“AN ANALYSIS ON INVESTMENT IN MUTUAL FUND

THROUGH SYSTEMATIC INVESTMENT

PLANNING-
A SMART INVESTORS PREFERENCE”

Submitted by:
RAVINDRA GOPALKA
(Roll No: MBA FINANCE- 1502005345)

DECLARATION
I hereby declare that the dissertation “AN ANALYSIS ON
INVESTMENT IN MUTUAL FUND THROUGH SYSTEMATIC
INVESTMENT PLANNING-A SMART INVESTORS

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PREFERENCE” submitted for the MBA Degree at Sikkim Manipal
University Department of Project Management is my original work and
the dissertation has not formed the basis for the award of any degree,
associate ship, fellowship or any other similar titles.

Place: New Delhi

Date:

Signature of the Student

PREFACE

“Experience is the best teacher.” This saying is very well applicable in

everyone’s life. Therefore as a student of management it must apply to
me also. Then the question arises that from where we can get this
experience. Obviously we must undergo study on Mutual fund. To serve
this purpose I have done analysis on Mutual fund through the various
sources available and as an outcome I have prepared this

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In today’s corporate and competitive world, I find that Mutual fund has
good growth and potential. Study of Mutul fund has given me the
opportunity to work and get experience in a highly competitive and
enhancing sector.

The success story of good market share of different Mutual fund

depends upon the returns of the Mutual fund

TABLE OF CONTENTS

SR.NO. CHAPTERIZATION PAGE NO.

1. Executive Summary 9
1.1- Research Methodology 11
13
1.2-Literature Review
16
1.3-Limitations Of The Study
2. Systematic Investment Plan 17
2.1- Introduction 18
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 2.2- How to invest through SIP 25
29
2.3- Procedure to be followed for investing in SIP
34
2.4- Mode of payment 37
2.5- Different types of SIP
3. Mutual fund 43
3.1- Introduction 44
3.2- Advantages of Investing in a Mutual Fund 47
3.3- Disadvantages of Investing in a Mutual Fund 49
3.4.- Procedure of Mutual Fund 52
3.5.- Mutual Fund Schemes 56
3.6- Major players in the Mutual Fund Industry 61
3.7- ULIPs vs. Mutual fund 82
4. Conceptual Framework 88
4.1- Steps to invest in Equity 89
4.2.- Net Asset Value (NAV) 93
4.3- Chargeable Fees and Expenses 95
4.4- Governance, Management Structure and 104
SEBI regulations
5. Latest Review on Mutual Fund 107
5.1- Mutual Fund Industry Review by CRISIL 109
5.2- Banking, FMCG funds top MF return charts in 111
2012
113
5.3- How to evaluate Mutual Fund portfolio
performance 116
5.4- What is the Mutual Fund Direct NAV all about
6. Data Interpretation and Analysis 119

7. Finding 154
8. Recommendations and Suggestion 156

9. Conclusion 158

10. Bibliography 160

11. Annexure 161

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 Chapter 1
EXECUTIVE SUMMARY

EXECUTIVE SUMMARY
SIP is a method of investing a fixed sum, regularly, in a mutual fund. It is
very similar to regular saving schemes like a recurring deposit. An SIP
allows you to buy units on a given date each month, so that you can
implement an investment / saving plan for yourself. Once you have
decided on the amount you want to invest every month and the mutual
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fund scheme in which you want to invest, you can either give post-dated
cheques or ECS instruction, and the investment will be made regularly.
SIPs generally start at minimum amounts of Rs 1,000 per month and
theupper limit for using an ECS is Rs 25000 per instruction. Therefore, if
you wish to invest Rs 100,000 per month, you may need to do it on four
different dates.

In few years Mutual Fund has emerged as a tool for ensuring one’s
financial well being. Mutual Funds have not only contributed to the India
growth story but have also helped families tap into the success of Indian
Industry. As information and awareness is rising more and more people
are enjoying the benefits of investing in mutual funds. The main reason
the number of retail mutual fund investors remains small is that nine in
ten people with incomes in India do not know that mutual funds exist.
But once people are aware of mutual fund investment opportunities, the
number who decide to invest in mutual funds will increase to as many as
one in five people. The trick for converting a person with no knowledge
of mutual funds to a new Mutual Fund customer is to understand which
of the potential investors are more likely to buy mutual funds and to use
the right arguments in the sales process that customers will accept as
important and relevant to their decision.

OBJECTIVE OF THE STUDY

 To understand the concept of investment plan in mutual fund.

 To study the benefits of SIP.

 To find out the preference of the investors for Asset Management

Company.
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 To know the preference of the portfolios.

 To know why one has invested or not invested in mutual fund.

 To find out the preferred channels.

 To find out what should be done to boost the mutual fund industry.

1.1 RESEARCH METHODOLGY

 This project is a study done through primary research and
secondary sources.
 The primary data related to the study will be collected by
conducting interviews in the companies and through
questionnaires.
 Sampling size will be approximately 100 investors.
 Sampling area will be Mumbai and Navi mumbai area.
 Secondary data will be collected through websites and from
various books, magazines and journals.

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 SCOPE OF STUDY

The study will be basically focusing on Systematic Investment Plan

which is a popular method of investing in mutual funds, the conceptual
framework and S.I.P offered by different companies.

In few years Mutual Fund has emerged as a tool for ensuring one’s
financial well being. Mutual Funds have not only contributed to the India
growth story but have also helped families tap into the success of Indian
Industry.

Therefore in this study an attempt is made to find out how to invest in

Mutual Fund safely and securely, the major players in the Mutual Fund
Industry with special focus on investing through SIPs online as in todays
world everybody is too occupied so investing from the comfort of their
homes is most preferred today.

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 1.2 LITERATURE REVIEW
Any research builds on the research carried out previously on the given
subject. The purpose of the literature review is to review what has
previously been done on the subject and analyse it in the present
context so that an effective understanding can be established.

Before conducting this project I have gone through some work which has
been done previously on the subject which are given below:

1) Research paper-
Analysis of components of investment performance- An empirical
study of Mutual funds in India.
Authors- Dr.S.Anand-Assistant professor, Goa Institute of
Management.
Dr. V.Murugaia- Reader, Kuvempu University.
2) Making Mutual funds work for you-
The investors concise guide
Author- Association of mutual funds in India (AMFI) in assistance
with Ogilvy & Mather
3) Perceptual study of Systematic Investment Plan (SIP) A case study
of service class.
Author-Dr.B.S.Hundal, Saurabh Grover,Professor Department of
commerce and business management GNDU Amritsar

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 Abstract:
Systematic Investment Plan (SIP) is a disciplined way of investing,
where you make regular investments according to a set calendar
you create. Systematic investing is a time-tested discipline that
makes it easy to invest automatically. This paper is an attempt to
study the perception of service class people towards systematic
investment plan. Factor analysis and cluster analysis have been
used to study the same and found that service class have positive
attitude towards investment in these plans.

4) Hazardous to your wealth: Extraordinary Popular Delusions and

the madness of Mutual Fund Experts

Abstract: The author analyzes a number of investment fallacies,

with specific academic references to long held beliefs but with a
very readable tone throughout. If the rest of the book is as good as
this excerpt, then it should become a mainstay on every long-term
investor’s shelf, right beside classics such as Malkiel’s A Random
walk Down Wall Street and Bogle’s writings on long term mutual
funds.
The book has two redeeming virtues. The first is its rich lode of
unintended humour, beginning with its title. Its other virtue is the
advice here is so bad that a completely contrarian strategy has
much merit: Do use indexed funds and whenever possible avoid
using actively managed funds.

5) “Indian Capital Markets” Uma Shashikant & S. Arumugam

Publication: TATA Mc-Graw Hill.
This book reveals how Indian capital markets have changed in
the last decades. Stock markets today are fully electronic;
settlement cycles have been compressed, clearing corporations
that guarantee settlement of transactions, nearly eliminating risk.
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 The growth in the number of foreign institutional investor’s &
mutual funds; the changing investment profile of provident funds &
the privatization initiatives in the insurance sector. Change
processes bring along with them immense challenges. One of
them is the need for analytical insights into the impact and
implications of the processes themselves. The financial markets in
India have been at the forefront of what we can term as a
paradigm shift in the economy.

6) “Capital Market – The Indian Financial Scene” N. Gopalsamy

Publication: MacMillan India Pvt. Ltd.

This book speaks that the capital markets are the barometer of
the health of the economy. Indian capital markets have begun to
transform rapidly in order to provide world class services to the
investors. The key to better corporate governance in India today lies
in a more efficient and vibrant capital market. A variety of
developmental measures such as deregulation and economic
reforms, disintermediation and financial sector reforms,
institutionalization of capital markets investors preference for higher
standards of disclosures and corporate governance measures to
those followed in developed markets, globalization and tax reforms,
etc have all contributed to bring a bout the required changes in the
capital market scene. These changes and reforms have been taken
up in the best interest of all stakeholder of capital market. SEBI’s aim
is also remarkable to make the Indian financial market a truly world-
class and a respectable institution. To achieve its objectives it has
also drawn strategic action plans.

1.3 LIMITATION OF THE STUDY

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The various limitations of the study are:

 Most people are aware about mutual funds in general but not
many people know about investing through SIPs so this can be a
constraint.

 Many companies do not like to reveal actual data about the

number of people investing through SIPs and how popular the plan
actually is, so the information collected may not be accurate.

 Time limit is also a constraint in the completion of the project.

Chapter 2
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 Systematic Investment Plan

2..1 INTRODUCTION
TO
SYSTEMATIC INVESTMENT PLAN

SYSTEMATIC INVESTMENT PLAN (SIP)

A systematic investment plan (SIP) commits the investor to invest a
specified amount every month (or every quarter) in the units of a fund’s
equity scheme. The number of units bought each month for the investor
under the plan will depend on the ruling price: fewer units are bought
when the price is high, and more units are bought when price is low. This
is a built-in advantage of SIPs. It averages out investor’s buying price
over the entire period of holding. The SIP resolves a dilemma often
facing investors due to ups and downs in the market price. The investor
finds it difficult to decide when to invest in the equity scheme.
The monthly or quarterly amount to be invested can be as small as Rs.
500 or Rs. 1000. Mutual funds specify the schemes for which SIP is
allowed by them. Some funds charge a lower entry load under SIP than
for one-time investment, but others don’t make any such distinction. An

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exit load under SIP is charged if the investor leaves the scheme before a
specific period of time.

Why invest using SIP?

Investing through SIP in a mutual fund indubitably is the key solution in
order to avoid or prevent the loopholes of equity investment and yet,
continually enjoy the high returns of investment. Isn’t it great therefore to
invest using this effective strategy of SIP? Obviously, yes! And not only
that, it makes all the more sense today when the stock markets are
booming and are tempting to really invest.

1. Tension free investment: Experts and other well versed people in

this business who will definitely manage the investor’s money and other
forms of investment is one of the key advantages of investing through a
mutual fund. They regularly carry out extensive research – on the
company, the industry and the economy – thus ensuring informed
investment. This then is one big advantage in view of investing one’s
hard earned money.
In addition to that, they regularly track the market. Thus, for many of us
who do not have the desired expertise and are too busy with our
vocation to devote sufficient time and effort to investing in equity, mutual

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funds offer an attractive alternative. Therefore, indubitably this type of
business is indeed, a tension-free form of investment.

2. Putting eggs in different baskets: Another advantage of investing

through mutual funds is that, even with just small amounts we are able to
enjoy the benefits of diversification. Huge amounts would be required for
an individual to achieve the desired diversification, which would not be
possible for many of us.

3. It’s all transparent and well-regulated: It is interesting to note that

the mutual fund industry is well regulated both by Sebi (Securities and
Exchange Board of India) and AMFI (Association of Mutual Funds in
India). They have, over the years, introduced regulations, which ensure
smooth and transparent functioning of the mutual funds industry.
Moreover, the mutual fund can be changed time by time, switch in
different mutual fund, this is one of the big profit.

4. Does not affect one’s monthly budget: Furthermore, with SIP small
amounts (Rs 500-Rs 1,000) can be invested periodically in Mutual funds
as against larger one-time investment required to buy directly from the
market. In this way, an investment does not appear to be a burden every
month. On the other hand, to prevent losses in volatile markets,
investing in Sips is the best option as every month there may be an
opportunity to buy at lower levels.

5. Rupee cost averaging: This is especially true for investments in

equities. When you invest the same amount in a fund at regular intervals
over time, you buy more units when the price is lower. Thus, you would
reduce your average cost per share (or per unit) over time. This strategy
is called 'rupee cost averaging'. With a sensible and long-term
investment approach, rupee cost averaging can smoothen out the
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market's ups and downs and reduce the risks of investing in volatile
markets.

People who invest through SIPs capture the lows as well as the highs of the market. In an SIP, your
average cost of investing comes down since you will go through all phases of the market, bull or bear

Units Units
Investor Investor Unit
Month Subscribed Subscribed
A B Price
A B
1 10000 1000 1000 100 10
2 0 1000 105.3 9.5
3 0 1000 113.6 8.8
4 0 1000 117.6 8.5
5 0 1000 111.1 9
6 0 1000 105.3 9.5
7 0 1000 103.1 9.7
8 0 1000 98 10.2
9 0 1000 95.2 10.5
10 0 1000 93.5 10.7
Total
10000 1000 10000 1042.7 9.6
Investment
Market
10700 11157.4
Value

6. Discipline: The cardinal rule of building the corpus is to stay focused,

invest regularly and maintain discipline in investing pattern. A few
hundred’s set aside every month will not affect the monthly disposable
income. It will be easier to part with a few hundreds every month, rather
than set aside a large sum for investing in one shot.

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7. Power of compounding: Investment gurus always recommend that
one must start investing early in life. One of the main reasons for doing
that is the benefit of compounding.

Let's explain this with an example.

Let’s assume two people A and B. They both decide to start a SIP of Rs.
1000/- per month and invest in it till the age of 60.

A started investing Rs 1,000 per year at the age of 25 and B started investing the same amount every
month at the age of 35. Below is a table of how much their money grew to when they turned 60.

At Investment (in Wealth at 60 (in

Age lacs) lacs)
25 4.2 148.6
30 3.6 70.1
35 3 32.8
40 2.4 15.2
45 1.8 6.8
50 1.2 2.8

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At 60, A had built a corpus of Rs 148.6 lakh while person B's corpus was
only Rs 32.8lakh. For this example, we have taken a rate of return of
15% compounded. A difference of Rs 1, 20,000 as investment over a 10
year horizon between the two of them results in a huge difference of Rs.
115.8 lakhs in their end-corpus. That difference is due to the effect of
compounding.

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The longer the (compounding) period, the higher the returns.

Now, suppose A invested Rs 1,000 per month after every fifteen years,
starting at the age of 45. The total amount invested, thus remains Rs 1.8
lakh. However, when he is 60, his corpus will be Rs 15.2lakh. Again, he
loses the advantage of compounding in the early years.

8. Helps to fulfill one’s dreams: Finally and the best part of all is the
fact that with the use of SIP, it will make one’s dreams come true. The
investments that are made are ultimately for some objectives such as to
buy a house, children’s education, marriage etc. And many of them
require a huge one-time investment. As it would usually not be possible
to raise such large amounts at short notice, It would be necessary to
build the corpus over a longer period of time, through small but regular
investments. This is what SIP is all about. Small investments, over a
period of time, result in large wealth and help fulfill one’s dreams &
aspirations.

9. Convenience: This is a very convenient way of investing. The

investor has to submit cheques along with the filled up enrolment form.
The mutual fund will deposit the cheques on the requested date and
credit the units to one's account and will send the confirmation for the
same.

10. Other advantages: There are no entry or exit loads on SIP

investments. Capital gains, wherever applicable, are taxed on a first-in,
first-out basis.
2.2 HOW TO INVEST THROUGH SIP

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  Mutual funds through SIP allow to periodically invest in them (lets
say 5 investments of Rs 20 each) on a weekly, monthly or quarterly
basis.

