A PROJECT REPORT ON

MUTUAL FUNDS IS THE BETTER INVESTMENTS PLAN

Submitted in pa tia! "u!"i!!ment "#

MASTER OF BUSINESS ADMIMISTRATION

P #$ amme #"

INSTITUTE OF MANA%EMENT TECHNOLO%&

%HA'IABAD Bat()*++,-+.

Submitted b/ 0A1HILESH MISHRA MBA2 T) ee &ea P #$ amme3 Bat() 2*++,-*++.3 En #!ment N#-,*5+*6.7

Unde %uidan(e 0CA SHARAD CHAUHAN Mana$e A((#unt4 Uttam Su$a Mi!!4 Limited C# p #te #""i(e N#ida

Depa tment #" Bu4ine44 Mana$ement

INSTITUTE OF MANA%EMENT TECHNOLO%&

%HA'IABAD

AC1NO8LED%EMENT With regard to my Project with Mutual Fund I would like to thank each and every one who offered help, guideline and support whenever required First and foremost I would like to e!press gratitude to Manager "#I kanwali $oad %ehradoon and other staffs for their support and guidance in the Project work I

am e!tremely grateful to my guide, CA S)a ad C)au)an for their valua&le guidance and timely suggestions I would like to thank all faculty mem&ers of 'ttam "ugar Mills (imited for the valua&le guidance) support I would also like to e!tend my thanks to my mem&ers and friends for their support specially M*+ +nuj Panday officer I , 'ttam "ugar Mills (imited "haranpur ) Mr $ajeev -oyal consultant, "ales ta!, income ta! +nd lastly, I would like to e!press my gratefulness to the parent.s for seeing me through it all

A1HILESH MISHRA

CERTIFICATE
,his is to certify that Mr +khilesh Mishra a student of IM,/*%( -ha0i&ad has completed project work on

MUTUAL

FUNDS IS THE BETTER INVESTMENTS PLAN under my

guidance and supervision I certify that this is an original work and has not &een copied from any source

"ignature of -uide 1ame of Project -uide CA S)a ad C)au)an %ate/

DECLERATION

I here&y declare that this Project $eport entitled 2,34 M','+( F'1% I" #4,,4$ I154",M41, P(+1 in "#I Mutual Fund su&mitted in the partial fulfillment of the requirement of Master of #usiness +dministration 6M#+7 of I1",I,',4 8F M+1+-4M4, ,4*318(8-9, -3+:I+#+% is &ased on primary ) secondary data found &y me in various departments, &ooks, maga0ines and we&sites ) *ollected &y me in under guidance of * + "harad *hauhan

%+,4;

+<3I(4"3 MI"3$+ M#+ 6,hree 9ears7 4nrollment 1o =>?@>ABC

E9ECUTIVE SUMMAR&
In few years Mutual Fund has emerged as a tool for ensuring one.s financial well &eing Mutual Funds have not only contri&uted to the India growth story &ut have also helped families tap into the success of Indian Industry +s information and awareness is rising more and more people are enjoying the &enefits of investing in mutual funds ,he main reason the num&er of retail mutual fund investors remains small is that nine in ten people with incomes in India do not know that mutual funds e!ist #ut once people are aware of mutual fund investment opportunities, the num&er who decide to invest in mutual funds increases to as many as one in five people ,he trick for converting a person with no knowledge of mutual funds to a new Mutual Fund customer is to understand which of the potential investors are more likely to &uy mutual funds and to use the right arguments in the sales process that customers will accept as important and relevant to their decision ,his Project gave me a great learning e!perience and at the same time it gave me enough scope to implement my analytical a&ility ,he analysis and advice presented in this Project $eport is &ased on market research on the saving and investment practices of the investors and preferences of the investors for investment in Mutual Funds ,his $eport will help to know a&out the investors. Preferences in Mutual Fund means +re they prefer any particular +sset Management *ompany 6+M*7, Which type of Product they prefer, Which 8ption 6-rowth or %ividend7 they prefer or Which Investment "trategy they follow 6"ystematic Investment Plan or 8ne time Plan7 ,his Project as a whole can &e divided into two parts

,he first part gives an insight a&out Mutual Fund and its various aspects, the *ompany Profile, 8&jectives of the study, $esearch Methodology 8ne can have a &rief knowledge a&out Mutual Fund and its &asics through the Project ,he second part of the Project consists of data and its analysis collected through survey done on >@@ people For the collection of Primary data I made a questionnaire and surveyed of >@@ people I also taken interview of many People those who were coming at the "#I #ranch where I done my Project I visited other +M*s in %ehradoon to get some knowledge related to my topic I studied a&out the products and strategies of other +M*s in %ehradoon to know why people prefer to invest in those +M*s ,his

Project covers the topic 2,34 M','+( F'1% I" #4,,4$ I154",M41, P(+1 ,he data collected has &een well organi0ed and presented I hope the research findings and conclusion will &e of use

CONTENTS

+cknowledgement %eclaration 4!ecutive "ummary

*hapter / ? *hapter / > *hapter / D *hapter / F *hapter / = *hapter / A *hapter / G

I1,$8%'*,I81 *8MP+19 P$8FI(4 8#E4*,I54" +1% "*8P4 $4"4+$*3 M4,38%8(8-9 %+,+ +1+(9"I" +1% I1,4$P$4,+,I81 FI1%I1-" +1% *81*('"I81" "'--4",I81" ) $4*8MM41%+,I81" #I#(I8-$+P39

MUTUAL FUNDS

ALL ABOUT MUTUAL FUNDS

8HAT IS MUTUAL FUND B& STRUCTURE B& NATURE E:UIT& FUND DEBT FUNDS B& INVESTMENT OBJECTIVE OTHER SCHEMES PROS ; CONS OF INVESTIN% IN MUTUAL FUNDS ADVANTA%ES OF INVESTIN% MUTUAL FUNDS DISADVANTA%ES OF INVESTIN% MUTUAL FUNDS MUTUAL FUNDS INDUSTR& IN INDIA MAJOR PLA&ERS OF MUTUAL FUNDS IN INDIA HISTOR& OF THE INDIAN MUTUAL FUND INDUSTR& CATE%ORIES OF MUTUAL FUNDS INVESTMENT STRATE%IES 8OR1IN% OF A MUTUAL FUND %UIDELINES OF THE SEBI FOR MUTUAL FUND COMPANIES DISTRIBUTION CHANNELS DOES FUND PERFORMANCE AND RAN1IN% PERSIST< PORTFOLIO ANAL&SIS TOOLS

RESEARCH REPORT

OBJECTIVE OF RESEARCH SCOPE OF THE STUD& DATA SOURCES SAMPLIN% DATA ANAL&SIS :UESTIONNAIRE

*hapter / ? Introduction

INTRODUCTION TO MUTUAL FUND AND ITS VARIOUS ASPECTS=

Mutual fund is a trust that pools the savings of a num&er of investors who share a common financial goal ,his pool of money is invested in accordance with a stated o&jective ,he joint ownership of the fund is thus 2Mutual, i e the fund &elongs to all investors ,he money thus collected is then invested in capital market instruments such as shares, de&entures and other securities ,he income earned through these investments and the capital appreciations reali0ed are shared &y its unit holders in proportion the num&er of units owned &y them ,hus a Mutual Fund is the most suita&le investment for the common man as it offers an opportunity to invest in a diversified, professionally managed &asket of securities at a relatively low cost + Mutual Fund is an investment tool that allows small investors access to a well/ diversified portfolio of equities, &onds and other securities 4ach shareholder participates in the gain or loss of the fund 'nits are issued and can &e redeemed as needed ,he funds 1et +sset value 61+57 is determined each day Investments in securities are spread across a wide cross/section of industries and sectors and thus the risk is reduced %iversification reduces the risk &ecause all stocks may not move in the same direction in the same proportion at the same time Mutual fund issues units to the investors in accordance with quantum of money invested &y them Investors of mutual funds are known as unit holders

When an investor su&scri&es for the units of a mutual fund, he &ecomes part owner of the assets of the fund in the same proportion as his contri&ution amount put up with the corpus 6the total amount of the fund7 Mutual Fund investor is also known as a mutual fund shareholder or a unit holder +ny change in the value of the investments made into capital market instruments 6such as shares, de&entures etc7 is reflected in the 1et +sset 5alue 61+57 of the scheme 1+5 is defined as the market value of the Mutual Fund schemeHs assets net of its lia&ilities 1+5 of a scheme is calculated &y dividing the market value of schemeHs assets &y the total num&er of units issued to the investors

ADVANTA%ES OF MUTUAL FUND

Portfolio %iversification Professional management $eduction I %iversification of $isk (iquidity Fle!i&ility ) *onvenience $eduction in ,ransaction cost "afety of regulated environment *hoice of schemes ,ransparency

DISADVANTA%E OF MUTUAL FUND

1o control over *ost in the 3ands of an Investor 1o tailor/made Portfolios Managing a Portfolio Funds %ifficulty in selecting a "uita&le Fund "cheme

HISTOR& OF THE INDIAN MUTUAL FUND INDUSTR&

,he mutual fund industry in India started in ?CAD with the formation of 'nit ,rust of India, at the initiative of the -overnment of India and $eserve #ank ,hough the growth was slow, &ut it accelerated from the year ?CBG when non/',I players entered the Industry In the past decade, Indian mutual fund industry had seen a dramatic improvement, &oth qualities wise as well as quantity wise #efore, the monopoly of the market had seen an ending phaseJ the +ssets 'nder Management 6+'M7 was $sAG &illion ,he private sector entry to the fund family raised the +um to $s FG@ &illion in March ?CCD and till +pril >@@FJ it reached the height if $s ?=F@ &illion ,he Mutual Fund Industry is o&viously growing at a tremendous space with the mutual fund industry can &e &roadly put into four phases according to the development of the sector 4ach phase is &riefly descri&ed as under Fi 4t P)a4e > 576?-.@ 'nit ,rust of India 6',I7 was esta&lished on ?CAD &y an +ct of Parliament &y the $eserve #ank of India and functioned under the $egulatory and administrative control of the $eserve #ank of India In ?CGB ',I was de/linked from the $#I and the Industrial %evelopment #ank of India 6I%#I7 took over the regulatory and administrative control in place of $#I ,he first scheme launched &y ',I was 'nit

"cheme ?CAF +t the end of ?CBB ',I had $s A,G@@ crores of assets under management
Se(#nd P)a4e > 57.@-577A 2Ent / #" Pub!i( Se(t# Fund43

?CBG marked the entry of non/ ',I, pu&lic sector mutual funds set up &y pu&lic sector &anks and (ife Insurance *orporation of India 6(I*7 and -eneral Insurance *orporation of India 6-I*7 "#I Mutual Fund was the first non/ ',I Mutual Fund esta&lished in Eune ?CBG followed &y *an&ank Mutual Fund 6%ec BG7, Punja& 1ational #ank Mutual Fund 6+ug BC7, Indian #ank Mutual Fund 61ov BC7, #ank of India 6Eun C@7, #ank of #aroda Mutual Fund 68ct C>7 (I* esta&lished its mutual fund in Eune ?CBC while -I* had set up its mutual fund in %ecem&er ?CC@ +t the end of ?CCD, the mutual fund industry had assets under management of $s FG,@@F crores T)i d P)a4e > 577A-*++A 2Ent / #" P iBate Se(t# Fund43 ?CCD was the year in which the first Mutual Fund $egulations came into &eing, under which all mutual funds, e!cept ',I were to &e registered and governed ,he erstwhile <othari Pioneer 6now merged with Franklin ,empleton7 was the first private sector mutual fund registered in Euly ?CCD ,he ?CCD "4#I 6Mutual Fund7 $egulations were su&stituted &y a more comprehensive and revised Mutual Fund $egulations in ?CCA ,he industry now functions under the "4#I 6Mutual Fund7 $egulations ?CCA +s at the end of Eanuary >@@D, there were DD mutual funds with total assets of $s ?,>?,B@= crores F#u t) P)a4e > 4in(e Feb ua / *++A

In Fe&ruary >@@D, following the repeal of the 'nit ,rust of India +ct ?CAD ',I was &ifurcated into two separate entities 8ne is the "pecified 'ndertaking of the 'nit ,rust of India with assets under management of $s >C,BD= crores as at the end of Eanuary >@@D, representing &roadly, the assets of '" AF scheme, assured return and certain other schemes ,he second is the ',I Mutual Fund (td, sponsored &y "#I, P1#, #8# and (I* It is registered with "4#I and functions under the Mutual Fund $egulations consolidation and growth +s at the end of "eptem&er, >@@F, there were >C funds, which manage assets of $s ?=D?@B crores under F>? schemes

CATE%ORIES OF MUTUAL FUND0

Mutual funds can &e classified as follow ;

Ba4ed #n t)ei 4t u(tu e0

8pen/ended funds; Investors can &uy and sell the units from the fund, at any point
of time

*lose/ended funds; ,hese funds raise money from investors only once ,herefore,
after the offer period, fresh investments can not &e made into the fund If the fund is listed on a stocks e!change the units can &e traded like stocks 64 g , Morgan "tanley -rowth Fund7 $ecently, most of the 1ew Fund 8ffers of close/ended funds provided liquidity window on a periodic &asis such as monthly or weekly $edemption of units can &e made during specified intervals ,herefore, such funds have relatively low liquidity

Ba4ed #n t)ei inBe4tment #bCe(tiBe0 EDuit/ "und4; ,hese funds invest in equities and equity related instruments With
fluctuating share prices, such funds show volatile performance, even losses 3owever, short term fluctuations in the market, generally smoothens out in the long term, there&y offering higher returns at relatively lower volatility +t the same time, such funds can yield great capital appreciation as, historically, equities have outperformed all asset classes in the long term 3ence, investment in equity funds should &e considered for a period of at least D/= years It can &e further classified as;

i3 IndeE "und4/ In this case a key stock market inde!, like #"4 "ense! or 1ifty is tracked ,heir portfolio mirrors the &enchmark inde! &oth in terms of composition

and individual stock weightages ii3 EDuit/ diBe 4i"ied "und4- ?@@K of the capital is invested in equities spreading across different sectors and stocks iiiF3 DiBidend /ie!d "und4- it is similar to the equity diversified funds e!cept that they invest in companies offering high dividend yields iB3 T)emati( "und4- Invest ?@@K of the assets in sectors which are related through some theme e g /+n infrastructure fund invests in power, construction, cements sectors etc B3 Se(t# "und4- Invest ?@@K of the capital in a specific sector e g / + &anking sector fund will invest in &anking stocks Bi3 ELSS/ 4quity (inked "aving "cheme provides ta! &enefit to the investors

Ba!an(ed "und0 ,heir investment portfolio includes &oth de&t and equity

+s a result, on

the risk/return ladder, they fall &etween equity and de&t funds #alanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments Following are &alanced funds classes;

i3 Debt-# iented "und4 -Investment &elow A=K in equities ii3 EDuit/-# iented "und4 -Invest at least A=K in equities, remaining in de&t

