TO STUDY THE GROWTH OF MUTUAL FUNDS REGARDING

SALARIED INDIVIDUALS

Major Research Project

DISSERTATION
Submitted to
Veer Bahadur Singh Purvanchal University, Jaunpur
in partial fulfilment of the requirements of the I year (VII & VIII Semester)

Master’s Degree Programme in M.Com

By
Harsh Mdanwal
Under the Supervision of

Mr. Avaneesh Kumar

(Assistant professor T.D.P.G.College)

Session: 2022-23

College: Tilak Dhari Postgraduate College, Jaunpur

Examination Roll No: 23601048582 Enroll no: PU17/128332
 DECLARATION

I, Harsh Modanwal , hereby declare that the summer training

report entitled “TO STUDY THE GROWTH OF MUTUAL FUNDS REGARDING
SALARIED INDIVIDUALS ” is a record of independent and bonafide report
work carried out by me under the supervision and guidance of Mr.
Avaneesh Kumar ( Assistant professor)

The information and data given in the report is authentic to the

best of my knowledge. The report has not been previously submitted

for the award of any Degree, Diploma, Associateship or other similar

title of any other university or institute.

Date :- …/…/……..

Research Scholor
Harsh Modanwal
M.Com (8th Semester)
Commerce Department
T.D.P.G. College, Jaunpur

2
 ACKNOWLEDGEMNT

I would like to take the opportunity to express my sincere gratitude to

all people who have helped me with sound advice and able guidance.

Above all, I express my eternal gratitude to the Lord Almighty under

whose divine guidance; I have been able to complete this work
successfully.

I would like to express my sincere obligation to Mr Avaneesh Kumar

(Assistant Professor) for providing various facilities.

I am thankful to Prof Mr. Gaurav Singh , Branch Manager of Prudent CAS

PVT LTD, for providing proper help and encouragement in the preparation

of this report. . I am also really obliged guided by Mr. Amit Singh, Mr.
Ketan Srivastava, Mr. Siddhartha Mukherjee.

3
 INDEX

SR NO PARTICULARS PAGE NO.

1 Introduction

10 to 34
1.1 Company profile
1.2.introduction
1.3.definition

1.4.history
1.5.characteristics
1.6.best mutual fund
options

comparing mutual
funds with other
investments

structure of mutual
funds

list of mutual fundsin

india

2
Research methodology
2.1.advantages 35 to 47
2.2.disadvantages
2.2.features
2.3.objectives 2.4.tools
and techniques to invest
in mutual funds

3 Literature review

48 to 54

4
4
Data analysis and
interpretation 55 to 75

5 Conclusion

76 to 80

6 Bibliography

81 to 83

7 Appendix

84 to 87

5
CHAPTER 1:
COMPANY PROFILE

6
AN INTEGRATED WEALTH MANAGEMENT GROUP

Prudence (prdns): the exercise of good judgment, common sense and

caution, especially in the conduct of
practical manners Incorporated in 2000 with a clear vision of providing
professional services in the area of
personal and corporate investments, it has created a niche segment
over a period of me with an excellent
quality client base with in-house capability of analyzing various
products on various parameters before
suggesting them to clients. The team approach worked wonders and in
the short span of over one decade,
the Prudent Group expanded its horizon by offering specialized
services in the areas of Personal & Corporate
Investment Planning through Mutual Funds, Equities, Derivatives, Third
Party Products, Fixed income
Products, Life/General Insurance, Commodities and Real Estate
through various business vertical.

Prudent Corporate Advisory Services Ltd.

Being a flagship company, Prudent Corporate Advisory Services Ltd

remains the primary arm of the Prudent
Group. It offers specialized services in the area of Personal and
Corporate Investment Planning through
distribution of Mutual Funds, Bonds and Third party products. Besides
having a large pool of its own clients,
the company also manages its geographically spread business
operations through a unique platform for

7
independent financial advisors (IFA’s) which helps them to grow and
expand their services by providing them
training & consultation, technology, operations, back-office and
support for sales and markeng.

PruTech Financial Services Pvt. Ltd.

The Company provides Financial Planning solutions to clients with the

help of excellent Financial Planning
software. It is a SEBI registered Investment advisory (RIA) company.

Prudent Properties

Property is one of the important asset class. The efforts and paperwork
involved in purchasing the same can
be intimidating. Prudent Property provides real estate solutions not
only in creating an asset class but is also
helping the customers in buying their dream realty, whether it is home
or office. We also help our clients for
their housing loan needs through our e up with various Housing
Finance Companies (HFCs).

Prudent Broking Services Pvt. Ltd.

Incorporated in 2004, Prudent Broking Services Pvt. Ltd. is a Stock

Broking and Depository Participant.
Company is a member with Bombay Stock Exchange (BSE), National
Stock Exchange (NSE), MCX Stock
Exchange (MCXSX) & Central Depositary Services (India) Limited (CDSL).
With solid research, well trained
people, State of the art infrastructure and Strong IT, Prudent broking is
fastest growing company in the field
of stock broking.

8
Prudent Comder Private Limited

The Company was incorporated in 2010 with an objective to provide

Commodities Broking services. It has
the membership of Mul Commodity Exchange (MCX) and National
Commodity & Derivatives Exchange
Limited (NCDEX).

Prudent Fin trade Pvt. Ltd.

It is a Non-Banking Finance Company registered with RBI engaged in

business of providing Loan against
Securities to clients registered with it.

9
INTRODUCTION 1.2

10
Introduction

Mutual Funds are financial instruments. These funds are collective

investments which gather money from different investors to invest in
stocks, short-term money market financial instruments, bonds and
other securities and distribute the proceeds as dividends. The Mutual
Funds in India are handled by Fund Managers, also referred as the
portfolio managers. The Securities Exchange Board of India regulates
the Mutual Funds in India. The unit value of the Mutual Funds in India
is known as net asset value per share (NAV). The NAV is calculated on
the total amount of the Mutual Funds in India, by dividing it with the
number of units issued and outstanding units on daily basis. Unlike
investment in stocks, mutual funds do not invest in a specific stock.
Mutual fund investment takes place across several investment options
so that the investor gets the maximum returns. An investor himself
does not have to select the stocks for investment. Fund manager
selects those stocks with top-performing investment options that can
bring the best possible returns. For example: Imagine there is a box of
12 oranges which cost Rs.40. There are 4 friends, who want to buy
this box but have only Rs.10 each. They decide to pool in their money
and buy the box. Based on each of their contributions, they are
entitled to get 3 oranges. Now try equating this example with mutual
funds. The cost per unit is calculated simply by dividing the total
amount of investment by the total number of shares/equities. Every
investor is a part-owner of the fund and collectively they own the
entire pool of money. 9

Definition

A mutual fund is like a trust that pools money from different investors
who share a mutual investment objective. This trust is managed by a

11
professional fund manager. The manager uses these funds to invest in
equities, stocks, and different money market instruments which help
increase wealth. The income gained from this collective investment is
then distributed amongst all the investors proportionately after
deducting certain expenses.

