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Role of financial system is to enthusiast economic development. As investors are getting more
educated, aware and prudent they look for innovative investment instruments so that they are able to
reduce investment risk, minimize transaction costs, and maximize returns along with certain level of
convenience as a result there has been as advent of numerous innovative financial instrument such as
bonds, company deposits, insurance, and mutual finds. All of which could be matched with
individuals investment needs. Mutual funds score over all other investment options in terms of
safety, liquidity, returns, and are as transparent, convenient as it can get. Goal of a mutual fund is to
provide an efficient way to make money .In India there are 36 mutual funds with different
Investment strategies and goals to choose from .different mutual funds have different risks, which
differ because of funds goals, funds manager, and investment styles.
A mutual fund is an investment company that collects money from many people and
invests it in a variety of securities .the company then manages the money on an ongoing basis for
individuals and businesses. Mutual funds are an efficient way to invest in stocks, bonds, and other
securities for three reasons:

a) The securities purchased are managed by professional managers.

b) Risk is spread out or diversified, because you have a collection of different stocks and bonds.
c) Costs usually are lower than what you would pay on your own, since the funds buy in large



The objective of the research is to study and analyze the awareness level of investors of mutual


To measure the satisfaction level of investors regarding mutual funds.


An attempt has been made to measure various variables playing in the minds of investors in
terms of safety, liquidity, service, returns, and tax saving.


To get insight knowledge about mutual funds


Understanding the different ratios & portfolios so as to tell the distributors about these terms, by
this, managing the relationship with the distributors


To know the mutual funds performance levels in the present market


To analyze the comparative study between other leading mutual funds in the present market.


To know the awareness of mutual funds among different groups of investors.

What is a Mutual fund?
Mutual fund is an investment company that pools money from shareholders and invests in a variety
of securities, such as stocks, bonds and money market instruments. Most open-end Mutual funds
stand ready to buy back (redeem) its shares at their current net asset value, which depends on the
total market value of the fund's investment portfolio at the time of redemption. Most open-end
Mutual funds continuously offer new shares to investors. Also known as an open-end investment
company, to differentiate it from a closed-end investment company. Mutual funds invest pooled cash
of many investors to meet the fund's stated investment objective. Mutual funds stand ready to sell
and redeem their shares at any time at the fund's current net
asset value: total fund assets divided by shares outstanding.

In Simple Words, Mutual fund is a mechanism for pooling the resources by issuing units to the
investors and investing funds in securities in accordance with objectives as disclosed in offer
document. Investments in securities are spread across a wide cross-section of industries and sectors
and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the
same direction in the same proportion at the same time. Mutual fund issues units to the investors in
accordance with quantum of money invested by them. Investors of Mutual funds are known as unit
holders. The profits or losses are shared by the investors in proportion to their investments. The
Mutual funds normally come out with a number of schemes with different investment objectives
which are launched from time to time. In India, A Mutual fund is required to be registered with
Securities and Exchange Board of India (SEBI) which regulates securities markets before it can
collect funds from the public. In Short, a Mutual fund is a common pool of money in to which
investors with common investment objective place their contributions that are to be invested in
accordance with the stated investment objective of the scheme. The investment manager would
invest the money collected from the investor in to assets that are defined/ permitted by the stated
objective of the scheme. For example, an equity fund would invest equity and equity related
instruments and a debt fund would invest in bonds, debentures, gilts etc. Mutual fund is a suitable
investment for the common man as it offers an opportunity to invest in a diversified, professionally
managed basket of securities at a relatively low cost.


Professional Management.
The major advantage of investing in a mutual fund is that you get a professional money
manager to manage your investments for a small fee. You can leave the investment decisions
to him and only have to monitor the performance of the fund at regular intervals.

Considered the essential tool in risk management, mutual funds make it possible for even
small investors to diversify their portfolio. A mutual fund can effectively diversify its
portfolio because of the large corpus. However, a small investor cannot have a welldiversified portfolio because it calls for large investment. For example, a modest portfolio of
10 bluechip stocks calls for a few a few thousands.

