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Anamika Tiwari

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For the students of Masters of Business Administration, only coaching classrooms

and theoretical studies are not enough to understand different aspects and various

critical principles of business.

As a student of M.B.A, SEM-III, preparation of the summer internship project

report of any company is an important part of practical study. For this I have done

the summer internship of 6 weeks in PRUDENT C.A.S. LTD. and gained a lot of

knowledge about different financial products and also experienced how market of

these financial products works.

I have studied the different department of HR, finance and marketing by

observation and interaction with departments personnel.

I have found out the perception about the mutual fund in the investors mind

throughout our survey.

I had prepared the questionnaires for the (survey on investor perception with respect to

different investment avenues). This tool of data collection has provided me the different

view for investing in the mutual fund that the people have no more time to spend in

the stock market. If people want to invest their money without spending much

time, then the mutual fund is the best option for them.

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1. Preface

Chapter-1 Introduction 1-32

Chapter-2 Company Profile 33-68

Chapter-3 Objective of study 69-70
Chapter-4 Research methodology 71-74
Chapter-5 Data analysis and interpretation 75-90

Chapter-6 Findings 91-93

Chapter-7 Suggestions and recommendations 94-96

Chapter-8 Conclusion 97-98

Chapter-9 Limitation of study 99-101

Chapter- Bibliography

Chapter- Annexure


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A Mutual Fund is a trust that pools together the savings of a number of investors

who share a common financial goal. The money collected is then invested in

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capital market instruments such as shares, debentures and other securities based

on their objective. The income earned through these investments and the capital

appreciation realized are shared by its unit holders in proportion to the number

of units owned by the investors.

According to the above definition, a mutual fund in India can raise resources

through sale of units to the public. It can be setup in the form of a Trust under

the Indian Trust Act. The definition has been further extended by allowing

mutual funds to diversify their activities in the following areas:

Portfolio management services

Management of offshore funds
Providing advice to offshore funds
Management of pension or provident funds
Management of venture capital funds
Management of money market funds
Management of real estate funds

Mutual Funds pool money from many small investors with similar (one could

say mutual) objectives, to achieve Economies of Scale and Diversification in the

investment of these funds. This can result in higher returns at lower risk.

Each mutual fund schemes has a defined investment objective and strategy.

The Project is related to the field of Mutual Fund in which

comparative analysis of the various debt schemes in mutual fund. In

the project, all the points are explained like - what is mutual fund, types

of mutual fund and which fund is better. Mutual Fund industry has grown in

many folds over the period of last two decades. There h a s b e e n a n u p s u r g e

i n t h e M u t u a l F u n d i n d u s t r y i n 9 0 s. D u r i n g t h i s p e r i o d a

l a r g e number of private sector companies have started their mutual

funds. The growth in the number of distributors of mutual funds. Many

private companies were established which t o o k u p t h e j o b o f s e l l i n g

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mutual funds not only to the common man but also to the

corporate. Mutual Fund provides better return as compared to the traditional

investment opportunities like Fixed Deposit and Saving Accounts etc.

Mutual Fund present an ideal solution to the investment needs of the corporate,

which are looking for returns from their surplus funds. The Mutual

Fund gives them a chance to gain more profits over a short period. The

Mutual fund is the most suitable investment for corporate as it offers an

opportunity to invest in a diversified, professionally managed portfolio

at a low cost. Prudent CAS (Corporate Advisory Services) ltd. gives

advices to its

clientsregardingF i n a n c i a l P l a n n i n g . T h e s t r o n g a n d e f f i c i e

n t r e s e a r c h t e a m w h i c h s u p p o r t s t h e investments advisors.

The research team provides the desk to the necessary information

regarding the different mutual fund schemes and other investments options like

Insurance etc.

The company sells its financial products through both direct and direct f o r c e .

Prudent Channel since its inception has a strong hold in the

market through its Direct Force. It also has strong hold on

t h e corporate channel also now wants to have a greater reach to its clients

which it has already developed through its 150 certified brokers just

the beginning of the force that will grow in leaps and bounds.

T h e company also has a strong and efficient research team that is currently

working from Gujarat which publishes the data that helps the clients in assessing

their funds performance. Thus through the comparative analysis of the

these three schemes it has been studied which of the scheme is best in terms

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performance, in comparison to the schemes of other mutual funds in the

debt mutual funds category.

Benefits of Mutual Funds

An investor can invest directly in individual securities or indirectly through a

financial intermediary. Globally, mutual funds have established themselves as

the means of investment for the retail investor.

1. Professional management: An average investor lacks the knowledge of

capital market operations and does not have large resources to reap the benefits

of investment. Hence, he requires the help of an expert. It, is not only expensive


hire the services of an expert but it is more difficult to identify a real expert.

Mutual funds are managed by professional managers who have the requisite

skills and experience to analyze the performance and prospects of companies.

They make possible an organized investment strategy, which is hardly possible

for an individual investor.

2. Portfolio diversification: An investor undertakes risk if he invests all his

funds in a single scrip. Mutual funds invest in a number of companies across

various industries and sectors. This diversification reduces the riskiness of the


3. Reduction in transaction costs: Compared to direct investing in the capital

market, investing through the funds is relatively less expensive as the benefit of

economies of scale is passed on to the investors.

4. Liquidity: Often, investors cannot sell the securities held easily, while in case

of mutual funds, they can easily cash their investment by selling their units to

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the fund if it is an open-ended scheme or selling them on a stock exchange if it

is a close-ended scheme.

5. Convenience: Investing in mutual fund reduces paperwork, saves time and

makes investment easy.

6. Flexibility: Mutual funds offer a family of schemes, and investors have the

option of transferring their holdings from one scheme to the other.

7. Tax benefits: Mutual fund investors now enjoy income-tax benefits.

Dividends received from mutual funds debt schemes are tax exempt to the

overall limit of Rs 9,000 allowed under section 80L of the Income Tax Act.

8. Transparency: Mutual funds transparently declare their portfolio every

month. Thus an investor knows where his/her money is being deployed and in

case they are not happy with the portfolio they can withdraw at a short notice.

9. Stability to the stock market: Mutual funds have a large amount of funds

which provide them economies of scale by which they can absorb any losses in

the stock market and continue investing in the stock market. In addition, mutual

funds increase liquidity in the money and capital market.

10. Equity research: Mutual funds can afford information and data required for

investments as they have large amount of funds and equity research teams

available with them.

Mutual Fund Operation Flow Chart

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All mutual funds comprise of four constituents- Sponsors, Trustees, Asset

Management Company(AMC) and Custodians.

a) Sponsors:
A sponsor is any person who, acting alone or in combination with another

body corporate, establishes a MF. The sponsor of a fund is similar to the

promoter of a company.
In accordance with SEBI Regulations, the sponsor forms a trust and

appoints a Board of Trustees, and also generally appoints an AMC as fund

manager. In addition, the sponsor also appoints a custodian to hold the fund

assets. The sponsor must contribute at least 40% of the net worth of the

AMC and possess a sound financial track record over five years prior to


b) Trust/Board of Trustees:

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The MF or trust can either be managed by the Board of Trustees, which is a

body of individuals, or by a Trust Company, which is a corporate body.

Most of the funds in India are managed by Board of Trustees.

The trustees being the primary guardians of the unit holders funds and

assets, a trustee has to be a person of high repute and integrity. The trustees,

however, do not directly manage the portfolio of securities. The portfolio is

managed by the AMC as per the defined objectives, in accordance with

Trust Deed and SEBI (Mutual Funds) Regulations.

c) Fund Managers/ AMC:

The AMC, which is appointed by the sponsor or the trustees and approved

by SEBI, acts like the investment manager of the trust. The AMC functions

under the supervision of its own Board of Directors, and also under the

direction of the trustees and SEBI.

AMC, in the name of the trust, floats and manages the different investment

schemes as per the SEBI Regulations and as per the Investment

Management Agreement signed with the Trustees.

d) Custodians:

The mutual fund should appoint a custodian to carry out the custodial

services for the schemes of the fund and sent intimation of the same to the

Board within fifteen days of the appointment of the custodian. No custodian

in which the sponsor or its associates hold 50% or more of the voting rights

of the share capital of the custodian or where 50% or more of the directors

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of the custodian represent the interest of the sponsor or its associates should

act as custodian for a mutual fund constituted by the same sponsor or any of

its associate or subsidiary company.




The Indian mutual fund industry has evolved over distinct stages. The growth of

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the mutual fund industry in India can be divided into four phases: Phase I (1964-

87), Phase II (1987-92), Phase III (1992-97), and Phase IV (beyond 1997).

Phase I: The mutual fund concept was introduced in India with the setting up of

UTI in 1963. The Unit Trust of India(UTI) was the first mutual fund set up

under the UTI Act, 1963, a special act of the Parliament. It became operational


1964 with a major objective of mobilizing savings through the sale of units and

investing them in corporate securities for maximizing yield and capital

appreciation. This phase commenced with the launch of Unit Scheme 1964 (US-

64) the first open-ended and the most popular scheme. UTIs investible funds, at

market value (and including the book value of fixed assets) grew from Rs 49

crore in1965 to Rs 219 crore in 1970-71 to Rs 1,126 crore in 1980-81 and

further to Rs 5,068 crore by June 1987. Its investor base had also grown to about

2 million investors. It launched innovative schemes during this phase. Its fund

family included five income-oriented, open-ended schemes, which were sold

largely through its agent network built up over the years. Master share, the

equity growth fund launched in 1986, proved to be a grand marketing success.

Master share was the first real close-ended scheme floated by UTI. It launched

India Fund in 1986-the first Indian offshore fund for overseas investors, which

was listed on the London Stock Exchange (LSE). UTI maintained its monopoly

and experienced a consistent growth till 1987.

Phase II: The second phase witnessed the entry of mutual fund companies

sponsored by nationalized banks and insurance companies. In 1987, SBI Mutual

Fund and Can bank Mutual Fund were set up as trusts under the Indian Trust

Act, 1882. In1988, UTI floated another offshore fund, namely, The India

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Growth Fund which was listed on the New York Stock Exchange (NYSB). By

1990, the two nationalized insurance giants, LIC and GIC, and nationalized

banks, namely, Indian Bank, Bank of India, and Punjab National Bank had

started operations of wholly owned mutual fund subsidiaries. The assured return

type of schemes floated by the mutual funds during this phase were perceived to

be another banking product offered by the arms of sponsor banks. In October

1989, the first regulatory guidelines were issued by the Reserve Bank of India,

but they were applicable only to the mutual funds sponsored by FIIs.

Subsequently, the Government of India issued comprehensive guidelines in June

1990 covering all mutual funds. These guidelines emphasized compulsory

registration with SEBI and an arms length relationship be maintained between

the sponsor and asset management company (AMC). With the entry of public

sector funds, there was a tremendous growth in the size of the mutual fund

industry with investible funds, at market value, increasing to Rs 53,462 crore

and the number of investors increasing to over 23 million. The buoyant equity

markets in 1991-92 and tax benefits under equity-linked savings schemes

enhanced the attractiveness of equity funds.

