pritesh final

Investors perception towards mutual funds

A

PROJECT REPORT

ON

“INVESTORS PERCEPTION TOWARDS MUTUAL FUNDS”

A Report Submitted To University Of Pune

In Partial Fulfilment Of The Degree Of

MASTER OF BUSINESS ADMINISTRATION

2014-2016

SUBMITTED

BY

PRITESH M BHANUSHALI

MBA FINANCE

UNDER THE GUIDANCE OF

PROF. SUNIL MAHAJAN SIR

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A

PROJECT REPORT

ON

“INVESTORS PERCEPTION TOWARDS MUTUAL FUNDS”

By

PRITESH M BHANUSHALI

Under the Guidance of

Mrs. SANGEETHASRUTHI

WAY TO WEALTH CONSULTING

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ACKNOWLEDGEMENT

I would like to express my gratitude to my project guide – Prof. Sunil Mahajan who gave me this golden opportunity to do the wonderful project on the topic- “Investors perception towards Mutual Fund”, which also helped me in doing a lot of research and I came to know about so many new things.

I have also been benefited greatly from the advice and counsel of the co-founder of way to wealth consulting Mrs.Sangeethasruthi where i did my internship and i am happy to express my grateful thanks to her.

Secondly i would also like to thank my parents and friends who helped me a lot in finalizing this project within the limited time frame.

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DECLARATION

I Mr.Pritesh M Bhanushali, hereby declare that the Project Report entitled “Investors Perception Towards Mutual Funds” , written and submitted by me to the University of Pune, Partial fulfilment of the requirement for the award of degree of Master of Business Administration under the guidance of Prof. Sunil Mahajan. It is my original work and the conclusions drawn there in are based on the Collected Material by Myself.

The information submitted is true and original to the best of my knowledge.

Pritesh M Bhanushali

Place: Pune

Date: /08/2015

PREFACE

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The successful completion of this project was a unique experience for me because by visiting many place and interacting various person ,I achieved a better knowledge about sales . The experience which I gained by doing this project was essential at this turning point of my carrier . this project is being submitted which content detailed analysis of the research under taken by me.The research provides an opportunity to the student to devote his/her skills knowledge and competencies required during the technical session.

The research is on the topic “INVESTORS PERCEPTION TOWARDS MUTUAL FUND”

EXECUTIVE SUMMARY

Investment can be defined as an item of value purchased for income or capital appreciation. Investments are made to achieve a specific objective and savings are made to meet an unforeseen event.There are various avenues of investments in accordance with individual preferences. Investments are made in different asset classes depending upon on an individuals risk and return characteristics. Investment choices are physical assets and financial assets.

Gold and Real estates are examples of physical assets, which have a physical form to them.

Another avenue of investment is mutual funds. It is created when investors put their money together. It is therefore a pool of the investor’s funds. The most important characteristics of a mutual fund is that the contributors and the beneficiaries of the fund are the same class of people, namely the investors.

The term mutual means that investors contribute to the pool, and also benefit from the pool. There are no other claimants to the funds. The pool of funds held mutually by investors is the mutual fund.

The money in turn is invested in various securities depending on the objectives of the mutual fund scheme, and the profits (or loss) are shared among investors in proportion to their investments.

Mutual fund schemes are usually open-ended (perpetually open for investments and redemptions) or closed end (with a fixed term). A mutual fund scheme issues units that are normally priced at Rs.10 during the initial offer. Thus, the number of units you own as against the total number of units issued by the mutual fund scheme determines your

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share in the profits or loss of a scheme. In the case of open-end schemes, units can be purchased from or sold back to the fund at a Net Asset Value (NAV) based price on all business days.

The NAV is the actual value of a unit of the fund on a given day .Thus, when you invest in a mutual fund scheme, you normally get an account statement mentioning the number of units that have been allotted to you and the NAV based price at which the units have been allotted. The account statement is similar to your bank statement.

Mutual funds invest basically in three types of asset classes:

Stocks:

Stocks represent ownership or equity in a company, popularly known as shares.

Bonds:

These represent debt from companies, financial institutions or Government agencies.

Money market instruments:

These include short-term debt instruments such as treasury bills, certificate of deposits and inter-bank call money.

A mutual fund’s business is to invest the funds thus collected, according to the wishes of the investors who created the pool. In many markets these wishes are articulated as investment mandates .Analysis of The perception towards these mutual funds is done herein this project. Even what factors the investors look before investing can also be observed.

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INDEX CONTENTS

CHAPTER NO

CONTENTS PAGE NO

1 Company Profile 9 – 112 Review of Literature 12 – 133 Research Methodology 14 – 154 Contents of Mutual Funds –

IntroductionHistory

Advantages and DisadvantagesTypes

16 – 24

5 Mutual Funds Constituents 25 – 266 Investment Strategy – SIP 27 – 297 Role of SEBI 30 – 318 Mutual Funds – Emerging Challenges 32 – 339 Marketing Strategy adopted by Mutual Fund 34 – 3510 Comparison of other avenues with Mutual Funds 36 – 3811 Risks involved in Mutual Funds 39 – 4012 How to choose a Fund? 41 – 4213 Data Analysis and Interpretation 43 – 5414 Findings 5515 Recommendations 5616 Conclusion 5717 Learnings 5818 Bibliography 5919 Annexture 61

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COMPANY PROFILE

Introduction

WAYtoWEALTH is a firm which deals as a Financial Consultant, Financial Planner, Financial Coach and Financial Educator.

They are financial planning specialist not just because of their world class expertise Or company’s top notch consultants who deliver unbiased game-changing advice every single time. Or their innate capacity of doing the right things for the right reasons.

All that makes the waytowealth consulting the best in the business, but what truly makes waytowealth specialists is their range of offering which covers the entire Financial Planning ecosystem.

Company offer Premium Financial Planning to the person who values in-person expertise the most, co-habits our locations with us & wishes to work with an expert Financial Planner who doubles up as a Financial Coach, extensively, all year round.

For the connoisseur of expertise who doesn’t co-habit their location company’s Expert Online Advice is available seamlessly. The same specialized services without the geographical barriers.

The person wanting to Start Investing Now, with expectation of only returns & not hassle, they have an online interface to do just that for him. And a Wealth Management arm to manage all his investments.

Waytowealth do all this, but also strive to leave a legacy behind, hence the company take great pride in pioneering a Training Academy that imparts World-Class Financial

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Education to foster the next generation of exemplary Consultants as well as train corporate employees in finances to complete their leadership skills.

FOUNDERS

Founder and Chief Strategist - Rahul Kalra

Co-founder,Chief Consultant and Financial Planner.- Sangeethasruthi S

ESTABLISHMENT

Way to wealth is a Financial Consultancy that has been launched in 2014.

ITS MISSION

We Plan to change the world.

One Financial Plan at a time.

THEIR PRODUCTS

Premium Financial Plan -They offer Premium Financial Planning to the person who values in-person expertise the most & wishes to work with an expert Financial Planner who doubles up as a Financial Coach, extensively, all year round.

