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“Mutual Funds as an Investment option”
(In partial fulfillment of Degree of Master of Business Administration, Finance)
Deepak Dhiman Gauri
MBA (Finance) Manager) Roll. No. 7032221160 LIMITED
Swami Vivekanand Institute Of Engineering & Technology
I hereby declare that the project work entitled “MUTUAL FUND AS AN INVESTMENT OPTION ” is an authentic record carried out at SHAREKHAN, Chandigarh as requirements of 2 month summer internship for the award of MBA degree, SVIET, under the guidance of Mr. Atul Gauri, the deputy Asst. manager of SHAREKHAN ltd., Chandigarh. Date-25-july-2008
SIGNATURE OF THE STUDENT
DEEPAK DHIMAN 7032221160 MBA(finance) SECTION A
This is to certify that Deepak Dhiman studying in Third Semester of Masters Of Business Administration in the Academic Year 2007-2009 at SVIET, BANUR, has completed project on “MUTUAL FUNDS AS AN INVESTMENT OPTION”, under my guidance for two months i.e. 01.05.2008 to 30.06.2008 The information presented in this project is true and original to the best of my knowledge.
Date: Place: (Ms.PARINEETA )
Words are often to be a mode of expression for one’s deep feelings. I take this opportunity to express my deepest gratitude to those who have generously helped me in providing the valuable knowledge and expertise during my training. At the very outset, I bow my head to thank the God Almighty, whose kind grace has made it possible for me to bring this report. I, hereby express my sincere gratitude to my Company Guide, Asst. Mgr. Mr. ATUL GAURI for the valuable guidance and immense cooperation right from the day 1 st till the end of the training without which this project would not have become a successful one. I shall also like to specially thank Mrs. Parineeta (Faculty Guide) for giving me the required guidance and removing any difficulties faced by me during training.
. The perfect combination of Project and OJT help us in exploring our skills and capabilities. This internship program makes a mark of hard work. sincerity. Date-25-07-2008 Deepak Dhiman PREFACE The Summer Internship Program forms an important component of education SVIET.Last but not the least I would like to thank Company staff to help me write this report by providing full cooperation and continuous support during the course of this assignment. It is an attempt to bridge the gap between the academic institution and the corporate world. knowledge and ethics on the host organization. Thanks to my parents and SVIET . I would like to thank each and every person who has contributed in any of the ways in my training. It would also be a great learning experience since it enables us to apply theory to practice and observe and learn the current trends in the market. It provides us an opportunity to apply the concepts learnt in real life situations. And finally. Faculty Members for their belief and constant support.
. For those two rules are to be followed they are: Rule 1.customer is always right. and helps us to acquire social skills by being in constant interaction with the professionals of other organizations. provides exposure to technical skills. deadlines. This will help to gain a deeper understanding of the work. which will be useful in enhancing in career prospects.if not. It helps us in developing a network.It provides an opportunity for us to satisfy our inquisitiveness about corporate. ABSTRACT In the corporate world of today customer is considered as the king and is placed at the top and if you have won the customer then the gold coin is in your pocket. it helps to develop the qualities of a Manager by involving teamwork. Rule 2. goal orientation and managing interpersonal relationships and by creating awareness about strengths and weaknesses in the work environment. pressures etc. refer to rule 1. culture. Thus. of an organization.
Relationship management plays a vital role while dealing with financial instruments. The project also is an endeavor towards unearthing the psyche of the end-users of these financial products For completion of this respective task. building long term relationship is very important. In business. personal interaction with the executives was done so as to get the first hand information. .If these two rules are followed then the customers will always be happy and would be having a better relation with the market.
TABLE OF CONTENTS SERIAL NO.1 5.3 5.2 5. PARTICULARS PAGE NO. 4 5 7 8 10 14 16 20 23 1 2 3 4 5 5.4 COMPANY PROFILE INTRODUCTION TO MUTUAL FUNS V/S OTHER INVESTMENT OPTIONS MUTUAL FUNS V/S OTHER INVESTMENT OPTIONS PEOPLE PERCEPTION ABOUT MUTUAL FUNDS SUGGESTIONS AND RECOMMENDATIONS QUESTIONAIRRE RETURNS OF VARIOUS MUTUAL FUNDS BIBLIOGRAPHY INVESTMENT CHECK STYLE .
The Citi Venture holds a majority stake in the company. It is the retail broking arm of the Mumbai Sharekhan offers its customers a wide range of equity related services including trade execution on BSE. the site has customers. 2000 . Cambridge Technologies.www. The firm’s online trading and investment site . are net- contemporaries because of its steadfast dedication to offering customers best technology and superior market information. The objective has been make informed decisions based executable On A pril 17. Vignette. a registered base of over 2 lacs facility to retail customers across the country. investment advice etc. which has over eight decades of experience SSKI Group which is running -based in the stock broking business. The site gives access to language and high quality research. investor friendly over 5 Lacs .sharekhan. This was for the first time that a net based trading station of this caliber was offered to the traders. In the last six months SpeedTrade has become a net. Spider Software Pvt Ltd. Sharekhan’s ground network includes over 700+ Shareshops in 130+ cities in India. successfully since 1922 in the country. While . 2002 Sharekhan launched and to simplify the process of investing in stocks. online trading. Sharekhan has always believed in investing in technology to build its business. depository services.com . Nexgenix. Sharekhan alone accounts for 27 per cent o f the volumes traded online The content -rich and research oriented portal has stood out among its -of-breed to let customers . Verisign Financial Technologies India Ltd. de facto standard for the Day Trading community over the . like Sun Microsystems . The company has used some of the best -known names in the IT industry. HSBC.SHAREKHAN BACKGROUND Sharekhan is one of the leading retail brokerage of SSKI Group. to build its trading engine and content. The number of trading members superior content and transaction -free. Derivatives. Known for its jargon currently stands at online trading currently accounts for just over 2 per cent of the daily trading in stocks in India. Microsoft. Speed Trade and Trade Tiger application that emulates the broker terminals along with host of other information relevant to the Day Traders. NSE. Oracle.was launched on Feb 8.
It has 60 institutional clients spread over India. 4.Portfolio Management Service. Presently SSKI is one of the leading players in institutional broking and corporate finance activities. 5.Mutual Fund Advisory and Distribution. 2. HSBC. Some of the clients include BPL Cellular Holding. The Corporate Finance section has a list of very prestigious clients and has many ‘firsts’ to its credit. with a daily turnover of over US$ 2 million. Far East. Hutchison. the SSKI group ventured into institutional broking and corporate finance 18 years ago. Foreign Institutional Investors generate about 65% of the organization’s revenue.Equity Trading Platform (Online/Offline). in terms of the size of deal. UK and US. sector tapped etc. Planetasia. SSKI’s institutional broking arm accounts for 7% of the market for Foreign Institutional portfolio investment and 5% of all Domestic Institutional portfolio investment in the country. The group has placed over US$ 5 billion in private equity deals. SSKI holds a sizeable portion of the market in each of these segments.The Citi Venture holds a majority stake in the company. . 3. With a legacy of more than 80 years in the stock markets. Intel & Carlyle are the other investors. PRODUCTS OFFERED BY SHAREKHAN 1. Gujarat Pipavav. and Shopper’s Stop.Insurance Distribution.Commodities Trading Platform (Online/Offline). Essar.
You will get access to our powerful online trading tools that will help you take complete control over your investment in shares.com) as well as over the Voice Tool. . Knowledge In a business where the right information at the right time can translate into direct profits. www. EDUCATION. You will also get a useful set of knowledge-based tools that will empower you to take informed decisions. Ever since it launched Sharekhan as its retail broking division in February 2000. These services are accessible through our centers across the country (Over 650 locations in 150 cities) over the Internet (through the website www.REASONS TO CHOOSE SHAREKHAN LIMITED Experience SSKI has more than eight decades of trust and credibility in the Indian stock market. you get access to a wide range of information on our content-rich portal. it has been providing institutional-level research and broking services to individual investors. SSKI won the 'India's best broking house for 2004' award. In the Asia Money broker's poll held recently. Accessibility Sharekhan provides ADVICE. TOOLS AND EXECUTION services for investors.sharekhan.sharekhan. Technology With our online trading account you can buy and sell shares in an instant from any PC with an internet connection.com.
com. We have a dedicated call-center to provide this service via a Toll Free Number 1800-22-7500 & 39707500 from anywhere in India. billing. Our customer service can be contracted via a toll-free number. email or live chat on www. Customer Service Our customer service team will assist you for any help that you need relating to transactions. online chat. Investment Advice Sharekhan has dedicated research teams of more than 30 people for fundamental and technical research. Our analysts constantly track the pulse of the market and provide timely investment advice to you in the form of daily research emails.sharekhan. printed reports and SMS on your mobile phone. demat and other queries.Convenience One can call our Dial-N-Trade number to get investment advice and execute your transactions. .
