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SUMMER INTERNSHIP PROJECTREPORT
ON
COMPARATIVE STUDY OF MAJORCOMPANIES
MUTUAL FUNDS & ULIP PLANS
WITH SPECIAL REFERENCE
TO
‘BAJAJ CAPITAL’
BHUBANESWAR (ORISSA)
Submitted in partial fulfillment of requirements for the degreeof
Master of Business Administration (2010 – 2012) affiliated to
Biju Pattnaik University of Technology, Rourkela (Orissa)
UNDER THE ESTEEMED GUIDENCE OF :-SUBMITTED BY :-
Mr. Sanat Kumar PattnaikNabadip Saikia Lecturer1006283061 MarketingMBA
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RAJDHANI COLLEGE OF ENGG & MANAGEMENT
BHUBANESWAR, ORISSA
CERTIFICATE FROM THE GUIDE
This is to certify that the Summer Internship projectwork titled
“COMPARATIVE STUDY OF MAJOR COMPANIES MUTUALFUND & ULIP PLANS WITH SPECIAL REFERENCE TO‘BAJAJ CAPITAL’ BHUBANESWAR, (ORISSA)” is abonafide work of Nabadip Saikia, UniversityRoll No- 1006283061 is carried out in partial fulfillmentfor the award of M.B.A. From RAJDHANI COLLEGE OFENGG. & MANAGEMENT IS affiliated to Biju PattnaikUniversity of Technology, Rourkela (Orissa) under my
guidance.
This project has not been submitted earlier for theaward of any degree/diploma of any otherInstitution/University.
NAME OF THE GUIDE:Mr. Sanat Kumar Pattnaik
DESIGNATION OF THE GUIDE:LECTURER IN MARKETING
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SIGNATURE OF THE GUIDE:PL
ACE:BH
UBANESWAR(O
RISSA)DA
TE:SE
PTEMBER, 2011
DECLARATION BY THE STUDENT
I hereby declare that this project report entitled
“COMPARATIVE STUDY OF MAJOR COMPANIES MUTUALFUNDS & ULIPS PLANS WITH SPECIAL REFERENCE TOBAJAJ CAPITAL, BHUBANESWAR (ORISSA)”
Has been written and prepared by me under theguidanceand supervision of Mr. Sanat Kumar Pattnaik inrequirement for the
fulfillment of Master of business administration.I also declare that this project is the result of my ownefforts andHad not been presented to any other university orinstitution for theaward of any degree or diploma.
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DATE:-SEPTEMBER 2011NABADIP SAIKIAPLACE:-BHUBANESWAR, (ORISSA)
ACKNOWLEDGEMENT
No work is considered complete unless dueindebtedness is expressed to all those, who made thework successful. Concentration, dedication, hard work &application are essential but not the only factors toachieve the desired goal. There must be supplemented
by guidance, assistance and co-operation of people tomake it a success. Every complete successfulassignment is the result of many hands joined together.
A formal statement of acknowledgement is hardlysufficient to express my gratitude towards thepersonalities who have helped me to undertake thistraining.
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I am highly indebted to Mr.Sambit Mohanty, (areamanager)Mr.Rabindra Nath Das (Asst Manager), Mr.Kalandi Das &cooperative staff of BAJAJ CAPITAL, BHUBANESWAR whogave me weighty guidance in the study. It was reallynice experience to work in their guidance and helpingme in knowing practical things, which was my mainobjective, before entering the corporate world. Theyhave provided me an Unconditional support during theproject work.
I am highly thankful to Mr.Sanat Kumar Pattnaik for hisGuidance. He had been a constant source of inspirationand his critical evaluations during our course in thecollege have helped me to complete this projectproperly.
Through this acknowledgement, I would like to grab theopportunity to thank all those who helped me from thestart of my training, to its end.
It is warmth and efforts of my teachers, friends and wellwishers who have been a source of strength andconfidence for me in the end devour. Finally, yetimportantly, we would like to thank almighty forblessing me to do and complete this project.
NABADIP SAIKIA
PREFACE
The present era is undoubtedly a management era.Management is an important function in any
organization. A management is one of the mostimportant fields which are widely used in every stage of
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life. The effective management can be achieved only byeffective management training and developing skillto understand the organizational level this projectwork is a part of the course of MBA and was done atBajaj Capital.
This project is prepared on the basis of awareness of Bajaj Capital in market andunderstanding the requirement of financial planningadvisor by the customer.
Bajaj Capital is world class financial service providingcompany who provides financial solution to customer.
It consists of an integrated team consisting of highlyqualified, versatile and experienced f inanceprofessionals. This project helps me to betterunderstanding of market and financial productsand their benefits.
Now I am feeling the great pleasure in delivering this
project because of a better skill of handling thesituation and customer understanding.
CONTENTS
· INTRODUCTION
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(a) Bajaj Capital La Premier’s Wealth ManagementServices.(b) Bajaj Capital’s 4-step Advisory Process.(c) Services of Bajaj Capital.
· COMPANY PROFILE(a) Four decades of excellence.(b) Wide range of services.(c) The History of Bajaj Capital.(d) Mission, Aims & Objectives.(e) The Significance of Logo.(f) Bajaj Capital’s Vale Added Services.(g) Management Team.
· OBJECTIVES OF THE STUDY.
· COMPARATIVE STUDY OF MAJOR COMPANIES(a) MUTUAL FUNDS &(b) ULIPS
· RESEARCH METHODOLGY· DATA ANALYSIS AND INTERPRATIONS· RESULTS & FINDINGS· LIMITATIONS. CONCLUSION· RECOMMENDATION· BIBLIOGRAPHY· ANNEXURE
INTRODUCTION
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INTRODUCTION
Bajaj Capital is one of India’s leading Financial Services
companies offering Free Advice on Investments,
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Insurance, Tax Saving, Retirement Planning, Financial
Planning, Children’s Future Planning and other services.
They are also SEBI-approved Category I Merchant
Bankers.
Today, Bajaj Capital is a one of the largest financial
planning and investment advisory companies in India,
with a strong presence all over the country. They offer a
comprehensive range of services including financial
planning and investment advice, and the entire gamut
of financial instruments and investment products of
almost all major companies, both public and private. In
addition, they also provide investment assistance by
helping clients complete all the formalities, and help
them keep regular track of their investments.
They offer personalized Investment Advisory andFinancial Planning services to individual investors,
corporate houses, institutional investors, Non- Resident
Indians (NRIs) and High Net worth Clients, among
others.
As one of India’s largest distributors of financial
products, they offer a wide range of investment
products such as mutual funds, life and generalinsurance, bonds, post office schemes, etc. offered by
reputed public and private and government
organizations.
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Bajaj Capital La Premier’s WealthManagement Services
Bajaj Capital La Premier was created to cater to theneeds of High Net worth Individuals. It is a specializedgroup comprising handpicked professionals thatprovides exclusive and world-class wealth managementservices to a select group of clients.
Essentially, the Wealth Management Services aim to
help clients preserve, enhance and grow their wealth by
implementing the well-accepted principles and global
best practices on wealth management. To cater to theelite segment of High Net worth Clients, La Premier
offers an exclusive range of value-added service,
including:
• Personalized attention through a dedicatedRelationship Manager
• Market information sharing through quality in-houseresearch reports,
• Periodic portfolio review and regular update onportfolio valuation
• Pro-active advice on market events and triggers
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• Immediate alerts on new products and New FundOffers
• Need-based interactions with Fund Managers
• Independent, unbiased advice
Bajaj Capital’s 4-step AdvisoryProcess
Investment consultancy is a complex business,
requiring an intimate understanding of several financial
parameters and human factors, including the client’s
requirements and the market subtleties. Being a
process-driven organization, they have perfected a
four-step advisory procedure, which includes:-
• Need Analysis
• Asset Allocation
• Portfolio Construction
• Ongoing Review
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Bajaj Capital was one of the first companies in the
organized sector to offer investment advisory and
financial planning services along with a wide spectrumof financial products and services, all under one roof.
SERVICES OF BAJAJ CAPITAL
They are SEBI approved merchant banker, investmentadvisory and financial planer. They have a track recordof ethical dealing for last, 40 years and have had thehonors of helping millions of investor achieve their life’sfinancial goal.
Bajaj capital is acting like a super market of financialproducts. They offer a comprehensive range of services,which will help in achieving life’s goal, all under oneroof.
Bajaj capital offers a variety of services to their clientslike:
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➢ INSURANCE➢ INVESTMENT
➢ MUTUAL FUND
➢ FINANCIAL ADVISORY➢ SYSTAMATIC INVESTMENT PLANNING (SIP)➢ FINANCIAL PLANING➢ COMPANY FIX DEPOSITS➢ BOND
➢ PENSION SCHEMES➢ POST OFFICE SCHEMES➢ HOUSING LOANS
➢ INITIAL PUBLIK OFFER (IPO)
COMPANY PROFILE
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COMPANY PROFILE
Bajaj Capital is one of India’s leading Financial Services
companies offering Free Advice on Investments,
Insurance, Tax Saving, Retirement Planning, Financial
Planning, Children’s Future Planning and other services.We also have a wide range of products and services for
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Corporate, High Net worth Individuals, and NRIs… all
under than one roof.
At Bajaj Capital, we believe in dreaming big. Dreams
inspire us to excel. They ignite hope and kindle in us
the passion to stretch our limits. We also believe that
nothing can or should stop us from realizing our
dreams… and financial constraints should be the last
thing to stop anyone.
FOUR DECADES OF EXCELLENCE
For over four decades, we have been helping peoplerealize their aspirations by helping them to make theirwealth grow, and plan their financial lives.
Today, we are a one of the largest financial planning
and investment advisory companies in India, with a
strong presence all over the country. We take pride in
serving our customers – both individual and institutional
– and are known for our strong professionalism and
work ethics.
WIDE RANGE OF SERVICES
We offer a comprehensive range of services including
financial planning and investment advice, and the
entire gamut of financial instruments and investment
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products of almost all major companies, both public and
private.
In addition, we also provide investment assistance by
helping you complete all the formalities, and help youkeep regular track of your investments. These services
and products are delivered through our network of 109
Bajaj Capital Investment Centers located all over the
country.
We are also a SEBI-approved Category I Merchant
Banker. We raise
resources for over 1,000 top institutions and corporate
houses every year, and offer specialized services to
Non-Resident Indian (NRIs) and High Net worth Clients.