Phase III: The year 1993 marked a turning point in the history of mutual funds

in India. Tile Securities and Exchange Board of India (SEBI) issued the Mutual

Fund Regulations in January 1993. SEBI notified regulations bringing all

mutual funds except UTI under a common regulatory framework. Private

domestic and foreign players were allowed entry in the mutual fund industry.

Kothari group of companies, in joint venture with Pioneer, a US fund company,

set up the first private mutual fund the Kothari Pioneer Mutual Fund, in 1993.

Kothari Pioneer introduced the first open-ended fund Prima in 1993. Several

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other private sector mutual funds were set up during this phase. UTI launched a

new scheme, Master-gain, in May 1992, which was a phenomenal success with

a subscription of Rs 4,700 crore from 631akh applicants. The industrys

investible funds at market value increased to Rs 78,655 crore and the number of

investor accounts increased to 50 million.

However, the year 1995 was the beginning of the sluggish phase of the mutual

fund industry. During 1995 and 1996, unit holders saw an erosion in the value of

their investments due to a decline in the NA V s of the equity funds. Moreover,

the service quality of mutual funds declined due to a rapid growth in the number

of investor accounts, and the inadequacy of service infrastructure. A lack of

performance of the public sector funds and miserable failure of foreign funds

like Morgan Stanley eroded the confidence of investors in fund managers.

Investors perception about mutual funds, gradually turned negative. Mutual

funds found it increasingly difficult to raise money. The average annual sales

declined from about Rs 13,000. crore in 1991-94 to about Rs 9,000 crore in

1995 and 1996.

Phase IV: During this phase, the flow of funds into the kitty of mutual funds

sharply increased. This significant growth was aided by a more positive

sentiment in the capital market, significant tax benefits, and improvement in the

quality of investor service. Investible funds, at market value, of the industry rose

by June 2000 to over Rs 1,10,000 crore with UTI having 68% of the market

share. During 1999-2000 sales mobilization reached a record level of Rs 73,000

crore as against Rs 31,420 crore in the preceding year. This trend was, however,

sharply reversed in 2000-01. The UTI dropped a bombshell on the investing

public by disclosing the NAV of US-64-its flagship scheme as on December

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28,2000, just at Rs 5.81 as against the face value of Rs 10 and the last sale price

of Rs 14.50. The disclosure of NAV of the countrys largest mutual fund scheme

was the biggest shock of the year to investors. Crumbling global equity markets,

a sluggish economy coupled with bad investment decisions made life tough for

big funds across the world in 2001-02. The effect of these problems was felt

strongly in India also. Pioneer m, JP Morgan and Newton Investment

Management pulled out from the Indian market.

Bank of India MF liquidated all its schemes in 2002. The Indian mutual fund

industry has stagnated at around Rs 1,00,000 crore assets since 2000-01. This

stagnation is partly a result of stagnated equity markets and the indifferent

performance by players. As against this, the aggregate deposits of Scheduled

Commercial Banks (SCBs) as on May 3, 2002, stood at Rs 11,86,468 crore.

Mutual funds assets under management (AUM) form just around 10% of

deposits of SCBs.

The Unit Trust of India is losing out to other private sector players. While there

has been an increase in AUM by around 11% during the year 2002, UTI on the

contrary has lost more than 11% in AUM. The private sector mutual funds have

benefited the most from the debacle ofUS-64 of UTI. The AUM of this sector

grew by around- 60% for the year ending March 2002.


Mutual funds are currently the most popular investment vehicle and provide

several advantages to investors, including the following:

1. Advanced Portfolio Management

You pay a management fee as part of your expense ratio, which is used to hire a

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professional portfolio manager who buys and sells stocks, bonds, etc. This is a

relatively small price to pay for help in the management of an investment


2. Dividend Reinvestment

As dividends and other interest income is declared for the fund, it can be used to

purchase additional shares in the mutual fund, thus helping your investment


3. Risk Reduction (Safety)

A reduced portfolio risk is achieved through the use of diversification, as most

mutual funds will invest in anywhere from 50 to 200 different securities -

depending on their focus. Several index stock mutual funds own 1,000 or more

individual stock positions.

4. Convenience and Fair Pricing

Mutual funds are common and easy to buy. They typically have low minimum

investments (some around $2,500) and they are traded only once per day at the

closing net asset value (NAV). This eliminates price fluctuation throughout the

day and various arbitrage opportunities that day traders practice.


However, there are also disadvantages of mutual funds, such as the following:

1. High Expense Ratios and Sales Charges

If you're not paying attention to mutual fund expense ratios and sales charges,

they can get out of hand. Be very cautious when investing in funds with expense

ratios higher than 1.20%, as they will be considered on the higher cost end. Be

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wary of 12b-1 advertising fees and sales charges in general. There are several

good fund companies out there that have no sales charges. Fees reduce overall

investment returns.

2. Management Abuses

Churning, turnover and window dressing may happen if your manager is

abusing his or her authority. This includes unnecessary trading, excessive

replacement and selling the losers prior to quarter-end to fix the books.

3. Tax Inefficiency

Like it or not, investors do not have a choice when it comes to capital gain

payouts in mutual funds. Due to the turnover, redemptions, gains and losses in

security holdings throughout the year, investors typically receive distributions

from the fund that are an uncontrollable tax event.

4. Poor Trade Execution

If you place your mutual fund trade anytime before the cut-off time for same-

day NAV, you'll receive the same closing price NAV for your buy or sell on the

mutual fund. For investors looking for faster execution times, maybe because of

short investment horizons, day trading, or timing the market, mutual funds

provide a weak execution strategy.

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Fig:1 Types of Mutual Funds

Schemes according to Maturity Period

A mutual fund scheme can be classified into open-ended scheme or close-ended

scheme depending on its maturity period.

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Open-end fund (or open-ended fund)-

Open-end fund is a collective investment scheme which can issue and redeem

shares at any time. An investor will generally purchase shares in the fund

directly from the fund itself rather than from the existing shareholders. It

contrasts with a closed-end fund, which typically issues all the shares it will

issue at the outset, with such shares usually being tradable between investors


Open-ended funds are available in most developed countries, though

terminology and operating rules vary. U.S. mutual funds, UK unit

trusts and OEICs, European SICAVs, and hedge funds are all examples of open-

ended funds.

The price at which shares in an open-ended fund are issued or can be redeemed

will vary in proportion to the net asset value of the fund, and therefore directly

reflects the fund's performance.



Active management

Net asset value

Hedge funds


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There may be a percentage charge levied on the purchase of shares or units.

Some of these fees are called an initial charge (UK) or 'front-end load' (US).

Some fees are charged by a fund on the sale of these units, called a 'close-end

load,' that may be waived after several years of owning the fund. Some of the

fees cover the cost of distributing the fund by paying commission to the adviser

or broker that arranged the purchase. These fees are commonly referred to

as 12b-1 fees in US.

Not all fund have initial charges; if there are no such charges levied, the fund is

"no-load" (US).

These charges may represent profit for the fund manager or go back into the


Active management

Most open-end funds are actively managed, meaning that a portfolio manager

picks the securities to buy, although index funds are now growing in popularity.

Index funds are open-end funds that attempt to replicate an index, such as the

S&P 500, and therefore do not allow the manager to actively choose securities

to buy.

Net asset value

The price per share, or NAV (net asset value), is calculated by dividing the

fund's assets minus liabilities by the number of shares outstanding. This is

usually calculated at the end of every trading day.

Hedge funds

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Hedge funds are typically open-ended and actively managed. However,

investors can typically redeem shares only monthly or less frequently (e.g.,

quarterly or semi-annually)

Closed-end fund (CEF) or closed-ended fund-

Closed-end fund is a collective investment model based on issuing a fixed

number of shares which are not redeemable from the fund. Unlike open-end

funds, new shares in a closed-end fund are not created by managers to meet

demand from investors. Instead, the shares can be purchased and sold only in

the market. This is the original design of the mutual fund which predates open-

end mutual funds but offers the same actively managed pooled investments. In

the United States, closed-end funds sold publicly must be registered under both

the Securities Act of 1933 and the Investment Company Act of 1940.

Closed-end funds are usually listed on a recognized stock exchange and can be

bought and sold on that exchange. The price per share is determined by the

market and is usually different from the underlying value or net asset

value (NAV) per share of the investments held by the fund. The price is said to

be at a discount or premium to the NAV when it is below or above the NAV,


A premium might be due to the market's confidence in the investment managers'

ability or the underlying securities to produce above-market returns. A discount

might reflect the charges to be deducted from the fund in future by the

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managers, uncertainty due to high amounts of leverage, concerns related to

liquidity or lack of investor confidence in the underlying securities.



Distinguishing features

Initial offering


Discounts and premiums

Comparison with open-ended funds


Closed end funds are typically traded on the major global stock exchanges. In

the United States the New York Stock Exchange is dominant although

the NASDAQ is in competition; in the United Kingdom the London Stock

Exchange's main market is home to the mainstream funds

although AIM supports many small funds especially the venture capital trusts; in

Canada, the Toronto Stock Exchange lists many closed-end funds.

Like their better-known open-ended cousins, closed-end funds are usually

sponsored by a fund management company which will control how the fund is

invested. They begin by soliciting money from investors in an initial offering,

which may be public or limited. The investors are given shares corresponding to

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their initial investment. The fund managers pool the money and purchase

securities or other assets. What exactly the fund manager can invest in depends

on the fund's charter, prospectus and the applicable government regulations.

Some funds invest in stocks, others in bonds, and some in very specific things

(for instance, tax-exempt bonds issued by the state of Florida in the USA).

Distinguishing features

A closed-end fund differs from an open-end mutual fund in that:

It is closed to new capital after it begins operating.

Its shares (typically) trade on stock exchanges rather than being redeemed

directly by the fund.

Its shares can therefore be traded at any time during market opening hours.

An open-end fund can usually be traded only at a time of day specified by

the managers, and the dealing price will usually not be known in advance.

It usually trades at a premium or discount to its net asset value. An open-

end fund trades at its net asset value (to which sales charges may be added;

and adjustments may be made for e.g. the frictional costs of purchasing or

selling the underlying investments).

In the United States, a closed-end company can own unlisted securities.

Another distinguishing feature of a closed-end fund is the common use

of leverage (gearing). In doing so, the fund manager hopes to earn a higher

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return with this additional invested capital. This additional capital can be raised

by issuing auction rate securities, preferred stock, long-term debt, or reverse-

repurchase agreements.

A fund raises its initial equity through the sale of common stock. The amount of

equity that belongs to a share of common stock is known as its net asset value

(NAV). As the fund operates, NAV increases with investment gains and

decreases with losses. These gains or losses are amplified when the fund

employs leverage.

The amount of leverage a fund uses is expressed as a percent of total fund assets

(e.g. if it has a 25% leverage ratio, that means that for each $100 of total assets

under management, $75 is equity and $25 is debt).

Leverage affects both fund income, and capital gains and losses. The additional

investments bought with the leverage increases gross income proportionally to

the leverage used, but net income is reduced by the interest rate paid to lenders

or preferred shareholders. However, capital gains or losses flow directly to the

NAV of the common stock. This increases the volatility of the NAV of a

leveraged fund, compared with its un-leveraged peer. For example, if an un-

leveraged fund had a 10% gain or loss, its 25% leveraged peer would have an

about 13.3% gain or loss. If instead, the fund had a 40% leverage ratio, the gain

or loss would be about 16.7%.

