Proj

MUTUAL FUND THROUGH SYSTEMATIC INVESTMENT PLANNING PROJECT REPORT
CONTENTS

SYNOPSIS INTRODUCTION
COMPANY PROFILE OBJECTIVE OF THE PROJECT RESEARCH METHODOLOGY MUTUAL FUND BASICS PAPER REVIEW SCHEMES AND INTERPRETATION SEBI GUIDELINES LATEST NAV INTERPRETATION & FINANCIAL GOALS OBSERVATIONAND FINDINGS SUGGESTION BIBLIOGRAPHY ANNEXURE
SYNOPSIS
PROJET TITLE:
MUTUAL FUND THROUGH S.I.P
(SYSTEMATIC INVESTING PLANNING)
OBJECTIVE OF THE STUDY
To find out how to sell different bank instrument related to mutual fund through S.I.P. Provide information to customers about new amendment; provide information to banks (related to existing as well as new customer), creating new S.I.P.
RESEARCH METHODOLOGY:
Oral Interview Provide leaflets Telephonic interview SAMPLING AREA: Noida Gaziabad Sahibabad Shalimar garden Dilshad garden. SAMPLE SIZE: 25 investors daily.
PROBLEM FACING: Working from 20th may to 16th June: 1) people do not have any awareness regarding systematic investment planning ,they do have a knowledge regarding mutual fund but not fully conversant . few investor do understand systematic investment planning as like mutual fund that why they dont want to take the risk. 2) some investor have already invested in other mutual fund schemes thatwhy yet they donot want to invest it.
INTRODUCTION
What is a Mutual Fund?
A mutual fund is a common pool of money in to which investors with common investment objective place their contributions that are to be invested in accordance with the stated investment objective of the scheme. The investment manager would invest the money collected from the investor in to assets that are defined/ permitted by the stated objective of the scheme. For example, an equity fund would invest equity and equity related instruments and a debt fund would invest in bonds, debentures, gilts etc.
Mutual fund:
The main idea of a mutual fund is to enable investors to pool their money and place it under professional investment management. The manager makes the trades, realizing a gain or
loss, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. Most mutual funds are open-end funds. This means that at the end of every day, the investment management company sponsoring the fund issues new shares to investors and buys back shares from investors wishing to leave the fund. A mutual fund can also be a closed-end fund. The sponsor of a closed-end fund registers and issues a fixed number of shares at the initial offering, similar to a common stock. Investors then can buy or sell these shares through a stock exchange. The sponsor doesn't redeem or issue shares after a closed-end fund is launched, so the investor must trade them through a broker. Mutual funds can invest in many different kinds of securities. The most common are cash, stock, and bonds, but there are hundreds of sub-categories. Stock funds, for instance, can invest primarily in the shares of a particular industry, such as high technology or utilities. These are known as sector funds. Bond funds can vary according to risk (high yield or junk bonds, investment-grade corporate bonds), type of issuers (government agencies, corporations, or municipalities), or maturity of the bonds (short or long term). Both stock and bond funds can invest in primarily US securities (domestic funds), both US and foreign securities (global funds), or primarily foreign securities (international funds). By law, mutual funds cannot invest in commodities and their derivatives or in real estate. A mutual fund may restrict itself in other ways. These restrictions, permissions, and policies are found in the prospectus, which every openend mutual fund must make available to a potential investor before accepting his or her money. Mutual funds are corporations under US law, but they are subject to a special set of regulatory, accounting, and tax rules. Unlike most other types of corporations, they are not taxed on their income as long as they distribute substantially all of it to their shareholders. Also, the type of income they earn is often unchanged as it passes through to the shareholders. Mutual fund distributions of tax-free municipal bond income are also tax-free to the shareholder. Taxable distributions can either be ordinary income or capital gains[?], depending on how the fund earned it. You can buy many mutual funds directly from the fund sponsor. These are called "no-load" funds, because the issuer doesn't charge a sales commission. Some discount brokers will sell no-load funds, some for a flat transaction fee, some for no fee at all. Load funds are sold through intermediaries such as brokers, financial planners, and other types of registered representatives who charge a commission for their services. Picking a mutual fund from among the thousands offered isn't easy. The following is just a rough guide, with some common pitfalls.
Unless you are in the highest tax bracket, you probably don't need a tax-exempt fund Match the term of the investment to the time you expect to keep it invested. Money you may need right away should be in a money market account. Money you will not need until you retire in 30 years should be in longer-term investments, such as stock or bond funds There are some funds that invest in both stocks and bonds called "balanced funds." These are not generally as good an idea as a do-it-yourself balance of a stock fund and a bond fund, simply because you get to control the mix yourself. More stock is more aggressive, more bond is more conservative. Expenses matter over the long term, and of course, cheaper is usually better. You can find the expense ratio in the prospectus. Expense ratios are critical in index funds, which seek to match the market. Actively managed funds need to pay the manager, so they usually have a higher expense ratio. Sector funds often make the "best fund" lists you see every year. The problem is that it is usually a different sector each year (internet funds, anyone?). Avoid making these a large part of your portfolio. Closed-end bond funds often sell at a discount to the value of their holdings. You can sometimes get extra income by buying these in the market. Hedge fund managers love this trick. This also implies that buying them at the original issue is usually a bad idea, since the price will often drop immediately. Mutual funds often make their distributions near the end of the year. If you get the money, you will have to pay taxes on it. Check the fund company's website to see when they plan to pay the dividend, and wait until afterwards if it is coming up soon. Do your homework. Read the prospectus, or as much of it as you can stand. It should tell you what these strangers can do with your money, among other vital topics. Check the performance of a fund against its peers with similar investment objectives, and against the index most closely associated with it. Diversification is the best way to reduce risk. Most people should own some stocks, some bonds, and some cash. Some of the stocks, at least, should be foreign. You might not get as much diversification as you think if all your stock funds are with the same management company, since there is often a common source of research and recommendations. Too many funds, on the other hand, will give you about the same effect as an index fund, except your expenses will be higher. The compounding effect is your best friend. A little money invested for a long time equals a lot of money later.
Company profile
COMPANY PROFILE OF HDFC
HDFC Bank Limited provides various banking and financial services to corporations, and middle and upper income individuals in India. The bank primarily operates through three divisions that include wholesale banking, retail banking, and treasury operations. HDFC services, credit cards, debit cards, third party distribution, investment advisory services,
card and automated teller machine (ATM) acquiring transactions, and depositary services. Its treasury division provides foreign exchange and derivative products. The bank also provides telephone banking, NetBanking, Internet banking, and mobile telephone banking services. As of March 31, 2004, HDFC Bank operated through 312 branches and 910 ATMs. The bank was incorporated in 1994 and is headquartered in Mumbai, India.
COMPANY PROFILE OF STANDARD CHARTERED
Standard Chartered Bank ? serving the emerging nations Set up by James Wilson in 1853, at the request of Queen Victoria, the Standard Chartered Bank aimed to finance and manage trade between the British Empire and its colonies in India, Australia and China. The end of the Empire did not cause the bank's downfall and it adapted to the new political and economic climate. Today it offers traditional banking services ? retail banking, fund management and account services to private citizens, professionals and institutions. The Standard Chartered Bank, generally known as Stanchart, has made a very original choice. It mainly operates in emerging countries ? Asia-Pacific, Latin America, the Middle East and Africa. In all, it has 500 branches in 56 countries.
OBJECTIVE OF THE PROJECT
TO
MAKE
US
FAMILIAR
WITH
FINANCIAL
INSTITUTION
AND
ITS
FUNCTIONING.

TO BE FAMILIAR WITH MNC CULTURE. TO INCREASE OUR INTERACTION AND EXPOSURE WITH THE CORPORATES. TO INCREASE OUR INTERACTION WITH INVESTOR. INCREASE THE BUSINESS TO CONVEINANCE THE INVESTOR.
OBJECTIVE OF THE RESEARCH Primary objective: to generate awareness among the prospect investor of the company
& among the mutual fund of different companies.
Secondary objective: to explore the opportunity for the STANDARD CHARTED &
HDFC bank ltd. among small as well at big investor. Of the sip 1) To get the maximum investor in the market of Delhi & Gaziabad 2) To identify the factor influence the customer decision for opting the mutual fund.
Research methodology
A research design is the specification of method and procedure for acquiring the information needed to the structure or to solve the problem. It is the overall operation pattern or framework of the project that stipulates what information is to be collected, from which sources and what procedure. Research design may be classified by many criteria, the most useful one concern the major or purpose of investigation on the basis one many identify the broad classes of design as exploratory, descriptive, causal. In the project exploratory studies are being applied .although descriptive information is often helpful for predictive purpose, but it is possible one would like to know the cause of what we are predicting. One would also like to know how these causal factors relate the effect that one is predicting. Sample size: 25 investor daily.
DATA SOURCE:
Both primary and secondary data are collected for the study, both play vital role at the time of analysis. to give a suitable recommendation to the existing problems, primary data played a major role, also secondary data is necessary to give proper support to the primary data/. Primary data: has been collected from the east and central, Delhi region with the help of questionnaire
Secondary data: has been collected from the internet, print media& investor.
Method of data collection:
Several alternative media are available for obtaining information from respondent through communication .respondent may be interviewed in person or interviewed by telephone, or they may be mailed a questionnaire to which they are asked to respond.
Primary data has been collected by personal interview of investor. in few cases the concerned person refused to give an appointment and has to collect information through phone .
MUTUAL FUND BASICS

Mutual Fund Basics
Understand the potential benefits of mutual funds:. Mutual funds are investment vehicles that pool money from many individual investors to purchase a variety of stocks, bonds and cash equivalents. Most people use the phrase "mutual fund" when referring to an open-end mutual fund. In fact, the Mutual Funds section on this site (available through navigation at the top of this page) strictly reports on Evergreen open-end funds. However, closed-end funds are technically mutual funds as well. A major difference between the two types of mutual funds is that open-end funds issue shares to buyers on an ongoing basis, while closed-end funds only issue shares via an initial public offering. While there are key differences between the two, they also offer some of the same potential benefits. The key advantage of both open- and closed-end mutual funds is that they put professional managers with experience and access to sophisticated financial research to work for you. This, and a wide range of other key benefits, is detailed below:
Choice:
There is an incredible array of mutual funds more than 10,000 available to meet your specific investment objective. Funds have different investment objectives and degrees of investment risk often indicated through asset classes and sub-classes, such as money market funds, fixed income funds, balanced funds, growth and income funds, growth funds and aggressive growth funds. This range of options lets you make choices that match your investment goals.
Buying Power:
When you invest in a mutual fund, you join other investors in a pool of investment money. The result is that you have a partial "stake" in each company the fund holds for a relatively small amount of principal invested, while potentially offsetting some of the risk associated with holding individual securities.
Professional Management:
Experienced portfolio managers carefully select a fund's holdings according to the fund's stated investment objective. The portfolio management team continuously monitors and evaluates the fund's holdings to help make sure it keeps pace with changing market conditions. The team decides when to buy and sell securities in the fund so you don't have to. There is a fee associated with this professional management.
Diversification:
A single diversified mutual fund may invest in dozens even hundreds of different holdings. This approach may reduce the impact on your return if any one investment held by the fund declines. Diversification spreads your assets among different types of holdings and may be one of the best ways to protect yourself amid the complexity and uncertainty of the financial markets.
Liquidity:
Both open-end and closed-end mutual funds are liquid investments meaning you can sell all or part of your investment whenever you want, generally with a phone call. When you sell open-end funds, your mutual fund company sells the shares at that day's final net asset value (NAV), which is calculated by dividing the assets under management by the number of outstanding shares on that day. When you sell closed-end funds (which have a fixed number of shares), your shares are sold at the market price, which is determined by supply and demand on the stock market, where they are publicly traded. The proceeds of the sale can be mailed to you or you may establish an option to have the money sent directly to your bank. You may even automatically purchase or withdraw a set amount on a regular basis. There may be rare circumstances in which your funds are not available for up to five business days.
Compounding:
In a mutual fund, you may choose to reinvest your earnings automatically to buy more shares. When you reinvest, not only do you have the potential to earn money on your initial investment, you may also have the opportunity to earn money on the dividends and capital gains you accumulate. Compounding may increase the impact of what you contribute and can help your money grow faster. And the longer you invest, the greater the potential growth.
Systematic Investing:
You can invest in most mutual funds automatically through regular payments directly from your bank account. For as little as $50 a month in some cases, you can start building a long-term investment program. With systematic investing you invest a fixed amount of money at regular intervals regardless of market conditions, helping even out market fluctuations.
What are the different types of Mutual Funds?

Mutual Funds are classified by structure in to: Open - Ended Schemes Close-Ended Schemes Interval Schemes And by objective in to Equity (Growth) Schemes Income Schemes Money Market Schemes Tax Saving Schemes Balanced Schemes Offshore funds Special Schemes like index schemes etc
How significant are fund costs while choosing a scheme?

The cost of investing through a mutual fund is not insignificant and deserves due consideration, especially when it comes to fixed income funds. Management fees, annual expenses of the fund and sales loads can take away a significant portion of your returns. As a general rule, 1% towards management fees and 0.6% towards other annual expenses should be acceptable. Carefully examine the fee a fund charges for getting in and out of the
fund. Again, you can query on entry and exit loads under our Find-A-Fund query module or get a pre-defined shortlist of funds on the load specification structure through the Mutual Fund Directory section.
Ideally how many different schemes should one invest in?

Don't just zero in on one mutual fund (to avoid the risk of being overly dependent on any one fund). Pick two, preferably three mutual funds that would match you investment objective in each asset allocation category and spread your investment. We recommend a 60:40 split if you have shortlisted 2 funds and a 40:30:30 split if you have short-listed 3 funds for investment.
How do you select a mutual fund scheme?