WHAT YOU CAN EXPECT FROMBAJAJ CAPITAL
(A) Sound, research-based advice.(B) Unbiased, independent and need-basedadvice.(C) Prompt, courteous service.(D) Honest, ethical dealings.
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HISTORY OF BAJAJ CAPITAL
Bajaj Capital has contributed to the growth of the Indian
Capital Market at every step.
In 1965, we were the first to innovate the CompaniesFixed Deposit. Today, we are playing an active role inthe growth of the Indian Mutual Fund industry. We arealso working closely with private insurance companies todeepen India's insurance market.
Here is a brief gist of Bajaj Capital’s journeythrough the years
1964 Bajaj Capital sets up its first Investment Centre inNew Delhi to
Guide individual investors on where, when and how to
invest.
India's first Mutual Fund, Unit Trust of India (UTI) is
incorporated in the
same year.
1965 Bajaj Capital is incorporated as a Company. In thesame year, the
Company introduces an innovative financial instrument
– the Company
Fixed Deposit. EIL Ltd. (Oberoi Hotels, then known as
Associated Hotels of
India Ltd.) becomes the first company to raise
resources through Company Fixed Deposits.
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1966 Bajaj Capital expands its product range to includeall UTI schemes and Government saving schemes inaddition to Company Fixed Deposits.1969 Bajaj Capitalmanages its first Equity issue (through an associatecompany) of & Wells India Ltd.; right from drafting theprospectus to marketing the issue.
Contd…1975 Bajaj Capital starts offering 'need-based'investment advice to investors, which would later beknown as 'Financial Planning' in the investment world.
1981 SAIL becomes the first government company toaccept deposits,
Followed by IOC, BHEL, BPCL, HPCL and others; thus
opening the
floodgates for growth of retail investment market in
India.Bajaj Capital plays an active role in all the schemes as
'Principal Brokers'
1986 Public Sector Undertakings (PSUs) begin makingpublic issues of bonds MTNL, NHPC, IRFC offer a series of Bond Issues.
Bajaj Capital isamong the top ranks of resource mobilizes.
1987 SBI leads the launch of Public Sector Mutual Fundsin India. BajajCapital plays a significant role in fund mobilization forall these players.
1991 SBI issues India Development Bonds for NRIs.Bajaj Capital becomes
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the top mobilize with collections of over US $20 million.
1993 The first private sector Mutual Fund – Kothari
Pioneer – is launched, followed by Birla and Alliance inthe following years. Bajaj Capital plays an active role
and is ranked among the top mobilizes for all these
schemes.
1995 IDBI and ICICI begin issuing their series of Bondsfor retail investors. Bajaj Capital is the co-manager in all
these offerings and consistently ranks among the topfive mobilizers on an all-India basis.1997 Private sector players lead the revival of MutualFunds in India through Open-ended Debt schemes.Bajaj Capital consolidates its position as India's largestretail distributor of Mutual Funds.
Contd…
1999 Bajaj Capital begins marketing Life and GeneralInsurance products of LIC and GIC (through associatefirms) in anticipation of opening up of the InsuranceSector. Bajaj Capital achieves the milestone of becoming the top 'Pension Scheme' seller in India andlaunches marketing of GIC's Health Insurance schemes.
2000 Bajaj Capital implements its vision of being a'One-stop Financial
Supermarket.' The Company offers all kinds of financial
products, including the entire range of investment and
insurance products through its Investment Centers.
Bajaj Capital offers 'full-service merchant banking'
including structuring, management and marketing of
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Capital issues. Bajaj Capital reinvents 'Financial
Planning' in its international sense and upgrades its
entire team of Investment Experts into Financial
Planners.
2002 The Company focuses on creating investorawareness for Financial
Planning and need-based investing. To achieve this
goal, the company
introduced the International College of Financial
Planning. The graduates of this institute becomeCertified Financial Planners (CFPs), a coveted
professional qualification.
2004 Bajaj Capital obtains the All India InsuranceBroking License.Simultaneously, a series of wealth creation seminarsare launched all over the country, making Bajaj Capital
a household name.
2005 Bajaj Capital launches 360° Financial Planning, asoftware-basedProgramme aimed at encouraging scientific and holisticinvesting.2007 Bajaj Capital launches Stock Broking andDepository (Demit) Services.
2008 Bajaj Capital launches Just Trade, an onlinePlatform for investing in Equities, Mutual Funds andIPO’s.
MISSION ,AIM & OBJECTIVES
Bajaj Capital's Mission Statement :-
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The focus of our organization is to be the most useful,
reliable and efficient provider of Financial Services. It is
our continuous Endeavour to be a trustworthy advisor
to our clients, helping them achieve their financialgoals.
Aim :- To serve our clients with utmost dedication andintegrity so that we exceed their expectations and buildenduring relationships.
OBJECTIVES :- To offer unparalleled quality of service through
complete knowledge of products, constant innovationin services and use of the latest technology.
To always give honest and unbiased financial adviceand earn our clients' everlasting trust.
To serve the community by educating individuals onthe merits of Financial Planning and in turn helpshape a financially strong society.
To create value for all stake holders by ensuringprofitable growth.
To build an amicable environment that accordsrespect to every individual and permits their personalgrowth.
To utilize the power of teamwork to function as a
family and build aseamless organization.
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WHY INVEST THROUGH BAJAJCAPITAL
Wide range of products and services.
41 years’ experience as Investment Advisorsand Financial Planners.
More than seven lakhs satisfied clients all overIndia.
Countrywide network of 109 branches.
Over 12,000 NRI clients across the globe.
Personalized wealth management advice.
24 x 7 online accessibility throughwww.bajajcapital.com.
Strong team of qualified and experiencedprofessionals including CAs,MBAs, MBEs, CFPs,CSs, Insurance experts, Legal experts and,
SEBI-Approved Category I Merchant Bankers.
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THE SIGNIFICANCE OF LOGO
Our logo depicts Lord Ganesha who is the source of allour values and ethics in business. The large ears of LordGanesha remind us to hear more. We listen carefully toour clients to understand their needs.
The weight of the trunk on the mouth symbolizessilence. We work silently, without blowing our owntrumpet. The long trunk symbolizes continuousexploration. We explore all avenues to provide the bestinvestment opportunities for our clients. The heavyposture of Ganesha symbolizes stability. We help ourclients to attain financial stability through wiseinvestments.
Lord Ganesha is known as the remover of obstacles andbestower of prosperity. We emulate His example and try our best tohelp our clientsattain prosperity by proper financial planning.
Our logo has a yellow background. Yellow is the color of
gold, which
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symbolizes wealth. According to Vedic lore, it is also thecolor associatedwith Brihaspati, the guru and counselor of the Gods. Weoffer our clientssage counsel to make their wealth grow.
The letters are in red. Red is the color rajas –symbolizing power andincessant activity. It symbolizes our aggressive questfor your well-being and happiness. The white streakrepresents the trunk of Lord Ganesha. White is the colorof satva guna, and implies our selfless commitment to
your life-long happiness.
Contd…
By your side whenever you need us…
As your true partner, we promise to use our knowledgefor your benefit. Be it advice on the right insuranceproducts or looking after your rights and interests incase of a claim, we’ll be by your side... whenever youneed us. Risks are unavoidable in personal life and inbusiness, but can be managed by proper planning.
That's exactly where we at Bajaj Capital InsuranceBroking Ltd. step in. At BCIBL, an IRDA licensed directbroker (bearing license number DB042/02), we call it Risk Management. We help you toidentify the potential risks and pass some of them on toinsurance companies.We are your partners, who help you to identify andunderstand various risks, prioritize them and eventually
manage them. As a broker, we do not offer you just asingle option but multiple options available, and help
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you select the most appropriate one.
BAJAJ CAPITAL WITH THEIR CIENTS
Bajaj capital is achieving great success in order toprovide reliable, useful, efficient financialservices. It IS THEIR CONTINIOUS ENDEAVOUR TOBE A TRUST WORTHY ADVISOR TO THEIRCLIENTS, HELPING THEM TO ACHIEVE THEIRFINANCIAL GOALS.
Bajaj capital provides services to their clientswith utmost dedication and integrity so that
they exceed their expectations and buildenduring relationships.
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Bajaj capital offer unparallel quality of servicesthrough complete knowledge of products,constant innovation in services and use of thelatest technology.
Bajaj capital always gives honest and unbiasedfinancial advice.
One of its aims is to serve the community byeducating individuals on the merits of financialplanning and in turn help in shaping afinancially strong society.
Bajaj capital ensures profitable growth for all
stockholders.
BAJAJ CAPIT AL’S VAL U E ADDE D
S E RVIC E S
Bajaj capital offers comprehensive range of
services including financial planning and invests
mint advice, and entire gamut of financial
instruments and investment products of almostall major companies, both public and private. In
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addition, we also provide investment assistance
by helping you complete all the formalities, and
help you keep regular track of your investments.
➢ REGULAR INFORMATION UPDATE They keep us updated on the latestopportunities in the world of investments.
➢ NEED BASED ADVICE Their advice is all “need based”. They give
customized advice only after understanding onesfinancial goals, risk tolerance and other prioritiesin life.
➢ RESEARCH BASED ADVICE Their professional research team will help onewith advice that is thoroughly based on analysis
of market dynamics, government policies andclose monitoring of global developments.
➢ FREE! INVESTMENT HEALTH CHECK They help one to achieve his financial goals byassessing his risk tolerance level andrecommending to him a suitable asset allocation
model for his investments.
Contd…➢ DOOR-TO-DOOR SERVICE
They have vast network of branches all overIndia, helping one to get services at his door step.
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➢ REGULAR INFORMATION Through their in houses publications like Bajajcapital investors India, Investors outlook,investment, s select list and others, they keepone updated on the latest opportunities in theworld of investments.
➢ ACCESSIBILITY They has branches spread nation wide,
covering all-important Indian cities almost everynook and corner of the country.
➢ TAILOR MADE SOLUTIONSOne gets easy transactions and tailor-madesolutions through their, investment centerseven at the tinkle of phone.
➢ SPECILISATION IN ALL CLIENT SEGMENTS
They offer financial planning for housewives,celebrities, players, doctors, architects,professionals, army officers and the likes.
