Need of Financial Advisor For Mutual Fund Investors": A Study On

NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR
A Study
On
“Need of financial advisor for Mutual Fund Investors”
A project report submitted to in the partial fulfillment of requirement of

the award of
MASTER OF BUSINESS ADMINISTRATION
Submitted by
Sanjay Padaliya
Arpan Soni
M.B.A (Sem-4th )
Under the guidance of
Mr. Hitesh Daxini
Kum. M.H.GARDI SCHOOL OF MANAGEMENT
RAJKOT
Submitted To:
GUJARAT TECHNOLOGICAL UNIVERSITY
AHEMADABAD
ACKNOWLEDGEMENT
“The only place where success comes before work is in the dictionary.”
It is great exposure for us using our Theoretical knowledge which We have learnt till
4th semester of Master of Business Administration (M.B.A.) in our project work
We like to first heartily thanks to GUJARAT TECHNOLOGICAL UNIVERSITY

(GTU) for including project in our M.B.A. syllabus. It is helpful to learn real situation
of industry and helpful for increasing in our practical knowledge.
We thankful to Dr. Sandip Solanki Director of MHGSM. For giving us chance to do

our project work.
We are thankful to our project guide Mr. Hitesh Daxini for guiding during our project
tenure. As he helps us whenever we need and spare his valuable time. Without his this
project is not possible.
We are thankful to our parents and our friends as they always motivate us and help us
directly or indirectly in our project work.
Sanjay Padaliya
Arpan Soni
DECLARATION
Hereby declare that the project report entitled “NEED OF FINANCIAL

ADVISOR FOR MUTUAL FUND INVESTORS” under the guidance of Mr.
Hitesh Daxini Submitted in partial fulfillment of the requirements for the award of
the degree of Master of Business Administration to GUJARAT
TECHNOLOGICAL UNIVERSITY, Rajkot is our original work – research study
– carried out and not submitted for the award of any other degree/diploma/fellowship
or other similar titles or prizes to any other institution/organization or university by
any other person.
Signature,
Sanjay Padaliya
Arpan Soni
INDEX
Sr.No. Subject Page No.

1 Executive Summary
2 Mutual Fund
 Introduction
 Advantages of Mutual Fund
 Drawbacks of Mutual Fund
 Risk in Mutual Fund
 Performance of Mutual Fund In India
 Organization of Mutual Fund
 Process of Invest in Mutual Fund
 Cost Associated with Mutual Fund
 Categories of Mutual Fund
 Measuring Performance of Mutual Fund
3 Systematic Investment Plan
4 Portfolio Analysis Tools
5 Research Methodology
 Literature Review
 Objectives of Research
 Data Analysis
 Testing Hypothesis
 Findings And Conclusion
 Recommendations
 Sample Questionnaire
6 Glossary of Some Concepts
7 Conclusion
8 Bibliography
EXECUTIVE SUMMARY
This project has been a great learning experience for us; at the same time it gave us
enough scope to implement our analytical ability. This project as a whole can be
divided into two parts:
The first part gives an insight about the mutual funds and its various aspects.
One can have a brief knowledge about mutual funds and all its basics through the
project. Other than that the real servings come when one moves ahead. Some of the
most interesting questions regarding mutual funds have been covered. Some of them
are: why has it become one of the largest financial intermediaries? How investors do
choose between funds? Most popular stocks among fund managers, most lucrative
sectors for fund managers, a special report on Systematic Investment Plan, does fund
performance persists and the topping of all the servings in the form of portfolio
analysis tool and its application.
All the topics have been covered in a very systematic way. The language has been
kept simple so that even a layman could understand. All the data have been well
analyzed with the help of charts and graphs.
The second part consists of data and their analysis, collected through a survey
done on 200 people. It covers the topic” need of financial advisors for mutual fund
investors”. The data collected has been well organized and presented. Hope the
research findings and conclusions will be of use. It has also covered why people don’t
want to go for financial advisors? The advisors can take further steps to approach
more and more people and indulge them for taking their advices.
MUTUAL FUNDs
INTRODUCTION
A Mutual fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is invested by the fund manager in
different types of securities depending upon the objective of the scheme. These could
range from shares to debentures to money market instruments. The income earned
through these investments and the capital appreciation realized by the scheme is
shared by its unit holders in proportion to the number of units owned by the (pro rata).
Thus a Mutual fund is the most suitable investment for the common man as it offers
an opportunity to invest in a diversified, professionally managed portfolio at a
relatively low cost. Anybody with an invest able surplus of as a few thousand rupees
can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment
objective and strategy.
A mutual fund is the ideal investment vehicle for today's complex and modern
financial scenario. Markets for equity shares, bonds and other fixed income
instruments, real estate, derivatives and other assets have become mature and
information driven. Price changes in these assets are driven by global events
occurring in faraway places. A typical individual is unlikely to have the knowledge,
skills, inclination and time to keep track of events, understand their implications and
act speedily. An individual also finds it difficult to keep track of ownership of his
assets, investments, brokerage dues and bank transactions etc.
A mutual fund is answer to all these situations. It appoints professionally qualified

and experienced staff that manages each of these functions on a full time basis. The
large pool of money collected in the fund allows it to hire such staff at a very low cost
to each investor. In effect, the mutual fund vehicle exploits economies of scale in all
three areas – research, investments and transaction processing. While the concept of
individuals coming together to invest money collectively is not new, the mutual fund
in its present form is a 20th century phenomenon. In fact, mutual fund gained
popularity only after the Second World War. Globally, there are thousands of firms
offering tens of thousands of mutual funds with different investment objectives.
Today, mutual funds collectively manage almost as much as or more money as

compared to banks
Mutual Funds now represent perhaps the most appropriate investment opportunity for
most investors. As financial markets become more sophisticated and complex,
investors need a financial intermediary who provides the required knowledge and
professional expertise on successful investing. As a result, in the birthplace of mutual
funds - the U.S.A. - the fund industry has overtaken the banking industry: more funds
are under mutual fund management than deposited with banks.
In India with more person getting interested to earn more from their saving to
minimize the effect of growing inflation mutual funds are becoming one the best way
to achieve the required solution. Despite the fact that mutual funds are still a new
financial intermediary in India, they have started opening up many exciting
investment opportunities for the Indian investor.
A mutual fund is a professionally-managed firm of collective

investments that pools money from many investors and invests it in stocks, bonds,
short-term money market instruments, and/or other securities. In other words we can
say that A Mutual Fund is a trust registered with the Securities and Exchange Board
of India (SEBI), which pools up the money from individual / corporate investors and
invests the same on behalf of the investors /unit holders, in equity shares, Government
securities, Bonds, Call money markets etc., and distributes the profits.
The value of each unit of the mutual fund, known as the net asset value (NAV), is
mostly calculated daily based on the total value of the fund divided by the number of
shares currently issued and outstanding. The value of all the securities in the portfolio
in calculated daily. From this, all expenses are deducted and the resultant value
divided by the number of units in the fund is the fund’s NAV.
NAV = Total value of the fund

Number of shares currently issued and outstanding
ADVANTAGES OF MUTUAL FUNDs
Professional Management
The primary advantage of funds (at least theoretically) is the professional

management of your money. Investors purchase funds because they do not have the
time or the expertise to manage their own portfolios. A mutual fund is a relatively
inexpensive way for a small investor to get a full-time manager to make and monitor
investments.
Diversification
By owning shares in a mutual fund instead of owning individual stocks or bonds, your
risk is spread out. The idea behind diversification is to invest in a large number of
assets so that a loss in any particular investment is minimized by gains in others. In
other words, the more stocks and bonds you own, the less any one of them can hurt
you (think about Enron). Large mutual funds typically own hundreds of different
stocks in many different industries. It wouldn't be possible for an investor to build this
kind of a portfolio with a small amount of money.
Economies of scale
Because a mutual fund buys and sells large amounts of securities at a time, its
transaction costs are lower than what an individual would pay for securities
transactions.
Liquidity
Just like an individual stock, a mutual fund allows you to request that your shares be
converted into cash at any time.
DRAWBACKS OF MUTUAL FUNDs
No guarantee
No investment is risk free. If the entire stock market declines in value, the value of
mutual fund shares will go down as well, no matter how balanced the portfolio is.
Investors encounter fewer risks when they invest in mutual funds than when they buy
and sell stocks on their own. However, anyone who invests through a mutual fund
runs the risk of losing money.
Fees and commission
All funds charges administrative fees to cover their day to day expenses. Some funds
also charge sales commission or “loads” to compensate brokers, financial consultants
or financial planners. Even if you do not use a broker or other financial adviser, you
will pay a sales commission if you buy shares in a load fund.
Taxes
During a typical year, most actively managed mutual funds sell anywhere from 20 to
70 % of the securities in their portfolios, if your fund makes a profit on its sales, you
will pay taxes on the income you receive, even if you reinvest the money you made.
Management risk
When you invest in a mutual fund, you depend on the fund manager to make the right
decisions regarding the fund’s portfolio. If the manager does not freeform as well as
you had hoped, you might not make as much money on your investment as you
expected. Of course, if you invest in Index funds, you forego management risk
because these funds do not employ managers.
RISK ASSOCIATED WITH THE INVESTMENT IN THE