In some cases, fund managers charge management fees based on the total

managed assets of the fund, which includes leverage. This further reduces the

income benefit of leverage to the common shareholder, while retaining the

additional volatility.

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Leveraged funds can seem to have higher expense ratiosa common way that

investors compare fundsthan their non-leveraged peers. Some investment

analysts advocate that expenses attributable to the use of leverage should be

considered a reduction of investment income rather than an expense, and publish

adjusted ratios.

Long-term debt arrangements and reverse repurchase agreements are two

additional ways to raise additional capital for the fund. Funds may use a

combination of leveraging tactics or each individually. However, it is more

common for the fund to use only one leveraging technique.

Since stock in closed-end funds is traded like other stock, an investor trading

them will pay a brokerage commission similar to that paid when trading other

stocks (as opposed to commissions on open-ended mutual funds, where the

commission will vary based on the share class chosen and the method of

purchasing the fund). In other words, closed-end funds typically do not have

sales-based share classes with different commission rates and annual fees. The

main exception is loan-participation funds.

Initial offering

Like a company going public, a closed-end fund will have an initial public

offering of its shares at which it will sell, say, 10 million shares for $10 each.

That will raise $100 million for the fund manager to invest. At that point, the

fund's 10 million shares will begin to trade on a secondary market, typically

the NYSE or the AMEX for American closed-end funds. Any investor who

subsequently wishes to buy or sell fund shares will do so on the secondary

market. In normal circumstances, closed-end funds do not redeem their own

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shares. Nor, typically, do they sell more shares after the IPO (although they may

issue preferred stock, in essence taking out a loan secured by the portfolio). In

general, closed-end funds cannot issue securities for services or property other

than cash or securities.


Closed-end fund shares are traded throughout market opening hours at whatever

price the market will support. It may be possible to deal using advanced types of

orders such as limit orders and stop orders. This is in contrast to some open-end

funds which are only available for buying and selling at the close of business

each day, at the calculated NAV, and for which orders must be placed in

advance, before the NAV is known, and by simple buy or sell orders. Some

funds require that orders be placed hours or days in advance, in order to simplify

their administration, make it easier to match buyers with sellers, and eliminate

the possibility of arbitrage (for example if the fund holds investments which are

traded in other time zones).

Closed-end funds are traded on exchanges and in that respect they are

like exchange-traded funds (ETFs), but there are important differences between

these two kinds of security. The price of a closed-end fund is completely

determined by the valuation of the market, and this price often diverges

substantially from the NAV of the fund assets.

In contrast, the market price of an ETF trades in a narrow range very close to its

net asset value, because the structure of ETFs allows major market participants

to redeem shares of an ETF for a "basket" of the fund's underlying assets.[5] This

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feature could in theory lead to potential arbitrage profits if the market price of

the ETF were to diverge substantially from its NAV.

The market prices of closed-end funds are often 10% to 20% higher or lower

than their NAV, while the market price of an ETF is typically within 1% of its

NAV. Since the market downturn of late 2008 a number of fixed income ETFs

have traded at premiums of roughly 2% to 3% above their NAV.

Discounts and premiums

As they are exchange-traded, the price of CEFs will be different from the NAV -

an effect known as the closed-end fund puzzle. In particular, fund shares often

trade at what look to be irrational prices because secondary market prices are

often very much out of line with underlying portfolio values. A CEF can trade at

a premium at some times, and a discount at other times.

Comparison with open-ended funds

With open-end funds, the value is precisely equal to the NAV. So investing

$1000 into the fund means buying shares that lay claim to $1000 worth of

underlying assets (apart from sales charges and the fund's investment costs). But

buying a closed-end fund trading at a premium might mean buying $900 worth

of assets for $1000.

Some advantages of closed-end funds over their open-ended cousins are

financial. CEFs do not have to deal with the expense of creating and redeeming

shares, they tend to keep less cash in their portfolio, and they need not worry

about market fluctuations to maintain their "performance record". So if a stock

drops irrationally, the closed-end fund may snap up a bargain, while open-ended

funds might sell too early.

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Also, if there is a market panic, investors may sell a particular stock or segment

of stocks en masse. Faced with a wave of sell orders and needing to raise money

for redemptions, the manager of an open-ended fund may be forced to sell

stocks he would rather keep, and keep stocks he would rather sell, because of

liquidity concerns (selling too much of any one stock causes the price to drop

disproportionately). Thus it may become overweight in the shares of lower

perceived quality or underperforming companies for which there is little

demand. But an investor pulling out of a closed-end fund must sell it on the

market to another buyer, so the manager need not sell any of the underlying

stock. The CEF's price will likely drop more than the market does (severely

punishing those who sell during the panic), but it is more likely to make a

recovery when/if the stock(s) rebound.

Because a closed-end fund is listed on the market, it must obey certain rules,

such as filing reports with the listing authority and holding annual stockholder


Fund according to Investment Objective

A scheme can also be classified as growth fund, income fund, or balanced fund

considering its investment objective.

Equity Funds

Funds that invest in stocks represent the largest category of mutual funds.

Generally, the investment objective of this class of funds is long-term capital

growth with some income. There are, however, many different types of equity

funds because there are many different types of equities. A great way to

28 | P a g e
understand the universe of equity funds is to use a style box, an example of

which is below.

The idea is to classify funds based on both the size of the companies invested in

and the investment style of the manager. The term value refers to a style of

investing that looks for high quality companies that are out of favor with the

market. These companies are characterized by low P/E and price-to-book

ratios and high dividend yields. The opposite of value is growth, which refers to

companies that have had (and are expected to continue to have) strong growth in

earnings, sales and cash flow. A compromise between value and growth is blend,

which simply refers to companies that are neither value nor growth stocks and

are classified as being somewhere in the middle.

For example, a mutual fund that invests in large-cap companies that are in

strong financial shape but have recently seen their share prices fall would be

placed in the upper left quadrant of the style box (large and value). The opposite

of this would be a fund that invests in startup technology companies with

excellent growth prospects. Such a mutual fund would reside in the bottom right

quadrant (small and growth).

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Bond/Income Funds

Income funds are named appropriately: their purpose is to provide current

income on a steady basis. When referring to mutual funds, the terms "fixed-

income," "bond," and "income" are synonymous. These terms denote funds that

invest primarily in government and corporate debt. While fund holdings may

appreciate in value, the primary objective of these funds is to provide a steady

cashflow to investors. As such, the audience for these funds consists of

conservative investors and retirees.

Bond funds are likely to pay higher returns than certificates of deposit and

money market investments, but bond funds aren't without risk. Because there are

many different types of bonds, bond funds can vary dramatically depending on

where they invest. For example, a fund specializing in high-yield junk bonds is

much more risky than a fund that invests in government securities. Furthermore,

nearly all bond funds are subject to interest rate risk, which means that if rates

go up the value of the fund goes down.

Balanced Funds

The objective of these funds is to provide a balanced mixture of safety, income

and capital appreciation. The strategy of balanced funds is to invest in a

combination of fixed income and equities. A typical balanced fund might have a

weighting of 60% equity and 40% fixed income. The weighting might also be

restricted to a specified maximum or minimum for each asset class.

A similar type of fund is known as an asset allocation fund. Objectives are

similar to those of a balanced fund, but these kinds of funds typically do not

30 | P a g e
have to hold a specified percentage of any asset class. The portfolio manager is

therefore given freedom to switch the ratio of asset classes as the economy

moves through the business cycle.

Money Market

These funds are also income funds and their aim is to provide easy liquidity,

preservation of capital and moderate income. These schemes invest exclusively

in safer short-term instruments such as treasury bills, commercial paper and

government securities, etc. These funds are appropriate for corporate and

individual investors as a means to park their surplus funds for short periods

Gilt fund

These funds invest exclusively in government securities. Government securities

have no default risk.

Index Funds

The last but certainly not the least important are index funds. This type of

mutual fund replicates the performance of a broad market index such as the S&P

500 or Dow Jones Industrial Average (DJIA). An investor in an index fund

figures that most managers can't beat the market. An index fund merely

replicates the market return and benefits investors in the form of low fees.


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1. Performance Ranking

Performance Ranking More than the recent or long term performance of any

scheme its ranking among peers should be looked at. To find out the ranking

you need to check out the quartile ranking which will show how the fund has

performed quarter on quarter among its peer group. In quartile ranking each

quartile comprises of 25 percent of peer group schemes. So one may select

the scheme which has remained in top quartile most of the time. If at all you

find your scheme going below 3rd quartile in a couple of consecutive

quarters it hints that time has come to exit the scheme. You can find these

rankings from the factsheets of various AMCs and also on some mutual

funds research websites.

2. Ratio analysis

Risk and return ratios like standard deviation, Sharpe ratio etc. I have discussed

in my earlier article on Measuring Mutual funds risk. Along with those ratios,

one also should check out the ALPHA of the fund. Alpha tells us what extra or

less the fund manager has generated out of a given portfolio in comparison to

benchmark. In other words alpha is the performance ranking of the fund

manager. You may check how often the fund manager has generated positive

alpha in last few quarters and also keep a watch on its consistency going


32 | P a g e
3. Total expense ratio

Expense ratio is very important parameter to be looked at while selecting

any mutual fund scheme. All fund management and distribution related

expenses are borne by the scheme. This means high expense ratio will affect

the funds returns. Though mutual funds total expense ratio has been capped

by SEBI, still lower the better unless we get some extraordinary return by

paying higher expenses for fund management.

4. Fund manager tenure and experience

Fund manager plays a very important role in the funds performance.

Though it is a process oriented approach but still fund manager is the

ultimate decision maker and his experience and view point counts a lot. You

should know who is the fund manager of the scheme and what is his past

track record. You should also look at the performance of other funds which

he is managing. If the fund manager of the scheme has recently been

changed, dont panic. Just keep a watch on his performance by looking at

alpha and quarter to quarter performance. If you find that due to change in

the fund manager there is considerable effect on the funds performance

which does not suit your risk appetite then you may make a decision to exit.

5. Scheme asset size

This parameter is different for debt and equity schemes. In equity the

comfortable asset size in hundreds of crores, in debt it should be in

thousands of crores as the investment value per investor is higher in debt

funds. 90 percent of total assets under management (AUM) of the mutual

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fund industry are invested in debt funds, so your selected scheme assets

should also have a considerable AUM. Less AUM in any scheme is very

risky as you dont know who the investors are and what quantum of

investments they have in this particular scheme. Exit of any big investor out

of any mutual fund may impact its overall performance very badly and the

remaining investors in a scheme will have to bear the impact. In schemes

with larger AUMs this risk gets minimized.


Like most investments, mutual funds have risk you could lose money on

your investment. The value of most mutual funds will change as the value of

their investments goes up and down.

The level of risk in a mutual fund depends on what it invests in. Usually, the

higher the potential returns, the higher the risk will be. For example, stocks are

generally riskier than bonds, so an equity fund tends to be riskier than a fixed

income fund.