 This will avoid the risk of locking in to one single valuation but get
an 'average' of the valuations on the various dates that we invest.

 SIP is very helpful in a volatile market. Since we invest a fixed

amount, we buy more of the security when its prices fall and less
when it is more expensive.

 Mutual funds define the dates on which we can make the regular
investments (typically 1st/7th/15th/21st of every month). If we are a
salaried employee, we will realize that we have surplus monthly
savings and hence this can become a preferred option for us. We
receive our salary on the 5th of the month and hence we can make
the investment every 7th of the month.

 We can fill the SIP application form and inform the mutual fund that
we want to invest on 7th every month.

 Almost all mutual funds provide an Electronic Clearing Scheme

(ECS) with the major banks: this means that we can sign an order
to our bank that we allow the mutual fund company to take a
specified sum of money from our bank account on specified dates
for a specified period. This saves us the hassle of signing post
dated cheques or of sending cheques on a periodic basis to the
mutual fund.

How an SIP Works?

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 I. An SIP allows to take part in the stock market without trying to
second-guess its movements. It is also known as dollar cost
averaging.
II. An SIP means committing yourself to investing a fixed amount
every month.
III. E.g. 1,000 may be invested every month.When the Market price
of shares fall, the investor benefits by purchasing more units; and
is protected by purchasing less when the price rises.
IV. Thus the average cost of units is always closer to the lower end.)
{ NAV : Net Asset Value, or the price of one unit of a fund can be
computed as follows : NAV = [ market value of all the investments
in the fund + current assets + deposits - liabilities ] divided by the
number of units outstanding.}
V.

Date NAV Approx number of units investor will get at 1000

Jan 1 10 100

Feb 1 10.5 95.23

Mar 1 11 90.90

Apr 1 9.5 105.26

May 1 9 111.11

Jun 1 11.5 86.95

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 VI. Within six months, the investor would have 589.45 units by
investing just 1,000 every month. Over the long run, he may
make money or lose.

VII. Let's say a person invested in a Mutual Fund unit during the
dotcom and tech boom. Say he began with 1,000 and kept
investing 1,000 every month. This would be the result:

VIII. Investment period

 Mar 2000- Mar 2005

Monthly investment

 1,000

Total amount invested

 61,000

Value of investment of Mar 7, 2005

 1,09,315

Return on investment

 23.87%

IX. Had he bought the units on March 13, 2000 at 10.88 per unit
(that was the NAV then), he would have lost because the NAV
was just 7.04 on March 7, 2005. But because he spaced out his
investment, he won.

X. Conversely if the market had trended higher from the day you
decided to start investing, you would lose out on an opportunity.

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 This would happen as your subsequent purchases will get you
less number of units for the same amount.

Systematic Investment Plan can help you to be disciplined (if you need
discipline) but not solve your market timing issues. The Investment
advisor or the Mutual Fund has a vested interest in pitching this idea to
you as once you invest all your future investment would also accrue to
them effortlessly.

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2.3 PROCEDURE TO BE FOLLOWED FOR
INVESTING IN SIP

Step 1 Visit the SIP Calculator tool to select your SIP amount.
Step 2 Select the mutual fund schemes that suit your investment
objectives.
Step 3 Fill-up the Application form Online or download the same. (One
application form for every scheme)
Step 4 Submit the application form along with the first cheque at any of
the branch locations / CAMS (Computer Age Management Services)
locations or to your nearest distributor.

How an SIP Scores

 It makes you disciplined in your savings. Every month you are
forced to keep aside a fixed amount. This could either be debited
directly from your account or you could give the mutual fund post-
dated cheques.
 As you see above, it helps you make money over the long term.
Since you get more units when the NAV drops and fewer when it
rises, the cost averages out over time. So you tide over all the ups
and downs of the market without any drastic losses.
 Also, a number of mutual funds do not charge an entry load if you
opt for an SIP. This fee is a percentage of the amount you are
investing. And if you do not exit (sell your units) within a year of
buying the units, you do not have to pay an exit load (same as an
entry load, except this is charged when you sell your units).
 If, however, you do sell your units within a year, you would be
charged an exit load. So it pays to stay invested for the long-run.
The best way to enter a mutual fund is via an SIP. But to get the
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 benefit of an SIP, think of at least a three-year time frame when
you won't touch your money.Of course you would lose money if
your units lost value over time.
 What most SIP Mutual funds don't tell you is that they recover their
fees as monthly charges by selling your units, so while you are
buying more units when the market is down, more of your units are
also being sold to fund the monthly charges of the Mutual fund.
Also the Bid and Offer of the Mutual Fund is around 7% and this is
the front load or expense you pay for buying the units each month.
Also sometimes the Mutual fund will have annual fee charges.
 In spite of the above drawbacks the retail investors' benefit in the
long term horizon of 5–8 years is enormous. Only make sure that
you can switch your funds from stock market to money market at
short notice when the markets are really in a correction phase to
safeguard the profits which you have made when the market was
in a booming phase. This is easier said than done.
 SIP will work best if markets trend lower after your investment. SIP
performance would be average if markets trade in a range. SIP will
perform worst if markets trend higher. Another Benefit of investing
in mutual funds via SIP is you benefit from Power of Compounding.

When SIP would be advantageous?

1. It cannot be claimed that the SIP is always more advantageous than a
lump sum investment. It all depends on the course of equity prices
which form the basis for computing the price of units.
2. If over the total period of holding, the prices have been generally
declining, the SIP would cause a loss: the redemption amount (based on

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NAV at the end) paid to the investor for the accumulated units in his/her
account would be less than the total cost. In the opposite case of rising
prices, the SIP would be advantageous.

Example
 Consider the following simplified example: Monthly investment is
Rs. 1000 for the next 12 months. The amount is invested each
month immediately in units of an equity scheme at the ruling price
of units.
 Assumption-1 (Declining Prices): The price per unit is Rs.16 for
first 8 months and Rs 10 per unit for last 4 months. (This is a
simplification. The price for each month would ordinarily be
different.) Under this assumption, against Rs.1000 per month paid
by the investor, the number of units purchased will be 500 in the
first 8 months and 400 in the last 4 months. Thus the total number
of units purchased over 12 months will be 900 at a cost of Rs.
12000. The redemption of the accumulated units is done always at
the closing NAV. As per our assumptions, the accumulated units
are 900 and will fetch only Rs. 9000 at the closing NAV of Rs. 10
per unit. The investor suffers a loss of Rs.3000 on the total amount
invested (Rs. 12000 – 9000).
 Assumption-2 (Rising Prices): The ruling prices of units are
reversed, being Rs. 10 for first 8 months and Rs. 16 for last 4
months. The number of units bought for the investor will be 800 in
the first 8 months and 250 in the last 4months. The total number of
units accumulated over the 12months will be 1050 for Rs. 12000.
These 1050 units will fetch Rs. 16800 at the closing price of Rs. 16
per unit. There is a total gain of Rs. 4800 for the investor (Rs.
16800 –12000).
3. The example given above brings out that the crucial factor show the
ruling price behaves over the period of SIP. In the real world, no one can
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predict the pattern of prices which will prevail in the future over the next
12 months or a longer period of some years.
4. The most advantageous situation for the investor is when his/her over-
all buying cost is the least and the realisable price on completion of the
investment plan is the highest.
5. An investor, who joins the SIP at a wrong time (i.e. when the equity
prices are all-time high), will be in an unfortunate situation unless the
prices rise further in the future. Thus, we see that the averaging of price
over the period of SIP does not always insulate the small investors
against the market’s volatility.
6. In the case of SIP, the possibility of loss can be avoided by not starting
at the wrong time (i.e. when equity prices are too high). We should bear
in mind the fact that the Indian stock market is far more volatile than the
developed markets, like U.S. and U.K. If we look at the movements of
BSE Sensex, significant fall or rise of 20-25% within a few months is
fairly common. The SIP provides a very imperfect solution to the problem
posed by market’s high volatility.

Caution needed
The investor should not take it for granted that SIP is always
advantageous. The price level at the starting point is particularly
important, as illustrated above. The price level at the end of the period
chosen is also critical. The rigidity of most SIP schemes can be both
inconvenient and, disadvantageous to the investors. The investor should
avoid a situation of forced redemption of accumulated units at, unduly
low price by building some flexibility in the choice of redemption date.

When an SIP won’t deliver…

1. In rising markets
An SIP could fail to deliver on its proposition of lowering the average
purchase cost, if equity markets rise in a secular manner. Such a
scenario is fairly possible over shorter time periods.
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As a result, investing via an SIP could prove to be more expensive vis-à-
vis a lump sum investment. Hence, the solution lies in opting for an SIP
that runs over an appropriate timeframe, say at least 12-24 months.
2. A directionless SIP
Here we are referring to an SIP that is not a part of an investment plan or
an aimless SIP. It should be understood that an SIP is not an ‘end’;
instead, it is the ‘means’ to achieve an end.
Hence, the SIP should form part of an investment plan aimed at
achieving a predetermined objective.
3. An SIP in the wrong fund
Investing via the SIP mode doesn’t improve the prospects of a wrong
fund. A poorly managed fund stays that irrespective of the investment
mode. An SIP will not eliminate its shortcomings.
Hence the key lies in first selecting selecting a well-managed fund that is
right for the investor and then investing in it via an SIP.
As can be seen, the SIP mode of investing has a fair number of
advantages to offer; conversely, there can be instances when it may not
deliver as expected. Investors on their part should make well-informed
investment decisions after acquainting themselves of both the pros and
cons.

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 2.4 MODE OF PAYMENT
There are two options here
1. Through Electronic Clearance Service (ECS):- In this option,
Mutual Fund will debit the stipulated amount from client’s account
on monthly basis.
2. Post dated cheques –In this option, Investor can give post dated
cheques. Mutual Fund will deposit the cheques on the mentioned
dates. The cheques should be issued with date mentioned at
regular interval.

Note: - All the mutual fund schemes do not offer SIP. Equity funds, debt
funds and balanced funds belong to this category. Liquid funds, cash
funds and floating rate debt funds also offer SIP.

Checklist for Systematic Investment Plan

Mutual fund's Systematic Investment Plan is often advertised as
the best investment option for sustainable wealth creation.
However, in reality not all SIPs work in favor of the investor.
Systematic Investment Plan (SIP) is often suggested as the best
investment option for sustainable wealth creation for retail investors. The
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arguments for investments into mutual fund using SIP is often based on
the fact that investors will be able to overcome vagaries of stock market
behavior using SIP. However, in reality not all SIPs work for investors.
Many investors complain that SIP started them some years back has
failed to generate the kind of return that investments in stock market has
either generated directly or schemes of other mutual funds have given
where SIP was used by other investors.

So, what is the lesson learnt. There are many a slip between returns and
the SIP. As an investor, you need to circumspect while investing through
SIP. Take following steps to ensure that investment made by you through
SIP does not become a failure:
 Watch the performance of SIP periodically: Though you can
trust mutual fund managers, you need to be circumspect about the
investments made by you. Watch your investments in SIP atleast
once in six months. This does not mean that you withdraw your
investment from SIP if the fund is not performing. This process will
help you track something going substantially wrong with your fund.
Suppose the benchmark against which your fund operates has
given 10% return, while your SIP return is abysmally less, then it
may be time to change your fund. A recent study by S & P CRISIL
(SPIVA ) shows that more than 50% of large cap funds have failed
to beat the benchmark index against which they operate.
 Do not start SIP in two similar types of schemes: Investors put
their money in different schemes of one mutual fund or separate
mutual funds. However, they end up selecting almost same type of
fund. This means that the exposure of the funds is similar type of
stocks. It is very common to find stocks like ITC, HDFC Bank etc.
in various schemes of mutual funds. The reasons are obvious.
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 These stocks have been star performer for long time. As an
investor, you need to check if your fund has significant exposure in
similar stocks. This increases risk for you especially when the
stocks are not stable performers.
 Star funds may not be the star performers always: It is very
common for the mutual fund investors to look at star rating of the
scheme of mutual funds. The star rating generally comes from past
performance and may not always return in good future returns. Do
not get swayed away by star rating. Even star rated schemes need
to be watched.
 All my funds must have SIP: After an investor enters into the
world of mutual fund, SIP is recommended to him like Crocin is
recommended for headache. It is important to note that all your
funds should not have SIP. Let some of your fund perform even for
the lump sum investment made by once. This means that for some
of your funds you can allow the investment to grow for one time
investment made by you while for others you can continue with
SIP. Riskier schemes should you SIP route while stable schemes
can follow lump sum investment process. Look at the Sharpe ratio
of the funds to identify the riskiness of mutual funds. Sharpe Ratio
indicates the risk adjusted return of schemes of mutual funds.In
brief as an investor, you need to watchful about your money when
you have given the responsibility of handling it to others.

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2.5 DIFFERENT TYPES OF SIP IN MUTUAL FUNDS

 Monthly SIP
This is the most traditional way of doing a SIP in an equity mutual fund.
This works well mostly for salaried people, who get a monthly cash flow.
Investors tend to opt for a date between the 1st and 10th of the month,
since for most of the people salaries get credited at the end of the
month. Most investors tend to avoid the last 10 days of the month, on
fear of exhausting their surplus money and not being able to meet their
SIP commitment.

 Daily SIP
Compared to traditional investment in which money goes in on a
monthly basis, here money goes daily into the fund. Of late, some
mutual funds have started offering a daily SIP. Essentially, these
products are meant for small traders or for the micro segment.
However, not everyone is a fan of daily SIP. Daily SIP is an overkill and
not really needed. Though it makes averaging consistent, it is
cumbersome.

 Flexi-SIP

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Traditional SIPs allow us to invest only a fixed amount every month or
daily. However, a flexi SIP enables investors to set up a range of
amounts for the SIP investments and be flexible about how much they
want to invest every month. It is not available in the conventional mode
through mutual funds. It is offered by portals like fundsindia.com. It is
very difficult to alter your SIP using traditional methods. For a particular
SIP, the amount or the date just cannot be changed. Technically, an
ECS mandate is registered for a particular bank account for debiting a
specific amount on a fixed date every month. If any of these three
change, one would have to stop and re-do the SIP. This is what has led
to the concept of flexi SIP. Using this facility, an investor can choose a
range from Rs 1,000 to Rs 10,000 per month and depending on his or
her cash flow, invest that amount every month.

 SIP Top-Up
HDFC Mutual Fund, SBI, ICICI Prudential, etc offer a SIP Top-Up. Here
an investor who wishes to enrol for SIP, has an option to increase the
amount of the SIP instalment by a fixed amount at pre-defined intervals.
The SIP top-up amount should be filled in the enrolment form itself.
For example: We choose to invest Rs 2,000 for the first six months and
then prefer to invest Rs 5,000 per month.

 Value Averaging Plan

This is offered by some mutual funds such as Benchmark and portals
like fundsindia.com. It is a strategy that uses mathematics and
algorithms. It works like SIP in terms of steady monthly contributions,
but differs with regard to monthly contribution. Here the investor, sets a
target growth rate or amount on his or her asset base or portfolio each

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month, and then adjusts the subsequent month’s contribution according
to the relative gain or shortfall made on the original asset base.
Suppose we want to add Rs 1,000 added to our equity mutual fund
every month and we start with investing Rs 1,000. Now at the end of
first month the value of our fund becomes Rs 1,200. So now we need to
invest only Rs 800 (1000-200) to make the investment worth Rs 2,000.
In the following month, the value of investment reduces to Rs 1,900 due
to correction in the market, so we need to invest Rs 1,100 (3,000-1,900)
so that the amount touches the target amount of Rs 3,000. In other
words, we buy more (units) when the prices are low and we end up
investing less (buying less units) when the markets peak.

How are the calculations made in SIP

Systematic Investment Plan (SIP) Calculator

Systematic Investing in a Mutual Fund is the answer to preventing the
pitfalls of equity investment and still enjoying the high returns. This SIP
Calculator will show you how small investments made at regular
intervals can yield much better returns over a long period of time.

Use IRR to calculate returns from a SIP

Since returns from a SIP involve outflow of cash at different time periods,
and then a large inflow of cash at the end – you can use IRR to calculate
the returns percentage from a SIP.