History

The first company that dealt in mutual funds was the Unit Trust of
India. It was set up in 1963 as a joint venture of the Reserve Bank of
India and the Government of India. The objective of the UTI was to
guide small and uninformed investors who wanted to buy shares and
other financial products in larger firms. The UTI was a monopoly in
those days. One of its mutual fund products that ran for several years
was the Unit Scheme 1964. The mutual fund industry in India has
undergone at least 4 phases. Let us now look at each phase in brief:
>Phase of Inception (1964-87): The first phase was marked by the
setting up of the UTI. Though it was a collaboration between the RBI
and the Indian Government, the latter was soon delinked from theday-
to-day operations of the Unit Trust of India. In this phase, the company
was the sole operator in the Indian mutual fund industry. In 1971, the
UTI launched the Unit Linked 10 Insurance Plan or the ULIP. From that
year until 1986, UTI introduced several plans and played a very big role
in introducing the concept of mutual funds in India. When UTI was set
up several years ago, the idea was to not just introduce the concept of
mutual funds in India; an associated idea was to set up a corpus for
nation-building as well. Therefore, to encourage the small Indian
investor, the government built in several income-tax rebates in the UTI
schemes. Not surprisingly, the investible corpus of UTI swelled from
600 crores in 1984 to 6,700 crores in 1988. Clearly, the time had come
for the Indian mutual industry to move into the next phase.
>Entry of Public Sector (1987-1993): By the end of 1988, the mutual
fund industry had acquired its own identity. From 1987, many public
12
sector banks had begun lobbying the government for starting their
own mutual fund arms. In November 1987, the first non-UTI Asset
Management Fund was set up by the State Bank of India. This AMC was
quickly followed by the creation of other AMCs by banks like Canara
Bank, Indian Bank, Life Insurance Corporation, General Insurance
Corporation, and Punjab National Bank. This opening up of the mutual
fund industry delivered the desired results. In 1993, the cumulative
corpus of all the AMCs went up to a whopping Rs. 44,000 crores.
Observers of this industry say that in the second phase, not only the
base of the industry increased but also it encouraged investors to
spend a higher percentage of their savings in mutual funds. It was
evident that the mutual fund industry in India was poised for higher
growth. 11 >Entry of Private Sector Phase (1993-1996): In the period
1991-1996, the Government of India had realized the importance of
the liberalization of the Indian economy. Financial sector reforms were
the need of the hour. India needed private sector participation for the
rebuilding of the economy. Keeping this in mind, the government
opened up the mutual fund industry for the private players as well.
The foreign players welcomed this move and entered the Indian
market in significant numbers. In this period, 11 private players –in
collaboration with foreign entities- launched their Asset Management
Funds. Some of the top AMCs in the private sector were: • ICICI
Prudential AMC- This Company is a joint venture between ICICI Bank
of India and Prudential Plc of UK. It manages a corpus of INR 2, 93,000
crores and has an inventory of more than 1400 schemes. • HDFC
Mutual Fund- Launched in the 1990s, the HDFC Mutual Fund manages
more than 900 different kinds of funds. • Kotak Mahindra Mutual
Fund- This AMC has an asset base of more than Rs. 1,19,000 crores. It
is a joint venture of Kotak Financial Services and the Mahindra Group.
>SEBI Interventions and Growth, And AMFI: As the mutual fund
industry grew further in the 1990s, the AMCs government felt that it
was time for regulation and some control. Investors had to be
13
protected as well as a level playing ground had also to be laid down. A
few years ago, the Indian industry had suffered a lot 12 because of
bank scams and there was a real threat that investors might lose their
monies yet again. Consequently, the government introduced the SEBI
Regulation Act in 1996 which laid down a set of fair and transparent
rules for all the stakeholders. In 1999, the Indian government declared
that all mutual fund dividends would be exempt from income tax. The
idea behind this decision was to spur further growth in the mutual
fund industry. Meanwhile, the mutual fund industry also realized the
importance of self-regulation. As a result, it set up an industry body-
the Association of Mutual Funds of India (AMFI). One of the goals of
this body is investor education. >Phase of Consolidation (February
2003 – April 2014): In February 2003, the Unit Trust of India was split
into two separate entities, following the repeal of the original UTI Act
of 1963. The two separated entities were the UTI Mutual Fund (which
is under the SEBI regulations for MFs) and the Specified Undertaking of
the Unit Trust of India (SUUTI). Following this bifurcation of the former
UTI and occurrence numerous mergers among different private sector
entities, the mutual fund industry took a step towards the phase of
consolidation. After the global economic recession of 2009, the
financial markets across the globe were at an all-time low and Indian
market was no exception to it. Majority of investors who had put in
their money during the peak time of the market had suffered great
losses. This severely shook the faith of investors in the MF products.
The Indian Mutual Fund industry struggled to recover from these
hardships and remodel itself over the next two years. The situation
toughened up more with SEBI abolishing the entry load and the lasting
13 repercussions of the global economic crisis. This scenario is
evident from the sluggish rise in the overall AUM of the Indian MF
industry. >Phase of Steady Development And Growth (Since May
2014): Recognizing the lack of penetration of mutual funds in India,
especially in the tier II and tier III cities, SEBI launched numerous
14
progressive measures in September 2012. The idea behind these
measures was to bring more transparency and security for the interest
of the stakeholders. This was SEBI’s idea to ‘re-energize’ the Indian MF
Industry and boost the overall penetration of mutual funds in India.
The measures bore fruit in the due course by countering the negative
trend that was set because of the global financial crisis. The situation
improved considerably after the new government took charge at the
center. Since May ’14, the Indian MF industry has experienced a
consistent inflow and rise in the overall AUM as well as the total
number of investor accounts (portfolio). Currently, all the Asset
Management Companies in India manage a combined worth of around
Rs. 23 lac crore of assets. Though this number looks attractive, we still
have to go a long way in order to match the west. It is estimated that
Indians save approximately Rs. 20-30 lakh crore annually. The Indian
mutual fund industry can grow immensely if Indians started parking a
higher percentage of their savings in MFs. Observers say that Indians
have begun shifting a part of their savings from physical assets like
gold and land to financial instruments like bonds and silver. However,
the AMFI and the government need to encourage Indians even more
for investments in mutual funds. 14

CHARACTERISTICS

A diversified portfolio of high-performing mutual funds can provide

an investor with an excellent vehicle for accumulating wealth.
However, with thousands of possibilities to choose from, selecting the
proper funds to invest in can be an overwhelming task. Fortunately,
there are certain characteristics that the best-performing funds seem
to share. Using a list of basic characteristics as a way of filtering, or
paring down, the massive list of all possible funds available for
consideration can greatly simplify the task of fund selection, as well as
increase the probability that an investor's choices become profitable.
1. Low Fees or ExpensesMutual funds with relatively low expense
15
ratios are generally always desirable, and low expenses do not mean
low performance. In fact, it is very often the case that the best-
performing funds in a given category are among those that offer
expense ratios below the category average. There are some funds that
charge substantially higher-than-average fees and justify the higher
fees by pointing to the fund's performance. But the truth is there is
very little genuine justification for any mutual fund having an expense
ratio much over 1%. Mutual fund investors sometimes fail to
understand how big a difference even a relatively small percentage
increase in fund expenses can make in the investor's bottom-line
profitability. A fund with a 1% expense ratio charges an investor with
$10,000 invested in the fund $100 annually. If the fund generates a
4% profit for the year, then that $100 charge takes away a 15 full 25%
of the investor's profits. If the expense ratio is 2%, it takes half of the
profits. But an expense ratio of 0.25% only takes 6% of the investor's
total profit. In short, expenses are of critical importance for mutual
fund investors, who should be diligent in seeking out funds with low
expense ratios. In addition to the basic operating expenses charged by
all funds, some funds charge a "load," or a sales fee that can run as
high as 6% to 8%, and some charge 12b-1 fees used to cover
advertising and promotional expenses for the fund. There is no need
for mutual fund investors to ever have to pay these additional fees,
since there are plenty of perfectly good funds to choose from that are
"no-load" funds and do not charge any 12b-1 fees. 2. Consistently
Good PerformanceMost investors utilize investing in mutual funds as
part of their retirement planning. Therefore, investors should select a
fund based on its long-term performance, not on the fact that it had
one really great year. Consistent performance by the fund's manager,
or managers, over a long period of time indicates the fund will likely
pay off well for an investor in the long-run. A fund's average return on
investment (ROI) over a period of 20 years is more important than its
one-year or threeyear performance. The best funds may not produce
16
the highest returns in any one year but consistently produce good,
solid returns over time. It helps if a fund has been around long enough
for investors to see how well it manages during bear market cycles.
The best funds are able to minimize losses during difficult economic
periods or cyclical industry downturns. A large part of consistently
good performance is having a good fund manager. Investors should
review a fund manager's 16 background, previous experience, and
performance as part of their overall evaluation of the fund. Good
investment managers do not usually suddenly go bad, nor do poor
investment managers tend to suddenly become overachievers. 3.
Sticking to a Solid StrategyThe best-performing funds perform well
because they are directed by a good investment strategy. Investors
should be clearly aware of the fund's investment objective and the
strategy the fund manager uses to achieve that objective. Be wary of
what is commonly called "portfolio drift." This occurs when the fund
manager drifts off course from the fund's stated investment goals and
strategy in such a way that the composition of the fund's portfolio
changes significantly from its original goals. For example, it may shift
from being a fund that invests in large-cap stocks that pay above-
average dividends to being a fund mainly invested in small-cap stocks
that offer little or no dividends at all. If a fund's investing strategy
changes, the change and the reason for it should be clearly explained
to fund shareholders by the fund manager. 4. Trustworthy, With Solid
Reputations. The best funds are perennially developed by well-
established, trustworthy names in the mutual fund business, such as
Fidelity, T. Rowe Price, and the Vanguard Group. With all the
unfortunate investing scandals over the past 20 years, investors are
well-advised to do business only with firms in which they have the
utmost confidence 17 in, in regard to honesty and fiscal responsibility.
The best mutual funds are invariably offered by companies that are
transparent and upfront about their fees and operations, and they do
not try to hide information from potential investors or in any way
17
mislead them. 5. Plenty of Assets, but Not Too Much Money. The best-
performing funds tend to be those that are widely invested in but fall
short of being the funds with the very highest amount of total assets.
When funds perform well, they attract additional investors and are able
to expand their investment asset base. However, there comes a point
at which a fund's total assets under management (AUM) become so
large as to be unwieldy and cumbersome to manage. When investing
billions, it becomes increasingly difficult for a fund manager to buy
and sell stocks without the size of their transaction shifting the market
price, so it costs more than they would ideally wish to pay to acquire a
large amount of a specific stock. This can be particularly true for funds
that seek undervalued, less-popular stocks. If a fund suddenly looks
to buy $50 million worth of a stock that is ordinarily not very heavily
traded, then the demand pressure injected into the market by the
fund's buying could drive the stock's price substantially higher. This
would make the stock less of a bargain than it appeared when the fund
manager evaluated it prior to deciding to add it to the portfolio.

