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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. Faculty Members for their belief and constant support. . sincerity.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. This internship program makes a mark of hard work. knowledge and ethics on the host organization. It is an attempt to bridge the gap between the academic institution and the corporate world. It provides us an opportunity to apply the concepts learnt in real life situations. Thanks to my parents and SVIET . And finally. I would like to thank each and every person who has contributed in any of the ways in my training. Date-25-07-2008 Deepak Dhiman PREFACE The Summer Internship Program forms an important component of education SVIET. 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.
This will help to gain a deeper understanding of the work. culture. pressures etc. For those two rules are to be followed they are: Rule 1. 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. Thus. deadlines. provides exposure to technical skills.It provides an opportunity for us to satisfy our inquisitiveness about corporate.customer is always right. goal orientation and managing interpersonal relationships and by creating awareness about strengths and weaknesses in the work environment. Rule 2.if not. of an organization. which will be useful in enhancing in career prospects. . It helps us in developing a network. refer to rule 1. it helps to develop the qualities of a Manager by involving teamwork. and helps us to acquire social skills by being in constant interaction with the professionals of other organizations.
Relationship management plays a vital role while dealing with financial instruments.If these two rules are followed then the customers will always be happy and would be having a better relation with the market. personal interaction with the executives was done so as to get the first hand information. 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.
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 . PARTICULARS PAGE NO. 4 5 7 8 10 14 16 20 23 1 2 3 4 5 5.1 5.TABLE OF CONTENTS SERIAL NO.2 5.3 5.
The company has used some of the best -known names in the IT industry.www. depository services. In the last six months SpeedTrade has become a net. Microsoft. the site has customers. 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. Derivatives. This was for the first time that a net based trading station of this caliber was offered to the traders.SHAREKHAN BACKGROUND Sharekhan is one of the leading retail brokerage of SSKI Group. 2002 Sharekhan launched and to simplify the process of investing in stocks. HSBC. a registered base of over 2 lacs facility to retail customers across the country. The site gives access to language and high quality research. Sharekhan’s ground network includes over 700+ Shareshops in 130+ cities in India. which has over eight decades of experience SSKI Group which is running -based in the stock broking business. While . The Citi Venture holds a majority stake in the company. successfully since 1922 in the country.com . are net- contemporaries because of its steadfast dedication to offering customers best technology and superior market information.was launched on Feb 8. Vignette. Speed Trade and Trade Tiger application that emulates the broker terminals along with host of other information relevant to the Day Traders. Spider Software Pvt Ltd. Sharekhan has always believed in investing in technology to build its business. to build its trading engine and content.sharekhan. investment advice etc. The number of trading members superior content and transaction -free. 2000 . Oracle. The objective has been make informed decisions based executable On A pril 17. Verisign Financial Technologies India Ltd. like Sun Microsystems . investor friendly over 5 Lacs . de facto standard for the Day Trading community over the . The firm’s online trading and investment site . 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. NSE. online trading. Cambridge Technologies. 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 . Nexgenix.
and Shopper’s Stop. 2. with a daily turnover of over US$ 2 million. UK and US. 4. HSBC. 5. It has 60 institutional clients spread over India. Intel & Carlyle are the other investors. Far East. Foreign Institutional Investors generate about 65% of the organization’s revenue. Essar. 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. Presently SSKI is one of the leading players in institutional broking and corporate finance activities.Portfolio Management Service. SSKI holds a sizeable portion of the market in each of these segments. Planetasia. Gujarat Pipavav.Equity Trading Platform (Online/Offline). in terms of the size of deal. 3. Hutchison. 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.The Citi Venture holds a majority stake in the company.Mutual Fund Advisory and Distribution. sector tapped etc. the SSKI group ventured into institutional broking and corporate finance 18 years ago.Insurance Distribution. .Commodities Trading Platform (Online/Offline). With a legacy of more than 80 years in the stock markets. PRODUCTS OFFERED BY SHAREKHAN 1.
it has been providing institutional-level research and broking services to individual investors. www. Ever since it launched Sharekhan as its retail broking division in February 2000. You will also get a useful set of knowledge-based tools that will empower you to take informed decisions. Technology With our online trading account you can buy and sell shares in an instant from any PC with an internet connection. Knowledge In a business where the right information at the right time can translate into direct profits. . You will get access to our powerful online trading tools that will help you take complete control over your investment in shares. Accessibility Sharekhan provides ADVICE.REASONS TO CHOOSE SHAREKHAN LIMITED Experience SSKI has more than eight decades of trust and credibility in the Indian stock market. TOOLS AND EXECUTION services for investors. SSKI won the 'India's best broking house for 2004' award.sharekhan. you get access to a wide range of information on our content-rich portal.com. These services are accessible through our centers across the country (Over 650 locations in 150 cities) over the Internet (through the website www. In the Asia Money broker's poll held recently. EDUCATION.sharekhan.com) as well as over the Voice Tool.
online chat.sharekhan. . Our analysts constantly track the pulse of the market and provide timely investment advice to you in the form of daily research emails. billing.com. Investment Advice Sharekhan has dedicated research teams of more than 30 people for fundamental and technical research. email or live chat on www. demat and other queries. Customer Service Our customer service team will assist you for any help that you need relating to transactions. printed reports and SMS on your mobile phone. Our customer service can be contracted via a toll-free number. We have a dedicated call-center to provide this service via a Toll Free Number 1800-22-7500 & 39707500 from anywhere in India.Convenience One can call our Dial-N-Trade number to get investment advice and execute your transactions.
We offer you the following products:- CLASSIC ACCOUNT This is an User Friendly Product which allows the client to trade through website www.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. Automated Portfolio to keep track of the value of your actual purchases. 7. 12. 11. Anytime Ordering.sharekhan. 6. Multiple Bank Option. Live Chat facility with Relationship Manager onYahoo Messenger 9. Special Personal Inbox for order and trade confirmations. On-line Customer Service via Web Chat. Buy or sell even single share 13. Secure Order by Voice Tool Dial-n-Trade. Enjoy Automated Portfolio.sharekhan. Personalised Price and Account Alerts delivered instantly to your Mobile Phone & E-mail address. 5.com . 24x7 Voice Tool acess to your trading account.Benefits 1. 8. Free Depository A/c 2. Online trading account for investing in Equity and Derivatives via www. 10. 4. Instant Cash Tranfer 3. Features 1.
