I. PUBLIC SECTOR BONDS

What are bonds ?
 
Bonds are debt instru­ments in which the issuer promises a fixed rate of return (inter­est) to the holder and repay the prin­ci­pal after a cer­tain period of time.

It is a for­mal con­tract between the investor and the borrower stating that the borrower will repay the borrowed money with inter­est to the investor.

Bonds are issued by a com­pany, finan­cial insti­tu­tion or gov­ern­ment. Based on the matu­rity period, bonds can be divided into short term bonds and long term bonds.

Few ter­mi­nolo­gies of a bond

1)   Issuer    – Issuer of a bond is the bor­rower of cap­i­tal or the debtor.

2)   Holder   – Holder of a bond is the cred­i­tor of cap­i­tal or the lender

3)   Coupon – It is the inter­est rate on the bond

4)   Matu­rity – It is the date on which the issuer pays the principled amount 
       to the holder.

5)   Tenor    -- The period start­ing from the date of issue of bond till the date of 
       maturity of the bond is called tenor.

6)   Yield     – It is the total returns on invest­ment in bonds.

Investment in Bonds :- 

In the Indian mar­ket, Banks are the largest investors in bonds. Apart from bank, mutual funds, for­eign insti­tu­tional investors, Prov­i­dent funds also invest in bonds. In the year 2002, RBI 
cat­e­go­rized indi­vid­u­als as retail investors and allowed them to par­tic­i­pate in the auction car­ried by RBI. The min­i­mum bid has to be for an amount of Rs 10,000 and a sin­gle bid should not exceed Rs 1 Crore.

A) Public Sector Bonds, 

These bonds are medium and long term obligations issued by public sector companies where the Government shareholding is 51% and more.

Most of PSU bonds are in form of promissory notes transferable by endorsement and delivery.

No stamp duty or transfer deed is required at the time of transfer of bonds transferable by endorsement.

Government securities, Government guaranteed stocks and local Government stocks are often referred to as gilt-edged securities because they have been regarded as absolutely safe, although medium-term and long-term loans suffer from the effects of inflation much more than equity shares.

B) Finance Company’s Bonds,

Companies issue bonds to finance operations. Most companies can borrow from banks, but view direct borrowing from a bank as more restrictive and expensive than selling debt on the open market through a bond issue.

The costs involved in borrowing money directly from a bank are prohibitive to a number of companies.

In the world of corporate finance, many chief financial officers (CFOs) view banks as lenders of last resort because of the restrictive debt covenants that banks place on direct corporate loans. 

Covenants are rules placed on debt that are designed to stabilize corporate performance and reduce the risk to which a bank is exposed when it gives a large loan to a company.

In other words, restrictive covenants protect the bank's interests; they're written by securities lawyers and are based on what analysts have determined to be risks to that company's performance.

Here are a few examples of the restrictive covenants faced by companies:  

they can't issue any more debt until the bank loan is completely paid off; 

they can't participate in any share offerings until the bank loan is paid off;                                                                                                            

they can't acquire any companies until the bank loan is paid off, and so on.

Relatively speaking, these are straightforward, unrestrictive covenants that may be placed on corporate borrowing. However, debt covenants are often much more convoluted and carefully tailored to fit the borrower's business risks.

Some of the more restrictive covenants may state that the interest rate on the debt increases substantially should the chief executive officer (CEO) quit, or should earnings per share drop in a given time period. 

Covenants are a way for banks to mitigate the risk of holding debt, but for borrowing companies they are seen as an increased risk.

Simply put, banks place greater restrictions on what a company can do with a loan and are more concerned about debt repayment than bondholders.

Bond markets tend to be more forgiving than banks and are often seen as being easier to deal with. As a result, companies are more likely to finance operations by issuing bonds than by borrowing from a bank. 

N.B :-

Covenants  - a formal agreement , especially a written contract by  

                       which you agree to make regular payments to a

                       charity

Convoluted - folded or twisted in a complex way

H. PUBLIC PROVIDENT FUND

Most of us would have already made our decisions as to where we will make our investments or would at least have had the chance of looking at different investment instruments.

At one point in some time or the other we would have come across ‘Public Provident Fund’ as an effective investing instrument. But how much do we know about Public Provident Fund or, PPF?

What is the Public Provident Fund ( PPF ) ?
 
The key to wealth creation lies in the practice of saving regularly and systematically. The Public Provident Fund (or the PPF) is one such long-term investment option that would suit investors of all types. Scoring high on safety, by virtue of it being government backed, this wonderful option comes with tax benefits, loan options and at a low maintenance cost.

The PPF is a long-term, government backed small savings-cum-tax-saving scheme of the Central Government started with the objective of providing old age income security to the workers in the unorganized sector and self employed individuals.

It also serves as a retirement-planning tool for many of those who do not have any structured pension plan covering them

Brief Highlights !
 
Non-resident Indians (NRIs) are not eligible to open an account under the Public Provident Fund Scheme. If a resident who subsequently becomes NRI during the currency of maturity period prescribed under Public Provident Fund Scheme, may continue to subscribe to the fund till its maturity on a non-repatriation basis.

Investments in a PPF account can be made in multiples of Rs 5, either lumpsum, or in installments (not exceeding 12 in a year and more than one deposit can be made in a month). The credit to the PPF account is made on the date of presentation of the cheque and not on the date of its clearance. This allows flexibility in savings.

The tenure of the PPF account is 15 years, which can be further extended in blocks of 5 years each for any number of blocks. The extension can be with or without contribution. An account holder, continuing with fresh subscription, can withdraw up to 60% of the balance to his credit at the commencement of each extended period in one or more installments but only once in a year.

Every subscription shall be made in cash or through a crossed cheque or draft or postal order, in favor of the accounts office, at the place at which that office is situated. In case of any cheque, draft or postal order should be drawn at a bank or post office at that place.

Nomination facility is available. In the case of joint nominees, it is possible to allocate the percentage of benefits to each nominee.

Quite like NSC, the Pub­lic Prov­i­dent Fund is also mon­i­tored and backed up by the gov­ern­ment of India

What is the duration of investment ?
 
People who are interested in liquidity or small-term gains would not be very keen about PPF because the duration for the investment is 15 years. However, the effective period works out to 16 years i.e., the year of opening the account and adding 15 years to it. The contribution made in the 16th financial year will not earn any interest but one can take advantage of the tax rebate.

The account holder has an option to extend the PPF account for any period in a block of 5 years after the minimum duration elapses. The account holder can retain the account after maturity for any period without making any further deposits. The balance in the account will continue to earn interest at normal rate as admissible on PPF account till the account is closed.

Who can open a PPF account and where ?
 
A PPF account can be opened by an individual (salaried or non-salaried) or self employed,
An individual can open only one PPF account to which he contributes.
A PPF account can also be opened in the name of your spouse or children.

It can be opened with a minimum deposit of Rs. 100 at any branch of the State Bank of India (SBI) or branches of it’s associated banks like the State Bank of Mysore or Hyderabad. The account can also be opened at the branches of a few selected outlets of nationalized banks, like the Bank of India, Central Bank of India and Bank of Baroda, and at any head post office.

The general post office too allows opening of a PPF account. Individuals may also open a PPF account on behalf of a minor child of whom he is the guardian.

What is the minimum and maximum amount of deposit ?

The minimum deposit that you can make into a PPF account in one whole financial year is Rs. 500. The maximum that could be deposited is Rs.1,00,000 w.e.f 01.12.2011 

( Earlier Rs. 70, 000 ( limit of the investment in PPF)

Deposits could be in either one go, or in flexible installments ( in multiples of Rs. 10 ). You could vary the amount and the number of installments, as per your convenience, provided you do not exceed 12 installments in one financial year.

Failing to deposit the minimum requirement, would lead to your account being discontinued. Interest would however continue to accrue. You could regularize the account again on paying the prescribed default fee along with subscription arrears.

What is the interest rate offered through PPF ?
 
The interest rate in your PPF account is calculated on the lowest balance between the fifth and the last day of the calendar month. So to maximize your earnings, try making deposits between the 1st and the 5th of the month. Interest is compounded annually and credited on 31st of March each year.

Currently, the interest rate offered through PPF is around Interest rate w.e.f 01.04.2012
is 8.8 %. Interest  rate w.e.f 01.12.2011 was 8.6 % per annum upto 30.11.2011 was 8%,
which is compounded annually.

So to derive the maximum, the deposits should be made between 1st and 5th day of the month.

