INTRODUCTION

Personal finance is an all about fulfilling each individual financial goal and needs personal
finance is all about meeting an individual financial needs whether it involves short term or
long-term goal or planning for one’s retirement

Personal finance generally involves managing money, savings and investments by individual
for completing their personal financial goals it basically involves managing money and
financial decisions for a person or a family personal financial planning is very important for
any individual as it helps them plan their income assets and savings for their current and
future needs and guides how to use money and achieve then desired goals keeping in mind
the expenses and inflation.

Now days investments are a very important part since only earning money is not enough to
complete your financial goals, we may be working to earn the money but it is very necessary
to invest in the correct mediums to grow the money as well.

There are various ways to grow your money like stocks, bonds, mutual funds, real estate etc.
and everyone should choose a way depending on their goals, age and risk tolerance

One of the more popular way of investment is mutual funds, mutual funds are basically
collections of securities predicted by the fund and sold to investors, mutual funds are very
popular as people get to invest in a number of securities picked by an expert and risk and
profit is shared with other people

In this project we will learn more about mutual funds the modes of investing in a mutual
funds, the shareholders of mutual funds what type of fund you should select on the basis of
holding shares and the process of registering with the correct authorities for completing your
KYC and start investing in a mutual fund.

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DISCUSSION

How many holders can invest in Mutual Funds?

The first part of the project is to understand how many holders can invest in mutual funds we
will first know more about what are mutual funds.

Mutual fund is a mechanism for pooling money by issuing units to the investors and investing
funds in securities in accordance with objectives as disclosed in offer document

A mutual fund is basically a pool of investments from the shareholders which is invested in
various investments in the market to diversify the portfolio of investments in securities
which are spread across a wide cross-section of industries and sectors and thus the risk is
diversified because all stocks may not move in the same direction with the same proportion at
the same time The profits or losses are shared by investors with proportion to their
investments in the mutual fund Mutual funds normally come out with various of schemes
which are launched from time to time with different investment objectives for the investors.
A mutual fund is required to be registered with Securities and Exchange Board of India
(SEBI) before it starts collecting funds from the public.

The First mutual fund in India was set up in the year 1963 which was the Unit Trust of India
after which the government of India allowed public sector banks and institutions to set up
mutual funds as well after which the Securities and Exchange Board of India (SEBI) Act was
passed in the year 1992.

The objective of the SEBI Act was to protect the interest of investors in the securities and as
well promote regulation of the stock securities market, after SEBI Notified the regulations in
1993 private entities were allowed to set up mutual funds as well.

The mutual fund is handled by a fund manager the fund manager is responsible for
implementing the mutual fund’s investment strategy and manage all it’s trading strategies ,
the main benefit of investing in a mutual fund is trusting the fund manager for his investment
decisions people invest in mutual funds since they don’t know or have the time to invest in
securities themselves so it is really important for the fund managers to know how to invest
the money of all the investors so they get peace knowing that their money is handled by
experts

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NAV

To know the performance of a particular mutual fund the value is denoted by the Net Asset
Value or the NAV

A mutual fund invests its resources in different securities in the market the Net asset value
determines the market value of the total investment made in various securities

Simply put NAV is the market value of the securities held by the mutual fund Since market
value of securities changes every day, NAV of a scheme also varies on day to day basis The
NAV per unit is the market value of securities of a scheme divided by the total number of
units of the scheme on any particular date NAV is required to be disclosed by the mutual
funds on a daily basis the NAV of an individual depends the units of NAV which have been
acquired by them which is calculated on the investment made by them from the total value of
the scheme.

Mutual fund investment is now available for everyone to invest in but there are various
modes to invest in mutual funds are

 Single Investment or Lump Sum Investment

The Lump sum investment method is in which the investor invests all the amount
in one go and has been allotted the NAV units at once.