BEST MUTUAL FUNDS INVESTMENT OPTION FOR SALARIED

INDIVIDUALS

> Equity Mutual Fund

Equity mutual funds have to invest a minimum of 65% of their corpus

in equities. These funds allow the investors lacking required expertise
or time to invest in stocks to benefit from the high growth potential of
equities. Moreover, as equities beat fixed income instruments and
inflation over the long term by a wide margin, they are best suited for
creating corpuses for achieving the long term financial goals. Listed
below are equity schemes where you can consider investing:

Multicap fund- Multi cap are those funds that invest across all market
capitalizations, segments and themes without any SEBI imposed caps.

18
Fund managers of this fund can freely change their exposure to
various market capitalisations and segments as per the changing
market conditions. These funds have to invest at least 65% of the total
assets in equity and equity linked instruments.

Large cap fund: Large cap funds primarily invest in large cap
companies. As per SEBI guidelines, top 100 companies in terms of
market capitalization are classified as large cap companies. SEBI
guidelines have mandated large cap funds to invest at least 80% of the
total assets in the equity and equity linked instruments of large cap
companies. Equity Linked Savings Scheme (ELSS): ELSS popularly
known as tax savings mutual funds, are equity oriented schemes
qualifying for tax deduction of up to Rs 1.5 lakh per financial year
under Section 80C. 19 These schemes have a lock in period of just 3
years, the shortest lock among all investment options available under
the Section 80C. Being invested in equities, these funds have the
greatest long term wealth creation potential among all tax saving
investment options available under Section 80C.

Midcap fund: Midcap funds invest primarily in the equity and equity
related instruments of midcap companies. As per SEBI guidelines, mid
cap funds have to invest a minimum of 65% of the total assets in the
midcap companies. Midcap companies are those ranked from 101st to
250th in terms of full market capitalization. Focused fund: According
to SEBI guidelines, focused funds are those that can invest in a
maximum of thirty stocks. These funds have to invest at least 65% of
their total assets in equity and equity related instruments.
Sectoral/thematic fund: Sectoral and thematic fund are those that
invest predominantly in stocks related to a pre-determined theme or
sectors like pharma, banking, technology, energy, real estate etc.
Examples of investment themes can be commodity, defence, rural
consumption, urban consumption, etc. As per SEBI guidelines, sectoral
or thematic funds have to invest at least 80% of the total assets in
19
equity and equity linked instrument selected sector or theme
respectively.

Dividend Yield fund: Dividend yield funds are those that invest
predominantly in dividend yielding stocks. As per SEBI guidelines,
dividend yield funds have to invest at least 65% of their total assets in
dividend yielding stocks.

>Debt Mutual Funds

Debt funds basically invest in fixed income instruments such as money

market instruments, corporate bonds, government securities, etc. As
market-linked fixed income instruments are less volatile than equities,
debt mutual funds too are relatively less volatile than most equity and
hybrid fund categories. Being invested in market-linked fixed income
instruments, debt funds usually generate higher returns than savings
and fixed deposits. Listed below are debt funds where you can
consider investing:

Overnight fund: Overnight funds are those debt funds that invest in
overnight securities or assets having a residual maturity of 1 day.

Liquid fund: Liquid funds are those that are allowed to invest only in
debt and money market securities having maturity of up to 91 days.

Ultra short duration fund: Ultra short duration funds are those that
primarily invest in debt and money market instruments to build
portfolios with Macaulay duration of 3 to 6 months.

Low duration fund: Low duration funds are debt funds, which invest in
debt and money market instruments in a manner that the Macaulay
duration of portfolio is between 6 and 12 months. Money market fund:
Money market funds are those debt funds that invest in money market
instruments with maturity of up to 1 year.

20
Short duration fund: Short duration funds are those debt funds, which
invest in money and debt market instruments in such a way that the
Macaulay duration of their portfolios are from 1 to 3 years.

Medium duration fund: Medium duration funds are those debt funds
that invest in money and debt market instruments in such a way that
the Macaulay duration of portfolio is from 3 to 4 years. These funds
have been given the flexibility to maintain a Macaulay duration of 1 to
4 years in case of anticipated adverse situations.

Medium to long duration fund: ‘Medium to long duration’ funds are

those that invest in money and debt market instruments in such a
manner that the Macaulay duration of the portfolio ranges from 4 to 7
years. These funds have been given the flexibility to maintain a
Macaulay duration of 1 to 7 years in case of anticipated adverse
situations.

Long duration fund: Long duration funds are those debt funds that
invest in money and debt market instruments in such a manner that
the Macaulay duration of portfolio is more than 7 years.

Dynamic bond fund: Dynamic bond funds are open-ended dynamic

debt schemes that are free to invest in money market and debt
instruments across duration depending on the interest rate scenario,
credit quality and other market factors.

Credit risk fund: Credit risk funds are those that invest at least 65% of
their total assets in AA rated papers (except AA+) and below rated
corporate bonds.

>Hybrid Mutual Funds

Hybrid mutual funds are those funds that invest in equity, debt and
other asset classes to generate better risk-adjusted returns. These
funds are ideal for those who want their mutual fund managers to
21
implement their asset allocation strategy as well. Here a list of hybrid
mutual funds where you can consider investing in:

Conservative hybrid fund: Conservative hybrid funds primarily invest

debt instruments with some exposure to equities. As per SEBI
guidelines, conservative hybrid funds have to invest between 10% and
25% of their total assets in equity and equity linked instruments and
between 75% and 90% of the total assets in debt instruments.

Balanced hybrid fund: As per SEBI guidelines, balanced funds are

those that have to invest between 40% and 60% of the total assets in
equity and equity linked instruments and between 40% and 60% of the
total assets in debt instruments. These schemes are not allowed to
exploit arbitrage opportunities.

Aggressive hybrid fund: Aggressive hybrid funds predominantly invest

in equity and equity related instruments. As per SEBI guidelines, these
funds have to invest between 65% and 80% of their total assets in
equity and equity linked instruments and between 20% and 35% of the
total assets in debt instruments.

Dynamic asset allocation/Balanced advantage fund: Dynamic asset

allocation funds, popularly known as balanced advantage funds, have
the freedom to dynamically manage their exposure to equity and debt
instruments as per the market conditions and without any minimum or
maximum exposure limits.

Multi asset allocation fund: Multi asset allocation funds are those that
invest in at least 3 asset classes. As per SEBI guidelines, multi asset
allocation funds have to maintain at least 10% of their total assets in
each of the 3 asset classes pre-determined by the respective fund
houses.

22
Arbitrage fund: Arbitrage funds are those that seek to benefit from
arbitrage opportunities. As per SEBI guidelines, arbitrage funds have to
invest a minimum 65% of their total assets in equity and equity linked
instruments while following their arbitrage strategies.

Equity savings fund: Equity savings funds aim to provide capital

appreciation and income distribution by investing in equity, debt and
arbitrage opportunities. As per SEBI guidelines, equity savings funds
have to invest at least 65% of the total assets in equity and equity
linked instruments and minimum of 10% of the total assets in debt
funds. These funds have to also disclose their minimum hedged and
unhedged exposure in their Scheme Information Document (SID)

Equity savings fund: Equity savings funds aim to provide capital

appreciation and income distribution by investing in equity, debt and
arbitrage opportunities. As per SEBI guidelines, equity savings funds
have to invest at least 65% of the total assets in equity and equity
linked instruments and minimum of 10% of the total assets in debt
funds. These funds have to also disclose their minimum hedged and
unhedged exposure in their Scheme Information Document (SID).

Comparing mutual funds with other investment options

When it comes to saving or investing money, most Indians prefer

traditional options such as fixed deposits (FDs), Public Provident Fund
(PPF) or gold. These avenues are well-known for capital preservation
and stable returns. However, mutual funds are a good alternative for
short-term as well as long-term returns.

23
Mutual funds vs fixed deposits

Fixed Deposits Debt mutual funds

2 reasons for investing in FDs: Debt mutual funds offer similar

benefits to investors
1) Capital preservation 2) Good
returns Returns can vary but they help to
beat inflation

Constant returns

Less liquid: you cannot exit an FD Highly liquid. You can exit a debt
any time you wish fund any time you wish

Capital preservation and regular returns:

two of the biggest reasons why people put their money in FDs. Debt
mutual funds offer similar benefits to the investor. For instance, they
are considered relatively safe investments. And while the returns can
vary, they can help beat inflation. In addition, mutual funds are more
liquid compared to FDs. You can exit a fund any time you want to. FDs
don’t provide you that facility.

Mutual Funds vs Bank Deposits

Bank deposits for long have been seen as a safe investment avenue by
majority of investors. We have compared mutual funds and bank
deposits on parameters such as returns, risks and liquidity, among
others that will help you make an informed choice.

