Professional Documents
Culture Documents
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1. Introduction
Investor has a daunt in task in deciding the best avenue for investing his hard
earned money. He has to constantly monitor the returns from his investment, while keeping
in view the risk associated with the same. Many a times even the most experiences of
investors fail on this front. The task is more arduous for a notice investor.
Thankfully for such investors, mutual fund has provided more convenient avenue for
investing their professional management, are supposed to maximize the returns for the
investors at a minimum risk. They are becoming increasingly popular among investors. The
question is, have they provided all that promise to the investors? This project provides a
frame work for analyzing the performance of a mutual fund on comprehensive basis.
1.2 What is mutual fund?
Mutual Funds
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. Every Mutual Fund has an objective, the guiding principal of
investments of the mutual fund. The investors invest in the mutual fund primarily based on
the objective of the fund meeting their financial goals. Also every Mutual Fund has a Fund
manager who invests the money collected by the investors based on the objectives of the
fund. The investors earn the returns for their investment in the Mutual Fund through the
following modes:
1.
Dividends
2.
3.
Capital Appreciation.
Bonus joints.
The income earned by the Mutual fund is distributed to the investors on the
proportion of units held by them in the Mutual Funds on pro rate basis. The fund manager is
guided in his decisions by a team of Analysts who scan the market for the investment
opportunities based on the objectives of the fund.
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Advantage
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Reasons
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1.
2.
3.
diverfication.
4.
5.
professional management
6.
withdrawal plan.
volatility risk.
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7.
8.
scheme to another.
his returns.
open ended mutual funds provide very One can sell or buy open ended mutual funds units on
high liquidity of investment
daily basis at net asset values of the fund. This allows for
very high liquidity of investment
1.6.1India
Unit Trust of India was the first mutual fund to be established in India. It was
established in1964 through a Unit Trust of India Act (1963) by Government of India.
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It flag ship scheme unit 64 is the largest open ended scheme In India. UTI is the
dominant player in the Mutual Fund industry with Rs 76,547 Cores in managed assets.
In 1987 public sectors banks and insurances companies were permitted to set up
mutual fund and accordingly since 1987, 6 public sectors banks have set up mutual funds.
Also the two insurances companies LIC and GIC established mutual funds.
Securities Exchanged Board of India (SEBI) formulated the Mutual Fund
(Regulation) 1993, which for the first time established a comprehensive regulatory
framework for the mutual fund industry. Since then several mutual funds have been set up by
the private and joint sectors.
1.7 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. At the end of 1988 UTI had Rs.6, 700
crores of assets under management.
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.
At the end of 1993, the mutual fund industry had assets under management of Rs.47,
004 crores.
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The Indian Mutual fund industry has passed through three phases. The first phase was
between 1964 and 1987 when Unit Trust of India was the only player. By the end of 1988,
UTI had total asset of Rs 6,700 crores.
The second phase was between 1987 and 1993 during which period 8 funds were
established (6 by banks and one each by LIC and GIC). The total assets under management to
grow to Rs. 61,028 crores at the end of 1994and the number of schemes were 167.
The third phase began with the entry of private and foreign sectors in the Mutual fund
industry in 1993. Several private sectors Mutual Funds were launched in1993 and 1994. The
share of the private players has risen rapidly since then. Currently there are 34 Mutual Fund
organizations in India.
Kothari Pioneer Mutual fund was the first fund to be established by the private sector
in association with a foreign fund.
This signaled a growth phase in the industry and at the end of financial year 2000, 32
funds were functioning with Rs.1, 13,005 crores as total assets under management. As on
August end 2000
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At present, if we consider UTI as a public sector fund, public sector funds are
dominating the mutual fund industry in India. They, with the combination of UTI hold
around 65000 crores of assets under management.
1.12.2 Private sector mutual funds:
Private sector mutual funds are those funds, which are set up by the private
sector banks and other financial institutions. They started their functioning in India at the end
of 1993 with Franklin Templeton set up its AMC for the first time.
It was the first time when this company broken the monopoly of public sector funds.
At present private sector mutual funds hold around 45000 crores of assets under management
giving a tough competition to the public sector funds. In 2006 was leading the market than
any other public or private mutual funds.
1.13 Present Asset under Management of Public and Private sector
Mutual Funds
(Amount in crores)
Public mutual funds
62701.59
44548.92
PUBLIC
UTI
ICICI Prudential
GIC
HSBC
SBI
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HDFC
LIC
ABN AMRO
Kotak Mahindra
1.16 Types of Mutual Funds Schemes in India
Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial
position, risk tolerance and return expectations etc. The table below gives an overview into
the existing types of schemes in the Industry.
1. By Structure
Open - Ended Schemes
Close - Ended Schemes
Interval Schemes
2. By Investment Objective
Growth Schemes
Income Schemes
Balanced Schemes
Money Market Schemes
3. Other Schemes
1.17 Mutual fund schemes may be classified on the basis of its structure and its
investment objective.
1.17.1 by Structure
A) Open-end Funds
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.
B) Closed end Funds
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
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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.
c) Interval Funds
Interval funds combine the features of open-ended and close-ended schemes. They
are open for sale or redemption during pre-determined intervals at NAV related prices.
1.17.2 by Investment Objective
A) Growth Funds.
The aim of growth funds is to provide capital appreciation over the medium to long
term. Such schemes normally invest a majority of their corpus in equities. It has been proved
that returns from stocks, have outperformed most other kind of investments held over the
long term. Growth schemes are ideal for investors having a long term outlook seeking growth
over a period of time.
B) Income Funds
The aim of income funds is to provide regular and steady income to investors. Such
schemes generally invest in fixed income securities such as bonds, corporate debentures and
Government securities. Income Funds are ideal for capital stability and regular income.
C) Balanced Funds
The aim of balanced funds is to provide both growth and regular income. Such schemes
periodically distribute a part of their earning and invest both in equities and fixed income
securities in the proportion indicated in their offer documents. In a rising stock market, the
NAV of these schemes may not normally keep pace, or fall equally when the market falls.
These are ideal for investors looking for a combination of income and moderate growth.