Some specialty mutual funds focus on certain kinds of investments, such as

emerging markets, to try to earn a higher return. These kinds of funds also tend

to have a greater risk of a larger drop in value

6 common types of risk:

Type of risk Type of investment How the fund could lose money
1. Market All types The value of its investments decline
risk because of unavoidable risks that

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affect the entire market
2. Liquidity All types The fund cant sell an investment
risk thats declining in value because there
are no buyers.
3. Credit Fixed income securities If a bond issuer cant repay a bond, it
risk may end up being a worthless
4. Interest Fixed income securities The value of fixed income securities
rate risk generally falls when interest rates rise.
5. Country Foreign investments The value of a foreign investment
risk declines because of political changes
or instability in the country where the
investment was issued.
6. Currency Investments If the other currency declines against
risk denominated in a the Canadian dollar, the investment
currency other than the will lose value.
Canadian dollar




A Systematic Investment Plan (SIP) is a simple method of investing, used across

the world as a means to accumulate wealth. It works the same way as a recurring

deposit account. SIP involves investing a fixed sum of money in a specific

investment scheme, on a regular basis, for a pre-determined number of periods.

How do SIPs work?

A SIP is a flexible and easy investment plan. Your money is auto-debited from

your bank account and invested into a specific mutual fund scheme. You are

allocated certain number of units based on the ongoing market rate (called NAV

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or net asset value) for the day.

Every time you invest money, additional units of the scheme are purchased at

the market rate and added to your account. Hence, units are bought at different

rates and investors benefit from Rupee-Cost Averaging and the Power of


Rupee-Cost averaging

With volatile markets, most investors remain skeptical about the best time to

invest and try to 'time' their entry into the market. Rupee-cost averaging allows

you to opt out of the guessing game. Since you are a regular investor, your

money fetches more units when the price is low and lesser when the price is

high. During volatile period, it may allow you to achieve a lower average cost

per unit.

Power of Compounding

Albert Einstein once said, "Compound interest is the eighth wonder of the

world. He, who understands it, earns it... he who doesn't... pays it." The rule for

compounding is simple - the sooner you start investing, the more time your

money has to grow.


SWP refers to Systematic Withdrawal Plan which allows an

investor to withdraw a fixed or variable amount from his mutual

fund scheme on a preset date every month, quarterly, semi

annually or annually as per his needs.

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An investor can customize the cash flows as desired; he can

either withdraw a fixed amount or just the capital gains on his

investments. SWP provides the investor with a regular income

and returns on the money that is still invested in the scheme.


Under STP, you invest a lump sum amount in one scheme and regularly transfer

a pre-defined amount into another scheme, on a specified date. The mutual fund

will reduce the number of units equal to the amount you have specified from the

scheme you intend to transfer money. At the same time, the amount that is

transferred will be utilized to buy the units of the scheme you intend to transfer

money into, at the applicable net asset value (NAV). You can get into a weekly,

monthly or a quarterly transfer plans as per you needs..

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Nature of the Organization

Prudent CAS (Corporate Advisory Services) Ltd, originally established as

Prudent Fund Manager in 2000, is a registered investment company.

They offer specialized services in the areas of Personal and Corporate

Investment Planning through Mutual Funds, Equities, Derivatives, Third Party

Products, Fixed Income Products and Life/General Insurance.

It focus on each client, build investment strategies tailored to specific client

needs, and regularly review those strategies to increase the likelihood of

38 | P a g e
success. It would like to know the clients goals and aspirations. So that it can

determine an investing strategy that helps you achieve your full potential.

Prudent CAS (Corporate Advisory Services) ltd. gives advices to its clients

regarding Financial Planning. The research team provides the desk to the

necessary information regarding the different mutual fund schemes and other

investments options like Insurance etc.

The company sells its financial products through both direct and indirect force.

Prudent Channel since its inception has a strong hold in the market through its

Direct Force. It also has strong hold on the corporate channel also now wants to

have a greater reach to its clients which it has already developed through its 150

certified brokers just the beginning of the force that will grow in leaps and

bounds. The company also has a strong and efficient research team that is

currently working from Gujarat which publishes the data that helps the clients in

assessing their funds performance.

Prudent believes in understanding the customer needs and offering the product

that can match his requirement (marketing) as against just selling what product

is already available. Owing to the inherent professional expertise we first study

and understand the investment requirements and circumstances. Our experts

assess the investors' need and their risk profile. Once the entire comparative

analysis is done then the best possible option is advised to the investors. The

best possible option provides the proper asset allocation to various asset classes

and also the estimated risk involved. This helps us to provide our clients an

optional basket of funds rather than selling the typical available funds. This

approach lets us set our focus on the quality work rather than the just the


39 | P a g e
Prudent is a service based distribution company mainly operates in functional

areas of finance, marketing & sales for financial products. Company is in the

business of distribution of and marketing research of financial products like

mutual funds, insurance, wealth management, stock broking, real estate.

Companys vision and mission

Vision : Providing Professional services in area of Personal and Corporate

Investment keeping in view the requirements of the client.

Mission : To help Investor in their Wealth Creation by advising them to invest in

the best products.

Product Range of the Company

Prudent CAS Ltd plans the financial needs in customized way. It analyses

market trend and investment buckets in turn to have maximum returns. Prudent

CAS Ltd serves with array of financial planning.

Spectrum of Products in which Prudent has an expertise:

1) Mutual Funds.
2) Investment Consultancy.
3) Equity and Derivatives broking.
4) RBI Relief funds and Infrastructure Bonds.
5) Life and general Insurance.
6) Fixed Deposits (fixed income products)
7) Real Estate
8) Third party products

Mutual funds

A mutual fund is just the connecting bridge or a financial intermediary that

allows a group of investors to pool their money together with a predetermined

investment objective. The mutual fund will have a fund manager who is

responsible for investing the gathered money into specific securities (stocks or

bonds). When you invest in a mutual fund, you are buying units or portions of

the mutual fund and thus on investing becomes a shareholder or unit holder of

40 | P a g e
the fund.

Investment consultancy

Managing your money and planning your financial security are no easy tasks.

Time constraints, tax laws that are constantly changing and a confusing

assortment of investment options - all present road blocks for most people

seeking to manage their finances in a profitable way. As an experienced private

investment advisor, we are able to offer high - performance financial products

that help you take right financial decisions. Our experts analyze your basic

financial goals - elements such as needs and desires, your status in life and your

current net worth and then advise an optimal solution.

Equity and derivative broking

Incorporated in 2004, Prudent Broking Services Pvt. Ltd is a Stock Broking and

Depository Participant service provider. Company is a member with Bombay

Stock Exchange (BSE) and it applied for membership of National Stock

exchange (NSE) & Central depository services (India) Limited (CDSL).

Company is in the process of creating its national presence by opening offices in

various parts of the country.

A broker's function is to arrange contracts for property in which he or she has no

personal interest, possession, or concern. The broker is an intermediary or

negotiator in the contracting of any type of bargain, acting as an agent for

parties who wish to buy or sell stocks, bonds, real or Personal Property,

commodities, or services. Rules applicable to agency are generally relevant to

most transactions involving brokers. The client is considered the principal and

the broker acts as the client's agent. An agent's powers generally extend beyond

41 | P a g e
those of a broker. A distinguishing feature between an agent and a broker is that

a broker acts as a middleperson. When a broker arranges a sale, he or she is an

agent of both parties.

Infrastructure bonds
Bonds issued to help fund infrastructure projects such as those for land or air

transport, electricity generation and transmission or distribution of water supply.

The bonds carry tax advantages which enable funding at lower interest rates.
Bonds can be issued in secured or unsecured form. Normally bonds issued in the

form of debentures are secured. Bond issued by Financial Institutions offer

attractive returns. Interest under the scheme is paid monthly, quarterly, half

yearly, annually and on maturity. Most of the bonds provide flexibility, liquidity

Safety. The flexibility can be seen from the range of options provided (i.e.)

frequency of return/tenure/tax benefits etc. Bonds provide good liquidity, option

to withdraw on pre-specified dates, listing on major stock exchanges, avail loans

from banks by pledging bonds/securities.

Life insurance and general insurance

Life insurance is a contract under which the insurer (Insurance Company) in

consideration of a premium paid undertakes to pay a fixed sum of money on

the death of the insured or on the expiry of a specified period of time

whichever is earlier.
In case of life insurance, the payment for life insurance policy is certain. The

event insured against is sure to happen only the time of its happening is not


So life insurance is known as Life Assurance. The subject matter of insurance

is life of human being. Life insurance provides risk coverage to the life of a

42 | P a g e
person. On death of the person insurance offers protection against loss of

income and compensate the titleholders of the policy.

General insurance or non-life insurance policies, including automobile and

homeowners policies, provide payments depending on the loss from a particular

financial event. General insurance typically comprises any insurance that is not

determined to be life insurance.

Looking at the immense growth potential of the insurance sector in India,

Prudent Insurance Services Pvt. Ltd. was incorporated in 2008.

Fixed Deposits

Bank Fixed Deposits are also known as Term Deposits. In a Fixed Deposit

Account, a certain sum of money is deposited in the bank for a specified time

period with a fixed rate of interest. The rate of interest for Bank Fixed Deposits

depends on the maturity period. It is higher in case of longer maturity period.

There is great flexibility in maturity period and it ranges from 15days to 5 years.

The interest can be compounded quarterly, half-yearly or annually and varies

from bank to bank. Minimum deposit amount is Rs 1000/- and there is no upper

limit. Loan / overdraft facility is available against bank fixed deposits.

Premature withdrawal is permissible but it involves loss of interest.

Fixed deposits with the banks are nearly 100% safe as all the banks operating in

the country, irrespective of whether they are nationalized, private, or foreign, are

governed by the RBI's rules and regulations, and give due weight age to the

interest of the investor. Till recently, all bank deposits were insured under the

Deposit Insurance & Credit Guarantee Scheme of India, which has now been

made optional. Nonetheless, bank deposits are among the safest modes of

43 | P a g e
investment. One can get loans up to 75- 90% of the deposit amount from banks

against fixed deposit receipts. Though the interest charged will be slightly more

than the interest earned by the deposit.

Real estate

Real estate has emerged as an important asset class in recent years in India.

Greater transparency, emergence of large national players and entry of organized

finance have worked together to make real estate an avenue retail investors can

think as an asset class. Real estate offers valuable diversification to an

investment portfolio. In most cases it is a dividend paying asset with good

appreciation potential. Hence it offers income as well as growth as an asset.

Also if chosen carefully, the price risk associated with real estate tends to be

lower than that for equity. The downside to a real estate investment is larger

investment size, greater transaction cost, lower liquidity and greater information


The Indian real estate sector plays a significant role in the country's economy.

The real estate sector is second only to agriculture in terms of employment

generation and contributes heavily towards the gross domestic product (GDP).

Almost five per cent of the country's GDP is contributed to by the housing

sector. In the next five years, this contribution to the GDP is expected to rise to 6

per cent.
Almost 80 per cent of real estate developed in India is residential space, the rest

comprising of offices, shopping malls, hotels and hospitals. According to the

Tenth Five-Year-Plan, there is a shortage of 22.4 million dwelling units. Thus,

over the next 10 to 15 years, 80 to 90 million housing dwelling units will have

44 | P a g e
to be constructed with a majority of them catering to middle- and lower-income

Size in terms of manpower & turnover of organization

Manpower: - Prudent presently has a manpower pool of 400 employees.

