INDEX:

SR NO. TITLE PAGE NO.

1 SUMMARY 2

2 INTRODUCTION 3-4

3 LITERATURE REVIEW 5-6

4 RESEARCH METHODOLOGY 7

5 DATA ANALYSIS 8-9

6 CONCLUSIONS AND SUGGESTIONS 10-11

7 BIBLIOGRAPHY 12

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AN ANALYSIS ON INVESTMENT IN MUTUAL FUND
THROUGH SYSTEMATIC INVESTMENT PLANNING

SIP is a method of investing a fixed sum, regularly, in a mutual fund. It is very

similar to regular saving schemes like a recurring deposit. An SIP allows you to
buy units on a given date each month, so that you can implement an
investment / saving plan for yourself. Once you have decided on the amount
you want to invest every month and the mutual fund scheme in which you want
to invest, you can either give post-dated cheques or ECS instruction, and the
investment will be made regularly. SIPs generally start at minimum amounts of
Rs 1,000 per month and the upper limit for using an ECS is Rs 25000 per
instruction. Therefore, if you wish to invest Rs 100,000 per month, you may
need to do it on four different dates. In few years Mutual Fund has emerged as a
tool for ensuring one’s financial wellbeing. Mutual Funds have not only
contributed to the India growth story but have also helped families tap into the
success of Indian Industry. As information and awareness is rising more and
more people are enjoying the benefits of investing in mutual funds. The main
reason the number of retail mutual fund investors remains small is that nine in
ten people with incomes in India do not know that mutual funds exist. But once
people are aware of mutual fund investment opportunities, the number who
decide to invest in mutual funds will increase to as many as one in five people.
The trick for converting a person with no knowledge of mutual funds to a new
Mutual Fund customer is to understand which of the potential investors are
more likely to buy mutual funds and to use the right arguments in the sales
process that customers will accept as important and relevant to their decision.

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 INTRODUCTION

SYSTEMATIC INVESTMENT PLAN (SIP) A systematic investment plan

(SIP) commits the investor to invest a specified amount every month (or every
quarter) in the units of a fund’s equity scheme. The number of units bought each
month for the investor under the plan will depend on the ruling price: fewer
units are bought when the price is high, and more units are bought when price is
low. This is a built-in advantage of SIPs. It averages out investor’s buying price
over the entire period of holding. The SIP resolves a dilemma often facing
investors due to ups and downs in the market price. The investor finds it
difficult to decide when to invest in the equity scheme. The monthly or
quarterly amount to be invested can be as small as Rs. 500 or Rs. 1000. Mutual
funds specify the schemes for which SIP is allowed by them. Some funds charge
a lower entry load under SIP than for one-time investment, but others don’t
make any such distinction. An exit load under SIP is charged if the investor
leaves the scheme before a specific period of time.

Why invest using SIP?

Investing through SIP in a mutual fund indubitably is the key solution in order
to avoid or prevent the loopholes of equity investment and yet, continually
enjoy the high returns of investment. Isn’t it great therefore to invest using this
effective strategy of SIP? Obviously, yes! And not only that, it makes all the
more sense today when the stock markets are booming and are tempting to
really invest.

1. Tension free investment: Experts and other well versed people in this
business who will definitely manage the investor’s money and other forms of
investment is one of the key advantages of investing through a mutual fund.
They regularly carry out extensive research – on the company, the industry and
the economy – thus ensuring informed investment. This then is one big
advantage in view of investing one’s hard earned money. In addition to that,
they regularly track the market. Thus, for many of us who do not have the

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desired expertise and are too busy with our vocation to devote sufficient time
and effort to investing in equity, mutual funds offer an attractive alternative.
Therefore, indubitably this type of business is indeed, a tension-free form of
investment.
2. Putting eggs in different baskets: Another advantage of investing through
mutual funds is that, even with just small amounts we are able to enjoy the
benefits of diversification. Huge amounts would be required for an individual to
achieve the desired diversification, which would not be possible for many of us.
3. It’s all transparent and well-regulated: It is interesting to note that the
mutual fund industry is well regulated both by Sebi (Securities and Exchange
Board of India) and AMFI (Association of Mutual Funds in India). They have,
over the years, introduced regulations, which ensure smooth and transparent
functioning of the mutual funds industry. Moreover, the mutual fund can be
changed time by time, switch in different mutual fund, this is one of the big
profit.