Debt "und0 ,hey invest only in de&t instruments, and are a good option for investors
averse to idea of taking risk associated with equities ,herefore, they invest e!clusively in fi!ed/income instruments like &onds, de&entures, -overnment of India securitiesJ and money market instruments such as certificates of deposit 6*%7, commercial paper 6*P7 and call money Put your money into any of these de&t funds depending on your investment hori0on and needs i3 LiDuid "und4- ,hese funds invest ?@@K in money market instruments, a large portion &eing invested in call money market ii3 %i!t "und4 ST- ,hey invest ?@@K of their portfolio in government securities of and ,/&ills iii3 F!#atin$ ate "und4 - Invest in short/term de&t papers Floaters invest in de&t instruments which have varia&le coupon rate iB3 A bit a$e "und- ,hey generate income through ar&itrage opportunities due to mis/ pricing &etween cash market and derivatives market Funds are allocated to equities, derivatives and money markets 3igher proportion 6around G=K7 is put in money markets, in the a&sence of ar&itrage opportunities B3 %i!t "und4 LT- ,hey invest ?@@K of their portfolio in long/term government securities

Bi3 In(#me "und4 LT- ,ypically, such funds invest a major portion of the portfolio in long/term de&t papers Bii3 MIP4- Monthly Income Plans have an e!posure of G@K/C@K to de&t and an e!posure of ?@K/D@K to equities Biii3 FMP4- fi!ed monthly plans invest in de&t papers whose maturity is in line with that of the fund

INVESTMENT STRATE%IES
5= S/4temati( InBe4tment P!an0 under this a fi!ed sum is invested each month on a fi!ed date of a month Payment is made through post dated cheques or direct de&it facilities ,he investor gets fewer units when the 1+5 is high and more units when the 1+5 is low ,his is called as the &enefit of $upee *ost +veraging 6$*+7 *= S/4temati( T an4"e P!an0 under this an investor invest in de&t oriented fund and give instructions to transfer a fi!ed sum, at a fi!ed interval, to an equity scheme of the same mutual fund A= S/4temati( 8it)d aGa! P!an0 if someone wishes to withdraw from a mutual fund then he can withdraw a fi!ed amount each month

RISK V/S. RETURN:

*hapter L > *ompany Profile

INTRODUCTION TO SBI MUTUAL FUND

"#I Funds Management Pvt (td is one of the leading fund houses in the country with an investor &ase of over F A million and over >@ years of rich

e!perience in fund management consistently delivering value to its investors "#I Funds Management Pvt (td is a joint venture &etween H,he "tate #ank of IndiaH one of IndiaHs largest &anking enterprises, and "ociMtM -MnMrale +sset Management 6France7, one of the worldHs leading fund management companies that manages over '"N =@@ #illion worldwide ,oday the fund house manages over $s >B=@@ crores of assets and has a diverse profile of investors actively parking their investments across DA active schemes In >@ years of operation, the fund has launched DB schemes and successfully redeemed ?= of them, and in the process, has rewarded our investors with consistent returns "chemes of the Mutual Fund have time after time

outperformed &enchmark indices, honored us with ?= awards of performance and have emerged as the preferred investment for millions of investors ,he trust reposed on us &y over F A million investors is a genuine tri&ute to our e!pertise in fund management "#I Funds Management Pvt (td serves its vast family of investors through a network of over ?D@ points of acceptance, >B Investor "ervice *entres, FA Investor "ervice %esks and =A %istrict 8rgani0ers "#I Mutual is the first &ank/ sponsored fund to launch an offshore fund L $esurgent India 8pportunities Fund -rowth through innovation and sta&le investment policies is the "#I MF credo

PRODUCTS OF SBI MUTUAL FUND 4quity schemes

,he investments of these schemes will predominantly &e in the stock markets and endeavor will &e to provide investors the opportunity to &enefit from the higher returns which stock markets can provide 3owever they are also e!posed to the volatility and attendant risks of stock markets and hence should &e chosen only &y such investors who have high risk taking capacities and are willing to think long term 4quity Funds include diversified 4quity Funds, "ectoral Funds and Inde! Funds %iversified 4quity Funds invest in various stocks across different sectors while sectoral funds which are speciali0ed 4quity Funds restrict their investments only to shares of a particular sector and hence, are riskier than %iversified 4quity Funds Inde! Funds invest passively only in the stocks of a particular inde! and the performance of such funds move with the movements of the inde! Magnum *8MM+ Fund Magnum 4quity Fund Magnum -lo&al Fund Magnum Inde! Fund Magnum Midcap Fund Magnum Multicap Fund Magnum Multiplier plus ?CCD Magnum "ectoral Funds 'm&rella

M"F'/ 4merging #usiness Fund M"F'/ I, Fund

 M"F'/ Pharma Fund M"F'/ *ontra Fund M"F'/ FM*- Fund

"#I +r&itrage 8pportunities Fund "#I #lue chip Fund "#I Infrastructure Fund / "eries I "#I Magnum ,a!gain "cheme ?CCD "#I 814 India Fund "#I ,+O +%5+1,+-4 F'1% / "4$I4" I

%e&t schemes
%e&t Funds invest only in de&t instruments such as *orporate #onds, -overnment "ecurities and Money Market instruments either completely avoiding any investments in the stock markets as in Income Funds or -ilt Funds or having a small e!posure to equities as in Monthly Income Plans or *hildrenHs Plan 3ence they are safer than equity funds +t the same time the e!pected returns from de&t funds would &e lower "uch investments are advisa&le for the risk/averse investor and as a part of the investment portfolio for other investors Magnum *hildren.s &enefit Plan Magnum -ilt Fund

Magnum Income Fund Magnum Insta *ash Fund Magnum Income Fund/ Floating $ate Plan Magnum Income Plus Fund Magnum Insta *ash Fund /(iquid Floater Plan Magnum Monthly Income Plan Magnum Monthly Income Plan / Floater Magnum 1$I Investment Fund "#I Premier (iquid Fund

#+(+1*4% "*34M4"
Magnum #alanced Fund invests in a mi! of equity and de&t investments 3ence they are less risky than equity funds, &ut at the same time provide commensurately lower returns ,hey provide a good investment opportunity to investors who do not wish to &e completely e!posed to equity markets, &ut is looking for higher returns than those provided &y de&t funds Magnum #alanced Fund

COMPETITORS OF SBI MUTUAL FUND

"ome of the main competitors of "#I Mutual Fund in %ehradoon are as Follows; i ii iii iv v vi I*I*I Mutual Fund $eliance Mutual Fund ',I Mutual Fund #irla "un (ife Mutual Fund <otak Mutual Fund 3%F* Mutual Fund

vii "undaram Mutual Fund viii i! ! (I* Mutual Fund Principal Franklin ,empleton

A8ARDS AND ACHIEVEMENTS

"#I Mutual Fund 6"#IMF7 has &een the proud recipient of the I*$+ 8nline +ward / B times, *1#* ,5 / ?B *risil +ward >@@A / F +wards, ,he (ipper +ward 69ear >@@=/ >@@A7 and most recently with the *1#* ,5 / ?B *risil Mutual Fund of the 9ear +ward >@@G and = +wards for our schemes

*hapter / D 8&jectives and scope

OBJECTIVES OF THE STUD&

?

,o find out the Preferences of the investors for +sset Management *ompany

>

,o know the Preferences for the portfolios

D ,o know why one has invested or not invested in "#I Mutual fund
F

,o find out the most preferred channel

= ,o find out what should do to &oost Mutual Fund Industry

S(#pe #" t)e 4tud/

+ &ig &oom has &een witnessed in Mutual Fund Industry in resent times + large num&er of new players have entered the market and trying to gain market share in this rapidly improving market ,he research was carried on in %ehradoon I had &een sent at one of the &ranch of "tate #ank of India %ehradoon where I completed my Project work I surveyed on my Project ,opic 2+ study of preferences of the Investors for investment in Mutual Fund on the visiting customers of the "#I #oring *anal $oad #ranch ,he study will help to know the preferences of the customers, which company, portfolio, mode of investment, option for getting return and so on they prefer ,his project report may help the company to make further planning and strategy

*hapter L F $esearch Methodology

RESEARCH METHODOLO%&
,his report is &ased on primary as well secondary data, however primary data collection was given more importance since it is overhearing factor in attitude studies 8ne of the most important users of research methodology is that it helps in identifying the pro&lem, collecting, analy0ing the required information data and providing an alternative solution to the pro&lem It also helps in collecting the vital information that is required &y the top management to assist them for the &etter decision making &oth day to day decision and critical ones

Data 4#u (e40

$esearch is totally &ased on primary data "econdary data can &e used only for the reference $esearch has &een done &y primary data collection, and primary data has &een collected &y interacting with various people ,he secondary data has &een collected through various journals and we&sites

Du ati#n #" Stud/0

,he study was carried out for a period of two months, from D@th May to D@th Euly >@@B

Samp!in$0
Samp!in$ p #(edu e0 ,he sample was selected of them who are the customersIvisitors of "tate #ank if India, #oring *anal $oad #ranch, irrespective of them &eing investors or not or availing the services or not It was also collected through personal visits to persons, &y formal and informal talks and through filling up the questionnaire prepared ,he data has &een analy0ed &y using mathematicalI"tatistical tool

Samp!e 4iHe0 ,he sample si0e of my project is limited to >@@ people only 8ut of which only ?>@ people had invested in Mutual Fund 8ther B@ people did not have invested in Mutual Fund

Samp!e de4i$n0 %ata has &een presented with the help of &ar graph, pie charts, line graphs etc

Limitati#n0

"ome of the persons were not so responsive Possi&ility of error in data collection &ecause many of investors may have not given actual answers of my questionnaire "ample si0e is limited to >@@ visitors of "tate #ank of India , #oring *anal $oad #ranch, %ehradoon out of these only ?>@ had invested in Mutual Fund ,he sample si0e may not adequately represent the whole market "ome respondents were reluctant to divulge personal information which can affect the validity of all responses ,he research is confined to a certain part of %ehradoon

*hapter L = %ata +nalysis ) Interpretation

ANAL&SIS ; INTERPRETATION OF THE DATA

5= 2a3 A$e di4t ibuti#n #" t)e InBe4t# 4 #" De) ad##n

+ge -roup 1o of Investors

PQ D@ ?>

D?/D= ?B

DA/F@ D@

F?/F= >F

FA/=@ >@

R=@ ?A

I%&e'#or' (%&e'#e) (% M # *+ F %)

35 30 25 20 15 10 5 0 <=30 31-35 36-40 41-45 46-50 >50 Age gro ! o" #$e I%&e'#or' 12 18 30 24 20 16

Inte p etati#n0

+ccording to this chart out of ?>@ Mutual Fund investors of %ehradoon the most are in the age group of DA/F@ yrs i e >=K, the second most investors are in the age group of F?/F=yrs i e >@K and the least investors are in the age group of &elow D@ yrs

2b3= Edu(ati#na! :ua!i"i(ati#n #" inBe4t# 4 #" De) ad##n

Edu(ati#na! :ua!i"i(ati#n -raduateI Post -raduate 'nder -raduate 8thers ,otal Numbe #" InBe4t# 4 BB >= G ?>@

623-

,1-

.r*) *#e/0o'# .r*) *#e

U%)er .r*) *#e

O#$er'

Inte p etati#n0

8ut of ?>@ Mutual Fund investors G?K of the investors in %ehradoon are -raduateIPost -raduate, >DK are 'nder -raduate and AK are others 6under 3"*7

(3= O((upati#n #" t)e inBe4t# 4 #" De) ad##n

O((upati#n
-ovt "ervice Pvt "ervice #usiness +griculture 8thers

N#= #" InBe4t# 4

D@ F= D= F A

50 No1 o" I%&e'#or' 40 30 20 10 0 .o&#1 Ser&(2e 0&#1 Ser&(2e B '(%e'' 35 45 30 4 Agr(2 +# re 6 O#$er'

O22 !*#(o% o" #$e 2 '#o3er'

Inte p etati#n0
In 8ccupation group out of ?>@ investors, DBK are Pvt 4mployees, >=K are #usinessman, >CK are -ovt 4mployees, DK are in +griculture and =K are in others

2d3= M#nt)!/ Fami!/ In(#me #" t)e InBe4t# 4 #" De) ad##n= In(#me % #up
PQ?@,@@@ ?@,@@?/?=,@@@ ?=,@@?/>@,@@@ >@,@@?/D@,@@@ RD@,@@@ 50 45 40 35 30 25 20 15 10 5 0

N#= #" InBe4t# 4

=

?> >B FD D>

No1 o" I%&e'#or'

43 28 5 <=10 12 10-15 15-20 20-30 >30 32

I%2o3e .ro ! o" #$e I%&e'#or'% 4R'1 (% T$15

Inte p etati#n0
In the Income -roup of the investors of %ehradoon, out of ?>@ investors, DAK investors that is the ma!imum investors are in the monthly income group $s

>@,@@? to $s D@,@@@, "econd one i e >GK investors are in the monthly income group of more than $s D@,@@@ and the minimum investors i e FK are in the monthly income group of &elow $s ?@,@@@

2*3 InBe4t# 4 inBe4ted in di""e ent Iind #" inBe4tment4= <ind of Investments
"aving +I*

Fi!ed deposits Insurance Mutual Fund Post office 61"*7 "haresI%e&entures -oldI"ilver $eal 4state

1o of $espondents ?C= ?FB ?=> ?>@ G= =@ D@ A=

7(%)' o" I%&e'#3e%#

65
. ""( 2e o+) /S r* 4N g (+& % S A/ 2e C5 er 2

30 50 ,5 120 152 148 165 0 50 100 150 200 250

S*

&( %

I% '

0o '#

No1o" Re'!o%)e%#'

Inte p etati#n0 From the a&ove graph it can &e inferred that out of >@@ people,
CG =K people have invested in "aving +Ic, GAK in Insurance, GFK in Fi!ed %eposits, A@K in Mutual Fund, DG =K in Post 8ffice, >=K in "hares or %e&entures, ?=K in -oldI"ilver and D> =K in $eal 4state

A= P e"e en(e #" "a(t# 4 G)i!e inBe4tin$

Factors 6a7 (iquidity 6&7 (ow $isk 6c7 3igh $eturn 6d7 ,rust

1o of $espondents

F@

A@

AF

DA

18%

20%

32%

30%

Liquidity

Low R is k

H i !R "tu#$

T#us t

Inte p etati#n0

8ut of >@@ People, D>K People prefer to invest where there is 3igh $eturn, D@K prefer to invest where there is (ow $isk, >@K prefer easy (iquidity and ?BK prefer ,rust

?= AGa ene44 ab#ut Mutua! Fund and it4 Ope ati#n4

$esponse 1o of $espondents

9es ?D=

1o A=

33%

%&%

' "s

No

Inte p etati#n0
From the a&ove chart it is inferred that AGK People are aware of Mutual Fund and its operations and DDK are not aware of Mutual Fund and its operations

