Project on Mf

8/2/2019 Project on Mf

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1.1INTRODUCTIONThe research methodology is the conceptual structure within which the research is conducted.

1.2 TITLE:

A COMPREHENSIVE STUDY ON MUTUAL FUND.

1.3 NEED AND SCOPE OF THE STUDY:

A big boom has been witnessed in Mutual Fund Industry in recent times. A large number of newplayers have entered the market and trying to gain market share in this rapidly improving market.

As stated earlier, a mutual fund is nothing but a pool of the investors fund. The special feature

of a mutual fund is that the contributors and the beneficiaries of the fund are one and the sameclass of people i.e., investors. Nobody else can claim that fund. Since the investors themselvescontribute to the pool of fund and enjoy it and its fruits, the term Mutual have been employed.

1.4 OBJECTIVES OF THE STUDY:

1. To get insight knowledge about mutual fund

2. To know the importance of mutual fund

3. To know the mutual fund performance on present market

4. To know the awareness of mutual fund among different groups of investors

1.5 LIMATITATION OF THE STUDY

1. It is one time study.

2. Some of the persons were not so responsive.

3. Possibility of error in data collection because many of investors may have not given actualanswers of my questionnaire.


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Mutual funds have become a hot favorite of millions of people all over the world. The drivingforce of mutual fund is the safety of the principal guaranteed, plus the added advantage of

capital appreciation together with the income earned in the form of interest or dividend. Peopleprefer Mutual Funds to bank deposits, life insurance and even bond because with a little money,

they can get into the investment game. One can own string blue chips like ITC, TISCO, Relianceetc., through mutual funds. Thus, mutual funds act as a gateway to enter into big companieshitherto inaccessible to an ordinary investor with his small investment.

In the current economic scenario interest rates are falling and fluctuation I the share market haveput investors in confusion. One finds it difficult to take decision on investment. This is primarily,because of investments are risky in nature and investors have to consider various factors beforeinvesting in investment avenues.

Over the past decades mutual funds have grown intensely in popularity and have experienced aConsiderable growth rate. Mutual funds are popular because they make it easy for small

investors to invest their money in a diversified pool of securities. As the mutual fund industryhas evolved over the years, there have arisen many questions about the nature of operations andcharacteristics of these funds.

Mutual funds are considered as one of the best available investments as compare to others theyare very cost efficient and also easy to invest in, thus by pooling money together in a mutualfund, investors can purchase stocks or bonds with much lower trading costs than if they tried todo it on their own. But the biggest advantage to mutual funds is diversification, by minimizingrisk & maximizing returns.

The study will guide the new investor who wants to invest in equity and mutual fund schemesby providing knowledge about how to measure the risk and return of particular scrip or mutualfund scheme. Mutual fund industry today is one of the most preferred investment avenues inIndia. Like all investment, they also carry certain risks. The investors compare the risks &expected fields after adjustment to tax on various instrument while taking investments decision.Mutual fund is the better investment plan Stock markets have been one of the major avenues forinvesting. Investors have been focusing their attention mostly on large capitalization stocks.They used to invest most of their money only in large capitalization stocks. But, lately it hasbeen observed that few medium capitalization stocks have been giving returns better than largecapitalization stocks.

Portfolio manager evaluates his portfolio performance and identifies the source of strength andweakness. The evaluation of portfolio provides a feed back about the performance to evolvebetter management strategy. Even though evaluation of portfolio performance is considered to bethe last stage of investment process, it is a continuous process. The managed portfolios arecommonly known as mutual funds. Various managed portfolio are prevalent in the capital market.Each shareholder participates in the gain or loss of the fund. Units are issued and can beredeemed as needed. The funds Net Asset value (NAV) is determined each day.


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Investments in securities are spread across a wide cross-section of industries and sectors and thusthe risk is reduced. Diversification reduces the risk because all stocks may not move in the same

Direction in the same proportion at the same time. Mutual fund issues units to the investors in

accordance with quantum of money invested by them. Investors of mutual funds are known asunit holders.

An investment vehicle that is made up of a pool of funds collected from many investors for thepurpose of investing in securities such as stocks, bonds, money market instruments and similarassets. Mutual funds are operated by money managers, who invest the fund's capital and attemptto produce capital gains and income for the fund's investors. A mutual fund's portfolio isstructured and maintained to match the investment objectives stated in its prospectus.

A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of amutual fund as a company that brings together a group of people and invests their money instocks, bonds, and other securities. Each investor owns shares, which represent a portion of theholdings of the fund.

2.1 Meanings:

Mutual Funds Definition refers to the meaning of Mutual Fund, which is a fund, managed by aninvestment company with the financial objective of generating high Rate of Returns. These assetmanagement or investment management companies collects money from the investors andinvests those money in different Stocks, Bonds and other financial securities in a diversifiedmanner. Before investing they carry out thorough research and detailed analysis on the market


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Conditions and market trends of stock and bond prices. These things help the fund mangers tospeculate properly in the right direction.

Mutual Fund A mutual fund is a professionally managed type of collective investment scheme

that pools money from many investors and invests it in stocks, bonds, short-term money marketinstruments, and/or other securities.

2.3 MUTUAL FUND-CONCEPT

A mutual fund is a professionally managed type of collective investment scheme that poolsmoney from many investors and invests it instocks, bonds, short-term money market instruments,and other securities. The mutual fund has a fund manager who trades the pooled money on aregular basis. The net proceeds or losses are then typically distributed to the investors annually.According to SEBI (Mutual Fund) Regulations 1993, Mutual Fund is "a fund established in theform of a trust by a sponsor to raise money by the trustees through the sale of units to the public

under one or more schemes for investing securities in accordance with these regulations.AMutual Fund is a trust that pools the savings of a number of investors who share a commonfinancial 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 capitalappreciations realized are shared by its unit holders in proportion to the number of units ownedby them. Thus Mutual funds are considered as one of the best available investments as compareto others they are very cost efficient and also easy to invest in, thus by pooling money together ina mutual fund, investors can purchase stocks or bonds with much lower trading costs than if theytried to do it on their own. But the biggest advantage to mutual funds is diversification, byminimizing risk & maximizing returns.

Hence it the most suitable investment for the common man as it offers an opportunity to invest ina diversified, professionally managed basket of securities at a relatively low cost. When aninvestor subscribes for the units of a mutual fund, he becomes part owner of the assets of thefund in the same proportion as his contribution amount put up with the corpus (the total amountof the fund). Mutual Fund investor is also known as a mutual fund shareholder or aunitholder.Any change in the value of the investments made into capital market instruments(such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAVis defined as the market value of the Mutual Fund scheme's assets net of its liabilities, which isdetermine every day. NAV of a scheme is calculated by dividing the market value of scheme'sassets by the total number of units issued to the investors.


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OPERATION OF MUTUAL FUND

2.4 ORGANISATION OF MUTUAL FUND


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There are many entities involved and the diagram below illustrates the organizational set

up of a Mutual fund:

Sponsor:

The sponsor is the promoter of the mutual fund. The sponsor establishes the Mutual fund&registers the same with SEBI. He appoints the trustees, Custodians & the AMC with priorapproval of SEBI, & in accordance with SEBI regulations. He must have at least five year trackrecord of business interest in the financial markets. Sponsor must have been profit making in atleast three of the above five years. He must contribute at least 40% of the capital of the AMC.

Trustees:

The Mutual Fund may be managed by a Board of Trustees of individuals, or a trust companyacorporate body. Most of the funds in India are managed by board of trustees. While the board oftrustees is governed by the provisions of the Indian trust act, where the trustee is the corporate

body, it would also be required to comply with the provisions of the companies act, 1956. Theboard of trustee company, as an independent body, act as protector of the unit-holders interest.The trustees dont directly manage the portfolio of securities. For this specialist function, theyappoint an AMC. They ensure that the fund is managed by AMC as per the defined objectives&in accordance with the trust deed & SEBI regulations.

Asset Management Company (AMC):

The role of an Asset management companies is to act as the investment manager of the trust.They are the ones who manage money of investors. An AMC takes decisions, compensatesinvestors through dividends, maintains proper accounting & information for pricing of units,calculates the NAV, & provides information on listed schemes. It also exercises due diligenceoninvestments & submits quarterly reports to the trustees. AMCs have been set up in variouscountries internationally as an answer to the global problem of bad loans.