Can I execute a Premature withdrawal from PPF ?
 
The entire amount in your account could be withdrawn only on maturity. However, in times of financial crisis partial withdrawals are permitted subject to certain ceiling limits. You could withdraw once in a year, from the 7th year onwards.

Such withdrawals, must not exceed, 50% of the balance at the end of the fourth year, or 50% of the balance at the end of the immediate preceding year, whichever is lower.

Pre-mature closure of a PPF account is permissible only in case of death. Debts can also be obtained from 3rd year. This 15 year plan can also be extended as a multiple of 5 years.

What are the tax benefits from PPF?

The amount you deposit in a PPF account qualify for a deduction under section 80 C under the Rs.1,00,000 limit. On maturity, the entire amount including the interest is non-taxable. Not only is the interest earned tax free, PPF deposits are exempt from wealth tax too. According to Section 80 C, 88, tax benefits to a maximum of Rs.1,00,000 / - can be availed by investing in
this plan.

Need a Loan ! Shall I Use The PPF ?
 
Yes. You can take a loan on the PPF deposit, subject to certain terms and conditions such as loan repayable in 36 months. Loans could be taken in or after from the third year onwards till the sixth year. Up to a maximum of 25% of the balance at the end of 2nd immediately preceding financial year would be allowed as loan. Such withdrawals are to be repaid within 24 months.

So, if the account is opened during the financial year 2009-10, the first loan can be taken during financial year 2011-12 ( the financial year is from April 1 to March 31).

The interest charged on the loan is 1 per cent higher for the first 36 months, and thereafter, 6 per cent on the outstanding amount. A second loan can be obtained before the end of the 6th financial year if the first one is fully repaid.

A second loan could be availed as long as you are within the 3rd and the 6th year, and only if the first one is fully repaid. Also note that once you become eligible for withdrawals, no loans would be permitted. You can make withdrawals during any one year from the sixth year.

You are allowed to withdraw 50% of the balance at the end of the fourth year, preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower.

For e.g., if the account was opened in 2000-01, and the first withdrawal was made during 2006-07, the amount you can withdraw is limited to 50% of the balance as on March 31, 2003, or March 31, 2006, whichever is lower.

Inactive accounts or discontinued accounts are not eligible for loan.

Benefits in Continuing PPF after the 15 year period !
 
PPF account holders have an option of extending their accounts after the15 year tenure with or without further subscription, withdrawal up to 60 percent of the balance at the beginning of each extended period ( block of five years) is permitted.

The balance in the account will continue to earn interest at normal rate as admissible on PPF account till the account is closed. In case the account is extended without contribution, any amount can be withdrawn without restrictions. However, only one withdrawal is allowed per year.

G. SILVER

SILVER AS AN INVESTMENT OPTION
 
Sil­ver is con­sid­ered as a poor man’s gold whereas gold investment is for the rich man.
Sil­ver is a bet­ter invest­ment in a bull mar­ket but gold is best in a bear market
Sil­ver is cheaper than gold because more sil­ver is mined than gold
Sup­ply of sil­ver has always been in abun­dance while gold availability was scarce

Gold or Sil­ver – Which is better?
Both the met­als have given phe­nom­e­nal returns over the last few years. But sil­ver has given bet­ter returns than gold during a pre­cious metals bull mar­ket.

In fact, sil­ver rose by 3 times whereas gold dou­bled in the same period. Sil­ver also has more indus­trial appli­ca­tions than gold does, with more uses being developed.

As indi­vid­u­als, your heart might opt for gold but a sound investor will select the white metal.

UNDERSTAND THE MARKET TO PREVENT LAMENTING !
While gold prices touches a never before all time high and the governments have bailed out their banking systems by providing enormous loans and special finance arrangements and to balance those activities either by borrowing eye-watering quantity of money or like printing of money to a smaller quantity is undergone, which they refer to by other names such as 'quantitative easing'.

If the government creates more money, the true value of money falls and in turn the Inflation increases. Even though certain commodities, apart from the fall of money value, tends to keep its value such as land, Gold, Silver and other precious metals which are valuable may promisingly pay at sometimes in the Future.

The news media has an obsession with the price of gold and appears to take delight in reporting the ever-increasing price, but they don't report other precious metal prices such as silver.

Silver is no longer the metal that's used for making fancy teapots or candlesticks. Silver is an industrial metal, used throughout industry. Large quantities of silver were used in the photographic industry for the production of film.

In the world of digital cameras and mobile phone cameras silver may not be needed for film, but its industrial uses are increasing which means that demand has not fallen. The Silver Institute website has extensive information about silver production and demand.

Investment markets
Many people know to their cost the meaning of 'negative equity', a term coined to describe the fact that the value of a house is below the price that the buyer paid.

In this post-financial-era investors cannot help but realize that the value of their investments can go down as well as up. In the same way that house buyers have been caught holding properties that have fallen in value, so some buyers of other investment commodities have bought at the top of the market.

There can be no substitute for careful study of the market, watching prices, reading different views and thoroughly researching your chosen investment medium whether it's gold, silver, property or artworks.

Knowledge is the key to successful investment. Some would say that buying at the bottom of the market and selling at a higher price is simply a matter of luck, but some investors seem to have the knack of repeating their success, which means it's not entirely luck.

What successful investors have is dedication. They know their market and keep abreast of developments which means they are ready to buy or sell at the appropriate times.

Anyone who expects to simply buy precious metals today and sell at some unspecified future date is likely to be disappointed and be left with no profit or even a loss. Our advice to investors who intend to invest a substantial amount in precious metal, such as silver is to understand the market well or stay away.

Personal purchases
Silver coins and small silver ingots ( A metal bar ) are a relatively inexpensive way of purchasing silver. Everyone should consider owning a small quantity of gold or silver in the same way that everyone might own a watch. It's useful, a pleasure to own and in hard times it can be sold to realize cash quickly and easily.

If the amount of money tied up in this way is not large then a detailed knowledge of the market is not really needed because the manufacturing costs of these small amounts of silver and the pleasure of ownership will outweigh the financial outlay.

USES OF SILVER ;-
TRADITIONAL 
Coins and medals
Dentistry
Jewellery
Photography
Silverware (teapots etc) and Tableware (knives, forks etc)

INDUSTRIAL
Batteries (silver oxide cells)
Bearings
Brazing and Soldering
Catalysts
Chemical industry (silver is a superb hear conductor)
Electronics

EMERGING
Clothing
Medical Applications
Mirrors & Optics Coatings
Solar Energy
Water Purification (silver is used to kill bacteria)
Investment.

F. GOLD

India is crazy about gold jewellery. With the World Gold Council (WGC) aggressively marketing social and religious functions as gold buying events, the demand has shot up in the recent years to record levels. Research shows that over 16,000 tonnes of gold is there in Indian households predominantly in the form of jewellery. The value of this as per market price is a whooping Rs. 27.2 lakh crore. That is close to twice the foreign exchange reserves held by the RBI. Let's consider the factors one needs to be aware of and the know-how of investing in gold.
 

Gold, the shin­ing yel­low metal is one of the most pop­u­lar invest­ment options. It is con­sid­ered as a safe haven against all national, polit­i­cal and cul­tural crisis.

Tra­di­tion­ally gold has been con­sid­ered as the most favored cur­rency of the world’s pop­u­la­tion. The value of gold is neg­a­tively cor­re­lated to shares. When the econ­omy is not sta­ble, the price of gold appre­ci­ates.

The pos­i­tive of invest­ing in gold is, it improves the con­sis­tency of the invest­ments. A major­ity of the finan­cial plan­ners rec­om­mends around 15– 20% allo­ca­tion of the total port­fo­lio to Gold. 
Invest­ment in gold can be made in two forms –  

1) Phys­i­cal form  
2) Non Phys­i­cal form.

Invest­ment in phys­i­cal gold is in form of Coins / Bars in addi­tion to the jew­ellery which every house­hold have.

Whereas Non phys­i­cal form of invest­ment can be in the form of Gold Exchange Traded Fund ( ETF - A Finan­cial prod­uct designed to give an oppor­tu­nity to the investors to invest in gold with­out tak­ing the phys­i­cal cus­tody of the yel­low metal ). Most of the banks are sell­ing gold coins / bars where one can invest. Many banks and few pri­vate orga­ni­za­tions also pro­vide the option of gold loans.

Have you ever thought about it ? 
Shall I invest in the yel­low metal or white metal ?