,= S#u (e #" in"# mati#n "# (u4t#me 4 ab#ut Mutua! Fund

S#u (e #" in"# mati#n +dvertisement Peer -roup #ank Financial +dvisors N#= #" Re4p#ndent4 ?B >= D@ A>

& 0 % 0 ( 0 ) 0 3 0 2 0 2 ( 1 0 1 8 0 ,d-"#tis". "$t /""# 0#ou+

No. o* R "s+o$d"$ts

% 2 3 0 1 2 $k 3 i$2 $4i2 5 ,d-iso#s

S ou#4" o* I$*o#. 2 tio$

Inte p etati#n0
From the a&ove chart it can &e inferred that the Financial +dvisor is the most important source of information a&out Mutual Fund 8ut of ?D= $espondents, FAK know a&out Mutual fund ,hrough Financial +dvisor, >>K through #ank, ?CK through Peer -roup and ?DK through +dvertisement

A InBe4t# 4 inBe4ted in Mutua! Fund

Re4p#n4e 94" 18 ,otal N#= #" Re4p#ndent4 ?>@ B@ >@@

No 40-

8e' 60-

Inte p etati#n0
8ut of >@@ People, A@K have invested in Mutual Fund and F@K do not have invested in Mutual Fund

@= Rea4#n "# n#t inBe4ted in Mutua! Fund

Rea4#n 1ot +ware 3igher $isk 1ot any "pecific $eason N#= #" Re4p#ndent4

6, , 5+

13%

%%

81%
Not ,w2#" H i !"# R is k Not ,$y

Inte p etati#n0
8ut of B@ people, who have not invested in Mutual Fund, B?K are not aware of Mutual Fund, ?DK said there is likely to &e higher risk and AK do not have any specific reason

.= InBe4t# 4 inBe4ted in di""e ent A44et4 Mana$ement C#= 2AMC3

Name #" AMC

"#IMF ',I 3%F* $eliance I*I*I Prudential <otak 8thers

N#= #" InBe4t# 4 == G= D@ G= =A F= G@

O#$er' :DFC N*3e o" AMC 7o#*9 SBIMF ICICI Re+(*%2e UTI 0 20 40 No1 o" I%&e'#or' 60 30 45 55 56

,0

,5 ,5 80

Inte p etati#n0
In %ehradoon most of the Investors preferred ',I and $eliance Mutual Fund 8ut of ?>@ Investors A> =K have invested in each of them, only FAK have invested in "#IMF, FGK in I*I*I Prudential, DG =K in <otak and >=K in 3%F*

7= Rea4#n "# inBe4ted in SBIMF $eason

+ssociated with "#I #etter $eturn +gents +dvice

1o of $espondents
D= = ?=

2&%

6%

%)%

,s s o4i2t"d wit! S 1I

1 "tt"# R "tu#$

, "$ts ,d-i4"

Inte p etati#n0
8ut of == investors of "#IMF AFK have invested &ecause of its association with #rand "#I, >GK invested on +gent.s +dvice, CK invested &ecause of &etter return

5+= Rea4#n "# n#t inBe4ted in SBIMF

Rea4#n
1ot +ware (ess $eturn +gent.s +dvice

N#= #" Re4p#ndent4

>= ?B >>

3)%

38%

28%
Not ,w 2#" L "ss R"tu#$ , "$t7s ,d-i4"

Inte p etati#n0
8ut of A= people who have not invested in "#IMF, DBK were not aware with "#IMF, >BK do not have invested due to less return and DFK due to +gent.s +dvice

55= P e"e en(e #" InBe4t# 4 "# "utu e inBe4tment in Mutua! Fund Name #" AMC
"#IMF ',I 3%F* $eliance I*I*I Prudential

N#= #" InBe4t# 4 GA F= D= B> B@

<otak 8thers

A@ G=

;t!"#s K ot2k N2. " o* ,8: I: I: I /#ud"$ti25 R "5i2$4" H 9 3 : UTI S 1I83 0 20 3( )( %0

&(

80 82

&% )0 %0 80 100

No. o* I$-"s to#s

Inte p etati#n0
8ut of ?>@ investors, ABK prefer to invest in $eliance, AGK in I*I*I Prudential, ADK in "#IMF, A> =K in 8thers, =@K in <otak, DG =K in ',I and >CK in 3%F* Mutual Fund

5*= C)anne! P e"e ed b/ t)e InBe4t# 4 "# Mutua! Fund InBe4tment

*hannel 1o of $espondents Financial +dvisor G> #ank ?B +M* D@

2(%

1(%
3 i$2 $4i2 5 ,d-iso# 1 2 $k ,8:

%0%

Inte p etati#n0
8ut of ?>@ Investors A@K preferred to invest through Financial +dvisors, >=K through +M* and ?=K through #ank

5A= M#de #" InBe4tment P e"e ed b/ t)e InBe4t# 4

Mode of Investment 1o of $espondents 8ne time Investment GB "ystematic Investment Plan 6"IP7 F>

3(%

%(%

;$" ti. " I$-"s t. "$t

S I/

Inte p etati#n0
8ut of ?>@ Investors A=K preferred 8ne time Investment and D= K Preferred through "ystematic Investment Plan

5?= P e"e ed P# t"#!i#4 b/ t)e InBe4t# 4 P# t"#!i#

4quity %e&t #alanced

N#= #" InBe4t# 4

=A >@ FF

3&%

)%%

1&%

Equity

9 "<t

1252$4"

Inte p etati#n0
From the a&ove graph FAK preferred 4quity Portfolio, DGK preferred #alance and ?GK preferred %e&t portfolio

5,= Opti#n "# $ettin$ Retu n P e"e ed b/ t)e InBe4t# 4

8ption 1o of $espondents %ividend Payout >= %ividend $einvestment ?@ -rowth B=

21%

8% &1%
9 i-id"$d /2yout 9 i-id"$d R "i$-"s t. "$t 0#owt!

Inte p etati#n0
From the a&ove graph G?K preferred -rowth 8ption, >?K preferred %ividend Payout and BK preferred %ividend $einvestment 8ption

56= P e"e en(e #" InBe4t# 4 G)et)e t# inBe4t in Se(t# a! Fund4 Re4p#n4e &e4 N# N#= #" Re4p#ndent4 *, 7,

21%

&6%

' "s

No

Inte p etati#n0
8ut of ?>@ investors, GCK investors do not prefer to invest in "ectoral Fund &ecause there is ma!imum risk and >?K prefer to invest in "ectoral Fund

*hapter L A

Findings and *onclusion

Findin$4
In %ehradoon in the +ge -roup of DA/F@ years were more in

num&ers ,he second most Investors were in the age group of F?/F= years and the least were in the age group of &elow D@ years
In %ehradoon most of the Investors were -raduate or Post -raduate

and &elow 3"* there were very few in num&ers

 In 8ccupation group most of the Investors were -ovt employees, the second most Investors were Private employees and the least were associated with +griculture In family Income group, &etween $s >@,@@?/ D@,@@@ were more in num&ers, the second most were in the Income group of more than $s D@,@@@ and the least were in the group of &elow $s ?@,@@@ +&out all the $espondents had a "aving +Ic in #ank, GAK Invested in Fi!ed %eposits, 8nly A@K $espondents invested in Mutual fund
Mostly $espondents preferred 3igh $eturn while investment, the

second most preferred (ow $isk then liquidity and the least preferred ,rust
8nly AGK $espondents were aware a&out Mutual fund and its

operations and DDK were not +mong >@@ $espondents only A@K had invested in Mutual Fund and F@K did not have invested in Mutual fund 8ut of B@ $espondents B?K were not aware of Mutual Fund, ?DK told there is not any specific reason for not invested in Mutual Fund and AK told there is likely to &e higher risk in Mutual Fund

 Most of the Investors had invested in $eliance or ',I Mutual Fund,

I*I*I Prudential has also good #rand Position among investors, "#IMF places after I*I*I Prudential according to the $espondents
8ut of == investors of "#IMF AFK have invested due to its

association with the #rand "#I, >GK Invested &ecause of +dvisor.s +dvice and CK due to &etter return Most of the investors who did not invested in "#IMF due to not +ware of "#IMF, the second most due to +gent.s advice and rest due to (ess $eturn

For Future investment the ma!imum $espondents preferred $eliance Mutual Fund, the second most preferred I*I*I Prudential, "#IMF has &een preferred after them

A@K Investors preferred to Invest through Financial +dvisors, >=K through +M* 6means %irect Investment7 and ?=K through #ank

A=K preferred 8ne ,ime Investment and D=K preferred "IP out of &oth type of Mode of Investment

,he most preferred Portfolio was 4quity, the second most was #alance 6mi!ture of &oth equity and de&t7, and the least preferred Portfolio was %e&t portfolio

 Ma!imum 1um&er of Investors Preferred -rowth 8ption for returns, the second most preferred %ividend Payout and then %ividend $einvestment
Most of the Investors did not want to invest in "ectoral Fund, only

>?K wanted to invest in "ectoral Fund

C#n(!u4i#n
$unning a successful Mutual Fund requires complete understanding of the peculiarities of the Indian "tock Market and also the psyche of the small investors ,his study has made an attempt to understand the financial

&ehavior of Mutual Fund investors in connection with the preferences of #rand 6+M*7, Products, *hannels etc I o&served that many of people

have fear of Mutual Fund ,hey think their money will not &e secure in Mutual Fund ,hey need the knowledge of Mutual Fund and its related terms Many of people do not have invested in mutual fund due to lack of awareness although they have money to invest +s the awareness and income is growing the num&er of mutual fund investors are also growing 2#rand plays important role for the investment People invest in those *ompanies where they have faith or they are well known with them ,here are many +M*s in %ehradoon &ut only some are performing well due to #rand awareness "ome +M*s are not performing well although some of the schemes of them are giving good return &ecause of not awareness a&out #rand $eliance, ',I, "#IMF, I*I*I Prudential etc they are well known #rand, they are performing well and their +ssets 'nder Management is larger than others whose #rand name are not well known like Principle, "underam, etc %istri&ution channels are also important for the investment in mutual fund Financial +dvisors are the most preferred channel for the investment in mutual fund ,hey can change investors. mind from one investment option

to others Many of investors directly invest their money through +M* &ecause they do not have to pay entry load 8nly those people invest directly who know well a&out mutual fund and its operations and those have time

*hapter L G "uggestions +nd $ecommendations

Su$$e4ti#n4 and Re(#mmendati#n4

,he most vital pro&lem spotted is of ignorance Investors should &e

made aware of the &enefits 1o&ody will invest until and unless he is fully convinced Investors should &e made to reali0e that

ignorance is no longer &liss and what they are losing &y not investing Mutual funds offer a lot of &enefit which no other single option could offer #ut most of the people are not even aware of what actually a mutual fund isS ,hey only see it as just another investment option "o the advisors should try to change their mindsets ,he advisors should target for more and more young investors 9oung investors as well as persons at the height of their career would like to go for advisors due to lack of e!pertise and time Mutual Fund *ompany needs to give the training of the Individual Financial +dvisors a&out the FundI"cheme and its o&jective, &ecause they are the main source to influence the investors

#efore making any investment Financial +dvisors should first

enquire a&out the risk tolerance of the investorsIcustomers, their need and time 6how long they want to invest7 #y considering these three things they can take the customers into consideration

 9ounger people aged under D= will &e a key new customer group into the future, so making greater efforts with younger customers who show some interest in investing should pay off *ustomers with graduate level education are easier to sell to and there is a large untapped market there ,o succeed however, advisors must provide sound advice and high quality

"ystematic Investment Plan 6"IP7 is one the innovative products launched &y +ssets Management companies very recently in the industry "IP is easy for monthly salaried person as it provides the facility of do the investment in 4MI ,hough most of the prospects and potential investors are not aware a&out the "IP ,here is a large scope for the companies to tap the salaried persons

BIBLIO%RAPH&
N;<S 0A0;RS OUTLOO7 MON;8

T;L;=ISION C:ANN;L 4CNBC AA<A>5 MUTUAL FUND :AND BOO7 FACT S:;;T AND STAT;M;NT <<<1SBIMF1COM <<<1MON;8CONTROL1COM <<<1AMFIINDIA1COM <<<1ONLIN;R;S;ARC:ONLIN;1COM <<<1 MUTUALFUNDSINDIA1COM

Mutua! Fund4

A!! Ab#ut Mutua! Fund4

#efore we understand what is mutual fund, it.s very important to know the area in which mutual funds works, the &asic understanding of stocks and &onds

St#(I4 ; "tocks represent shares of ownership in a pu&lic company 4!amples of pu&lic companies include $eliance, 81-* and Infosys "tocks are considered to &e the most common owned investment traded on the market B#nd4 ; #onds are &asically the money which you lend to the government or a company, and in return you can receive interest on your invested amount, which is &ack over predetermined amounts of time #onds are considered to &e the most common lending investment traded on the market ,here are many other types of investments other than stocks and &onds 6including annuities, real estate, and precious metals7, &ut the majority of mutual funds invest in stocks andIor &onds

8)at I4 Mutua! Fund

+ mutual fund is just the connecting &ridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment o&jective ,he mutual fund will have a fund manager who is responsi&le for investing the gathered money into specific securities 6stocks or &onds7 When you invest in a mutual fund, you are &uying units or portions of the mutual fund and thus on investing &ecomes a shareholder or unit holder of the fund Mutual funds are considered as one of the &est availa&le investments as compare to others they are very cost efficient and also easy to invest in, thus &y pooling money together in a mutual fund, investors can purchase stocks or &onds with much lower trading costs than if they tried to do it on their own #ut the &iggest advantage to mutual funds is diversification, &y minimi0ing risk ) ma!imi0ing returns ,hus a Mutual Fund is the most suita&le investment for the common man as it offers an opportunity to invest in a diversified, professionally managed &asket of securities at a relatively low cost ,he flow chart &elow descri&es &roadly the working of a mutual fund U$it T#ust o* I$di2 is t!" *i#st 8utu25 3u$d s"t u+ u$d"# 2 s"+2#2t" 24t= UTI ,4t i$ 16%3= 2$d st2#t"d its o+"#2tio$s i$ 16%) wit! t!" issu" o* u$its u$d"# t!" s4!"." US>%).