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B) Special Schemes
Industry Specific Schemes invest only in the industries specified in the offer
document. The investment of these funds is limited to specific industries like Infotech,
FMCG, and Pharmaceuticals etc.
C) Index Schemes:
Index Funds attempt to replicate the performance of a particular index such as the BSE
Sensex or the NSE 50
D) Sect oral Schemes:
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Sectorial Funds are those which invest exclusively in a specified sector. This could be
an industry or a group of industries or various segments such as 'A' Group shares or initial
public offerings.\
1.18 Mutual fund concept
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal.
The money thus collected is then invested in capital market instruments such as
equities, debentures and other securities.
Thus a Mutual Fund strives to meet the investment needs of the common man by
offering him or her opportunity to invest in a diversified, professionally managed basket of
securities at a relatively low cost. The flow chart below describes broadly the working of a
mutual fund:
1.19
Operation of
Mutual
Funds - A
Flow Chart
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of
companies and selects suitable investments to achieve the objectives of the scheme.
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B) Diversification
Mutual Funds invest in a number of companies across a broad cross-section of industries
and sectors. This diversification reduces the risk because seldom do all
stocks decline at
the same time and in the same proportion. You achieve this diversification through a Mutual
Fund with far less money than you can do on your own.
C) Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such
as bad deliveries, delayed payments and follow up with brokers and companies.
Mutual
Funds save your time and make investing easy and convenient.
D) Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher
return as they invest in a diversified basket of selected securities.
E) Low Costs
Mutual Funds are a relatively less expensive way to invest compared to directly investing
in the capital markets because the benefits of scale in brokerage, custodial and
other
fees
stock
exchange at the prevailing market price or the investor can avail of the facility
of
class
on
of
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Through features such as regular investment plans, regular withdrawal plans and dividend
reinvestment plans, you can systematically invest or withdraw funds according to your needs
and convenience
I) Affordability
Investors individually may lack sufficient funds to invest in high-grade stocks. A
mutual fund because of its large corpus allows even a small investor to take the benefit of its
investment strategy.
1.23 Rights of a Mutual Fund Unit holder
A unit holder in a Mutual Fund scheme governed by the SEBI (Mutual Funds) Regulations
is entitled to:
1.Receive unit certificates or statements of accounts confirming the title within 6 weeks
2. From the date of closure of the subscription or within 6 weeks from the date of request for
a unit certificate is received by the Mutual Fund.
3 Receive information about the e investment policies, investment objectives, financial
position and general affairs of the scheme.
4.
Receive dividend within 42 days of their declaration and receive the redemption or
holder.
The
Inspect the documents of the Mutual Funds specified in the scheme's offer document.
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CHAPTER 2
RESEARCH DESIGN
1)Objective of the study
2)Scope of the study
3)Methodology
4)Limitation of the study
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CHAPTER II
2.Research methodology
2.1 Background of the Study
Every individual in life wants to earn as much as possible to live in the society with a
great pleasure and comforts. He always had been searching for the investment opportunities
in the market to get high returns within a shorter span of time. As the interest rates in the PPF,
NSC, and bank deposits are decreasing, the common man is asking the question, where to
invest? The answer what we can give is Mutual Funds. Although the concept of mutual fund
in India is of new, it offers a great opportunity for earning a high return. The risk involved in
the mutual funds is relatively low compared to the investment in stock markets. The
investments in stock market are an expensive task but it is not the in case of mutual funds.
Mutual Funds have become a very important investment avenue in the recent times.
The major aspect to be covered in the study is preference of the investors towards buying &
selling the mutual funds. Other aspects to be covered are the profile of the investors, their
consultancy pattern, and their preference among the different investment avenues available in
the market, the factors that they observe while buying the mutual fund of different sector. The
purchase behavior pattern of the investors has changed in the recent times and is continued to
change day by day. Earlier they used to have very little information about investment options
available in the market. During this time the entry of mutual fund industry was sponsored by
UTI, state owned banks & financial institutions.
The industry now has been widely opened up by the private sector & several private
financial companies. Some of them are already functioning efficiently with good returns.
The masses in India generally prefer to save in those instruments that are safe. The
safety of the money invested is not compromised, and at times, they do not mind accepting
lesser returns on their investment.
An average small investor generally advocates the phenomenon of risk adversity.
But, return on investment in capital markets comes with the associated risk.
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With falling interest rates on investments like Public Provident Fund (PPF), National
Saving Certificate (NSC), Bank deposits, etc., the question to be answered is: what
investment alternative should a small investor adopt? Going with direct investment in capital
market is an expensive proposal, and requires expert knowledge; and keeping money in the
above mentioned saving instruments does not seem advisable. Therefore, the easy route left
with the small investor for earning better return on investment is by investing in Mutual
Funds.
This dissertation highlights the important aspect to be taken into account while
investing in mutual funds. The preference on Mutual Funds was broadly underscored.
The study started with the introduction of different investment avenues available in
Mutual Funds. The study has helped to know about the preferences towards investing in the
Mutual Funds. During this study respondents were interviewed randomly and data was
collected according to their answers to the questions in the questionnaire. It was also found
that most of the respondents are fully aware of the Mutual Funds and they have invested in
Mutual Funds.
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1. To know the investors preference towards different types of mutual funds in India.
2. To examine whether the investors are satisfied with the returns over the risk involved
in investing in Mutual Funds.
3. To know mutual funds and their types preferred for investment
4. To know different sources from which the investor gets information about the Mutual
Funds.
2.4 RESEARCH METHODOLOGY
The research technique used here is descriptive research. It is based on the primary
data collected from the selected respondents, which forms the basis of this research purpose.
In order to collect the primary data, survey method using a structured questionnaire has been
adopted.
2.5 SAMPLING TECHNIQUE: Convenient method of sampling was adopted for the purpose of survey where in
respondents were interviewed whenever and wherever they were available for the study to be
completed.
2.6 SAMPLING PLAN:The researcher now decides on the sampling plan. Here the following needs to be taken
care of:
Population: who is to be surveyed? The researcher must define the target population from
which the sample will be derived.
