Summer Training Project Report

ON

“TRENDS OF INVESTMENT IN MUTUAL FUNDS BY

RETAIL INVESTORS”

Submitted in Partial fulfillment of requirement of award of MBA degree of

GGSIPU, New Delhi

Submitted By

Amulya Srivastava

Roll. No - 03815603911

3rd

Semester/Batch

Northern India Engineering College (Affiliated to GGSIPU)

FC-26, Shastri Park, Delhi-110053

DECLARATION

I hereby declare that the following documented project report titled “Trends of

Investment in Mutual Funds among Retail Investors " is an authentic work done

by me. The study was undertaken as a part of the course curriculum of M.B.A.

Full time Programme Northern India Engineering College, I.P. University, New

Delhi.

I hereby declare that the study has not been submitted to any other

institute/organization for the reference.

AMULYA SRIVASTAVA

M.B.A., IIIrd

Semester

2011-2013

Certificate

This is to certify that MR. AMULYA SRIVASTAVA, Enroll No.

03815603911, Student of Finance Department from Northern

India Engineering College, Shastri Park, New Delhi affiliated to

Guru Gobind Singh University has successfully completed her

Summer Internship on the topic “TRENDS OF INVESTMENT IN

MUTUAL FUNDS AMONG RETAIL INVESTORS” from Bajaj Capital

from 4th June, 2012 to 31st July, 2012 during his 3rd semester.

The project has been completed successfully by the student

under the guidance and supervision of undersigned.

______________________ ______________________ (Mr. Harish Bhatia) (Mr. Sunil Pande) Area Manager Branch Manager

ACKNOWLEDGEMENT The satisfaction that accompanies the successful completion of any task would

be incomplete without the mention of the people whose ceaseless cooperation

made it possible, whose guidance and encouragement helped me immensely in

my endeavor.

It has been very fortunate to have worked at Bajaj Capitals for my project. I

wish to express my gratitude towards Mr. Sunil Pande, Head of finance

department for giving me the opportunity to work at this place.

It gives me immense pleasure in thanking my project guide, Mr. Harish Bhatia

and Mr. Ajit Sharma for their constant encouragement and valuable guidance

throughout the project. It has been a pleasure some and educating experience to

have worked under their kind supervision.

I take this opportunity to thank Dr. Divya Gangwar (HOD-MBA ) and C.A.

D.K. Gupta sir as my mentor for his valuable guidance and support.

I would also like to thank them for extending the much needed help and

corporation for the completion of my project.

Finally I would like to extend my thanks to everybody at Bajaj Capital for

providing a cordial atmosphere to work in.

AMULYA SRIVASTAVA

(03815603911)

TABLE OF CONTENT

S.NO TOPIC PAGE

1 OBJECTIVE 1

2 INTRODUCTION 2

3 COMPANY PROFILE 3

4 MISSION AND AIMS 4

5 36OO FINANCIAL PLANNING AND AWARENESS OF

BAJAJ CAPITAL

(I) INVESTMENT PLANNING

(II) CASH FLOW PLANNING

(III) TAX PLANNING

(IV) INSURANCE PLANNING

(V) CHILDREN’S FUTURE PLANNING

(VI) RETIREMENT PLANNING

6

6 LITERATURE REVIEW

(I) MUTUAL FUNDS

(II) WHAT ARE MUTUAL FUNDS

(III) DEFINITION

(IV) WHY SELECT MUTUAL FUNDS

(V) ADVANTAGES OF MUTUAL FUNDS

(VI) DISADVANTAGES OF MUTUAL FUNDS

13

7 HISTORY OF MUTUAL FUNDS 18

8 TYPES OF MUTUAL FUNDS SCHEME 20

9 NET ASSET VALUE (NAV) 24

10 MUTUAL FUND FEES AND EXPENSES 26

11 LOADS 27

12 RISK FACTORS OF MUTUAL FUNDS 29

13 RESEARCH METHODOLOGY 30

14 DATA ANALYSIS 32

15 FINDINGS 40

16 CONCLUSION 41

17 RECOMMENDATION 42

18 BIBLIOGRAPHY 43

1

OBJECTIVE Trends of investment in Mutual Funds by Retail Investors in India. To understand the various products at ‘Bajaj Capitals’.

To understand about the working of Mutual Funds.

To know how to calculate net asset value and various fees required with the

Mutual Funds. To know the awareness among the people about the Mutual Funds.

To estimate the preference of Mutual Funds over other Investment Schemes by

retail investors.

2

INTRODUCTION A mutual fund is a scheme in which several people invest their money for a common

financial cause. The collected money invests in the capital market and the money, which they

earned, is divided based on the number of units, which they hold.

The mutual fund industry started in India in a small way with the UTI Act creating

what was effectively a small savings division within the RBI. Over a period of 25 years this

grew fairly successfully and gave investors a good return, and therefore in 1989, as the next

logical step, public sector banks and financial institutions were allowed to float mutual funds

and their success emboldened the government to allow the private sector to foray into this

area.

The advantages of mutual fund are professional management, diversification, economies of

scale, simplicity, and liquidity. The disadvantages of mutual fund are high costs, over-

diversification, possible tax consequences, and the inability of management to guarantee a

superior return.

The biggest problems with mutual funds are their costs and fees it include Purchase

fee, Redemption fee, Exchange fee, Management fee, Account fee & Transaction Costs.

There are some loads which add to the cost of mutual fund. Load is a type of commission

depending on the type of funds.

Mutual funds are easy to buy and sell. You can either buy them directly from the fund

company or through a third party. Before investing in any funds one should consider some

factor like objective, risk, Fund Manager‟s and scheme track record, Cost factor etc. There

are many, many types of mutual funds. You can classify funds based Structure (open-ended

& close-ended), Nature (equity, debt, balanced), Investment objective (growth, income,

money market) etc.

A code of conduct and registration structure for mutual fund intermediaries, which

were subsequently mandated by SEBI. In addition, this year AMFI was involved in a

number of developments and enhancements to the regulatory framework.

The most important trend in the mutual fund industry is the aggressive expansion of

the foreign owned mutual fund companies and the decline of the companies floated by

nationalized banks and smaller private sector players.

Reliance Mutual Fund, UTI Mutual Fund, ICICI Prudential Mutual Fund, HDFC Mutual

Fund and Birla Sun Life Mutual Fund are the top five mutual fund company in India.

3

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 Corporate, High Net worth Individuals, and NRIs… all under 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 realising our dreams… and financial constraints should be the last thing to stop

anyone.

For over four decades, we have been helping people realize their aspirations by helping them

make their wealth 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.

We 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, we also provide investment assistance

by helping you complete all the formalities, and help you keep regular track of your

investments. These services and products are delivered through our network of 134 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 Networth Clients.

