“A CRITICAL STUDY OF

SBI MUTUAL FUND AS AN

INVESTMENT PLAN”
INTRODUCTION TO MUTUAL FUND
 INTRODUCTION

CONCEPT OF MUTUAL FUND:

Mutual fund is a vehicle to mobilize moneys from investors, to invest in different markets and

securities, in line with the investment objectives agreed upon, between the mutual fund and the

investors. In other words, through investment in a mutual fund, a small investor can avail of

professional fund management services offered by an asset management company.

ROLE OF MUTUAL FUNDS:

Mutual funds perform different roles for different constituencies. Their primary role is to assist

investors in earning an income or building their wealth, by participating in the opportunities

available in various securities and markets. It is possible for mutual funds to structure a scheme

for any kind of investment objective. Thus, the mutual fund structure, through its various

schemes, makes it possible to tap a large corpus of money from diverse investors.

Therefore, the mutual fund offers schemes. In the industry, the words ‘fund’ and ‘scheme’ are

used inter-changeably. Various categories of schemes are called “funds”. In order to ensure

consistency with what is experienced in the market, this Workbook goes by the industry practice.

However, wherever a difference is required to be drawn, the scheme offering entity is referred to

as “mutual fund” or “the fund”. The money that is raised from investors, ultimately benefits

governments, companies or other entities, directly or indirectly, to raise moneys to invest in

various projects or pay for various expenses. As a large investor, the mutual funds can keep a

check on the operations of the investee company, and their corporate governance and ethical

standards.

The projects that are facilitated through such financing, offer employment to people; the income

they earn helps the employees buy goods and services offered by other companies, thus

supporting projects of these goods and services companies. Thus, overall economic development

is promoted. The mutual fund industry itself, offers livelihood to a large number of employees of

mutual funds, distributors, registrars and various other service providers. Higher employment,

income and output in the economy boost the revenue collection of the government through taxes

and other means. When these are spent prudently, it promotes further economic development and
nation building. Mutual funds can also act as a market stabilizer, in countering large inflows or

outflows from foreign investors. Mutual funds are therefore viewed as a key participant in the

capital market of any economy.

WHY MUTUAL FUND SCHEMES

Mutual funds seek to mobilize money from all possible investors. Various investors have

different investment preferences. In order to accommodate these preferences, mutual funds

mobilize different pools of money. Each such pool of money is called a mutual fund scheme.

Every scheme has a pre-announced investment objective. When investors invest in a mutual fund

scheme, they are effectively buying into its investment objective.

INVESTMENT STRATEGIES

1. Systematic Investment Plan: under this a fixed sum is invested each month on a

fixed date of a month. Payment is made through post dated cheques or direct debit

facilities. The investor gets fewer units when the NAV is high and more units when the

NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and

give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the

same mutual fund.

3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund

then he can withdraw a fixed amount each month.

 2.1 GROWTH IN ASSETS UNDER MANAGEMENT

The Indian Mutual Fund has passed through three phases. The first phase was between 1964 and
1987 and the only player was the Unit Trust of India, which had a total asset of Rs. 6,700 crores
at the end of 1988. The second phase is between 1987 and 1993 during which period 8 Funds
were established (6 by banks and one each by LIC and GIC). The total assets under management
had grown to 61,028 crores at the end of 1994 and the number of schemes was 167.

The third phase began with the entry of private and foreign sectors in the Mutual Fund
industry in 1993. Kothari Pioneer Mutual Fund was the first Fund to be established by the private
sector in association with a foreign Fund. As at the end of financial year 2000(31st march) 32
Funds were functioning with Rs. 1, 13,005 crores as total assets under management. As on august
end 2000, there were 33 Funds with 391 schemes and assets under management with Rs 1, 02,849
crores.
 The securities and Exchange Board of India (SEBI) came out with comprehensive
regulation in 1993 which defined the structure of Mutual Fund and Asset Management Companies
for the first time. Several private sectors Mutual Funds were launched in 1993 and 1994. The share
of the private players has risen rapidlysincethen. Currently there are 34 Mutual Fund organizations
inIndiamanaging1,02,000crores.

OBJECTIVES OF MUTUAL FUNDS

To define and maintain high professional and ethical standards in all areas of operation of mutual

fund industry

To recommend and promote best business practices and code of conduct to be followed by

members and others engaged in the activities of mutual fund and asset management including

agencies connected or involved in the field of capital markets and financial services.