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How to fill a Systematic Investment Plan (SIP) form
Let us see how to fill the SIP part of the Mutual Fund application form.
You can use SIP method of investing in most mutual fund schemes
except the ones that have a short-term focus.

Enrolling for SIP

 Get a sip enrolment form apart from the application form.

 Fill in the folio number if you are an exisiting customer else the
application number
 “Frequency of SIP“ selection- monthly or quarterly.
 “Enrolment period“- how long you want to remain invested
beginning with the month the first cheque to this plan is dated.
 Mode of payment - cheque or auto debt facility.
 If you invest by cheque, number, data and amount.
 The first cheque may be dated any time but the remaining post
dated cheque have to follow specified dates and minimum amount
that are stipulated by the mutual fund company.
 Also there has to be a 30 days gap between 1 st and 2nd cheque for
monthly sip and a 3 month gap for quarterly SIPs

Other methods of Investing in Mutual Fund other than SIP

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 Lump sum investment:

This is the simplest manner of investing in a mutual fund. You have a

certain sum of money (lets say, Rs 100) and you want to invest it in one
go. You approach the mutual fund company with your cheque for the
amount you want to invest. The main risk with this investing strategy is
that you are locked in to the valuations of the underlying security as on
a particular date.

If, for example, the prices were to go down from this point, you would
lose money on the entire investment. Similarly, if you have timed the
investment right, you will see a good rise on your entire investment.

 Systematic Transfer Plan (STP):

In the above example, if you had a lump sum of money and wanted to
do an SIP, you would have to park your extra money (i.e., Rs 80, which
is Rs 100 minus the first installment of Rs 20) somewhere. Mutual
funds, realizing this issue, offer an STP. Here, you can invest the entire
sum of money (Rs 100) with the fund: you put in Rs 20 in the equity
fund, while putting the extra sum (Rs 80) in cash or debt funds. Over
the next four months, you can request the fund to transfer Rs 20 (plus
the gains/losses) each month to the equity fund. This saves you the
hassle of creating a communication between your mutual fund and
your bank through ECS. Similarly, if you believe that you would
gradually want to move your exposure in IT to lets say, pharma, you
can create an STP between your investments in the IT fund and the
pharma fund. This way you do not suddenly shift exposure in one go,
but do it gradually. If you are approaching a milestone, you can use this
instrument to move your exposure from equity to debt funds – so that
you have more certainty around the final figure that you will receive.

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 Systematic Withdrawal Plan (SWP):
This is, as the name suggests, the reverse of the STP. Here you
gradually withdraw money from the mutual fund. Assume you need Rs
20 over the next 5 months and you have Rs 100 invested in a mutual
fund. You can request the mutual fund to return 1/5th of your money
(including the gains/losses) every month for the next five months. If your
bank account details are provided, the fund will deposit the money
directly in your bank account. This is typically used when you are nearer
to a milestone or during your retirement.

 Lock-in and capital gains tax:

In all systematic cases, you need to be careful about lock-ins and
capital gains tax. Each date of your investment is treated as the date
when you made or divested the investment. The first date of your
SIP/STP is NOT considered as the investment date for all your
subsequent dates. Hence, if the mutual fund has a lock-in provision,
then all different investments will have different dates when the lock-in
gets over.

Page | 37
 Chapter 3

Mutual Fund

3.1. INTRODUCTION TO MUTUAL FUNDS

Page | 38
Over a long term horizon, equity investments have given returns which
far exceed those from the debt based instruments. They are probably
the only investment option, which can build large wealth. In short term,
equities exhibit very sharp volatilities, which many of us find difficult to
stomach. Investment in equities requires one to be in constant touch
with the market and a lot of research.

Buying good scripts require one to invest fairly large amounts.

Systematic Investing in a Mutual Fund is the answer to preventing the
pitfalls of equity investment and still enjoying the high returns. And it
makes all the more sense today when the stock markets are
booming.
Management of the fund by the professionals or experts is one of the
key advantages of investing through a mutual fund. They regularly
carry out extensive research - on the company, the industry and the
economy – thus ensuring informed investment. Secondly, they
regularly track the market.

Thus for many of us who do not have the desired expertise and are
too busy with our vocation to devote sufficient time and effort to
investing in equity, Mutual Funds offer an attractive alternative.
Another advantage of investing through mutual funds is that even with
small amounts we are able to enjoy the benefits of diversification.
Huge amounts would be required for an individual to achieve the
desired diversification, which would not be possible for many of us.
Diversification reduces the overall impact on the returns from a
portfolio, on account of a loss in a particular company/sector.
The Mutual Funds industry is well regulated both by SEBI and AMFI.
They have, over the years, introduced regulations, which ensure
smooth and transparent functioning of the mutual funds industry. This
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 makes it safer and convenient for investors to invest through Mutual
Funds.
One of the biggest difficulties in equity investing is WHEN to invest,
apart from the other big question WHERE to invest. While, investing
in a mutual fund solves the issue of ‘where’ to invest, SIP helps us to
overcome the problem of ‘when’. SIP is a disciplined investing
irrespective of the state of the market. It thus makes the market timing
totally irrelevant.

With the next 2-3 years looking good from Indian Economy point of
view, one can expect handsome returns through regular investing.
Mutual Funds allow us to invest very small amounts (Rs 500 – Rs
1000) in SIP, as against larger one-time investment required, if we
were to buy directly from the market. This makes investing easier as it
does not strain our monthly finances. It, therefore, becomes an ideal
investment option for a small-time investor, who would otherwise not
be able to enjoy the benefits of investing in the equity market.
In SIP we are investing a fixed amount regularly. Therefore, we end
up buying more number of units when the markets are down and NAV
is low and less number of units when the markets are up and the NAV
is high. Generally, we would stay away from buying when the markets
are down. We generally tend to invest when the markets are rising.
SIP works as a good discipline as it forces us to buy even when the
markets are low, which actually is the best time to buy.

Mutual funds are investment companies that pool money from investors
at large and offer to sell and buy back its shares on a continuous basis
and use the capital thus raised to invest in securities of different

Page | 40
companies. In this your amount is invested in different companies
according to percentage ratio. A Mutual Fund is not an alternative
investment option to stocks and bond; rather it pools the money of
several investors and invests this in stocks, bonds, money market
instruments and other types of securities.
A Mutual Fund is a trust that pools the savings of a number of
investors who share a common financial goal. The money thus
collected is then invested in capital market instruments such as shares,
debentures and other securities. The income earned through these
investments and the capital appreciation realised are shared by its unit
holders in proportion to the number of units owned by them. Thus a
Mutual Fund is the most suitable investment for the common man as it
offers an opportunity to invest in a diversified, professionally managed
basket of securities at a relatively low cost.
.

3.2 ADVANTAGES OF INVESTING IN A MUTUAL

FUND

 Small investments :

Mutual funds help you to reap the benefit of returns by a portfolio

spread across a wide spectrum of companies with small investments.
Such a spread would not have been possible without their assistance.
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  Professional Fund Management:

Professionals having considerable expertise, experience and

resources manage the pool of money collected by a mutual fund.
They thoroughly analyse the markets and economy to pick good
investment opportunities.

 Spreading Risk :

An investor with a limited amount of fund might be able to to invest in

only one or two stocks / bonds, thus increasing his or her risk.
However, a mutual fund will spread its risk by investing a number of
sound stocks or bonds. A fund normally invests in companies across
a wide range of industries, so the risk is diversified at the same time
taking advantage of the position it holds. Also in cases of liquidity
crisis where stocks are sold at a distress, mutual funds have the
advantage of the redemption option at the NAVs.

 Transparency and interactivity :

Mutual Funds regularly provide investors with information on the

value of their investments. Mutual Funds also provide complete
portfolio disclosure of the investments made by various schemes and
also the proportion invested in each asset type. Mutual Funds clearly
layout their investment strategy to the investor.

 Liquidity :

Closed ended funds have their units listed at the stock exchange, thus
they can be bought and sold at their market value. Over and above this

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the units can be directly redeemed to the Mutual Fund as and when they
announce the repurchase.

 Choice :

The large amount of Mutual Funds offer the investor a wide variety to
choose from. An investor can pick up a scheme depending upon his
risk / return profile.

 Regulations :

All the mutual funds are registered with SEBI and they function within
the provisions of strict regulation designed to protect the interests of the
investor.

3.3 DISADVANTAGES OF INVESTING IN A MUTUAL

FUND

 Fluctuating Returns:
Mutual funds are like many other investments without a guaranteed
return. There is always the possibility that the value of your mutual fund

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will depreciate. Unlike fixed-income products, such as bonds and
Treasury bills, mutual funds experience price fluctuations along with the
stocks that make up the fund. When deciding on a particular fund to buy,
you need to research the risks involved - just because a professional
manager is looking after the fund, that doesn't mean the performance
will be stellar. Another important thing to know is that mutual funds are
not guaranteed by the U.S. government, so in the case of dissolution,
you won't get anything back. This is especially important for investors in
money market funds. Unlike a bank deposit, a mutual fund will not be
FDIC insured.
 Diversification:
Although diversification is one of the keys to successful investing, many
mutual fund investors tend to overdiversify. The idea of diversification is
to reduce the risks associated with holding a single security;
overdiversification (also known as diworsification) occurs when investors
acquire many funds that are highly related and so don't get the risk
reducing benefits of diversification. At the other extreme, just because
you own mutual funds doesn't mean you are automatically diversified.
For example, a fund that invests only in a particular industry or region is
still relatively risky.

 Cash, Cash and More Cash:

As we know that mutual funds pool money from thousands of investors,
so everyday investors are putting money into the fund as well as
withdrawing investments. To maintain liquidity and the capacity to
accommodate withdrawals, funds typically have to keep a large portion
of their portfolio as cash. Having ample cash is great for liquidity, but

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money sitting around as cash is not working for you and thus is not very
advantageous.
 Costs:
Mutual funds provide investors with professional management;
however, it comes at a cost. Funds will typically have a range of
different fees that reduce the overall payout. In mutual funds the fees
are classified into two categories: shareholder fees and annual fund-
operating fees.
The shareholder fees, in the forms of loads and redemption fees, are
paid directly by shareholders purchasing or selling the funds. The
annual fund operating fees are charged as an annual percentage -
usually ranging from 1-3%. These fees are assessed to mutual fund
investors regardless of the performance of the fund. As you can
imagine, in years when the fund doesn't make money these fees only
magnify losses.

 Misleading Advertisements:
The misleading advertisements of different funds can guide investors
down the wrong path. Some funds may be incorrectly labeled as growth
funds, while others are classified as small-cap or income. The SEC
requires funds to have at least 80% of assets in the particular type of
investment implied in their names. The remaining assets are under the
discretion solely of the fund manager.

The different categories that qualify for the required 80% of the assets,
however, may be vague and wide-ranging. A fund can therefore
manipulate prospective investors by using names that are attractive and
misleading. Instead of labeling itself a small cap, a fund may be sold
under the heading growth fund. Or, the "Congo High-Tech Fund" could
be sold with the title "International High-Tech Fund".
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  Evaluating Funds:
Another disadvantage of mutual funds is the difficulty they pose for
investors interested in researching and evaluating the different funds.
Unlike stocks, mutual funds do not offer investors the opportunity to
compare the P/E ratio, sales growth, earnings per share, etc. A mutual
fund's net asset value gives investors the total value of the fund's
portfolio less liabilities, but how do you know if one fund is better than
another?

Furthermore, advertisements, rankings and ratings issued by fund

companies only describe past performance. Always note that mutual
fund descriptions/advertisements always include the tagline "past results
are not indicative of future returns". Be sure not to pick funds only
because they have performed well in the past - yesterday's big winners
may be today's big losers.

3.4 PROCEDURE OF MUTUAL FUND

How to read a Mutual Fund Offer Document
 Many people today find that they are deluged with information

about investing. News programs provide updates on the stock

market several times a day.
 Through the Internet, individuals can check on the performance of
their investments at the click of a mouse. But one of the key
sources of investment information, and one that some investors
may be tempted to overlook, is the Mutual Fund Scheme

Page | 46
 Information Document and Statement of Additional
Information.
 A mutual fund scheme information document and statement of
additional information is a legal document that must adhere to
standards set forth by the Securities Exchange Board Of India
(SEBI), the regulatory agency that oversees the Indian Mutual
Fund industry.
 The information contained in the prospectus is intended to help
you understand what types of securities a fund invests in and the
investment philosophy that the Investment Manager uses in
selecting individual securities for the fund.
 The scheme information document and statement of additional
information will also provide information on the fund's income and
expenses, a review of historical performance, and information
about your ability to purchase or redeem your units.
 In addition, the scheme information document and statement of
additional information will also outline any loads/sales charges that
may apply to your investment transactions.
By law, mutual fund companies are required to provide you with an
scheme information document and statement of additional information
before you make an initial investment. Before investing, take the time
to read this important document.

Questions to ask before mutual fund investing

A mutual fund scheme information document and statement of additional
information can help you answer the following questions:
I. In what does this scheme invest?
II. Is the scheme seeking income or capital growth?
III. What has been the rate of return?
IV. What are the options available in the scheme (Growth/ Dividend)?
V. Is the scheme an open ended / close ended scheme and if there is
a lock-in period applicable?

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Key Elements of a Mutual Fund Scheme Information Document and
Statement of Additional Information
The information contained in a mutual fund scheme information
document and statement of additional information is presented in several
sections. As you read through these sections, you'll want to evaluate
how well the fund matches your investment objectives. Here's a look at
key elements that are contained in an Scheme Information Document
and Statement of Additional Information.
 Date of issue - A prospectus must be updated at least once in two
years.
 Minimum investment - Mutual funds differ both in the minimum initial
investment required and the minimum for subsequent investments.

 Investment objective - This section states the investment goal of the

fund, from income to long-term capital appreciation, and may state
the types of investments that the scheme invests in, such as
government bonds or common stocks. Be sure the scheme's
objective matches your investment goal.
 Investment policies – An scheme information document and
statement of additional information will outline the general strategies
the Investment Manager will use in selecting individual securities.
This section may provide further information about the securities in
which the scheme invests, such as ratings of bonds or the types of
companies considered appropriate for a fund.
 Risk factors - Every investment involves some level of risk. The
scheme scheme information document and statement of additional
information will describe the risks associated with investments in the
scheme.
 Fees and expenses - Sales and management fees associated with a
mutual fund must be clearly listed.
 Tax information - An Scheme Information Document and Statement
of Additional Information will include information on the tax treatment
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 of dividend and capital gains, including information on deduction of
tax at source
 Investor services – Unit holders may have access to certain
services, such as automatic reinvestment of dividends, systematic
investment plan (SIP), systematic withdrawal plans (SWP) and
systematic investment plan for corporate employees. This section of
the prospectus, usually near the back of the publication, will describe
these services and how you can take advantage of them.

A prospectus generally ranges from 20 to 30 pages and includes a table

of contents. The scheme information document and statement of
additional information may be amended from time to time and attaching
an addendum which highlights the changes e.g. change in load
structure, introducing of a new facility etc. usually reflects this. It is
therefore important for investors to read the scheme information
document and statement of additional information in detail to be able to
understand the features of the scheme and get the best out of the
services offered by the Investment Manager.

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3.5 MUTUAL FUND SCHEMES
There are a wide variety of Mutual Fund schemes that cater to your
needs, whatever your age, financial position, risk tolerance and
return expectations. Whether as the foundation of your investment
programme or as a supplement, Mutual Fund schemes can help you
meet your financial goals?

(A) By Structure. .
Closed-End and Open End schemes
Mutual fund schemes are of two broad types, viz.,
(a) closed-end and
(b) open-end.

A closed-end fund has a fixed number of units outstanding, just like

shares of a company. Such units are listed on stock exchanges and
traded in the market at the prevailing market prices in the same way as
shares of a company. The liquidity of such units depends on how actively
they are being traded. With just a few exceptions, most closed-end funds
are not actively traded but have a fixed tenure. At the end of such
tenure, the fund is liquidated and the money returned to the unit holders.

