SWOT ANALYSIS OF ASSET
CLASSES
BY
SURAJ G D
EQUITY
STRENGTH WEAKNESS
High returns compared to CASA accounts High volatality
Regulated by a statutary body, SEBI No constant dividend
Dividends are paid regularly If the prices drop, it becomes a liability
Good long term investment plan for middle class Cost of equity for the company is high
Can be traded Not a short tern plan
OPPORTUNITY THREAT
Provides opportunity for economic stability Government litigatigation
Can become the owner of the company Economic slowdown and Negative market sentiments
It is an economic indicator Fixed income securities
Market trends could be understood Short term investments
take part in decision making Bankruptcy risk
DEBT
STRENGTH WEAKNESS
Low cost of capital and government guaranteed Interest obligation and agency cost
Secured compared to equity Increases burden during losses
Fixed interest rate Leverage decreases during loss
Helps to regulate managers Tough to obtain for a non tangible sector
Ease to obtain and profits are with company Low returns compared to equity and are illiquid
OPPORTUNITY THREAT
Bonds can be traded Equity gives more return
Lending is more during rate cuts Government regulation
Saves tax and increases financial leverage RBI interest rate fluctuation
Less complexity to obtain Increasing NPA
Good credit rating boost image of the company Bankruptcy risk
GOLD
STRENGTH WEAKNESS
Valuable worldwide Storage cost
Good Hedge in the market Illiquid in India due to sentiments
Balance in the portfolio
Can be invested in both physical and paper form
Can be traded
OPPORTUNITY THREAT
Demand increases as population increases Quality of Gold
Can be used as collateral Fluctuation in price
NPS
STRENGTH WEAKNESS
Regulated by PFRDA Only one account is allowed
Diversification factor Only up to 75% of investment can be in equity
Consists both equity and debt Cannot make withdrawal in the first 10 years
Gives option of customized n or automatic allocation Cannot make more than 3 withdrawals until the age of
60
Can be started at the age of 18
Not a short tern plan
OPPORTUNITY THREAT
Partial tax exemption Subjected to market fluctuation
40% of returns are not taxed PPF and EPF are 100% tax exempted
Benefits of equity unlike other pension schemes Mutual funds offer greater returns and are yet tax free
PPF
STRENGTH WEAKNESS
High returns compared to CASA accounts Money locked for 15 years
Simple and accessible process Minimum of `500 has to be deposited every year
Lowest risk level Cannot invest more than `1,50,000 per year
Guaranteed returns Withdrawal is allowed after 7 years
OPPORTUNITY THREAT
Future saving opportunity Inflation challenge
Interest exempted from tax Interest rate volatility
Tax deduction Equity offers greater returns
Can take loan on PPF at 1% interest
MUTUAL FUNDS
STRENGTH WEAKNESS
Offers liquidity Commision charges
Avoids volatility of interest rates No intraday advantage
Diversification of investment
Can enter international market
Only `500 is sufficient
OPPORTUNITY THREAT
Huge untapped market Intraday trading provides higher returns
Failure of NBFC RBI and SEBI regulations are stringent
Interest rate cuts in the bank Subjected to market risk
Advertisements being noticed “Mutual funds sahi hai”
EQUITY MUTUAL FUNDS
STRENGTH WEAKNESS
Diversification of investment Lock in period of 3 years to get tax benefit
Monitored by professionals Expense in the form of commission
Income by dividends but low cost compared to equity Only large cap fund gets tax benefit
High liquidity factor
Government backing
OPPORTUNITY THREAT
Tax benefit if invested in large cap funds Subjected to market risk
More returns compared to debt market SEBI regulations
Low returns during global slowdown
DEBT MUTUAL FUNDS
STRENGTH WEAKNESS
Low risk or no risk Lock in period of 1-3 years
Guaranteed return Low liquidity
Option to invest both in Gilt and corporate bond Cost of funds
Capital gain tax of 20%
OPPORTUNITY THREAT
When markets go down Credit default
Picture of economy Interest rate risk
Can have both government and corporate bonds Economic slowdown
HYBRID FUNDS
STRENGTH WEAKNESS
Benefits of both equity and debt Fund managers decide the allocation of fund
Diversification and consistant returns Not risk-less
Generally market fluctuation and interest rate Lower returns compared to equity
fluctuation are opposite in direction. Hence can take
advantage at any time High commission charges
OPPORTUNITY THREAT
Lot of first time investors see low risk investment Has threat from both interest rate and market
fluctuation
Provides balance in portfolio
INDEX MUTUAL FUND
STRENGTH WEAKNESS
Low risk No big gains
Steady growth Lack of flexibility in investing
Low fees
OPPORTUNITY THREAT
For people who have retired or are on the verge of
retirement Market risk is inevitable
Returns are always in line with market and hence can
be predicted
EXCHANGE TRADED FUNDS
STRENGTH WEAKNESS
Diversification Not good for long term investment
Intraday trading is allowed and hence profits are more Dividend paying ETFs have low dividend yield
Commission fees is less
OPPORTUNITY THREAT
No tax charged Regulations by the government and SEBI
Arbitrage advantage can taken Market risk if not used wisely
Market crash or boom, both may be good
SYSTEMATIC INVESTMENT PLAN
STRENGTH WEAKNESS
Disciplined investment No flexibility in investing
Even `500 is sufficient to start Not suitable for investors with irregular cashflow
Long term plan mitigates risk No short investment
Liquidity is high
OPPORTUNITY THREAT
Good for young people who have just got job Market risk
Other equity instruments have higher returns
PORTFOLIO MANAGEMENT SCHEME
STRENGTH WEAKNESS
Investment of large scale is suitable Min investment is 5 lakhs but many companies keep
25 lakhs
Diversification of both bonds and equities
Separate demat account is required
Even NRIs can invest
There is a fund manager fees involved
Entirely customized unlike mutual funds
OPPORTUNITY THREAT
Best suited for HNI SEBI regulations
Opportunity to earn in both state of market Market risks
Personal bias loss
SENIOR CITIZEN SAVING SCHEME
STRENGTH WEAKNESS
Government backed Illiquid and premature withdrawal attract fine
Higher interest rate than CASA Cannot reinvest
Can deposit from 1,000 to 15 lakh rupees People below 60 years cannot invest
NRI and HUF are not eligible
Interest is taxable
OPPORTUNITY THREAT
Income tax benefit up to 1.5 lakhs Sentiments of people as they invest when they earn
Post office benefits as account is openable in it Interest rate fluctuation
Contribution to GDP by retired person
SUKHANYA SAMRUDHI YOJANA
STRENGTH WEAKNESS
Guaranteed returns Only girls child can invest
Investment can be done at a very young age Cannot start to invest once the age of the daughter is
above 10
Government support
Illiquid
Disciplined investment
There is an upper cap for investment
OPPORTUNITY THREAT
Tax exemption
Interest rate fluctuation
Can invest additional 1.5 lakhs if a couple has
daughter child Equity gets greater returns