Bajaj Capital has contributed to the growth of the Indian Capital Market at every step. In

1965, we were the first to innovate the Companies Fixed Deposit. Today, we are playing an

active role in the growth of the Indian Mutual Fund industry. We are also working closely

with private insurance companies to deepen India‟s insurance market.

4

MISSION, AIMS & OBJECTIVES

BAJAJ CAPITAL'S MISSION STATEMENT

“The focus of our organization is to be the most useful, reliable and efficient provider

of Financial Services. It is our continuous endeavor to be a trustworthy advisor to our clients,

helping them achieve their financial goals.”

AIMS:

To serve our clients with utmost dedication and integrity so that we exceed their

expectations and build enduring relationships.

To offer unparalleled quality of service through complete knowledge of products,

constant innovation in services and use of the latest technology.

To serve the community by educating individuals on the merits of Financial Planning

and in turn help shape a financially strong society.

To create value for all stake holders by ensuring profitable growth.

To build an amicable environment that accords respect to every individual and

permits their personal growth.

Wide range of products and services.

41 years‟ experience as Investment Advisors and Financial Planners.

More than eight lakh satisfied clients all over India.

Over 12,000 NRI clients across the globe.

Personalized wealth management advice

SEBI-Approved Category I Merchant Bankers

5

WHO’S AT BAJAJ CAPITAL

Mr. K.K. Bajaj

(Chairman)

A visionary par excellence, a pioneer and a leader, Mr. K.K. Bajaj has

been instrumental in shaping Bajaj Capital‟s emergence as one of

India‟s largest Investment Advisory companies.

Mr. Rajiv Deep Bajaj

(Vice Chairman & Managing Director)

A qualified Financial Planner, Mr. Rajiv Deep Bajaj was the first to

introduce the concept of Financial Planning in India. In fact, he is the

Founding Chairman of the Association of Financial Planners (AFP).

He is also amongst the first batch of 25 Certified Financial Planners

(CFP tm) designation holders in India.

Mr. Sanjiv Bajaj

Joint Managing Director

Mr. Sanjiv Bajaj started his career in 1995 as managerial trainee,

worked on various projects which included developments at alternate

channel of distribution like Broker's associations...etc.

Mr. Anil Chopra

(CEO. & Director)

Mr. Anil Chopra is the Chief Executive Officer & Director of Bajaj

Capital Limited; He joined the Company in 1984. Mr. Chopra has

been instrumental in expanding the branch network of Bajaj Capital

Ltd. all over India.

6

360O FINANCIAL PLANNING AND AWARENESS OF BAJAJ CAPITAL

Investment Planning: To make your wealth grow

Cash Flow Planning: To provide for assets and meet the periodic cash requirements.

Tax Planning: To save on taxes and increase your income

Insurance Planning: To protect yourself, your family and your assets

Children's Future Planning: To give your children a financially secure future

Retirement Planning: Because retirement is a time to relax, not to get worried Top

7

INVESTMENT PLANNING

Everyone needs to save for a rainy day. Once you have saved enough to take care of

emergencies, you should start thinking about investing and to make your money grow. We

can help you plan your investments so that you can reap adequate benefits and achieve your

financial goals.

Bajaj Capital‟s Investment Planning Service includes:

Risk Profiling

Asset Allocation and Portfolio Construction

Creation and Accumulation of Wealth through Systematic Investment Plans (SIP)

Regular review of progress and Portfolio Rebalancing

Essentially, Investment Planning involves identifying your financial goals throughout

your life, and prioritizing them. Investment Planning is important because it helps you to

derive the maximum benefit from your investments.

Your success as an investor depends upon your ability to choose the right investment options.

This, in turn, depends on your requirements, needs and goals. For most investors, however,

the three prime criteria of evaluating any investment option are liquidity, safety and return.

Investment Planning also helps you to decide upon the right investment strategy.

Besides your individual requirement, your investment strategy would also depend upon your

age, personal circumstances and your risk appetite. These aspects are typically taken care of

during investment planning.

Investment Planning also helps you to strike a balance between risk and returns. By prudent

planning, it is possible to arrive at an optimal mix of risk and returns that suits your particular

needs and requirements.

8

CASH FLOW PLANNING

In simple terms, cash flow refers to the inflow and outflow of money. It is a record of

your income and expenses. Though these sounds simple, very few people actually take the

time out to find out what comes in and what goes out of their hands each month

Cash flow planning refers to the process of identifying the major expenditures in

future (both short-term and long-term) and making planned investments so that the required

amount is accumulated within the required time frame.

Cash flow planning is the first thing that should be done prior to starting an

investment exercise, because only then will you be in a position to know how your finances

look like, and what is it that you can invest without causing a strain on yourself. It will also

enable you to understand if a particular investment matches with your flow requirement.

So does it involve looking at future cash flows only? Not really. You should always

do a cash flow for yourself as on date, and you will realize that you could have a potential

savings amount within each month of your working life.

This is the amount that you should look at saving for meeting your financial goals. The best

way of doing this is to have a personal budget.

WHY IS CASH FLOW PLANNING IMPORTANT?

Cash flow plans are commonly used by business houses. Without a viable cash flow

plan, a company could easily spend more than its revenue, putting it in peril. Unfortunately,

most of us do not realize that a cash flow plan is as important for people like us as well. The

principles that apply to corporate finance and to our personal lives are largely the same.

There has never been a bigger need than today for families and individuals to work

out cash flow plans. Without proper cash flow planning one could easily get caught in the

debt trap. Of course, it goes without saying that creating a plan is not enough. One also needs

to implement the plan, besides bringing about a change in the spending habits.

Cash flow plan brings you face-to-face with what you should ideally be saving, and

investing in a systematic and regular manner, and what would it mean to you to withdraw

from your portfolio after a couple of years. It brings down in numbers what your financial

future has in store for you, and gives a crystal clear view (as much as is possible with

inflation and the interest rate scenario).

9

TAX PLANNING “Proper tax planning is a basic duty of every person which should be carried out religiously”.

Basically, there are three steps in tax planning exercise. These three steps in tax planning are:

1) Calculate your taxable income under all heads i.e., Income from Salary, House

Property, Business & Profession, Capital Gains and Income from Other Sources.

2) Calculate tax payable on gross taxable income for whole financial year (i.e. from 1st

April to 31st March) using a simple tax rate table, given on next page.

3) After you have calculated the amount of your tax liability. You have two options to

choose from:

1. Pay your tax (No tax planning required)

2. Minimize your tax through prudent tax planning.

Most people rightly choose Option 'B'. Here you have to compare the advantages of

several taxes saving schemes and depending upon your age, social liabilities, tax slabs and

personal preferences, decide upon a right mix of investments, which shall reduce your tax

liability to zero or the minimum possible.