4. Does not affect one’s monthly budget: Furthermore, with SIP small
amounts (Rs 500-Rs 1,000) can be invested periodically in Mutual funds as
against larger one-time investment required to buy directly from the market. In
this way, an investment does not appear to be a burden every month. On the
other hand, to prevent losses in volatile markets, investing in Sips is the best
option as every month there may be an opportunity to buy at lower levels.
5. Rupee cost averaging: This is especially true for investments in equities.
When you invest the same amount in a fund at regular intervals over time, you
buy more units when the price is lower. Thus, you would reduce your average
cost per share (or per unit) over time. This strategy is called 'rupee cost
averaging'. With a sensible and long-term investment approach, rupee cost
averaging can smoothen out the market's ups and downs and reduce the risks of
investing in volatile markets.

6. Discipline: The cardinal rule of building the corpus is to stay focused, invest
regularly and maintain discipline in investing pattern. A few hundred’s set aside
every month will not affect the monthly disposable income. It will be easier to
part with a few hundreds every month, rather than set aside a large sum for
investing in one shot.

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 LITERATURE REVIEW

Any research builds on the research carried out previously on the given subject. The purpose of the
literature review is to review what has previously been done on the subject and analyse it in the
present context so that an effective understanding can be established. Before conducting this project
I have gone through some work which has been done previously on the subject which are given
below:

1) Research paper: Analysis of components of investment performance- An

empirical study of Mutual funds in India. Authors- Dr.S.Anand-Assistant
professor, Goa Institute of Management. Dr. V.Murugaia- Reader, Kuvempu
University.
2) Making Mutual funds work for you: The investors concise guide Author-
Association of mutual funds in India (AMFI) in assistance with Ogilvy &
Mather
3) Perceptual study of Systematic Investment Plan (SIP) A case study of
service class. Author-Dr.B.S.Hundal, Saurabh Grover,Professor Department
of commerce and business management GNDU Amritsar Abstract:
Systematic Investment Plan (SIP) is a disciplined way of investing, where
you make regular investments according to a set calendar you create.
Systematic investing is a time-tested discipline that makes it easy to invest
automatically. This paper is an attempt to study the perception of service
class people towards systematic investment plan. Factor analysis and cluster
analysis have been used to study the same and found that service class have
positive attitude towards investment in these plans.
4) Hazardous to your wealth: Extraordinary Popular Delusions and the
madness of Mutual Fund Experts Abstract: The author analyzes a number of
investment fallacies, with specific academic references to long held beliefs
but with a very readable tone throughout. If the rest of the book is as good as
this excerpt, then it should become a mainstay on every long-term investor’s
shelf, right beside classics such as Malkiel’s A Random walk Down Wall
Street and Bogle’s writings on long term mutual funds. The book has two
redeeming virtues. The first is its rich lode of unintended humour, beginning
with its title. Its other virtue is the advice here is so bad that a completely
contrarian strategy has much merit: Do use indexed funds and whenever
possible avoid using actively managed funds.
5) “Indian Capital Markets” Uma Shashikant & S. Arumugam
Publication: TATA Mc-Graw Hill. This book reveals how Indian capital

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markets have changed in the last decades. Stock markets today are fully
electronic; settlement cycles have been compressed, clearing corporations
that guarantee settlement of transactions, nearly eliminating risk. The
growth in the number of foreign institutional investor’s & mutual funds; the
changing investment profile of provident funds & the privatization
initiatives in the insurance sector. Change processes bring along with them
immense challenges. One of them is the need for analytical insights into the
impact and implications of the processes themselves. The financial markets
in India have been at the forefront of what we can term as a paradigm shift
in the economy.

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 RESEARCH METHODOLOGY

 This project is a study done through secondary research sources.

 Secondary data has been collected through websites and from various
books, magazines and journals.

OBJECTIVES OF THE STUDY

1) To understand the concept of investment plan in mutual fund

2) To study the benefits of SIP.
3) To find out the preference of the investors for Asset Management Company.
4) To know the preference of the portfolios.
5) To know why one has invested or not invested in mutual fund.
6) To find out the preferred channels.
7) To find out what should be done to boost the mutual fund industry.

HYPOTHESIS

Ho: There is no significant difference in the returns on investment between

individuals who invest in mutual funds through systematic investment planning
and those who do not.
H1: There is a significant difference in the returns on investment between
individuals who invest in mutual funds through systematic investment planning
and those who do not.