24
Parameters Mutual Funds Bank Deposits

Return Returns aren’t fixed. Returns are assured

However, returns are but quite low. Of late,
higher compared to they have plummeted,
bank deposits in the and there are chances
long run. of them going down
further.

Risk Performance of They are latent to

mutual funds is market risks and the
subject to various vagaries of the stock
systematic and market.
unsystematic risks.

Liquidity You can easily redeem If you have invested in

your mutual fund and a tax-saving bank
the money is credited deposit, you can’t
into your bank withdraw before the
account the next day. tenure ends. For
regular deposits, you
can withdraw after
paying a certain
penalty.

Mutual funds vs Gold

The allure of gold has captivated Indians for centuries. Every family
buys and invests in the yellow metal in the form of jewellery and gold
coins. However, gold Exchange Traded Funds (ETFs) are a good
alternative to physical gold.
25
Gold Gold ETFs

Pricing is not uniform. It varies Pricing and transaction of gold ETFs

from one jeweller to another are completely transparent

Brokerage charges (around 0.5%)

Making charges (20-30%) form a
and expense ratio (1%) are much
significant expense
lower

Safety issues: loss or theft of No danger of theft since they are

physical gold is possible traded in demat form

Tough to liquidate physical gold for Easy to sell gold ETFs when

cash in short time required

While most Indians still prefer the traditional investment avenues, the
scenario is slowly changing. Over the past few years, the mutual fund
industry has gained traction in the country. The reason is simple: there
are a variety of mutual funds in the market that can help you reach
your financial goals.

Mutual Funds vs Real Estate

Mutual funds vs real estate has been one of the most widely debated
subjects in the realm of personal finance. While mutual funds have
gained traction of late, real estate for long has been viewed as a safe
and prudent investment option. We have compared them on

26
 parameters such as ease of investment, liquidity, risks, and returns
among others that will help you make the right choice.

Parameters Mutual Funds Real Estate

Ease of investment Quite easy. Once you The emergence of

are KYC-compliant, property portals has
you can invest in made investments in
mutual funds of your real estate easy.
choice. However, there are
many legal nitty-gritty
that you need to take
care of.

Liquidity Highly liquid. You can A non-liquid asset.

easily redeem when Money invested in real
required.
estate can’t be easily
converted into cash.

Risks You need to ensure

Investments in mutual
that the builder has
funds are subject to
followed all the
market risks. Returns
compliance and the
vary depending on the
papers are in place. If
type of fund and
not, there could be
market performance.
legal trouble.

27
Returns Returns are not fixed Though returns are
and depend on various not fixed, investment
internal and external in a property well-
factors. However, in researched with all the
the long run, returns amenities generally
are positive and can fetches good returns
even be in double in the long term.
digits.

Structure of mutual funds

In India, the structure of Mutual Funds is a three-tier structure with a

few other significant components. It is not just the different banks or
AMCs that create or float different mutual fund schemes; instead,
there are other players that are involved in the structure of mutual
funds. The primary watchdog in all these transactions is the Securities
Exchange Board of India (‘SEBI’) under whom each entity is required to
be registered with. The inception of SEBI (Mutual Funds) Regulations,
1996, revolutionized the structure of mutual funds and since then all
the entities are regulated under it. Currently, mutual funds comprise of
five basic participants, namely a Sponsor, Mutual Fund Trustee, Asset
Management Company, Custodian & Registrar and a Transfer Agent.
The hierarchy looks like this-

28
>Sponsor-

A sponsor is any person or entity that can set up a mutual fund

scheme to generate income through fund management. The sponsor
can be said as the first layer of the three-tier structure of mutual funds
in India. The sponsor is required to approach SEBI and get a mutual
fund scheme approved. The sponsor cannot work alone. It needs to
create a Public Trust under the Indian Trust Act 1882 and get the same
registered with SEBI. Once the trust is created, the Trustee is registered
with SEBI and is appointed as the trustee of the fund in order to
safeguard the interest of the unit holders and to adhere the SEBI
Mutual Fund regulations. The Sponsor subsequently creates an Asset
Management Company under the Companies Act, 1956 to deal with
the fund management. There are certain eligibility criteria to become a
Sponsor, as prescribed under:

a. The Sponsor must have profit in 3 of the last 5 years including

immediately preceding year.

29
b. The Sponsor must have a minimum of 5 years of experience in
financial services.

c. The net worth of the Sponsor must be positive for all the
preceding five years.

d. Out of the total net worth of the AMC, 40% must be participated
by the Sponsor.

As seen above, the position of a Sponsor is crucial and they should

have high credibility. Strict norms show that the sponsor must have
enough liquidity and faithfulness to return the money of an innocent
investor, in case of a financial meltdown.

>Trust And Trustees-

Trust and trustees make up the second layer of the structure of mutual
funds. Trustees are also known as the protectors of the fund and are
employed by the fund sponsor. As the name suggests, they have a very
important role in maintaining the trust of the investors and to oversee
the growth of the fund. SEBI mandates the trustees to provide a report
on the fund and the functioning of the AMC on a half-yearly basis.
Trustees can be created either in the form of Board of Trustees or a
Trust Company. The Trustees supervise the entire functioning of the
AMC and regulate the operations of the mutual fund schemes. The SEBI
has tightened the rule of transparency so as to avoid any conflict of
interest between the Sponsor and the AMC. Without the permission
and approval of the Trust, an AMC cannot float a new mutual fund
scheme. It is important for the Trustees to act independently and take
appropriate measures to safeguard the hard earned money of the
investors. The Trustees are also required to be registered under SEBI,

30
and SEBI further regulates their registration by either suspending or
revoking the registration if found breaching any conditions.

>Asset Management Company-

An AMC is the third working layer in the structure of mutual funds. An

AMC floats various schemes of mutual fund in the market, pursuant to
the needs of the investors and the nature of the market. They create
mutual funds along with the trustee and the sponsor and then oversee
its development. While creating the scheme, they take help of bankers,
brokers, RTAs auditors etc. and enter into an agreement with them. An
AMC is a company formed under Companies Act and needs to be
registered under SEBI. Similar to the Trustees, an AMC also needs to
ensure that there is no conflict of interest amongst them, the sponsor
and the trustees.

Other Participants In The Structure Of Mutual Funds-

>Custodian-

A Custodian is an entity, which is responsible for the safekeeping of

the securities. Custodians are registered with SEBI and are responsible
for the transfer and delivery of units and securities. Custodians also
enable investors in updating their holdings at a particular point of time
and help them in keeping track of their investments. Along with the
primary job of safekeeping, custodians are also in charge of the
collection of corporate benefits such as bonus issue, interest,
dividends etc.

>Registrar And Transfer Agents-

31
RTAs are an important link between fund managers and investors.
They cater to the fund managers by updating them with the investor
details and to investors by delivering the benefits of the fund to them.
RTAs are SEBI registered entities who process the applications of
mutual funds, help with investor KYC, manage and deliver periodical
statements of investments, update records of investors and process
investor requests. Link-in time, Karvy etc. are some of the famous
RTAs in India and they provide the requisite operational support to the
AMC in mutual fund activities.

>Other Participants-

Some other participants in the structure of mutual funds are brokers,

auditors, and bankers. The brokers are responsible to attract investors
and help to disseminate the fund. The brokers help investors in sell,
purchase of units and provide with their valuable advice. Brokers also
study the market trend and predict the future movement of the
market. Unlike brokers, auditors are an independent internal
watchdog, who audit the financials of the AMC, Trustee, and Sponsor
and provide their report. Bankers are also an important participant,
who act as collecting agents on behalf of the fund managers.

List of mutual funds in India

>Axis Asset Management Company Ltd.

>Aditya Birla Sun Life AMC Limited

>Aditya Birla Sun Life AMC Limited

32
>BNP Paribas Asset Management India Private Limited

>BOI AXA Investment Managers Private Limited

>Canara Robeco Asset Management Company Limited

>DHFL Pramerica Asset Managers Private Limited

>DSP Investment Managers Private Limited

>Edelweiss Asset Management Limited

>Franklin Templeton Asset Management (India) Private Limited

>HDFC Asset Management Company Limited >ICICI

Prudential Asset Management Company Limited

>IDBI Asset Management Ltd.

>Kotak Mahindra Asset Management Company Limited (KMAMCL)

>LIC Mutual Fund Asset Management Limited

1. Axis Asset Management Company Ltd.

This AMC launched its first mutual fund in October 2009 and since
then the firm has been able to make its presence in over 90 cities in
India. It manages more than 20 lakh investor accounts and offers
around 50 mutual fund schemes in the categories of debt, equity,
hybrid, ETFs (Exchange-Traded Funds), FoFs (Fund of Funds), etc.

