SAMBALPUR UNIVERSITY

DEPARMENT OF BUSINESS ADMINISTRATION

mutual fund and sip : a study under Bhubaneswar (odisha) state,

GUIDED BY BIPIN DUTTA

(ASSISTANT MANAGER BHUBENESWAR CAPITAL MARKET,FORMER BHUBENESWAR
STOCK EXCHANGE).
BATCH-2016-2018

NAME : SANJAY KHAN

ROLL NO : 1416MBA55
 Content

INTRODUCTION
Objective of the study
Purpose of the project
Scope of the project
A brief about Mutual Funds
Definition
Structure
Classification of mutual funds
History of mutual funds in India
Terminology of mutual funds
Tax benefits of mutual funds
Advantages and disadvantages of mutual fund
About SIP(Systematic Investment Plans
Concept of SIP
Working of SIP
Features of SIP
Benefits of SIP
Disadvantages of SIP
SIP Calculator
Rupee cost averaging
Power of compounding
Comparison of SIP with other investment avenues

Research by direct survey method

Objective of survey
Data analysis and interpretation
Limitation of survey
Result and finding
Final conclusion & recommendation
 mutual fund and sip:
(Does it contribute to enhancement of liquidity in stock exchange?)

PREFACE

This project ―QUERY HANDLING, INVESTOR SERVICES AND CONSUMER BENEFIT IN

INVESTING IN MUTUAL FUNDS I have tried my best to present my project under the able Co-operation
with all the staff of Odisha capital market former (Bhubaneswar stock exchange) and my faculties Project
stretched for seven weeks internship in the company to gain the knowledge of mutual funds. Mutual funds
are now the most appropriate investment option for the investors. The development of economic form of
organization marks turning point for rapid industrialization and economic growth. This form of
organization flourished on account of several features such as limited liability easy transerferability of
share separate legal entity etc. This led to development of security market where ownership interest are
initially sold (Primary market) and later sold in the faster industrial growth and channelizing the savings of
masses who do not venture to create and manage enterprise but want to be more investor.

Savings should be converted into investment for better return

Initially you may keep your savings in a savings account with a bank. Please be certain that your bank is
providing you with a competitive interest rate. But remember, interest in a savings account is very low.

Make your money work harder and earn for you. Invest your savings in financial products and assets which
provide better return. Prudent investing is necessary to achieve your financial goals.

OBJECTIVE OF THE STUDY:

 To know the awareness of mutual fund and sip among people.

 To see the interest of people in investing in mutual fund.
 To know the investment behaviour of investor in mutual fund according to different age group.
 To ascertain the percentage of income the investor invests in mutual fund.
 To know the different attitude of people regarding risk, rate of return, period of investment.
 INTRODUCTION;

A mutual fund is a professionally managed type of collective investment scheme that pools
money from many investors and invests it in stocks, bonds, short-term money market
instruments and other securities. Mutual funds have a fund manager who invests the money
on behalf of the investors by buying / selling stocks, bonds etc
• A Mutual Fund is a trust that collects money from many investors and invest in
various asset classes (equity, debt, liquid assets, etc).
• It is called “Mutual “because all the profit, loss, risks and dividends from the
investments are shared among all the investors according to their contributions.
• Investors of mutual funds are known as unit holders. The profits or losses are shared
by investors in protection to their investment. the mutual international journal of
research in management ISSN 22495908 issue 2, vol. 2 (march -2012) page 63 fund
is constituted as trust in accordance with the provision of the Indian trust in
accordance with the provisions of the Indian Trust Act 1882 by the year sponsor.
LITERATURE REVIEW

Literature on mutual fund performance evaluation is enormous. A few research studies that
have influenced the preparation of this paper substantially are discussed in this section.

Sharpe, William F. (1966) suggested a measure for the evaluation of portfolio

performance. Drawing on results obtained in the field of portfolio analysis, economist Jack
L. Treynor has suggested a new predictor of mutual fund performance, one that differs from
virtually all those used previously by incorporating the volatility of a fund's return in a
simple yet meaningful manner.

Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio performance

(Jensen’s alpha) that estimates how much a manager’s forecasting ability contributes to
fund’s returns. As indicated by Statman (2000), the e SDAR of a fund portfolio is the
excess return of the portfolio over the return of the benchmark index, where the portfolio is
leveraged to have the benchmark index’s standard deviation.
S.Narayan Rao, evaluated performance of Indian mutual funds in a bear market through
relative performance index, risk-return analysis, Treynor’s ratio, Sharpe’s ratio, Sharpe’s
measure , Jensen’s measure, and Fama’s measure. The study used 269 open-ended schemes
(out of total schemes of 433) for computing relative performance index. Then after
excluding funds whose returns are less than risk-free returns, 58 schemes are finally used
for further analysis. The results of performance measures suggest that most of mutual fund
schemes in the sample of 58 were able to satisfy investor’s expectations by giving excess
returns over expected returns based on both premium for systematic risk and total risk.
Bijan Roy, et. al., conducted an empirical study on conditional performance of Indian
mutual funds. This paper uses a technique called conditional performance evaluation on a
sample of eighty-nine Indian mutual fund schemes .This paper measures the performance of
various mutual funds with both unconditional and conditional form of CAPM, Treynor-
Mazuy model and Henriksson-Merton model. The effect of incorporating lagged
information variables into the evaluation of mutual fund managers’ performance is
examined in the Indian context. The results suggest that the use of conditioning lagged
information variables improves the performance of mutual fund schemes, causing alphas to
shift towards right and reducing the number of negative timing coefficients. Mishra, et al.,
(2002) measured mutual fund performance using lower partial moment. In this paper,
measures of evaluating portfolio performance based on lower partial moment are
developed. Risk from the lower partial moment is measured by taking into account only
those states in which return is below a pre-specified “target rate” like risk-free rate. Kshama
Fernandes (2003) evaluated index fund implementation in India. In this paper, tracking error
of index funds in India is measured. The consistency and level of tracking errors obtained
by some well-run index fund suggests that it is possible to attain low levels of tracking error
under Indian conditions. At the same time, there do seem to be periods where certain index
funds appear to depart from the discipline of indexation. K. Pendaraki et al. studied
construction of mutual fund portfolios, developed a multi-criteria methodology and applied
it to the Greek market of equity mutual funds. The methodology is based on the
combination of discrete and continuous multi-criteria decision aid methods for mutual fund
selection and composition. UTADIS multi-criteria decision aid method is employed in order
to develop mutual fund’s performance models. Goal programming model is employed to
determine proportion of selected mutual funds in the final portfolios .
ZakriY.Bello (2005) matched a sample of socially responsible stock mutual funds matched
to randomly selected conventional funds of similar net assets to investigate differences in
characteristics of assets held, degree of portfolio diversification and variable effects of
diversification on investment performance. The study found that socially responsible funds
do not differ significantly from conventional funds in terms of any of these attributes.
Moreover, the effect of diversification on investment performance is not different between
the two groups. Both groups underperformed the Domini 400 Social Index and S & P 500
during the study period.

Panwar, S. and Madhumathi, R. (2006)

Has conducted study used sample of public-sector sponsor ed & pr iva te -
s ecto r sp onsor ed mu t ual funds o f va ri ed n et ass ets to inve stigat e the
differences in characteristics of assets held,
portfolio diversification, and variable effects of diversification on investment
performance for the period May, 2002 to May, 2005. The
studyf ound th at publi c -
s ecto r sp onsor ed f unds do not di ffe r signi fic antl y fr o m priv ate -
s ecto r sponsored funds in terms of mean returns%. However, there is a significant
difference between public-sector sponsored mutual funds and private-sector
sponsored mutual funds in terms of average standard deviation, average variance
and average coefficient of variation (COV). The study also found that there is a
statistical difference between sponsorship classes in terms of eSDAR (excess
standard deviation adjusted returns) as a performance measure. When residual
variance (RV) is used as the measure of mutual fund portfolio diversification characteristic,
there is a statistical difference between public-sector sponsored mutual funds
and private-
sector s p o n s o r e d m u t u a l f u n d s f o r t h e s t u d y p e r i o d . T h e m o d e l b u i l t
o n t e s t i n g t h e i m p a c t o f diversification on fund performance and found a statistical
difference among sponsorship classes when residual variance is used as a measure of
portfolio diversification and excess standard d eviation ad just ed retu rns as a
pe rf or ma nc e me asu re . R V, ho weve r , h as a dir ect i mp act on Sharpe fund
performance measure.
Cici, G., Gibson, S. & Moussawi, R. (2006)
conducted a research on that Firms which engage in the simultaneous, or "side-by-
side", management of mutual funds and hedge funds have a fiduciary duty to each
fund's investors to make portfolio decisions and to execute trades in
them o s t f a v o r a b l e w a y . T h i s f i d u c i a r y d u t y i s p u t t o t h e t e s t , h o w e v
e r , w h e n s i d e - b y - s i d e management firms can increase fee income by
strategically transferring performance from the

mutual funds to the hedge funds they oversee. Our empirical evidence proves
consistent with such favouritism. The reported returns of side-by-
side mutual funds are significantly less
thant h o s e o f s i m i l a r m u t u a l f u n d s r u n b y f i r m s t h a t d o n o t a l s o
m a n a g e h e d g e f u n d s . A decomposition of reported returns into holdings-
return and return-gap components and return- persistence tests also
suggest favouritism. Finally,
examining a potential wealth transferenceme c hanis m, we find evid enc e consis
t ent wi th s ide -b y- side mutu al funds get ting less o f a contribution to
performance from IPO under pricing than matched unaffiliated mutual funds.