Types of AMCs in Indian Context:

The following are the various types of AMCs we have in India:AMCs owned by banks.AMCsowned by financial institutions.AMCs owned by Indian private sector companies.AMCs ownedby foreign institutional investors.AMCs owned by Indian & foreign sponsors.

Custodian:

Often an independent organization, it takes custody all securities & other assets of mutual fund.Its responsibilities include receipt & delivery of securities collecting income-distributingdividends, safekeeping of the unit & segregating assets & settlements between schemes. Asponsor then hires an asset management company to invest the funds according to the investmentobjective. It also hires another entity to be the custodian of the assets of the fund &perhaps thethird one to handle registry work for the unit holder of the fund.


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Agent(R & T Registrars & Transfer Agent):

The Registrars & Transfer Agents(R & T Agents) are responsible for the investor servicingfunction, as they maintain the records of investors in mutual funds. They process investor

applications; record details provide by the investors on application forms; send out to investorsdetails regarding their investment in the mutual fund; send out periodical information on theperformance of the mutual fund; process dividend payout to investor; incorporate changes ininformation as communicated by investors; & keep the investor record up-to-date, by recordingnew investors & removing investors who have withdrawn their funds.

SEBISecurities and Exchange Board of India:

It is a board (autonomous body) created by the Government of Indian 1988 and given statutoryform in 1992 with the SEBI Act 1992 with its head office atMumbai.SEBI acts as the nodalagency for addressing complaints of the investor, if they are not solved directly between the

parties concerned, or if the investor is not happy with the response.SEBI has listed certaincategories of grievances for which investors can file complaints with it. These include: on-receiptof refund order or allotment advice in case of investment in IPO's, FPO's and rightsissuesNon-receipt of dividend from listed companies on-receipt of share certificates after transfer fromlisted companies on-receipt of debentures after transfer or non-receipt of interest or principal onredemption andnon-receipt of interest on delayed repayment on-receipt of rights offer letterBrokers -Complaints against brokers stem from disputes over brokerage rates, non-receipt ofpurchased shares or payments for sold shares, auction of shares sold and delivered timely, butdelay at broker's end, etc Complaints against securities lending intermediaries may arise due tonon-receipt of shares lent by the investor or interest thereupon, or non-receipt of funds uponreturn of borrowed shares or excessive interest charged upon borrowing. Complaints againstmerchant bankers, registrar and transfer agents, bankers to issues and underwriters generallystem from problems in primary market issues, like non-disclosures, service issues etc.Complaintsagainst securities exchanges, clearing or settlement houses or depositories - these concernirregularities or failure to act diligently, Derivative trading - Investors sign legal papersempowering the broker to trade on their behalf, without proper knowledge and wake up onseeing their margin money eroded due to sustained losses.


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2.5 METHOD OF MEASURING MUTUAL FUND:

Compounded Average Annual Return Method: -

This method is basically used for calculating the return for more than 1 year. In this methodreturn is calculated with the following formula: A = P X (1 + R / 100) N Where P = Principalinvested = maturity value = period of investment in years = Annualized compounded interest ratein %R = {(Nth root of A / P)1} X 100E. g: If amount invested is Rs. 100 & in the end we getreturn of Rs. 200 & period of Investment is 10 years then annualized compounded return is200 =100 (1 + R / 100) 10Rate= 7.2 %

Total Return when dividend is reinvested:

This method is also called the return noninvestment (ROI) method. Here, the dividends are

reinvested into the scheme as soon as they are received at the then prevailing NAV.Ex-dividendNAV = [(Value of holdings at the end of the period/ value of the holdings atthe beginning)1)*100]E.g. an investor buys 100 units of a fund at Rs. 10.5 on January 1, 2007. On June30,2007. He receives dividends at the rate of 10%. The ex-dividend NAV was Rs. 10.25. OnDecember 31, 2007, the funds NAV was Rs. 12.25.Value of holdings at the beginning period=10.5*100= 1050Number of units re-invested = 100/10.25 = 9.756End period value of investment= 109.756*12.25 = 1344.51Return on Investment= ((1344.51/1050)-1)*100= 28.05%

Total Return Method:

The total return method takes into account the dividends distributed by the mutual fund, and addsit to the NAV appreciation, to arrive at returns.Total Return=(Dividend distributed + Change in NAV)/ NAV at the start X 100Ex: If NAV ofone fund changes from Rs.20 to Rs.22 in 6 months if in between dividend of Rs. 4 has beendistributed thenTotal Return= {4 + (2220)}/20 X 100 = 30%

Simple Annual Return Method:

Converting a return value for a period other than one year, into a value for one year, is called asanimalization. In order to annualize a rate, we find out what the return would before a year, if the

return behaved for a year, in the same manner it did, for any other fractional period.Ex: If NAVof one fund changes from Rs.20 to Rs.22 in 6 months thenAnnual Return= (2220) /20 X 12/6 X 100 = 20%

Absolute Return Method:-

Percentage change in NAV is an absolute measure of return, which finds the NAV appreciationbetween two points of time, as a percentage.Ex: If NAV of one fund changes from Rs.20 toRs.22 in 12 months then


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Absolute return= (2220)/20 X 100 =10%SEBI requires that the fund must ensure that repurchase price is not lower than 93% of NAV(95% in the case of a closed-fund). On the other side, a fund may sell new units at aprice that isdifferent from the NAV, but the sale price cannot be higher than 107 % of NAV. Also the

difference between the repurchase price and the sale price of the unit is not permitted to exceed7% of the sale priceUnits Sold or Redeemed.Other Assets and Liabilities.Valuation of all Investment Securities.Purchase or Sale of Investors Securities. Funds NAV is affected by Pay: Other PayablesLia: Other Liabilities (Custodian and

Management Fees)

COMPUTATION OF NAV:

The net assets represent the market value of assets, which belong to the investors, on agivendate.Net Asset Value or NAV of a mutual fund is the value of one unit of investment in thefund, in net asset terms.Following are the regulatory requirements and accounting definitions laid down bySEBI:NAV =Net Asset of the Scheme / Number of Units Outstanding= MVL+ REC+ AI+ AssetAEPayLiaNo .of Units Outstanding as at the NAV date Where MVL: Market value of InvestmentREC:Receivables: Other Accrued Income Asset: Other Assets (Dividend yet to be received)AE:Accrued ExpensesIf someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount eachmonth.

INVESTMENT STRATEGIES:

Systematic Investment Plan:

A fixed sum is invested each month on a fixed date of a month. Payment is made through postdated cheques or direct debit facilities. The investor gets fewer units when the NAVis high andmore units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA)

Systematic Transfer Plan:

Under this an investor invests in debt oriented fund and gives instructions to transfer afixed sum,

at a fixed interval, to an equity scheme of the same mutual fund.

Systematic Withdrawal Plan:

If someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount eachmonth.


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Portfolio

A collection of various company shares, fixed interest securities or money-market instruments.People may talk grandly of 'running a portfolio' when they own a couple of shares but thecharacteristic of a serious investment portfolio is diversity. It should show a spread of

investments to minimize risk - brokers and investment advisers warn against 'putting all youreggs in one basket'.

Portfolio Management

Portfolio management involves deciding what assets to include in the portfolio, given the goalsof the portfolio owner and changing economic conditions. Selection involves deciding whatassets to purchase, how many to purchase, when to purchase them, and what assets to divest.These decisions always involve some sort of performance measurement, most typically expectedreturn on the portfolio, and the risk associated with this return (i.e. the standard deviation of thereturn).

Portfolio Evaluation

Portfolio evaluation refers to the evaluation of the performance of the portfolio. It is essentiallythe process of comparing the return earned on a portfolio with the return earned on one or moreother portfolios or on a benchmark portfolio. Portfolio evaluation essentially comprises twofunctions, performance measurement and performance evaluation.

Equity Funding

The term equity funding is the exchange of money for a share of business. This allows you toobtain funds for your business without incurring any debt. Selling equity means taking oninvestors. Many small businesses raise equity by bringing in investors to make their businesssucceed and get a return on investment.