MUTUAL FUNDS
Savings are invested in various investment opportunities for earning better returns.
The returns of the investment depend upon the risk of such investment. All
investments involve some risk. The objective of any investor is to minimize the risk
and maximize returns. The value of financial assets depends on their return and risk
patterns.
Risk can be defined as “the chance factor in trading in which expected or
perspective advantage, gain, profit or return may not materialize”
The actual outcome of investment may be less than the expected outcome. The greater
is the variability in the possible outcome, the greater is the risk. Generally, the
variance and the standard deviation of return are used as the alternative statistical
measures of the risk of the financial asset. Similarly, co-variance measured the risk of
the assets, relative to other assets in a portfolio. Some risks can be controlled by the
investors. Others cannot be controlled, and they are to be borne by the investor
compulsorily.
DIFFERENT TYPES OF RISK IN MUTUAL FUNDs
Risk is an inherent aspect of every form of investment. For mutual fund investments,
risks would include variability, or period-by-period fluctuations in total return. The
value of the scheme’s investment may be affected by factors affecting capital markets
such as price and volume, volatility in the stock markets, interest rates, currency
exchange rates, foreign investment, changes in government policy, political,
economic or other developments.
Market Risk
At times the prices or yields of all the securities in a particular market rise or fall due
to broad outside influences. When this happens, the stock prices of both an
outstanding, highly profitable company and a fledgling corporation may be affected.
This change in price is due to “market risk.”
Inflation Risk
Sometimes it is referred to as “loss of purchasing power”. Whenever the rate of

inflation exceeds the earnings on your investment, you run the risk that you will
actually be able to buy less, not more.
Credit Risk
In short, how stable is the company or entity to which you lend your money when you
invest? How certain are you that it will be able to pay the interest you are promised, or
repay your principal when the investment matures?
Interest Rate Risk
Changing interest rates affect both equities and bonds in many ways. Bond prices are
influenced by movements in the interest rates in the financial system. Generally, when
interest rates rise, prices of the securities fall and when interest rates drop, the prices
increase. Interest rate movements in the Indian debt markets can be volatile leading to
the possibility of large price movements up or down in debt and money market
securities and thereby to possibly large movements in the NAV.
Investment Risk
In the sectored fund schemes, investments will be predominantly in equities of

selected companies in the particular sectors. Accordingly, the NAV of the schemes
are linked to the equity performance of such companies and may be more volatile than
a more diversified portfolio of equities.
Liquidity Risk
Thinly traded securities carry the danger of not being easily saleable at or near their
real values. The fund manager may therefore be unable to quickly sell an illiquid bond
and this might affect the price of the fund unfavorably. Liquidity risk is characteristic
of the Indian fixed income market.
Changes in the Government Policy
Changes in government policy especially in regard to the tax benefits may impact the
business prospects of the companies leading to an impact on the investments made by
the fund.
PERFORMANCE OF MUTUAL FUND IN INDIA
Let us start the discussion of the performance of mutual funds in India from the
concept of mutual fund took birth in India. The year was 1963, Unit Trust of India
invited investors or rather to those who believed in savings, to park their money in
UTI mutual fund. And their idea of this investment was good.
For 30 years it goaled without a single second player. Though the 1988 year saw some
new mutual fund companies, but UTI remained in a monopoly position.
The performance of mutual funds in India in the initial phase was not even closer to
satisfactory level. People rarely understood, and of course investing was out of
question. But yes, some 24 million shareholders were accustomed with guaranteed
high returns by the beginning of liberalization of the industry in 1992.This good
record of UTI became marketing tool for new entrants. The expectations of investors
touched the sky in profitability factor. However, people were miles away from the
preparedness of risks factor after the liberalization.
The Assets under Management of UTI was Rs. 67bn. by the end of 1987. Let me
concentrate about the performance of mutual funds in India through figures. From Rs.
67bn. the Assets under Management rose to Rs. 470 bn. in March 1993 and the figure
had a three times higher performance by April 2004. It rose as high as Rs. 1,540bn.
The net asset value (NAV) of mutual funds in India declined when stock prices started
falling in the year 1992. Those days, the market regulations did not allow portfolio
shifts into alternative investments. There were rather no choices apart from holding
the cash or to further continue investing in shares. One more thing to be noted, since
only closed-end funds were floated in the market, the investors disinvested by selling
at a loss in the secondary market.
The performance of mutual funds in India suffered qualitatively. The 1992 stock
market scandals, the losses by disinvestments and of course the lack of transparent
rules in the where about rocked confidence among the investors. Partly owing to a
relatively weak stock market performance, mutual funds have not yet recovered, with
funds trading at an average discount of 1020 percent of their net asset value.
The supervisory authority adopted a set of measures to create a transparent and

competitive environment in mutual funds. Some of them were like relaxing
investment restrictions into the market, introduction of open-ended funds, and paving
the gateway for mutual funds to launch pension schemes.
The measure was taken to make mutual funds the key instrument for long-term
saving. The more the variety offered, the quantitative will be investors.
At last to mention, as long as mutual fund companies are performing with lower risks
and higher profitability within a short span of time, more and more people will be
inclined to invest until and unless they are fully educated with the dos and don’ts of
mutual funds.
ORGANISATION OF MUTUAL FUND

ORGANISATION OF MUTUAL FUND
A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset
Management Company (AMC) and custodian. The trust is established by a
sponsor or more than one sponsor who is like promoter of a company. The
trustees of the mutual fund hold its property for the benefit of the unit holders.
AMC approved by SEBI manages the fund by making investments in various
types of securities. A custodian, who is registered with SEBI, holds the securities
of various schemes of the fund in its custody. The trustees are vested with the
general power of superintendence and direction over AMC. They monitor the
performance and compliance of SEBI regulations by the mutual fund.
 Sponsor
 Mutual Fund as Trust
 Asset Management Company
 Other Fund Constituents
1. Sponsor
Any person acting alone or in concert with another body corporate
comparable to a promoter of a company as he gets fund registered with SEBI. For
person to qualify as sponsor at least 40% of the initial Net worth of AMC should
be contributed by him should be in the financial services business for a period of
not less than five years should possess sound financial track record of over five
years & should have positive net worth in all the immediately preceding five
years form a trust and appoint Board of Trustees appoint AMC directly or in
concert with Trustees.
2. Mutual Fund as Trust

Constituted as Trust under Indian Trust Act, 1882 (and registered under
Indian Registration Act, 1908). Sponsor acts as Settler of trust contributes initial
trustee to hold the investors’ assets in trust. Trust deed to be executed by the
sponsor in favor of trustees.
3. Trustees
Eligibility of Board of Trustees or a Trustee Company
 Not guilty of moral turpitude

 Not convicted (economic offence and securities laws)
 Not part of AMC (director, employee or officer of AMC)
 Appointment approved by SEBI
 More than one trusteeship (in mutual fund industry; approved by SEBI)
 At least two third should be independent
 ‘Meaning of Independence’
Rights of Trustees
 Appoint AMC with SEBI approval