4. Features 1. Automated Portfolio to keep track of the value of your actual purchases.sharekhan. Buy or sell even single share 13. 24x7 Voice Tool acess to your trading account.com and is suitable for the retail investor who is risk-averse and hence prefers to invest in stocks or who do not trade too frequently. Instant Cash Tranfer 3. Free Depository A/c 2. 6. 7. 8. Live Chat facility with Relationship Manager onYahoo Messenger 9. Secure Order by Voice Tool Dial-n-Trade. 12.com . Personalised Price and Account Alerts delivered instantly to your Mobile Phone & E-mail address. 5. We offer you the following products:- CLASSIC ACCOUNT This is an User Friendly Product which allows the client to trade through website www. On-line Customer Service via Web Chat. Enjoy Automated Portfolio. Special Personal Inbox for order and trade confirmations. Online trading account for investing in Equity and Derivatives via www. 11.sharekhan. 10.Benefits 1. Multiple Bank Option. Anytime Ordering.
tic-by-tic charts. Technical Studies.2. Instant order Execution and Confirmation. 9. 3. Integration of On-line trading. 4. NSE F&O & BSE. 8. 9. . 8. 6. 10. SPEEDTRADE SPEEDTRADE is an internet-based software application. Instant order and trade confirmation by E-mail. Competative transaction charges. Live market debts. Market summary (Cost traded scrip. Instant cash transfer facility against purchase & sale of shares. Features 1. 5. Single screen interface for Cash and derivatives and more.) 7. Multiple Charting. 4. 3. 10. 2. Live Terminal and Single terminal for NSE Cash. Single screen trading terminal for NSE Cash. Alerts and reminders. 7. Real-time streaming quotes. Streaming Quotes (Cash & Derivatives). Hot keys similar to broakers terminal. Back-up facility to place trades on Direct Phone lines. Saving Bank and Demat Account. highest calue etc. 5. that enables you to buy and sell in an instant. NSE F&O & BSE. 6. Personlized market watch. It is ideal for active traders and jobbers who transact frequently during day’s session to capitalise on intra-day price movement. Provision to enter price trigger and view the same online in market watch.
the CLASSIC and SPEEDTRADE ACCOUNT also gives you our Dial-n-trade serives. With this service. All you need is a Sharekhan account and a GPRS enabled Mobile handset.! Sharekhan had introduced ShareMobile. 2000 Prepaid Speedtrade Account : . So when you place a buy-sell order on ShareMobile. Relationship Managers are always available on Offic Phone and Mobile to Resolve your querries. ShareMobile* Now Track the Market Anywhere. Sharekhan's new service that lets you to catch the pulse of the stock market on your mobile phone. our Dial-n-Trade executive will call you back and place the order on your behalf. * As per SEBI regulations.Rs. Beside this. Pay Advance Brokerage on your Account and enjoy uniterrupted trading in your Account.. A mobile based software where you can watch Stock Prices. 6000 . all you have to do is dial our dedicated phone lines 1-800-22-7500.DIAL-N-TRADE Along with enabling access for your trade online. Reasearch & Advice and Trading Calls live on the Mobile. Prepaid Classic Account : .Rs. This service is free and has NO extra fees. Stay updated with ShareMobile. Beside this. get great discount (upto 50%) on Brokerage. buying-selling shares through a mobile phone is not yet permitted. PREPAID Account Now you can buy Prepaid Account of Sharekhan. Intra Day Charts. 3970-7500.
PRINCIPAL. Birla. DSP Merrill Lynch. SBI. . Mutual Fund Online You can apply to Mutual Funds of Reliance. Apply for the IPO and Sit Back & Relax. ICICI Prudential. Sundaram.IPO ON-LINE You can apply to all the forthcoming IPO online hasselfree. paperless and time saving. TATA with Sharekhan hasselfree. HDFC. paperless and time saving. Franklin Templeton Investments. Simply allocate fund to IPO Account.
Now you can have a Zero Balance Saving Account with ICICI Bank after your demat Account creation with Sharekhan. NIL Speed Trade Account Rs. 750/= Rs.0.10 %** Delivery . 1000/= Rs.10%** Delivery .50%** Classic Account Rs.Zero Balance ICICI Saving Account * Sharekhan had tied-up with ICICI bank for Zero Balance Account for Sharekhan’s Clients. 500/= p. ** Condition Apply.0.m. Intra-day . *** Taxes as per govt. 500/= . • Subject to Approval of Account CHARGE STRUCTURE Fee Structrue for General Individuals : Charge Account Opening Monthly Commitment Broakerage Intra-day – 0.50 %** * Refundable in case the broakerage is more than Rs.0.
Monthly Recurring Fee: Rs 500/. 500/.per month. Trading through website Live terminal. NIL Rs. 500/. Both Cash & F&O.will be given only to customers who have contributed more than Rs. from second celender year onward PRODUCT DETAILS Online Trading: (a) CLASSIC ACCOUNT: A/C Opening charges: Rs.300 from 2nd year onwards (Annual Maintenance charges). This access charges will be debited to all the new customers signed up after Sept 15. 2004.this credit of Rs. 1000/.as brokerage the access charges of Rs. Brokerage : . 300/= p.Both Cash & F&O.Depository Charges Account Opening Charges Annual Maintanance Charges Rs. No brokerage commitment required. 500/. NSE and BSE online. 500/. Please note . And at the end of the month if the client has contributed more than Rs. (b) SPEED TRADE : Account Opening Fee: Rs. NIL Special Discount in A/c Opening Charges Rs. NIL first year Rs.a. which is very nominal if you consider the benefits of the product.as brokerage during the months.will be credited back to the clients account.
Union Bank of India. Centurion Bank of Punjab. Oriental Bank of Commerce.7 TIMES (ON MARGIN MONEY) Online IPO's available We have tie up with Twelve Banks for online fund transfering i.0. Bank of India. Yes Bank.05 % Plus Taxes for Each leg of Intra-day trade 0. FOLLOWING DOCUMENTS REQUIRED TO OPEN AN A/c WITH SHAREKHAN LTD. HDFC.e.50 % Plus Taxes for trades resulting in delivery EXPOSURE : 4 TO 6. CITI. Bank of Punjab and UTI bank for online money transfer. IDBI.: Photo ID Proof Residence Proof (Permanent) · Passport (valid) · Pan Card (Mandetory) · Passport · Driving Licence · Telephone Bill (latest) · Voter's ID · Electricity Bill (lates) · MAPIN UIN Card · Ration Card · Flat Maintanance Bill (latest) · Insurance Policy (latest) · Leave-Licence/Purchase Agreement · Voter's ID · Driving Licence (valid) · Bank Statement (latest) . INDUSIND. ICICI.
) Colour Photographs (Passport size & front face) For Classic Account:. 1000/.in the favour of M/s Sharekhan Limited THANKS So we look forward to your joining in the Sharekhan family and benefitting from the evergreen posibilities of the stock market.2 (Two no. .1 cancelled cheque For Speed Trade:.1 Account Opening Cheque of Rs.
Research Methodology: Convenience research methodology is used and chose samples on random sampling basis. . From the data collected. & also used a questionnaire to collect date from people. Data Analysis: Analysis is done by using various statistical tools such as graphs. I have only studied people perception of Chandigarh people. etc. Scope: Scope of my study in Chandigarh only. averages. Suggestions will be given that how to invest in mutual funds. My objective is to Study the people perception about the mutual fund To study mutual funds in comparison to other investment options. analysis & conclusion have been made.SYNOPSIS Title: “Mutual fund – As an investment Option”. Objective: Experts generally says that mutual says that mutual fund is the best investment option. charts.
invests it. As per Mutual Fund Book. Meaning of Mutual Funds A ‘mutual Fund’ is an investment vehicle for investors who pool their savings for investing in diversified portfolio of securities with the aim of attractive yields and appreciation in their value. the middle class had an ideological bias against having too much wealth. Money was seen only as a means for meeting basic needs.” . attempts to make it grow and agrees to pay the shareholders cash on demand for the current value of his investment. “ A Mutual Fund is a financial service organization that received money from shareholders. published by Investment Company Institute of U.INTRODUCTION TO MUTUAL FUNDS Introduction to mutual funds For decades.. A mutual fund is a trust that pools together the savings of a number of investors who share a common financial goal. earns returns on it. The risk and low returns provided by other investment schemes accompanied by high inflation and decreasing interest rates gave birth to Mutual Funds.S.
These objectives guide the manager to plan the portfolio of the schemes. Through diversification in portfolio. investors gain access to the expertise of the qualified and experienced fund managers. a mutual fund is a special type of institution. The concepts is explained in Fig. Professional fund managers take pool of money and invest in a variety of securities selected from a broad range of industries. Through pooling the financial resources of thousand of investors. Individuals are free from the time consuming mechanics involved in the direct purchase of securities in their portfolio. On the other hand investors are guided by these objectives to select most suitable scheme. The investment objective set forth by the fund is important both to managers and investors. including money market instruments. 1 Investors . a trust or an investment company which acts as an investment intermediary and channelizes the savings or large number of people to the corporate securities in such a way that investors get steady returns. A scheme is most suitable whose objectives are compatible to investor’s targets. They make decision when to buy. Pooling is the key to mutual fund investing. each with a different amount to invest. otherwise available only to institutions. when to sell and when to hold based on their extensive research and experience. 1996 defines ‘Mutual Funds’ as “ a fund established in the form of a trust to raise monies through the sale of units to the public or section the public under one or more schemes for investing in securities. mutual funds spread out inherent risks in securities and can earn a more stable return.” So.Securities and Exchange Board of India (Mutual Funds) Regulations. wide diversification of ownership in securities market and a variety of services. capital appreciation and a low risk. They select securities that best meet their funds investment objectives.
they can be classified A) According to Scheme of Operation B) According to Portfolio C) According to Location D) Other Types ACCORDING TO SCHEME OF OPERATION: According to scheme of Operation.Passed back to Pool their money with Returns Fund Manager Generates invest in Securities Source: Making Mutual Funds work for you AMFI CLASSIFICATION OF MUTUAL FUNDS There are various types of Mutual Funds. Broadly. Mutual Funds can be classified as: 1) Open-Ended Funds: Open Ended Funded means a scheme of mutual funds which .