What's strategy got to do with selecting a mutual fund? Shouldn't you just go and invest in the best performing fund? The answer is no. Mutual fund investing requires as much strategic input as any other investment option. But the advantage is that the strategy here is a natural extension of your asset allocation plan (use our Asset Allocate to understand what your optimum asset allocation plan should be, based on your personal risk profile). Money control recommends the following process:
Identify funds whose investment objectives match your asset allocation needs Just as you would buy a computer that fits your needs and budget, you should choose a mutual fund that meets your risk tolerance (need) and your risk capacity (budget) levels (i.e. has similar investment objectives as your own). Typical investment objectives of mutual funds include fixed income or equity, general equity or sector-focused, high risk or low risk, blue-chips or turnarounds, long-term or shortterm liquidity focus. You can use Money controls Find-A-Fund query module to find funds whose investment objectives match yours.
Evaluate past performance, look for consistency although past performance is no guarantee of future performance, it is a useful way of assessing how well or badly a fund has performed in comparison to its stated objectives and peer group. A good way to do this would be to identify the five best performing funds (within your selected investment objectives) over various periods, say 3 months, 6 months, one year, two years and three years. Shortlist funds that appear in the top 5 in each of these time horizons as they would have thus demonstrated their ability to be not only good but also, consistent performers. You can engage in such research through Money controls Find-A-Fund query module. Or, to get such a list, use our Best Picks reports which use this methodology as its predominant basis.
Are investments in mutual funds liquid?

Yes. Investors of open-ended schemes can redeem their units on any business day and receive the current market value on their investments within a short time period (normally three- to five-days). Investors of close-ended schemes can redeem their units only on maturity but can sell it in the secondary market like stocks.

Mutual Funds are classified by structure in to: Open - Ended Schemes Close-Ended Schemes Interval Schemes And by objective in to Equity (Growth) Schemes Income Schemes Money Market Schemes Tax Saving Schemes Balanced Schemes Offshore funds Special Schemes like index schemes etc

The cost of investing through a mutual fund is not insignificant and deserves due consideration, especially when it comes to fixed income funds. Management fees, annual expenses of the fund and sales loads can take away a significant portion of your returns. As a general rule, 1% towards management fees and 0.6% towards other annual expenses should be acceptable. Carefully examine the fee a fund charges for getting in and out of the fund. Again, you can query on entry and exit loads under our Find-A-Fund query module or get a pre-defined shortlist of funds on the load specification structure through the Mutual Fund Directory section.


Identify funds whose investment objectives match your asset allocation needs Just as you would buy a computer that fits your needs and budget, you should choose a mutual fund that meets your risk tolerance (need) and your risk capacity (budget) levels (i.e. has similar investment objectives as your own). Typical investment objectives of mutual funds include fixed income or equity, general equity or sector-focused, high risk or low risk, blue-chips or turnarounds, long-term or short-
term liquidity focus. You can use Money controls Find-A-Fund query module to find funds whose investment objectives match yours. Evaluate past performance, look for consistency although past performance is no guarantee of future performance, it is a useful way of assessing how well or badly a fund has performed in comparison to its stated objectives and peer group. A good way to do this would be to identify the five best performing funds (within your selected investment objectives) over various periods, say 3 months, 6 months, one year, two years and three years. Shortlist funds that appear in the top 5 in each of these time horizons as they would have thus demonstrated their ability to be not only good but also, consistent performers. You can engage in such research through Money controls Find-A-Fund query module. Or, to get such a list, use our Best Picks reports which use this methodology as its predominant basis.

SYSTEMATIC INVESTING
Systematic investing is simply a method whereby one automatically and systematically sets up an account to add funds to an investment regularly. Consequently, given the same dollar investment, when share prices of mutual funds or unit values of variable annuities are high a systematic investor buys less of them, they purchase more when prices are lower. Systematic investors have no regard to market timing and are adding the same dollar amount on a regular LONG TERM basis with the idea of accumulating additional mutual funds share (see information below) and or units of variable annuity (see information below) accounts. Most of the major mutual fund companies and variable annuity companies offer flexible systematic accumulation plans for their investors. Typically, there is a minimum account opening amount needed, after which additional investments of as little as $25.00 per investment period can be added. The investment period might be weekly, bi-weekly, monthly, or quarterly. Generally, systematic investment plans are set-up as direct periodic and automatic withdrawals from personal savings and or personal checking accounts. These plans can be stopped or started at anytime; and in addition to the automatic component of the program; investors can add or withdraw funds as they deem appropriate. This type of plan does not assure a profit and does not protect against loss in a declining market. Investors should consider their financial ability to continue their purchases through periods of all price levels. Overall, systematic investment programs have been recognized historically as an excellent method for developing what could be a substantial investment account, i.e., wealth accumulation. This type of plan does not assure a profit or protect against a loss.
Systematic investment accumulation plans are available for individual accounts, joint accounts, Uniform Gifts to Minors accounts, Educational IRAs*, Roth IRA*, IRAs* and various other retirement type accounts, etc.
VARIABLE ANNUITIES (Can be either a deductible or non-tax deductible contribution; tax deferred growth and generally a taxable distribution) Variable Annuities are offered by prospectus only. The prospectus contains complete information including charges and expenses. Please read the prospectus carefully before you invest. Variable Annuities can be used for tax deferred long term Individual and family investment and gifting accounts, for various Charitable Trust Accounts, and for investments inside of retirement vehicles such as IRA's, IRA SIMPLE, SEP-IRA's, SAR-SEP IRA's, 401K Plans, Simple 401Ks, Age Weighted Profit Sharing Plans, Defined Benefit Plans, Profit Sharing Plans, 403B Plans, Money Purchase Plans, 401K Rollovers, 403B Rollovers, etc.
Performance Figures and Valuations: Most Variable Annuities offer contract owners daily account valuations via toll free access and or automatic telephone computerized pricing. Some Variable Annuities offer investors a full range of different asset class investment categories to accommodate different interests, different investment objectives, different risk levels, and different volatility levels. Virtually all the major investment asset (Stock, Bonds) classes ranging from conservative to aggressive are available within annuities, including: Fixed Rate Accounts, Money Market Accounts, Utility Stock Accounts, US Government Bond Accounts, High Quality Bond Accounts, Foreign Bond Accounts, High Yield Bond Accounts, Zero Coupon Bond Accounts, Strategic Bond Accounts, Blend Accounts, Balance Accounts, Stock Index Accounts, Growth and Income Accounts, Large Capitalization Stock Accounts, Mid Capitalization Stock Accounts, Small Capitalization Stock Accounts, Foreign & International Stock Accounts, Natural Resource and Precious Metal Accounts etc. Death Benefit for Spouses or other Survivors: Variable Annuities have a minimum death benefit, up to a certain age, to heirs equal to the initial investment less any withdrawals. Probate Avoidance: Variable annuities have a named beneficiary. Consequently they totally avoid probate expense, and the asset passes directly to the named beneficiary. Taxes are still payable on the gains in the account. Tax Deferral: Growth of capital, interest income and dividend income within Variable Annuities are all tax deferred until withdrawal. Consequently, within annuities one can switch between investment subsets without any tax consequences, and one can control the disbursements as he or she deems appropriate. Once funds are removed from the annuity and if those funds have a gain in value then they are taxable as ordinary income. Switching Privileges: Many variable annuities allow unlimited switching between investment sub-accounts at no cost. Others allow 12 or more per year, after which some have a small charge. Plus, both inside and outside of retirement plans within annuities there is no tax consequences associated with these financial switching transactions. Automatic Dollar Cost Averaging: Many variable annuities allow you to place monies into money funds, limited term bond funds or fixed rate accounts and periodically and systematically take the earned interest from these accounts and invest into other investment choices within the investment sub-accounts. The management companies managing the sub-accounts include many leading managers.
Partial Cost Free Withdrawal Privilege: Most Variable annuities allow owners to withdraw a percent of the account each year without any cost. Generally, the permitted withdrawal is between 10% and 15% of the account, and the difference sometimes depends on the age of the owner. Some allow a percent withdrawal and withdrawal of all the gains. Withdrawals prior to retirement and or the age of 59 1/2 generally have a special 10% tax penalty imposed by the IRS. Aside, from the no cost component associated with the "allowable" withdrawals, for additional withdrawals there generally will be a annual declining contingent sales charge from 7% to 1% which goes to zero after 5 to 7 years for other amounts withdrawn. Variable Annuities Are Regulated Securities and Also Are Regulated by State Insurance Commissions: Each offered annuity contract is specific to the state in which the annuity is offered. Consequently, the terms and conditions of a contract offered in one state might or might not be the same as the terms and conditions of a contract offered in a different state. Variable Annuities Are Offered by Prospectus Only: All Variable Annuities are offered by prospectus only, which should be read carefully before investing. Insurance companies and investment brokers do not provide tax or legal advise. Any tax or legal information is the issuing company's understanding of current laws and regulations, which are subject to interpretation and change. Consult your tax advisor for full details. Systematic and dollar cost averaging within Mutual Funds, Variable Annuities and Variable Life insurance policies does not assure a profit and does not protect against loss in declining markets. It involves continuous investment in securities regardless of fluctuating prices and the investor should consider his or her financial ability to continue purchases through periods of low price levels. Variable Annuities have internal expense charges, administrative fees, and mortality expense. Most Variable Annuities, (excluding Noload Variable Annuities) typically have declining surrender charges should the contract be totally surrendered over the first several years. Please see, prospectus for details. Investing in stocks, bonds, mutual funds and variable annuities does not guarantee a profit. All of these investments can loss money. The tax deferral characteristic associated with variable annuities is not needed when used in an account that is by definition tax deferred (retirement accounts) and according to some sources variable annuities generally have higher fees and internal expenses than mutual funds. Investing in stocks, bonds, mutual funds and variable annuities does not guarantee a profit. All of these investments can lose money.
MUTUAL FUNDS

(Can be either a deductible or non-tax deductible contribution, can be either tax deferred growth or taxable and generally a taxable distribution) Funds offer professional investment management and are available for investment and diversification with virtually all major financial assets classes. Funds offer broad diversifications within different markets and different asset classes: Money Market Funds, US and Foreign Bond Funds, Corporate and Government Bond Funds, High Yield Bond Funds, US Stock and Foreign Stock Funds, Balanced Funds, International and Global Bond Funds, World Income Funds, Utility Funds, Technology Funds, Precious Metal Funds, etc. Funds offer access to several investment classes that are difficult for individuals to access directly. Some families of mutual funds offer up to 100 different investment funds within their family of funds. Funds offer monthly accumulation plans. Funds offer systematic payouts. Funds offer exchange privileges within their families. Funds offer dividend spinning and other automatic asset re-allocations. Funds offer liquidity. Funds are typically fully taxable, except tax-free bond funds, or funds held within an IRA, pension plan, charitable trust. Funds can be purchased by individuals, corporations, trusts. Systematic and dollar cost averaging within Mutual Funds, Variable Annuities and Variable Life insurance policies does not assure a profit and does not protect against loss in declining markets. It involves continuous investment in securities regardless of fluctuating prices and the investor should consider his or her financial ability to continue purchases through periods of low price levels. Variable Annuities have internal expense charges, administrative fees, and mortality expense. Most Variable Annuities, (excluding Noload Variable Annuities) typically have declining surrender charges should the contract be totally surrendered over the first several years. Please see, prospectus for details. Investing in stocks, bonds, mutual funds and variable annuities does not guarantee a profit. All of these investments can loss money. The tax deferral characteristic associated with variable annuities is not needed when used in an account that is by definition tax deferred (retirement accounts) and according to some sources variable annuities generally have higher fees and internal expenses than mutual funds. Investing in stocks, bonds, mutual funds and variable annuities does not guarantee a profit. All of these investments can lose money

Mutual Funds are classified by structure in to: Open - Ended Schemes Close-Ended Schemes Interval Schemes And by objective in to Equity (Growth) Schemes Income Schemes Money Market Schemes
Tax Saving Schemes Balanced Schemes Offshore funds Special Schemes like index schemes etc

The cost of investing through a mutual fund is not insignificant and deserves due consideration, especially when it comes to fixed income funds. Management fees, annual expenses of the fund and sales loads can take away a significant portion of your returns. As a general rule, 1% towards management fees and 0.6% towards other annual expenses should be acceptable. Carefully examine the fee a fund charges for getting in and out of the fund. Again, you can query on entry and exit loads under our Find-A-Fund query module or get a pre-defined shortlist of funds on the load specification structure through the Mutual Fund Directory section.


Identify funds whose investment objectives match your asset allocation needs Just as you would buy a computer that fits your needs and budget, you should choose a mutual fund that meets your risk tolerance (need) and your risk capacity (budget) levels (i.e. has similar investment objectives as your own). Typical investment objectives of mutual funds include fixed income or equity, general equity or sector-focused, high risk or low risk, blue-chips or turnarounds, long-term or shortterm liquidity focus. You can use Money controls Find-A-Fund query module to find funds whose investment objectives match yours.
Evaluate past performance, look for consistency although past performance is no guarantee of future performance, it is a useful way of assessing how well or badly a fund has performed in comparison to its stated objectives and peer group. A good way to do this would be to identify the five best performing funds (within your selected investment objectives) over various periods, say 3 months, 6 months, one year, two years and three years. Shortlist funds that appear in the top 5 in each of
these time horizons as they would have thus demonstrated their ability to be not only good but also, consistent performers. You can engage in such research through Money controls Find-A-Fund query module. Or, to get such a list, use our Best Picks reports which use this methodology as its predominant basis.