Back-up facility to place trades on Direct Phone lines. 8. Instant order and trade confirmation by E-mail. 5. Streaming Quotes (Cash & Derivatives). 7. Saving Bank and Demat Account. 9. 10. SPEEDTRADE SPEEDTRADE is an internet-based software application. Live market debts. 6. 8.2. Single screen trading terminal for NSE Cash. Live Terminal and Single terminal for NSE Cash. 3. 5. Single screen interface for Cash and derivatives and more. . Instant cash transfer facility against purchase & sale of shares. NSE F&O & BSE.) 7. Market summary (Cost traded scrip. Competative transaction charges. Integration of On-line trading. 3. Alerts and reminders. that enables you to buy and sell in an instant. tic-by-tic charts. Multiple Charting. highest calue etc. Instant order Execution and Confirmation. NSE F&O & BSE. 4. 4. Real-time streaming quotes. Hot keys similar to broakers terminal. Provision to enter price trigger and view the same online in market watch. Features 1. 9. It is ideal for active traders and jobbers who transact frequently during day’s session to capitalise on intra-day price movement. 2. 10. Personlized market watch. Technical Studies. 6.
Prepaid Classic Account : . Beside this. Pay Advance Brokerage on your Account and enjoy uniterrupted trading in your Account. * As per SEBI regulations. PREPAID Account Now you can buy Prepaid Account of Sharekhan. All you need is a Sharekhan account and a GPRS enabled Mobile handset. Relationship Managers are always available on Offic Phone and Mobile to Resolve your querries. Intra Day Charts. So when you place a buy-sell order on ShareMobile. Stay updated with ShareMobile. A mobile based software where you can watch Stock Prices. the CLASSIC and SPEEDTRADE ACCOUNT also gives you our Dial-n-trade serives. 6000 . buying-selling shares through a mobile phone is not yet permitted.Rs. 2000 Prepaid Speedtrade Account : . With this service.. all you have to do is dial our dedicated phone lines 1-800-22-7500.! Sharekhan had introduced ShareMobile. This service is free and has NO extra fees. get great discount (upto 50%) on Brokerage. Reasearch & Advice and Trading Calls live on the Mobile. Beside this.Rs. ShareMobile* Now Track the Market Anywhere. 3970-7500. our Dial-n-Trade executive will call you back and place the order on your behalf. Sharekhan's new service that lets you to catch the pulse of the stock market on your mobile phone.DIAL-N-TRADE Along with enabling access for your trade online.
. Apply for the IPO and Sit Back & Relax. DSP Merrill Lynch. paperless and time saving. paperless and time saving.IPO ON-LINE You can apply to all the forthcoming IPO online hasselfree. Mutual Fund Online You can apply to Mutual Funds of Reliance. Birla. SBI. Simply allocate fund to IPO Account. ICICI Prudential. PRINCIPAL. Franklin Templeton Investments. TATA with Sharekhan hasselfree. Sundaram. HDFC.
Zero Balance ICICI Saving Account * Sharekhan had tied-up with ICICI bank for Zero Balance Account for Sharekhan’s Clients.0.m. ** Condition Apply.0. Now you can have a Zero Balance Saving Account with ICICI Bank after your demat Account creation with Sharekhan.50 %** * Refundable in case the broakerage is more than Rs. 500/= .10 %** Delivery . 1000/= Rs. NIL Speed Trade Account Rs. Intra-day . • Subject to Approval of Account CHARGE STRUCTURE Fee Structrue for General Individuals : Charge Account Opening Monthly Commitment Broakerage Intra-day – 0.10%** Delivery .0. 500/= p. *** Taxes as per govt. 750/= Rs.50%** Classic Account Rs.
Brokerage : .will be given only to customers who have contributed more than Rs. Trading through website Live terminal.this credit of Rs. NSE and BSE online. No brokerage commitment required. 500/. 1000/.Both Cash & F&O. Both Cash & F&O. 500/.will be credited back to the clients account.a. NIL first year Rs.as brokerage the access charges of Rs. 500/. NIL Rs. (b) SPEED TRADE : Account Opening Fee: Rs. which is very nominal if you consider the benefits of the product. from second celender year onward PRODUCT DETAILS Online Trading: (a) CLASSIC ACCOUNT: A/C Opening charges: Rs.Depository Charges Account Opening Charges Annual Maintanance Charges Rs. Please note .per month. 2004.as brokerage during the months. This access charges will be debited to all the new customers signed up after Sept 15. 300/= p. Monthly Recurring Fee: Rs 500/. NIL Special Discount in A/c Opening Charges Rs. 500/. And at the end of the month if the client has contributed more than Rs.300 from 2nd year onwards (Annual Maintenance charges).
Bank of Punjab and UTI bank for online money transfer.: 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) . Bank of India.50 % Plus Taxes for trades resulting in delivery EXPOSURE : 4 TO 6.e. ICICI. HDFC. CITI.05 % Plus Taxes for Each leg of Intra-day trade 0. IDBI. Centurion Bank of Punjab. FOLLOWING DOCUMENTS REQUIRED TO OPEN AN A/c WITH SHAREKHAN LTD. Oriental Bank of Commerce.0. INDUSIND. Union Bank of India. Yes Bank.7 TIMES (ON MARGIN MONEY) Online IPO's available We have tie up with Twelve Banks for online fund transfering i.
) Colour Photographs (Passport size & front face) For Classic Account:. .1 Account Opening Cheque of Rs.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. 1000/.2 (Two no.1 cancelled cheque For Speed Trade:.
My objective is to Study the people perception about the mutual fund To study mutual funds in comparison to other investment options. Scope: Scope of my study in Chandigarh only. averages. Suggestions will be given that how to invest in mutual funds.SYNOPSIS Title: “Mutual fund – As an investment Option”. & also used a questionnaire to collect date from people. Research Methodology: Convenience research methodology is used and chose samples on random sampling basis. I have only studied people perception of Chandigarh people. etc. . charts. analysis & conclusion have been made. Data Analysis: Analysis is done by using various statistical tools such as graphs. Objective: Experts generally says that mutual says that mutual fund is the best investment option. From the data collected.
The risk and low returns provided by other investment schemes accompanied by high inflation and decreasing interest rates gave birth to Mutual Funds. invests it. As per Mutual Fund Book.” .INTRODUCTION TO MUTUAL FUNDS Introduction to mutual funds For decades. Money was seen only as a means for meeting basic needs. 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. 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 trust that pools together the savings of a number of investors who share a common financial goal. “ A Mutual Fund is a financial service organization that received money from shareholders.S. published by Investment Company Institute of U. earns returns on it. the middle class had an ideological bias against having too much wealth..
Individuals are free from the time consuming mechanics involved in the direct purchase of securities in their portfolio. The concepts is explained in Fig. They make decision when to buy. A scheme is most suitable whose objectives are compatible to investor’s targets. Professional fund managers take pool of money and invest in a variety of securities selected from a broad range of industries. They select securities that best meet their funds investment objectives. Through pooling the financial resources of thousand of 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. each with a different amount to invest. These objectives guide the manager to plan the portfolio of the schemes. wide diversification of ownership in securities market and a variety of services.Securities and Exchange Board of India (Mutual Funds) Regulations. a mutual fund is a special type of institution. Pooling is the key to mutual fund investing. On the other hand investors are guided by these objectives to select most suitable scheme. 1 Investors . Through diversification in portfolio. investors gain access to the expertise of the qualified and experienced fund managers. otherwise available only to institutions. mutual funds spread out inherent risks in securities and can earn a more stable return. including money market instruments. 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.” So. capital appreciation and a low risk. when to sell and when to hold based on their extensive research and experience. The investment objective set forth by the fund is important both to managers and investors.