Convenient Administration.
Mutual funds offer tailor-made solutions like systematic investment plans and systematic
withdrawal plans to investors, which is very convenient to investors. Investors also do not
have to worry about investment decisions, they do not have to deal with brokerage or
depository, etc. for buying or selling of securities. Mutual funds also offer specialized
schemes like retirement plans, childrens plans, industry specific schemes, etc. to suit
personal preference of investors. These schemes also help small investors with asset
allocation of their corpus. It also saves a lot of paper work.

Costs Effectiveness
A small investor will find that the mutual fund route is a cost-effective method (the AMC fee
is normally 2.5%) and it also saves a lot of transaction cost as mutual funds get concession
from brokerages. Also, the investor gets the service of a financial professional for a very
small fee. If he were to seek a financial advisor's help directly, he will end up paying
significantly more for investment advice. Also, he will need to have a sizeable corpus to offer
for investment management to be eligible for an investment advisers services.

You can liquidate your investments within 3 to 5 working days (mutual funds dispatch
redemption cheques speedily and also offer direct credit facility into your bank account i.e.
Electronic Clearing Services).

Mutual funds offer daily NAVs of schemes, which help you to monitor your investments on a
regular basis. They also send quarterly newsletters, which give details of the portfolio,
performance of schemes against various benchmarks, etc. They are also well regulated and
Sebi monitors their actions closely.

Tax benefits.
You do not have to pay any taxes on dividends issued by mutual funds. You also have the
advantage of capital gains taxation. Tax-saving schemes and pension schemes give you the
added advantage of benefits under section 88.

Mutual funds allow you to invest small sums. For instance, if you want to buy a portfolio of
blue chips of modest size, you should at least have a few lakhs of rupees. A mutual fund
gives you the same portfolio for meager investment of Rs.1,000-5,000. A mutual fund can do
that because it collects money from many people and it has a large corpus.


Professional Management- Did you notice how we qualified the advantage of professional
management with the word "theoretically"? Many investors debate over whether or not the
so-called professionals are any better than you or I at picking stocks. Management is by no
means infallible, and, even if the fund loses money, the manager still takes his/her cut. We'll
talk about this in detail in a later section.

Costs - Mutual funds don't exist solely to make your life easier--all funds are in it for a profit.
The Mutual fund industry is masterful at burying costs under layers of jargon. These costs are
so complicated that in this tutorial we have devoted an entire section to the subject.

Dilution - It's possible to have too much diversification (this is explained in our article
entitled "Are You Over-Diversified?"). Because funds have small holdings in so many
different companies, high returns from a few investments often don't make much difference
on the overall return. Dilution is also the result of a successful fund getting too big. When
money pours into funds that have had strong success, the manager often has trouble finding a
good investment for all the new money.

Taxes - When making decisions about your money, fund managers don't consider your
personal tax situation. For example, when a fund manager sells a security, a capital-gain tax
is triggered, which affects how profitable the individual is from the sale. It might have been
more advantageous for the individual to defer the capital gains liability.

Equity funds, if selected in the right manner and in the right proportion, have the ability to play an
important role in achieving most long-term objectives of investors in different segments. While the

selection process becomes much easier if you get advice from professionals, it is equally important
to know certain aspects of equity investing yourself to do justice to your hard earned money.



Open Ended Schemes.

Close Ended Schemes.

Interval Schemes.


Growth Schemes.

Income Schemes.

Balanced Schemes.


Tax Saving Schemes.

Special Schemes.

Index Schemes.

Sector Specific Schemes.



The units offered by these schemes are available for sale and repurchase on any business day at NAV
based prices. Hence, the unit capital of the schemes keeps changing each day. Such schemes thus
offer very high liquidity to investors and are becoming increasingly popular in India. Please note that
an open-ended fund is NOT obliged to keep selling/issuing new units at all times, and may stop
issuing further subscription to new investors. On the other hand, an open-ended fund rarely denies to
its investor the facility to redeem existing units.



The unit capital of a close-ended product is fixed as it makes a one-time sale of fixed number of
units. These schemes are launched with an initial public offer (IPO) with a stated maturity period
after which the units are fully redeemed at NAV linked prices. In the interim, investors can buy or
sell units on the stock exchanges where they are listed. Unlike open-ended schemes, the unit capital
in closed-ended schemes usually remains unchanged. After an initial closed period, the scheme may
offer direct repurchase facility to the investors. Closed-ended schemes are usually more illiquid as
compared to open-ended schemes and hence trade at a discount to the NAV. This discount tends
towards the NAV closer to the maturity date of the scheme.