Expert Online Advice – A Specialist of a given field whose opinion is valued gives Expert Online Advice for the individuals who wish to make a Financial Plan.

Start Investing Now -The person wanting to Start Investing Now, with expectation of only returns & not hassle, we have an online interface to do just that for him. And a Wealth Management arm to manage all his investments.

Training Academic -

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They do all this, but also strive to leave a legacy behind, hence they take great pride in pioneering a Training Academy that imparts World-Class Financial Education to foster the next generation of exemplary Consultants as well as train corporate employees in finances to complete their leadership skills.

WEBSITEhttp://www.waytowealthconsulting.com

INDUSTRYFinancial Services

TYPEPrivately Held

COMPANY SIZE1-10 employees

ROLES PLAYED BY THEM:-

Financial Consultant

As Consultants, they give Expert Personal Financial advice.

Financial Planner

As planners they are strategists. They build your financial roadmap, they plan your finances and investments which is known as a Financial Plan.

Financial Coach

As a Financial Coach they mentor and they educate.

Financial Educator

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As educators they are teachers and mentors who believe in creating the next generation of top notch consultants in India.

As trainers they train non finance managers in the essential domain skill of understanding finances.

THREE C’S ANALYSIS

Company :-Company is offering premium Financial Planning, Start Investing Now that is online way of investing, they are providing free online expert advice about financial planning which can be availed any time at any place.

Competitors :-Other financial consultants are their competitors like bharati consultancy keshavnagar-mundhawa, sanraya investment advisor pvt ltd. Etc.waytowealth is different from their competitors because of the service they provide the online service and the education in financial planning.

Customers :- The company is targeting the one who is earning and who has small goal in life to achieve and who need a financial planning to meet the future expenses.

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REVIEW OF LITERATURE

McDonald and John (1974) examined 123 mutual funds and identifiedthe existence of positive relationship between objectives and risk. Thestudy identified the existence of positive relationship between return and risk. The relationship between objective and risk-adjusted performance indicated that, more aggressive funds experienced better results.

Obaidulla and Sridhar (1991) evaluated the performance of two majorgrowth oriental mutual fund schemes - Master share and Canshare. They both concluded that both the funds provided abnormal returns. Master share out performed based on market risk.

Gupta (1994) made a household investor survey with the objective toprovide data on the investor preferences on Mutual Funds and otherfinancial assets. The findings of the study were more appropriate, at that time, to the policy makers and mutual funds to design the financial products for the future.

Conrad S Ciccotello and C Terry Grant’s (1996) study identified anegative correlation between asset size of the fund and the expense ratio. The results of the study brought out that, larger funds had lower expense acquire information for trading decision and were consistent with the theory of information pricing.

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Anand and Murugaiah (2004) had studied various strategic issues related to the marketing offinancial services. They found that recently this type of industry requires new strategies tosurvive and for operation. For surviving they have to adopt new marketing strategies andtactics that enable them to capture maximum opportunities with the lowest risks in order to enable them to survive and meet the competition from various market players globally

Ramamurthy and Reddy (2005) conducted a study to analyze recent trends in the mutual fund industry and draw a conclusion that the main benefits for small investors’ due to efficient management, diversification of investment, easy administration, nice return potential, liquidity, transparency, flexibility, affordability, wide range of choices and a proper regulation governed by SEBI. The study also analyzed about recent trends in mutual fund industry like various exit and entry policies of mutual fund companies, various schemes related to real estate, commodity, bullion and precious metals, entering of banking sector in mutual fund, buying and selling of mutual funds through online

Desigan et al (2006) conducted a study on women investors’ ’ perception towards investment and found that women investors’ ’ basically are indecisive in investing in mutual funds due to various reasons like lack of knowledge about the investment protection and their various investment procedures, market fluctuations, various risks associated with investment, assessment of investment and redressal of grievances regarding their various investment related problems. Savings is a habit specially embodied into women. Even in the past, when women mainly depended on their spouses’ income, they used to save to meet emergencies as well as for future activities. In those days, women did not have any awareness about various investment outlets. But as time passed, the scenario has totally changed.

Deepak Agarwal (2011), Mutual fund contributes to globalization of financial markets and is one among the main sources for capital formation in emerging economies. He analyzed the pricing mechanism of Indian Mutual Fund Industry, data at both the fund-manager and fund-investor levels. There has been incredible growth in the mutual fund industry in India, attracting large investments from domestic and foreign investors.

Kalpesh P Prajapati and Mahesh K Patel (2012),evaluated the performance of Indian mutual funds using relative performance index, risk-return analysis, Treynor's ratio, Sharp's ratio, Sharp's measure, Jensen's measure, andFama's measure. The data used is daily closing NAVs from 1st January 2007 to 31st December, 2011 and concluded that most of the mutual funds have given positive return during the period of study.

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RESEARCH METHODOLOGY

Research Methodology can be defined as, giving a clear cut idea on what methods or

process the researcher is going to use in his research to achieve research objectives. In

order to plan for the whole research process at a right point of time and to advance the

research work in the right direction, carefully chosen research methodology is very

critical.

TOPIC

Study of “Investors Perception Towards Mutual Fund”.

OBJECTIVES OF THE STUDY

To study the level of awareness of mutual funds To analyse the perception of investors towards mutual funds. To study the factors considered by the investors and those which

ultimately influence him while investing. To determine the type of mutual fund investor prefers the most.

RESEARCH INSTRUMENT:

A well- structured questionnaire are used which are multiple choices questions that are

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used for collections of certain information.

QUESTIONNAIRE DESIGN:

The questionnaire designed is one consisting of multiple choices.

DATA COLLECTION:

Nature of data: The nature of data is both primary and secondary data.

Primary data:

Descriptive research design is been used for the study. Primary data was collected from

investors. Survey method and personal interview method was used to collect data from

consumer.

Secondary data:

The secondary data was collected from websites and blogs.

SAMPLE SIZE:

The sampling size of 95 investors selected for the survey.

FIELD AREA: Mumbai

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LIMITATIONS OF THE STUDY

Some of the persons were not so responsive.

Possibility of error in Data Collection because many of investors may not have

given correct answer for my questionnaire.

There was no proper knowledge about Mutual Funds to many Investors.

CONTENTS OF MUTUAL FUNDS

1) INTRODUCTION

A mutual fund is a financial intermediary that pools the savings of investors for collective investment in a diversified portfolio of securities. A fund is “mutual” as all of its returns, minus its expenses, are shared by the fund’s investors.

The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 defines a mutual fund as a ‘a fund established in the form of a trust to raise money through the sale ofunits to the public or a section of the public under one or more schemes for investing in securities, including money market instruments’.

According to the above definition, a mutual fund in India can raise resources through sale of units to the public. It can be set up in the form of a Trust under the Indian Trust Act. Thedefinition has been further extended by allowing mutual funds to diversify their activities in the following areas:

Portfolio management services Management of offshore funds Providing advice to offshore funds Management of pension or provident funds Management of venture capital funds Management of money market funds Management of real estate funds

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A mutual fund serves as a link between the investor and the securities market by mobilising savings from the investors and investing them in the securities market to generate returns.Thus, a mutual fund is a kin to portfolio management services (PMS). Although, both are conceptually same, they are different from each other. Portfolio management services are offered to high net worth individuals; taking into account their risk profile, their investments are managed separately. In the case of mutual funds, savings of small investors are pooled under a scheme and the returns are distributed in the same proportion in which the investments are made by the investors/unit-holders.