The answer is “No”, as we pre­fer the gold metal any time over the white metal. But past few years data shows sil­ver has given bet­ter returns than gold.

1. Forms of buying gold
 
Any investor has to be aware of the different forms of buying gold. Jewellery, the most traditional and the dominant form of buying gold in India, is in fact not an investment idea. The reason is that there are heavy losses in the form of wastage and making charges. This can vary from a minimum of 10 per cent to as high as 35 per cent for special and complex designs.

Bank coins, again, are not an investment idea as the premium that banks charge for their coins is around 5-10 per cent. Also, the bank coins have lesser liquidity as they are not bought back by the banks.

Bullion bars are good modes for investment but the minimum investment here is much higher than a common investor can think of.

Gold Exchange Traded Funds (ETFs) are a hot option these days. These are like mutual funds that invest only in gold. They are proving to be an easier and safer mode to buy gold. The charges are very less and the gold can be accessed electronically. The disadvantage is that one never gets to "see" one's holdings.

2. Current income
 
Gold in any form does not give any current income. The only exception is the dividend option in the gold ETFs. If held in the physical form, there is only outflow of cash for the maintenance of lockers.

3. Capital appreciation
 
Historically, gold has been the perfect hedge for inflation. This is based on data from the year 1800 AD. But in terms of absolute returns gold has fared rather poorly giving returns at only 0.8 per cent above inflation. Real estate and shares beat gold squarely on the capital appreciation front. Real estate and shares have given returns of about 11 per cent over inflation since 1979 (1979 as that was the year the Sensex was launches).

In the short run, however, gold is a very strong bet compared to shares that are highly volatile. The idea for gold investment will be to use it at times when the markets are falling and when the inflation is very high.

A 5 per cent of the overall investment portfolio can be considered for gold investments (bullion, WGC coins, Gold ETFs). Jewellery is not an investment as far as personal finance goes. It is only an expense for pleasure, symbolizing wealth.

4. Risk
 
Gold does not carry much risk at least in India, as we hardly see deflation in the real sense. Even when the official figures where showing negative inflation (deflation) during the last year, the actual prices of food items were increasing. This was reflected in the gold prices too.

The real risk with buying gold is in the opportunity cost of investing in other avenues that can actually give higher returns.

5. Liquidity
 
Gold scores the highest in terms of liquidity, compared to all other investments. At any time of the day and any day gold can literally be converted to cash. Banks would give you a jewellery loan (remember though that many banks do not give loans on coins, including their own), and so would your friendly neighborhood pawn shop. They can also be sold in some pawn shops, though many are cautious to purchase in these outlets for fear of 'stolen jewellery'.

Gold jewelers would exchange your gold possessions for other gold jewels. But the problem here is that there is going to be making and wastage charges involved again. Here we lose the value (to the extent of 10-35 per cent) of gold jewels.

An unfortunate social aspect in most families in India related to liquidity is that gold has sentiments attached and is the last item to leave the house in case of financial difficulties. This negates the entire purpose of gold having liquidity.

6. Tax treatment
 
Gold suffers capital gains tax as per the IT Act. So it is better to ask your jeweler for the bill. Close to 90 per cent of the gold jewellery traded in India is unbilled. This is a serious problem for those who look at gold as an investment. Only the branded jewellers would automatically give you a bill. At other places ask for one.

We can make use of indexation benefits when calculating the capital gains of gold. So the tax payable will not be much.

Gold does not have any other tax benefits.

7. Convenience
 
Gold scores very high here. But with the per gram price rising, the smallest single investment is becoming higher. With the emergence of golf ETFs the convenience to hold gold for the short term has increased. Instead of holding cash for the short term, one can today make investments in gold ETFs.

Ten Benefits of Investment in Gold

1) Safe investment

Throughout the world gold is considered as safe investment as it has not been impacted in a large economic conditions such as

a) Inflation, 
b) Market uncertainty, and 
c) Political discontent.

In fact the price of gold is resistant to short term political upheaval and economic conditions. The range of movement of gold is very narrow compared to other investments

2) Decent or high rate of return

Observing the trend of last decade, the average rate of return had been high at 18.43% (refer rate of return report for last decade) and this trend is expected to continue further. Return from gold had never been disappointed in long period of time.

In fact last decade return has been much better than any other traditional form of investment like fixed deposit.

3) Can be invested in small parts

In today’s stock market there are various type of instruments available to invest in gold by which investment can be made in a very small pieces. 

For example investment can be made via gold ETF as low as 1 gram. Also there are other schemes available in the market where you can invest as low as Rs 100 ( $ 2.25 ).

4) Various form of investment is available in the market

There are number of instruments available in the market to invest in gold say such as

1) Jewellery 
2) Gold coins 
3) Gold ETF , etc.

5) Can be pledged for Loan.

Gold can be pledged for loan. In fact it is the easiest form of obtaining loan against security. There are Public sector and Private sector Banks and number of companies, also dealing in providing loan against gold like

Muthoot Finance, 
Manappuram gold loan. 
HDFC gold loan etc.

A minimal documentation is only needed for obtaining loan against gold moreover you need not wait for approval for long period of time as most of the companies approving loan against gold on the spot itself.

6) Can be utilized for personal use

Gold can be utilized for personal use in form of jewellery / ornaments. In fact this is one of the few investments that can be utilized for personal use also.

7) Diversify your portfolio

Investment in gold is considered as instrument of diversifying your investment portfolio to reduce risk. Studies show portfolios having gold as diversified instrument are more robust and better able to deal with market uncertainties as gold is mostly uncorrelated with most other assets and moves independent of key economic indicators This makes it as a good diversification opportunity in portfolios.

8) Recognized investment throughout the world

Gold has a intrinsic value hence unlike other investments which are connected to a specific Continent / Country / Province / State / Area / Location ,gold is a recognized investment instrument and it is not connected / belonging to a specific Continent / Country / Province / State / Area / Location.

9) Can be held in dematerialized form

Gold can be invested in both forms namely

a) Material ( Physical ) form or 
b) Dematerialized ( Non-Physical ) form.

Via Gold ETF one can invest in dematerialized form hence does not bear the risk of Encroach, Encumbrance, theft, lost, storage … etc.

10) Can be held for any time of period- No maturity period

Unlike other instruments of investment having certain maturity period, investment in gold can be sustainable for unlimited period of time, without bothering about the maturity period.
Top 5 Things to Consider Before Purchasing Gold

Investing in gold may be your best investment yet, but there are several things that you need to consider to make sure that you are on the right path.

You will be dealing with a great deal of money here and since this is an investment, you must guarantee yourself returns in the future, whether this is a short-term or long-term investment.

What are the things that you need to do first before buying gold? 
How can you exercise caution while finding the best type of gold investment for you? 
Here are the top five things you can do:
 
#1. Do your research on what types of gold you should invest in.
There are different types of gold that you can invest in. Although most people think that physical gold (gold coins or bars) are the best ways to invest in gold, know that you have other options which may be best suited for your investment goals. Here they are:

Gold Bars.

This is the easiest way to invest in gold as you can buy it from many gold dealers at low premiums. Comparing prices in gold bars is easier so you have a real good chance at finding the best deal. Read our in-depth buyers guide to purchasing gold bars by clicking here.

Gold Bullion Coins.

Another simple way to invest in gold as there are plenty of dealers out there for coins as well. The great thing about gold coins is you can work with any budget.

IRA

Most individuals aren’t familiar with the term self directed IRA. This type of account allows you to place precious metals like gold and silver in your IRA account. This is perfect if you wish to rollover a 401k because these are backed by one asset class. We have a company that we highly recommend if you are considering anything like this. Read our review about this company.

Gold Certificates.

Investing in gold certificates is not as straightforward as investing in physical gold, but this will remove complications when it comes to the delivery of gold and storing it.

Gold ETF’s and Gold Stocks.

For investors who are used to investing in stocks, this is the best type of gold investment. It is open to anybody and it doesn’t take a genius to understand this investment.

Gold Futures.

This is probably the most complex gold investment you can make. It is also riskier too. This is better suited for people who have a good enough experience in making investments. Investing in gold futures can bring greater returns, but the risk should be understood first.
 
#2. Have questions ready when speaking with gold company representatives.

When buying gold, you will have to talk directly to gold company representatives. They will say anything to get you to buy from them, but you have to be smart about this. Make sure you ask the right questions and get the relevant information you need to make the best decision.

Know the terms.

