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Evaluation of various

investment avenues

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Return Risk Marketabilit

y/ Liquidity

Tax

shelter

convenienc

eCurrent

yield

Capital

appreciatio

n

Equity shares Low High High Fairly high High High

Non-

convertible

debentures

High Negligible Low Average Nil High

Equity shares Low High High High High Very High

Debt Moderate Low Low High No tax on

dividend

Very High

Bank deposits Moderate Nil Negligi

ble

High Low Very High

PPF Nil Moderate Nil Avg 80 C Very High

LI Nil Moderate Nil Avg 80 C Very High

Residential

house

Moderate Moderate Negligi

ble

Low High Fair

Gold & silver Nil Moderate Avg High Nil Avg

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Approaches to the

investment decisionmaking

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Fundamental approach Intrinsic value of security depends upon the underlying economic factors.

Factors related to company , industry and economy. Buy- undervalued (IV >MP), Sell overvalued (IV

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Risk & Return concepts

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Risk

Variation of return of income

Risk can be quantified and measured

Risk is the difference between expected return and actual

return.

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Sources of risks

market risk

Earing power of corporate sector. price of securities tend tofluctuate. Major cause appear to change in consumer sentiment.

Interest rate risk Interest rate goes up, market price of fixed income securities will

fall & vice versa.

Business risk

Emerging new technologies, changes in consumer preference,changes in government policiesetc. poor business performanceaffects the interest of equity holders.

Inflation risk

Currency risk

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Return

Reward for undertaking investment.

Total return =current return + capital return

R=C+(Pc-PB)/PB