mentor final project
TRANSCRIPT
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ACKNOWLEGDEMENT
I am using this opportunity to express my gratitude to everyone who supported me
throughout the Mentoring project. I am thankful for their aspiring guidance, invaluably
constructive criticism and friendly advice during the project work. I am sincerely greatful
to them for sharing their truthful and illuminating views on a number of issues related to
the project.
I express my warm thanks to Mr. and Ms. GOPIKA KUMAR for their support and
guidance at project title “ THE MUTUAL FUND IS BETTER INVESTMENT PLAN”.
I would also like to thank my college Director DR.SATISH SETH and all the people who
provided me with the facilities being reuired and conductive conditions for my
Mentoring !roject.
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EXECUTIVE SUMMARY
In few years Mutual "und has emerged as a tool for ensuring one#s financial well
being. Mutual "unds have not only contributed to the India growth story but have
also helped families tap into the success of Indian Industry. $s information and
awareness is rising more and more people are enjoying the benefits of investing in
mutual funds. %he main reason the number of retail mutual fund investors remains
small is that nine in ten people with incomes in India do not know that mutual funds
exist. &ut once people are aware of mutual fund investment opportunities, the
number who decide to invest in mutual funds increases to as many as one in fivepeople. %he trick for converting a person with no knowledge of mutual funds to a
new Mutual "und customer is to understand which of the potential investors are
more likely to buy mutual funds and to use the right arguments in the sales
process that customers will accept as important and relevant to their decision.
%his !roject gave me a great learning experience and at the same time it gave meenough scope to implement my analytical ability. %he analysis and advice
presented in this !roject 'eport is based on market research on the saving and
investment practices of the investors and preferences of the investors for
investment in Mutual "unds. %his 'eport will help to know about the investors#
!references in Mutual "und means $re they prefer any particular $sset
Management (ompany )$M(*, +hich type of !roduct they prefer, +hich ption
)-rowth or Dividend* they prefer or +hich Investment trategy they follow
)ystematic Investment !lan or ne time !lan*. %his !roject as a whole can be
divided into two parts.
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%he first part gives an insight about Mutual "und and its various aspects, the(ompany !rofile, bjectives of the study, 'esearch Methodology. ne can have a
brief knowledge about Mutual "und and its basics through the !roject.
%he second part of the !roject consists of data and its analysis collected through
survey done on /00 people. "or the collection of !rimary data I made a
uestionnaire and surveyed of /00 people. I also taken interview of many !eople
those who were coming at the 1D"( &ranch where I done my !roject.. I studied
about the products and strategies of other $M(s to know why people prefer toinvest in those $M(s. %his !roject covers the topic “%12 M3%3$4 "35D I
&2%%2' I562%M25% !4$5.7 %he data collected has been well organi8ed and
presented. I hope the research findings and conclusion will be of use.
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CHAPTER – I
INTRODUCTION
What Is Mutua !u"#
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$ mutual fund is just the connecting bridge or a financial intermediary that allows a
group of investors to pool their money together with a predetermined investment
objective. %he mutual fund will have a fund manager who is responsible for investing the
gathered money into specific securities )stocks or bonds*. +hen you invest in a mutual
fund, you are buying units or portions of the mutual fund and thus on investing becomes
a shareholder or unit holder of the fund.
Mutual funds are considered as one of the best available investments as compare to
others they are very cost efficient and also easy to invest in, thus by pooling money
together in a mutual fund, investors can purchase stocks or bonds with much lower
trading costs than if they tried to do it on their own. &ut the biggest advantage to mutual
funds is diversification, by minimi8ing risk 9 maximi8ing returns.
%hus a Mutual "und is the most suitable 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. %he flow chart below describes broadly the working of a mutual fund
U"$t Trust %& I"#$a $s th' &$rst Mutua !u"# s't u( u"#'r a s'(arat' a)t* UTI A)t $"
+,-* a"# start'# $ts %('rat$%"s $" +,-/ 0$th th' $ssu' %& u"$ts u"#'r th' s)h'1'
US2-/.
O3'r3$'0 %& '4$st$"5 s)h'1's '4$st'# $" 1utua &u"# )at'5%r6
+ide variety of Mutual "und chemes exists to cater to the needs such as financial
position, risk tolerance and return expectations etc. %he table below gives an overview
into the existing types of schemes in the Industry.
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T6(' %& Mutua !u"# S)h'1's
7Y STRUCTURE
O('" E"#'# S)h'1's
$n open:end fund is one that is available for subscription all through the year. %hese do
not have a fixed maturity. Investors can conveniently buy and sell units at 5et $sset
6alue );5$6;* related prices. %he key feature of open:end schemes is liuidity.
C%s' E"#'# S)h'1's
$ closed:end fund has a stipulated maturity period which generally ranging from < to =>
years. %he fund is open for subscription only during a specified period. Investors can
invest in the scheme at the time of the initial public issue and thereafter they can buy or
sell the units of the scheme on the stock exchanges where they are listed. In order to
provide an exit route to the investors, some close:ended funds give an option of selling
back the units to the Mutual "und through periodic repurchase at 5$6 related prices.
2&I 'egulations stipulate that at least one of the two exit routes is provided to the
investor.
I"t'r3a S)h'1's
Interval chemes are that scheme, which combines the features of open:ended and
close:ended schemes. %he units may be traded on the stock exchange or may be open
for sale or redemption during pre:determined intervals at 5$6 related prices.
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7Y NATURE
1. Equity fund:
%hese funds invest a maximum part of their corpus into euities holdings. %he structure
of the fund may vary different for different schemes and the fund manager#s outlook on
different stocks. %he 2uity "unds are sub:classified depending upon their investment
objective, as follows?
• Diversified 2uity "unds
• Mid:(ap "unds
• ector pecific "unds
• %ax avings "unds )24*
2uity investments are meant for a longer time hori8on, thus 2uity funds rank high on
the risk:return matrix.
8. D'9t &u"#s:
%he objective of these "unds is to invest in debt papers. -overnment authorities, private
companies, banks and financial institutions are some of the major issuers of debt
papers. &y investing in debt instruments, these funds ensure low risk and provide stable
income to the investors. Debt funds are further classified as?
• G$t !u"#s? Invest their corpus in securities issued by -overnment, popularly
known as -overnment of India debt papers. %hese "unds carry 8ero Default risk
but are associated with Interest 'ate risk. %hese schemes are safer as they
invest in papers backed by -overnment.