2.7 Here survey is with regard to mutual fund investors only.
Sample unit: Once the population is determined, a sampling unit must be developed,
then the sampling frame, so that everyone in the target population has an equal chance of
being sampled.
The target population for the research is business people, high income groups,
professionals, housewives and students.
Sampling method: Simple Random sampling method is used for this research purpose.
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Sample size: How many people should be surveyed? It is not necessary to sample the
entire target population. The selection of sample size depends on accuracy of data required.
Often less than one percent of samples can provide good reliability; given a credible
sampling procedure 100 respondents were selected randomly for the purpose of collecting
required data. These respondents are residents of Bangalore.
Field work (place of study):
The fieldwork involved, contacting the mutual funds investors personally at Money
Ltd. to collect relevant information through questionnaire and interview.
2.8 RESEARCH INSTRUMENTS:To conduct the research and to collect valuable data the researcher has used the
following 2 techniques:
objectives of the study and as well as the time constraints of the respondents.
The questionnaire was given to the respondents and their opinions were collected by
personally meeting the selected respondents. The questionnaire can be ans about
minutes.
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factors, which influence his mutual fund investment decisions. People invest on different
mutual fund available in the market.
Therefore it becomes very important for the finance managers, marketers who market
financial product, financial intermediaries and financial institutions to know the factors
governing the investments of the individuals and their preferences on different mutual funds.
2.10 Scope of study
The study was confined to the limits of Bangalore City. This study covers the various
factors affecting the investments patterns of mutual funds investors knowing the profile of
mutual fund investors in Bangalore and to analyze the preferences of the mutual fund
investors towards the different factors regarding mutual fund investments.
2.12 SAMPLE SIZE
The study was conducted in Bangalore city. So the findings and conclusions drawn
are applicable to Bangalore only.
The respondents did not declare certain factors which are related to the research, so
the in depth analysis cannot be made.
The methods used for analysis and interpretation purpose may have some limitations
of their own and some errors can always creep in.
2.13 SAMPLING METHOD:Convenient method of sampling was adopted for the purpose of survey where in
respondents were interviewed whenever and wherever they were available for the study to be
completed
2.14 METHOD OF DATA COLLECTION
Primary data
Secondary data
Primary data
Secondary data
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The study was conducted in Bangalore city. So the findings and conclusions drawn
are applicable to Bangalore only.
The respondents did not declare certain factors which are related to the research, so
the in depth analysis cannot be made.
The methods used for analysis and interpretation purpose may have some limitations
of their own and some errors can always creep in.
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CHAPTER 3
Industry profile
Company Profile
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INDUSTRY PROFILE
Introduction to financial planning
Few people in India today really understand the importance of financial planning. While for
many, financial planning begins and ends with collecting ULIPS and endowment plans
without any rhyme or reason, there are others who simply associate financial planning with
tax savings.
Historically there were distinct divisions of service providers in the financial services
industry. For example, we used to go to a bank to save our money or to get a loan. We bought
stocks and bonds from brokers. We purchased insurance from insurance agents and mutual
funds from mutual fund sales representatives.
In fact, the concept of financial planning has failed to catch on even amongst those who
typically consider themselves financial and market-savvy. As the chap active in the stock
market on whether he has planned his finances and he will proudly show you his portfolio
comprising loads of insurance, 20- odd mutual fund schemes and about 30-50 stock
regardless of whether he is 25,40,45 of age. Everything looks hunky-dory so long as you are
in a bull market, but the moment the market hits a significant iceberg, as it did in 2008, your
lack of financial planning comes into focus.
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Set specific targets of what results you want to achieve and when you want to achieve them.
For example, instead of saying you want to be comfortable when you retire or that you want
your children to attend good schools, quantify what comfortable and good mean so that
youll know youve reached your goals.
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Retirement planning:
Today life expectation going up people typically must factor for nearly 1/3 rd of there life to be
spent post retirement. That means you need to built a substainal nest egg to ensure that you
continue living with the same standard that you did prior to retirement by start and planning
early you can allow the power of compounding to ensure that your investment grow
exponentially in the long run you cal let your money work for you to help you achieve your
retirement goal. Today a financial planner should be able to guide you through the range of
retirement. Products available in the market, including ulip, endowment, unit linked pension
plan, include the new pension system(nps) recently announced by the government of India.
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A well defined and committed planning can ensure that feathers are not only able manage
long term financial goal, but they are also able to leave enough on the plate to lead there
golden years comfortable without being dependent on there children during retirement year.
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20-Somethings
We can see here young people trying to get their financial life off to a good start. Most of the
concerns in this age group are about how to do something new, and can be addressed with a
financial-planning coach instead of a full-blown asset manager:
30-Somethings
Now life starts to get a little more complicated. People in this age range typically
are managing multiple goals--college funding versus saving for retirement, paying off debt
versus investing more, etc. Here are some of the financial concerns that appear in the 30s:
1. Tax awareness
o Where to hold stocks--in a retirement plan or in a taxable account?
o The power of compounding through a tax-deferred retirement plan
2. Handling a divorce and becoming a single parent
3. Investment Planning
o Not knowing how to get started with investments
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40-Somethings
Sometimes panic sets in for people in their 40s. Suddenly retirement no longer seems that far
away, and yet most people are behind in putting away enough to have a comfortable
retirement. Many 40-somethings are making up for lost time. Here are some of their
concerns:
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7. For some entrepreneurial individuals, the decision to sell a business they built
8. More attention is paid to the value of and a strategy for cashing in on stock options
9. Bad experiences with financial planners--how to find someone they can trust and who
has their best interests at heart
10. Dealing with death--typically a parent or a spouse
11. Launching and perhaps relaunching the kids (its not unusual for parents to have kids
come home once they have been out on their own for a while)
50-Somethings
Probably the most common question from this age group is, How soon can I
realistically leave my job? Retirement is in sight for some; for others, there may be a
realization that they may have to work longer than they had originally thought. Here are
some typical 50-something issues:
1. Transitions
o What are the trade-offs with moving from a 60-hour-per-week, high-stress job to a
lower-paying but possibly more enjoyable job?
o Im too young to be a grandparent, arent I?
o Help! Ive been downsized. Now what?
o Role reversal with parents (parents become dependent)
Investments
o If I take a lump-sum retirement payout and roll it over to an PPF, should I still try to
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manage it myself?
o Diversification away from company stock, especially within five years of retirement
o If retirement is in sight, should the portfolio change?
o How to invest proceeds from selling a business
o How to invest an inheritance
Healthcare
o If I retire before Im eligible for Medicare, who pays for my health insurance?
