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Chapter: 11th Commerce : Chapter 19 : Sources of Business Finance

People investment Avenues

People invest the savings to gain financial security.

People investment Avenues

People invest the savings to gain financial security. They are investing their savings  in a various investment avenues for various purposes. They may invest in various securities and wait for a stipulated period to get back their investments with higher value addition.

There are three aspects which need to be considered before investing the money namely liquidity, profitability, and safety. In other words some investments can be easily and readily encashed in the market without any loss. Such investments are called liquid investments, for example bank deposits, government bonds, mutual funds, precious metals like gold, silver, platinum etc. while certain other investments cannot be liquidated immediately but they may fetch higher returns at maturity. For example shares, real assets, debentures, public deposits, fixed deposits, money back insurance policies come under this category.

Certain other investments offer higher income earning prospects but they are totally unsafe as in the case of gambling, horse race, lottery, speculation and so on and so forth. Therefore an individual investor has to park the surplus funds judiciously so as to balance the liquidity, safety and profitability.


Following are some of the investment options available to individual investor


Public Provident Fund (PPF)

It is the safest long-term investment option for the investors in India. It is totally tax- free. PPF account can be opened in bank or post office. The money deposited cannot be withdrawn before 15 years and an investor can earn compound interest from this account. However the investor can extend the time frame for  the next five years if  the investor does not opt to withdraw the amount matured for payment at maturity date. PPF investor can take loan against PPF account when he/she experiences financial difficulties.


Mutual Funds

An individual investor who wants to invest in equities and bond with a balance of risk and return generally can invest in mutual funds. Nowadays people invest in stock markets through a mutual fund. Systematic investment plan is one of the best investment options in India.


Direct Equity or Share Purchase

An individual can opt for investment in shares. But he has toanalyse the market price of various shares traded in stock exchange, reputation of the company, consistency in the payment of dividend, the nature of the project undertaken by the company, growth prospects of industry in which a company is operating, before investing in shares. If the investment is made for a long time, it may yield good return. However there is equally risky to invest in shares as there is no guaranteed return therein.


Real Estate Investment

Real estate is one of the fastest growing sectors in India. Buying a flat or plot is supposed to be the best decision amongst the investment options. The value of the real asset may increase substantially depending upon the area of location and other support facilities available therein. However an investor in real estate has to be cautious and circumspect in verifying the genuineness of the title deeds before investing in real estate assets and also the reputation of seller of real assets.


Investing in Metals

Investment in metals like gold, silver and platinum is one of the oldest and evergreen investment products. The values of the metals rise slowly and steadily in line with the dynamic market conditions. But investors can liquidate the metals immediately in the market without any loss. Besides an investor can opt for investment format, like gold deposit scheme, gold ETF (exchange- traded fund), Gold Bar, Gold mutual fund etc., to get benefit in the short period of time.


Post Office Saving Schemes

There are different types of postal small savings schemes namely Post Office Savings Account, Post Office Recurring Deposit Account (RD), Post Office Fixed Deposit Account (FD/TD), Post Office Monthly Income Account Scheme (MIS), Senior Citizens Saving Scheme (SCSS) Public Provident Fund Account (PPF), National Savings Certificates (NSC), Kisan Vikas Patra (KVP), Sukanya Samriddhi Account (SSA). Investors can choose the appropriate postal schemes as per their needs.Postal investment schemes is the safest investments


Public Deposits

Public deposits are more beneficial than the fixed deposit in the bank, in the matter of yielding good return. An investor has to select the investment period very carefully. He/she is not allowed to withdraw money before maturity. However the public deposits collected by companies and institutions do not offer any insurance benefits. It  does not come under the control of the Reserve Bank of India. The investors who are willing to invest for long term can opt for public deposits.



Bonds are one of the ideal investment options for those investors who would like to invest their hard earned money safely. Bonds are issued both by government and public and private sector companies and financial institutions. Mostly there are four types of bonds sold in India namely Government bonds, Corporate bonds, Banks and other financial institutions bond and Tax saving bonds. The term bond is used for the debt collected by the government while  the term   debenture is used when the corporates collect debt capital from the public.Investment in bonds is totally risk free.


Unit Linked Insurance Plans (ULIP)

ULIP is a life insurance linked product, which provides risk cover for the policy holder along with investment options to invest in any number of qualified investments such as stocks, bonds or mutual funds.


Bank Deposits

Fixed deposits (FD) enable the  investor to invest the money for a specific period. The Fixed deposit can be opened from a minimum period of 7 days to a maximum period of 10 years. The fixed deposit holder can take loan against the fixed deposit receipt. The depositor cannot withdraw the fixed deposits before the maturity date.

Recurring deposit (RD) account is another investment option for those people who earn regular income. This deposit can be opened for a minimum period of 1 year to a maximum period of 10 years. The Recurring deposit holder can take loan against the instalments paid.


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11th Commerce : Chapter 19 : Sources of Business Finance : People investment Avenues |

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