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• I")%1' !u"#s? Invest a major portion into various debt instruments such as
bonds, corporate debentures and -overnment securities.
• MIPs? Invests maximum of their total corpus in debt instruments while they take
minimum exposure in euities. It gets benefit of both euity and debt market.
%hese scheme ranks slightly high on the risk:return matrix when compared with
other debt schemes.
• Sh%rt T'r1 Pa"s ;STPs
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7Y INVESTMENT O7>ECTIVE
• Gr%0th S)h'1's: -rowth chemes are also known as euity schemes. %he
aim of these schemes is to provide capital appreciation over medium to long
term. %hese schemes normally invest a major part of their fund in euities and
are willing to bear short:term decline in value for possible future appreciation.
• I")%1' S)h'1's: Income chemes are also known as debt schemes. %he aim
of these schemes is to provide regular and steady income to investors. %hese
schemes generally invest in fixed income securities such as bonds and corporate
debentures. (apital appreciation in such schemes may be limited.
• 7aa")'# S)h'1's: &alanced chemes aim to provide both growth and income
by periodically distributing a part of the income and capital gains they earn.
%hese schemes invest in both shares and fixed income securities, in the
proportion indicated in their offer documents )normally >0?>0*.
• M%"'6 Mar?'t S)h'1's? Money Market chemes aim to provide easy liuidity,
preservation of capital and moderate income. %hese schemes generally invest in
safer, short:term instruments, such as treasury bills, certificates of deposit,
commercial paper and inter:bank call money.
OTHER SCHEMES
• Ta4 Sa3$"5 S)h'1's: %ax:saving schemes offer tax rebates to the investors
under tax laws prescribed from time to time. 3nder ec.@@ of the Income %ax $ct,
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contributions made to any 2uity 4inked avings cheme )24* are eligible for
rebate.
• I"#'4 S)h'1's: Index schemes attempt to replicate the performance of a
particular index such as the &2 ensex or the 52 >0. %he portfolio of these
schemes will consist of only those stocks that constitute the index. %he
percentage of each stock to the total holding will be identical to the stocks index
weightage. $nd hence, the returns from such schemes would be more or less
euivalent to those of the Index.
• S')t%r S(')$&$) S)h'1's: %hese are the fundsAschemes which invest in the
securities of only those sectors or industries as specified in the offer documents.
e.g. !harmaceuticals, oftware, "ast Moving (onsumer -oods )"M(-*,
!etroleum stocks, etc. %he returns in these funds are dependent on the
performance of the respective sectorsAindustries. +hile these funds may give
higher returns, they are more risky compared to diversified funds. Investors need
to keep a watch on the performance of those sectorsAindustries and must exit at
an appropriate time.
T6('s %& r'tur"s
%here are three ways, where the total returns provided by mutual funds can be enjoyed
by investors?
• Income is earned from dividends on stocks and interest on bonds. $ fund pays
out nearly all income it receives over the year to fund owners in the form of a
distribution.
• If the fund sells securities that have increased in price, the fund has a capital
gain. Most funds also pass on these gains to investors in a distribution.
• If fund holdings increase in price but are not sold by the fund manager, the fundBs
shares increase in price. Cou can then sell your mutual fund shares for a profit.
"unds will also usually give you a choice either to receive a check for
distributions or to reinvest the earnings and get more shares.
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ADVANTAGE & DISADVANTAGE OF INVESTING IN MUTUAL
FUND:
"or investments in mutual fund, one must keep in mind about the !ros and cons of
investments in mutual fund.
A#3a"ta5's %& I"3'st$"5 Mutua !u"#s:
+. Pr%&'ss$%"a Ma"a5'1'"t 2 %he basic advantage of funds is that, they are
professional managed, by well ualified professional. Investors purchase funds because
they do not have the time or the expertise to manage their own portfolio. $ mutual fund
is considered to be relatively less expensive way to make and monitor their
investments.
8. D$3'rs$&$)at$%" 2 !urchasing units in a mutual fund instead of buying individual
stocks or bonds, the investors risk is spread out and minimi8ed up to certain extent. %he
idea behind diversification is to invest in a large number of assets so that a loss in any
particular investment is minimi8ed by gains in others.
. E)%"%1$'s %& S)a' 2 Mutual fund buy and sell large amounts of securities at a time,
thus help to reducing transaction costs, and help to bring down the average cost of the
unit for their investors.
/. L$=u$#$t6 2 ust like an individual stock, mutual fund also allows investors to liuidate
their holdings as and when they want.
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@. S$1($)$t6 2 Investments in mutual fund is considered to be easy, compare to other
available instruments in the market, and the minimum investment is small. Most $M(
also have automatic purchase plans whereby as little as 's. /000, where I! start with
just 's.>0 per month basis.
D$sa#3a"ta5's %& I"3'st$"5 Mutua !u"#s:
+. Pr%&'ss$%"a Ma"a5'1'"t: ome funds doesn#t perform in neither the market, as
their management is not dynamic enough to explore the available opportunity in the
market, thus many investors debate over whether or not the so:called professionals are
any better than mutual fund or investor himself, for picking up stocks.
8. C%sts E %he biggest source of $M( income, is generally from the entry 9 exit load
which they charge from an investors, at the time of purchase. %he mutual fund
industries are thus charging extra cost under layers of jargon.
. D$ut$%" : &ecause funds have small holdings across different companies, high
returns from a few investments often donBt make much difference on the overall return.
Dilution is also the result of a successful fund getting too big. +hen money pours into
funds that have had strong success, the manager often has trouble finding a good
investment for all the new money.
/. Ta4's : when making decisions about your money, fund managers donBt consider
your personal tax situation. "or example, when a fund manager sells a security, a
capital:gain tax is triggered, which affects how profitable the individual is from the sale.
It might have been more advantageous for the individual to defer the capital gains
liability
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Mutua !u"#s I"#ustr6 $" I"#$a
%he origin of mutual fund industry in India is with the introduction of the concept of
mutual fund by 3%I in the year =FG0 bn.
%he main reason of its poor growth is that the mutual fund industry in India is new in the
country. 4arge sections of Indian investors are yet to be intellectuated with the concept.
1ence, it is the prime responsibility of all mutual fund companies, to market the product
correctly abreast of selling.