If you don’t understand the terms they use like “spot,” “troy ounce” or “bid,” ask them. It is important that you know what these terms mean before you start buying gold.

Ask the price.

Knowing the price is one of the most important things because you’d want to know if you’re buying your gold at the best price. Asking prices from different gold companies is ideal so you can make a comparison.

Know the company’s background.

If you will be dealing with this company, then you have every right to know who you’re dealing with. Ask for the company background including its years in business, number of clients, BBB rating, and etc.

Aside from asking questions, do your homework as well. Research on the type of gold you’re buying, the premiums, the usual price range and also, the company you are dealing with.
 
#3. Decide how much you plan on purchasing.

This decision will ultimately depend on you and your budget. But some insight on the ideal percentage to spend will be helpful in your endeavor. In buying or investing in gold, a rule of thumb is to spend 10 to 30% of your assets.

Determining your percentage will depend on your economic, political and financial standing. Your safest bet is at 20 percent.
 
#4. Are you buying for the short term or long term?

Before buying gold, you must decide whether this is a short term or long term investment. You must know that there are specific types of gold that is better used for a short term or long term investment.

With short term gold investments, you’re better off buying gold bullion coins or bars for the reason that their prices keep moving up. Hence, when you decide to sell it later, you’re sure to earn a profit. You can keep your gold coins or bars for at least two years before selling them.

For long term gold investments, it is best that you invest in grade-certified gold coins. In other words, these are rare American gold coins. These types of coins always outperform the value of gold bullion coins.

On the other hand, it is always your choice what type of gold investment you will make. Again, it will also depend on your personal preference and experience. In any case, gold will always be a lucrative investment to have.
 
#5. Where to store the gold after your purchase?

One of the worries when buying physical gold is where to store it once you have it. It is for this reason why some investors prefer buying other forms of gold. They don’t want to be bothered with the physical storing of these precious metals.

But if you prefer investing in physical gold, here are your different storage options:
At home. You can store your gold at home but keep them at a minimum. For one, your home may be private but it is more susceptible to theft. You can also risk the gold being stolen while in transport to and from your home. Gold worth below $10,000 need not be reported anymore.
Safe Deposit Box. This is a good option to store your gold as it is safer but still maintaining your privacy. However, renting a safe deposit box can put you back $100 to $300 a year.
Precious Metal Vault. Usually, the precious metal vault is for corporate clients. The storage fee and insurance fee are cheaper and clients can deposit large amounts of gold. Precious metal vaults are very secure.
 
Allocated Gold with Custodians. The custodian will hold the gold you bought. For example, if you buy 10 ounces of gold, the custodian’s system will put 10 ounces of gold under your name. That is your allocated gold. They will keep it in their own vault. There is a 100 percent guarantee from the custodian of your gold.

These are the five things you should do or ask yourself before buying gold. Be meticulous and cautious so you can make a good investment.

Conclusion
 
Gold has proved itself time and again to be the perfect hedge for inflation. But to look at it as a hedge avenue, Indians are yet to consider this market actively as the purchases continue to be dominated by jewellery. Gold only beats inflation. It fares poorly when compared to real estate or shares when compared on the basis of real inflation adjusted returns.

Any serious investor, however, is advised to have a certain percentage of investment in gold to hedge inflation.

E. STOCK MARKET

Another Sunday and another headline about the financial crisis troubling America, from investors in the stock market to those companies that either contributed to the crisis or have been crippled by it.

No one is particularly happy with the idea of a massive bailout (the largest intervention by the federal government in the markets).

However, no one close to the markets denies the need is there and until something positive happens, the stock market is going to be a very difficult place.

Will the proposed and amended bailout plan work? Again, no one absolutely knows for sure.
Individual Investors Where does this leave individual investors?

One of the most troubling environments for markets to handle is uncertainty.

Since the market always looks forward and stock prices are derived from expected earnings, uncertainty about the economy or the stability of the financial markets destroys projections.

When investors can’t reliably predict a company’s future earnings because the market is in chaos, the smart thing to do is nothing.

A normal strategy in a down market is to look for good companies trading at a discount.

Investing in the stock markets potentially yield higher prof­its. Investors must con­stantly keep themselves up to date on the recent stock market and news. How­ever, investing in the stock market can prove to be a gam­ble as it is sub­ject to vast fluctuations.

The rea­son is stock mar­ket runs on prob­a­bil­ity. Based on infor­ma­tion &analy­sis, future share prices are pre­dicted but the prob­a­bil­ity of the share prices reach­ing the target price is always a 50:50 chance. As there are many fac­tors which affects the share prices of a company and this price tar­get is pre­dicted based on cer­tain assumptions, if the assumptions becomes incor­rect, the chances of the share reach­ing the tar­get price decreases.

On the downside, stocks tend to be one of the most volatile investments. This means that the value of stocks can drop in the short term. Sometimes stock prices may fall for a protracted period.

For instance, those who put all their savings in stocks in early 2000 are probably still underwater today. Bad luck or bad timing can easily sink your returns, but you can minimize this by taking a long look and different investing approaches.

There's also no guarantee you will actually realize any sort of positive return. If you have the misfortune of consistently picking stocks that decline in value, you can obviously lose money.

But the ques­tion is how do i know when to invest and in which com­pany should I invest. In addition, how long should I hold the stock or when should I sell the shares? This is the most dif­fi­cult ques­tion to answer by any­one.

You ask any expert in the field of stock mar­ket, they will mention “Based on my analy­sis, I think this stock is a good invest­ment option”. Ulti­mately it means, the experts pre­dict the future move­ment in stock prices but it may not be 100% accurate

Con­sid­er­ing the prob­a­bil­ity involved in a stock mar­ket, you should be care­ful before you park your money with any com­pany. Do not invest because your friend / colleague is pur­chas­ing it. Don’t invest because many TV Chan­nels and news­pa­pers are talk­ing about the stock.

You must have a clear idea of the shares(stock) you want to pur­chase. Pick a stock based on your invest­ment objec­tive, risk appetite and the fun­da­men­tal para­me­ters of the share (stock). Addi­tional points to note is the liq­uid­ity of the stock ( Vol­umes of shares traded on a daily basis) and the volatil­ity of the share ( the dif­fer­ence between the high­est price and lowest price for the day).
 
Uncertainty in the Market 

However, when you are uncertain there will be any future earnings because the economy is falling off a cliff, picking a winning stock becomes much more risky.

Investors need to know that there will be a functioning economy in the future and that markets will react in reasonably predictable ways.

Until that confidence is restored, many investors will sit on cash or cash out of stocks when they can.

It is not the responsibility of the Federal Reserve Board, the Securities and Exchange Commission, the Treasury Department or even Congress and the President to make investors whole.

It is their job to ensure the economy is on sound footing and that there is sufficient regulatory oversight of the markets to keep everyone honest. Here’s hoping the bailout restores some confidence to the economy and to the markets. Until that confidence returns, investing the stock market will remain very uncertain.

D. REAL ESTATE

What is Real estate ?
 
A piece of land, including the air above it and the ground below it, and any buildings or structures on it along with its natural resources such as crops, minerals, or water, immovable property of this nature, an interest vested in this; an item of real property, buildings or housing in general.

Real estate can include business and / or residential properties, and are generally sold either by a realtor ( An Agency, or Agent or Broker connected with Real Estate ) or directly by the individual who owns the property ( for sale by owner ). Also the business of real estate, the profession of buying, selling, or renting land, buildings or housing.

Real Estate as an investment option

Real Estate refers to invest­ment in immov­able prop­er­ties which includes land, build­ings, flats etc. Invest­ing in real estate involves the pur­chase of real estate and sell­ing it for a profit.

Basi­cally invest­ment in real estate involves a sub­stan­tial invest­ment and for a long period of time. Major­ity of the investors invest in real estate in the form of buy­ing a house.

But real estate invest­ment is beyond this and the objec­tive behind the invest­ment is to make prof­its. Before mak­ing a real estate invest­ment, the investor should eval­u­ate the risk appetite and invest­ment amount.

The dif­fer­ent types of real estate invest­ments are as follows :–

A) Rental
The main aim of this form of invest­ment is to rent out prop­erty to a ten­ant and earn a con­tin­u­ous stream of rent from the ten­ant. The value of the prop­erty also increases over a period of time. The risk in this form of invest­ment is the owner of the prop­erty has to find out a ten­ant and also need to pay for the main­te­nance expenses.