Mutual Funds can be classified as: 1) Open-Ended Funds: Open Ended Funded means a scheme of mutual funds which . 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.
offers unit of ale without specifying any duration for redemption. 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 price in the secondary market is determined on the bases of demand & supply. Thus it combines the features of both ended & close-ended funds. The units of the scheme are also traded in the stock exchange. ACCORING TO PORTFOLIO: Mutual Fund can also be classified according to portfolio or the objective of the fund. The repurchase rates are based upon the Net Asses Value (NAV) 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 . 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. These days open ended schemes are more popular. Some of these funds are: 1) Equity funds: These funds mainly invest in shares of the companies.e. These schemes are listed at the secondary market i. The investments may vary from ‘blue-chip’ companies to newly established companies. 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. stock exchanges. They undertake risk associated with investment in equity shares of . which are disclosed in the offer document. The open-ended funds provide better liquidity to the investor. The scheme is open for sale or repurchase at fixed predetermined interval.
2) Debt Funds: These funds employee their resources in bonds. Equity funds may have further sub-divisions such as income fund & growth fund. 5) Leverage Funds: The primary aim of leverage funds is to maximize capital appreciation. Any investor wanting to invest in a particular security will prefer a fund dealing in such securities. Come times bonds are available in the market at lower than the face value. 4) Sectoral Funds: These funds invest in a particular type of securities. The leverage is . These funds are amore risky. the net income on these bonds goes higher because interest will be received on the face value of the bond.companies. 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/. These funds are also known as ‘ Conservative Funds’ or’ Income & Growth Funds’. Balanced Funds ensure both appreciation in stock as well as regular return in the shape of interest & dividend. The investors have advantages of regular income and appreciation in value of securities. 3) Balanced Funds: Balanced funds spend both on common stock and preferred stock. 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 cost of raising loaned funds and the gain form holding shares is the profit of the leveraged fund. The funds may specialize in securities of companies dealing in a particular product or firms in a particular industry. These investments ensure fixed and regular income.
used to the benefit of the shareholders. These instruments include treasury bills. These schemes are also known as Equity linked Saving Schemes (ELSS). call and notice money. 7) Money. 6) Taxation Funds: Mutual Funds may be designed to suit the taxpayers. The contributors to such funds get some concession in income tax. The Amount collected by these funds is used to acquire shares and interest bearing securities. commercial bills accepted by banks and certificate of deposits. 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. 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. Leverage funds indulge in speculative activities to earn more and more profits. dated Government Securities with an unexpired maturity of upto one year. commercial paper. ACCORDING TO LOCATION: Mutual on the basis of location form where they mobilize funds.
By investing in many companies. Mutual Funds have cushioned themselves from unexpected drop in value of some shares. 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. which mutual fund can afford because of large . “ Hub & Spoke funds’ which are basically fund of funds invests in other mutual funds. 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. capital appreciation and allow risk. 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. These funds attract foreign savings for investments in India. such as ‘Loan Funds’ and Non-Loan Funds’ based on the expense / fees to be charged. Other Types: There can be some other types of Mutual Fund also.
Thus a small investor also gets the benefits of large scale economies and low operating costs. . 7) Flexibility: Mutual Funds provide flexible investment plans to its subscriber such as regular investment plans. a mutual fund in India is required to ensure liquidity. fees. an investor can invest or withdraw funds according to his own requirements.resources at their disposal. etc. The funds can be professionally employed through the mutual funds ensuring good returns. According to the regulation of SEBI. Thus. Fund Managers can analyze the performance and prospects of various companies and take better decisions in making investments. 6) Low Operating Costs: Mutual Funds Have large investible funds at their disposal and thus can avail economies of large scale. etc. regular withdrawal plans and dividend reinvestment plans etc. delays. This reduces their operating costs by way of brokerage. commission. 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. the risk factor of the investor is reduced. 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. 4) Reduced risk: As mutual fund invests in large number of companies and is managed professionally.
reduced risks. These are: 1) No assured returns and no protection of capital: Mutual funds do not offer assured returns and carry risk. etc. impart a great degree of flexibility and facilitate completion. 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. For instance. 9) Investor Protection: Mutual Funds are regulated and monitored by SEBI. unlike bank deposits. investment in a mutual fund can fall in value.8) Higher Returns: Mutual funds are expected to provide higher returns to the investors as compared to direct investment because of professional management. SEBI ( Mutual Fund) Regulation Act. provide better protection to the investors. . even mutual funds have some inherent drawbacks. economies of scale. DISADVANTAGES: Mutual funds are good investment vehicles to navigate the complex & unpredictable world of investments. However. In addition. 1996. mutual funds are not insured or guaranteed by any government body. the proportion allocated to different assets and the fund managers investment strategy. which have replaced the regulations of 1993.
investment entities that resembled what we know as mutual funds had been around in Europe since the eighteenth century.2) Restrictive Gains: Diversification helps. A direct investment in the stock would appreciate by 50 percent. with verbose and quicky names that. For example. the ideas of pooling money for investment purposes is not a twentieth century phenomenon. Reliance appreciated 50 percent. when translated. which had invested 10 percent of its corpus in Reliance. In 1774. formed on 21 March 1924 by three Boston financial executives. is recognized as the first mutual fund. formed in London in 1868. read. The Foreign and Colonial government Trust. with the objective of diversification at low cost to investors. . it means ‘ Unity creates Strength’. and more investment trusts were launched. will see only a 5 per cent appreciation. History of Mutual Funds Although the Massachussets Investors Trust. But your investment in the mutual fund. ‘Profitable and Prudent’ or ‘Small Matters Grow by Consent’. if risk minimization is objective. promised “ the investor of modest means and same advantages as the large capitalists by spreading the investment over a number of stocks”. say. the lack of investment focus also means you gain less than if you had invested directly in a single security. a Dutch merchant invited subscriptions from investors to set up an investment trust by the name of Eendragt Maakt Magt (translated) into English. By various historical accounts. 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. Its success caught on. However.
laying down of rules for all industry participants. There was an initial euphoria among American investors over a new investment vehicle. It took a series of confidence building measures – the birth of a powerful market regulator. The schemes and total assets keeps on increasing from year to year. launched. but much of this died with the onset of the Great Depression in 1929..S. started a chain of events that would bring mutual funds to American homes for good. 1992 The Harshad Mehta fuelled bull market arouses middle-class interest in shares and mutual funds. UTI launches US-64. 1993 fund house to start operations. The Indian Time line 1963 1964 1986 1987 first off the blocks. enactment of legislation – for the mutual fund juggernaut to start rolling again More and more financial entities got into the act. SEBI set up to regulate industry. UTI Mastershare India’s first true ‘mutual fund’ scheme.The Birth of the Massachusetts Investors Trust in the U. Kothari Pioneer first private UTI is India’s first mutual fund. PSU banks and insurers allowed to float mutual funds. State Bank of India . in 1924. Private sector and foreign players allowed.