Mutual fund is a collective savings scheme. Mutual funds play an important role in mobilising the savings of small investors and channelising the same for productive ventures in the Indianeconomy.

2) HISTORY – MUTUAL FUNDS

The history of mutual funds in India can be broadly divided into four distinct phases

FIRST PHASE – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.

SECOND PHASE – 1987-1993 (ENTRY OF PUBLIC SECTOR FUNDS)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

THIRD PHASE – 1993-2003 (ENTRY OF PRIVATE SECTOR FUNDS)

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With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds.

FOURTH PHASE – SINCE FEBRUARY 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth.

3) ADVANTAGES AND DISADVANTAGES

Advantages of Investing into a Mutual Fund: -

Flexibility - Mutual Fund investments offers a lot of flexibility with features such as systematic investment plans, systematic withdrawal plans & dividend reinvestment.

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Affordability - They are available in units so this makes it very affordable. Because of the large corpus, even a small investor can benefit from its investment strategy.

Liquidity - In open-ended schemes, there is an option of withdrawing or redeeming money.

Diversification - Risk is lowered with Mutual Funds as they invest across different industries & stocks. Professional Management - Expert Fund Managers of the Mutual Fund analyze all options based on experience & research.

Potential of return -The fund managers who take care of Mutual Fund have access to information and statistics from leading economists and analysts around the world. Because of this, they are in a better position than individual investors to identify opportunities for investments to flourish.

Economies of Scale: – Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than as an individual would pay.

Simplicity – Buying a mutual fund is easy. When an investor invest in the mutual fund then they need to take form, fill it according to required instructions given and give the demand draft or cheque of amount whatever they want to invest.

Reduced risk: - As mutual funds invests in large number of companies and are managed professionally, the risk factor of the investor is reduced. A small investor, on the other hand, may not be in position to minimize the such risk.

Tax advantage: - There are certain schemes of mutual fund which provide tax advantage under income tax act. Thus tax liability of investor also reduced when he invest in mutual fund schemes.

Low operating cost: - Mutual fund has large number of investible funds at their disposal and thus can avail the large scale of economies. This reduces their operating cost by way of brokerage, fees, commission etc. Thus, an investor can also gets the benefits of large scale of economies and low operating cost.

DISADVANTAGES OF MUTUAL FUNDS

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Risks and Costs:

Changing market conditions can create fluctuations in the value of a mutual fund investment. Also there are fees and expenses associated with investing in mutual funds that do not usually occur when purchasing individual securities directly.

No Guarantees:

As Mutual funds invest in debt as well equities , there are no sure returns . Returns depends on the market conditions .

No Control:

Investor does not have control on investment , all the decisions are taken by the fund manager. Investor can just join or leave the show.

Difficulty in Selecting a Suitable Fund Scheme :

Many investors find it difficult to select one option from the plethora of funds/schemes/plans available. For this, they may have to take advice from financial planners in order to invest in the right fund to achieve their objectives.

Selecting right financial securities is not easy :

It's difficult task for a mutual fund manager to select appropriate and suitable financial securities for investment to generate higher returns.

4) TYPES OF MUTUAL FUND

Wide varieties of Mutual Fund Schemes exist to cater to the needs such as financial

position, risk tolerance and return expectations etc. Following are the types -

A) BY STRUCTURE

Open - Ended Schemes:

An open-ended fund or scheme is one that is available for subscription and repurchase

on a continuous basis. These schemes do not have a fixed maturity period. Investors can

conveniently buy and sell units at Net Asset Value (NAV) related prices, which are

declared on a daily basis. The key feature of open-end schemes is liquidity.

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Close - Ended Schemes:

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is

open for subscription only during a specified period at the time of launch of the scheme.

Investors can invest in the scheme at the time of the initial public issue and thereafter

they can buy or sell the units of the scheme on the stock exchanges where the units are

listed. In order to provide an exit route to the investors, some close-ended funds give an

option of selling back the units to the mutual fund through periodic repurchase at NAV

related prices. SEBI Regulations stipulate that at least one of the two exit routes is

provided to the investor i.e. either repurchase facility or through listing on stock

exchanges. These mutual funds schemes disclose NAV generally on weekly basis.

Interval Scheme:

These combine the feature of open-ended and close ended schemes. They may be traded

on the stock exchange or may be open for sale or redemption during predetermined

intervals at NAV related prices.

B) BY INVESTMENT OBJECTIVE

Growth Schemes:

The aim of growth funds is to provide capital appreciation over the medium to long-

term. Such schemes normally invest a major part of their corpus in equities. Such funds

have comparatively high risks. These schemes provide different options to the investors

like dividend option, capital appreciation, etc. and the investors may choose an option

depending on their preferences. The investors must indicate the option in the application

form. The mutual funds also allow the investors to change the options at a later date.

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Growth schemes are good for investors having a long-term outlook seeking appreciation

over a period of time.

Income Schemes:

The aim of income funds is to provide regular and steady income to investors. Such

schemes generally invest in fixed income securities such as bonds, corporate debentures,

Government securities and money market instruments. Such funds are less risky

compared to equity schemes. These funds are not affected because of fluctuations in

equity markets. However, opportunities of capital appreciation are also limited in such

funds. The NAVs of such funds are affected because of change in interest rates in the

country. If the interest rates fall, NAVs of such funds are likely to increase in the short

run and vice versa. However, long term investors may not bother about these fluctuations.

Balanced Schemes:

The aim of balanced funds is to provide both growth and regular income as such schemes

invest both in equities and fixed income securities in the proportion indicated in their

offer documents. These are appropriate for investors looking for moderate growth. They

generally invest 40-60% in equity and debt instruments. These funds are also affected

because of fluctuations in share prices in the stock markets. However, NAVs of such

funds are likely to be less volatile compared to pure equity funds.

Money Market Schemes:

These funds are also income funds and their aim is to provide easy liquidity, preservation

of capital and moderate income. These schemes invest exclusively in safer short-term

instruments such as treasury bills, certificates of deposit, commercial paper and inter-

bank call money, government securities, etc. Returns on these schemes fluctuate much

less compared to other funds. These funds are appropriate for corporate and individual

investors as a means to park their surplus funds for short periods.

Gilt Fund:

These primarily invest in government debts. Hence, the investor usually does not have to

worry about credit risk since government debt is generally credit risk free. Reliance Gilt

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Securities Fund - Short Term Gilt Plan & Long Term Gilt Plan are best example of such

scheme.

C) OTHER SCHEMES

Tax Saving Schemes:

These schemes offer tax rebates to the investors under specific provisions of the Income

Tax Act, 1961 as the Government offers tax incentives for investment in specified

avenues. E.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the

mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-

dominantly in equities. Their growth opportunities and risks associated are like any

equity-oriented scheme.