These schemes combine the features of open-ended and closed-ended schemes. They may be traded
on the stock exchange or may be open for sale or redemption during pre-determined intervals at
NAV based prices.



These schemes, also commonly called Equity Schemes, seek to invest a majority of their funds in
equities and a small portion in money market instruments. Such schemes have the potential to
deliver superior returns over the long term. However, because they invest in equities, these schemes
are exposed to fluctuations in value especially in the short term.


These schemes, also commonly called Debt Schemes, invest in debt securities such as corporate
bonds, debentures and government securities. The prices of these schemes tend to be more stable
compared with equity schemes and most of the returns to the investors are generated through
dividends or steady capital appreciation. These schemes are ideal for conservative investors or those
not in a position to take higher equity risks, such as retired individuals. However, as compared to the
money market schemes they do have a higher price fluctuation risk and compared to a Gilt fund they
have a higher credit risk.


These schemes are commonly known as Hybrid schemes. These schemes invest in both equities as
well as debt. By investing in a mix of this nature, balanced schemes seek to attain the objective of
income and moderate capital appreciation and are ideal for investors with a conservative, long-term


Investors are being encouraged to invest in equity markets through Equity Linked Savings Scheme
(ELSS) by offering them a tax rebate. Units purchased cannot be assigned / transferred/ pledged /
redeemed / switched out until completion of 3 years from the date of allotment of the respective
The Scheme is subject to Securities & Exchange Board of India (Mutual Funds) Regulations, 1996
and the notifications issued by the Ministry of Finance (Department of Economic Affairs),
Government of India regarding ELSS.


Subject to such conditions and limitations, as prescribed under Section 88 of the Income-tax Act,



The primary purpose of an Index is to serve as a measure of the performance of the market as a
whole, or a specific sector of the market. An Index also serves as a relevant benchmark to evaluate
the performance of mutual funds. Some investors are interested in investing in the market in general
rather than investing in any specific fund. Such investors are happy to receive the returns posted by
the markets. As it is not practical to invest in each and every stock in the market in proportion to its
size, these investors are comfortable investing in a fund that they believe is a good representative of
the entire market. Index Funds are launched and managed for such investors.



Sector Specific Schemes generally invests money in some specified sectors for example: Real
Estate Specialized real estate funds would invest in real estates directly, or may fund real estate
developers or lend to them directly or buy shares of housing finance companies or may even buy
their securitized assets.



The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the
initiative of the Government of India and Reserve Bank. The history of mutual funds in India can
be broadly divided into four distinct phases: First Phase 1964-87
An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by the Reserve
Bank of India and functioned under the Regulatory and administrative control of the Reserve
Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of
India (IDBI) took over the regulatory and administrative control in place of RBI. The first
scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of
assets under management.
Second Phase 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and
Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC).
SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Can
bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual
Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established
its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.
Third Phase 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in
which the first Mutual Fund Regulations came into being, under which all mutual funds, except
UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector mutual fund registered in July 1993.


The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual
Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual funds setting
up funds in India and also the industry has witnessed several mergers and acquisitions. As at the
end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The
Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other
mutual funds.
Fourth Phase since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated
into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets
under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the
assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of
Unit Trust of India, functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered
with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the
erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management
and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund
Regulations, and with recent mergers taking place among different private sector funds, the
mutual fund industry has entered its current phase of consolidation and growth. As at the end of
September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421



An applicant proposing to sponsor a Mutual fund in India must submit an application in Form A
along with a fee of Rs.25, 000. The application is examined and once the sponsor satisfies certain
conditions such as being in the financial services business and possessing positive net worth for
the last five years, having net profit in three out of the last five years and possessing the general
reputation of fairness and integrity in all business transactions, it is required to complete the
remaining formalities for setting up a Mutual fund. These include inter alia, executing the trust
deed and investment management agreement, setting up a trustee company/board of trustees
comprising two- thirds independent trustees, incorporating the asset management company
(AMC), contributing to at least 40% of the net worth of the AMC and appointing a custodian.
Upon satisfying these conditions, the registration certificate is issued subject to the payment of
registration fees of Rs.25.00 lacs for details; see the SEBI (Mutual funds) Regulations, 1996.