2. Aditya Birla Sun Life AMC Limited.

Touted as one of the 3rd largest AMCs in India in terms of domestic

AAUM (Average Assets Under Management). The firm forms a part of

33
the Aditya Birla Group, a Fortune 500 Indian multinational and offers
24 schemes in the debt, equity, and hybrid categories.

3. Baroda Asset Management India Limited.

Previously known as Baroda Pioneer Asset Management Co. Ltd., this

AMC is a wholly owned subsidiary of the Bank of Baroda, India’s
second largest public sector bank. It offers 16 mutual fund schemes in
the categories of equity, debt income, and liquid.

4. Canara Robeco Asset Management Company Limited

The fund house is a joint venture between public sector lender Canara
Bank and Netherlands-based investment firm, Robeco. The firm was
founded in December 1987 and initially was known as Canbank Mutual
Fund. The fund house was later renamed to Canara Robeco Mutual
Fund in 2007 and offers 18 schemes in various categories (equity,
debt, hybrid, and ETF).

5. HDFC Asset Management Company Limited.

This asset management firm is sponsored by the Housing

Development
Finance Corporation Limited (HDFC Ltd.) and Standard Life Investments
Ltd. The fund house launched its first scheme in July 2001 and at the
moment, offers 40 schemes

6. Kotak Mahindra Asset Management Company Limited (KMAMCL)

The AMC is wholly-owned by Kotak Mahindra Bank Limited (KMBL)

and commenced its operations in December 1998. The fund house has
its presence in 80 cities and offers 46 schemes in various categories.

34
2. RESEARCH
METHODOLOGY

35
advantages and benefits

>Liquidity:

The most important benefit of investing in a Mutual Fund is that the

investor can redeem the units at any point in time. Unlike Fixed
Deposits, Mutual Funds have flexible withdrawal but factors like the
pre-exit penalty and exit load should be taken into consideration.

>Diversification:

The value of an investment may not rise or fall in tandem. When the
value of one investment is on the rise the value of another may be in
decline. As a result, the portfolio’s overall performance has a lesser
chance of being volatile. Diversification reduces the risk involved in
building a portfolio thereby further reducing the risk for an investor.
As Mutual Funds consist of many securities, investor’s interests are
safeguarded if there is a downfall in other securities so purchased.

>Expert Management:

A novice investor may not have much knowledge or information on

how and where to invest. The experts manage and operate mutual
funds. The experts pool in money from investors and allocates this
money in different securities thereby helping the investors incur a
profit. The expert keeps a watch on timely exit and entry and takes
care of all the challenges. One only needs to invest and be least
assured that rest will be taken care of by the experts who excel in this
field. This is one of the most important advantages of mutual funds

36
> Flexibility to invest in Smaller Amounts:

Among other benefits of Mutual Fund the most important benefit is its
flexible nature. Investors need not put in a huge amount of money to
invest in a Mutual Fund. Investment can be as per the cash flow
position. If You draw a monthly salary then you can go for a Systematic
Investment Plan (SIP). Through SIP a fixed amount is invested either
monthly or quarterly as per your budget and convenience.

>Accessibility – Mutual Funds are Easy to Buy:

Mutual Funds are easily accessible and you can start investing and buy
mutual funds from anywhere in the world. An asset management
companies (AMC) offers the funds and distributes through channels
like:

Brokerage Firms

Registrars like Karvy and CAMS

AMC’S Themselves

Online Mutual Fund Investment Platforms

Agents and Banks

This factor makes mutual funds universally available and easily

accessible. More so, you do not require a Demat Account to invest in
Mutual Funds.

>Schemes for Every Financial Goals:

37
The best part of the Mutual Fund is the minimum amount of
investment can be Rs. 500. And the maximum can go up to whatever
an investor wishes to invest. The only point one should consider
before investing in the Mutual Funds is their income, expenses, risk-
taking ability, and investment goals. Therefore, every individual from
all walks of life is free to invest in a Mutual Fund irrespective of their
income.

>Safety and Transparency:

With the introduction of SEBI guidelines, all products of a Mutual Fund

have been labeled. This means that all Mutual Fund schemes will have
a color-coding. This helps an investor to ascertain the risk level of his
investment, thus making the entire process of investment transparent
and safe.

This color-coding uses 3 colors indicating different levels of risk-

Blue indicates low risk

Yellow indicates medium risk, and

Brown indicates a high risk.

Investors are also free to verify the credentials of the fund manager,
his qualifications, years of experience, and AUM, solvency details of
the fund house.

>Lower cost:

In a Mutual Fund, funds are collected from many investors, and then
the same is used to purchase securities. These funds are however

38
invested in assets which therefore helps one save on transaction and
other costs as compared to a single transaction. The savings are
passed on to the investors as lower costs of investing in Mutual Funds.
Besides, the Asset Management Services fee cost is lowered and the
same is divided between all the investors of the fund.

>Best Tax Saving Option:

Mutual Funds provide the best tax saving options. ELSS Mutual Funds
have a tax exemption of Rs. 1.5 lakh a year under section 80C of the
Income Tax Act. All other Mutual Funds in India are taxed based on
the type of investment and the tenure of investment. ELSS Tax Saving
Mutual Funds has the potential to deliver higher returns than other
taxsaving instruments like PPF, NPS, and Tax Saving FDs.

>Lowest Lock-in Period:

Tax Saving Mutual Funds have the lowest lock-in periods of only 3
years. This is lower as compared to a maximum of 5 years for other
tax saving options like FD, ULIPs, and PPF. On top of that one has the
option to stay invested even after the completion of the lock-in period.

>Lower Tax on the Gains:

With Equity linked saving scheme you can save tax up to Rs. 1.5 Lakh a
year under section 80C of Income Tax (IT) Act. All other types of
Mutual Funds are taxable depending on the type of fund and tenure.
Before making an investment one should keep in mind the various

39
advantages Mutual Fund provides. Thorough knowledge of the benefits
of Mutual Funds would lead to better gains in the future.

Disadvantages and limitations

>Cost to Manage the Mutual Fund scheme:

As mentioned above, Market Analysts or Fund Managers manage and
operate the mutual funds. These Fund Managers work for the fund
houses that manage huge investments every day. This requires a lot of
efficiencies, expertise, and experience in the subject matter.

>Dilution:
Due to dilution, it is not recommended to invest in too many Mutual
Funds at the same time. Diversification, although saves an investor
from major losses, also restricts one from making a higher profit.

>Management Abuses:
Churning, turnover, and window dressing may happen if your manager
is abusing his or her authority. This includes unnecessary trading,
excessive replacement, and selling the losers prior to quarter-end to
fix the books.

>Tax Inefficiency:
Like it or not, investors do not have a choice when it comes to capital
gains payouts in mutual funds. Due to the turnover, redemptions,
gains, and losses in security holdings throughout the year, investors
typically receive distributions from the fund that are an uncontrollable
tax event.

40
>Poor Trade Execution:
If you place your mutual fund trade anytime before the cut-off time for
same-day NAV, you will receive the same closing price NAV for your
buy or sell on the mutual fund. 2 For investors looking for faster
execution times, maybe because of short investment horizons, day
trading, or timing the market, mutual funds provide a weak execution
strategy.

features

>Managed by A Qualified Expert:

An expert fund manager manages a mutual fund and takes care of

your hard earned money. It goes on without saying that managing
financial investments is not an easy task. Amidst this, if you don’t get
the help of an expert, you may get lost in the financial ocean. Mutual
fund schemes provide you with the service of an expert who takes care
of your money along with the other investments.

>Open-Ended And Close-Ended Funds:

Based on the constitution there are two types of mutual funds open-
ended and close-ended. In an open-ended fund, an investor is free to
invest money whenever he/she feels like. Similarly, you are also free to
withdraw money anytime. These are the funds in which the freedom or
flexibility of investment timing is highest. In a close-ended fund, an
investor has limited time to invest money in the fund. Whenever a
scheme is launched, investors are offered with a time frame to invest.

41
If an investor is interested in investing, he/she is required to put in
money during the time period failing which he/she is not provided
with units of the fund nor another time frame for investing.

>Lump Sum And SIP Investment:

As seen in the previous point, in an open-ended fund, you have the

timing flexibility for investment. Similarly, you have no restriction on
the frequency or amount you can invest per year. If you are investing
Rs 50000 at a time or making any irregular investments such as Rs
10000 in one month and Rs 25000 in another, all these are considered
to be the lump-sum investment. These funds also provide you with an
option of investing regularly. However, mutual funds allow you to
invest regularly. In this case, when you invest a fixed amount at a fixed
interval, it is called the Systematic Investment Plan (SIP). In a SIP, you
can decide the amount and interval such as monthly, quarterly, weekly,
etc. SIP is very similar to recurring deposit.

>No Fixed Returns:

Mutual funds invest in capital market instruments such as bonds,

equities, and money market instruments. The price of these
instruments change as per the market dynamics, and thus it is not
possible to predict the returns a mutual fund. Mutual fund schemes
buy and sell bonds and equities from the market, the profit of such as
transactions are also re-invested in subsequent transactions. Also,
redemption by investors often lead to selling decisions by fund
managers, and thus the returns from the mutual fund are not fixed
and are purely dependent on the market condition.