60-Somethings
Medicare. Social Security. Time to slow down? Hardly. Most of the people in this age
group are still quite active. They change the types of activities they participate in, but
many say they are busier than ever. The number one pleasure for most? Probably
grandchildren. (Well, maybe golf is a close second.) Here are some of the things on their
minds:
1. Weighing the decision to take a lump sum from a retirement plan and roll it over to an
PPF or to take a regular monthly pension
2. When to start taking a pension, if one is offered
3. Are annuities worth a look?
4. How to cope with low interest rates
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70-Somethings
Happy 70-somethings have come to terms with getting older. So what if you forget things
now and then? Its not the end of the world. And even if your hands shake or you take so
many pills that you have to get one of the days-of-the-week containers, you still make a
difference in the lives of the people (and animals) that love you. Heres whats on your
minds:
1. Why arent there more articles written about managing money in retirement?
2. Do I have enough money? Am I spending too much?
3. What happens if long-term care insurance premiums go up in the future? Can I afford
it?
4. Is my pension at risk?
5. How can I get my spouse more interested in financial management? What will he or
she do when Im gone?
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FPSB India is a part of leading Global Confederation - Financial Planning Standard Board
(FPSB) council that promotes CFPCM Certification. The International CFPCM Council was
established in 1990 as an international assembly of Financial Planning Associations, and
promotes professionalism in Financial Planning. FPSB India is the fifteenth member of the
Council. As the Indian affiliate of the Financial Planning Standards Board Denver, U.S.A.,
FPSB India oversees the administration of the internationally recognized Certified Financial
Planner CM professional certification process.
FPSB India is based on Voluntary Self Regulatory Mechanism, which is reflected by virtue of
its Code of Ethics & Rules of Professional Conduct which is mandated for all its members.
The creation of FPSB India represents commitment to the emergence of Financial Planning
as a respected profession in India and globally, and will strengthen our ability to educate the
public about the Financial Planning process and about the professionalism of Financial
Planners who have committed to competent and ethical behavior in India. Consistent with
development in other countries FPSB India will attempt to ensure that Financial Planning
Certificants in India meet Competency and Ethics standards which are based on a platform of
Education, Examination, Experience and Ethics requirements (the 4Es).
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Date
affiliated
Dec-90
Mar-02
Mar-02
Jan-96
May-06
Jan-05
Oct-97
Oct-97
Nov-00
Oct-01
Nov-06
May-92
Apr-00
May-96
Jun-00
Dec-98
Nov-98
Apr-99
Jun-95
country
2001
Australia
Austria
Brazil
Canada
China
C.T
France
Germany
Hongkong
India
Indonesia
Japan
Malaysia
Newzeland
R.O.K
Singapore
Southafrica
Switzerland
U.K
U.S
TOTAL
3885
2002
4725
19
0
13277 14483
2003
2004
2005
5198
54
61
15492
5336
82
60
15928
5310
88
55
16350
0
148
1433
973
1929
134
2006
5308
110
97
16834
488
0
345
540
850
1200 1297
1471
601
694
880
921
1009
88
334
996
1422
2293
0
0
54
90
235
0
5860 7967 10037 11614 13061 14751
24
961
2580 2320 2581 2689
253
268
287
307
346
385
30
101
354
616
819
1343
91
212
370
505
539
548
2300 2117 2551 2750 2921 3163
239
280
287
287
235
242
215
232
284
400
510
610
38408 40375 42973 45755 49117 53031
65811 73618 83658 89690 96549 104902
2007
2008
2009
5322
110
99
17000
550
350
1479
987
2280
540
5300
121
100
17300
575
365
1457
1000
2290
600
5330
125
101
17245
610
370
1500
1080
2300
610
15000
2700
400
1440
550
3200
235
789
54300
107331
15400
2789
410
1443
548
3209
255
890
54320
108372
15300
2799
420
1448
600
3200
277
745
54390
108450
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1.
The financial planner has to inspire as much trust as that reposed by patients in their
doctors. Only a trustworthy financial planner can expect the client to share information that is
vitally important to make a credible financial plan
We do not change our doctor from day to day. Often, the relationship ends only when the
doctor becomes too old to practice. In which case, we seek the doctors suggestion on an
alternative. Similarly, financial planning has to be a relationship across time not a
transaction for the next application form and cheque.
We go to the same doctor that our parents visited, because he understands the entire family
history. So also, the financial planner has to transcend generations. He has to position
himself as a financial planner for the family.
The doctor knows the limits to his expertise. He recommends a specialist the moment the
limit is reached. So also financial planners need to offer services based on their competence,
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and not be tempted by some easy money to offer a service that they are not qualified to
handle.
1. Investors who have such financial planners will gain a lifetime of value, not just a
few crumbs in the form of rebates
1. INSURANCE;
Health insurance is compulsory. Personal accident and critical illness policies may be taken
if necessary. The entire family must be covered by health insurance.
Life insurance: if an individual has no financial dependents, life insurance is not necessary
and will be a waste of money. If there are financial dependents, the quantum of life cover
required must be calculated. Thereafter, it is advisable to take only a pure term life insurance
policy, to the extent life is required.
Property insurance: protection against losses caused by earthquake, fire damage from other
causes, breakdown, burglary etc, may be taken if required
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Ensure that an amount equal to at least 12 months living expenses is deployed in highly
liquid avenues like money market accounts, short term mutual funds, short-term floating rate
mutual funds, flexi deposits, etc. this builds an excellent buffer in case of unexpected shocks
like job/earning loss, change of residential status, migration to a different country,
unexpected large expenditure, etc. An emergency fund is your private insurance policy and
your first line of defense, when tackling an unexpected adverse financial situation. It is
important that an emergency fund be utilized only in an emergency.