 Systematic Investment Plan or SIP

SIP Is the most common method of investing in mutual funds as instead of
transferring all the amount in one go SIP transfers a fixed monthly amount from
your bank account to the fund.
 Systematic Transfer Plan or STP
STP is similar to SIP it invests a gradual amount in less risky liquid funds that
may offer better returns, and over time gradually or systematically transfer a
certain amount from the scheme to another scheme which may be an equity fund
from the same fund house
 Dividend Transfer Plan or DTP
DTP is similar to STP which transfers all the dividend made from one schemed int
another scheme in a different asset class

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  Systematic Withdrawal Plan or SWP
SWP helps Systematically Withdraw an amount of money from the invested
mutual fund scheme on a regular basis (...at pre-determined intervals) to meet the
ongoing expenses of the investor

Each plan is made to help and individual find which mode of investment that better suits their
income and their investment goals

Now to understand the question how many holders can invest in mutual funds, the holders
or the shareholders are the people who are the NAV unit holders in the mutual fund , when an
individual buys shares in a mutual fund they receive the market value of the share which is
the NAV which consists of the underlying value of all the securities purchased by the fund
and became a shareholder in the mutual fund but how many holders can invest in a mutual
fund depends what type of mutual fund it is

Mutual funds are primarily divided into two types

1) Open Ended Mutual Funds

2) Close Ended Mutual Funds

Open Ended Mutual Funds

An open-end mutual fund is one which a person can sell or buy units at any time after the
closure of New fund offering – NFO, The NFO is usually open for a maximum period of 30
days. Investment in these funds can be made through systematic investment plans (SIPs) and
systematic withdrawal plans (SWPs).

In open-ended mutual funds, units are purchased and sold on demand at the net asset value of
the fund. The NAV fluctuates every day based on the prices of the stocks and bonds in the
market. There is no limitation on the number of units of the mutual fund that can be issued.
There is no set maturity period for these funds. Once an investor redeems the units of an
open-ended fund, the units are taken off the market. However, an investor has to pay exit
loads for units that are sold within 1 year. Since there is no cap on the investment there can be
unlimited number of shareholders in an open-ended mutual fund

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Close Ended Mutual Funds

Close ended mutual funds is basically a fund for which a fixed number of units are issued
which are traded on the stock exchange. a mutual fund is launched through a New Fund Offer
which can be open for a maximum of 30 days the funds are then traded in the open market
like shares. The price of the fund is regulated by demand and supply as it is possible to trade
the fund at a price that is above or below its real value Units of a close-ended mutual fund
can be purchased only during the NFO period. They can be traded at premiums or discounts
to their NAVs. The units can be redeemed only after the maturity of the fund. The amount of
shareholders in a close ended mutual fund are based on the capital requirement of the fund
the NAV units of the fund are distributed according to the investment by each unitholder.

The Main differences in open ended and close ended schemes are regarding these

i. Liquidity
Open ended schemes are more liquid and flexible since redemption can be done at any
time but close ended schemes usually have a fixed lock in period and hence have less
liquidity
ii. Trading
Open Ended schemes are usually not traded on stock exchanges closed Ended
schemes are traded on stock exchanges.
iii. Fund Management
In Open Ended schemes, the fund manager has to stick to the objective of the
schemes. There is also pressure on fund manager because investors are free to redeem
money. In Closed Ended scheme, there is no pressure of redemption on the fund
manager
iv. NAV (Net Asset Value)
When you buy Open Ended schemes, you buy on the existing NAV of the scheme.
However, Closed Ended schemes can have different NAV compared to the price that
you buy because they trade on exchanges.

Hence from this we can see that the amount shareholder in a mutual fund are
dependent on what type of mutual fund if the fund is open ended there is no limit of
the shared but if it’s a close ended fund the NAV units depends on the capital required
and the price per unit.

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Is There a need for KYC for all Holders?

Another part of this project is the question if there is a need for KYC for all holders before
answering that question, we should learn more about KYC in Mutual funds

Any bank, lending institution, investment platforms, mutual fund companies, insurance firms:
basically, any company that provides financial services needs to do a background check of its
customers. This is mainly done to prevent money laundering instances, frauds and criminal
activities. KYC is another name for such background checks. KYC for mutual funds can be
completed by investors and they can choose the offline route as well.

KYC is an acronym for ‘Know your customer’ which is nothing but a customer identification
process conducted by all types of financial institutions which include brokers, asset
management companies, banks and likewise. In lieu of the customer identification process
you will be asked to furnish your photo identification, address proof and other identification
documents to authenticate your identity, the process of mutual fund KYC check is required
under Prevention of Money Laundering Act (2002). Reserve Bank of India first furnished
KYC guidelines in the year 2002 and Rules framed thereunder, read with the SEBI
(Securities and Exchange Board of India) Master Circular on Anti Money Laundering (AML)
Standards/ Combating the Financing of Terrorism (CFT) /Obligations of Securities Market
Intermediaries.