Makes market timing irrelevant

*Helps you build for the future *Compounds returns *Lowers the average cost *Light on the wallet *Saving for different Investment goals *Opportunity Cost saved by the Investor
Market Timing Irrelevant

Most investors want to buy stocks when the prices are low and sell them when prices are high. But timing the market is time-consuming and risky and involves lot of element of judgment. A more successful investment strategy is to adopt the method called Rupee Cost Averaging. To illustrate this lets compare investing the identical amounts through a SIP and in one lump sum.
Types of Schemes:
Investment Objective Schemes can be classified by way of their stated investment objective such as Growth Fund, Balanced Fund, and Income Fund etc. Equity Oriented Schemes These schemes, also commonly called Growth Schemes, seek to invest a majority of their funds in equities and a small portion in money market instruments. Such schemes have the potential to deliver superior returns over the long term. However, because they invest in equities, these schemes are exposed to fluctuations in value especially in the short term. Equity schemes are hence not suitable for investors seeking regular income or needing to use their investments in the short-term. They are ideal for investors who have a long-term investment horizon. The NAV prices of equity fund fluctuates with market value of the underlying stock which are influenced by external factors such as social, political as well as economic.HDFC Growth Fund, HDFC Tax Plan 2000 and HDFC Index Fund are examples of equity schemes.
General Purpose
The investment objectives of general-purpose equity schemes do not restrict them to invest in specific industries or sectors. They thus have a diversified portfolio of companies across a large spectrum of industries. While they are exposed to equity price risks, diversified general-purpose equity funds seek to reduce the sector or stock specific risks through diversification. They mainly have market risk exposure. HDFC Growth Fund is a generalpurpose equity scheme. Sector Specific These schemes restrict their investing to one or more pre-defined sectors, e.g. technology sector. Since they depend upon the performance of select sectors only, these schemes are inherently more risky than general-purpose schemes. They are suited for informed investors who wish to take a view and risk on the concerned sector. Special Schemes Index
schemes
The primary purpose of an Index is to serve as a measure of the performance of the market as a whole, or a specific sector of the market. An Index also serves as a relevant benchmark to evaluate the performance of mutual funds. Some investors are interested in investing in the market in general rather than investing in any specific fund. Such investors are happy to receive the returns posted by the markets. As it is not practical to invest in each and every stock in the market in proportion to its size, these investors are comfortable investing in a fund that they believe is a good representative of the entire market. Index Funds are launched and managed for such investors. An example to such a fund is the HDFC Index Fund. Tax Saving schemes Investors (individuals and Hindu Undivided Families (HUFs)) are being encouraged to invest in equity markets through Equity Linked Savings Scheme (ELSS) by offering them a tax rebate. Units purchased cannot be assigned / transferred/ pledged / redeemed / switched out until completion of 3 years from the date of allotment of the respective Units. The Scheme is subject to Securities & Exchange Board of India (Mutual Funds) Regulations, 1996 and the notifications issued by the Ministry of Finance (Department of Economic Affairs), Government of India regarding ELSS. Subject to such conditions and limitations, as prescribed under Section 88 of the Income-tax Act, 1961, subscriptions to the Units not exceeding Rs.10, 000 would be eligible to a deduction, from income tax, of an amount equal to 20% of the amount subscribed. HDFC Tax Plan 2000 is such a fund. Real Estate Funds
Specialized real estate funds would invest in real estates directly, or may fund real estate developers or lend to them directly or buy shares of housing finance companies or may even buy their securitized assets. Debt Based Schemes
These schemes, also commonly called Income Schemes, invest in debt securities such as corporate bonds, debentures and government securities. The prices of these schemes tend to be more stable compared with equity schemes and most of the returns to the investors are generated through dividends or steady capital appreciation. These schemes are ideal for conservative investors or those not in a position to take higher equity risks, such as retired individuals. However, as compared to the money market schemes they do have a higher price fluctuation risk and compared to a Gilt fund they have a higher credit risk.
Income Schemes
These schemes invest in money markets, bonds and debentures of corporates with medium and long-term maturities. These schemes primarily target current income instead of capital appreciation. They therefore distribute a substantial part of their distributable surplus to the investor by way of dividend distribution. Such schemes usually declare quarterly dividends and are suitable for conservative investors who have medium to long term investment horizon and are looking for regular income through dividend or steady capital appreciation. HDFC Income Fund, HDFC Short Term Plan and HDFC Fixed Investment Plans are examples of bond schemes.
Liquid Income Schemes
Similar to the Income scheme but with a shorter maturity than Income schemes. An example of this scheme is the HDFC Liquid Fund.
Money Market Schemes
These schemes invest in short term instruments such as commercial paper (CP), certificates of deposit (CD), treasury bills (T-Bill) and overnight money (Call). The schemes are the least volatile of all the types of schemes because of their investments in money market instrument with short-term maturities. These schemes have become popular with institutional investors and high net worth individuals having short-term surplus funds.
Gilt Funds
This scheme primarily invests in Government Debt. Hence the investor usually does not have to worry about credit risk since Government Debt is generally credit risk free. HDFC Gilt Fund is an example of such a scheme.
Hybrid Schemes
These schemes are commonly known as balanced schemes. These schemes invest in both equities as well as debt. By investing in a mix of this nature, balanced schemes seek to attain the objective of income and moderate capital appreciation and are ideal for investors with a conservative, long-term orientation. HDFC Balanced Fund and HDFC Childrens Gift Fund are examples of hybrid schemes. Constitution
Schemes can be classified as Closed-ended or Open-ended depending upon whether they give the investor the option to redeem at any time (open-ended) or whether the investor has to wait till maturity of the scheme.
Open ended Schemes

The units offered by these schemes are available for sale and repurchase on any business day at NAV based prices. Hence, the unit capital of the schemes keeps changing each day. Such schemes thus offer very high liquidity to investors and are becoming increasingly popular in India. Please note that an open-ended fund is NOT obliged to keep selling/issuing new units at all times, and may stop issuing further subscription to new investors. On the other hand, an open-ended fund rarely denies to its investor the facility to redeem existing units.
Closed ended Schemes

The unit capital of a close-ended product is fixed as it makes a one-time sale of fixed number of units. These schemes are launched with an initial public offer (IPO) with a stated maturity period after which the units are fully redeemed at NAV linked prices. In the interim, investors can buy or sell units on the stock exchanges where they are listed. Unlike openended schemes, the unit capital in closed-ended schemes usually remains unchanged. After an initial closed period, the scheme may offer direct repurchase facility to the investors. Closed-ended schemes are usually more illiquid as compared to open-ended schemes and hence trade at a discount to the NAV. This discount tends towards the NAV closer to the maturity date of the scheme.
Interval Schemes
These schemes combine the features of open-ended and closed-ended schemes. They may be traded on the stock exchange or may be open for sale or redemption during predetermined intervals at NAV based prices.
PAPER REVIEW
INVESTOR DIVERSIFIED CAN EXPECT 15% RETURN EQUITY MFS OVER NEXT 10 YEARS FROM
*How should small investor go about investing mutual funds? Choose a reputed financial advisor who offers advice that puts your interests before his commission. Staying invested instead of churning from one fund to the other is one of the biggest determinants of the investor return advisors who churn their investor investment from one fund to another just for making commission should be avoided. While choosing a mutual fund, look at the pedigree of the fund the sponsors credential and vintage. Then look at the past performance. But do not choose shortens top performance funds that rank very highly over one period rarely finish on top in later ones. When choosing
a fund, look for consistence long-term results the other parameters is the amount of risk a fund has been taking to generate the return. There are the ratios that help one determine this. Investor should insist on their financial advisor explaining the risk adjusted return of the fund to them and avoid making decisions just on absolute fund return. Investment concentration is another risk, check the fund portfolio and see that its actually being true to its label i.e.. Investment is according to its stable style.
Look out for exposure in certain sector or size of the company. SEBI does not allow more than 10% exposure in a single company for ay fund, which is a good protection measure. The size of the fund is the important parameter of the fund investing in a madcap and small cap stocks. After they reach a size of Rs 500-700 crorer, such funds may not be able to take meaningful exposures in such stocks without betting huge amounts which itself would move the price. Investor should also look at expenses ratio, especially in a bond /liquid funds. On a 5/6%return funds, if the expenses charges are 1.5%, a big chunks are return funds are being taken away. Similarly, if maps are charged expenses at 2.25% on a return of 1112%, these expenses make a big dent on final return. Further ask for portfolio turnover. The investor pays for the brokerage and security transaction tax that funds have to pay for investing. if the funds manager is continuously churning the portfolio, investor return fall to that extent. No wonder.
ELSS schemes, that have a three years lock in period, have outperformed open-ended equity schemes by 5-10% across vintages. Low portfolio and low investor turnover is a big contributor to this What strategy must retail investor adopt while investing? The cardinal rule is known yourself retail investor must understand their life cycle stage and their wealth management stage. This will help them understand that are their financial goals current goals, like future earning saving risk appetite, time horizon tax situation. Based on this they can derive their idle assets allocation.
@is systematic investment plan (sip) the best way to invest in any product& For the retail investor, seep is indeed the best way to invest in Mfs.this allow to get the benefit of the rupee cost averaging./also, most Mfs waive entry loads for sip investment .that 2.25%gain is significant plus. What is the idea time frame it invest in equity At least 10yeras, looking at Indian market return over the past 25 years 25 years if a customer was invested for one years there was a 30% chances of a loss. However if one was invested for a 5 years
Period, the chances of losses fell to 11% for a 10years period no investor has ever made a loss in the Indian equity market. Having said that there would be a word of caution. What kind of return could small retail investor expect from equity-retailed product* In the Indian market over the past25years from 1979to 04, equity have returned 18%returnperannum, compounded annually .in the smart time inflation was at 7% bank deposit rates were 7.2%all per annum compounded annually but past performance is no indicator of future return .one other way of looking at equity return would be through earning growth rate for the next few years, there is a expectation of corporate earning growth in India tracking 15%plus per annum equity would give similar or more return however investor can plan for a 15% return on their diversified equity portfolio for the next 5 to 10 years .
%NEW WINE IN A NEW BOTTLE %

(Mutual fund IPOs are a different ball game altogether. before going in for them, be sure that you have a long-term investment horizon,) IPOs (initial public offering) hardly need an introduction. most investor have at same point of time ,invested in an equity IPOs either aim of making short term listing gains or for long term investment ,depending on their respective investment horizons. However, the IPO scene has witnessed a new variant .the mutual fund Ipos. And many investors went for them expecting the same return as from equity IPOs and IPOs offering from a mutual fund.
Addressing the confusion faced by investor. Association of mutual fund of India issued a notice on June 2,05 changing the nomenclature of IPOs by mutual fund. The security and exchange board of India (Sebi) accepted the suggestion and subsequently advised all funds house to use the term new fund offer for launching new schemes at the time when this directives was issued Tata mfs had already launched the IPOs of Tata midcapfund after the internet mailer changed in conformity with he new norms. Subsequently two new funds from kotak contra and birlagen next were launched as new fund offers.
WHY SYSTEMATIC INVESTING
The goal of the most investor it to buy when the price are low, and sell when the price are high.
Sounds simple, but trying to time the market like this is: Time consuming Risky
And almost impossible
A more successful strategy is to adopt rupee cost averaging. What is rupee cost averaging?

The market is volatile: they move up and down in an unpredictable manner. Invest a fixed amount, at a regular, predetermined interval and use the market fluctuation to your benefits. How does it helps you:
#You buy more when the market is down #You buy less when the market is up) # Over time the market fluctuation are averaged # Most likely you will realize a saving on the cost per units # This leads to Higher Returns. Systematic investment, (Let compare investing with a lump sum investment) an example
SYSTEMATIC INVESTMENT:
You invest Rs1000 on the 10th of every month in the HDFC growth fund, in 2001.
LUMPSUM INVESTMENT:
Rajesh invest Rs 12000 in January of in HDFC growth funds
. CONTINUE EXAMPLE
your investment
MONTH Jan-01 Feb-01 Mar-01 Apr-01 May-01
Rajesh investment
NAV 9.345 9.399 7.713 7.199 7.411 AMOUNT 1000 1000 1000 1000 1000 UNITS 107.01 106.39 129.65 138.91 134.93 AMOUNT 12000 UNITS 1284.11
Jume-01 July-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 Total
7.297 6.994 6.997 6.864 6.462 6.931 7.600
1000 1000 1000 1000 1000 1000 1000 12000
137.04 142.98 142.92 145.69 154.75 144.28 131.58 1616.13
12000
12384.11
Systematic investing, an example:

Why you predict the market and know to buy low, sell high, hence invest systematically. *Difficult to predict the market and know when to buy low, sell high/, hence invest systematically.

Takes advantage of rupee cost averaging: buy more when the price is low and buy less when its high Low maintenance, payment are made automatically Contribute as little as Rs 1000 every month Instills investing disciplines: no temptation to time the market.
Systematic investment plan:

SIP dates are the 1st, 10th, 15th, &25th of every month. Minimum amount is Rs 1000 and multiples of Rs 100 thereof for the growth option. Minimum amount under dividend option is Rs 5000 to start a folio and Rs1000 and multiples of Rs100 thereof for an SIP unless a folio of the same scheme and option is available. Applicable entry load originally waived will be levied if the units are redeemed on or before expiration of 3654 days from the date of allotment.
Units will be allocated on the SIP dates of as same .if the dates fall on a non business day, the immediate next business day will be considered for the applicability of the NAV subjects to the realization of the cheque.