➢ 24 HOURS AVILABILITY
Bajaj capital is available to one, 24 hours aday on their website, WWW.Bajajcapital.com
MANAGEMENT TEAM OF BAJAJ
CAPITAL
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Mr. K K Bajaj Mr. RajivDeep Bajaj
CHAIRMAN VICE CHAIRMAN &
MANAGING DIRECTOR
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Mr.Sanjiv Bajaj
Mr.Anil Chopra
MANAGING DIRECTOR GROUP
CEO & DIRECTOR
MUTUAL FUNDS
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What are Mutual Funds?
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 then invested in
capital market instruments such as shares, debentures
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and other securities. The income earned through these
investments and the capital appreciations realized are
shared by its unit holders in proportion to the number of
units owned by them. Thus a Mutual Fund is the mostsuitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally
managed basket of securities at a relatively low cost.
Today, the mutual fund industry in the country
manages around Rs 100,000 crore of assets, a large
part of which comes from retail investors. 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 the answer to all these situations. It
appointed professionally qualified and experienced staff
that manages each of these functions on a full time bas
The history of the mutual fund in India can
be divided into 5 important phases:
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1963-1987: The Unit Trust of India was the sole player in the
industry. Created by an Act of Parliament in 1964, which is even
today the single largest mutual fund scheme. UTI created anumber of schemes such as monthly income plans, children’s
plan, equity oriented schemes and offshore funds during this
period. UTI managed assets worth Rs. 6700 core at the end of
this phase.
1987-1993: In 1987 public sector banks and financial
institutions entered the mutual fund industry. SBI mutual fund
was the first non-UTI fund to be set up in 1987. Significant shift
of investors from deposits to mutual fund industry happened
during this phase. Most funds were growth oriented close-ended
funds. By the end of this period, assets under UTI’s
management grew to Rs. 38,247 crore and public sector funds
managed Rs. 8750 crore.
1993-1996: In 1993, the mutual fund industry was open to
private players, both Indian and foreign. SEBI’s first set of
regulations for the industry were formulated in 1993, and
substantially revised in 1996. Significant innovations in
servicing, product design and information disclosure happened
in this phase, mostly initiated by private sector players.
1996-1999: The implementation of the new SEBI regulations
and the restructuring of the mutual fund industry led to rapid
asset growth. Bank mutual funds were re-cast according to SEBI
recommended structure, and UTI came under voluntary SEBIsupervision.
1999-2002: This phase was marked by very rapid growth in the
industry, and significant increase in the market share of private
sector players. Assets crossed Rs. 1, 00,000 crore. The tax
break offer to mutual funds in 1999 created arbitrage
opportunities for a number of institutional players. Bond funds
and liquid funds registered the highest growth in this period,
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accounting for nearly 60% of the assets. UTI’s share of the
industry dropped to nearly 50%.
HOW IS A MUTUAL FUND SET UP?
A mutual fund is set up in the form of a trust, which has
sponsor, trustees, Asset Management Company (AMC) and
custodian. The trust is established by a sponsor/s that is like
promoter of a company. The trustees of the mutual fund hold
its property for the benefit of the unit holders. AssetManagement Company (AMC) approved by SEBI manages the
funds by making investments in various types of securities.
Custodian, who is also registered with SEBI, holds the securities
of various schemes of the fund in its custody. The trustees are
vested with the general power of superintendence and direction
over AMC. They monitor the performance and compliance of
SEBI Regulations by the mutual fund.
SEBI Regulations require that at least two thirds of the directorsof trustee company or board of trustees must be independent
i.e. they should not be associated with the sponsors. Also, 50%
of the directors of AMC must be independent. All mutual funds
are required to be registered with SEBI before they launch any
scheme.
There are many entities involved and the diagram below
illustrates the organizational set up of a mutual fund:
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Net asset value (NAV) of a scheme
Net asset value denotes the performance of a particular scheme
of a mutual fund. Mutual funds invest the money collected fromthe investors in securities markets. In simple terms, NAV is the
market value of the securities held by the scheme. Since market
value of securities changes every day, NAV of a scheme also
varies on a day-to-day basis. The NAV per unit is the market
value of securities of a scheme divided by the total number of
units of the scheme on any particular date.
For example, if the market value of securities of a mutual fund
scheme is Rs 200 lakes and the mutual fund has issued 10 lakh
units of Rs 10 each to the investors, then the NAV per unit of the
fund is Rs 20. NAV is required to be disclosed by the mutual
funds on a regular basis - daily or weekly - depending on the
type of scheme.
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By Structure
Open–ended funds: Investors can buy and sell units of open-
ended funds at NAV-related price every day. Open-end funds do
not have a fixed maturity and it is available for subscription
every day of the year. Open-end funds also offer liquidity to
investments, as one can sell units whenever there is a need for
money.
Close-ended funds: These funds have a stipulated maturity
period, which may vary from three to 15 years. They are open
for subscription only during a specified period. Investors have
the option of investing in the scheme during initial public offer
period or buy or sell units of the scheme on the stock
exchanges. Some close-ended funds repurchase the units at
NAV-related prices periodically to provide an exit route to the
investors.
Interval Funds: These funds combine the features of both open
and close-ended funds. They are open for sale and repurchase
at a predetermined period.
By Investment objective
Growth funds: They normally invest most of their corpus in
equities, as their objective is to provide capital appreciation
over the medium-to-long term. Growth schemes are ideal for
investors with risk appetite.
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Income funds: As the name suggests, the aim of these funds is
to provide regular and steady income to investors. They
generally invest their corpus in fixed income securities like
bonds, corporate debentures, and government securities.
Income funds are ideal for those looking for capital stability and
regular income.
Balanced funds: The objective of balanced funds is to provide
growth along with regular income. They invest their corpus in
both equities and fixed income securities as indicated in the
offer documents. Balanced funds are ideal for those looking for
income and moderate growth.
Money market funds: These funds strive to provide easy
liquidity, preservation of capital and modest income. MMFs
generally invest the corpus in safer short-term instruments like
treasury bills, certificates of deposit, commercial paper and
inter-bank call money. Returns on these schemes hinges on the
interest rates prevailing in the market. MMFs are ideal for
corporate and individual investors looking to park funds for
short periods.
Other schemes
Tax saving schemes: Tax saving schemes or equity-linked
savings schemes offer tax rebates to investors under section 88
of the Income Tax Act. They generally have a lock-in period of
three years. They are ideal for investors looking to exploit tax
rebates as well as growth in investments.
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Special schemes: These schemes invest only in the industries
specified in the offer document. Examples are InfoTech funds,
FMCG funds, pharma funds, etc. These schemes are meant for
aggressive and well-informed investors.
Index funds: Index Funds invest their corpus on the specified
index such as BSE Sensex, NSE index, etc. as mentioned in the
offer document. They try to mimic the composition of the index
in their portfolio. Not only the shares, even their weightage is
replicated. Index funds are a passive investment strategy and
the fund manager has a limited role to play here. The NAVs of
these funds move along with the index they are trying to mimic
save for a few points here and there. This difference is called
tracking error.
Sector specific schemes: These funds invest only specified
sectors like an industry or a group of industries or various
segments like ‘A’ Group shares or initial public offerings.
Measuring Performance of Mutual Funds
Benchmark Method
Under this method a comparison is made between the returns
given by a market index and the fund over a given period of
time. If the returns generated by the fund as measured by
changes in NAV over that given period of time are greater than
those generated by the benchmark then the fund is deemed to
have outperformed the market portfolio.
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Sharps Ratio
This measure uses standard deviation as a measure to evaluate
a fund’s risk-adjusted returns. Mathematically, it is arrived at by
deducting the risk free returns from the returns generated by
the fund and dividing the residual figure by the standard
deviation of the fund's returns. One thing that has to be kept in
mind while using this measure is that the ratio is not an
absolute figure. Its real utility lies in inter scheme comparison.
where,
S = Sharpe's Indexrp = average monthly return of fundrf = risk free return
The sharp ratio is the return generated over the risk free return,
per unit of risk. Risk in this case is to taken as funds standard
deviation. As standard deviation represents the total risk
experienced by the fund, the sharps ratio generate the return
generated by undertaking the all possible risks. A higher sharps
ratio is better as it represent the higher return generated per
unit of risk.
BETA-A measure is of the volatility or systematic risk of a
S = R P – R f /σ p
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security or a portfolio in comparison to the market as a whole. A
beta of 1 indicates that the security’s price will move with the
market. A beta of less than then 1 means that the security will
be less volatile than the market. A beta of greater than
1indicates that the security price will be more volatile than the
market. For example, if a stock beta is 1.2, it’s theoretically
20% more volatile than the market.
Beta is ascertained mathematically by finding the covariance of
the returns of the scrip to those of the market and then dividing
it by the variance of the market returns. As a market
professional one is aware of his or her investment objective and
how much risk he or she can assume and can best descried
whether to use monthly, weekly or daily pricing information for
the calculation of beta.
ALPA- To analyze the performance of the investment manager
you must not look only the overall return of the portfolio , butalso the risk of that portfolio For example they are two mutual
funds both are having the return of 12%, a rational investor will
want the fund which is less risky. Jensen’s method is one of the
way which help us in determining if a portfolio is earning proper
return for its level of risk. If the value is positive then the
portfolio is earning excess return.
Covariance (Portfolio’s NAV, market index)
BETA(β)=
Variance (Market Index)
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R- Squared-R- Squares value ranges from 0 to 1. An r-square of
1 means that all the movement of the securities is completely
explained by the movement in the index. A high R-square
between (0.85 and 1) indicates the funds performance patterns
have been in the line with the index. A fund with the low R-
square (.70 or less) doesn’t act much like index.
P/B Ratio- This ratio is used to compare stocks market value
with it’s book value. It is calculated by dividing the current
closing price of the stock by the latest quarter’s book value per
share. A low P/B ratio means that the stock is undervalued.
However it could be means that something is fundamentally
wrong with the company.
P/E Ratio-A valuation ratio of a company’s current share price
compared to its pre-earning share.
ADVANTAGES OF INVESTING IN MUTUAL FUNDS
Stock Price
P/B Ratio=
Total asset – Intangible asset and liability
Market value per share
P/E Ratio=
Earning per share
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Diversification: A single mutual fund can hold securities from
hundreds or even thousands of issuers, far more than most
investors could afford on their own. This diversification sharply
reduces the risk of a serious loss due to problems in a particular
company or industry.