. Mutual fund distributors banned form giving commissions to investors. 2004 33 Mutual Funds exits. 2003 AMFI certification made compulsory for new agents. comes under SEBI purview. came into force. 1998 1999 UTI Master Index Fund is the country’s first index fund. 2000 2001 2002 The industry assets under management crosses Rs. floating rate funds and foreign debt funds debut.1994 1996 Morgan Stanley is the first foreign player. The takeover of 20 Century AMC by Zurich Mutual Fund is the first acquisition in the mutual fund industry.000 crore. Loads on schemes increased. SEBI’s mutual fund rules and regulation. which form the basis of the most current laws.00. 1. UTI bifurcated. US-64 scam leads to UTI overhaul. fund of funds launched.
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. . every individual is trying to accumulate lots and lots of wealth. The basic step for creating wealth revolve around the concept of asset allocation. The objective of average Indian changed from ‘finding a good job’ to become a crorepati.
Option of Borrowing 6. Liquidity 4. Returns 3. Bank Fixed Deposits. Study of some investment options on the basis of following parameters: 1. Inflation Protection 5.These days their are many investment option available like Post Office Schemes. Risk 2. Share. 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 . Mutual Funds. Etc. Before investing one has to be very clear about his financial goals and pros & cons of each investment option.
Debt Funds 8. person who can take risk can go for equity funds while who don’t take risks goes for debt fund. schemes with higher risk also have potential to provide higher returns. Monthly Income Plans 6. higher the return. Fund of Funds Open-ended mutual funds are indeed suitable for an appreciation in investment. . Open Ended Mutual Funds are of many types and the returns form them are also different: The major types being: 1.” There is no guarantee of returns as NAV of mutual funds depends on market. Equity Diversified Funds 2. Gilt Funds 7.g. For Open-ended mutual fund. Balanced Funds 5. Fig 2 shows risk and return relationship of various mutual funds.OPEN-ENDED MUTUAL FUNDS An open-ended mutual fund is the one whose units can be freely sold and repurchased by the investors. Therefore. we can go by saying “higher the risk.e. There is a direct relationship between risk and return i. it is stated that ‘Mutual Funds are subject to market risk’. Equity Tax Relief Funds (ELSS) 4. 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. Choice of mutual funds can vary depending on one’s appetite to take risks e. Equity Sectoral Funds 3. or NAV-linked prices.
and received the cheque in 3-4 days. INFLATION PROTECTION: .Open – ended Mutual Funds provide a fair amount of protection against inflation.Equity Sectoral Fund Equity Diversified Fund Equity Tax Relief Fund Balanced Funds RISK Monthly Income Plans Gilt funds Debt Funds RETURN Fig. But funds with an equity portfolio provide better protection than debt funds because equities.2 Returns given by various mutual funds schemes are shown in annexure 2. provide the . A majority of open-ended mutual funds allow switching among the various funds of the same AMC without any load. in case of Equity Linked Savings Schemes (ELSS) there is a lock in period of three years. LIQUIDITY: Instant Liquidity is the USP of open ended funds. Units of openended mutual funds can be redeemed on weekdays (Monday-Friday) at NAV or at NAV plus a small exit load. However. You generally get your redemption requests processed promptly. 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. over the long term.
000 per year. On redemption of an unit held for more than a year. long-term capital gains are taxed after indexing for inflation.Divided paid by mutual funds is fully tax-exempt at the hands of the investors. 1961. However.5 per cent dividend distribution tax. or at a flat rate of 10 percent. OPTION OF BORROWING: . Moreover. debt funds have to pay a 12.best means of beating inflation. . CLOSE – ENDED MUTUAL FUND Closed-ended mutual funds have a fixed umber of units. TAX BENEFITS:. Different banks have their own criteria on which they approve the loans. 10. 5. and a fixed tenure (3. realization will attract long-term capital gains tax of 20 percent plus surcharge after indexing for inflation. These funds have various objectives: generating steady income by investing in debt instruments.There are some banks that offer loans against mutual funds. 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. after which their units are redeemed or they are made open-ended. although. capital appreciation by investing in equities. one can cave tax by investing in Equity-Linked Savings Scheme (ELSS) under Section 88 of the Income Tax Act. or both by making an equal allocation of the corpus in debt and equity instruments. If redeemed before a year it will be termed as short term capital gain and taxed along with your other income. 10 or 15 years).
a mutual fund is more influenced by the value of its own portfolio than any other factor. some mutual funds also offer repurchase option in there closed-ended funds at an NAV-linked price after a certain lock-in period. Closed-ended debt funds. equity provided healthy appreciation in NAV in the long term. the closed-ended mutual funds are illiquid where they are listed and trade with heavy discount to their NAVs. Units of an equity fund are more frequently traded than a debt fund. One the other hand. 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. However. TAX IMPLICATIONS: While divided paid on open-ended mutual funds is fully tax-exempt. One cannot be completely sure of getting your full investment back. INFLATION PROTECTION: with stocks being better than bonds in providing returns on a long term basis. How ever. an equity closed-ended fund is better equipped to guard investment against inflation in the long run. the NAV of an equity fund rises and falls at a much faster pace. LIQUIDITY: The Indian stock markets lack depth and. Hence. Depending on their investment objective and under laying portfolio. with their conservative investment approach are best suited for income. on redemption or sale of units.Since units of closed-ended funds rise and fall in the market like any other stock. Also. closed-ended funds can be very volatile or be fairly stable. there are few listed closed-ended fund that may be acceptable by banks. they are well suited for an increase in your investment. Besides listing. realization will attract long-term . These funds declare dividend annually or semi-annually. thus. principal is not assured.
