Page 247 - DCOM507_STOCK_MARKET_OPERATIONS

Stock Market Operations

Notes Main Advantages
(a) Generally high returns due to capital gains
(b) Easy liquidity due listing on stock exchanges and transferability as also bank loan facility
(c) Tax exemptions on income as also long-term capital gains

Disadvantages
(a) High risk
(b) No assured returns
Income Funds

(i) Objective: Assured minimum income and safety of capital
(ii) Duration: 5-7 years
(iii) Investment Pattern: Bulk (75-80%) of funds invested in fixed income securities like
government bonds, company debentures, etc. and rest in equity shares,
(iv) Investment Risk: Absolute safety,
(v) Return: 14.75% p.a. upwards-payable monthly or quarterly plus mid scheme bonus and
end of the scheme appreciation (minimum 2%).
(vi) Liquidity: No listing on stock exchanges and units are not transferable. Repurchase facility
after initial lock-in period of three years.

Main Advantages
(a) Safety of investment and assured minimum income.
(b) Reasonable liquidity due to availability of bank loan facility
(c) Income/dividend eligible for exemption up to ` 10,000 under Section 80L of Income Tax
Act.
Disadvantage
Extraordinary gains not possible.

Some examples of income funds:
Scheme Issued by
(a) Units Scheme of 1964, Growing Income Unit Trust of India
Unit Scheme of 1987
(b) Magnum Monthly Income Schemes SBI Mutual Fund
(c) Rising Monthly Income Scheme BOI Mutual Fund
(d) Swarna Pushpa Indbank Mutual Fund

(e) GIC Safe-1991, GIC-Rise-1991, Big Value GIC Mutual Fund
(f) PNBRIPS PNB Mutual Fund
Growth and Income Funds
These are ‘No Guaranteed Return’ schemes of either all enquiry fund type or balanced fund type.

All Equity Fund Schemes
(i) Objective: High income combined with growth.

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