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  • Performance measures
  • To measure the fund¶s performance, the comparisons are
  • usually done with
  • Financial Planning For Investors (Ref. To Mutual Funds)
  • Websites
  • Journals & Other References


A Study On
³Need of financial advisor for Mutual Fund Investors´

A project report submitted to in the partial fulfillment of requirement of the award of MASTER OF BUSINESS ADMINISTRATION

Submitted by Sanjay Padaliya Arpan Soni

M.B.A (Sem-4th ) Under the guidance of Mr. Hitesh Daxini



³The only place where success comes before work is in the dictionary.´ It is great exposure for us using our Theoretical knowledge which We have learnt till 4th semester of Master of Business Administration (M.B.A.) in our project work

We like to first heartily thanks to GUJARAT TECHNOLOGICAL UNIVERSITY (GTU) for including project in our M.B.A. syllabus. It is helpful to learn real situation of industry and helpful for increasing in our practical knowledge. We thankful to Dr. Sandip Solanki Director of MHGSM. For giving us chance to do our project work.

We are thankful to our project guide Mr. Hitesh Daxini for guiding during our project tenure. As he helps us whenever we need and spare his valuable time. Without his this project is not possible.

We are thankful to our parents and our friends as they always motivate us and help us directly or indirectly in our project work.

Sanjay Padaliya Arpan Soni



Hereby declare that the project report entitled ³NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTORS´ under the guidance of Mr. Hitesh Daxini Submitted in partial fulfillment of the requirements for the award of the degree of Master of Business Administration to GUJARAT TECHNOLOGICAL UNIVERSITY, Rajkot is our original work ± research study ± carried out and not submitted for the award of any other degree/diploma/fellowship or other similar titles or prizes to any other institution/organization or university by any other person.


Sanjay Padaliya Arpan Soni

NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR INDEX Sr.No. 1 2 Subject Executive Summary Mutual Fund y Introduction y Advantages of Mutual Fund y Drawbacks of Mutual Fund y Risk in Mutual Fund y Performance of Mutual Fund In India y Organization of Mutual Fund y Process of Invest in Mutual Fund y Cost Associated with Mutual Fund y Categories of Mutual Fund y Measuring Performance of Mutual Fund Systematic Investment Plan Portfolio Analysis Tools Research Methodology y Literature Review y Objectives of Research y Data Analysis y Testing Hypothesis y Findings And Conclusion y Recommendations y Sample Questionnaire Glossary of Some Concepts Conclusion Bibliography Page No. 3 4 5 6 7 8 .

Hope the research findings and conclusions will be of use. does fund performance persists and the topping of all the servings in the form of portfolio analysis tool and its application. This project as a whole can be divided into two parts: The first part gives an insight about the mutual funds and its various aspects. . Other than that the real servings come when one moves ahead. The language has been kept simple so that even a layman could understand. It has also covered why people don¶t want to go for financial advisors? The advisors can take further steps to a pproach more and more people and indulge them for taking their advices. collected through a survey done on 200 people. a special report on Systematic Investment Plan. All the data have been well analyzed with the help of charts and graphs. Some of them are: why has it become one of the largest financial intermediaries? How investors do choose between funds? Most popular stocks among fund managers. All the topics have been covered in a very systematic way. at the same time it gave us enough scope to implement our analytical ability. One can have a brief knowledge about mutual funds and all its basics through the project. The data collected has been well organized and presented. Some of the most interesting questions regarding mutual funds have been covered. most lucrative sectors for fund managers. It covers the topic´ need of financial advisors for mutual fund investors´. The second part consists of data and their analysis.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR EXECUTIVE SUMMARY This project has been a great learning experience for us.


The income earned through these investments and the capital appreciation realized by the scheme is shared by its unit holders in proportion to the number of units owned by the (pro rata). While the concept of individuals coming together to invest money collectively is not new. investments and transaction processing. Each Mutual Fund scheme has a defined investment objective and strategy. Price changes in these assets are driven by global events occurring in faraway places. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. professionally managed portfolio at a relatively low cost. Markets for equity shares. In effect. . the mutual fund in its present form is a 20th century phenomenon. The large pool of money collected in the fund allows it to hire such staff at a very low cost to each investor. understand their implications and act speedily. These could range from shares to debentures to money market instruments. bonds and other fixed income instruments. Globally. An individual also finds it difficult to keep track of ownership of his assets. A mutual fund is answer to all these situations. the mutual fund vehicle exploits economies of scale in all three areas ± research. In fact. It appoints professionally qualified and experienced staff that manages each of these functions on a full time basis. A mutual fund is the ideal investment vehicle for today's complex and modern financial scenario. brokerage dues and bank transactions etc. there are thousands of firms offering tens of thousands of mutual funds with different investment objectives. Anybody with an invest able surplus of as a few thousand rupees can invest in Mutual Funds. real estate.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR INTRODUCTION A Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. A typical individual is unlikely to have the knowledge. Thus a Mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified. investments. derivatives and other assets have become mature and information driven. inclination and time to keep track of events. skills. mutual fund gained popularity only after the Second World War.

The value of each unit of the mutual fund. Government securities. in the birthplace of mutual funds . which pools up the money from individual / corporate investors and invests the same on behalf of the investors /unit holders. As financial markets become more sophisticated and complex. From this. bonds. investors need a financial intermediary who provides the required knowledge and professional expertise on successful investing. In India with more person getting interested to earn more from their saving to minimize the effect of growing inflation mutual funds are becoming one the best way to achieve the required solution. is mostly calculated daily based on the total value of the fund divided by the number of shares currently issued and outstanding..the fund industry has overtaken the banking industry: more funds are under mutual fund management than deposited with banks. in equity shares. all expenses are deducted and the resultant value divided by the number of units in the fund is the fund¶s NAV. NAV = Total value of the fund Number of shares currently issued and outstanding .S. . Despite the fact that mutual funds are still a new financial intermediary in India. Call money markets etc. The value of all the securities in the portfolio in calculated daily. they have started opening up many exciting investment opportunities for the Indian investor. and distributes the profits. In other words we can say that A Mutual Fund is a trust registered with the Securities and Exchange Board of India (SEBI).NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR Today. short-term money market instruments.A. Bonds. and/or other securities. A mutual fund is a professionally-managed firm of collective investments that pools money from many investors and invests it in stocks. As a result. known as the net asset value (NAV). mutual funds collectively manage almost as much as or more money as compared to banks Mutual Funds now represent perhaps the most appropriate investment opportunity for most investors.the U.

Investors purchase funds because they do not have the time or the expertise to manage their own portfolios. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR ADVANTAGES OF MUTUAL FUNDs Professional Management The primary advantage of funds (at least theoretically) is the professional management of your money. In other words. a mutual fund allows you to request that your shares be converted into cash at any time. your risk is spread out. its transaction costs are lower than what an individual would pay for securities transactions. Large mutual funds typically own hundreds of different stocks in many different industries. It wouldn't be possible for an investor to build this kind of a portfolio with a small amount of money. A mutual fund is a relatively inexpensive way for a small investor to get a full-time manager to make and monitor investments. the less any one of them can hurt you (think about Enron). the more stocks and bonds you own. Liquidity Just like an individual stock. . Diversification By owning shares in a mutual fund instead of owning individual stocks or bonds. Economies of scale Because a mutual fund buys and sells large amounts of securities at a time.

even if you reinvest the money you made. you might not make as much money on your investment as you expected. However. no matter how balanced the portfolio is. anyone who invests through a mutual fund runs the risk of losing money. financial consultants or financial planners. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. Taxes During a typical year. Fees and commission All funds charges administrative fees to cover their day to day expenses. Some funds also charge sales commission or ³loads´ to compensate brokers. If the entire stock market declines in value.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR DRAWBACKS OF MUTUAL FUNDs No guarantee No investment is risk free. you will pay taxes on the income you receive. Management risk When you invest in a mutual fund. Even if you do not use a broker or other financial adviser. if your fund makes a profit on its sales. if you invest in Index funds. you forego management risk because these funds do not employ managers. you depend on the fund manager to make the right decisions regarding the fund¶s portfolio. the value of mutual fund shares will go down as well. most actively managed mutual funds sell anywhere from 20 to 70 % of the securities in their portfolios. If the manager does not freeform as well as you had hoped. you will pay a sales commission if you buy shares in a load fund. . Of course.