Index Schemes:

Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index,

S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the same weight

age comprising of an index. NAVs of such schemes would rise or fall in accordance with

the rise or fall in the index, though not exactly by the same percentage due to some

factors known as "tracking error" in technical terms. Necessary disclosures in this regard

are made in the offer document of the mutual fund scheme. There are also exchange

traded index funds launched by the mutual funds which are traded on the stock

exchanges.

Sector Specific Schemes:

These are the funds/schemes which invest in the securities of only those sectors or

industries as specified in the offer documents. E.g. Pharmaceuticals, Software, Fast

Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are

dependent on the performance of the respective sectors/industries. While these funds may

give higher returns, they are more risky compared to diversified funds. Investors need to

keep a watch on the performance of those sectors/industries and must exit at an

appropriate time. They may also seek advice of an expert.

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MUTUAL FUND CONSTITUENTS

Following are the constituents of Mutual Funds –

Sponsors:

The sponsors initiate the idea to set up a mutual fund. It could be a registered company, scheduled bank or financial institution. A sponsor has to satisfy certain conditions, such as capital, record (at least five years’ operation in financial services), and de-fault free dealings and general reputation of fairness. The sponsors appoint the Trustee, AMC and Custodian. Once the AMC is formed, the sponsor is just a stakeholder.

Trust/ Board of Trustees:

Trustees hold a fiduciary responsibility towards unit holders by protecting their interests. Trustees float and market schemes, and secure necessary approvals. They check if the AMC’s investments are within well-defined limits, whether the fund’s assets are

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protected, and also ensure that unit holders get their due returns. They also review any due diligence by the AMC. For major decisions concerning the fund, they have to take the unit holders consent. They submit reports every six months to sebi.

Investors get an annual report. Trustees are paid annually out of the fund’s assets 0.5 percent of the weekly net asset value.

Fund Managers/ AMC:

They are the ones who manage money of the investors. An AMC takes decisions, compensates investors through dividends, maintains proper accounting and information for pricing of units, calculates the NAV, and provides information on listed schemes. It also exercises due diligence on investments, and submits quarterly reports to the trustees. A fund’s AMC can neither act for any other fund nor undertake any business other than asset management. Its net worth should not fall below Rs. 10 crore. And, its fee should not exceed 1.25 percent if collections are below Rs. 100 crore and 1 percent if collections are above Rs. 100 crore. SEBI can pull up an AMC if it deviates from its prescribed role.

Custodian:

Often an independent organization, it takes custody of securities and other assets of mutual fund. Its responsibilities include receipt and delivery of securities, collecting income-distributing dividends, safekeeping of the units and segregating assets and settlements between schemes. Their charges range between 0.15-0.2 percent of the net value of the holding. Custodians can service more than one fund.

Mutual Fund :

A fund established in the form of a trust to raise money through the sale ofunits to the public or a section of the public under one or more schemes forinvesting in securities, including money market instruments.

Transfer Agent:

A transfer agent is employed by a mutual fund to maintain records ofshareholder accounts calculate and disburse dividends and prepare and mailshareholder account statements, federal income tax information and othershareholder notices.

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Unit Holder:

A person who is holding units in a scheme of a mutual fund.

INVESTMENT STRATEGY - Systematic Investment Plan

Systematic Investment plan is a smart method of investing. This method of investing

builds greater wealth through the small contributions. It has become very popular due to

its obvious benefit and ease. Today, almost all the mutual fund companies give the

option of investment through the systematic investment plan. Even mutual fund

companies relaxes some of their criteria for SIP.

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Benefits of Systematic Investment Plan

SIP is becoming very popular. The Financialplanner always suggests investing through

the SIP to build the wealth. Often, the term SIP is used parallel with mutual fund and

ELSS. Once again, I would say it is not an investment option. It is a way of investing.

Let us see the benefits of Systematic Investment Plan.

COST AVERAGING:

SIP helps you lower your average cost of investment. This principle is called rupee-cost

averaging. Every month, the value of the MF scheme changes. Units are thus available at

a different price every month. So, when you invest a fixed amount every month, during

different market cycles, you buy varying amounts of MF units. So, on the whole, the

average cost falls. You get more unit of a mutual fund if the price of a mutual fund unit

(NAV) goes down. You get less number of mutual fund unit if price of a mutual fund unit

goes up. Therefore, you buy a less number of mutual fund units at the higher price and a

higher number of mutual fund units at a lower price. This auto balancing helps to get a

better return.

POWER OF COMPOUNDING:

As you keep investing, you also earn returns on the interest or profits you make.

Moreover, you can also earn more by reinvesting your profits.

Thus, the longer you invest, the higher your total return.

For this reason, it is advisable to start investing as early as possible, and thus earn more

profits through continuous reinvestment. This is called the power of compounding. SIP

helps you tap into the power of compounding.

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TAX-SAVING SCHEMES:

In an SIP, your investment process is automated. So, you never miss a single investment.

This instills discipline in your investments and helps you to meet your financial goals.

DISCIPLINE:

These schemes – a kind of debt fund – invest in short-term instruments such as

commercial paper (CP), certificates of deposit (CD), treasury bills (T-Bill) and overnight

money (Call).

SMALL INVESTORS:

SIPs can be started even with the small amount of Rs 500 or Rs 1,000 whereas some

mutual funds may have a higher investment threshold.

Because of the regular investment, one invests a higher amount at the end of the

year.

The money starts getting return from the first day..

You can start and stop SIP any time.

You can choose many dates during a month.

The SIP can be monthly, quarterly, weekly or fortnightly. You can choose the

frequency as per your wish.

The regular payment through the post datedcheques (PDC) or Electronic clearing system

(ECS) has made SIP very convenient.

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ROLE OF SEBI

SEBI (Mutual Funds) Regulations, 1996 The provision of this regulation pertaining to AMC are: All the schemes to be launched by the AMC need to be approved by the trustees and copies of offer documents of such schemes are to be filed with SEBI.

The offer documents shall contain adequate disclosures to enable the investors to make informed decisions.

Advertisements in respect of schemes should be in conformity with the SEBI prescribed advertisement code, and disclose the method and periodicity of valuation of investment sales and repurchase in addition to the investment objectives.

The listing of close-ended schemes is mandatory and every close-ended scheme should be listed on a recognised stock exchange within six months from the closure of subscription. However, listing is not mandatory in case the scheme provides for monthly income or caters to the special classes of persons like senior citizens, women, children, and physically handicapped; if the scheme discloses details of repurchase in the offer document; if the scheme opens for repurchase within six months of closure of subscription.

Units of a close-ended scheme can be opened for sale or redemption at a predetermined fixed interval if the minimum and maximum amount of sale, redemption, and periodicity is disclosed in the offer document.

Units of a close-ended scheme can also be converted into an open-ended scheme with the consent of a majority of the unit-holders and disclosure is made in the offer documentabout the option and period of conversion.

Units of a close-ended scheme may be rolled over by passing a resolution by a majority of the shareholders.