3. RETIREMENT PLANNING:
Never expect either the government or your employer to provide for your retirement. You are
responsible for your financially comfortable retirement. No one else is.
There is a wrong notion that planning for retirement should start when a person approaches
retirement. Nothing can be further from the truth. Retirement planning must start as soon as a
person starts earning. The best private retirement plan would be a sustained( ELSS) mutual
funds. So long as interest rates in public Provident Fund(PPF) remains tax free, this would be
an excellent retirement avenue for the conservative investor.
From the financial year 2005-06 onwards, section 80c of the income tax Act 1961 provides
an excellent opportunity to build a tax-advantaged retirement fund of up to Rs 1 lakh per
annum, using, among other things, PPF and ELSS, while exemption under section 80c may
be sweetner, it should be borne in mind that a retirement fund is of vital importance in its
own right, whether or not there is a tax benefit attached to it.
SAP-K Business School
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Several items of expenditure and avenues of investment are eligible for section 80c
exemption under the overall limit of 1 lakh per annum. To get the best from section 80c, first
total up the tuition fees paid on the education of two children, life insurance premium,
repayment of hosing loan principle and employee contribution to statutory/recognised
provident funds. If the above do not add up to Rs 1 lakh, the deficit may be made up by
choosing either the PPF or systematic investment into equity linked saving scheme(ELSS), or
a mixure of both. Just as an emergency fund must be utilised only in an emergency, a
retirement fund must be encashed only upon retirement. The only exception is if the family
or any of its members is threatened with a life and death situation and emergency funds and
insurance have already been exhausted.
4. HOUSING
Everyone must aspire to dwelling. This is the only area where we will not object to a loan
being taken. Today, interest rates on housing loans are reasonable and there are substantial
tax advantages attached to the repayment of principle and the payment of interest on these
loans. However it should be remembered that the acquisition of a residential house is
important in its own right, regardless of any tax advantage attached to it. If the individual has
need for commercial premises may also be considered. Additional real estate investments
may be undertaken only if the individual has specialised knowledge and a talent for real
estate investments.
5. EXTINGUISHMENT OF DEBT
SAP-K Business School
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It would be prudent to have no debt at all, except perhaps a housing loan, if needed. Get rid
of dangerous, high cost, open-ended debt like credit card debt, personal loans, cash credits
and overdrafts. Use only term loans, that too sparingly, for the acquisition of assets.
6. INVESTMENT
Investment can be for parking funds, to earn regular returns and for growth. Use saving
accounts, flexi accounts, liquid, short-term floating rate mutual funds, for short duration
parking of funds. Use 8% Post office Monthly income scheme, 85 taxable government of
India savings bonds, 9% senior citizens saving scheme(for persons of 60 years and above
only), post office time deposits, bank fixed deposits, short and long term floating rate mutual
funds, market-neutral funds like arbitrage funds and structured withdrawals from PPF
accounts, to earn regular returns.
Invest in a very well diversified equity portfolio of blue chip stocks and/or use systematic
investment and systematic transfer plans into mainline diversified equity mutual funds, for
wealth enhancing (growth) investments. Real estate is also a good long-term wealth
enhancing avenue of investment. However real estate suffers from some drawbacks such as
poor liquidity, difficulties in verification of title, requirement of large amounts of capital, etc.
real estate mutual funds should be available in India before long, at which time systematic
investment and systematic transfer plans into these funds can certainly be considered.
7. OTHER OBJECTIVES
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not constantly
Page 45
COMPANY PROFILE:
Growing at a breakneck pace with a strong pan presence ARTHA has emerged as a
strong player.
ARTHA Financial planning is a joint venture between two firm ARTHA AND COLACO &
ARANHA,ARTHA financial planning firm was incorporated on
Research undertaken:
A guide to equity investment.
Page 46
Highlights of reports
Our view of stock market investments is that in a boom, you do not need the advice of
experts to make money. Any trash you buy will appreciate. In a recession, the advice of the
best experts cannot prevent you from losing money.
SIX RULES AND A RECOMMENDATION
1. Diversify across 10 to 20 major economic/industry sectors.
2. Select only the top blue chips from each sector, aiming for an ultimate portfolio of
approximately 60 stocks and 20 sectors. The BSE-200 index provides a basic basket for
stock and sector selection.
3. Allocate equal amounts to each sector.
4. Reinvest dividends, dont spend them.
5. Review the portfolio at least once in three months, making additional purchases upon a
drop of 25% in the index from the date of investment, and if need be, liquidating the portfolio
wholly or partially, when targeted returns are achieved.
6. The time horizon for equity investments is at least five years.
Services provided by Artha
1. Financial Planning :- It is one of the core sectors which they focus in educating
investor.Financial planning, which is infinitely more important than mere investment.
Financial planning is like preventive medicine on the financial front. There are
certain areas of your financial life that need to be addressed, where a few steps are to
be taken, to ensure that you have a stress-free and comfortable financial existence.
Page 47
1. Insurance
2. Emergency Fund
3. Retirement Planning
4. Housing
5. Extinguishment of Debt
6. Investment
7. Other objectives
2. Value Added Service For Corporate People:- Advice is done to corporate people
for investment purposes
3. Value Added Service To Business School :- tied up with many b-schools for the
education of the students
4. NCFM certification course training is done.
Investment advisory team
Page 48
CHAPTER 4
ANALYSIS & INTERPRETATION
Page 49
CHAPTER 4
DATA ANANSIS AND INTERPETATION
Table 1
1) Showing the details of age group of respondents
Age in years
18-30
30-40
40-50
50-60
60-above
Total
No of Respondents
18
19
10
03
00
50
Percentage of Respondents
36%
38%
20%
06%
00%
100%
Analysis:
From the above table it is clear that the respondents were chosen from all the age
groups. There were 36% respondents from the age group ranging between 18-30 years; 38%
respondents between 30-40 years; 20% respondents between 40-50 years and 6% of the
respondents fall between the age group of 50-60 years.