Debt Funding

The term debt funding refers to money that it borrowed and has to be repaid over a period oftime; this is normally re-paid with interest. This debt funding can either be short term or longterm. In a short term sense the full amount to be repaid is done so within a year. In a long termsense the repayments will go on for over a year.


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Advantages of mutual fund

Portfolio Diversification

Professional management

Reduction / Diversification of Risk

Liquidity

Flexibility & Convenience

Reduction in Transaction cost

Safety of regulated environment

Choice of schemes

Transparency

Disadvantages of mutual fund

No control over Cost in the Hands of an Investor

No tailor-made Portfolios

Managing a Portfolio Funds

Difficulty in selecting a Suitable Fund Scheme


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REVIEW OF LITERATURE

Industry Scenario Mutual fund provides an opportunity for an investor. The benefit of

diversification and the advantages of the return of capital market with less risk. Mutual fund'sbirth place is America. It was registered in 1882, until the beginning of foreign company byholding establishing their business in India. UTI was only mutual funds Company by holdingalmost all entire market shares.

In simple mutual fund in India was a monopoly market for UTI. Why do investors pour money inUnit trust funds? The whole point is to leave the direct investing; stock or bond picking decisionto the professionals, as they don't have the time, knowledge, skills and expertise to manage themoney themselves. When selecting a unit trust fund, investors tend to trust and rely on the fund'strack record. It is course greatly determined by the investments mangers behind the fund. Wefrequently have expectations of events in our lives. We expect the traffic to be smooth because of

school holidays. We also expect that when it rains heavily, the traffic will be bad, based onhistorical experience.

It's no different for the fund managers. They set their expectations of markets and plan theirinvestments strategies and decisions accordingly. Expectations are constantly built into marketsespecially after an anticipated event (economic or otherwise) to explain why a particular stock orthe market in general went up or down.

The explanation for this behavior is pretty simple. Investors, especially professional investors,are rational human beings. They set their expectations on how things are going to pan out andthen make key investment decisions based on these expectations.

A Successful fund manager must be creative, innovative and understand all the essentialfinancial concepts like the cost of capital, price earnings ratio, dividend yields, discounted cashflows and portfolio theory. With these concepts, he supposedly can derive valuations of stock.Then, he buys an undervalued stock and sells it becomes overvalued.

One must have an interest in markets not only when they're hot but also when they're cold. Agood fund manager has the ears of a fox and is able to figure out the huge amount of noisecoming from the various markets in order to pick the right pieces of pies. The experience of thefund manager plays a large part in fund managing. Experience gives a fund manager the materialwith to mix and match hypothesis. While history rarely repeats itself, as the timing may be off orthe reaction may be more intense, it gives a guide with to forecast future outcomes.

The fund manager should be rational about his view of the markets or a particular stock, draw aconclusion and instinctively act on it. In more difficult situation, a fund manager must keep anopen mind; markets can go either way and the fund manager is merely waiting for theappropriate data to confirm or deny his hypothesis.


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A great fund can sense when theyre in sync with the market; when they feel that the 'force' iswith them. However, even the best fund manager can lose his hearing and sight just when hethinks he has skills down pat. A successful fund manager is one who is able to pick to himself upand start searching again for the right decision. Its an art to be able to hold strongly onto one's

beliefs even through paper losses and volatility.

A good fund manager has to know macroeconomics and valuation methodologies well, but it'sstill not enough. He has to be able to make expectations well. In other words, he has to anticipatewhat the market, comprising all investors and market participants, will focus on next, extrapolatethe outcome and position his portfolio ahead of time for that out come to materialize.

This must be done over and over again and often is revised because the fund manager willsometimes be wrong. Markets will always test a fund manager's conviction or expectations. Agreat fund manager will understand rational expectations in markets and constantly feel its pulses.Managing money successfully is purely a form of art.

A mutual fund is just the connecting bridge or a financial intermediary that allows a group ofinvestors to pool their money together with a predetermined investment objective. The mutualfund will have a fund manager who is responsible for investing the gathered money into specificsecurities (stocks or bonds). When you invest in a mutual fund, you are buying units or portionsof the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.Mutual funds are considered as one of the best available investments as compare to others theyare very cost efficient and also easy to invest in, thus by pooling money together in a mutualfund, investors can purchase stocks or bonds with much lower trading costs than if they tried todo it on their own. But the biggest advantage to mutual funds is diversification, by minimizingrisk & maximizing returns.

Mutual Fund like most developed and developing countries the mutual fund cult has beencatching on in India. There are various reasons for this. Mutual funds make it easy and lesscostly for investors to satisfy their need for capital growth, income and/or income preservation.And in addition to this a mutual fund brings the benefits of diversification and moneymanagement to the individual investors, providing an opportunity for the financial success thatwas once available only to a select few.

Understanding Mutual funds is easy as their such a simple concepts: a mutual fund is a companythat pools the of money of many investorsits shareholdersto invest in a variety of differentsecurities. Investments may be in stock, bonds, money market security or some combination ofthese. Those securities are professionally managed on behalf of the shareholder, and eachinvestor holds a pro rata share of the portfolioentitled to any profits when the securities aresold, but subject to any losses in value as well.

For the individual investors, mutual funds provides the benefits of having someone else manageyour investments and diversify your money over many different securities that may not beavailable or affordable to you otherwise. Today, minimum investment requirements on manyfunds are low enough that even the smallest investors can get started in mutual funds.


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A mutual fund by its very nature is diversifiedits assets are invested in many differentsecurities. Beyond that, there are many different types of mutual funds with different objectivesand levels of growth potential, furthering your chances to diversification.

Mutual fund industry in India began with setting up of Unit Trust of India (UTI) in 1964 by thegovernment of India. During last 39 years UTI has grown to be a dominant player in the industry.The UTI is governed by a special legislation, the Unit Trust of India Act 1963. In 1987 publicsector banks and insurance companies were permitted to set up mutual funds and accordingly in1987 six public sectors banks have set up mutual funds. Also the two insurance companies LICand GIC established the mutual funds. Securities Exchange Board of India (SEBI) formulated themutual fund regulation in 1993, which for the first time established a comprehensive regulatoryframework for the mutual fund industry. Since then several mutual funds have been set up theprivate and joint sectors.

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 asshares, debentures and other securities. The income earned through these investments and thecapital appreciations realized are shared by its unit holders in proportion to the number of unitsowned by them. Thus a Mutual Fund is the most suitable investment for the common man as itoffers an opportunity to invest in a diversified, professionally managed basket of securities at arelatively low cost.

The SEBI (MF) Regulations, 1993 defines mutual fund as A fund established in the form of a

trust by a sponsor to raise monies by the trustees through the sale of units to the public under oneor more schemes for investing in securities in accordance with these regulations.

What is mutual fund?

A mutual fund collects the savings from small investors, invest them in government and othercorporate securities and earn income through interest and dividends, besides capital gains. Itworks on the principle of small drops of water make a big ocean

A mutual fund is just the connecting bridge or a financial intermediary that allows a group ofinvestors to pool their money together with a predetermined investment objective. The mutualfund will have a fund manager who is responsible for investing the gathered money into specificsecurities (stocks or bonds). When you invest in a mutual fund, you are buying units or portionsof the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.Mutual funds are considered as one of the best available investments as compare to others theyare very cost efficient and also easy to invest in, thus by pooling money together in a mutualfund, investors can purchase stocks or bonds with much lower trading costs than if they tried todo it on their own. But the biggest advantage to mutual funds is diversification, by minimizingrisk & maximizing returns.

It works principle of small drops of water make a big ocean. For instance, if one has Rs 1000 to

invest, it may not fetch very much on its own .But when it is pooled with Rs.1000 each from alot of other people, then, one could create a big fund large enough to invest in a wide varieties


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of shares and debentures on a commanding scale and thus, to enjoy the economies of large scaleoperations. Hence, a mutual fund is nothing but a form of collective investment. It is formed bythe coming together of a number of investors who transfer their surplus funds to a professionallyqualified organization to manage it. To get the surplus funds from investors, the fund adopts a

simple technique. Each fund is divided into a small fraction called units of equal value. Eachinvestor is allocated units in proportion to the size of his investment. Thus, every investor,whether big or small, will have a stake in the fund and can enjoy the wide portfolio of theinvestment held by the fund. Hence, mutual funds enable millions of small and large investors toparticipate in and derive the benefit of the capital market growth.