Turnover: - Prudent has a sales turnover of Rs 600-700 crores out of which

profit turnover is around 50 crores and the company is having over Rs 3,000

crores of AUM (Asset under Management).

Organization structure of the company

Fig2(a): Organizational structure of the company

Market share and position of the company in the industry

45 | P a g e
Market share:- The total market share of the industry is 5 lac crores and Prudent

CAS ltd. is now capturing 3000 crores as its AUM (asset under management).

Market position:- It captures 6% of the market share just after Bajaj capital

which is leading the race.

Services Provided to Prudent Valueable Clients

1. Weekly report send by e-mail.

2. Inform about each and every new N.F.O.

3. Any information related with Indian Investment World.

Companys Achievements

1. Have gained a dominant place in the Indian mutual funds distribution


2. Certified by the Association of Mutual Funds as AMFI registered Mutual

Funds advisors.

3. Won the best broker award twice in the year 2004 and 2005 for outstanding

performance in the schemes of Birla Sun Life and State Bank Of Indias Mutual


4. Won many awards and certificates for outstanding performance in various

Mutual Funds schemes.

5. It has acquired about 25 to 29% share of the total Mutual Fund business of


6. Assets under Management (AMU) more than 1700 crores.

7. Prudent C.A.S. Ltd. has tie up almost 30 AMC out of 36 operating in Mutual

Fund industry.

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Financial planning

Financial planning is the process of developing a personal roadmap for the

financial well being. The inputs to the financial planning process are:

1. the finances, i.e., the income, assets, and liabilities,

2. the goals, i.e., current and future financial needs and

3. the appetite for risk.

The output of the financial planning process is a personal financial plan that tells

how to use the money to achieve goals, keeping in mind inflation, real returns, and

taxes. In short, financial planning is the process of systematically planning finances

towards achieving your short-term and long-term life goals. Life Goals most

people nurture dreams of owning a bigger house or car, exploring the world, giving

their children the best possible education, a blissful retirement, etc. Basically, these

dreams are life goals. Consider this example: Mr and Mrs Khanna, 35 and 32

respectively, have a three year old son. Both work in private sector companies. Mr

Khanna plans to retire when hes 50. From their current one bedroom rented

suburban Mumbai apartment, the Khannas hope to move to their own two bedroom

apartment costing around Rs 25 lakh within the next five years. They own a small

car, for which they have availed of a loan. Mr Khanna reckons that he will need Rs

15 lakh for his sons higher education 15 years later. He also wants to build a

corpus of Rs 75 lakh for his retirement. While distinguishing short term goals from

long term goals, you must keep in mind that, as a general rule, any life goal that

47 | P a g e
needs to be met within five years can be considered as short term. Beyond that, any

other goal can be classified as long term. By this classification, the Khannas goals

can be classified as follows:

Using a similar yardstick, you may classify your own life goals. Each of them

needs financing. How you plan your finances, to have the right amount at your

disposal at the right time, is what financial planning is about.Importance of

financial planning. Can you manage without financial planning? Many people do,

but they may findoften when its too latethat they dont have the means to

achieve their life goals. For example, people today realize the importance of living

life to the fullest. Consequently, many opt for early retirement from full time jobs,

as compared to a few decades ago, when most people worked until the maximum

retirement age of 58-60 years. The average person can, today, expect to live a

healthy life well into his or her seventies or eighties, which means that retirement

life is almost as long as working life. Financially, it implies that savings (after

taking into account inflation) should be enough, not just to maintain the same

lifestyle for almost 25-30 years, with no new income, but also to take care of

medical expenses, which are usually high the older a person gets. Planning for all

this is a tall order for anyone. Thats why its critical for everyone to plan their

finances from an early age. So, what do you need to know about yourself when

thinking about a Financial Plan? Financial plan entirely depends upon how much

effort one is willing to put in. This means not just having a good handle on the

48 | P a g e
details of your income and expenses, assets and liabilities, but more importantly on

the following items:

1. Time Horizon and Goals

2. Risk Tolerance

3. Liquidity Needs

4. Inflation

5. Need for Growth or Income

No doubt there are other factors that are important as well, but we believe that the

above five require a more detailed study on the part.

Time Horizon and Goals: It is important to understand what the goals are, and

over what time period you want to achieve the goals. Some goals are short term

goals those that you want to achieve within the year. For such goals its important to

be conservative in ones approach and not take on too much risk. For long term

goals, however, one can afford to take on more risk and use time to ones


Risk Tolerance: Every individual should know what their capacity to take risk is.

Some investments can be more risky than others. These will not be suitable for

someone of a low risk profile, or for goals that require you to be conservative.

Crucially, ones risk profile will change across lifes stages. As a young person with

no dependants or financial liabilities, one might be able to take on lots of risk.

49 | P a g e
However, if this young person gets married and has a child, he/she will have

dependants and higher fiscal responsibilities. His/her approach to risk and finances

cannot be the same as it was when he/she was single.

Liquidity Needs: When the money is needed to meet the goal and how quickly can

you access this money. If investment is in an asset to and expect to sell the asset to

supply you funds to meet a goal, then please understand how easily you can sell the

asset. Usually, money market and stock market related assets are easy to liquidate.

On the other hand, something like real estate might take you a long time to sell.

Inflation: Inflation is a fact of our economic life in India. The bottle of cold drink

that you buy today is almost double the price of what you paid for ten years ago. At

inflation or slightly above 4% per annum, a packet of biscuits that costs you Rs 20

today will cost you Rs. 30 in ten years time. Just imagine what the cost of buying a

car or buying a home might be in ten years time! The purchasing power of your

money is going down every year. Therefore, the cost of achieving your goals need

to be seen in what the inflated price will be in the future.

Need for Growth or Income: As you make investments, think about whether you

are looking for capital appreciation or income. Not all investments satisfy both

requirements. Many people are buying apartments, but are not renting them out

even after they take possession. So, this asset is generating no income for them and

they are probably expecting only capital appreciation from this. A young person

should usually consider investing for capital appreciation to take advantage of their

young age. An older person however might be more interested in generating

50 | P a g e
income for themselves. Benefits of financial planning Heres a list of the benefits

that a well chalked out financial plan can bring about:

Helps monitor cash flows and reduces unnecessary expenditure.

Enables maintenance of an optimum balance between income and

Helps boost savings and create wealth.
Helps reduce tax liability.
Maximizes returns from investments.
Creates wealth and ensures better wealth management to achieve life

Financially secures retirement life.
Reviews insurance needs and therefore also ensures that dependents

are financially secure in the unfortunate event of death or disability.

Lastly, it also ensures that a will is made.

The financial planning process-

This section examines each of these steps in detail.

Step 1: Identify the current financial situation

Sit down with all the earning members of your family and gather all information

about your sources of income, debts, assets, liabilities, etc. This gives you a picture of

your current financial situation.

Step 2: Identify the goals

Ask each member to list what they think are current and future family goals. Prioritize

each goal by establishing consensus and put a time period against each, i.e., when will

you need the finances to achieve that goal. If possible, quantify each goal. This

exercise enables recognition of short term and long term goals, and how much money

you need for each.

Step 3: Identify financial gaps

Once you know where you stand financially, and where you want to be, i.e., how

51 | P a g e
much you have or can expect regular sources of income to generate, and how much

you need to fulfill various goals.

A simple calculation gives you an idea of the shortfall. This is important, because,

identifying the right investments to cover the shortfall depends on you quantifying the

income from investments.

Step 4: Prepare the personal financial plan

Now review various investment options such as stocks, mutual funds, debt

instruments such as PPF, bonds, fixed deposits, gilt funds, etc. and identify which

instrument(s) or a combination thereof best suits your needs. The time frame for your

investment must correspond with the time period for your goals.

Step 5: Implement the financial plan

Its now time to put things into action. Gather necessary documents, open necessary

bank, demat, trading accounts, liaise with brokers and get started.

Most importantly, start investing and stick to your plan.

Step 6: Periodically review the plan

Financial planning is not a one-time activity. A successful plan needs serious

commitment and periodical review (once in six months, or at a major event such as

birth, death, inheritance). You should be prepared to make minor or major revisions to

your current financial situation, goals and investment time frame based on a review of

the performance of your investments.

Financially challenged individuals who feel this is just beyond them, can of course

always consult professional financial planners, who takes one through the whole

process. Being a long term commitment, financial planning goes on until one meets

his last goal. It is also a personal decision, which implies that a person must select

someone who he is comfortable with, and can build a long term relationship that is

mutually beneficial.

52 | P a g e
Tips for making the most of the financial planning process

1. Start now. Even if you are in your mid thirties or forties, its better to start now

than dawdle for another five years. Every day counts.

2. Be honest with yourself. Seek help when needed.

3. Set sensible, measurable goals for yourself. Be realistic in your expectations of

the results of financial planning.

4. Review your plan and financial situation periodically and adjust as needed.

5. Always review the performance of your investments; pull out if needed and

reinvest the money elsewhere.

6. Be hands-on. Its your money and no one else will do your work for you.

Features of a good financial plan

How do you evaluate the quality and effectiveness of your financial plan? Well, heres

a checklist we can use.

Does it indicate your current financial situation?

Does it list out all your goals in measurable terms?

If professional help is sought, your financial planner will ensure that your financial

plan also contains the following:

List of possible risks and a risk management plan.

Expected returns from each investment.
A mapping between the investments and goals, i.e., how each investment helps

Details of one time and recurring fees charged by him.

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The building blocks of financial planning-

Let us have a look at these blocks, what they are and how to go about their planning:

1.Retirement planning

2. Investment planning

3. Insurance planning

4. Contingency planning

Let us start with the foundation and the first of the two levels in risk management.

Retirement Planning :
The longest of journeys start with a single step. We are not sure who said that, but

being in the financial planning space, we think it most aptly describes what retirement

planning is all about. Planning for retirement is one long journey but a resolute and

systematic step-by-step approach makes it a lot less laborious.

1. Start early

A well-prepared approach towards any goal is usually the result of an early

start. Retirement planning is no different. We hear financial planners say that

its never too early to start saving for retirement, they are right. Make no

mistake that an early start helps and you will be surprised at just how much it

helps. Your friend or colleague who started saving for retirement even five

years earlier than you with the same quantum of investments is likely to save

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twice as much as you at retirement. Even if you dont have the requisite

amount of money required to start, the key lies in starting with what you have

and making up for the deficit at a later stage. However the opportunity to

make an early start should not be compromised with.

2. Seek the assistance of a financial planner

Planning for retirement can be fairly uncomplicated. You need to have a good

idea of where you want to be 30 years from now in financial terms and what

kind of a lifestyle you would like to maintain. However, putting the financial

plan in place (which has a lot to do with math, an unpopular subject with a lot

of us at school) can be quite complicated. This is where an investment advisor

steps in. He can give a concrete shape to your retirement plan by coming up

with the all-important figure, based on your inputs and chart out a plausible

investment strategy for the long term.