Every citizen has a fundamental right to avail all the tax incentives provided by the

Government. Therefore, through prudent tax planning not only income-tax liability is reduced

but also a better future is ensured due to compulsory savings in highly safe Government

schemes. We sincerely advise all our readers‟ and clients to plan their investments in such a

way, that the post-tax yield is the highest possible keeping in view the basic parameters of

safety and liquidity

10

INSURANCE PLANNING "Insurance is not for the person who passes away, it for those who survive," goes a popular

saying that explains the importance of Insurance Planning.

It is extremely important that every person, especially the breadwinner, covers the

risks to his life, so that his family's quality of life does not undergo any drastic change in case

of an unfortunate eventuality.

Insurance Planning is concerned with ensuring adequate coverage against insurable

risks. Calculating the right level of risk cover is a specialized activity, requiring considerable

expertise. Proper Insurance Planning can help you look at the possibility of getting a wider

coverage for the same amount of premium or the same level of coverage for the same amount

of premium or the same level of coverage for a reduced premium. Hence, the need for proper

insurance planning.

Insurance, simply put, is the cover for the risks that we run during our lives. Insurance

enables us to live our lives to the fullest, without worrying about the financial impact of

events that could hamper it. In other words, insurance protects us from the contingencies that

could affect us.

So what are the risks that we run? To name a few - the risk on our lives that is, the

worries of replacement of the incomes that we contribute to the running of the household),

the risks of medical contingencies (since they have the capability of depleting our wealth

considerably) and risks to assets (since the replacement of these can have tremendous

financial implications). If we can imagine a situation where our goals are disturbed by acts

beyond our control, we can realize the relevance of insurance in our lives.

Insurance Planning takes into account the risks that surround you and then provides

an adequate coverage against those risks. There is no risk not worth insuring yourself against,

and insurance should first and foremost be looked as a measure to guard against risks - the

risk of your dreams going awry due to events beyond your control

11

CHILDREN'S FUTURE PLANNING

Like every parent, you too must be overjoyed to watch your child grow. All parents

want to give the best possible upbringing to their children. This includes good education and

security, in case of any eventuality. Soon, your little bundle of joy will grow up, and it will be

time to provide for his or her higher education and wedding.

The purpose of Children's Future Planning is to create a corpus for foreseeable

expenditures such as those on higher education and wedding, and to provide for an adequate

security cover during their growing years.

Children's Future Planning acquires added importance because children's education

and wedding are not high priority life goals, which can be postponed nor can there be a

compromise on the amount.

Good education has always been the passport to a secure future. Today, career

opportunities have grown manifold, and there are many professional courses that your child

can aspire for. However, costs of higher education have also increased exponentially.

Like most parents, you might be saving regularly to ensure a safe tomorrow for your child.

However, savings alone is no longer enough. For ensuring adequate funding of your child's

education, you as a parent need to do two things:

Invest appropriate amount systematically and at regular intervals.

Provide for a financial security blanket to cover any eventuality.

It is never too early to start saving and investing for your child's future. Especially in

today's context. For example, the cost of a professional degree today is approximately Rs

2.5 lakhs. If your child is one-year-old today, after 17 years when he/she goes to college,

you may require a sum of Rs 6.3 lakhs, assuming an annual rate of inflation of 6%.

There are many products which your Financial Planner can use to achieve the above

objectives. For example, he could suggest a Children's Future Plan offered by any good

insurance company, to build a corpus for your child's higher education, and provide for a

security cover in the event of the parent's unfortunate demise.

Children's plans are also available under unit-linked option. Being unit-linked, they

offer access to investments in all kinds of asset classes - equity, debt and cash.

12

RETIREMENT PLANNING

Some like it. Some don‟t. But retirement is a reality for every working person. Most

young people today think of retirement as a distant reality.

However, it is important to plan for your post-retirement life if you wish to retain your

financial independence and maintain a comfortable standard of living even when you are no

longer earning. This is extremely important, because, unlike developed nations, India does

not have a social security net.

Retirement Planning acquires added importance because of the fact that though longevity has

increased, the number of working years haven‟t.

Our Retirement Planning Service involves:

Computing that amount that would be required post-retirement. This is done after

taking inflation and time value of money into account.

Building your Retirement Corpus using Systematic Investment Plans (SIPs) and other

long-term growth orient products.

Ensuring adequate post-retirement income through safe investments.

The asset allocation and selection of investment vehicles keep changing as your risk-bearing

capacity diminishes.

PLAN FOR A WORRY FREE RETIREMENT

In simple words, retirement planning means making sure you will have enough

money to live on after retiring from work. Retirement should be the best period of your life,

when you can literally sit back and relax or enjoy your life by reaping benefits of what you

earn in so many years of hard work. But it is easier said than done. To achieve a hassle-free

retired life, you need to make prudent investment decisions during your working life, thus

putting your hard-earned money to work for you in future.

13

LITERATURE REVIEW

MUTUAL FUNDS

Mutual Funds are among the hottest favorites with all types of investors. Investing in

mutual funds ranks among one of the preferred ways of creating wealth over the long term. In

fact, mutual funds represent the hands-off approach to entering the equity market. There are a

wide variety of mutual funds that are viable investment avenues to meet a wide variety of

financial goals. This section explains the various aspects of Mutual Funds. There are a lot of

investment avenues available today in the financial market for an investor with an investable

surplus. He can invest in Bank Deposits, Corporate Debentures, and Bonds where there is

low risk but low return. He may invest in Stock of companies where the risk is high and the

returns are also proportionately high. The recent trends in the Stock Market have shown that

an average retail investor always lost with periodic bearish tends. People began opting

for portfolio managers with expertise in stock markets who would invest on their behalf.

Thus we had wealth management services provided by many institutions. However they

proved too costly for a small investor. These investors have found a good shelter with the

mutual funds.

WHAT ARE MUTUAL FUNDS?

A mutual fund is a common pool of money into which investors place their

contributions that are to be invested in accordance with a stated objective. The ownership of

the fund is thus joint or “mutual”; the fund belongs to all investors. A single investor‟s

ownership of the fund is in the same proportion as the amount of the contribution made by

him or her bears to the total amount of the fund.

Mutual Funds are trusts, which accept savings from investors and invest the same in

diversified financial instruments in terms of objectives set out in the trusts deed with the view

to reduce the risk and maximize the income and capital appreciation for distribution for the

members. A Mutual Fund is a corporation and the fund manager‟s interest is to professionally

manage the funds provided by the investors and provide a return on them after deducting

reasonable management fees.

The objective sought to be achieved by Mutual Fund is to provide an opportunity for

lower income groups to acquire without much difficulty financial assets. They cater mainly to

the needs of the individual investor whose means are small and to manage investors portfolio

in a manner that provides a regular income, growth, safety, liquidity and diversification

opportunities.

