#1- Return
Returns depends upon
- nature of the investment
- the maturity period
- host of other factors
Received return in the form of Yield [dividend or interest] + capital appreciation [difference between sales price and purchase price]
#2- Risk
- Risk is inherent in any investment.
- Risk and return of an investment are related.
- the higher the risk, the higher is the return.
Risks may be
- Loss of capital
- Delay in repayment
- Non-payment of interest
- Variability in returns
Risk of an investment depends on the following Factors
- Maturity period
- The lower credit worthiness
- Nature of the investment eg. Equity shares carry higher risk and debt instruments bond/debentures carry lower risk compare with equity.
#3-Safety
- Every investor expects to get back his capital on maturity without loss and without delay
- Safety is another feature which an investor desires for his investments
- Safety implies the certainty of return of capital without loss of money or time.
#4- Liquidity
An investment which is easily saleable or marketable
- without loss of money
- without loss of time
is said to be possess liquidity.
#5-Tax Shelter
Tax benefits are in the following three kinds
- Initial tax benefit - The tax relief enjoyed at the time of making the Investment.
- Continuing tax benefit - A continuing tax benefit represents the tax shield associated with the periodic returns from the Investment.
- Terminal tax benefit - Relief from taxation when an investment is realized or liquidate
Ex: withdrawal from a public provident fund account is not subject to tax