The 1st cheque can be of any date and the subsequent cheques should be of the SIP. For discontinuing a written request must be received at the ISC at least 7 days prior to the due date of the next cheque. The SIP enrolment from should be completed in English and in block letters only. SEBI has now made it mandatory for applicants to mention his/her permanent account number (pan) in case application amount of and above Rs50000.
EQUITY SCHEMES HDFC growth fund HDFC equity fund HDFC top 200 fund HDFC capital builder fund Tax saving schemes HDFC tax plan 2000 HDFC tax saver Balanced prudence fund
1 YEAR SIP 12.90% 10.80% 15.76% 34.99%
3 YEARS SIP 39.58% 45.18% 47.70% 44.54%
5 YEARS SIP 29.54% 27.76% 24.47%
39.18% 19.79% 12.36%
58.18% 41.47% 38.36%
23.37% 26.69%
Benefits can a monthly investment plan have? 34.99%become a disciplined investor.
BENEIFT
Being disciplined- its the key to investing success. With the HDFC MF systematic investment plan you commit an amount of your choice (minimum of Rs 1000 and in multiples of Rs 100 thereof) to be invested every month in one of our schemes think of each SIP payment as laying a brick. One by one, you will be seeing them transform into a building. You will see your investment accrue month after month. it is a simple as given at least 6 post dated monthly cheques to us for a fixed amount in a scheme of your choice. Its the perfect solution for irregular investor.
BENEIFT: imagine you want to buy a car a year from now, but you dont know where the
dozen-payment will come from. the HDFC MF SIP is a perfect tool for people who have a specific, future financial requirement .by investing an amount of your choice every month, you can plan for and meet financial goals ,like funds for a child education, a marriage in the family or a comfortable post retirement life .the table below illustrate how a little every month can go a long way.
SAVING PER MONTH (FOR 15 DAYS) 5000 4000 3000 2000 1000
TATAL AMOUNT INVESTED (RS IN LACS) 9.0 7.2 5.4 3.6 1.8
RATE
OF
RETURN
14.6 11.7 8.8 5.8 2.9
17.4 13.9 10.4 7.0 3.5
20.9 16.7 12.5 8.3 4.2
BENEIFT:
Take advantage of rupee cost averaging: Most investor wants to buy stocks when the prices are low and sell them when prices are low and sell them when prices are high. but timing the market is time consuming and risky. A more successful investment strategy is to adopt the method called rupee cost averaging.
BENEIFT
Grow your investment with compounded benefits: It is far to invest a small amount of money regularly. Rather then save up to make one large investment. This is because while you are saving the lump sum, your saving may not earn much interest. With HDFC MF Sip, each amount you invest grows through compounding benefits as well. That is the interest earned on your investment also earns interest. the following examples illustrates this Imagine neha is 20 years old when she starts working. Every month she saves and invest Rs5000till she is 254 years old. The total investment made by her over 5 years is Rs3 lakhs. Arjun also starts working when he is 20 years old. But he doesnt invest monthly. he gets bonus of Rs 3 lakes at 25 and decides to invest the entire amount.
Both of them decides not to withdraw these investment till they turn 50.at 50, neha investment have grown to Rs 4668,273 Whereas Arjun investment have grown to Rs 3617084.
Schemes And Interpretation

OPEN-ENDED GROWTH SCHEMES:
Investment objective: to generate long term capital appreciation from a portfolio that is invested predominantly in equity and equity instruments.
ASSETS ALLOCATION
PATTERN OF THE SCHEME:

Types of instrument Equity & equity related instruments Debt security, money market instrument & cash (including money at call) Normal allocation ()% of net assets( 80-100 0-20
Risk profile of the schemes: mutual fund investment is subjected to market risk.
Expenses of the scheme: continuous offer period (1) Load structure; entry/sales load:

In respect of each purchase/switch in unit less than Rs 5 corer in value, an entry load of 2.25% is payable. In respect of each purchase/switch in unit equal to or greater than Rs 5 corer in value, no entry load is payable. Exit load: nil.
2) Recurring expenses (% of weekly average net asset)

First Rs 100 crorer Next Rs 300crorer Next Rs 300 crorer BALANCE 2.50 2.25 2.00 1.75
HDFC CAPITAL BUILDER FUND:

HDFC Capital Builder Fund, an open-ended growth scheme, aims to invest in strong companies at price that are fair value in the option of the fund manger. The investor approach is based on the philosophy that value may be uncovered only where the crowd has discovered it yet. in the option of the fund manager such value exist in good quality well managed neglected stocks, with an equitable mix of large and small companies. Guided by the belief that earning drive stocks prices. The companies in the portfolio exhibit potential for earning momentum and attractive valuation. Big companies- faster growth prospects
The fund invests in small players in early stages of the growth cycle or strong niche players that are expected to report substantial increases in net income in the next few years. This is largely because small entrepreneurial players have much more to expand compared to companies, which have reached a certain scales. With many such companies having a domestics focus make them easier to understand than global commodities or cycles or trends, moreover such stocks tend to b cheaper than large cap stocks on just about any measure. Such small or neglected companies also tend to be more and volatile than other large cap stocks. While assuming such relative risk-adjusted liquidity risk the fund managers propose to capitalize on expected pick up in reported earning as a result of strong growth prospects in the future. This eventually translates depending on the success of this strategy. the fund also manages this risk by diversifying its investment across a broad range of industries. Investment objective: to achieve capital appreciation in the long term. Features: ASSET ALLOCATION: EQUITY & EQUITY RELATED INSTRUMENT: 80%-100%. Debt security, money market instrument & cash (including money at call)o%-20% PLANS /OPTION: growth & dividend. The dividend plans also offers payout and reinvestment facility. Minimum application amount (under each plan /option):

New investor Rs 5000 and in multiple of Rs 100 thereof. Existing investor: Rs 1000and in multiples of Rs 100 thereof.
Entry load:

In respect of each purchase/switch in units less than Rs 5 crorer in value, an entry load of Rs 2.25% is payable. In respect of each purchase/switch in units equal to or greater than Rs 5 crorer in value, no entry load is payable.
Exit load: Nil
Data:
DATE Mar31, 04 Nov28, 03 Nov29, 01 Nov30, 99 Feb01, 94
PERIOD Last 244 days Last 1 year (368 days) Last 3 years (1097days) Last 5 years (1827) Since inception
NAV (PERUNIT 22863 19783 13.79 13.79 10.00
RETURN 38.49 59.44 18.07 18.07 11.22
BENCHMARK 13.43 28.35 9.72 9.72 4.16
Benefit of systematic investment plan (SIP) The term and condition of the SIP facility have been revamped effective sept 1,04 and it is now flexible and convenient for the investor.
SIP INVESTMENT
5 YEARS 60000 4729.02 149739.69 37.61
3YEARS 36000 2622.98 83054.46 62.62
1YEARS 12000 501.72 15886.46 65.16
HDFC LONG TERM ADVANTAGE FUND:

(Our NAV has grown 4 times within 4 years) (An open ended equity linked saving scheme with a lock in period of 3 years) has been designed keeping in mind the long-term investor. With a three years lock in period the fund provides the investor with the discipline to remain invested and the fund manger the flexibility to invest in stock with a long-term horizon without any short-term pressure.
Fund philosophy:
One of the tenets of successful equity investing is the ability to understand that companies. Grow over a long period of time. However all companies face tough times, squeezed margin, lower profits and crises putting pressure on the stock price in the short term. The three years lock in period in the HDFC long-term advantage fund provides the fund manager the flexibility to choose stocks with a longer-term horizon remain invested. Buying shares of companies with sound fundamentals lie at the core of the funds investment approach. These are the companies that may exhibit the following characteristic:
Have relatively low capital expenditure requirement Generally do not need to take on high levels of the debt to fund expansion Preferably trade at low prices. Have a high return on capital employed ratio over a five years period Have high dividend payouts Generate high amounts of free cash flow
Low churn: Short-term pressures such as frequent redemptions often force fund managers to churn their portfolio.i.e. Sell some of their holdings. Every time a fund manager sells or buys some shares the fund incurs costs such as payment to brokers, security transaction tax, depository charges etc. Hence the more churn the higher the cost incurred is your investment. However the three years lock in period doesnt put many redemption pressure on the fund manager helping him keep a low churn ratio (also referred to turnover ratio) .the structure of the fund helps HDFC long-term advantage fund keep churn low. Investment objective: to generate long term capital appreciation from a portfolio that is invested predominantly in equity and equity related instruments. Features: assets allocation: equity &equity related instruments: 80%; debt security, money market instrument & cash (including money at call); 20%
Plans option: growth and dividend. They dividend plan also offers payout and reinvestment.
Minimum application amount (under each plan option): p Rs 500 and in multiples of RS 500tehreof Entry load:

in respect of each purchase/switch in of unit less than Rs 5 corer in value, an entry load of 2.25% is payable. In respect of each purchase/ switch in unit equals to or greater than Rs 5 corer in value, no entry is payable.
Exit load: nil. Relative performance:

DATE Mar 31,04 Dec 31,03 Dec 31,01 PERIOD Last 275 days Last 1 years (366 days) Last 3 years NAV UNIT) 30.985 32.712 9.635 (PER RETURNS 54.64 46.32 70.60 BENCHMARK 18.10 13.04 26.47
Jan 02,01
(1096days) Since inception
10.00
47.99
13.22
Absolute return ** compounded annualized return.
Benefit of systematic investment plan: The term & condition of the SIP facility have been revamped effective sept1, 2004 and it is now more flexible and convenient for investor. to illustrate the advantage of the SIP investment, this is how your investment would have grown if you had invested say Rs 1000 systematically on the first business day of every monthly over a period of time.
SIP INVESTMENT Total amount invested Market value as at (dec 31,04) Return annualized*% Benchmark return (annualized)#% SINCE INCEPTION 48000 159230.48 28.38 28.38 3 YEARS SIP 36000 98249.75 77.38 36.73 1 YEAR SIP 12000 16836.86 82.08 38.88
HDFC CORE AND SATELLITE (HCSF) Investment objective: the objective of the scheme is to generate capital appreciation
through equity investment in companies whose shares are quoting at price below their true value.
Assets allocation pattern
Of the scheme:
Types of instrument Equity &equity linked instrument Fixed income securities (including securities debt of 10% of net asset& money market instrument)
Normal allocation (%of net assets) 90-95% 5-10%
Plan and option: plan option: nil.
Option: *growth option * dividend option (The dividend option offers payout and reinvestment facility.) Applicable NAV:
(After the scheme opens for repurchase and sale): the NAV applicable foe purchase or redemption or switching of unit will be based on the time of the business day on which the application is accepted. Presently as per SEBI directive, the cut off time for acceptance of application is Rs 3.00. p.m.
Minimum application amount/number of units:

Purchase Rs 5000 Rs 1000 Additional purchase In multiples of Rs 100 thereof In multiples of Rs 100 thereof Repurchase Rs 1,000 or minimum of 100 units Rs1,000or minimumof Rs 100 units
New investor Existing investor
STANDARD CHARTED:
Debt fund simplified: debt fund that invest only in debt security and are designed to primarily protect your capital and provide better returns by investing in high quality debt security. Before choosing the right fund, it is essential to know how debt funds operate.
How do your invested in a debt fund appreciate?

There are two independent sources of revenue that a debt fund earns: a) Interest income: when you invest in a bank/company deposit, it offers you a fixed rate of interest with the principal being returned on maturity. Similarly when a debt fund invests in various debt securities the issue of these securities offers a rate of interest and the principal of maturity. He issuers of these securities could either be various corporate like reliance, hidalgo, and icici. b) Mark to market gains/loss: as interest rates on bank fixed deposits change frequently so do interest rates on debt security. Interest rate debt security prices are in fact the two sides in see saw. In general, prices fall when interest rate rise and rise when interest fall. If interest rates were to decline then newer bonds would be issued at lower interest rates than existing bonds. Consequently old bonds would be dearer and hence prices of these older bonds would rise. Similarly if interest rates were to raise then the values of old bonds would fall as newer bonds would bear higher interest rates. The traded price of a bond may thus differ from its face value. The longer a bonds period to maturity, the more its prices tend to fluctuate as market interest rates change. Example: say a debt fund with a starting NAV of Rs 100.00 buys a Rs 100 gol security paying 8.5% interest annually with a maturity of 5 years.
Understanding: the debt fund would earn RS 8.50% annually and get back the principal of RS 100at the end of 5 years. The debt funds spreads the Rs 8.50 of interest or earns annually over 365 days of the year i.e. it earns Rs 0.0233
NAV 1day
100.0233 1
104.25 180
108.50 365
c) Understanding; mark to market, if interest rates decline and the goals issues new 5 years bonds an interest rates of 7.5% it leads to an increase in the value of the old bonds of 8.5% .he price of the old bonds will move from Rs 100 to Rs 105.if the old bonds are now sold the new buyer will receive Rs 8.50 per years for 5 years but will make a loss of RS 5 on redemption of the principal at the end of 5 years. The investor over 5 years therefore earns Rs 42050 by way of interest and losses Rs 5 on the principal amount invested giving a return of Rs 37.50 over 5 years which is equal to the new bonds.
Old bonds 37.50 105 New bonds 37.50 100
Total gain Price (a) At the maturity after 5 years Principal (b Interest earned
100 42.50
100 37.50
Total gain= (b-a)+c On the day the old bond price is marked up to Rs 105 the NAV of the fund will increase by Rs 5.00 but from that day onwards the daily interest income will decrease from 8.5% p.a.to 7.5%7.5% GRINDLAYS CASH FUNDS (MAKE MONEY ON WEEKENDS)
Working capital management id crucial .yet at times we tend to err on the side of the caution when it comes to managing money over weekends we prefer to leave it idle over weekends.
YOU CAN NOW EARN INTEREST ON YOUR IDLE MONEY:

Presenting the grind lays cash fund (gcf) an open-ended income schemes with hid liquidity. a scheme that invest in money market instrument like treasury bills, call money, repos, shorter corporate be mature, commercial papers ,certificate of deposit etc.that provide a high level of stability and easy liquidity with no exposure whatsoever to equities.
DEPLOYING MONEY OVERWEEKEND:

Friday

Invest on a Friday before the high value cutoff time in your region. And in case you require this money back on a Monday then submit the purchase from along with the dated redemption request.
Monday
If you have a blank account with any of the ten banks that we have arrangement with, then you or get credit into your bank account, for to use on a Monday. if not ,then you get a high value cheque well within the value cut off time. This money will help you earn return from Friday -Sunday
WHAT IF I DONOT REQUIRE MONEY ON A MONDAY?

If you dont require the money on the following Monday, then just submit your redemption request any time before 10.00am on any business day at our offices or up to offices hours on the previous business day. You then get the proceeds within the high value cut-off time either in the form of a cheque or a directed credit (if you have a bank account with any of the ten banks that we currently have a relationship with) within same days high value cut off time.
What about returns?