%he mutual fund industry can be broadly put into four phases according to the
development of the sector $ mutual fund is a professionally:managed firm of collective
investments that pools money from many investors and invests it in stocks, bonds,
short:term money market instruments, andAor other securities.in other words we can say
that $ Mutual "und is a trust registered with the ecurities and 2xchange &oard of India
)2&I*, which pools up the money from individual A corporate investors and invests the
same on behalf of the investors Aunit holders, in euity shares, -overnment securities,
&onds, (all money markets etc., and distributes the profits.
%he value of each unit of the mutual fund, known as the net asset value )5$6*, is
mostly calculated daily based on the total value of the fund divided by the number of
shares currently issued and outstanding. %he value of all the securities in the portfolio in
calculated daily. "rom this, all expenses are deducted and the resultant value divided by
the number of units in the fund is the fund#s 5$6.
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NAV = Total alu! of t"! fund######.
No. of $"a%!$ u%%!ntly i$$u!d and out$tandin'
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MA>OR MUTUAL !UND COMPANIES IN INDIA
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A#3a"ta5's %& a M!
– Mutual "unds provide the benefit of cheap access to expensive stocks
– Mutual funds diversify the risk of the investor by investing in a basket of
assets
– $ team of professional fund managers manages them with in:depthresearch inputs from investment analysts.
– &eing institutions with good bargaining power in markets, mutual funds
have access to crucial corporate information, which individual investors
cannot access.
(i$to%y of t"! Indian )utual fund indu$t%y:
%he mutual fund industry in India started in =FG< with the formation of 3nit %rust of
India, at the initiative of the -overnment of India and 'eserve &ank. %he history of
mutual funds in India can be broadly divided into four distinct phases.
!$rst Phas' – +,-/2B
3nit %rust of India )3%I* was established on =FG< by an $ct of !arliament by the
'eserve &ank of India and functioned under the 'egulatory and administrative control
of the 'eserve &ank of India. In =FH@ 3%I was de:linked from the '&I and the IndustrialDevelopment &ank of India )ID&I* took over the regulatory and administrative control in
place of '&I. %he first scheme launched by 3%I was 3nit cheme =FG. $t the end of
=F@@ 3%I had 's.G,H00 crores of assets under management.
S')%"# Phas' – +,B2+,, ;E"tr6 %& Pu9$) S')t%r !u"#s<
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=F@H marked the entry of non: 3%I, public sector mutual funds set up by public sector
banks and 4ife Insurance (orporation of India )4I(* and -eneral Insurance (orporation
of India )-I(*. &I Mutual "und was the first non: 3%I Mutual "und established in une
=F@H followed by (anbank Mutual "und )Dec @H*, !unjab 5ational &ank Mutual "und
)$ug @F*, Indian &ank Mutual "und )5ov @F*, &ank of India )un F0*, &ank of &aroda
Mutual "und )ct F/*. 4I( established its mutual fund in une =F@F while -I( had set
up its mutual fund in December =FF0.$t the end of =FF
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*at!'o%i!$ of )utual fund$ :
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Mutual funds can be classified as follow?
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7as'# %" th'$r stru)tur':
• pen:ended funds? Investors can buy and sell the units from the fund, at any
point of time.
• (lose:ended funds? %hese funds raise money from investors only once.
%herefore, after the offer period, fresh investments can not be made into the
fund. If the fund is listed on a stocks exchange the units can be traded like stocks
)2.g., Morgan tanley -rowth "und*. 'ecently, most of the 5ew "und ffers of
close:ended funds provided liuidity window on a periodic basis such as monthly
or weekly. 'edemption of units can be made during specified intervals.
%herefore, such funds have relatively low liuidity.
7as'# %" th'$r $"3'st1'"t %9')t$3':
2uity funds? %hese funds invest in euities and euity related instruments. +ith
fluctuating share prices, such funds show volatile performance, even losses.
1owever, short term fluctuations in the market, generally smoothens out in the
long term, thereby offering higher returns at relatively lower volatility. $t the same
time, such funds can yield great capital appreciation as, historically, euities have
outperformed all asset classes in the long term. 1ence, investment in euityfunds should be considered for a period of at least years. It can be further
classified as?
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%he entire mutual fund industry operates in a very organi8ed way. %he investors, known
as unit holders,handover their savings to the $M(s under various schemes. %heobjective of the investment should match with the objective of the fund to best suit the
investors# needs. %he $M(s further invest the funds into various securities according
to the investment objective. %he return generated from the investments is passed on to
the investors or reinvested as mentioned in the offer document
D%)u1'"ts r'=u$r'# ;PAN 1a"#at%r6
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Pr%%& %& $#'"t$t6 ?
+. !hoto !$5 card
8. In case of non:photo !$5 card in addition to copy of !$5 card any one of the
following? driving licenseApassport copyA voter idA bank photo pass book.
!roof of address )any of the following * ?latest telephone bill, latest electricity bill,
!assport, latest bank passbookAbank account statement, latest Demat account
statement, voter id, driving license, ration card, rent agreement.
O&&'r #%)u1'"t: $n offer document is issued when the $M(s make 5ew "und
ffer)5"*. Its advisable to every investor to ask for the offer document and read it
before investing. $n offer document consists of the following?
tandard ffer Document for Mutual "unds )2&I "ormat*
ummary Information
-lossary of Defined %erms
'isk Disclosures
4egal and 'egulatory (ompliance
2xpenses (ondensed "inancial Information of chemes
(onstitution of the Mutual "und
Investment bjectives and !olicies
Management of the "und
ffer 'elated Information.
K'6 I"&%r1at$%" M'1%ra"#u1: a key information memorandum, popularly known as
JIM, is attached along with the mutual fund form. $nd thus every investor get to read it.Its contents are?
+ Name of the fund.
8. Iestment objective
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. $set allocation pattern of the scheme.
/. 'isk profile of the scheme
@. !lans 9 options
-. Minimum application amountA no. of units
B. &enchmark index
. Dividend policy
,. 5ame of the fund manager)s*
+ . 2xpenses of the scheme? load structure, recurring expenses
++. !erformance of the scheme )scheme return vAs. benchmark return*
+8. Cear: wise return for the last > financial year.
D$str$9ut$%" )ha""'s:
Mutual funds posses a very strong distribution channel so that the ultimate customers
doesn#t face any difficulty in the final procurement. %he various parties involved in
distribution of mutual funds are?