Interpretation:
The researcher was clear in the research to collect the feedback from the age group
ranging between 18 years and 60 years and above. It is also clear that the investors were
divided almost equally among all the age group. By this we can interpret that the investors
were there in all age groups and they were aware of investment opportunities available in the
There was less number of respondents falling in the last two rows (i.e., ranging
between 50-60 and above 60 years) as they are dependent more on fixed income and they
have less risk taking ability.
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Graph-1
Showing Age Group of Respondents
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Table 2
2) Showing the details of gender group of respondents
Gender
Male
Female
Total
No. of Respondents
35
15
50
Percentage of Respondents
70
30
100
Analysis:
This table is designed to measure the Gender Profile of the respondents. Here male
respondents are 3% and females 27%.
Interpretation:
From the above data, we can interpret that majority of respondents were males. From
this we can make out that more investors into mutual funds are males as they opt for high
risk, high return modes of investing. It is also clear from the analysis that females are
reluctant to high risk investments.
Graph-2
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Table 3
SAP-K Business School
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Respondents
11
06
09
07
00
02
04
03
06
02
50
Percentage
22
12
18
14
00
04
08
06
12
04
100
Analysis:
In a sample size of 50, 20% of respondents are prefer to invested in UTI, 30% of
respondents are invested in , 12% of the respondents are preferred in SBI , 10% of the
respondents are preferred in ICICI Prudential.
Interpretation:
Based on the feedback collected by the respondents, it is very clear that the most of
the respondents preferred to invest in UTI. Nearest competitor is HDFC.
Graph 3
Showing preference while investing in Mutual Funds.
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TABLE-4
Priority while investing in Mutual Funds.
Priority
SAP-K Business School
Respondents
Percentage
Page 55
Safety
Returns
Tax benefits
Liquidity
Convenience
Marketability
TOTAL
10
09
10
08
04
09
50
20
18
20
16
08
18
100
Analysis:
From the above table out of 50 respondents, 20% of the respondents said that the
safety and Tax benefit most preferred and least preferred is convenience with 08% and all the
other factors lies between these two extremes.
Interpretation:
Based on the feedback, it was very clear that the majority of the respondents preferred
Safety and Tax benefits.
Graph 4
Priority while investing in Mutual Funds.
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Table 5
Page 57
Investment option
Respondents
Percentage of Respondents
Fixed Deposits
13
26
Mutual Funds
10
20
Gold
05
10
Bond
05
10
Real Estate
08
16
Post Office Savings
03
06
Share Market
06
12
TOTAL
50
100
Showing the details of the most preferred Investment Avenue of the respondents
Analysis:
In a sample size of 50, 26% of the respondents have invested in Fixed Deposits, 20%
of respondents are Mutual Funds, 16% of the respondents are invested in Real Estate, and
10% of the respondents are invested Gold and Bonds.
Interpretation:
Most of the respondents have invested in Fixed Deposits and Mutual Funds that mean
most of the investors preferred to invest their savings in Fixed Deposits Mutual Funds for
higher return.
Graph 5
Showing the details of the most preferred Investment Avenue of the respondents
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Table 6
Showing the sources of influence for investing in mutual funds.
Particular
Brokers/ Financial Advisors
Friends advice
SAP-K Business School
No of Respondents
08
13
Percentage of Respondents
16
26
Page 59
Print Media
Electronic Media
TOTAL
12
17
50
24
34
100
Analysis:
From the above table it is clear that major source that influences investors decision to
invest in Mutual Funds is the advice of Electronic Media, Second major source is friends
advice. And Brokers influence less number of investors.
Interpretation:
Majority of the investors investment influence by the Electronic Media. That means
advertisement on Internet, TV, Radio, Newspaper and magazines as a source of information
for investors to know about a Mutual Fund.
Graph 6
Showing the sources of influence for investing in mutual funds.
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Table 7
Influence of brand among respondents while investing in mutual funds
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Influence
No of Respondents
Percentage of
Respondents
YES
42
84
NO
08
16
TOTAL
50
100
Analysis:
From the above table it is clear that 84% of the respondents say that brand name is
very important. And 16% of the respondents say that brand name is not important for them
while investing.
Interpretation:
In mutual funds, investors look for the brand before investing as 84% said. Therefore
the company has to give more importance to build better brand equity through
advertisements, good service, better rates of return etc.,
Graph 07
Influence of brand among respondents while investing in mutual funds
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Table 08
The investment knowledge and experience of the customers.
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Invest Experience
No of Respondents
Percentage of
Respondents
23
56
15
30
Starting to learn.
07
14
TOTAL
50
100
depth.
Analysis:
Only 56% of the respondents have good knowledge of the various investment
products and services that are available in the market, 30% have some knowledge, but not indepth about the various products and 14% are still trying to learn about them.
Interpretation:
A majority of the respondents have some knowledge of the various options that they
have in the market, but their knowledge is not in-depth. 56% of the respondents are fully
aware of their investments and understand the implications of the various products like fixed
deposits, mutual funds, stock market etc. 14% of the respondents are still trying to learn and
have no clear understanding of the financial world.
Graph 08
The investment knowledge and experience of the customers.
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Table 09
Investors preference towards fund scheme
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Schemes
Equity Funds
Debt Funds
Balance Funds
TOTAL
No of Respondents
23
17
10
50
Percentage of Respondents
46
34
20
100
Analysis:
From the above table it is clear that 46% of respondents preferred to invest in equity
fund, 34% of the respondents in debt fund and 20% of the respondents in balanced fund.
Interpretation:
Based on the feedback collected by the researcher, it was very clear that the most of
the respondents invested in equity fund. That means investors are ready to take more risks for
more return.
Graph 09
Investors preference towards fund scheme
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Table 10
Type of mutual fund scheme preferred
Type
Open end scheme
SAP-K Business School
Respondents
27
Percentage of Respondents
54
Page 67
23
50
46
100
Analysis:
From the above table it is clear that 54% of the respondents invested in open end
scheme and 46% of the respondents invested in close-end scheme.