An open-end mutual fund has arrangement both to issue further units

and also to repurchase existing units from the holders. The sale and
repurchase prices are both linked to the NAV. The SEBI has laid down
rules for regulating the maximum permissible spread between issue and
repurchase prices of open-end schemes.

A puzzle
In the case of closed-end schemes, it has been observed that their
market price is often significantly lower than the NAV (i.e., “at a discount
to NAV”, in market parlance). This has always been a puzzle because it
looks illogical. In such a case, the unit holders will be better off if the fund

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is liquidated and the money returned to the unit holders. If unit holders
had voting power, they could get the scheme liquidated.

Open-end schemes are better

From the investor’s viewpoint, open-end funds are preferable because
they provide immediate liquidity to the investor in case of need. They
also keep the fund’s management on its toes. If an open-end fund is
poorly managed, the investors can walk out any time. This is not so in
the case of closed-end schemes which, in a sense, lock-in the existing
investors. In the case of actively traded closed-end funds, an existing
investor can sell his holding in the market but usually at a price which is
significantly below the NAV.

(c) Interval Schemes. .

These combine the features of open-ended and close-ended schemes.
They may be traded on the stock exchange or may be open for sale
or redemption during predetermined intervals at NAV related prices.

(B) By Investment objective

Growth Schemes
Aim to provide capital appreciation over the medium to long term. These
schemes normally invest a majority of their funds in equities and
are willing to bear short term decline in value for possible future
appreciation.
These schemes are not for investors seeking regular income or needing
their money back in the short term.

Income Schemes/ Bond Schemes

Bond schemes, also known as income schemes, invest in government
and corporate bonds of medium and long duration. The bulk of their
income arises from interest and some part from trading of bonds.
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Bonds are exposed to interest rate risk, if interest rates rise, the market
value of the existing portfolio of bonds will fall. Bonds of longer maturity
will decline more than bonds of shorter maturity. Two other risks in the
case of bonds arise respectively from defaults by the issuers and market
illiquidity. Hence, bond schemes are not always as safe as they may
appear to be.
Income Schemes Aim to provide regular and steady income to investors.
These schemes generally invest in fixed income securities such as
bonds and corporate debentures. Capital appreciation in such schemes
may be limited.

Ideal for:

 Retired people and others with a need for capital stability and
regular income.
 Investors who need some income to supplement their earnings.

Balanced schemes
Balanced schemes invest in both equity and bonds. For this purpose,
limits are specified in the form of percentage to be invested in equity and
bonds respectively. The idea is to provide a mix of equity and bonds in a
single scheme to suit the somewhat conservative investor. However,
such schemes are not popular in India, an important reason being that
they don’t enjoy the tax advantage which equity schemes have.
Aim to provide both growth and income by periodically distributing a part
of the income and capital gains they earn. They invest in both shares
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.

Ideal for:
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  Investors looking for a combination of income and moderate
growth.

Money Market / Liquid Schemes

Money market or liquid schemes are a relatively recent phenomenon in
India. They invest in money market instruments which are of very short-
term maturity and, therefore, do not generally involve much interest-rate-
risk. Such schemes compete with bank deposits as a method of holding
liquid balances.
Aim to provide easy liquidity, preservation of capital and moderate
income. These schemes generally invest in safer, short term
instruments such as treasury bills, certificates of deposit, commercial
paper and interbank call money. Returns on these schemes may
fluctuate, depending upon the interest rates prevailing in the market.

Ideal for:
 Corporates and individual investors as a means to park their
surplus funds for short periods or awaiting a more
favourable investment alternative.

Tax Saving Schemes (Equity Linked Saving Scheme - ELSS)

These schemes offer tax incentives to the investors under tax laws as
prescribed from time to time and promote long term investments
in equities through Mutual Funds. Eligible for deduction under section
80C .Lock in period three years

Ideal for:

 Investors seeking tax incentives.

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Special Schemes
This category includes index schemes that attempt to replicate the
performance of a particular index such as the BSE Sensex, the NSE 50
(NIFTY) or sector specific schemes which invest in specific sectors such
as Technology, Infrastructure, Banking, Pharma etc. Besides, there are
also schemes which invest exclusively in certain segments of the
capital market, such as Large Caps, Mid Caps, Small Caps, Micro Caps,
'A' group shares, shares issued through Initial Public Offerings
(IPOs), etc.

3.6- MAJOR PLAYERS IN THE MUTUAL FUND

INDUSTRY

SBI MUTUAL FUND

 About SBI Mutual fund

With 25 years of rich experience in fund management, SBI Funds
Management Pvt. Ltd. bring forward their expertise by consistently
delivering value to our investors. They have a strong and proud lineage
that traces back to the State Bank of India (SBI) - India's largest bank. It
is a Joint Venture between SBI and AMUNDI (France), one of the
world's leading fund management companies.
With a network of over 222 points of acceptance across India, they
deliver value and nurture the trust of their vast and varied family of
investors.
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Excellence has no substitute. And to ensure excellence right from the
first stage of product development to the post-investment stage, they are
ably guided by the philosophy of ‘growth through innovation’ and our
stable investment policies. This dedication is what helps their customers
achieve their financial objectives.

Vision
“To be the most preferred and the largest fund house for all asset
classes, with a consistent track record of excellent returns and best
standards in customer service, product innovation, technology and HR
practices.”

UTI MUTUAL FUND

About Uti Mutual fund

Vision

To be the most preferred Mutual Fund

Mission
To make UTI Mutual Fund:
 The most trusted brand that is admired by all stakeholders
 The largest and most efficient wealth manager with global presence
 The best-in-class customer service provider
 The most preferred employer
 The most innovative and best wealth creator
 A socially responsible organisation known for best corporate
governance

Genesis
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January 14, 2003 is when UTI Mutual Fund started to pave its path
following the vision of UTI Asset Management Co. Ltd. (UTIAMC), which
was appointed by UTI Trustee Co, Pvt. Ltd. for managing the schemes
of UTI Mutual Fund and the schemes transferred/migrated from the
erstwhile Unit Trust of India.

Assets under Management

UTI Mutual Fund has a track record of managing a variety of schemes

catering to the needs of every class of citizens. It has a nationwide
network consisting 149 UTI Financial Centres (UFCs) and UTI
International offices in London, Dubai and Singapore.

UTIAMC has a well-qualified, professional fund management team,

which has been fully empowered to manage funds with greater
efficiency and accountability in the sole interest of the unit holders. The
fund managers are ably supported by a strong in-house securities
research department. To ensure investors' interests, a risk management
department is also in operation.

Reliability

UTIMF has consistently reset and upgraded transparency standards. All

the branches, UFCs and registrar offices are connected on a robust IT
network to ensure cost-effective quick and efficient service. All these
have evolved UTIMF to position as a dynamic, responsive, restructured,
efficient and transparent entity, fully compliant with SEBI regulations.

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Investment Philosophy
UTI Mutual Fund’s investment philosophy is to deliver consistent and
stable returns in the medium to long term with a fairly lower volatility of
fund returns compared to the broad market. It believes in having a
balanced and well-diversified portfolio for all the funds and a rigorous in-
house research based approach to all its investments. It is committed to
adopt and maintain good fund management practices and a process
based investment management.

UTI Mutual Fund follows an investment approach of giving as equal an

importance to asset allocation and sectoral allocation, as is given to
security selection while managing any fund. It combines top-down and
bottom-up approaches to enable the portfolios/funds to adapt to different
market conditions so as to prevent missing an investment opportunity.

In terms of its funds performance, UTI Mutual fund aims to remain

consistently in the top quartile vis-à-vis the funds in the peer group.

HDFC MUTUAL FUND

About HDFC Mutual fund

HDFC Asset Management Company Ltd (AMC) was incorporated under
the Companies Act, 1956, on December 10, 1999, and was approved to

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act as an Asset Management Company for the HDFC Mutual Fund by
SEBI vide its letter dated July 3, 2000.

The registered office of the AMC is situated at Ramon House, 3rd Floor,
H.T. Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai -
400 020.

In terms of the Investment Management Agreement, the Trustee has

appointed the HDFC Asset Management Company Limited to
manage the Mutual Fund. The paid up capital of the AMC is Rs.
25.169 crore.

The present equity shareholding pattern of the AMC is as follows :

Particulars % of the paid up equity capital

Housing Development Finance Corporation Limited 59.98
Standard Life Investments Limited 39.99
Other Shareholders (shares issued on exercise of Stock Options) 0.03

HDFC Mutual Fund is one of the largest mutual funds and well-
established fund house in the country with consistent fund performance
across categories since its incorporation on December 10, 1999. While
their past experience does make them a veteran, but when it comes to
investments, they have never believed that the experience is enough.

Investment Philosophy

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The single most important factor that drives HDFC Mutual Fund is its
belief to give the investor the chance to profitably invest in the financial
market, without constantly worrying about the market swings. To realize
this belief, HDFC Mutual Fund has set up the infrastructure required to
conduct all the fundamental research and back it up with effective
analysis. Their strong emphasis on managing and controlling portfolio
risk avoids chasing the latest "fads" and trends.

RELIANCE MUTUAL FUND

About Reliance Mutual fund

Reliance Mutual Fund is one of India’s leading Mutual Funds, with

Average Assets Under Management (AAUM) of Rs. 90,636 Crores and
an investor count of over 58.42 and 64.53 Lakh folios. (AAUM and
investor count as of Oct to Dec '12).

Reliance Mutual Fund, a part of the Reliance Group, is one of the fastest
growing mutual funds in India. RMF offers investors a well-rounded
portfolio of products to meet varying investor requirements and has
presence in 179 cities across the country. Reliance Mutual Fund
constantly endeavors to launch innovative products and customer
service initiatives to increase value to investors. Reliance Capital Asset
Management Limited (‘RCAM’) is the asset manager of Reliance Mutual
Fund. RCAM is a subsidiary of Reliance Capital Limited (RCL).
Presently, RCL holds 65.23% of its total issued and paid-up equity share
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capital and the balance of its issued and paid up equity share capital is
held by other shareholders which includes Nippon Life Insurance
Company (“NLI”), holding 26% of RCAM’s total issued and paid up
equity share capital. NLI acquired the said 26% share holding in RCAM
on August 17, 2012.

Reliance Capital Ltd. is one of India’s leading and fastest growing private
sector financial services companies, and ranks among the top 3 private
sector financial services and banking companies, in terms of net worth.
Reliance Capital Ltd. has interests in asset management, life and
general insurance, private equity and proprietary investments, stock
broking and other financial services.

Sponsor : Reliance Capital Limited

Trustee : Reliance Capital Trustee Co. Limited

Investment : Reliance Capital Asset Management Limited

Manager / AMC

Statutory Details : The Sponsor, the Trustee and the Investment

Manager are incorporated under the Companies Act
1956.

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 ICICI PRUDENTIAL

About ICICI Prudential

ICICI Prudential Asset Management Company Ltd. (IPAMC/ the
Company) is the joint venture between ICICI Bank, a well-known and
trusted name in financial services in India and Prudential Plc, one of
UK’s largest players in the financial services sectors. IPAMC was
incorporated in the year 1993. The Company in a span of over 18 years
since inception and just over 13 years of the Joint Venture, has forged a
position of preeminence in the Indian Mutual Fund industry as the third
largest asset management company in the country, contributing
significantly to the growth of the Indian mutual fund industry.

The Company manages significant Mutual Fund Asset Under

Management (AUM), in addition to Portfolio Management Services and
International Advisory Mandates for clients across international markets
in asset classes like Debt, Equity and Real Estate with primary focus on
risk adjusted returns.

IPAMC has witnessed substantial growth in scale. From merely 2

locations and 6 employees during inception to the current strength of
over 700 employees with reach across around 150 locations, the growth
momentum of the Company has been exponential. The organization
today is an ideal mix of investment expertise, resource bandwidth &
process orientation. IPAMC’s Endeavour is to bridge the gap between
savings & investments to help create long term wealth and value for
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investors through innovation, consistency and sustained risk adjusted
performance.

ICICI Mutual fund

ICICI Prudential Mutual Fund (the Fund) offers a wide range of retail and
corporate investment solutions across different asset classes like Equity,
Fixed Income and Gold.

The Fund House has continuously aimed to provide investors with

financial solutions to aid them in achieving their lifecycle objectives. It
has constantly been on the forefront of innovation and has introduced
products aligned to meet customer needs leading to a well-diversified
portfolio of around 57 mutual fund products. The success of the
endeavors is evident in the mutual fund investor base that has witnessed
significant growth from 210 to over 2 Million currently.

ICICI Prudential Mutual Fund gained from managing funds as per its
investment objectives and was able to deliver superior risk adjusted
returns. The consistent long term performance was achieved on the
strength of fundamentals, process driven investment approach with
enough flexibility for the fund managers to manage their funds in their
unique style and insight.
The fund house over the last 18 years has garnered trust of its investors
and has emerged as the leading and preferred investment solution
provider in India. The fund house has always aimed to fulfill its fiduciary
responsibility of managing investor's wealth with prudence and due
diligence.

KOTAK MAHINDRA MUTUAL FUND

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Kotak Mahindra is one of India's leading financial institutions, offering
complete financial solutions that encompass every sphere of life. From
commercial banking, to stock broking, to mutual funds, to life insurance,
to investment banking, the group caters to the financial needs of
individuals and corporates.

The group has a net worth of Rs.7,911 crore and employs around 20,000
employees across its various businesses, servicing around 7 million
customer accounts through a distribution network of 1,716 branches,
franchisees and satellite offices across more than 470 cities and towns
in India and offices in New York, California, San Francisco, London,
Dubai, Mauritius and Singapore.

Kotak Mahindra Asset Management Company Limited (KMAMC), a

wholly owned subsidiary of KMBL, is the Asset Manager for Kotak
Mahindra Mutual Fund (KMMF). KMAMC started operations in
December 1998 and has over 10 Lac investors in various schemes.
KMMF offers schemes catering to investors with varying risk - return
profiles and was the first fund house in the country to launch a dedicated
gilt scheme investing only in government securities.

STANDARD CHARTERED MUTUAL FUND

Standard Chartered Mutual Fund was set up on March 13, 2000

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sponsored by Standard Chartered Bank. The Trustee is Standard
Chartered Trustee Company Pvt. Ltd. Standard Chartered Asset
Management Company Pvt. Ltd. is the AMC which was incorporated with
SEBI on December 20,1999.

FRANKLIN TEMPLETON MUTUAL FUND

The group, Franklin Templeton Investments is a California (USA)

based company with a global AUM of US$ 409.2 bn. (as of April 30,
2005).
It is one of the largest financial services groups in the world. Investors
can buy or sell the Mutual Fund through their financial advisor or through
mail or through their website. They have Open end Diversified Equity
schemes, Open end Sector Equity schemes, Open end Hybrid schemes,
Open end Tax Saving schemes, Open end Income and Liquid schemes,
Closed end Income schemes and Open end Fund of Funds schemes to
offer.

MORGAN STANLEY MUTUAL FUND INDIA

Morgan Stanley is a worldwide financial services company and its

leading in the market in securities, investment management and credit
services. Morgan Stanley Investment Management (MISM) was
established in the year 1975. It provides customized asset management
services and products to governments, corporations, pension funds and
non-profit organizations. Its services are also extended to high net worth

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individuals and retail investors. In India it is known as Morgan Stanley
Investment Management Private Limited (MSIM India) and its AMC is
Morgan Stanley Mutual Fund (MSMF). This is the first close end
diversified equity scheme serving the needs of Indian retail investors
focusing on a long-term capital appreciation.