1. To interact with the Securities and Exchange Board of India (SEBI) and to represent to

SEBI on all matters concerning the mutual fund industry.

2. To represent to the Government, Reserve Bank of India and other bodies on all matters

relating to the Mutual Fund Industry.

3. To develop a cadre of well trained Agent distributors and to implement a programme of

training and certification for all intermediaries and other engaged in the industry.

4. To undertake nation wise investor awareness programme so as to promote proper

understanding of the concept and working of mutual funds.

5. To disseminate information on Mutual Fund Industry and to undertake studies and

research directly and/or in association with other bodies.

 CHARACTERISTICS OF MUTUAL FUNDS
1. The ownership is in the hands of the investors who have pooled in their funds.

2. It is managed by a team of investment professionals and other service providers.

3. The pool of funds is invested in a portfolio of marketable investments.

4. The investors share is denominated by ‘units’ whose value is called as Net Asset Value

(NAV) which changes every day.

5. The investment portfolio is created according to the stated investment objectives of the

fund.

2.2 ADVANTAGES OF MUTUAL FUND

1. Portfolio Diversification: The basic advantage of funds is that, they are professional

managed, by well qualified professional. Investors purchase funds because they do not

have the time or the expertise to manage their own portfolio. A mutual fund is considered

to be relatively less expensive way to make and monitor their investments.

2. Diversification: - Purchasing units in a mutual fund instead of buying individual

stocks or bonds, the investors risk is spread out and minimized up to certain extent. The

idea behind diversification is to invest in a large number of assets so that a loss in any

particular investment is minimized by gains in others.

3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time,

thus help to reducing transaction costs, and help to bring down the average cost of the

unit for their investors.

4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate

their holdings as and when they want.

5. Simplicity - Investments in mutual fund is considered to be easy, compare to other

available instruments in the market, and the minimum investment is small. Most AMC

also have automatic purchase plans whereby as little as Rs. 2000, where SIP start with

just Rs.50 per month basis.

2.3 DISADVANTAGES OF INVESTING MUTUAL

FUNDS

1. Professional Management:- Some funds doesn’t perform in neither the market, as

their management is not dynamic enough to explore the available opportunity in the

market, thus many investors debate over whether or not the so-called professionals are

any better than mutual fund or investor himself, for picking up stocks.

2. Costs: – The biggest source of AMC income is generally from the entry & exit load

which they charge from an investors, at the time of purchase. The mutual fund industries

are thus charging extra cost under layers of jargon.

3. Dilution: - Because funds have small holdings across different companies, high returns

from a few investments often don't make much difference on the overall return. Dilution

is also the result of a successful fund getting too big. When money pours into funds that

have had strong success, the manager often has trouble finding a good investment for all

the new money.

 4. Taxes: - when making decisions about your money, fund managers don't consider your

personal tax situation. For example, when a fund manager sells a security, a capital-gain

tax is triggered, which affects how profitable the individual is from the sale. It might have

been more advantageous for the individual to defer the capital gains liability.

The entire mutual fund industry operates in a very organized way. The investors, known as unit

holders, handover their savings to the AMCs under various schemes. The objective of the

investment should match with the objective of the fund to best suit the investors’ needs. The

AMCs further invest the funds into various securities according to the investment objective.

The return generated from the investments is passed on to the investors or reinvested as

mentioned in the offer document.

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the

initiative of the Government of India and Reserve Bank. Though the growth was slow, but it

accelerated from the year 1987 when non-UTI players entered the Industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement, both qualities

wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the

Assets Under Management (AUM) was Rs67 billion. The private sector entry to the fund family

raised the Aum to Rs. 470 billion in March 1993 and till April 2004; it reached the height if Rs.

1540 billion.

The Mutual Fund Industry is obviously growing at a tremendous space with the mutual fund

industry can be broadly put into four phases according to the development of the sector. Each

phase is briefly described as under.

First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the Reserve Bank

of India and functioned under the Regulatory and administrative control of the Reserve Bank of

India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India

(IDBI) took over the regulatory and administrative control in place of RBI. The first scheme

launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets

under management.
Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and

Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC).

SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by

Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank

Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC

established its mutual fund in June 1989 while GIC had set up its mutual fund in December

1990.At the end of 1993, the mutual fund industry had assets under management of Rs.47,004

crores.

