SAVE YOUR FORTUNE

SAVE ! SAVE ! SAVE !


In Modern world it is very important to save your hard earned money for your better future. Our generation has the habit of spending most of our hard earned salary on our necessities and luxuries. Due to this people forget to save some part of their money for a secure future.
I would like to give some schemes and places where you could invest your fortune to save it as well as gradually increase it.

Postal savings schemes
Life Insurance (LIC)
Public Provident fund (PPF)
Stock Market
Mutual Funds

Postal savings schemes :-

Postal saving schemes are run by the government of India. These are most secure means of saving your money.
These schemes give you an annual interest of 8% of the invested amount in various schemes.

Different schemes are:
National savings certificates (NSC)
Kisan vikas patra (KVP)
Monthly Income scheme (MIS)
Recurring deposits (RD)


National Savings certificate:-

NSC is a scheme where you can invest certain amount for a fixed period of 6 years.
You get an interest of 8 % per annum for 6 years and the total interest plus original amount is returned back at the end of 6 years.
This investment made in NSC is tax free for a limit of Rs.1 Lakh

If you invest an amount of Rs.10,000/- you get an amount of Rs.16,010/- at the end of 6 years.



Kisan Vikas Patra:-

KVP is a scheme where you get double your invested amount after a certain period of time.

This period is calculated according to the interest, i.e. 8%.
The period is 8 years and 7 months.
If you invest an amount of 10000 then you will get back 20000 at the end of 8 years and 7 months.



Monthly Income Scheme:-

MIS is a scheme in which you have to invest a certain amount for a period of six years and you get the interest on a monthly basis.
At the end of the six years you will get back the original amount you had invested as well as the interest of 72 months.
If you invest Rs.1,50,000/- in MIS, You get an interest of 1000 per month for 72 months.
Hence the total amount you will get is Rs.2,22,000/- at the end of 6 years.
The advantage of this scheme is that you are allowed to take your interest at the end of every month.


Recurring Deposit:-

RD is a scheme in which you can invest certain amount every month for five years to get the total amount you have saved plus the interest on that amount.

Therefore if you save Rs.1000/- per month in RD then you will get Rs.72,890/- at the end of five years.

STOCK MARKET

What is stock market and how it works?
What is stock market?Stock market is just like the other markets but here the stocks of the different companies are the only entity available for buying or selling. Here the bargaining takes place for the right price is also similar to our normal market and as soon as the buyers and sellers are agreed on the same price trade gets executed.How it works?Stock Market has got two parts :1. Primary Market2. Secondary MarketPrimary Market:IPO (Initial Public Offering): In IPO company issues its stocks to the public very first time at a certain price. It has got two typesFixed Price: Here the stock price is already offeredBook Building: Here offer price is given in the range of highest and lowest value, public is allowed to bid in that range and after evaluating it company decides the offer price and accordingly company either allots the shares to the people who have applied for it or returns their money. The individual who gets the shares of the company becomes the part owner of that company.Secondary Market:Once the share allotment is over the company gets listed with the stock exchange and here it enters the secondary market. Now depending on the company’s performance the buyers bids for the buying price and sellers offer the selling price as soon as it matches the trade gets executed. The movement in the prices of the security is totally depending on the demand/supply law.Important institutions/organizations in the market:Stock Exchange: This is the place where the stocks of the companies are listed and actual trading takes place. In short here the stock exchanges with the money hence it is called stock exchange.Brokers: These are the intermediaries between buyers/sellers and the stock exchange. They are listed with the exchange whatever trade we want to put we have to do it through the brokers and as they provide us this service they charge us, which is called as brokerage.Depository exchange: Now a days all the shares are stored in the electronic form and the place where this shares are hold is known as depository exchange. We can call it as a bank of securities; as per the instruction of the account holder it transfers the holding of the securities. It makes transaction easier and safe.Depository Participant (DP): DP is an agent through which the Depository exchange interfaces with the investor. You will have your demat account with DP which will show your current stock holding and as you transact it gets updated.Registrar and Transfer Agent (RTA): RTA keeps the records of all the shareholders of a particular company with all the details and it updates the database with the transactions takes place.

Why company issues Stocks
What is capital?Capital:Just imagine you want to start your own toyshop, now for that you need to invest in property, toy suppliers etc. all this investment you have made to start your business is known as capital. In short capital of business includes all its assets that assists in wealth creationWhy corporations issue stocksOnce you have decided to start your business you will have the budget for the required investment suppose the budgeted value is $25000 and you have $ 10000 with you now to cover the remaining $15000 you will have two optionsEither you can borrow it from the others that you will need payback with the interest ORYou can issue the stocks to them who wish to help you in venture in return you are sharing the ownership as well as profit with them.Advantages of issuing the stocksCompany can raise the capital without borrowing it from the creditorsCompany need not to make periodic interest payments to the creditors

MUTUAL FUNDS

CONCEPT
ORGANISATION OF A MUTUAL FUND
ADVANTAGES OF MUTUAL FUNDS
TYPES OF MUTUAL FUND SCHEMES
FREQUENTLY USED TERMS

CONCEPT

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realised are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:

Mutual Fund Operation Flow Chart

ORGANISATION OF A MUTUAL FUND

There are many entities involved and the diagram below illustrates the organisational set up of a mutual fund:

Organisation of a Mutal Fund

ADVANTAGES OF MUTUAL FUNDS

The advantages of investing in a Mutual Fund are:
Professional Management
 Diversification
 Convenient Administration
 Return Potential
 Low Costs
 Liquidity
 Transparency
 Flexibility
 Choice of schemes
 Tax benefits
 Well regulated

TYPES OF MUTUAL FUND SCHEMES

Wide variety of Mutual Fund Schemes exist to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry.

FREQUENTLY USED TERMS


Net Asset Value (NAV)

Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date.


Sale Price

Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.


Repurchase Price

Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price.


Redemption Price

Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related.


Sales Load

Is a charge collected by a scheme when it sells the units. Also called, ‘Front-end’ load. Schemes that do not charge a load are called ‘No Load’ schemes.


Repurchase or ‘Back-end’Load

Is a charge collected by a scheme when it buys back the units from the unitholders.