14

DEFINITION:

“Mutual funds are collective savings and investment vehicles where savings of

small (or sometimes big) investors are pooled together to invest for their mutual

benefit and returns distributed proportionately.”

WHY SELECT MUTUAL FUNDS?

The risk return trade-off indicates that if investor is willing to take higher risk then

correspondingly he can expect and vice versa if he pertains to lower the risk instruments,

which would be satisfied by lower returns. For example, if an investors opt for bank FD,

which provide moderate returns with minimal risk. But as he moves ahead to invest in capital

protected funds and the profit-bonds that give out more return which is slightly higher as

compared to the bank deposits but the risk involved in the same proportion.

Thus investors choose mutual funds as their primary means of investing, as Mutual

funds provide professional management, diversification, convenience and liquidity. That

doesn‟t mean mutual fund investments risk free.

This is because the money that is pooled in are not invested only in debts funds which

are less riskier but are also invested in the stock market which involves a higher risk but can

expect higher returns. Hedge fund involves a very high risk since it is mostly traded in the

derivatives market which is considered very volatile.

RETURN RISK MATRIX:

HIGHER RISK

MODERATE RETURNS

HIGHER RISK

HIGHER RETURNS

LOWER RISK

LOWER RETURNS

LOWER RISK

HIGHER RETURNS

Venture

Capital

Postal

Savings

Equity

Mutual

Funds Bank

FD

15

ADVANTAGES OF MUTUAL FUNDS:

The following are the major advantages offered by mutual funds to all investors:

Portfolio Diversification:

Each investor in the fund is a part owner of all the fund‟s assets, thus enabling him to

hold a diversified investment portfolio even with a small amount of investment that

would otherwise require big capital.

Professional Management:

Even if an investor has a big amount of capital available to him, he benefits from the

professional management skills brought in by the fund in the management of the

investor‟s portfolio. The investment management skills, along with the needed

research into available investment options, ensure a much better return than what an

investor can manage on his own. Few investors have the skill and resources of their

own to succeed in today‟s fast moving, global and sophisticated markets.

Reduction/Diversification of Risk:

When an investor invests directly, all the risk of potential loss is his own, whether he

places a deposit with a company or a bank, or he buys a share or debenture on his own

or in any other from. While investing in the pool of funds with investors, the potential

losses are also shared with other investors. The risk reduction is one of the most

important benefits of a collective investment vehicle like the mutual fund.

Reduction of Transaction Costs:

What is true of risk as also true of the transaction costs? The investor bears all the

costs of investing such as brokerage or custody of securities. When going through a

fund, he has the benefit of economies of scale; the funds pay lesser costs because of

larger volumes, a benefit passed on to its investors.

Liquidity:

Often, investors hold shares or bonds they cannot directly, easily and quickly sell.

When they invest in the units of a fund, they can generally cash their investments any

time, by selling their units to the fund if open-ended, or selling them in the

market if the fund is close-end. Liquidity of investment is clearly a big benefit.

Convenience and Flexibility:

Mutual fund management companies offer many investor services that a direct market

investor cannot get. Investors can easily transfer their holding from one scheme to the

other; get updated market information and so on.

Tax Benefits:

16

Any income distributed after March 31, 2002 will be subject to tax in the assessment

of all Unit holders. However, as a measure of concession to Unit holders of open-

ended equity-oriented funds, income distributions for the year ending March 31,

2003, will be taxed at a concessional rate of 10.5%.In case of Individuals and

Hindu Undivided Families a deduction up to Rs. 9,000 from the Total Income will be

admissible in respect of income from investments specified in Section 80L, including

income from Units of the Mutual Fund. Units of the schemes are not subject to

Wealth-Tax and Gift-Tax.

Choice of Schemes:

Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

Well Regulated:

All Mutual Funds are registered with SEBI and they function within the

provisions of strict regulations designed to protect the interests of investors. The

operations of Mutual Funds are regularly monitored by SEBI.

Transparency:

You get regular information on the value of your investment in addition to disclosure

on the specific investments made by your scheme, the proportion invested in each

class of assets and the fund manager's investment strategy and outlook.

17

DISADVANTAGES OF INVESTING THROUGH MUTUAL FUNDS:

No Control over Costs:

An investor in a mutual fund has any control of the overall costs of investing. The

investor pays investment management fees as long as he remains with the fund, albeit

in return for the professional management and research. Fees are payable even if the

value of his investments is declining. A mutual fund investor also pays fund

distribution costs, which he would not incur in direct investing. However, this

shortcoming only means that there is a cost to obtain the mutual fund services.

No Tailor-Made Portfolio:

Investors who invest on their own can build their own portfolios of shares and bonds

and other securities. Investing through fund means he delegates this decision to the

fund managers. The very-high-net-worth individuals or large corporate investors may

find this to be a constraint in achieving their objectives. However, most mutual fund

managers help investors overcome this constraint by offering families of funds- a

large number of different schemes- within their own management company. An

investor can choose from different investment plans and constructs a portfolio to his

choice.

Managing a Portfolio of Funds:

Availability of a large number of funds can actually mean too much choice for the

investor. He may again need advice on how to select a fund to achieve his objectives,

quite similar to the situation when he has individual shares or bonds to select.

The Wisdom of Professional Management:

That's right, this is not an advantage. The average mutual fund manager is no better at

picking stocks than the average nonprofessional, but charges fees.

No Control:

Unlike picking your own individual stocks, a mutual fund puts you in the passenger

seat of somebody else's car.

Dilution:

Mutual funds generally have such small holdings of so many different stocks that

insanely great performance by a fund's top holdings still doesn't make much of a

difference in a mutual fund's total performance.

Buried Costs:

Many mutual funds specialize in burying their costs and in hiring salesmen who do

not make those costs clear to their clients.

18

HISTORY OF MUTUAL FUNDS IN INDIA

The mutual fund industry in India started in 1963 with the formation of Unit Trust of

India, at the initiative of the Government of India and Reserve Bank. The history of mutual

funds in India can be broadly divided into four distinct phases

FIRST PHASE – 1964-87: Unit Trust of India (UTI) was established on 1963 by an Act of

Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory

and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from

the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and

administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme

1964.

SECOND PHASE – 1987-1993 (ENTRY OF PUBLIC SECTOR FUNDS):1987 marked

the entry of non- UTI, public sector mutual funds set up by public sector banks and Life

Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI

Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Can

bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank

Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC

established its mutual fund in June 1989 while GIC had set up its mutual fund in December

1990.

THIRD PHASE – 1993-2003 (ENTRY OF PRIVATE SECTOR FUNDS): With the entry

of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving

the Indian investors a wider choice of fund families. Also, 1993 was the year in which the

first Mutual Fund Regulations came into being, under which all mutual funds, except UTI

were to be registered and governed. The erstwhile Kothari Pioneer (now merged with

Franklin Templeton) was the first private sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions

under the SEBI (Mutual Fund) Regulations 1996.

