MUTUAL FUND & CHIT FUND

Submitted To KRITIKA RASTOGI MAA’M

Submitted By ARPAN,RASHI,JAYANT,MANAV,ADITYA
 CONTENTS
• Chit Fund
1.What is Chit Fund?
2.How Chit Fund Works
3.Online Chit Fund
4.History
5.Benefits &risks

• Mutual Fund
1.What is mutual fund
2.How Mutual Fund works
3.History
4. Types of Mutual Funds
5.Advantages & Disadvantages
CHIT FUND
 What is Chit Fund?
• Chit Fund is a saving scheme practiced in India. It originated 1000s of years
ago. It was started as informal association of traders and households with
in communities. It enables poor people to convert small savings into lump
sums.
• According to the definition given by Chit Funds Act 1982:-
Chit means a transaction whether called chit, or by any other name by or
under which a person enters into an agreement with a specified number
of persons that every one of them shall subscribe a certain sum of money
(or a certain quantity of grain instead) by way of periodical instalments
over a definite period and that each such subscriber shall, in his turn, as
determined by lot or by auction or by tender or in such other manner as
may be specified in the chit agreement, be entitled to the prize amount.
 Three types of Chit Funds in India are Follows:-

Chit funds
run by State
Registered Govt
Chit Funds
Like shriram

Unregistered
Chit Funds
based on
Social groups

Chit Funds In India

• Some acts governing Chit funds in India are:-

Union Government - Chit Funds Act 1982
New Delhi: The Chit Funds Act,1982
Maharashtra: Maharashtra Chit Fund Act 1975
.
HOW CHIT FUNDS WORK
 HISTORY OF CHIT FUNDS
• The chit fund is said to be an institution that's been handed down since ancient
times. In 1887, William Logan, erstwhile Collector of the Malabar district of
the Madras Presidency, described the custom of chit funds among friend groups in
that region.
• Various reports in the 1930’s point to the popularity of chit funds in (Kasaragod
talus) current-day Kerala and (Madras estate) now Tamil Nadu.
• Chit funds went through several stages of overlapping formalization in the 20th
century. The organizer became more active in soliciting funds for the fund and
merchants and salaried workers, not just farmers, had also begun to
participate. Institutional organizers including partnerships, limited liability firms,
co-op societies, and joint-stock banks entered the business.
• During the 1930s, 160 banks were conducting chit funds in Kerala. The first two
states-run chit funds were, Kerala State Financial Enterprises, Madras estate
Financial Corp was established in 1969 by the Kerala government and 1970 by
Tamil Nadu government.
 ONLINE CHIT FUNDS
• A chit fund is a type of rotating savings and credit association system practiced
in India
• Chit fund schemes may be organized by financial institutions, or informally among
friends, relatives, or neighbours. In some variations of chit funds, the savings are
for a specific purpose.
• Chit funds are often microfinance organizations.
• With the advent of ecommerce in India, chit funds have also started going online.
Online chit funds conduct auctions, and subscribers can pay their monthly dues
and receive the prize amounts online through online transactions, including
electronic fund transfers.
 The rate of borrowing
than other non
banking loans like
money lenders. You
can borrow up to 70%
of the chit value, just
by paying the first
instalment.

Suitable for the

Prize money that you unorganised economy
are awarded is entirely ADVANTAGES group and needy
yours and it is up to people who are unsure
your discretion on how OF CHIT FUND of their cash flows and
to use it. for their unexpected
expenditure.

Chit funds are flexible.

This is the principal
advantage on which
the success of chit
funds depends.
 High level of risks is
involved in chits, so
depending on them
can be dangerous.

No security in
unregistered chit
In chits return Disadvantages fund companies.
earning is less than There are more
FDs in banks. of Chit Fund chances of getting
duped by these
fraud companies.