+. Direct marketing by the $M(s? the forms could be obtained from the $M(s directly.
%he investors can approach to the $M(s for the forms. some of the top $M(s of India
areL 'eliance ,&irla unlife, %ata, &I magnum, Jotak Mahindra, 1D"(, undaram,
I(I(I, Mirae $ssets, (anara 'obeco, 4otus India, 4I(, 3%I etc. whereas foreign $M(s
include? tandard (hartered, "ranklin %empleton, "idelity, ! Morgan, 1&(, D!
Merill 4ynch, etc.
8 .&rokerA sub broker arrangements? the $M(s can simultaneously go for brokerAsub:
broker to populari8e their funds. $M(s can enjoy the advantage of large network of
these brokers and sub brokers.
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. Individual agents, &anks, 5&"(? investors can procure the funds through individual
agents, independent brokers, banks and several non: banking financial corporations
too, whichever he finds convenient for him.
Wh6 has $t 9')%1' %"' %& th' ar5'st &$"a")$a $"stru1'"ts
If we take a look at the recent scenario in the Indian financial market then we can find
the market flooded with a variety of investment options which includes mutual funds,
euities, fixed income bonds, corporate debentures, company fixed deposits, bank
deposits, !!", life insurance, gold, real estate etc. all these investment options couldbe judged on the basis of various parameters such as: return, safety convenience,
volatility and liuidity. measuring these investment options on the basis of the
mentioned parameters, we get this in a tabular form
-!tu%n Saf!ty Volatility Liquidit
y
*on!ni!
n!
Equity High Lo High High Mo!"#$%"
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ond$ Mo!"#$%" High Mo!"#$%" Mo!"#$%" High
*o.
D!/!ntu%
!$
Mo!"#$%" Mo!"#$%" Mo!"#$%" Lo Lo
*o. FD$ Mo!"#$%" Lo Lo Lo Mo!"#$%"
an,
D!0o$it$
Lo High Lo High High
F Mo!"#$%" High Lo Mo!"#$%" High
Lif!
In$u%an!
Lo High Lo Lo Mo!"#$%"
Gold Mo!"#$%" High Mo!"#$%" Mo!"#$%" &o'!
-!alE$tat!
High Mo!"#$%" High Lo Lo
Mutual
Fund$
High High Mo!"#$%" High High
+e can very well see that mutual funds outperform every other investment option. n
three parameters it scores high whereas it#s moderate at one. comparing it with the
other options, we find that euities gives us high returns with high liuidity but its
volatility too is high with low safety which doesn#t makes it favourite among persons who
have low risk: appetite. 2ven the convenience involved with investing in euities is just
moderate.
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5ow looking at bank deposits, it scores better than euities at all fronts but lags badly
in the parameter of utmost important ieL it scores low on return , so it#s not an
happening option for person who can afford to take risks for higher return. %he other
option offering high return is real estate but that even comes with high volatility and
moderate safety level, even the liuidity and convenience involved are too low. -old
have always been a favourite among Indians but when we look at it as an investment
option then it definitely doesn#t gives a very bright picture. $lthough it ensures high
safety but the returns generated and liuidity are moderate. imilarly the other
investment options are not at par with mutual funds and serve the needs of only a
specific customer group. traightforward, we can say that mutual fund emerges as a
clear winner among all the options available.
%he reasons for this being?
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financial intermediary and that is the flexibility that mutual funds offer regarding the
investment amount. ne can start investing in mutual funds with amount as low as 's.
>00 through I!s and even 's. =00 in some cases.
H%0 #% $"3'st%rs )h%%s' 9't0''" &u"#s
+hen the market is flooded with mutual funds, it#s a very tough job for the investors to
choose the best fund for them. +henever an investor thinks of investing in mutual
funds, he must look at the investment objective of the fund. %hen the investors sort out
the funds whose investment objective matches with that of the investor#s. 5ow the toughtask for investors start, they may carry on the further process themselves or can go for
advisors like 1D"( . f course the investors can save their money by going the direct
route i.e. through the $M(s directly but it will only save =:/./>K )entry load* but could
cost the investors in terms of returns if the investor is not an expert. o it is always
advisable to go for M" advisors. %he mf advisors# thoughts go beyond just investment
objectives and rate of return. ome of the basic tools which an investor may ignore but
an mf advisor will always look for are as follow?
+. Ru('' )%st a3'ra5$"5:
%he investors going for ystematic Investment !lans)I!* and ystematic %ransfer
!lans)%!* may enjoy the benefits of '($ )'upee (ost $veraging*. 'upee cost
averaging allows an investor to bring down the average cost of buying a scheme by
making a fixed investment periodically, like 's >,000 a month and nowadays even as
low as 's. >00 or 's. =00. In this case, the investor is always at a profit, even if the
market falls. In case if the 5$6 of fund falls, the investors can get more number of units
and vice:versa. %his results in the average cost per unit for the investor being lower
than the average price per unit over time.
%he investor needs to decide on the investment amount and the freuency. More
freuent the investment interval, greater the chances of benefiting from lower prices.
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Investors can also benefit by increasing the I! amount during market downturns,
which will result in reducing the average cost and enhancing returns. +hereas %!
allows investors who have lump sums to park the funds in a low:risk fund like liuid
funds and make periodic transfers to another fund to take advantage of rupee cost
averaging.
8. R'9aa")$"5:
'ebalancing involves booking profit in the fund class that has gone up and investing in
the asset class that is down. %rigger and switching are tools that can be used to
rebalance a portfolio. %rigger facilities allow automatic redemption or switch if a
specified event occurs. %he trigger could be the value of the investment, the net asset
value of the scheme, level of capital appreciation, level of the market indices or even adate. %he funds redeemed can be switched to other specified schemes within the same
fund house. ome fund houses allow such switches without charging an entry load.
%o use the trigger and switch facility, the investor needs to specify the event, the amount
or the number of units to be redeemed and the scheme into which the switch has to be
made. %his ensures that the investor books some profits and maintains the asset
allocation in the portfolio.
. D$3'rs$&$)at$%":
Diversification involves investing the amount into different options. In case of mutual
funds, the investor may enjoy it afterwards also through dividend transfer option. 3nder
this, the dividend is reinvested not into the same scheme but into another scheme of the
investorBs choice.