Mutual fund is a trust that pools the savings of a number of investors who share a commonfinancial goal. This pool of money is invested in accordance with a stated objective. The jointownership of the fund is thus Mutual, i.e. the fund belongs to all investors. The money thuscollected is then invested in capital market instruments such as shares, debentures and othersecurities. The income earned through these investments and the capital appreciations realized

are shared by its unit holders in proportion the number of units owned by them. Thus a MutualFund is the most suitable investment for the common man as it offers an opportunity to invest ina diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fundis an investment tool that allows small investors access to a well-diversified portfolio of equities,bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units areissued and can be redeemed as needed. The funds Net Asset value (NAV) is determined each

day.

Investments in securities are spread across a wide cross-section of industries and sectors andthus the risk is reduced. Diversification reduces the risk because all stocks may not move in thesame direction in the same proportion at the same time. Mutual fund issues units to the investorsin accordance with quantum of money invested by them. Investors of mutual fund are known asunit holders.

Definition refers to the meaning of Mutual Fund, which is a fund, managed by an investmentcompany with the financial objective of generating high Rate of Returns. These assetmanagement or investment management companies collects money from the investors andinvests those money in different Stocks, Bonds and other financial securities in a diversifiedmanner. Before investing they carry out thorough research and detailed analysis on the marketconditions and market trends of stock and bond prices. These things help the fund managers tospeculate properly in the right direction


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3.2 History of mutual fund

The first mutual funds were established in Europe. One researcher credits a Dutch merchant withcreating the first mutual fund in 1774. The first mutual fund outside the Netherlands was the

Foreign & Colonial Government Trust, which was established in London in 1868. It is now theForeign & Colonial Investment Trust and trades on the London stock exchange.Mutual funds were introduced into the United States in the 1890s.They became popular duringthe 1920s. These early funds were generally of the closed-end type with a fixed number of shareswhich often traded at prices above the value of the portfolio.

The first open-end mutual fund with redeemable shares was established on March 21, 1924. Thisfund, the Massachusetts Investors Trust, is now part of the MFS family of funds. However,closed-end funds remained more popular than open-end funds throughout the 1920s. By 1929,open-end funds accounted for only 5% of the industry's $27 billion in total assets.After the stock market crash of 1929, Congress passed a series of acts regulating the securities

markets in general and mutual funds in particular. The Securities Act of 1933 requires that allinvestments sold to the public, including mutual funds, be registered with the Securities andExchange Commission and that they provide prospective investors with a prospectus thatdiscloses essential facts about the investment. The Securities and Exchange Act of 1934 requiresthat issuers of securities, including mutual funds, report regularly to their investors; this act alsocreated the Securities and Exchange Commission, which is the principal regulator of mutualfunds. The Revenue Act of 1936 established guidelines for the taxation of mutual funds, whilethe Investment Company Act of 1940 governs their structure.

When confidence in the stock market returned in the 1950s, the mutual fund industry began togrow again. By 1970, there were approximately 360 funds with $48 billion in assets. Theintroduction of money market funds in the high interest rate environment of the late 1970sboosted industry growth dramatically. The first retail index fund, First Index Investment Trust,was formed in 1976 by The Vanguard Group, headed by John Bogle; it is now called theVanguard 500 Index Fund and is one of the world's largest mutual funds, with more than $100billion in assets as of January 31, 2011.

Fund industry growth continued into the 1980s and 1990s, as a result of three factors: a bullmarket for both stocks and bonds, new product introductions (including tax-exempt bond, sector,international and target date funds) and wider distribution of fund shares. Among the newdistribution channels were retirement plans. Mutual funds are now the preferred investmentoption in certain types of fast-growing retirement plans, specifically in 401(k) and other definedcontribution plans and in individual retirement accounts (IRAs), all of which surged in popularityin the 1980s. Total mutual fund assets fell in 2008 as a result of the credit crisis of 2008.In 2003, the mutual fund industry was involved in a scandal involving unequal treatment of fundshareholders. Some fund management companies allowed favored investors to engage in latetrading, which is illegal, or market timing, which is a practice prohibited by fund policy. Thescandal was initially discovered by then-New York State Attorney General Eliot Spitzer andresulted in significantly increased regulation of the industry.


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At the end of 2010, there were over 15,000 mutual funds of all types in the United States withcombined assets of $13.1 trillion, according to the Investment Company Institute (ICI), anational trade association of investment companies in the United States. The ICI reports thatworldwide mutual fund assets were $24.7 trillion on the same date.

Mutual funds play an important role in U.S. household finances. At the end of 2010, theyaccounted for 23% of household financial assets. Their role in retirement planning is particularlysignificant. Roughly half of assets in 401 plans and individual retirement accounts were investedin mutual funds.

3.3 History of Mutual Funds in India:

Mutual Fund is an instrument of investing money. Nowadays, bank rates have fallen down andare generally below the inflation rate. Therefore, keeping large amounts of money in bank is nota wise option, as in real terms the value of money decreases over a period of time.One of the options is to invest the money in stock market. But a common investor is not

informed and competent enough to understand the intricacies of stock market. This is wheremutual funds come to the rescue.

A mutual fund is a group of investors operating through a fund manager to purchase a diverseportfolio of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in. Bypooling money together in a mutual fund, investors can purchase stocks or bonds with muchlower trading costs than if they tried to do it on their own. Also, one doesn't have to figure outwhich stocks or bonds to buy. But the biggest advantage of mutual funds is diversification.Diversification means spreading out money across many different types of investments. Whenone investment is down another might be up. Diversification of investment holdings reduces therisk tremendously.

The end of millennium marks 36 years of existences of mutual funds in this country. The ridethrough these 36 years is not been smooth. Investors opinion is still divided. While some are for

mutual funds others are against it.

UTI commenced its operation from July 1964. The impetus for establishing a formal institutioncame from the desire to increase propensity of the middle and lower groups to save and invest.UTI came into existence during a period market by great political and economical uncertainty inIndia. With war on borders and economic turmoil that depressed the financial market,entrepreneurs were hesitant to enter capital market. The already existing companies found itdifficult to raise fresh capital, as investors did not respond adequately to new issues.

UTI commenced its operation from July 1964 With a view to encouraging savings andinvestments and participations in the income, profits and gains accruing to the corporation fromthe acquisition, holding management and disposal of securities. Different provisions of the UTI

Act laid down the structure of management, scope of business, power and function of the Trustas well as accounting, disclosures and regulatory requirements for the trust.


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year 1999 saw immense future potential and developments in this sector. This year signaled theyear of resurgence of Mutual funds and the regaining of investors confidence in these mutualfunds. This time around all the participants are involved in the revival of the funds, the AMC's,

the unit holders. The other related parties. However, the sole factor that gave life to the revival ofthe funds was the Union Budget.

Mutual fund is the better investment plan brought a large number of changes in the on onestroke. An insight of the Union Budget on Mutual funds taxation in provided later.The fund started to regulate them and was all out on winning and trust and confidence of theinvestors under the agencies of the ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI).The quest to attract investors extended beyond just new schemes.

One can say that industry is moving from infancy to adolescence, the industry is maturing andthe investors and funds are frankly opening discussing difficulties opportunities and compulsions.

Mutual funds are best alternatives to stocks to get high returns with medium risk in India. Manyfinancial institutions, banks, Equity related companies offering the mutual funds in India.

Popular and Top Mutual Fund Companies in India mentioned here.

A mutual fund is a group of investors operating through a fund manager to purchase a diverseportfolio of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in. Bypooling money together in a mutual fund, investors can purchase stocks or bonds with muchlower trading costs than if they tried to do it on their own. Also, one doesn't have to figure outwhich stocks or bonds to buy. But the biggest advantage of mutual funds is diversification.Diversification means spreading out money across many different types of investments. Whenone investment is down another might be up. Diversification of investment holdings reduces therisk tremendously.