BIRLA SUNLIFE MUTUAL FUND

Birla Sun Life Asset Management Company Ltd. (BSLAMC), the

investment managers of Birla Sun Life Mutual Fund, is a joint venture
between the Aditya Birla Group and the Sun Life Financial Services Inc.
of Canada. The joint venture brings together the Aditya Birla Group's
experience in the Indian market and Sun Life's global experience.
Established in 1994, Birla Sun Life Mutual fund has emerged as one of
India's leading flagships of Mutual Funds business managing assets of a
large investor base. Their solutions offer a range of investment options,
including diversified and sector specific equity schemes, fund of fund
schemes, hybrid and monthly income funds, a wide range of debt and
treasury products and offshore funds.
Birla Sun Life Asset Management Company has one of the largest team
of research analysts in the industry, dedicated to tracking down the best
companies to invest in. BSLAMC strives to provide transparent, ethical
and research-based investments and wealth management services.
Birla Sun Life Asset Management Company follows a long-term,
fundamental research based approach to investment. The approach is to
identify companies, which have excellent growth prospects and strong
fundamentals. The fundamentals include the quality of the company’s
management, sustainability of its business model and its competitive
position, amongst other factors.

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 ABOUT BIRLA SUNLIFE
1) Mission
To consistently pursue investor's wealth optimization by:
 Achieving superior and consistent investment results.
 Creating a conducive environment to hone and retain talent.

 Providing customer delight.

 Institutionalizing system-approach in all aspects of functioning.

 Upholding highest standards of ethical values at all times.

2) Birla Sun life iSIP

iSIP is an online systematic investment plan (SIP) tool where we can
invest through an SIP online and secure our long term goals with ease.

3) Features OF iSIP
Birla Sun Life iSIP is the first of its kind in the Indian mutual fund
industry. The significant features are -
 Quick and Paperless
 Simple 3 step process

 Manage your SIP anytime and anywhere

 Its easy and secured

 We can change our Bank Mandate

 Change the Debit Date

 Change the Amount

 Change the Scheme online

4)

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How To Invest Through SIP Online (iSIP)
Investing through iSIP is a simple three step process:-
Once you are logged in to the online portfolio management system, click
on 'Register for SIP' and follow the instructions which will guide
you through the entire process.

 Fill the registration form

 Confirm your registration

 Login to your banks website and register Birla Sun Life as a Biller

 Note your Unique Registration Number (URN) for future reference

5) Availability Of Schemes
This facility is offered for schemes where SIP is currently available. Once
we login, we will be able to see a list of schemes which we can
then choose to register our SIP.

6) Minimum amount required to avail iSIP services

The minimum amount required to invest is Rs. 500 for ELSS (equity-
linked savings schemes) funds and Rs. 1000 for other schemes.

7) Minimum Duration of registering for iSIP

The minimum duration is 6 months for all investments made under SIP.
We can choose either 'monthly' or 'quarterly' SIP option. Under the
monthly option, a minimum of 6 installments can be selected and 4
installments under the quarterly option.

8) Available dates while making an iSIP Purchase

An existing investor, who has a CIP (Customer Identification Pin)/ TPIN
(Transaction Pin), can avail of this facility by logging in to the
Website. They can select any one of the following dates; 1st, 7th, 10th,
14th, 20th, 21st or 28th.

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9) Registration for SIP through banks
We can register through any of the banks provided in the drop down box.
However, we need to have online access with our bank to avail this
facility.

10) Account required to avail iSIP Facility

We can invest through a current or savings account held with the
registered banks. This facility is currently not available for NRI accounts.

11) Rejection of iSIP

MICR and IFSC codes are mandatory fields. iSIP will be rejected if they
are not mentioned.

12) ‘Direct Investment’

We have an option of investing via a Broker OR Direct. If we want to
invest through a broker then we have to enter the broker code and 'sub
broker' code (if applicable). This will ensure that our broker gets the
brokerage for this transaction. The advantage of investing via a broker is
that we will get sound investment advice.

13) Applicable charges

This facility comes absolutely free for the investors; however the only
charges applicable will be the load fee (A sales charge or commission
charged to an investor when buying or redeeming shares in a mutual
fund) (as applicable).

Instalments of Rs. 50,000 and above require one to be KYC compliant.

14) Payment Option to Avail Facility

We can avail of an auto debit facility from our bank account only. Units
cannot be purchased using a debit or credit card.

15) Procedure for renewal

We can renew SIP online.

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All we have to do is register for a new SIP via SIP and we can move our
entire manual SIP's to the automatic mode. However we need to register
one month in advance.

16) SIP Online Cancellation

There is an option to cancel the SIP online anytime. Just select the 'My
SIP status' under SIP, if multiple SIP's, select the SIP to be
cancelled, answer a few questions and the SIP will be cancelled.
The status of the request can be checked on the same link under
the 'status' tab. The iSIP must be cancelled 30 days prior to the
next installment date.
17) Charges Applicable While Investing in SIP
The load structure will be applicable depending on the scheme selected
while registering for an SIP and on selecting a Direct or Broker
investment.

18) Registry Check

By select the 'My SIP status' under SIP, the 'status' tab will display as
'Registered', 'Active', 'Cancelled', 'Expired' OR 'Closed'.

Registered: This means a SIP transaction has been created that will be
active once you have registered Birla as a Biller with the Bank.
Active: The SIP is now active in the system and respective bank will be
debited on the date investor has chosen. (This will only happen after
Birla is registered as a biller with the Bank)
Cancelled: Transaction Cancelled by the Investor.
Expired: Unique Registration Number expired. Therefore, Investor has to
register for a new SIP.
Closed: The SIP term is complete.

19) Status Check

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The investors will be able to see the status of all their SIP's that they
have created online.

Benefits of investing in Birla Sun life SIP

I] Wealth Creation Solutions

Birla Sun life Wealth Creation Solutions aim to grow your money through
equity/gold investments and are available in a range of conservative
to aggressive options.
These solutions can be ideal for investors who are planning for future
expenses, like higher education of children, marriage, buying a home
etc. These solutions are availab le in the range of aggressive to conservative options to
suit the needs of the investor.

II] Tax Savings

Birla Sun Life Tax Savings Solutions help to reduce your tax burden and
at the same time, aim to grow your money through equity investments.
III] Savings
Birla Sun Life Savings Solutions are aimed at preserving your money,
providing you with liquidity and giving you superior tax-efficient returns
compared to bank accounts and FDs.
IV] Regular Income
Birla Sun Life Regular Income Solutions aim to preserve your money
and provide regular income.

Unit Linked Insurance Policies (ULIPs) :-

What is ULIP?
When we talk about Insurance as an investment option, ULIPs have an
important role as many of the investor nowadays goes for this as a
profitable avenue. ULIP is an abbreviation for Unit Linked Insurance
policy. A ULIP is a Life Insurance policy which provides an arrangement

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of risk cover and investment. The dynamics of the capital market have a
direct impact on the performance of the ULIPs. Remember that in a unit
linked insurance policy, the investment risk is generally borne by the
investor/ the holder of the policy.

Under this policy the insurer allocates the total premium into various
units. You are also given the opportunity to choose the option of
investment units. Most of the investors prefer to allocate them in financial
instrument and assets. The number of units you choose on each option
might differ from individual to individual. Some of you may choose to
invest more on Real Estate while the rest prefer to invest more
on financial instruments such as shares, debentures, etc.

Likewise the insurer takes care to allocate a unit of the premium for
insurance maintenance and the related expenses. You are also excused
from paying income tax for the profits received from the investment.
However this policy does not guarantee profits like the traditional plans
and is therefore risky as far as returns are concerned. But the possibility
of making more profit is very high in this policy.

ULIPs fundamentally work like a Mutual Fund with a life cover thrown in.
They invest the premium in market-linked instruments like stocks,
debentures, Corporate Bonds and Government Securities. Investments
in ULIPs help to gain tax benefits under Section 80C.

Depending upon the performance of the unit linked funds chosen; the
policy holder may realize gains or losses on his/her investments. It
should also be noted that the past performance of a fund are not
necessarily indicative of the future returns of the fund.

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Types of Funds ULIP Offer
Most insurers offer a wide variety of funds to suit your investment
objectives, risk profile and time horizons. Different funds have different
risk profiles. The possible for returns also varies from fund to fund.
Following are some of the common types of funds accessible along with
an indication of their risk uniqueness.

Funds Nature of investments Risk category

Equity funds Primarily invested in company
stocks with the general aim
Medium to High
capital appreciation
Income, Fixed Invested in corporate bonds,
Interest and government securities and other
Medium
Bond Funds fixed income instruments

cash funds Sometimes known as MoneyLow

Market Funds invested in cash,
bank deposits and money market
instruments

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Balanced funds Combining equity investment withMedium
fixed interest instruments

3.7 ULIPs vs. MUTUAL FUNDS

ULIPs and Mutual Funds: Which is superior?

In configuration ULIPs and mutual funds are similar; in purpose it’s not
similar. Because of the high first-year charges of ULIPs mutual funds are
an improved option if you have a five-year investment horizon. But if you
have a horizon of 10 years or more then ULIPs have an edge. To explain
this further a ULIP has high first-year charges towards acquisition
including agent’s commissions. As a result, they discover it difficult to
break mutual funds in the first five years. But in the long-term ULIP
managers have numerous advantages over mutual fund managers.
Since policyholder premiums come at regular intervals investments can
be planned out more evenly. Mutual fund managers cannot take a
comparable long-term view because they have volume investors who
can move money in and out of schemes at short notice.

Unit Linked Insurance Policies (ULIPs) as an investment avenue are

closest to mutual funds in terms of their structure and functioning. As is
the cases with mutual funds investors in ULIPs are selected units by
the Insurance Company and a net asset value (NAV) is affirmed for the
same on a daily basis.

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Similarly ULIP investors have the option of investing across various
schemes like the ones found in the mutual funds domain i.e. diversified
equity funds, balanced funds and debt funds to name a few. Normally
talking ULIPs can be termed as mutual fund schemes with an insurance
component. However it should not be interpreted that excepting the
insurance element there is nothing differentiating mutual funds from
ULIPs.

ULIPs Vs Mutual Funds

In spite of the apparently similar structures there are various factors

wherein ULIPs and Mutual Funds differ and they are as follows:

1) Mode of investment/ investment amounts

Mutual fund investors have the choice of either making lump

sum investments or investing using the systematic investment plan (SIP)
route which entails commitment over longer time horizons. The minimum
investment amounts are laid out by the fund house. ULIP investors also
have the option of investing in a lump sum or using the conventional
route i.e. making premium payments on an yearly, half-yearly, quarterly
or monthly basis. In ULIPs formative the premium paid is frequently the
initial point for the investment activity. This is in stark contrast to
conventional insurance plans where the sum guaranteed is the starting
point and premiums to be paid are strong-minded thereafter.

ULIP investors also have the elasticity to modify the premium amounts
during the policy's residence. For example an individual with access to
surplus funds can improve the payment thereby ensuring that his surplus
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funds are profitably invested, conversely an individual faced with a
liquidity crunch has the option of paying a lower amount (the
differentiation being adjusted in the accumulated value of his ULIP). The
liberty to adjust premium payments at one's convenience clearly gives
ULIP investors an edge over their mutual fund counterparts.

2) Expenses

In mutual fund investments, expenses charged for various activities like

fund management, sales and marketing, management among others are
subject to pre-determined higher limits as arranged by the Securities and
Exchange Board of India. For example equity-oriented funds can charge
their investors a maximum of 2.5% per annum on a recurring basis for all
their expenses, any expenditure above the agreed limit is borne by the
fund house and not the investors. Similarly funds also charge their
investors entry and exit loads in most cases. Entry loads are charged at
the timing of creation an investment while the exit load is charged at the
time of sale. Insurance companies have a free hand in levying expenses
on their ULIP products with no upper limits being arranged by the
regulator i.e. the Insurance Regulatory and Development Authority. This
explains the complex and at times unwieldy expenditure structures
on ULIP offerings. The only command placed is that insurers are
necessary to notify the controller of all the expenses that will be charged
on their ULIP offerings. Expenses can have far-reaching penalty on
investors since higher expenses translate into lower amounts being
invested and a smaller quantity being accumulated.

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3) Flexibility in altering the asset allocation

As we discussed earlier the offerings in both the mutual funds section

and ULIPs segment are mainly comparable. For example plans that
invest their entire corpus in equities (diversified equity funds) a 60:40
allotment in equity and debt instruments and those investing only in debt
instruments can be found in both ULIPs and mutual funds. If a mutual
fund investor in a diversified equity fund wishes to shift his quantity into a
debt from the same fund house he could have to bear an exit load or
entry load.

On the other hand most insurance companies allow their ULIP inventors
to shift investments crossways various plans/asset classes either at a
nominal or no cost. Usually pair of switches are allowable free of charge
every year and a cost has to be borne for extra switches. Successfully
the ULIP investor is given the choice to invest across asset classes as
per his convenience in a cost-effective manner. This can create to be
very useful for investors for example in a bull market when the ULIP
investor's equity component has appreciated he can book profits by
simply transferring the necessary amount to a debt-oriented plan.

4) Tax benefits
ULIP investments are eligible for deductions under Section 80C of
the Income Tax Act. This holds well, irrespective of the nature of the plan
selected by the investor. On the other hand in the mutual funds area only
investments in tax-saving funds also referred as equity-linked savings
schemes are eligible for Section 80C benefits. Maturity incomes from
ULIPs are tax free. In case of equity-oriented funds for example
diversified equity funds, balanced funds, if the investments are detained
for a period over 12 months; the gains are tax free; conversely

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investments sold within a 12-month period attract short-term capital
gains tax @ 10%. Similarly, debt-oriented funds pull towards you a long-
term capital gains tax @ 10% while a short-term capital gain is taxed at
the investor's marginal tax rate.

Even though they are seemingly alike in structure, obviously both mutual
funds and ULIPs have their sole set of advantages to offer. As always it
is vital for investors to be aware of the differences in both offerings and
make learned decisions. Following are the major difference between
ULIPs and Mutual Funds.

Features ULIP’s Mutual Funds

Minimum investment
amounts are
Investment Determined by the
determined by the fund
amounts investor and can be
house
modified as well
No upper limits,Upper limits for
expenses determined byexpenses chargeable to
Expenses
the insurance company investors have been set
by the regulator
Not mandatory Quarterly disclosures
are mandatory
Portfolio disclosure
Generally permitted forEntry/exit loads have to
free or at a nominal cost be borne by the
Modifying asset
investor
allocation
Section 80C benefits areSection 80C benefits
available on all ULIPare available only on
Tax benefits
investments investments in tax-

Page | 77
 saving funds

ULIP's usually have following charges built into it:

a) Up-front Charges
b) Mortality Charges ( Charges for providing the risk cover for life)
c) Administrative Charges
d) Fund Management Charges

Mutual Fund's have the following charges:

a) Up-front charges (Marketing, Advertising, distributors fee etc.)
b) Fund Management Charges (expenses for managing your fund)

Investing in Mutual Funds is Convenient & Secure

 Professional Money Management:

Your investments are managed by experts who analyze all options

based on experience and research.

 Well Regulated and Transparent:

The mutual fund industry is well regulated and protects the interests of
investors at all times. You can analyze the track record of a fund or
institution before investing.

 Returns Offered:

You benefit from the diversified investment objective of a mutual fund.

The fund manager, at all times, tries to include performing stocks in the
portfolio that would give good returns. Mutual funds look to invest across

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different industries and stocks ensuring the portfolio remains balanced at
all times.

Chapter 4
Conceptual Framework

4.1 STEPS TO INVEST IN EQUITY

10 Steps To Invest In Equity
Equity market investments typically yield high returns, particularly if
invested over longer periods of time, although such investments are

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characterized by a high degree of price volatility in the short term. The
volatility in our markets, particularly in the nineties, reflects significant
shifts in the nature of the Indian economy, with the services sector
gaining increasing importance. This fundamental change in the economy
has resulted in a dramatic change in the nature of our stock markets with
the services sector, including technology, assuming increasing
importance. Investment in equities has dismayed many in the short term,
but if executed in the framework of the steps outlined below, may help in
better choices.

Step 1:
Identify your objective, given your needs, life stage and resources. If you
want to increase the value of your investment in order to have a larger
sum to spend at a later date, your main priority will be capital growth.