In such a case. 1961. the liquidity factor varies to a large extent. they’re also the riskiest investment option. Predictably. 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. are the basic building blocks of a company. 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. A company’s ownership is determined on the basis of its shareholding. over the long term. or at a flat rate of 10 per cent .Diversity. also called scrips. shares of some companies may not witness any trading for many days altogether. 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. However. . Most shares belonging to the A Group on the BSE are among the most liquid. Three golden rules for investment in equity. Shares do generate income form dividend as well as capital appreciation and have a strong potential to increase value of investment.capital gains tax of 20-per cent –plus surcharge after indexing for inflation. Average out & most importantly stay invested. Shares are. you can save tax by investing in Equity-Linked Savings Scheme (ELSS) under Section 88 of the Income Tax Act. you will not be able to sell your shares. by far. the most glamorous investment option for the simple reason that. So. Shares are meant to be long-term investments.000 per year. However. SHARES Shares.
it is called a Bank Fixed Deposit (FD). they can also be invested in capital gains bonds of the NHAI.INFLATION PROTECTION: Shares do provide for some protection although share prices have no relation to inflation. They are one the most common savings . it attracts a capital gains tax. 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. shares of well known and respectable companies are accepted a security. If the duration is more than one year. depending on the maturity period of the FD and the amount invested. OPTION OF BORROWING: You can pledge shares with a bank for raising a loan. The price may crash or rise far beyond the inflation rate. Alternatively. or a flat 10 percent. you are entitled to receive the principle amount as well as the interest earned at the prespecified rate during that period. listed shares acquired after March 1. The interest can be calculated monthly. 2003. The rate of interest for Bank Fixed Deposits varies between 4 and 6 per cent. capital gains are. However. TAX IMPLICATION: While dividend is not taxable at the hands of the investor. and are included in gross taxable income. However. Gains realised within one year of purchase of shares come under the shortterm capital gains tax. Generally. it attracts long-term capital gains tax. will not be subject to long-term capital gains tax. The rate is 20 per cent with indexation benefit. or Rural Electrification Corporation (REC). or annually. and varies form bank to bank. When your sell your shares at a profit. BANK FIXED DEPOSITS When you deposit a certain sum in a bank with a fixed rate of interest and a specified time period. At maturity. half-yearly. The banks have their list of approved shares that they accept as a security. NABARD. quarterly.
04 3. Since capital appreciation in any investment option depending on the safety of that option.00 5.25 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. LIQUIDITY: Bank FDs are liquid to the extent that premature withdrawal of a bank FD is allowed.1 While a Bank FD does provide for an increase in your initial investment. The facilities vary form bank to bank. break deposit through premature withdrawal. it may be at a lower rate than other comparable fixed-return instruments. and account for a substantial portion of an average investor’s savings.75 4. and overdraft facility etc.) effective 9 Aug.1 shows the return on FD’s INTEREST RATES PAYABLE ON DEPOSITS Duration Interest Rates ( % p. 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).a. . and banks being among the safest avenues.25 4. which frames regulations keeping in mind the interest of the investors. the increase in investment is modest.75 5.2. Fig 2. that involves a loss of interest. However. Some services offered are withdrawal through cheques on maturity.avenue.
in some cases. Over and above the scheduled interest payments as and when applicable. Bonds can be issued by companies. OPTION OF BORROWING: Yes.exempt. BONDS Bond is a loan given by the buyers to the issuer of the instrument. or even the government. which is lower than other assured return options. 12. banks cannot guard against inflation. In fact. loans upto 90 per cent of the deposit amount can be taken form the bank against fixed deposit receipts.000 is tax. b) NAABARD/ NHAI/ REC Bonds under Section 54EC of Income Tax Act. c) RBI Tax Relief Bonds . Examples are: a) ICICI Infrastructure Bonds under Section 88 of the Income Tax Act. TAX IMPLICATIONS: Interest income form a Bank FD qualifies for exemption under section 80L. 1961. this is the main problem with Bank FDs as any return has to be calculated keeping inflation in mind. the holder of a bond is entitled to received the par value of the instrument at the specified maturity date. 1961. which means that interest income upto Rs. 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.INFLATION PROTECTION: With a fixed return. financial institutions.
Some bonds are also available in the secondary market. Selling in the debt market is an obvious option. If the bond is listed. Some issues also offer what is known as ‘Put and Call option. the investor has the option to approach the issuing entity.Bonds are usually not suitable for an increase in your investment. In times of falling inflation. . and sell back the bond to the issuer. the company has the right to recall its debt obligation after a particular time frame. it finds it can raise the same amount at 10 per cent.’ Under the Put option. an investor can exercise his Put option if interest rates have moved up and there are better options available in the market. hereby facilitating an increase in your investment. This is because they offer a pre-determined rate of interest. a company issues a bond at an interest rate of 12 per cent . After 2 years. Similarly. after a specified period (say. This is called capital appreciation. It is common practice for FIs and corporates to raise funds for asset financing or capital expenditure through primary bond issues. The company can now exercise the Call option and recall its debt obligation provided it has declared so in the offer document. the resultant drop in rates leads to an increase in the price of the bond. However. it can be sold in the secondary debt market. In the Call option. The duration of a bond issue usually varies between 5 and 7 years. the real rate of return remains high. three years). LIQUIDITY: Investors can subscribe to primary issues of Corporates and Financial Institutions (FIs). INFLATION PROTECTION: This depends on the rate of inflation. but bonds do not offer any protection if prices are rising. For instance. There is low risk involved in bonds. in the rare situation where an investor buys bonds at a lower price just before a decline in interest rates.
upto a limit of Rs. and is considered completely risk-free. This lump-sum amount that you received on maturity ( at the end of 15 year) is completely tax. It is mainly suitable for long-term saving and for availing of tax incentives. borrowings depend on the credit rating of the instrument. any capital appreciation is subject to the Capital Gains Tax. it is easier to borrow against government bonds than against bonds issued by a company with a low credit rating.free. Since the PPF Scheme is backed by the GOI. Although factors like inflation and interest rate fluctuations may determine whether you opt for a PPF . and this is guaranteed by the Government of India (GOI). A PPF account is not aimed at generating capital appreciation since it has no secondary market. TAX IMPLICATIONS: There are specific tax saving bonds in the market that offer various concessions and tax-breaks. Your money grows @ 8 per cent per annum. 3. Tax free bonds offer tax relief under Section 88 of the Income Tax Act. For instance. Interest income form bonds. You can safety put your money in a PPF Scheme as it is risk-free. PUBLIC PROVIDEND FUND A public Providend Fund (PPF) is a long-term savings plan with powerful tax benefits. Your interest income is assured.000 exclusively for interest from government securities. However. plus Rs. if you sell bonds in the secondary market. You may consider this option if you are not looking for short-term liquidity or regular income.OPTION OF BORROWING: One can borrow against bonds by pledging the same with a bank. 12000. 1961. are exempt under section 80 L of the Income tax Act. The PPF Scheme has the backing of the GOI. Normal maturity period is 15 years from the close of the financial year in which the initial subscription was made. However.
The duration of a PPF account is 15 years.e.000 at the end of the fifth financial year. . LIQUIDITY: PPF certainly lacks liquidity.000). interest on loan is et at 6 per cent per annum. On expiry or five financial years form the end of the financial year in which the initial subscription was made. 50. In certain years when the inflation rate is high. Else. These rate are notified by the GOI in the Official Gazette form time to time. the decision to invest in a PPF account is based on the twin benefits of long-term savings and tax incentives. you can withdraw upto Rs. But if the interest rates will be applicable to your account. Subsequent interest calculations will be on the new rate of interest. INFLATION PROTECTION: A PPF account does not provide protection against high inflation. 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. and are calculated in such manner as in specified in the scheme. 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. 50. 15 complete financial years. there are no penalties for availing of the withdrawal facility. whichever is lower. For instance. This depends on the prevailing rate of interest on your PPF at any given time. 25. 90.000 (50 per cent of Rs. the real rate of return on your PPF may be marginal. if you have Rs.000 at the end of the eighth financial year. i. Importantly. you have the facility of one withdrawal every year. OPTION OR BORROWING: Loans can be availed of form the third to sixth year @ 1 per cent per annum if repaid within 36 months. You will continue to earn interest at the specified rate on your balance in the PPF Account after availing of the loan facility. and Rs.Account or not..