It is important to evaluate the performance of the portfolio on an ongoing basis. The following
factors are important in this process: Consider long-term track record rather than short-term
performance. It is important because long-term track record moderates the effects which
unusually good or bad short-term performance can have on a fund's track record. Besides,
longer-term track record compensates for the effects of a fund manager's particular investment
style. Evaluate the track record against similar funds. Success in managing a small or in a fund
focusing on a particular segment of the market cannot be relied upon as an evidence of
anticipated performance in managing a large or a broad based fund. Discipline in investment
approach is an important factor as the pressure to perform can make a fund manager susceptible
to have an urge to change tracks in terms of stock selection as well as investment strategy.
The objective should be to differentiate investment skill of the fund manager from luck and to
identify those funds with the greatest potential of future success.



1. Know your risk profile
Before you take a decision to invest in equity funds, it is important to assess your risk tolerance.
Risk tolerance depends on certain factors like emotional temperament, attitude and investment
experience. Remember, Vwhile ascertaining the risk tolerance, it is crucial to consider one's
desire to assume risk as the capacity to assume the risk. It helps to understand different
categories of overall risk tolerance, i.e. Conservative, moderate or aggressive. While a
conservative investor will accept lower returns to minimise price volatility, a moderate investor
would be all right with greater price volatility than conservative risk tolerances to pursue higher
returns. An aggressive investor wouldn't mind large swings in the NAVs to seek the highest
returns. Though identifying the desire for risk is a tough job, it can be made easy by defining
one's comfort zone.
2. Don't have too many schemes in your portfolio
While it is true that diversification helps in earning better returns with a lower level of
fluctuations, it becomes counterproductive when one has too many funds in the portfolio. For
example, if you have 15 funds in your portfolio, it does not necessarily mean that your portfolio
is adequately diversified. To determine the right level of diversification, one has to consider
factors like size of the portfolio, type of funds and allocation to different asset classes. Therefore,
it is possible that a portfolio having 5 schemes may be adequately diversified whereas another
one with 10 schemes may have very little diversification. Remember, to have a well-balanced
equity portfolio, it is important to have the right level of exposure to different segments of the
equity market like large cap, mid-cap and small cap. In addition, for a decent portfolio size, it is
all right to have some exposure in the sector and specialty funds.


3. Longer time horizon provides protection from volatility

As an equity fund investor, you need to understand that volatility is an integral part of the stock
market. However, if you remain focused on the long-term objectives and follow a disciplined
approach to investing, you can not only handle volatility properly but also turn it to your
4. Understand and analyze 'Good Performance'
'Good performance' is a subjective thing. Ideally, to analyze performance, one should consider
returns as well as the risk taken to achieve those returns. Besides, consistency in terms of
performance as well as portfolio selection is another factor that should play an important part
while analyzing the performance. Therefore, if an investment in a Mutual fund scheme takes you
past your risk tolerance while providing you decent returns; it cannot always be termed as good
performance. In fact, at times to ensure that your investment remains within the parameters
defined in the investment plan, you may to be forced to exit from that scheme. In other words,
you need to assess as to how much risk did the fund manger subject you to, and did he give you
an adequate reward for taking that risk. Besides, you also need to consider whether own risk
profile allows you to accept the revised level of risk
5. Sell your fund, if you need to
There is no standard formula to determine the right time to sell an investment in Mutual fund or
for that matter any investment. However, you can definitely benefit by following certain
guidelines while deciding to sell an investment in a Mutual fund scheme. Here are some of them:
You may consider selling a fund when your investment plan calls for a sale rather than doing so
for emotional reasons. You need to hold a fund long enough to evaluate its performance over
a complete market cycle, i.e. around three years or so. Many of us make the mistake of either
holding on to funds for too long or exit in a hurry. It is important to do a thorough analysis before
taking a decision to sell. In other words, if you take a wrong decision, there is always a risk of
missing out on good rallies in the market or getting out too early thus missing out on