"or example, the dividends from debt funds may be transferred to euity schemes. %his
gives the investor a small exposure to a new asset class without risk to the principal
amount. uch transfers may be done with or without entry loads, depending on the M"Bs
policy.
/. Ta4 '&&$)$'")6:
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%ax factor acts as the “x:factor7 for mutual funds. %ax efficiency affects the final decision
of any investor before investing. %he investors gain through either dividends or capital
appreciation but if they haven#t considered the tax factor then they may end loosing.
Debt funds have to pay a dividend distribution tax of =/.>0 per cent )plus surcharge andeducation cess* on dividends paid out. Investors who need a regular stream of income
have to choose between the dividend option and a systematic withdrawal plan that
allows them to redeem units periodically. +! implies capital gains for the investor.
If it is short:term, then the +! is suitable only for investors in the =0:per:cent:tax
bracket. Investors in higher tax brackets will end up paying a higher rate as short:term
capital gains and should choose the dividend option.
If the capital gain is long:term )where the investment has been held for more than one
year*, the growth option is more tax efficient for all investors. %his is because investors
can redeem units using the +! where they will have to pay =0 per cent as long:term
capital gains tax against the =/.>0 per cent DD% paid by the M" on dividends.
$ll the tools discussed over here are used by all the advisors and have helped investors
in reducing risk, simplicity and affordability. 2ven then an investor needs to examine
costs, tax implications and minimum applicable investment amounts before committingto a service.
o%tfolio analy$i$ tool$:
+ith the increasing number of mutual fund schemes, it becomes very difficult for an
investor to choose the type of funds for investment. &y using some of the portfolio
analysis tools, he can become more euipped to make a well informed choice. %here
are many financial tools to analy8e mutual funds. 2ach has their uniue strengths and
limitations as well. %herefore, one needs to use a combination of these tools to make a
thorough analysis of the funds.
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%he present market has become very volatile and buoyant, so it is getting difficult for the
investors to take right investing decision. so the easiest available option for investors is
to choose the best performing funds in terms of “returns7 which have yielded maximum
returns.
&ut if we look deeply to it, we can find that the returns are important but it is also
important to look at the Nuality# of the returns. NOuality# determines how much risk a fund
is taking to generate those returns. ne can make a judgment on the uality of a fund
from various ratios such as standard deviation, sharpe ratio, beta, treynor measure, ':
suared, alpha, portfolio turnover ratio, total expense ratio etc.
5ow I have compared two funds of 1D"( on the basis of standard deviation, beta, ':
suared, sharpe ratio, portfolio turnover ratio and total expense ratio. o before goinginto details, lets have a look at these ratios?
Sta"#ar# #'3$at$%":
in simple terms standard deviation is one of the commonly used statistical parameter to
measure risk, which determines the volatility of a fund. Deviation is defined as any
variation from a mean value )upward 9 downward*. ince the markets are volatile, the
returns fluctuate everyday. 1igh standard deviation of a fund implies high volatility and a
low standard deviation implies low volatility.
7'ta a"a6s$s:
beta is used to measure the risk. It basically indicates the level of volatility associated
with the fund as compared to the market. In case of funds, as compared to the market.
In case of funds, beta would indicate the volatility against the benchmark index. It is
used as a short term decision making tool. $ beta that is greater than = means that the
fund is more volatile than the benchmark index, while a beta of less than = means that
the fund is more volatile than the benchmark index. $ fund with a beta very close to =
means the fund#s performance closely matches the index or benchmark.
%he success of beta is heavily dependent on the correlation between correlation
between a fund and its benchmark. %hus, if the fund#s portfolio doesn#t have a relevant
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benchmark index then a beta would be grossly inappropriate. "or example if we are
considering a banking fund, we should look at the beta against a bank index.
R2S=uar'# ;R8 and beta value is 0.F. it means that this fund is less aggressive than the
market.
harpe ratio? sharpe ratio is a risk to reward ratio, which helps in comparing the returns
given by a fund with the risk that the fund has taken. $ fund with a higher sharpe ratio
means that these returns have been generated taking lesser risk. In other words, the
fund is less volatile and yet generating good returns. %hus, given similar returns, the
fund with a higher sharpe ratio offers a better avenue for investing(
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CHAPTER -2
COMPANY PROFILE
HD!C Ass't Ma"a5'1'"t C%1(a"6 L$1$t'# ;AMC<
1D"( $sset Management (ompany 4td )$M(* was incorporated under the (ompanies
$ct, =F>G, on December =0, =FFF, and was approved to act as an $sset Management
(ompany for the 1D"( Mutual "und by 2&I vide its letter dated uly
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In terms of the Investment Management $greement, the %rustee has appointed the
1D"( $sset Management (ompany 4imited to manage the Mutual "und. %he paid up
capital of the $M( is 's. />./= crore as on eptember
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• Mr. 'ajeshwar 'aj &ajaaj• Mr. 6ijay Merchant• Ms. 'enu . Jarnad• Mr. Milind &arve• Mr. Deepak . !arekh
S(%"s%rs:
1D"( 4td. was incorporated in =FHH as the first specialised mortgage company in India.
1D"( provides financial assistance to individuals, corporates and developers for the
purchase or construction of residential housing. It also provides property related
services )e.g. property identification, sales services and valuation*, training and
consultancy. f these activities, housing finance remains the dominant activity. 1D"(has a client base of around = lac borrowers, over =H.> lac depositors, over =.@/ lac
shareholders and over />,000 deposit agents, as at March
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4imited, -'31 "inance 4imited, 1D"( 6enture (apital 4imited and (redila "inancial
ervices 4imited.
Trust''s:
1D"( %rustee (ompany 4imited, a company incorporated under the (ompanies $ct,
=F>G is the %rustee to 1D"( Mutual "und vides the %rust deed dated une @, /000, as
amended from time to time. 1D"( %rustee (ompany 4td is wholly owned subsidiary of
1D"(
%he &oard of Directors of 1D"( %rustee (ompany 4imited consists of the
following eminent persons.