List of "Mutual Fund Companies" in India

Sr. No. Name of company

1 Reliance

2 State bank of India (SBI)3 TATA4 HDFC5 ABN Amro6 AIG7 Bank of Baroda8 Canara bank9 ICICI10 DBS Cholamandalam AMC11 DSP Merrill lynch12 Birla Sun life


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13 LIC (Life Insurance Corporation of India)14 HSBC15 JP Morgan16 Kotak Mahindra bank

17 JM financial18 Sundaram BNP Paribas19 UTI (Unit Trust of India)20 Standard chartard21 Fidelity22 Sahara23 Franklin Templeton


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The chart shows our risk rating overview which takes into account a funds potential downside,volatility, investment objectives, and its underlying investments.

There are three main categories of funds in our risk rating overview: equity funds, multi-assetclass funds and debt funds. Investors can choose the funds to form their portfolio based on theirinvestment objectives as well as their risk profile. Investors should be aware of the fact thatfunds that may deliver higher potential returns tend to carry higher risks.The funds with the lowest risk such as liquid and ultra short term funds start off with a risk ratingof 1, and funds with the highest risk, such as sector/thematic funds are given a rating of 10. Therating goes up as the risk level increases.


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What Should Investors Do With Investments In Fidelity Mutual Fund? March 28, 2012Impact on a regular investor with L&T Finance's buy out of Fidelity Mutual Fund. Or to be moreprecise, the sole question lingering through the minds of investors, "What should you do with the

investments made in Fidelity's Mutual Funds?"

The big news doing the rounds in the mutual fund industry is L&T buying out the India businessof Fidelity Mutual Fund for an undisclosed amount. However, the amount paid by L&T isassumed to be lower than the bids offered by HDFC Asset Management Company and Pramerica.But, how is a regular investor affected with this buy out? Or to be more precise, the sole questionlingering through the minds of investors, What should you do with the investments made in

Fidelitys Mutual Funds?

3.4 Growth of Mutual Fund in India

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at theinitiative of the Government of India and Reserve Bank. The history of mutual funds in India canbe broadly divided into four distinct phases.

First Phase1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by theReserve Bank of India and functioned under the Regulatory and administrative control of theReserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial DevelopmentBank of India (IDBI) took over the regulatory and administrative control in place of RBI. Thefirst scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700crores of assets under management.

Second Phase1987-1993

(Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual fundsset up by public sector banks and Life Insurance Corporation of India (LIC) and GeneralInsurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fundestablished in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab National BankMutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank ofBaroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had setup its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assetsunder management of Rs.47, 004 corers.

Third Phase1993-2003

(Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era startedin the Indian mutual fund industry, giving the Indian investors a wider choice of fund families.Also, 1993 was the year in which the first Mutual Fund Regulations came into being, underwhich all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari


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Pioneer (now merged with Franklin Templeton) was the first private sector mutual fundregistered in July 1993.The 1993 SEBI (Mutual Fund) Regulations were substituted by a morecomprehensive and revised Mutual Fund Regulations in 1996. The industry now functions underthe SEBI (Mutual Fund) Regulations 1996.The number of mutual fund houses went on

increasing, with many foreign mutual funds setting up funds in India and also the industry haswitnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutualfunds with total assets of Rs. 1, 21,805 corers. The Unit Trust of India with Rs.44, 541 corers ofassets under management was way ahead of other mutual funds.

Fourth Phasesince February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcatedinto two separate entities. One is the Specified Undertaking of the Unit Trust of India with assetsunder management of Rs.29, 835 corers as at the end of January 2003, representing broadly, theassets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of

Unit Trust of India, functioning under an administrator and under the rules framed byGovernment of India and does not come under the purview of the Mutual Fund Regulations.The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registeredwith SEBI and functions under the Mutual Fund Regulations. With the bifurcation of theerstwhile UTI which had in March 2000 more than Rs.76, 000 crores of assets undermanagement and with the setting up of a UTI Mutual Fund, conforming to the SEBI MutualFund Regulations, and with recent mergers taking place among different private sector funds, themutual fund industry has entered its current phase of consolidation and growth. As at the end ofSeptember 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421schemes.

Overview of existing schemes existed in mutual fund category

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risktolerance and return expectations etc. The table below gives an overview into the existing typesof schemes in the Industry.

1. Concept of Mutual Fund2. Many investors with common financial objectives pool their money3. Investors on a proportionate basis. Get mutual fund units for the sum contributed to the pool4. The money collected from investors is invested into shares, debentures & other securities by

the fund manager

5. The fund manger realizes gains or losses, & collects divided or interest income6. Any capital gains or losses from such investments are passed on to the investors in

proportion of the number of units held by them


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When an investor subscribes for the units of a mutual fund, he becomes part owner of the assetsof the fund in the same proportion as his contribution amount put up with the corpus (the totalamount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unitholder. Any change in the value of the investments made into capital market instruments (such asshares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is definedas the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme iscalculated by dividing the market value of scheme's assets by the total number of units issued tothe investors.

The important features of a mutual fund are the following:

1. A mutual fund belongs to those who have contributed to that fund and thus, theownership of the fund lies in the hands of the investors.

2. The pool of funds collected is invested in a portfolio of marketable securities.3. Generally the investment portfolio of the mutual fund is created according to the objective ofthe fund. For example a sectoral mutual fund invests its funds in a specific sector like IT sector,oil sector etc.

4. The investors share in the fund is represented by units just like shares in the case of sharecapital of a company. The unit value depends upon the value of the portfolio held by the fund.Hence, the value changes almost every day and it is called Net Asset Value.

The entire mutual fund industry operates in a very organized way. The investors, known as unitholders, handover their savings to the AMCs under various schemes.

The objective of the investment should match with the objective of the fund to best suit theinvestors needs. The AMCs further invest the funds into various securities according to the

investment objective. The return generated from the investments is passed on to the investors orreinvested as mentioned in the offer document.


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Importance of Mutual Funds

The mutual fund industry has grown at a phenomenal rate in the recent past. One can witness arevolution in the mutual fund industry in view of its importance to the investors in general and

the countrys economy at large.

The following are some of the important advantages of mutual funds

Channelizing Savings for Investment:

Mutual funds act as a vehicle in galvanizing the savings of the people by offering variousschemes suitable to the various classes of customers for the development of the economy as awhole. A number of schemes are being offered by MFs so as to meet the varied requirements ofthe masses, and thus, savings are directed towards capital investments directly.

Providing Better Yields:

The pooling of funds from a large number of customers enables the fund to have large funds atits disposal. Due to these large funds, mutual funds are able to buy cheaper and sell dearer thanthe small and medium investors. Thus, they are able to command better market rates and lowerrates of brokerage .So; they provide better yields to their customers.

Promoting Industrial Development:

The economic development of any nation depends upon its industrial advancement andagricultural development. All industrial units have to raise their funds by resorting to the capitalmarket by the issue of shares and debentures. The mutual funds not only create a demand forthese capital instruments but also supply large sources of funds to the markets, and thus, theindustries are assured of their capital requirements. In fact the entry of mutual funds hasenhanced the demand for Indias stocks and bonds. Thus, mutual funds provide financial

resources to the industries at market rates.

Keeping the Money Market Active:

Individual investors can not have any access to money market instruments since the minimumamount of investment is out of his reach. On the other hand, mutual funds keep the moneymarket active by investing money on the money market instruments. In fact ,The availability ofmore money market instruments itself is a good sign for a developed money market which isessential for the successful functioning of the central bank in a country. Thus mutual fundsprovide stability to share prices, safety to investors and resources to prospective entrepreneurs.


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Introducing Flexible Investment Schedule:

Some mutual funds have permitted the investors to exchange their units from one scheme toanother and this flexibility is a great boon to investors. Income units can be exchanged for

growth units depending upon the performance of the funds. One cannot derive such flexibility inany other investments.

Providing Greater Affordability and Liquidity:

Even very small investors can afford to invest in Mutual Funds. They provide an attractive andcost effective alternative to direct purchase of shares. In the absence of MFs, small investorscannot think of participating in a number of investments with such a merge sum. Again, there isgreater liquidity. Units can be sold to the Fund at any time at the Net Asset Value and thus quickaccess to liquid cash is assured.

Simplified Record Keeping:

An investor with just an investment in 500 shares or so in 3 or 4 companies has to keep properrecords of dividend payments, bonus issues, price movements, purchase or sale instruction,brokerage and other related items. It is tedious and it consumes a lot of time. One may evenforget to record the rights issue and may have to forfeit the same. Thus, record keeping is thebiggest problem for small and medium investors. Now, mutual funds offers a single investmentsource facility, i.e., a single buy order of 100 units from a mutual fund is equivalent toinvestment in more than 100 companies.