The units of the scheme are also traded in the stock exchange. stock exchanges. These days open ended schemes are more popular. which are disclosed in the offer document. 3) Interval Funds: scheme is a scheme of mutual funds which is kept open for specific interval and after that it operates as close scheme. ACCORING TO PORTFOLIO: Mutual Fund can also be classified according to portfolio or the objective of the fund. 2) Close-Ended Funds: A close ended fund means any scheme of mutual fund in which the period of maturity of the scheme is specified . Some of these funds are: 1) Equity funds: These funds mainly invest in shares of the companies. The corpus of the close-ended scheme is fixed and an investor can subscribe directly to the scheme only at the time of initial issue. The scheme is open for sale or repurchase at fixed predetermined interval. These schemes are listed at the secondary market i. The price in the secondary market is determined on the bases of demand & supply. The open-ended funds provide better liquidity to the investor. These schemes do not have a fixed maturity and entry to the funds is always open to investors having an option to get their holdings redeemed at any time. The repurchase rates are based upon the Net Asses Value (NAV) of the fund.e. The investments may vary from ‘blue-chip’ companies to newly established companies.offers unit of ale without specifying any duration for redemption. Thus it combines the features of both ended & close-ended funds. They undertake risk associated with investment in equity shares of .
Balanced Funds ensure both appreciation in stock as well as regular return in the shape of interest & dividend. Come times bonds are available in the market at lower than the face value. The leverage is . 4) Sectoral Funds: These funds invest in a particular type of securities. Any investor wanting to invest in a particular security will prefer a fund dealing in such securities. 5) Leverage Funds: The primary aim of leverage funds is to maximize capital appreciation. 3) Balanced Funds: Balanced funds spend both on common stock and preferred stock. 2) Debt Funds: These funds employee their resources in bonds.the cost of raising loaned funds and the gain form holding shares is the profit of the leveraged fund. Some part of the funds is pent on buying equity which other part is used in acquiring interest bearing debentures and preference shares ensuring certain amount of dividend. The funds may specialize in securities of companies dealing in a particular product or firms in a particular industry. the net income on these bonds goes higher because interest will be received on the face value of the bond. Some funds generally spend half the funds on equity stock while the other half is pent on preferred stock. These funds may use even borrowed funds for buying speculative stocks which ensures a profit in the future/. Equity funds may have further sub-divisions such as income fund & growth fund.companies. The investors have advantages of regular income and appreciation in value of securities. These funds are amore risky. These investments ensure fixed and regular income. These funds are also known as ‘ Conservative Funds’ or’ Income & Growth Funds’.
. 7) Money. ACCORDING TO LOCATION: Mutual on the basis of location form where they mobilize funds. as Fund can also be classified 1) Domestic Funds: These are the funds which mobilizes savings of people with in the country where investments are made. call and notice money. commercial paper. These instruments include treasury bills. These schemes are also known as Equity linked Saving Schemes (ELSS). 6) Taxation Funds: Mutual Funds may be designed to suit the taxpayers.used to the benefit of the shareholders. dated Government Securities with an unexpired maturity of upto one year. commercial bills accepted by banks and certificate of deposits. The Amount collected by these funds is used to acquire shares and interest bearing securities. Market Mutual Funds: Money Market Mutual Fund means a scheme of a Mutual Fund which has been setup with the objective of investing exclusively in money market instruments. The investors are required to keep the money with the fund for a period of 3 years. The contributors to such funds get some concession in income tax. Leverage funds indulge in speculative activities to earn more and more profits.
These funds attract foreign savings for investments in India. which mutual fund can afford because of large . WHY MUTUAL FUNDS? A mutual fund is a special type of institution which acts as an investment intermediary & Channelizes the savings of large number of the people in the corporate securities in such a way that investors get steady returns. Other Types: There can be some other types of Mutual Fund also. Mutual funds are becoming very popular world wide because of the following important advantages: 1) Diversification: A proven principle of sound investment is that of diversification which is the idea of not putting all your eggs in one basket. By investing in many companies. “ Hub & Spoke funds’ which are basically fund of funds invests in other mutual funds. capital appreciation and allow risk. Mutual Funds have cushioned themselves from unexpected drop in value of some shares. such as ‘Loan Funds’ and Non-Loan Funds’ based on the expense / fees to be charged. 2) Expert Supervision & Management: Other advantage of Mutual Fund is of expert supervision and management.2) Off-Shore Funds: Off-Shore mutual funds are those funds which raise or mobilize funds in those countries other than where investments are to be made.
Thus a small investor also gets the benefits of large scale economies and low operating costs. . The funds can be professionally employed through the mutual funds ensuring good returns. etc. fees. According to the regulation of SEBI. 7) Flexibility: Mutual Funds provide flexible investment plans to its subscriber such as regular investment plans. 6) Low Operating Costs: Mutual Funds Have large investible funds at their disposal and thus can avail economies of large scale. 3) Liquidity: A peculiar advantage of a mutual fund is that investments made in its schemes can be converted back into cash promptly without heavy expenditure on brokerage. This reduces their operating costs by way of brokerage. Thus. commission. a mutual fund in India is required to ensure liquidity. etc. 5) Tax Advantage: There are certain schemes of mutual funds which provide tax advantage under the Income Tax Act liability of an investor is also reduced when he invests in these schemes of the mutual funds.resources at their disposal. regular withdrawal plans and dividend reinvestment plans etc. Fund Managers can analyze the performance and prospects of various companies and take better decisions in making investments. the risk factor of the investor is reduced. an investor can invest or withdraw funds according to his own requirements. 4) Reduced risk: As mutual fund invests in large number of companies and is managed professionally. delays.
In addition. SEBI ( Mutual Fund) Regulation Act. investment in a mutual fund can fall in value. provide better protection to the investors. 10) Transparency: You will always have access to up-to-date information on the value of your investment in addition to the complete portfolio of investments.8) Higher Returns: Mutual funds are expected to provide higher returns to the investors as compared to direct investment because of professional management. DISADVANTAGES: Mutual funds are good investment vehicles to navigate the complex & unpredictable world of investments. economies of scale. unlike bank deposits. 1996. mutual funds are not insured or guaranteed by any government body. which have replaced the regulations of 1993. However. For instance. reduced risks. impart a great degree of flexibility and facilitate completion. etc. the proportion allocated to different assets and the fund managers investment strategy. even mutual funds have some inherent drawbacks. . 9) Investor Protection: Mutual Funds are regulated and monitored by SEBI. These are: 1) No assured returns and no protection of capital: Mutual funds do not offer assured returns and carry risk.
say. the lack of investment focus also means you gain less than if you had invested directly in a single security. and more investment trusts were launched. A direct investment in the stock would appreciate by 50 percent. with verbose and quicky names that. . is recognized as the first mutual fund. a Dutch merchant invited subscriptions from investors to set up an investment trust by the name of Eendragt Maakt Magt (translated) into English. will see only a 5 per cent appreciation. By various historical accounts. Its success caught on. read. ‘Profitable and Prudent’ or ‘Small Matters Grow by Consent’.2) Restrictive Gains: Diversification helps. formed on 21 March 1924 by three Boston financial executives. when translated. Reliance appreciated 50 percent. History of Mutual Funds Although the Massachussets Investors Trust. The Foreign and Colonial government Trust. formed in London in 1868. the ideas of pooling money for investment purposes is not a twentieth century phenomenon. if risk minimization is objective. In 1774. For example. which had invested 10 percent of its corpus in Reliance. it means ‘ Unity creates Strength’. investment entities that resembled what we know as mutual funds had been around in Europe since the eighteenth century. promised “ the investor of modest means and same advantages as the large capitalists by spreading the investment over a number of stocks”. The formal origin of Mutual Funds can be traced to Belgium where Society ‘ Generale de Belgique’ was established in 1822 as an investment company to finance investment in national industries with high associated risks. But your investment in the mutual fund. However. with the objective of diversification at low cost to investors.