3. Implementing the plan

Having an investment plan in place sets the ball rolling for you and your

investment advisor. He will now implement the plan by making investments in

stocks, mutual funds, bonds, small savings schemes and fixed deposits among

other investment avenues. Your risk profile is the most important reference

point for the investment plan. The objective is to invest in avenues that lower

risk and maximize returns and do so in line with your risk profile. Asset

allocation i.e. investing across assets in varying degrees will play a vital role

over the long run. This is where the investment advisors expert advice will

play a crucial role. Typically a retirement portfolio should be well-diversified

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across pension plans, mutual funds, equities, EPF/PPF and fixed deposits.

4. Tracking/reviewing the plan

Your investment plan must be monitored regularly to make sure that you are

on course to meeting your objectives over different market cycles without

compromising on the risk. Again, your investment advisor has an important

role to guide you in this regard. For instance, with the robust performance of

equity markets over the last couple of years, you are probably over-invested in

equities and have therefore taken on more risk than usual. You will have to

liquidate some of your equity investments to bring it in line with your risk

profile. With passage of time as your risk profile changes, the same will be

reflected in your investments as well. The portion of investments in market-

linked products like equities and mutual funds is likely to reduce; instead

greater allocations could be made in assured return avenues like fixed


5. Dont dip into the retirement savings

Since retirement money is sacred it is important that you treat it as such. Your

carefully drafted investment plan need not go for a toss every time you

witness a cash crunch. Avoid dipping into your retirement monies, unless its

urgent. A one-time sum of Rs 5,000 invested over 30 years (at 10%

compounded growth) will swell to Rs 100,000. That is what long-term

investing can do for you, so money needs to go into your retirement savings

kitty and not come out of it.

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Investment planning
Why do we invest?
Of course to save money and earn returns! For what?

Your obvious answer would be: for my and my family's future. If asked to elaborate, I

am sure you will find it difficult to list down five things for which you are saving

money. But if the investments or the money you are saving is not invested in right

investment avenues then in the hour of crisis you either have invested in a locked-in

financial product or their value has become half or in a product which rates very low

in liquidity (like real estate). So the right type of investment product is very important

to help your money grow and in achieving your goals.

So this is where investment planning comes in place. Investments of your hard earned

money should always be done considering your goals and the time frame in which

you want to achieve your goals. The next question is how to go about it. First you

need to start with charting, that is, writing down your goals and the time frame in

which you would like to achieve them. This forms the base of your investments. To

make the task simpler, you can break down your goals into three different sections:

Responsibilities: Providing for your dependent parents; funding for your

children's education and marriage; funding for marriage of your siblings, etc

Needs: Buying a house, saving for retirement, buying office space and any

other needs you may have

Dreams: Finally, your dreams or your aspirations which can range anywhere

from buying a solitaire for your wife to going on a world tour to buying a

sports car

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We live only once and so no dream is too big or far-fetched. The next step is the time

frame in which you would like to achieve it. Let me explain the importance of this via

an example.

Let us say you want to save for a down payment for the dream car, which you are

planning to buy after a year and a half. You start saving by investing regularly in

equity mutual funds. After a year, just nearing the time frame you have set for

yourself, you decide to redeem the investment and the market crashes. Forget the

profit, your initial investments too has halved in value.

Equities are good investments but only when you have the time frame of more than

eight years. Then you can be rest assured that your investments will earn on an

average 13 per cent to 15 per cent return.

Insurance planning
It is the planning for an adequate amount of insurance. And it definitely does not end

with life insurance alone. One needs to also plan for health insurance, disability

insurance, and property insurance. These insurances are very important and everyone

should try to incorporate them in their insurance planning. First and foremost, it is

very important to know one very important fact. Insurance is not investment and vice

versa. Never try to mix the two. Insurance is for risk management and investments are

for goal achievements. This golden rule should form the crux of your decision-

making when buying insurance polices. Never buy insurance just because someone

advises you to buy. Try and understand the product, correlate it with your needs and

requirements and only then go for it. So how much is adequate? A number of

components go into the calculations in finding the adequate amount of insurance.

These are:

Your current age

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Inflation adjusted returns

Number of dependent in the house

One time cost (which includes any existing loans that you may have taken,

(exclude the home loan which is already insured against declining term

insurance) and any other expenses such as last rites expenditure)

Your current cost of living (only include the fixed and variable mandatory

expenses. Exclude any mandatory expenses related to you since these

expenses will cease to exist after your demise)

The amount needed to pay off responsibilities like your child's education and


Exiting investments

Any existing life insurance

All these factors help in finding the adequate amount of life insurance. Hence if you

have any existing insurance then you only need to buy the additional amount. NOTE:

If you are no more an earning member of the family, that is, if you have retired, then

you should not take any life insurance.

Health insurance

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A must again with the increasing amount of stress that the younger generation is

facing, we would not be surprised if you have already started running huge amounts

of medical bills at a young age. A minimum amount of Rs 2 lakh is a must. If

affordable increase the amount. Also, if possible try to take individual policies as

against family floater plans.

This is because if you have a floater health policy worth Rs 3 lakh, and you fall sick

and use up an amount of say, Rs one lakh worth of health insurance, only Rs 2 lakhs

will be available for the rest of the year for you and your entire family.

In fact now individuals have an option to go for a top-up, that is, if you have an

existing policy with your employer or you have bought it one yourself then you can

top it up to Rs 10 lakh. The premium amount works much cheaper. For example, say

you have Rs 5 lakh of health insurance (this is the maximum offered by most health

insurers today) and you would like to be insured for more than that then you could

buy a top-up plan for another Rs 5 lakh.

So if you have a medical bill of Rs 7 lakh then the first Rs 5 lakh are covered by your

existing policy and the balance Rs 2 lakh by the top-up policy. NOTE: It is very

important to pay your insurance premium on time and see that it does not lapse

especially for individuals who are nearing 60 as after this age very few insurance

companies offer health insurance and to get a new one is very difficult. Also, for

people who are working and have not taken any other mediclaim policy besides the

one their company offers them, remember that once you leave the job and find a new

one, you might no longer be covered by that policy.

Disability insurance
Again an important insurance policy, especially, for individuals who travel frequently.

Accidents can happen anytime and if it leads to any disability then well let's not even

think about it. This policy is not an expensive one though. There is also an option for

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individuals to take this insurance as a rider along with their life insurance.

Compare the premium amounts of a standalone policy and the premium if it is taken

as a rider and then decide which one is better.

Property insurance
Your hard earned money has gone in setting up your house. If something were to

happen to it, or maybe something is stolen then it is difficult to replace. So it is

always advisable to have your property insured. The premium amount is low and

hence this amount will not pinch your pockets.

The only hitch is that in India, property insurance is for the market value and not for

the replacement value of the property. But this should not be an excuse for not taking

property insurance.

Professional indemnity insurance

This insurance policy is a must for all professionals to protect them from any claim

arising during the course of their business.

I know it sounds like too many insurances at one time will leave you with no money

for other investment planning but the ones mentioned here are amongst the most

commonly needed ones. The most important are the life insurance and health

insurance and for individuals who are nearing their retirement age or are retired for

them health insurance a must. Once these two are in place you can buy the others

eventually. Once we are assured that your risk is managed, we do not have to worry

about it anymore. Now we can safely move towards investing and planning to achieve

your goals.

Contingency planning
Also known as emergency planning. It has been emphasised time and again that a

contingency plan or an emergency plan has to be in place before starting to plan for

other goals. Why? Emergencies can come anytime or anyplace especially when we

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least expect it. We cannot predict it or even prevent it but what we can do is buffer

ourselves against it so that our life does not go for a toss due to the emergency. It is

basically saving for a rainy day. So once that you have planned for any untoward or

unpredicted eventualities, you can safely move ahead to the next level of the financial


How to calculate?
All your mandatory monthly expenses which you have to meet by hook or by crook

have to be taken into account. A list of all mandatory expenses have been given


Fixed mandatory expenses (which are fixed every month) include:

Mortgage installment

Car loan installment

Other loan installments

Life insurance premium

Health insurance premium

And variable mandatory expenses (which are mandatory but vary every month)





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Miscellaneous (unavoidable) expenses

The above expenses have to be calculated on a yearly basis and then divided by 12

months so as to arrive at an average monthly figure.

How much to set aside?

At least three months of your average monthly expenses have to be kept aside in the

form of emergency funds since it is generally observed that three months worth of

funds are enough to meet most emergencies and come back on track. People nearing

retirement should try and keep aside at least five to six months of mandatory monthly

expenses as contingency fund.

Let us take an example: Say your yearly mandatory expense is Rs 350,000.00.

Hence your monthly average expenses will come to Rs 29,167 (3,50,000/12)

(rounded off). You need to keep aside Rs 87,500 (29,167*3) that is your three months'

average monthly expenses as contingency funds to meet any eventualities.

It is not necessary to keep the entire amount in cash. You can keep aside Rs 20,000 in

cash and the balance you can split between savings account, fixed deposit, or liquid

funds. Why? Because all of the above mentioned products have liquidity, their biggest

advantage, which is a very important feature in case of any emergencies. Also,

remember that in case of usage of these funds always remember to replenish it.


Investment related reports

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Portfolio Valuation Report Detailed

Portfolio Valuation Report Summary

Capital Gain/Loss Report

Dividend Income Report

Transaction Report

AUM Report

Customer Profiling Report

SIP related reports

SIP Transaction Report

SIP Reminder Report

SIP Reconciliation Report

SIP Termination/Closed Report

SIP Account report

SIP Calculator


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Shift Sub Group

Create Sub Group

Other Reports and Utilities

Insurance Pending Policy and Premium Report

Change Password

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Working Theory Of Prudent C.A.S. Ltd.

To provide reliable information

To honor our service commitments

To maintain all records in privacy

To preserve client capital

To provide appropriate feedback

To guide their future investment

To restructure investment plan on demand

Finally to provide complete solution & peace of mind on the investment plan

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Strengths of the Company

Prudent CAS ltd. is a national distributor.

Company has harnessed the potential of information technology for excellent

research and portfolio management through specialized software which works

on real-time market information and generates error-free reports.

For IT-savvy investors, Company possesses a secured user-friendly website that

contains excellent research and portfolio management tools to help client to

access their portfolios round the clock.

The research team and the website are backed by a team of veteran IT

professionals, developers, designers, programmers and high-end Servers.

The entire focus is on security of information, integrity of data, and

accuracy of real-time reports.

Company constantly endeavors to achieve optimum client & partner

satisfaction and confidence building by providing various tailor-made

reports according to client needs. Company possess dedicated qualified

team that research and analyze the various financial products available in

the marketplace.

Company has created in-house capabilities of analyzing funds on various

parameters before suggesting them to clients.

4000 plus distributors are associated with the company.

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Company is having 6% share in the market with having Rs. 3000 crore

plus assets.
Fulltime Dedicated of Team RM & CRO for client support & Assistance.
Regular Meeting with Partners on business and market Updates.
Company provides an Online 24X7 query module to its clients and

Company deals in various kinds of financial products which helps the

client in planning their financial management better.

Wide Branch Network.
Training at Regular Interval.

Weaknesses of the company

Company is having fewer branches in north India.

Company deals in limited products.

Opportunities and Threats of the Company

Opportunities of the Company

Company can grow and expand their services & support through sales and

marketing, technology, operations, back- office support, training &


Prudent Group expanded its horizon by offering specialized services in the

areas of Personal and Corporate Investment Planning through Mutual

Funds, Equities, Derivatives, Third Party Products, Fixed Income

Products, Life/General Insurance and Real Estate which can help the

company become a global player.