Interpretation:
Based on researchers findings it was very clear that the preference towards open-end
scheme is high as majority of them are satisfied with their current return from open-end
scheme.
Graph 10
Type of mutual fund scheme preferred
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Table 11
Investing option of the respondents towards risk
Risk
High Risk
SAP-K Business School
Respondents
18
percentage
36
Page 69
Moderate Risk
Low Risk
TOTAL
22
10
50
44
20
100
Analysis:
From the above table it is clear that 44% of respondents preferred to take moderate
risk, 36% of the respondents preferred high risk and 20% of the respondents preferred to
take low risk.
Interpretation:
Based on the feedback, it was very clear that the majority of the respondents preferred
moderate risk and high risk. So this proves the fact that investors are ready to take risk for
more return.
Graph 11
Investing option of the respondents towards risk
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Table 12
Plans of mutual funds
Rating
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No. of Respondents
percentage
Page 71
Very Good
Good
Average
Poor
Very Poor
TOTAL
09
20
17
04
00
50
18
40
34
08
00
100
Analysis:
From the above table out of 50 respondents, 40% of the respondents said that the
plans are good. 34% respondents said that they are average. 18% of the respondents said it is
very good. On the other hand, 8% of the respondents said that the plans are poor.
Interpretation:
Based on the findings it was very clear that the majority of the responds said the plans
are Average and Good.
Graph 12
Plans of mutual fund
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Table 13
The factors according to the respondents for the success of mutual fund
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Factors
Respondents
percentage
Brand Name
28
56
Product
15
30
Customers Services
07
14
Others
00
00
TOTAL
50
100
Analysis:
From the above table out of 50 respondents, 56% of the respondents said that its the
brand name because of which mutual fund has been successful. 30% respondents said that
its because of products.14% from Customer services.
Interpretation:
Based on the findings it was very clear that the majority of the respondents said brand
name which influenced .for the success of mutual funds.
Graph 13
The factors according to the respondents for the success of mutual fund
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Table 14
Temporary Decline.
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Decline
No Decline
5%-10% Decline
10%-15% Decline
More than 15%
TOAL
Respondents
15
25
10
00
50
Percentage
50
30
20
00
100
Analysis:
From the above table it is clear that 50% of respondents preferred to take No Decline,
30% of the respondents tolerate 5%-10% Decline, and 20% of the respondents tolerate 10%15% of Decline.
Interpretation:
Based on the feedback, it was very clear that the majority of the respondents preferred
No Decline. So this proves the fact that investors are not ready to take decline on their
investment.
Graph 14
Temporary Decline.
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Table 15
The Reaction of the Customer to Fluctuations in the Value of Their Investments
Reaction
Sell
SAP-K Business School
No. of Respondents
10
percentage
20
Page 77
15
30
to invest
Hold investment
Diversify across Market
TOTAL
20
05
50
40
10
100
Analysis:
The above table shows that 20% of the respondents would sell their investments
immediately on a daily or weekly basis if it loses money, 30% of them will use this
opportunity to invest. 40% well hold their investment if its value decreases or increase and
10% will Diversify across Market.
Inference:
Most of the respondents feel that it is best to Hold the investment if its value
fluctuation. It gives time to balance considerably the ups and downs of the market and if the
investment is still losing value it is best to sell it.
Graph-15
The Reaction of the Customer to Fluctuations in the Value of Their Investments
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Page 79
CHAPTER 5
SUMMRY OF FINDINGS,
CHAPTER V
Page 80
SUMMARY OF FINDINGS
1. Mutual funds had been ranked as the most preferred avenue for investment. That
means as interest fall in PPF, NSC, and Bank deposits, now investors are giving more
preference to invest in mutual funds.
2. It was found that most of the investors i.e., 34% base their investment decision on the
Electronic Media. That means advertisement on Internet, TV, Newspaper and
magazines as a sources of information for investors about a mutual fund has a well
impact.
3. From the research it was found that the preference towards open-end scheme is high
as majority of them are satisfied with their current return. That means most of the
respondents invested in open end scheme as it does not have any time duration where
as close end schemes have fixed time duration
4. From the research it was found that the 46% of the respondents invested in equity
fund. That means investors are ready to take more risks for more return. That means
investment in equity funds is done for earning good returns.
5. It was found that the majority of the respondents preferred Moderate risk and High
risk. So this proves the fact that investors are ready to take risk for more return. And
majority of the investors are satisfied with the return.
6. Based on researchers findings it was very clear that the majority of the respondents
are interested to recommend mutual funds to others.
7. Based on the findings it was very clear that the majority of the responds said the plans
of are good and average.
8. IT was clear in the almost equally among all the age group. By this we
can interpret that the investors were there in all age groups and
they were aware of investment opportunities available in the
9. We Find that majority of respondents were males. From this we can make out that
more investors into mutual funds are males as they opt for high risk, high return
Page 81
modes of investing. It is also clear from the analysis that females are reluctant to high
risk investments.
10. Based on research we find that it is very clear that the most of the respondents
preferred to invest in UTI. Nearest competitor is HDFC.
11. Based on research we find that it was very clear that the majority of the respondents
preferred Safety and Tax benefits.
12. Most of the respondents have invested in Fixed Deposits and Mutual Funds that mean
most of the investors preferred to invest their savings in Fixed Deposits Mutual Funds
for higher return.
13. Majority of the investors investment influence by the Electronic Media. That means
advertisement on Internet, TV, Radio, Newspaper and magazines as a source of
information for investors to know about a Mutual Fund.
14. In mutual funds, investors look for the brand before investing as 84% said. Therefore
the company has to give more importance to build better brand equity through
advertisements, good service, better rates of return etc.,
15. A majority of the respondents have some knowledge of the various options that they
have in the market, but their knowledge is not in-depth. 56% of the respondents are
fully aware of their investments and understand the implications of the various
products like fixed deposits, mutual funds, stock market etc. 14% of the respondents
are still trying to learn and have no clear understanding of the financial world.
16. Based on research we find that, it was very clear that the most of the respondents
invested in equity fund. That means investors are ready to take more risks for more
return.