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 DATA ANALYSIS

Power of compounding: Investment gurus always recommend that one must

start investing early in life. One of the main reasons for doing that is the benefit
of compounding.

Let’s assume two people A and B. They both decide to start a SIP of Rs. 1000/-
per month and invest in it till the age of 60. A started investing Rs 1,000 per
year at the age of 25 and B started investing the same amount every month at
the age of 35. Below is a table of how much their money grew to when they
turned 60

AT AGE INVESTMENT ( IN WEALTH AT 60 (IN LACS)

LACS)
25 4.2 148.6
30 3.6 70.1
35 3 32.8
40 2.4 15.2
45 1.8 6.8
50 1.2 2.8

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 Rs 100 Invested per month @10% p.a till age of 60
8000000
7000000
6000000
wealth accumulated

5000000
4000000
3000000
2000000
1000000
0
25 YRS 30 YRS 35 YRS 40 YRS 45 YRS 50 YRS
Age at which SIP has started

amount invested value of investment

At 60, A had built a corpus of Rs 148.6 lakh while person B's corpus was only
Rs 32.8lakh. For this example, we have taken a rate of return of 15%
compounded. A difference of Rs 1, 20,000 as investment over a 10 year horizon
between the two of them results in a huge difference of Rs. 115.8 lakhs in their
end-corpus. That difference is due to the effect of compounding. The longer the
(compounding) period, the higher the returns. Now, suppose A invested Rs
1,000 per month after every fifteen years, starting at the age of 45. The total
amount invested, thus remains Rs 1.8 lakh. However, when he is 60, his corpus
will be Rs 15.2lakh. Again, he loses the advantage of compounding in the early
years.

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 CONCLUSIONS

People save in Mutual Funds for different purposes i.e. children education,
house construction, retirement planning and tax planning, investing in
gold/silver, shares and debenture, fixed deposit, banking fund and real estate. it
is the need of hour in India to popularize the pension funds which have greater
potential in the years to come. Mutual funds companies should introduce new
pension funds scheme for investors. In case of the relationship between monthly
income and purpose of savings, a unique trend has emerged. As the income
increases, priority is given to tax planning. Majority of the respondents gave the
first preference to children education followed by retirement planning. During
the period of study, it was found that the majority of the investors invest their
money through the SIP plan scheme as they found it less burdensome and easy
to keep aside a few amount from their monthly salary. This indicates that more
efforts have to be made by the Mutual Funds to create awareness among the
investors regarding the earnings potential of other schemes. The influencing
factors for selection of Mutual Fund scheme in India are High Returns, Net
Asset Value, Market Trends, Tax Policy, and Reputation of Mutual Fund in their
order of priority. Most of investors prefer to invest their money in open ended
schemes of Mutual Funds.

Government should see that Mutual Fund companies follow corporate

governance regulations. All mutual fund investors want transparency. Strict
regulations should be enforced by SEBI with regard to Corporate Governance.
Thus mutual funds should build investors confidence through schemes meeting
the diversified needs of investors, speedy disposal of information, improved
transparency in operation, better customer service and assured benefits of
professionalism

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 SUGGESTIONS

1) There is no such thing as an ideal mutual fund portfolio that can suit
need and risk appetite of each and every individual. While there is no
dearth of good mutual funds in the market today, building a portfolio
depends on preferences and objectives of each individual.

2) The factors that come into play include age of the investor , risk appetite
, time at hand to let investment grow, need for moneyimmediate or later
– and more importantly , the purpose of making such an investment.
Broadly – we have ‘Aggressive’, ‘moderate’ and ‘Conservative’
portfolios where each of them incorporates a different genre of mutual
fund schemes to suit varying needs.

3) An individual should work towards building a stable portfolio which

includes large cap funds to provide your portfolio required stability,
funds with proven track record and maybe some aggressive funds to
spice up your portfolio. Therefore it is advisable for the investors to
understand their risk profile and invest accordingly.

4) Mutual fund companies should dispatch their annual report in time to

their investors so that the investors are informed about the company’s
financial position. This will help the investor to know the status of their
investment.

5) It is suggested that the investors should not consider only one or two
factors for investing in mutual fund but they should consider other
factors such as higher return, degree of transparency, efficient service,
fund management and Reputation of mutual fund in selection of mutual
funds.

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 BIBLIOGRAPHY

 http://amfiindia.com

 http://mutualfundindia.com

 http://valueresearchonline.com

 http://www.theequitymarkets.com

 http://www.moneycontrol.com

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