There was an initial euphoria among American investors over a new investment vehicle. enactment of legislation – for the mutual fund juggernaut to start rolling again More and more financial entities got into the act. in 1924. 1992 The Harshad Mehta fuelled bull market arouses middle-class interest in shares and mutual funds.The Birth of the Massachusetts Investors Trust in the U. PSU banks and insurers allowed to float mutual funds. but much of this died with the onset of the Great Depression in 1929. started a chain of events that would bring mutual funds to American homes for good.. Private sector and foreign players allowed. It took a series of confidence building measures – the birth of a powerful market regulator. UTI Mastershare India’s first true ‘mutual fund’ scheme. The Indian Time line 1963 1964 1986 1987 first off the blocks. SEBI set up to regulate industry. The schemes and total assets keeps on increasing from year to year.S. State Bank of India . UTI launches US-64. laying down of rules for all industry participants. launched. 1993 fund house to start operations. Kothari Pioneer first private UTI is India’s first mutual fund.
1998 1999 UTI Master Index Fund is the country’s first index fund. which form the basis of the most current laws. 1. US-64 scam leads to UTI overhaul. . comes under SEBI purview. Mutual fund distributors banned form giving commissions to investors.1994 1996 Morgan Stanley is the first foreign player. 2004 33 Mutual Funds exits. 2003 AMFI certification made compulsory for new agents. Loads on schemes increased.000 crore.00. UTI bifurcated. floating rate funds and foreign debt funds debut. SEBI’s mutual fund rules and regulation. came into force. 2000 2001 2002 The industry assets under management crosses Rs. fund of funds launched. The takeover of 20 Century AMC by Zurich Mutual Fund is the first acquisition in the mutual fund industry.
The objective of average Indian changed from ‘finding a good job’ to become a crorepati. every individual is trying to accumulate lots and lots of wealth.Mutual Funds Vs. systematic investments and taking a long term approach towards investments. Other Investment Options In today’s world. But to become a crorepati one has to plan his investments carefully. . The basic step for creating wealth revolve around the concept of asset allocation.
Inflation Protection 5. Etc. Study of some investment options on the basis of following parameters: 1.These days their are many investment option available like Post Office Schemes. Share. Risk 2. Tax Implications Various investment options : <> Open Ended Mutual Funds <> Close Ended Mutual Funds <> Shares <> Bank Fixed Deposits <> Bonds <> Public Providend Fund <> National Saving Certificates <> Post Office Monthly Income Scheme <> Post Office Time Deposits . Liquidity 4. Before investing one has to be very clear about his financial goals and pros & cons of each investment option. Bank Fixed Deposits. Option of Borrowing 6. Mutual Funds. Returns 3.
Fig 2 shows risk and return relationship of various mutual funds. we can go by saying “higher the risk. Equity Sectoral Funds 3. or NAV-linked prices.OPEN-ENDED MUTUAL FUNDS An open-ended mutual fund is the one whose units can be freely sold and repurchased by the investors. Open Ended Mutual Funds are of many types and the returns form them are also different: The major types being: 1. person who can take risk can go for equity funds while who don’t take risks goes for debt fund. For Open-ended mutual fund. Equity Diversified Funds 2. schemes with higher risk also have potential to provide higher returns.” There is no guarantee of returns as NAV of mutual funds depends on market. it is stated that ‘Mutual Funds are subject to market risk’. Fund of Funds Open-ended mutual funds are indeed suitable for an appreciation in investment.e. Choice of mutual funds can vary depending on one’s appetite to take risks e. . Gilt Funds 7. Balanced Funds 5. Such funds are not listed on bourses since the Asset Management Companies (AMCs) provide the facility for buyback of units form unit-holders either at the NAV. Monthly Income Plans 6. There is a direct relationship between risk and return i. Debt Funds 8.g. Equity Tax Relief Funds (ELSS) 4. higher the return. Therefore.
Equity Sectoral Fund Equity Diversified Fund Equity Tax Relief Fund Balanced Funds RISK Monthly Income Plans Gilt funds Debt Funds RETURN Fig. over the long term. However. LIQUIDITY: Instant Liquidity is the USP of open ended funds. A majority of open-ended mutual funds allow switching among the various funds of the same AMC without any load.2 Returns given by various mutual funds schemes are shown in annexure 2. But funds with an equity portfolio provide better protection than debt funds because equities. You generally get your redemption requests processed promptly. Units of openended mutual funds can be redeemed on weekdays (Monday-Friday) at NAV or at NAV plus a small exit load. in case of Equity Linked Savings Schemes (ELSS) there is a lock in period of three years. INFLATION PROTECTION: . and received the cheque in 3-4 days. provide the . There is a concept of Contingent Deferred Sales Charge where the exit load is charged only if the redemption takes place before a specified time period or above a specified amount.Open – ended Mutual Funds provide a fair amount of protection against inflation.
5 per cent dividend distribution tax. TAX BENEFITS:.Divided paid by mutual funds is fully tax-exempt at the hands of the investors. realization will attract long-term capital gains tax of 20 percent plus surcharge after indexing for inflation. or both by making an equal allocation of the corpus in debt and equity instruments. or at a flat rate of 10 percent.000 per year. and a fixed tenure (3. one can cave tax by investing in Equity-Linked Savings Scheme (ELSS) under Section 88 of the Income Tax Act. These funds have various objectives: generating steady income by investing in debt instruments. 10 or 15 years). according to which 20 per cent of the amount invested in ELSS can be deducted from tax liability subject to a maximum investment of Rs. CLOSE – ENDED MUTUAL FUND Closed-ended mutual funds have a fixed umber of units. If redeemed before a year it will be termed as short term capital gain and taxed along with your other income. after which their units are redeemed or they are made open-ended. although. . Different banks have their own criteria on which they approve the loans. On redemption of an unit held for more than a year. Moreover. OPTION OF BORROWING: . However. 5. long-term capital gains are taxed after indexing for inflation.There are some banks that offer loans against mutual funds. 1961. debt funds have to pay a 12. capital appreciation by investing in equities. 10.best means of beating inflation.
a mutual fund is more influenced by the value of its own portfolio than any other factor. LIQUIDITY: The Indian stock markets lack depth and. Closed-ended debt funds. However. Besides listing. the NAV of an equity fund rises and falls at a much faster pace. TAX IMPLICATIONS: While divided paid on open-ended mutual funds is fully tax-exempt. some mutual funds also offer repurchase option in there closed-ended funds at an NAV-linked price after a certain lock-in period. principal is not assured. One cannot be completely sure of getting your full investment back. closed-ended funds can be very volatile or be fairly stable. realization will attract long-term . they are well suited for an increase in your investment. on redemption or sale of units. These funds declare dividend annually or semi-annually. the closed-ended mutual funds are illiquid where they are listed and trade with heavy discount to their NAVs. One the other hand. Hence. there are few listed closed-ended fund that may be acceptable by banks. How ever. thus. Depending on their investment objective and under laying portfolio. OPTION OF BORROWING: Closed end funds are treated as shares for the purpose of raising loans in which the market value of the fund is considered. Also.Since units of closed-ended funds rise and fall in the market like any other stock. with their conservative investment approach are best suited for income. equity provided healthy appreciation in NAV in the long term. an equity closed-ended fund is better equipped to guard investment against inflation in the long run. Units of an equity fund are more frequently traded than a debt fund. INFLATION PROTECTION: with stocks being better than bonds in providing returns on a long term basis.
Three golden rules for investment in equity. 1961. . SHARES Shares. So. A company’s ownership is determined on the basis of its shareholding. Shares are. shares of some companies may not witness any trading for many days altogether. But shares are risky – share prices are affected by factors beyond anyone’s control and hence one needs to have an appetite for that kind of risk. or at a flat rate of 10 per cent . you will not be able to sell your shares. Shares do generate income form dividend as well as capital appreciation and have a strong potential to increase value of investment. they’re also the riskiest investment option. they offer the highest returns. LIQUIDITY: Shares are the most liquid financial instruments as long as there is a buyer for shares on the stock exchange. according to which 20 percent of the amount invested in ELSS-which have a lock-in period of 3 years-can be deducted from your tax liability subject to a maximum investment of Rs 10. you can save tax by investing in Equity-Linked Savings Scheme (ELSS) under Section 88 of the Income Tax Act. However. are the basic building blocks of a company.000 per year. Shares are meant to be long-term investments. the most glamorous investment option for the simple reason that. by far. In such a case..Diversity. Predictably. However. Most shares belonging to the A Group on the BSE are among the most liquid. also called scrips. the liquidity factor varies to a large extent.capital gains tax of 20-per cent –plus surcharge after indexing for inflation. Average out & most importantly stay invested. over the long term.