Mr. A"$ ?u1ar h$r''
Mr. V$")'"t %s'(h %F9r$'"
Mr. Sh$sh$r ?. D$0a"$
Mr. Ra"a" sa"5h$
Mr. V. Sr$"$3asa ra"5a"
VISION O! HD!C AMC
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R'5$strar Tra"s&'r A5'"ts:
(omputer $ge Management ervices !vt. 4td.,'ayala %owers : I,
=>@ $nna alai,(hennai G0000/.%el? )PF=* 0 /@>/ 0>=G"ax? )PF=* 0 /0< /F>/+ebsite? www.camsonline.com
Cust%#$a":
1D"( &$5J 4IMI%2DJamala Mills (ompound,
enapati &apat Marg,4ower !arel,Mumbai 00 0=
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+orli, Mumbai 00 0=@.+ebsite? www.citibank.com
Au#$t%rs:
D24I%%2 1$JI5 9 244(hartered $ccountants=/, Dr. $nnie &esant 'oad,pp. hiv agar 2state,+orli,Mumbai 00 0=@.+ebsite? www.deloitte.co
A0ar#s a))%a#'s :
A0ar#s 0%" 96 HD!C Ass't Ma"a5'1'"t C%. Lt#
eria
l no.
5ame of the $ward
(eremony
$ward
$gency
$wardsQ 2ligible
number of
"und 1ouses
!eriod for
the award
= I('$ Mutual
"und
$wards /0==
I('$ 4td.A
I('$
nline
4imited
tar "und
1ouse
of the Cear
)2uity
(ategory*
=<
Cear
endedDecember
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H%us$"5 D'3'%(1'"t !$"a")' C%r(%rat$%" L$1$t'# ;HD!C
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the eligible fund houses. %o ualify for the award a fund house needs to have at least
one scheme ranked < star or above in at least three of the euity and debt categories
respectively defined by I('$. %he scoring aims at assessing the number of superior
performing schemes managed by the fund house over the current one:year period. %he
result also takes into account ualitative factors of an $M(Bs structure based on their
responses to a due diligence uestionnaire.
MORNINGSTAR INDIA !UND AWARDS 8++:
&est 2uity "und 1ouse? %he award recogni8es sustained outperformance over three
years, based on the Morningstar 'isk:$djusted 'eturn across its euity fund line:ups for
the period ending December
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Mutual fund industry and structure:
Mutual funds have organi8ation structure as per the ecurity 2xchange &oard of India
guidelineL ecurity 2xchange &oard of India specified authority and responsibility of
%rustee and $sset Management (ompanies. %he objective is to controlling, to
promoted, to regulate, to protect the investor#s right and efficient trading of units.
peration of Mutual fund start with investors saves their money on mutual fund, than
Mutual "und manager handling the funds and strategic investment on scrip. $s per the
objectives of particular scheme manager selected scrip. 3nit value will become high
when fund manager Investment policy generate the return on capital market. 3nit return
depends on fund return and efficient capital market. $lso affects international capital
market, liuidity and at last economic policy. &elow the graph indicates how the process
was going on to investors to earn returns. Mutual fund manager having high
responsibility inside of return and how to minimi8e the risk. +hen fund provided high
return with high risk, investors attract to invest more funds for same scheme.
%he Mutual fund organi8ation as per the 2&I formation and necessary formation is
needed for sooth activities of the companies and achieved the desire objectives.
%ransfer agent and custodian play role for demateriali8ation of the fund and unit holders
hold the account statement, but custody of the unit is on particular $sset Management
(ompany. (ustodian holds all the fund units on demateriali8ation form. ponsor had
decided the responsibility of custodian when investor to purchase the fund and to sell
the unit. $pplication forms, transaction slip and other reuests received by transfer
agent, middle men between investors and $ssets Management (ompanies.
S%1' &a)ts &%r th' 5r%0th %& 1utua &u"#s $" I"#$a:
• Mutual funds have seen =00K growth in the last G years.
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• 5umber of foreign $M(#s is in the ueue to enter the Indian markets like "idelity
Investments, 3 based, with over 3R=trillion assets under management
worldwide.
• ur saving rate is over /
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recommendations are not binding on the industry participants. &y its very nature, $M"I
has an advisor#s or a counsellor#s role in the mutual fund industry. Its recommendations
become mandatory if and only if the ecurities and 2xchange &oard of India )2&I*
incorporates them into the regulatory framework it stipulates for mutual funds.
%he Indian mutual fund industry follows a
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name of the %rustees. nce the %rust is created, it is registered with 2&I, after which
point, this %rust is known as the mutual fund.
. Ass't Ma"a5'1'"t C%1(a"6 ;AMC
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Shareholding Trus deed
IM agree!en
PRODUCTS
49
T#,+%""+AM.
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Chapter - 3
Objectives and scope
O7>ECTIVES O! THE STUDY
%o find out the !references of the investors for $sset Management
(ompany.
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%o know the !references for the portfolios.
%o know why one has invested or not invested in 1D"( Mutual fund
%o find out the most preferred channel.
%o find out what should do to boost Mutual "und Industry(
S)%(' %& th' stu#6
$ big boom has been witnessed in Mutual "und Industry in recent times. $ large
number of new players have entered the market and trying to gain market share in
this rapidly improving market. I surveyed on my !roject %opic “$ study of
preferences of the Investors for investment in Mutual "und7 on the visiting
customers of the 1D"( M3%3$4 "35D. %he study will help to know thepreferences of the customers, which company, portfolio, mode of investment,
option for getting return and so on they prefer. %his project report may help the
company to make further planning and strategy.
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CHAPTER -"
RESEARCH METHO#OLO$Y
-ESEA-*( MET(ODOLOG2
%his report is based on primary as well secondary data, however primary datacollection was given more importance since it is overhearing factor in attitude
studies. ne of the most important users of research methodology is that it helps
in identifying the problem, collecting, analy8ing the reuired information data and
providing an alternative solution to the problem .It also helps in collecting the vital
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information that is reuired by the top management to assist them for the better
decision making both day to day decision and critical ones.
Data s%ur)'s:
'esearch is totally based on primary data. econdary data can be used only for
the reference. 'esearch has been done by primary data collection, and primary
data has been collected by interacting with various people. %he secondary data
has been collected through various journals and websites.
Sa1($"5:
Sa1($"5 (r%)'#ur':
%he sample was selected of them who are the customersAvisitors of 1D"(
mutual fund, , irrespective of them being investors or not or availing the
services or not. It was also collected through personal visits to persons, by
formal and informal talks and through filling up the uestionnaire prepared.
%he data has been analy8ed by using mathematicalAtatistical tool.