The value of financial assets depends on their return and risk patterns. and they are to be borne by the investor compulsorily. Some risks can be controlled by the investors. The returns of the investment depend upon the risk of such investment. The greater is the variability in the possible outcome. relative to other assets in a portfolio. the greater is the risk. All investments involve some risk. Risk can be defined as ³the chance factor in trading in which expected or perspective advantage. profit or return may not materialize´ The actual outcome of investment may be less than the expected outcome. . gain. the variance and the standard deviation of return are used as the alternative statistical measures of the risk of the financial asset. co-variance measured the risk of the assets. The objective of any investor is to minimize the risk and maximize returns.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR RISK ASSOCIATED WITH THE INVESTMENT IN THE MUTUAL FUNDS Savings are invested in various investment opportunities for earning better returns. Similarly. Others cannot be controlled. Generally.

The value of the scheme¶s investment may be affected by factors affecting capital markets such as price and volume. how stable is the company or entity to which you lend your money when you invest? How certain are you that it will be able to pay the interest you are promised. currency exchange rates. Market Risk At times the prices or yields of all the securities in a particular market rise or fall due to broad outside influences. For mutual fund investments. political. Whenever the rate of inflation exceeds the earnings on your investment. When this happens. interest rates. Credit Risk In short. This change in price is due to ³market risk. the stock prices of both an outstanding. foreign investment. economic or other developments. risks would include variability.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR DIFFERENT TYPES OF RISK IN MUTUAL FUNDs Risk is an inherent aspect of every form of investment. or repay your principal when the investment matures? . highly profitable company and a fledgling corporation may be affected. you run the risk that you will actually be able to buy less.´ Inflation Risk Sometimes it is referred to as ³loss of purchasing power´. volatility in the stock markets. not more. or period-by-period fluctuations in total return. changes in government policy.

Changes in the Government Policy Changes in government policy especially in regard to the tax benefits may impact the business prospects of the companies leading to an impact on the investments made by the fund. prices of the securities fall and when interest rates drop. the NAV of the schemes are linked to the equity performance of such companies and may be more volatile than a more diversified portfolio of equities. Bond prices are influenced by movements in the interest rates in the financial system. the prices increase.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR Interest Rate Risk Changing interest rates affect both equities and bonds in many ways. Investment Risk In the sectored fund schemes. Generally. Accordingly. The fund manager may therefore be unable to quickly sell an illiquid bond and this might affect the price of the fund unfavorably. Liquidity Risk Thinly traded securities carry the danger of not being easily saleable at or near their real values. investments will be predominantly in equities of selected companies in the particular sectors. Liquidity risk is characteristic of the Indian fixed income market. when interest rates rise. Interest rate movements in the Indian debt markets can be volatile leading to the possibility of large price movements up or down in debt and money market securities and thereby to possibly large movements in the NAV. .

since only closed-end funds were floated in the market.This good record of UTI became marketing tool for new entrants. people were miles away from the preparedness of risks factor after the liberalization. Let me concentrate about the performance of mutual funds in India through figures.540bn. the investors disinvested by selling at a loss in the secondary market. And their idea of this investment was good. but UTI remained in a monopoly position. . But yes.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR PERFORMANCE OF MUTUAL FUND IN INDIA Let us start the discussion of the performance of mutual funds in India from the concept of mutual fund took birth in India. 67bn. The performance of mutual funds in India in the initial phase was not even closer to satisfactory level. For 30 years it goaled without a single second player. in March 1993 and the figure had a three times higher performance by April 2004. Though the 1988 year saw some new mutual fund companies. The expectations of investors touched the sky in profitability factor. The net asset value (NAV) of mutual funds in India declined when stock prices started falling in the year 1992. Those days. One more thing to be noted. 1. There were rather no choices apart from holding the cash or to further continue investing in shares. the Assets under Management rose to Rs. The year was 1963. to park their money in UTI mutual fund. However. by the end of 1987. People rarely understood. and of course investing was out of question. 470 bn. The Assets under Management of UTI was Rs. some 24 million shareholders were accustomed with guaranteed high returns by the beginning of liberalization of the industry in 1992. Unit Trust of India invited investors or rather to those who believed in savings. It rose as high as Rs. From Rs. the market regulations did not allow portfolio shifts into alternative investments. 67bn.

as long as mutual fund companies are performing with lower risks and higher profitability within a short span of time.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR The performance of mutual funds in India suffered qualitatively. Some of them were like relaxing investment restrictions into the market. At last to mention. introduction of open-ended funds. with funds trading at an average discount of 1020 percent of their net asset value. The more the variety offered. more and more people will be inclined to invest until and unless they are fully educated with the dos and don¶ts of mutual funds. and paving the gateway for mutual funds to launch pension schemes. mutual funds have not yet recovered. the losses by disinvestments and of course the lack of transparent rules in the where about rocked confidence among the investors. The supervisory authority adopted a set of measures to create a transparent and competitive environment in mutual funds. . Partly owing to a relatively weak stock market performance. The measure was taken to make mutual funds the key instrument for long-term saving. The 1992 stock market scandals. the quantitative will be investors.


holds the securities of various schemes of the fund in its custody. which has sponsor. The trustees of the mutual fund hold its property for the benefit of the unit holders. 2. A custodian. Sponsor Any person acting alone or in concert with another body corporate comparable to a promoter of a company as he gets fund registered with SEBI. The trustees are vested with the general power of superintendence and direction over AMC. . The trust is established by a sponsor or more than one sponsor who is like promoter of a company. Asset Management Company (AMC) and custodian. trustees. Mutual Fund as Trust Constituted as Trust under Indian Trust Act. who is registered with SEBI.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR ORGANISATION OF MUTUAL FUND A mutual fund is set up in the form of a trust. 1882 (and registered under Indian Registration Act. They monitor the performance and compliance of SEBI regulations by the mutual fund. Trust deed to be executed by the sponsor in favor of trustees. AMC approved by SEBI manages the fund by making investments in various types of securities. For person to qualify as sponsor at least 40% of the initial Net worth of AMC should be contributed by him should be in the financial services business for a period of not less than five years should possess sound financial track record of over five years & should have positive net worth in all the immediately preceding five years form a trust and appoint Board of Trustees appoint AMC directly or in concert with Trustees.  Sponsor  Mutual Fund as Trust  Asset Management Company  Other Fund Constituents 1. Sponsor acts as Settler of trust contributes initial trustee to hold the investors¶ assets in trust. 1908).