If one were to deploy money for 3 days over an entire year, here, s what one could have potentially earned.
Amount invested {every weakened}(for 3 days) Appreciation 25lacs 54lacs 1crorer 1.5crorer
40,179
80,359
160,718
241,007
5 POINTERS TO MUTUAL FUND PERFORMANCE

More often than not meritocracy of investment is often decided by the return. quite simply then a fund generating more return than the others is considered better than other. But this is just half the story.
What most of us would appreciate is the level of risk that a fund has taken to generate this return? So what is really relevant is not just performance or return. What matters therefore is risk adjusted return. The only caveat whilst using any risk-adjusted performance is the fact that their clairvoyance is decided by the past. Each of these measures uses past performance data and to that extent is not accurate indicator of the future. As an investor you just have to hope that the fund continues to be managed by the set of principles in the future too. (1) The most basic of all measures- standard deviation allows you evaluate the volatility of the fund. put differently it allows you to measure the consistency of the return. Volatility is often a direct indicator of the risk taken by the fund. the standard deviation of the fund measures this risk by measuring the degree to which the fund fluctuates in relation to its means return ,the average return of a fund over a period of time. A security this is also considered higher risk because its performance may change quickly in either direction at any moment. A fund that has a consistence four-years return of 3%,for example ,would have a mean, or average ,of 3%.the standard deviation for this fund would then be zero because the funds return in any given year does not differ from its four means of 3%.on the other hand a fund that in each of the last four years returned-5%,17%,2% and 30% will have a means return of 11%.thenfund will also exhibit a high standard deviation because of each year the return of the fund differs from the means return. this fund is therefore more risky because it fluctuate widely between negative and positive returns within a short period. 2) Beta: beta is a fairly commonly used measure of the risk. it is basically indicates the level of volatility associated with the fund as compared to the benchmark. So quite naturally the success of beta is heavily dependent the correlation between fund and benchmark. Thus if the funds portfolio doesnt have a relevant benchmark index then a beta would be grossly inadequate. A beta that is greater than one means that the fund is more volatile than the benchmark, a beta of less than one means that the fund is less volatile than the index. a fund with a beta very close to 1 means the fund performance closely matches the index or benchmark. If, for example, a fund has a beta of 1.03% in relation to the Bse senxex,the fund has been moving 3% more than the index. Therefore, if the Bse sense increased 10%, the fund would be expected to increase 10.03%. Investor expecting the market to be bullish may chose funds exhibiting high betas, which increase investors chances of beating the market. If the investor expects the market to be bearish in the near future, the funds that have beats less than 1 are a good choice because they would be expected to decline less in value than the index.
3) R-SQUARED: the success of beta is dependent in the correlation of a fund to its benchmark or its index. Thus whilst consideration the beta of any security, you should also consider another statistically R squared the measures the correlation. The R squared of a fund advices investor if the beta of a mutual fund is measured against an appropriate benchmark. Measuring the correlation of funds movements to that of an index, R-squared describe the levels of association between the funds volatility is a result of the day fluctuations experienced by the overall market. R squared values range between 0&1, where 0 represents no correlation and 1 represents no correlation and 1 represents full correlation. if a fund betas has an R squared value that is close to 1,the beta of the fund should be trusted. On the other hand ,an R squared values that is less than 0.5 indicates that the beta is not particularly useful because the fund is being compared against an inappropriate benchmark. 4) Alpha: Alpha=(fund return-risk free return)- funds beta (benchmark return-risk return). Alpha is the different between the returns one would expects from a fund, given its beta, and the return it actually produces. An alpha of 1.0 means the fund produces a return 1% higher than its beta would predict. An alpha of-1.0 means the fund produced a return 1% lower If a fund returns more than its beta then it has a positive alpha and if it returns less, then it has a negative alpha. Once the beta of a fund is known, alpha compares the funds performance to that of the benchmark risk adjusted return. it knows you to ascertain if the fund returns out performed the markets given the s are amount of risk. The higher a fund risk level, the greater the return it must generate in order to produce a high alpha. Normally one would like to see a positive alpha foe all of the funds your own. But a high alpha does not means a fund is doing a bad job nor is the vice versa true. Because alpha measures the out-performed relative to betas the limitation that apply to beta would also apply to alpha. Alpha can be used to directly measure the value added or subtracted by a funds manager. The accuracy of an alpha depends on two factor: 1) the assumption the market risks measured by beta, is the only risk measure necessary; 2) the strength of funds correlation to a chosen benchmark such as the sense or the nifty. (2)
1) Sharpe ratio:
Sharpe ratio= funds returns in excess of risk free returns / standard deviations of fund
So what does one do for funds that have low correlation with indices or benchmark? Use the sample ratio. Since it uses only the standard deviation ,which measures the volatility of the return there is no problem of benchmark correlation. The higher the Sharpe ratio, the better a funds returns relative to the amount of risk taken. Sharpe ratios are ideals for comparing funds that have mixed assets classes. That is balanced funds have component of fixed income offering.
SEBI GUIDLINES
SECURITIES AND EXCHANGE BOARD OF INDIASEBI INVESTOR EDUCATION PROGRAMME (INVESTMENTS IN MUTUAL FUNDS):
Introduction
Different investment avenues are available to investors. Mutual funds also offer good investment opportunities to the investors. Like all investments, they also carry certain risks. The investors should compare the risks and expected yields after adjustment of tax on various instruments while taking investment decisions. The investors may seek advice from experts and consultants including agents and distributors of mutual funds schemes while making investment decisions. With an objective to make the investors aware of functioning of mutual funds, an attempt has been made to provide information in question-answer format which may help the investors in taking investment decisions. What is a Mutual Fund? Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders. The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public. What is the history of Mutual Funds in India and role of SEBI in mutual funds industry?
Unit Trust of India was the first mutual fund set up in India in the year 1963. In early 1990s, Government allowed public sector banks and institutions to set up mutual funds. In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The objectives of SEBI are to protect the interest of investors in securities and to promote the development of and to regulate the securities market. As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds to protect the interest of the investors. SEBI notified regulations for the mutual funds in 1993. Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital market. The regulations were fully revised in 1996 and have been amended thereafter from time to time. SEBI has also issued guidelines to the mutual funds from time to time to protect the interests of investors. All mutual funds whether promoted by public sector or private sector entities including those promoted by foreign entities are governed by the same set of Regulations. There is no distinction in regulatory requirements for these mutual funds and all are subject to monitoring and inspections by SEBI. The risks associated with the schemes launched by the mutual funds sponsored by these entities are of similar type. It may be mentioned here that Unit Trust of India (UTI) is not registered with SEBI as a mutual fund (as on January 15, 2002). How is a mutual fund set up? A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset Management Company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund. SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e. they should not be associated with the sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme. However, Unit Trust of India (UTI) is not registered with SEBI (as on January 15, 2002). What is Net Asset Value (NAV) of a scheme? The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV). Mutual funds invest the money collected from the investors in securities markets. In simple words, Net Asset Value is the market value of the securities held by the scheme. 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. For example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a regular basis - daily or weekly depending on the type of scheme. What are the different types of mutual fund schemes? 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. Open-ended Fund/ Scheme An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity. Close-ended Fund/ Scheme A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis. Schemes according to Investment Objective A scheme can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as follows: Growth / Equity Oriented Scheme The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.
Income / Debt Oriented Scheme The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations. Balanced Fund The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds. Money Market or Liquid Fund 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, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. 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. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes. Index Funds Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc These schemes invest in the securities in the same weightage comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. There are also exchange traded index funds launched by the mutual funds which are traded on the stock exchanges. What are sector specific funds/schemes?
These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. They may also seek advice of an expert. What are Tax Saving Schemes? These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like any equity-oriented scheme. What is a Load or no-load Fund? A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time one buys or sells units in the fund, a charge will be payable. This charge is used by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs.10. If the entry as well as exit load charged is 1%, then the investors who buy would be required to pay Rs.10.10 and those who offer their units for repurchase to the mutual fund will get only Rs.9.90 per unit. The investors should take the loads into consideration while making investment as these affect their yields/returns. However, the investors should also consider the performance track record and service standards of the mutual fund which are more important. Efficient funds may give higher returns in spite of loads. A no-load fund is one that does not charge for entry or exit. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units. Can a mutual fund impose fresh load or increase the load beyond the level mentioned in the offer documents? Mutual funds cannot increase the load beyond the level mentioned in the offer document. Any change in the load will be applicable only to prospective investments and not to the original investments. In case of imposition of fresh loads or increase in existing loads, the mutual funds are required to amend their offer documents so that the new investors are aware of loads at the time of investments. What are a sales or repurchase/redemption price? The price or NAV a unit holder is charged while investing in an open-ended scheme is called sales price. It may include sales load, if applicable. Repurchase or redemption price is the price or NAV at which an open-ended scheme purchases or redeems its units from the unit holders. It may include exit load, if applicable.
What is an assured return scheme? Assured return schemes are those schemes that assure a specific return to the unit holders irrespective of performance of the scheme. A scheme cannot promise returns unless such returns are fully guaranteed by the sponsor or AMC and this is required to be disclosed in the offer document. Investors should carefully read the offer document whether return is assured for the entire period of the scheme or only for a certain period. Some schemes assure returns one year at a time and they review and change it at the beginning of the next year. Can a mutual fund change the asset allocation while deploying funds of investors? Considering the market trends, any prudent fund managers can change the asset allocation i.e. he can invest higher or lower percentage of the fund in equity or debt instruments compared to what is disclosed in the offer document. It can be done on a short term basis on defensive considerations i.e. to protect the NAV. Hence the fund managers are allowed certain flexibility in altering the asset allocation considering the interest of the investors. In case the mutual fund wants to change the asset allocation on a permanent basis, they are required to inform the unit holders and giving them option to exit the scheme at prevailing NAV without any load. How to invest in a scheme of a mutual fund? Mutual funds normally come out with an advertisement in newspapers publishing the date of launch of the new schemes. Investors can also contact the agents and distributors of mutual funds who are spread all over the country for necessary information and application forms. Forms can be deposited with mutual funds through the agents and distributors who provide such services. Now a day, the post offices and banks also distribute the units of mutual funds. However, the investors may please note that the mutual funds schemes being marketed by banks and post offices should not be taken as their own schemes and no assurance of returns is given by them. The only role of banks and post offices is to help in distribution of mutual funds schemes to the investors. Investors should not be carried away by commission/gifts given by agents/distributors for investing in a particular scheme. On the other hand they must consider the track record of the mutual fund and should take objective decisions. Can non-resident Indians (NRIs) invest in mutual funds? Yes, non-resident Indians can also invest in mutual funds. Necessary details in this respect are given in the offer documents of the schemes. How much should one invest in debt or equity oriented schemes? An investor should take into account his risk taking capacity, age factor, financial position, etc. As already mentioned, the schemes invest in different type of securities as disclosed in the offer documents and offer different returns and risks. Investors may also consult
financial experts before taking decisions. Agents and distributors may also help in this regard. How to fill up the application form of a mutual fund scheme? An investor must mention clearly his name, address, number of units applied for and such other information as required in the application form. He must give his bank account number so as to avoid any fraudulent encashment of any cheque/draft issued by the mutual fund at a later date for the purpose of dividend or repurchase. Any changes in the address, bank account number, etc at a later date should be informed to the mutual fund immediately. What should an investor look into an offer document? An abridged offer document, which contains very useful information, is required to be given to the prospective investor by the mutual fund. The application form for subscription to a scheme is an integral part of the offer document. SEBI has prescribed minimum disclosures in the offer document. An investor, before investing in a scheme, should carefully read the offer document. Due care must be given to portions relating to main features of the scheme, risk factors, initial issue expenses and recurring expenses to be charged to the scheme, entry or exit loads, sponsors track record, educational qualification and work experience of key personnel including fund managers, performance of other schemes launched by the mutual fund in the past, pending litigations and penalties imposed, etc. When will the investor get certificate or statement of account after investing in a mutual fund? Mutual funds are required to dispatch certificates or statements of accounts within six weeks from the date of closure of the initial subscription of the scheme. In case of closeended schemes, the investors would get either a demat account statement or unit certificates as these are traded in the stock exchanges. In case of open-ended schemes, a statement of account is issued by the mutual fund within 30 days from the date of closure of initial public offer of the scheme. The procedure of repurchase is mentioned in the offer document. How long will it take for transfer of units after purchase from stock markets in case of closeended schemes? According to SEBI Regulations, transfer of units is required to be done within thirty days from the date of lodgment of certificates with the mutual fund. As a unit holder, how much time will it take to receive dividends/repurchase proceeds? A mutual fund is required to dispatch to the unit holders the dividend warrants within 30 days of the declaration of the dividend and the redemption or repurchase proceeds within 10 working days from the date of redemption or repurchase request made by the unit holder. In case of failures to dispatch the redemption/repurchase proceeds within the stipulated
time period, Asset Management Company is liable to pay interest as specified by SEBI from time to time (15% at present). Can a mutual fund change the nature of the scheme from the one specified in the offer document? Yes. However, no change in the nature or terms of the scheme, known as fundamental attributes of the scheme e.g. structure, investment pattern, etc. can be carried out unless a written communication is sent to each unit holder and an advertisement is given in one English daily having nationwide circulation and in a newspaper published in the language of the region where the head office of the mutual fund is situated. The unit holders have the right to exit the scheme at the prevailing NAV without any exit load if they do not want to continue with the scheme. The mutual funds are also required to follow similar procedure while converting the scheme form close-ended to open-ended scheme and in case of change in sponsor. How will an investor come to know about the changes, if any, which may occur in the mutual fund? There may be changes from time to time in a mutual fund. The mutual funds are required to inform any material changes to their unit holders. Apart from it, many mutual funds send quarterly newsletters to their investors. At present, offer documents are required to be revised and updated at least once in two years. In the meantime, new investors are informed about the material changes by way of addendum to the offer document till the time offer document is revised and reprinted. How to know the performance of a mutual fund scheme? The performance of a scheme is reflected in its net asset value (NAV) which is disclosed on daily basis in case of open-ended schemes and on weekly basis in case of close-ended schemes. The NAVs of mutual funds are required to be published in newspapers. The NAVs are also available on the web sites of mutual funds. All mutual funds are also required to put their NAVs on the web site of Association of Mutual Funds in India (AMFI) and thus the investors can access NAVs of all mutual funds at one place
The mutual funds are also required to publish their performance in the form of half-yearly results which also include their returns/yields over a period of time i.e. last six months, 1 year, 3 years, 5 years and since inception of schemes. Investors can also look into other details like percentage of expenses of total assets as these have an affect on the yield and other useful information in the same half-yearly format. The mutual funds are also required to send annual report or abridged annual report to the unit holders at the end of the year. Various studies on mutual fund schemes including yields of different schemes are being published by the financial newspapers on a weekly basis. Apart from these, many research agencies also publish research reports on performance of mutual funds including the ranking of various schemes in terms of their performance. Investors should study these reports and keep themselves informed about the performance of various schemes of different mutual funds. Investors can compare the performance of their schemes with those of other mutual funds under the same category. They can also compare the performance of equity oriented schemes with the
benchmarks like BSE Sensitive Index, S&P CNX Nifty, etc. On the basis of performance of the mutual funds, the investors should decide when to enter or exit from a mutual fund scheme. How to know where the mutual fund scheme has invested money mobilized from the investors?
The mutual funds are required to disclose full portfolios of all of their schemes on half-yearly basis which are published in the newspapers. Some mutual funds send the portfolios to their unit holders. The scheme portfolio shows investment made in each security i.e. equity, debentures, money market instruments, government securities, etc. and their quantity, market value and % to NAV. These portfolio statements also required to disclose illiquid securities in the portfolio, investment made in rated and unrated debt securities, non-performing assets (NPAs), etc. Some of the mutual funds send newsletters to the unit holders on quarterly basis which also contain portfolios of the schemes. Is there any difference between investing in a mutual fund and in an initial public offering (IPO) of a company? Yes, there is a difference. IPOs of companies may open at lower or higher price than the issue price depending on market sentiment and perception of investors. However, in the case of mutual funds, the par value of the units may not rise or fall immediately after allotment. A mutual fund scheme takes some time to make investment in securities. NAV of the scheme depends on the value of securities in which the funds have been deployed. If schemes in the same category of different mutual funds are available, should one choose a scheme with lower NAV? Some of the investors have the tendency to prefer a scheme that is available at lower NAV compared to the one available at higher NAV. Sometimes, they prefer a new scheme which is issuing units at Rs. 10 whereas the existing schemes in the same category are available at much higher NAVs. Investors may please note that in case of mutual funds schemes, lower or higher NAVs of similar type schemes of different mutual funds have no relevance. On the other hand, investors should choose a scheme based on its merit considering performance track record of the mutual fund, service standards, professional management, etc. This is explained in an example given below. Suppose scheme A is available at a NAV of Rs.15 and another scheme B at Rs.90. Both schemes are diversified equity oriented schemes. Investor has put Rs. 9,000 in each of the two schemes. He would get 600 units (9000/15) in scheme A and 100 units (9000/90) in scheme B. Assuming that the markets go up by 10 per cent and both the schemes perform equally good and it is reflected in their NAVs. NAV of scheme A would go up to Rs. 16.50 and that of scheme B to Rs. 99. Thus, the market value of investments would be Rs. 9,900 (600* 16.50) in scheme A and it would be the same amount of Rs. 9900 in scheme B (100*99). The investor would get the same return of 10% on his investment in each of the
schemes. Thus, lower or higher NAV of the schemes and allotment of higher or lower number of units within the amount an investor is willing to invest, should not be the factors for making investment decision. Likewise, if a new equity oriented scheme is being offered at Rs.10 and an existing scheme is available for Rs. 90, should not be a factor for decision making by the investor. Similar is the case with income or debt-oriented schemes. On the other hand, it is likely that the better managed scheme with higher NAV may give higher returns compared to a scheme which is available at lower NAV but is not managed efficiently. Similar is the case of fall in NAVs. Efficiently managed scheme at higher NAV may not fall as much as inefficiently managed scheme with lower NAV. Therefore, the investor should give more weight age to the professional management of a scheme instead of lower NAV of any scheme. He may get much higher number of units at lower NAV, but the scheme may not give higher returns if it is not managed efficiently. How to choose a scheme for investment from a number of schemes available? As already mentioned, the investors must read the offer document of the mutual fund scheme very carefully. They may also look into the past track record of performance of the scheme or other schemes of the same mutual fund. They may also compare the performance with other schemes having similar investment objectives. Though past performance of a scheme is not an indicator of its future performance and good performance in the past may or may not be sustained in the future, this is one of the important factors for making investment decision. In case of debt oriented schemes, apart from looking into past returns, the investors should also see the quality of debt instruments which is reflected in their rating. A scheme with lower rate of return but having investments in better rated instruments may be safer. Similarly, in equities schemes also, investors may look for quality of portfolio. They may also seek advice of experts. Are the companies having names like mutual benefit the same as mutual funds schemes? Investors should not assume some companies having the name "mutual benefit" as mutual funds. These companies do not come under the purview of SEBI. On the other hand, mutual funds can mobilize funds from the investors by launching schemes only after getting registered with SEBI as mutual funds. Is the higher net worth of the sponsor a guarantee for better returns? In the offer document of any mutual fund scheme, financial performance including the net worth of the sponsor for a period of three years is required to be given. The only purpose is that the investors should know the track record of the company which has sponsored the mutual fund. However, higher net worth of the sponsor does not mean that the scheme would give better returns or the sponsor would compensate in case the NAV falls. Where can an investor look out for information on mutual funds? Almost all the mutual funds have their own web sites. Investors can also access the NAVs, half-yearly results and portfolios of all mutual funds at the web site of Association of mutual funds in India (AMFI) AMFI has also published useful literature for the investors. Investors can log on to the web site of SEBI and go to "Mutual Funds" section for
information on SEBI regulations and guidelines, data on mutual funds, draft offer documents filed by mutual funds, addresses of mutual funds, etc. Also, in the annual reports of SEBI available on the web site, a lot of information on mutual funds is given. There are a number of other web sites which give a lot of information of various schemes of mutual funds including yields over a period of time. Many newspapers also publish useful information on mutual funds on daily and weekly basis. Investors may approach their agents and distributors to guide them in this regard.
LATEST NAV
Latest NAV:
PRODUCT NAME HDFC Liquid Fund (Dividend Option) HDFC Liquid Fund (Growth Option) HDFC Floating Rate Income Fund Short Term Plan (Dividend Option) HDFC Floating Rate Income Fund Short Term Plan (Growth Option) HDFC Liquid Fund - PREMIUM PLAN (Dividend Option) HDFC Liquid Fund - PREMIUM PLAN (Growth Option) HDFC Liquid Fund - PREMIUM PLUS PLAN (Dividend Option) HDFC Liquid Fund - PREMIUM PLUS PLAN (Growth Option) HDFC Cash Management Fund Savings Plan (Growth Option) HDFC Cash Management Fund Savings Plan (Daily Dividend Option) HDFC Cash Management Fund Savings Plan
NAV (RS. PER UNIT) 10.1641 13.3509 10.0618
REPURCHASE SALE PRICE PRICE (RS. PER UNIT) (RS. PER UNIT) 10.1641 13.3509 10.0618 10.1641 13.3509 10.0618
11.2963 12.2021 13.4109 12.1670
11.2963 12.2021 13.4109 12.1670
11.2963 12.2021 13.4109 12.1670
13.4355
13.4355
13.4355
13.9923
13.9923
13.9923
10.6364 10.6278
10.6364 10.6278
10.6364 10.6278
(Weekly Dividend Option) HDFC Cash Management Fund CallPlan 11.6378 (Growth Option) HDFC Cash Management Fund - Call Plan 10.4266 (Daily Dividend Option) 11.6378 11.6378
10.4266
10.4266
INTERPRETATION& FINANCIAL GOALS