FOURTH PHASE – SINCE FEBRUARY 2003: In February 2003, following the repeal of

the Unit Trust of India Act1963 UTI was bifurcated into two separate entities. One is the

Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835

crores as at the end of January 2003, representing broadly, the assets of US 64 scheme,

assured return and certain other schemes. The Specified Undertaking of Unit Trust of India,

functioning under an administrator and under the rules framed by Government of India and

does not come under the purview of the Mutual Fund Regulations.

19

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is

registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation

of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under

management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual

Fund Regulations, and with recent mergers taking place among different private sector funds,

the mutual fund industry has entered its current phase of consolidation and growth. As at the

end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores

under 421 schemes.

20

TYPES OF MUTUAL FUNDS SCHEMES

Wide variety of Mutual Fund Schemes exists to cater to the needs such as

financial position, risk tolerance and return expectations etc. thus mutual funds has Variety

of flavors, Being a collection of many stocks, an investors can go for picking a mutual fund

might be easy. There are over hundreds of mutual funds scheme to choose from. It is easier to

think of mutual funds in categories, mentioned below.

Types of Mutual Funds

By Structure

Open-Ended Schemes

Close-Ended Schmes

Interval Schemes

By Nature

Equity Funds

Debt Funds

Balance Funds

By Investment Objective

Growth Schemes

Income Schemes

Balanced Schemes

Money Market

Schemes

Others Scheme

Tax Saving Schemes

Index Schmes

Sector Specific

Schemes

21

A) BY STRUCTURE:

Open - Ended Schemes: An open-end fund is one that is available for subscription all

through the year. These do not have a fixed maturity. Investors can conveniently buy and

sell units at Net Asset Value ("NAV") related prices. The key feature of open-end

schemes is liquidity.

Close - Ended Schemes: A closed-end fund has a stipulated maturity period which

generally ranging from 3 to 15 years. The 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 Fund through periodic repurchase at

NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is

provided to the investor.

Interval Schemes: Interval Schemes are that scheme, which combines the features of

open-ended and close-ended schemes. The units may be traded on the stock exchange or

may be open for sale or redemption during pre-determined intervals at NAV related

prices.

B) BY NATURE:

Equity Fund: These funds invest a maximum part of their corpus into equities holdings.

The structure of the fund may vary different for different schemes and the fund manager‟s

outlook on different stocks. The Equity Funds are sub-classified depending upon their

investment objective, as follows:

Diversified Equity Funds

Mid-Cap Funds

Sector Specific Funds

Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds rank high on

the risk-return matrix.

Debt Funds: The objective of these Funds is to invest in debt papers. Government

authorities, private companies, banks and financial institutions are some of the major

issuers of debt papers. By investing in debt instruments, these funds ensure low risk

and provide stable income to the investors. Debt funds are further classified as:

Gilt Funds: Invest their corpus in securities issued by Government, popularly known as

Government of India debt papers. These Funds carry zero Default risk but are associated

with Interest Rate risk. These schemes are safer as they invest in papers backed by

Government.

22

Income Funds: Invest a major portion into various debt instruments such as bonds,

corporate debentures and Government securities.

MIPs: Invests maximum of their total corpus in debt instruments while they take

minimum exposure in equities. It gets benefit of both equity and debt market. These

scheme ranks slightly high on the risk-return matrix when compared with other

debt schemes.

Short Term Plans (STPs): Meant for investment horizon for three to six months. These

funds primarily invest in short term papers like Certificate of Deposits (CDs) and

Commercial Papers (CPs). Some portion of the corpuses also invested in corporate

debentures.

Liquid Funds: Also known as Money Market Schemes, These funds provides easy

liquidity and preservation of capital. These schemes invest in short-term instruments like

Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for

short-term cash management of corporate houses and are meant for an investment

horizon of 1dayto 3 months. These schemes rank low on risk-return matrix and are

considered to be the safest amongst all categories of mutual funds.

Balanced Funds: As the name suggest they, are a mix of both equity and debt funds.

They invest in both equities and fixed income securities, which are in line with pre-

defined investment objective of the scheme. These schemes aim to provide investors with

the best of both the worlds. Equity part provides growth and the debt part provides

stability in returns.

Further the mutual funds can be broadly classified on the basis of investment parameter

viz, Each category of funds is backed by an investment philosophy, which is

pre-defined in the objectives of the fund. The investor can align his own investment

needs with the funds objective and invest accordingly.

C) BY INVESTMENT OBJECTIVE:

Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these

schemes is to provide capital appreciation over medium to long term. These schemes

normally invest a major part of their fund in equities and are willing to bear short-term

decline in value for possible future appreciation.

Income Schemes: Income Schemes are also known as debt schemes. The aim of these

schemes is to provide regular and steady income to investors. These schemes

generally invest in fixed income securities such as bonds and corporate debentures.

Capital appreciation in such schemes may be limited.

Balanced Schemes: Balanced Schemes aim to provide both growth and income by

periodically distributing a part of the income and capital gains they earn. These schemes

23

invest in both shares and fixed income securities, in the proportion indicated in their offer

documents (normally 50:50).

Money Market Schemes: Money Market Schemes aim to provide easy liquidity,

preservation of capital and moderate income. These schemes generally invest in

safer, short-term instruments, such as treasury bills, certificates of deposit, commercial

paper and inter-bank call money.

Load Funds: A Load Fund is one that charges a commission for entry or exit. That is,

each time you buy or sell units in the fund, a commission will be payable. Typically entry

and exit loads range from 1% to 2%. It could be worth paying the load, if the fund has a

good performance history.

No-Load Funds: A No-Load Fund is one that does not charge a commission for entry or

exit. That is, no commission is payable on purchase or sale of units in the fund. The

advantage of a no load fund is that the entire corpus is put to work.

D) OTHER SCHEMES:

Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax

laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions

made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.

Index Schemes: Index schemes attempt to replicate the performance of a particular index

such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of

only those stocks that constitute the index. The percentage of each stock to the total

holding will be identical to the stocks index weight age. And hence, the returns from

such schemes would be more or less equivalent to those of the Index.

Sector Specific Schemes: These are the funds/schemes which invest in the securities of

only those sectors or industries as specified in the offer documents. E.g. Pharmaceuticals,

Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in

these funds are dependent on the performance of the respective sectors/industries. While

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 sectors/industries and must

exit at an appropriate time.

24

NET ASSET VALUE (NAV) Since each owner is a part owner of a mutual fund, it is necessary to establish the value of his

part. In other words, each share or unit that an investor holds needs to be assigned a value.