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No scheme other than unit-linked scheme can be opened for subscription for more than 45 days. . The AMC must specify in the offer document about the minimum subscription and the extent of over- subscription, which is intended to be retained. In the case of over-subscription, all applicants applying up to 5,000 units must be given full allotment subject to over subscription.

The AMC must refund the application money if minimum subscription is not received, and also the excess over subscription within six weeks of closure of subscription.

Guaranteed returns can be provided in a scheme if such returns are fully guaranteed by the AMC or sponsor. In such cases, there should be a statement indicating the name of the person, and the manner in which the guarantee is to be made must be stated in the offer document.

A close-ended scheme shall be wound up on redemption date, unless it is rolled over, or if 75% of the unit-holders of a scheme pass a resolution for winding up of the scheme; if the trustees on the happening of any event require the scheme to be wound up; or if SEBI, so directs in the interest of investors.

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MUTUAL FUND- EMERGING CHALLENGES

Growth versus governance – a right mixThe Indian Mutual Fund industry has held its ground in the center of hard times in capital market. As number of players in the market increases, competition may force fund houses to comply not only with the laid down regulations and concentrate more on growth but efforts in creating excellence in governance as well. In this challenging environment, the debate of growth versus governance is surely set to assume greater significance.

Administration and distributionNo discussion on mutual funds can be complete without touching upon the aspect of distribution. A lot has been spoken about the need to increase penetration of mutual funds in Tier II and Tier III cities. Rural participation in mutual funds continues to be poor. Such poor penetration has much to do with lack of investor awareness, inefficiencies in fund transfer mechanisms, presence of safer substitutes and cost of establishing presence in smaller areas. Fund houses cannot fight this battle single handedly. They need adequate support in terms of banking infrastructure, distribution services and technological solutions to ensure a sustainable cost-benefit model of growth.

Investor education- a driving force on financial planningThe efforts taken by the industry and AMFI towards investor education are definitely showing results. The media is also making a fair share of its contribution. Today, we have news channels, running dedicated shows for mutual funds, wherein fundamentals of investing in mutual funds are explained and queries of investors are answered by experts. However, the fact remains that in our country mutual funds are sold rather than bought and this trend has been observed uniformly across all classes of investors and for all kinds of products. This is where professional help is required. The economic boom in our country has led to the emergence of a very strong Small and Medium Enterprise (SME) sector.

The technological backboneFund houses have introduced interesting technological innovations such as transacting through the internet, net asset value updates on mobile phones, unit balance alerts via SMS messages, transacting through ATM cards etc. However, these innovations

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currently cater to the already pampered urban class of investors. The internet revolution in our country is yet to penetrate to the grass root levels. The per capita usage of internet in our country is still very low compared not only to the developed countries but also as compared to our developing peers. Mobile telephony comparatively has grown exponentially. Herein lies another important challenge for the industry. It is very important to strike the right balance while choosing to invest in technological advancements.

Diminishing talent poolPrint media these days has dedicated space to capture resource movements between companies, especially in the financial services sector. The acute shortage of talented resources is slowly but surely showing its impact. The pool of talented people is diminishing and staff costs are soaring.The key challenge is to find a permanent solution to tide over this acute shortage. One possible solution could be for the industry through AMFI to tie up with universities and colleges to offer programmes dedicated to the financial services industry in general and the mutual fund industry in particular, which would cover various critical aspects of the financial services industry ranging from fund management, research, analysis, treasury, operations and accounting.

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MARKETING STRATEGIES ADOPTED BY THE MUTUAL FUNDS

The present marketing strategies of mutual funds can be divided into three main headings:

A. Direct marketing

B. Selling through intermediaries.

C. Joint Calls

1) Direct Marketing:

This constitutes 20 percent of the total sales of mutual funds.

Some of the important tools used in this type of selling are:

Personal Selling:- In this case the customer support officer or Relationship Manager of the fund at a particular branch takes appointment from the potential prospect. Once the appointment is fixed, the branch officer also called Business Development Associate (BDA) in some funds then meets the prospect and gives him all details about the various schemes being offered by his fund. The conversion rate in this mode of selling is in between 30% - 40%.

Telemarketing: In this case the emphasis is to inform the people about the fund. The names and phone numbers of the people are picked at random from telephone directory. Some fund houses have their database of investors and they cross sell their other products. Sometimes people belonging to a particular profession are also contacted through phone and are then informed about the fund. Generally the conversion rate in this form of marketing is 15% - 20%.

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Direct mail: This one of the most common method followed by all mutual funds. Addresses of people are picked at random from telephone directory, business directory, professional directory etc. The customer support officer (CSO) then mails the literature of the schemes offered by the fund. The follow up starts after 3 to 4 days of mailing the literature. The CSO calls on the people to whom the literature was mailed. Answers their queries and is generally successful in taking appointments with those people. It is then the job of BDA to try his best to convert that prospect into a customer.

Advertisements in newspapers and magazines: The funds regularly advertise in business newspapers and magazines besides in leading national dailies. The purpose to keep investors aware about the schemes offered by the fund and their performance in recent past.

Advertisement in TV/FM Channel: The funds are aggressively giving their advertisements in TV and FM Channels to promote their funds.

Hoardings and Banners: In this case the hoardings and banners of the fund are put at important locations of the city where the movement of the people is very high. The hoarding and banner generally contains information either about one particular scheme or brief information about all schemes of fund.

2) Selling through intermediaries

Intermediaries contribute towards 80% of the total sales of mutual funds. These are the people/ distributors who are in direct touch with the investors. They perform an important role in attracting new customers. Most of these intermediaries are also involved in selling shares and other investment instruments. They do a commendable job in convincing investors to invest in mutual funds. A lot depends on the after sale services offered by the intermediary to the customer.

Customers prefer to work with those intermediaries who give them right information about the fund and keep them abreast with the latest changes taking place in the market especially if they have any bearing on the fund in which they have invested.

Regular Meetings with distributors:

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Most of the funds conduct monthly/bi-monthly meetings with their distributors. The objective is to hear their complaints regarding service aspects from funds side and other queries related to the market situation. Sometimes, special training programmes are also conducted for the new agents/ distributors.

Training involves giving details about the products of the fund, their present performance in the market, what the competitors are doing and what they can do to increase the sales of the fund.

3) Joint Calls

This is generally done when the prospect seems to be a high net worth investor. The BDA and the agent (who is located close to the residence or area of operation) together visit the prospect and brief him about the fund. The conversion rate is very high in this situation, generally, around 60%. Both the fund and the agent provide even after sale services in this particular case.

COMPARISION OF OTHER AVENUES WITH MUTUAL FUNDS

The mutual fund sector operates under stricter regulations as compared to most other investment avenues.

1) Mutual funds vs ULIP investments

Mutual funds (MFs) and unit-linked insurance plans (ULIPs) are two popular investment options available for investors. Clearly different yet these products are very similar in their functioning and structure. These instruments offer investors an exposure to a market linked portfolio giving an opportunity to earn positive returns.