potential gains. You should consider coming out of a fund if its performance has consistently
lagged its peers for a period of one year or so. It doesn't make sense to hold a fund when it no
longer meets your needs. If you have made a proper selection, you would generally be required
to make changes only if the fund changes its objective or investment style, or if your needs
6. Diversified vs. Concentrated Portfolio
The choice between funds that have a diversified and a concentrated portfolio largely depends
upon your risk profile. As discussed earlier, a well - diversified portfolio helps in spreading the
investments across different sectors and segments of the market. The idea is that if one or more
stocks do badly, the portfolio won't be affected as much. At the same time, if one stock does very
well, the portfolio won't reap all the benefits. A diversified fund, therefore, is an ideal choice for
someone who is looking for steady returns over the longer term. A concentrated portfolio works
exactly in the opposite manner. While a fund with a concentrated portfolio has a better chance of
providing higher returns, it also increases your chances of underperforming or losing a large
portion of your portfolio in a market downturn. Thus, a concentrated portfolio is ideally suited
for those investors who have the capacity to shoulder higher risk in order to improve the chances
of getting better returns.
7. Review your portfolio periodically
It is always a good idea to review your portfolio periodically. For example, you may begin
reviewing your portfolio on a half-yearly basis. Besides, you may be required to review your
portfolio in greater detail when your investments goals or financial circumstances change.



Any kind of investment we make is subject to risk. In fact we get return on our
investment purely and solely because at the very beginning we take the risk of parting
with our funds, for getting higher value back at a later date. Partition itself is a risk.
Well known economist and Nobel Prize recipient William Sharpe tried to segregate the
total risk faced in any kind of investment into two parts - systematic (Systemic) risk and
unsystematic (Unsystemic) risk.
Systematic risk is that risk which exists in the system. Some of the biggest examples of
systematic risk are inflation, recession, war, political situation etc.
Inflation erodes returns generated from all investments e.g. If return from fixed deposit is
8 per cent and if inflation is 6 per cent then real rate of return from fixed deposit is
reduced by 6 per cent.
Similarly if returns generated from equity market is 18 per cent and inflation is still 6 per
cent then equity returns will be lesser by the rate of inflation. Since inflation exists in the
system there is no way one can stay away from the risk of inflation.
Economic cycles, war and political situations have effects on all forms of investments.
Also these exist in the system and there is no way to stay away from them. It is like
learning to walk.
Anyone who wants to learn to walk has to first fall; you cannot learn to walk without
falling. Similarly anyone who wants to invest has to first face systematic risk; there can
never make any kind of investment without systematic risk.


Another form of risk is unsystematic risk. This risk does not exist in the system and
hence is not applicable to all forms of investment. Unsystematic risk is associated with
particular form of investment.
Suppose we invest in stock market and the market falls, then only our investment in
equity gets affected OR if we have placed a fixed deposit in particular bank and bank
goes bankrupt, than we only lose money placed in that bank.
While there is no way to keep away from risk, we can always reduce the impact of risk.
Diversification helps in reducing the impact of unsystematic risk. If our investment is
distributed across various asset classes the impact of unsystematic risk is reduced.
If we have placed fixed deposit in several banks, then even if one of the banks goes
bankrupt our entire fixed deposit investment is not lost.
Similarly if our equity investment is in Tata Motors, HLL, Infosys, adverse news about
Infosys will only impact investment in Infosys, all other stocks will not have any impact.
To reduce the impact of systematic risk, we should invest regularly. By investing
regularly we average out the impact of risk.
Mutual fund, as an investment vehicle gives us benefit of both diversification and
Portfolio of mutual funds consists of multiple securities and hence adverse news about
single security will have nominal impact on overall portfolio.
By systematically investing in mutual fund we get benefit of rupee cost averaging.


Mutual fund as an investment vehicle helps reduce, both, systematic as well as

unsystematic risk.


Customer education of the salaried class individuals is far below standard. Thus
Asset Management Companys need to create awareness so that the salaried class
people become the prospective customer of the future.
Early and mid earners bring most of the business for the Asset Management
Companys. Asset Management Companys thus needed to educate and develop
schemes for the persons who are at the late earning or retirement stage to gain
the market share.
Returns record must be focused by the sales executives while explaining the
schemes to the customer. Pointing out the brand name of the company repeatedly
may not too fruitful.
The target market of salaried class individual has a lot of scope to gain business,
as they are more fascinated to Mutual Funds than the self employed.
Schemes with high equity level need to be targeted towards self employed and
professionals as they require high returns and are ready to bear risk.
Salary class individuals are risk averse and thus they must be assured of the
advantage of risk diversification in Mutual Funds.
There should be given more time & concentration on the Tier-3 distributors.
The resolution of the queries should be fast enough to satisfy the distributors.
Time to time presentation/training classes about the products should be there.
There should be more number of Relationship Managers in different Regions
because one RM can handle a maximum of 125 distributors efficiently and also to
cover untapped market.