Besides having a large pool of their own clients, the company also has the

potential to manage its geographically-spread business operations through

a unique platform for independent financial advisors (IFA).

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Company is in the process of creating its national presence by opening offices

in various parts of the country.

Company is a member with Bombay Stock Exchange (BSE) and it applied

for membership of National Stock exchange (NSE) & Central depository

services (India) Limited (CDSL).

It also has strong hold on the corporate channel - it now wants to have a greater

reach to its clients which it has already developed through its 2000+ certified

brokers just the beginning of the force that will grow in leaps and bounds.

Threats of the Company

Company faces competition from various companies in the market.

Due to few branches of the company in the north India it could affect the

company in the competition geographically

Company deals in limited products in turn competitor can lead the

competition by dealing in those products in which company does not deal.

Best practices and Unique Selling Proposition (USP) of the Company

Company provides the online platform to its clients. Companys 90% dealing

is web based and it provides an online 24 X 7 portfolio and query module that

helps a customer to see their money growing.

Online Valuation report for all Mutual Fund investments.

Unbiased advice across the product basket.

The Variations / Deviations in practices followed by the company

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Prudent CAS ltd. has only one strategy i.e. Distribution; it can be direct or

indirect. Instead of spending money on normal marketing channels like

advertisements etc., they focus is on getting the Consumer to use the products

and services of the Company and then asking them to recommend the

Companys services to his friends, relatives and peers. On achieving a certain

turnover or numbers the person recommending the company is paid certain

incentives and rewards.

Prudent CAS ltd. believes in sales through investing in different AMCs, not in

advertising their services. Advertising concept is not the part of Prudent CAS

ltd., though this concept has been taught to us in the classroom.

The diversity among the work force is not as creative as required as the

major difference between workforces is the age factor.

Effective strategies are not developed to achieve the companys goal in

concern with its policies.

Synergy in team work is seen but there was resistance in different


Moreover strategies taught in class to handle lower level people were


Recruitment process also made a major difference as stages taught in room

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1. To study the investment pattern of Investors of Prudent CAS.

2. To find out the awareness level of investors regarding mutual funds.

3. To find the type of schemes of mutual fund preferred by investors.

4. To find out the importance of factors like liquidity, higher return, company

reputation and other factors that influence investment decision of mutual fund


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The study aims to delineate the methodology, employed to undertake this study.

Research is a common parlance, which refers to a search for knowledge. One can

define research as a scientific and systematic search for pertinent.

Research is of great importance to find out the nature, extent and cause of the

research issue under study.

Research methodology is a process in which various steps that are generally

adopted by a research are outlined.

The various steps provide useful guidelines regarding the research process


1. Preparation of the research design.

2. Source of data.

3. Technique of research.

4. Sampling design.

Preparation of the research Design:

A research design is the arrangement of conditions for collection and analysis of

data. Actually, it is the blueprint of research project.

The research design used for this project is Exploratory Research and Analytical


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Sources of Data:

Sound marketing research depends upon the existence of facts or directly related to

problem studied. To fulfill a foresaid objective of study, the information was

gathered from primary as well as secondary sources.

A. Primary Source Information-

I. Method of obtaining data: Questionnaire.

II. Communication method: Personal meeting.

B. Secondary Source Information-

I. Internal: Company internal information.

II. External: Books, Magazine and Journals.

In my study I used secondary as well as primary data. For this research purpose all

primary and secondary data were collected.

Research Technique:

The following research techniques were used for data collection:

(A) Questionnaire-

Questionnaire was structured to get it filled by investors .

(B) Collection of Information-

The respondents were personally approached to explain the objective of survey.

During the meeting the questionnaire was filled by the respondents.

Sample Design:

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Sample Design refers to the technique as the procedure that a researcher would

adopt in selective item for the sample.

(A) Target Population or Sampling Unit-

The universe of the study is investors of Prudent CAS Ltd.

(B) Sample Size-

The sample size taken for the study is 100 respondents. The respondents were the

investors of Prudent CAS Ltd. They hold the mutual funds of Prudent CAS Ltd.

(C) Sampling Method-

The agents and investors had been selected on the basis of Random Sampling. The

study is sample survey consisting of small sized sample of agents who had not

much awareness of Mutual Funds and AMFI examination.

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Ques.1. What is your investment priority?

Kind of Investment No. of respondents

Fixed Deposits 28

Real Estate 18

Insurance 21

Mutual Fund 10

Gold 15

Other 8

No.of respondents
Real estate
15% 8% 28% Insurance
10% MF
21% Gold


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28% investors prefer FD, 21% investors prefer Insurance, 10% investors prefer

MF, 15% investor prefers Gold, 18% investor prefers Real Estate and 8% prefer

other options for investing.

Ques.2. Which factor influence you to invest?

Factors No. of respondents

Liquidity 20

Low risk 30

High return 32

Trust 18

No. of respondent

18% 20% Liquidity

Low risk
High return
32% 30%


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32% investors prefer because of High return, 30% prefer because of Low risk,

20% prefer because of Liquidity and 18% investors prefer because of Trust.

Ques.3. From where did you get information about Prudent CAS Ltd.?

Source of Information No. of Respondents

Advertisement 18

Financial Advisor 46

Bank 22

Peer Group 14

No. of respondent

Peer Group
46% 14% Bank
Financial Advisor


18%of the customers said that they get the information about MF from

Advertisement, 14% from Peer Group, 22% from Bank and 46% get information

from financial advisors.

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Ques.4- Which reason prompts you to make an investment in mutual funds?

Reasons for Investment No. of People (in Percent)

Returns 21
Wealth Creation 23
Tax Saving 35
Brand Name Equity 7
Liquidity 14

No. of People (in Percent)

Wealth Creation
Tax Saving
Brand Name Equity


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23% invest to create their wealth. 21% invest to get returns 35% invest to save tax

this is generally for the people whose most of the part goes in tax. 14% invest

because of liquidity reason. 7% invest on a basis to earn Brand name Equity.

Ques.5- Which channel do you prefer for MF investment?

Channels No. Of respondent

Financial advisors 60

Banks 15

AMCs 25

No. of respondent

25% Financial advisor



60% of investors prefer financial advisors, 15% of investors prefer bank and 25%

of investors prefer AMC channel.

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Ques- 6- What are your objectives for making investments?

Particulars Response

Tax Saving 35

Regular Income 25

Child`s future 15

Retirement plan 10

Other 15

Total 100

Objectives behind investment

Tax saving Regular Child's
41% Income future
29% Retirement Other


25% invest to generate regular income, 35% investors seek tax saving as their main

motive behind investments, 15% investors invest with the objective of planning of

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their childs future,10% prefer as retirement planning and 15% prefer other options

as their objective for investment.

Ques.7- Which fund do you prefer while investing in Mutual Funds?

Particulars Response

Balanced 20

Debt fund 15

Equity fund 50

Gold fund 10

Other 5

Total 100


Among the 10% investors of mutual funds, 20%prefer Balanced Fund, 15% prefer

Debt fund, 50% prefer equity, 10% prefer Gold and 5% prefer other available funds

for investing.

Ques.8- Which type of schemes do you prefer to invest in MF?

Particulars Percentage (%)

Close ended 19

Open ended 81

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Total 100


Also, 81% of the investors believed in open-ended schemes and 19% of the

investors believed in close ended.

Ques.9- For how long do you prefer to invest ?

Period No. of respondents

Less than 6 months 4

6 12 months 25

12 2 year 40

More than 2 year 31

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Horizon of investment

Less than 6
4% months
6 - 12 months
12 - 2 year
more than 2year


25% investors prefer more than 6-12 months investment period, 31% prefer more

than 2year period, 40% prefer 12 months-2 year and 4% prefer less than 6 months

for an investment period.

Ques.10. Which mode of investment is preferred by you?


One time investment 35

Systematic Investment Plan (SIP) 65

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One time
35% investment
65% SIP


65% investors replied that they prefer one time investment mode and 35% prefer

SIP mode for investment.

Ques.11- Which is the most preferable option for earning high returns?

Opinion No. of respondents

Dividend Pay-out 21

Dividend Reinvestment 8

Growth in NAV 71

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No.of respondents
21% Dividend
8% reinvestment
Growth in


71% investors prefer growth in NAV opinion, 21% prefer dividend reinvestment

and 8% prefer dividend payout as a opinion for getting return.

Ques.12- Do you get influenced by past returns provided or by the current

NAV of a fund?

Return No. of respondent

By current NAV 41

By past returns 34

By both 25

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Influencing factors of returns
25% By return
34% By both


41% says that they get influenced by NAV, 34% because of returns and 25% says

that they get influenced by both NAV and Returns.


Last 3 1 3
Category 1
Week Mth Yr Yrs
Equity - Banks & Fin
-2.26 -8.37 -4.82 14.37 21.60
Equity - Contra -1.36 -9.26 -5.75 5.71 21.88
Equity - Diversified -0.71 -8.60 -4.72 6.92 20.93
Equity - Dividend Yield -0.79 -8.09 -4.40 5.63 17.31
Equity - ELSS -0.89 -9.12 -5.21 5.77 19.63
Equity - Energy / Power 0.35 -6.04 -0.14 20.80 25.52
Equity - FMCG -1.93 -10.34 -11.62 0.00 13.29
Equity - Global 1.57 1.09 -0.46 3.86 6.55
Equity - Infrastructure -0.82 -8.42 -4.32 5.06 22.37
Equity - Large-cap -0.90 -8.53 -5.60 4.50 15.63
Equity Media -1.39 -9.65 -5.05 4.21 17.43

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Equity - Mid-cap -0.83 -10.66 -5.09 6.63 29.38
Equity - Multi-cap -0.55 -8.58 -4.45 6.10 20.50
Equity - Nifty Linked
-0.73 -7.79 -6.70 3.81 12.00
Equity - Savings /
-0.20 -2.80 -0.81 7.43 10.56
Equity - Sensex Linked
-0.99 -7.17 -6.47 2.21 9.96
Equity - Small-cap -0.67 -11.21 -5.46 5.92 36.12
Equity ETFs -0.98 -6.67 -5.02 5.11 12.51
FOF Equity -0.09 -3.42 -0.89 9.28 16.26
FOF Overseas 1.53 -1.12 -3.45 9.44 -0.48

Fig:4(a) Returns of Equity

Last 3 1 3
Category 1
Week Mth Yr Yrs
Debt -Interval Funds - Half
1.59 2.06 3.25 9.24 8.65
Debt -Interval Funds
0.12 0.57 1.61 7.10 8.14
Debt -Interval Funds
0.19 0.64 1.68 6.99 8.00
Debt -Interval Funds
0.32 0.93 2.16 8.35 8.84
Fixed Maturity Plans 0.23 0.97 2.42 8.78 9.13
Floating Rate - Long Term 0.45 1.68 3.59 11.41 10.59
Floating Rate - Short Term 0.21 0.88 2.25 8.70 8.92
FOF Debt 0.45 0.40 2.64 10.87 12.20
Gilt - Long Term 1.94 4.64 7.47 18.24 14.23