3. Trustees

Eligibility of Board of Trustees or a Trustee Company  Not guilty of moral turpitude  Not convicted (economic offence and securities laws)  Not part of AMC (director, employee or officer of AMC)  Appointment approved by SEBI  More than one trusteeship (in mutual fund industry; approved by SEBI)  At least two third should be independent  µMeaning of Independence¶ Rights of Trustees  Appoint AMC with SEBI approval  Approve schemes floated by AMC  Right to necessary information  Remedial action to ensure that business is conducted as per SEBI regulation ± right to dismiss AMC with approval from SEBI and in accordance with regulations  Ensure based on quarterly review that any shortfall in NW of AMC is made up.

Obligations of Trustee 

Investment Management Agreement between trustee and AMC with approval from SEBI (4th schedule)  Monitoring of AMC by trustees ± right to information  Right to dismiss the AMC with approval SEBI  Must ensure transactions are in accordance with trust deed  Ensure AMC has proper systems and procedures  Due diligence in appointment of brokers  Ensure AMC is managing funds independent of other activities

NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR  Half yearly report of fund activities and certificate that AMC has been managing funds independent of other activities

4. Other Fund Constituents
i. Custodian and Depositories For safekeeping of securities and participating in clearing system through approved depository companies. Entity independent of the sponsor¶s direction and responsibility of the Trustees.


Bankers Bankers are dealing with money for buy and sale of units, paying and receiving funds for investments, discharging obligations for operational expenses.


Transfer Agent Transfer agents are used for used for issuing and redeeming units, preparation of transfer documents, updating investor records, in-house or external agency.


Distributors Distributor enable fund to sell units over a wide bas of investors, brokers, banks, individual agents.


1. Reading a Prospectus 2. Objective Statement 3. Performance 4. Fees and Expenses

The most common method to invest in a fund once you are in it is to simply fill out investment forms and write a check to the mutual fund family. This is probably the easiest but it often takes a few days or even a week to have the funds credited to your account.

Another method that is common is automatic withdrawals. These allow you to have a certain amount, which you choose to be deducted from your bank account each month. These are excellent for getting into the habit of investing on a regular basis.

The fund will also provide information on how you can redeem your shares. One common way is to request redemption by filling out a form or writing a letter to the mutual fund family. This is the most common method but it isn¶t the only one. Now that you understand the basics of a prospectus, you are one step closer to getting started in mutual funds. So when you finally receive the information you requested on a mutual fund, look it over carefully and make an educated decision if it is right for you.

Therefore. By investing a fixed sum each month. financial independence. lifestyle. the quantum of risk you are willing to take and your cash flow requirements. you buy fewer units when the price is higher and more units when the price is low.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR PROCESS OF INVESTING IN MUTUAL FUND  Identify Your Investment Needs Your financial goals will vary.  Invest Regularly The best approach is to invest a fixed amount at specific intervals. This is called rupee cost averaging and do investors all over the world follow a disciplined investment strategy. which suits your requirements. The offer document of the scheme tells you its objectives and provides supplementary details like the track record of other schemes managed by the same Fund Manager.  Select the Ideal Mix of Schemes Investing in just one Mutual Fund scheme may not meet all your investment needs. buying a home or finance a wedding or educate your children or a combination of all these needs.  Choose the Right Mutual Fund The important thing is to choose the right mutual fund scheme. You can begin by defining your investment objectives and needs. the first step is to assess your needs. which could be regular income. family commitments. thus bringing down your average cost per unit. and level of income and expenses among many other factors. Your may consider investing in a combination of schemes to achieve your specific goals. say every month. based on your age. .

The power of compounding lets you earn income on income and your money multiplies at a compounded rate of return.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR  Start Early It is desirable to start investing early and stick to a regular investment plan. you will make more than if you wait and invest later.  The Final Step All your need to do now is to for online application forms of various mutual fund schemes and start investing. . You may reap the rewards in the years to come. If you start now.

ongoing yearly fees to keep you invested in the fund. The expense ratio is composed of the following: 1. etc. Some critics of the industry say that mutual fund companies get away with the fees they charge only because the average investor does not understand what he/she is paying for. The Expense Ratio The ongoing expenses of a mutual fund are represented by the expense ratio.fund managers are definitely not going hungry! It's true that paying managers is a necessary fee. 2. customer service. The Cost Of Hiring The Fund Manager(S) Also known as the management fee. Some funds are excellent at minimizing these costs while others (the ones with the cappuccino machines in the office) are not.5% and 1% of assets on average. . These costs eat into your return. but don't think that a high fee assures superior performance. While it sounds small. Transaction fees paid when you buy or sell shares in a fund. cappuccino machines. What's even more disturbing is the way the fund industry hides costs through a layer of financial complexity and jargon. Think about it for a second: 1% of 250 million (a small mutual fund) is $2. Administrative Costs These include necessities such as postage. and they are the main reason why the majority of funds end up with sub-par performance.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR THE COST ASSOCIATED WITH MUTUAL FUND Costs are the biggest problem with mutual funds. This is sometimes also referred to as the management expense ratio (MER). this fee ensures that mutual fund managers remain in the country's top echelon of earners. this cost is between 0. record keeping. 2.5 million . Fees can be broken down into two categories: 1.

Here is how certain loads work 3. Back-end loads (also known as deferred sales charges) These are a bit more complicated.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR On the whole. Loads are just fees that a fund uses to compensate brokers or other salespeople for selling you the mutual fund. If you sell a fund within a certain time frame. In such a fund you pay the back end load. . you don't have to pay them. 4. All you really need to know about loads is this: don't buy funds with loads. and $950 will be invested in the fund. etc.000 in a mutual fund with a 5%. The average equity mutual fund charges around 1. expense ratios range from as low as 0. 5% in the second year. $50 will pay for the sales charge. If you don't sell the mutual fund unt il the seventh year. If you invest $1. The load is 6% if you sell in the first year. Front-end loads These are the simplest type of load: you pay the fee when you purchase the fund.3%-1.2% (usually for index funds) to as high as 2%. A typical example is a 6% backend load that decreases to 0% in the seventh year.5%. You'll generally pay more for specialty or international funds. which require more expertise from managers.

.g. If the fund is listed on a stocks exchange the units can be traded like stocks (E. fresh investments cannot be made into the fund. Redemption of units can be made during specified intervals. after the offer period. Morgan Stanley Growth Fund). most of the New Fund Offers of close -ended funds provided li uidity window on a periodic basis such as monthly or weekly. at any point of time. Therefore. Recently. such funds have relatively low li uidity. Therefore. y Close-ended funds: These funds raise money from investors only once.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR CATEGORIES OF MUTUAL FUND M t l funds can be classified as follow:  B y on thei structure Open-ended funds: Investors can buy and sell t e units from t e fund..

e. Equity Funds These funds invest in equities and equity related instruments. historically. e. y ELSS. However. y Sector funds Invest 100% of the capital in a specific sector. equities have outperformed all asset classes in the long term. such funds show volatile performance. investment in equity funds should be considered for a period of at least 3-5 years. y Dividend yield funds It is similar to the equity diversified funds except that they invest in companies offering high dividend yields. such funds can yield great capital appreciation as. With fluctuating share prices. Their portfolio mirrors the benchmark index both in terms of composition and individual stock weightages. y Thematic funds Invest 100% of the assets in sectors which are related through some theme. .A banking sector fund will invest in banking stocks. thereby offering higher returns at relatively lower volatility.Equity Linked Saving Scheme provides tax benefit to the investors. cements sectors etc. even losses. like BSE Sensex or Nifty is tracked. construction. y Equity diversified funds 100% of the capital is invested in equities spreading across different sectors and stocks. .NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR  Based on their investment objective i. Hence. generally smoothens out in the long term. At the same time.g. -An infrastructure fund invests in power. short term fluctuations in the market. It can be further classified as: y Index funds In this case a key stock market index.g.