B) Trad­ing
Basically traders in real estate in order to make a quick profit buy prop­er­ties for a short term ( six months) and sell them at a profit. Traders look out for buy­ing under­val­ued properties / very hot prop­er­ties and sell them at a profit.

C) Long Term Invest­ment
There is a cer­tain group of investors who invests in real estate basi­cally plot of land from a long term per­spec­tive. The objec­tive is over a period of time the value of the prop­erty will rise and the owner will make a profit by sell­ing it. The biggest flaw in this invest­ment is money is blocked for an indef­i­nite period and the appre­ci­a­tion of the prop­erty value is unpredictable.

REAL ESTATE INVESTMENT DEPENDING UPON THEIR NATURE :
 

a) Residential real estate
These are investments or properties such as houses, apartment buildings, townhouses, and vacation houses where a person or family pays you to live in the property. The length of their stay is based upon the rental agreement, or lease agreement.

b) Commercial real estate
These are investments consisting mostly of office buildings. If you were to take some of your savings and construct a small building with individual offices, you could lease them out to companies and small business owners, who would pay you rent to use the property.

c) Industrial real estate
These are investments consisting of storage units, car washes and other special purpose real estate that generates sales from customers who temporarily use the facility. Industrial real estate investments often have significant "fee" and "service" revenue streams, such as adding coin-operated vacuum cleaners at a car wash, to increase the return on investment for the owner.

d) Retail real estate
These are investments consist of shopping malls, strip malls, and other retail storefronts. In some cases, the landlord also receives a percentage of sales generated by the tenant store in addition to a base rent to incentive them to keep the property in top-notch condition.

e) Mixed-use real estate
These are investments are those that combine any of the above categories into a single project. Mixed-use real estate investments are popular for those with significant assets because they have a degree of built-in diversification, which is important for controlling risk.

f) Real Estate Investment Trusts or REITs
A real estate investment trust or REIT is a tax designation for a corporate entity investing in real estate. The purpose of this designation is to reduce or eliminate corporate tax. In return, REITs are required to distribute 90% of their taxable income into the hands of investors. The REIT structure was designed to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks.

REITs can be publicly or privately held. Public REITs may be listed on public stock exchanges.

REITs can be classified as equity, mortgage, or a hybrid.Those Trusts trade like stocks and own a portfolio of underlying real estate or real estate mortgages. Understanding the differences, advantages, and drawbacks of REITs is so important.

The key statistics to examine in a REIT are net asset value (NAV), funds from operations (FFO), adjusted funds from operations (AFFO) and cash available for distribution (CAD). In the period from 2008 to this writing (2011), REITs face challenges from both a slowing United States economy and the late-2000s financial crisis, which depressed share values by 40 to 70 percent in some cases.

Technically, lending money for real estate is also considered real estate investing but I think it is more appropriate to consider this as a fixed income investment, just like a bond, because you are lending money with property securing the debt. You have no underlying interest in the appreciation or profitability of a property beyond the interest income to which you are entitled.

Likewise, buying a piece of real estate or a building and then leasing it back to a tenant, such as a restaurant, is more akin ( related ) to fixed income investing rather than a true real estate investment. You are essentially financing a property, although this somewhat straddles ( sit or stand with one leg on either side of ) the fence of the two because you will eventually get the property back and presumably the appreciation belongs to you.

C.POST OFFICE SAVINGS SCHEMES

Investment in Post Office Savings

Indian Postal ser­vice pro­vides var­i­ous invest­ment schemes. The most attrac­tive schemes are as fol­lows –

a) Post Office Recurring Deposits,
b) Post Office Monthly Income account,
c) Kisan Vikas Patra,
d) National Sav­ings Cer­tifi­cates,
e) Senior Cit­i­zens sav­ings scheme.
Investors can invest in these schemes in their near­est post offices.

A) POST OFFICE RECURRING DEPOSITS,

Monthly Savings Option
POST OFFICE RECURRING DEPOSIT SCHEME   (PORD)
Name of the Scheme	Interest	Maturity Period	Limit of Deposit	I.T.benefit	Place of Deposit
PORD	-----	5 years	Min: Rs.10 Deposits can be in multiples of Rs.5. Maximum: No limit	-----	All Post Offices

For example of Rs. 10 every month for 5 years will fetch interest of Rs. 128.90/- with Principle of Rs.600/-. After 5 years the account can be continued for another 5 years at the same rate of interest.

Opening of Account

The account can be opened by a single adult of two adults jointly or a minor who has attained the age of 10 years or a guardian on behalf of a minor.

Deposits may be made a minimum of Rs.10/- once in a calendar month, in multiples of Rs.5/-. Amount of deposit made at the time of opening the account shall not be changed.

A depositor may have more than one account in his own name or jointly with others. There is no ceiling on deposit. Monthly installments can be paid in advance and in that case, a suitable rebate is allowed.

Loan Facility

Loan up to half of the deposit may be taken after one year and before maturity. This must be repaid together with interest in one or more installments. Loan not repaid is deducted together with interest from the amount payable at the time of closure of the account.

Insurance Benefit

In case of death of a depositor, his legal heir or nominee becomes entitled to get immediately the full maturity value of the account/accounts subject to the maximum account value of Rs.50 /-

(a) the account is not a discontinued one
(b) twenty four months have elapsed from the dates of opening the account, and
(c) the age of the depositor at the time of opening of the account was between 18 and 53 years.
(d) there should not be withdrawal during the first 24 months.

Account may be opened through authorised women agents under Mahila Pradhan Kshetriya Bachat Yojana (MPKBY). Recurring Deposit account may be opened through Payroll Savings Scheme for employees in State / Centre Government and Public undertakings.

B) POST OFFICE MONTHLY INCOME ACCOUNT

#  Rate of inter­est is 8% per annum payable monthly. Invest­ment of Rs 1 Lakh will give a return
    of around Rs 666.67 per month.
#  Min­i­mum invest­ment amount is Rs.1500/- or in mul­ti­ple thereof.
#  Max­i­mum amount is Rs. 4.5 Lakhs in sin­gle account and Rs. 9 Lakhs in a joint account.
#  Period of matu­rity – 6 years
#  A bonus of 5% on the prin­ci­pal is pro­vided on matu­rity.
#  Deduc­tion of 3% on the deposit amount if amount is with­drawn before 3 years
#  Deduc­tion of 2% on the deposit amount if amount is with­drawn after 3 years
#  Inter­est income is tax­able but it is not deducted at Source.
#  Account is trans­fer­able from one post office to any Post office in India free of cost.

C) KISAN­VIKAS PATRA (KVP)

Kisan Vikas Patra or KVP is a sort of savings, which is regulated with the help of government and post offices. This Kisan Vikas Patra KVP is a plan, which allows the investors to make their investments up to double amount in a less duration of time in comparisons to the other governmental plans.

The plan and subscription for Kisan Vikas Patra is now available at every post offices that are regulated through government. Kisan Vikas Patra KVP is known as the most reliable savings procedure as the government conducts it directly and regulated by it. It is also said as the most reliable way of investments just because of the support and backup of Indian government.

Subscription for a Kisan Vikas Patra or KVP can be done by completing following few requirements which are mandatory for it.

#  These requirements includes like minimum subscription of five hundred is to be done in     
     initial stage and no limit for any maximum amount like Invest­ment amount in denom­i­na­tions
    of Rs.100, Rs 500, Rs 1000, Rs 5000, Rs 10,000
#  Like other investments, in this Kisan Vikas Patra KVP plan too the Rate of inter­est is 8.4%
    per annum com­pounded yearly. Invest­ment of Rs 1 Lakh will become Rs 2 Lakhs after a
    period of 8 years and 7 months and also assures to double the amount in approximately 9
    years.
#  Kisan Vikas Patra or KVP can be subscribed by any adult in their name. Apart form it a
    minor and two adult's persons with a joint account,companies and firm can also subscribe it.
#  Here, it should be noted that any NRI or any member of Hindu Undivided Family are not
    bounded to subscribe these Kisan Vikas Patra KVP plan. Reinvestment plans are also
    present with this KVP plan.
#  But this reinvestment on Kisan Vikas Patra plan is only allowed by the authority on maturity
    of the policy.
#  Interest income is tax­able but not deducted at source

Other features apart from the above ones are also included in this KVP plan. These patras acts like an security for issuing any bank loan form credit lending institutions.

They are also transferable to any other name under the rules and regulations of Kisan Vikas Patra KVP plans. This plan is known as the best way to increase the investments without spending a long duration of time.