No guarantee of
fixed returns, as
the returns is based
on auctions.
MUTUAL FUNDS
 WHAT IS MUTUAL FUND?
• A mutual fund is a professionally managed investment fund that pools money from
many investors to purchase securities. These investors may be retail or institutional
in nature.
• Mutual funds are operated by professional money managers, who allocate the
fund's assets and attempt to produce capital gains or income for the fund's
investors.
• A mutual fund's portfolio is structured and maintained to match the investment
objectives stated in its prospectus.
• Mutual funds give small or individual investors access to professionally managed
portfolios of equities, bonds and other securities. Each shareholder, therefore,
participates proportionally in the gains or losses of the fund.
• Mutual funds invest in a vast number of securities, and performance is usually
tracked as the change in the total market cap of the fund—derived by the
aggregating performance of the underlying investments.
 HOW MUTUAL FUNDS WORK?
• Mutual funds work by pooling your money with the money of other investors and
investing it in a portfolio of other assets (e.g., stocks, bonds). This means you’ll be
able to invest in portfolios that you wouldn’t be able to afford alone because you’re
investing alongside other investors.
• For example, there are large-cap, mid-cap, and small-cap mutual funds, but also
mutual funds that focus on biotechnology, communication, and even Europe or Asia.
• Mutual funds are extremely popular because they allow you to pick one fund, which
contains different stocks, and not worry about putting too many eggs in one basket
(as you likely would if you bought individual stocks), monitoring prospectuses, or
keeping up with industry news.
• The funds provide instant diversification because they hold many different stocks.
Most people’s first encounter with mutual funds is through their 401k, where they
choose from an array of options.
• Mutual funds are typically managed by a fund manager, who picks all the
investments in the portfolio. This is often a big selling point for beginner investors
who don’t have much experience and would rather place their faith in an “expert” in
the mutual fund world.
• Anyone who tells you they’re an expert and can out-play the market is lying
because they can’t actually predict what will happen.)
• Because these fund managers actively manage your money, you’ll sometimes hear
mutual funds referred to as “actively managed funds.” They’ll also charge a variety
of fees for their work (which I’ll go into more later).
• And if you want to invest in a mutual fund, the mutual fund manager is important.
You’re essentially investing in them by putting your money in their fund. They have
A LOT of incentive to do a good job for you, as their jobs literally depend on how
well the funds perform. They also receive bonuses in the millions if they do a good
job.
 HISTORY OF MUTUAL FUND
• The early mutual funds spread were of the closed-end variety, issuing a fixed
number of shares
• They spread from the Netherlands to England and France before heading to the
U.S. in the 1890s.
• The first modern-day mutual fund, Massachusetts Investors Trust, was created on
March 21, 1924.
• The first modern investment fund were established in the Dutch Republic. In
response to the financial crisis of 1772 - 1773. Amsterdam-based businessman
Abraham van Ketwich formed a trust named Eendragt Maakt Magt ("unity creates
strength"). His aim was to provide small investors with an opportunity to diversify.
 Stock
funds

TYPES OF Money
Bond
MUTUAL market
funds
FUNDS funds

Hybrid
bonds
1) MONEY MARKET FUNDS
• Money market funds invest in money market instruments, which are fixed income securities with a
very short time to maturity and high credit quality.
• Investors often use money market funds as a substitute for bank savings account though money
market funds are not insured by the government.

2) BOND FUNDS
• Bond funds invest in fixed income or debt securities.
• Bond funds can be contrasted with stock funds and money funds.
• Bond funds typically pay periodic dividends that include interest payments on the fund's
underlying securities plus periodic realized capital appreciation.

3) STOCK FUNDS
• Stock or equity funds invest in common stocks. Stock funds may focus on a particular area of the stock
market, such as

4) HYBRID BONDS
• Hybrid funds invest in both bonds and stocks or in convertible securities.
• Balanced funds, asset allocation funds, target date or target risk funds, and lifecycle or lifestyle funds
are all types of hybrid funds.
• Hybrid funds may be structured as funds of funds, meaning that they invest by buying shares in
other mutual funds that invest in securities.
 Diversification

Low
Low Cost Minimum
ADVANTAGES Investment
OF MUTUAL
FUND

Professional
Flexible
Management
 No
Guarantee
Of Returns Diversification
Mutual funds Of portfolio
are subjected doesn’t
to market risk maximize
returns

DISADVANTAGES
Hidden or OF MUTUAL FUND Selecting right
12b-1 fees of financial
mutual fund securities is
not easy

Unethical Cost
management not
practices may proportional to
creep in. performance
 DIFFERENCE
MUTUAL FUND
• It is a professionally-managed
investment scheme, usually run by an
asset management company that
brings together a group of people
and invests their money in stocks,
bonds and other securities.
• It is regulated and maintained by
SEBI.
• It is an saving cum investment option.
• It is subject to market risks and
volatility of the market.
• Risk is very high.
CHIT FUND
• Investors money is pooled and is lend
to needy people along with investing at
some interest rates and the income
earned is shared with everyone.
• Regulator of chit funds is the Registrar
of Chits appointed by respective state
governments under Section 61 of Chit
Funds Act 1982.
• It is a saving cum borrowing option
cum investment.
• Not subject to any market risks.
Interests are always fixed.
• Risk is comparatively lower if it’s a
registered chit fund.