OBe BieG #" eEi4tin$ 4()eme4 eEi4ted in mutua! "und (ate$# /

Wide variety of Mutual Fund "chemes e!ists to cater to the needs such as financial position, risk tolerance and return e!pectations etc ,he ta&le &elow gives an overview into the e!isting types of schemes in the Industry T/pe #" Mutua! Fund S()eme4 B& STRUCTURE Open Ended S()eme4 +n open/end fund is one that is availa&le for su&scription all through the year ,hese do not have a fi!ed maturity Investors can conveniently &uy and sell units at 1et +sset 5alue 6T1+5T7 related prices ,he key feature of open/end schemes is liquidity C!#4e Ended S()eme4 + closed/end fund has a stipulated maturity period which generally ranging from D to ?= years ,he fund is open for su&scription only during a specified period Investors can invest in the scheme at the time of the initial pu&lic issue and thereafter they can &uy or sell the units of the scheme on the stock e!changes where they are listed In order to provide an e!it route to the investors, some close/ ended funds give an option of selling &ack the units to the Mutual Fund through periodic repurchase at 1+5 related prices "4#I $egulations stipulate that at least one of the two e!it routes is provided to the investor Inte Ba! S()eme4 Interval "chemes are that scheme, which com&ines the features of open/ended and close/ended schemes ,he units may &e traded on the stock e!change or may &e open for sale or redemption during pre/determined intervals at 1+5 related prices

B& NATURE 5= EDuit/ "und0

,hese funds invest a ma!imum part of their corpus into equities holdings ,he structure of the fund may vary different for different schemes and the fund manager.s outlook on different stocks ,he 4quity Funds are su&/classified depending upon their investment o&jective, as follows;

%iversified 4quity Funds Mid/*ap Funds "ector "pecific Funds ,a! "avings Funds 64(""7

4quity investments are meant for a longer time hori0on, thus 4quity funds rank high on the risk/ return matri! *= Debt "und40 ,he o&jective of these Funds is to invest in de&t papers -overnment authorities, private companies, &anks and financial institutions are some of the major issuers of de&t papers #y investing in de&t instruments, these funds ensure low risk and provide sta&le income to the investors %e&t funds are further classified as;

%i!t Fund4; Invest their corpus in securities issued &y -overnment, popularly known as -overnment of India de&t papers ,hese Funds carry 0ero %efault risk &ut are associated with Interest $ate risk ,hese schemes are safer as they invest in papers &acked &y -overnment

In(#me Fund4; Invest a major portion into various de&t instruments such as &onds, corporate de&entures and -overnment securities

MIP4; Invests ma!imum of their total corpus in de&t instruments while they take minimum e!posure in equities It gets &enefit of &oth equity and de&t market ,hese scheme ranks slightly high on the risk/return matri! when compared with other de&t schemes

S)# t Te m P!an4 2STP43; Meant for investment hori0on for three to si! months ,hese funds primarily invest in short term papers like *ertificate of %eposits 6*%s7 and *ommercial Papers 6*Ps7 "ome portion of the corpus is also invested in corporate de&entures

LiDuid Fund4; +lso known as Money Market "chemes, ,hese funds provides easy liquidity and preservation of capital ,hese schemes invest in short/term instruments like ,reasury

#ills, inter/&ank call money market, *Ps and *%s ,hese funds are meant for short/term cash management of corporate houses and are meant for an investment hori0on of ?day to D months ,hese schemes rank low on risk/return matri! and are considered to &e the safest amongst all categories of mutual funds A= Ba!an(ed "und40 +s the name suggest they, are a mi! of &oth equity and de&t funds ,hey invest in &oth equities and fi!ed income securities, which are in line with pre/defined investment o&jective of the scheme ,hese schemes aim to provide investors with the &est of &oth the worlds 4quity part provide growth and the de&t part provides sta&ility in returns Further the mutual funds can be broadly classified on the basis of investment parameter viz, 4ach category of funds is &acked &y an investment philosophy, which is pre/defined in the o&jectives of the fund ,he investor can align his own investment needs with the funds o&jective and invest accordingly

B& INVESTMENT OBJECTIVE

% #Gt) S()eme40 -rowth "chemes are also known as equity schemes ,he aim of these schemes is to provide capital appreciation over medium to long term ,hese schemes normally invest a major part of their fund in equities and are willing to &ear short/term decline in value for possi&le future appreciation

In(#me S()eme40 Income "chemes are also known as de&t schemes ,he aim of these schemes is to provide regular and steady income to investors ,hese schemes generally invest in fi!ed income securities such as &onds and corporate de&entures *apital appreciation in such schemes may &e limited

Ba!an(ed S()eme40 #alanced "chemes aim to provide &oth growth and income &y periodically distri&uting a part of the income and capital gains they earn ,hese schemes invest in &oth shares and fi!ed income securities, in the proportion indicated in their offer documents 6normally =@;=@7

M#ne/ Ma Iet S()eme4; Money Market "chemes aim to provide easy liquidity, preservation of capital and moderate income ,hese schemes generally invest in safer, short/term instruments, such as treasury &ills, certificates of deposit, commercial paper and inter/&ank call money

OTHER SCHEMES

TaE SaBin$ S()eme40 ,a!/saving schemes offer ta! re&ates to the investors under ta! laws prescri&ed from time to time 'nder "ec BB of the Income ,a! +ct, contri&utions made to any 4quity (inked "avings "cheme 64(""7 are eligi&le for re&ate

IndeE S()eme40 Inde! schemes attempt to replicate the performance of a particular inde! such as the #"4 "ense! or the 1"4 =@ ,he portfolio of these schemes will consist of only those stocks that constitute the inde! ,he percentage of each stock to the total holding will &e identical to the stocks inde! weightage +nd hence, the returns from such schemes would &e more or less equivalent to those of the Inde!

Se(t# Spe(i"i( S()eme40 ,hese are the fundsIschemes which invest in the securities of only those sectors or industries as specified in the offer documents e g Pharmaceuticals, "oftware,

Fast Moving *onsumer -oods 6FM*-7, Petroleum stocks, etc ,he returns in these funds are dependent on the performance of the respective sectorsIindustries 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 sectorsIindustries and must e!it at an appropriate time T/pe4 #" etu n4 ,here are three ways, where the total returns provided &y mutual funds can &e enjoyed &y investors;

Income is earned from dividends on stocks and interest on &onds + fund pays out nearly all income it receives over the year to fund owners in the form of a distri&ution If the fund sells securities that have increased in price, the fund has a capital gain Most funds also pass on these gains to investors in a distri&ution If fund holdings increase in price &ut are not sold &y the fund manager, the fundHs shares increase in price 9ou can then sell your mutual fund shares for a profit Funds will also usually give you a choice either to receive a check for distri&utions or to reinvest the earnings and get more shares

P #4 ; (#n4 #" inBe4tin$ in mutua! "und40

For investments in mutual fund, one must keep in mind a&out the Pros and cons of investments in mutual fund

AdBanta$e4 #" InBe4tin$ Mutua! Fund40

5= P #"e44i#na! Mana$ement - ,he &asic advantage of funds is that, they are professional managed, &y well qualified professional Investors purchase funds &ecause they do not have the time or the e!pertise to manage their own portfolio + mutual fund is considered to &e relatively less e!pensive way to make and monitor their investments *= DiBe 4i"i(ati#n - Purchasing units in a mutual fund instead of &uying individual stocks or &onds, the investors risk is spread out and minimi0ed up to certain e!tent ,he idea &ehind diversification is to invest in a large num&er of assets so that a loss in any particular investment is minimi0ed &y gains in others A= E(#n#mie4 #" S(a!e - Mutual fund &uy and sell large amounts of securities at a time, thus help to reducing transaction costs, and help to &ring down the average cost of the unit for their investors ?= LiDuidit/ - Eust like an individual stock, mutual fund also allows investors to liquidate their holdings as and when they want ,= Simp!i(it/ - Investments in mutual fund is considered to &e easy, compare to other availa&le instruments in the market, and the minimum investment is small Most +M* also have automatic purchase plans where&y as little as $s >@@@, where "IP start with just $s =@ per month &asis

Di4adBanta$e4 #" InBe4tin$ Mutua! Fund40

5= P #"e44i#na! Mana$ement/ "ome funds doesn.t perform in neither the market, as their management is not dynamic enough to e!plore the availa&le opportunity in the market, thus many investors de&ate over whether or not the so/called professionals are any &etter than mutual fund or investor himself, for picking up stocks *= C#4t4 L ,he &iggest source of +M* income, is generally from the entry ) e!it load which they charge from an investors, at the time of purchase ,he mutual fund industries are thus charging e!tra cost under layers of jargon A= Di!uti#n / #ecause funds have small holdings across different companies, high returns from a few investments often donHt make much difference on the overall return %ilution is also the result of a successful fund getting too &ig When money pours into funds that have had strong success, the manager often has trou&le finding a good investment for all the new money ?= TaEe4 / when making decisions a&out your money, fund managers donHt consider your personal ta! situation For e!ample, when a fund manager sells a security, a capital/gain ta! is triggered, which affects how profita&le the individual is from the sale It might have &een more advantageous for the individual to defer the capital gains lia&ility

Mutua! Fund4 Indu4t / in India

,he origin of mutual fund industry in India is with the introduction of the concept of mutual fund &y ',I in the year ?CAD ,hough the growth was slow, &ut it accelerated from the year ?CBG when non/ ',I players entered the industry In the past decade, Indian mutual fund industry had seen a dramatic improvements, &oth quality wise as well as quantity wise #efore, the monopoly of the market had seen an ending phase, the +ssets 'nder Management 6+'M7 was $s AG&n ,he private sector entry to the fund family rose the +'M to $s FG@ in in March ?CCD and till +pril >@@F, it reached the height of ?,=F@ &n Putting the +'M of the Indian Mutual Funds Industry into comparison, the total of it is less than the deposits of "#I alone, constitute less than ??K of the total deposits held &y the Indian &anking industry ,he main reason of its poor growth is that the mutual fund industry in India is new in the country (arge sections of Indian investors are yet to &e intellectuated with the concept 3ence, it is the prime responsi&ility of all mutual fund companies, to market the product correctly a&reast of selling ,he mutual fund industry can &e &roadly put into four phases according to the development of the sector 4ach phase is &riefly descri&ed as under

T)e maC# p!a/e 4 in t)e Indian Mutua! Fund Indu4t / a e0

MaC# P!a/e 4 #" Mutua! Fund4 In India Pe i#d 2La4t;nb4p5 8eeI3

RanI 5 * A ? , 6 @ . 7 5+ 55 5* 5A 5? 5, S()eme Name EM *ore ?? Fund / "eries ? / -rowth ,ata Indo/-lo&al Infrastructure Fund / -rowth ,ata *apital #uilder Fund / -rowth "tandard *hartered 4nterprise 4quity Fund / -rowth %#" *hola Infrastructure Fund / -rowth I*I*I Prudential Fusion Fund / "eries III / Institutional / -rowth %"P Merrill (ynch Micro *ap Fund / $egular / -rowth I*I*I Prudential Fusion Fund / "eries III / $etail / -rowth %#" *hola "mall *ap Fund / -rowth Principal Personal ,a!saver #enchmark "plit *apital Fund / Plan + / Preferred 'nits I*I*I Prudential FMP / "eries DD / Plan + / -rowth ,ata "IP Fund / "eries I / -rowth "ahara $ 4 + ( Fund / -rowth ,ata "IP Fund / "eries II / -rowth Date Mar >A , >@@B Mar >A , >@@B Mar >A , >@@B Mar >A , >@@B Mar >A , >@@B Mar >A , >@@B Mar >A , >@@B Mar >A , >@@B Mar >A , >@@B Mar >= , >@@B Mar >A , >@@B Mar >A , >@@B Mar >A , >@@B Mar >= , >@@B Mar >A , >@@B NAV 2R4=3 B F= B >A ?> FF ?F @G C @? ?@ > C CD ?@ ?C A DA ?>F AA ?F? =? C BC ?@ >= G AF C CD La4t 5 8eeI = ?> = @= = @D = F A= F A> F =A F =? D G= D FF D ?F > C? > DB ? BA ? =B Sin(e In(epti#n /CF AF /F@ F> ?= D= >@ C> /?G ?G >D AC /@ B= >> DC /B? GB >C CG ?D G? /G BB > DC /FC => /@ CF

+ mutual fund is a professionally/managed firm of collective investments that pools money from many investors and invests it in stocks, &onds, short/term money market instruments, andIor other securities in other words we can say that + Mutual Fund is a trust registered with the "ecurities and 4!change #oard of India 6"4#I7, which pools up the money from individual I corporate investors and invests the same on &ehalf of the investors Iunit holders, in equity shares, -overnment securities, #onds, *all money markets etc , and distri&utes the profits ,he value of each unit of the mutual fund, known as the net asset value 61+57, is mostly calculated daily &ased on the total value of the fund divided &y the num&er of shares currently issued and outstanding ,he value of all the securities in the portfolio in calculated daily From this, all e!penses are deducted and the resultant value divided &y the num&er of units in the fund is the fund.s 1+5

NAV J

T#ta! Ba!ue #" t)e "undKKKKKK= N#= #" 4)a e4 (u ent!/ i44ued and #ut4tandin$

AdBanta$e4 #" a MF L Mutual Funds provide the &enefit of cheap access to e!pensive stocks L L L Mutual funds diversify the risk of the investor &y investing in a &asket of assets + team of professional fund managers manages them with in/depth research inputs from investment analysts #eing institutions with good &argaining power in markets, mutual funds have access to crucial corporate information, which individual investors cannot access

Hi4t# / #" t)e Indian mutua! "und indu4t /0

,he mutual fund industry in India started in ?CAD with the formation of 'nit ,rust of India, at the initiative of the -overnment of India and $eserve #ank ,he history of mutual funds in India can &e &roadly divided into four distinct phases Fi 4t P)a4e > 576?-.@ 'nit ,rust of India 6',I7 was esta&lished on ?CAD &y an +ct of Parliament &y the $eserve #ank of India and functioned under the $egulatory and administrative control of the $eserve #ank of India In ?CGB ',I was de/linked from the $#I and the Industrial %evelopment #ank of India 6I%#I7 took over the regulatory and administrative control in place of $#I ,he first scheme launched &y ',I was 'nit "cheme ?CAF +t the end of ?CBB ',I had $s A,G@@ crores of assets under management

Se(#nd P)a4e > 57.@-577A 2Ent / #" Pub!i( Se(t# Fund43

?CBG marked the entry of non/ ',I, pu&lic sector mutual funds set up &y pu&lic sector &anks and (ife Insurance *orporation of India 6(I*7 and -eneral Insurance *orporation of India 6-I*7 "#I Mutual Fund was the first non/ ',I Mutual Fund esta&lished in Eune ?CBG followed &y *an&ank Mutual Fund 6%ec BG7, Punja& 1ational #ank Mutual Fund 6+ug BC7, Indian #ank Mutual Fund 61ov BC7, #ank of India 6Eun C@7, #ank of #aroda Mutual Fund 68ct C>7 (I* esta&lished its mutual fund in Eune ?CBC while -I* had set up its mutual fund in %ecem&er ?CC@ +t the end of ?CCD, the mutual fund industry had assets under management of $s FG,@@F crores T)i d P)a4e > 577A-*++A 2Ent / #" P iBate Se(t# Fund43 ?CCD was the year in which the first Mutual Fund $egulations came into &eing, under which all mutual funds, e!cept ',I were to &e registered and governed ,he erstwhile <othari Pioneer 6now merged with Franklin ,empleton7 was the first private sector mutual fund registered in Euly ?CCD ,he ?CCD "4#I 6Mutual Fund7 $egulations were su&stituted &y a more comprehensive and revised Mutual Fund $egulations in ?CCA ,he industry now functions under the "4#I 6Mutual Fund7 $egulations ?CCA +s at the end of Eanuary >@@D, there were DD mutual funds with total assets of $s ?,>?,B@= crores