In a short time period with a fixed rate of interests, this plan acts as a guaranteed returning interest amount after completing the maturity of it.

D) NATIONAL SAV­INGS CER­TIFI­CATE (NSC)
 
The National Sav­ing Cer­tifi­cate makes it easy for cit­i­zens from all walks of life to save for a rainy day. With the min­i­mum amount set at Rs 100 only, one also gets an 8% inter­est on the amount cal­cu­lated biannually.

Since the NSC comes under Sec­tion 80 C, it also enti­tles you to get tax deduc­tions up to
Rs 1, 00,000. How­ever from 2005 –2006, the inter­est accu­mu­lated on the NSC amount is taxable.

NATIONAL SAVINGS CERTIFICATE ( NSC VIII ISSUE )

a) Scheme specially designed for Government employees, Businessmen and other salaried
classes who are Income Tax assesses.
b) No maximum limit for investment.
c) No tax deduction at source.
d) Certificates can be kept as collateral security to get loan from banks.
e) Investment up to INR 1,00,000/- per annum qualifies for IT Rebate under section 80 C of
Income Tax Act.
f ) Trust and HUF cannot invest.

NATIONAL SAVINGS CERTIFICATE ( NSC IX ISSUE )

a) No maximum limit for investment.
b) INR. 100/- grows to INR 234.35 after 10 years.
c) Minimum INR. 100/- No maximum limit available in denominations of INR. 100/-, 500/-
1000/-, 5000/- & Rs. 10,000/-.
d) A single holder type certificate can be purchased by an adult for himself or on behalf of a
minor or to a minor.

Buy National Savings Certificates ( NSC's ) every month for Five / Ten years – Reinvest on maturity and relax - On retirement it will fetch you monthly pension as the NSC matures.

BRIEF HIGHLIGHTS

#  Rate of inter­est is 8% per annum com­pounded six monthly but it is paid six monthly.
    Investment of Rs 1 Lakh will become Rs 1,60,100 after a period of 6 years.
#  Min­i­mum Limit is Rs 100 and No max­i­mum limit on investments.
#  Investment amount in denom­i­na­tions of Rs.100, Rs 500, Rs 1000, Rs 5000, Rs 10,000.
#  Investments in NSC are eli­gi­ble under sec­tion 80 C of Income Tax Act.
#  Annual Inter­est income qual­i­fies for tax rebate under sec­tion 80 C of income tax act, if it is
    deemed to be reinvested.
#  Individu­als and minor through guardian are eli­gi­ble to invest.
#  Inter­est income is tax­able but not deducted at source.

E) SENIOR CIT­I­ZENS SAV­INGS SCHEME

#  Rate of inter­est is 9% per annum. Inter­est is payable on 31st March / 30th Sept / 31st
    Decem­ber in the first instance and there­ after, inter­est shall be payable on 31st March,
    30th June , 30th Sep and 31st Decem­ber.
#  One time deposit of Rs 1000 and its mul­ti­ple thereof and max­i­mum amount not exceed­ing
    Rs 15 Lakhs
#  Period of matu­rity – 5 years
#  Eli­gi­bil­ity Cri­te­ria — Age should be 60 years or more, and 55 years or more but less than
    60 years who has retired on super­an­nu­a­tion or oth­er­wise on the date of open­ing of account
    sub­ject to the con­di­tion that the account is opened within one month of receipt of retire­ment
    ben­e­fits.
#  Early clo­sure is allowed after a period of one year with a deduc­tion of 1.5% inter­est and
    after 2 years 1% inter­est.
#  Inter­est income is tax­able and deducted at source, if the inter­est amount is more than
    Rs10,000 per annum.
#  Invest­ment in the scheme is eli­gi­ble for tax ben­e­fit under sec­tion 80 C of Income Tax Act.

B.LIFE INSURANCE

WHAT IS LIFE INSURANCE ?

An agree­ment between an indi­vid­ual (often the insured per­son) and a life insur­ance com­pany 
( the insurer) that guar­an­tees the pay­ment of a stated amount of money on the death of the insured or at the end of a spec­i­fied term.

It is a risk mea­sure taken by an indi­vid­ual for the ben­e­fits of his / her depen­dents in his / her absence. As life is uncer­tain, an indi­vid­ual by tak­ing an insur­ance pol­icy gives a cush­ion to his 
/ her ben­e­fi­ciary / nominee where they are enti­tled for an insured value in case of the insured untimely death.

Life insurance is designed to provide financial security to your designated beneficiaries at the time of your death. A predetermined amount of money will be paid to the person or persons named on your policy, according to State Farm Insurance. These funds are typically used to cover funeral costs, taxes and other miscellaneous expenses. When applying for life insurance, your age will not only affect the cost of your policy but your health will be scrutinized when you reach a certain age.

WHY LIFE INSURANCE IS NECESSARY ?

Human life has no guarantee, which is full of uncertainty and being uncertainty comes the risk. We can’t say any thing about our future. What will happen in coming few seconds no body knows? We also can’t say about our self,

However well prepared we are, we do not know what is around the corner and what kind of fate awaits us and that is the reason why life insurance is so critical.

Life Insurance caters to your following requirements :


• Financial Security to your family
• Investment & saving options
• Protection of your home mortgage
• Saving options for Retirement through Pension plans
• Saving options for Children through Children Insurance Plans

If you don’t have life insurance already it may be worth considering, at least now to take a life policy which guarantees you a sum of money during the term of the policy should you be unfortunate enough to pass away. This policy is guaranteed as long as you make the monthly premiums on the policy. Now the premium is determined by actuaries who work out how long you are likely to live given your lifestyle. This sort of policy is essential if you have dependents that you want to protect financially in the event of death.

NEED FOR LIFE INSURANCE


Today, there is no shortage of investment options for a person to choose from. Modern day investments include gold, property, fixed income instruments, mutual funds and of course, life insurance. Given the plethora of choices, it becomes imperative to make the right choice when investing your hard-earned money. Life insurance is a unique investment that helps you to meet your dual needs - saving for life's important goals, and protecting your assets.

WHICH PEOPLE THINK ABOUT LIFE INSURANCE ?

There are many more, of those a few are illustrated as below,  

1) People are just too busy, and besides, it will never happen to them. They believe that they can take care of getting the insurance in place tomorrow, next week, when rates come down, or when they loose a little weight. 

2) They don’t take the time, effort, and initiative to think deeply about an inherently uncomfortable and unpleasant situation.

3) They believe that the coverage from work will always be enough, be the best value, and be available.

4) They do not have the skills to determine how much, or what kind, of life insurance they should have. They are concerned that if the consult an insurance professional, they will be “sold” coverage that they don’t need. It never occurs to them that an insurance company will never insure an asset for more than it is worth. This extends to the financial value of their life.

Likewise, a much larger risk is being unable to generate an income due to sickness or accident. But an even smaller percentage of the population has individual disability coverage.

WHO NEEDS LIFE INSURANCE ?


Life insurance is designed to protect your family and other people who may depend on you for financial support. If you die and lose your income, the people that are dependent on your financial support will lose that income, so life insurance can help cover some or all of that loss depending on the policy you choose. But there are instances where life insurance can be beneficial even if you have no dependents, such as your desire to cover your own funeral expenses.

Who will take care of my family if tomorrow something unfortunate happens to me?” If this question bothers you, then Life Insurance is the answer.

Of course, under any circumstances, the loss of a loved one is a traumatic experience. But, if your family is also left without sufficient money to meet basic living needs or prepare for future goals, they will have to cope with a financial crisis at the same time. A Life Insurance plan ensures that your family is financially secure even if tomorrow you are no longer around to care for them.

WHO ARE BENEFITED BY LIFE INSURANCE ?


Life Insurance can provide for two risks the risk of your dying early and the risk of your living too long.

It provides financial security to your family if you are not around anymore, depending on the type of life insurance policy you opt for. Different types have different premium levels and varying coverage.

Some insurance plans also provide income for you in your non-earning years i.e. after retirement. There are various life insurance plans that do this, such as endowment plans and pension plans.

Secure your family's future and provide for your comfort after all these hard years.

WHAT ARE THE APT AGES TO TAKE LIFE INSURANCE ?

AGES
When it comes to life insurance, Insurance Rate.com says age is one of the main factors a potential insurer will look at when determining your premium. A 25-year-old in excellent health will pay out significantly less than a 55-year-old who has a heart murmur.