KYC is usually traditionally done through a physical process but now it can be done online
via E-KYC first we will know more about the traditional process

The process of registering for KYC can be started by any of the following SEBI-registered
intermediaries

- Fund House (Asset Management Company)

- KYC Registration Agency (KRA) such as CAMS, Karvy, CSDL (Central Depository
Services Limited) Ventures, NSDL (National Securities Depository Limited) and
NSE-owned (National Stock Exchange) DotEx International Limited.

It is important to note that each investor has to undergo a uniform KYC process only once in
the securities market.

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The KYC process first begins with a KYC form which you can download from the various
website. You can also ask for the form from a broker or an agent if you are dealing with any
of them.

Usually two types of KYC are collected when the process is being done, the first one is the
basic and uniform KYC the second one is additional KYC, distinct form the first type.

Basic KYC includes identity and proof of address the documents which can be used for
identity proof (which require a photo) and address are

 Aadhar Card
 Passport
 Voter’s Id Card
 PAN Card
 Driving License
 NREGA Card

Besides the above documents the following documents are also admissible as a proof of
address

 Latest updated Telephone Bill: Landline/Mobile (not more than 3 months prior to the
date of application)
 Latest updated Electricity Bill (not more than 3 months prior to the date of
application)
 Lates updated Bank Passbook/Bank Account Statement (not more than 3 months prior
to the date of application)
 Latest updated Demat Account statement (not more than 3 months prior to the date of
application)
 Ration Card
 Rent Agreement

Note: In case current correspondence and permanent address are different proof is
required for both of these addresses.

The additional KYC will be done after this step and different documents have to be
provided by the individual/body depending on their functions

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 i. In case an individual is filling for additional KYC they need to provide
 Occupation Details
 Gross Annual Income details
 Politically exposed Person status
 Addresses in other county jurisdictions other than India, where the
customer has tax residency.
ii. A corporate body will have to help with the following documents
 Certificate of Incorporation
 Memorandum & Articles of Association
 Authorized signatories list with specimen signatures
 Board resolution approving initial investment in Mutual Fund
iii. A partnership firm will have to furnish the following funds
 Certificate of Registration which is required for registered firms only.
 Partnership Deed
 Authorized signatories list with specimen signatures
iv. The Hindu undivided family will have to share
 Self-attested copy of PAN card in HUF. Deed of declaration of HUF or
PAN in name of Karta and pass book / bank statement / Demat statement
in the name of HUF.
v. Any Trust wanting to complete the KYC will have to share:
 Certificate of registration (for registered trusts)
 Trust deed
 Authorized signatories list with specimen signatures
vi. An Unincorporated association or a body of individuals will have to share
 Proof of Existence/Constitution document
 Authorized signatories list with specimen signatures

There are a few cases in which is not only an individual/company the KYC yet needs to be
completed some of them are

 Joint applicants - KYC needs to be completed by all the applicants.

 Power of Attorney - KYC needs to be completed by both the investor and the power
of attorney holder.
 NRIs/PIOs – Also need to complete their KYC

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  Minors - In case of investments in respect for minors, the Parent/Legal Guardian who
opens the account on for the minor needs to complete the KYC process. When the
minor person becomes a major, he will need to complete KYC at that point of time.

After filling up the form self-attested copies of the all the necessary documents will have to
be provided along with it the originals need to be carried for In-person verification

If the KYC documents are not found do be in order, or if there is any deficiency in the
documents, the KYC compliance status of the investor may be cancelled, and an intimation of
the same will be sent to the investor.

E- KYC

Another form of KYC for mutual funds is Electronic Know your customer or E-KYC

E-KYC or Electronic Know Your Customer is an electronic (paperless) way of authenticating

the resident used by organisations like AMC’S or Banks, it allows the customers to verify
their identity and address electronically via authentication of Aadhaar.

The eKYC is done through your UIDA Aadhar card number which is further matched with
your PAN number for cross verification. It is necessary for the investor to have his mobile
number linked to the Aadhaar card for eKYC

The Steps for eKYC are

- Get Ready with Aadhaar & PAN. Read

- Enter PAN details
- Enter Aadhar number
- Enter the OTP
- Fill in additional details
- Submit to complete KYC

Once the eKYC is complete can start investing in mutual funds immediately Although
through eKYC, your investment gets restrict to Rs 50,000 per annum per Mutual Fund for
OTP-based if you want to increase the limit you need to go through proper KYC process as
discussed above, where you have to submit the physical form with your signature's done on it

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To answer the question if there is a need for KYC for all holders

Yes, there is a need for KYC for all mutual fund holders

KYC was introduced by the Reserve bank of India in 2005 in the context of the
recommendations made by the Financial Action Task Force (FATF) on Anti Money
Laundering (AML) standards and on Combating Financing of Terrorism (CFT). The
Prevention of Money Laundering Act requires all banks, financial institutions and
intermediaries to ensure that everyone follows certain basic standard of KYC.