F#u t) P)a4e > 4in(e Feb ua / *++A In Fe&ruary >@@D, following the repeal of the 'nit ,rust of India +ct ?CAD ',I was &ifurcated into two separate entities 8ne is the "pecified 'ndertaking of the 'nit ,rust of India with assets under management of $s >C,BD= crores as at the end of Eanuary >@@D, representing &roadly, the assets of '" AF scheme, assured return and certain other schemes ,he second is the ',I Mutual Fund (td, sponsored &y "#I, P1#, #8# and (I* It is registered with "4#I and functions under the Mutual Fund $egulations consolidation and growth +s at the end of "eptem&er, >@@F, there were >C funds, which manage assets of $s ?=D?@B crores under F>? schemes

Cate$# ie4 #" mutua! "und40

Mutual funds can &e classified as follow;

Ba4ed #n t)ei 4t u(tu e0

8pen/ended funds; Investors can &uy and sell the units from the fund, at any point of time *lose/ended funds; ,hese funds raise money from investors only once ,herefore, after the offer period, fresh investments can not &e made into the fund If the fund is listed on a stocks e!change the units can &e traded like stocks 64 g , Morgan "tanley -rowth Fund7 $ecently, most of the 1ew Fund 8ffers of close/ended funds provided liquidity window on a periodic &asis such as monthly or weekly $edemption of units can &e made during specified intervals ,herefore, such funds have relatively low liquidity

Ba4ed #n t)ei inBe4tment #bCe(tiBe0 4quity funds; ,hese funds invest in equities and equity related instruments With fluctuating share prices, such funds show volatile performance, even losses 3owever, short term fluctuations in the market, generally smoothens out in the long term, there&y offering higher returns at relatively lower volatility +t the same time, such funds can yield great capital appreciation as, historically, equities have outperformed all asset classes in the long term 3ence, investment in equity funds should &e considered for a period of at least D/= years It can &e further classified as;

i3 Inde! funds/ In this case a key stock market inde!, like #"4 "ense! or 1ifty is tracked ,heir portfolio mirrors the &enchmark inde! &oth in terms of composition and individual stock weightages ii3 4quity diversified funds/ ?@@K of the capital is invested in equities spreading across different sectors and stocks iii3 %ividend yield funds/ it is similar to the equity diversified funds e!cept that they invest in companies offering high dividend yields iB3 ,hematic funds/ Invest ?@@K of the assets in sectors which are related through some theme e g /+n infrastructure fund invests in power, construction, cements sectors etc B3 "ector funds/ Invest ?@@K of the capital in a specific sector e g / + &anking sector fund will invest in &anking stocks Bi3 4(""/ 4quity (inked "aving "cheme provides ta! &enefit to the investors

Ba!an(ed "und0 ,heir investment portfolio includes &oth de&t and equity +s a result, on the risk/return
ladder, they fall &etween equity and de&t funds #alanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments Following are &alanced funds classes;

i7 %e&t/oriented funds /Investment &elow A=K in equities ii7 4quity/oriented funds -Invest at least A=K in equities, remaining in de&t Debt "und0 ,hey invest only in de&t instruments, and are a good option for investors averse to idea of taking risk associated with equities ,herefore, they invest e!clusively in fi!ed/income instruments like &onds, de&entures, -overnment of India securitiesJ and money market instruments such as certificates of deposit 6*%7, commercial paper 6*P7 and call money Put your money into any of these de&t funds depending on your investment hori0on and needs i3 (iquid funds/ ,hese funds invest ?@@K in money market instruments, a large portion &eing invested in call money market ii3-ilt funds ",/ ,hey invest ?@@K of their portfolio in government securities of and ,/&ills iii3Floating rate funds / Invest in short/term de&t papers Floaters invest in de&t instruments which have varia&le coupon rate iB3+r&itrage fund/ ,hey generate income through ar&itrage opportunities due to mis/pricing &etween cash market and derivatives market Funds are allocated to equities, derivatives and money markets 3igher proportion 6around G=K7 is put in money markets, in the a&sence of ar&itrage opportunities B3-ilt funds (,/ ,hey invest ?@@K of their portfolio in long/term government securities Bi3 Income funds (,/ ,ypically, such funds invest a major portion of the portfolio in long/term de&t papers Bii3 MIPs/ Monthly Income Plans have an e!posure of G@K/C@K to de&t and an e!posure of ?@K/ D@K to equities Biii3FMPs/ fi!ed monthly plans invest in de&t papers whose maturity is in line with that of the fund

InBe4tment 4t ate$ie40
5= S/4temati( InBe4tment P!an0 under this a fi!ed sum is invested each month on a fi!ed date of a month Payment is made through post dated cheques or direct de&it facilities ,he investor gets fewer units when the 1+5 is high and more units when the 1+5 is low ,his is called as the &enefit of $upee *ost +veraging 6$*+7 *= S/4temati( T an4"e P!an0 under this an investor invest in de&t oriented fund and give

instructions to transfer a fi!ed sum, at a fi!ed interval, to an equity scheme of the same mutual fund A= S/4temati( 8it)d aGa! P!an0 if someone wishes to withdraw from a mutual fund then he can withdraw a fi!ed amount each month

Risk -/s. #"tu#$:

8# Iin$ #" a Mutua! "und0

,he entire mutual fund industry operates in a very organi0ed way ,he investors, known as unit holders,handover their savings to the +M*s under various schemes ,he o&jective of the investment should match with the o&jective of the fund to &est suit the investors. needs ,he +M*s further invest the funds into various securities according to the investment o&jective ,he return generated from the investments is passed on to the investors or reinvested as mentioned in the offer document

8# Iin$ O" Mutua! Fund

Mutua! Fund4

#efore we understand what is mutual fund, it.s very important to know the area in which mutual funds works, the &asic understanding of stocks and &onds St#(I4 ; "tocks represent shares of ownership in a pu&lic company 4!amples of pu&lic companies include $eliance, 81-* and Infosys "tocks are considered to &e the most common owned investment traded on the market B#nd4 ; #onds are &asically the money which you lend to the government or a company, and in return you can receive interest on your invested amount, which is &ack over predetermined amounts of time #onds are considered to &e the most common lending investment traded on the market ,here are many other types of investments other than stocks and &onds 6including annuities, real estate, and precious metals7, &ut the majority of mutual funds invest in stocks andIor &onds 8)at I4 Mutua! Fund + mutual fund is just the connecting &ridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment o&jective ,he mutual fund will have a fund manager who is responsi&le for investing the gathered money into specific securities 6stocks or &onds7 When you invest in a mutual fund, you are &uying units or portions of the mutual fund and thus on investing &ecomes a shareholder or unit holder of the fund Mutual funds are considered as one of the &est availa&le investments as compare to others they are very cost efficient and also easy to invest in, thus &y pooling money together in a mutual fund, investors can purchase stocks or &onds with much lower trading costs than if they tried to do it on their own #ut the &iggest advantage to mutual funds is diversification, &y minimi0ing risk ) ma!imi0ing returns

,hus a Mutual Fund is the most suita&le investment for the common man as it offers an opportunity to invest in a diversified, professionally managed &asket of securities at a relatively low cost ,he flow chart &elow descri&es &roadly the working of a mutual fund

OBe BieG #" eEi4tin$ 4()eme4 eEi4ted in mutua! "und (ate$# /

Wide variety of Mutual Fund "chemes e!ists to cater to the needs such as financial position, risk tolerance and return e!pectations etc ,he ta&le &elow gives an overview into the e!isting types of schemes in the Industry

T/pe #" Mutua! Fund S()eme4

B& STRUCTURE Open Ended S()eme4
+n open/end fund is one that is availa&le for su&scription all through the year ,hese do not have a fi!ed maturity Investors can conveniently &uy and sell units at 1et +sset 5alue 6T1+5T7 related prices ,he key feature of open/end schemes is liquidity

C!#4e Ended S()eme4

+ closed/end fund has a stipulated maturity period which generally ranging from D to ?= years ,he fund is open for su&scription only during a specified period Investors can invest in the scheme at the time of the initial pu&lic issue and thereafter they can &uy or sell the units of the scheme on the stock e!changes where they are listed In order to provide an e!it route to the investors, some close/ ended funds give an option of selling &ack the units to the Mutual Fund through periodic repurchase at 1+5 related prices "4#I $egulations stipulate that at least one of the two e!it routes is provided to the investor

Inte Ba! S()eme4

Interval "chemes are that scheme, which com&ines the features of open/ended and close/ended schemes ,he units may &e traded on the stock e!change or may &e open for sale or redemption during pre/determined intervals at 1+5 related prices

B& NATURE
'nder this the mutual fund is categori0ed on the &asis of Investment 8&jective #y nature the mutual fund is categori0ed as follow;

5= EDuit/ "und0

,hese funds invest a ma!imum part of their corpus into equities holdings ,he structure of the fund may vary different for different schemes and the fund manager.s outlook on different stocks ,he 4quity Funds are su&/classified depending upon their investment o&jective, as follows;

%iversified 4quity Funds Mid/*ap Funds "ector "pecific Funds ,a! "avings Funds 64(""7

4quity investments are meant for a longer time hori0on, thus 4quity funds rank high on the risk/ return matri!

*= Debt "und40
,he o&jective of these Funds is to invest in de&t papers -overnment authorities, private companies, &anks and financial institutions are some of the major issuers of de&t papers #y investing in de&t instruments, these funds ensure low risk and provide sta&le income to the investors %e&t funds are further classified as;

%i!t Fund4; Invest their corpus in securities issued &y -overnment, popularly known as -overnment of India de&t papers ,hese Funds carry 0ero %efault risk &ut are associated with Interest $ate risk ,hese schemes are safer as they invest in papers &acked &y -overnment

In(#me Fund4; Invest a major portion into various de&t instruments such as &onds, corporate de&entures and -overnment securities

MIP4; Invests ma!imum of their total corpus in de&t instruments while they take minimum e!posure in equities It gets &enefit of &oth equity and de&t market ,hese scheme ranks slightly high on the risk/return matri! when compared with other de&t schemes

S)# t Te m P!an4 2STP43; Meant for investment hori0on for three to si! months ,hese funds primarily invest in short term papers like *ertificate of %eposits 6*%s7 and *ommercial Papers 6*Ps7 "ome portion of the corpus is also invested in corporate de&entures

LiDuid Fund4; +lso known as Money Market "chemes, ,hese funds provides easy liquidity and preservation of capital ,hese schemes invest in short/term instruments like ,reasury #ills, inter/&ank call money market, *Ps and *%s ,hese funds are meant for short/term cash management of corporate houses and are meant for an investment hori0on of ?day to D months ,hese schemes rank low on risk/return matri! and are considered to &e the safest amongst all categories of mutual funds

A= Ba!an(ed "und40 +s the name suggest they, are a mi! of &oth equity and de&t funds ,hey invest
in &oth equities and fi!ed income securities, which are in line with pre/defined investment o&jective of the scheme ,hese schemes aim to provide investors with the &est of &oth the worlds 4quity part provides growth and the de&t part provides sta&ility in returns Further the mutual funds can be broadly classified on the basis of investment parameter viz, 4ach category of funds is &acked &y an investment philosophy, which is pre/defined in the o&jectives of the fund ,he investor can align his own investment needs with the funds o&jective and invest accordingly

B& INVESTMENT OBJECTIVE

% #Gt) S()eme40 -rowth "chemes are also known as equity schemes ,he aim of these schemes is to provide capital appreciation over medium to long term ,hese schemes normally invest a major part of their fund in equities and are willing to &ear short/term decline in value for possi&le future appreciation

In(#me S()eme40 Income "chemes are also known as de&t schemes ,he aim of these schemes is to provide regular and steady income to investors ,hese schemes generally invest in fi!ed income securities such as &onds and corporate de&entures *apital appreciation in such schemes may &e limited

Ba!an(ed S()eme40 #alanced "chemes aim to provide &oth growth and income &y periodically distri&uting a part of the income and capital gains they earn ,hese schemes invest in &oth shares and fi!ed income securities, in the proportion indicated in their offer documents 6normally =@;=@7

M#ne/ Ma Iet S()eme4; Money Market "chemes aim to provide easy liquidity, preservation of capital and moderate income ,hese schemes generally invest in safer, short/term instruments, such as treasury &ills, certificates of deposit, commercial paper and inter/&ank call money

OTHER SCHEMES

TaE SaBin$ S()eme40 ,a!/saving schemes offer ta! re&ates to the investors under ta! laws prescri&ed from time to time 'nder "ec BB of the Income ,a! +ct, contri&utions made to any 4quity (inked "avings "cheme 64(""7 are eligi&le for re&ate

IndeE S()eme40 Inde! schemes attempt to replicate the performance of a particular inde! such as the #"4 "ense! or the 1"4 =@ ,he portfolio of these schemes will consist of only those stocks that constitute the inde! ,he percentage of each stock to the total holding will &e identical to the stocks inde! weightage +nd hence, the returns from such schemes would &e more or less equivalent to those of the Inde!