Third Phase – 1993-2003 (Entry of Private Sector Funds)

1993 was the year in which the first Mutual Fund Regulations came into being, under which all

mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer

(now merged with Franklin Templeton) was the first private sector mutual fund registered in July

1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and

revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual

Fund) Regulations 1996. As at the end of January 2003, there were 33 mutual funds with total

assets of Rs. 1,21,805 cores.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated

into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets
under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the

assets of US 64 scheme, assured return and certain other schemes

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered

with SEBI and functions under the Mutual Fund Regulations. consolidation and growth. As at

the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores

under 421 schemes.

Structure of Mutual Funds

2.4 CATEGORIES OF MUTUAL FUND
 CLASSIFICATION OF MUTUAL FUNDS

BY STRUCTURE:

1. Open Ended Schemes:- An open-end fund is one that is available for subscription all

through the year. These do not have a fixed maturity. Investors can conveniently buy and

sell units at Net Asset Value ("NAV") related prices. The key feature of open-end

schemes is liquidity.

2. Close Ended Schemes:-A closed-end fund has a stipulated maturity period which

generally ranging from 3 to 15 years. The fund is open for subscription only during a

specified period. 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

they 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.

3. Interval Schemes:-Interval Schemes are that scheme, which combines the features of

open-ended and close-ended schemes. The units may be traded on the stock exchange or

may be open for sale or redemption during pre-determined intervals at NAV related

prices.

BY NATURE:

1. Equity fund: - These funds invest a maximum part of their corpus into equities

holdings. The structure of the fund may vary different for different schemes and the fund
 manager’s outlook on different stocks. The Equity Funds are sub-classified depending

upon their investment objective, as follows:

i. Diversified Equity Funds

ii. Mid-Cap Funds

iii. Sector Specific Funds

iv. Tax Savings Funds (ELSS)

v. Equity investments are meant for a longer time horizon, thus Equity funds rank

high on the risk-return matrix.

2. Debt funds: - The objective of these Funds is to invest in debt papers. Government

authorities, private companies, banks and financial institutions are some of the major

issuers of debt papers. By investing in debt instruments, these funds ensure low risk and

provide stable income to the investors. Debt funds are further classified as:

i. Gilt Funds: Invest their corpus in securities issued by Government, popularly known as

Government of India debt papers. These Funds carry zero Default risk but are associated

with Interest Rate risk. These schemes are safer as they invest in papers backed by

Government.

ii. Income Funds: Invest a major portion into various debt instruments such as bonds,

corporate debentures and Government securities.

iii. MIPs: Invests maximum of their total corpus in debt instruments while they take

minimum exposure in equities. It gets benefit of both equity and debt market. These

scheme ranks slightly high on the risk-return matrix when compared with other debt

schemes.
iv. Short Term Plans (STPs): Meant for investment horizon for three to six months. These

funds primarily invest in short term papers like Certificate of Deposits (CDs) and

Commercial Papers (CPs). Some portion of the corpus is also invested in corporate

debentures.

v. Liquid Funds: Also known as Money Market Schemes, These funds provides easy

liquidity and preservation of capital. These schemes invest in short-term instruments like

Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for

short-term cash management of corporate houses and are meant for an investment

horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are

considered to be the safest amongst all categories of mutual funds.

3. Balanced funds: As the name suggest they, are a mix of both equity and debt funds.

They invest in both equities and fixed income securities, which are in line with pre-

defined investment objective of the scheme. These schemes aim to provide investors with

the best of both the worlds. Equity part provides growth and the debt part provides

stability in returns.

Further the mutual funds can be broadly classified on the basis of investment parameter

via; each category of funds is backed by an investment philosophy, which is pre-defined

in the objectives of the fund. The investor can align his own investment needs with the

funds objective and invest accordingly.

BY INVESTMENT OBJECTIVE:

1. Growth Schemes: Growth Schemes are also known as equity schemes. The aim
of these schemes is to provide capital appreciation over medium to long term. These
 schemes normally invest a major part of their fund in equities and are willing to bear
short-term decline in value for possible future appreciation.
2. Income Schemes: Income Schemes are also known as debt schemes. The aim of
these schemes is to provide regular and steady income to investors. These schemes
generally invest in fixed income securities such as bonds and corporate debentures.
Capital appreciation in such schemes may be limited.
3. Balanced Schemes: Balanced Schemes aim to provide both growth and income
by periodically distributing a part of the income and capital gains they earn. These
schemes invest in both shares and fixed income securities, in the proportion indicated
in their offer documents (normally 50:50).
4. Money Market Schemes: Money Market Schemes aim to provide easy liquidity,
preservation of capital and moderate income. These schemes generally invest in safer,
short-term instruments, such as treasury bills, certificates of deposit, commercial
paper and inter-bank call money.