Christopher, G., Stambaugh, Robert F. & Levin, D.(2005)

Author has construct optimal portfolios of mutual funds
whose objectives include socially responsible investment (SRI).Comparing
portfolios of these funds to those constructed from the broader fund universe reveals the
cost of imposing the SRI constraint on investors seeking the highest Sharpe ratio.
This SRI cost depends crucially on the investor's views about asset pricing models and
stock-picking skill by fund managers. To an investor who believes strongly in the CAPM
and rules out managerial skill, i.e. a market-index investor, the cost of the SRI
constraint is typically just a few basis points per month, measured in certainly-
equivalent loss. To an investor who still disallows
skill but inste ad be liev es to so me deg re e in pri cing mo d els that associ ate h
igh er r eturn s with exposures to size, value, and momentum factors, the SRI constraint is
much costlier, typically by at least 30 basis points per month. The SRI constraint
imposes large costs on investors whose beliefs allow a substantial amount of
fund-manager skill, i.e., investors who rely heavily on individual funds' track records
to predict future performance.
Miller, Ross M. (2005)
Conducted a research In Recent years have seen a dramatic shift from mutual funds
into hedge funds even though hedge funds charge management fees that have been
decried as outrageous. While expectations of superior returns
may be responsible for this shift, this article shows that mutual funds are more
expensive than commonly believed. Mutual funds appear to provide investment
services for relatively low fees because they bundle passive and active funds
management together in a way that understates the true cost of active management. In
particular, funds engaging in closet or shadow indexing charge their investors for
active management while providing them with little more than an indexed investment.
Even the average mutual fund, which ostensibly provides only active management,
will have over 90% of the v ari anc e in its retu rns expl ained b y its bench ma rk
ind ex. This a rti cle de rives a me t hod
f or al locat ing fund exp enses b et ween activ e and passiv e ma n age me nt and
con str u cts a si mpl eformula for finding the cost of active management. Computing this
active expense ratio requires only a fund's published expense ratio, it’s R-squared
relative to a benchmark index, and the expense ratio for a competitive fund that
tracks that index. At the end of 2004, the mean active expense ratio for the large -
cap equity mutual funds tracked by Morningstar was 7%, over six times their
published expense ratio of 1.15%. More broadly, funds in the Morningstar
universe had a mean active expense ratio of 5.2%, while the largest funds averaged a
percent or two less.
Sapar, Narayan R. & Madava, R. (2003
) I n t h i s p a p e r c o n d u c t e d a r e s e a r c h o n t h e performance evaluation
of Indian mutual funds in a bear market is carried out through relative performance
index, risk-return analysis, Treynor's ratio, Sharp's ratio, Sharp's measure,
Jensen'smeasure, and Fama's measure. The data used is monthly closing NAVs.
The source of data is

website of Association of Mutual Funds in India (AMFI). Study period is September 98-
April 02(bear period). We started with a sample of 269 open ended schemes (out of total
schemes of 433) for computing relative performance index. Then after excluding the funds
whose returns are less than risk-free returns, 58 schemes were used for further
analysis. Mean monthly (logarithmic) return and risk of the sample mutual fund
schemes during the period were 0.59% and 7.10%, respectively, compared to similar
statistics of 0.14% and 8.57% for market portfolio. The results of performance measures
suggest that most of the mutual fund schemes in the sample of 58 were able to satisfy
investor's expectations by giving excess returns over expected returns based
on both premium for systematic risk and total risk.

Bo re nsz te in , E . a nd G elos , G . (2001 )

This paper explores the behaviour of emerging market mutual funds using a novel
database covering the holdings of individual funds over the period January 1996 to
March 1999. An examination of individual crises shows that, on average, funds
withdrew m o n e y o n e m o n t h p r i o r t o t h e e v e n t s . T h e d e g r e e o f h e r d i n g
a m o n g f u n d s i s statistically significant, but moderate. Herding is more widespread
among open-ended funds than among closed-end funds, but not more prevalent during
crises than during tranquil times. Funds tend to follow momentum strategies, selling past
losers and buying past winners, but their overall behaviour is more complex than often
suggested.

Block, Stanley B. and French, Dan W. (2000)

Conducted a study on Portfolios of equity mutual funds tend to be equally weighted to a
greater degree than they are value weighted according to metrics of fund developed in this
paper. Measures of fund investment performance b ased sole l y on a singl e va lue -
weigh ted o r equa ll y weight ed ben ch ma rk ma y t he re for e not adequately
identify significant excess performance. We propose a two-index model using both a value-
weighted and an equally weighted index. Estimated models using a sample of 506 mutual
f unds sho w that the t wo -ind ex mode l provid es a b ett er fit th an the singl e -
ind ex mo del and identifies a larger set of funds with abnormal performance

Why to invest in security market and mutual fund

The primary ways to build wealth through capital appreciation -- an increase in the
securities’ value over time. Savings accounts earn interest, and the principal is absolutely
secure because investing in a securities market, also called investing in stocks and bonds, is
one of these accounts are insured by the FDIC, the Federal Deposit Insurance Corp. Even if
the bank where you have your deposit fails, your money is protected up to the insurance
limit of $250,000.

Higher Rate of Return

The stock market has its ups and downs, but a patient investor who holds stocks as a long-
term investment -- five years or more -- historically earns a higher rate of return than
someone who puts his money in a savings account. Buying stock shares means having an
ownership interest in a company. As the company grows and becomes more profitable, the
value of the shares increases. At times, stocks can rise dramatically, allowing investors to
earn double-digit returns on their investment portfolios -- much more than savings account
holders earn. Over the last 60 years, the average annual rate of return on stocks has been 11
percent -- 7 percent when adjusted for inflation.

Capital Gains and Dividends

Investors in stocks can earn money two ways: capital gains and dividends. Savings account
holders just earn interest. Many corporations pay cash dividends, usually quarterly, to
shareholders. The big payoff for stock investors is the capital gain, which is the difference
between the value of the stock when it is sold and the value when it was purchased.

Flexible Objectives
A century ago, the universe of possible investments was so limited that their prices could be
published in the morning newspaper. These days, the investment world is like a giant
supermarket, with choices to fit every financial objective. Of course, in this supermarket it’s
not easy to spot the potentially rotten eggs. Mutual funds are considered excellent ways for
the beginning investor to get started. These are professionally managed funds that select
groups of securities. The investor purchases share of the overall fund, not the individual
stocks. If you want a combination of current income and growth, certain funds are designed
to accomplish that objective. If you want a riskier portfolio with the potential for faster
growth, you can choose from among the “aggressive growth” mutual funds. Savings
accounts provide just one major objective: a stress-free way to earn a modest return.
Tax advantages: Stock investments and related investments may offer tax rebates or other
benefits in tax deduction 80c.
Better return may be assured as well as risk can be diversified if one takes a basket of
different stocks or securities for investment

Diversification is one of two general techniques for reducing investment risk.

A well-diversified portfolio is the best way to minimize your risks!
• First things first
Before you undertake any serious market research, ponder over what type of an investor
you really are. Don’t try to be adventurous if you detest market fluctuations. Your
portfolio should, therefore, be tailor-made to suit your own personal requirements and
risk appetite.

• Diversification = Do not put all your eggs in one basket!

• Change is the only constant.
• The operative word is ‘risk tolerance’.
• Time, tide and market movements wait for no one.
• The correlation factor.
• Mutual Fund is a common pool of funds which comes in –

• To mobilize small savings and to invest the mobilized capital in several securities on
behalf of the investors

• To ensure diversification of risk and to provide investors the return derived from such
investment in the form of dividend and capital appreciation net off incidental expenses.

For a small investor –

* It is not possible to invest in different stocks to maintain a portfolio of securities for

diversification of risk while searching for higher return.

* So, it is wise to go through a fund manager instead investing directly by

himself/herself in several securities.

Mutual Fund – An Insight Review

A Mutual Fund is a trust registered with the Securities and Exchange Board of India
(SEBI), which pools up the money from individual and corporate investors and invests the
same on behalf of the investors or unit holders, in equity shares, Government securities,
Bonds, etc. and distributes the profits. The income earned through these investments and the
capital appreciation realized are shared by its unit holders in proportion to the number of
units owned by them. This pooled income is professionally managed on behalf of the unit-
holders, and each investor holds a proportion of the portfolio i.e. entitled not only to profits
when the securities are sold, but also subject to any losses in value as well.
For retail investor who does not have the time and expertise to analyze and invest in stocks
and bonds, mutual funds offer a viable investment alternative. This is because:
• Mutual Funds provide the benefit of cheap access to expensive stocks.
• Mutual funds diversify the risk of the investor by investing in a basket of assets.
• A team of professional fund managers manages them with in-depth research inputs from
investment analysts.
Being institutions with good bargaining power in markets, mutual funds have access to
crucial corporate information which individual investors cannot access.

History and development;

Unit Trust of India (UTI) was the first mutual fund set up in India in the year 1963.
• In early 1990s, the 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 established. The
objectives of SEBI are:
1) TO formulate policies and regulates the mutual funds
2) TO protect the interest of investors
3) TO promote the development of securities market
• In 1993, Private sector companies started to offer mutual funds
• In 1996, the regulations were completely revised and updated
• Thereafter, SEBI issued guidelines to Mutual Funds from time to time to protect the
interest of investors.

Mutual fund operation;

Structure of mutual fund;

This diagram represents the various parties involved in organisational

structure of mutual fund,
Mutual fund in India are regulated by the securities and exchange board of india (SEBI).
Since running of mutual fund involves managing of investers money, SEBI prescribes
comprehensive set of guidelines in the functioning of a mutual fund through the “SEBI MF
regulations 1996”.these regulations stipulate that a mutual fund must be a three-tire
structure consisting as follows;

• Sponsor,

• Trustee,

• An asset management company

While the above mentioned play the most important roles in creating and running a fund
house, the custodian, registrar and transfer agent (RTA),auditors and the fund
accountant play a vital supporting role in aiding the smooth functioning of a mutual
fund.

• Sponsor – SEBI regulations define Sponsor as any person who either itself or in
association with another body corporate establishes a mutual fund. Sponsor sets up a
mutual fund to earn money by doing fund management through its subsidiary
company which acts as Investment manager of the fund. Largely, a sponsor can be
compared with a promoter of a company.
• Trustees – The trust is created through a document called the trust deed which is
executed by the fund sponsor in favour of the trustees. Trustees manage the trust and
 are responsible to the investors in the mutual funds. They are the primary guardians of
the unit-holders’ funds and assets.
• Asset Management Company – The Asset Management Company (AMC) is the
investment Manager of the Trust. The sponsor, or the trustees is so authorized by the
trust deed, appoints the AMC as the “Investment Manager” of the trust (Mutual Fund)
via an agreement called as ‘Investment Management Agreement’.
The role of AMC is to carry out all functions related to management of the assets of
the trust. The AMC structures various schemes, launches the scheme and mobilizes
initial amount, manages the funds and give services to the investors.
Company operation;
Fund manager;
A fund manager is responsible for implementing a funds investing strategy and managing
its portfolio trading activities. A fund can be managed by one person, by two people as co-
managers, or by a team of three or more people. Fund manager are paid a fee for their work,
which is a percentage of the fund’s average asset under management (AUM).