INTERPRETATION
Evaluation of alternative:
There is no single process used by all customer or by one customer in all buying situation, there are several decision evaluation processes i.e. they see the consumer as forming judgment largely an a conscious and relational basis.
Some basis concept will help to understand consumer evaluation processes first, investor is trying to satisfy a need, second the investor are looking for certain benefits from the instruments which they are going to buy it.
Purchase decision:
In the evaluation stage the investor forms preference among the mutual fund among the brand the choice .the investor may also form an intention to buy the most preferred mutual fund-however two factors can intervene between the purchase intention and the purchase decision.
Financial Planning Your Goals!

The first and most important step in your life as an investor is to define your goals at the onset of your investing activity. This will map the road ahead for you in terms of time, amount, type of asset and risk. At this point of time you must also decide how much you are willing to save. When you look at defining your goals think carefully and try to include all your requirements, here are a few things that might help you:
Retirement In how many years? How much money will you need? How long will you need it for? Daughters/Sons wedding When and how much? Daughters/Sons education When and how much? Purchase of big ticket items e.g. House, Car etc.
Again, when and how much?
A simple way to get an overall perspective is to draw a time line starting from today with the amount you have saved up till now labeled at time zero. Going forward you can label your major outflows as and when they occur till retirement and then the steady outflows for your retirement income. Please remember your worst enemy Inflation and factor this into your targets. Remember that in an inflationary environment an apple will cost more tomorrow than today. For example: Let us say that you have Rs. 5,00,000 saved up today. In addition to this you figure that in year 10 you will need Rs. 5,00,000 for your daughters wedding. Also you decide with your wife that you will retire in thirty years time and will need Rs. 6,00,000 per year for 15 years after that. You also decide that you want to play it safe and want to invest only in debt products. Taking an annual rate of return of 7.00% you will have to save Rs. 38,042 per year for thirty year and you will be able to withdraw Rs. 4,61,958 (5,00,000 38,042) for your daughters wedding in year 10. Another scenario with 9.00% is available as well.
Now let us assume that you and your wife require Rs. 20,00,000 per annum for 15 years after retirement and want to spend Rs. 15,00,000 on your daughters wedding. Knowing this you decide to take the additional risk of investing your money in equities that historically do tend to provide double-digit returns in the long run. Assuming an annual rate of return on 13.00% per annum you would have to save Rs. 36,328 per year for thirty years to achieve your goals. An example with a 15.00% return is provided as well.
Investors usually diversify their investment between debt and equities and earn returns that are commensurate with their asset allocations
Financial Planning: Meeting your Goals Considerations

Time:
The principal of time value of money (TVM) applies here. Let us start with an example first. Two friends, Ajay, and Mustafa are 20 years old. Ajay decides that he wants to start investing his money early to build himself a secure future and decides to save Rs. 5,000 monthly (i.e. Rs. 60,000 per annum) at the age of 20. Mustafa feel that he is young and wants to enjoy his money for the time being. Mustafa wakes up late and decides to invest at the age of 35 years and decides to save Rs. 10,000 per month (i.e. Rs. 1,20,000 per annum). At the age of 60 years when they want to retire, using an interest rate of 7% per annum, Ajay who had invested Rs. 5,000 monthly for 25 years has Rs. 1.15 cr. and Mustafa who had invested Rs. 10,000 monthly for the same amount of time has Rs. 57 lacs. Please refer to the illustrations below for a better understanding.
Ajay (7%):
Diversification:
The nuclear weapon in your arsenal for your fight against Risk. It simply means that you must spread your investment across different securities (stocks, bonds, money market instruments, real estate, fixed deposits etc.) and different sectors (auto, textile, information technology etc.). This kind of a diversification may add to the stability of your returns, for example during one period of time equities might under perform but bonds and money market instruments might do well enough to offset the effect of a slump in the equity markets. Similarly the information technology sector might be faring poorly but the auto and textile sectors might do well and may protect you principal investment as well as help you meet your return objectives
Inflation Do not invest too conservatively:
Things you hear people talk about:Rs. 100 today is worth more than Rs. 100 tomorrow. Remember the time when a bus ride costed 50 paise? Mehangai Ka Jamana Hai. The root cause, Inflation. Inflation is the loss of purchasing power over time. A lot of times people make conservative investment decisions to protect their capital but end up with a sum of money that can buy less than what the principal could at the time of the investment. This happens when inflation grows faster than the return on your investment. A welldiversified portfolio with some investment in equities might help mitigate this risk.
Day Trading / Tips etc:

More often than not we find investors buying stocks in companies suggest by their friends, while not knowing what the company does or how it is performing. The aim - to make a quick buck. The result they may probably lose their money. We believe in buying value, it is imperative that you either do your homework or hire a professional financial advisor to do it for you. Buying and holding undervalued securities is the probably the best way to beat the market.
Liquidity:
This depends on your cash requirements. If you feel that you might need the funds that your are investing say sometime in the near future you might consider investing in liquid assets or plan your cash flows accordingly. Higher liquidity translates into lower returns and consequently lower risk.
Rupee Cost Averaging:

This technique helps you make volatility in the financial markets work for you. Let us start with an example:
MONTH 1 2 3 4 5 Total
INVESTMENT AMOUNT (RS.) 1,000 1,000 1,000 1,000 1,000 5,000
UNIT PRICE (RS.) 10.00 11.00 12.00 9.00 8.00 10.00 / 9.801*
NO. OF UNITS 100.00 90.91 83.33 111.11 125.00 510.35
(* Rs. 10.00 is the average sales price achieved by taking an average of all of the sales prices. Rs. 9.80 is the average cost per unit arrived to by dividing the total amount invested by the number of units bought.)
As you see from the example above that even though you buy units at the higher prices of Rs.11 and Rs. 12 per unit your average cost per unit still remains at Rs. 9.80 per unit since you have the chance to buy addition units at lower prices as well. The amount invested per month has to be the same for this to work since you end up buying more units when the price is low and fewer units when the price is high, only then will your average cost per unit (Rs. 9.80) remain below your average sale price (Rs. 10). Please note that Rupee Cost Averaging does not protect against loss in a declining market scenario.
The higher the risk you take with your money, the greater the chance of higher returns. The lower the risk, the lower the return. Hence, do not get misled by high returns. You could also end up losing all your money. That is why equity (shares) rates high on the risk factor compared to other investments, like post office saving schemes, fixed deposits and bonds. The returns can be phenomenal. So are the chances of you losing your money. How risky is your mutual fund? Check out the ratings given by mutual fund research outfit Value Research.
The best funds may not be the safest!
How the funds are rated? Here is a quick and easy way to identify mutual funds that have produced strong riskadjusted performances vis--vis their peers. The funds with a 5-star rating are the best. Those with a 1-star rating are the worst.
HOW THE RATING IS DONE:

A fund's return for each month is taken since the day it is launched. This return is compared to other 'risk less' investments, like government investments, which have no risk per se. This means funds do not rate very high if they give phenomenal returns, but have taken tremendous risks to do so. Only funds with a minimum performance history of three years are considered. *WHY YOU SHOULD WATCH OVER YOUR MUTUAL FUND? THE TOP 5-STAR DIVERSIFIED EQUITY FUNDS: Diversified equity funds are those that invest in the shares of various companies of various sectors. Here are the funds that offer the best returns when the risk factor is taken into account.
1-year return (%) Alliance Industries HDFC Equity Magnum Contra Reliance Growth Reliance Vision Basic 54.20 82.69 57.84 101.56 92.10 68.33 Return since launch (%) 27.84 24.51 20.74 28.18 30.68 25.79
Franklin India Prima
*All about tax-saving funds:
THE TOP 5-STAR TAX PLANNING FUNDS: These are diversified equity funds that have the tax benefit under Section 80C.
1-year (%) Birla Taxplan '98 HDFC Long Term Advantage HDFC Taxsaver 64.74 77.77
return
Return since launch (%) 39.58 45.72
101.18
41.98
HOW TO INVEST IN A MUTUAL FUND
AMCs that have the most 5-star funds: Do remember that mutual fund houses (Asset Management Companies) offer more than one fund. Take a look at the AMCs that have the most number of 5-star funds.
AMC HDFC Franklin Templeton Reliance Alliance Capital Birla Sun Life Canbank JM Kotak Mahindra Prudential ICICI UTI Mutual Fund BoB DSP ML Escorts LIC Sahara SBI Benchmark Cholamandalam Deutsche 1 1 2 2 1 4 1 5 2 6 1 2 1 1 2 1 1 1-star 2 2 2-star 10 4 3 1 2 2 4 3 2 9 3-star 7 10 1 7 8 2 1 4 9 13 2 3 4 1 1 5 2 4 1 1 1 2 1 4-star 2 9 2 1 2 1 3 4 4 12 1 5 5-star 6 3 3 2 2 2 2 2 2 2 1 1 1 1 1 1
GIC HSBC ING Vysya Principal Standard Chartered Sundaram Tata Taurus
1 1 2 1 1 2 4 4 1 2 1 3 2
1 1 1 7 5 6 7
2 6
2 6 3
Mutual Funds and securities investments are subject to market risks and there can be no assurance or guarantee that the Scheme(s) objectives will be achieved. As with any investment in securities, the Net Asset Value of Units issued under the Schemes(s) may go up or down depending on the various factors and forces affecting the capital market. Past performance of the Sponsor and its affiliates does not indicate the future performance of the Scheme(s) of the Mutual Fund. The Sponsor is not responsible or liable for any loss or shortfall resulting from the operations of the Scheme(s) beyond the initial contribution of Rs. 1 lakh made by it towards setting up of the Mutual Fund. HDFC Growth Fund, HDFC Balanced Fund, HDFC Income Fund, HDFC Liquid Fund, HDFC Tax Plan 2000, HDFC Children's Gift Fund, HDFC Gilt Fund, HDFC Fixed Investment Plan, HDFC Short Term Plan, HDFC Index Fund & HDFC Floating Rate Income Fund are the names of the Scheme(s) and do not in any manner indicate either the quality of the Scheme(s) or their future prospects and returns.
The higher the risk you take with your money, the greater the chance of higher returns. The lower the risk, the lower the return. Hence, do not get misled by high returns. You could also end up losing all your money. That is why equity (shares) rates high on the risk factor compared to other investments, like post office saving schemes, fixed deposits and bonds. The returns can be phenomenal. So are the chances of you losing your money. How risky is your mutual fund? Check out the ratings given by mutual fund research outfit Value Research.
The best funds may not be the safest!
HOW THE FUNDS ARE RATED: Here is a quick and easy way to identify mutual funds that have produced strong riskadjusted performances vis--vis their peers. The funds with a 5-star rating are the best. Those with a 1-star rating are the worst. HOW THE RATING IS DONE: A fund's return for each month is taken since the day it is launched. This return is compared to other 'risk less' investments, like government investments, which have no risk per se. This means funds do not rate very high if they give phenomenal returns, but have taken tremendous risks to do so. Only funds with a minimum performance history of three years are considered. *WHY YOU SHOULD WATCH OVER YOUR MUTUAL FUND? The top 5-star diversified equity funds: Diversified equity funds are those that invest in the shares of various companies of various sectors. Here are the funds that offer the best returns when the risk factor is taken into account.
1-year return (%) Alliance Basic Industries Franklin India Prima HDFC Equity Magnum Contra Reliance Growth Reliance Vision 54.20 82.69 57.84 101.56 92.10 68.33 Return since launch (%) 27.84 24.51 20.74 28.18 30.68 25.79
INTERPRETATION OF THE MUTUALFUND

What are the various types of mutual fund schemes? What are the factors that need to be considered while choosing a fund? What is the cost associated with mutual fund investing? How is the worth of investment in a mutual fund measured? What is NAV? Do mutual funds guarantee safety of capital and returns? What are the various ways in which fund performance can be measured? How relevant is past performance of a fund scheme? Do the fund managers commit to any particular investment philosophy and style? What risks is one exposed to while investing in mutual funds? What is Rupee Cost Averaging? What is an offer document? How does one read the offer document? What are the tax benefits one can avail of by investing in mutual funds? Arent the recent tax provisions of distribution tax biased against the small investors? Mutual fund advertisements make exaggerated claims. What points should one check to avoid being taken in by aggressive advertising and ever obliging salesmen? Where can information about mutual funds be found? Is there any minimum investment amount being stipulated by the scheme? What is the 'switching facility' offered by various funds? What needs to be done to buy units? Why sign Power of Attorney? Is signing the Power of Attorney safe? How does my buy order get processed?
What are the various types of mutual fund schemes?
You'd be surprised at how many there are, especially if you've always thought mutual funds was one big amorphous entity! Well, there are means and means for classifying them listed below are some of the most common criteria:
ASSET CLASS: This classifies funds according to the class of assets they invest in. INVESTMENT SECTOR: This segregates funds on the basis of the sub-sector or the special focus area on which the fund's investments are concentrated. DURATION: This basis uses the maturity time (i.e. whether the funds have any specific maturity date or not) as the determinant for classifying the funds. TRADING: Strategy this classifies funds on the basis of the frequency with which the portfolio is turned over in the market. INVESTMENT STRATEGY: this is based on the investment strategy being followed by the fund. SECURITY: Selection this classifies funds according to the criteria used by the fund to select securities for its portfolio. OBJECTIVE OF INVESTMENT: Here the funds are classified on the basis of the investment objective: that is, the purpose for which the investor has invested in that fund, which could be anything ranging from higher education of children to taxsaving.
COSTS/LOADSCHARGED: In this case, funds are classified on the basis of whether or not there are any fees charged (thats load' in the mutual funds jargon!) on the purchase or sale of units. What do I need to keep in mind while selecting a fund? It all depends on what you want your money to do - get out there and earn you a large sum of money NOW, stay put and save you taxes, be readily convertible into cash if you're in a tight spot - the list of expectations is long and will vary from person to person. Once you've figured that initial bit for yourself, it'll be worth your while to remember the following points:
INVESTMENT NEEDS:It is essential to decide - why am I making this investment? To what purpose? This is because depending on your specific need, you can choose a specific investment avenue. For instance if you're investing for some future event like retirement or your children's marriage, and there's plenty of time left for both, it makes sense for you to invest in equity-dominated funds. On the other hand, if you want to invest the lump sum you get on retirement for a regular income that sees you through your retired life, then a fixed income dominated fund would be best for you. RISK PROFILE: How much of a daredevil are you? Does thinking of even the slightest risk or uncertainty make you break out in cold sweat? It is vital that you
invest according to your appetite for risk-taking! Thus, if you're the kind who'd rather be safe than sorry, equity funds would not be suitable for you as volatile equity markets can impact fund returns, so you can imagine what effect they'd have on you!
TIME FRAME: How long do you want your funds to stay tied up? Are you comfortable waiting for the money to come to you at some future date or would you rather have it as fast as possible? Would you prefer it in a lump sum or in smaller, regular amounts? Different funds meet different time-based needs. Generally, equity funds are considered to be performers over a relatively longer period of time. In the short term, they are prone to market fluctuations. Thus, if you have invested in an equity fund, at the time of withdrawal of your investment, you may not get any returns at all! In such a case, rather than going for an equity fund, you might consider an income fund or a money market scheme instead. LIQUIDITY: This is linked to the above point. If the time frame of the investment is short, then it is not really advisable to invest in close-ended schemes. Units of these schemes are generally listed on stock exchanges, and past experience has shown that they quote at a heavy discount to their value. So if you're in a hurry, a close-end scheme may not be your thing. On the other hand, if you're willing to invest for a certain defined period, a close-ended scheme may be perfect. Not just when you'll get your money - but also how well the fund will be able to liquidate its portfolio that's another thing you should look into before choosing your mutual fund. SERVICE LEVELS EXPENSES: With most top funds offering similar returns, service levels have become a major differentiating factor. Choose a fund that offers efficient service in terms of prompt delivery of account statements and quick redressal of grievances. Also consider the charges you'll have to pay and the expense ratios of the funds you propose to invest in. It may sound like a drag, but it's better to be warned beforehand than shocked later!
TRANSPARENCY: How much do you know about the fund? For your peace of mind and for the safety of your money, choose a fund that is open about its investments, its investment style, and has a history of clear and direct communication with its investors.
What are the costs involved in mutual fund investing?