Professional management: Few investors have the time or
expertise to manage their personal investments every day, to
efficiently reinvest interest or dividend income, or to investigate
the thousands of securities available in the financial markets.
They prefer to rely on a mutual fund's investment adviser. With
access to extensive research, market information, and skilled
securities traders, the adviser decides which securities to buy
and sell for the fund.
Liquidity: Shares in a mutual fund can be bought and sold any
business day, so investors have easy access to their money.
While many individual securities can also be bought and sold
readily, others aren't widely traded. In those situations, it could
take several days or even longer to build or sell a position.
Convenience: Mutual funds offer services that make investingeasier. Fund shares can be bought or sold by mail, telephone,
or the Internet, so you can easily move your money from one
fund to another as your financial needs change. You can even
schedule automatic investments into a fund from your bank
account, or you can arrange automatic transfers from a fund to
your bank account to meet expenses. Most major fund
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companies offer extensive recordkeeping services to help you
track your transactions, complete your tax returns, and follow
your funds' performance.
DISADVANTAGES OF INVESTING IN MUTUAL
FUNDS:
No Guarantees: No investment is risk free. If the entire stock
market declines in value, the value of mutual fund shares willgo down as well, no matter how balanced the portfolio.
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 commissions: All funds charge administrative fees to
cover their day-to-day expenses. Some funds also charge sales
commissions or "loads" to compensate brokers, financial
consultants, or financial planners. Even if you don't 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 percent 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.
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Management risk: When you invest in a mutual fund, you
depend on the fund's manager to make the right decisions
regarding the fund's portfolio. If the manager does not perform
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.
WHAT IS ENTRY AND EXIT LOAD?
Some Asset Management Companies (AMC’s) have sales
charges, or loads, on their funds (entry load and/or exit load) to
compensate for distribution costs. Funds that can be purchased
without a sales charge are called no-load funds. Entry load is
charged at the time an investor purchases the units of a
scheme. The entry load percentage is added to the prevailingNAV at the time of allotment of units. Exit load is charged at the
time of redeeming (or transferring an investment between
schemes). The exit load percentage is deducted from the NAV
at the time of redemption (or transfer between schemes). This
amount goes to the Asset Management Company and not into
the pool of funds of the scheme.
OPTIONS FOR STRUCTURING RETURNS TO AN INVESTOR
DIVIDEND OPTION-Investors, who choose a dividend option on
their investments, will receive dividends from the mutual funds,
as and when such dividends are declared. Dividends are paid in
the form of warrants, or are directly credited to the investors’
bank accounts. There are further choices in the distribution of
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dividend. In a normal dividend plan, periodicity of dividend is
left to the fund managers, who may pay annual and/or an
interim dividend. Though investors know that they would earn a
dividend income from their further investment, the timing of the
payout is decided by the fund managers. The variants to the
normal dividend plan are pre-specified distributions schedules.
Mutual funds provide investors the option of receiving dividends
at pre-determined frequencies, which can vary from daily,
weekly, monthly, quarterly, half-yearly and annually. Investors
can choose the frequency of dividend distribution that suits
their requirements. Not all mutual funds provide all of these
frequencies as choices, though. Investors can choose an income
distribution frequency from the choices available in a particular
mutual fund product.
GROWTH OPTION-Investors who do not require periodic income
distributions can choose the growth option, where the income
earned are retained in the investment portfolio, and allowed to
grow, rather than being distributed to the investors. Investors
with longer-term horizons, and limited requirements for income,
chosen this option. The return to the investor who chooses a
growth option is the rate at which initial investment has grown
over the period for which he was invested in the fund. The NAV
of the investor choosing this option will vary with the value of
the investment portfolio, while the number of units held will
remain constant.
RE- INVESTMENT OPTION-Mutual funds also provide another
option to investors in the form of re-investment. Investors re-
invest the dividends that are declared by the mutual fund, back
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into the fund itself, at NAV that is prevalent at the time of re-
investment. In this option, the number of units held by the
investor will change with every re-investment. The value of the
units will be similar to that under the dividend option.
ULIPS
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Introduction to ULIPS
Unit-linked insurance plans, popularly known as Ulips are life
insurance policies which offer a mix of investment and
insurance similar to traditional life insurance policies such as
endowment, money-back and whole-life, but with one major
difference. Unlike traditional policies, in Ulips investment risk
lies with the insured (i.e., policy holder) and not with the
insurance company. Put another way, in case of adverse market
conditions, you can even lose your capital invested.
The returns in a ULIP depend upon the performance of the fund
in the capital market. ULIP respondents have the option of
investing across various schemes, i.e, diversified equity funds,
balanced funds, debt funds etc. It is important to remember
that in a ULIP, the investment risk is generally borne by the
investor.
In a ULIP, respondents have the choice of investing in a lump
sum (single premium) or making premium payments on an
annual, half-yearly, quarterly or monthly basis. Respondents
also have the flexibility to alter the premium amounts during
the policy's tenure. For example, if an individual has surplus
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funds, he can enhance the contribution in ULIP. Conversely an
individual faced with a liquidity crunch has the option of paying
a lower amount (the difference being adjusted in the
accumulated value of his ULIP). ULIP respondents can shift their
investments across various plans/asset classes (diversified
equity funds, balanced funds, debt funds) either at a nominal or
no cost.
Brief History of Insurance
The insurance sector in India dates back to 1818, when Oriental
Life Insurance Company like Bombay life Assurance Company, in
1823 and Tritons Insurance Company, for General Insuran.. ce,in 1850 were incorporated. Insurance ACT was passed in 1928
but it was subsequently reviewed and comprehensive legislation
was enacted in 1938 the nationalization of life insu rance
business took place in 1956 when 245 Indian and Foreign
insurance societies were first merged and then nationalized. It
paved the way towards the establishment of life insuranceCorporation (LIC) and since then it has enjoyed a monopoly
over the life insurance business in India. General Insurance
business.
Subsequently in 1973, non-life insurance business was
nationalized and the General Insurance Business
(Nationalization) ACT, 1972 was promulgated. The
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General Insurance Corporation (GIC) in its present form was
incorporated in 1972 and maintains a very strong hold over the
non-life insurance business in India. Due to concerns of
relatively low spread of insurance in the country.
The efficient and quality functioning of the Public Sector
Insurance Companies. The untapped potential for mobilizing
long-term contractual savings funds for infrastructure. The
(Congress) government set up Insurance set u an Insurance
Reforms committee in April 1993. The committee submitted its
report in January 1994, recommended a phased program of
liberalization, and called for private sector entry and
restructuring of the LIC and GIC.
TRADITIONAL LIFE – AN OVERVIEW
The basic and widely used form of design is known
as Traditional Life Platform. It is based on the concept of
sharing. Each of the policy holder contributes his contribution
(premium) into the common large fund is managed by
the company on behalf of the policy holders.
Administration of that common fund in the interest of
everybody was entrusted to the insurance company .It was the
responsibility of the company to administer schemes for benefit
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of the policyholders. Policyholders played a very passive roll. In
the course of time, the same concept of sharing and a common
fund was extended to different areas like saving, investment
etc.
Structure of ULIPs
ULIPs offered by different insurers have varying charge
structures. However the insurers have the right to revise or
cancel the fees and charges over a period of time
Broadly the different types of fees and charges are given below:
1. Premium Allocation Charge: This is a percentage of the
premium appropriated towards charges from the premium
received. The balance known as allocation rate constitutes that
part of premium which is utilized to purchase (investment) units
for the policy. The percentage shall be explicitly stated and
could vary interalia by the policy year in which the premium is
paid, the premium size, premium payment frequency and the
premium type (regular, single or top-up premium). This is a
charge levied at the time of receipt of premium. This charge
may also include an initial management charge, which is levied
on the units created from the first years’ premium, for a
specified period.
Example: If premium = Rs.1000 & Premium Allocation Charge:
10% of the premium; then the charge is: Rs.100 and Balance
amount of premium is Rs.900 and is utilized to purchase units.
2. Fund Management Charge (FMC): This is a charge levied as a
percentage of the value of assets and shall be appropriated by
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adjusting the Net Asset Value This is a charge levied at the time
of computation of NAV, which is usually done on daily basis.
Example:
If Fund Management charge (FMC) is 1% p.a. payableannually; Fund as at 31.3.2004 before FMC is Rs.100/- and Fund
after this charge is Rs.99/-.
3. Policy Administration Charge: This charge shall represent the
expenses other than those covered by premium allocation
charges and the fund management expenses. This is a charge
which may be expressed as a fixed amount or a percentage of
the premium or a percentage of sum assured. This is a charge
levied at the beginning of each policy month from the policy
fund by canceling units for equivalent amount. This charge
could be flat throughout the policy term or vary at a pre-
determined rate.
Example: Rs.40/- per month increased by 2% p.a. on every
policy anniversary.
4 Surrender Charge: This is a charge levied on the unit fund at
the time of surrender of the contract. This charge is usually
expressed either as a percentage of the fund or as a
percentage of the annualized premiums (for regular premium
contracts).
5. Switching Charge: This a charge levied on switching of
money from one fund to another available within the product.
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Example: Rs.100 per switch.
6. Mortality charge: This is the cost of life insurance cover. It is
exclusive of any expense loadings levied either by cancellationof units or by debiting the premium but not both. This charge
may be levied at the beginning of each policy month from the
fund. The method of computation shall be explicitly specified in
the policy document. The mortality charge table shall invariably
form part of the policy document.
7. Rider premium charge: This is the premium exclusive of
expense loadings levied separately to cover the cost of rider
cover levied either by cancellation of units or by debiting the
premium but not both. This charge is levied at the beginning of
each policy month from the fund.
8. Partial withdrawal charge: This is a charge levied on the unitfund at the time of part withdrawal of the fund during the
contract period.
9. Miscellaneous charge: This is a charge levied for any
alterations within the contract, such as, increase in sum
assured, premium redirection, change in policy term etc. The
charge is expressed as a flat amount levied by cancellation of
units. This charge is levied only at the time of alteration.
Example: Rs.100/- for any alteration such as increase in sum
assured, change in premium mode etc.
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Table 1.1 ULIPS Vs. Traditional Life Insurance
Plans:-
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S. No Features ULIP’S Traditional Plan
1 Premium Invested by Policy
Holder.
Invested by
Insurer’s.