REGULATER OF MUTUAL FUND;

Mutual Funds in India are regulated by SEBI with following objectives: to formulate
policies and regulates the mutual funds :- to protect the interest of investors in share market
:- to promote the development of securities market

SEBI issues guidelines and revises policies from time to time to protect the interest of
investors in the equity market.

MUTUAL FUND SCHEME;

Schemes managed by professional fund managers
• Mutual funds offer a wide variety of schemes that you can choose as per your needs and
convenience

• Mutual funds diversify the risks by investing in a number of companies across a broad
range of sectors

• Mutual funds have the potential to deliver higher returns over medium to long exit period.

FUND TYPE AVAILABLE IN INDIA;

BY STRUCTURE:
• Open Ended Schemes :- These schemes don’t have a fixed maturity period :- You can
buy or sell the units at any time of the year as per NAV prices :- The key feature of this
scheme is liquidity. You can take out your money whenever you want :- These schemes
announce NAV on daily basis

• Close Ended Schemes :- These schemes come with a fixed maturity period :- You can
invest in these schemes only at the time of initial issue called ”New Fund Offer(NFO)” :-
You can sell the units only at/after a specified maturity date :- In addition, these schemes
are listed on the Stock Exchange where you can buy or sell units of the fund :- These
schemes announce NAV on a weekly basis

• Interval Schemes :- These schemes combine the feature of both Open ended and Close
ended schemes :- You can buy or sell the units at pre-determined intervals at NAV price :-
In addition ,these schemes are listed on the Stock Exchange where you can buy or sell units
of the fund.

BY NATURE;
• Equity Schemes:- These schemes are known as “high risk, high return” :- These schemes
generally invest a majority of their funds in equities and hence these are high risk
investments :- These schemes aim to provide capital appreciation over long Exit Age and
hence suitable for Long Exit Investors :- These schemes are not Suitable for those who want
regular income or who need money in short Exit

• Income or Debt Schemes: - These are known as “less risk, less return” :- These schemes
invest a majority of their funds in fixed income securities like Bonds, Corporate
Debentures, Government Securities and money market instruments :- These are low risk
investments :- These schemes aim to provide regular and steady income hence suitable for
short Exit investors and retired people :- These schemes are not suitable for long Exit
investors as there will not be much capital appreciation

• Balanced Schemes: - These schemes are known as “medium risk, medium return” :-
These schemes invest in both equity and fixed income instruments :- These schemes aim to
provide a combination of regular income and moderate capital appreciation :- These
schemes are suitable for investors looking for moderate growth

• Money market or Liquid Schemes: - These schemes provide easy liquidity

:- These schemes can invest in safe and short exit age instruments such as Treasury Bills,
Certificates of Deposits

:- These schemes aim to provide capital protection and moderate income

:- The returns from these schemes may fluctuate based on the interest in the market

• Tax Saving Schemes

:- These schemes provide tax benefits to investors as per the Income Tax Act

:- E.g. Equity Linked Savings Schemes(ELSS) and Rajiv Gandhi Equity Savings Schemes

:- The aim of these schemes is to provide capital appreciation and tax benefits

:- These schemes come with a specific lock in period

:- These schemes invest mainly in equities and hence they are high risk oriented schemes

• Gilt Schemes

:- These schemes invest exclusively in Government Securities

:- NAVs of these schemes fluctuate due to change in interest rates

• Index Schemes

:- These schemes represent the portfolio of a particular index such as BSE Index, NSE
Index etc
:- These schemes invest in the shares that represent an Index

:- NAVs of these schemes will rise or fall according to the rise or fall in the underlying
index

• Sector Schemes :- These schemes in shares that are part of a specific sector

:- For example, technology sector schemes will invest in Infosys Technologies, Wipro
Technologies, etc

:- Returns from these schemes depends on the performance of the chosen sector

:- These schemes are high risky compared to diversified equity funds

• Exchange Traded Schemes

:- These schemes contain a basket of shares that represent the combination f index like BSE
Index, NSE Index,etc

:- Investors can buy or sell the funds anytime during trading hours at the traded price

:- This has advantage over the index funds that allows you to buy or sell based on the end
of the day NAV only

• Fund of Funds Schemes

:- These schemes in other mutual fund schemes

:- This helps investors to diversify the risk through one scheme

:- The returns depend on the performance of the target mutual fund scheme

Types By Payout

• Growth Schemes

:- As the name implies, Growth option aims for capital appreciation over long exit age

:- The number of units that you bought will remain the same till you sell them

:- NAV of the scheme will increase or decrease depending upon the performance of the
scheme

:- In these schemes, you will get money only when you sell the units

:- This is suitable for those who expects a growth over long exit age and those who is not in
need of money during short exit age

• Dividend payout schemes

:- Dividends are nothing but profit made by the Mutual Fund Scheme

:- This scheme pays out dividends to investors from time to time

:- But,the amount and the frequency of the dividends are not guaranteed

:- The number of units will remain the same but the NAV of the scheme comes down after
the dividend is declared

:- This is suitable for those who expect to receive income flow on regular basis

• Dividend Re-invest schemes

:- This scheme declares dividends but it is not paid to the investors

:- Instead they are re-invested into the scheme. This way, you stay invested in the scheme

:- NAV gets re-adjusted after the dividends are declared and reinvested

:- The number of units will increase as the dividends are reinvested.

Tax benefits under various Section

:- ELSS And RGESS provides tax benefits to investors

:- Under ELSS scheme ,investments up to Rs.1lakh in a financial year qualify for tax
deduction U Sec 80C of the Income Tax Act

:- Under RGESS,50% of the investments (up to a maximum investment Rs.50000/-) in a

financial year qualify for tax deduction U/Sec 80CCG.This benefit is over and above the
limit of Sec 80C

:- Dividends received under ELSS and RGESS are completely tax free

:- For tax on maturity or withdrawal amount, please refer to “Capital Gains Tax” section
below

• TDS ( Tax Deducted at Source)

:- There is no TDS (Tax Deducted at Source) in Mutual Fund investments.

TERMONOLOGY RELATED WITH MUTUAL FUND;

NAV?
NAV stands for Net Asset Value
• It is the current market price of one unit of a mutual fund scheme

• It is calculated on a daily basis for open ended schemes and weekly basis for close ended
schemes • It is calculated after deducting all the expenses and charges incurred by the fund

• NAV value depends upon the performance of the mutual fund scheme

ENTRY LOAD

If you invest directly into a mutual fund scheme ,then there will be no entry charges at all :-
If you invest through mutual fund agents then following charges need to be paid * No
charges for investments less than Rs.10000/*Rs .150/- for investments more than Rs.10000/

• Entry charges for existing investors :- If you invest directly into a mutual fund scheme
,then there will be no entry charges at all :- If you invest through mutual fund agents then
following charges need to be paid * No charges for investments less than Rs.10000/*Rs
.100/- for investments more than Rs.10000/

• Entry charges for SIP: :- If you invest directly into a mutual fund SIP scheme ,then there
will be no entry charges at all :- If you invest through mutual fund agents then following
charges need to be paid * No charges for investments less than Rs.10000/*Rs .100/- for
investments more than Rs.10000/* this Rs.100/- will be deducted in 4 instalment

Exit load

• Exit charges

:- Exit charges are like penalty that the investor has to pay if he sells the units before the
specific period applicable for a mutual fund scheme :-It may vary from one scheme to
another scheme. Generally exit charges are from 1% to 3% :- E.g. If you are trying to sell
the units of an equity mutual fund before 1 year, then 1% will be deducted from the final
amount that you are going to receive :- Exit charges are deducted from the scheme’s NAV
and hence the NAV value will come down resulting in a lesser final amount. This is known
as “Redemption NAV”

• ault risk is the chance that companies or individuals will be unable to the required
payments on their debt obligations.Ongoing (recurring)Charges :- These are collected by
the fund house for providing various professional fund management services to the
investors :- These charges are calculated on daily basis and deducted from the net asset of
the fund :- The NAV declared every day is after deducting these charges :- These charges
are known as “Expense Ratio” and it varies from 1.5% to 2.5% depending upon the size of
the assets of the mutual fund company and scheme :- The expense ratio affects the returns
of the mutual fund scheme and hence you need to consider the expense ratio before
investing
Redemption Price: Redemption price is the price received by the investor/customer on
selling units of an open-ended scheme to the fund. In case of funds that does not levy an
exit load the redemption price is same as the net asset value. However, in case the fund
levies an exit load, the redemption price is lower than the net asset value. In that case the
exit load percentage is subtracted from the NAV at the time of redemption of the fund.

• Repurchase Price: Repurchase price is the price paid by a close-ended scheme to

repurchase its units that are trading in the secondary market.Close-ended Funds have a fixed
maturity period that range from 2 to 14 years. They sale only a fixed number of shares in
the initial public offering after which the shares typically trade on a secondary market. The
cost of closed-end fund shares that do business on a secondary market after their initial
public offering is totally dependent on the market and doesn’t depend on the initial
NAV.The repurchase price can either be the NAV or it might have an exit load associated
with it.

• Switch: Moving either the whole or part of the investment from one mutual fund scheme
to another mutual fund scheme within the fund family is called as Switching of Mutual
Funds.

• Shut-out Period: The period offered by trustees for the investors opting for payment of
dividend under the respective Dividends Plans. Shut-out period does not exceed 5 days
at the end of each month/quarter/half-year. The declaration of the Shut-Out period is
envisaged to facilitate the AMC/the Registrar to determine the Units of the unit holders
eligible for receipt of dividend under the various Dividend Options. Further, the Shut-
Out period will also help in expeditious processing and dispatch of dividend warrants.