 Approve schemes floated by AMC
 Right to necessary information
 Remedial action to ensure that business is conducted as per SEBI
regulation – right to dismiss AMC with approval from SEBI and in
accordance with regulations
 Ensure based on quarterly review that any shortfall in NW of AMC is made
up.
Obligations of Trustee
 Investment Management Agreement between trustee and AMC with approval

from SEBI (4th schedule)
 Monitoring of AMC by trustees – right to information
 Right to dismiss the AMC with approval SEBI
 Must ensure transactions are in accordance with trust deed
 Ensure AMC has proper systems and procedures
 Due diligence in appointment of brokers
 Ensure AMC is managing funds independent of other activities

 Half yearly report of fund activities and certificate that AMC has been
managing funds independent of other activities
4. Other Fund Constituents
i. Custodian and Depositories

For safekeeping of securities and participating in clearing system through
approved depository companies. Entity independent of the sponsor’s
direction and responsibility of the Trustees.
ii. Bankers
Bankers are dealing with money for buy and sale of units, paying and
receiving funds for investments, discharging obligations for operational
expenses.
iii. Transfer Agent

Transfer agents are used for used for issuing and redeeming units,
preparation of transfer documents, updating investor records, in-house or
external agency.
iv. Distributors
Distributor enable fund to sell units over a wide bas of investors, brokers,
banks, individual agents.
HOW TO INVEST IN MUTUAL FUND
1. Reading a Prospectus
2. Objective Statement
3. Performance
4. Fees and Expenses
THE PROCESS TO PURCHASE AND REDEEM UNITS
The most common method to invest in a fund once you are in it is to simply fill
out investment forms and write a check to the mutual fund family. This is
probably the easiest but it often takes a few days or even a week to have the funds
credited to your account.
Another method that is common is automatic withdrawals. These allow

you to have a certain amount, which you choose to be deducted from your bank
account each month. These are excellent for getting into the habit of investing on
a regular basis.
The fund will also provide information on how you can redeem your
shares. One common way is to request redemption by filling out a form or writing
a letter to the mutual fund family. This is the most common method but it isn’t the
only one.
Now that you understand the basics of a prospectus, you are one step closer to
getting started in mutual funds. So when you finally receive the information you
requested on a mutual fund, look it over carefully and make an educated decision if it
is right for you.
PROCESS OF INVESTING IN MUTUAL FUND
 Identify Your Investment Needs
Your financial goals will vary, based on your age, lifestyle, financial
independence, family commitments, and level of income and expenses among
many other factors. Therefore, the first step is to assess your needs. You can begin
by defining your investment objectives and needs, which could be regular income,
buying a home or finance a wedding or educate your children or a combination of
all these needs, the quantum of risk you are willing to take and your cash flow
requirements.
 Choose the Right Mutual Fund
The important thing is to choose the right mutual fund scheme, which suits
your requirements. The offer document of the scheme tells you its objectives and
provides supplementary details like the track record of other schemes managed by
the same Fund Manager.
 Select the Ideal Mix of Schemes
Investing in just one Mutual Fund scheme may not meet all your
investment needs. Your may consider investing in a combination of schemes to
achieve your specific goals.
 Invest Regularly
The best approach is to invest a fixed amount at specific intervals, say

every month. By investing a fixed sum each month, you buy fewer units when the
price is higher and more units when the price is low, thus bringing down your
average cost per unit. This is called rupee cost averaging and do investors all over
the world follow a disciplined investment strategy.
 Start Early
It is desirable to start investing early and stick to a regular investment
plan. If you start now, you will make more than if you wait and invest later. The
power of compounding lets you earn income on income and your money
multiplies at a compounded rate of return.
 The Final Step

All your need to do now is to for online application forms of various
mutual fund schemes and start investing. You may reap the rewards in the years
to come.
THE COST ASSOCIATED WITH MUTUAL FUND
Costs are the biggest problem with mutual funds. These costs eat into your return, and
they are the main reason why the majority of funds end up with sub-par performance.
What's even more disturbing is the way the fund industry hides costs through a layer
of financial complexity and jargon. Some critics of the industry say that mutual fund
companies get away with the fees they charge only because the average investor does
not understand what he/she is paying for.
Fees can be broken down into two categories:
1. ongoing yearly fees to keep you invested in the fund.
2. Transaction fees paid when you buy or sell shares in a fund.
The Expense Ratio
The ongoing expenses of a mutual fund are represented by the expense ratio. This is
sometimes also referred to as the management expense ratio (MER). The expense
ratio is composed of the following:
1. The Cost Of Hiring The Fund Manager(S)
Also known as the management fee, this cost is between 0.5% and 1% of
assets on average. While it sounds small, this fee ensures that mutual fund
managers remain in the country's top echelon of earners. Think about it for a
second: 1% of 250 million (a small mutual fund) is $2.5 million - fund
managers are definitely not going hungry! It's true that paying managers is a
necessary fee, but don't think that a high fee assures superior performance.
2. Administrative Costs
These include necessities such as postage, record keeping, customer service,

cappuccino machines, etc. Some funds are excellent at minimizing these costs
while others (the ones with the cappuccino machines in the office) are not.
On the whole, expense ratios range from as low as 0.2% (usually for
index funds) to as high as 2%. The average equity mutual fund charges around
1.3%-1.5%. You'll generally pay more for specialty or international funds,
which require more expertise from managers.
Loads are just fees that a fund uses to compensate brokers or other
salespeople for selling you the mutual fund. All you really need to know about
loads is this: don't buy funds with loads.
Here is how certain loads work
3. Front-end loads
These are the simplest type of load: you pay the fee when you purchase the
fund. If you invest $1,000 in a mutual fund with a 5%, $50 will pay for the
sales charge, and $950 will be invested in the fund.
4. Back-end loads (also known as deferred sales charges)
These are a bit more complicated. In such a fund you pay the back end load. If
you sell a fund within a certain time frame. A typical example is a 6% back-
end load that decreases to 0% in the seventh year. The load is 6% if you sell in
the first year, 5% in the second year, etc. If you don't sell the mutual fund until
the seventh year, you don't have to pay them.
CATEGORIES OF MUTUAL FUND
Mutual funds can be classified as follow:

 Based on their structure
 Open-ended funds:
Investors can buy and sell the units from the fund, at any point of time.
 Close-ended funds:
These funds raise money from investors only once. Therefore, after the offer
period, fresh investments cannot be made into the fund. If the fund is listed on
a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley
Growth Fund). Recently, most of the New Fund Offers of close-ended funds
provided liquidity window on a periodic basis such as monthly or weekly.
Redemption of units can be made during specified intervals. Therefore, such
funds have relatively low liquidity.
 Based on their investment objective
i. Equity Funds
These funds invest in equities and equity related instruments. With fluctuating
share prices, such funds show volatile performance, even losses. However, short
term fluctuations in the market, generally smoothens out in the long term, thereby
offering higher returns at relatively lower volatility. At the same time, such funds
can yield great capital appreciation as, historically, equities have outperformed all
asset classes in the long term. Hence, investment in equity funds should be
considered for a period of at least 3-5 years. It can be further classified as:
 Index funds
In this case a key stock market index, like BSE Sensex or Nifty is tracked. Their
portfolio mirrors the benchmark index both in terms of composition and
individual stock weightages.
 Equity diversified funds
100% of the capital is invested in equities spreading across different sectors and
stocks.
 Dividend yield funds
It is similar to the equity diversified funds except that they invest in companies
offering high dividend yields.
 Thematic funds
Invest 100% of the assets in sectors which are related through some theme.
e.g. -An infrastructure fund invests in power, construction, cements sectors etc.
 Sector funds
Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will
invest in banking stocks.
 ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.
ii. Balanced fund
Their investment portfolio includes both debt and equity. As a result, on the risk-
return ladder, they fall between equity and debt funds. Balanced funds are the
ideal mutual funds vehicle for investors who prefer spreading their risk across
various instruments. Following are balanced funds classes:
 Debt-oriented funds -Investment below 65% in equities.
 Equity-oriented funds -Invest at least 65% in equities, remaining in debt.
iii. DEBT FUND
They invest only in debt instruments, and are a good option for investors averse to
idea of taking risk associated with equities. Therefore, they invest exclusively in
fixed-income instruments like bonds, debentures, Government of India securities;
and money market instruments such as certificates of deposit (CD), commercial
paper (CP) and call money. Put your money into any of these debt funds
depending on your investment horizon and needs.
 Liquid funds- These funds invest 100% in money market instruments, a large
portion being invested in call money market.
 Gilt funds ST- They invest 100% of their portfolio in government securities of
and T-bills.
 Floating rate funds - Invest in short-term debt papers. Floaters invest in debt
instruments which have variable coupon rate.
 Arbitrage fund- They generate income through arbitrage opportunities due to
mis-pricing between cash market and derivatives market. Funds are allocated to
equities, derivatives and money markets. Higher proportion (around 75%) is put in
money markets, in the absence of arbitrage opportunities.
 Gilt funds LT- They invest 100% of their portfolio in long-term government
securities.
 Income funds LT- Typically, such funds invest a major portion of the portfolio in
long-term debt papers.
 MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an

exposure of 10%-30% to equities.
INVESTMENT STRATEGIES
1. Systematic Investment Plan