Step 2:
Identify your risk tolerance and then invest appropriately Young people
at the start of their working lives will have a greater appetite for taking
financial risk as compared to people at the end of their career who are
looking forward to stable income and preservation of capital. These two
extremes will exemplify the ability to take equity exposure. The young
person is likely to be invested largely in equities for he can afford to take
short term capital loss in anticipation of higher rates of return from
equities. The elderly will be unable to take the risk of capital loss even in
the short term as their ability to make back any losses will be limited by
time and ability to earn.

Step 3:
Categorize your stock: Cyclical, Growth or Defensive Investing in cyclical
stocks, such as those in the cement or steel sector, requires an
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understanding of the economic scenario. An active involvement in the
investment is required in order to reap the maximum benefits of swings
in economic cycles over time. The stock prices are likely to move
through extreme highs and lows, and the ability to time entry and exit will
be necessary. Growth investing refers to stocks in sectors where the
future direction is clear for the medium term - such as technology.
However even here, timing is key, for the stock may do nothing for a long
time as momentum builds up and then move sharply thereafter.
Defensive investing is that which is done from a long term viewpoint,
where a stock is held on the premise that it will grow consistently and on
a sustainable basis over time, such as those in the fast moving
consumer goods sector. While the appreciation may, at times, not be as
dramatic as cyclical or growth stocks, stocks that constitute defensive
investments grow steadily over longer time periods.

Step 4:
Check out the technical position. Can you actually sell your investment
when you want to? The liquidity of a stock is very important in taking an
investment decision, for if there is very little free stock available in the
market, buying and selling may well impact the stock price in an adverse
manner. It is interesting to see what the price volume relationship is for a
stock. So if a stock price is moving up or down on high trading volume, it
is more likely that there is real interest in that price movement than if
there is very little volume supporting the price move.

Step 5:
Know what the company does. The fate of each stock is tied inextricably
to the fortune of the underlying business, and the market's perception of
the future prospects for that business. The industry's future potential in

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terms of projected demand-supply is key as is the company's
competitive position in the industry. The business model of the company
should be considered, as well as possible future changes, and the ability
of the company to sustain growth and momentum well into the future.

Step 6:
Know who runs the company. The capability and integrity of
management is even more important in determining the future viability of
your investment. A strong, credible, experienced and shareholder
responsive management team is critical for operating and growing a
successful company. In the newer areas of our economy, management
vision is also of significant importance.

Step 7:
Know the company's performance. The price earnings (P/E) ratio is the
often quoted measure of a company's value. This ratio divides the stock
price by the year's earnings, and is useful in arriving at comparative
valuation. But the tool that is quite prevalent in professional evaluations
is the return on equity (ROE), which is the year's earnings divided by the
net worth of the company. This when compared to the cost of capital for
the company allows the investor to gauge the company's wealth creating
ability. Apart from the ratios the investor must also focus on the
sustainability of earnings growth.

Step 8:
Know the company's valuation. Two stocks may have the same EPS but
different P/E's. This is because ROE may be different and its
sustainability may be different. Broadly speaking, the higher the
sustainable ROE, the higher the P/E rating. A high P/E does not

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therefore necessarily imply an overvalued stock. Stocks with high
sustainable ROEs are likely to trade at high P/E multiples.

Step 9:
Know the price target. Having selected stocks and built a portfolio, it is
now imperative to track these investments closely. One method of doing
so is to set expectations, by identifying a target price, and to re-evaluate
the stock when this target is reached. Here, it is important to consider
opportunity costs. If there is a loss on a stock, should one realize that
loss and invest in another stock, which has a greater potential, or should
one wait for the loss to turn into a profit. By not selling out of low return
stocks to get into higher return stocks, investors miss out on
opportunities.

Step 10:
Do you want a professional manager? Many investors mistakenly
assume that they can purchase one or two stocks and they will do well.
In the absence of good luck, this can be a dangerous strategy since
there is always a risk of a stock declining in value or the business facing
company specific problems. The more diversified the portfolio, lower is
the risk of one poorly performing stock affecting overall performance of
the portfolio. However, a good way of diversifying the portfolio is to invest
through mutual funds where the professional fund manager and the
rigorous investment process is likely to limit risk while maximizing profit,
depending on the risk profile of the fund invested in.

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 4.2 NET ASSET VALUE (NAV)
A Very Important Concept
Once a mutual fund scheme has been floated, the buying and selling
prices of its units from day to day are related to the NAV of the units
according to the regulations of SEBI. It is important for investors to
understand the NAV concept.

Daily NAV
A mutual fund is required to compute the NAV once a day based on the
closing market prices by valuing all assets and liabilities at their current
values.

NAV per unit

The steps involved in computing the NAV per unit are as follows:
(a) Compute the aggregate assets of the fund as a whole at current
values.
(b) Compute the aggregate liabilities at current values.
(c) Compute the aggregate NAV i.e. (a) minus (b).
(d) Compute the per unit NAV by dividing the aggregate NAV by the total
number of units outstanding. That is:

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 Aggregate NAV
NAV of per unit = ---------------------------------
No. of units outstanding

Watch the NAV per unit

Just as investors in shares watch the share prices in order to know how
their investment is faring, a mutual fund investor can keep track of the
progress of the fund by looking at the movement of the NAV per unit.

Mutual fund and stock market relationship

Remember that the NAV per unit of an equity fund is linked to the value
of the fund’s portfolio, which, in turn, is related to the ups and downs of
the stock market. The fickleness of the equity market as a whole affects
the mutual fund investors through its effect on the NAV per unit. Such
fickleness sometimes borders on madness because it has no link with
fundamental factors. It is best brought out by movements of the market’s
P/E ratio. If the stock market crashes, the value of an equity fund will
also crash. As Peter Lynch has said, “there is no such thing as a crash-
proof portfolio”. Even the best fund manager cannot protect the investor
in such an eventuality. Short-term and cyclical fluctuations are a
characteristic of stock markets all over the world.
Investors should view mutual fund equity schemes as an avenue for
long-term investment rather than for short-term speculation.

4.3 CHARGEABLE FEES AND EXPENSES

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1) SEBI Regulations
The AMC (Asset Management Company) charges an investment
advisory fee to the mutual fund. In addition, the day to day running
expenses are also chargeable to the mutual fund.

If the AMC is lavish, careless or unscrupulous in spending, the net return

to investors will be adversely affected. Hence, SEBI regulations have
laid down in detail what and how much can be charged to the mutual
fund in the form of advisory fees and expenses.

The SEBI regulations have laid down sub-limits for

(a) “investment advisory fee”, and
(b) other recurring expenses and also an over-all limit for the two
combined.
Expenses which are not expressly allowable have to be borne by the
AMC. (For example, expenses of account maintenance is the AMC’s
responsibility. There could be others, like rental for office space)

The over-all limit on advisory fees plus recurring expenses, which the
AMC can charge to the fund, is prescribed as a percentage of “average
weekly net assets”, indicated below:

Table A
Average Weekly Net Assets Over-all limit on fees and expenses
(1)First Rs 100 crore 2.50%
(2)Next Rs 300 crore 2.25%
(3)Next Rs 300 crore 2.00%
(4)Additional assets 1.75%

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Note: The percentages mentioned are applied to the “average weekly
net assets”.

In the case of bond schemes, the percentage is required to be lower by

at least 0.25% than the above-mentioned figures.

Within the over-all limit mentioned above, there is a sub-limit for advisory
fees as follows:

Table B
Average Weekly Net Assets Sub-limit on advisory fees
(1) Rs 100 crore 1.25%
(2) Excess over Rs 100 crore 1.00%

The difference between the combined over-all limit (mentioned in Table A

above) and the sub-limit for advisory fee represents the sub-limit for
allowable recurring expenses. These expenses comprise brokerage and
transaction cost, registrar’s services, custodian fees, audit fees, trustees’
fees and expenses, investor communication expenses, insurance

2) Initial launching expenses

The initial launching expenses of a scheme are also regulated by SEBI
as a separate category. SEBI regulations allow these expenses up to a
maximum limit of 6% of the initial resources raised. Till recently, the
regulations required that if the initial expenses exceeded 6%, the excess
will have to be borne by the AMC. A recent change disallows initial
expenses beyond 6% even if the AMC is prepared to bear the excess.
Ostensibly, this change has been made to stop unhealthy competition
among mutual funds.

3) Load funds and no-load funds

No-load funds are those funds which do not charge an initial entry-fee
from investors. On the other hand, load funds charge an entry fee. In the
case of schemes launched on “no load basis”, the AMC is permitted to

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recover the launching expenses by increasing the investment
management advisory fee slightly, i.e. by up to 1% of the average weekly
net assets. Some investors may get attracted into a scheme because it
charges no entry fee but this advantage is, more or less, cancelled out
by higher advisory fee and exit fee.

4) Are no-load funds preferable?

In the case a load-fund which has an entry fee of, say, 6%, for every Rs.
100 paid by the investor, the amount actually invested on his/her behalf
will be Rs. 94 only. On the other hand, in the case of a no-load fund, the
full amount of Rs. 100 paid by the investor is available to be invested on
his/her behalf but the fund is allowed to charge an additional 1%
advisory fees in lieu of not charging an entry fee.
There is thus a trade-off. The difference between the two alternatives
does not seem to be significant from the long-term angle. Usually, in the
case of no-load funds, the investor has to pay up to 1% additional
advisory fee and also an exit charge if he/she exits from the fund within a
short period. In the case of load funds which levy an entry fee, there is
generally no exit charge.

TYPES OF FUNDS
Index Fund
Index fund schemes are ideal for investors who are satisfied with a
return approximately equal to that of an index. Index Funds: Here, the
portfolio composition is not decided by the fund manager but is given by
a particular index, as announced at the time of launching the scheme.
Reasons for index funds:-
Index funds simply mirror a chosen market index. They first emerged in
the U.S. because it was found that many equity fund managers did
worse than the market average as measured by the index. That is, they
earned a lower return than the return which could be earned on portfolio
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corresponding to the market index. So, why not hold a portfolio which
simply mirrors the market index?

I. An index fund can reduce the fund management costs on two

counts:
(1) it can dispense with the highly paid fund managers because no
selection of investments is required and
(2) it can reduce the transaction costs also because there is no need for
portfolio churning, i.e. changing the portfolio mix by constantly reviewing
the portfolio, selling some shares and buying others in their place.

II. How index funds operate

For the reasons given above, the cost of running an index fund is
substantially lower compared to the discretionary diversified equity
funds. Hence, index funds charge lower management fees and
expenses to the extent of almost one-half, compared to discretionary
diversified funds.
Of course, some purchases and sales of stocks will be necessitated
even in the case of index funds. This is because some existing investors
may leave the fund and some new investors join the fund from time to
time. The purchases and sales of stocks have to be made in such a
manner that the portfolio composition continues to match the index
chosen.

III. Slight “tracking error”

This means that if the fund has to reduce its portfolio size by, say, 1%,
each distinct holding should be reduced by 1%.The exact calculation
may mean fractions of some shares but shares cannot be sold or bought
in fractions. The fund manager can only try to match the fund’s portfolio
to the index as nearly as possible. Slight mismatch, known as “tracking

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error”, will generally remain but this is unlikely to affect the fund’s
performance materially.

IV. Effect of index revision

Agencies which compile the share index usually revise the index at
some intervals by replacing some of the existing companies by others.
The agency has to give an advance notice to the public about such
changes. The index fund will have to readjust its portfolio composition so
that it corresponds to the revised index. Some changes in the
composition of the index are necessitated by mergers and liquidations of
companies also.

V. Index funds not popular in India

In India, index funds are not very popular for two main reasons. First, not
many investors in India have much idea about what kind of future return
to expect from the particular index. Second, an emerging economy, like
India, provides many rewarding opportunities of investing in companies
not included in the index. These may be young and fast growing
companies. Even in the case of index companies, some companies may
be more promising than others but index funds have to rigidly adhere to
the percentage representation of the various index companies in the
fund’s portfolio. In the present Indian situation, flexibility in fund
management has been found to be advantageous.

Sectoral fund schemes

Sectoral fund schemes are ideal for investors who have already decided
to invest in a particular sector or segment.

Fixed Maturity Plan

Fixed Maturity Plans (FMPs) are investment schemes floated by mutual
funds and are close ended with a fixed tenure, the maturity
period ranging from one month to three/five years. These plans are
predominantly debt-oriented, while some of them may have a small
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equity component. The objective of such a scheme is to generate steady
returns over a fixed-maturity period and protect the investor against
market fluctuations.

FMPs are typically passively managed fixed income schemes with the
fund manager locking into investments with maturities
corresponding with the maturity of the plan. FMPs are not guaranteed
products.

Exchange Traded Funds

Exchange Traded Funds are essentially index funds that are listed and
traded on exchanges like Index fund schemes are ideal for investors
who are satisfied with a return approximately equal to that of an
index. Globally, ETFs have opened a whole new panorama of
investment opportunities to retail as well as institutional investors. ETFs
enable investors to gain broad exposure to entire stock markets as well
as in specific sectors with relative ease, on a real-time basis and at a
lower cost than many other forms of investing.
An ETF is a basket of stocks that reflects the composition of an index,
like S&P CNX Nifty, BSE Sensex, CNX Bank Index, CNX PSU Bank
Index, etc. The ETF's trading value is based on the net asset value of
the underlying stocks that it represents. It can be compared to a stock
that can be bought or sold on real time basis during the market hours.
The first ETF in India, Benchmark Nifty Bees, opened for subscription on
December 12, 2001 and listed on the NSE on January 8, 2002.

Capital Protection Oriented Schemes

Capital Protection Oriented Schemes are schemes that endeavour to
protect the capital as the primary objective by investing in high
quality fixed income securities and generate capital appreciation by
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investing in equity / equity related instruments as a secondary objective.
The first Capital Protection Oriented Fund in India, Franklin Templeton
Capital Protection Oriented Fund opened for subscription on October 31,
2006. Gold Exchange Traded Funds offer investors an innovative, cost-
efficient and secure way to access the gold market. Gold ETFs are
intended to offer investors a means of participating in the gold bullion
market by buying and selling units on the Stock Exchanges, without
taking physical delivery of gold. The first Gold ETF in India, Benchmark
GETF, opened for subscription on February 15, 2007 and listed on the
NSE on April 17, 2007.

Quantitative Funds
A quantitative fund is an investment fund that selects securities based on
quantitative analysis. The managers of such funds build computer
based models to determine whether or not an investment is attractive. In
a pure "quant shop" the final decision to buy or sell is made by
the model. However, there is a middle ground where
the fund manager will use human judgment in addition to a quantitative
model. The first Quant based Mutual Fund Scheme in India, Lotus
Agile Fund opened for subscription on October 25, 2007.

Funds Investing Abroad

With the opening up of the Indian economy, Mutual Funds have been
permitted to invest in foreign securities/ American Depository Receipts
(ADRs) / Global Depository Receipts (GDRs). Some of such schemes
are dedicated funds for investment abroad while others invest partly in
foreign securities and partly in domestic securities. While most such
schemes invest in securities across the world there are also schemes
which are country specific in their investment approach.

Fund of Funds (FOFs)

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Fund of Funds are schemes that invest in other mutual fund schemes.
The portfolio of these schemes comprise only of units of other
mutual fund schemes and cash / money market securities/ short term
deposits pending deployment.
The first FOF was launched by Franklin Templeton Mutual Fund on
October 17, 2003. Fund of Funds can be Sector specific e.g. Real Estate
FOFs, Theme specific e.g. Equity FOFs, Objective specific e.g. Life
Stages FOFs or Style specific e.g. Aggressive / Cautious FOFs etc.

4.4 GOVERNANCE, MANAGEMENT STRUCTURE

AND SEBI REGULATIONS
The top management structure of a mutual fund should ensure that the
fund is managed in the best interest of the ‘unit holders’ in the mutual
fund. It is to be noted in this connection that, unlike the shareholders of a
company, the unit holders in a mutual fund do not have voting rights and
have no hand in appointing, supervising or dismissing the fund’s top
management. The unit holders are simply “beneficiaries” .Mutual funds’
original legal form was that of a “trust”, as their history in the U.K. shows.
The fund was divided into “units” for sale to the public. Hence, the name
“investment trust” or “unit trust” came to be used.