Reducing the Marketing Cost of New Issues:

The mutual fund helps to reduce the marketing cost of the new issues. The promoters used toallot a major share of the Initial Public Offering to the mutual funds and thus they are saved fromthe marketing cost of such issues.

Providing Research Service:

A mutual fund is able to command vast resources and hence it is a possible for it to have an indepth study and carry out research on corporate securities. Each fund maintains a large researchteam which constantly analyses the companies and the industries and recommends the fund tobuy or sell a particular share. Thus, investments are made purely on the basis of a thoroughresearch. Since research involves a lot of times, efforts and expenditure, an individual investorscannot take up this work. By investing in a mutual fund, the investor gets the benefit of theresearch done by the fund.


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Advantages of Mutual Fund:

Diversification:

An investor undertakes risk if he invests all his funds in a single scrip. Mutual funds invest in anumber of companies across various industries and sectors. This diversification reduces the riskof the investment.

Professional Management:

An investor lacks the knowledge of the capital market operations and does not have largeresources to reap the benefits of investment. Hence, he requires the help of an expert. Mutualfunds are managed by professional managers who have the requisite skills and experiences toanalyses the performance and prospectus of companies.

Regulatory oversight:

Mutual funds are subLiquidity: It's easy to get your money out of a mutual fund. Write a check, make a call, andyou've got the cash.

Convenience:

You can usually buy mutual fund shares by mail, phone, or over the Internet. It reducespaperwork, saves time and makes investment easy.

Low cost:

Mutual fund expenses are often no more than 1.5 percent of your investment. Expenses for IndexFunds are less than that, because index funds are not actively managed. Instead, theyautomatically buy stock in companies that are listed on a specific index.

Transparency:

Mutual funds transparently declare their portfolio every month. Thus, an investor knows wherehis/her money is being deployed and in case they are not happy with the portfolio they canwithdraw at a short notice.

Tax benefits:

Mutual fund investors now enjoy income tax benefits. Dividends received from mutual funds

debt schemes are tax exempt to the overall limit of Rs 9000 allowed under section SOL of theIncome Tax Act.


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Disadvantage of Mutual Fund:

No Guarantees:

No investment is risk free. If the entire stock market declines in value, the value of mutual fundshares will go down as well, no matter how balanced the portfolio. Investors encounter fewerrisks when they invest in mutual funds than when they buy and sell stocks on their own.However, anyone who invests through a mutual fund runs the risk of losing money.

Fees and commissions:

All funds charge administrative fees to cover their day-today expenses. Some funds also chargesales commissions or "loads" to compensate brokers, financial consultants, or financial planners.Even if you don't use a broker or other financial adviser, you will pay a sales commission if youbuy shares in a Load Fund.

Taxes:

During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percentof the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes onthe income you receive, even if you reinvest the money you made.

Management risk:

When you invest in a mutual fund, you depend on the fund's manager to make the right decisionsregarding the fund's portfolio. If the manage does not perform as well as you had hoped, youmight not make as much money on your investment as you expected.Organization of a Mutual Fund

1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed date ofa month. Payment is made through post dated cheques or direct debit facilities. The investor getsfewer units when the NAV is high and more units when the NAV is low. This is called as thebenefit of Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and giveinstructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutualfund. 3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then hecan withdraw a fixed amount each month.

RISK V/S. RETURN: The risk return trade-off indicates that if investor is willing to takehigher risk then correspondingly he can expect higher returns and vice versa if he pertains tolower risk instruments, which would be satisfied by lower returns. For example, if an investorsopt for bank FD, which provide moderate return with minimal risk. But as he moves ahead toinvest in capital protected funds and the profit-bonds that give out more return which is slightly


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Higher as compared to the bank deposits but the risk involved also increases in the sameproportion.

3.5 CATEGORIES OF MUTUAL FUND:

Mutual funds can be classified as follows:In the investment market, one can find a variety of investors with different needs, objectives and

risk capacities. For instance, a young businessman would like to get more capital appreciation forhis funds and he would be prepared to take greater risks than a person who is just on the verge ofhis retiring age. So, it is very difficult to offer one fund to satisfy all the requirements ofinvestors. One fund is not suitable to meet the vast requirements of all investors. Therefore,many types of funds are available to the investors. It is completely left to the discretion of theinvestors to choose any one of them depending upon has requirements and his risk takingcapacity.

Based on their structure:

Structure of mutual fund

In the United States, mutual funds must be registered with the Securities and ExchangeCommission, overseen by a board of directors or board of trustees and managed by a registeredinvestment advisor. They are not taxed on their income if they comply with certain requirements.Mutual funds have both advantages and disadvantages compared to direct investing in individualsecurities. They have a long history in the United States. Today they play an important role inhousehold finances.

There are 3 types of U.S. mutual funds: open-end, unit investment trust and closed-end. Themost common type, the open-end mutual fund, must be willing to buy back its shares from itsinvestors at the end of every business day. Exchange-traded funds are open-end funds or unitinvestment trusts that trade on an exchange. Open-end funds are most common, but exchange-traded funds have been gaining in popularity.

Mutual funds are classified by their principal investments. The four largest categories of fundsare money market funds, bond or fixed income funds, stock or equity funds and hybrid funds.Funds may also be categorized as index or actively-managed.

Investors in a mutual fund pay the funds expenses. There is controversy about the level of theseexpenses. A single mutual fund may give investors a choice of different combinations ofexpenses by offering several different types of share classes.

In the United States, a mutual fund is registered with the Securities and Exchange Commission(SEC) and is overseen by a board of directors (if organized as a corporation) or board of trustees(if organized as a trust). The board is charged with ensuring that the fund is managed in the bestinterests of the fund's investors and with hiring the fund manager and other service providers tothe fund.


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The fund manager, also known as the fund sponsor or fund management company, trades (buysand sells) the fund's investments in accordance with the fund's investment objective. A fundmanager must be a registered investment advisor. Funds that are managed by the same fundmanager and that have the same brand name are known as a "fund family" or "fund complex".

Mutual funds are not taxed on their income as long as they comply with requirements establishedin the Internal Revenue Code. Specifically, they must diversify their investments, limitownership of voting securities, distribute most of their income to their investors annually, andearn most of the income by investing in securities and currencies.

Mutual funds pass taxable income on to their investors annually. The type of income they earn isunchanged as it passes through to the shareholders. For example, mutual fund distributions ofdividend income are reported as dividend income by the investor. There is an exception: netlosses incurred by a mutual fund are not distributed or passed through to fund investors.Mutual funds may invest in many kinds of securities. The types of securities that a particularfund may invest in are set forth in the fund's prospectus, which describes the fund's investment

objective, investment approach and permitted investments. The investment objective describesthe type of income that the fund seeks. For example, a "capital appreciation" fund generallylooks to earn most of its returns from increases in the prices of the securities it holds, rather thanfrom dividend or interest income. The investment approach describes the criteria that the fundmanager uses to select investments for the fund.

A mutual fund's investment portfolio is continually monitored by the fund's portfolio manager ormanagers, who are employed by the fund's manager or sponsor.Hedge funds are not considered a type of mutual fund. While they are another type ofcommingled investment scheme, they are not governed by the Investment Company Act of 1940


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and are not required to register with the Securities and Exchange Commission (though manyhedge fund managers now must register as investment advisors).

Open-ended funds:Under this scheme, the size of the fund and /or the period of the fund are not pre-determined. Theinvestors can buy and sell the units from the fund, at any point of time. For instance, the unitscheme (1964) of the Unit Trust of India is openended one, both in terms of period and targetamount. Anybody can buy this unit at any time and sell it also at any time at his discretion.

The Main Features of the Open-ended Funds are:

1. The main objective of this fund is income generation. The investors get dividend, rightsor bonuses as rewards for their investments.

2.

These units are not publicly traded but, the fund is ready to repurchase them and resellthem at any time.

3. Generally the listed prices are very close to their Net Asset Value .The Fund fixes differentprices for their purchases and sales.