Under this a fixed sum is invested each month on a fixed date of a month.
Payment is made through post dated cheques or direct debit facilities. The investor
gets fewer units when the NAV is high and more units when the NAV is low. This
is called as the benefit of Rupee Cost Averaging (RCA)
2. Systematic Transfer Plan

Under this an investor invests in debt oriented fund and gives instructions to
transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual
fund.
3. Systematic Withdrawal Plan
If someone wishes to withdraw from a mutual fund then he can withdraw a fixed
amount each month.
RISK Vs RETURN
MEASURING AND EVALUATING MUTUAL FUND

PERFORMANCE
Every investor investing in the mutual funds is driven by the motto of either wealth
creation or wealth increment or both. Therefore it’s very necessary to continuously
evaluate the funds’ performance with the help of factsheets and newsletters, websites,
newspapers and professional advisors like BIRLA mutual fund services. If the
investors ignore the evaluation of funds’ performance then he can lose hold of it any
time. In this ever-changing industry, he can face any of the following problems:
1. Variation in the funds’ performance due to change in its management/ objective.

2. The funds’ performance can slip in comparison to similar funds.
3. There may be an increase in the various costs associated with the fund.
4. Beta, a technical measure of the risk associated may also surge.
5. The funds’ ratings may go down in the various lists published by independent
rating agencies.
6. It can merge into another fund or could be acquired by another fund house.
Performance measures
Equity funds
The performance of equity funds can be measured on the basis of: NAV Growth,
Total Return; Total Return with Reinvestment at NAV, Annualized Returns and
Distributions, Computing Total Return (Per Share Income and Expenses, Per Share
Capital Changes, Ratios, Shares Outstanding), the Expense Ratio, Portfolio Turnover
Rate, Fund Size, Transaction Costs, Cash Flow, Leverage.
Debt fund
Likewise the performance of debt funds can be measured on the basis of: Peer Group
Comparisons, The Income Ratio, Industry Exposures and Concentrations, NPAs,
besides NAV Growth, Total Return and Expense Ratio.
Liquid funds
The performance of the highly volatile liquid funds can be measured on the basis of:
Fund Yield, besides NAV Growth, Total Return and Expense Ratio
To measure the fund’s performance, the comparisons are

usually done with
1. With a market index.
2. Funds from the same peer group.
3. Other similar products in which investors invest their funds.
Financial Planning For Investors (Ref. To Mutual Funds)

Investors are required to go for financial planning before making investments in any
mutual fund. The objective of financial planning is to ensure that the right amount of
money is available at the right time to the investor to be able to meet his financial
goals. It is more than mere tax planning.
Steps in financial planning are
1. Asset allocation.
2. Selection of fund.
3. Studying the features of a scheme.
In case of mutual funds, financial planning is concerned only with broad asset
allocation, leaving the actual allocation of securities and their management to fund
managers. A fund manager has to closely follow the objectives stated in the offer
document, because financial plans of users are chosen using these objectives.
WHY HAS IT BECOME ONE OF THE LARGEST

FINANCIAL INSTRUMENTS?
If we take a look at the recent scenario in the Indian financial market then we can find
the market flooded with a variety of investment options which includes mutual funds,
equities, fixed income bonds, corporate debentures, company fixed deposits, bank
deposits, PPF, life insurance, gold, real estate etc. All these investment options could
be judged on the basis of various parameters such as- return, safety convenience,
volatility and liquidity. Measuring these investment options on the basis of the
mentioned parameters, we get this in a tabular form
Return Safety Volatility Liquidity Convenie

nce
Equity High Low High High Moderate
Bonds Moderate High Moderate Moderate High
Co. Moderate Moderate Moderate Low Low
Debentur
es
Co. FDs Moderate Low Low Low Moderate
Bank Low High Low High High
Deposits
PPF Moderate High Low Moderate High
Life Low High Low Low Moderate
Insurance
Gold Moderate High Moderate Moderate Gold
Real High Moderate High Low Low
Estate
Mutual High High Moderate High High
Funds
We can very well see that mutual funds outperform every other investment option. On
three parameters it scores high whereas it’s moderate at one. comparing it with the
other options, we find that equities gives us high returns with high liquidity but its
volatility too is high with low safety which doesn’t makes it favorite among persons
who have low risk- appetite. Even the convenience involved with investing in equities
is just moderate.
Now looking at bank deposits, it scores better than equities at all fronts but lags badly
in the parameter of utmost important i.e.; it scores low on return , so it’s not an
happening option for person who can afford to take risks for higher return. The other
option offering high return is real estate but that even comes with high volatility and
moderate safety level, even the liquidity and convenience involved are too low. Gold
have always been a favorite among Indians but when we look at it as an investment
option then it definitely doesn’t gives a very bright picture. Although it ensures high
safety but the returns generated and liquidity are moderate. Similarly the other
investment options are not at par with mutual funds and serve the needs of only a
specific customer group. Straightforward, we can say that mutual fund emerges as a
clear winner among all the options available.
The reasons for this being:
1. Mutual funds combine the advantage of each of the investment products
Mutual Fund is one such option which can invest in all other investment options.
Its principle of diversification allows the investors to taste all the fruits in one
plate. Just by investing in it, the investor can enjoy the best investment option as
per the investment objective.
2. Dispense the shortcomings of the other options
Every other investment option has more or less some shortcomings. Such as if
some are good at return then they are not safe, if some are safe then either they
have low liquidity or low safety or both….likewise, there exists no single option
which can fit to the need of everybody. But mutual funds have definitely sorted
out this problem. Now everybody can choose their fund according to their
investment objectives.
3. Returns get adjusted for the market movements
As the mutual funds are managed by experts so they are ready to switch to the
profitable option along with the market movement. Suppose they predict that
market is going to fall then they can sell some of their shares and book profit and
can reinvest the amount again in money market instruments.
HOW DO INVESTORS CHOOSE BETWEEN FUNDS?
When the market is flooded with mutual funds, it’s a very tough job for the investors
to choose the best fund for them. Whenever an investor thinks of investing in mutual
funds, he must look at the investment objective of the fund. Then the investors sort
out the funds whose investment objective matches with that of the investor’s. Now the
tough task for investors start, they may carry on the further process themselves or can
go for advisors like BIRLA. Of course the investors can save their money by going
the direct route i.e. through the AMCs directly but it will only save 1-2.25% (entry
load) but could cost the investors in terms of returns if the investor is not an expert. So
it is always advisable to go for MF advisors. The mf advisors’ thoughts go beyond
just investment objectives and rate of return. Some of the basic tools which an
investor may ignore but an mf advisor will always look for are as follow:
1. Rupee Cost Averaging
The investors going for Systematic Investment Plans (SIP) and Systematic
Transfer Plans (STP) may enjoy the benefits of RCA (Rupee Cost Averaging).
Rupee cost averaging allows an investor to bring down the average cost of buying
a scheme by making a fixed investment periodically, like Rs 5,000 a month and
nowadays even as low as Rs. 500 or Rs. 100. In this case, the investor is always at
a profit, even if the market falls. In case if the NAV of fund falls, the investors can
get more number of units and vice-versa. This results in the average cost per unit
for the investor being lower than the average price per unit over time.
The investor needs to decide on the investment amount and the frequency. More
frequent the investment interval, greater the chances of benefiting from lower
prices. Investors can also benefit by increasing the SIP amount during market
downturns, which will result in reducing the average cost and enhancing returns.
Whereas STP allows investors who have lump sums to park the funds in a low-
risk fund like liquid funds and make periodic transfers to another fund to take
advantage of rupee cost averaging.
2. Rebalancing
Rebalancing involves booking profit in the fund class that has gone up and
investing in the asset class that is down. Trigger and switching are tools that can
be used to rebalance a portfolio. Trigger facilities allow automatic redemption or
switch if a specified event occurs. The trigger could be the value of the
investment, the net asset value of the scheme, level of capital appreciation, level
of the market indices or even a date. The funds redeemed can be switched to other
specified schemes within the same fund house. Some fund houses allow such
switches without charging an entry load.
To use the trigger and switch facility, the investor needs to specify the event, the
amount or the number of units to be redeemed and the scheme into which the
switch has to be made. This ensures that the investor books some profits and
maintains the asset allocation in the portfolio.
3. Diversification
Diversification involves investing the amount into different options. In case of