The objective of KYC guidelines is to prevent banks and financial institutions from being
used, intentionally or unintentionally, by criminal elements for money laundering activities.
The procedures related to KYC also help banks to better understand their customers and their
financial dealings and this also helps them manage their risks correctly.

The process of KYC is also standardised and clear for the customers as well and has to be
done only once before they can start investing in mutual funds

KYC process is considered important as

- It shows the true net worth and liquidity of the consumer

- It prevents fraud in banks and financial institutions
- It helps detect illegal or undetected money as well
- It helps establish trust between the investor and the bank/fund
- It keeps a standardized process for understanding the consumer.
- KYC helps banks analyse risk customer of banks and avoid money laundering

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CONCLUSION

After completing learning and understanding about mutual funds we know that mutual funds
is very popular and trustable method of investment in securities

Mutual funds combine a portfolio of assets and securities and invests the capital on behalf of
the investors with the aim of earning profit from it. The investors then become share holders
in the mutual fund and we learnt about how mutual fund is based on the number of
shareholders into open and closed mutual funds and the investor can choose to invest in an
open or close fund based in their investment decisions if they choose to invest in a fund
which is more liquid and freely available they should invest in open ended funds but if the
investor wants who are looking at a long term investment horizon and is looking into
diversifying his or her investment portfolio they should choose close ended mutual funds.

After learning more about mutual funds, we learned about the process of KYC and how a
investor has to set up their KYC to start investing in mutual funds. The process of KYC is set
up as a standardized process to create complete transparency between the investor and the
fund the KYC process is mandatory and required for all the investors to do before they can
start investing in the fund so there is no fraud committed by the investor , without KYC the
fund would never truly know whether is the investor is genuine or fake so KYC is needed to
verify all details, the process of KYC is adapted by a lot of financial institutions as it creates
complete transparency

After selecting the type of mutual fund and completing the KYC and selecting the mode of
investing the process of investing in mutual funds is complete after learning more about
mutual funds as an investor I would personally go towards a closed ended fund with an SIP
plan which matches my long term goals and deducts money every month rather than P a g e |
11investing everything in one lump sum.

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BIBLIOGRAPHY

- Know your KYC – published on May 3rd 2019

https://www.karvy.com/growth-hub/mutual-funds/know-how-to-do-kyc-for-mutual-
funds (accessed on 22nd June 2020)
- How to Complete Your Mutual Funds KYC – Published on 9th April 2020
https://www.paisabazaar.com/mutual-funds/ekyc/ (accessed on 22nd June 2020)
- Mutual fund KYC –
https://groww.in/p/mutual-fund-kyc/(accessed on 22nd June 2020)
- KYC for Mutual Funds – Published on 17th June 2020
https://www.fincash.com/l/ekyc-aadhaar-mutual-fund (Accessed on 22nd June 2020)
- Importance of KYC
https://www.barclays.in/content/dam/barclays-in/documents/download-
forms/kyc/Importance_of_KYC.pdf (Accessed on 22nd June 2020)
- Investments in Mutual Funds
https://www.sebi.gov.in/sebi_data/faqfiles/may-2017/1494501305219.pdf
(Accessed on 22nd June 2020)
- Mutual Funds in India
https://www.yourarticlelibrary.com/mutual-funds/mutual-funds-in-india-project-
report/85102 (Accessed on 22nd June 2020)
- About Mutual Funds
http://www.simplifysors.com/about-mutual-fund.php (Accessed on 22nd June 2020)
- Understanding mutual funds
https://www.icicipruamc.com/learn-about-mutual-funds/courses/basics-of-mutual-
fund/various-modes-of-investing-in-mutual-funds(Accessed on 23rd June 2020)
- Open Ended vs Close Ended Mutual funds – Published on 30th September 2019
https://groww.in/blog/open-ended-vs-close-ended-schemes/ (Accessed on 23rd June
2020)
- Investment in Mutual Funds – Personal Financial planning by S. Praveen
(Accessed on 23rd June)

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PLAGIARISM REPORT
Screenshot of Plagiarism report on SmallSeoTools

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