They invest 100% of their portfolio in long-term government securities.Invest in short-term debt papers. such funds invest a major portion of the portfolio in long-term debt papers. on the riskreturn ladder. As a result. DEBT FUND They invest only in debt instruments. debentures. a large portion being invested in call money market. and money market instruments such as certificates of deposit (CD). y Income funds LT. iii. they invest exclusively in fixed-income instruments like bonds.They generate income through arbitrage opportunities due to mis-pricing between cash market and derivatives market.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR ii. Therefore. .Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%-30% to equities. Balanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments. Floaters invest in debt instruments which have variable coupon rate. Following are balanced funds classes: y y Debt-oriented funds -Investment below 65% in equities. Government of India securities. y Arbitrage fund.These funds invest 100% in money market instruments. Balanced fund Their investment portfolio includes both debt and equity. y MIPs. y Gilt funds ST. Put your money into any of these debt funds depending on your investment horizon and needs. y Liquid funds. remaining in debt. in the absence of arbitrage opportunities. and are a good option for investors averse to idea of taking risk associated with equities. Higher proportion (around 75%) is put in money markets. y Gilt funds LT.They invest 100% of their portfolio in government securities of and T-bills. Equity-oriented funds -Invest at least 65% in equities.Typically. they fall between equity and debt funds. y Floating rate funds . Funds are allocated to equities. derivatives and money markets. commercial paper (CP) and call money.

3. Payment is made through post dated cheques or direct debit facilities. Systematic Investment Plan Under this a fixed sum is invested each month on a fixed date of a month. The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA) 2. . at a fixed interval. Systematic Withdrawal Plan If someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR INVESTMENT STRATEGIES 1. Systematic Transfer Plan Under this an investor invests in debt oriented fund and gives instructions to transfer a fixed sum. to an equity scheme of the same mutual fund.


Debt fund Likewise the performance of debt funds can be measured on the basis of: Peer Group Comparisons. newspapers and professional advisors like BIRLA mutual fund services. NPAs. Per Share Capital Changes. Ratios. Variation in the funds¶ performance due to change in its management/ objective. The funds¶ ratings may go down in the various lists published by independent rating agencies. the Expense Ratio. It can merge into another fund or could be acquired by another fund house. websites. 5. The Income Ratio. Beta. 4. Fund Size. besides NAV Growth. 3. The funds¶ performance can slip in comparison to similar funds. Annualized Returns and Distributions. Transaction Costs. There may be an increase in the various costs associated with the fund. Therefore it¶s very necessary to continuously evaluate the funds¶ performance with the help of factsheets and newsletters.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR MEASURING AND EVALUATING MUTUAL FUND PERFORMANCE Every investor investing in the mutual funds is driven by the motto of either wealth creation or wealth increment or both. In this ever-changing industry. Industry Exposures and Concentrations. Leverage. Cash Flow. Total Return and Expense Ratio. he can face any of the following problems: 1. a technical measure of the risk associated may also surge. Computing Total Return (Per Share Income and Expenses. 2. . Shares Outstanding). Performance measures Equity funds The performance of equity funds can be measured on the basis of: NAV Growth. If the investors ignore the evaluation of funds¶ performance then he can lose hold of it any time. 6. Total Return with Reinvestment at NAV. Total Return. Portfolio Turnover Rate.

Studying the features of a scheme. The objective of financial planning is to ensure that the right amount of money is available at the right time to the investor to be able to meet his financial goals.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR Liquid funds The performance of the highly volatile liquid funds can be measured on the basis of: Fund Yield. Financial Planning For Investors (Ref. 2. Funds from the same peer group. Other similar products in which investors invest their funds. Selection of fund. the comparisons are usually done with 1. To Mutual Funds) Investors are required to go for financial planning before making investments in any mutual fund. It is more than mere tax planning. besides NAV Growth. 2. Asset allocation. With a market index. A fund manager has to closely follow the objectives stated in the offer document. 3. financial planning is concerned only with broad asset allocation. In case of mutual funds. 3. leaving the actual allocation of securities and their management to fund managers. because financial plans of users are chosen using these objectives. Steps in financial planning are 1. . Total Return and Expense Ratio To measure the fund¶s performance.

corporate debentures. volatility and liquidity. FDs Bank Deposits PPF Life Insurance Gold Real Estate Mutual Funds High Moderate Moderate Low High Moderate High Moderate Moderate High Moderate Low Moderate High Low Moderate Low Low High Low Low Low High Moderate High Moderate Low High High Low Low Moderate Low High Moderate Moderate High High High Moderate High Moderate High Moderate Moderate Low High Gold Low High We can very well see that mutual funds outperform every other investment option. gold.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR WHY HAS IT BECOME ONE OF THE LARGEST FINANCIAL INSTRUMENTS? If we take a look at the recent scenario in the Indian financial market then we can find the market flooded with a variety of investment options which includes mutual funds. safety convenience. real estate etc. life insurance. fixed income bonds.return. bank deposits. On three parameters it scores high whereas it¶s moderate at one. Measuring these investment options on the basis of the mentioned parameters. company fixed deposits. All these investment options could be judged on the basis of various parameters such as. Debentures Co. PPF. equities. comparing it with the other options. we find that equities gives us high returns with high liquidity but its volatility too is high with low safety which doesn¶t makes it favorite among persons . we get this in a tabular form Return Safety Volatility Liquidity Convenience Equity Bonds Co.

The reasons for this being: 1. 2. Just by investing in it. Although it ensures high safety but the returns generated and liquidity are moderate. Returns get adjusted for the market movements As the mutual funds are managed by experts so they are ready to switch to the profitable option along with the market movement. Even the convenience involved with investing in equities is just moderate. Mutual funds combine the advantage of each of the investment products Mutual Fund is one such option which can invest in all other investment options.appetite. Its principle of diversification allows the investors to taste all the fruits in one plate.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR who have low risk. Such as if some are good at return then they are not safe. But mutual funds have definitely sorted out this problem. Suppose they predict that market is going to fall then they can sell some of their shares and book profit and can reinvest the amount again in money market instruments.e. so it¶s not an happening option for person who can afford to take risks for higher return. Straightforward. Now everybody can choose their fund according to their investment objectives. even the liquidity and convenience involved are too low. Gold have always been a favorite among Indians but when we look at it as an investment option then it definitely doesn¶t gives a very bright picture. The other option offering high return is real estate but that even comes with high volatility and moderate safety level. it scores low on return .. we can say that mutual fund emerges as a clear winner among all the options available. if some are safe then either they have low liquidity or low safety or both«.likewise. it scores better than equities at all fronts but lags badly in the parameter of utmost important i. Dispense the shortcomings of the other options Every other investment option has more or less some shortcomings. 3. Now looking at bank deposits. Similarly the other investment options are not at par with mutual funds and serve the needs of only a specific customer group. the investor can enjoy the best investment option as per the investment objective. there exists no single option which can fit to the need of everybody. .