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
25 per cent. . 3 years is 7. Unlike certain other investment options. Time Deposits are one of the better ways to get a relatively high interest rate for your savings.25 and 7. growth in investment. The scheme pays annual interest. With backing form the Government of India. Time deposit for 1 year offers a coupon rate of 6. your principal is as assured as it is in any other post office account. the rate of growth is also high. and 5-year Time Deposits can be closed after one year. The only condition is that they are bound for some specific period of time. your interest income form Time deposits is assured . a 2 –years deposit offers an interest of 6. Since the rate of return in case of a Time Deposit is fixed .5 per cent return. Time Deposits return a lower. With a Government of India-baking . where returns are commensurate with the risk.25 per cent while 5-year Time Deposit offers 7. 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. 3. Therefore. but its is compounded quarterly. Time Deposits have a term ranging between 1 and 5 years. and is available through post-office across the country. they cannot guard you against a high rate of inflation.5 per cent. they entail a loss in the interest accrued for the time the account ha been in operation. compounded quarterly.5 per cent. thus giving a higher yield. LIQUIDITY: a time Deposit account can be opened at any post-office. There are no risks unique to this investment option.A Time Deposit is an investment option that pays annual interest rates between 6. While 2. but safer. Time Deposits are suitable for capital appreciation in the sense that your money grows at a pre-determined rate.
Investments at a glance is shown in Fig. The balance in you account can be pledged a security for a loan.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.. Character ‘H’ means “High”.e. TAX IMPLICATIONS: Interest income upto Rs. ‘L’ “Low” & ‘A’ means “ Adequate” . and no tax is deducted at source. the interest income form a Time Deposit is also exempt form TDS.2 Here. 2. 9. 1961. i.000 from Time Deposits is exempt under section 80L of the Income Tax Act. 2.OPTION OF BORROWING: You can borrow against a Time Deposit.
I have conducted my research on 40 respondents of Chandigarh from different age / income group. To study people perception about Mutual Funds. 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. It is very important for an industry to satisfy its customers.1 AGE GROUP . Customer is the king.PEOPLE PERCERTION ABOUT MUTUAL FUND In today’s market.
000 Rs. 3. 3 Lakh Rs. 50.2 Percentage 10% 20% 55% 15% 100% . 3 Lakh & Above Total No of Respondents 4 8 22 6 40 Table 3. 50. 1 Lakh – Rs. 1 Lakh Rs.1 Different Income Groups Income Below Rs.15% 5% 1-18 years 18-35 years 35-45 years 45% 35% 45 & above Fig.000 – Rs.
1 Lakh 20 % Rs. 3.3 SEX 100% 65% 50% 0% Male Female 35% Fig.000 – Rs. 3 Lakh & Above Fig. 1 Lakh – Rs.3.3 Marital Status Married Married Single Total No of Respondents 28 12 40 Percentage 70% 30% 100% .Income Groups Below Rs. 3 Lakh 55% Rs. 3. 50.2 Male / Female Sex Male Female Total No. 50.000 15% 10 % Rs. of Respondents 26 14 40 Percentage 65% 35% 100% Table .
4 Marital Status 80% 60% 40% 20% 0% 70% 30% Married Single Fig 3.Table 3.4 PEOPLE AWARENESS ABOUT MUTUAL FUNDS Answer Yes No Total No.5 Percentage 15% 100% .of Respondents 34 6 40 Table 3.
UNDERSTADING MUTUAL FUNDS Answer A B C Total No.100% 80% 60% 85% Ser i es1 40% 20% 0% 15% Yes No Fig.82% 23. It suggests that there is awareness amount people about mutual funds which is good for the mutual funds industry. of Respondents 3 8 23 34 Table 3.5 I conducted my research on 40 respondents.e.6 Uderstanding Mutual Fund Percentage 8.65 % .65% 100% 8. 3. Only 15 % of the respondents are not at all aware about mutual funds.82% 23. out of which 34 respondents are aware about mutual funds i.53 % a b c 67. 85%.53% 67.
23% 82. From this.76% 32.53% respondents understands it as an organization providing financial services.59% 61. how they work.82% of respondents thinks that mutual fund units are just similar to share. 8.23% 88. 23. what they are. 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 88.6 When it actually comes to understanding mutual funds.35% 70.Fig 3.35% . invests it is different securities and generate returns.65% respondents actually knows mutual funds as an trust that pools the saving of investors. 67. we can interpret that people understands about mutual funds.
8 .00% 1 Pru ICICI Franklin Templeton Birla Sunlife HSBC SBI Magnum Fig 3. Moving onto which AMC is known to people. INVESTMENTS IN MUTUAL FUNDS Answer Yes No Total No. UTI.36% 100% Table 3. HSBC & SBI are also popular.00% 80. most of the respondents knows about UTI & Pru ICICI.35% of the respondents knows about Franklin Templeton shares 70.Popularity Chart UTI 100.59% of respondents are aware of Birla Sunlife.23%. of Respondents 23 11 34 Percentage 67.7 Only 5.00% 20.88 % of respondents knows only one AMC i.00% 0. Majority of AMC’s knows about 4-5 AMC’s. 88.e. expressed in percentage as 88.64% 32.00% 60. This clearly shows that UTI & Pru ICICI are the most popular AMC’s.00% 40.
25% 25% .39% 17. .00% 60.50% 50% & above Total No of respondents 0 15 4 4 23 Table 3.36% Percentage Yes No Fig 3. This suggests that lots of people of Chandigarh have invested in mutual funds.64% 32.50% 17.36% of respondents are there who have not invested in mutual funds.22% 50% & above Fig 3.00% 40.9 67.39% 65.39% 17.00% 0.00% 0 – 10% 10% .8 Answer 0 – 10% 10% .39% of respondents have invested 25.80.00% 10. Only 32.00% 67.9 Percentage 0% 65.00% 20.00% 70.64% of respondents have invested their savings in mutual funds.22% People have invested 10-25% of their savings while 17. 67.00% 30.00% 50.50% & 50 % and above in mutual funds.22% 17.39% 100% Percentage of Savings 0.25% 25% .
