A Project report on Mutual Funds

Submitted by: Rahul Arjun Mridula Chetna Neelam Pooja

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Submitted to: Prof. L.P. Sabnis.

Mutual Funds

Introduction
Mutual Fund is a pool of money, collected from investors, and is invested according to certain investment objective.

Mutual Fund is the pooling of Money from the retail investors to the corporate investors for Sustainable growth of the investments.

Operational flow chart of Mutual funds

POOL THEIR PASS ON TO INVESTORS MONEY TO

R E T U R N S

FUND MANAGER

GENERATE

INVEST IN

SECURITIES & STOCK MARKET

Features of mutual fund

Belongs to the investors Managed by investment professionals Portfolio investors share in the funds is denominated by units

Result: As shown in the above chart 60% business men want to invest money into the mutual fund because they have interest in mutual fund, maximum customers want to invest their money into the mutual fund because their interest decreased in equity market they know that in this field, risk is low as compared to share market. 40% government employees want to invest their money into the mutual fund, 56% youngsters and 40% private employees want to invest their money into the mutual fund.

Result: From the above graph, mostly customers want to invest their money into the gold, they purchase gold, according to customers, price of gold always increase and this is always profitable in future. Youngsters and business men have interest in mutual fund; they like to take risk because they know that, if risk is high then return may be high. 28% business men,16% government employees, 40% youngsters, 20% private employees like to invest money into the mutual fund

Result: As reliance is the brand name in India, the company has good reputation in the market, almost everyone heard about the reliance and their companies. Brand management is also required to increase the product perceived value to the customer. Thats the reason behind 37% of the people choosing reliance.

Frequently used terms

Net asset value (NAV) Sale price Repurchase price Redemption price Sales load Repurchase load

Top 10 Mutual funds you must own

DSPML opportunities fund Franklin India flexi cap HDFC equity fund HDFC Top 200 Prudential ICICI Dynamic fund Reliance Vision SBI Magnum contra SBI Magnum global 94 Sundaram BNP Paribas Leadership Sundaram BNP Paribas Select Midcap

Types of Mutual Fund

Money Market Funds/Cash Funds

Relatively low risk Reflects short term dividend Aim to provide easy liquidity, preservation of capital and moderate income.

Gilt Funds
Invest in Gilts which are government securities with medium to long term maturities. Virtually zero risk of default as it is backed by the Government. It is most sensitive to market interest rates. The price falls when the interest rates goes up and viceversa.

Debt Funds
Invest in debt instruments issued not only by government, but also by private companies, banks and financial institutions and other entities such as infrastructure companies/utilities. Target low risk and stable income for the investor.

Have higher price fluctuation as compared to money market funds due to interest rate fluctuation.
Carry both credit risk and interest rate risks.

Equity Funds
Acquired directly in initial public offering or through secondary market and keep a part in cash to take care of redemptions. Risk is higher than debt funds but offer very high growth potential for the capital.

Distribution Channels
Agents Distribution Companies Banks and NBFCS

Agent
Acts as a broker between the fund and the investor. Also sells other services. Financial advisor

Distribution companies
Has several employees and sub brokers Manages distribution of several funds Receives commission

Bank and NBFCS

Private and foreign banks are involved Provide similar services like Distribution Companies. Commission basis.

Advantages and Disadvantages of Mutual Funds

Advantages of Mutual Funds

Portfolio diversification Professional management Reduction/Diversification of Risks

Wide Choice to suit risk-return profile: Investors can chose the fund based on their risk tolerance and expected returns

Cont
Liquidity Convenience and Flexibility Transparency: Fund gives regular information to its investors on the value of the investments

Disadvantages of Mutual Funds

No control over costs: The investor pays investment management fees as long as he remains with the fund No tailor-made portfolios: The very high net-worth individuals or large corporate investors may find this to be a constraint

Cont
Managing a portfolio of funds: Availability of a large number of funds can actually mean too much choice for the investor Delay in redemption : It takes 3-6 days for redemption of the units and the money to flow back into the investors account.

10 REASONS TO BUY A MUTUAL FUND

1. 2. 3. 4. 5. Mutual Funds Offer Diversification Mutual Funds are Professionally Managed Mutual Funds Come in Many Varieties Mutual Funds Have Low Minimums Systematic Investing and Withdrawals with Mutual Funds

Cont
6. Mutual Funds Offer Automatic Reinvestment 7. Mutual Funds Offer Transparency 8. Mutual Funds Are Liquid 9. Mutual Funds Have Audited Track Records 10.Safety of Investing in Mutual Funds