42
 >Equities Can Make Losses:

Equity mutual funds are the funds that invest in equities. Equities by
nature are riskier instruments and come with high profitability and
high risk. While an investor may generate healthy returns, he/she may
have to go through a harrowing period as well depending on the
market dynamics.

Objectives

>To give a brief idea about the benefits available from mutual fund
investment.

>To know more about the investment of salaried individuals in mutual

funds.

>To study and know more about the mutual fund schemes.

>To know and compare other investments with mutual funds.

>To study the limitations and benefits of mutual funds.

>To know how salary people know about mutual fund schemes.

tools and techniques to invest in mutual funds for salaried

individuals

>Credit Rating (Debt schemes only)

What it indicates

43
All debt papers that the fund invests in are rated by agencies
according to their risk profile. While government securities are totally
risk free, corporate papers are rated from AAA (highest safety) to D
(default).

How is it calculated

Agencies use their own methodology to rate a fund. The ratings are
usually provided in the fund’s fact sheet.

Implications for investors

High rating indicates that the fund is taking lower credit risk. Since
investors go for debt investment to reduce risk, they should avoid
schemes with too many low quality papers.

>Sharpe Ratio

What it indicates

This ratio shows the return per unit of the total risk taken by the
scheme.

How is it calculated

(Return – risk free return) ÷ standard deviation

Implications for investors

Compare only within categories. Higher than category average Sharpe

ratio indicates that the fund manager was able to generate higher
return per unit of total risk.

44
>Average Maturity or Maturity Profile (Debt schemes only)

What it indicates

Debt funds invest in papers with varying maturities. The maturity

profile indicates the average maturity of all debt securities in a fund.

How is it calculated

This is usually given in the fund’s fact sheet.

Implications for investors

Market prices of long-duration papers are more sensitive to

movements in interest rates. Investors should avoid funds with long
maturity if interest rates are likely to rise. If rates are likely to fall, such
schemes can give higher returns.

>Expense Ratio

What it indicates

This ratio represents the annual expense the fund will charge the
investor. It ranges between 0.1% (for fixed maturity plans) to 3.25%
(for small-sized equity funds).

How is it calculated

Total expenses charged by the fund/average assets under

management of the fund.

Implications for investors

The lower the expense ratio, the better it is for the investor. Since
most debt funds generate similar gross returns, expense ratio
becomes more important for debt funds. Direct plans have lower
expense ratios.

45
>Portfolio Concentration Ratio

What it indicates

This ratio shows where and how much has the fund invested.

How is it calculated

This is usually a percentage of the fund’s top five stocks or sectors.

Implications for investors

Normal range is 30%-40% for top five stocks and 30%-60% for top five
sectors for diversified funds. Investors go to mutual funds for
diversification, any undue concentration in its portfolio defeats this
goal.

>Standard Deviation

What it indicates

This is a measure of the volatility in a fund’s returns and, therefore,

indicates the risk in a funds portfolio.

How is it calculated

First, calculate the average of daily returns. Deduct this average from
each daily return and square the difference. The sum of all these
squared values is then divided by the number of days to get the
variance. And the square root of the variance is standard deviation.

Implications for investors

46
Lower the deviation, the better it is. However, one needs to compare it
only within categories. The range can be below 1% for liquid funds 20%-
40% for equity funds.

47
3. LITERATURE
REVIEW

48
 Meaning of review of literature.

Review of literature is very important to give better understanding and

insight necessary to develop a broad conceptual framework in which a
particular problem can be examined. It helps in the formation of specific
problem and helps acquaint the investigator to what is already known in
relation to the problem under review and it also provides a basis for
assessing the feasibility of the research, Review of literature is important
to a scholar in order to know what has been established and documented
as there are critical summaries of what is already known about a
particular topic. Therefore a review of literature helps in relating the
present study to the previous ones in the same field.

> Martin P. and McCann B. (1998) in their book titled “The Investor’s

Guide to Fidelity Funds – Winning Strategies for Mutual Fund Investing”

have very nicely guided investors regarding issues related with mutual
fund investing. They have advised that Investors should focus on sectors
of the global economy that have the greatest potential for profit in order
to beat the market averages. By combining this approach with the safety
provided by mutual funds’ inherent diversification, mutual funds become
an investment vehicle with all the advantages of trading individual
securities and none of the disadvantages. Like any other investment, it is
essential to develop a strategy for selecting which funds to buy and sell –
and when. These decisions should not be left to the emotions or to
chance.

40
 Gremillion L (2005) in his book “Mutual Fund Industry Handbook – A
Comprehensive Guide for Investment Professionals” has given detailed
information about working of mutual fund industry. It has also mentioned
the different type of challenges faced by various professionals connected
with this industry. The book has provided a broad and comprehensive
sweep of information and knowledge, which will help everybody who has
serious interest in the industry.

>Tyson E (2007) in his book “Mutual Funds for DUMMIES” (5 th edition) has
provided practical and profitable techniques of mutual fund investing
that investors can put to work now and for many years to come. By
proper selection investor can identify good schemes, where fund
managers invest in securities as per that match investors’ financial goals.
Investors can spend their time doing the activities in life that they enjoy
and are best at. Mutual Funds should improve investors’ investment
returns as well as their social life. The book helps investors how to avoid
mutual fund investing pitfalls and maximizing their chances for success.
Whenever any investor wants to buy or sell a mutual fund, the decision
needs to fit his overall financial objectives and individual situation.

>Jank S (2010) in his Discussion Paper on “Are there disadvantaged

clieneles in mutual funds?” has mentioned that mutual fund investors
chase past performance, even though performance is not persistent over
time. This means that investors buy mutual funds that had a high return
in the past. On the other hand, investors are reluctant to withdraw their
money from the worst performing funds. This behavior has often been
attributed to the irrationality of mutual fund investors. Sophisticated
50
investors rationally chase past performance, because high past
performance is a signal for managerial ability. No significant difference
was found between investor composition of the worst performing funds
and those with average performance.

>Singh B K (2012) in an article “A study on investors’ attitude towards

mutual funds as an investment option” from International Journal of
Research in Management has reiterated the need for spreading the
awareness about Mutual Funds among common masses. There is a
strong need to make people understand the unique features of
investment in Mutual Funds. From the existing investors point of view the
benefits provided by mutual funds like return potential and liquidity have
been perceived to be most attractive by the invertors’ followed by
flexibility, transparency and affordability.

>Divya K. (2012) in the article “A Comparative study on evaluation of

Selected Mutual Funds in India” from International Journal of Marketing
and Technology has suggested that the investment managers whose
performance is below benchmark index should have a relook at their
investment strategy and asset allocation. Investing styles should be
redesigned according to up & down swings of the market to
generate superior performance. To increase the efficiency and popularity
of mutual funds, the regulator should set the standard criteria of
benchmarks which will be helpful to asset management companies.

Goel S et al (2012) in the article “A Review of Performance Indicators of

Mutual Funds” from Researchers World – Journal of Arts, Science &
51
Commerce have reiterated that the Stock picking ability and lengthy
tenure of fund managers are favourable for mutual funds’ performance.
Performance of the Mutual Fund is also related to its ownership style.
Local mutual funds perform better than the foreign mutual funds as they
have better knowledge of the local market. Mutual Fund companies with
larger asset base are performing better than lower asset base companies.

>Vanaja V. and Karrupasamy R (2013) in the article “A study on the

performance of select Private Sector Balanced Category Mutual Fund
Schemes in India” from International Journal of Management Sciences and
Business Research have mentioned that Out of five private sector
balanced category mutual funds (under study) two earned a return above
the average returns. Two have made negative returns. All the private
sector balanced category funds selected for the study have a positive
Sharpe ratio. The range of excess returns over risk free return per unit of
total risk is wide. All the funds selected for the study have a positive
Treynor ratio. All the funds selected for the study has positive Jensen’s
alpha indicating superior performance.

>Narayanasamy R. and Rathnamani V (2013) in an article “Performance

Evaluation of Equity Mutual Funds(on selected Equity Large Cap
Funds)” from International Journal of Business and Management Invention
have mentioned that all funds performed well during the period under
study despite volatility in the market. The fall in NIFTY during the year
2011 impacted the performance of all selected mutual funds. In order to
ensure consistent performance of mutual funds, investors should also

52
consider statistical parameters like alpha, beta, standard deviation
besides considering NAV and total return.

>Santhi N.S. and Gurunathan K. (2013) in the article “The growth of

Mutual Funds and Regulatory Challenges” from Indian Journal of Applied
Research have mentioned that as mutual fund industry has grown
tremendously over past few years, Regulators are keeping close watch on
any potential impact of mutual fund products on financial stability and
market volatility. The growth of mutual funds has been accompanied by
innovative products and servicing methods. Regulators will have to do
balancing act by carefully managing risks and not imposing unnecessary
regulation.