Advantages of mutual fund

• Diversification: Mutual fund provides us with the immediate benefit of instant

diversification and asset allocation without the large amounts of cash needed to create
individual portfolios.
• Affordability: Mutual funds generally buy and sell securities in large volumes which
allow investors to benefit from lower trading costs. The smallest investor can get started on
mutual funds because of the minimal investment requirements. One can invest with a
minimum of Rs.500 in a Systematic Investment Plan on a regular basis.
• Professional management: Investors money are managed by Qualified professionals.
Apart from this, they also have a research team that continuously analyses the performance
and prospects of companies and select suitable investments schemes.
• Liquidity: With open-end funds, one can redeem all or part of their investment any time
they wish and receive the current value of the shares. Funds are more liquid than most
investments in shares, deposits and bonds. Moreover, the process is standardized, making it
quick and efficient so that one can get their cash in hand as soon as possible.
• Tax benefits: Investments held by investors for a period of 12 months or more qualify
for capital gains and will be taxed accordingly. These investments also get the benefit of
indexation.
• Flexibility: One can invest in just one fund or invest in a wide variety. Automatic
deposit, systematic withdrawal, annuity sub-accounts, dividends, short-term savings, long-
term savings, and nearly limitless investment strategies make mutual funds the best overall
investment type for both beginners and advanced investors.
DRAWBACK OF MUTUAL FUND;
Mutual Fund returns is not guaranteed and it may vary base on market conditions
:- Mutual fund companies charge investors for various professional fund management
tasks. They include entry charges, exit charges and recurring annual charges. These
charges may impact the returns of the scheme.
:- Mutual Fund companies will continue to charge fees even if the fund gives negative
returns
:- You can buy or sell mutual fund units only at the end of the day, Not during trading
hours
:- Mutual fund companies keep a large amount of cash at hand to pay the investors
just in case they sell the units due to various reasons. It means that they need to invest
in cash in addition to other asset classes. This may impact returns.
Risk and how NAV matters to investment
2.6.1Risk
Mutual funds offer a variety of schemes, so it is also considered to be a diversified
investment vehicle which means that to a large extent because of its feature of
diversification it reduces investors risk, but remember it does not eliminate the risk
completely which means that if one decides to invest in equity market or in debt market
through mutual funds the risk associated with those markets still remain with the investor.

Types of risk associated with Mutual fund

• Liquidity Risk: Liquidity Risk pertains to how saleable a security is in the market. If a
particular security does not have a market at the time of sale, then the scheme may have to
bear an impact depending on its exposure to that particular security.
• Credit Risk: Credit risk refers to the risk that a borrower may not repay a loan and that
the lender may lose the principal of the loan or the interest associated with it. Government
Securities have zero credit risk while other debt instruments are rated according to the
issuer's ability to meet the obligations.
• Price Risk: Price risk is the risk of a decline in the value of underlying assets of mutual
fund. Underlying asset of mutual fund is a financial instrument like stock or bond etc.,
whose price fluctuates. A fall in price of underlying asset will lead to lower NAV of mutual
fund.
Effect of NAV on investment
NAV reflects the composite prices of all the securities held along with the liquid cash. It is
calculated on a unit basis after deducting all liabilities. If the prices of the majority of the
securities held by the scheme goes up, the NAV will also rise and vice versa. The NAV
moves in tandem with the prices of the securities held by the scheme. It is mandatory to
calculate and publish its NAV on a daily basis.

It is not wise to base our investment decision on NAV of a scheme. Comparing the NAV of
two mutual fund schemes does not tell anything about their future prospects. It only reflects
the total value of the schemes investments minus liabilities and expenses. Ideally, most
would say the one with the lower NAV would work better. They believe that the lower the
NAV, the larger the number of units one gets and more dividends it paid. That’s not true.
Investors should refrain from being attracted to low NAV funds. Assuming that both the
schemes belong to the same category and have an identical portfolio, it wouldn't really
matter whether the NAV is higher or lower. The value of the investment in both cases
would be same.
Consider two schemes are of same kind and we invest ₹11,000 in both.
Scheme A: The NAV here is ₹100. You will get 11000/100 = 110 units here.
Scheme B: The NAV here is ₹110. You will get 11000/110= 100 units here.
Now assume that the market moves up 10 percent.
Scheme A: The NAV goes up to ₹110.
Scheme B: The NAV goes up to ₹121.
Now let's see the market value of the investments. The market value of investments of the
Scheme A would become₹12,100 (110 units X ₹110 NAV) and ₹12,100 in scheme B (100
units X ₹121 NAV). Both schemes will give the same return of ten per cent (₹12,100-
11,000/11,000).

Another common myth is that mutual funds with a high NAV have maxed out their
potential and that they are no longer as lucrative. Now, one must remember that mutual
funds have an underlying portfolio of stocks, which are chosen by an experienced fund
manager who has a well-thought strategy for entering and exiting stocks. As soon as a
particular stock has met its objective, the fund manager sells the stock and buys newer ones
that are likely to provide returns in line with the scheme objectives.
One must understand that at the end, it is the fund performance that should matter and not
the absolute value of the NAV. The money growth will depend on how the fund is
performing and not on the NAV value.
The Assets Under management (AUM) of the mutual fund industry touched an all-time high of ₹16.46
trillion in December, according to the data from the AMFI and expects to cross ₹20trillion this year.

Assets managed by the Indian mutual fund industry have grown from ₹13.86 trillion in April 2016 to
₹19.11 trillion in April 2017. That represents a 38% growth in assets over April 2016.
Debt funds constitute significant share of industry AUM. Unlike global AUM mix where equity is the
dominant asset class, in India debt (or income-oriented) schemes continue to dominate accounting for
almost half of the industry’s AUM. However, post 2013, increased demand for equity and money market
funds has led to decline in the share of debt funds in overall AUM mix. In FY15 and FY16, equity funds
witnessed a surge in AUM in line with the revival in Indian capital markets. In 2015, equity mutual fund
assets crossed the INR4 trillion land mark for the first time in mutual fund history mainly driven by
increased demand by retail investors, especially investors from small towns, as they took to investing in the
mutual fund market with sluggish growth in the real estate space and decline in gold prices. During FY16,
MFs reported net inflow of more than INR750crores in equity and equity-linked savings schemes with
investors from smaller towns contributing for 44% of these flows.

Impact of Digital India in Mutual Fund Sector

Technological advances are transforming India’s mutual fund industry. Technologies such as mobile, social
media, big data and analytics, cloud and artificial intelligence are transforming the mutual fund industry
and continue to be a key growth enabler by facilitating seamless customer acquisition and real-time
efficient processes. Technology has become a crucial element across mutual fund operations spanning from
transaction processing and fund management to distribution and customer service. Asset managers are not
only using technology to drive efficiencies and cost reduction in the back-office, but also developing their
front-office digital capabilities. AMCs are using social media to reach out to customers, especially new-age
customers, and employing big data and analytics in data-driven models for improving offerings and
customer engagement while using cloud technologies to drive process efficiencies and rationalize costs.
Additionally, the launch of differentiated banks — i.e., Payment Banks that will be allowed to sell third-
party mutual funds — will help increase the market reach of the fund industry.
Digital advances have not only ensured distribution efficiencies, but also helped create predictable revenue
streams in the low-margin business. Earlier, distributors needed to put in significant effort in operational
tasks, but digital platforms have helped them focus more on research and tracking markets rather than on
individual client visits and extended paperwork. Moreover, there have been several industry-wide
initiatives to help distributors build digital capabilities in order to serve investors better.

Impact of Goods & Service Tax’s in Mutual Fund Sector

The rajyasabha has passed the GST Bill in the year 2016, paving the way for the most significant tax
reform and probably the second most significant economic reform since Independence. GST is expected to
bring in more clarity, consistency, certainty and efficiency in the tax system. However, investors will have
to shell out more for buying mutual fund products after the implementation Goods and Services Tax
(GST), which the government expects to bring into force from July this year.
A key question that the bill raises is regarding the requirement of state specific registration and compliance.
The current Bill says that the service tax has to be paid at a place where it has been consumed. AMCs,
insurers and distributors have investors spread across the country. That means both companies and
distributors will have to register themselves with the service tax department of the respective states. This
tax can be paid online but auditing and compliance need to be done at the source state.
For investors, the mutual fund scheme may get costlier since fund houses charge service tax on
management fee.
For distributors, with the service tax rate mounting under GST, advice from an investment adviser /
financial planner / financial guardian will also get dearer. If investors opt for arbitrary recommendations
from mutual fund distributors who earn commissions from mutual fund houses, it could possibly hurt this
category of financial professionals.
Organizations will have to work on assessing the impact of these changes on their business with regard to
the following aspects: cash flow profit and loss account, business process and technology. A work plan
should be put in place
Measurement of Performance of Mutual Fund

There are many ways to calculate returns from mutual fund investments. Two of the most popular methods
are Absolute or Total returns and Annualised returns.
• Absolute/Total return
Absolute return is the simple increase (or decrease) in our investment in terms of percentage. It does not
take into account the time taken for this change. It only requires the initial and the current or the ending net
asset value (NAV) of the scheme. For example, if your initial NAV was, say, ₹20 and now after 3 years, it
is ₹37.
• Annualised Return
A Compound Annual Growth Rate (CAGR) measures the rate of return over an investment period. It is a
smoothened rate because it measures the growth of an investment as if it had grown at a steady rate, on an
annually compounded basis.

3.1 Annualised Vs. Actual total return

For most investors, determining whether an investment in a particular mutual fund is worthwhile comes
down to an analysis of its performance. However, measuring an investment's performance is not always as
simple as adding up or averaging returns. To get a clear picture of an investment's return over time, it's
important for investors to understand the difference between annual return and annualized return. Annual
return is defined as the percentage change in an investment over a one-year period; annualized return is the
percentage change in an investment measured over periods of time shorter or longer than one year but
stated as a yearly rate of return.
3.2 The Performance Disclaimer
In the investment business, the often repeated statement that "performance data represents past
performance, which is no guarantee of future results" has become a cliché. Of course, the real purpose of
this statement is to provide liability protection to purveyors of investment products as opposed to providing
guidance to investors. The real problem here is the phrase, "no guarantee," which should alert investors to
the simple fact that future investment performance is subject to many variables.
• Systematic Investment Plan;
Systematic Investment Plan (SIP) is an investment plan offered by Mutual Funds wherein one could invest
a fixed amount in a mutual fund scheme periodically, at fixed intervals – say once a month, instead of
making a lump-sum investment. The systematic investment plan or SIP is an investment strategy offered by
fund house to investors, making it convenient to invest small sum of money in their mutual fund.