00% 50.43%.00% 70.60% 90.56% of respondents have invested.60% 21. Thus we can say.00% 1 69.00% 30.43% Balanced funds 21.00% 40.00% 10.00% 80.00% 0.43% 82. People have also invested their savings in debt funds expressed in percentage as 30.10 Balanced funds are more popular as 82.74% of respondents have invested in them.56% 30. Popularity of funds of fund is really low as only 21.74% 82.56% Equity Debt 30.00% 60. Balanced Funds are the most popular as they have both equity and debt portfolio.POPULARITY OF OPEN-ENDED MUTUAL FUND SCHEMES Answer Equity Debt Balanced funds Fund of Funds No. of Respondents 16 7 19 5 Percentage 69.00% 20.60% of people have invested in these schemes followed by equity funds where 69. RETURNS FROM INVESTMENT IN MUTUAL FUNDS .74% Fund of Funds Percentage Fig 3.
05% 100% Table 3.52% Fig. of Percentage 7 13 3 23 Percentage 30. we can predict that returns form mutual funds are good. 3.43% 56.52% 13.11 56.05% of respondents got low returns. By looking at the above figures.43% have earned handsome high return.11 Percentage Low 13.43% Good 56. 13.52% of people have enjoyed good returns from their investments in mutual funds whereas 30.05% High 30. RISK ASSOCIATED WITH MUTUAL FUNDS .Answer High Good Low Total No.
74% of respondents think that there is low risk associated with mutual funds. 17.00% 40.87%) who have invested in mutual funds see adequate risk in mutual funds.87% 100% Table 3.39% of respondents perceives mutual funds as very risky option where as 21.00% 50. .Answer High Low Adequate Total No.00% 60. 3.00% 21.00% High Low Adequate 17. of Respondents 5 4 14 23 Percentage 17.00% 30.74% 20.00% 10.87% 60.12 Risk 70.00% 0.39% Fig.74% 60.12 People of Chandigarh (60.39% 21.
00% 20.00% 35. of Respondents 8 11 4 23 Percentage 34.13 47.83% of respondents invests in mutual funds because of higher returns whereas 34.00% 45.00% 15.13 Reasons for investments 50.83% 34.00% 47.78% 47.00% 10.39% of investors invests in mutual funds for liquidity advantage.78% of respondents invests in mutual funds for tax benefits.00% 0.MAIN REASON FOR INVESTMENT IN MUTUAL FUNDS Answer Tax Benefits Higher Returns Liquidity Total No. Only 17.39% 100% Table 3.00% 40. .00% 30.83% 17.00% 25.78% 17. 3.00% 5.39% Tax Benefits Higher Returns Liquidity S1 Fig.
00% 0.00% 1 No.00% 30.00% 20. EXPERIENCE OF INVESTORS ABOUT MUTUAL FUND Answer No.70% 100% Table 3.60% 14. of Respondents 5 17 7 5 34 Percentage 14.70% 3rd 4th & above Percentage Fig.60% 14.00% 10.70% 50% 20.3.00% 40.00% 50. of Respondents Percentage . other option is good.14 The above data clearly indicates that mutual funds standing vs.70% 14.RANKING OF MUTUAL FUNDS VS OTHER INVESTMENT OPTION Answer 1st 2nd 3rd 4th & above Total 60.14 50% 1st 2nd 20.
EXPECTATIONS FROM INVESTMENT OPTIONS People of Chandigarh expects high returns. low risks professional management. we can conclude that people that people of Chandigarh are aware of mutual funds and understands what mutual funds are. after sales service and liquidity. They have also earned a very handsome return which is more than other investment options. from an investment option . People of Chandigarh expects high returns.13% have bad experience in mutual fund. professional management. But risk associated with mutual funds is one the higher side.13% 100% Table 3. transparency. People of Chandigarh invests about 10-50% of their savings in mutual funds. They think that mutual funds provide better returns over a longer period of time. 60. People’s experience about mutual funds is good. but people invests because of various reasons like tax benefits. after sales service and liquidity form an investment. easy availability.87% of respondents agrees with it whereas 39.Good Bad Total 14 9 23 60. higher returns better returns. Conclusion: From above data. easy availability. liquidity.15 The experience of investors about mutual funds industry is quite good. UTI & Franklin Templeton are popular amongst the people of Chandigarh. AMCs like Pru ICICI.87% 39. low risks. transparency. They have also invested their savings in various mutual funds schemes.
professional management. So. All these qualities are not generally present in single investment option. which is present in mutual funds.As an investment options. Mutual Funds provide high returns with risk associated with it. DO YOU EXPECT THESE FROM YOUR INVESTMENTS? IDEAL RETURNS TAX EFFICIENCY ANYTIME LIQUIDITY FLEXIBILITY TRANCPARENCY SAFETY THE ANSWER IS MUTUAL FUNDS . power of diversification etc. tax benefits. better liquidity. option of borrowing. inflation protection. we can say “Mutual Fund is the smart way to invest”.
CONTROL OF MONEY SUGGESTION & RECOMMENDATIONS Investment Planning is necessary for all individuals to achieve their financial goals. One has to plan his limited resources to avail maximum benefit about of them. . 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.
To do this. After checking his score. before investing one has to be vary sure about his financial goals and risk taking capacity. the right investment is a balance of three things: Liquidity. In each case. one can know what kind of investor he or she is. So. one should check his risk taking capacity with ‘ Investment Style Check’ enclosed in Annexure IV. 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: .Choosing the best investment option one depends in his personal circumstances as well as general market conditions. Safety and Return.
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. Returns are not guaranteed and assured Take long term approach towards investments. Every time is good for investments. Past performance do not indicate future performance. Remember: Mutual funds are subject to market risk and there is no assurance that fund objective will be achieved. one has to plan his investments and as proved by studies that: “MUTUAL FUNDS IS A BEST LONG TERM INVESTMENT OPTION” . NAV fluctuates depending on forces affecting capital markets. Do not put all eggs in one basket Do not stop working on mutual funds Do not time the market .
50.Married . 3 Lakh & Above Sex: Male Female Marital Status: Married Un.Annexure I QUESTIONAIRE Personal Information: Name :_________________________ Age:___________________________ Address:________________________ _______________________________ Income : Below Rs.000 Rs.000 – Rs. 50. 1 Lakh Rs. 3 Lakh Rs. 1 Lakh – Rs.
25% c) 25% . invests it in different securities and generate return. 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 . b) It is an organization providing financial services.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. c) It is an trust that pools the savings of investors.50% d) 50% & above Q-6) In which Mutual Fund schemes have you invested? .10% b) 10% .
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 .