Se(t# Spe(i"i( S()eme40 ,hese are the fundsIschemes which invest in the securities of only those sectors or industries as specified in the offer documents e g Pharmaceuticals, "oftware, Fast Moving *onsumer -oods 6FM*-7, Petroleum stocks, etc ,he returns in these funds are dependent on the performance of the respective sectorsIindustries 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 sectorsIindustries and must e!it at an appropriate time

T/pe4 #" etu n40

,here are three ways, where the total returns provided &y mutual funds can &e enjoyed &y investors;

Income is earned from dividends on stocks and interest on &onds + fund pays out nearly all income it receives over the year to fund owners in the form of a distri&ution If the fund sells securities that have increased in price, the fund has a capital gain Most funds also pass on these gains to investors in a distri&ution If fund holdings increase in price &ut are not sold &y the fund manager, the fundHs shares increase in price 9ou can then sell your mutual fund shares for a profit Funds will also usually give you a choice either to receive a check for distri&utions or to reinvest the earnings and get more shares

P #4 ; (#n4 #" inBe4tin$ in mutua! "und40

For investments in mutual fund, one must keep in mind a&out the Pros and cons of investments in mutual fund

AdBanta$e4 #" InBe4tin$ Mutua! Fund40

5= P #"e44i#na! Mana$ement - ,he &asic advantage of funds is that, they are professional managed, &y well qualified professional Investors purchase funds &ecause they do not have the time or the e!pertise to manage their own portfolio + mutual fund is considered to &e relatively less e!pensive way to make and monitor their investments *= DiBe 4i"i(ati#n - Purchasing units in a mutual fund instead of &uying individual stocks or &onds, the investors risk is spread out and minimi0ed up to certain e!tent ,he idea &ehind diversification is to invest in a large num&er of assets so that a loss in any particular investment is minimi0ed &y gains in others A= E(#n#mie4 #" S(a!e - Mutual fund &uy and sell large amounts of securities at a time, thus help to reducing transaction costs, and help to &ring down the average cost of the unit for their investors ?= LiDuidit/ - Eust like an individual stock, mutual fund also allows investors to liquidate their holdings as and when they want ,= Simp!i(it/ - Investments in mutual fund is considered to &e easy, compare to other availa&le instruments in the market, and the minimum investment is small Most +M* also have automatic purchase plans where&y as little as $s >@@@, where "IP start with just $s =@ per month &asis

Di4adBanta$e4 #" InBe4tin$ Mutua! Fund40

5= P #"e44i#na! Mana$ement/ "ome funds doesn.t perform in neither the market, as their management is not dynamic enough to e!plore the availa&le opportunity in the market, thus many investors de&ate over whether or not the so/called professionals are any &etter than mutual fund or investor himself, for picking up stocks *= C#4t4 L ,he &iggest source of +M* income, is generally from the entry ) e!it load which they charge from an investors, at the time of purchase ,he mutual fund industries are thus charging e!tra cost under layers of jargon A= Di!uti#n / #ecause funds have small holdings across different companies, high returns from a few investments often donHt make much difference on the overall return %ilution is also the result of a successful fund getting too &ig When money pours into funds that have had strong success, the manager often has trou&le finding a good investment for all the new money ?= TaEe4 / when making decisions a&out your money, fund managers donHt consider your personal ta! situation For e!ample, when a fund manager sells a security, a capital/gain ta! is triggered, which affects how profita&le the individual is from the sale It might have &een more advantageous for the individual to defer the capital gains lia&ility

%uide!ine4 #" t)e SEBI "# Mutua! Fund C#mpanie4 0

,o protect the interest of the investors, "4#I formulates policies and regulates the mutual funds It notified regulations in ?CCD 6fully revised in ?CCA7 and issues guidelines from time to time "4#I approved +sset Management *ompany 6+M*7 manages the funds &y making investments in various types of securities *ustodian, registered with "4#I, holds the securities of various schemes of the fund in its custody +ccording to "4#I $egulations, two thirds of the directors of ,rustee *ompany or &oard of trustees must &e independent ,he +ssociation of Mutual Funds in India 6+MFI7 reassures the investors in units of mutual funds that the mutual funds function within the strict regulatory framework Its o&jective is to increase pu&lic awareness of the mutual fund industry +MFI also is engaged in upgrading professional standards and in promoting &est industry practices in diverse areas such as valuation, disclosure, transparency etc

D#(ument4 eDui ed 2PAN mandat# /30 P ##" #" identit/ ; 5= Photo P+1 card *= In case of non/photo P+1 card in addition to copy of P+1 card any one of the following; driving licenseIpassport copyI voter idI &ank photo pass &ook Proof of address 6any of the following 7 ;latest telephone &ill, latest electricity &ill, Passport, latest &ank pass&ookI&ank account statement, latest %emat account statement, voter id, driving license, ration card, rent agreement

O""e d#(ument0 +n offer document is issued when the +M*s make 1ew Fund 8ffer61F87 Its advisa&le to every investor to ask for the offer document and read it &efore investing +n offer document consists of the following; "tandard 8ffer %ocument for Mutual Funds 6"4#I Format7 "ummary Information -lossary of %efined ,erms $isk %isclosures (egal and $egulatory *ompliance 4!penses *ondensed Financial Information of "chemes *onstitution of the Mutual Fund Investment 8&jectives and Policies Management of the Fund 8ffer $elated Information 1e/ In"# mati#n Mem# andum0 a key information memorandum, popularly known as <IM, is attached along with the mutual fund form +nd thus every investor get to read it Its contents are; 5 Name of the fund *= Iestment o&jective A +set allocation pattern of the scheme ? , @ . 7 $isk profile of the scheme Plans ) options #enchmark inde! %ividend policy 1ame of the fund manager6s7

6= Minimum application amountI no of units

5+ 4!penses of the scheme; load structure, recurring e!penses 55 Performance of the scheme 6scheme return vIs &enchmark return7 5* 9ear/ wise return for the last = financial year

Di4t ibuti#n ()anne!40

Mutual funds posses a very strong distri&ution channel so that the ultimate customers doesn.t face any difficulty in the final procurement ,he various parties involved in distri&ution of mutual funds are; 5 %irect marketing &y the +M*s; the forms could &e o&tained from the +M*s directly ,he investors can approach to the +M*s for the forms some of the top +M*s of India areJ $eliance ,#irla "unlife, ,ata, "#I magnum, <otak Mahindra, 3%F*, "undaram, I*I*I, Mirae +ssets, *anara $o&eco, (otus India, (I*, ',I etc whereas foreign +M*s include; "tandard *hartered, Franklin ,empleton, Fidelity, EP Morgan, 3"#*, %"P Merill (ynch, etc * #rokerI su& &roker arrangements; the +M*s can simultaneously go for &rokerIsu&/&roker to populari0e their funds +M*s can enjoy the advantage of large network of these &rokers and su& &rokers eg; "#I &eing the top financial intermediary of India has the greatest network "o the +M*s dealing through "#I has access to most of the investors A Individual agents, #anks, 1#F*; investors can procure the funds through individual agents, independent &rokers, &anks and several non/ &anking financial corporations too, whichever he finds convenient for him

C#4t4 a44#(iated0
EEpen4e40 +M*s charge an annual fee, or e!pense ratio that covers administrative e!penses, salaries, advertising e!penses, &rokerage fee, etc + ? =K e!pense ratio means the +M* charges $s? =@ for every $s?@@ in assets under management + fundHs e!pense ratio is typically to the si0e of the funds under management and not to the returns earned 1ormally, the costs of running a fund grow slower than the growth in the fund si0e / so, the more assets in the fund, the lower should &e its e!pense ratio

L#ad40 Ent / L#adLF #nt-End L#ad 2+-*=*,K7/ its the commission charged at the time of &uying the fund to cover the cost of selling, processing etc EEit L#adLBa(I- End L#ad 2+=*,-*=*,M3- it is the commission or charged paid when an investor e!its from a mutual fund, it is imposed to discourage withdrawals It may reduce to 0ero with increase in holding period

Mea4u in$ and eBa!uatin$ mutua! "und4 pe "# man(e0

4very investor investing in the mutual funds is driven &y the motto of either wealth creation or wealth increment or &oth ,herefore it.s very necessary to continuously evaluate the funds. performance with the help of factsheets and newsletters, we&sites, newspapers and professional advisors like "#I mutual fund services If the investors ignore the evaluation of funds. performance then he can loose hold of it any time In this ever/changing industry, he can face any of the following pro&lems; 5 5ariation in the funds. performance due to change in its managementI o&jective * ,he funds. performance can slip in comparison to similar funds A ,here may &e an increase in the various costs associated with the fund ? =#eta, a technical measure of the risk associated may also surge , ,he funds. ratings may go down in the various lists pu&lished &y independent rating agencies 6 It can merge into another fund or could &e acquired &y another fund house

Pe "# man(e mea4u e40

EDuit/ "und4; the performance of equity funds can &e measured on the &asis of; 1+5 -rowth, ,otal $eturnJ ,otal $eturn with $einvestment at 1+5, +nnuali0ed $eturns and %istri&utions, *omputing ,otal $eturn 6Per "hare Income and 4!penses, Per "hare *apital *hanges, $atios, "hares 8utstanding7, the 4!pense $atio, Portfolio ,urnover $ate, Fund "i0e, ,ransaction *osts, *ash Flow, (everage Debt "und; likewise the performance of de&t funds can &e measured on the &asis of; Peer -roup *omparisons, ,he Income $atio, Industry 4!posures and *oncentrations, 1P+s, &esides 1+5 -rowth, ,otal $eturn and 4!pense $atio LiDuid "und40 the performance of the highly volatile liquid funds can &e measured on the &asis of; Fund 9ield, &esides 1+5 -rowth, ,otal $eturn and 4!pense $atio C#n(ept #" ben()ma Iin$ "# pe "# man(e eBa!uati#n0 4very fund sets its &enchmark according to its investment o&jective ,he funds performance is measured in comparison with the &enchmark If the fund generates a greater return than the &enchmark then it is said that the fund has outperformed &enchmark , if it is equal to &enchmark then the correlation &etween them is e!actly ? +nd if in case the return is lower than the &enchmark then the fund is said to &e underperformed

S#me #" t)e ben()ma I4 a e 0

5 4quity funds; market indices such as ")P *1O nifty, #"4?@@, #"4>@@, #"4/P"', #"4 =@@ inde!, #"4 &anke!, and other sectoral indices * %e&t funds; Interest $ates on +lternative Investments as #enchmarks, I/#e! ,otal $eturn Inde!, EPM ,/#ill Inde! Post/,a! $eturns on #ank %eposits versus %e&t Funds A (iquid funds; "hort ,erm -overnment Instruments. Interest $ates as #enchmarks, EPM ,/ #ill Inde!

T# mea4u e t)e "undN4 pe "# man(eO t)e (#mpa i4#n4 a e u4ua!!/ d#ne Git)0 I7with a market inde! ii3 Funds from the same peer group iii7 8ther similar products in which investors invest their funds Finan(ia! p!annin$ "# inBe4t# 42 e"= t# mutua! "und430 Investors are required to go for financial planning &efore making investments in any mutual fund ,he o&jective of financial planning is to ensure that the right amount of money is availa&le at the right time to the investor to &e a&le to meet his financial goals It is more than mere ta! planning Step4 in "inan(ia! p!annin$ a e0 +sset allocation "election of fund "tudying the features of a scheme= In case of mutual funds, financial planning is concerned only with &road asset allocation, leaving the actual allocation of securities and their management to fund managers + fund manager has to closely follow the o&jectives stated in the offer document, &ecause financial plans of users are chosen using these o&jectives 8)/ )a4 it be(#me #ne #" t)e !a $e4t "inan(ia! in4t ument4< If we take a look at the recent scenario in the Indian financial market then we can find the market flooded with a variety of investment options which includes mutual funds, equities, fi!ed income &onds, corporate de&entures, company fi!ed deposits, &ank deposits, PPF, life insurance, gold, real estate etc all these investment options could &e judged on the &asis of various parameters such as/ return, safety convenience, volatility and liquidity measuring these form investment options on the &asis of the mentioned parameters, we get this in a ta&ular

Retu n EDuit/ B#nd4 C#= Debentu e4 C#= FD4 BanI Dep#4it4 PPF Li"e In4u an(e %#!d Rea! E4tate Mutua! Fund4 3igh Moderate Moderate Moderate (ow Moderate (ow Moderate 3igh 3igh

Sa"et/ (ow 3igh Moderate (ow 3igh 3igh 3igh 3igh Moderate 3igh

V#!ati!it/ 3igh Moderate Moderate (ow (ow (ow (ow Moderate 3igh Moderate

LiDuidit/ 3igh Moderate (ow (ow 3igh Moderate (ow Moderate (ow 3igh

C#nBenien( e Moderate 3igh (ow Moderate 3igh 3igh Moderate -old (ow 3igh

We can very well see that mutual funds outperform every other investment option 8n three parameters it scores high whereas it.s moderate at one comparing it with the other options, we find that equities gives us high returns with high liquidity &ut its volatility too is high with low safety which doesn.t makes it favourite among persons who have low risk/ appetite 4ven the

convenience involved with investing in equities is just moderate 1ow looking at &ank deposits, it scores &etter than equities at all fronts &ut lags &adly in the parameter of utmost important ieJ it scores low on return , so it.s not an happening option for person who can afford to take risks for higher return ,he other option offering high return is real estate &ut that even comes with high volatility and moderate safety level, even the liquidity and convenience involved are too low -old have always &een a favourite among Indians &ut when we look at it as an investment option then it definitely doesn.t gives a very &right picture +lthough it ensures high safety &ut the returns generated and liquidity are moderate "imilarly the other investment options are not at par with mutual funds and serve the needs of only a specific customer group "traightforward, we can say that mutual fund emerges as a clear winner among all the options availa&le ,he reasons for this &eing; I3Mutua! "und4 (#mbine t)e adBanta$e #" ea() #" t)e inBe4tment p #du(t40 mutual fund is one such option which can invest in all other investment options Its principle of diversification allows the investors to taste all the fruits in one plate just &y investing in it, the investor can enjoy the &est investment option as per the investment o&jective

II3di4pen4e t)e 4)# t(#min$4 #" t)e #t)e #pti#n40 every other investment option has more or les some shortcomings "uch as if some are good at return then they are not safe, if some are safe then either they have low liquidity or low safety or &othU likewise, there e!ists no single option which can fit to the need of every&ody #ut mutual funds have definitely sorted out this pro&lem 1ow every&ody can choose their fund according to their investment o&jectives

III3 Retu n4 $et adCu4ted "# t)e ma Iet m#Bement4; as the mutual funds are managed &y e!perts so they are ready to switch to the profita&le option along with the market movement "uppose they predict that market is going to fall then they can sell some of their shares and &ook profit and can reinvest the amount again in money market instruments

IV3 F!eEibi!it/ #" inBe4ted am#unt0 8ther then the a&ove mentioned reasons, there e!ists one more reason which has esta&lished mutual funds as one of the largest financial intermediary and that is the fle!i&ility that mutual funds offer regarding the investment amount 8ne can start investing in mutual funds with amount as low as $s =@@ through "IPs and even $s ?@@ in some cases

H#G d# inBe4t# 4 ()##4e betGeen "und4<

When the market is flooded with mutual funds, it.s a very tough jo& for the investors to choose the &est fund for them Whenever an investor thinks of investing in mutual funds, he must look at the investment o&jective of the fund ,hen the investors sort out the funds whose investment o&jective matches with that of the investor.s 1ow the tough task for investors start, they may carry on the further process themselves or can go for advisors like "#I 8f course the investors can save their money &y going the direct route i e through the +M*s directly &ut it will only save ?/> >=K 6entry load7 &ut could cost the investors in terms of returns if the investor is not an e!pert "o it is always advisa&le to go for MF advisors ,he mf advisors. thoughts go &eyond just investment o&jectives and rate of return "ome of the &asic tools which an investor may ignore &ut an mf advisor will always look for are as follow;