Mutual Fund Classified On The Basis Of Risk Profile

RISK VS RETURN
 Comparative Analysis of Systematic Investment Plan and Lump

Sum Investment

SIP and Lump Sum: are the two techniques to invest in mutual funds. Any investor can choose
one out of them and can invest their money into mutual funds. SIP is Systematic Investment Plan
which is very helpful to salaried and middle class man. They can invest their saving into
Systematic Investment Plan and can collect huge funds for future.

SIP is paid in monthly or quarterly as per the scheme. But lump sum is paid only one time and
the whole transaction is based on this investing money. Opting SIP, an investor can invest their
saving into it and can safe his money doing that. SIP is good because if it seems that market will
goes down in few days so an investor can safely withdraw his money and can safe his money.

Objectives:

1. To evaluate investment performance of selected mutual funds in terms of risk and return.

2. To evaluate and create an ideal portfolio consisting the best mutual fund schemes which

will earn highest possible returns and will minimize the risk.

3. To analyze the performance of mutual fund schemes on the basis of various parameter
 How to invest in mutual funds?

Investors can invest in mutual funds two ways:

1. Yearly payment
2. SIP (Systematic Investment Plan)

Yearly payment: In such investor can invest desire amount at a one time in mutual fund
scheme without follow installment payment system and on that day NAV is applicable on
invested amount.

SIP (Systematic Investment Plan): Buy low and Sell high, just four words sum up a

winning strategy for the stock markets Indian Market is a synonym for volatility and dynamism.

Though great returns from the market may not always be possible, stable and consistent returns

are. And one of the best ways to get this return in this market of ours is the “Systematic

Investment Plan (SIP)” offered by the mutual funds. Under this plan Investors invest a specific

amount for a continuous period, at regular intervals. By doing this, the investor get the advantage

of rupee cost averaging. Which means that by investing the same amount at regular intervals, the

average cost per unit remains lower than the average market price, irrespective of how the

market is –rising, falling or fluctuating .i.e. with every fluctuation in the market the units are

purchased systematically, thus resulting in averaging the purchase price? Whereas this is not true

for a one- time investment. This is the reason why a SIP investors gets phenomenal rate of return

compared to a one- time investor.

COMPANY PROFILE
 INTRODUCTION TO SBI MUTUAL FUND

Proven Skills in Wealth Generation

SBI Mutual Fund is India’s largest bank sponsored mutual fund and has an enviable track record

in judicious investments and consistent wealth creation. The fund traces its lineage to SBI -

India’s largest banking enterprise. The institution has grown immensely since its inception and

today it is India's largest bank, patronized by over 80% of the top corporate houses of the

country.

SBI Mutual Fund is a joint venture between the State Bank of India and Society Generally

Asset Management, one of the world’s leading fund management companies that

manages over US$ 500 Billion worldwide.

Exploiting expertise, compounding growth

In twenty years of operation, the fund has launched 38 schemes and successfully redeemed

fifteen of them. In the process it has rewarded it’s investors handsomely with consistently high

returns. Today, the fund manages over Rs. 31,794 crores of assets and has a diverse profile of

investors actively parking their investments across 36 active schemes. The fund serves this vast

family of investors by reaching out to them through network of over 130 points of acceptance, 28

investor service centers, 46 investor service desks and 56 district organizers. SBI Mutual is the

first bank-sponsored fund to launch an offshore fund – Resurgent India Opportunities Fund.
 Measuring and evaluating mutual funds performance:

Every investor investing in the mutual funds is driven by the motto of either wealth creation or

wealth increment or both. Therefore it’s very necessary to continuously evaluate the funds’

performance with the help of factsheets and newsletters, websites, newspapers and professional

advisors like SBI mutual fund services. If the investors ignore the evaluation of funds’

performance then he can lose hold of it any time. In this ever-changing industry, he can face any

of the following problems:

1. Variation in the funds’ performance due to change in its management/ objective.

2. The funds’ performance can slip in comparison to similar funds.
3. There may be an increase in the various costs associated with the fund.
4. Beta, a technical measure of the risk associated may also surge.
5. The funds’ ratings may go down in the various lists published by independent rating
agencies.
6. It can merge into another fund or could be acquired by another fund house.

