Investment Alternatives Introduction - Security Analysis and Investment Management

Introduction of Investment Avenues

Now-a-days a wide range of investment opportunities are available to the investor. These are primarily bank deposits, corporate deposits, bonds, units of mutual funds, instruments under National Savings Schemes, pension plans, insurance policies, equity shares etc. All these instruments compete with each other for the attraction of investors. Each instrument has its own return, risk, liquidity and safety profile. The profiles of households differ depending upon the income-saving ratio, age of the household’s head, number of dependents etc. The investors tend to match their needs with the features of the instrument available for investment. They do have varying degrees of preferences for savings vehicles.

Every investor tends to keep some cash balance and maintain a certain amount in the form of bank deposit to meet his/her transaction and precautionary needs. In the case of salaried people, contributions to Employees Provident Fund become compulsory. Life Insurance is widely preferred to meet situations arising out of untimely deaths of the bread earner. Besides these needs, the surplus income (savings) awaits investment in alternative financial assets. Investors have to take decisions relating to their investment in competing assets/ avenues. An investor has a wide array of investment avenues, which may be classified as shown in the Exhibit 8.1.

Investment Avenues

Investment Avenues

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