Key features of systematic investment plan:

Remember the days when you saved small amounts of money every month to buy an expensive gift you
would not buy otherwise. It’s a type of regular saving, which is a very good habit. Systematic Investment
Plan (SIP) is quite similar to the same old technique; the magic here is in the returns over the term of
investments. In other words, SIP is a plan where you can invest in Mutual Fund Schemes at regular
intervals. In SIP Investors majorly benefit from the Rupee Cost Averaging and compounded returns.
• Small and regular investment
Systematic Investment Plan helps you achieve your bigger financial goals even with a small sum of
amount invested every periodic interval. SIP is lighter on your wallet. It allows you to invest a small
amount as per your wallet size with as low as Rs. 500/- with periodic intervals of investments such as
weekly, fortnightly, monthly, quarterly. It is a simple and affordable way for beginners to start investing in
Mutual Fund Schemes.

• Disciplined Investment
Investors often fail to maintain the habit of investing over the period of time. A dedicated approach and
focus is the key to any investment. As the name says, systematic investment plan is a system to invest a
particular amount regularly. This naturally brings a discipline to your investing habits. Inculcating a habit
of investing with a regular investment of a small sum is practically much easier than investing lump sum
amount every year. It is recommended to start an SIP if you haven’t yet inculcated the discipline of
investing.

• Ease of investing
SIP can be implemented in two ways; Online and Offline SIP. Traditionally, you can invest in SIP by

filling up a mandate, however, in the current digital wave, you can invest in SIP via invest online
platforms. Invest Online portal avails you a paperless transaction with quicker transactions and hassle free

procedures. You can opt to link your portfolio to your bank account, so that you can enable uninterrupted

automatic investments. Usually, salaried employees choose to map their SIP accounts to their salary

accounts so that the process continues to be regular and linear. This rectifies the issues of regularity

failures. You need to be a KYC complaint to start investing.

• Power of compounding
The biggest force that drives investments ahead is the power of compounding. Although, systematic
investments are smaller, investors can benefit higher with the power of compounding. Starting to invest
early can build opportunities of higher returns. Simply, the small amounts that you invest every month
generate returns over the invested period and similarly the returns upon the previous investment gets added
to your new investments. An amount of Rs. 2000/- invested every month for 5 years with an assumption of
10% CAGR will generate Rs. 1,54,874. Find out your monthly SIP investment amounts to achieve your
goals with our SIP Returns Calculator.

Example:

Illustration: Estimated returns from SIP into an Equity Mutual Fund (at an assumed rate
of 12% p.a.)

PERSON A PERSON B PERSON C

No. of years 10 20 30
No. of months invested 120 240 360
Monthly inv. Amount 15000 7500 5000
Mutual fund returns 12% 12% 12%
(assumed)
Monthly returns 0.95% 0.95% 0.95%
Total amt. invested 1800000 1800000 1800000
Est. redemption amt. Rs. 3,360,538 6,898,930 15,404,866

It shows that in time pace and long run systematic investment in SIP mutual fund increasing in long run
due to compounding effect.

Advantages of systematic investment plan -

• Stress-free way of investing: Investor doesn't have to worry about timing the market. It stress-
free. Once the mechanism is set-up, fixed amount will be deducted from your account.
• Short-term fluctuation doesn't harm as much: If the price goes down by 10 % in the next
month. You have a consolation that you ar1e also buying at reduced price too. And if the
market recovers to previous level, you actually make money overall.
 • It encourage saving habit in you: A little every month by month can make to huge amount at the
end of 40 years. If one invests 20,000 Rupees every month for 40 years in a mutual fund, and
assume that mutual fund give annual returns of 20 % over a period of 40 years, and then at the end
of 40 years, he will have 3.40 crores.

Disadvantages:

• If price of underlying (investment vehicle) doubles in first month and don't move much after that,
then he won't have handsome returns.

• if investors have significant amount of cash to begin with, then it doesn't make much sense to do
SIP and keep the rest of amount as cash in initial period.

• SIP averages out short-term fluctuation and gives returns similar to long-term growth of underlying.
Bad part is, investors invest the same amount at market highs and lows. Wouldn't it be better, if he
could invest more at lows and less at highs? This is generally referred to as Value investment Plan
(VIP).

How does SIP differ from Lump Sum Investment?

In case of a lump sum investment, a large amount of money needs to be invested all at once and this can
significantly strain the finances of most individuals especially if they are salaried.

It is much easier for investors to set aside a small sum of money every month through SIP and invest those
in mutual funds in order to generate wealth in the long term for future expenses. Additionally, in case of
lump sum investment, all the mutual fund units bought would feature the same price, hence the profit/loss
incurred at the time of liquidating the units will be exactly the same, on the other hand, in case of an SIP
the units are bought at separate times and at separate times, hence the profits would also differ from one set
of units to another.

How does SIP work?

Systematic Investment Plan(SIP) works more or less like a mutual fund. The handling of your
money is done by money market experts and is none of your headache. But it is good to know how
SIP makes your money grow. Well, there are two underlying mechanisms behind the working of
SIP.
Effect of Compounding

Unlike simple interest, the compounding involves making the interest earned, a part of your base
capital and the subsequent interest is calculated on the basis of this new increased capital. Thus,
Compound Interest leads to an exponential growth of your money. The effect of compounding
increases as the investment tenure increases. The table below illustrates the fact.

Types of SIP SIP Rate of Return at Total output

investment investment interest the end of
Interest
tenure tenure
Input in Rs.
Simple 100 5 years 10% 50 150
interest

Compound 100 5 years 10% 61 161

interest

As can be seen, there is a 11% rise in the total output when the interest is calculated on a
compounding basis. This seemingly small difference in the final output becomes staggering as the
period of investment lengthens. The table below shows the figures when calculated for a peri od of
20 years. As you can see, the difference becomes even more than twice in the long run, when the
effect of compounding is playing up.

Types of SIP SIP Rate of Return at Total

interest investment investment interest the end of output
tenure tenure
Input in Rs.
Simple 100 20 years 10% 200 300
interest

Compound 100 20 years 10% 573 673

interest

Example: Consider a scenario –

• Raj decides to invest in a SIP
• Buy the market units by investing Rs 1000/month
• Invest for 6 months.
• Condition- if NAV is low, unit will be more
If NAV is high, units will be less
• Junaid decide to invest in lump sum
 • Buy units for Rs 6000 at the current NAV.

Who do you think is going to end up with a lower cost per unit at the end of the 6 months
period?

Month NAV Monthly No. Average One Time No. Average

(Rs) Investment of Cost Per Investment of Cost Per
made in SIP Units Unit made in a Units Unit
(Rs) plain
Mutual
Fund (Rs)
1st 15 1000 67 12.42 6000 400 15
Rs/Unit Rs/Unit
2nd 12 1000 83

3rd 10 1000 100

4th 12 1000 83
5th 15 1000 67

6th 12 1000 83

Total 6000 483

As can be seen from the table above:

• Raj will be enjoying a gain of Rs 2.58 per unit over Junaid.
• Raj played up smart by investing consistently for a period of time.
• In the long run he’ll be less and less affected by the ups and downs of market, as the time
period will lead to an averaging of the market fluctuations.
• This effect is called as Rupee Cost Averaging and is primarily responsible for making SIP a
lucrative investment.

Working of SIP

A SIP is a flexible and easy investment plan. Investor money is auto-debited from their bank account and
invested into a specific mutual fund scheme. Investors are allocated certain number of units based on the
ongoing market rate (called NAV or net asset value) for the day.
Every time one invest money, additional units of the scheme are purchased at the market rate and added to
their account. Hence, units are bought at different rates and investors benefit from Rupee-Cost Averaging
and the Power of Compounding.
Rupee Cost Averaging
Rupee cost averaging ensures that investors automatically buy more units when the NAV is low and fewer
when the NAV is high. For example, an SIP of ₹1000 gets investor 50 units when the NAV is ₹20, but gets
100 units when the NAV is ₹10. The average cost for buying those 150 units would be ₹2000/150 units i.e.
₹ 13.33.
However, the Rupee cost averaging does not assure profit, nor does it protect one against investment losses
in declining markets. It merely ensures disciplined & regular investment in stock markets, which helps
overcome the natural impulse to stop investing in a falling or a depressed market or investing a lot, when
markets are buoyant and euphoric.

The Power of Compounding

There is a great advantage with long-term investments, namely, compounding which is considered one of
the greatest mathematical discovery.
To put it in simple words, compounding is when the interest (or income) investor earns is reinvested in the
original corpus and accumulated corpus continues to earn (& grow). Every time this happens, Investors
investment keeps growing, paving the way for a systematic accumulation of money, multiplying over time.
For example, ₹5000 invested monthly at a 10% p.a. return over a 30 and 35-year period would accumulate
to ₹1.13 crores and ₹1.90 crores, respectively - a massive difference of ₹77 lacks. Hence, just by starting 5-
years earlier, a person would ultimately be able to accumulate ₹77 lacks more - that is the power of
compounding.

SIP Vs Lump Sum Investment – A Review

In case of lump sum investing, the investor has money on hand that can be invested. Whereas in case of
SIP, the investor may not have lump sum on hand and may have regular surplus expected in future. If a
person does not have lump sum money available to invest, there is no question of one investing at one go.
Similarly, if there is a person whose future income is uncertain, SIP is out of question.SIP is not always a
better method than the lump sum investment option. The Sensex is around 30000 levels today and if we
know with certainty that it is going to become 43000 after one-year than we would obviously be better off
buying our entire investment quantity today at probably the lowest value rather than keep averaging
upwards month after month through the SIP route. Therefore, SIP is not some magic that it will outperform
lump sum investing method or always give positive returns, even during the long term.
SIP route would ideally yield positive results only under the following conditions:
• Bull or Rising Market: SIP would yield positive results in a bull or rising market as every new purchase,
although made at a higher cost, is ultimately valued at an even higher price. However, as seen earlier, in
such a case it would be wiser to buy the entire investment lump sum rather than keep "averaging upwards"
through the SIP route.
• Volatile but rising market: SIP should finally perform well in a volatile but ultimately rising or bull
market. This would be the market kind in which the "rupee cost averaging" would work most favorably for
the investor as the volatility would lead to the best possible average price. The final rising or subsequent
bull market would ensure that the end price is higher than the average price.
• Market in Median range: This would be another case in which SIP would perform well and in all
likelihood better than initial lump sum investment. This is because the investor will get the assistance of the
intermediate correction to lower his average cost.