The rate is 20 per cent with indexation benefit. or Rural Electrification Corporation (REC). When your sell your shares at a profit. or a flat 10 percent. They are one the most common savings . The interest can be calculated monthly. and varies form bank to bank. The banks have their list of approved shares that they accept as a security. you are entitled to receive the principle amount as well as the interest earned at the prespecified rate during that period. it is called a Bank Fixed Deposit (FD). shares of well known and respectable companies are accepted a security. However. depending on the maturity period of the FD and the amount invested. 2003. Alternatively. half-yearly. NABARD. The rate of interest for Bank Fixed Deposits varies between 4 and 6 per cent. it attracts a capital gains tax. BANK FIXED DEPOSITS When you deposit a certain sum in a bank with a fixed rate of interest and a specified time period. will not be subject to long-term capital gains tax. quarterly. Generally. However. capital gains are.INFLATION PROTECTION: Shares do provide for some protection although share prices have no relation to inflation. they can also be invested in capital gains bonds of the NHAI. it attracts long-term capital gains tax. If the duration is more than one year. The price may crash or rise far beyond the inflation rate. and are included in gross taxable income. listed shares acquired after March 1. At maturity. TAX IMPLICATION: While dividend is not taxable at the hands of the investor. OPTION OF BORROWING: You can pledge shares with a bank for raising a loan. capital gains tax can be saved if the gains are invested in an IPO of a company with a lock-in period of 1 year. Gains realised within one year of purchase of shares come under the shortterm capital gains tax. or annually.
Some services offered are withdrawal through cheques on maturity. and account for a substantial portion of an average investor’s savings. Since capital appreciation in any investment option depending on the safety of that option. the increase in investment is modest. The facilities vary form bank to bank. which frames regulations keeping in mind the interest of the investors.1 While a Bank FD does provide for an increase in your initial investment.) effective 9 Aug. and banks being among the safest avenues.75 5. LIQUIDITY: Bank FDs are liquid to the extent that premature withdrawal of a bank FD is allowed.00 5.a.75 4.25 15 days to 45 days 46 days to 179 days 180 days to less than 1 year 1 year to less than 3 years 3 years & above Source: State Bank of India Fig. . Fig 2. and overdraft facility etc.2. that involves a loss of interest. 04 3.avenue. However. it may be at a lower rate than other comparable fixed-return instruments. Bank Deposits are the safest investment option after post-office schemes since the banks function according to the parameters set by the Reserve Bank of India (RBI). break deposit through premature withdrawal.1 shows the return on FD’s INTEREST RATES PAYABLE ON DEPOSITS Duration Interest Rates ( % p.25 4.
loans upto 90 per cent of the deposit amount can be taken form the bank against fixed deposit receipts. BONDS Bond is a loan given by the buyers to the issuer of the instrument. 1961. which means that interest income upto Rs. b) NAABARD/ NHAI/ REC Bonds under Section 54EC of Income Tax Act. TAX IMPLICATIONS: Interest income form a Bank FD qualifies for exemption under section 80L. OPTION OF BORROWING: Yes. Over and above the scheduled interest payments as and when applicable. 1961. Bonds can be issued by companies.exempt. in some cases. this is the main problem with Bank FDs as any return has to be calculated keeping inflation in mind. In fact. banks cannot guard against inflation. c) RBI Tax Relief Bonds . Bonds can be broadly classified into (a) Tax-Saving Bonds (b) Regular Income Bonds Tax-Savings Bonds offer tax exemption up to a specified amount of investment.000 is tax. financial institutions.INFLATION PROTECTION: With a fixed return. Examples are: a) ICICI Infrastructure Bonds under Section 88 of the Income Tax Act. which is lower than other assured return options. or even the government. the holder of a bond is entitled to received the par value of the instrument at the specified maturity date. 12.
Similarly. Some bonds are also available in the secondary market. a company issues a bond at an interest rate of 12 per cent . If the bond is listed. but bonds do not offer any protection if prices are rising.Bonds are usually not suitable for an increase in your investment. The company can now exercise the Call option and recall its debt obligation provided it has declared so in the offer document. the real rate of return remains high. This is because they offer a pre-determined rate of interest. However. This is called capital appreciation. Selling in the debt market is an obvious option. hereby facilitating an increase in your investment. in the rare situation where an investor buys bonds at a lower price just before a decline in interest rates. after a specified period (say. and sell back the bond to the issuer. In times of falling inflation. three years). It is common practice for FIs and corporates to raise funds for asset financing or capital expenditure through primary bond issues. The duration of a bond issue usually varies between 5 and 7 years. For instance. the investor has the option to approach the issuing entity. the resultant drop in rates leads to an increase in the price of the bond. LIQUIDITY: Investors can subscribe to primary issues of Corporates and Financial Institutions (FIs).’ Under the Put option. There is low risk involved in bonds. Some issues also offer what is known as ‘Put and Call option. the company has the right to recall its debt obligation after a particular time frame. an investor can exercise his Put option if interest rates have moved up and there are better options available in the market. In the Call option. it finds it can raise the same amount at 10 per cent. it can be sold in the secondary debt market. After 2 years. INFLATION PROTECTION: This depends on the rate of inflation. .
and is considered completely risk-free. However. The PPF Scheme has the backing of the GOI. Your interest income is assured. any capital appreciation is subject to the Capital Gains Tax. Interest income form bonds. Although factors like inflation and interest rate fluctuations may determine whether you opt for a PPF . borrowings depend on the credit rating of the instrument. 3. Normal maturity period is 15 years from the close of the financial year in which the initial subscription was made. Since the PPF Scheme is backed by the GOI. You may consider this option if you are not looking for short-term liquidity or regular income. 12000.free.000 exclusively for interest from government securities. plus Rs. For instance. It is mainly suitable for long-term saving and for availing of tax incentives. However. are exempt under section 80 L of the Income tax Act.OPTION OF BORROWING: One can borrow against bonds by pledging the same with a bank. This lump-sum amount that you received on maturity ( at the end of 15 year) is completely tax. and this is guaranteed by the Government of India (GOI). Your money grows @ 8 per cent per annum. PUBLIC PROVIDEND FUND A public Providend Fund (PPF) is a long-term savings plan with powerful tax benefits. A PPF account is not aimed at generating capital appreciation since it has no secondary market. 1961. TAX IMPLICATIONS: There are specific tax saving bonds in the market that offer various concessions and tax-breaks. You can safety put your money in a PPF Scheme as it is risk-free. it is easier to borrow against government bonds than against bonds issued by a company with a low credit rating. Tax free bonds offer tax relief under Section 88 of the Income Tax Act. if you sell bonds in the secondary market. upto a limit of Rs.
Account or not. and are calculated in such manner as in specified in the scheme. 50. and Rs. . i. 15 complete financial years.e. But if the interest rates will be applicable to your account. there are no penalties for availing of the withdrawal facility. you have the facility of one withdrawal every year. interest on loan is et at 6 per cent per annum.000 (50 per cent of Rs. You will continue to earn interest at the specified rate on your balance in the PPF Account after availing of the loan facility. Subsequent interest calculations will be on the new rate of interest. LIQUIDITY: PPF certainly lacks liquidity. This depends on the prevailing rate of interest on your PPF at any given time. For instance. Importantly. Amount of such loans will not exceed 25 per cent of the amount that stood to your credit at the end of the second year immediately preceding the year in which the loan is applied for. the decision to invest in a PPF account is based on the twin benefits of long-term savings and tax incentives. In certain years when the inflation rate is high.000 at the end of the eighth financial year. 50.000). if you have Rs. INFLATION PROTECTION: A PPF account does not provide protection against high inflation. On expiry or five financial years form the end of the financial year in which the initial subscription was made. 25.000 at the end of the fifth financial year. you can withdraw upto Rs. whichever is lower. Else. These rate are notified by the GOI in the Official Gazette form time to time. The duration of a PPF account is 15 years. The maximum amount available for withdrawal is 50 per cent of the balance at the end of the year immediately preceding the year of withdrawal or the fourth year immediately preceding the year of withdrawal. the real rate of return on your PPF may be marginal.. 90. OPTION OR BORROWING: Loans can be availed of form the third to sixth year @ 1 per cent per annum if repaid within 36 months.
TAX IMPLICATIONS: besides long-term savings, the most attractive feature
PPF is the tax incentives it offers. The interest income earned in PPF and the lumpsum amount received on maturity or premature withdrawal is completely tax-free as per the pro-visions of the Income Tax Act, 1961. The scheme also offers tax benefits under Section 88 of the Income tax Act, 1961 as indicated below: Gross Total Income (Rs) Rebate 0 – 150,000 150,001 – 500,000 500,001 & Above 20% 15% Nil
Rebate is calculated @ 30 per cent if your gross annual salary is upto Rs 1,00,000. This also helps to reduce the actual amount invested over a 15-year period. You can also open an account in the name of your spouse or children including married daughters and claim the tax rebate if the contribution is made out of your personal taxable income.
NATIONAL SAVING CERTIFICATES
National Savings Certificates (NSC) are an assured return scheme, armed with powerful tax rebates under Section 88 of the Income Tax Act, 1961. Interest is payable at 8 per cent, compounded half-yearly for a duration of 6 years. NSC combines growth in money with reductions in tax liability as per the provisions of the Income Tax Act, 1961. The scheme offers a coupon of 8 per cent, compounded semi-annually. So, Rs 1,000 invested in NSCs become Rs. 1,601 on maturity after 6 years. The NSC has the backing of the Government of India. Since the NSC has the backing of the Government of India, your income at the prescribed rate of interest is
assured. This is a safe long-term savings option. There are no risks associated with your investment in the NSC.