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Gilt - Medium Term 1.09 2.99 5.51 14.58 11.98
Gilt - Short Term 0.67 1.98 4.01 12.58 9.98
Liquid Funds 0.13 0.56 1.68 7.48 8.18
Long Term Income 1.09 2.96 5.28 13.72 11.61
Medium Term Income 0.68 2.21 4.37 12.44 11.20
Short Term Income Plans 0.45 1.64 3.51 10.83 10.03
Ultra Short Term Plans 0.24 0.99 2.42 9.01 8.91
Fig:4(b) Returns of Debentures


Scheme Name Return 1 Week Rank 1 Week

ICICI Pru Half Yrly Inv II-Ret(G) 4.4973 1/2355
Tata India Pharma & Healthcare Fund-Reg(G) 4.1859 2/2355
Mirae Asset China Advantage-Reg(G) 3.6358 3/2355
SBI Pharma Fund(G)-Direct Plan 3.6055 4/2355
SBI Pharma Fund-Reg(G) 3.5915 5/2355
Principal Global Opportunities Fund(G) 3.4993 6/2355
Reliance Pharma Fund(G) 3.4591 7/2355
ICICI Pru Annual Inv II-Ret(G) 3.3601 8/2355
UTI Pharma & Healthcare Fund(G)-Direct
3.0237 9/2355
MOSt Shares NASDAQ-100 ETF 3.0154 10/2355
UTI Pharma & Healthcare Fund(G) 3.0062 11/2355

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Birla SL Global Commodities Fund(G) 2.9571 12/2355
DSPBR World Agriculture Fund-Reg(G) 2.7404 13/2355
R*Shares Hang Seng BeES 2.7013 14/2355
Kotak US Equity Fund(G) 2.6038 15/2355
DSPBR World Energy Fund-Reg(G) 2.6033 16/2355
Reliance US Equity Opp Fund(G) 2.4985 17/2355
DSPBR World Mining Fund-Reg(G) 2.3691 18/2355
HSBC Emerging Mkts Fund(G) 2.3463 19/2355
JPMorgan US Value Equity Offshore Fund(G) 2.3018 20/2355
Fig:4(c) Fund ranking

From the above chart it is seen that some of the schemes which gives better returns

and gained highest ranking are ICICI Pru Half Yrly Inv II-Ret(G), Tata India

Pharma & Healthcare Fund-Reg(G), Mirae Asset China Advantage-Reg(G), SBI

Pharma Fund(G)-Direct Plan etc.


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The trend for investment is changing rapidly besides the traditional pattern of

investment and people today they are ready to undertake risk and also bear the

volatility of changing mutual fund market scenario.

This shows that people with Middle Income Group are more attractive this market

and are ready to bear the risk.

It is observed that 81% investors have invested open ended schemes that they

want higher returns on their investment rather than investing in closed ended

schemes in mutual fund.

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It is observed that 35% investors have invested money for tax assumption.21%

investors have invested money for higher returns in their investment.23% investors

have invested money for value creation in fund. And remaining9% investors have

invested money for other reason.

It is observed that 50% investors have not interested to invest money in mutual

fund.33% investors have imperfect knowledge so they not invested money in

mutual fund.9% investors find govt. securities bond is better thats way they not

invested money in mutual fund. And remaining 8% investors have other reason so

they not invested money in mutual fund.

It is observed that more businessmen were inclined towards investing in current

account. The ladies were inclined to invest their money in Gold and jewellery

Service class people and retired class people prefer more saving and fixed deposits

People with high income.

It is observed that 70% investors have invested to getting returns in the range of

5-15% which shows in short span of time they are getting good returns and more

than expectations.

It is observed that 80% investors have invested in short term duration which

indicates the investors have not ready to invest in long term period due to various

risks associated with long term duration of investment.

On asking how they get knowledge of mutual fund a large number of them

attributed to print media. Even banks today follow the role of the investment

advisors. Very few get any information from the e-media or Hence, AMCs must

increase the awareness about their product through Electronic media (TVs, Cables,

Radios etc.) as well as and should not just constrained itself to the print

advertisement those who do not read newspaper.

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Many of the investors are aware of mutual funds but most of their perception

towards them is not positive.

Investors are mainly concerned with the risk factors of mutual funds and are not

directing towards them.

The investors who have invested in mutual funds mainly go for it because of the

Liquidity matter and Tax exemption.

Most of the people dont know the advantages of mutual funds and the various

types of mutual funds.

There are nearly 1173 schemes of mutual funds offered by various mutual fund

houses, which an ordinary person is not aware.

A common investor basically looks for the Tax exemption and Safety &security

while investing.

Investors often feel that those people, who have surplus amount with them and

invest to avail Tax exemption, can do investing in mutual funds.

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Suggestions to PRUDENT C.A.S. LTD. Mutual Fund:

Disclosure of Risk: The funds should disclose the level of risk associated with

investment in the fund return in offer documents and in comparative levels of returns

and risk in the annual reports for the sake of prospective and existing investors.

Educating the agents: While investing the agents/salesmen should clearly explain

the investors all the features both positive as well as negatives associated with a fund.

Primarily, the agent/salesmen should first understand the purpose/ need for the

investment by the investor.

Simple Terminology: The details both facts and figures should be in plan English

and the figures must be explained, for example when Sharpe ratio is mentioned, they

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should clearly tell its significance and how it is related with risk and how to

assess( eg., higher, the ratio, higher the better instrument).

Regional Languages: The fact books may be printed also in regional languages so

that penetration in rural areas may be achieved

. Customer Care Divisions: Along with internet access the customers queries about

any schemes should be answerable and attract through well suitable counseling.

Educating the public and the investors: Workshops or seminars explaining the

importance and risk factor associated with different classes of assets may be

conducted from time to time for the existing investors. At the same time awareness

programmes more in all areas and more in number should be conducted for the public.

Understanding the Psychology of the Investors: AMCs should put extra effort in

studying and understand the psychology of investors in order to provide better

schemes and better service.

Suggestions to the investors:

Understand the purpose of investment: The first point to analyze before investing

in a fund is to find out whether the objective matches with the scheme. It is necessary,

as any mismatch of the same would directly affect the prospective probable returns.

Low risk tolerance: Those investors with less risk tolerance should go for debt

schemes, as they are relatively safer, when compared to empowered schemes like

equity. Aggressive investors can go for equity investments. Investors that are even

more aggressive can opt for schemes that invest in specific industry or sector.

Track Record: Investors should go through the schemes track record, performance

against relevant market benchmarks and its competitors.

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Period of Investment: One should look at covering the volatility exposure which

can be done by holding onto the investment for longer periods which also enables the

scheme to gain.

Cost Factor: Though the AMC fee is regulated, one should look at the expense

ratio of the fund before investing. This is because the money is deducted from the

returns. A higher entry load or exit load also will eat into the actual returns. A higher

expense ratio can be justified only by superlative returns. It is very crucial in a debt

fund, as it will give a very few percentages of returns.

Points to be considered while investing in NFOs: At the time of NFO, one can buy

units at par. However, it is not always advantageous to buy a mutual fund during

NFO. One should always wait and see the performance before investing in it. One can

buy units of an open-end scheme anytime at NAV-related price. The units can be

either purchased directly or via internet.

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Prudent is a growing advisory firm that provides effective services to customers

and investors. Prudent CAS has limited awareness among investors but has been

effective in rendering advisory and brokerage services to the investors,

From the research, it is indicative that investors prefer Systematic Investment

Plan and open ended funds. Investors after the bubble of 2008 have preferred

to invest in mutual funds as they are safer.

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The Firm helps investors to maintain an effective portfolio of wide range of

investments that diversifies their risk. The basic objective of investors is to

invest for tax saving, retirement planning and childs future.

Investors are risk averse and do not prefer to invest for very long term and

look for short term gains which 1 to 3 years period.

Investors are not experienced in investments and tae decisions emotionally.

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Every research has its own limitations and present research work is no exception to

this general rule the inherent limitation of the study are as under:

1. The study is limited to the city limits of Lucknow only so generalizations cannot

be done.

2. The study is time bound for a period of two months only.

3. Manpower constraint as I conducted the project solely.

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4. Many customers even though they had invested in mutual funds were hesitant to

respond to questionnaire due to lack of interest.

5. Some people though they invested in mutual funds did not possess any

knowledge of mutual funds; they were totally dependent on their bank investment

advisor or their friends and family people advice.

6. Since the sample size was 100 it cannot give the exact perception of whole


7. Interview method, which was followed in the present research work, is

relatively more time consuming.

8. Questionnaire method can be used only when respondents are literate and co-


9. The success of questionnaire method, lies more on the quality of questionnaire


10. In the present work, the sample size is very small. Research is mainly based

on the survey of investors and insurance and post agents which may not be true

representative of whole market scenario.

11. Few agents refuse to give answers.

12. Lack of time.

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1. Bodie, Kane, Marcus Security Analysis and Portfolio Management, 5th

Edition Tata Mc Graw Hill publications.

2. Mutual Fund testing program Book AMFI publication.
3. Association of Mutual Fund in India workbook.
4. C.R. Kothari- Research Methodology,


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Magazine & Newspaper:

Business World

The Economic Times

The Financial Express



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Q1.Name and address along with phone no.

Q2. Age (years): Between

21-25 25-30 30-40 40-45 50-55

55-60 ABOVE



Post Profession Graduate Diploma Undergradua

graduate al holder te
Intermediat 10th class Illiterate

Q4. Gender Male Female

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Q5. Occupation

Governmen Private Public Home Agricultur

t employee sector sector maker e others

employee employee retired



f employed

Q6. Marital status

Married Unmarried

Q7. What is your income per month(Rs.) approximately?

5000-10000 10001-15000 15001-20000 20001-25000 25001-

30001-35000 35001-40000 40001-45000 Above 45000


Preferences of mutual funds investors

Q1. What is your investment priority?

Fixed Deposits Real Estate Insurance

Mutual Fund Gold Others please specify

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Q2. Which factor influence you to invest?

Liquidity Low risk High return Company


Q3. From where did you get information about Prudent MF schemes?

Advertisement Financial Banks Peer Group Others please

s Advisors specify

Q4. Which reason prompts you to make an investment in mutual funds?

Neutral Unimportan important Highly Extremely

t important important
Wealth Creation
Tax Savings
Brand Name


Q.5 Which channel do you prefer for MF investment?

Financial advisors Banks AMCs

Q6. What are your objectives for making investments?

Tax Saving Regular Child`s future Retirement Others please

Income plans specify

Q7. Which fund do you prefer while investing in Mutual Funds?

Name of the sector Please tick

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Balanced funds
Debt funds
Equity fund
Others please specify

Q8. Which type of schemes do you prefer to invest in MF?

Open ended Closed ended

Q9. For how long do you prefer to invest ?

Less than 6 6 12 months 12 2 year More than 2 year


Q10. Which mode of investment is preferred by you?

Systematic investment plan One time investment plan

Q11. Which is the most preferable option for earning high returns?

Dividend Pay-out Dividend Reinvestment Growth in NAV

Q12. Do you get influenced by past returns provided or by the current NAV of

a fund?

Returns Please tick

By current NAV

By past returns

By both

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