>Sharma N. and Ravikumar R (2013) in an article “Analysis of the Risk

and Return relationship of Equity based Mutual Fund in India” from
International Journal of Advancements in Research & Technology
have mentioned that their study investigated the performance of Equity
based mutual fund schemes using Capital Asset Pricing Model (CAPM). In
the long run private and public sector mutual funds have performed well.
But while comparing the performance over last 15 years it is found that
private sector mutual funds have outperformed the Public Sector mutual
funds. The schemes of private sector mutual funds not only performed
better than those of public sector mutual funds but were also found to be
less risky.

Nair R K (2014) in the article “Indian Mutual Fund Market – A tool to

stabilize Indian Economy” from International Journal of Scientific and
53
Research Publications has reiterated that a Mutual fund is a powerful tool
to stabilize Indian economy. The products of mutual funds are playing a
vital role in mobilizing scattered savings among investors and channelize
these funds to infrastructural development of the country. The banks and
Financial Institutions are also playing a crucial role by promoting mutual
fund business in the country.

>Srivastava S and Malhotra S (2015) in an article “A Paradigm Shift in

Risk Measuring Tools of Mutual Fund Industry” from International Journal
of Informative & Futuristic Research have mentioned that equity
funds are performing better than debt funds. A strong linear relationship
was found between risk and return. Fund managers can adopt Calmar
ratio and safety first ratio to analyze the risk of selected funds. No fund
is risk free and Investors should invest in equity and equity related
instruments to diversify the risk.

54
4. DATA ANALYSIS
AND
INTERPRETATION

55
Table no 1: Do you invest in mutual fund?

Particulars No of respondents Percentage

Yes 20 67%
no 10 33%
total 30 100%

Analysis:

As per the above table it is clear that while 67% of respondents are
investing in mutual funds, 33% of respondents are not investing in
mutual funds.

INVEST IN MUTUAL FUNS

33%

67%

YES -BLUE

NO-RED

Graph no 1: Graph is showing no of respondents who is invest in mutual

funds

56
Interpretation: As per the above graph it can be interpreted that most
respondents are investing in mutual funds. That is 67%. This still
indicates that mutual fund products are to be used by a large pool of
investors

Table no 2: The age group under you belong to

Age group No of investors percentage

21-30 4 13%

31-40 10 34%

41-50 9 30%

51-60 7 23%

total 30 100%

Analysis:

As in the above table, the majority of respondents can be analyzed to be

in the 31-40 years age group, ie 34%. The second most common investor
is the age group of 41 to 50 years, ie 30%, the age group of 51 to 60
years has 23% investors and the lowest investor of 13% is 21 to 30 years
It is an age group.

57
 AGE GROUP

13%

23%
34%

30%

21 -30 PURPLE

31-40 BLUE

41-50 RED

51-60 GREEN

Graph no 2: graph showing age group of the respondents.

Interpretation: As per the above graph, it can be interpreted the most of

the respondents are corresponds to the age group of 31-40 and least of
the investors are falling under the age group of 21-30. It means that
working class individuals are more lure towards investments than young
individuals.

Table no 3: Occupation of the investors:

occupation No of investors percentage

Business 7 23%

58
Professional 13 44%
Salaried 10 33%
total 30 100%

Analysis: From the analysis out of 30 respondents as per above table 44%
investors are professionals like doctor, CA and others. 33% investors are
of salaried persons and 23% investors are business persons.

NO OF INVESTORS

23%

44%

33%

BUSINESS - GREEN

PROFESSIONAL- BLUE

SALARIED- RED

Graph no 3: graph showing occupation of investors

Interpretation: From the above graph, it can be interpreted that

specialists such as doctors, CPAs and consultants are inclined to invest in
mutual funds. It is followed by salary individuals.

59
 Table no 4: Why do you invest in mutual funds?

Particulars No of respondents percentage

Safety 9 30%

Good returns 7 23%

Tax benefit 4 13%

Capital appreciation 2 7%

Risk diversification 8 27%

total 30 100%

Analysis:

As per the above table, it is analysed that 30% of respondents invest in

mutual funds for purpose of safety, 23% of respondents are invest for
good returns, 13% of the respondents invest to get tax benefit, 7% of the
respondents are for capital appreciation and 27% respondents for risk
diversification.

60
 PURPOSE OF INVESTMENT

23%

7%
30%
13%

27%

SAFETY- DARK BLUE

GOOD RETURNS- BLUE

TAX BENEFIT – GREEN

CAPITAL APPRICIATION- PURPLE

RISK DIVERSIFICATION- RED

Graph no 4: graph showing purpose of investment

Interpretation: From the above graph, it can be interpreted that safety

and risk diversification are key considerations for investing in mutual
funds. Capital appreciation is found to be least considered for making
investment.

Table no 5: What is your income?

Income level No of respondents percentage

61
1 lakh 8 27%

2-4 lakh 11 36%

4-5 lakh 6 20%

More than 5 lakh 5 17%

total 30 100%

Analysis:

As per the above table, it is analysed that 27% of the investors have
income below 1lakh, 36% of the respondents have income between 2-4
lakh, 20% of the respondents have income between 4-5 lakh and 17% of
the respondents are of above 5 lakh.

INCOME LEVEL OF INVESTORS

17%

20%
36%

27%

1 LAKH - RED

2-4 LAKH- BLUE

4-5 LAKH- GREEN

MORE THAN 5 LAKH – PURPLE

62
Graph no 5: graph showing income level of investors.

Interpretation: From the above graph it can be interpreted that most of

the respondents belonging to the income above 2-4 lakhs. These
investors are interested in mutual funds because it is their primary
financial goal.

Table no 6: what is Duration of your investment

Duration No of investors percentage

0-1 year 10 33%
1-2 years 13 43%
2-4 years 5 17%
More than 4 years 2 7%
total 30 100%

Analysis:

As per the above table, it can be analysed that 33% of the respondents
are interested to invest between 0-1 year, 43% of the respondents are
interested to invest between the duration of 1-2 years, 17% of the
respondents are interested to invest between duration of 2-4 years and
7% of the respondents are interested in investing more than 5 years.

63
 DURATION OF INVESTMENT

7%

17%

43%
33%

0 TO 1 YEAR - RED

1-2 YEARS- BLUE

2-4 YEARS- GREEN

MORE THAN 4 YEARS- PURPLE

Graph no 6: graph showing duration of investment

Interpretation: From the above graph, it can be interpreted that most of

the respondents are investing for 1-2 years and these respondents are
short term investors who expecting high profits in short term.

64
Table no 7: how much amount do you invest?

Amount of investment No of investors percentage

< rs 50000 14 47%

Between rs 50000- rs 10 33%

100000
>Rs 100000 6 20%

total 30 100%

Analysis:

As per the above table, it is analysed that 47% of the respondents are
invest below 50000 in mutual fund, 33% of the respondents are
interested to invest between Rs-50000-Rs.100000 and 20% respondents
are interested to invest above Rs.100000

AMOUNT OF INVESTMENT

20%

33%
47%

< RS 50000 - BLUE

BETWEEN RS50000 TO 100000 – RED

65
>RS 100000 –GREEN

Graph no 7: graph showing amount of0investment.

Interpretation : As per the above graph, it can be interpreted that most of

the people invest <50000 because they are not ready to take risk, second
most of the respondents are interested to invest between Rs.50000-
Rs100000 and they are ready to take risk.

Table no 8: what type of scheme do you prefer?

schemes No of investors percentage

Equity 9 30%

Debt 3 10%

balanced 11 37%

Fixed maturity plan 7 23%

total 30 100%

Analysis:

As per the above table, it can be analysed that where in the scheme
preference most of the investor Prefer a balanced scheme which has 37%,
the second most investors are in Equity Schemes are in 30% then fixed
maturity plan has 23% and the least investors scheme debt has10%.

66
 PREFERRED SCHEME

10%

23%

37%

30%

EQUITY - RED

DEBT- PURPLE

BALANCED- BLUE

FIXED MATURITY PLAN- GREEN

Graph no 8: graph showing preferred scheme of respondents

Interpretation: As the graph above shows, it is highly likely that there is a
balanced fund in the market. This is not revealed to investors because of
its complexity and low awareness.

67
Table no 9: from which sources you came to know about mutual
funds

particulars No of respondents percentage

Friends suggestion 6 20%

Self- decision 12 40%

Television 4 13%

Agent/brokers 8 27%

total 30 100%

Analysis:

As per the above table it is analysed that 27% of respondents are came to
know about mutual funds by agents, 20% of the respondents by friend’s
suggestion, 40% of the respondents are self-decided and 13% of the
respondents came to know by television.

SOURCES

13%

40%
20%

27%

FRIENDS SUGGESTION - GREEN

68
SELF DECISION- BLUE

TELIVISION- PURPLE

AGENT/BROKERS- RED

Graph no 9: graph showing from which source respondents have heard

about mutual funds.