2 Return Depends Upon Market
moments
Fixed
3 Loans Not Provided Provided
4 Bonus No bonuses, except
loyalty addition in
some cases.
Bonuses are payable
5 Loss Likely Unlikely
6 Benefits Variable Pre- Determined
7 Gains Gains likely
depending on market
movements
Gains unlikely
except through
bonuses
8 Potential for
better returns
100% investment in
Debt or Equity acc. to
wish.
At least 85%
investment in debt
which result low
return9 Greater
transparency
Here we know were
over money is
invested.
Not known where
money is to be
invested.10 Flexibility in
investment
Flexibility provided to
customer.
No Flexibility
provided to
customer.11 Flexibility in
insurance
coverage
Option to choose
coverage & to
increase risk cover
No option to choose
coverage
12 Higher Liquidity Exit option available. No exit option
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Types of Funds under ULIPs
Most insurers offer a wide range of funds to suit one’sinvestment objectives, risk profile and time horizons. Different
funds have different risk profiles. The potential for returns also
varies from fund to fund.
The following are some of the common types of funds available
along with an indication of their risk characteristics.
Table 1.2: Types of fund under ULIPs
General Description Nature of Investments Risk Category
Equity Funds
Primarily invested in
company stocks with
the general aim of
capital appreciation
Medium to High
Income, Fixed
Interest and Bond
Funds
Invested in corporate
bonds, govt. securities
and other fixed income
instruments
Medium
Cash Funds
Sometimes known as
Money Market Funds -invested in cash, bank
deposits and money
market instruments
Low
Balanced Funds
Combining equity
investment with fixed
interest instruments
Medium
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for life cover to the investors , while UTI , as a mutual
was taking care of investing the unit holders money in the
capital market and giving them a fair return .
Subsequently in the year 1989 , another Unit Linked Product
was launched by the LIC Mutual Fund called by the name of
“DHANARAKSHA” which was more or less on the line of ULIP of
UTI . Thereafter LIC itself came out with a Unit Linked Insurance
Product known by name “BIMA PLUS “ in the year 2001-
02 .
Presently a number of private life insurance companies have
launched Unit Linked Insurance Products with a variety of new
features
TYPES OF ULIP
There are various unit linked insurance plans available in the
market However, the key ones are pension, children, group
and capital guarantee Plans.
The pension plans come with two variations — with and without
life cover and are meant for people who want to generate
returns for their sunset years
The children plans, on the other hand, are aimed at taking care
of their educational and other needs.
Apart from unit-linked plans for individuals, group unit linked
plans are also available in the market. The Group linked plans
are basically designed for employers who want to offer certain
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benefits for their employees such as gratuity, superannuation
and leave encashment.
The other important category of ULIPs is capital guarantee
plans. The plan promises the policyholder that at least the
premium paid will be returned at maturity. But the guaranteed
amount is payable only when the policy's maturity value is
below the total premium paid by the individual till maturity
However, the guarantee is not provided on the actual premium
paid but only on that portion of the premium that is net of
expenses (mortality, sales and
marketing, administration).
Type I vs Type II ULIPs
There are basically two types of ULIP plans. Type-I plans pays
the higher of the sum assured and fund value to the nominees
upon the death of life assured whereas in case of Type II plans
both the sum assured and fund value are paid.
It is always preferable to opt for Type 2 policies which are more
protection (the core aim of insurance) oriented -- although a bit
expensive then Type-I policies due to high mortality charges --
because in case of Type-I policies risk exposure/sum at risk(sum assured minus fund value) keeps on decreasing in the
later years as your fund value increases which amounts to
having inadequate insurance coverage
How ULIPs work
ULIPs work on the lines of mutual funds. The premium paid by
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the client (less any charge) is used to buy units in various funds
(aggressive, balanced or conservative) floated by the insurance
companies. Units are bought according to the plan chosen by
the policyholder. On every additional premium, more units are
allotted to his fund. The policyholder can also switch among the
funds as and when he desires. While some companies allow any
number of free switches to the policyholder, some restrict the
number to just three or four. If the number is exceeded, a
certain charge is levied.
Individuals can also make additional investments (besides
premium) from time to time to increase the savings component
in their plan. This facility is termed "top-up". The money parked
in a ULIP plan is returned either on the insured's death or in the
event of maturity of the policy. In case of the insured person's
untimely death, the amount that the beneficiary is paid is the
higher
of the sum assured (insurance cover) or the value of the units
(investments) However, some schemes pay the sum assured
plus the prevailing value of the investments.
ULIP - KEY FEATURES
• Premiums paid can be single, regular or variable. The
payment period too can be regular or variable. The
risk cover can be increased or decreased.
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• As in all insurance policies, the risk charge (mortality rate)
varies with Age
• The maturity benefit is not typically a fixed amount and
the maturity period can be advanced or extended.
• Investments can be made in gilt funds, balanced funds,
money market funds, growth funds or bonds.
• The policyholder can switch between schemes, for
instance, balanced to debt or gilt to equity, etc
• The maturity benefit is the net asset value of the units.
• The costs in ULIP are higher because there is a
life insurance component in it as well, in addition to the
investment component.
• Insurance companies have the discretion to decide on their
investment portfolios.
• Being transparent the policyholder gets the entire
episode on the performance of his fund.
• ULIP products are exempted from tax and they provide life
insurance.
• Provides capital appreciation.
• Investor gets an option to choose among debt, balanced
and equity funds.
USP of ULIPS
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Insurance cover plus savings-ULIPs serve the purpose of
providing life insurance combined with savings at market-linked
returns. To that extent, ULIPS can be termed as a two-in-one
plan in terms of giving an individual the twin benefits of life
insurance plus savings.
Multiple investment options-ULIPS offer a lot more variety than
traditional life insurance plans. So there are multiple options at
the individual’s disposal. ULIPS generally come in three broad
variants.
Aggressive ULIPS (which can typically invest 80%-100% in
equities, balance in debt)
Balanced ULIPS (can typically invest around 40%-60% in
equities)
Conservative ULIPS (can typically invest up to 20% in equities)
Although this is how the ULIP options are generally
designed, the exact debt/equity allocations may vary across
insurance companies. Individuals can opt for a variant based on
their risk profile.
Flexibility- The flexibility with which individuals can switch
between the ULIP variants to capitalize on investmentopportunities across the equity and debt markets is what
distinguishes it from other instruments. Some insurance
companies allow a certain number of ‘free’ switches. Switching
also helps individuals on another front. They can shift
from an Aggressive to a Balanced or a Conservative
ULIP as they approach retirement. This is a reflection of the
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change in their risk appetite as they grow older.
Works like an SIP- Rupee cost-averaging is another important
benefit associated with ULIPS. With an SIP, individuals invest
their monies regularly over time intervals of a month/quarter
and don’t have to worry about ‘timing’ the stock markets
Fund Switching Option- There is nil or negligible cost involved.
Besides, there is no tax involved. And most of all, it is hassle
free. The day mutual funds also start providing this fund
switching facility, the only real edge Ulips have over
mutual funds will be lost.
HURDLES OF ULIP
No standardization- All the costs are levied in ways that do
not lend to standardization. If one company calculates
administration cost by a formula, another levies a flat rate. If
one company allows a range of the sum assured (SA), another
allows only a multiple of the premium. There was also the
problem of a varying cost structure with age.
Lack of Flexibility in Life cover-ULIP is known to be more flexible
in nature than the traditional plans and, on most counts, they
are. However, some insurance companies do not allow the
individual to fix the life cover that he needs. These rely on a
multiplier that is fixed by the insurer.
Overstating the Yield-Insurance companies work on illustrations.
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They are allowed to show you how much your annual premium
will be worth if it grew at 10 per cent per annum But there are
costs, so each company also gives a post-cost return at the 10
per cent illustration, calling it the yield. some companies were
not including the mortality cost while calculating the yield. This
amounts to overstating the yield.
Internally made Sales Illustration-During the process of
collecting information, it was found that the sales
benefit illustration shown was not conforming to the Insurance
Regulatory and Development Authority (Irda) format. in
many locations30 per cent return illustrations are still
rampant.
Not all Show the Benchmark Return- To talk about returns
without pegging them to a benchmark is misleading the
customer. Though most companies use Sensex, BSE 100 or the
Nifty as the benchmark, or the measuring rod of
performance, some companies are not using any benchmark at
all.
Early exit Options- The Ulip product works over the long term.
The earlier the exit, the worse off is the investor since he endsup redeeming a high-front-load product and is then
encouraged to move into another higher cost product at that
stage. An early exit also takes away the benefit of compounding
from insured.
Creeping Costs-Since the investors are now more aware than
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before and have begun to ask for costs, some companies
have found a way to answer that without disclosing too
much. People are now asking how much of the premium will go
to work. There are plans that are able to say 92 per cent will be
invested, that is, will have a front load of just 8 per cent. What
they do not say is the much higher policy administration cost
that is tucked away inside (adjusted from the fund value). While
most insurance companies charge an annual fee of about Rs
600 as administration costs, that stay fixed over time, there are
plans that charge this amount, but it grows by as much as 5 per
The Insurance Players…
• HDFC Standard Life Insurance Company Limited
• Birla Sun Life Insurance Company Limited
• TATA AIG Life Insurance Company Limited
• Max New York Life Insurance Company Limited
• Kotak Mahindra Old Mutual Life Insurance Limited
• SBI – Cardiff Life Insurance Company Limited
• ING Vysya Life Insurance Company Limited
• Bajaj Allianz Life Insurance Company Limited
• ICICI Prudential Life Insurance Company Limited
• MetLife Life Insurance Company Limited
• Aviva Life Insurance Company Limited
• Reliance Life Insurance Company Limited
• Sahara India Life Insurance Limited
Comparison between ULIPS and Mutual fund
Unit Linked Insurance Policies (ULIPs) as an investment avenue
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are closest to mutual funds in terms of their structure and
functioning. As is the case with mutual funds, investors in ULIPs
are allotted units by the insurance company and a net asset
value (NAV) is declared for the same on a daily basis.
Similarly ULIP investors have the option of investing across
various schemes similar to the ones found in the mutual funds
domain, i.e. diversified equity funds, balanced funds and debt
funds to name a few. Generally speaking, ULIPs can be termed
as mutual fund schemes with an insurance component.
However it should not be construed that barring the insurance
element there is nothing differentiating mutual funds from
ULIPs.