17. Based on research we find that, it was very clear that the preference towards open-end
scheme is high as majority of them are satisfied with their current return from openend scheme.
18. Based on research we find that it was very clear that the majority of the respondents
preferred moderate risk and high risk. So this proves the fact that investors are ready
to take risk for more return.
SAP-K Business School
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19. Based on the findings it was very clear that the majority of the responds said the plans
are Average and Good.
20. Based on the findings it was very clear that the majority of the respondents said brand
name which influenced .for the success of mutual funds.
21. Based on research we find that it was very clear that the majority of the respondents
preferred No Decline. So this proves the fact that investors are not ready to take
decline on their investment.
22. Most of the respondents feel that it is best to Hold the investment if its value
fluctuation. It gives time to balance considerably the ups and downs of the market
and if the investment is still losing value it is best to sell it.
CHAPTER 6
Suggestion and Conclusion
SAP-K Business School
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SUGGESTIONS
The time has come to stay invested at all times in Mutual fund . While Mutual fund
are a safe bet for a small investor, those with more that few lakh rupees to invest may good
for portfolio management schemes"
1. The National stock exchanges is kind enough to investors which arranges investors meet
every month in order to create awareness about various aspects of Indian stock market.
However, it should through a light on creating awareness on significance of Mutual fund .
Suggestions for the investors:SAP-K Business School
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1. Here investor can study 3 years past records of an mutual fund companies for investing
particular script
2. In these scripts investors are not investing for long term purpose.
3. Investors must look for higher returns in short term.
4. Every successful large-cap company started at one time or another as Mutual fund . They
give the individual investor a chance to get in on the ground floor. They should not forget
that "Mutual fund today, Large caps tomorrow"
5. There is need to take some strategy to bring more confidence among investors through
which Mutual Fund would be able to project the image successfully.
6. Mutual Fund Company should be more transparent while declaring their dividends, net
asset value, administration charges and their accounting norms.
7. Mutual funds is a better than bank deposits and much safer that stock market, however
not many customers really understand mutual funds and it benefits, most of them invest
in funds that do not suit their profile and withdraw out of mutual funds, when their
expected returns are not meet. Proper financial advice and profiling of any customer is
very necessary and
8. Most of the investors in India are middle income group. So they cannot take high
investments and high risk for their invested. So mutual fund companies should come out
with mutual funds which have low risk profile to suit such investors.
9. In the present scenario equity investment has emerged with a higher growth. So mutual
fund investments are the best form of investments in the present scenario for a variety
group of investor.
10. To make investors invest in mutual funds in large amounts the mutual fund companies
should provide greater knowledge to the investors about various funds and their
performances in the changing market scenario.
11. Most of the investors do not know about the product features and the position of products
in the market. So company should make their advertisements more aggressively
SAP-K Business School
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12. As we can see that 21-30 are the target customers, the mutual fund companies should also
focus on the customers between 31-40, by giving them necessary benefits for which they
are investing.
13. Most of the people whose saving is 10000-20000 are investing in the mutual fund for
safety and return. The companies should also target whose income is below 10000 also
and they will be investing for return and
schemes also.
17. Here by the survey I came to know that most of the people prefer to invest for 2-5
years .and very few people are interested in investing more than 5 years. So mutual fund
companies should induce the customers to go for long term and they could get some
benefits like tax benefits, safety etc.
CONCLUSION:
The present study looks at investors preference levels in mutual fund product. This
kind of investors orientation is necessary in market like India where the market is turning
competitive. The small investors preference towards different avenues and purchase
behavior does not have a high level of coherence due to the influence of different purchase
factors. The buying intent of a mutual fund product by a small investor can be due to multiple
reasons depending up on investor risk return trade off.
Due to the reduction in the bank interest rates & high degree of volatilities in Indian
Stock Market, investors are looking for an alternative for their small time investment which
will provide them a high return & also safety to their investment.
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Investors preference for different industries keeps on changing. This change occurs
because of market moves and market news. Most of the respondent have diversified portfolio
and most of them said that preferred industry for investment depends on the changes in the
economy.
In order to attract new investors & retain the existing investor, Mutual fund company
have to introduce new products and need to adopt some strategies.
By concluding I can say that investors prefer to invest in the mutual fund for return,
tax benefit and capital appreciation sake. And most of the people to go for long term
investment. Most of the people do not know about the SIP (Systematic Investment Plan), so
company has to give seminars and other information about this to the customers.
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BIBLIOGRAPHY
Websites Referred:
1. www.valueresearcholine.com
SAP-K Business School
Page 88
2. www.indianfoline.com
3. www.mutualfundsindia.com
4. www.amfi-india.com
Publications referred:
1. Financial Planning standards Board Publications
2. Mutual funds financial planning board
Books
Chandra Dr. Prasanna Investment and Portfolio Management
Financial Institute and Market by L. M Bhole
Mutual funds by Ronald. j.jorden
Page 89
Dear Sir/Madam
I Madhusudana P N student of SAP-K Business School would you
Like your kind attention for a few minutes to answer these questions. This is part of the
project survey on INVESTORS PREFRENCE TOWORDS MUTUAL FUNDS as a
partial fulfillment of MBA course. Therefore, I sincerely request you to fill the following
questionnaire. The information provide by you be used for academic purpose only, and will
be revealed else where.
Page 90
Name:
Age:
Gender:
Male
Occupation
Female
a) Business
b) profession
c) House wife
d) others
Annual Income
a)
b)
Rs.50,000-2,50,000
c)
Rs.2,50,000-5,00,000
d)
f) Tata
b) Reliance
g) SBI
c) ICICI Prudential
h) HSBC
i) HDFC
e) ABN AMRO
j) Kotak Mahendra
f)
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Safety
Returns
Tax benefits
Liquidity
3)
do
(High
Convenience
you prefer?
preference and Low preference)
marketability
Fixed deposits
Mutual funds
Gold
Bond
Real estates
Post office Savings
Share markets
b) No
Page 92
Page 93
e) Very Poor
b) No
12) What are the factors according to you for the success of Mutual Fund?
a) Brand name
b) Products
c) Customer Service
d) Others
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