Nature of products - Mutual funds are a sole investment product. The primary aim of a MF is wealth creation. Equity, debt or hybrid, it offers different investment options to suit various risk profiles. On the other hand, ULIP is a product bundled with life cover, wealth creation as well as tax saving. Mutual funds too have a tax saving option, but that is applicable only to equity linked savings schemes (ELSSs).

Degree of risk in investment - ULIPs are primarily insurance products. Fund managers of ULIP therefore are careful and use less aggressive investment strategies. This makes ULIP less risky than mutual funds. Mutual funds being pure investments products have their portfolios exposed to much more risks to be able to generate superior returns.

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Liquidity - ULIPs typically have a lock-in period of five years during which time units cannot be sold. Mutual funds generally do not have a lock-in period (except in the case of closed-ended funds which have a lock-in period of normally three years) and are more liquid than ULIP, as they can also be widely traded in the market.

Different regulatory - Mutual funds and ULIPs are regulated and governed by two different regulatory bodies. Mutual funds fall under the purview of SEBI (Securities and Exchange Board of India), while ULIPs are governed by the IRDA (Insurance Regulatory and Development Authority).

Charges - Expenses incurred in a MF are much lower than expenses in ULIPs. There are three types of mutual fund charges—Entry load, exit load and recurring charges. Entry and exit load are onetime expenses ranging from 1% to 3%. Recurring charges are towards, fund management, cost of sales & marketing and administration, and is around 2.5%. In the case of ULIPs, the upfront charges are much higher. Most of the charges are collected in the initial three to five years.

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2) Mutual Funds v/s Fixed Deposits

Return on Investments –

Bank Deposits offers a fixed percentage of return,as one has agreed upon by the investor and the bank at the time of the investment.

On the other hand, debt mutual funds have no assured rate, and the return on investment for debt mutual funds depend completely on the market and the performance of the fund. Fluctuations in the money market impacts the NAV of the fund, thereby altering returns. Thus, a great advantage of bank fixed deposits is that, you will continue to earn the same interest rates even if the market goes down.

Capital appreciation –

When it come to capital appreciation, mutual funds are better than fixed deposits, because of the equity investment. In longer time periods, market changes result in increasing interest rates. And, your mutual funds manager is there with all the expertise and professionalism to ensure a better capital appreciation.

Liquidity –

In terms of liquidity, these days both fixed deposits and mutual funds are almost same. Fixed deposits are actually meant for long lock in periods, but most banks allow premature withdrawals with a nominal penalty (usually 1%). The interest rate calculation for bank fixed deposit withdrawals is done on how long the money was parked. Mutual funds are equally liquid; you can take out any number of units within a couple of days. The return for premature withdrawal of mutual funds units is done on the prevalent NAV of the fund. Usually, there is an exit load of 1% for premature withdrawals before 1 year.

Cost of investments –

Investing in bank fixed deposits costs nothing. On the other hand, there is a minimum charge for mutual funds investments management and fund distribution, borne by the investor irrespective of returns. In other words, no matter whether your return on mutual funds investments is positive or negative, you have to bear an expense as the fees of fund management.

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3) PPF v/s ELSS

ELSS or PPF: Which is Less Risky? - ELSS invests in the shares. Shares can

swing with the market sentiment.

Hence, ELSS is very risky.

PPF invests in government bonds. These bonds are backed by the Government of

India. The government securities are considered the most secure investment.

The Return Comparison of ELSS and PPF - ELSS and PPF work on different

investment objective. ELSS invests in shares to maximize the return, whereas PPF

investment in government bonds which don’t give more than the bank fixed deposit.

The interest rate of PPF is fixed for every year.

Redemption Time Limit - All the investments which give tax benefit come with some

limitation. The most notable condition is the lock in period. The ELSS and PPF both lock

our money for the certain period.

A PPF account is for minimum 15 years. You get the maturity amount after the

completion of 15 financial years. However, you can take loan against PPF. You can also

withdraw some amount from the PPF account after 5 full financial years.

The ELSS is more flexible in this regard. ELSS has the lock in period of only 3 years.

Equity investment gives you the best return in the long period.

Investment Limit

You can invest minimum Rs 500 in both ELSS and PPF. However In a PPF account,

you can’t invest more than Rs 1.5 lakh in a year. There is no such restriction in ELSS.

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RISKS INVOLVED IN MUTUAL FUND INVESTMENTS

The risk return trade-off

The most important relationship to understand is the risk-return trade-off. Higher the risk greater the returns/loss and lower the risk lesser the returns/loss. Hence, it is up to the investor to decide how much risk he is willing to take. In order to do this one must first be aware of the different types of risks involved with his investment decision.

Political/ government policy risk

Changes in government policy and political decision especially with regard to the tax benefits may impact the business prospects of the companies leading to an impact on the investments made by the fund. They can create a favorable environment for investment or vice-versa. Therefore, stable monetary and fiscal policies are crucial to sustain a propitious investment environment.

Liquidity risk

Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. Liquidity risk can be partly mitigated by diversification, staggering of maturities as well as internal risk controls that lean towards purchase of liquid securities.

Effect of loss of key professionals and inability to adapt

An industries' key asset is often the personnel who run the business i.e.intellectual properties of the key employees of the respective companies. Given the ever-changing complexion of few industries and the high obsolescence levels, availability of qualified, trained and motivated personnel is very critical for the success of industries in few sectors. It is, therefore, necessary to attract key personnel and also to retain them to meet the changing environment and challenges the sector offers. Failure or inability to attract/retain such qualified key personnel may impact the prospects of the companies in the particular sector in which the fund invests.

Exchange risks

A number of companies generate revenues in foreign currencies and may have investments or expenses also denominated in foreign currencies. Changes in exchange rates may, therefore, have a positive or negative impact on companies which in turn would have an effect on the investment of the fund.

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Investment risk

The sectoral fund schemes, investments will be predominantly in equities of select companies in the particular sectors. Accordingly, the NAVof the schemes are linked to the equity performance of such companies and may be more volatile than a more diversified portfolio of equities.

Risk tolerance

Typically,

risk is defined as short-term price variability. But on a long-term basis, risk is the possibility that one‘s accumulated real capital will be insufficient to meet his financial goals.

Individual tolerance for risk varies, creating a distinct "investment personality" for each investor. Some investors can accept short-term volatility with ease, others with near panic. So whether One‘s investment temperament is conservative, moderate or aggressive. One needs to focus on how comfortable or uncomfortable he will be as the value of his investment moves up or down.

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HOW TO CHOOSE A FUND

Money is precious. It is hard-earned. You can’t just put your money in an investment vehicle or mutual fund without some research.

Here are some things to keep in mind while choosing a fund:

Past performance:

History is important. Before investing, check the historic performance of the mutual fund scheme, the asset manager’s investment decisions, fund returns and so on. While the past performance is not an indicator of the future, it could help you figure out what to expect in the future. You can understand the investment philosophies of the fund and the kind of returns it is offering to investors over a period of time. It would also make sense to check out the two-year and one-year returns for consistency.