Points of difference between the two:
1. Mode of investment/ investment amounts-Mutual fund
investors have the option of either making lump sum
investments or investing using the systematic investment
plan (SIP) route which entails commitments over longer
time horizons. The minimum investment amounts are laid out
by the fund house
ULIP investors also have the choice of investing in a
lump sum (single premium) or using the conventional route,i.e. making premium payments on an annual, half-yearly,
quarterly or monthly basis. In ULIPs, determining the premium
paid is often the starting point for the investment activity.
This is in stark contrast to conventional insurance
plans where the sum assured is the starting point and
premiums to be paid are determined thereafter.
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ULIP investors also have the flexibility to alter the premium
amounts during the policy's tenure. For example an individual
with access to surplus funds can enhance the contribution
thereby ensuring that his surplus funds are gainfully
invested; conversely an individual faced with a liquidity crunch
has the option of paying a lower amount (the difference
being adjusted in the accumulated value of his ULIP). The
freedom to modify premium payments at one's convenience
clearly gives ULIP investors an edge over their mutual
fund counterpart
2. Expenses-In mutual fund investments, expenses charged
for various activities like fund management, sales and
marketing, administration among others are subject to pre-
determined upper limits as prescribed by the Securities and
Exchange Board of India.
For example equity-oriented funds can charge their investors
a maximum of 2.5% per annum on a recurring basis for
all their expenses; any expense above the prescribed limit is
borne by the fund house and not the investors Similarly funds
also charge their investors entry and exit loads (in most cases,
either is applicable). Entry loads are charged at the
timing of making an investment while the exit load ischarged at the time of sale.
Insurance companies have a free hand in levying expenses
on their ULIP products with no upper limits being
prescribed by the regulator, i.e. the Insurance Regulatory
and Development Authority. This explains the complex and at
times 'unwieldy' expense structures on ULIP offerings.
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The only restraint placed is that insurers are required to notify
the regulator of all the expenses that will be charged on their
ULIP offerings.
Expenses can have far-reaching consequences on
investors since higher expenses translate into lower amounts
being invested and a smaller corpus being accumulated. ULIP-
related expenses have been dealt with in detail in the article
"Understanding ULIP expenses”.
3. Portfolio disclosure-Mutual fund houses are required
to statutorily declare their portfolios on a quarterly basis,
albeit most fund houses do so on a monthly basis. Investors
get the opportunity to see where their monies are being
invested and how they have been managed by studying the
portfolio.
There is lack of consensus on whether ULIPs are required to
disclose their portfolios. During our interactions with
leading insurers we came across divergent views on this
issue.
While one school of thought believes that disclosing portfolios
on a quarterly basis is mandatory, the other believes that there
is no legal obligation to do so and that insurers are required todisclose their portfolios only on demand.
Some insurance companies do declare their portfolios on a
monthly/quarterly basis. However the lack of transparency
in ULIP investments could be a cause for concern
considering that the amount invested in insurance policies is
essentially meant to provide for contingencies and for long-
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term needs like retirement; regular portfolio disclosures on
the other hand can enable investors to make timely
investment decisions.
4. Flexibility in altering the asset allocation-As was stated
earlier, offerings in both the mutual funds segment and ULIPs
segment are largely comparable. For example plans that
invest their entire corpus in equities (diversified equity funds), a
60:40 allotment in equity and debt instruments (balanced
funds) and those investing only in debtinstruments (debt
funds) can be found in both ULIPs and mutual funds.
If a mutual fund investor in a diversified equity fund wishes to
shift his corpus into a debt from the same fund house, he
could have to bear an exit load and/or entry load.
On the other hand most insurance companies permit their
ULIP inventors to shift investments across various plans/asset
classes either at a nominal or no cost (usually, a couple of
switches are allowed free of charge every year and a cost has to
be borne for additional switches).
Effectively the ULIP investor is given the option to invest across
asset classes as per his convenience in a cost-effective manner.
This can prove to be very useful for investors, for examplein a bull market when the ULIP investor's equity component
has appreciated, he can book profits by simply transferring
the requisite amount to a debt-oriented plan.
5. Tax benefits-ULIP investments qualify for deductions under
Section 80C of the Income Tax Act. This holds good,
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irrespective of the nature of the plan chosen by the
investor. On the other hand in the mutual funds domain, only
investments in tax-saving funds (also referred to as
equity-linked savings schemes) are eligible for Section 80C
benefits.
Maturity proceeds from ULIPs are tax free. In case of equity-
oriented funds held for a period over 12 months, the
gains are tax free; conversely investments sold within a 12-
month period attract short-term capital gains tax @ 10%.
Similarly, debt-oriented funds attract a long-term capital
gains tax @ 10%, while a short-term capital gain is taxed at the
investor's marginal tax rate.
Despite the seemingly similar structures evidently both
mutual funds and ULIPs have their unique set of advantages
to offer. As always, it is vital for investors to be aware of the
nuances in both offerings and make informed decisions
Mutual fund’s
• Primary objective investment
• Cost even costs through the term
• Investment duration: works out for medium term, long-
term investor. Risky for short term Investors.
• Flexibility: very flexible. Plenty of scope to correct yourmistake if you made any wrong
Investment decision. You can easily shuffle your portfolio
in MFs.
• Liquidity: very liquidity. You can sell your MFs units any
time (except ELSS or specified Lock in period scheme)
• Investment objective: MFs can be used as your vehicle
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for investment to achieve different objectives. (E.g. buying
a car three years from now, down payment for a home five
years from now. Children’s marriage 15 years from now.
Retirement planning 25 years from now
• Tax implication: all investment in MFs does not qualify
for section 80c. Only investment in ELSS qualifies for
section 80c. MFs returns on equity MFs are exempt from
long-term capital gains tax. Unless tax laws change in the
future.
• Strings attached: nothing too substantial. At most pay a
small exit load if any.
ULIPS
• Primary objective: Protection + investment
• Costs: upfront costs over the first few years – high, but
over the policy term, ULIPs are comparing better.
• Investment duration: work out only for long-term
investor.
• Flexibility: flexibility is limited to moving across the
different funds offered with your policy. Correcting
mistakes can turn out to be expensive. Moving funds from
ULIP of a different fund house can be expensive.• Liquidity: limited liquidity. Need to stay invested for the
minimum number of years specified before you can
redeem.
• Investment objective: ULIPs can ideally be used for
achieving only long term goals (children’s marriage,
education, retirement planning) as the charges are usually
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higher in the initial years and it is more of a longer term
product.
• Tax implication: ULIPs provides tax benefit under section
80c. We are moving from EEE to EET. No clarity if ULIPs
will be taxed under EET.
• Strings attached; some strings attached for your policy
to be in effect. Minimum number of premiums needs to be
paid.
In case of MFs there r only 3 types of charges applicable
–
1. Entry Load - It can be avoided if u invest directly to ur MF
bypassing ur MF agent.
2. Exit Load - It can also be avoided by remaining invested for
certain time period in that particular plan.
3. Fund Management Charge - It`s charged as a %age of
total assets under the plan. Normally it varies from 0.25% to
2.5% depending upon type of funds (Debt to Eq.) as well as
expertise of fund co. for a same set of MF plans, lower FMC Plan
is always advisable for investment.
In case of ULIP following 4 types of charges r applicable.1. Prem. allocation Charge - It may vary from as low as 1% to
as high as 65-70% of ur first year prem. & reduced year after
year or may remain same at a constant level say 4% or 5%.
2. Mortality Charges - It`s the basic cost of insurance & again
it varies among Ins. cos.
3. Policy admin charges - Some ULIPs charge as low as 20 Rs.
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per month where as some charge as high as 200-300 Rs. per
month. Again not constant among Ins. cos.
4. Fund Management charges - From 0.5% to 2.5%
depending upon the type of Fund (debt to Equity).
Need of study
As we now that there was a big controversy between SEBI and
IRDA whether ulips is insurance product or not. Finally this
controversy is solved and ulips is an insurance product. So it is
very important to determine the difference between ulips and
mutual fund and preference of investors regarding this
investment option.
1) This study has been conducted to find out the difference
between ulips and mutual fund because all the AMC are
targeting the same customers for both ulips & mutual fund
2) The requirement of this research is to know the behavior
of investors who have invested in ulips & mutual fund
3) This study tries to know their Current scenario for these
two investment options
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OBJECTIVES OF THE STUDY
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Objectives of the study
1. To know the customers awareness about Ulips and Mutual
Fund.
2. To compare the investment in ULIPS plan with the Mutual
fund.
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3. To study the degree of risk involved in both.
4. To analyze the future prospective of these investment option.
RESEARCH METHODOLOGY
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RESEARCH METHODOLOGY
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Research can be defined as systematic investigation to
establish facts.
Research methodology is defined as a highly
intellectual human activity used in the investigation of
nature and matter and deals specifically with the
manner in which the data is collected, analyzed and
interpreted.
CONCEPTUAL FRAMEWORK The main theme of the research has been
conceptualized within a framework to avoid disorder &
ambiguity in the process of conducting the present
study. The aim of the research project is to compare the
Investment Portfolio of business and service class
investors and to know their current portfolio with theirrisk bearing capability.
The study is conducted with the help of a Non-Disguised
structures Questionnaire. The study made use of
various factors like Demographic factors, Financial
Attributes, risk tolerance level & preference for
Investment products.
RESEARCH DESIGN
Research design is a blueprint for any kind of research.
Research design provides the glue that holds the
research project together. A design is used to structure
the research, to show how all of the major parts of the
research project- the samples or groups, measures,
treatments or programs, and methods of assignment-
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work together to try to address the central research
questions. A research design lays the foundation for
conducting the project.
TYPES OF RESEARCH DESIGN
1)Exploratory Design.
2)Descriptive Design.
3)Causal Design.
EXPLORATORY DESIAs its name implies, the objective of exploratory
research is to explore or search through a problem or
situation to provide insights and understanding.
Exploratory research is characterized by flexibility and
versatility with respect to the methods because formal
procedures are not employed. This design can be used
for following purposes:-
Formulate a problem or define a problem more
precisely.
Identify alternative course of action.
Develop hypothesis.
Isolate key variables and relationships for further
examinations.
Gain insights for developing an approach to the
problem.