mutual funds, the investor may enjoy it afterwards also through dividend transfer
option. Under this, the dividend is reinvested not into the same scheme but into
another scheme of the investor's choice.
For example, the dividends from debt funds may be transferred to equity
schemes. This gives the investor a small exposure to a new asset class without risk
to the principal amount. Such transfers may be done with or without entry loads,
depending on the MF's policy.
4. Tax efficiency
Tax factor acts as the “x-factor” for mutual funds. Tax efficiency affects the final
decision of any investor before investing. The investors gain through either
dividends or capital appreciation but if they haven’t considered the tax factor then
they may end loosing.
Debt funds have to pay a dividend distribution tax of 12.50 per cent (plus
surcharge and education fess) on dividends paid out. Investors who need a regular
stream of income have to choose between the dividend option and a systematic
withdrawal plan that allows them to redeem units periodically. SWP implies
capital gains for the investor.
If it is short-term, then the SWP is suitable only for investors in the 10-per-cent-
tax bracket. Investors in higher tax brackets will end up paying a higher rate as
short-term capital gains and should choose the dividend option.
If the capital gain is long-term (where the investment has been held for more than
one year), the growth option is more tax efficient for all investors. This is because
investors can redeem units using the SWP where they will have to pay 10 per cent
as long-term capital gains tax against the 12.50 per cent DDT paid by the MF on
dividends.
All the tools discussed over here are used by all the advisors and have helped
investors in reducing risk, simplicity and affordability. Even then an investor
needs to examine costs, tax implications and minimum applicable investment
amounts before committing to a service.
SYSTEMATIC INVESTMENT PLAN
We have already mentioned about SIPs in brief in the previous pages but now going
into details, we will see how the power of compounding could benefit us. In such
case, every small amounts invested regularly can grow substantially. SIP gives a clear
picture of how an early and regular investment can help the investor in wealth
creation. Due to its unlimited advantages SIP could be redefined as “a methodology of
fund investing regularly to benefit regularly from the stock market volatility. In the
later sections we will see how returns generated from some of the SIPs have
outperformed their benchmark. But before moving on to that lets have a look at some
of the top performing SIPs and their return for 1 year:
Total
Scheme Amount NAV NAV Date Amount
Reliance diversified power
sector retail 1000 62.74 25/2/2011 14524.07
Reliance regular savings
equity 1000 22.208 25/2/2011 13584.944
principal global opportunities
fund 1000 18.86 25/2/2011 14247.728
DWS investment
opportunities fund 1000 35.31 25/2/2011 13791.157
BOB growth fund 1000 42.14 25/2/2011 13769.152
In the above chart, we can see how if we start investing Rs.1000 per month then what
return we’ll get for the total investment of Rs. 12000. There is reliance diversified
power sector retail giving the maximum returns of Rs. 2524.07 per year which comes
to 21% roughly. Next we can see if anybody would have undertaken the SIP in
Principal would have got returns of app. 18%. We can see reliance regular savings
equity, DWS investment opportunities and BOB growth fund giving returns of
13.20%, 14.92%, and 14.74% respectively which is greater than any other monthly
investment options. Thus we can easily make out how SIP is beneficial for us. Its
hassle free, it forces the investors to save and get them into the habit of saving. Also
paying a small amount of Rs. 1000 is easy and convenient for them, thus putting no
pressure on their pockets.
Example:-
Now we will analyze some of the equity fund SIP s of Birla Sun life with BSE 200
and bank fixed deposits In a tabular format as well as graphical.
Scheme Name NUMBER OF Original Returns at FUND

INSTALMEN inv BSE 200 RETURN
TS S
Birla SL tax relief '96 144 1,44,000 5,53,190 16,84,008
Birla SL equity fund 114 1,14,000 3,88,701 6,69,219
Birla frontline equity 66 66,000 1,56,269 1,81,127
fund
In the above case, we have taken three funds of Birla sun life namely Birla sun life tax
relief ’96, Birla sun life equity fund and Birla sun life frontline equity fund. All these
three funds follow the same benchmark ie; BSE 200. Here, we have shown how one
would have benefitted if he would have put his money into these schemes since their
inception. And the amount even is a meager Rs. 1000 per month.
Starting from Birla frontline equity fund, we could spot that if someone would have
invested Rs. 1000 per month resulting into total investment of Rs. 66000 then it would
have amounted to rs.156269 if invested in BSE 200 whereas the fund would have
given a total return of Rs 181127. Now moving next to Birla sun life equity fund, a
total investment of 114000 for a total of 114 months at BSE 200 would have given a
total return of Rs. 388701 whereas the fund gave a total return of Rs. 669219, nearly
double the return generated at BSE 200. And now the cream of all the investments,
Birla sun life tax relief ’96. A total investment of Rs. 144000 for a period of 12 years
at BSE 200 would have given total returns of just Rs. 553190 but the Birla sun life tax
relief ’96 gave an unbelievable total return of Rs 1684008.
Thus the above case very well explains the power of compounding and early
investment. We have seen how a meager amount of Rs. 144000 turned into Rs.
1684008. It may appear unbelievable for many but SIPs have turned this into reality
and the power of compounding is speaking loud, attracting more and more investors
to create wealth through SIPs.
PORTFOLIO ANALYSIS TOOLS