Case Study:

On Verification, I have found out some Mutual Fund product line which is furnished below:

Since it is not possible to study and analysis each and every product line taken below, I have considered
their performance in the market and have taken top 2 schemes from each category according to records
furnished and status available on Public domain.

This data has been taken from Money control as it is the best site considered for Capital related market.

Analyses are further carried out on product line as proceeded below in the further sections.

LARGE CAP RETURN

Kotak Select Focus fund- Direct 29.7%
ICICI Pru Top 100 Fund- Direct 29.2%
Kotak Select Focus Fund- Regular 28.2%
ICICI Pru Top 100 Fund 27.8%
SBI Blue chip Fund- Direct 18.2%
SMALL & MID CAP
L&T Midcap Fund- Direct 42.0%
Mirae Emerging Blue chip Fund- Direct 41.1%
L&T Midcap Fund 40.9%
Mirae Emerging Blue chip Fund 40.0%
DSP-Black rock Micro cap Fund- Direct 36.9%
DIVERSIFIED EQUITY
Tata Equity P/E Fund- Direct 44.2%
Tata Equity P/E Fund 43.2%
Principal Emerging-Blue chip- Direct 37.5%
Sundaram Rural India Fund-Direct 37.5%
Sundaram Rural India Fund 36.5%
BALANCED – Hybrid
 ICICI Pru Balanced Fund- Direct 26.4%
ICICI Pru Balanced Fund 24.7%
MIP AGGRESSIVE- Hybrid
Birla SL MIP 2-Wealth 25 19.0%
Kotak Monthly Income Plan- Direct 14.8%
• Product analysis:

I have chosen the schemes on the basis of their magnificent performance as shown above. Out of these
schemes, I have taken 2 from each of the following categories on the basis of highest growth rate or rate of
return as shown below. The returns are as on 20th April, 2017.

LARGE CAP RETURN

Kotak Select Focus fund- Direct 29.7%
ICICI Pru Top 100 Fund- Direct 29.2%

Both of these schemes are direct plans which mean the investor deals with the AMC directly. The major
advantage here is they don’t have to pay any commission fees and gradually it helps translating corpus into
more returns every year. Direct plan was launched by SEBI in 2012.

Starting from Kotak Select Focus fund- Direct (G), below follows the details preceding benefits and further
information.

• Kotak Select Focus fund- Direct:

Launch Date Jan 01, 2013

Scheme Type Open Ended
Face Value (price at which it was Rs. 10
issued)
Minimum Investment Rs. 5000
Benefit of the Scheme Benefits are long-term capital appreciation
from a portfolio of equity and equity related
securities, generally focusing on a few
selected sectors.
Investment Type Equity
Fund Family Kotak Mahindra Mutual Fund

Calculations after 1, 2, 3, 4, 5years.

Corpus time Return:

After 1 year (in 2014) 24.6%
After 2 years (in 2015) 13.9%
After 3years (in 2016) 29.1%
After 4 years (in 2017) 21.2%
5 years hence till April 20th,2017 17.1% (Absolute Return)
 AVERAGE RATE OF RETURN 20.98%
Source: Money Control

• Performance of the Scheme from the date of Issue:

Explanation: As NAV is only significant for open-end mutual funds. This is calculated using (current
market value of the fund’s net assets-Liabilities including items such as fees, etc.) / Number of shares
outstanding. So, each time market value appreciates or depreciates these NAV changes accordingly. And
here, it shows the market value has been appreciating thus leading to gradual growth in NAV.

• Quantitative Study- An Analysis as a Proof:

To calculate the rate of return using following methods:

• Point-to-point or absolute return: Whatever the nature of a mutual fund scheme is, its value is
reflected in the NAV. Absolute returns on this, helps one to calculate the simple returns on the initial
investment.

Absolute return = (current NAV - initial NAV)/ initial NAV x 100

So, to demonstrate this in this case;

CASE-1: AR= (30.607-13.488)/13.488 x 100= 1.269 or 126.9%

Interpretation: This means that if anybody has invested on the day of issue, i.e. here Jan 4 th, 2013 at
13.488 and after 4+ years wants to know the return as on 20th April, 2017, he/she has earned a growth of
126% according to the absolute return method. (This is considering all the highs and lows)

CASE-2: But in case, if a person invests at Face value of Rs. 10 at the time of launching with a minimum
investment size of 5000 is likely to get 500 units i.e. 5000/10=500units.So, as on 20th April, 2017, he/she
will hold the investment value of:

500*30=15000 (today’s return); 30=NAV as on April 20, 2017, 500= Units held.

Table1: Showing Returns as on

Time NAV* Units Return after

After 1 year 14.079* 500=7039.5 7039.5-5000=2,039.5
After 2 years 22.171*500=11085.5 11085.5-5000=6,085.5
After 3 years 23.586*500=11793 11793-5000=6,793
For 4 years + 30*500=15000 15000-5000=10,000
Note: NAV’s are as on Jan 3rd of every year

Interpretation:
• As we go through the table mentioned above it is evident that each time NAV is increasing the overall
investment return is also increasing twofold. If we take a case of a person who, at the time of launch,
invests Rs.5000 will after 4 years earn a total of Rs.10, 000 at Rs.30 NAV.

• Though the growth is slow, but the returns are guaranteed taking into consideration various risk factors
such as Economic policy, Market volatility, other calamities, etc.

• Annualized Return: Two investment options have indicated their returns since inception on 5% and
3% respectively. If the first investment was in existence for 6 months and the second for 4 months, then the
two returns are obviously not comparable. Therefore, Annualisation helps to compare the returns of two
different time periods.

Simple Returns x12

Period of Simple Return (in months)

Investment 1 Investment 2
5% x 12 3% x 12
6 4
i.e. 10% i.e. 9%

Interpretation:

• From the survey I chose 2 participants who invested and withdrew their corpus after 6 months and 4
months respectively. Since inception, its return has been 5% and 3% respectively but on finding the
annualized return it has been calculated as 10% from 5% and 9% from 3% respectively. This shows a great
increment in returns.

• ICICI Pru Top 100 Fund- Direct:

Launch Date Jan 01, 2013

Scheme Type Open Ended
Face Value (price at which it was issued) Rs. 10
Minimum Investment Rs. 5000
Benefit of the Scheme Benefits are to generate long term capital
appreciation by investing predominantly in
equities that is 95% in equities while the rest
would be invested in debt and money market
instruments.
Investment Type Equity
Fund Family ICICI Prudential Mutual Fund

• Performance of the Scheme from the date of Issue:

Explanation:
 • NAV of Direct plans will always be higher than that of regular plans as schemes do not pay a fee to
distributors and consequently have a lower expense ratio.

• So taking this into consideration, though NAVs are showing gradual shift upwards, it represents the
fund’s intrinsic worth and hence high and low criterion should not be choosed while selecting the fund
type/scheme.

• Nevertheless, higher NAV shows that it has been working under good operative and managerial
company.

• Quantitative Study- An Analysis as a Proof:

To calculate the rate of return using following methods:

• Point-to-point or Absolute Return: To calculate the return of ICICI PRUDENTIAL Scheme,

CASE 1: Absolute return = (current NAV - initial NAV)/ initial NAV x 100

= (303.69-157.21) /157.21 x100= 0.931 or 93.17%

Interpretation: This shows that, as compared to previous scheme of Kotak, NAV here is higher than the
NAV of Kotak. Though the high and low have been fluctuating in the whole year, the returns are high
enough from its inception. So, returns are independent of how much the NAV is over time as discussed
earlier in the previous Sections.

CASE 2: But in case, if a person invests at Face value of Rs. 10 at the time of launching with a minimum
investment size of 5000 is likely to get 500 units i.e. 5000/10=500units.So, as on 20th April, 2017, he/she
will hold the investment of:

Table1: Showing Returns as on

Time NAV* Units Return after

2014 168.56* 500=84,280 84,280-5000=79,280
2015 241.43*500=120,715 120,715-5000=115,715
2016 240.81*500=120,405 120,405-5000=115,405
2017 303.69*500=151,845 151,845-5000=146,845
Note: NAV’s are as on Jan 3rd of every year

Interpretation:

• This has higher NAV because they must have some past track record of Earnings. But since NAV
shouldn’t be the criteria to decide the good or bad about any fund, if any person considers investing at face
value at Rs. 10, he/she will now get a return of Rs. 1, 46, 845 after 4 years due to higher NAV.

• Annualized Return:

Simple Returns x12

Period of Simple Return (in months)

Out of Survey, I have picked up 2 people who have invested in ICICI Prudential. And on interviewing
them, I found out that one has invested for 10 months and has earned 12% return since inception, and the
other 11% interest for 10.5 months (This can be showed through the data collected through Survey method
and interviewing the most efficient once).

Investment 1 Investment 2
12% x 12 11% x 12
10 10.5
i.e. 14.4% i.e. 12.57%

Note: XIRR was used to find their annualised internal rate of return (12% & 11% respectively)

Interpretation:

• This shows that annualised return year-on-year keeps on increasing as shown here- 1; from 12% to 14%
and 2; 11% to 12.57% respectively.

• Comparison of term deposit bank rate between Kotak Focus Fund and ICICI Prudential top 100
Fund.

This Comparison of Investment in Mutual Fund with Investment in term deposit by Compounding Method
is an efficient method as discussed below.

Compounded Return: To see the compounding return, suppose we place Rs.10,000 in a cumulative bank
deposit for 3 years at 10% interest, compounded annually.

The bank would calculate the interest in each of the 3 years as follows:

Table 1 Compounded Interest Rate

Year Interest Closing

Opening (10% on Balance
Balance Opening)
1 10,000 1000 11000
2 11,000 1100 12100
3 12,100 1210 13310

Interpretation: Thus at the end of 3 years period, the principal of Rs. 10,000 would have grown to Rs.13,
310. If on the other hand, the bank had calculated interest on simple basis, it would have calculated interest
at Rs. 1000 for each of the 3 years and given us Rs. 13,000. The difference between Rs.13,310 and
Rs.13,000 is the effect of compounding. Longer the period of investment holding, higher would be the
error, if compounding is not considered.