Performance measures:
1. Equity funds: the performance of equity funds can be measured on the basis of: NAV

Growth, Total Return; Total Return with Reinvestment at NAV, Annualized Returns and

Distributions, Computing Total Return (Per Share Income and Expenses, Per Share Capital

Changes, Ratios, Shares Outstanding), the Expense Ratio, Portfolio Turnover Rate, Fund Size,

Transaction Costs, Cash Flow, Leverage.

2. Debt fund: likewise the performance of debt funds can be measured on the basis of: Peer

Group Comparisons, The Income Ratio, Industry Exposures and Concentrations, NPAs, besides

NAV Growth, Total Return and Expense Ratio.

3. Liquid funds: the performance of the highly volatile liquid funds can be measured on the

basis of: Fund Yield, besides NAV Growth, Total Return and Expense Ratio.

How to Invest in Mutual Funds?

Regardless of the size or goals of your investment portfolio, adding mutual fund holdings can
help you diversify your investments while maintaining a low cost structure and a focused
investment target. Investors of all sizes and skill levels can benefit from learning how to invest in
mutual funds.
1. Select the financial institution you plan to use for purchasing mutual funds by
carefully researching and asking for referrals from friends and family who
regularly invest their money in the market.

i. Online investment firms typically have competitive fee structures and varied fund
selections for investors willing to take a do-it-yourself approach to investing in mutual
funds. This will require you to complete your own research and carefully monitor the
performance and allocation of your mutual fund holdings. Many online investment
management firms have helpful tools and guidance sections for beginning investors.
ii. If you have a more sizable portfolio, you may prefer to have the guidance of a
professional. Payments to fee-only Financial Advisers typically are in the form of an
hourly or retainer basis, or a percentage of assets managed. Choosing this option will
alleviate the burden of self-selecting and monitoring each of the mutual funds in your
various accounts.
iii. Banks and credit unions also sometimes offer mutual fund purchasing capabilities.
However, they often charge higher fees and/or commissions than fee-only advisers, while
 providing a rather limited selection of mutual funds available for purchase. Some banks
only allow customers to purchase funds in their own investment family.

2. Determine the risk tolerance with which you are comfortable and willing to accept
for your investments.

i. Mutual funds will range in risk level from very conservative to highly risky. You should
develop a diversified basket of mutual funds which meets your preferred level of risk.
Visit financial websites where you can find a risk assessment for each mutual fund,
usually on a scale from 1 to 5.
ii. Even if you are a conservative investor, you may want to add at least a small portion of
riskier mutual funds to ensure that your overall portfolio will be able to experience
growth in addition to preservation of capital. Refrain, however, from putting all of your
funds into highly-risky investments. Reserve at least a small portion (2 to 5 percent) in
cash to take advantage of opportunities as they arise.

3.3HOW DO INVESTORS CHOOSE BETWEEN

MUTUAL FUND

When the market is flooded with mutual funds, it’s a very tough job for the investors to choose

the best fund for them. Whenever an investor thinks of investing in mutual funds, he must look at

the investment objective of the fund. Then the investors sort out the funds whose investment

objective matches with that of the investor’s. Now the tough task for investors start, they may
carry on the further process themselves or can go for advisors like SBI . Of course the investors

can save their money by going the direct route i.e. through the AMCs directly but it will only

save 1-2.25% (entry load) but could cost the investors in terms of returns if the investor is not an

expert. So it is always advisable to go for MF advisors. The mf advisors’ thoughts go beyond just

investment objectives and rate of return. Some of the basic tools which an investor may ignore

but an mf advisor will always look for are as follow:

1. Rupee cost averaging: The investors going for Systematic Investment Plans (SIP)

and Systematic Transfer Plans (STP) may enjoy the benefits of RCA (Rupee Cost

Averaging). Rupee cost averaging allows an investor to bring down the average cost of

buying a scheme by making a fixed investment periodically, like Rs 5,000 a month and

nowadays even as low as Rs. 500 or Rs. 100. In this case, the investor is always at a

profit, even if the market falls. In case if the NAV of fund falls, the investors can get

more number of units and vice-versa. This results in the average cost per unit for the

investor being lower than the average price per unit over time.