With the increasing number of mutual fund schemes, it becomes very difficult for an
investor to choose the type of funds for investment. By using some of the portfolio
analysis tools, he can become more equipped to make a well informed choice. There
are many financial tools to analyze mutual funds. Each has their unique strengths and
limitations as well. Therefore, one needs to use a combination of these tools to make a
thorough analysis of the funds.
The present market has become very volatile and buoyant, so it is getting difficult for
the investors to take right investing decision. so the easiest available option for
investors is to choose the best performing funds in terms of “returns” which have
yielded maximum returns.
But if we look deeply to it, we can find that the returns are important but it is also
important to look at the ‘quality’ of the returns. ‘Quality’ determines how much risk a
fund is taking to generate those returns. One can make a judgment on the quality of a
fund from various ratios such as standard deviation, Sharpe ratio, beta, trey nor
measure, R-squared, alpha, portfolio turnover ratio, total expense ratio etc.
Now I have compared two funds of SBI on the basis of standard deviation, beta, R-
squared, sharpe ratio, portfolio turnover ratio and total expense ratio. So before going
into details, let’s have a look at these ratios:
Standard deviation
In simple terms standard deviation is one of the commonly used statistical parameter
to measure risk, which determines the volatility of a fund. Deviation is defined as any
variation from a mean value (upward & downward). Since the markets are volatile,
the returns fluctuate every day. High standard deviation of a fund implies high
volatility and a low standard deviation implies low volatility.
Beta analysis
Beta is used to measure the risk. It basically indicates the level of volatility associated
with the fund as compared to the market. In case of funds, as compared to the market.
In case of funds, beta would indicate the volatility against the benchmark index. It is
used as a short term decision making tool. A beta that is greater than 1 means that the
fund is more volatile than the benchmark index, while a beta of less than 1 means that
the fund is more volatile than the benchmark index. A fund with a beta very close to 1
means the fund’s performance closely matches the index or benchmark.
The success of beta is heavily dependent on the correlation between correlation
between a fund and its benchmark. Thus, if the fund’s portfolio doesn’t have a
relevant benchmark index then a beta would be grossly inappropriate. For example if
we are considering a banking fund, we should look at the beta against a bank index.
R-Squared (R2)
R squared is the square of ‘R’ (i.e.; coefficient of correlation). It describes the level of
association between the fun’s market volatility and market risk. The value of R-
squared ranges from0 to1. A high R- squared (more than 0.80) indicates that beta can
be used as a reliable measure to analyze the performance of a fund. Beta should be
ignored when the r-squared is low as it indicates that the fund performance is affected
by factors other than the markets.
For example:
Case 1 Case 2
R2 0.65 0.88
B 1.2 0.9
In the above tableR2 is less than 0.80 in case 1, implies that it would be wrong to
mention that the fund is aggressive on account of high beta. In case 2, the r- squared is
more than 0.85 and beta value is 0.9. it means that this fund is less aggressive than the
market.
Sharpe ratio: sharpe ratio is a risk to reward ratio, which helps in comparing the
returns given by a fund with the risk that the fund has taken. A fund with a higher
sharpe ratio means that these returns have been generated taking lesser risk. In other
words, the fund is less volatile and yet generating good returns. Thus, given similar
returns, the fund with a higher sharpe ratio offers a better avenue for investing. The
ratio is calculated as:
Sharpe ratio = (Average return- risk free rate)/ standard deviation
Portfolio turnover ratio
Portfolio turnover is a measure of a fund's trading activity and is calculated by

dividing the lesser of purchases or sales (excluding securities with maturities of less
than one year) by the average monthly net assets of the fund. Turnover is simply a
measure of the percentage of portfolio value that has been transacted, not an
indication of the percentage of a fund's holdings that have been changed. Portfolio
turnover is the purchase and sale of securities in a fund's portfolio. A ratio of 100%,
then, means the fund has bought and sold all its positions within the last year.
Turnover is important when investing in any mutual fund, since the amount of
turnover affects the fees and costs within the mutual fund.
Total Expenses Ratio
A measure of the total costs associated with managing and operating an investment

fund such as a mutual fund. These costs consist primarily of management fees and
additional expenses such as trading fees, legal fees, auditor fees and other operational
expenses. The total cost of the fund is divided by the fund's total assets to arrive at a
percentage amount, which represents the TER:
Total Expense Ratio = (Total fund Costs/ Total fund Assets)
RESEARCH
REPORT
REVIEW OF LITERATURE
This chapter devoted to the review of literature available on the topic under study.
The selection of the topic for the study has been undertaken after a brief review of
literature available on the subject. The purpose of referring the research paper, project
reports, articles and working paper was also to derive supporting evidence for some of
the finding of the study. An attempt was made to refer some of the national as well as
international journals and project reports. A few names may be mentioned here in:
 World development report
 Journal of financial performance
 The intelligent investors, Mumbai
 Chartered accountant, ICAI, New Delhi
 Chartered secretary, ICAI, New Delhi
 Vikalpa, The journal for decision makers, IIM, Ahmedabad
 Management review, IIM, Bangalore
In literature various researchers have used profitability and growth as

measurement of performance. Profitability has been used as measure of performance
by Gort (1962), Rumelt (1974), McDougal and Round (1984), Paul (1985-86),
Sambharya (19950, Tallman and Li (1996), Faejoun (1998).
One of the financial indicators that give the utmost satisfaction to the investors is
return that is generated by their investment but at the same time they are worried
about the risk that is associated with their investment. Hence, it turns out to be very
significant and vital for the financial managers to analysis and identified the risk and
return associated with the investment.
According to Erich L. Kohlar “ It is a general term applied to a part or to all of the
conduct of activities of an organization over a period of time; often with
reference to Past or Projected costs efficiency management responsibility or
accountability or the like.”
OBJECTIVE OF RESEARCH
 The main objective of this project is concerned with getting the opinion of people
regarding mutual funds and what they feel about availing the services of financial
advisors.
 I have tried to explore the general opinion about mutual funds. It also covers why/
why not investors are availing the services of financial advisors.
 Along with it a brief introduction to India’s largest financial intermediary, BIRLA
has been given and it is shown that how they operate in mutual fund department
SCOPE OF THE STUDY
 The research was carried on in the Eastern Region of India. It is restricted to

Kolkata where it has got 11 branch offices and 3 franchisees. I have visited people
randomly nearby my locality, different shopping malls, small retailers etc.
DATA SOURCES
 Research is totally based on primary data. Secondary data can be used only for the
reference. Research has been done by primary data collection, and primary data
has been collected by interacting with various people. The secondary data has
been collected through various journals and websites.
SAMPLING
i. Sampling Procedure
The sample is selected in a random way, irrespective of them being investor or not
or availing the services or not. It was collected through mails and personal visits
to the known persons, by formal and informal talks and through filling up the
questionnaire prepared. The data has been analyzed by using the measures of
central tendencies like mean, median, mode. The group has been selected and the
analysis has been done on the basis statistical tools available.
ii. Sample Size
The sample size of my project is limited to 200 only. Out of which only 135
people attempted all the questions. Other 65 not investing in MFs attempted only
2 questions.
iii. Sample Design
Data has been presented with the help of bar graph, pie charts, line graphs etc.
LIMITATION
 Time limitation.
 Research has been done only at Rajkot.
 Some of the persons were not so responsive.
 Possibility of error in data collection.
Possibility of error in analysis of data due to small sample size.
DATA ANALYSIS
1. Have you ever invested/ interested to invest in Mutual funds?
YES 135
NO 65
33%
YES
NO
68%
2. What is the most important reason for not investing in mutual

funds? (only for above 65 participants)
Lack of knowledge about mutual funds 25

Enjoys investing in other options 10
Its benefits are not enough to drive you 18
for investment
No trust over the fund managers 12
12
no trust 4
4
18
benefitnot enough 3
3
10
enjoys investing in their own 2
2
25
lack of knowledge 1
1
3. Where do you find yourself as a mutual fund investor?

Totally ignorant 28
Partial knowledge of MFs 37
Aware of only scheme in which 46
invested
Good knowledge of MFs 24
good knowledge totally ignorant

18% 21%
aware of only invested

scheme partial knowledge
34% 27%
4. Where from you purchases mutual funds?

Directly from the AMCs 33
Brokers only ( large intermediaries) 28
Broker/ sub-brokers 59
Other sources 15
59
33
28
15
5. Which feature of the mutual funds allure you most?

Diversification 42
Professional management 29
Reduction in risk and transaction cost 34
Helps in achieving long term goal 30
Helps in achieving long term goal 30
Reduction in risk and transaction cost 34
Professional management 29
Diversification 42
6. According to you which is the most suitable stage to invest in

mutual funds?
Young unmarried stage 55
Young Married with children stage 32

Married with older children stage 21
Pre retirement stage 27
20%
Young unmarried
41% stage
Young Married with
children stage
16% Married with older
children stage
Pre retirement stage
24%
7. Are you availing the services of personal financial advisors?