Regular activities like canopy should be done so as to get more interaction with
the distributors.
All the persons who have cleared the AMFI exam should be empanelled with
Mutual Fund so as to be largest distributor base.
Should have to provide more advertisements, canopies in the shopping mall, main
markets because no. of people visiting these places are mostly of service classes
and they have to save tax, hence there is more opportunity of getting more no. of



These were my objectives of my project

To get an insight knowledge about mutual funds
Understanding the different ratios & portfolios so as to tell the distributors about these
terms, by this, managing the relationship with the distributors
To know the mutual funds performance levels in the present market
To analyze the comparative study between other leading mutual funds in the present
To know the awareness of mutual funds among different groups of investors.
To evaluate consumer feedback on mutual funds



The AMC is the corporate entity, which markets and manages a mutual fund scheme and in
return receives a management fee from the fund corpus. SEBI specifies that an AMC must be
separate entity the trust that manages it.
It is the value of unit of a Mutual Fund scheme and represents its true worth. NAV is arrived at
by dividing total value of all investment made under the scheme by number of units of the
scheme. NAV is critical yardstick of the funds performance.
Units in a mutual fund scheme are similar to shares of a joint company. These are always in
denominations of Rs. 10 each the sum total of all the units constitutes corpus of mutual fund.
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.
SEBI rules stipulate that mutual fund trust as well as the AMC must maintain an arms length
relationship with the sponsors to avoid any conflict to interests, which may affect the unit
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, their scale may
fluctuate depending upon the prevalent interest rates and credit quality of the debt securities.
Growth funds predominantly invest in stock market securities and carry risks larger than income
funds. Since stock markets travel through a natural cycle of boom and bursts one should
normally stay invested inequity funds for a longer times to earn higher returns.


Equity funds may earn higher but they also carry larger risks. For risk taking investor equity are
best suited.
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.
In a close-ended fund an investor is allowed to subscribe only during the period of the initial
offer. Close-ended funds mature after a specified period.
Those funds in which investor can invest & withdraw whenever they wish, after the close of
initial offer. Withdrawals are allowed at NAV minus a back end load.
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.
An AMC that mangers & markets a mutual fund scheme is entitled to a management fee@ 1% to
25% of the total funds managed, it could be charged to the scheme irrespective of the
performance of the scheme.
Disbursement of unit capital on the maturity of that particular scheme to all its existing unit
The price at which units of mutual funds are quoted in stock exchange where they are listed.


Organization appointed by an AMC to the schemes it is registered, monitored, and regulated by
SEBI, it provides required services like system capabilities back up, accepts and processes
investors applications in informs AMC about amounts received/disbursed for subscription/
purchase/ redemption it also handles communications with investors, perform data entry services
and dispatches account statements.
Banking organization that keeps in safe custody all the securities & other instruments belonging
to the fund to insure smooth inflow & outflow of securities. It is also approved regulated and
registered with SEBI.
Value of deduction from NAV on the date when one choose to withdraw from a fund, 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.
Charge paid by unit holder when he invests an amount in the scheme. Mutual funds incur many
expenses during an issue, which are charged to the scheme. Such load is called entry load.
Ability of investors to change its unit into cash within minimum time as and when he needs
Basic feature of mutual funds is transparency, their functioning is very efficient, well monitored
& transparent working of AMC is regulated by SEBI it is audited weekly, it has to work under
strict guidelines issued by SEBI, and its NAV is calculated and published daily so that there is no
default in the working of Mutual Funds.




David F, Swensen. 2005. Unconventional Success. A fundamental Approach to Personal

Investment Free Press 416
D.C. Anjaria. Dhaivat Anjaria. 2001 AMFIs Mutual Fund Testing Programme.