Investment Alternatives

Mr. Sunil Mashru

Asst. Professor

Financial Instruments Categories

Non Marketable financial Assets -:

Bank Deposits Post office Deposits Company Deposits Provident fund Deposits

Equity Shares Preference Shares Life Insurance

Conti..

Bonds:

Govt. Securities Saving Bonds Govt. Agency Securities PSU bonds Debenture of Private Sector Companies

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Money Market Instruments:

Treasury Bills Commercial Paper Certificate of Deposit Equity Schemes Debt Schemes Balanced Schemes

Mutual Funds:

Continue.

Real Estate:

Agriculture Land Semi-urban Property Commercial Property Options Futures Gold And Silver Precious Stones Art Objects

Financial Derivatives:

Precious Objects:

Non Marketable Financial Assets

Bank Deposits: Opening a bank a/c and depositing money in it. 3 types: Current a/c does not earn int. but other forms do. For fix deposits if deposit period is less than 90 days, int. is paid on maturity; otherwise quarterly. Most bank calculate int. on the minimum deposit between the 10th and the last date of the month.

Post Office Time Deposits

Deposits can be made in multiples of Rs.50 without any limit. Interest rates are higher than bank deposits and is calculated half-yearly and paid annually. No withdrawal is permitted for up to six months. Withdrawals made: 6-12mths no int. payable 1yr- before term of deposits: paid for the period the deposit is held, subject to penal deduction of 2%. It can be Pledge

Monthly Income Scheme of Post office

The term of the scheme is 6yrs. Minimum amt of invest. Is 1000 and maximum is 300000 in a single a/c and 600000 in joint a/c. Int. rate payable is 8% monthly and a bonus of 10% is payable on maturity No TDS Facility of premature withdrawal after 1yr, with 5%deductin before 3 yrs.

Kisan Vikas Patra

The min. amt of invest Rs 1000.,maximum no limit. Investment doubles in 8ys and 7 mths Compound int. rate of 8.4%. Can be pledged as a collateral security for raising loans. Withdrawal facility after 2.1/2 yrs.

National Saving Certificate

Issued at post office It comes in the denomination of Rs. 100, 500, 1000, 5000, 10,000. It has a term of 6 yrs. The compound rate of return is 8.16%. Can be deducted before computing the taxable income under Sec 80 c. No TDS Can be pledged as a collateral for raising loans.

Company Deposits

Fix deposits by finance cos are regulated by the RBI. For Mfg. Co. the term of deposits can be 1-3 yrs and for NBFCs it is between 25mths to 5yrs. Represent unsecured loans. Have to necessarily credit rated. No income tax is deducted if the int. income is upto 5000 in a financial year.

Money Market Instruments

Treasury Bill They Represent obligation of GoI. Primary tenure like 91 days and 364 days. Sold on an auction basis every week in certain denominations by RBI. Are Sold at Discount and Redeemed at par. Nil Credit risk and negligible price risk.

Certificate of Deposits

Represent short term deposits, transferable from one to another. Banks and FIs are the major issuers The principle investors are banks, FIs, corporates and MFs. Maturity of 3mts to 1yr. Offers higher rate of int. than Treasury Bills or term deposits.

Commercial Papers

Short term unsecured promissory note issued by firms by financially strong companies. Has maturity period of 90 180 days. Sold at discount and redeemed at par.