Yes 87
No 48
Number Of Person
36%
yes
no
64%
8. Which expertise of the personal financial advisor is

demanded most?
Portfolio review & investment 43

recommendation
Planning to achieve specific financial 35
goals
Managing assets in retirement 30
Access to specialists in areas such as tax 27
planning
Access to specialists in areas such as tax planning 27
Managing assets in retirement 30
Planning to achieve specific financial goals 35
Portfolio review & investment recommendation 43

9. What
is the
major reason for using financial advisors?
Want help with asset allocation 42

Don’t have enough time to make 23
own decision
To explain various investment 37
options
Want to have surety about 33
financial goals
42
37
33
23
Want help with Don’t have To explain Want to have

asset allocation enough time to various surety about
make own investment financial goals
decision options
10. What is the major reason for not using financial advisor?
Have access to all resources 18

needed
Believe advisors are too expensive 53
Unsure how to find a trustworthy 21
advisor
Want to be in control of own 43
investments
Want to be in control of own investments 43
Unsure how to find a trustworthy advisor 21
Believe advisors are too expensive 53
Have access to all resources needed 18
HYPOTHESIS TESTING
Following table shows the number as well as percentages of people who are availing
the service of personal Financial Advisor for invent in mutual fund. 64.44% of the
people are availing the service of personal Financial Advisor for invent in mutual
fund and rest of 35.56% people not availing the service of personal Financial Advisor
for invent in mutual fund.
Particular Frequency Percent Valid % Cumulative %
Yes 87 64.44 64.44 64.44
No 48 35.56 35.56 100.00
Total 135 100.00 100.00 100.00

Ho: 60% People availing the service of personal Financial Advisor for invent in
mutual fund.
pHO=0.60
H1: 40% people availing the service of personal Financial Advisor for invent in
mutual fund.
qHO =0.40
pHO: Hypothesized value of population proportion of success.

qHO: Hypothesized value of population proportion of failure.
It is one tailed
Sample size (n) = 135
p = 0.6444
q = 0.3555
Significance level α = 0.05
σp =√ pHO ×qHo
n
σp =√ 60 ×40
135
σp = 0.0422
Z = p–q
σp
Z = 0.6444 – 0.6000
0.0422
= 1.0521
For α = 0.05, Z = 1.96
The calculated Z value falls in acceptance area.
So, Accept null hypothesis and reject alternative.i.e. 60% People availing the service
of personal Financial Advisor for invent in mutual fund.
RESEARCH FINDINGS AND CONCLUSIONS
 At the survey conducted upon 200 people, 135 are already mutual fund investors
or are interested to invest in future and the remaining 65 are not interested in it.
So there is enough scope for the advisors to convert those 65 participants into
investors through their convincing power and great communication skills.
 Now, when those 65 people were asked about the reason of not investing in
mutual funds, then most of the people held their ignorance responsible for that.
They lacked knowledge and information about the mutual funds. Whereas just 10
people enjoyed investing in other option. For 18 people, the benefits arousing
from these investments were not enough to drive them for investment in MFs and
12 people expressed no trust over the fund managers’ decision. Again the
financial advisors can tap upon these people by educating them about mutual
funds.
 Out of the 135 persons who already have invested in mutual funds/ are interested
to invest, only 18% have sound knowledge of MFs, 34% people are aware of only
the schemes in which they have invested. 27% possess partial knowledge whereas
21% stands nowhere in knowledge about MFs.
 33 participants buy forms directly from the AMCs, 28 from brokers only, 55 from
brokers and sub-brokers even then 15 people buy from other sources. The brokers
and sub brokers have the maximum reach so they should try to make those
investors aware f the happenings, even the AMCs should follow it.
 When asked about the most alluring feature of MFs, most of them opted for
diversification, followed by reduction in risk, helps in achieving long term goals
and helps in achieving long term goals respectively.
 Most of the investor preferred to invest at a young unmarried stage. Even 32

persons were ready to invest at a stage of young married with children but person
with older children avoid investing due to increased expenses. But again the
number rose to 27 at pre-retirement stage.
 Out of them 87 were already availing the services of financial advisors whereas 48
didn’t. When asked about the expertise of financial advisors which they liked
most? 43 of them favored portfolio review and investment recommendation,
followed by planning to achieve long term goals, managing assets in retirement
and access to specialists in area such as tax planning.
 42 participants regarded asset allocation as the major reason for going for
financial advisors. 37 of them needed them to explain them the various investment
options available.33 of them wanted to make sure that they were saving enough to
meet their financial goals. While just 23 gave the reason- lack of time.
 When asked about one reason for not availing the services of financial advisors,
about 53 of them pointed the advisors as expensive. 43 of them wished to be in
control of their own assets.21 of them said that they find it difficult to get
trustworthy advisors. Whereas 18 of them said they have access to all the
necessary resources required.
RECOMMENDATIONS
 The most vital problem spotted is of ignorance. Investors should be made aware of
the benefits. Nobody will invest until and unless he is fully convinced. Investors
should be made to realize that ignorance is no longer bliss and what they are
losing by not investing.
 Mutual funds offer a lot of benefit which no other single option could offer. But
most of the people are not even aware of what actually a mutual fund is? They
only see it as just another investment option. So the advisors should try to change
their mindsets. The advisors should target for more and more young investors.
Young investors as well as persons at the height of their career would like to go
for advisors due to lack of expertise and time.
 The advisors may try to highlight some of the value added benefits of MFs such as
tax benefit, rupee cost averaging, and systematic transfer plan, rebalancing etc.
these benefits are not offered by other options singlehandedly. So these are
enough to drive the investors towards mutual funds. Investors could also try to
increase the spectrum of services offered.
 Now the most important reason for not availing the services of advisors was
spotted was being expensive. The advisors should try to charge a nominal fee at
the beginning. But if not possible then they could go for offering more services
and benefits at the existing rate. They should also maintain their decency and
follow the code of ethics so that the investors could trust upon them. Thus the
advisors should try to attract more and more persons and turn them into investors
and finally their clients.
QUESTIONNAIRE
We, the students of Kum. M. H. Gardi School of Management, are doing

our grand project “Need of financial advisor for Mutual Fund Investors” as a part
of our syllabus of semester 4, so we require your co-operation by filling the below
narrated questionnaire which can help us in our research work and will not be used for
any other purpose. Your positive response will be appreciated.
If any problems arise for filling this questionnaire so you can contact us –
Padaliya Sanjay +918128844481
Soni Arpan +919601155990
 PERSONAL DETAILS:
1. Name:____________________________________________
2. Gender: Male Female
3. Age: 18-35 36-50

Above 50
4. Education: _________________________________________
5. Occupation:
Professional Businessman
Govt. Employee Employees working
Other (Specify: ________________)
1) Are you interested to invest in mutual funds?

• Yes [ ] • No [ ] (please attempt the next question)
2) What is the most important reason for not investing in mutual funds?
• Lack of knowledge about mutual funds [ ]
• Enjoys investing in other options [ ]
• Its benefits are not enough to drive you for investment [ ]
• No trust over the fund managers [ ]
3) Where did you find yourself as a mutual fund investor?
• Totally ignorant [ ]
• Partial knowledge of mutual funds [ ]
• Aware only of any specific scheme in which you invested [ ]
• Fully aware [ ]
4) From where you purchase mutual funds?
• Directly from the AMCs [ ]
• Brokers only [ ]
• Brokers/ sub-brokers [ ]
• Other sources [ ]
5) Which feature of the mutual funds attracts you most?
• Diversification [ ]
• Professional management [ ]
• Reduction in risk and transaction cost [ ]
• Helps in achieving long term goals [ ]
6) According to you which are the most suitable stage to invest in mutual
funds?
• Young unmarried stage [ ]
• Young Married with children stage [ ]
• Married with older children stage [ ]
• Pre-retirement stage [ ]
7) Are you availing the services of personal financial advisors?

• Yes [ ] • No [ ]
8) Which expertise of the personal financial advisor is demanded most?
• Portfolio review & investment recommendation [ ]
• Planning to achieve specific financial goals [ ]
• Managing assets in retirement [ ]
• Access to specialist in areas such as tax planning [ ]
9) What is the major reason for using financial advisors?
• Want help with asset allocation [ ]
• Don’t have time to make my own investment decision [ ]
• To explain various investment options [ ]
• Want to make sure I am investing enough to meet my financial goals [ ]
10) What is the major reason for not using financial advisor?
• Have access to all resources needed to invest on own [ ]
• Believe advisors are too expensive [ ]
• Unsure how to find a trustworthy advisor [ ]
• Want to be in control of own investment [ ]
Thank you So much for your response.