Now, taking this as a base, we will calculate the returns of the above mentioned banks and see which one
benefits the most as compared to the Mutual fund investment.
Earlier, banks used to compound quarterly or annually but now they have considered half yearly
compounding. So taking half yearly compounding we will now assume the investment size to be 1 lakh.

AIM: My main aim is to find out what would be the annualised rate of return after 5 years in each case of
Kotak and ICICI.

Using the Compounded Interest formula, we have that; For ICICI @ 7%

P=1, 00,000, r=6.90/100=0.069, n= 2, t=5Yrs. A= 1, 00,000(1+0.07/2)2(5)

Therefore, for KOTAK @ 6.90% ~141,060 approx.

A=P (1+r/n) NT

A= 1, 00,000 (1+0.069/2)2(5)

~140,380 approx.

Showing it in tabulation form, the results are same as computed in Compounding formula above:

KOTAK ICICI
Years Opening Bal. Interest Closing Opening Interest Closing
(6.90%) Bal. Bal. (7%) Bal.
annually annually
1 100000 6900 106900 100000 7000
107000
2 106900 7376 114276 107000 7490
114490
3 114276 7885 122161 114490 8014
122504
4 122161 8429 130590 122504 8575
131079
5 130590 9010.7 140,380 131079 9175
141,060
approx. approx.
This serves my question of whether my investment in mutual fund is more than the return
accrued on account of my term deposit at given interest rate.

Interpretation:

• The compounding return half yearly is yielded more in case of ICICI bank as compared to Kotak
because of its annual return.

• But when it comes to differentiating Mutual fund with term deposit, it is evident that Mutual fund is
yielding higher return, i.e. 126% in case of Kotak and 93.17% in ICICI fund. Compounding method in term
deposit yields good return but the calculations are half-yearly as shown above.

• So, if the total average rate of return of Mutual fund is above the bank rate, this signifies it is a good way
and one can consider investing in Mutual fund Scheme.
 Survey
Every earning person must save and saving must be converted into investment for tomorrow considering
future needs and Time Value of Money. In so far as the question of investment is concerned there are so
many investment avenues available with us.

A person before investing his/her surplus money should examine such avenues and go for investments
according to his/her needs and capabilities even though his primary objective of an investor is to maximise
his/her return.

However, the aspect of maximize of return always entitles risk. In that situation if anybody wants to go for
better return he/she has to take risk. But that risk must be affordable. Mutual Fund is such an investment
avenue which provides the possibility of better return with a relatively low risk.

On the backdrop of the above questionnaire or a survey of the investor is aimed at ascertaining the
awareness and the perception of the investors towards investment option available through Mutual Fund
schemes.

In the above context, a survey was conducted in order to gain the market insight and investor awareness
and perception.

Questionnaire was the tool selected to conduct this survey. So, a questionnaire of 20 questions was
prepared to carry out the process. The questionnaire was prepared to gather as much information as
possible in a short span of time. It was necessary to design the questionnaire simple and easy so that the
respondents can easily give their view points within 5-10 minutes.

DATA COLLECTION

For the survey, 100 respondents were targeted who were either regular investors or were prospective
investors. The survey was conducted through two channels:

• In person, one to one and

• Online
The entire survey was conducted over a period of 5 days from 10th june 2017 to 15th june 2017
Henceforth the data collected was organized and studied in detail. The data was then analysed through
graphical methods and results were drawn. These results were then used to draw inferences so that
recommendations and suggestions could be documented.
DATA ANALYSIS

All the raw data collected is not useful in its original form to carry out analysis and obtain
results. The data has to be organized and filtered before it can be used for carrying out
analysis and obtaining results. The data collected during survey was organized and some
parameters were selected which would be used in carrying out the analysis

GRAPHS AND INTERPRETION

1. Education background of respondent:

Fig. no-1

21

Graduate
5 Others
Post graduate

74

Interpretation:

Educational background vis-à-vis knowledge of investment of the respondent

It is observed from (fig.no-1) that most of the respondent are post graduate which
constitute 74, of the total respondent.
And it also shows that 21 respondent are graduated, which so that the respondent are
highly qualified.
As the majority of respondent are highly qualified, they actually understood the
necessity of investment in present scenario.
As coming to investment and there inference, a well- educated person only can
understand the needs and benefits of the investment without a guide in comparison to
an uneducated person.
 2. Age group to which the sample population belongs

Fig. no-2

TOTAL

30-35 yrs
29
37
36-40 yrs

41-45 yrs

9 21 Over 45 yrs
3
Under 30 yrs

Interpretation:

Age group vis-à-vis risk taking appetite of the respondent

It is observed that majority of respondent’s lies within an age group of under

30 years.
This is an age where a person can take high risk so that he/she can gain more
return to complete his/her desire or needs.
At an age of 40 or above 45 don’t have that much of appetite to take risk and
lose the invested amount.
Rather to go for fixed deposit or we can say that riskless saving like bank term
deposits.
3. Annual Income pattern of sample population

Total
0
Below Rs. 20,000
18 24
Rs.20,001-Rs.40,000
18
23 Rs.40,001-Rs.60,000 Fig. no-3
16
Rs.60,001-Rs.80,000
Rs.80,001 and above Interpretation:

Annual income vis-à-vis amount of investors of the respondent

It exhibits that the higher the annual income the proportion the investment will be.
In this case if a person is earning Rs.200000 p.a. he is going to invest only 10k to
20k not more than that, because other obligation he may have.
In the above fig. 23 respondents are below 20k and 23 respondents earn 20k-40k per
month so they can invest a little bit high amount.so that they can earn a handsome
profit.
Income is directly proportion to investment.
 4. Employment status of the sample population

Fig. no-4

1 14
Full time
Others
11
Part time
57 Retired
17
Self employed

Interpretation:

Employee status vis-à-vis period of holding the investment

It is viewed the 57 respondents works as full timers.

It has been found that respondents hold for long term purpose.
If a person is regular worker then he/she can invest for a long term, so that they can
gain a good yield. If a person is not a regular worker in case working as a part timer
or retired person due to irregular income source he may be an irregular investor and
can’t hold for a longer period of time.
5. Do you save money for investment?

Fig. no- 5 fig. no-6

Total Total

2 1-3 yrs
12 15
Maybe 13 3-5 yrs
21
No 36 5-10 yrs
86
Yes 36 15 More than 10 yrs
Upto 1 yr

Interpretation:

Saving vis-à-vis investment pattern of respondent

It is observed that 86 respondents said “yes” they save money for investment.
2 respondent don’t save as they don’t earn more.
12 respondent said that they may plan for investment in future.
It is observed in (fig. no-6) that 21 respondents wants to invest for more than 10 years
because as we know that the longer the holding period, better the return and also
capital appreciation.
Whereas 15 respondents investment pattern is for 1-3 year as they wants to liquefy
the investment for short term period. Which shows “moderate risk moderate return”.
6. Amount of money respondents invest yearly

Fig. no-7

Total

11
Above Rs.1,00,000

37 Rs.25001-Rs.35,000
Rs.35,001-Rs.50,000
26
Rs.50,001-Rs.75,000
Rs.75,001-Rs.1,00,000
Upto Rs.25,000
7
13 6

Interpretation:

It is exhibited from (fig. no-7) that 37 respondents have invested up to 25k

accordance with their income pattern.
Then 26 respondents has invested 35k, similarly a minor group of respondent has
invested above Rs.100000 i.e., 11 respondent.
“more income, more investment, more risk, more return”
Objective of investment of respondents from sample population

Fig. no-8

Total
All of the above
1 13 6
4 49 Income and/or
Growth of Capital
27
Inflation protection

Marketability/liquid
ity

Interpretation:

It has been observed that from (fig. 8) 49 respondents objective is to cope up with
inflation rate as day-by-day the rate of goods and services are increasing it has to be
managed by these investment. For safety purpose, emergency need, tax benefits,
income or growth etc are other objective of respondents.
Whereas 27 respondents said that their main objective is to get the income from the
investment.
8. Respondents investment areas from the sample population

Fig. no-9

Total
Bank fixed Deposit
5
5 18
5 Gold
1
I diversify my investment
avenues
Mutual Fund
26
40
Post office

Real estate

Interpretation:

Response towards investment avenues of the respondents

Fig. no-9 explore that the majority of respondents prefer mutual fund as investment
as it is managed by professionals in a diversified manner which leads to
diversification risk.
Also it has been observed that 26 respondents are having diversified portfolio like
mutual fund, post office deposits, real estate and bank fixed deposits.
“Don’t put all your investment in one basket”
9. Investment in mutual fund yes or no?

Fig. no-10 fig. no-11

Total Total
0
All of the above
2
12 4 3
24
10
No
Diversified
Yes portfolio of several
securities with
35 lesser investment
87
Less risk and better
return

Interpretation:

If yes what is the reason of investment in Mutual Fund

From the fig. 10 it is seen that 87 respondents invested in Mutual Fund.

And the reasons are less risk and better return Diversified portfolio of
several securities with lesser investment, professionally managed, Liquidity
and Tax benefit of mutual fund investment.
35 respondents has diversified portfolio.
10. Source of knowing about mutual fund investments

Fig. no-12

Total
0
Advertisement
10 12
22 15 All of the above

15 Family members
25
Financial advisers
Friends & relatives

Interpretation:

It is observed from fig. 12 that majority with 25 respondents have come to know
about mutual fund from their financial advisers.
The reason is that now a days almost all companies providing financial knowledge to
all the needy customers who opt for the service.
Respondents also share that they come across their friends and relative those who
have invested previously in mutual funds.
Active advertisements also helps the investors to know about pros and corns of these
type of investments.
11. Preferences/choosing of the schemes from sample population

Fig. no-13

Total
0

14 All of the above

34
Balanced
Debt/Income
29
5 Equity/Growth
(blank)

Interpretation:

It is seen that from fig. no-13, 34 respondents preferred the balanced fund the reason
behind it is that (60 equity-40 debt) so that the risk of total loss will be not there.
It is also seen that majority go for equity/growth funds for better return.
12. Manner of investment in mutual fund

Fig. no-14

Total

15

Lump sum

Systematic investment
plan (SIP)

85

Interpretation:

If SIP, why do you preferred

It shows that 85 respondents preferred systematic investment plan (SIP).