In this case. Then the investors sort out the funds whose investment objective matches with that of the investor¶s. which will result in reducing the average cost and enhancing returns. the investor is always at a profit. So it is always advisable to go for MF advisors. Whereas STP allows investors who have lump sums to park the funds in a lowrisk fund like liquid funds and make periodic transfers to another fund to take advantage of rupee cost averaging. they may carry on the further process themselves or can go for advisors like BIRLA. .e. Of course the investors can save their money by going the direct route i. Rupee cost averaging allows an investor to bring down the average cost of buying a scheme by making a fixed investment periodically. the investors can get more number of units and vice-versa. even if the market falls. Investors can also benefit by increasing the SIP amount during market downturns.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR HOW DO INVESTORS CHOOSE BETWEEN FUNDS? When the market is flooded with mutual funds. like Rs 5. 500 or Rs. he must look at the investment objective of the fund. Now the tough task for investors start. through the AMCs directly but it will only save 1-2. Whenever an investor thinks of investing in mutual funds. Some of the basic tools which an investor may ignore but an mf advisor will always look for are as follow: 1. Rupee Cost Averaging The investors going for Systematic Investment Plans (SIP) and Systematic Transfer Plans (STP) may enjoy the benefits of RCA (Rupee Cost Averaging).25% (entry load) but could cost the investors in terms of returns if the investor is not an expert. greater the chances of benefiting from lower prices. This results in the average cost per unit for the investor being lower than the average price per unit over time. More frequent the investment interval. The mf advisors¶ thoughts go beyond just investment objectives and rate of return. The investor needs to decide on the investment amount and the frequency. In case if the NAV of fund falls.000 a month and nowadays even as low as Rs. it¶s a very tough job for the investors to choose the best fund for them. 100.

50 per cent (plus surcharge and education fess) on dividends paid out. Some fund houses allow such switches without charging an entry load. The funds redeemed can be switched to other specified schemes within the same fund house. level of the market indices or even a date. Debt funds have to pay a dividend distribution tax of 12. Investors who need a regular . level of capital appreciation. Under this. Tax efficiency Tax factor acts as the ³x-factor´ for mutual funds. the dividends from debt funds may be transferred to equity schemes. To use the trigger and switch facility. The investors gain through either dividends or capital appreciation but if they haven¶t considered the tax factor then they may end loosing. depending on the MF's policy.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR 2. In case of mutual funds. Such transfers may be done with or without entry loads. the investor may enjoy it afterwards also through dividend transfer option. This ensures that the investor books some profits and maintains the asset allocation in the portfolio. the net asset value of the scheme. 3. Tax efficiency affects the final decision of any investor before investing. For example. the investor needs to specify the event. Rebalancing Rebalancing involves booking profit in the fund class that has gone up and investing in the asset class that is down. the amount or the number of units to be redeemed and the scheme into which the switch has to be made. 4. Trigger and switching are tools that can be used to rebalance a portfolio. This gives the investor a small exposure to a new asset class without risk to the principal amount. The trigger could be the value of the investment. the dividend is reinvested not into the same scheme but into another scheme of the investor's choice. Diversification Diversification involves investing the amount into different options. Trigger facilities allow automatic redemption or switch if a specified event occurs.

the growth option is more tax efficient for all investors. Even then an investor needs to examine costs.50 per cent DDT paid by the MF on dividends. simplicity and affordability. . Investors in higher tax brackets will end up paying a higher rate as short-term capital gains and should choose the dividend option. This is because investors can redeem units using the SWP where they will have to pay 10 per cent as long-term capital gains tax against the 12. SWP implies capital gains for the investor. If it is short-term. then the SWP is suitable only for investors in the 10-per-centtax bracket. tax implications and minimum applicable investment amounts before committing to a service.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR stream of income have to choose between the dividend option and a systematic withdrawal plan that allows them to redeem units periodically. If the capital gain is long-term (where the investment has been held for more than one year). All the tools discussed over here are used by all the advisors and have helped investors in reducing risk.

DWS investment opportunities and BOB growth fund giving returns of 13.07 per year which comes to 21% roughly.92%.14 25/2/2011 25/2/2011 13791. Next we can see if anybody would have undertaken the SIP in Principal would have got returns of app. we will see how the power of compounding could benefit us. In the later sections we will see how returns generated from some of the SIPs have outperformed their benchmark. it forces the investors to save and get them into the habit of saving. 2524. Also .86 25/2/2011 14247.20%. But before moving on to that lets have a look at some of the top performing SIPs and their return for 1 year: Total Scheme Reliance diversified power sector retail Reliance regular savings equity principal global opportunities fund DWS investment opportunities fund BOB growth fund 1000 1000 35. Its hassle free. There is reliance diversified power sector retail giving the maximum returns of Rs. 18%.157 13769. In such case.07 Amount NAV NAV Date Amount In the above chart. 14. We can see reliance regular savings equity. and 14.31 42.944 1000 62. we can see how if we start investing Rs.74% respectively which is greater than any other monthly investment options.152 1000 18. Due to its unlimited advantages SIP could be redefined as ³a methodology of fund investing regularly to benefit regularly from the stock market volatility.1000 per month then what return we¶ll get for the total investment of Rs. SIP gives a clear picture of how an early and regular investment can help the investor in wealth creation.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR SYSTEMATIC INVESTMENT PLAN We have already mentioned about SIPs in brief in the previous pages but now going into details. Thus we can easily make out how SIP is beneficial for us.208 25/2/2011 13584.74 25/2/2011 14524. every small amounts invested regularly can grow substantially. 12000.728 1000 22.

144000 turned into Rs.53.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR paying a small amount of Rs. And the amount even is a meager Rs.69.81. Example:Now we will analyze some of the equity fund SIP s of Birla Sun life with BSE 200 and bank fixed deposits In a tabular format as well as graphical. we could spot that if someone would have invested Rs. And now the cream of all the investments. attracting more and more investors to create wealth through SIPs. Birla sun life tax relief ¶96.44. we have taken three funds of Birla sun life namely Birla sun life tax relief ¶96. 1000 per month resulting into total investment of Rs.84. Now moving next to Birla sun life equity fund.88. 66000 then it would have amounted to rs. 144000 for a period of 12 years at BSE 200 would have given total returns of just Rs.127 equity 66 In the above case.156269 if invested in BSE 200 whereas the fund would have given a total return of Rs 181127.000 66. All these three funds follow the same benchmark ie. 669219. Here.000 1. we have shown how one would have benefitted if he would have put his money into these schemes since their inception. BSE 200. 1684008. A total investment of Rs. a total investment of 114000 for a total of 114 months at BSE 200 would have given a total return of Rs. Scheme Name NUMBER S OF Original inv Returns at BSE FUND 200 RETURNS INSTALMENT Birla SL tax relief '96 Birla SL equity fund Birla fund frontline 144 114 1. It may appear unbelievable for many but SIPs have turned this into reality and the power of compounding is speaking loud.701 1.190 3. . Starting from Birla frontline equity fund. We have seen how a meager amount of Rs.14. 1000 per month.008 6. Birla sun life equity fund and Birla sun life frontline equity fund. 388701 whereas the fund gave a total return of Rs. Thus the above case very well explains the power of compounding and early investment. nearly double the return generated at BSE 200.269 16. 553190 but the Birla sun life tax relief ¶96 gave an unbelievable total return of Rs 1684008. thus putting no pressure on their pockets.000 5.219 1.56. 1000 is easy and convenient for them.

beta. Rsquared. so the easiest available option for investors is to choose the best performing funds in terms of ³returns´ which have yielded maximum returns. Deviation is defined as any variation from a mean value (upward & downward). portfolio turnover ratio. total expense ratio etc. we can find that the returns are important but it is also important to look at the µquality¶ of the returns. beta. so it is getting difficult for the investors to take right investing decision. one needs to use a combination of these tools to make a thorough analysis of the funds. the returns fluctuate every day. sharpe ratio. There are many financial tools to analyze mutual funds. Each has their unique strengths and limitations as well. But if we look deeply to it. By using some of the portfolio analysis tools. which determines the volatility of a fund. Since the markets are volatile. The present market has become very volatile and buoyant. Sharpe ratio. alpha. portfolio turnover ratio and total expense ratio. µQuality¶ determines how much risk a fund is taking to generate those returns. let¶s have a look at these ratios: Standard deviation In simple terms standard deviation is one of the commonly used statistical parameter to measure risk. Therefore. trey nor measure. it becomes very difficult for an investor to choose the type of funds for investment. R-squared. So before going into details.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR PORTFOLIO ANALYSIS TOOLS With the increasing number of mutual fund schemes. One can make a judgment on the quality of a fund from various ratios such as standard deviation. . High standard deviation of a fund implies high volatility and a low standard deviation implies low volatility. he can become more equipped to make a well informed choice. Now I have compared two funds of SBI on the basis of standard deviation.