LIQUIDITY: The maturity period (duration) of a NSC scheme is 6 years. NSCs
do not offer any scope of premature withdrawal except on death or forfeiture by pledgee or by court order. However, NSCs can be transferred from one person to another through the post office on the payment of a prescribed fee. They can also be transferred form one post office to another. If a certificate a lost, destroyed, stolen or mutilated, a duplicate can be issued by the post-office on payment of the prescribed fee.
INFLATION PROTECTION: With a Fixed rate of return, the NSC cannot
provide adequate safeguards against the risk of a high inflation rate.
OPTION OF BORROWING: You can borrow against your NSC by pledging
it after the permission of the concerned post-master. You can pledge you NSC to any of the following:
> The President of India or Governor of a State is his official capacity. > The RBI or a scheduled bank or a co-operative society ( including a co-operative bank). > A Corporation or a government company. > A local authority. > A Housing Finance Company approved by the National Housing Bank and notified by the Central Government.
TAX IMPLICATIONS: NSCs offer tad benefits as per the provisions of the
Income Tax Act, 1961. Rebates are available under Section 88 of the Income Tax
Act, 1961 on both the principal as well as the interest income. Under the provisions of this Section, an investor can reduce his tax liability by Rs. 12,000 by investing the maximum permissible sum of Rs. 60,000 in one financial year. Moreover, the annual interest income ( till five years) is deemed reinvested under Section 88, and is eligible for tax rebate. Moreover, the annual interest income ( till five years) is deemed reinvested under Section 88, and is eligible for a 20 per cent tax rebate. The rebate is calculated @ per cent if your gross annual salary is upto Rs. 1,00,000. However, the interest income at the end of the sixth year is not eligible for tax breaks. The interest income every year also qualifies for exemption under Section 80L of the Income Tax act, which means that interest income upto Rs. 12,000 is tax-exempt. Thus, while you can claim 20 percent tax rebate on reinvested interest income, the entire interest income will be tax-free if it is lower than Rs. 9,000. An added advantage is that TDS ( Tax Deductible at Source) is not applicable on the NSC.
POST OFFICE MONTHLY INCOME SCHEMES
The post-office monthly income scheme (MIS) provides for monthly payment of interest income to investors. It is meant for investors who want to invest a lump-sum amount initially and earn interest on a monthly basis for their livelihood. The scheme is, therefore, a boon for retired persons. The post-office MIS gives a return of 8 per cent plus a bonus of 10 per cent on maturity. However, this 10 per cent bonus is not available in case of premature withdrawals. Like all post-office schemes, the MIS has the backing of the Government of India, and is, therefore, a safe investment. You can be assured of getting your full
investment back. Your monthly interest income is assured at the specified rate of interest. Since this scheme ha the backing of the Government of India, it is a sage investment channel.
LIQUIDITY: You can buy a post office MIS at any post-office in India. The
duration of the MIS is six years. Investors can withdraw money before three years, but at a discount of 5 percent. No such deduction will be made if an account is closed after three years. Premature closure of the account is permitted any time after the expire of a period of one year of opening the account. Deduction of an amount equal to5 per cent of the deposit is to be made when the account is prematurely closed.
INFLATION PROTECTION: With a fixed rate of return, the MIS does not
provide adequate safeguards against high inflation rates.
OPTION OF BORROWING: Depends if the banker accepts it as a security.. TAX IMPLICATIONS: The interest income accruing from a post office MIS
is exempt for tax under Section 80L of the Income Tax Act, 1961. Moreover, no TDS is deductible on the interest income. The balance is exempt form Wealth Tax.
POST OFFICE TIME DEPOSITS
5 per cent. Time Deposits have a term ranging between 1 and 5 years. compounded quarterly. Time deposit for 1 year offers a coupon rate of 6. Time Deposits are suitable for capital appreciation in the sense that your money grows at a pre-determined rate.25 per cent while 5-year Time Deposit offers 7. With a Government of India-baking .5 per cent return. your principal is as assured as it is in any other post office account. Therefore. Unlike certain other investment options. There are no risks unique to this investment option. they entail a loss in the interest accrued for the time the account ha been in operation. While 2.25 per cent. The scheme pays annual interest. 3 years is 7. With backing form the Government of India. thus giving a higher yield. a 2 –years deposit offers an interest of 6. but its is compounded quarterly. and is available through post-office across the country. The only condition is that they are bound for some specific period of time.5 per cent.A Time Deposit is an investment option that pays annual interest rates between 6. INFLATION PROTECTION: Time Deposits are not the ideal investment option if the rate of inflation is either too high or is fluctuating beyond a limit. . Time Deposits are one of the better ways to get a relatively high interest rate for your savings. Time Deposits return a lower. where returns are commensurate with the risk. Since the rate of return in case of a Time Deposit is fixed . the rate of growth is also high. growth in investment. they cannot guard you against a high rate of inflation. 3.25 and 7. your interest income form Time deposits is assured . but safer. LIQUIDITY: a time Deposit account can be opened at any post-office. and 5-year Time Deposits can be closed after one year.
‘L’ “Low” & ‘A’ means “ Adequate” .2 Here..e. and no tax is deducted at source.OPTION OF BORROWING: You can borrow against a Time Deposit. i.000 from Time Deposits is exempt under section 80L of the Income Tax Act. The balance in you account can be pledged a security for a loan. 2. TAX IMPLICATIONS: Interest income upto Rs. Investments at a glance is shown in Fig. 1961. 9.2 INVESTMENT AT A GLANCE Investments Open-ended Mutual Funds Close-ended Mutual Funds Shares Bank Fixed Deposits Bond Public Providend Fund National Saving Certificate Post Office Monthly Income Scheme Post Office Time Deposits Risk A A H L L L L L L Return H H H A H A A A A Liquidity H L H A L A A A A Inflation Protection H H H L L A L A L Option of Borrowing A H H H H H H H H Tax Benefits A H A A H H H A A Fig. 2. Character ‘H’ means “High”. the interest income form a Time Deposit is also exempt form TDS.
Different Age Groups Age 1-18 years 18-35 years 35-45 years 45 & above Total No of Respondents 2 18 14 6 40 Percentage 5% 45% 35% 15% 100% Table 3.1 AGE GROUP . It is very important for an industry to satisfy its customers. To study people perception about Mutual Funds. I have conducted my research on 40 respondents of Chandigarh from different age / income group. Customer is the king.PEOPLE PERCERTION ABOUT MUTUAL FUND In today’s market.
3 Lakh Rs.000 – Rs.1 Different Income Groups Income Below Rs. 50.2 Percentage 10% 20% 55% 15% 100% .15% 5% 1-18 years 18-35 years 35-45 years 45% 35% 45 & above Fig.000 Rs. 1 Lakh – Rs. 3. 1 Lakh Rs. 50. 3 Lakh & Above Total No of Respondents 4 8 22 6 40 Table 3.
3 Lakh & Above Fig. 3. 3 Lakh 55% Rs.000 – Rs. 3. of Respondents 26 14 40 Percentage 65% 35% 100% Table .2 Male / Female Sex Male Female Total No. 50. 50.000 15% 10 % Rs. 1 Lakh 20 % Rs.3. 1 Lakh – Rs.3 Marital Status Married Married Single Total No of Respondents 28 12 40 Percentage 70% 30% 100% .3 SEX 100% 65% 50% 0% Male Female 35% Fig.Income Groups Below Rs.
4 Marital Status 80% 60% 40% 20% 0% 70% 30% Married Single Fig 3.5 Percentage 15% 100% .Table 3.of Respondents 34 6 40 Table 3.4 PEOPLE AWARENESS ABOUT MUTUAL FUNDS Answer Yes No Total No.
82% 23.e. Only 15 % of the respondents are not at all aware about mutual funds.65% 100% 8.6 Uderstanding Mutual Fund Percentage 8.65 % . It suggests that there is awareness amount people about mutual funds which is good for the mutual funds industry.53% 67. UNDERSTADING MUTUAL FUNDS Answer A B C Total No. out of which 34 respondents are aware about mutual funds i.82% 23. 85%. 3. of Respondents 3 8 23 34 Table 3.100% 80% 60% 85% Ser i es1 40% 20% 0% 15% Yes No Fig.53 % a b c 67.5 I conducted my research on 40 respondents.
35% . POPULARITY OF VARIOUS MUTUAL FUNDS AMS’s Answer UTI Pru ICICI Franklin Templeton Birla Sunlife HSBC SBI Magnum No of Respondents 30 30 28 24 21 11 Percentage 88.82% of respondents thinks that mutual fund units are just similar to share. invests it is different securities and generate returns. 8. From this.76% 32. how they work. we can interpret that people understands about mutual funds.23% 88. 23. 67.53% respondents understands it as an organization providing financial services.35% 70.23% 82.6 When it actually comes to understanding mutual funds. what they are.Fig 3.65% respondents actually knows mutual funds as an trust that pools the saving of investors.59% 61.
expressed in percentage as 88. HSBC & SBI are also popular.00% 0. Moving onto which AMC is known to people. INVESTMENTS IN MUTUAL FUNDS Answer Yes No Total No. UTI.36% 100% Table 3.e.Popularity Chart UTI 100. 88. This clearly shows that UTI & Pru ICICI are the most popular AMC’s.8 .00% 60.00% 40. most of the respondents knows about UTI & Pru ICICI.35% of the respondents knows about Franklin Templeton shares 70.00% 80.00% 1 Pru ICICI Franklin Templeton Birla Sunlife HSBC SBI Magnum Fig 3.00% 20.23%.88 % of respondents knows only one AMC i.7 Only 5. of Respondents 23 11 34 Percentage 67. Majority of AMC’s knows about 4-5 AMC’s.59% of respondents are aware of Birla Sunlife.64% 32.