Since the units held by investors evidence the ownership of the fund‟s assets, the value of the

total assets of the fund when divided by the total number of units issued by the mutual funds

gives us the value of one unit. This is generally called the Net Asset Value (NAV) of one unit

or one share. The value of an investor‟s part ownership is thus determined by the NAV of the

number of units held.

Example 1:

As an example, assume there are two investors X and Y who have invested in a mutual fund

which decided to issue out units at Rs 1/-.

X invests Rs 100/- and Y invests Rs 200/-.

The total corpus of the mutual fund will be Rs 100 + Rs 200 = Rs 300/- and X will get 100

units and Y will get 200 units.

Now suppose the mutual fund manager invests smartly over a year and makes the investment

grow and the corpus becomes Rs 800/-.

The NAV will be calculated as :

NAV per share = (Assets – Debts) / (Number of Outstanding Units)

= (Rs 800/- 0) / (300)

= 2.67

The NAV is 2.67.

So X‟s value of investments will be 100 units * 2.67 = Rs 267/- and

Y‟s value of investments will be 200 units * 2.67 = Rs 534/-.

25

Example 2:

How to calculate the growth of your Mutual Fund investments?

Let's assume that Mr. Gupta has purchased Mutual Fund units worth Rs. 10,000 at an NAV of

Rs. 10 per unit on February 1. The Entry Load on the Mutual Fund was 2%. On September

15, he sold all the units at an NAV of Rs 20. The exit load was 0.5%.

His growth/ returns is calculated as under:

1. Calculation of Applicable NAV and No. of units purchased:

(a) Amount of Investment = Rs. 10,000

(b) Market NAV = Rs. 10

(c) Entry Load = 2% = Rs. 0.20

(d) Applicable NAV (Purchase Price) = (b) + (c) = Rs. 10.20

(e) Actual Units Purchased = (a) / (d) = 980.392 units

2. Calculation of NAV at the time of Sale

(a) NAV at the time of Sale = Rs 20

(b) Exit Load = 0.5% or Rs.0.10

(c) Applicable NAV = (a) – (b) = Rs. 19.90

3. Returns/Growth on Mutual Funds

(a) Applicable NAV at the time of Redemption = Rs. 19.90

(b) Applicable NAV at the time of Purchase = Rs. 10.20

(c) Growth/ Returns on Investment = {(a) – (b)/ (b) * 100} = 95.30%

26

MUTUAL FUND FEES AND EXPENSES

Mutual funds fees and expenses are charged that may be incurred by investors who hold

mutual funds

1) TRANSACTION FEES

PURCHASE FEE:

A purchase fee is type of fee that some funds charge their shareholders when the

shareholders purchase their shares. A purchase fee differs from, and is not considered to

be, a front-end sales load because a purchase fee is paid to the fund (not to a broker) and

is typically imposed to defray some of the fund‟s costs associated with the purchase.

REDEMPTION FEE:

A redemption fee is type of fee that some funds charge their shareholders when the

shareholders redeem their shares. Although a redemption fee is deducted from redemption

proceeds just like a deferred sales load, it is not considered to be a sales load. Unlike a

sales load, which is used to pay brokers, a redemption fee is typically used to defray fund

costs associated with a shareholder‟s redemption and is paid directly to the fund, not to a

broker. The SEC limits redemption fees to 2%.

EXCHANGE FEE:

An exchange fee is a fee that some funds impose on shareholders if they exchange

(transfer) to another fund within the same fund group or “family of funds”.

2) PERIODIC FEES

MANAGEMENT FEES:

Management fees are fees that are paid out of fund assets to the fund‟s investment adviser

(or its affiliates) for managing the fund‟s investment portfolio , any other management

fees payable to the fund‟s investment advisor or its affiliates, and administrative fees

payable to the investment adviser that are not included in the "Other Expenses" category

(discussed below). They are also called maintenance fees.

ACCOUNT FEE:

An account fee is a fee that some funds separately impose on investors in connection with

the maintenance of their accounts. For example, some funds impose an account

maintenance fee on accounts whose value is less than a certain dollar amount.

3) OTHER OPERATING EXPENSES

TRANSACTION COSTS:

These costs are incurred in the trading of the fund‟s assets. Funds with a high turnover

ratio or investing in illiquid or exotic markets usually face higher transaction costs.

Unlike the Total Expense Ratio these costs are usually not reported.

27

LOADS

DEFINITION OF A LOAD

“Load funds exhibits a “Sales Load” with a percentage charge levied on purchase or

sales of share. A load is a type of Commission (remuneration). Depending on the type of load

a mutual fund exhibits, charges may be incurred at the time of purchase, time of sale, or a

mix of both. The different types of load are outlined below.”

1) FRONT-END LOAD:

Also known as Sales charge, this is a fee paid when shares are purchased. Also known as

a “front-end load,” this fee typically goes to the broker that sells the fund‟s shares. Front-

end load reduces the amount of your investment. For example, let‟s say you have Rs.

10,000 and want to invest it in a mutual fund with a 5% front-end load. The Rs.500 sales

load you must pay comes off the top, and the remaining Rs.9, 500 will be invested in the

funds. According to NASD rules, a front-end load cannot be higher than 8.5% of your

investment.

2) BACK-END LOAD:

Also known as Deferred Sales Charge, this is a fee paid when shares are sold. Also

known as a “back-end load,” this fee typically goes to the brokers that sell the fund‟s

shares. The amount of this type of load will depend on how long the investor holds his or

her shared and typically decreases to zero if the investor holds his or her shares long

enough.

3) LEVEL LOAD/ LOW LOAD:

It‟s similar to a back-end load in that no sales charges are paid when buying the funds.

Instead a back-end load may be charged if the shares purchased are sold within a given

time frame. The distinction between level loads and low loads as opposed to back-end

loads is that this time frame where charges are levied is shorter.

4) NO-LOAD FUNDS:

As the name implies, this means that the fund does not charge any type of sales load.

But, as outlined above, not every type of shareholder fee is a “sales load”. A no-load

fund may charge fees that are not sales loads, such as purchase fees, redemption fees,

exchange fees, and accounts fees.

28

RISK FACTORS OF MUTUAL FUNDS

1) THE RISK-RETURN TRADE-OFF:

The most important relationship to understand is the risk-return trade-off. Higher the risk

greater the returns/loss and lower the risk lesser the returns/loss. Hence it is up to you, the

investor to decide how much risk you are willing to take. In order to do this you must first

be aware of the different types of risk involved with your investment decisions.

2) MARKET RISK:

Sometimes prices and yield of all securities rise and fall. Broad outside influences

affecting the market in general lead to this. This is true, may it be big corporations or

smaller mid-sized companies. This is known as Market Risk. A Systematic Investment

Plan (SIP) that works on the concept of Rupee Cost Average (RCA) might help mitigate

this risk.