The investor needs to decide on the investment amount and the frequency. More frequent

the investment interval, greater the chances of benefiting from lower prices. Investors can

also benefit by increasing the SIP amount during market downturns, which will result in

reducing the average cost and enhancing returns. Whereas STP allows investors who

have lump sums to park the funds in a low-risk fund like liquid funds and make periodic

transfers to another fund to take advantage of rupee cost averaging.

2. Rebalancing: Rebalancing involves booking profit in the fund class that has gone up

and investing in the asset class that is down. Trigger and switching are tools that can be

used to rebalance a portfolio. Trigger facilities allow automatic redemption or switch if a

 specified event occurs. The trigger could be the value of the investment, the net asset

value of the scheme, level of capital appreciation, level of the market indices or even a

date. The funds redeemed can be switched to other specified schemes within the same

fund house. Some fund houses allow such switches without charging an entry load.

To use the trigger and switch facility, the investor needs to specify the event, the amount

or the number of units to be redeemed and the scheme into which the switch has to be

made. This ensures that the investor books some profits and maintains the asset allocation

in the portfolio.

3. Diversification: Diversification involves investing the amount into different options.

In case of mutual funds, the investor may enjoy it afterwards also through dividend

transfer option. Under this, the dividend is reinvested not into the same scheme but into

another scheme of the investor's choice.

For example, the dividends from debt funds may be transferred to equity schemes. This

gives the investor a small exposure to a new asset class without risk to the principal

amount. Such transfers may be done with or without entry loads, depending on the MF's

policy.

4. Tax efficiency: Tax factor acts as the “x-factor” for mutual funds. Tax efficiency

affects the final decision of any investor before investing. The investors gain through

either dividends or capital appreciation but if they haven’t considered the tax factor then

they may end loosing.

Debt funds have to pay a dividend distribution tax of 12.50 per cent (plus surcharge and

education cess) on dividends paid out. Investors who need a regular stream of income
have to choose between the dividend option and a systematic withdrawal plan that allows

them to redeem units periodically. SWP implies capital gains for the investor.

If it is short-term, then the SWP is suitable only for investors in the 10-per-cent-tax

bracket. Investors in higher tax brackets will end up paying a higher rate as short-term

capital gains and should choose the dividend option.

If the capital gain is long-term (where the investment has been held for more than one

year), the growth option is more tax efficient for all investors. This is because investors

can redeem units using the SWP where they will have to pay 10 per cent as long-term

capital gains tax against the 12.50 per cent DDT paid by the MF on dividends. All the

tools discussed over here are used by all the advisors and have helped investors in

reducing risk, simplicity and affordability. Even then an investor needs to examine costs,

tax implications and minimum applicable investment amounts before committing to a

service.
 CONCLUSION

Running a successful Mutual Fund requires complete understanding of the peculiarities of

the Indian Stock Market and also the psyche of the small investors. This study has made an

attempt to understand the financial behavior of Mutual Fund investors in connection with

the preferences of Brand (AMC), Products, Channels etc. I observed that many of people

have fear of Mutual Fund. They think their money will not be secure in Mutual Fund. They

need the knowledge of Mutual Fund and its related terms. Many of people do not have

invested in mutual fund due to lack of awareness although they have money to invest. As

the awareness and income is growing the number of mutual fund investors are also

growing. “Brand” plays important role for the investment. People invest in those

Companies where they have faith or they are well known with them. There are many

AMCs in Dehradun but only some are performing well due to Brand awareness.

Some AMCs are not performing well although some of the schemes of them are giving

good return because of not awareness about Brand. Reliance, UTI, SBIMF, ICICI

Prudential etc. they are well known Brand, they are performing well and their Assets

Under Management is larger than others whose Brand name are not well known like

Principle, Sunderam, etc.Distribution channels are also important for the investment in

mutual fund. Financial Advisors are the most preferred channel for the investment in

mutual fund. They can change investors’ mind from one investment option to others. Many

of investors directly invest their money through AMC because they do not have to pay

entry load. Only those people invest directly who know well about mutual fund and its

operations and those have time.

 BIBLIOGRAPHY

1. NEWS PAPERS

2. OUTLOOK MONEY

3. TELEVISION CHANNEL (CNBC AAWAJ)

4. MUTUAL FUND HAND BOOK

5. FACT SHEET AND STATEMENT

6. WWW.SBIMF.COM

7. WWW.MONEYCONTROL.COM

8. WWW.AMFIINDIA.COM

9. WWW.ONLINERESEARCHONLINE.COM

10. WWW. MUTUALFUNDSINDIA.COM