There are three parties to such an arrangement:

(a) trustees who exercise over-all control;
(b) managers who manage the investments from day to day; and

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(c) beneficiaries or unit holders, i.e. investors.

The question which arises is: How do we ensure that the mutual fund will
be managed in the best interest of the unit holders? This problem is
taken care of partly by the regulatory system and partly by fairly fierce
competition among the mutual funds for the investor’s money. There are
as many as 30 mutual fund organisations in India. Each of them has
dozens of mutual fund schemes.

Mutual funds in India are structured on the lines indicated below:-

Mutual fund structure

Each mutual fund has a Board of Trustees, an Asset Management

Company or AMC (the manager) and unit holders. In India, we also have
a promoter or “sponsor” who takes the initiative of starting a mutual fund
but has no active role after the fund has been launched. The sponsor
remains only as a shareholder of the AMC. As per SEBI regulations, the
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 effective control of the AMC is not with the sponsor but with the Board of
Trustees. A majority of the trustees have to be chosen from amongst
independent persons and the rest are the nominees of the sponsor. The
Board of Trustees functions as the governing body of the mutual fund.

SEBI regulations provide the framework within which mutual funds have
to operate. Maximum limits have been prescribed for management fees
and other chargeable expenses, as detailed a little later. SEBI also
regulates many other aspects of their operations and policies.

Mutual Fund Scheme Types

Equity Bond Balanced Liquid

Broadly Index fund Industry Mid -cap

diversified specific

Corporate bond Government

bond

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 Chapter 5
Latest Review on Mutual Fund

5.1 MUTUAL FUND INDUSTRY REVIEW BY CRISIL

Crisil Research analyzing the Mutual Fund industry in the current market
condition. The key highlights of the report are:

 The Indian mutual fund industry's average assets under

management (AUM) grew for the first time in the past four quarters;
average AUM rose by 4% or Rs 27,400 cr to Rs 6.92 lakh cr in the April-

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 June 2012 quarter from Rs 6.65 lakh cr in the previous quarter
(excluding domestic fund of funds or FoFs).
 Debt-oriented funds were the key contributors to the rise; assets of
money market or liquid funds grew by Rs 16,864 cr, that of ultra short
term debt funds by Rs 6,888 cr, fixed maturity plans (FMPs) by Rs 2,868
cr and other debt-oriented funds by Rs 5,800 cr over the past quarter.
 Equity funds declined Rs 5,265 cr in AUM owing to weak sentiments
prevailing in the asset class in the quarter gone by.
 Average AUM of 29 out of 44 fund houses increased in the latest
quarter.
 HDFC Mutual Fund maintained its top position by asset size at Rs
92,625 cr in the June quarter; its assets rose by Rs 2,746 cr or 3.05%.
Reliance Mutual Fund was second with assets of Rs 80,694 cr while
ICICI Prudential Mutual fund was third with Rs 73,050 cr of assets.
 The share of the top five mutual funds' average assets stood at 54% in
the June quarter while the share of the top 10 funds was 78%; the
bottom 10 fund houses continued to occupy less than 1% of the average
AUM.
 In terms of month-end assets, the Indian mutual fund industry's AUM fell
by 1.5% to Rs 6.89 lakh cr in June 2012 primarily due to outflows in
money market funds which witnesses cyclical quarter-end outflows due
to withdrawals by corporates for paying advance taxes.
 In the secondary market, mutual funds bought equities worth Rs 296 cr
in June compared to net selling of Rs 398 cr in May, while they were net
buyers of debt to the tune of Rs 78,465 cr in June compared to net
buying of Rs 37,280 cr in April.
 On the regulatory front, SEBI plans to talk to fund managers of
mutual fund schemes that have been underperforming their respective
benchmarks for a long time.
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 5.2 BANKING, FMCG FUNDS TOP MF RETURN

CHARTS IN 2012

 Mutual funds focused on banking, FMCG and midcap stocks topped

the return charts for investors in 2012, while those investing in IT
stocks fared the worst, albeit with modest gains.
 Mutual funds focused on banking, FMCG and midcap stocks topped
the return charts for investors in 2012, while those investing in IT
stocks fared the worst, albeit with modest gains.
 As per an analysis of net asset values for all mutual fund schemes
during 2012, the banking funds have an average 55 per cent return in
the year, as against appreciation of 26-28 per cent in the broader
benchmark indices.

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 The FMCG funds came a close second with average return of 48 per
cent in 2012, followed by midcap schemes (41 per cent), multicap
funds (33 per cent) and pharma funds (32 per cent). Tax funds, a
popular avenue for saving taxes, gained 31 per cent in calendar year
2012.
 Some sectors which gave extraordinary returns in this period include
Banking, FMCG and consumer durables. Stocks in sectors such as IT,
Power and Oil & gas didn't do as well in 2012. Largely, investors
currently favour stocks in consumption sector give some of macro
winds.
 Infrastructure equity funds rode on the back of market rebound to give
investors 25 per cent average gain in 2012. International equity funds
(14 per cent), arbitrage funds (9 per cent) and IT funds (6 per cent) were
the poorest performers in the year gone by as their chosen themes did
not play out well as the winners.
 Gold funds, which saw copious inflows, gave an average 11 per cent
gain in 2012 as the precious metal prices inched up. In the fixed income
fund space, Gilt medium and long term funds walked away with the
honors of best average gains (10.5 per cent), followed by income funds
(10.1 per cent), short-term income schemes (9.8 per cent), liquid funds
(9.2 per cent) and gilt short-term funds (8.3 per cent).
 Most short-term debt funds and dynamic bond funds have also
increased duration and exposure to government securities to take
advantage of a fall in yields.
 Among the hybrid fund categories, equity-oriented funds gave an
average 27 per cent gains while the debt oriented ones mirrored the
fixed income gains of around 13 per cent.

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 5.3 HOW TO EVALUATE MF PORTFOLIO

PERFORMANCE

(for investors)

What bothers investors the most - Their portfolio performance! . A

portfolio in green will always be a comfort factor, while the same in red
will drive them into a panic zone.

Some pointers which investors can consider while reviewing their

portfolios:
1) Performance is the first factor that can be considered while reviewing
portfolios. However; this parameter can be looked at from different
angles. The performance of a portfolio can be reviewed by checking if
the funds in the portfolio have been able to beat their respective
benchmarks or if the portfolio has been able to outperform the major
indices, i.e. the Sensex and Nifty. The alternate way to check
performance of the portfolio vs the benchmark is to construct an

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appropriate benchmark which will be a culmination of 2-3 indices by
assigning suitable weights to them. Another metric that can be used is
the evaluation of the relative performance of the funds; i.e. the
performance of a particular fund vis-à-vis the peer group.

2) The performance of the portfolio should be tracked over a period of

time. For instance, let’s say an investment of INR 1 Lakh had been
made into a mid- cap fund like IDFC sterling Equity Fund on January 9,
2012 and the fund value became INR 1, 45,802 on January 21,
2013.The normal investor psyche in this case will be to sell this
investment and book profits before the market takes a u-turn. When this
decision is made, the investor tends to forget the time horizon and the
goals for which the investments have been made. There can also be
instances when investments have been made into sector or global funds
for 2 years and if the investments have been in red, then typically,
investors would give an exit call. However, here the investors have to
keep in mind the fact that investments into these funds should be made
only if they see some future potential in these types of funds. In short,
the performance of the portfolio should not be done in isolation; investors
should keep themselves abreast about any changes that are being
brought about in the funds that they hold in their portfolios.

3) Active management is a habit that investors must cultivate to ensure

that the investments turn out to be positive for them in the long run. A
simple example can be shown with the help of fixed income instruments
which are used to mitigate the overall risk to the portfolio. Two years
back, if an investor had made an exposure into Fixed Maturity Plans
(FMPs) and if these have matured now, then the best investment option
in the current scenario would be to consider duration funds. In short, this

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is an informed decision that the investor will have to make so as to make
sure that his portfolio is moving in the right direction.

4) Another important factor that needs to be considered is to see if there

is a change in the risk profile and if the answer is a yes, then appropriate
changes will have to be made in the portfolio. For instance, if an investor
had created a portfolio in his early twenties for the purpose of saving, if
after 5 years he had a family, has taken a loan for buying a house, and
his investment objective is to plan for his child’s education then the
existing portfolio would have to be modified as per the new risk profile.

5) To conclude, investors should not stop just at performance when

monitoring their portfolios but should also hold accountable the fund
management teams with whom they have trusted their surplus. To do
this, they will have to spend a lot of time and effort for the same which is
not possible in this rat race called life. This is where investors need to
take the support of financial advisors and together they should be able to
create and monitor the portfolios. Hence, in hand holding is needed if
investors have to make the right investment decisions.

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 5.4 WHAT IS THE MF DIRECT NAV ALL ABOUT?

SEBI has directed all fund houses to maintain separate plan called
Direct Plan for all their mutual fund schemes along with the Regular
plan. So let us see what is this Direct plan and how will it impact
investors.
Sebi has directed all fund houses to have separate NAVs for their
schemes, with a direct NAV and a regular NAV. The direct NAV will be
higher than the regular NAV, although the scheme will hold the same
portfolio. The difference is that under the direct NAV plan, there will be
no distribution charges, resulting in higher NAV. It will cost less to hold
funds in the direct plan, as the expense ratio is expected to be cheaper
by about 0.5%-0.75%.
Larger investors including corporates and financial institutions have been
representing with the regulator that they do not get the benefit of direct
investments into funds. Since they have professionals within their
organization, they also do not require the expertise of a financial
advisor. SEBI has opened this up as an option to all investor classes,
allowing even individual investors to use this option.

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This plan will benefit only those investors who directly invest with the
fund house without the service of any advisors or distributors. Other
investors who invest through a broker/ agent will bear the normal
expenses in terms of cost structure by the fund house as is currently
prevalent.
Any investor investing directly with the mutual fund house in any open-
ended schemes, interval income schemes or new fund offers will be
eligible to avail the direct NAV plans. However, prior to shifting your
investments into a direct fund scheme, it is essential to note that any
investments done less than twelve months back will attract both an exit
load as well as capital gains tax. Debt fund investors need to weigh the
capital gains tax impact for their long-term investments as well.
The previous time direct investments were allowed, it did not evoke
much response from individual investors as they typically do not have
in-depth knowledge of mutual funds and rely on their financial advisors.
Further, they would not be able to avail of the servicing that advisors
provide. Institutional, large investors, and other savvy investors are
likely to be the ones opting for the direct route & enjoying better
returns.
Currently, mutual funds companies have a lean organization structure as
they have predominantly worked through a distributor model. It needs
to be seen how this impacts their ability to service direct customers and
also could have an impact on their cost structure in the long term.
Since a greater portion of the mutual fund investors have either time
constraints or are not fully aware of the various investment offerings,
the distributor/ agent will be of immense help, by giving sound advice,
pre-filling certain forms, assisting with redemptions, etc. Most investors
are likely to continue bearing the extra cost for the service and
simplicity of investing via an intermediary.
Page | 104
The key positive of this regulation is that it brings back focus on quality
of advice and quality of service provided by the distributors / advisors.
This is in line with the removal of entry load so that it aligns the goals of
the advisor with that of the investor. It also reduces the cost structure
institutions and hence could have some positive impact for institutional
investors like ULIPs, which eventually benefit the investor. Direct
investments would also eliminate the pass backs.
For investors who have a decent knowledge of the investment options,
do not require servicing and with adequate time to identify and monitor
mutual funds; the direct plan will benefit them with earn higher returns
and can be a good option for them.

Summary:
 Mutual funds must have two NAVs per scheme - direct & regular
 Direct NAV schemes will have lower expenses - giving better
returns to investors
 Direct NAV plans must be purchased directly only from the AMC
 Taxation remains the same for both schemes
 Individual investors who are capable of choosing schemes,
technology savy and do not require servicing provided by the
advisors can go in for this option

Page | 105
 Chapter 6
Data Interpretation and Analysis

1) What type of investment you prefer the most?

Savings- 26% Fixed deposits-29% Mutual funds-10%

Insurance-8% Gold/ Silver-20% Real estate-8%
Shares/ Debentures-2% Post Office-0% PPF-0%
Table No 6.1

Page | 106
INTERPRETATION

 The analysis shows that majority of the respondents still prefer to

invest in fixed deposits i.e 30% as they feel it is a safe investment
for them and they are still not willing to take any risk of investing in
equities.

 26% of respondents invest in savings account and this comprises

a majority of salaried people , Investors who prefer gold/silver
purchases are 20% which is mostly middle-aged people and
women , Sadly even now only 10% of the respondents invest in

Page | 107
 mutual funds which comprises of young people who are ready to
take risks mostly in the age group of 25 to 35.

 The other investment preferences are insurance 8% , real estate

8% , shares/debentures 2% and PPF 0% .

2) While Investing your money, which factor you prefer the

most?

Liquidity 42%
High return 30%
Low risk 25%
Table No
Company Reputation 3%
6.2

FACTOR PREFERENCE

Page | 108
INTERPRETATION

 The factors preferred the most are liquidity i.e 42% as people want
to be prepared for any crisis which may evolve during their life.
Hence they prefer investing such that they can withdraw the funds
whenever the situation arises.

 The remaining 30% of the respondents would like to get high

returns on their investments.

 Around 25% of the respondents are not willing to take any risk in
their investments, they prefer safe investments.

Page | 109
 The remaining 3% of the respondents go for reputed companies as
their preference.

3) Have you ever invested your money in Mutual Fund?

YES 63%
NO 28%
Earlier, now stopped 9%
Table No 6.3

INVESTMENT IN MUTUAL FUNDS

Page | 110
INTERPRETATION

 The major part of the sample taken has invested in the Mutual
Funds. The percentage of respondents investing in mutual funds
are 63%, though they do prefer investing in fixed deposits more
than mutual funds yet they have agreed to take some risk.

 The demand for the mutual funds have increased in the past few
years with many Foreign players entering in the Indian market,
Fidelity, Franklin Templeton, DSP Meryll Lynch to name few.

 Still there are few who are not investing in MF.28% of the
respondents do not invest in mutual funds.

 9% of the respondents said they were investing in the past but

have discontinued.

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 4) Which feature of Mutual Fund allure you most?

Diversification Better return Reduction in Regular Tax Benefit

and safety risk and Income
transaction
cost
18% 33% 16% 18% 15%
Table No 6.4

FEATURE OF MUTUAL FUND

INTERPRETATION

Page | 112
  Majority of the respondents i.e. 33% look for better return and
safety in a mutual fund.

 18% invest in mutual fund for regular income and because of the
diversified investment in different stocks by the asset management
company.

 16% due to reduction in risk and transaction cost and lastly, 15%
invest in mutual funds because of the tax exemptions and benefits
which come with it.

5) In which Mutual Fund have you invested?

UTI SBI MF Reliance Other ICICI HDFC JM MF

Prudential
36% 20% 18% 12% 8% 6% 0%
Table No 6.5

MONEY INVESTED IN

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INTERPRETATION
 In investing in mutual fund people mostly preferred 36% in UTI.

 Most of the respondents go for online purchase of the fund

because that saves a lot of their time and they can conveniently
do it on weekends when they are not working.

 The other investments made were 20% in SBI MF, 18% in

RELIANCE , 12% in OTHER , 8% ICICI PRUDENTIAL ,6% in
HDFC and 0% in JM MUTUAL FUND.

Page | 114
6) When you invest in Mutual Funds which mode of investment will you
prefer?

One Time Investment 18%

Systematic Investment 82% Table No
6.6

MODE OF INVESTMENT PREFERENCE

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INTERPRETATION

 The analysis shows that 82 % of investors prefer to opt for the

systematic investment plan and 18 % invest in one time
investment plan.

 Most of the respondents feel that since they are salaried people
they do not have to worry much about setting aside just a small
portion of their monthly salary for investing in mutual fund.

 so for them systematic investment is a safe bet rather than the

one-time investment wherein they have to invest a lump sum
amount and then they have to worry about liquidity too for their
expenditure.