3) CREDIT RISK:

The debt servicing ability (may it be interest payments or repayment of principal) of a

company through its cash flows determine the Credit Risk faced by you. This credit risk

is measured by independent rating agencies like CRISIL who rate companies and their

paper. An „AAA‟ rating is considered the safest whereas a „D‟ rating is considered poor

credit quality. A well-diversified portfolio might help mitigate this risk.

4) INFLATION RISK:

Things you hear people talk about:

“Rs. 100 today is worth more than Rs. 100 tomorrow.”

“Remember the time when a bus ride costs 50 paisa?”

“Mehangai ka zamana hai.”

The root cause, Inflation. Inflation is the loss of purchasing power over time. A lot of

times people make conversation investment decision to protect their capital but end up

with a sum of money that can buy less the principle could at the time of the investment.

This happens when inflation grows a faster than the return on your investment. A well-

diversified portfolio with some investment in equities might help mitigate this risk.

5) INTEREST RATE RISK:

In a free market economy interest rates are difficult if not impossible to predict. Changes

in interest rates affect the prices of bonds as well as equities. If interest rates rise the

prices of bonds fall and vice versa. Equity might be negatively affected as well in a rising

interest rate environment. A well-diversified portfolio might help mitigate this risk.

29

6) POLITICAL/GOVERNMENT POLICY RISK:

Changes in government policy and political decision can change the investment

environment. They can create a favorable environment for investment or vice versa.

7) LIQUIDITY RISK:

Liquidity risk arises when it becomes difficult to sell securities that one has purchased.

Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well

as internal risk controls that lean purchase of liquid securities.

30

RESEARCH METHODOLOGY

PROJECT TITLE:

“TRENDS OF INVESTMENT IN MUTUAL FUNDS BY RETAIL INVESTORS”.

OBJECTIVE:

Awareness among people about Mutual funds.

Investment Trend in Mutual Funds.

Company that are preferred by the Investors.

Whether investor like to invest in mutual Funds directly or through Broker.

Scheme which is popular among the investors in India.

SAMPLING UNIT:

Salaried Employees.

SAMPLE SIZE:

Sample of 40 salaried employees is chosen.

RESEARCH METHODOLOGY:

Research Methodology used here is Descriptive Research Design. It is a way to

systematically solve the research problem .It may be understood as a science of studying how

research is done scientifically.

METHODS OF DATA COLLECTION:

PRIMARY DATA :

1) Interview Method: personal interview involve asking questions in face to face

contact.

2) Questionnaire: It is the most popular and common instrument used in research.

The basic objective of questionnaire was to collect adequate information.

SECONDARY DATA

1) Internet Search

2) Books

3) Published Material

31

PROCESSING OF DATA:

Different techniques are used for processing:

Editing to detect errors and omit it

Classification to reduce the data into homogenous groups

Tabulation to arrange it into concise and logical order

ANALYSIS OF DATA:

Data collected through above method has been analyzed statistically.

Result of analysis is shown in the form of Bar Char.

LIMITATIONS:

This study is based on reaction hence it is not an indication that everything is true t its fullest

sense.

Time is act as constraint.

Some employees refuse to fill the questionnaire because they do not free time.

Some employee does not read the questions carefully as a result they give the wrong

response.

Most of employees do not give answer of the personal question related to PAN

number and Accurate Salary.

32

DATA ANALYSIS

Ques 1: Type of Investment Preferred by Investors.

Interpretation: Types of investment preferred by most of the investors is Fixed-Deposits,

post-offices and NSC. As they provide fixed returns and the risk associated with these

investment is low.

0

5

10

15

20

25

30

35

Investment Prefered by Investors

33

Ques 2: Awareness among people about Mutual Funds.

Interpretation: As per my findings, most of the people have the basic awareness about the

Mutual Funds.

People know well about MF, 78%

People don’t know, 22%

Awareness among people about Mutual Funds

34

Ques 3: Whether the Investors would like to invest in Public or Private Mutual Funds.

Interpretation: As per my findings, most of the people would invest in Public sector as the

risk associated with it is very low.

0% 10% 20% 30% 40% 50% 60% 70% 80%

Private

Public

Private, 21%

Public, 79%

Whether investor like to invest in Public or Private MF

35

Ques 4: In which Scheme would Investor like to Invest.

Interpretation: Schemes that are mostly preferred by investors are equity and Debt/Fixed

Income as their returns are high.

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Equity Fund HybridScheme

LiquidScheme

Debt/FixedIncomeScheme

Fund ofFunds

Scheme

FixedMaturity

Plans

Scheme Prefered By Investor

36

Ques 5: Which company‟s Mutual Fund is preferred most.

.

Interpretation: As per the data collected at the time of my training period DSP Blackrock

and UTI Mutual Fund is Preferred by the Investors

DSP Blackrock, 30%

UTI MF, 24%

SBI MF, 18%

HDFC MF, 10%

Reliance MF, 12%

Others MF, 6%

Mutual Fund prefered Most

37

Ques 6: Which mode is used while investing in Mutual Funds.

Interpretation: Single Investment Plan is used mostly by the investors while investing in Mutual

Funds.

One Time Investment, 38%

SIP, 62%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

One Time Investment

SIP

Mode Used while Investing in MF

38

Ques 7: Sector wise preference of the Mutual Funds by the Investors.

Interpretation: The sectors that are mostly preferred by investors are Gold funds and Debt funds.

Gold Funds, 21%

Diversified Equity Funds, 17%

Oil and Petroleum, 5%

Debt Fund, 19%

Banking Fund, 13%

Real Estate, 16%

Power Sector, 2% Other Sector, 7%

Sector wise Preference

39

Ques 8: Method of return is opted by the investors.

Interpretation: There are only three kind of Return methods among which the most preferable

is Growth Plan followed by dividend reinvestment.

Divident Payout, 17%

Divident Reinvestment, 39%

Growth in NAV, 44%

Method of Return

40

FINDINGS

From the survey we come to know about the increasing popularity of investment among

people:

Generally most people prefer to keep their money float in the market despite keeping in

bank of the low rate of return as bank provides.

Increase in working population, larger family incomes and consequent higher savings.

Increase in tendency of people to hedge against inflation.

Availability of large and attractive investment alternatives.

Ability of investments to provide income and capital gains.

Provision of tax incentives in respect of investments in specified channels.

In the coming future people would like to invest in Insurance along with fixed deposit,

real estate, mutual funds and primary market.

According to the survey done, most of the people invest money to get higher returns and

to gain on their savings.

Most of the public sector employees at present invest their money in banks as they

consider to be the safest financial institutions, although they would prefer primary market

and mutual funds if they invest in future.

Government servants at present mostly invest in banks and post office. However, in

future they would like to make investment in insurance.