For exploratory research these methods can be used:-
• Experience Survey
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• Pilot Study
• Statistical Data
• Literature
From above given methods PILOT STUDY is done to
know the expectations of the market and is undertaken
by the company before launch of a product.
CAUSAL DESIGN
Causal design is used to obtain evidence of cause and
effect relationships. This kind of research is done in a
controlled environment where one variable remains
constant or fixed and it is tested against othervariables. This design is basically used to know the
degree of relationship between different variables.
Causal research is appropriate for the following:-
• To understand which variables are the causes and
which are the effects of a phenomenon.
• To determine the nature of the relationshipbetween the causal variables and the effect to be
predicted.
DESCRIPTIVE RESEARCH DESIGN
Descriptive research also known as statistical research,
describes data and characteristics about the population
or phenomenon being studied. It basically deals with
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everything that can be counted and studied.
Descriptive research is pre planned and structured. A
descriptive design requires clear specification of the
WHO, WHAT, WHEN, WHERE, WHY and WAY (the sixWs) of the research.
The objective is to know the Percentage (%) of
phenomenon in population.
All perceptual studies are come under Descriptive
study.
Where Comparison between two variables is done
that is descriptive research.
In this design the variables are being predicted.
In conducting this research study the Descriptive
research design has been used.
DATA COLLECTION
There are two types of data collection methods which
are as following:-
1)Primary Research
2)Secondary Research
PRIMARY RESEARCH
Primary Research (also called Field Research) involves
the collection of data that does not already exist. This
can be through numerous forms, including
Questionnaires & Telephone Interviews amongst others.
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SECONDARY RESEARCH
Secondary research (also called desk research) involves
the summary, collation and/or synthesis of existingresearch rather than primary research, where data is
collected from, for example, research subjects or
experiments.
In doing this research the both methods are being
used.
The Questionnaires are being prepared and filledby the people who are investing in ulips & mutual
fund
The Secondary data is being collected from
different magazines, newspaper & Journals. For the
Literature of review certain online journals has also
been collected.
In doing this research the Questionnaire is used
to collect the data.
SAMPLE
A subgroup of the elements of the population selected
for participation in the study.
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SAMPLING UNIT
It is a basic unit containing the elements of the
population to be sampled. The sampling unit in this research is all the people of
Ludhiana who invest in ulips or mutual fund
SAMPLE SIZE
It refers to the number of elements to be studied in a
study/research.
The Sample Size for this study is 100.
SAMPLING TECHNIQUES
In doing this research Convenience Sampling Technique
is used.
A Convenience Sampling refers to a technique thatattempts to obtain a sample of convenient elements.
The selection of sampling units is left primarily to the
Interviewer.
So, in doing this research the walking clients & the
investors who comes to BAJAJ CAPITAL are used for
Convenience Sampling Technique.
DATA ANALYSIS &
INTERPRETATION
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Table 4.1 Percentage of people who have invested in ULIPS, in Mutual fund
and both.
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Fig 4.1 Percentage of people who have invested in ULIPS, in Mutual fund
and both
Analysis- It is clear from the above table that 30% of the respondents
invest in ULIPs, 51% in mutual fund & 19% in both.
Interpretation- Mutual funds are more preferred investment avenue
comparative to ULIPS because more number of people prefer mutual fund
comparative to ULIPs and there are only few people who are investing in
both ULIPs and Mutual fund.
Investment option No. of respondents Percentage (%)
ULIPS 30 30
Mutual Fund 51 51
Both 19 19
Total 100
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Table 4.2:- Annual income of the investors.
Fig 4.2:- Annual income of the investors
Analysis:- Among the people who invest only in ULIPs 17% belongs to
income group of below 2 lacs, 20% belongs to the income group of 2 lacs
-4 lacs, 40% belongs to income grpup of 4lac- 6 lacs & 23% above 6 lacs.
In the case of mutual fund 14% belongs to the income group of below 2
lacs, 16% to the income group of 2 lacs- 4 lacs, 37% to the income group 4
lacs- 6lacs & 33% to the income group of above 6 lacs. People who invest
in both ulips and mutual fund 5% belongs to the income group of below 2
lacs, 11% to the income group of 2 lacs- 6 lacs, 26% to the income group
of 4 lacs- 6 lacs & 58% to the income group of above 6 lacs.
Interpretation- Income vise investment is almost same in both ULIPS and
Mutual Fund people with high income group are more likely to invest their
Annualincome
ULIPS
No. of
PercentageResponses
Mutual fund
No. of
PercentageResponses
Both
No. of
PercentageResponses
Below- 2lac
5 17% 7 14% 1 5%
Rs 2 lac- 4lac
6 20% 8 16% 2 11%
Rs 4 lac- 6lac
12 40% 19 37% 5 26%
Above 6 lac 7 23% 17 33% 11 58%
Total 30 51 19
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money comparative to the low income group. But it is clear from the graph
that people who are investing in both ULIPS and Mutual fund are having
income above than 6 lakhs.
Table 4.3:- Factors consider by investors before investing in ULIPS and
Mutual fund.
Factors No. of Responses PercentageSafety of Principal 39 39%High Return 42 42%Maturity Period 12 12%
Terms and Conditions 7 7% Total 100
Fig 4.3:-Factors consider by investors before investing in ULIPS and Mutual
fund
Analysis- As seen in the above table among the various factors
considered by investors before investing their money in ULIPs and Mutual
fund 42% people feel that high return is more important, 39% of the
respondents consider safety of principal, 12% to the maturity period & 7%
to the terms and condition.
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Interpretation- The most important factor which is highly considered by
the investors before investing their money in ULIPS or Mutual fund is the
return earned by them and after return the second factor is the safety of
the principal. So we can say that people wants their investment to get the
good return along with the safety of principal.
Table 4.4:- Information Sources helpful to the investor in makinginvestment decision.
Fig 4.4:- Information Sources helpful to the investor in making investment
decision
Sources No. of responses Percentage
Journals 5 5%
Reference Group 21 21% Television 5 5%
Brokers 66 66%
Newspaper 3 3%
Total 100
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Analysis- 66% people feel that their investment decision are made with
the help of brokers, 21% people feel that reference group plays an
important role while making their investment decision, 5% gets the
information from the journals, 5% from the television & 3% of the
respondents feel that they get the information from the news paper.
Interpretation- People feel that brokers plays an important role while
making their investment decision and after broker people think that their
investment decision are made with the help of reference groups. The
reason for this may be that there is mostly push selling in case of Ulips &
in case of mutual fund broker may provide better information regarding
various schemes.
Table 4.5:- Preference of investor regarding different types of funds.
Types of fund No. of responses Mean
Equity based fund 45 0.215
Debt based fund 24 0.115
Balanced fund 56 0.268Open ended fund 64 0.306
Close ended funds 20 0.096
Total 209
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Fig 4.5:- Preference of investor regarding different types of mutual funds
Analysis- As clear from the above table the mean score of the open ended
fund is very high comparative to other types of mutual fund and the mean
sore of equity & balanced based fund is also good, but it is very less fordebt based & close ended funds.
Interpretation- Open ended funds are more popular among the investors
the reason for this may be that the Open-end funds do not have a fixed
maturity and it is available for subscription every day of the year. Open-
end funds also offer liquidity to investments, as one can sell units
whenever there is a need for money.
Table 4.6:-The reasons for investing in ULIPS.
Reason StronglyAgree(2)
Agree
(1)
Neutral
(0)
Disagree
(-1)
StronglyDisagree
(-2)
Total
Mean
TaxRebate
98 31 0 -7 -4
118 1.18
LifeInsurance
106 34 0 -3 -4
133 1.33
CapitalGrowth
76 34 0 -9 -5
96 .96
Investment of excessmoney
44 23 0 -29 -26
12 .12
4 3 7 2
5 3 8 3 2
3 3 14 9 5
2 2 13 13
11
29
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Fig 4.6:- The reasons for investing in ULIPS
Analysis- Among the various reasons of investing in ULIPs respondents
agree that capital growth is the important reason for investing in ULIPs
,but tax benefit and life insurance are the most important reason for
investing in ulips because its mean lies between strongly agree & agree.
People are neutral for the reason investment of excess money.
Interpretation- It is clear from the above graph that most of the people
invest in ULIPS to get the insurance facility and the second important
reason is get the benefit of tax rebate. All the plans of ulips provide tax
rebate therefore it is one of the important reason of investing in ulips.
Table 4.7:- The reason for investment in Mutual Fund.
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Fig 4.7:- The reason for investment in Mutual Fund.
Analysis- The mean of capital growth lies between strongly agree & agree.
So it the most important reason of investing in mutual fund. Tax rebate
lies between neutral & agree. Respondents are neutral for the reason
investment of excess money because its mean is 0.5.
Interpretation- It can be easily interpretated that people invest in mutual
fund for the appreciation of the capital invested by them and after this the
second important reason is investment of excess money which is kept with
them only few people think that they invest in mutual fund to get the
Reasons Strongly Agree(2)
Agree
(1)
Neutral
(0)
Disagree
(-1)
StronglyDisagree
(-2)
Total Mean
TaxRebate
58 26 0 -21 -32
31 .31
CapitalGrowth
96 39 0 -6 -4
125 1.25
Investment of excessmoney
64 28 0 -24 -18
50 .50
29 2 8 21 16
48 3 5
2 9
2
732
6
24
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advantage of tax rebate the reason may be that all the mutual fund does
not provide tax deduction.
Table 4.8:- Preference of ULIPS or mutual fund on the basis of following
factors.
Fig 4.8:- Preference of ULIPS or mutual fund on the basis of followingfactors.
Analysis- From the above table it is clear that for the advantage of
diversification 38% people go for ULIPs & 62% for mutual fund. For
professional management 40% for ulips & 60% for mutual fund, for the
advantage of low cost 34% for ulips and 66% for mutual fund, for liquidity
Advantages ULIPS
Mutual fund
Diversification 38 62ProfessionalManagement
40 60
Low cost 34 66
Liquidity 17 83Flexibility 12 88
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17% for ulips & 83% for mutual fund, for flexibility 12% of respondents
prefer ulips & 88% prefer mutual fund.
Interpretation- Mutual fund are preferred investment option comparative to
ulips the most important reason for this is flexibility and Liquidity provided
by the mutual fund plans. Investors feel that mutual funds are more liquid
and flexible comparative to ulips.
Table 4.9:- Investment in ULIPS and Mutual fund by risk profile.