Sa1(' s$J':
%he sample si8e of my project is limited to /00 people only. ut of which
only =/0 people had invested in Mutual "und. ther @0 people did not
have invested in Mutual "und.
Sa1(' #'s$5":
Data has been presented with the help of bar graph, pie charts, line
graphs etc.
L$1$tat$%":
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Cha%er-&
#aa anal'sis ( iner%reaion
ANAL2SIS & INTE--ETATION OF T(E DATA
1. 3a4 A5' #$str$9ut$%" %& th' I"3'st%rs .
Ag" o,)
30
3135 3640 4145 4650 50
No( o I*"+%o#+ 12 18 30 24 20 16
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+2@-2//+2/@/-2@@
@
+
+@
8
8@
@
+8
+
8/
8 +-
+
8
/
@
-
A5' 5r%u( %& th' I"3'st%rs
I"3'st%rs $"3'st'# $" Mutua !u"#
I"t'r(r'tat$%":
$ccording to this chart out of =/0 Mutual "und investors the most are in the agegroup of K, the second most investors are in the age group of =:
>yrs i.e. /0K and the least investors are in the age group of below
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INTERPRETATION
ut of =/0 Mutual "und investors
H=K of the investors are -raduateA!ost -raduate, /
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I"t'r(r'tat$%":
In ccupation group out of =/0 investors, K
are &usinessman, /FK are -ovt. 2mployees, K are in others.
3d4. Mont"ly Fa)ily Ino)! of t"! In!$to%$ .
Ino)! G%ou0 No. of In!$to%$
10000 5
1000115000 12
1500120000 28
2000130000 43
30000 32
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+ +2+@ +@28 82
@
+
+@
8
8@
@
/
/@
@
@+8
8
/
8
I")%1' Gr%u( %& th' I"3'st%rs" ;Rs. $" Th.<
N%. %& I"3'st%rs
I"t'r(r'tat$%":
In the Income -roup of the investors , out of =/0 investors,
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8 988 88
1;<
1
1<
No.of -!$0ond!nt$
ind$ of In!$t)!nt
I"t'r(r'tat$%":
"rom the above graph it can be inferred that out of /00 people, FH.>K
people have invested in aving $Ac, HGK in Insurance, HK in "ixed
Deposits, G0K in Mutual "und, K in !ost ffice, />K in hares or
Debentures, =>K in -oldAilver and K in 'eal 2state.
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98C
?8C?9C
1C
Liquidity LoB -i$, (i'" -!tu%n T%u$t
I"t'r(r'tat$%":
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ut of /00 !eople,
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"rom the above chart it is inferred that GHK !eople are aware of Mutual "und and
its operations and
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Y's -
N% /
I"t'r(r'tat$%":
ut of /00 !eople, G0K have invested in Mutual "und and 0K do not have
invested in Mutual "und.
R'as%" &%r "%t $"3'st'# $" Mutua !u"#
-!a$on No. of
-!$0ond!nt$
No% A$#" @<
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High"# Ri+ <
No% $*/ S)"iC
R"$+o*
18
=1C
1?C @C
Not ABa%! (i'"!% -i$, Not Any
I"t'r(r'tat$%":
ut of @0 people, who have not invested in Mutual "und, @=K are not aware of
Mutual "und, =
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I"3'st%rs $"3'st'# $" #$&&'r'"t Ass'ts Ma"a5'1'"t C%. ;AMC<
Na)! of AM* No. of In!$to%$
SBIMF 55
UTI 75
HDF. 30
R"'i$*" 75
I.I.I P#,!"*%i$' 56
:o%$ 45
%h"#+ 70
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UTI
R'$a")'
ICICI
S7IM!
K%ta?
HD!C
Oth'rs
+ 8 / @ - B
B@
B@
@-
@@
/@
B
+
8
/
@
-
B
+
8
/
@
-
B
N%. %& I"3'st%rs
Na1' %& AMC
I"t'r(r'tat$%":
Most of the Investors preferred 3%I and 'eliance Mutual "und. ut of =/0
Investors G/.>K have invested in each of them, only GK have invested in &IM",
HK in I(I(I !rudential, K in Jotak and />K in 1D"(.
R'as%" &%r $"3'st'# $" HD!C MUTUAL!UND
R"$+o* No( o
R"+)o*!"*%+
A++oi$%"! i%h HDF. 48
B"%%"# R"%,#* 7
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Ag"*%+ A!i" 20
@C;C
9>C
A$$oiat!d Bit" SI !tt!% -!tu%n A'!nt$ Adi!
I"t'r(r'tat$%":
ut of >> investors of 1D"( GK have invested because of its association with &rand
'24I$5(2, /HK invested on $gent#s $dvice, FK invested because of better return.
%!f!%!n! of In!$to%$ fo% futu%! in!$t)!nt in
Mutual Fund
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Na)! of AM* No. of In!$to%$
SBIMF 76
UTI 45
HDF. 35
R"'i$*" 82
I.I.I P#,!"*%i$' 80
:o%$ 60
%h"#+ 75
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SIMF
UTI
(DF*
-!lian!
I*I*I %ud!ntial
ota,
Ot"!%$
8 98 8 @8 8 188
>@
<
?<
9
8
@8
><
1
9
?
<
@
>
1
9
?
<
@
>
No. of In!$to%$
Na)! of AM*
Int!%0%!tation:
ut of =/0 investors, G@K prefer to invest in 'eliance, GHK in I(I(I !rudential,
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.h$**"' Fi*$*i$' A!i+o# B$* AM.
No( o
R"+)o*!"*%+
72 18 30
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No( o R"+)o*!"*%+ 78 42
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O(t$%" &%r 5'tt$"5 R'tur" Pr'&'rr'# 96 th' I"3'st%rs
)%io* Dii!"*! P$/o,% Dii!"*!
R"i*"+%-"*%
o%h
No( o
R"+)o*!"*%+
25 10 8
5
91CC
>1CDiid!nd ayout Diid!nd -!in!$t)!nt G%oBt"
I"t'r(r'tat$%":
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I"t'r(r'tat$%":
ut of =/0 investors, HFK investors do not prefer to invest in ectoral "und
because there is maximum risk and /=K prefer to invest in ectoral "und.