Ah - that all-important question - what kind of hole will it burn in your pocket! Well, there are a few charges involved, but if you think of all the bother they're saving you and the money that you stand to earn, you won't mind paying up! In addition to what are called 'loads' (explained below), a mutual fund also charges asset management fees and certain other expenses. These charges compensate the fund for the expenses it incurs in managing assets, processing transactions and paying brokerages. For instance, every redemption request involves not only administrative processing costs but also other costs associated with raising money to pay off the outgoing investor. However, it'll please you to know that there's nothing arbitrary about these charges. For example, regulations stipulate that the difference between the repurchase and the resale price cannot exceed 7 % of sale price, and that recurring expenses cannot exceed 2.5 % of average weekly net assets. The recurring expenses limit is even lower for schemes with a
size exceeding Rs. 100 crores in net assets. So if ever you get the feeling that you're being fleeced, don't, because there's somebody making sure that all is fair and square! Loads: Don't look at these as a burden; just think of them as tolls you pay on the highway to big money!
ENTRY/LOAD/SALE/LOAD: This is the charge imposed at the time you enter a fund as an investor. You pay for the value of the units plus an additional charge. That additional charge is termed entry/sale load. EXIT/LOAD/REPURCHASE/LOAD: The opposite of the above! This is what you cough up at the time of your exit from the scheme. Operationally, therefore, what you get back from the mutual fund will be the value of the units minus the exit charge. CONTINGENT DEFERRED SALES CHARGE: A mutual fund may not want to charge an exit load in all cases. But it will still need to recover the expenses incurred on the promotion and distribution of a scheme. What it does then is impose a charge based on the time of withdrawal. Thus, a fund that prefers long-term investors may stipulate that the exit charge will keep reducing with the increasing duration of investment. Such a charge is called Contingent Deferred Sales Charge (CDSC). The asset management company is entitled to levy a CDSC for redemption during the first four years after purchase, not exceeding 4% of the redemption proceeds in the first year, 3% in the second year, 2% in the third year and 1% in the fourth year. In order to charge a CDSC, the scheme has to be a no-load scheme as per the regulations laid down by SEBI. SWITCH/OVER/EXCHANGE/FEE: This is what you pay if you decide to switch your investment from one scheme of the fund to another scheme from the same fund family.
RECURRING EXPENSES: Apart from loads, mutual funds also charge some other expenses, such as:
Investment Management & Advisory Fees: As the name suggests, this is meant to remunerate the asset management company for managing the investor's money. Trustee Fees: These are fees payable to the trustees for managing the trust. Custodian Fees: These are paid by the fund to its custodians, the organization which handles the possession of the securities invested in by the fund. Registrar and Transfer Agents Charges: The fees payable to the registrar and the transfer agents for handling all formalities related to the transfer of units and other related operations. Broker/Dealer Remuneration, Audit Fees, Cost of Funds Transfer, Cost of providing a/c statements, Cost of Statutory Advertisements.
But remember, all these are regulated and have an upper limit, so you won't go broke trying to earn money! Do mutual funds guarantee safety of capital and returns? No, not normally. Neither returns nor capital is guaranteed in most mutual fund schemes. While full term assured schemes - both equity and debt - have been launched in the past, they are now being phased out with the maximum period of assurance having been limited to one year. Thus, according to the regulations of SEBI - no mutual fund scheme can assure a return beyond a period of one year. Unlike a fixed deposit in a bank, you cannot expect an assured return from a mutual fund. If that's making you think - why on earth am I considering mutual funds? - take a step back and consider this. Though mutual funds may not offer assured returns, remember that through diversification of investments your risks are drastically lowered. Be it the threat of capital depreciation or erosion of capital, you manage to avoid both. This applies more so in the case of say, income funds. Equity funds are the ones affected by the volatile nature of equity markets so if be selective, you still stand a chance to gain rather than lose in the long run. What are the various ways in which fund performance can be measured? Well, start with the NAV! That's what serves as the basic material for evaluating the performance of a fund. Some of the methods used are explained below: Relative-To-Benchmark method Under this method, a comparison is made between the returns given by a market index and the fund over a given period of time. If the returns generated by the fund (as measured by changes in NAV over that given period of time) are greater than those generated by the benchmark, then the fund is said to have outperformed the market portfolio. RISK-RETURN-METHOD:The Relative-to-Benchmark measure is very simplistic, as it does not incorporate any measure of risk in its calculation. An investor would naturally be interested in finding out the return generated for the risk undertaken, as, in a bid to generate super-normal returns, the fund may go overboard on the risk parameter. Therefore, riskadjusted measures of return are needed to evaluate the performance of funds. There are several such measures prominent among which are the Sharpe ratio, the Treynor ratio, and Alpha: SHARPE RATIO:This measure uses standard deviation as a measure to evaluate a fund's risk-adjusted returns. The higher a fund's Sharpe ratio, the better it is. Thus, a fund's returns would be regarded good if the fund returns a high level of Sharpe ratio. Mathematically, it is arrived at by deducting the risk-free returns from the returns generated by the fund and dividing the residual figure by the standard deviation of the fund's returns. One thing that has to be kept in mind while using this measure is that the ratio is not an absolute figure. Its real utility lies in inter-scheme comparison. ALPHA: Basically, alpha is the difference between the return that would be warranted by its beta (expected return) and the return that is actually generated by the fund. If a fund returns more than what is anticipated by beta, it has a positive and favorable alpha, and if it returns less than the amount predicted by beta, the fund has a negative alpha. Mathematically, Alpha = fund return - [Risk free rate + Beta of fund (Benchmark return - Risk free return)] How relevant is the past performance of a fund scheme?
That's a difficult one! Fund prospectuses will clearly tell you that "past performance is no indicator of the future", but, on the other hand, many analysts will tell you that sustained performance over a reasonably long period of time is a good criteria. There is truth in both points of view. While past performance reflects the success of the fund manager, the broad investment strategy and related factors, it serves as no guarantee that the strategy will work equally well in the future. A change in the external environment could necessitate a change in investment strategy too. Again, past successes could imply that the probability of future successes is respectably high. So it's one of those issues where you'll have to rely partly on information and partly on intuition! Do fund managers commit themselves to any particular investment philosophy and style? Normally fund managers do define the approach they intend to adopt to realise the investment objective of the scheme. In fact, if you want to know what your fund manager's philosophy is, go through the fund offer documents and other communication - that should give you a clear idea of what the fund manager proposes to do with your money, and how! Infact you can analyze any fund on our site Fund Analyzer What are the risks involved in investing in mutual funds? As they say, forewarned is forearmed! Go ahead; get acquainted with the types of risk involved:
MARKET RISK: If the overall stock or bond markets fall on account of macro economic factors, the value of stock or bond holdings in the fund's portfolio can drop, thereby impacting the NAV. NON-MARKET-RISK: Bad news about an individual company can pull down its stock price, which can negatively affect funds holding a large quantity of that stock. This risk can be reduced by having a diversified portfolio that consists of a wide variety of stocks drawn from different industries. INTEREST RATE RISK: Bond prices and interest rates move in opposite directions. When interest rates rise, bond prices fall and this decline in underlying securities affects the NAV negatively. How bad the damage will be is dependant on factors such as maturity profile, liquidity etc.
CREDIT RISK: Bonds are debt obligations. So when the funds invest in corporate bonds, they run the risk of the corporate defaulting on their interest and principal payment obligations and when that risk crystallizes, it leads to a fall in the value of the bond causing the NAV of the fund to take a beating What is Rupee Cost Averaging? Rupee cost averaging is an investment strategy in which equal amounts of money are invested in a scheme at regular intervals. So, you can buy a lower number of units when the NAV is high and a higher number of units when the NAV is low. What it does, in effect, is eliminate the need to keep a continuous track of the market. Regular investment over a period of time evens out the short term fluctuations associated with the market's volatility, so neither you nor the fund suffers. What is an offer document? An offer document is a document that offers you all the information you could possibly need about a particular scheme and the fund launching that scheme. That way, before you put in your money, you're well aware of the risks etc involved. This has to be designed in
accordance with the guidelines stipulated by SEBI and the prospectus must disclose details about: investment objectives risk factors and special considerations summary of expenses constitution of the fund guidelines on how to invest organization and capital structure tax provisions related to transactions financial information Do I actually have to read the whole offer document? I don't think I'll understand it! Relax; you don't have to punish yourself trying to decode all the legal jargon that's there in offer documents! You needn't read all the sections in such great detail. However the sections you can't afford to miss would be those addressing investment objectives, investment philosophy, expenses, fund management background, sale and repurchase procedures, potential risks, financial highlights, and past records. Once you've familiarized yourself with these basic and vital details, you can consider yourself ready to invest! What tax benefits will I get by investing in mutual funds? The investment in mutual funds designated as Equity Linked Saving Scheme (ELSS) qualifies for rebate under section 88. The maximum amount that can be invested in these schemes is Rs.10,000, therefore the maximum tax benefit available works out to Rs.2000. Apart from ELSS schemes, the benefit of Section 88 is also available in select schemes of some funds such as UTI ULIP, Pension Plans, Unit linked insurance schemes etc. The investor in a mutual fund is exempt from paying any tax on the dividend received by him from the mutual fund, irrespective of the type of the mutual fund. This benefit is available under section 10(33) of the I.T. Act. The units of mutual funds are treated as capital assets and the investor has to pay capital gains tax on the sale proceeds of mutual fund units sold by him. For investments held for less than one year the tax is equal to 30% of the capital gain. For investments held for more than one year, the tax is equal to 10% of the capital gains. The investor is entitled to indexation benefit while computing capital gains tax. Some schemes also offered the benefit of section 54EA and 54EB to the investors. This benefit now stands withdrawn and only those investors who have sold off their properties prior to 31st March, 2000 and amount is invested prior to 30th September,2000 are eligible to take advantage of the provision. The mutual funds are completely exempt from paying taxes on dividends/interest/capital gains earned by them. While this is a benefit to the fund, it is the indirect benefit of unit holders as well. This benefit is available to the mutual fund under section 10 (23D) of the I.T. Act. A mutual fund has to pay a withholding tax of 10% on the dividends distributed by it under the revised provisions of the I.T. Act putting them on par with corporate. However an open ended mutual fund which has invested more than 50% of its assets into equity shares is exempt from paying any tax on the dividend distributed by it, for a period of three years, by an overriding provision. This benefit is available under section 115R of the I.T. Act. Where can I get information on mutual funds? Right here! ( Seems like a lot of people have been asking the same question!) Pick up a newspaper, a magazine, a journal, or visit a web site - and there you have it. All the relevant information you're looking for about mutual funds. Sites such as this, and business
newspapers such as The Economic Times carry details and provide extensive coverage of mutual funds. Besides these, you can directly contact mutual funds and their agents for detailed, scheme specific information. Is there any minimum investment amount stipulated by a mutual fund scheme? Yes, there is indeed a minimum initial and subsequent level of investment stipulated by each mutual fund scheme. These amounts vary from fund to fund, so it'll depend on which one you finally go for. What is the 'switching facility' offered by various funds? Many mutual funds offer investors the benefit of mobility within the fund family i.e. unitholders can move over from one scheme to another with or without the payment of entry/exit charges. The advantage of this is that you can quickly move your investments as and when market conditions change, thereby making the most of it! What do I need to do if I wish to buy units? You are in the right place! All you need to do is fill in the simple registration from and sign up the power of attorney and you are on! Having done this once, you can buy and sell Mutual Funds online through Times of Money. To understand in greater detail, read the "Tell me more" section. Why sign Power of Attorney? Power of Attorney (POA) is a simple, one-time document that allows TimesofMoney.com to buy and sell Mutual Funds on your behalf, with your consent. The Power of Attorney helps us execute your buy or sell order with the Fund house. The buy / sell order when initiated by you on the website is sent to the fund house along with a copy of the POA. It helps the Fund House recognize who you are for facilitating the proper transfer of funds. Is signing the Power of Attorney safe? Yes. Let us take you through the process of buy and sell. When you buy from www.timesofmoney.com, you can pay by cheque or by a direct debit (if you hold an account with Citibank or HDFC). If you use the cheque payment mechanism, the cheque is drawn in the name of the Fund House. This means that the money debited from your account is credited only in the Fund House account. When you sell from www.timesofmoney.com, the Fund House draws a cheque is your name and the money gets transferred from the Fund House account directly to your account or a cheque is drawn in your name. Thus, the entire process is fraud free and safe. How does my buy order get processed? Most funds price their units on a prospective basis, i.e. you get to buy units at a price to be determined in the future. For this purpose each fund fixes a cut-off time. Applications for purchase or redemption submitted before the designated time are processed at a price linked to the NAV of that day (which, by the way, is announced at the end of that day) while applications submitted after the cut-off time are processed at a price linked to the NAV of the following day. This cut-off time determined varies from fund. So be sure to catch your deadlines! The number of units to be allotted - in case of purchase requests - is determined by dividing the amount invested by the applicable NAV based sale price. Normally, within a week of the purchase transaction, you will receive an account statement in the post confirming the NAV at which your investment has been made. Along with this, the statement will contain all the details you've given while applying for the units, as well as details about the broker.
*All about tax-saving funds:

The top 5-star tax planning funds These are diversified equity funds that have the tax benefit under Section 80C.
1-year return (%) Birla '98 Taxplan 64.74 77.77
Return since launch (%) 39.58 45.72
HDFC Long Term Advantage HDFC Taxsaver
101.18
41.98
How to invest in a mutual fund
AMCs that have the most 5-star funds Do remember that mutual fund houses (Asset Management Companies) offer more than one fund. Take a look at the AMCs that have the most number of 5-star funds.
AMC HDFC Franklin Templeton Reliance Alliance Capital Birla Sun Life Canbank JM Kotak Mahindra Prudential ICICI UTI Mutual Fund BoB DSP ML Escorts LIC Sahara SBI Benchmark Cholamandalam Deutsche GIC HSBC ING Vysya Principal Standard Chartered Sundaram Tata Taurus
1-star 2 2
2-star 10 4 3
3-star 7 10 1 7 8 2 1 4 9 13 2 3
4-star 2 9 2 1 2 1 3 4 4 12 1 5 1 2 1 1 2
5-star 6 3 3 2 2 2 2 2 2 2 1 1 1 1 1 1
1 2 1 1
1 2 2 4 3
1 2 1
2 9
1 2 1 4 1 1 1 1 2 1 1 2 4 4 1 2 1 3 2 5 2 6 2
4 1 1 5 2 4 1 1 1 1 7 5 6 7 2 6 3 2 6
OBSERVATION&FINDINGS
OBSERVATION OR FINDINGS (Remark of investor) FAVORABLE RESPONSE:

good concept more instrument should be introduced should interest and gave preference too technically strong asked for portfolio
NON FAVORABLE RESPONSE:

substitutes are more available high risk security of the money(in shorter span of time) less faith on the companies investment no acknowledgement certificate
SUGGESTION
commission should be distributed properly(with in the time)
more schemes should be added
services should be improved for the investor protection
locking problem should be changed
there should more tie-ups with other bank
edge over the competitors in terms of product and services.
BIBLIOGRAPHY

www.google.com www.yahoo.com www.Sebi.com C.R.Khotari P.P.Varshney
Annexure

questionnaire Sebi guidelines certificate
QUESTIONNAIRE

Name Address City Tel.no. E-mail Date of birth Occupation
1) 2) 3) 4) 5)
Salaried Self employed Retired Professional Homemaker
I Invest In
1) Mutual funds 2) Insurance 3) Shares
Within mutual fund ,i invest in;
1) 2)
Debth Equity
Annual Household
1) 2) 3) 4)
2 LAKHS >2 LAKHS 5 LAKHS 10 LAKHS

s

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MUTUAL FUND THROUGH SYSTEMATIC INVESTMENT PLANNING PROJECT REPORT

MUTUAL FUND THROUGH S.I.P

(SYSTEMATIC INVESTING PLANNING)

OBJECTIVE OF THE STUDY

COMPANY PROFILE OF STANDARD CHARTERED

OBJECTIVE OF THE PROJECT

Method of data collection:

MUTUAL FUND BASICS

What are the different types of Mutual Funds?

How significant are fund costs while choosing a scheme?

Ideally how many different schemes should one invest in?

How do you select a mutual fund scheme?

Are investments in mutual funds liquid?

What are the different types of Mutual Funds?

How significant are fund costs while choosing a scheme?

Ideally how many different schemes should one invest in?

How do you select a mutual fund scheme?

Are investments in mutual funds liquid?

What are the different types of Mutual Funds?

How significant are fund costs while choosing a scheme?

Ideally how many different schemes should one invest in?

How do you select a mutual fund scheme?

Are investments in mutual funds liquid?

Makes market timing irrelevant

Market Timing Irrelevant

Open ended Schemes

Closed ended Schemes

%NEW WINE IN A NEW BOTTLE %

WHY SYSTEMATIC INVESTING

And almost impossible

Jume-01 July-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 Total

7.297 6.994 6.997 6.864 6.462 6.931 7.600

1000 1000 1000 1000 1000 1000 1000 12000

137.04 142.98 142.92 145.69 154.75 144.28 131.58 1616.13

Systematic investing, an example:

Systematic investment plan:

1 YEAR SIP 12.90% 10.80% 15.76% 34.99%

3 YEARS SIP 39.58% 45.18% 47.70% 44.54%

5 YEARS SIP 29.54% 27.76% 24.47%

39.18% 19.79% 12.36%

58.18% 41.47% 38.36%

Benefits can a monthly investment plan have? 34.99%become a disciplined investor.

14.6 11.7 8.8 5.8 2.9

17.4 13.9 10.4 7.0 3.5

20.9 16.7 12.5 8.3 4.2

Schemes And Interpretation

PATTERN OF THE SCHEME:

2) Recurring expenses (% of weekly average net asset)

HDFC CAPITAL BUILDER FUND:

Exit load: Nil

DATE Mar31, 04 Nov28, 03 Nov29, 01 Nov30, 99 Feb01, 94

NAV (PERUNIT 22863 19783 13.79 13.79 10.00

RETURN 38.49 59.44 18.07 18.07 11.22

BENCHMARK 13.43 28.35 9.72 9.72 4.16

5 YEARS 60000 4729.02 149739.69 37.61

3YEARS 36000 2622.98 83054.46 62.62

1YEARS 12000 501.72 15886.46 65.16

HDFC LONG TERM ADVANTAGE FUND:

Exit load: nil. Relative performance:

(1096days) Since inception

Absolute return ** compounded annualized return.

Assets allocation pattern

Normal allocation (%of net assets) 90-95% 5-10%