7) From where do you purchase mutual funds?

Directly from the Brokers only Other Sources Brokers/ Sub

AMC brokers
16% 18% 57% 9%

Page | 116
 Table No 6.7

MODE OF PURCHASE PREFERENCE

INTERPRETATION

 There are many modes through which a mutual fund can be

purchased, like the AMC, the Brokers, the Sub brokers, etc
.
 Investors mostly purchase 57% from other sources.

 18 % brokers only, 16 % directly from the asset management

company and 9% from brokers / sub- brokers.

Page | 117
8) How much Risk are you willing to take?

Moderate 45%
Low 31%
High 24%
Table No 6.8

INTERPRETATION

Page | 118
“The higher the Risk, the more the Profits”. The people need to take the
risk to enjoy the benefits. Some investors were willing to take lower risk
and this was the reason they gave for investing in the MF.
Most of the people would like moderate level of risk in their investments.

9) Which AMC (Asset Management Company) do you prefer the most?

SBI MF Reliance UTI ICICI JM Kotak HDFC

Finance
14% 14% 24% 20% 6% 6% 16%
Table No 6.9

AMC PREFERENCE

INTERPRETATION

The Asset Management Company preferred by the investors are 24% in

UTI , 20% in ICICI , 16 % in HDFC , 14 % in RELIANCE and SBIMF ,
and 6 % in JM Finance and KOTAK
Page | 119
10) Over the long term what do you think is a realistic overall return on
your investment in mutual funds??

4%-6% 5%-7% 7%-9% More than 10%

10% 34% 36% 20%
Table No 6.10

INTERPRETATION

Investors prefer 36% in 7% - 9% , 34% in 5%-7% , 20% in more than

10% and 10% in 4%-6%.

11) Which sector are you investing in Mutual Funds sectors?

Banking funds-2% Power sector- Equity funds- General-24%

2% 10%
Oil and petroleum- Debt funds- Real Estate- Gold funds-30%
8% 10% 14%
Table No 6.11

Page | 120
 INVESTMENT SECTORS

INTERPRETATION

Investors mostly prefer the following sector 30% in GOLD FUND , 24%
in GENERAL , 14 % in REAL ESTATE , 10 % in DIVERCIFICATION IN
EQUITY FUNDS and DEBT FUNDS , 2 % in POWER SECTOR, 8% in
OIL AND PETROLEUM and 2% in BANKING FUNDS.
12) Which type of Mutual funds do you prefer?

Closed Ended Funds 56%

Open Ended Funds 44%

Table No 6.12

Page | 121
INTERPRETATION

The schemes offered in the market are of two types,

closed ended and open ended. The more demand was for the Close
ended funds with a locking period of around 2-3 years. The exit load
refrain the person from quitting earlier.

13) How much percentage of your income you trade in Mutual Funds?

Don’t trade Less than 5% 5-10% More than 10%

9% 46% 34% 11%
Table No 6.13

PERCENTAGE INVESTED FROM INCOME

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INTERPRETATION
 From the survey it was found that from their income the

percentage that they invest in mutual funds is 46 % invest Less

than 5% , 34 % invest 5%-10% , 11% invest more than 10% and
9% of the respondents don’t trade at all.

 Thus it was found that most of the people prefer making safe
investment and so they prefer investing in mutual fund rather than
equities.

 The 9% who did not trade were of the opinion that it was not a
safe option to invest in the market instead they prefer investing in
banks in the form of fixed deposits or post office savings. People
even now are skeptical to take any risks.
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14) What is your primary investment purpose in Mutual fund?
Table No 6.14
Retirement Future Building up a Others
Planning education of corpus charity
children
28% 28% 14% 30%
PRIMARY INVESTMENT PURPOSE

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INTERPRETATION

The primary investment purpose of investors in mutual fund is like that

they invest 30% in Others ,28 % in Retirement Planning and Future
Education Of Children and 14% in Building up a Corpus Charity.

15) How would you like to receive the returns every year?

Dividend Payout Dividend Growth in NAV

Reinvestment
46% 36% 18%
Table No 6.15

WAY OF RETURNS PREFERENCE

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INTERPRETATION
 Investors expected way of returns preference is 46% as Dividend

Payout , 36 % as Dividend Re-investment , and 18% as Growth in

NAV.

 Majority of respondents wanted encashment of their dividend so

that they can invest it in other activities and so they refrained from
re-investing it.

 However there are a good percentage of investors who would not

want to withdraw the dividend but invest it again in the same
mutual fund.

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16) What is your Average investment period?

Less than 3 3-9 Months 9 months- 2 More than 2

months years years
23% 10% 42% 25%
Table No 6.16

AVERAGE INVESTMENT PERIOD

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INTERPRETATION

 The investment period is very important to increase the profits.

 The timing must be right enough to benefit from fluctuations. The

smart investor decides it in advance for how much time he would
be keeping his money in the market and when he should leave
squaring-up.

 Many people consider the investment for 9 months – 2 years as a

right option.

 Still some want to be invested for over 2 years. The least

responded to the 3-9 months period.

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17) How important are tax consideration in your investment
strategy?

Not important Somewhat Very Important Extremely

important Important
8% 48% 32% 12%

Table No 6.17

TAX CONSIDERATION

INTERPRETATION

Investors think in following way:

48% says tax considerations are somewhat important , 32% says very
important , 12% says Extremely important and 8 % says not important at
all.

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18) I plan to begin taking money from my investment in…..
a) 1 year b) 1-2 years
c) 3-5 years d) more than 5 years

1 year 1-2 years 3-5 years More than 5

years
28% 42% 14% 16%
Table No 6.18

INTERPRETATION

The investor expects returns from his investment as 42% in 1-2 years ,
28% in 1 year ,16% in more than 5 year and 14 % in 3-5 years.

19) As I withdraw money from this investment I plan to spend it over a

period of …….

2 years or less 3-5 years 6-10 years More than 10

years
14% 26% 18% 14%
Table No 6.19

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 INTERPRETATION

The investors plan to spend over a time period of 42% in period of 2 year
or less, 26% in 3-5 years, 18% in 6-10 years and 14% in more than
10years.

(20) Generally I prefer an investment with little ups and downs in value
and I am willing to accept the lower returns these investments make.

I Agree I Strongly Agree I Somewhat Agree I Strongly Disagree

30% 20% 40% 10%
Table No 6.20

Page | 131
INTERPRETATION

Investors think in following ways 40% says I somewhat agree , 30% says
I agree , 20% says I strongly agree and 10 % says I strongly disagree.

21) When the market goes down I tend to sell some of my riskier
investment and put the money in safer investment?

I Agree I Strongly Agree I Somewhat Agree I Strongly Disagree

48% 16% 14% 22%

Table No 6.21

Page | 132
INTERPRETATION

Investors mostly sell their riskier investment and put in safer investment
; 48% of investor Agrees , 22% goes for I strongly disagree , 16% says I
strongly Agree , and 14 % says I somewhat agree.

22) Are you satisfied as a mutual Fund investor?

Yes 75%

No 25%

Table No 6.22

Page | 133
INTERPRETATION
 The sample drawn on the probability basis shows that out of 100%
of respondents 75% of the respondents approached were satisfied
with the Mutual Fund investments and 25% are dissatisfied with
the investments
.
 As 75% of the respondents are satisfied with the mutual fund
investments, it can be concluded that the company has undertaken
proper R&D in this aspect.

 The 25% of the respondents who have answered negatively are

the companies who may have not invested in mutual funds.

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23) According to you which things attracts you more for investment in
Mutual Funds?

Promotion (Ads) 5%

Plan Benefits 53%

Brand Name 42%

Table No 6.23

INTERPRETATION

From the Survey it was found that the Investors are more attracted
towards Mutual Fund because of Plan benefits. 53% Investors are
attracted due to Plan Benefits whereas 42% investors attracted due to
Brand Name and only 5% investors attracted due to Promotion Strategy
of Company.

7. FINDING

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 SIP is very helpful in a volatile market. The SIP resolves a dilemma
often facing investors due to ups and downs in the market price.

 Investing through SIP in a mutual fund indubitably is the key

solution in order to avoid or prevent the loopholes of equity
investment and yet, continually enjoy the high returns of
investment.

 However, An SIP could fail to deliver on its proposition of lowering

the average purchase cost, if equity markets rise in a secular
manner.

 Majority of the investors look for better return and safety in a

mutual fund.

 Most of the respondents feel that since they are salaried people
they do not have to worry much about setting aside just a small
portion of their monthly salary for investing in mutual fund so for
them systematic investment is a safe bet.

 It was found that most of the people prefer making safe investment
and so they prefer investing in mutual fund rather than equities.

Page | 136
 The investment period is very important to increase the profits. The
timing must be right enough to benefit from fluctuations.

 Government should see that Mutual Fund companies follow

corporate governance regulations. All mutual fund investors want
transparency.

8. RECOMMENDATION AND SUGGESTION

1. There is no such thing as an ideal mutual fund portfolio that can

suit need and risk appetite of each and every individual. While
there is no dearth of good mutual funds in the market today,
building a portfolio depends on preferences and objectives of each
individual.

Page | 137
2. The factors that come into play include age of the investor , risk
appetite , time at hand to let investment grow, need for money-
immediate or later – and more importantly , the purpose of making
such an investment. Broadly – we have ‘Aggressive’, ‘moderate’
and ‘Conservative’ portfolios where each of them incorporates a
different genre of mutual fund schemes to suit varying needs.

3. An individual should work towards building a stable portfolio which

includes large cap funds to provide your portfolio required stability,
funds with proven track record and maybe some aggressive funds
to spice up your portfolio. Therefore it is advisable for the investors
to understand their risk profile and invest accordingly.

4. Mutual fund companies should dispatch their annual report in time

to their investors so that the investors are informed about the
company’s financial position. This will help the investor to know the
status of their investment.

5. It is suggested that the investors should not consider only one or

two factors for investing in mutual fund but they should consider
other factors such as higher return, degree of transparency,

Page | 138
 efficient service, fund management and Reputation of mutual fund
in selection of mutual funds.

9. CONCLUSION
A Questionnaire was given to respondents. People save in Mutual Funds
for different purposes i.e. children education, house construction,
retirement planning and tax planning, investing in gold/silver, shares and
debenture, fixed deposit, banking fund and real estate. it is the need of
hour in India to popularize the pension funds which have greater
potential in the years to come. Mutual funds companies should introduce
new pension funds scheme for investors. In case of the relationship
between monthly income and purpose of savings, a unique trend has
emerged. As the income increases, priority is given to tax planning.
Majority of the respondents gave the first preference to children
education followed by retirement planning.

Page | 139
During the period of study, it was found that the majority of the investors
invest their money through the SIP plan scheme as they found it less
burdensome and easy to keep aside a few amount from their monthly
salary. This indicates that more efforts have to be made by the Mutual
Funds to create awareness among the investors regarding the earnings
potential of other schemes. The influencing factors for selection of
Mutual Fund scheme in India are High Returns, Net Asset Value, Market
Trends, Tax Policy, and Reputation of Mutual Fund in their order of
priority. Most of investors prefer to invest their money in open ended
schemes of Mutual Funds.

Government should see that Mutual Fund companies follow corporate

governance regulations. All mutual fund investors want transparency.
Strict regulations should be enforced by SEBI with regard to Corporate
Governance. Thus mutual funds should build investors confidence
through schemes meeting the diversified needs of investors, speedy
disposal of information, improved transparency in operation, better
customer service and assured benefits of professionalism.

Page | 140
 10. BIBLIOGRAPHY

Books and Journals:

 International journal of Business Economics and Management

Research volume 2, Issues 3 (March 2011)
 Security Analysis and Portfolio Management-Fischer & Gordon
 Investment Analysis and Portfolio Management- Prasanna
Chandra
 A Comprehensive approach on Mutual Fund- Dr.Peeyush Ranjan
Agarwal

Websites:

 http://amfiindia.com
 http://mutualfundindia.com
 http://valueresearchonline.com
 http://indianjournals.com
 http://www.theequitymarkets.com
 http://www.moneycontrol.com
 http://www.birlasunlife.com
 http://www.kotakmahindra.com
Page | 141
  http://www.iciciprudential.com
 http://www.hdfcmutualfund.com

Magazines and Newspapers:

 Newspapers(Economic Times, Mint paper, Business Standard)

 Magazines (Business World)

11. ANNEXURE

(1) Name:
(2) Gender?
a) Male
b) Female
(3) Age?
a) 18 to 25
b) 25 to 35
c) 35 and above
(4) Have you ever invested your money in Mutual Fund?
a) Yes b) No
(5) When you invest in Mutual Funds which mode of investment will you
prefer?
a) One Time Investment b) Systematic Investment
(6) What is your Average investment period?
a) Less than 3 months b) 3 to 9 months
c) 9 months to 2 year d) more than 2 year
(7) What type of investment you prefer the most?
a) Savings a/c b) Fixed Deposit a/c c) Insurance
d) Mutual Funds e) Post Office f) Shares/ Debentures
g) Gold/ Silver h) Real Estate i) PPF
(8) How much Risk are you willing to take?
a) High b) Low c) Moderate
(9) Over the long term what do you think is a realistic overall return on
your investment?
a) 4%-6% b) 5%-7%
c) 7%-9% d) more than 10%
(10) Which type of Mutual funds do you prefer?
Page | 142
 a) Open Ended Schemes b) Closed Ended Schemes
(11) While Investing your money, which factor you prefer the most?
a) Liquidity b) Low Risk c) High Returns d) Company Reputation
(12) Which feature of Mutual Fund allure you most?
a) Diversification b) Better Return and Safety c) Regular Income
d) Reduction in Risk and Transaction Cost e) Tax Benefit
(13) In which Mutual Fund have you invested?
a) SBIMF b) UTI c) HDFC d) Reliance
e) ICICI Prudential f) JM Mutual Funds g) Others
(14) From where do you purchase mutual funds?
a) Directly from the asset management company b) Brokers only
c) Brokers/ Sub Brokers d) Other Sources
(15) Which AMC (Asset Management Company) do you prefer the
most?
a) SBIMF b) UTI c) HDFC d) Reliance
e) ICICI f) JM Finance g) Kotak
(16) Which sector are you investing in Mutual Funds sectors?
a) General b) Oil & Petrolium c) Gold Funds
d) Diversification Equity Funds e) Power Sector f) Debt Funds
g) Banking Funds h) Real Estate
(17) How much percentage of your income you trade in Mutual Funds?
a) Don’t Trade b) Less than 5% c) 5-10% d) More than 10%
(18) What is your primary investment purpose in Mutual fund?
a) Retirement Planning b) Building up a corpus charity
c) Future Education of Children d) Others
(19) How would you like to receive the returns every year?
a) Dividend Payout b) Dividend Re-investment c) Growth in NAV
(20) How important are tax consideration in your investment strategy?
a) Not Important at all b) Somewhat Important
c) Very Important d) Extremely important
(21 ) I plan to begin taking money from my investment in…..
a) 1 year b) 1-2 years
c) 3-5 years d) more than 5 years
(22) As I withdraw money from this investment I plan to spend it over a
period of …….
a) 2 years or less b) 3-5 years
c) 6-10 years d) more than 10 years
(23) Generally I prefer an investment with little ups and downs in value
and I am willing to accept the lower returns these investments make.
Page | 143
 a) I Agree b) I Strongly Agree
c) I Somewhat Agree d) I Strongly Disagree
(24) When the market goes down I tend to sell some of my riskier
investment and put the money in safer investment?
a) I Agree b) I Strongly Agree
c) I Somewhat Agree d) I Strongly Disagree
(25) Are you satisfied as a mutual Fund investor?
a) Yes b) No
(26) According to you which things attracts you more for investment in
Mutual Funds?
a) Brand Name b) Plan Benefits c) Promotion (Ads)
Guide Number :- MBAGJ0067
Mobile Number :- 9724214353
Guide Name :- SUMAN BANERJEE

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