.h$)%"# 6
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Fi*!i*g+ $*! .o*',+io*
Findin'$
%he $ge -roup of years and the least were in the age
group of below
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$mong /00 'espondents only G0K had invested in Mutual "und and 0K did
not have invested in Mutual fund. ut of @0 'espondents @=K were not aware of Mutual "und, =K through
$M( )means Direct Investment* and =>K through &ank. G>K preferred ne %ime Investment and K preferred I! out of both type
of Mode of Investment. %he most preferred !ortfolio was 2uity, the second most was &alance
)mixture of both euity and debt*, and the least preferred !ortfolio was Debt
portfolio. Maximum 5umber of Investors !referred -rowth ption for returns, the second
most preferred Dividend !ayout and then Dividend 'einvestment. Most of the Investors did not want to invest in ectoral "und, only /=K wanted
to invest in ectoral "und.
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C%")us$%"
'unning a successful Mutual "und reuires complete understanding of the
peculiarities of the Indian tock Market and also the psyche of the small investors.
%his study has made an attempt to understand the financial behavior of Mutual
"und investors in connection with the preferences of &rand )$M(*, !roducts,
(hannels etc. I observed that many of people have fear of Mutual "und. %hey
think their money will not be secure in Mutual "und. %hey need the knowledge of Mutual "und and its related terms. Many of people do not have invested in mutual
fund due to lack of awareness although they have money to invest. $s the
awareness and income is growing the number of mutual fund investors are also
growing.
“&rand7 plays important role for the investment. !eople invest in those (ompanies
where they have faith or they are well known with them. %here are many $M(s in
!atna but only some are performing well due to &rand awareness. ome $M(s
are not performing well although some of the schemes of them are giving good
return because of not awareness about &rand. 1D"(, 'eliance, 3%I, &IM", I(I(I
!rudential etc. they are well known &rand, they are performing well and their
$ssets 3nder Management is larger than others whose &rand name are not well
known like !rinciple, underam, etc.Distribution channels are also important for
the investment in mutual fund. "inancial $dvisors are the most preferred channel
for the investment in mutual fund. %hey can change investors# mind from oneinvestment option to others. Many of investors directly invest their money through
$M( because they do not have to pay entry load. nly those people invest directly
who know well about mutual fund and its operations and those have time.
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*"a0t!% >
Su''!$tion$
And
-!o))!ndation$
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Su55'st$%"s a"# R')%11'"#at$%"s
%he most vital problem spotted is of ignorance. Investors should be made aware
of the benefits. 5obody will invest until and unless he is fully convinced. Investors
should be made to reali8e that ignorance is no longer bliss and what they are
losing by not investing. Mutual funds offer a lot of benefit which no other single option could offer. &ut
most of the people are not even aware of what actually a mutual fund isS %hey
only see it as just another investment option. o the advisors should try to change
their mindsets. %he advisors should target for more and more young investors.
Coung investors as well as persons at the height of their career would like to go for
advisors due to lack of expertise and time.
Mutual "und (ompany needs to give the training of the Individual "inancial $dvisors about the "undAcheme and its objective, because they are the main
source to influence the investors. &efore making any investment "inancial $dvisors should first enuire about the
risk tolerance of the investorsAcustomers, their need and time )how long they want
to invest*. &y considering these three things they can take the customers into
consideration. Counger people aged under will be a key new customer group into the future,
so making greater efforts with younger customers who show some interest in
investing should pay off. (ustomers with graduate level education are easier to sell to and there is a large
untapped market there. %o succeed however, advisors must provide sound advice
and high uality. ystematic Investment !lan )I!* is one the innovative products launched by
$ssets Management companies very recently in the industry. I! is easy for
monthly salaried person as it provides the facility of do the investment in 2MI.
%hough most of the prospects and potential investors are not aware about the I!.
%here is a large scope for the companies to tap the salaried persons.
UESTIONNAIRE
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A stu#6 %& (r'&'r'")'s %& th' $"3'st%rs &%r $"3'st1'"t $" 1utua &u"#s.
+. P'rs%"a D'ta$s:
)a*. 5ame?:
)b*. $dd? : !hone?:
)c*. $ge?:
)d*. Oualification?:
)e*. ccupation. !l tick )T*
-ovt. er !vt. er &usiness $griculture thers
)g*. +hat is your monthly family income approximatelyS !l tick )T*.
3p to's.=0,000
's. =0,00= to=>000
's. =>,00= to/0,000
's. /0,00= to
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8. +hat kind of investments you have made so farS !l tick )T*. $ll applicable.
a. aving account b. "ixed deposits c. Insurance d. Mutual "und
e. !ost ffice:5(, etc
f.haresADebenture
s
g. -oldA ilver h. 'eal 2state
. +hile investing your money, which factor will you preferS
.
)a* 4iuidity )b* 4ow 'isk )c* 1igh
'eturn
)d* %rust
/. $re you aware about Mutual "unds and their operationsS !l tick )T*. Ces 5o
@. If yes, how did you know about Mutual "undS
a. $dvertisement b. !eer -roup c. &anks d. "inancial $dvisors
-. 1ave you ever invested in Mutual "undS !l tick )T*. Ces 5o
B. If not invested in Mutual "und then whyS
)a* 5ot aware of M" )b* 1igher risk )c* 5ot any specific reason
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. If yes* in which Mutual "und you have investedS !l. tick )T*. $ll applicable.
a. &IM" b. 3%I c.
1D"(
d.
'eliance
e. Jotak f. ther. pecify
,. +hen you plan to invest your money in asset management co. which $M( will youpreferS
$ssets Management (o.
a. '24I$5(2
b. 3%I
c. &IM"
d. 1D"(
e. Jotak
f. I(I(I
+. +hich (hannel will you prefer while investing in Mutual "und
)a* "inancial $dvisor )b* &ank )c* $M(
++. +hen you invest in Mutual "unds which mode of investment will you preferS !l. tick)T*.
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a. ne %ime Investment b. ystematic Investment !lan )I!*
+8. +hen you want to invest which type of funds would you chooseS
a. 1aving only debtportfolio
b. 1aving debt 9 euityportfolio.
c. nly euity portfolio.
+. 1ow would you like to receive the returns every yearS !l. tick )T*.
a. Dividend payout b. Dividend re:
investment
c. -rowth in 5$6
+/. Instead of general Mutual "unds, would you like to invest in sectorial fundsS
!lease tick )T*. Ces 5o
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