Crores Franklin Infotech UTI Growth Sector – IT Reliance Pharma Fund Alliance Buy India Return % as on 21.17 59.96 12.29 9.58 17.34 15 days 6.90 75.89 88.19 2.96 50.82 17.77 64.97 15.12.47 2 year 62.64 4.09 19.90 28.10 1519.62 1 years 36.70 1 years 29.04 10.2004 7 days 3.58 32.36 203.61 46.56 2257 13.33 19.28 208.02 4.63 9.94 10.54 437.57 3.77 29.60 9.87 Since Inception 23.52 3 month 16.96 35.74 4.14 32.68 6.99 47.81 41.07 68.43 154.91 1 month 4.49 14.83 7.29 25.48 6.48 6 months 51.A 50.71 477.52 3.14 40.24 23.14 24. Crores Birla Advantage Fund HSBC Equity Fund FT India Bluechip Pru ICICI Power Fund Reliance Vision Fund Return % as on 21.45 5.14 4.96 34.35 Since Inception 30.Annexure II Return of Various Mutual Fund Schemes EQUITY DIVERSIFIED FUNDS Scheme Fund Corpu s in Rs.08 4.76 6 months 44.36 3.15 3.89 24.50 12.95 58.A 64.95 N.37 15 days 4.94 1938.12.14 EQUITY SECTORAL FUNDS Scheme Fund Corpu s in Rs.30 2 year 36.23 3 month 23.24 736.15 1 month 12.02 20.24 5.2004 7 days 3.29 .76 N.
36 6 months 47.34 459 93.11 2.66 1.79 19.05 7.88 3. Crores Birla Equity Plan Franklin India Taxshield Pru ICICI Tax Tate Tax Saving HDFC Tax Saver Return % as on 21.95 2.10 9.64 BALANCED FUNDS Scheme Fund Corpu s in Rs.38 15 days 1.69 1.24 22.51 6 months 36.28 15.28 0.15 EQUITY TAX RELIEF FUNDS Scheme Fund Corpu s in Rs.51 0.28 10.03 40.22 17.62 15 days 5.10 GILT FUNDS Scheme Fund Corpu Return % as on 21.12.30 2.55 25.81 36.44 71.10 Since Inception 27.41 2.55 0.02 3.83 41.61 4.04 8.12 17.A 6.76 13.85 39.34 549.76 40.40 32.97 54.33 35.54 1.14 1161.2004 7 days 3.41 1 years 27.91 1.31 32.47 N.A 2.67 48.77 8.12 41.23 1.55 27.38 2.15 40.92 2 year 10.39 6.25 61.59 2.20 10.04 28. Crores Birla MIP FT India MIP Tata MIP Reliance MIP UTI MIP Return % as on 21.04 0.71 -0.41 9.Birla MNC 133.42 28.56 3 month 3.08 1.78 6.99 3.66 4.37 13.05 13.02 1 month 11.62 12.87 2.12.24 23.33 126.10 19.13 34.24 283 575.36 4.43 79.80 1.97 752.59 6.01 29.2004 7 days 3.73 54.08 25.46 27.73 8.54 8.72 Since Inception 30.18 2.74 1 month 10.04 0.04 37.16 3 month 17.01 14.44 1 years 32.43 38.95 14.64 N.37 683.62 1 years 6.82 65.88 2.55 6.2004 7 days 0.63 0.83 9.66 11.71 32.02 4.13 8.02 0.83 158. Crores Alliance 95 fund Birla Balance Fund HDFC Prudence Fund UTI Balanced Fund Tata Balanced Fund Return % as on 21.30 12.49 83.43 6.74 13.11 43.27 1.50 1 month 2.32 3 month 23.12.99 6 months 6.03 73.47 17.72 48.75 0.17 4.13 2 year 81.58 MONTHLY INCOME FUNDS Scheme Fund Corpu s in Rs.10 137.2004 .46 0.50 2 year 46.22 Since Inception 12.26 3.04 15 days 5.85 3.47 28.62 13.12.
60 0.62 3 month 0.30 1. Gupta .72 1.63 2.24 29.02 33.13 4.12.29 4.33 Since Inception 9.44 1.88 1.41 0.19 2.21 1. Crores Birla Gilt Plus HSBC Gilt STP Sahara Gilt Fund Reliance G-Sec Fund Pru ICICI Gilt Fund 20.82 4.42 0.32 1.32 0.28 0.11 0.07 0.10 15 days 0.98 3.93 0.A 2.99 6 months 2.13 15 days 0.15 0.61 N.29 103.21 0.61 Annexure III BIBLIOGRAPHY Books Referred: Financial Management Merchant Banking & Financial Services By Shashi K.74 6 months 2.84 9.13 5.07 0.26 -0.17 Since Inception 5.25 4.80 0.63 -1. R.87 250.26 1 month 0.s in Rs.K.47 0. Bansal Magazines Cited: Outlook Layman’s Guide to Mutual Fund Top Performer .48 263.42 0.55 3 month 1.17 0.49 1.18 0.50 31.11 0.40 1265.01 2 year N.25 DEBT FUNDS Scheme Fund Corpu s in Rs.12 0.19 1 month 0.36 1.55 1.89 1 years 4.95 3.18 0.70 1 years 4.51 1.08 0.A 5.44 113.50 1.65 N.19 0. Sharma By Lalit K.67 4.59 3.A 6.08 0.A 6.14 0.64 1.65 0.10 0.52 0.67 2 year 6.35 1.98 7 days 0.16 0.65 6.99 4. Crores Birla Bond Plus Reliance STP HDFC STP SBI Magnum STP Templeton India STP Return % as on 21.20 0.2004 7 days 0.51 N.18 6.
Investors India Net Watch: www. Investment Style Check is a very common tool.com www. Greater the Return & Vice Versa.moneycontrol. Higher the Risk. My age is a) above 50 b) Between 30-50 c) Between 24-30 2. It is an follows: 1. To evaluate one’s risk bearing capacity.mutualfundsindia.com Conference Attended: Bajaj Capital Investor’s Meet Annexure IV Investment Style Check Risk and return always go hand in hand. I have following dependents a) More than 2 dependents b) 1-2 dependents c) None .
I am most concerned about: a) Safety of my principal b) Earning returns above the inflation rate c) Earning Returns 6. 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 current portfolio includes majority of : a) Govt. I would likely my investment to grow a) Steadily b) At an average rate c) Fast 8. While investing in my funds. c) Equity Share 7. 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 5.3. Securities and Bonds b) Mutual Funds and Company FDs. My job is a) Secured b) Not secured c) Does not affect me whether it secured or not 4.
c) For over 10 yrs and above 10. My knowledge about various investment schemes is a) Nil b) Average c) Good 12. b) For the lat 5-10 yrs.5% b) 5% . What percentage of you income do you invest? a) Upto . 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 has your portfolio allocation changed over time .10% c) Above 10% 11. How long have you been investing ? a) For the last 1-5 yrs.c) I would invest more in it 9. 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.
306 Between 307 .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’ .238 Between 239 . 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. How often do you monitor you investments a) Daily b) Monthly c) Occasionally 17.14.374 Between 375 .510 Very Conservative Investor Conservative Investor Moderate Investor Aggressive Investor Very Aggressive Investor . 20 points for answer ‘b’ . 30 points for answer ‘c’ Between 170 . 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.
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