5= Rupee (#4t aBe a$in$0 ,he investors going for "ystematic Investment Plans6"IP7 and "ystematic ,ransfer Plans6",P7 may enjoy the &enefits of $*+ 6$upee *ost +veraging7 $upee cost averaging allows an investor to &ring down the average cost of &uying a scheme &y making a fi!ed investment

periodically, like $s =,@@@ a month and nowadays even as low as $s =@@ or $s ?@@ In this case, the investor is always at a profit, even if the market falls In case if the 1+5 of fund falls, the investors can get more num&er of units and vice/versa ,his results in the average cost per unit for the investor &eing lower than the average price per unit over time ,he investor needs to decide on the investment amount and the frequency More frequent the investment interval, greater the chances of &enefiting from lower prices Investors can also &enefit &y increasing the "IP amount during market downturns, which will result in reducing the average cost and enhancing returns Whereas ",P allows investors who have lump sums to park the funds in a low/risk fund like liquid funds and make periodic transfers to another fund to take advantage of rupee cost averaging *= Reba!an(in$0 $e&alancing involves &ooking profit in the fund class that has gone up and investing in the asset class that is down ,rigger and switching are tools that can &e used to re&alance a portfolio ,rigger facilities allow automatic redemption or switch if a specified event occurs ,he trigger could &e the value of the investment, the net asset value of the scheme, level of capital appreciation, level of the market indices or even a date ,he funds redeemed can &e switched to other specified schemes within the same fund house "ome fund houses allow such switches without charging an entry load ,o use the trigger and switch facility, the investor needs to specify the event, the amount or the num&er of units to &e redeemed and the scheme into which the switch has to &e made ,his ensures that the investor &ooks some profits and maintains the asset allocation in the portfolio

A= DiBe 4i"i(ati#n0 %iversification involves investing the amount into different options In case of mutual funds, the investor may enjoy it afterwards also through dividend transfer option 'nder this, the dividend is reinvested not into the same scheme &ut into another scheme of the investorHs

choice For e!ample, the dividends from de&t funds may &e transferred to equity schemes ,his gives the investor a small e!posure to a new asset class without risk to the principal amount "uch transfers may &e done with or without entry loads, depending on the MFHs policy ?= TaE e""i(ien(/0 ,a! factor acts as the 2!/factor for mutual funds ,a! efficiency affects the final decision of any investor &efore investing ,he investors gain through either dividends or capital appreciation &ut if they haven.t considered the ta! factor then they may end loosing %e&t funds have to pay a dividend distri&ution ta! of ?> =@ per cent 6plus surcharge and education cess7 on dividends paid out Investors who need a regular stream of income have to choose &etween the dividend option and a systematic withdrawal plan that allows them to redeem units periodically "WP implies capital gains for the investor If it is short/term, then the "WP is suita&le only for investors in the ?@/per/cent/ta! &racket Investors in higher ta! &rackets will end up paying a higher rate as short/term capital gains and should choose the dividend option If the capital gain is long/term 6where the investment has &een held for more than one year7, the growth option is more ta! efficient for all investors ,his is &ecause investors can redeem units using the "WP where they will have to pay ?@ per cent as long/term capital gains ta! against the ?> =@ per cent %%, paid &y the MF on dividends +ll the tools discussed over here are used &y all the advisors and have helped investors in reducing risk, simplicity and afforda&ility 4ven then an investor needs to e!amine costs, ta! implications and minimum applica&le investment amounts &efore committing to a service

M#4t p#pu!a 4t#(I4 am#n$ "und mana$e 4 2as on 30th April 2008)

Company Name Reliance industries limited Larsen & toubro limited ICICI bank limited State bank of India "#arti airtel limited "#arat #ea$y electricals limited Reliance communication $entures ltd Infosys tec#nolo&ies ltd (il& Natural &as corporation ltd. I*C ltd.

no. of funds 244 206 202 !! !4 200 6% '% ') 4)

We can easily point out that reliance industries limited emerges as a true winner over here attracting the attention of almost>FF managers well followed &y (arsen ) tou&ro ltd I*I*I &ank ltd and #harat heavy electricals ltd ,he other companies succeeding in getting a place at top ?@ are "#I, #harti airtel limited, reliance communications, Infosys technologies limited,

81-* and at last I,* ltd

8)at a e t)e m#4t !u( atiBe 4e(t# 4 "# mutua! "und mana$e 4< ,his is a question of utmost interest for all the investors even for those who don.t invest in mutual funds #ecause the investments done &y the MFs acts as trendsetters ,he investments made &y the fund managers are used for prediction 3uge investments assure liquidity and reflects appositive picture whereas tight investment policy reflects crunch and investors may look forward for a gloomy picture ,heir investments show that which sector is hotS +nd will set the market trends ,he e!pert management of the funds will always look for profita&le and high paying sectors "o we can have a look at most lucrative sectors to know a&out the recent trends;

No. o* 83s <"tti$ o$ it automoti$e 2'' bankin& & financial %6 ser$ices cement & 2)+ construction consumer durables ' con&lomerates 2 ! c#emicals 2'% consumer non 46 durables en&ineerin& & ) + capital &oods food & be$era&es +' information 2!4 tec#nolo&y media & 2 ! entertainment ,anufacturin& 2'% metals& minin& 2+' ,iscellaneous 2'0 oil & &as 2%0 -#armaceuticals 2'0 Ser$ices 200 *elecom 264 *obacco '0 .tility 22' From the a&ove data collected we can say that engineering ) capital goods sector has emerged as the hottest as most of the funds are &etting on it We can say that this sector is on &oom and presents a &right picture 8ther than it other sectors on height are oil ) gas, telecom, metals ) mining and information technology "ectors performing average are automotive, cement ) construction, chemicals, media ) entertainment, manufacturing, miscellaneous, pharmaceuticals and utility ,he sectors which are not so favourite are &anking ) financial services, conglomerates, consumer non/ dura&les, food ) &everages, services and to&acco +nd the sector which failed to attract the fund managers is consumer dura&les with just =? funds &etting on it ,hus this analysis not only gives a picture of the mindset of fund managers rather it also

S"4to# $2."

reflects the liquidity e!isting in each of the sectors It is not only useful for investors of mutual funds rather the investors of equity and de&t too could take a hint from it +sset allocation &y fund managers are &ased on several researches carried on so, it is always advisa&le for other investors too take a look on it It can &e further presented in the form of a graph as follow;

S/4temati( inBe4tment p!an 2in detai!43

We have already mentioned a&out "IPs in &rief in the previous pages &ut now going into details, we will see how the power of compounding could &enefit us In such case, every small amounts invested regularly can grow su&stantially "IP gives a clear picture of how an early and regular investment can help the investor in wealth creation %ue to its unlimited advantages "IP could &e redefined as 2a methodology of fund investing regularly to &enefit regularly from the stock market volatility In the later sections we will see how returns generated from some of the "IPs have outperformed their &enchmark #ut &efore moving on to that lets have a look at some of the top performing "IPs and their return for ? year;

S4!"."

,.ou$t

N,V %2.&) 22.20 8 18.8% 3(.31 )2.1)

N,V 92t" 30/(/200 8 30/(/200 8 30/(/200 8 30/(/200 8 30/(/200 8

Tot25 ,.ou$t 1)(2).0& 13(8).6) ) 1)2)&.&2 8 13&61.1( & 13&%6.1( 2

R"5i2$4" di-"#si*i"d +ow"# s"4to# #"t2i5 1000 R"5i2$4" #" u52# s2-i$ s "quity +#i$4i+25 1000 5o<25

o++o#tu$iti"s *u$d 1000 9?S i$-"st."$t o++o#tu$iti"s *u$d 1;1 #owt! *u$d 1000 1000

In the a&ove chart, we can see how if we start investing $s ?@@@ per month then what return we.ll get for the total investment of $s ?>@@@ ,here is reliance diversified power sector retail giving the ma!imum returns of $s >=>F @G per year which comes to >?K roughly 1e!t we can see if any&ody would have undertaken the "IP in Principal would have got returns of app ?BK We can see reliance regular savings equity, %W" investment opportunities and #8# growth fund giving returns of ?D >@K,

?F C>K, and ?F GFK respectively which is greater than any other monthly investment options ,hus we can easily make out how "IP is &eneficial for us Its hassle free, it forces the investors to save and get them into the ha&it of saving +lso paying a small amount of $s ?@@@ is easy and convenient for them, thus putting no pressure on their pockets 1ow we will analy0e some of the equity fund "IP s of #irla "unlife with #"4 >@@ and &ank fi!ed deposits In a ta&ular format as well as graphical

N(. (/

Sc#eme Name "irla SL ta3 relief 4%6

INS*0L,1N*S

(ri&inal in$ 44000 4000 66000

Returns at "S1 200

/.N2 R1*.RNS

44

'') %0 )!!+0 '626%

6!400! 66%2 % ! 2+

4 "irla SL e5uity fund "irla frontline e5uity 66 fund

In the a&ove case, we have taken three funds of #irla sunlife namely #irla sunlife ta! relief .CA, #irla sunlife equity fund and #irla sunlife frontline equity fund +ll these three funds follow the same &enchmark ieJ #"4 >@@ 3ere, we have shown how one would have &enefitted if he would have put his money into these schemes since their inception +nd the amount even is a meager $s ?@@@ per month "tarting from #irla frontline equity fund, we could spot that if someone would have invested $s ?@@@ per month resulting into total investment of $s AA@@@ then it would have amounted to rs ?=A>AC if invested in #"4 >@@ whereas the fund would have given a total return of $s ?B??>G 1ow moving ne!t to #irla sunlife equity fund, a total investment of ??F@@@ for a total of ??F months at #"4 >@@ would have given a total return of $s DBBG@? whereas the fund gave a total return of $s AAC>?C, nearly dou&le the return generated at #"4 >@@ +nd now the cream of all the investments, #irla sunlife ta! relief .CA + total investment of $s ?FF@@@ for a period of ?> years at #"4 >@@ would have given total returns of just $s ==D?C@ &ut the #irla sunlife ta! relief .CA gave an un&elieva&le total return of $s ?ABF@@B ,hus the a&ove case very well e!plains the power of compounding and early investment We have seen how a meager amount of $s ?FF@@@ turned into $s ?ABF@@B It may appear un&elieva&le for many &ut "IPs have turned this into reality and the power of compounding is speaking loud, attracting more and more investors to create wealth through "IPs

D#e4 "und pe "# man(e and anIin$ pe 4i4t<

,his project has &een a great learning e!perience for me #ut the analyses that are carried onward these pages are really close to my heart +fter taking a look at the data presented &elow, an e!pert might underestimate my efforts 8ne might think it as a &oring task and can go for recording historic 1+5s since last ? month instead of recording it daily #ut frankly speaking, while tracking the 1+5s, I really developed some sentiments with these funds $eally the ups and downs in the 1+5s affected me as if I m tracking my own portfolio ,he portfolio consists of different types of funds We can see some funds are =/ star rated &ut

their performances are &elow the unrated funds We can also find some funds which performed very well initially &ut gradually declined either in short/ run or long run "ome funds have high 1+5" &ut the returns offered are low We can also see some funds following same &enchmark and reflecting diverse 1+5 and returns 4ven it can &e seen that the e!pense ratios for various funds varies which may affect the ultimate return 1ow &efore going into details, lets have a look at those funds; in this downgrading equity market, we can easily make out that the ? year return of the fund that was on ?G th of april could not &e sustained till ? month 8ne can sort out that the present return of funds has decreased a lot and su&sequently its 1+5 too has come down +ll the funds are showing negative returns for the last ? month 4ven the two hy&rid funds are showing negative monthly returns ,hat means all those who &ought these funds a month &ack must &e e!periencing a negative return +lthough the annual return of the funds have gone down in comparison to what it was offering a month &ack "till the total return is positive 8n an average the equity funds are offering a return of D@K annually, inspite of a week equity market

1ow checking the validity of funds. ratings, we can see that some of the funds are = star or F star rated &ut their returns lag &ehind the unrated funds +lthough, since the ratings include &oth risk and return so it will not &e a total justice to judge the funds purely on a return &asis &ut still we can go for it just to judge them on the &asis of returns generated (ooking at the funds, we have three = star rated funds, one Fstar rated and si! unrated funds In other way, we have seven equity diversified funds, one equity specialty, one hy&rid; dynamic asset allocation and one hy&rid; de&t oriented fund It is not possi&le to compare each and every fund in details "o I have compared > funds out of this list on the &asis of their returns and e!penses

3ere %#" *hola opportunities and I*I*I Pru infrastructure follows the same &enchmark ")P *1O 1IF,9 In this case, %#" *hola opportunities is a F star rated fund whereas I*I*I Pru infrastructure is an unrated fund ,he star rating definitely gives %#" a competitive advantage &ut now lets have a look at other factors, we can see that I*I*I Pru has really performed worse in the last month Its ? month return is /= BK whereas %#" gave a return of /D @GK 4ven if we consider A months return or yearly returns, definitely %#" is a winner We can easily spot the difference &y change in their rankings even *onsidering ? yr return, we can spot %#" at no = whereas I*I*I at no A &ut when we look at the monthly ratings, to our ultimate shock, %#" is at => and I*I*I far &ehind at ?G> #ut if we look at the yearly returns, then there is not much difference &etween them, %#" offering returns of D= ?GK whereas I*I*I offering DF >G #ut looking at the e!penses, the e!penses charged &y I*I*I is lower to that of %#", which may act as the ultimate factor in choosing the fund in a long run T)u4 at !a4t Ge (an (#n(!ude t)at atin$4 a e t#ta!!/ i e!eBant "# inBe4t# 4= He e i4 G)/ t)e/ a e t#ta!!/ i e!eBant t# inBe4t# 0 5= Mutual fund ratings are &ased on the returns generated, that is, appreciation of net asset value, &ased on the historical performance "o they rely more on the past, rather than the current scenario *= +s returns play a key role in deciding the ratings, any change in returns will lead to re/ rating of the mutual fund If you choose your mutual fund only on the &asis of rating, it will &e a nuisance to keep realigning your investment in line with the revision of the ratings A= ,he ratings don.t value the investment processes followed &y the mutual fund +s a result, a fund following a certain process may lose out to a fund that has given superior returns only &ecause it has a star fund manager #ut there is a higher risk associated with a star fund manager that the ratings don.t reflect If the star fund manager quits, it can throw the working of a mutual fund out of gear and thus affect its performance ?= ,he ratings don.t show the level of ethics followed &y the fund + fund or fund manager that is involved in a scam or financial irregularities won.t get poor ratings on the &asis of ethics +s the star ratings look at just returns, any wrongdoing carried out &y the fund or fund manager will &e completely ignored

,= $atings also don.t consider two very important factors; transparency and keeping investors informed ,here are no negative ratings awarded to the fund for &eing investor/unfriendly 6= $atings don.t match the investor.s risk/appetite with their portfolio +s a matter of fact, investments should &e done only after considering the risk appetite of the investor For e!ample, equities may not &e the &est investment vehicle for a very conservative investor 3owever ratings fail to take that into account

$atings should &e the starting point for making an investment decision ,hey are not the &e all and end all of mutual fund investments ,here are other important factors like portfolio management, age of funds and more, which should &e taken into account &efore making an investment