Private sector employees mostly make investments in banks but in the future they would

prefer to invest their money in fixed deposits.

People who fall under income group of 15,000-20,000 presently make their investments

in Insurance and other tax saving investments to save their tax labiality.

According to the survey done, most of the people who fall under the income group of

20,000-25,000 invest in different investments and in future they would like to invest in

tax savings instruments. (Bonds, NSC, Mutual Fund, etc.)

Most of the investors falling under the category of income group which is above Rs.

25,000 presently invest in insurance while in future their choice of investment would

preferably be real estate and fixed deposits.

People who are above the age of 51-55 presently make maximum of their investments in

Insurance as well as PPF and banks.

41

CONCLUSION

Mutual Funds now represent perhaps most appropriate investment opportunity for

most investors. As financial markets become more sophisticated ad complex, investors need a

financial intermediary who provides the required knowledge and professional expertise on

successful investing. As the investors always try to maximize the returns and minimize the

risk. Mutual fund satisfies these requirements by providing attractive returns with affordable

risks. The fund industry has already overtaken the banking industry, more funds being under

mutual fund management than deposited with bank. With the emergence of tough

competition in this sector mutual funds are launching a variety of schemes which caters to the

requirement of the particular class of investors. Risk takers for getting capital appreciation

should invest in growth, equity schemes. Investors who are in need of regular income should

invest in income plans.

The stock market has been rising for over three years now. This in turn has not only

protected the money invested in funds but has also helped grow these investments.

This has also instilled greater confidence among fund investors who are investing

more into the market through the MF route than ever before.

42

RECOMMENDATIONS

Today‟s environment is very competitive hence to survive in such environment

people need both power and wealth.

Earlier people prefer to keep their money either on home or keep in bank but today

people to see their money grow and today a lot of options are present which are not only

attractive but fast growing too.

People who can bear high risk for that person the security market are good. There is

high risk and high return according to their investment amount.

Salaried people wants the security in their savings so for those people who wants high

security Insurance and other Government instruments of Investments is better option in which

there is a fix growth up to certain amount.

Today‟s market is so fluctuating for this type of market security is important as well

as growth so Insurance is good option for them in which there is return as well as security.

43

BIBLIOGRAPHY

BOOKS:

M. Y. Khan and P. K. Jain of Financial Management (3

rd Edition)

I. M. Pandey of Financial Management (9th Edition)

BAJAJ CAPITAL PUBLICATION:

Investor India (For the month of June and July)

WEB SITE:

www.google.com.in

http://www.bajajcapital.com/

www.nseindia.com

http://www.bajajcapital.com/investments/mutual-funds/mutual-funds.php

http://www.amfiindia.com/

http://www.sec.gov/answers/mffees.htm

http://www.mutualfundsindia.com/

NEWSPAPERS:

ECONOMIC TIMES

THE FINANCIAL EXPRESS

i

ANNEXURE-I

1. What Kind of investment you prefer most? Please tick (√). All applicable.

1) Saving Account [ ]

2) Post Office-NSC. Etc. [ ]

3) Fixed Deposits [ ]

4) Insurance [ ]

5) Mutual Funds [ ]

2. While investing your money, which factor you prefer most? Please tick (√). Any one:

Liquidity [ ] Low Risk [ ] High Return [ ] Company Reputation [ ]

3. Have you ever invested your money in Mutual Funds? Please tick (√).

YES [ ]

NO [ ]

4. Why have not invested in Mutual Funds? (Ignore if your answer is yes in above

question.)

i) Not aware of MF [ ]

ii) Higher Risk [ ]

iii) Not any Specific reason [ ]

5. Where do you find yourself as a Mutual Fund investor? (Please tick(√))

Totally ignorant [ ]

Partial knowledge of Mutual Funds [ ]

Aware only of any specific scheme in which you invested [ ]

Fully aware [ ]

6. Which feature of Mutual Funds allure you most? (Please tick(√))

Diversification [ ]

Better returns and safety [ ]

Reduction in risk and transaction cost [ ]

Regular Income [ ]

Tax Benefit [ ]

ii

7. How do you come to know about Mutual Funds? (Please tick(√))

i) Advertisement [ ]

ii) Peer Group [ ]

iii) Banks [ ]

iv) Financial Advisors [ ]

8. In which kind of Mutual Funds you would like to invest? (Please tick(√))

Public [ ] Private [ ]

9. Which Mutual Funds scheme have you invested in?

Scheme To Invest Rank ( 1 to 5)

Equity Fund

Hybrid Scheme

Liquid Scheme

Debt/Fixed Income Scheme

Fund of Funds Scheme

Fixed Maturity Plans

10. In which Mutual Fund you have invested? Please tick (√). All applicable.

a) SBI MF [ ]

b) UTI MF [ ]

c) HDFC MF [ ]

d) Reliance MF [ ]

e) DSP Blackrock [ ]

f) Other. Please Specify [ ]

11. Where from you purchase Mutual Funds? (Please tick(√))

Directly from the AMC‟s [ ]

Brokers only [ ]

Brokers / Sub-brokers [ ]

Others sources [ ]

iii

12. Which AMC will you prefer to invest?

Asset Management Company [ ]

a) AIG Global [ ]

b) Bharat AXA MF [ ]

c) Birla Sun Life MF [ ]

d) DSP Blackrock MF [ ]

e) HDFC MF [ ]

f) ICICI Prudential MF [ ]

g) SBI MF [ ]

h) Reliance MF [ ]

i) Kotak Mahindra MF [ ]

j) LIC MF [ ]

k) Any Other. [ ]

13. In which sector are you investing in Mutual Fund?

i. Oil and Petroleum [ ]

ii. Gold Fund1 [ ]

iii. Diversified Equity Fund [ ]

iv. Power Sector [ ]

v. Debt Fund [ ]

vi. Banking Fund [ ]

vii. Real Estate Fund2 [ ]

viii. Other Sectors [ ]

14. How would you like to receive the returns every year?

a) Dividend Payout [ ]

b) Dividend Re-investment [ ]

c) Growth in NAV [ ]

iv

15. Personal Details: -

a) Name:

b) Age:

c) Contact No.:

d) Address:

e) Qualification (Please tick(√))

Graduate/PG

[ ]

Under Graduate

[ ]

Others

[ ]

f) Occupation (Please tick(√))

Govt. Sector

[ ]

Pvt. Sector

[ ]

Business

[ ]

Agriculture

[ ]

Others

[ ]

g) What is your monthly family income approximately? (Please tick(√))

Up to Rs.

10,000

Rs. 10,001

to 15,000

Rs. 15,001

to 20,000

Rs. 20,001

to 30,000

Rs. 30,001

and Above

[ ] [ ] [ ] [ ] [ ]