50% & 50 % and above in mutual funds.36% of respondents are there who have not invested in mutual funds.64% 32.36% Percentage Yes No Fig 3.00% 67.8 Answer 0 – 10% 10% .9 67.39% 100% Percentage of Savings 0.39% 17. .50% 50% & above Total No of respondents 0 15 4 4 23 Table 3.00% 0 – 10% 10% .00% 40. This suggests that lots of people of Chandigarh have invested in mutual funds.25% 25% .00% 30.00% 20.00% 70.25% 25% . Only 32. 67.50% 17.22% 17.22% 50% & above Fig 3.39% 17.64% of respondents have invested their savings in mutual funds.00% 0.39% of respondents have invested 25.80.9 Percentage 0% 65.00% 50.00% 60.22% People have invested 10-25% of their savings while 17.39% 65.00% 10.
60% of people have invested in these schemes followed by equity funds where 69.00% 20.56% Equity Debt 30.00% 30.00% 0.00% 1 69.POPULARITY OF OPEN-ENDED MUTUAL FUND SCHEMES Answer Equity Debt Balanced funds Fund of Funds No.43% Balanced funds 21. Popularity of funds of fund is really low as only 21. Thus we can say. RETURNS FROM INVESTMENT IN MUTUAL FUNDS .56% of respondents have invested.00% 70.10 Balanced funds are more popular as 82.43%.00% 80.00% 40.00% 10. of Respondents 16 7 19 5 Percentage 69.00% 60.00% 50.56% 30. People have also invested their savings in debt funds expressed in percentage as 30.43% 82.74% Fund of Funds Percentage Fig 3.60% 21.74% 82.74% of respondents have invested in them. Balanced Funds are the most popular as they have both equity and debt portfolio.60% 90.
05% 100% Table 3. we can predict that returns form mutual funds are good.Answer High Good Low Total No.11 56.05% High 30. By looking at the above figures.52% 13.43% 56. of Percentage 7 13 3 23 Percentage 30. 13.43% Good 56. 3.05% of respondents got low returns.43% have earned handsome high return. RISK ASSOCIATED WITH MUTUAL FUNDS .52% of people have enjoyed good returns from their investments in mutual funds whereas 30.11 Percentage Low 13.52% Fig.
00% 0.00% 30.00% 21.87%) who have invested in mutual funds see adequate risk in mutual funds.74% of respondents think that there is low risk associated with mutual funds.12 People of Chandigarh (60.39% of respondents perceives mutual funds as very risky option where as 21.12 Risk 70. of Respondents 5 4 14 23 Percentage 17.74% 20.87% 100% Table 3. 17.39% 21.00% 40.74% 60.Answer High Low Adequate Total No.87% 60.00% 50. 3.00% 10.00% 60. .39% Fig.00% High Low Adequate 17.
00% 35.00% 47.78% of respondents invests in mutual funds for tax benefits.13 Reasons for investments 50.00% 45.39% 100% Table 3.83% 34.78% 47.00% 10.00% 0.13 47.39% Tax Benefits Higher Returns Liquidity S1 Fig.83% of respondents invests in mutual funds because of higher returns whereas 34.00% 25.39% of investors invests in mutual funds for liquidity advantage. Only 17.00% 30.00% 40. .00% 15.00% 20. of Respondents 8 11 4 23 Percentage 34.MAIN REASON FOR INVESTMENT IN MUTUAL FUNDS Answer Tax Benefits Higher Returns Liquidity Total No.00% 5.83% 17. 3.78% 17.
14 50% 1st 2nd 20. EXPERIENCE OF INVESTORS ABOUT MUTUAL FUND Answer No.14 The above data clearly indicates that mutual funds standing vs.70% 50% 20.60% 14.00% 0. of Respondents Percentage .00% 10.70% 14. other option is good.00% 20.60% 14.RANKING OF MUTUAL FUNDS VS OTHER INVESTMENT OPTION Answer 1st 2nd 3rd 4th & above Total 60.00% 40.00% 50. of Respondents 5 17 7 5 34 Percentage 14.00% 1 No.70% 3rd 4th & above Percentage Fig.00% 30.3.70% 100% Table 3.
60. They think that mutual funds provide better returns over a longer period of time. professional management. liquidity. transparency. They have also earned a very handsome return which is more than other investment options. AMCs like Pru ICICI. we can conclude that people that people of Chandigarh are aware of mutual funds and understands what mutual funds are. Conclusion: From above data. People’s experience about mutual funds is good. low risks. after sales service and liquidity form an investment. easy availability. after sales service and liquidity.15 The experience of investors about mutual funds industry is quite good.13% have bad experience in mutual fund. from an investment option . EXPECTATIONS FROM INVESTMENT OPTIONS People of Chandigarh expects high returns. UTI & Franklin Templeton are popular amongst the people of Chandigarh. but people invests because of various reasons like tax benefits. easy availability. transparency. They have also invested their savings in various mutual funds schemes. People of Chandigarh expects high returns.87% of respondents agrees with it whereas 39. People of Chandigarh invests about 10-50% of their savings in mutual funds.Good Bad Total 14 9 23 60. But risk associated with mutual funds is one the higher side.13% 100% Table 3. higher returns better returns. low risks professional management.87% 39.
we can say “Mutual Fund is the smart way to invest”. All these qualities are not generally present in single investment option. which is present in mutual funds. Mutual Funds provide high returns with risk associated with it. So. power of diversification etc.As an investment options. option of borrowing. better liquidity. inflation protection. professional management. DO YOU EXPECT THESE FROM YOUR INVESTMENTS? IDEAL RETURNS TAX EFFICIENCY ANYTIME LIQUIDITY FLEXIBILITY TRANCPARENCY SAFETY THE ANSWER IS MUTUAL FUNDS . tax benefits.
CONTROL OF MONEY SUGGESTION & RECOMMENDATIONS Investment Planning is necessary for all individuals to achieve their financial goals. People should plan their investments to fulfill major needs like: Financial Protection Career Building Assets Purchase Marriage Children’ Education Retirement Funding There is no way to do it without investing surplus money in right kings of instruments. . One has to plan his limited resources to avail maximum benefit about of them.
the right investment is a balance of three things: Liquidity. before investing one has to be vary sure about his financial goals and risk taking capacity. In each case. one can know what kind of investor he or she is. one should check his risk taking capacity with ‘ Investment Style Check’ enclosed in Annexure IV.Choosing the best investment option one depends in his personal circumstances as well as general market conditions. Safety and Return. After checking his score. So. To do this. The recommended asset allocation for different kind of investors is given below in graphical form: 1) Very Conservative Investor: Equity 0% Cash 20% Debt 80% 2) Conservative Investor: .
Equity 10% Cash 10% Debt 80% 3) Moderate Investor: Equity 30% Debt 60% Cash 10% 4) Aggressive Investor: .
Don’ts for Mutual Funds: Do not speculate: always evaluate risk taking capacity Do not chase returns: because what goes up must come down . provided one invest according to the above portfolio.Debt 50% Cash 10% Equity 40% 5) Very Aggressive Investor: Debt 10% Equity 50% Cash 40% It is not difficult to become a crorepati with mutual funds.
Create an ideal portfolio By following the above suggestions. Remember: Mutual funds are subject to market risk and there is no assurance that fund objective will be achieved. NAV fluctuates depending on forces affecting capital markets. Every time is good for investments. one has to plan his investments and as proved by studies that: “MUTUAL FUNDS IS A BEST LONG TERM INVESTMENT OPTION” . Past performance do not indicate future performance. Do not put all eggs in one basket Do not stop working on mutual funds Do not time the market . Returns are not guaranteed and assured Take long term approach towards investments.
1 Lakh – Rs. 50. 3 Lakh Rs.Annexure I QUESTIONAIRE Personal Information: Name :_________________________ Age:___________________________ Address:________________________ _______________________________ Income : Below Rs.000 – Rs.Married . 1 Lakh Rs. 3 Lakh & Above Sex: Male Female Marital Status: Married Un. 50.000 Rs.