RISK OF DYING
The older you are, the more likely you are to die sooner than a younger person. That means older people are generally considered to be higher risk clients because there is a greater chance your insurer will have to pay your beneficiaries sooner than it would be with a younger policyholder.

MEDICAL EXAM
When you apply for life insurance, you might be required to take a medical exam regardless of your age. However, according to advantage Life Insurance, a physical check up is practically a certainty for individuals who are older than age 40. Medical exams might also be requested of younger people who would like to take out high levels of coverage.

COMPARISON SHOPPING
Since insurance premiums are apt to get higher with age, it might take more time and effort to find an affordable rate. According to Insurance Life Ok.com, the Internet allows you to not only compare rates but learn exactly how life insurance works.

OLD AGE ADVANTAGE
There could come a time when old age might work in your favor when paying for life insurance. Insurance Life Ok.com says many insurance companies waive premiums when you turn 100 years old.

BENEFITS OF LIFE INSURANCE
Life insurance, especially tailored to meet your financial needs
Let us look at these unique benefits of life insurance in detail.

ASSET PROTECTION
From an investor's point of view, an investment can play two roles - asset appreciation or asset protection. While most financial instruments have the underlying benefit of asset appreciation, life insurance is unique in that it gives the customer the reassurance of asset protection, along with a strong element of asset appreciation.

The core benefit of life insurance is that the financial interests of one’s family remain protected from circumstances such as loss of income due to critical illness or death of the policyholder. Simultaneously, insurance products also have a strong inbuilt wealth creation proposition. The customer therefore benefits on two counts and life insurance occupies a unique space in the landscape of investment options available to a customer.

GOAL BASED SAVINGS
Each of us has some goals in life for which we need to save. For a young, newly married couple, it could be buying a house. Once, they decide to start a family, the goal changes to planning for the education or marriage of their children. As one grows older, planning for one's retirement will begin to take precedence.

Clearly, as your life stage and therefore your financial goals change, the instrument in which you invest should offer corresponding benefits pertinent to the new life stage.

Life insurance is the only investment option that offers specific products tailor-made for different life stages. It thus ensures that the benefits offered to the customer reflect the needs of the customer at that particular life stage, and hence ensures that the financial goals of that life stage are met.

ADVANTAGES OF LIFE INSURANCE
Some of the various advantages of insurance policy are listed below:

RISK COVER 
Life today is full of uncertainties; in this scenario Life Insurance ensures that your loved ones continue to enjoy a good quality of life against any unforeseen event.

COVER FOR WHOLE LIFE
The life insurance policy provides coverage for the whole life of the policyholder. It also provides protection in cases of serious illness.

MENTAL PEACE
The most important benefit of life insurance is that it assures mental peace. When a person goes for life insurance, he and his family are relieved from worries of future. Thus, it ensures mental peace.

FINANCIAL SECURITY
The policy of life insurance provides economical security to the family of the policy holder in case of death of the breadwinner. On occurrence of this unfortunate event, the family is forced with a cash crunch. But by availing a life insurance policy, this problem of cash crunch is solved by a lump sum amount paid by the insurer.

SAFE AND PROFITABLE LONG-TERM INVESTMENT
Life Insurance is a highly regulated sector. IRDA, the regulatory body, through various rules and regulations ensures that the safety of the policyholder's money is the primary responsibility of all stakeholders. Life Insurance being a long-term savings instrument, also ensures that the life insurers focus on returns over a long-term and do not take risky investment decisions for short term gains.

GUARANTEED MATURITY VALUES
Protection against rising health expenses - Life Insurers through riders or stand alone health insurance plans offer the benefits of protection against critical diseases and hospitalization expenses. This benefit has assumed critical importance given the increasing incidence of lifestyle diseases and escalating medical costs.

ASSURED INCOME THROUGH ANNUITIES
Life Insurance is one of the best instruments for retirement planning. The money saved during the earning life span is utilized to provide a steady source of income during the retired phase of life.

PLANNING FOR LIFE STAGE NEEDS
Life Insurance not only provides for financial support in the event of untimely death but also acts as a long term investment. You can meet your goals, be it your children's education, their marriage, building your dream home or planning a relaxed retired life, according to your life stage and risk appetite. Traditional life insurance policies i.e. traditional endowment plans, offer in-built guarantees and defined maturity benefits through variety of product options such as Money Back, Guaranteed Cash Values,

LOAN IN CASE OF NEED
There are circumstances in life when the individual needs funds but is unable to get from various sources. The life insurance policy also provides a solution to this problem as loan can be taken against the policy and need not be repaid as the loan amount is deducted from the police value on maturity.

FACILITY OF LOANS WITHOUT AFFECTING THE POLICY BENEFITS
Policyholders have the option of taking loan against the policy. This helps you meet your unplanned life stage needs without adversely affecting the benefits of the policy they have bought.

MORTGAGE REDEMPTION
Insurance acts as an effective tool to cover mortgages and loans taken by the policyholders so that, in case of any unforeseen event, the burden of repayment does not fall on the bereaved family.

BUILDS THE HABIT OF THRIFT
Life Insurance is a long-term contract where as policyholder, you have to pay a fixed amount at a defined periodicity. This builds the habit of long-term savings. Regular savings over a long period ensures that a decent corpus is built to meet financial needs at various life stages.

PROTECTION PLUS SAVINGS OVER A LONG TERM 
Since traditional policies are viewed both by the distributors as well as the customers as a long term commitment; these policies help the policyholders meet the dual need of protection and long term wealth creation efficiently.

GROWTH THROUGH DIVIDENDS 
Traditional policies offer an opportunity to participate in the economic growth without taking the investment risk. The investment income is distributed among the policyholders through annual announcement of dividends / bonus.

SOURCE OF MITIGATING CERTAIN LIABILITIES
The life insurance policy provides a great source to satisfy certain needs and liabilities like loans and mortgages.

TAX BENEFITS
Insurance plans provide attractive tax-benefits for both at the time of entry and exit under most of the plans.

TAX-FREE SOURCE OF SAVINGS
In addition it is a source of savings which is completely tax-free

MAINTENANCE OF LIVING STANDARD
The life insurance policy helps in maintaining the living standard of the family even after the death of the breadwinner by providing financial benefits to the family.

ENHANCED COVERAGE
The policy provides enhanced coverage by providing for medical benefits.

DISADVANTAGES OF LIFE INSURANCE !
With the benefits of both cash value and term life insurance come a few disadvantages.

The most significant disadvantage of cash value life insurance is the inconsistency in premiums.

Most cash value policies contain required premiums that can increase over time. This can make the policy quite expensive for people on a budget who wish to purchase enough coverage to benefit their family in the event of their death.

Although many policies contain riders in which dividends from cash accounts can be used to pay premiums, such an instance almost always results in taking funds away from the cash value or investment account.

There is also never a guarantee that sufficient funds will be available to cover missed premiums in the event a policyholder falls short.

There are also several disadvantages of term insurance,

1. The first being that it is not permanent. 
Although a policyholder may enjoy extremely cheap premiums when he or she is young, term products expire after a certain number of years, or when the insured reaches a certain age. When a policy expires, a new one must be purchased.

This means that a person must qualify for a new program based on his or her current age and health in order for coverage to continue. Many times, this results in much higher premiums or un insurability. Some term insurance does, however, contain "re-up" or "renewal" options that may not require proof that the customer is insurable to continue coverage.

2. Expensive
The life insurance can prove to be a costly affair, particularly when suffering from illness and regarded by insurers as High Risk due to some reasons like old age etc.

3. Irrelevant in case of no-family person
The life insurance policy is irrelevant for an individual who is not having any family or dependents

4. Increasing premiums
The premium payable increases with the increase in age. But the income gradually decreases which makes it difficult to strike a balance.

5. No benefit in case of long life
Some policies do not provide any cash benefit on the policy holder surviving the policy term. In that case, amount paid for premiums is wasted.


From the above discussion, it becomes clear that though life insurance is a mixed blessing, yet its advantages outweigh its disadvantages. But at the same time, it depends on the requirements of the individual.
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TYPE OF LIFE INSUR­ANCE POLICIES
 
1. Term Insur­ance Policy
2. Whole Life Policy
3. Endow­ment Policy
4. Money back Policy
5. Annu­ities and Pension

A) TERM INSUR­ANCE POLICY


The Term Insurance policy is a Plain Vanilla Insurance Plan which offers financial help to the family in case of Insured’s demise only during a limited term/tenure of the plan. As & when the policy expires, you don’t receive any benefits at the maturity. One of the most striking features of this plan is its Premium rates which are very low along with the maximum sum assured. Now Insurance Companies have brought in Premium Back Term Plans wherein you get benefits at the maturity of the term even if you don’t make any claims, however this feature tends to increase the overall Premium amount.