It describes the level of association between the fun¶s market volatility and market risk.65 1. beta would indicate the volatility against the benchmark index.squared is more than 0.9 In the above tableR2 is less than 0. The value of Rsquared ranges from0 to1. A beta that is greater than 1 means that the fund is more volatile than the benchmark index. In case of funds.9. if the fund¶s portfolio doesn¶t have a relevant benchmark index then a beta would be grossly inappropriate.2 Case 2 0. . In case of funds. as compared to the market.80) indicates that beta can be used as a reliable measure to analyze the performance of a fund. the r. R-Squared (R2) R squared is the square of µR¶ (i.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR Beta analysis Beta is used to measure the risk. it means that this fund is less aggressive than the market. we should look at the beta against a bank index. For example if we are considering a banking fund. implies that it would be wrong to mention that the fund is aggressive on account of high beta.80 in case 1.. while a beta of less than 1 means that the fund is more volatile than the benchmark index. It is used as a short term decision making tool. coefficient of correlation).e.squared (more than 0. Thus.88 0.85 and beta value is 0. Beta should be ignored when the r-squared is low as it indicates that the fund performance is affected by factors other than the markets. It basically indicates the level of volatility associated with the fund as compared to the market. A high R. A fund with a beta very close to 1 means the fund¶s performance closely matches the index or benchmark. In case 2. The success of beta is heavily dependent on the correlation between correlation between a fund and its benchmark. For example: Case 1 R2 B 0.

NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR Sharpe ratio: sharpe ratio is a risk to reward ratio. the fund is less volatile and yet generating good returns. auditor fees and other operational expenses. the fund with a higher sharpe ratio offers a better avenue for investing. since the amount of turnover affects the fees and costs within the mutual fund. Total Expenses Ratio A measure of the total costs associated with managing and operating an investment fund such as a mutual fund. then. legal fees. The ratio is calculated as: Sharpe ratio = (Average return. Turnover is simply a measure of the percentage of portfolio value that has been transacted. Portfolio turnover is the purchase and sale of securities in a fund's portfolio. A fund with a higher sharpe ratio means that these returns have been generated taking lesser risk. which helps in comparing the returns given by a fund with the risk that the fund has taken.risk free rate)/ standard deviation Portfolio turnover ratio Portfolio turnover is a measure of a fund's trading activity and is calculated by dividing the lesser of purchases or sales (excluding securities with maturities of less than one year) by the average monthly net assets of the fund. not an indication of the percentage of a fund's holdings that have been changed. The total cost of the fund is divided by the fund's total assets to arrive at a percentage amount. given similar returns. means the fund has bought and sold all its positions within the last year. In other words. which represents the TER: Total Expense Ratio = (Total fund Costs/ Total fund Assets) . A ratio of 100%. Turnover is important when investing in any mutual fund. These costs consist primarily of management fees and additional expenses such as trading fees. Thus.


articles and working paper was also to derive supporting evidence for some of the finding of the study. Hence. Tallman and Li (1996). Sambharya (19950. often with reference to Past or Projected costs efficiency management responsibility or accountability or the like. Faejoun (1998). Kohlar ³ It is a general term applied to a part or to all of the conduct of activities of an organization over a period of time. According to Erich L. New Delhi Vikalpa.´ . IIM. The selection of the topic for the study has been undertaken after a brief review of literature available on the subject. McDougal and Round (1984). ICAI. New Delhi Chartered secretary. Bangalore In literature various researchers have used profitability and growth as measurement of performance. An attempt was made to refer some of the national as well as international journals and project reports. project reports. Ahmedabad Management review. One of the financial indicators that give the utmost satisfaction to the investors is return that is generated by their investment but at the same time they are worried about the risk that is associated with their investment. IIM. Rumelt (1974). A few names may be mentioned here in: y y y y y y y World development report Journal of financial performance The intelligent investors. Mumbai Chartered accountant. Profitability has been used as measure of performance by Gort (1962). it turns out to be very significant and vital for the financial managers to analysis and identified the risk and return associated with the investment. The purpose of referring the research paper. The journal for decision makers.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR REVIEW OF LITERATURE This chapter devoted to the review of literature available on the topic under study. ICAI. Paul (1985-86).

DATA SOURCES  Research is totally based on primary data. Secondary data can be used only for the reference. It is restricted to Kolkata where it has got 11 branch offices and 3 franchisees. and primary data has been collected by interacting with various people. The secondary data has been collected through various journals and websites.  I have tried to explore the general opinion about mutual funds. different shopping malls. BIRLA has been given and it is shown that how they operate in mutual fund department SCOPE OF THE STUDY  The research was carried on in the Eastern Region of India. Research has been done by primary data collection. . It also covers why/ why not investors are availing the services of financial advisors. small retailers etc.  Along with it a brief introduction to India¶s largest financial intermediary.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR OBJECTIVE OF RESEARCH  The main objective of this project is concerned with getting the opinion of people regarding mutual funds and what they feel about availing the services of financial advisors. I have visited people randomly nearby my locality.

line graphs etc. Out of which only 135 people attempted all the questions. Sampling Procedure The sample is selected in a random way. mode. The group has been selected and the analysis has been done on the basis statistical tools available.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR SAMPLING i. . It was collected through mails and personal visits to the known persons. Sample Size The sample size of my project is limited to 200 only. by formal and informal talks and through filling up the questionnaire prepared. iii. ii. pie charts. irrespective of them being investor or not or availing the services or not. Other 65 not investing in MFs attempted only 2 questions. Sample Design Data has been presented with the help of bar graph. median. The data has been analyzed by using the measures of central tendencies like mean.

 Research has been done only at Rajkot.  Possibility of error in data collection.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR LIMITATION  Time limitation. . Possibility of error in analysis of data due to small sample size.  Some of the persons were not so responsive.

Have you ever invested/ interested to invest in Mutual funds? YES NO 135 65 33% YES NO 67% .NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR DATA ANAL SIS 1.

What is the most important reason for not investing in mutual funds? (only for above 65 participants) Lack of knowledge about mutual funds Enjoys investing in other options Its benefits are not enough to drive you for investment No trust over the fund managers 25 10 18 12 Series3 no trust 12 benefitnot enough 18 10 enjoys investing in their own lack of knowledge 25 .NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR 2.

NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR 3. Where do you find yourself as a mutual fund investor? Totally i norant Partial knowledge of MFs Aware of only scheme in which invested Good knowledge of MFs 28 37 46 24 good knowledge 18% aware of only invested scheme 34% Totally ignorant partial knowledge 27% .