GLOSSARY OF SOME CONCEPTS
AMC
The AMC is the corporate entity, which markets and manager and manages a mutual
fund scheme and in return receives a management fee from the fund corpus. SEBI
specifies that an AMC must be separate entity the trust that manages it.
NAV
It is the value of unit of a Mutual Fund scheme and represents its true worth. NAV is
arrived at by dividing total value of all investment made under the scheme by number
of units of the scheme. NAV is critical yardstick of the fund’s performance.
UNITS
Units in a mutual fund scheme are similar to shares of a joint company. These are
always in denominations of Rs. 10 each the sum total of all the units constitutes
corpus of mutual fund.
SPONSORS
Sponsor of a mutual fund are those who establish the mutual fund trust and the AMC
they constitute the shareholders of the AMC and receive dividends on profits made by
the AMC. SEBI rules stipulate that mutual fund trust as well as the AMC must
maintain an arm’s length relationship with the sponsors to avoid any conflict to
interests, which may affect the unit holders.
INCOME FUND
These Funds invest largely in fixed income securities like bonds and debentures. Such
funds earn returns more regularly than a growth fund but level of returns over longer
periods normally lag behind those offered by growth funds while returns in such
funds may be regular, their scale may fluctuate depending upon the prevalent interest
rates and credit quality of the debt securities.
GROWTH FUNDS
Growth funds predominantly invest in stock market securities and carry risks larger
than income funds. Since stock markets travel through a natural cycle of boom and
bursts one should normally stay invested inequity funds for a longer times to earn
higher returns.
Equity funds may earn higher but they also carry larger risks. For risk taking investor
equity are best suited.
BALANCED FUNDS
A balanced fund is the mixture of income fund and growth fund invested partly in
equity to achieve a trade-of between risk and return.
CLOSE ENDED
In a close-ended fund an investor is allowed to subscribe only during the period of the
initial offer. Close-ended funds mature after a specified period.
OPEN ENDED FUNDS

Those funds in which investor can invest & withdraw whenever they wish, after the
close of initial offer. Withdrawals are allowed at NAV minus a back end load.
LOCK IN PERIOD
Time period during which investor can neither redeem nor they transfer their holdings
to others. Lock in period is imposed to allow fund manager to deploy money for an
adequate period of time to earn a reasonable return premature withdrawals may
destabilize the fund & are not beneficial to the interests of investors.
MANAGEMENT FEES
An AMC that mangers & markets a mutual fund scheme is entitled to a management
fee@ 1% to 25% of the total funds managed, it could be charged to the scheme
irrespective of the performance of the scheme.
REDEMPTION
Disbursement of unit capital on the maturity of that particular scheme to all its
existing unit holders.
MARKET PRICE
The price at which units of mutual funds are quoted in stock exchange where they are
listed.
REGISTRAR
Organization appointed by an AMC to the schemes it is registered, monitored, and
regulated by SEBI, it provides required services like system capabilities back up,
accepts and processes investors applications in informs AMC about amounts
received/disbursed for subscription/ purchase/ redemption it also handles
communications with investors, perform data entry services and dispatches account
statements.
CUSTODAIN
Banking organization that keeps in safe custody all the securities & other instruments
belonging to the fund to insure smooth inflow & outflow of securities. It is also
approved regulated and registered with SEBI.
EXIT LOAD
Value of deduction from NAV on the date when one choose to withdraw from a fund,
load is imposed because withdrawals carry transaction cost to AMC it can not be
more than 6% of NAV of corpus as prescribed by SEBI many schemes offer
redemption facility without exit load.
ENTRY LOAD
Charge paid by unit holder when he invests an amount in the scheme. Mutual funds
incur many expenses during an issue, which are charged to the scheme. Such load is
called entry load.
LIQUIDITY
Ability of investors to change its unit into cash within minimum time as and when he
needs money.
TRANSPARENCY
Basic feature of mutual funds is transparency, their functioning is very efficient, well
monitored & transparent working of AMC is regulated by SEBI it is audited weekly,
it has to work under strict guidelines issued by SEBI, and its NAV is calculated and
published daily so that there is no chance of any default in the working of Mutual
Funds.
CONCLUSION
Every person does not have all skills. Some are good at someplace but fail at another
place. So we do work in area where we have core competence.
The Mutual Fund has great scope but it still not as much famous as Stock Market. The
people don’t know how to invest in it and what is the benefit from it.
So, the work of financial advisor is too aware the client for the different schemes of
mutual fund for they work. Without the financial advisor the investor cannot easily
convince to invest in mutual fund. Financial advisor are the backbone of the Mutual
Fund Organization in this competition time.
We also conclude that from this we learn so many things like Self-discipline,
Leadership Quality, regularity at work, innovation on consistent basis, how to survive
in competition, etc.
This RESERCH PROJECT gives us great platform for applying our theoretical
knowledge which we learned in MBA.
At last we say that this RESERCH is very important for the current as well as future
carrier prospective.
BIBLIOGRAPHY
Websites
 www.the-finapolis.com
 www.Birla mutualfund.com
 www.mutualfundsindia.com
 www.valueresearchonline.com
 www.moneycontrol.com
 www.morningstar.com
 www.yahoofinance.com
 www.theeconomictimes.com
 www.rediffmoney.com
 www.bseindia.com
 www.nseindia.com
 www.investopedia.com
Journals & Other References
 The Economic Times
 Business Standard
 The Telegraph
 Business India
 Fact sheet and statements of various fund houses.

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NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTOR

“Need of financial advisor for Mutual Fund Investors”

A project report submitted to in the partial fulfillment of requirement of

MASTER OF BUSINESS ADMINISTRATION

Under the guidance of

Mr. Hitesh Daxini

Kum. M.H.GARDI SCHOOL OF MANAGEMENT

GUJARAT TECHNOLOGICAL UNIVERSITY

We like to first heartily thanks to GUJARAT TECHNOLOGICAL UNIVERSITY

We thankful to Dr. Sandip Solanki Director of MHGSM. For giving us chance to do

Hereby declare that the project report entitled “NEED OF FINANCIAL

Sr.No. Subject Page No.

A mutual fund is answer to all these situations. It appoints professionally qualified

Today, mutual funds collectively manage almost as much as or more money as

A mutual fund is a professionally-managed firm of collective

NAV = Total value of the fund

ADVANTAGES OF MUTUAL FUNDs

The primary advantage of funds (at least theoretically) is the professional

DRAWBACKS OF MUTUAL FUNDs

Fees and commission

RISK ASSOCIATED WITH THE INVESTMENT IN THE

DIFFERENT TYPES OF RISK IN MUTUAL FUNDs

Sometimes it is referred to as “loss of purchasing power”. Whenever the rate of

Interest Rate Risk

In the sectored fund schemes, investments will be predominantly in equities of

Changes in the Government Policy

PERFORMANCE OF MUTUAL FUND IN INDIA

The supervisory authority adopted a set of measures to create a transparent and

ORGANISATION OF MUTUAL FUND

ORGANISATION OF MUTUAL FUND

2. Mutual Fund as Trust

Eligibility of Board of Trustees or a Trustee Company

 Not guilty of moral turpitude

 Appoint AMC with SEBI approval

 Investment Management Agreement between trustee and AMC with approval

 Ensure AMC is managing funds independent of other activities

4. Other Fund Constituents

i. Custodian and Depositories

iii. Transfer Agent

HOW TO INVEST IN MUTUAL FUND

THE PROCESS TO PURCHASE AND REDEEM UNITS

Another method that is common is automatic withdrawals. These allow

PROCESS OF INVESTING IN MUTUAL FUND

 Identify Your Investment Needs

 Choose the Right Mutual Fund

 Select the Ideal Mix of Schemes

The best approach is to invest a fixed amount at specific intervals, say

 The Final Step

THE COST ASSOCIATED WITH MUTUAL FUND

The Expense Ratio

These include necessities such as postage, record keeping, customer service,

4. Back-end loads (also known as deferred sales charges)

CATEGORIES OF MUTUAL FUND

Mutual funds can be classified as follow:

 Based on their investment objective

ii. Balanced fund

 Debt-oriented funds -Investment below 65% in equities.

 Equity-oriented funds -Invest at least 65% in equities, remaining in debt.

iii. DEBT FUND

 MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an

1. Systematic Investment Plan

2. Systematic Transfer Plan