A term insur­ance pol­icy is a pure risk cover for a spec­i­fied period of time. In gen­eral terms it means that the sum assured is payable only if the pol­i­cy­holder dies within the pol­icy term.

For instance, if a per­son buys Rs 2 lakh pol­icy for 10-years, his nominee / beneficiary is enti­tled to the money if he dies within that 10-year period. If the pol­i­cy­holder sur­vives the 10 year period, the insur­ance com­pany keeps the entire pre­mium paid dur­ing the 10-year period.

Hence there is no ele­ment of sav­ings or invest­ment in such a pol­icy. It is a 100 per cent risk cover. It sim­ply means that a per­son pays a cer­tain pre­mium to pro­tect his fam­ily against his sud­den death.

He for­feits the amount if he out­lives the period of the pol­icy. This explains why the Term Insur­ance Pol­icy comes at the low­est cost. This is the cheap­est insur­ance available.

Following are the Term Insurance Plans by various Life Insurance Companies

Life Insurance Companies	Plans
Aegon Religare Life Insurance	iTerm Plan
Aviva Life Insurance	Aviva i-Life
Bharti AXA Life	eProtect
HDFC Life	Click2Protect
ICICI-Prudential	iProtect
Kotak Life Insurance	Kotak e-Term/e-Preferred Term
LIC	Anmol Jeevan
Max-New York Life Insurance	Level Term Policy
Met Life	Met Protect
SBI Life	SBI Life Swadhan
TATA-AIG Life Insurance	TATA-AIG Life-Assure

B) WHOLE LIFE INSUR­ANCE POLICY


The Whole Life Insurance Plans are Permanent Insurance Plans which run as long as the Policy Holder is alive. The Insured pays the premium amount throughout his life time. The beneficiary of the policy receives the coverage amount plus the interest & accumulated bonus only at the time of Insured’s death.

A Whole Life Pol­icy is an insur­ance cover against death, irre­spec­tive of when it hap­pens. Under this plan, the pol­i­cy­holder pays reg­u­lar pre­mi­ums until his death, fol­low­ing which the money is handed over to his fam­ily.

This pol­icy, how­ever, fails to address the addi­tional needs of the insured dur­ing his post-retirement years. It doesn’t take into account a person’s increas­ing needs either.

While the insured buys the pol­icy at a young age, his require­ments increase over time. By the time he dies, the value of the sum assured is too low to meet his family’s needs.

As a result of these draw­backs, insur­ance firms now offer either a mod­i­fied Whole Life Pol­icy or com­bine in with another type of policy

Following are the Whole-Life Insurance Plans

Life Insurance Companies	Plans
Aviva Life Insurance	Life Long
HDFC Life	Single Premium Whole Life Plan
ICICI-Prudential	ICICI Pru Whole Life
Kotak Life	Eternal Life Plan
LIC	Jeevan Tarang
Max-New York Life Insurance	Whole Life Participating
Met Life	Met 100- Limited Pay Whole life
TATA-AIG Life Insurance

C) ENDOWMENT POLICY


Endowment plans: The Endowment Plans are basically saving plans which offer Insurance against the Insured’s death during the term of the plan, simultaneously acting as a saving tool. Unlike Term Plans which don’t offer maturity benefits Endowment Plans provide benefits when the policy expires. In the case of the Insured’s death his family receives the sum assured/stipulated coverage along with the accumulated profits/bonus. When the Insured survives the term period he receives the life coverage plus the profits & bonuses.

It is a com­bi­na­tion of risk cover and finan­cial sav­ings. Endow­ment poli­cies is the most pop­u­lar poli­cies in the world of life insurance.

• In an Endow­ment Pol­icy, the sum assured is payable even if the insured sur­vives the pol­icy term.

• If the insured dies dur­ing the tenure of the pol­icy, the insur­ance

firm has to pay the sum assured just as any other pure risk cover.

• A pure endow­ment pol­icy is also a form of finan­cial sav­ing, whereby if the per­son cov­ered remains alive beyond the tenure of the pol­icy, he gets back the sum assured with some other invest­ment benefits.

The cost of such a pol­icy is slightly higher but worth its value.

Following are the Endowment Insurance Plans

Life Insurance Companies	Plans
Aviva Life Insurance	Life Saver
HDFC Life	Endowment Assurance Plan
ICICI-Prudential	Guaranteed Saving Insurance
Kotak Life	Endowment Plan
LIC	Jeevan Anand
Max-New York Life Insurance	Life Gain
Met Life	Met Suvidha
SBI Life	SBI Life Sudarshan
TATA-AIG Life Insurance	Assure Golden Years Plans

D) MONEY BACK POLICY

These poli­cies are struc­tured to pro­vide sums required as antic­i­pated expenses (mar­riage, edu­ca­tion, etc) over a stip­u­lated period of time.

With infla­tion becom­ing a big issue, com­pa­nies have real­ized that some­times the money value of the pol­icy is eroded. That is why with-profit poli­cies are also being intro­duced to off­set some of the losses incurred on account of infla­tion.

A por­tion of the sum assured is payable at reg­u­lar inter­vals. On sur­vival the remain­der of the sum assured is payable. In case of death, the full sum assured is payable to the insured. The pre­mium is payable for a par­tic­u­lar period of time.

E) ANNU­ITIES AND PENSION


In an annu­ity, the insurer agrees to pay the insured a stip­u­lated sum of money peri­od­i­cally. The pur­pose of an annu­ity is to pro­tect against risk as well as pro­vide money in the form of pen­sion at reg­u­lar inter­vals.

Over the years, insur­ers have added var­i­ous fea­tures to basic insur­ance poli­cies in order to address spe­cific needs of a cross sec­tion of people.

LIST OF LIFE INSUR­ANCE COM­PA­NIES IN INDIA

1. Bajaj Allianz Life Insur­ance Com­pany Limited
2. Birla Sun Life Insur­ance Co. Ltd
3. HDFC Stan­dard Life Insur­ance Co. Ltd
4. ICICI Pru­den­tial Life Insur­ance Co. Ltd.
5. ING Vysya Life Insur­ance Com­pany Ltd.
6. Life Insur­ance Cor­po­ra­tion of India
7. Max New York Life Insur­ance Co. Ltd
8. Met Life India Insur­ance Com­pany Ltd.
9. Kotak Mahin­dra Old Mutual Life Insur­ance Limited
10. SBI Life Insur­ance Co. Ltd
11. Tata AIG Life Insur­ance Com­pany Limited
12. Reliance Life Insur­ance Com­pany Limited.
13. Aviva Life Insur­ance Co. India Pvt. Ltd.
14. Sahara India Life Insur­ance Co, Ltd.
15. Shri­ram Life Insur­ance Co, Ltd.
16. Bharti AXA Life Insur­ance Com­pany Ltd.
17. Future Gen­er­ali Life Insur­ance Com­pany Ltd.
18. IDBI For­tis Life Insur­ance Com­pany Ltd.
19. Canara HSBC Ori­en­tal Bank of Com­merce Life Insur­ance Co. Ltd
20. AEGON Reli­gare Life Insur­ance Com­pany Limited.
21. DLF Pramer­ica Life Insur­ance Co. Ltd.
22. Star Union Dai-ichi Life Insur­ance Comp. Ltd.


TOP LIFE INSURANCE COMPANIES
BEST LIFE INSURANCE 

Number of Policies Up to Dec 2011	Life Insurance Companies
20404281	LIC
785938	ICICI Prudential
698109	Reliance Life
640483	Bajaj Allianz
589855	Birla Sunlife
491927	SBI Life
405662	Max New York
397408	HDFC Standard
199275	Tata AIG
161910	ING Vysya
109614	Kotak Mahindra Old Mutual
100216	Aviva
100143	Future Generali Life
98904	Met Life
82037	Star Union Dai-ichi
73490	Shriram Life
69151	Bharti Axa Life
47322	Aegon Religare
45833	IDBI Federal
44899	Canara HSBC OBC Life
43929	DLF Pramerica
38498	IndiaFirst
36228	Sahara Life
1968	Edelweiss Tokio