Q-3) Which major Mutual Funds do you Know? a) ____________________________ b) ____________________________ c) ____________________________ d) ____________________________ Q-4) Have you invested in Mutual Funds? a) Yes b) No Q-5) How much (%) of your savings have you invested in Mutual Funds? a) 0 .Q-1) Are you aware of Mutual Funds? a) Yes b) No Q-2) What do you understand by Mutual Funds? a) They are units just similar to share. b) It is an organization providing financial services.50% d) 50% & above Q-6) In which Mutual Fund schemes have you invested? .10% b) 10% .25% c) 25% . invests it in different securities and generate return. c) It is an trust that pools the savings of investors.
a) Equity b) Debt c) Balanced Funds d) Fund of Funds Q-7) What kind of returns have you got from your earlier investments in Mutual Funds? a) High b) Good c) Low Q-8) What kind of risk do you associate with Mutual Funds? a) High b) Low c) Adequate Q-9) What is the main reason for your investments in Mutual Funds? a) Tax Benefits b) Higher Returns c) Liquidity Q-10) What Ranking you give to Mutual Funds in comparisons with other investment options? a) 1st b) 2nd .
c) 3rd d) 4th & More Q-11) What is your experience about Mutual Fund Industry? a) Good b) Bad Q-12) What do you expect from you Investments? a) High Returns b) Low Risk c) Professional Management d) Transparency e) Easy Availability f) After Sales Service g) Liquidity h) All of above .
64 4.48 6.57 3.52 3.71 477.14 EQUITY SECTORAL FUNDS Scheme Fund Corpu s in Rs.61 46.17 59.97 15.90 28.36 3.96 50.33 19.04 10.81 41.54 437.47 2 year 62.62 1 years 36.28 208.14 32.96 34.24 736.23 3 month 23.96 12.76 N.14 24.94 1938.15 1 month 12.14 40.50 12.70 1 years 29.Annexure II Return of Various Mutual Fund Schemes EQUITY DIVERSIFIED FUNDS Scheme Fund Corpu s in Rs.35 Since Inception 22.214.171.124 32.43 154.60 9.77 64.48 6 months 51.A 50.89 24.24 23.63 9.96 35.19 2.A 64.29 9.36 203. Crores Birla Advantage Fund HSBC Equity Fund FT India Bluechip Pru ICICI Power Fund Reliance Vision Fund Return % as on 21.87 Since Inception 23.74 4.34 15 days 6.45 5.82 17.95 58.08 4.02 20.90 75.89 88.2004 7 days 3.95 N.29 .77 29.91 1 month 4.83 7.07 68.24 5.52 3 month 16.30 2 year 36.68 6.76 6 months 44.10 1519.94 10.58 17.14 4.99 47.2004 7 days 3.02 4.09 19.49 14.15 3.29 25.37 15 days 4.56 2257 13. Crores Franklin Infotech UTI Growth Sector – IT Reliance Pharma Fund Alliance Buy India Return % as on 21.
12.54 1.43 79.37 683.64 BALANCED FUNDS Scheme Fund Corpu s in Rs.Birla MNC 133.39 6.10 Since Inception 27.59 2.56 3 month 3.05 13.99 6 months 6.85 39.55 27.02 0.A 2.92 2 year 10.38 15 days 1.46 27.62 1 years 6.10 19.72 48.26 3.66 11.97 752.12.32 3 month 23.88 2.04 8.36 6 months 47.33 35.2004 7 days 0.81 36.74 13.05 7.79 19.41 2.58 MONTHLY INCOME FUNDS Scheme Fund Corpu s in Rs.55 6.63 0.02 1 month 11.31 32.33 126.10 GILT FUNDS Scheme Fund Corpu Return % as on 21.01 29.01 14.51 6 months 36.04 0.11 43.37 13.67 48.12.34 549.44 1 years 32.91 1. Crores Alliance 95 fund Birla Balance Fund HDFC Prudence Fund UTI Balanced Fund Tata Balanced Fund Return % as on 21.78 6.83 9.82 65.24 283 575.75 0.15 EQUITY TAX RELIEF FUNDS Scheme Fund Corpu s in Rs.2004 7 days 3.11 2.69 1.50 1 month 2.28 0.41 9.02 4.23 1.66 4.36 4.12 17.80 1.49 83.73 54.43 6.73 8.85 3.22 Since Inception 12.04 0.38 2.44 71.62 15 days 5.99 3.97 54.87 2.03 73.18 2.95 14.24 23.03 40.28 10.40 32. Crores Birla Equity Plan Franklin India Taxshield Pru ICICI Tax Tate Tax Saving HDFC Tax Saver Return % as on 21.51 0.04 37.62 12.04 28.16 3 month 17.47 28.61 4.64 N.17 4.30 12.54 8.59 6.77 8.83 41.66 1.10 137.12.62 13.27 1.41 1 years 27.42 28.2004 7 days 3.43 38.04 15 days 5.55 25.30 2.15 40.20 10.13 34.46 0.14 1161.08 25.24 22.34 459 93.74 1 month 10.25 61.71 32.13 2 year 81.50 2 year 46.88 3.2004 .95 2.22 17.55 0.72 Since Inception 30.A 6.47 17.10 9.28 15.12 41.76 13.08 1.83 158.76 40.02 3.71 -0.47 N. Crores Birla MIP FT India MIP Tata MIP Reliance MIP UTI MIP Return % as on 21.13 8.
01 2 year N.25 DEBT FUNDS Scheme Fund Corpu s in Rs.17 0.12 0.50 31.26 1 month 0.2004 7 days 0.55 1.32 0.59 3.55 3 month 1.28 0.18 0.72 1.18 0.84 9.67 4.41 0.29 103.63 2.42 0.65 6.65 N.67 2 year 6.51 1.29 4. Bansal Magazines Cited: Outlook Layman’s Guide to Mutual Fund Top Performer .19 0.60 0.12.11 0. Gupta .82 4.64 1.24 29.61 Annexure III BIBLIOGRAPHY Books Referred: Financial Management Merchant Banking & Financial Services By Shashi K.17 Since Inception 5. Crores Birla Bond Plus Reliance STP HDFC STP SBI Magnum STP Templeton India STP Return % as on 21.07 0.21 0.20 0.33 Since Inception 9.15 0.19 2. R.13 15 days 0.52 0.63 -1.44 113.80 0. Crores Birla Gilt Plus HSBC Gilt STP Sahara Gilt Fund Reliance G-Sec Fund Pru ICICI Gilt Fund 20.42 0.70 1 years 4.16 0.93 0.98 3.51 N.K.48 263.40 1265.95 3.18 6.25 4.87 250.65 0.21 1.08 0.A 6.36 1.47 0.19 1 month 0.A 2.32 1. Sharma By Lalit K.99 4.08 0.88 1.10 0.50 1.13 4.s in Rs.89 1 years 4.14 0.62 3 month 0.07 0.44 1.74 6 months 2.26 -0.13 5.98 7 days 0.35 1.99 6 months 2.10 15 days 0.49 1.A 5.30 1.61 N.02 33.11 0.A 6.
I have following dependents a) More than 2 dependents b) 1-2 dependents c) None .com www.moneycontrol.Investors India Net Watch: www. Greater the Return & Vice Versa. Higher the Risk.com Conference Attended: Bajaj Capital Investor’s Meet Annexure IV Investment Style Check Risk and return always go hand in hand. It is an follows: 1. My age is a) above 50 b) Between 30-50 c) Between 24-30 2.mutualfundsindia. To evaluate one’s risk bearing capacity. Investment Style Check is a very common tool.
Securities and Bonds b) Mutual Funds and Company FDs.3. c) Equity Share 7. I am most concerned about: a) Safety of my principal b) Earning returns above the inflation rate c) Earning Returns 6. My job is a) Secured b) Not secured c) Does not affect me whether it secured or not 4. I would likely my investment to grow a) Steadily b) At an average rate c) Fast 8. My current portfolio includes majority of : a) Govt. Imagine that the stock market drops immediately after you invest in it a) I would withdraw my money b) I would wait and watch . My approach in making an investment a) I take educated view of the investment b) I take friendly advice and make decisions c) I rely on my guess 5. While investing in my funds.
a) My portfolio allocation has remained consistent over long time b) My portfolio allocation has changed some what over time c) My portfolio allocation has changed significantly over time 13. What percentage of you income do you invest? a) Upto . b) For the lat 5-10 yrs. c) For over 10 yrs and above 10. My knowledge about various investment schemes is a) Nil b) Average c) Good 12.10% c) Above 10% 11. Which of the following statements truly describe you a) I am very much concerned with short-term volatility b) I am concerned if my investment does not give me return which is higher than inflation c) I am very much concerned with long-term volatility . How long have you been investing ? a) For the last 1-5 yrs.c) I would invest more in it 9.5% b) 5% . How has your portfolio allocation changed over time .
How often do you monitor you investments a) Daily b) Monthly c) Occasionally 17. 30 points for answer ‘c’ Between 170 .238 Between 239 .510 Very Conservative Investor Conservative Investor Moderate Investor Aggressive Investor Very Aggressive Investor . How easily could you replace the loss suffered on an investment with future income a) Impossible b) Not easy but possible c) Very easily 15.374 Between 375 .14. Which statement best describes you investment objective a) I just need regular income b) I need regular income but would like some growth as well c) I need only growth in my investment 16. 20 points for answer ‘b’ .442 Between 443 . What kind of return would you like on your investments a) You may gain a return upto25% but there is a chance of losing 10% of your principal b) You may gain a return upto 10 % eith a little chance of losing your principal c) You are assured to gain 5% return without any chance of losing your principal Evaluate Yourself Give 10 points for answer ‘a’ .306 Between 307 .
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