Close-ended funds:

These funds raise money from investors only once. Therefore, after the offer period, freshinvestments cannot be made into the fund. If the fund is listed on a stocks exchange the units canbe traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New FundOffers of close- ended funds provided liquidity window on a periodic basis such as monthly orweekly. Redemption of units can be made during specified intervals. Therefore, such funds haverelatively low liquidity.

The main features of the close-ended funds are:

1. The main objective of this fund is capital appreciation.2. The whole fund is available for the entire duration of the scheme and there will not be

any redemption demands before its maturity .Hence, the fund manager can manage theinvestments efficiently and profitably without the necessity of maintaining any liquidity.

3. From the investors point of view, it may attract more tax since the entire. Capitalappreciation is realized in at one stage itself.

4. Generally the prices of close-end scheme units are quoted at a discount of up to 40percent below their Net Asset Value (NAV).


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Based on their investment objective:

Equity funds:

These funds invest in equities and equity related instruments. With fluctuating share prices, suchfunds show volatile performance, even losses. However, short term fluctuations in the market,generally smoothens out in the long term, thereby offering higher returns at relatively lowervolatility. At the same time, such funds can yield great capital appreciation as, historically,equities have outperformed all asset classes in the long term. Hence, investment in equity fundsshould be considered for a period of at least 3-5 years.

It can be further classified as:

Index funds-

In this case a key stock market index, like BSE Sensex or Nifty is tracked. Their portfolio

mirrors the benchmark index both in terms of composition and individual stock weight ages.

Equity diversified funds-

100% of the capital is invested in equities spreading across different sectors and stocks.

Dividend yield funds-

it is similar to the equity diversified funds except that they invest in companies offering highdividend yields.

Thematic funds-

Invest 100% of the assets in sectors which are related through sometheme. e.g. -An infrastructurefund invests in power, construction, cements sectors etc.

Sector funds-

Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will invest inbanking stocks.

Balanced fund:

Their investment portfolio includes both debt and equity. As a result, on the risk-return ladder,they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle forinvestors who prefer spreading their risk across various instruments. Following are balancedfunds classes:

-oriented funds

Investment below 65% in equities.


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-oriented

Funds -Invest at least 65% in equities, remaining in debt.

Debt fund: They invest only in debt instruments, and are a good option for investors averse to

idea of taking risk associated with equities. Therefore, they invest exclusively in fixed-incomeinstruments like bonds, debentures, Government of India securities; and money marketinstruments such as certificates of deposit (CD), commercial paper (CP) and call money. Putyour money into any of these debt funds depending on your investment horizon and needs.

Liquid funds- These funds invest 100% in money market instruments, a large portion beinginvested in call money market.

Gilt funds ST- They invest 100% of their portfolio in government securities of and T-bills.Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments whichhave variable coupon rate.

Arbitrage fund- They generate income through arbitrage opportunities due to mis-pricingbetween cash market and derivatives market. Funds are allocated to equities, derivatives andmoney markets. Higher proportion (around 75%) is put in money markets, in the absence ofarbitrage opportunities.

Gilt funds LT- They invest 100% of their portfolio in long-term government securities. Incomefunds LT- Typically; such funds invest a major portion of the portfolio in long-term debt papers.


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3.6 SWOT Analysis

Strength:

1. It is one of the biggest Businesses in India2. It portfolios up to 12 different investment companies.3. It includes huge number of employees4. It is having merger & acquisition with and more companies to increase its growth.5. It elaborates its Network throughout the world.

Weakness:

1. Comparatively it has less branch offices geographically.

2. It has high level competition

Opportunities:

1. It has unlimited geographical locations for business2. It has an opportunity to serve different kinds of customers.3. Due to consistent level of competition there is an opportunity to improve its performance.

Threats:

1. It has different tax rates & policies for different locations2. Difficult to manage every companys response


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4.1 Source of Data:

Data which is collected for the first time is called primary data. In the study primary data

includes the data which is collected from the customer directly with interaction. The studyincludes data got with personal interaction.

Primary and Secondary Data:

The appraiser or market analyst must know what they are and what affects them. All data used inappraisals and market studies should be current, relevant, reliable, accurate, and conceptuallycorrect. This article presents a discussion of each of these terms and their significance in thecontext of the data and in the analysis. The article then discusses the nature of potential errorsthat can affect primary and secondary data. Several categories of errors can exist. The analystneeds to be able to recognize the error, understand its significance and evaluate the applicability

of that data in the analysis.

Secondary data

Information from secondary sources, i.e., not directly compiled by the analyst; may includepublished or unpublished work based on research that relies on primary sources of any materialother than primary sources used to prepare a written work.Secondary data has been gathered by others for their own purposes, but the data could be usefulin the analysis of a wide range of real property. In general, secondary data exists in publishedsources.

Methods for Obtaining Primary Data:

The analyst can obtain primary data through the process of direct observation or by explicitquestioning of people.

Observation:Observation as a data gathering technique focuses attention on an observable fact or inanimateentity such as a building or on an observable action or behavior by an animate entity such as ahomeowner or shopper. Observation of an inanimate object is the easier of the two activities, butit is not free from error or misinterpretation.

Data collection instrument

This report is based on primary as well secondary data, however primary data collection wasgiven more importance since it is overhearing factor in attitude studies. One of the mostimportant users of research methodology is that it helps in identifying the problem, collecting,analyzing the required information data and providing an alternative solution to the problem .Italso helps in collecting the vital information that is required by the top management to assistthem for the better decision making both day to day decision and critical ones.


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Sample size:

The sample size of my project is limited to 100 people only. Out of which only 60 people had

invested in Mutual Fund. Other 40 people did not have invested in Mutual Fund.

Sample design:

Sampling is a practice a researcher uses to draw data on people, places, or things to study.Sampling allows statisticians to draw conclusions about a whole by examining a part. It enablesus to estimates characteristics of a population by openly observing a portion of the entirepopulation. The whole that the researcher wants to know something about is the population iscalled a sample. Data has been presented with the help of bar graph, pie charts, line graphs etc.

Procedure data collection methods

The sample was selected of them who are the customers/visitors of Allegro advisor privatelimited, irrespective of them being investors or not or availing the services or not. It was alsocollected through personal visits to persons, by formal and informal talks and through filling upthe questionnaire prepared. The data has been analyzed by using mathematical/Statistical tool.

Techniques for data analysis

Research is totally based on primary data. Secondary data can be used only for the reference.Research has been done by primary data collection, and primary data has been collected byinteracting with various people. The secondary data has been collected through various journalsand websites.


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QUSTIONERY

Please answer the following questions by selecting only one response to each question.

1

What is your current age?

A) 18 to 30 years oldB) 31 to 40 years oldC) 41 to 50 years oldD) 51 to 60 years oldE) Above 60 years old

2 How many months of expenses can your emergency funds cover?A) I currently have no emergency funds

B) Less than 3 monthsC) 4 to 6 monthsD) 7 to 9 monthsE) More than 9 months

3 What percentage of monthly income can be invested?A) 0 to 10%B) 11% to 20%C) 21% to 30%D) More than 30%E) I currently have no income

4 When do you expect to liquidate your investment?A) Less than 1 yearB) 1 to 2 yearsC) 3 to 5 yearsD) 6 to 7 yearsE) More than 7 years

5 How many people depend on you financially?

A) 0B) 1C) 1, but someone who workD) 2 to 3E) More than 3


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6 In order to achieve high returns I am willing to choose high risk investments.

A) Strongly agreeB) Agree

C) NeutralD) DisagreeE) Strongly disagree

7 What is your expected rate of return from your investments?

A) Potential return of 6% per annumB) Potential return of 10% per annumC) Potential return of 12% per annumD) Potential return of 15% per annumE) Potential return of more than 15% per annum

8 I would start to worry about my investments if my portfolio value falls?

A) Less than 5% per annumB) 5%-10% per annumC) 10%-20% per annumD) 20%-30% per annumE) More than 30% per annum

9 Maximum allocation in your current portfolio pertains to

A) Savings and fixed depositsB) BondsC) EquitiesD) Mutual FundsE) Derivatives options, swaps and futures

10 I prefer to keep capital safe rather than have high returns

A) Strongly agreeB) AgreeC) NeutralD) DisagreeE) Strongly disagree


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4.2 TIPS FOR INVESTING IN MUTUAL FUND:-

Determine your financial objectives and amount to invest - Make sure the funds objectives

coincide with your own. Dont change your objectives or exceed the amount set aside for

investment unless you have good reason.