Match the scheme's risk with your profile:

Even though a mutual fund diversifies its portfolio to reduce risk, they may eventually invest in a single type of asset. The risk of the fund varies with the kind of assets it is invested in. For this reason, check if the mutual fund fits your risk profile and investment horizon. For example, certain sector-specific schemes come with a high-risk, high-return tag. Such plans are suspect to crashes in case the industry or sector loses the market's fancy. If the investor is risk-averse, he could instead opt for a debt scheme with little risk.

However, if you are a long-term investor, who doesn’t mind risk, you could go ahead with the sector-specific mutual fund scheme. For this reason, most investors prefer balanced schemes, which invest in a combination of equities and debts. They are less risky that pure equity or growth funds, which are likely to give greater returns, but more risky than pure debt plans.

Diversification:

While choosing a mutual fund, one should always consider factors like the extent of diversification that a mutual fund offers to your portfolio. A mutual fund can offer diversification either by investing in multiple assets, or by balancing your overall portfolio.

For example, suppose your portfolio contains 70% exposure to stocks from different industries, then it makes sense to invest the 30% in a debt fund to balance the portfolio.

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Similarly, if your portfolio has a lot of exposure to a particular sector like IT, then avoid investing in a mutual fund that also invests in IT. This way, you can balance your exposure to a similar kind of risk.

Know your fund manager:

The success of a fund, to a great extent, depends on the fund manager. Some of the most successful funds are run by the same managers. It would be sensible to always ask about the fund manager before investing as well as knowing about changes in the fund manager's strategy or any other significant developments that an AMC may have undergone.

For instance, if the portfolio manager, who generated the fund's successful performance, is no longer managing that particular fund, you may do well to wait and analyze the pros and cons of investing in that fund.

Read the fine print:

The prospectus says a lot about the fund. Reading the fund's prospectus is a must to learn about its investment strategy and the risk that it is prone to. Funds with higher rates of return may carry a higher element of risk. Hence, it is of utmost importance that an investor always chooses a particular scheme after considering his financial goals and weighs them against the mutual fund’s risk.

That said, remember that all funds carry some level of risk. Just because a fund invests in government or corporate bonds does not mean that it does not have any risk.

Costs:

A fund with high costs must perform better than a low-cost fund to generate returns for you. Even small differences in fees can translate into large differences in returns over a period of time.

So, ensure the costs and returns tally. There is no point in spending extra if it is delivering the same kind of returns like a low-cost fund.

Patience:

Finally, an investor must not enter and exit mutual funds as and when the market turns. Market cycles are natural. Be patient. Like stocks, mutual funds too pay off only if you have the patience to wait. This applies for both buying and selling. Don’t pick a fund simply because it has shown a spurt in value in the current rally.

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Ensure its returns are consistent. Similarly, don’t sell off a mutual fund just because it is not performing well due to poor market conditions. However, it makes little sense to hold on to a fund that lags behind the market year after year.

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DATA ANALYSIS AND INTERPRETATION

1) Where do you invest your savings?

Reasons No. of People PercentageFixed Deposit 31 33%Shares 13 14%Gold/Silver 20 21%Mutual Funds 22 23%Real Estate 9 9%

Fixed deposit Shares Gold/Silver Mutual Funds Real Estate0

5

10

15

20

25

30

35

Graph 1

Interpretation:-

As per the above graph most of the people like to invest in Fixed Deposit as it is safe investment instrument as it get the fixed rate of return as decided.

People are also ready to invest in mutual funds as it also give good returns.

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2) What are the factors to which you give priority when you invest?

Reasons No. of people PercentageSafety 16 17%High return 13 13%Liquidity 16 17%Less Risk 17 18%Marketability 24 25%Tax exemption 9 10%

Safety High return Liquidity Less risk Marketability Tax exemption0

5

10

15

20

25

30

Graph 2

Interpretation :-

Most of the people give more priority to marketability as people can know what the situation of a particular fund is and so with that they can select in which investment they want to opt.

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3) Reasons to invest in Mutual Funds

Reasons No. of people PercentageGood return 22 23%Safety 14 15%Limited risk 14 14%Tax exemption 19 11%Systematic Investment 16 17%Capital appreciation 10 20%

Good return

Safet

y

Limite

s risk

Tax e

xemption

Syste

matic in

vestm

ent

Capita

l apprec

iation

0

5

10

15

20

25

Graph 3

Interpretation:-

People invest in Mutual Fund as it gives good rate of return and involves more benefits with it.

People like to invest in Mutual Fund as in it ELSS has Tax exemption of Rs.1,50,000 and has less Lock In Period as compared with FD and PPF.

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4) Which Mutual Fund scheme you consider as best?

Reasons No. of people PercentageOpen ended fund 19 20%Close ended fund 14 9%Equity fund 15 14%Debt fund 17 31%Tax saving schemes 30 26%

open ended fund close ended fund equity fund debt fund tax saving schemes0

5

10

15

20

25

30

35

Graph 4

Interpretation:-

There are various types of Mutual Funds scheme included but the best is Tax saving. In Mutual Fund ELSS gives best Tax saving exemption of Rs.1,50,000 under section 80C rule with less Lock In Period.

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5) How long would you like to hold your Mutual Fund Investments?

Reasons No. of people Percentage1 – 3 26 27%4 – 6 34 36%7 – 10 21 22%More then 10 years 14 15%

3-Jan 6-Apr 10-Jul More then 10 years0

5

10

15

20

25

30

35

40

Interpretation:-

People are willing to hold Mutual Funds for more years as people know their benefits of investing it for a longer period of time.

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6) What is the level of risk you are ready to afford?

Reasons No. of people PercentageVery high 0 0%High 12 13%Moderate 23 24%Low 35 37%No risk 25 26%

very high high moderate low no risk0

5

10

15

20

25

30

35

40

Graph 6

Interpretation:-

Most of the people are willing to take low risk.

As per the graph given people are not ready to make more risk as they have fear of losing their money.

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7) Do you have knowledge about share market and its working?

Reasons No. of people PercentageYes 83 87%No 12 13%

Yes No0

10

20

30

40

50

60

70

80

90Yes; 83

No; 12

graph 7

Interpretation:-

People should have the knowledge of Share Market as it is important and in Mutual Funds also in many schemes it is traded in different stocks.

People should be aware of Mutual Funds.

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8) When you invest in Mutual Fund which mode of investment do you prefer?

Reasons No. of people PercentageSystematic Investment Plan 78 82%One Time Investment 17 18%

Systematic Investment Plan One Time Investment0

10

20

30

40

50

60

70

80

Systematic In-vestment Plan

One Time In-vestment

Graph 8

Interpretation :-

From the above graph it has been seen that 86% of the people like to invest through SIP rather then One Time Investment.

SIP helps in investing very less amount like 500 per month and it also makes people habituated to save and it makes people happy as large portion of their money doesn’t go like in One Time Investment.

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9) What advantages do you find when you invest in Mutual Fund?

