Chapter 5.2Alternative Forms of Investment

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

Documents

Chapter 5.2Alternative Forms of Investment