Analysis of Mutual Funds

The number of mutual fund investors in has India doubled to 2.39 crore as of 30 June 2021
from 1.19 crore at the end of March 2017, according to NS Venkatesh, chief executive
officer, Association of Mutual Funds in India (Amfi). The mutual fund industry added 12 lakh
investors in the quarter, going from 2.27 crore to 2.39 crore. This was higher than the 20
lakh investors added in the whole of FY 2021. The following criteria’s represent the various
characteristics of investment avenues, mutual funds in this case can be analyzed through
said criteria’s to evaluate why mutual funds is the best investment for the general public in
2021.

 Rate of return
The return on a particular investment decides the performance of the investment
avenue. The rate of return is calculated based on returns from an investment for one
year’s period. In case of Mutual Funds, the current yield tends to be low and
moderate for equity schemes and debt schemes respectively. Whereas capital
appreciation can be high and low for equity schemes and debt schemes respectively.

Axis Bluechip Fund is one of the long standing and better performing mutual funds
where it is evident that the current yeild is low in comparison to other investment
avenues but capital appretiation has much higher potential. The peers of these
mutual funds also have similar statistics.
 The second mutual fund mentioned here represent a debt scheme mutual fund. And
in evaluating both it becomes evident that it’s capital appretation is low but returns
can be expected through yeilds.
 Risk
Risk refers to the variability of the rate of return of an investment. This can be
measured using range, variance, standard deviation or beta. Based on the type of
mutual funds can have high risk or low risk. For equity schemes, the risk is generally
high this is due to the fact that it comprises of investments into equity oriented
assets hence having a similar risk level to equity shares. For debt schemes, risk is low
as it comprises of fixed income securities which is in line with its level of risk.
Axis Blue chip Fund Returns

HDFC Credit Risk Debt Fund Returns

 Marketability
 An investment if it can be transacted quickly, has a low transaction cost and price
change between two successive transactions is negligible, the investment can be
classified as highly marketable. Mutual funds are very much in line with these
features and hence classified as highly marketable investments.
 Tax Shelter
Mutual funds have a continuing tax benefit, a tax shield based on periodic returns
from the investment. In case of mutual funds, funds wherein 65% were allocated for
equity portfolios tax is calculated at the rate of 15% + 4% cess in the short term of
one year and in the long term of units sold after one year its taxed at 10% + 4% cess.
Moreover in the long term, capital gains up to Rs. 1 Lakh is tax free. On funds other
than the above it’s taxed as per the applicable tax rate of the investor plus 4% cess.
The tax shield present in both case, dividends are tax free in the hands of the
investor. Overall, mutual funds have a high tax shelter.
 Convenience
The ease with which the investment can be made and looked after is a factor which
differentiates the various investment avenues. Within the various investment
avenues existing in the financial market there are investments which require little to
no effort in purchasing and maintaining and there are also investments that requires
various time-consuming procedures and constant maintenance. The biggest factor
which makes mutual funds a better investment avenue than other investments for a
part of the population is the matter of convenience. Since the mutual funds are
operated by professional money managers, it takes out the need for market research
and experience required for investor and fulfills it through the fund operator.

References(in case u need it)

https://www.livemint.com/mutual-fund/mf-news/mutual-fund-investors-double-in-4-years-
to-2-39-crore-as-of-june-end-11625736191523.html

https://www.moneycontrol.com/

https://www.business-standard.com/article/markets/mutual-fund-assets-soar-41-to-rs-31-
43-trillion-in-fy-21-report-121040900711_1.html