Reasons No. of people PercentageProfessional Management 11 11%Liquidity 20 21%Choices of Schemes 22 23%Tax benefits 20 21%Well Regulated 12 13%Simplicity 10 11%

Professional Management

Liquidity Choices of schemes

Tax benefits Well regulated Simplicity0

5

10

15

20

25

Graph 9

Interpretation:-

As per the above graph people are investing in Mutual Funds as it gives various choices of schemes to investors as per their objectives.

With various choices of schemes it also provides with other advantages like Liquidity, good returns, etc.

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10)From where do you gather information about the performance of Mutual Fund?

Reasons No. of people PercentageBrokers 19 20%TV channels 9 9%Magazines 13 14%Internet 29 31%Financial Consultants 25 26%

Brokers TV channels Magazines Internet Financial consultants0

5

10

15

20

25

30

35

Graph 10

Interpretation:-

People found it easy to know the performance of the funds from the internet as it becomes very easy for them.

People also take help from the Financial Consultants to look for the performance.

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11)Can Mutual Funds be viewed as Risk Free?

Reasons No. of people PercentageYes 69 73%No 26 27%

Yes No0

10

20

30

40

50

60

70

80

Yes

No

Graph 11

Sales

Interpretation:-

As shown in the above graph most people think that Mutual Fund is risk free investments because it gives many benefits like SIP, Regulated by SEBI, Professionally managed, ELSS is known as best Tax Saving option and has less Lock In Period as compared with FD and PPF.

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12)According to you, which one do you rate as the best investment instrument?

Reasons No. of people PercentageFixed deposits 19 20%Shares 9 10%Mutual funds 23 24%Gold/Silver 16 17%Real estate 11 12%Savings account 16 17%

Fixed deposits Shares Mutual Funds Gold/Silver Real estate Savings account0

5

10

15

20

25

Graph 12

Interpretation:-

Mostly like to invest in Mutual Funds as it provides various advantages to

investors.

People don’t more rely on stock market as it is always fluctuating.

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FINDINGS

Many of the investors are aware of mutual funds but most of their Perception towards them is not positive.

Investors are mainly concerned with the risk factors of mutual funds and are not directing towards them.

The investors who have invested in mutual funds mainly go for it because of the Liquidity matter and Tax exemption.

Most of the people don’t know the advantages of mutual funds and the various types of mutual funds.

There are nearly 1173 schemes of mutual funds offered by various mutual fund houses, which an ordinary person is not aware.

A common investor basically looks for the Tax exemption and Safety & security while investing.

Investors often feel that those people, who have surplus amount with them and invest to avail Tax exemption, can do investing in mutual funds.

RECOMMENDATIONS

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With the findings it is seen that the investors with high income are investing lesser amount of money and hence the AMCs should motivate these investors by providing good and innovative lucrative schemes and motivate them to invest more.

As the investors are majorly seen to gather knowledge about the schemes from the agents, so there should be a major implementation in creation of more information centres which would provide the investors with full information at the investors will.

The public companies have a better goodwill in comparison to that of the private companies. So, it becomes imperially important for the private companies to build a strong goodwill in the minds of the investors by making them feel that they care for them and are prone to provide them with the best possible returns on their investments.

The investors are not fully aware about the various aspects of mutual funds such as the most important criteria of diversification. Hence certain steps needs to be taken wherein the investors are provided with the awareness of this factor which is not relevant in any other investment schemes. The diversification also reduces the risk and so the investors should bebrought into the daylight of this particular advantage.

The agents of the mutual funds do not find a great deal of profits after a sale of mutual funds as a result of which they tend to skip this investment option while explaining the investors. Hence to reduce this problem the agents should be awarded with good profits so that they get motivated and try to sell mutual funds along with other investment options.

When we look at the other investment options they try to provide the information to the investors in common via promotional activities. So, the mutual fund providing companies should make efforts in creating mass awareness by means of various promotional activities such as advertisements, sales promotion etc.

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CONCLUSION

Mutual fund is the ideal investment vehicle for today‘s complex and modern financial scenario.Market for equity shares, bonds and other fixed income instruments have become matured and information driven.

Price changes in these assets are driven by global event occurring in faraway places. the typical individual is unlikely to have skills, knowledge, inclination and time to keep track of events, understand their implication and act speedily. A mutual fund is answer to these entire situation it appoints professionally qualified and experienced staff manages each of these functions on a full time basis. Mutual fund provides varieties of schemes for different kind of customer to suit their goals.

Mutual fund have open-ended and close- ended schemes, children‘s plan, diversified equity fund, balanced fund, liquid plan, income fund, short term fund, sector fund and pension plan. So the future of mutual fund in India is bright, because it meets investor‘s confidence.

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OBSERVATIONS/LEARNINGS

My personal observations/learning’s are as follows:- I understood the different schemes of mutual fund how these schemes were launched and designed for customer.

I understood the behavior of the investors how investors are choosing the schemes of mutual fund.

What were the criteria for selecting the mutual funds.

In this loomy scenario the investor didn’t want to take any more risk in investment so they like to invest in mutual fund.

Because of less risk in mutual fund the new investor would like invest in mutual fund’s schemes.

Mutual fund becomes strong investment alternative for existing and new investors.

There will be a wide market place for mutual fund in future.

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BIBLIOGRAPHY

Websites: www.mutualfundsindia.com www.amfi.com www.mutualfunds.com www.bseindia.com www.sebi.com www.sebi.gov.in www.capitalmarket.com www.moneycontrol.com www.alliancecapitalindia.com

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http://www.alliancecapitalindia.com/


ANNEXTURE

Questionnaire

1) Where do you invest your savings?a) Fixed Depositb) Sharesc) Gold/Silverd) Mutual Fundse) Real Estatef) Other

2) What are the factors to which you give priority when you invest?a) Safetyb) High returnc) Liquidityd) Less riske) Marketabilityf) Tax exemption

3) Reasons to invest in Mutual Fundsa) Good returnb) Safetyc) Limited Riskd) Tax exemptione) Systematic Investmentf) Capital appreciation

4) Which Mutual Fund scheme you consider as best?a) Open ended fundb) Close ended fundc) Equity fundd) Debt funde) Tax saving schemes

5) How long would you like to hold your Mutual Fund Investments?a) 1 - 3 yearsb) 4 – 6 yearsc) 7 – 10 yearsd) More then 10 years

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6) What is the level of risk you are ready to afford?a) Very highb) Highc) Moderated) Lowe) No risk

7) Do you have knowledge about share market and its working?a) Yesb) No

8) When you invest in Mutual Fund which mode of investment do you prefer?a) Systematic Investment Planb) One Time Investment

9) What advantages do you find when you invest in Mutual Fund?a) Professional Managementb) Liquidityc) Choices of Schemesd) Tax Benefitse) Well regulatedf) Simplicity

10)From where do you gather information about the performance of Mutual Fund?a) Brokers b) TV channelsc) Magazinesd) Internete) Financial Consultants

11)Can Mutual Funds be viewed as Risk Free?a) Yesb) No

12)According to you, which one do you rate as the best investment instrument?a) Fixed Depositsb) Sharesc) Mutual Fundsd) Gold/Silvere) Real Estatef) Savings account

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pritesh final

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