITY ARE THE LEGAL OWNERS OF THE COMPANY. THEY ARE ENTITLED TO DIVIDENDS AFTER THE INCOME CLAIMS OF OTHERS HAVE BEEN SATISFIED. SIMILARLY WHEN THE COMPANY IS WOUND UP THEY CAN EXERCISE THEIR CLAIMS ON ASSETS AFTERS THE SATISFACTION OF OTHER’S CLAIMS. THE EQUITY SHARES HAS CERTAIN ADVANTAGE:-

1. CAPITAL APPRECIATION
2. LIMITED LIABILITY
3. FREE TRADE ABILITY

• THE STOCK MARKET CLASSIFIES SHARES INTO:-

1. GROWTH SHARES:- THE STOCKS THAT HAVE HIGHER RATE OF GROWTH THAN THE INDUSTRIAL GROWTH RATE IN PROFITABILITY
2. INCOME SHARES:-BELONGS TO THE COMPANIES THAT HAVE COMPARATIVELY STABLE OPERATIONS AND LIMITED GROWTH OPPORTUNITIES.
3. DEFENSIVE SHARES:- ARE RELATIVELY UNAFFECTED BY THE MARKET MOVEMENT
4. CYCLICAL SHARES : THE BUSINESS CYCLE AFFECTS THE CYCLICAL SHARES. THE UPWARD AND DOWNWARD MOVEMENT OF THE BUSINESS CYCLE AFFECT BUSINESS PROSPECT OF CERTAIN COMPANIES
5. SPECULATIVE SHARES:-SHARES THAT HAVE LOT OF SPECULATIVE TRADING . DURING BULL AND BEAR PHASES OF THE MARKET,THESE KINDS OF SHARES ARE DEALT.

• FIXED INCOME SECURITIES

1. PREFERENCE SHARES:HYBRID SECURITY BECAUSE IT HAS MANY FEATURES OF BOTH ORDINARY AND DEBENTURES.
2. SIMILAR TO EQUITY IN THAT:-
3. THE NON PAYMENT OF DIVIDENDS DOES NOT FORCE THE COMPANY TO INSOLVENCY
4. NOT DEDUCTIBLE FOR TAX
5. SIMILAR TO DEBENTURES
6. DIVIDEND RATE IS FIXED
7. DO NOT SHARE IN THE RESIDUAL EARNING
8. HAVE CLAIMS ON INCOME AND ASSETS PRIOR TO ORDINARY SHAREHOLDERS
9. DO NOT HAVE VOTING RIGHTS

• DEBENTURES AND BONDS
• DEBENTURES ARE THE DEBT INSTRUMENT USED BY THE CORPORATE FOR RAISING LONG TERM AS WELL AS SHORT TERM DEBT FROM THE INVESTOR. BY ISSUING DEBENTURES COMPANIES PROMISE TO PAY A SPECIFIED AMOUNT OF MONEY WITH PERIODIC INTEREST PAYMENT AT SPECIFIED DATE. THEY ARE THE CREDITORS OF THE COMPANY. THE INTEREST ON DEBENTURES MAY BE FIXED OR FLOATING. THEY OFFER HIGH RETURN THAN OTHER FIXED INCOME SECURITIES.
• FEATURES OF DEBENTURES:-

1. DEBENTURES ARE ISSUED IN THE FORM OF CERTIFICATE OF INDEBTEDNESS UNDER COMMON SEAL OF THE COMPANY
2. FIXED FACE VALUE AND FIXED MATURITY DATE
3. DO NOT HAVE VOTING RIGHT
4. COUPON RATE OR INTERST RATE IS FIXED AND INTEREST IS TAX DEDUCTIBLE