Where from you purchases mutual funds? Directly from the AMCs Brokers only ( large intermediaries) Broker/ sub-brokers Other sources 33 28 59 15 59 33 28 15 AMCs B oke s B oke s/ sub b oke s     othe s           .NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR 4.

Which feature of the mutual funds allure you most? Diversification Professional management Reduction in risk and transaction cost Helps in achieving long term goal 42 29 34 30 Series1 elps in achieving long term goal Reduction in risk and transaction cost Professional management 30 34 29 Diversification 42 .NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR 5.

NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR 6. According to you which is the most suitable stage to invest in mutual funds? Young unmarried stage Young Married with children stage Married with older children stage Pre retirement stage 55 32 21 27 20% 41% Y ng nmarried s age ¥£ Y ng arried wi c ildren s age ¡ ¥£ £ ¤ ¥ ¢¡ ¦ ¤ 15% arried wi lder c ildren s age Pre re iremen s age £ £ § £ 24% ¢ £ ¢¡ .

Are you availing the services of personal financial advisors? Yes No 87 48 Number Of Person 36% yes 64% ¨ n .NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR 7.

NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR 8. Which expertise of the personal financial advisor is demanded most? Portfolio review & investment recommendation Planning to achieve specific financial goals Managing assets in retirement Access to specialists in areas such as tax planning 43 35 30 27 Series1 Access to specialists in areas such as tax planning Managing assets in retirement Planning to achieve specific financial goals Portfolio review & investment recommendation 27 30 35 43 .

What is the major reason for using financial advisors? Want help with asset allocation Don¶t have enough time to make own decision To explain various investment options Want to have surety about financial goals 42 23 37 33 Series1 42 37 23 33 Want help ith on¶t have asset allocation enough time to make o n decision To explain various investment options Want to have surety about financial goals .NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR 9.

What is the major reason for not using financial advisor? Have access to all resources needed Believe advisors are too expensive Unsure how to find a trustworthy advisor Want to be in control of own investments 18 53 21 43 Series1 Want to be in control of own investments Unsure how to find a trustworthy advisor 43 21 Believe advisors are too expensive 53 ave access to all resources needed 18 .NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR 10.

pHO=0. qHO: Hypothesized value of population proportion of failure.05 .44% of the people are availing the service of personal Financial Advisor for invent in mutual fund and rest of 35.56 100.60 H1: 40% people availing the service of personal Financial Advisor for invent in mutual fund. qHO =0.6444 q = 0. It is one tailed Sample size (n) = 135 p = 0.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR HYPOTHESIS TESTING Following table shows the number as well as percentages of people who are availing the service of personal Financial Advisor for invent in mutual fund.44 35.00 Cumulative % 64.40 pHO: Hypothesized value of population proportion of success.00 Valid % 64.44 35.44 100.56% people not availing the service of personal Financial Advisor for invent in mutual fund.00 Ho: 60% People availing the service of personal Financial Advisor for invent in mutual fund.3555 Significance level = 0.00 100. Particular Yes No Total Frequency 87 48 135 Percent 64.56 100. 64.

0521 For = 0.0422 = 1.i.e.6000 0.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR = p   n p =  135 p = 0. 60% People availing the service of personal Financial Advisor for invent in mutual fund.6444 ± 0.05. .96 The calculated Z value falls in acceptance area.0422 Z = p±q p Z = 0. Accept null hypothesis and reject alternative. So. Z = 1.

 33 participants buy forms directly from the AMCs. The brokers and sub brokers have the maximum reach so they should try to make those investors aware f the happenings. even the AMCs should follow it. 34% people are aware of only the schemes in which they have invested.  When asked about the most alluring feature of MFs. Whereas just 10 people enjoyed investing in other option. when those 65 people were asked about the reason of not investing in mutual funds. most of them opted for diversification. So there is enough scope for the advisors to convert those 65 participants into investors through their convincing power and great communication skills. 135 are already mutual fund investors or are interested to invest in future and the remaining 65 are not interested in it.  Out of the 135 persons who already have invested in mutual funds/ are interested to invest. For 18 people. Again the financial advisors can tap upon these people by educating them about mutual funds. followed by reduction in risk.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR RESEARCH FINDINGS AND CONCLUSIONS  At the survey conducted upon 200 people. then most of the people held their ignorance responsible for that. helps in achieving long term goals and helps in achieving long term goals respectively. 27% possess partial knowledge whereas 21% stands nowhere in knowledge about MFs. only 18% have sound knowledge of MFs. the benefits arousing from these investments were not enough to drive them for investment in MFs and 12 people expressed no trust over the fund managers¶ decision.  Now. They lacked knowledge and information about the mutual funds. . 55 from brokers and sub-brokers even then 15 people buy from other sources. 28 from brokers only.

 When asked about one reason for not availing the services of financial advisors.  42 participants regarded asset allocation as the major reason for going for financial advisors. followed by planning to achieve long term goals.21 of them said that they find it difficult to get trustworthy advisors. When asked about the expertise of financial advisors which they liked most? 43 of them favored portfolio review and investment recommendation. 37 of them needed them to explain them the various investment options available.  Out of them 87 were already availing the services of financial advisors whereas 48 didn¶t. .lack of time.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR  Most of the investor preferred to invest at a young unmarried stage.33 of them wanted to make sure that they were saving enough to meet their financial goals. Whereas 18 of them said they have access to all the necessary resources required. 43 of them wished to be in control of their own assets. But again the number rose to 27 at pre-retirement stage. Even 32 persons were ready to invest at a stage of young married with children but person with older children avoid investing due to increased expenses. managing assets in retirement and access to specialists in area such as tax planning. While just 23 gave the reason. about 53 of them pointed the advisors as expensive.

Investors could also try to increase the spectrum of services offered. So the advisors should try to change their mindsets. But if not possible then they could go for offering more services and benefits at the existing rate. and systematic transfer plan. Investors should be made aware of the benefits. Young investors as well as persons at the height of their career would like to go for advisors due to lack of expertise and time. these benefits are not offered by other options singlehandedly. Investors should be made to realize that ignorance is no longer bliss and what they are losing by not investing.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR RECOMMENDATIONS  The most vital problem spotted is of ignorance.  Mutual funds offer a lot of benefit which no other single option could offer.  The advisors may try to highlight some of the value added benefits of MFs such as tax benefit. . The advisors should try to charge a nominal fee at the beginning. The advisors should target for more and more young investors. Nobody will invest until and unless he is fully convinced. So these are enough to drive the investors towards mutual funds. rupee cost averaging. rebalancing etc. They should also maintain their decency and follow the code of ethics so that the investors could trust upon them.  Now the most important reason for not availing the services of advisors was spotted was being expensive. But most of the people are not even aware of what actually a mutual fund is? They only see it as just another investment option. Thus the advisors should try to attract more and more persons and turn them into investors and finally their clients.

Age: Male 18-35 Female 36-50 Above 50 4. Gender: 3. Occupation: Professional Govt.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR QUESTIONNAIRE We. Name:____________________________________________ 2. If any problems arise for filling this questionnaire so you can contact us ± Padaliya Sanjay Soni Arpan +918128844481 +919601155990  PERSONAL DETAILS: 1. Gardi School of Management. M. so we require your co-operation by filling the below narrated questionnaire which can help us in our research work and will not be used for any other purpose. Your positive response will be appreciated. H. Education: _________________________________________ 5. are doing our grand project ³Need of financial advisor for Mutual Fund Investors ´ as a part of our syllabus of semester 4. Employee Businessman Employees working Other (Specify: ________________) 1) Are you interested to invest in mutual funds? ‡ Yes [ ] ‡ No [ ] (please attempt the next question) 2) What is the most important reason for not investing in mutual funds? ‡ Lack of knowledge about mutual funds ‡ Enjoys investing in other options ‡ Its benefits are not enough to drive you for investment ‡ No trust over the fund managers [ ] [ ] [ ] [ ] . the students of Kum.

NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR 3) Where did you find yourself as a mutual fund investor? ‡ Totally ignorant ‡ Partial knowledge of mutual funds ‡ Aware only of any specific scheme in which you invested ‡ Fully aware [ ] [ ] [ ] [ ] 4) From where you purchase mutual funds? ‡ Directly from the AMCs ‡ Brokers only ‡ Brokers/ sub-brokers ‡ Other sources [ ] [ ] [ ] [ ] 5) Which feature of the mutual funds attracts you most? ‡ Diversification ‡ Professional management ‡ Reduction in risk and transaction cost ‡ Helps in achieving long term goals [ ] [ ] [ ] [ ] .

NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR 6) According to you which are the most suitable stage to invest in mutual funds? ‡ Young unmarried stage ‡ Young Married with children stage ‡ Married with older children stage ‡ Pre-retirement stage [ ] [ ] [ ] [ ] 7) Are you availing the services of personal financial advisors? ‡ Yes [ ] ‡ No [ ] 8) Which expertise of the personal financial advisor is demanded most? ‡ Portfolio review & investment recommendation ‡ Planning to achieve specific financial goals ‡ Managing assets in retirement ‡ Access to specialist in areas such as tax planning [ ] [ ] [ ] [ ] 9) What is the major reason for using financial advisors? ‡ Want help with asset allocation ‡ Don¶t have time to make my own investment decision ‡ To explain various investment options ‡ Want to make sure I am investing enough to meet my financial goals [ ] [ ] [ ] [ ] .

.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR 10) What is the major reason for not using financial advisor? ‡ Have access to all resources needed to invest on own ‡ Believe advisors are too expensive ‡ Unsure how to find a trustworthy advisor ‡ Want to be in control of own investment [ ] [ ] [ ] [ ] Thank you So much for your response.

SEBI specifies that an AMC must be separate entity the trust that manages it. SEBI rules stipulate that mutual fund trust as well as the AMC must maintain an arm¶s length relationship with the sponsors to avoid any conflict to interests. NAV is arrived at by dividing total value of all investment made under the scheme by number of units of the scheme. their scale may fluctuate depending upon the prevalent interest rates and credit quality of the debt securities. Since stock markets travel through a natural cycle of boom and . NAV It is the value of unit of a Mutual Fund scheme and represents its true worth. 10 each the sum total of all the units constitutes corpus of mutual fund. These are always in denominations of Rs. GROWTH FUNDS Growth funds predominantly invest in stock market securities and carry risks larger than income funds. UNITS Units in a mutual fund scheme are similar to shares of a joint company. INCOME FUND These Funds invest largely in fixed income securities like bonds and debentures. Such funds earn returns more regularly than a growth fund but level of returns over longer periods normally lag behind those offered by growth funds while returns in such funds may be regular.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR GLOSSARY OF SOME CONCEPTS AMC The AMC is the corporate entity. NAV is critical yardstick of the fund¶s performance. SPONSORS Sponsor of a mutual fund are those who establish the mutual fund trust and the AMC they constitute the shareholders of the AMC and receive dividends on profits made by the AMC. which may affect the unit holders. which markets and manager and manages a mutual fund scheme and in return receives a management fee from the fund corpus.

Withdrawals are allowed at NAV minus a back end load. REDEMPTION Disbursement of unit capital on the maturity of that particular scheme to all its existing unit holders. MARKET PRICE The price at which units of mutual funds are quoted in stock exchange where they are listed. CLOSE ENDED In a close-ended fund an investor is allowed to subscribe only during the period of the initial offer. LOCK IN PERIOD Time period during which investor can neither redeem nor they transfer their holdings to others. Lock in period is imposed to allow fund manager to deploy money for an adequate period of time to earn a reasonable return premature withdrawals may destabilize the fund & are not beneficial to the interests of investors. after the close of initial offer. Equity funds may earn higher but they also carry larger risks. OPEN ENDED FUNDS Those funds in which investor can invest & withdraw whenever they wish. it could be charged to the scheme irrespective of the performance of the scheme.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR bursts one should normally stay invested inequity funds for a longer times to earn higher returns. BALANCED FUNDS A balanced fund is the mixture of income fund and growth fund invested partly in equity to achieve a trade-of between risk and return. . Close-ended funds mature after a specified period. For risk taking investor equity are best suited. MANAGEMENT FEES An AMC that mangers & markets a mutual fund scheme is entitled to a management fee@ 1% to 25% of the total funds managed.

and its NAV is calculated and published daily so that there is no chance of any default in the working of Mutual Funds. LIQUIDITY Ability of investors to change its unit into cash within minimum time as and when he needs money. Mutual funds incur many expenses during an issue. TRANSPARENCY Basic feature of mutual funds is transparency. accepts and processes investors applications in informs AMC about amounts received/disbursed for subscription/ purchase/ redemption it also handles communications with investors. It is also approved regulated and registered with SEBI.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR REGISTRAR Organization appointed by an AMC to the schemes it is registered. . and regulated by SEBI. well monitored & transparent working of AMC is regulated by SEBI it is audited weekly. it provides required services like system capabilities back up. CUSTODAIN Banking organization that keeps in safe custody all the securities & other instruments belonging to the fund to insure smooth inflow & outflow of securities. load is imposed because withdrawals carry transaction cost to AMC it can not be more than 6% of NAV of corpus as prescribed by SEBI many schemes offer redemption facility without exit load. their functioning is very efficient. perform data entry services and dispatches account statements. ENTRY LOAD Charge paid by unit holder when he invests an amount in the scheme. Such load is called entry load. monitored. which are charged to the scheme. EXIT LOAD Value of deduction from NAV on the date when one choose to withdraw from a fund. it has to work under strict guidelines issued by SEBI.

Leadership Quality. the work of financial advisor is too aware the client for the different schemes of mutual fund for they work. Financial advisor are the backbone of the Mutual Fund Organization in this competition time. So. We also conclude that from this we learn so many things like Self-discipline. Some are good at someplace but fail at another place. . Without the financial advisor the investor cannot easily convince to invest in mutual fund. innovation on consistent basis. regularity at work. The Mutual Fund has great scope but it still not as much famous as Stock Market. etc. This RESERCH PROJECT gives us great platform for applying our theoretical knowledge which we learned in MBA. The people don¶t know how to invest in it and what is the benefit from it.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR CONCLUSION Every person does not have all skills. how to survive in competition. So we do work in area where we have core competence. At last we say that this RESERCH is very important for the current as well as future carrier prospective.

com Journals & Other References y y y y y The Economic Times Business Standard The Telegraph Business India Fact sheet and statements of various fund houses.bseindia.rediffmoney.the-finapolis.investopedia.mutualfundsindia.theeconomictimes.com www.valueresearchonline.morningstar.yahoofinance.com www.NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR BIBLIOGRAPHY Websites y y y y y y y y y y y y www.com www.nseindia.Birla mutualfund.com www. .com www.moneycontrol.com www.com www.com www.com www.com www.com www.

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