Always obtain all available information before you invest- Request the prospectus, The

Statement of Additional Information and the latest shareholder report from each Fund you areconsidering.

Never invest in periodic payment plans unless you are virtually certain that you will not have

to redeem early - If you redeem early or do not complete the plan, you may have to pay salescharges of up to 51% of your investment.

Be alert for incorporation by reference -You will have "no excuse" for not knowing this

information, if a problem arises. You may be legally presumed to know materials incorporatedby reference in a prospectus or other documents.

Always determine all sales charges, fees and expenses before you invest -Fees such as 12b-1

fees can cost you dearly and charges for reinvestment of dividends and capital gains distributionscan substantially add to your costs. Shop around among them any funds offered and compare thevarious fees and costs connected with funds that appeal to you.

Learn the costs of redemption-Sometimes investors are surprised to learn that they have to pay

to get out of funds through back-end loads or redemption fees. Find out the redemption costsbefore you invest so you wont be unpleasantly surprised when you redeem your shares.

Never treat the risks of investment in a fund lightly -Weigh the risks of the funds you want to

buy against your ability to tolerate the ups and downs of the market and your investment goals.Be extra cautious when considering investing in funds with high yield/high risk portfolios. Junkbond problems, for example, invariably affect the funds performance.

Dont be misled by the name of a fund -Some funds have been given names denoting safety,

stability and low risk, despite the fact that the underlying investments in the portfolio are volatileand highly risky.


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LIMITAION OF THE STUDY

Time factor basically prevent me to take limited sample size, as more would have highlighted

a very clear scenario of the study.

The insecurity in Hyderabad led some respondent to be reluctant in their response.

Possibility of error in data collection.

Data Analysis and interpretation done may not be that strong due to small sample and

conveyance skill in me.

My inexperience in research area might have affected results.


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SUGGESTION AND RECOMMENDATIONS

A Seminar or a kind of campaigns should be launched in Hyderabad to educate citizens about

Mutual Fund, as most of the people have only the vague idea about Mutual Fund.

While interacting with investors, some groups of customers were not aware of Mutual Fund.

Thus a Mutual Fund awareness program can help to increase the penetration of Mutual Funds inthe market.

The most vital problem spotted is of ignorance. Investors should be made aware of the various

advantages while investing in Mutual Fund. Nobody will invest until and unless he is fullyconvinced. Investors should be made to realize that ignorance is no longer bliss and what theyare losing by not investing.

Middle age people (40) will be a key new customer group in the future, which should be the

focal point of the financial advisor in other to attract more investor in Hyderabad.

The bank employee are not able to expand the service of business Mutual Fund, due to lack of

time, Hence forth the Asset Management Company can provide them knowledge about singlewindow services by which investor can get all financial services from one place.

Financial advisors should giving sound and quality advice about Systematic Investment Plan

(SIP) to the salaried people, which will gain advantage as this group shows keen interest inInvesting yet lack technical know-how.

The people do not want to take risk. Therefore AMC should launch more diversified funds so

that the risk becomes minimum. This will lure more and more people to invest in mutual funds.Mutual funds offer lot of benefit, which no other single option could offer. But the investors onlysee it as just another investment option. Henceforth the advisors should try changing the mindsetof the people.

The various schemes should be clearly explained-merits and demerit, such that Investors can

take decision in choosing the scheme which deemed suit, which will draw greater interest inparticipating


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CONCLUSION

A business can be successful only when the firm understand its customer perspective anddiagnosed the wants and demand of it Customer. This project study has made an attempt tounderstand the customer perspective on mutual Fund in compression to various other investmentavenues in Hyderabad City.

In my observation, some people have fear in investing in Mutual Fund. Due to lack of technicalknowledge, they assume that their money will not be secure in Mutual Fund. As they are notaware of as to how Mutual fund is professionally managed. A certain group of people do notinvest in Mutual Fund, due to lack of awareness although they have money to invest.

Yet in reality, Mutual Fund is the best investment option for those seeking financial advice inmaking investment decisions. It is also a best option for novice investors. The trick forconverting a person with no knowledge of mutual funds to a new Mutual Fund customer is tounderstand which of the potential investors are more likely to invest in mutual funds and to usethe right knowledge in the sales process which customers will gladly accept, giving due weightage to advantages.

The increases in awareness level of Mutual Fund will increases the number of investors inMutual Fund, as once people are aware of Mutual Fund investment opportunities, they enjoyingthe benefits of investing in Mutual Funds, the number who decide to invest in Mutual fundsincreases to as many as one in five people.

This Project gave me a great learning experience, enhances my analytical ability and gets toknow the different aspect of Mutual Fund.

The analysis and advice presented in this Project Report is based on market research on a studyon customer perspective on Mutual fund v/s other investment options in Hyderabad City.


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BIBLOGRAPHY

http://www.iloveindia.com/finance/mutual-funds/index.html

http://www.economywatch.com/mutual-funds/definition/

http://www.investorwords.com/3173/mutual_fund.html

http://www.investopedia.com/university/mutualfunds/mutualfunds.asp#axzz1qr17cNf4

http://www.investopedia.com/terms/f/front-endload.asp#axzz1qr17cNf4

http://www.fundsupermart.co.in/main/home/index.svdo

http://www.fundsupermart.co.in/main/fundinfo/listManager.tpl

http://www.fundsupermart.co.in/main/home/whyUnitTrusts.svdo

http://www.fundsupermart.co.in/main/research/assistBuy.svdo?formSubmitUrl=assistBuyScore.svdo
http://www.iloveindia.com/finance/mutual-funds/index.htmlhttp://www.iloveindia.com/finance/mutual-funds/index.htmlhttp://www.economywatch.com/mutual-funds/definition/http://www.economywatch.com/mutual-funds/definition/http://www.investorwords.com/3173/mutual_fund.htmlhttp://www.investorwords.com/3173/mutual_fund.htmlhttp://www.investopedia.com/university/mutualfunds/mutualfunds.asp#axzz1qr17cNf4http://www.investopedia.com/university/mutualfunds/mutualfunds.asp#axzz1qr17cNf4http://www.investopedia.com/terms/f/front-endload.asp#axzz1qr17cNf4http://www.investopedia.com/terms/f/front-endload.asp#axzz1qr17cNf4http://www.fundsupermart.co.in/main/home/index.svdohttp://www.fundsupermart.co.in/main/home/index.svdohttp://www.fundsupermart.co.in/main/fundinfo/listManager.tplhttp://www.fundsupermart.co.in/main/fundinfo/listManager.tplhttp://www.fundsupermart.co.in/main/home/whyUnitTrusts.svdohttp://www.fundsupermart.co.in/main/home/whyUnitTrusts.svdohttp://www.fundsupermart.co.in/main/research/assistBuy.svdo?formSubmitUrl=assistBuyScore.svdohttp://www.fundsupermart.co.in/main/research/assistBuy.svdo?formSubmitUrl=assistBuyScore.svdohttp://www.fundsupermart.co.in/main/research/assistBuy.svdo?formSubmitUrl=assistBuyScore.svdohttp://www.fundsupermart.co.in/main/research/assistBuy.svdo?formSubmitUrl=assistBuyScore.svdohttp://www.fundsupermart.co.in/main/research/assistBuy.svdo?formSubmitUrl=assistBuyScore.svdohttp://www.fundsupermart.co.in/main/home/whyUnitTrusts.svdohttp://www.fundsupermart.co.in/main/fundinfo/listManager.tplhttp://www.fundsupermart.co.in/main/home/index.svdohttp://www.investopedia.com/terms/f/front-endload.asp#axzz1qr17cNf4http://www.investopedia.com/university/mutualfunds/mutualfunds.asp#axzz1qr17cNf4http://www.investorwords.com/3173/mutual_fund.htmlhttp://www.economywatch.com/mutual-funds/definition/http://www.iloveindia.com/finance/mutual-funds/index.html


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IF YOU HAVE ALREADY INVESTED IN FIED MF

Do not panic! The world is not

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