Interpretation: From the above graph, it can be interpreted that most

respondents will take a self-determining answer to start investing in
mutual funds. Only a few respondents helped TV make investment
decisions. As a result, AMC and SBI have found that more information is
needed to provide the best materials, services and information to
facilitate investors' subsequent investment.

Table no 10: what is risk preference.

Risk preference No of respondents percentage

Innovator 10 33%
Moderator 15 50%
Risk adverse 5 17%
total 30 100%

Analysis:
69
As per the above table it can be analysed that 33% of the respondents are
innovators they invest more amount of money and they are ready to take
any risk, 50% of the people will check out all the factors and then if they
find that they can bear the risk moderately they will invest and 17% of the
people are never ready to take risks.

RISK PREFERANCE

17%

50%
33%

INNOVATOR - RED

MODERATOR- BLUE

RISK ADVERSE- GREEN

Graph no 10: graph showing risk preference

Interpretation: From the above graph, the majority of investors are

prepared to take medium level risk by investing in mutual fund and some
respondents fall into the "high risk and high return" category. Here,
investors can be interpreted as being essentially medium risk takers.

70
Table no 11: What type of scheme do you prefer

Scheme type No of respondents percentage

Open ended method 15 50%

Close ended method 10 33%

Interval method 5 17%

total 30 100%

Analysis:

As per the above table, it can be analysed that 50% of the respondents
are prefer open ended method, 33% of the respondents prefer close
ended schemes and 17% of the respondents are prefer intervals scheme.

SCHEME TYPE

17%

50%
33%

OPEN ENDED METHOD - BLUE

CLOSE ENDED METHOD- RED

INTERVAL METHOD- GREEN

71
Graph no 11: graph showing scheme types that respondents prefer

Interpretation: From the above graph, with regard to the scheme's

prioritization based on its structure, most individual investors prefer
“open-end scheme” mainly for redemption, investment, good return,
flexibility of liquidity It can be interpreted. No investor likes the interval
method. In fact, some individual investors have confused interval-based
names.

Table no 12: performance of the fund manager.

particulars No of respondents percentage

Most important 8 27%

Important 7 23%

Neutral 10 33%

Less important 5 17%

Not at all important 0 0%

total 30 100%

Analysis:

As per the above table, it is analysed that 27% of the respondents are
ranked performance of the fund manager a most important, 23% of the
72
respondents given ranking has important, 33% given neutral and no one
has marked it has not at all important.

PERFORMANCE OF FUND
MANAGER
0%

17%

23% 33%

27%

MOST IMPORTANT - RED

IMPORTANT- GREEN

NEUTRAL- DARK BLUE

LESS IMPORTANT- PURPLE

NOT AT ALL IMPORTANT- LIGHT BLUE

Graph no 12: graph showing ranking of performance of fund manager

Interpretation: From the above graph, it can be interpreted that most of

the respondents marked performance of fund manager has neutral and
some respondents of fund managers performance has most important.
Therefore, the fund manager is responsible for conducting the fund
investment strategy and managing the portfolio trading activities. The
quality of the fund manager is one of the key factors to consider when
analyzing the quality of the fund investment.
73
Table no 13: Attitude toward risk of salaried individuals.

particulars No of respondents percentage

Most important 5 17%

Important 11 37%

Neutral 8 26%

Less important 3 10%

Not at all important 3 10%

total 30 100%

Analysis:

As per the above table it is analysed that 17% of respondents are ranked
attitude towards risk is most important, 37% of the respondent ranked it
has important, 26% given neutral, 10% less important and 10% of the
respondents marked as not at all important.

74
 ATTITUDE TOWARDS RISK

10%
10%
37%

17%

26%

MOST IMPORTANT - GREEN

IMPORTANT- DARK BLUE

NEUTRAL- RED

LESS IMPORTANT- LIGHT BLUE

NOT AT ALL IMPORTANT- PURPLE

Graph no 13: graph showing ranking of attitude towards risk5

Interpretation: From the above graph, it can be analysed that 17% of the
respondents are ranked Attitude towards risk is most important, 36% of
the respondents ranked it has important, the respondents who ranked
important and most important, they are ready to take risk.

75
5. CONCLUSION

76
 Suggestions and recommendations

Financial goals depend on a variety of factors, including the age of the

investor, lifestyle, financial independence, family dedication, and
income and spending levels. Therefore, it is necessary for investment
trust companies to assess the needs of consumers. They have the
purpose of investment, such as regular income, home purchase,
children's wedding or education funding, or a combination of all these
needs, the amount of risk, and willingness to accept, and cash flow
requirements define your needs. .

Investors should choose the right mutual fund system that suits their
needs. Investors should fully read the offering documents of the mutual
fund plan. Several factors that need to be evaluated before selecting a
particular mutual fund are the performance records of the fund over the
past few years, with appropriate standards and similar funds in the
same category. Other factors include portfolio allocation, dividend yield
and transparency, which are reflected in the frequency and quality of
communications.

For investors, the best way is to invest a fixed amount at a specific time
interval. By investing a fixed amount each month, you can reduce the
number of purchases at higher prices and increase the number of
purchases at lower prices, thereby reducing the average cost per
vehicle. This is called the rupee cost average.

77
 Conclusion

Mutual funds now represent perhaps most appropriate investment

opportunity for most investors. As financial markets became more
sophisticated and complex, investors need a financial intermediary
who provides the required knowledge and professional expertise
on successful investing. As the investor 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 taken over the banking industry,
more funds been 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 a particular class of
investors.

Reliance India mutual funds provide major benefits to a

common man who wants to make his life better than
previous.

Mutual funds are a popular investment avenue among

investors, as they are easy to invest in and give higher
returns as compared to other traditional asset classes such
as FDs or saving bank deposits. At the same time, portfolio
diversification techniques as well as availability of the
options of SIP, STP and SWP make them a viable investment
78
instrument. Further, you are not required to proactively
monitor your stocks, as your fund manager does the task for
you. As a result, mutual funds have become a much sought
after investment avenue today with record investments in the
recent months.

79
For achieving heights in the financial sector, the mutual fund companies
should formulate the strategies in such a way that helps in fulfilling the
investors’ expectations. Today the main task before mutual fund
industry is to convert the potential investors into the reality investors.
New and more innovative schemes should be launched from time to
time so that investor’s confidence should be maintained. All this will
lead to the overall growth and development ofthe mutual fund industry.

There are an incredibly large number of mutual funds. While some

mutual funds aim to produce short term, high yield profits, others look
for the long term profit. But, large segment of people are scared to
invest in the capital market. Some personal and family factors are
pulling them in deciding different type of investments. Age, Gender and
marital status are some of the socio demographic factors that share the
investors’ decision and preference in making investments. Many studies
have shown that age interact with financial information and issues
differently.

80
6. BIBLOGRAPHY

81
WEBILOGRAPHY

http://crisil.com/capital-markets/crisil-mf-ranking-list.html

http://www.mutualfundsindia.com/fund_fact_view.asp

http://www.hsbc.co.in/1/2/personal/investments/mutualfund/mutual-
fund-benefits

http://finance.indiamart.com/india_business_information/advantage_
mutual_funds.html

http://www.jagoinvestor.com/2007/11/advantages-and-
disadvantagesof-mutual_313.html

http://kalyan-city.blogspot.in/2012/02/what-are-disadvantages-
ofmutual-funds.html

http://www.iloveindia.com/finance/mutual-funds/equity-

mutualfunds.html

http://www.valueresearchonline.com/funds/default.asp

http://www.investopedia.com/ask/answers/04/032604.asp#ixzz20g7Jf

D3h http://www.blurtit.com/q462869.html

http://www.onemint.com/2011/03/30/best-balanced-mutual-funds-
inindia

http://beginnersinvest.about.com/od/mutualfunds1/a/What-Is-
ABalanced-Mutual-Fund.htm
BOOK REFERANCE

Indian mutual funds handbook Mutual funds in india

Mutual funds the money multiplier

Mutual fund industry hand book

7. APPENDIX
1. Gender

a) Male
b) Female

2. Do you invest in mutual funds?

a) YES
b) NO

3. The age group under which you belong.

a) 21-30
b) 31-40
c) 41-50
d) 51-60

4. Occupation.

a) Salaried
b) Bussines
c) Professional
d) retired
5. Why are you investing in mutual fund

a) safety

b) good returns

c) tax benefits

d) capital appreciation

e) risk diversification

6. What is your income?

a) 1 lakh

b) 2-4 lakh

c) 4-5 lakh

d) More than 5 lakhs

7. From which sources did you know about mutual funds?

a) Friends suggestion

b) Self decision

c) Television

d) Agent/brokers

8. Which scheme type do you like?

a) Open ended method

b) Close ended method

c) Interval method
9. Which type of savings do you like?

a. life insurance

b. bank deposit

c. units of mutual funds

d. gold