P# t"#!i# ana!/4i4 t##!40

With the increasing num&er of mutual fund schemes, it &ecomes very difficult for an investor to choose the type of funds for investment #y using some of the portfolio analysis tools, he can &ecome more equipped to make a well informed choice ,here are many financial tools to analy0e mutual funds 4ach has their unique strengths and limitations as well ,herefore, one needs to use a com&ination of these tools to make a thorough analysis of the funds ,he present market has &ecome very volatile and &uoyant, so it is getting difficult for the

investors to take right investing decision so the easiest availa&le option for investors is to choose the &est performing funds in terms of 2returns which have yielded ma!imum returns #ut if we look deeply to it, we can find that the returns are important &ut it is also important to look at the Vquality. of the returns VWuality. determines how much risk a fund is taking to generate those returns 8ne can make a judgment on the quality of a fund from various ratios such as standard deviation, sharpe ratio, &eta, treynor measure, $/squared, alpha, portfolio turnover ratio, total e!pense ratio etc 1ow I have compared two funds of "#I on the &asis of standard deviation, &eta, $/squared, sharpe ratio, portfolio turnover ratio and total e!pense ratio "o &efore going into details, lets have a look at these ratios;

Standa d deBiati#n0 in simple terms standard deviation is one of the commonly used statistical parameter to measure risk, which determines the volatility of a fund %eviation is defined as any variation from a mean value 6upward ) downward7 "ince the markets are volatile, the returns fluctuate everyday 3igh standard deviation of a fund implies high volatility and a low standard deviation implies low volatility

Beta ana!/4i40 &eta is used to measure the risk It &asically indicates the level of volatility associated with the fund as compared to the market In case of funds, as compared to the market In case of funds, &eta would indicate the volatility against the &enchmark inde! It is used as a short term decision making tool + &eta that is greater than ? means that the fund is more volatile than the &enchmark inde!, while a &eta of less than ? means that the fund is more volatile than the &enchmark inde! + fund with a &eta very close to ? means the fund.s performance closely matches the inde! or &enchmark

,he success of &eta is heavily dependent on the correlation &etween correlation &etween a fund and its &enchmark ,hus, if the fund.s portfolio doesn.t have a relevant &enchmark inde! then a &eta would &e grossly inappropriate For e!ample if we are considering a &anking fund, we should look at the &eta against a &ank inde! R-SDua ed 2R*30 $ squared is the square of V$. 6i e J coefficient of correlation7 It descri&es the level of association &etween the fun.s market volatility and market risk ,he value of $/ squared ranges from@ to? + high $/ squared 6more than @ B@7 indicates that &eta can &e used as a relia&le measure to analy0e the performance of a fund #eta should &e ignored when the r/squared is low as it indicates that the fund performance is affected &y factors other than the markets

F# eEamp!e; *ase ? *ase > $> @ A= @ BB # ?> @C In the a&ove ta&le$> is less than @ B@ in case ?, implies that it would &e wrong to mention that the fund is aggressive on account of high &eta In case >, the r/ squared is more than @ B= and &eta value is @ C it means that this fund is less aggressive than the market "harpe ratio; sharpe ratio is a risk to reward ratio, which helps in comparing the returns given &y a fund with the risk that the fund has taken + fund with a higher sharpe ratio means that these returns have &een generated taking lesser risk In other words, the fund is less volatile and yet generating good returns ,hus, given similar returns, the fund with a higher sharpe ratio offers a &etter avenue for investing ,he ratio is calculated as;

S)a pe ati# J 2ABe a$e etu n- i4I " ee ate3 L 4tanda d deBiati#n P# t"#!i# tu n#Be ati#; Portfolio turnover is a measure of a fundHs trading activity and is

calculated &y dividing the lesser of purchases or sales 6e!cluding securities with maturities of less than one year7 &y the average monthly net assets of the fund ,urnover is simply a measure of the percentage of portfolio value that has &een transacted, not an indication of the percentage of a fundHs holdings that have &een changed Portfolio turnover is the purchase and sale of securities in a fundHs portfolio + ratio of ?@@K, then, means the fund has &ought and sold all its positions within the last year ,urnover is important when investing in any mutual fund, since the amount of turnover affects the fees and costs within the mutual fund T#ta! eEpen4e4 ati#; + measure of the total costs associated with managing and operating an investment fund such as a mutual fund ,hese costs consist primarily of management fees and additional e!penses such as trading fees, legal fees, auditor fees and other operational e!penses ,he total cost of the fund is divided &y the fundHs total assets to arrive at a percentage amount, which represents the ,4$; T#ta! eEpen4e ati# J 2T#ta! "und C#4t4L T#ta! "und A44et43

Pe "# man(e

ep# t and p# t"#!i# ana!/4i4 #" ma$num eDuit/ "und and ma$num

mu!tip!ie p!u4 a$ain4t t)ei ben()ma I BSE5++0

M*g% 3 e? (#@ " %)

8TD />D GDK

1M C @>K

3M /G G?K

6M /?= ?BK

18 >A A?K

38 F= @GK

58 FB CAK

/>A ?AK M*g% 3 3 +#(!+( er !+ ' /?G =DK Be%2$ 3*r9 BS;100

= =GK

/?? >AK

/?B @@K

>? FFK

F= >BK

=C D?K

?? GFK

/> =AK

?? FGK

D@ G?K

F@ FAK

FF >FK

1ow in the a&ove ta&le, we have two funds from "#I ieJ magnum equity fund and magnum multiplier plus following the same &enchmark i eJ #"4 ?@@ In this case, we have compared their returns during various time periods We have their returns 9,%, during last ? month, Dmonth, A months, ? year, D year and = year If we look at a long term perspective, then magnum multiplier plus totally outperformed &oth magnum equity fund as well as &se ?@@ In case of = year returns, neither the &enchmark nor the magnum equity fund stands anywhere near multiplier plus It is greater than equity fund &y ?@ D=K and from &enchmark &y ?= @GK &ut in case of D year returns, surely multiplier plus gave the ma!imum return &ut it fell sharply in comparison to its = yr return + F= >BK return scored over equity fund just &y a margin of @ >?K and &enchmark &y a mere F >BK now moving down to ? yr return, we can clearly see that &se ?@@ emerges as a true winner ,he &enchmark gave a return of D@ G?K &ut &oth the funds failed to match it even

#ut the ultimate surprise comes when we look at the datas of last A months 3ere not only the fund mangers failed to &eat or match the market $ather they also performed as laggards, giving negative returns When the &se ?@@ gave returns of ?? FGK, these funds were trailing &y >C FGK and >A A=K which is a huge figure In th last D months too, &oth the funds were &ehind &se?@@ &ut all the three gave negative returns and the difference &etween them and &enchmark was narrowed down +gain, during last ? month return of all three got positive &ut the funds always remained &ehind the &enchmark ,he &se ?@@ outscored multiplier plus and equity fund

&y A ?GK and > G>K respectively "imilarly, the 9,% return of all D is negative even then the &enchmark is at a &etter position than the funds From the following analysis we can infer that inspite of all the steps takenJ it is not always possi&le for the fund managers to always &eat the market +lso, the past performance just tells the &ackground and history of the fund, &y looking at it we cannot interpret that the fund will perform in the same way in the future too T)e data4 (an be p e4ented in t)e "# m #" a $ ap) a4 "#!!#G0

:uantitatiBe data0

R*#(o' S#*%)*r) )e&(*#(o% Be#* r-'? *re) S$*r!e r*#(o 0or#"o+(o # r%o&er To#*+ eA!e%'e r*#(o Ana!/4i40

M*g% 3 e? (#@ " %) >A @@K @ CAK ? FAK D?K > =K

M*g% 3 3 +#(!+(er !+ ' >A C@K @ C=K @ BFK ? F>K >=K > =K

We can see that the standard deviation of &oth the funds are more or less same even then the " % of multiplier plus is greater than that of equity fund &y @ C@K -enerally higher the "% higher is the risk and vice/versa ,herefore, magnum multiplier plus is riskier than magnum equity fund ,he &eta of magnum equity fund is higher than that of magnum multiplier plus ,herefore, equity fund is more volatile than multiplier plus #ut &eta of &oth the funds is smaller than ? that means &oth the funds are less volatile than the market inde! +s r/ squared values are more than @ B@ in &oth the cases, we can rely on the usage of &eta for the analysis of these funds + look at the "harpe ratio indicates that magnum equity has outperformed multiplier plus + higher "harpe ratio of equity fund depicts that these return have &een generated taking lesser risk than the multiplier plus It Is less volatile than the other $/squared of &oth the funds are greater than @ B@ it indicates that &eta can &e used as a relia&le measure to analy0e the performance of these funds Magnum equity fund.s $/ squared is higher "o its &eta is more relia&le Portfolio turnover ratio of magnum equity fund is higher than multiplier plus It mean the manager is frequently churning the portfolio of equity fund than of multiplier plus It may lead to an increase in e!penses &ut could &e ignored if could generate higher return &y changing the composition of portfolio ,otal e!pense ratio of &oth the funds are same i e J > =K

In t)e "# m #" a ()a t0

R"s"2#4! #"+o#t

ObCe(tiBe #" e4ea ()P

 ,he main o&jective of this project is concerned with getting the opinion of people regarding mutual funds and what they feel a&out availing the services of financial advisors I have tried to e!plore the general opinion a&out mutual funds It also covers whyI why not investors are availing the services of financial advisors +long with it a &rief introduction to India.s largest financial intermediary, "#I has &een given and it is shown that how they operate in mutual fund deptt S(#pe #" t)e 4tud/0 ,he research was carried on in the 1orthern $egion of India It is restricted to %ehradoon I have visited people randomly near&y my locality, different shopping malls, small retailers etc Data 4#u (e40 $esearch is totally &ased on primary data "econdary data can &e used only for the reference $esearch has &een done &y primary data collection, and primary data has &een collected &y interacting with various people ,he secondary data has &een collected through various journals and we&sites and some special pu&lications of "#I Samp!in$0 Samp!in$ p #(edu e0 ,he sample is selected in a random way, irrespective of them &eing investor or not or availing the services or not It was collected through mails and personal visits to the known persons, &y formal and informal talks and through filling up the questionnaire prepared ,he data has &een analy0ed &y using the measures of central tendencies like mean, median, mode ,he group has &een selected and the analysis has &een done on the &asis statistical tools availa&le

 Samp!e 4iHe0 ,he sample si0e of my project is limited to >@@ only 8ut of which only ?D= people attempted all the questions 8ther A= not investing in MFs attempted only > questions Samp!e de4i$n0 %ata has &een presented with the help of &ar graph, pie charts, line graphs etc Limitati#n0 ,ime limitation $esearch has &een done only at %ehradoon "ome of the persons were not so responsive Possi&ility of error in data collection Possi&ility of error in analysis of data due to small sample si0e

Data ana!/4i40 HaBe /#u eBe inBe4tedL inte e4ted t# inBe4t in mutua! "und4< &ES NO 5A, A=

=G)at i4 t)e m#4t imp# tant ea4#n "# n#t inBe4tin$ in mutua! "und4< 2 only for

above 65 participants)

La(I #" In#G!ed$e ab#ut mutua! "und4 *, EnC#/4 inBe4tin$ in #t)e #pti#n4 ?@ It4 bene"it4 a e n#t en#u$) t# d iBe /#u ?B "# inBe4tment N# t u4t #Be t)e "und mana$e 4 ?>

 =G)e e d# /#u "ind /#u 4e!" a4 a mutua! "und inBe4t# <

T#ta!!/ i$n# ant Pa tia! In#G!ed$e #" MF4 AGa e #" #n!/ 4()eme in G)i() inBe4ted %##d In#G!ed$e #" MF4

28 DG FA >F

 =G)e e " #m /#u pu ()a4e4 mutua! "und4<

Di e(t!/ " #m t)e AMC4 B #Ie 4 #n!/ 2 !a $e inte media ie43 B #Ie L 4ub-b #Ie 4 Ot)e 4#u (e4 AA >B =C ?=

:UESTIONNAIRE

A 4tud/ #" p e"e en(e4 #" t)e inBe4t# 4 "# inBe4tment in mutua! "und4=
5= Pe 4#na! Detai!40 6a7 1ame;/ 6&7 +dd; / 6c7 +ge;/ 6d7 Wualification;/ -raduationIP6e7 8ccupation Pl tick 6X7 -ovt "er Pvt "er #usiness +griculture 8thers 'nder -raduate 8thers Phone;/

6g7 What is your monthly family income appro!imatelyS Pl tick 6X7 'p to $s ?@,@@@ $s ?@,@@? to ?=@@@ $s ?=,@@? to >@,@@@ $s >@,@@? to D@,@@@ $s D@,@@? and a&ove

*= What kind of investments you have made so farS Pl tick 6X7 +ll applica&le a "aving account e Post 8ffice/1"*, etc & Fi!ed deposits f "haresI%e&entures c Insurance g -oldI "ilver d Mutual Fund h $eal 4state

A= While investing your money, which factor will you preferS 6a7 (iquidity 6&7 (ow $isk 6c7 3igh $eturn 6d7 ,rust

?= +re you aware a&out Mutual Funds and their operationsS Pl tick 6X7

9es

1o

,= If yes, how did you know a&out Mutual FundS a +dvertisement & Peer -roup c #anks d Financial +dvisors 9es 1o

6= 3ave you ever invested in Mutual FundS Pl tick 6X7

@= If not invested in Mutual Fund then whyS 6a7 1ot aware of MF 6&7 3igher risk 6c7 1ot any specific reason

. If yesO in which Mutual Fund you have investedS Pl tick 6X7 +ll applica&le a "#IMF & ',I c 3%F* d $eliance e <otak f 8ther specify

7= If invested in "#IMF, you do so &ecause 6Pl tick 6X7, all applica&le7 a "#IMF is associated with "tate #ank of India & ,hey have a record of giving good returns year after year c +gent. +dvice 5+= If 18, invested in "#IMF, you do so &ecause 6Pl tick 6X7 all applica&le7 a 9ou are not aware of "#IMF & "#IMF gives less return compared to the others c +gent. +dvice 55 When you plan to invest your money in asset management co which +M* will you preferS +ssets Management *o a "#IMF & ',I c $eliance d 3%F* e <otak f I*I*I

5* Which *hannel will you prefer while investing in Mutual Fund< 6a7 Financial +dvisor 6&7 #ank 6c7 +M*

5A= When you invest in Mutual Funds which mode of investment will you preferS Pl tick 6X7 a 8ne ,ime Investment & "ystematic Investment Plan 6"IP7

5?= When you want to invest which type of funds would you chooseS a 3aving only de&t portfolio & 3aving de&t ) equity portfolio c 8nly equity portfolio

5,= 3ow would you like to receive the returns every yearS Pl tick 6X7 a %ividend payout & %ividend re/investment c -rowth in 1+5

56= Instead of general Mutual Funds, would you like to invest in sectorial fundsS Please tick 6X7 9es 1o