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Chapter 8: Investment Products 1
CHAPTER 8
Investment Products and Markets: An Introduction
Chapter 8: Investment Products 2
FIXED INCOME INVESTMENTS Savings Account Post Office Savings Account Public Provident Fund Scheme National Savings Certificate Certificates Of Deposit Monthly Income Scheme Marketable Government Issues
Treasury Bills Cash Management Bills Certificates of Indebtedness Treasury Notes and Bonds Agency Issues
Chapter 8: Investment Products 3
Non-marketable Government Issues Dated Government Securities Special Securities
State Development Loans Inflation-protection Securities Capital-indexed Bonds Municipal Bonds
General Obligation Bonds Revenue Bonds
Public Sector Undertaking Bonds
FIXED INCOME INVESTMENTS (Contd.)
Chapter 8: Investment Products 4
FIXED INCOME SECURITIES (Contd.) Corporate Bonds
Debentures Guaranteed Bonds Mortgage Bonds Convertible Bonds Callable Bonds Junk Bonds Zero-Coupon Bonds
Bond Ratings Warrants & Rights Secured Premium Notes Commercial Paper
Chapter 8: Investment Products 5
TYPES OF PREFERRED STOCK
CumulativeConvertible ParticipatingCallable
Chapter 8: Investment Products 6
TYPES OF COMMON STOCK Blue Chip Non-blue Chip Growth Company Value Large-, Mid-, Small- cap Cyclical Company Defensive Income Speculative Unlisted Penny Miscellaneous
Chapter 8: Investment Products 7
MUTUAL FUNDS CLOSED-END
Issue a set number of shares and investors trade them on stock exchange
OPEN-END Create more shares when investors want
them
Chapter 8: Investment Products 8
MUTUAL FUNDS (Contd.)
ADVANTAGES Diversification Professional Portfolio Management Liquidity
Chapter 8: Investment Products 9
MUTUAL FUNDS (Contd.) TYPES OF MUTUAL FUNDS
Aggressive Growth Growth International/Global Growth and Income Fixed Income (Bond) Balanced/Equity Income Specialty/Sector Asset Allocation Money Market Index
Chapter 8: Investment Products 10
MUTUAL FUNDS (Contd.)
Fees and Expenses Load or Sales Charges Management Fees and Operating Expenses 52(4) and 52 (6) Fees Redemption Fees Trustee Fees
Expense Ratio Higher the ratio, better the manager must
perform to generate a desired return.
Chapter 8: Investment Products 11
READING MUTUAL FUND PROSPECTUS Investment Objectives and Policies Risk Factors Investment Restrictions Past Performance
Chapter 8: Investment Products 12
MUTUAL FUNDS FEES AND EXPENSES Load or Sales Charges Management Fees and Operating Expenses 52 (4) and 52 (6) Fees Redemption Fees Trustee Fees Expense Ratio Lock-in Period
Chapter 8: Investment Products 13
FEE REDUCTION STRATEGIES Select Right Asset Class Take Advantage of Fund Break Sign Letter of Intent Time the Liquidation Invest Fund Distributions Consolidate Investments Utilize Group Discounts Find a Seller
Chapter 8: Investment Products 14
MUTUAL FUND RATING SERVICES Morningstar India
Industry’s best resource for comprehensive, unbiased and accurate mutual fund information
Lipper India Leading global mutual fund information company analyzing
fund companies and financial intermediaries Standard & Poor’s
Leading global provider for mutual fund information and analysis
CRISIL Crisil has developed methodology based on global best practices Thomas Financial
Global provider of data, analysis, and information tools
Chapter 8: Investment Products 15
TRADITIONAL INDEX FUNDS Index funds hold shares in all the companies
that make up an index like S&P BSE 500 ADVANTAGES
Fewer Capital Gains Keeping Pace with Selected Index Painless Strategy
Lower Cost
Chapter 8: Investment Products 16
TRADITIONAL INDEX FUNDS (Contd.)
PITFALLS OF INDEX FUNDS Downside Risk Skewed Weighting Systems Divergence between Index Funds Tax Ramifications Narrow Focus Value Added by Money Managers Increased Volatility
Chapter 8: Investment Products 17
NEW HORIZON IN INDEX FUNDS iShares International Index Investing with
iShares Nifty Fifty Funds Exchange-traded Index Funds
Chapter 8: Investment Products 18
ANNUITY AND LIFEINSURANCE PRODUCTS Deferred Annuity Equity-Indexed Annuity Variable Life Insurance Variable Universal Life Unit-Linked Products
Chapter 8: Investment Products 19
SOPHISTICATEDINVESTMENT PRODUCTS
Real Estate Investment Trusts Investment Derivatives• Options• Option Spreads• Straddle, strip, strap, and strangle• Futures• Eurodollar Futures• Swaps
Chapter 8: Investment Products 20
SOPHISTICATED INVESTMENT PRODUCTS (Contd.) Short Selling Money Control Goldman Sachs Nifty Exchange-traded Scheme Goldman Sachs Liquid Exchange-traded
Scheme Goldman Sachs Gold Exchange-traded Scheme Exchange Traded Index Investing
Chapter 8: Investment Products 21
MARKET BENCHMARKS CNX NIFTY CNX NIFTY JUNIOR LIX 15 CNX 100 CNX 200 CNX 500 NIFTY MID-CAP 50 CNX MID-CAP INDEX CNX SMALL-CAP INDEX S&PBSE SENSEX S&P BSE 100 S&P BSE 200 S&P BSE 500 S&P BSE MID-CAP INDEX S&P BSE SMALL-CAP INDEX