• CLASSIFICATION OF DEBENTURES

1. SECURED DEBENTURES: AGAINST THE ASSETS OF THE ORGANIZATION
2. UNSECURED DEBENTURES:-NOT SECURED AGAINST THE ASSETS OF THE COMPANY
3. CONVERTIBLE DEBENTURES: AFTER CERTAIN PERIOD AND AT SPECIFIED RATE THEY ARE CONVERTED INTO EITHER EQUITY SHARES OR PREFERENCE SHARES
4. NON CONVERTIBLE DEBENTURES:-FIXED INCOME DEBT INSTRUMENTS ISSUED BY THE COMPANY
5. REDEEMABLE DEBENTURES:-ISSUED FOR A FIXED MATURITY PERIOD. CAN BE REDEEMED EITHER AT PAR OR AT PREMIUM
6. IRREDEEMABLE DEBENTURES:PAID WHEN WILL BE CLOSED OR AT THE TIME OF WINDING UP OF THE COMPANY

• NATIONAL SAVING CERTIFICATES: IS DESIGNED FOR GOVERNMENT EMPLOYEES,BUSINESS MEN AND OTHER SALARIED CLASS WHO ARE INCOME TAX ASSESS. NATIONAL SAVING CERTIFICATES ARE AVAILABLE AT TWO MATURITY PERIODS. FOR 5 YEARS AND 10 YEARS. INTEREST RATE DIFFERS IN BOTH THE SCHEMES.MINIMUM INVESTMENT IS 100 AND NO MAXIMUM LIMIT. AVAILABLE IN THE DENOMINATION 100/500/1000/5000/10,000/ AND INTEREST ON THEM IS TAXABLE.
• GOVERNMENT SECURITIES:-

1. THE SECURITIES ARE ISSUED BY THE CENTRAL,STATE GOVERNMENT AND QUASI GOVERNMENT AGENCIES
2. ALSO KNOWN AS GILT EDGED SECURITIES
3. GUARANTEED SECURITY,SECURED FINANCIAL INSTRUMENT. ALSO CALLED RISK FREE
4. THE RATE OF INTEREST IS LOWER AS RELATIVELY BECAUSE OF THEIR HIGH LIQUIDITY AN SAFETY
5. CAN BE SOLD EASILY IN THE SECURITY MARKET
6. THE GOVERNMENT SECURITIES ARE TRADED ON OVER THE COUNTER/THROUGH NEGOTIATED DEALING SYSTEM

• MONEY MARKET SECURITIES:-

1. TREASURY BILLS
2. COMMERCIAL PAPER
3. CERTIFICATE OF DEPOSIT

• TREASURY BILLS ALSO KNOWN AS T –BILLS ARE THE SHORT TERM MONEY MARKET INSTRUMENT,ISSUED BY THE CENTRAL BANK ON BEHALF OF THE GOVERNMENT. THEY DO NOT YIELD ANY INTEREST BUT ISSUED AT DISCOUNT AT ITS REDEMPTION PRICE AND REPAID AT PAR WHEN IT GETS MATURED,SAFEST INVESTMENT INSTRUMENT. DATE OF ISSUE IS PREDETERMINED AS WELL AS THE AMOUNT.

1. ISSUED EITHER IN PHYSICAL FORM AS PROMISSORY NOTE OR DEMAT
2. INDIVIDUALS,FIRMS,COMPANIES,TRUST,BANKS INSURANCE COMPANIES,PROVIDENT FUNDS,STATE GOVERNMENT AND FINANCIAL INSTITUTIONS ARE ELIGIBLE
3. AVAILABLE BOTH IN PRIMARY OR SECONDARY MARKET
4. THE MINIMUM AMOUNT OF BID IS 25,000

5. 91 DAYS T BILLS AUCTIONED ON WEDNESDAY DAY AND PAYMENT IS MADE ON FOLLOWING FRIDAY
6. 182 T BILLS:-AUCTION IS ON WEDNESDAY OF NON REPORTING WEEK AND REPAID ON THE FOLLOWING FRIDAY WHEN THE TERM EXPIRES
7. 364 DAYS T BILLS AUCTION IS ON WEDNESDAY OF NON REPORTING WEEK AND REPAID ON THE FOLLOWING FRIDAY WHEN THE TERM EXPIRES
8. NO DEDUCTION OF TAX AT SOURCE,HIGH LIQUIDITY AND TRADE ABILITY,ZERO RISK AND GOOD RETURN