.
Fig 4.9:- Investment in ULIPS and Mutual fund by risk profile.
Risk profile Ulips
No of responsesPercentage
Mutual fund
No. of responsesPercentage
Low risk 16 53% 6 12%
Moderaterisk
10 33% 31 61%
High risk 4 14% 14 27%
Total 30 51
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Analysis- Among 30 respondents who invest in ULIPs 53% of respondents
feel that they take low risk profile, 33% feel that they take moderate risk
& 14 % fe l that they take moderate risk. From the 51 people who invest
in mutual fund 12% invest in low risk profile, 61% in moderate risk & 26%
in high risk profile.
Interpretation- It is clear from the above graph that if the risk taking
capability of an individual is low than he will prefer to invest in Ulips may
be because he is getting insurance plus investment facility, if the risk
taking capability is moderate or high than people prefer mutual fund.
Table 4.10:- Expected annual Return from both ULIPS and Mutual funds.
AnnualReturn
ULIPS
No. of responsesPercentage (%)
Mutual fund
No. of responsesPercentage (%)
Less than10%
2 7 1 2
11-15% 11 36 5 1015-20% 14 47 18 35
Above 20% 3 10 27 53
Total 30 51
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Fig 4.10:- Expected annual Return from both ULIPS and Mutual fund
Analysis- From the 30 people who invest in ULIPs 7% expect the return of
less then 7%, 36% of the respondents expect the return of 11-15%, 47% of
the people expect the return of 15-20% & only 10% expect the return of 20-25%. Among the 51 respondents who invest in only mutual fund 2%
expect the annual return of less then 10%, 10% of the people are having
the expected return 0f 11-15%, 35% people expect the annual return of
15-20% & 53% expect 20-25% annual return.
Interpretation- It is clear from the graph that people who invest in mutual
fund are expecting high return than those who invest in ulips. So we can
say that the basic reason of investing in mutual fund is to generate good
return from the investment.
Table 4.11:- Preferred tenure of investment for ULIPS and Mutual Fund.
Duration ULIPS
No. of responsesPercentage (%)
Mutual fund
No. of responsesPercentage (%)
Short term 2 7 6 12
Mid term 7 23 19 37
Long term 21 70 26 51
Total 30 51
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Fig 4.11:- Preferred tenure of investment for ULIPS and Mutual Fund
Analysis- Among the 30 respondents who invest in only ULIPs 7% of the
respondents invest for short term, 23% for mid- term & 70% for the long
term. From the 51 repondents who invest in only mutual fund 12% invest
for short term, 37% for mid-term & 51% for the long term.
Interpretation- The tenure of investment preferred by investors is almost
same in both ulips and mutual fund that is long term but, still the
difference is that for tenure of short term and midterm mutual fund are
preferred comparative to ulips.
Table 4.12:- Awareness among peoples regarding the controversy of ULIPS.
Opinion No of Responses Percentage
Yes 59 59%
No 41 41%
Total 100
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Fig 4.12:- Awareness among peoples regarding the controversy of ULIPS
Analysis- 59% of people are aware regarding the controversy of ulips and
among this 59% of people 65% of investors think that this controversy of
ulips will going to affect their investment decision.
Interpretation-As we can see that many people are aware regarding the
controversy of the of the ulips and among the people who are aware
regarding this controversy most of them feel that this is going to effect
their investment decision as from this controversy many people came to
know that negative points or about the lop holes of the Ulips.
Table 4.13:- Preferred investment option for investing their money in
future .
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Fig 4.13:- Preferred investment option for investing their money in future
Analysis-69% of people will like to reinvest their money in mutual fund
and only 31% people will invest their money in ulips.
Interpretation- So in coming years also mutual fund will preferred
investment option comparative to ulips. Future is good for mutual funds
comparative to ULIPs.
Investment option No. of Responses Percentage
Mutual fund 69 69%
ULIPS 31 31%
Total 100
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RESULTS & FINDINGS
FINDINGS
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People are aware regarding ulips &Mutual fund but, the
awareness regarding mutual fund is high comparative to
ulips. People with high income group are more likely to invest
their money but, people who invest in both ulips and mutual
fund mostly belongs to the income group of more than 6 lacs.
Broker and reference group plays an important role while
making an investment decision of an investor. Open ended
funds & closed funds are more popular among investors of
Bhubaneswar.
Insurance and tax rebate is the most important reason for
investing in ulips & people are investing in mutual fund for
the appreciation of the capital invested by them .among the
various advantages’ liquidity & flexibility plays the most
important role for the preference of mutual fund over ulips.
Low risk is taken in case of ulips & moderate risk in case of
mutual funds. The expected annual return is high for mutual
fund comparative to ulips. The preferred tenure of investment
is same for both ulips & mutual fund.
The recent controversy related to ulips will going to affect its
future demand &in future also more number of investors will
like to invest their money in mutual fund. So future is bright
for mutual funds.
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CONCLUSION
A mutual fund is the ideal investment vehicle for today’s
complex and modern financial scenario. Markets for equity
shares, bonds and other fixes income instruments, real
estate, derivatives and other assets have become matureand information driven. Today each and every person is fully
aware of every kind of investment proposal everybody
wants to invest money, which entitled of low risk,
high returns and easy redemption. In my opinion before
investing in mutual funds, one should be fully aware of each
and everything.
At the same time Ulips as an investment avenue is good
for people who has interest in staying for a longer period of
time, that is around 10 years and above. Also in the coming
times, Ulips will grow faster. Ulips are actually being publicized
more and also the other traditional endowment policies are
becoming unattractive because of lower interest rate. It is
good for people who were investing in ULIP policies of
insurance companies as their investments earn them a
better return than the other policies.
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RECOMMENDATIONS
The performance of the mutual fund depends on the previous
year’s Net Asset Value of the fund. All schemes are doing well.
But the future is uncertain. So, the AMC (Asset under
Management Companies) should take the following steps: -
1. The people do not want to take risk. The AMC should
launch more diversified funds so that the risk becomes
minimize. This will lure more and more people to invest in
mutual funds and ulips.
2. The expectation of the people from the mutual funds is
high. So, the portfolio of the fund should be prepared
taking into consideration the expectations of the people.
3. Try to reduce fund charges, administration charges and
other charges which help to invest more funds in the
security market and earn good returns.
4. Different campaigns should be launched to educate people
especially regarding SIP.
5. Companies should give regular dividends as it depicts
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profitability.
6. Companies should give handsome brokerage to brokers so
that they get attracted towards distribution of the funds.
7. ULIPs are good for those who prefer investment plus
insurance.
Limitations of the Study
The study based on survey through pre-designed
questionnaires suffers from the basic limitations of the
possibility of difference between what is recorded and what
is the truth, no matter how carefully the questionnaire has
been designed and field investigation has been conducted.
This is because the persons may not deliberately report their
true responses and even if they want to do so, they are
bound to be differences owing to problems in the
communication process. In addition, there are some
limitations, which are as below:
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• Data collection error may be there due to wrong response
from respondents as some time they are not the right
person who takes actual decisions.
• Some of the respondents can hide the real information.
• Some time people did not have time to fulfill
questionnaire, so they give only few information.
• A sample size cannot always represent the whole
population
BIBLIOGRAPHY
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Bibliography
• Prabhakar Sinha (2010) “Govt's ULIP ruling to hit MFs
hard” Times of India, June 22
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• Subramanian (2010) “NFOs make hay after Sebi bars
insurers from launching Ulips” Economic times. May,12
• Aggarwal Ashish(2010) “Back to the real issue: mis-
selling” Business standard
• Shankaran Sanjiv & Mathew Liz(2010) “Finance ministry
to call the shots on turf wars” Times of India
• Rosita “IRDA regulates ULIPS a relief for investors” 2009
Economic Times
• Kumar (2009),“Do Investors behave rationally in Stock
Market: A Behavioral Finance Perspective”, “Investors
India”, Oct.2009, Pg.16-20.
• www.amfiindia.com
• www.bajajcapital.com
• www.sebi.com
• www.economictimes.com
• www.investorsguide.com
• http://www.irda.gov.in
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ANNEXURE
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QUESTIONNAIRE
Name:-Contact No:-
Occupation:-1. In which of following plan you have invested?
a) ULIPS
b) Mutual Fund
c) Both
2. Income Group
a) Below- 2 lac b) Rs 2 lac- 4 lac
c) Rs 4 lac- 6 lac d) Above 6 lac
3. What factors do you consider before investing in ULIPS and
Mutual fund?
a) Safety of Principal b) High return
c) Maturity period d)Terms andCondition
4. Which of the following source helps you in making your
investment decision?
a) Journals b) Reference Group
c) Television d) Brokers
e) Newspaper
5. In which type of fund you would like to invest in? (You can
select more than one option)
a) Equity based Fund b) Debt based Fund
c) Balanced Fund d) Open ended Fund
e) Closed ended Fund
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6. What are the reasons that will initiate you to invest in ulips?
a) Tax rebate
Strongly Disagree Disagree Neutral
Agree Highly Agree
b) Life Insurance
Strongly Disagree Disagree Neutral
Agree Highly Agree
c) Capital Growth Rate
Strongly Disagree Disagree Neutral
Agree Highly Agree
d) Investment of Excess Money
Strongly Disagree Disagree Neutral Agree
Highly Agree
7. What are the reasons that will initiate you to invest in
mutual fund?
a) Tax Rebate
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Strongly Disagree Disagree Neutral Agree
Highly Agree
b) Capital Growth
Strongly Disagree Disagree Neutral Agree
Highly Agree
c)Investment of excess
Strongly Disagree Disagree Neutral AgreeHighly Agree
8. On the basis of following factors tick your preference
between ULIPS and Mutual fund?
ULIPS Mutual
fund
a) Diversification
b) Professional Management
c) Low cost
d) Liquidity
e) Flexibility
9. What is your risk taking capability?
a) High
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b) Moderate
c). Low
10. What is the expected annual return according to you?
a) Less than 10% b) 11-15%
c)15-20% d)Above 20%
11. What is your preferred tenure of investment?
a) Short term
b) Mid term
c) Long term
12.Are you aware of the controversy regarding ULIPS?
a) Yes b) No
If Yes then will it affect your investment decision?
13. Where would you like to invest your money in future?
a) ULIPS b) Mutual Fund
Why?
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