The reason behind investment in the SIP is, it provide a regular investment habit
and it also helps in dividing the amount of investment.
Whereas it also seen that only 15 respondents have invested in lump sum, as per
their wish.
But respondents view point is that why to take at a time burden.
 Fig.no-15

Total

Both of the above

17

It offers easy habitual

26 57 investment like recurring
deposit
It provides facility of rupee
cost averaging as per the
market conditions

It is seen that from the fig. 15, 57 respondents prefer SIP due to the
reason that it offer habituated investment and also facility of RCA as per
market condition.
Rupee Cost Averaging is tool or we can say technic to hedge the risk.
It is also been observed that 26 respondents prefer it because it is
providing easy of payment.
13. Preferences in case of mutual fund schemes

Fig. no-16

Total
0, 0%

31, 31% Close ended

Interval Scheme
51, 52%
Open ended
(blank)
17, 17%

Interpretation:

It is observed from fig. no-16, that 51.52% of respondents preferred open ended
schemes.
The reason they shared is that any time they can enter and any time they can
dissolved the scheme.
31.31% of respondents also gone for close ended schemes that they can fixed that
investment for a particular time period so that they can get high yield.
14. Awareness of net asset value (NAV) among respondents

Fig. no-17

TOTAL

57
Total
22

21

MAYBE NO YES

Interpretation:

Fig. no-17 exhibit that awareness among respondents are high. That respondents
know about net asset value of a schemes in mutual fund.
It is also seen from fig that 21 respondents said that they are not aware of the term
NAV the reason is that the funds are manage fully by mutual fund companies only
they pay the amount due.
15. Brand preference of respondents in mutual fund

Fig. no-18

Interpretation:

It can be seen from the fig. 18 that most of the respondents had preferred HDFC
mutual fund schemes as it is a leading brand in recent trends.
And also ICICI PRUDENTIAL is a 2nd highest leading brand in the mutual fund
industries.
Similarly all other brands of mutual funds are also performing.
16. Perception towards the brand of mutual fund of the respondents

Fig. no-19

TOTAL
60 41
40 18 23
13
20 5
0 Total

Interpretation:

From the fig. no-19 it is observed that perception of 41 respondents that they
prefer a particular brand due to the performance, reliability, as it is manage by
fund managers, as it is well diversified.
And also it can be seen that 23 respondents are preferring a particular brand
because of professional management bodies.
17. Satisfaction level of respondents towards investment on mutual fund

Fig. no-20

Interpretation:

It is seen that 37.8% respondents are very much satisfied with service provided by the
respective mutual funds companies.
As now a days due to strict regulation of sebi and other constitutions the mutual fund
institutions are providing better options and also sharing all kinds of charges and
documentation. So the 29.31% of respondents are rated excellent.
18. Awareness of respondents in case of grievance redressal procedure

Fig. no-21

Interpretation:

It explore from the fig. 21 that majority of respondents are well aware of redressal
mechanism i.e., they have to lodge a complaint with SEBI in case of any dispute
arises from mutual fund related issues.
Still now 15% of respondents are not aware of these compliant mechanism.
 Findings
• It was found that most of them choose to be conservative and less aggressive in nature while investing
into mutual funds schemes.

• People generally like to save their savings in fixed deposits and saving accounts as there was very less
risk.

• The most popular medium of investment in mutual fund is through SIP and moreover people like to
invest in equity funds though it is risky.

• It was found that post graduates qualified investors were more in numbers when compared to under
graduate qualified investors. This shows people are taking risk when they are experienced in well
terms.

• It was seen that most of the people have invested in mutual funds due to risk diversification though
SIP.

• People having age of 25-40 where a person can take high risk so that he/she can gain more return to
complete his/her desire or needs.

• It has been observed that investment objective is to cope up with inflation rate as day-by-day the rate
of goods and services are increasing it has to be managed by these investment. For safety purpose,
emergency need, tax benefits, income or growth etc are other objectives.
 Suggestion and recommendation
• It is seen that still now a big part of society is untapped by mutual fund companies
due to lack of awareness. Therefore massive financial campaigning is required the
channels may be radio, television, newspaper, seminars, and work shop.

• Though investors are showing interest for investment the portfolio manager should
carefully mobilize and utilize the fund in a productive manner so that more and more

Investors can be attracted.

• In case any company is involved in any type of manipulation activities there should
be a statutory body to handle this kind of situations, that’s why grievance redressal
mechanism should be strengthen. So that investor’s interest can be protected.

• One more facility can provided by the mutual funds companies i.e., step to be taken
to reach the door step of the investors.

• Investors service system should be strengthen, if investors are paying for the services
they must avail a good service.

• SIP is one of the innovative products launched by AMC in the industry. SIP is easy
for monthly salaried person as it provides the facilities of do the investment in EMIs.

• Though most of the prospects and potential investors are not aware about the SIP.
There is a large scope for the companies to trap the salaried persons.

• Mutual fund companies needs to give the training of the individual financial advisor
about the funds/schemes and its objectives, because they are the main source of
influence the investors.

• Young people aged under 35 will be a key new customers group into the future, so
making greater efforts with younger customer who show some interest in investing
should be pay off.
 Limitations
• Time constraint due to shortage and less availability of period it may be possible that
all the related and concerned aspects may not be covered in this project.
• It was not possible to expand the coverage of beyond 100 people due to constraint of
time.
• Survey task was to cope of with the cooperation of the respondents covered under
survey.
• All the targeted respondents were not fully aware of the investment prospective of
mutual fund.
• All the respondents covered under survey were not equally aged, qualified and
earning capable for facilitation of making a balanced or uniform conclusion of the
survey.
• Many of respondents hesitated and show reluctant to share their personal information.
 CONCLUSION

The Indian mutual fund industry has transformed totally for good since last decade and has
shown growth and potential. Though the asset under management and number of schemes
has increased significantly, but it is yet to be household product, and needs to cover the
retail segment effectively. Moreover, there are still many remote and potential areas which
lack the required knowledge and infrastructure of mutual funds.

Mutual fund is an excellent product offering great flexibility and liquidity, which can be
tailored to suit any investor’s objective and it is affordable for the all people of different
income levels and saving habits. Mutual funds now represent perhaps most appropriate
investment opportunity for most investor’s. As financial markets become more
sophisticated and complex, investor’s need a financial intermediary who provides the
required knowledge and professional expertise on successful investing. As the investor
always try to maximize the returns with affordable risk. Mutual fund satisfies these
requirements by providing attractive returns with affordable risks.

After doing study it is concluded that yes mutual funds are much better investment option
but as future is uncertain so no one can give a sure guarantee of good returns, no matter
whether it is equity or a mutual fund. Investors can minimize their risk by doing little
research before investing in the markets which will help them to decide the right investment
plan or product.1
 APPENDIX

Questionnaires Survey on Investor Awareness on Mutual Fund

• Your current age is within which of the following categories:

• Under 30
• 30-35
• 36-40
• 41-45
• Over 45
• What is your educational background:

• Higher secondary
• Graduate
• Post graduate
• Others (please specify). ________________

• Your employment status:

• govt . job
• private job
• self employeed
• Retired
• Others
• Your aggregate monthly income:

• Below Rs.20,000
• Rs.20,001 - Rs.30,000
• Rs.30,001 – Rs.50,000
• Rs.50,001 – Rs.80,000
• Rs.80,001 – Rs.1,00,000
• Above Rs.1,00,000
• Do you save money for investment?
 • Yes
• No

If yes, how long do you plan to invest your savings?

• Upto 1 year
• 1-3 years
• 3-5 years
• 5-10 years
• More than 10 years
6. What amount of money do you invest yearly?

• Up to Rs.25,000
• Rs.25,001 - Rs.35,000
• Rs.35,001 – Rs.50,000
• Rs.50,001 – Rs.75,000
• Rs.75,001 – Rs.1,00,000
• Above Rs.1,00,000
7. What is the objective of your investment?

a) Tax exemption

b) Income and/or Growth of capital

c) Safety

d) Inflation protection

e) Marketability/ liquidity

8. Where do you invest normally?

• Post office
• Shares and securities
• Gold
• Mutual fund
• Real estate
• Bank Fixed Deposit
9. Do you invest in Mutual Fund?

• Yes
• No
10. Why do you invest in Mutual Fund?

• Less risk and better return

• Diversified portfolio of several securities with lesser investment
• Professionally managed
• Liquidity
• Tax benefit
• All the above
11. How did you know about investment in Mutual Fund?

• Advertisement
• TV/Radio/Website
 • Friends and relatives
• Family members
• Financial advisers
• All the above
12. Which Mutual Fund Schemes do you prefer?

• Open ended
• Close ended
• Interval Scheme
13. Which of the following Schemes do you prefer?

• Equity/ Growth
• Debt/ Income
• Balanced
• All the above
14. What is the manner of your investment in Mutual Fund?

• Lump sum
• Systematic Investment Plan (SIP)

If SIP, why do you prefer it?

a) It offers easy habitual investment like recurring deposit

b) It provides facility of rupee cost averaging as per the market condition

c) Both (a) & (b)

15. Which type of scheme do you prefer in equity fund (SIP)?

a) Advantage fund

b) MID Cap

c) Equity plan

d) Index fund

e) MNC fund

f) Dividend yield plus

16. Do you know what NAV of a Mutual Fund scheme is?

a) Yes

b) No

17. Which brand of Mutual Fund do you prefer?

a) ICICI Prudential

b) HDFC
 c) Birla Sunlife

d) SBI

e) Kotak

f) Other

18. Why do you prefer a particular brand of Mutual Fund?

a) Performance

b) Well diversification

c) Investment strategy

d) Professional Fund Manager

e) All the above

19. What is the level of your satisfaction with Mutual Fund investment?

a) Excellent

b) Very Good

c) Good

d) Average

e) Below Average

20. Where can you lodge your complaint against a Mutual Fund?

a) Reserve Bank of India (RBI)

b) Insurance Regulatory Development Authority (IRDA)

c) Securities and Exchange Board of India (SEBI)

d) Not Aware
 Bibliography:

Websites

• www.mutualfundindia.com

• www.mututalfunds.com

• www.sebi.com

• www.moneycontrol.com

• www.rbi.org.in

• www.capitalmarket.com

• www.shamdham.org

• www.cybersurat.com

• www.amfi.com

• www.bseindia.com

• www.sebi.gov.in

• Research methodology book by Kothari