8/12/2019 project report on mutual fund.doc http://slidepdf.com/reader/full/project-report-on-mutual-funddoc 1/57 TABLE OF CONTENTS: 1. Acknowledgement 2. Preface 3. Student’s Declaration 4. Objectie !. Pro"osed #et$odolog% &. 'ackground of a. Standard ($artered b. Standard ($artered A#( ). #utual *und a. +ntroduction b. ($aracteristics of #* c. About #* +ndustr% d. ,egulator% Structure of #* in +ndia e. (once"t - ,ole of #* f. %"es of #* Sc$emes g. #ajor #utual *unds in +ndia $. ! /as% ste"s to +nest in #utual *und i. ! Pointers to #easure t$e Performance #* j. a0 rules for #utual *und +nestors k. Adantages - Disadantages of #* . $o can inest in #* in +ndia . (om"arison of +nestment Products 1.! (ommon #istakes of #* +nestors 11.Data +nter"retation of +nestors 12.Products or Sc$emes offered b% Standard ($artered A#( 13.com"arison of to" 1 o"en ended #*’s on ! "arameters 14.'eta calculation of S ( Premier - S ( (lassic *unds 1!.Sna"5s$ot com"arison s$eet 1&.Suggestion on t$e basis of life stages 1).,isk factors in #* 1.'ibliogra"$% 1
1. Acknowledgement2. Preface3. Student’s Declaration4. Objectie!. Pro"osed #et$odolog%&. 'ackground of
a. Standard ($artered b. Standard ($artered A#(
). #utual *unda. +ntroduction
b. ($aracteristics of #*c. About #* +ndustr%d. ,egulator% Structure of #* in +ndiae. (once"t - ,ole of #*f. %"es of #* Sc$emesg. #ajor #utual *unds in +ndia$. ! /as% ste"s to +nest in #utual *undi. ! Pointers to #easure t$e Performance #*
j. a0 rules for #utual *und +nestors
k. Adantages - Disadantages of #*. $o can inest in #* in +ndia. (om"arison of +nestment Products1.! (ommon #istakes of #* +nestors11.Data +nter"retation of +nestors12.Products or Sc$emes offered b% Standard ($artered A#(13.com"arison of to" 1 o"en ended #*’s on ! "arameters14.'eta calculation of S ( Premier - S ( (lassic *unds1!.Sna"5s$ot com"arison s$eet1&.Suggestion on t$e basis of life stages1).,isk factors in #*1.'ibliogra"$%
Success comes onl% after an effort6 encouragement and constant guidanceOn com"letion of t$is "roject + would like to t$ank #r. Amit Sriastaa 7Area salesmanager8 and #r. Ankit Samari%a 7sales officer8 for t$eir aluable guidance during t$ecourse of t$is "roject and also $el"ed me in t$e marketing of "ro"osed t$ree o"en endede9uit% funds :i;< 18 SA=DA,D (>A,/,/D (?ASS+( /@+B 28 SA=DA,D(>A,/,/D P,/#+/, /@+B 38 SA=DA,D (>A,/,/D +#P/,+A?/@+B as well as for giing me t$e o""ortunit% to work for t$e com"an%. Also + wouldlike to t$ank all t$e ot$er staff members for t$eir co5o"eration and guidance t$at $el"edme in com"leting t$e "roject.
+ would also like to t$ank all t$e *acult% members of Badruka Institute
of Foreign Trade , !dera"ad for t$eir continuous su""ort and motiation.
#utual *unds are going to be amongst t$e most e0citing "la%ers in t$e %ears to
come. *und managers of well oiled o"erations and t$eir clients are in for a terrific
e0"erience.
$e 9uestion in eer%bod%’s mind $oweer is6 C$enE $en will inestor’sinterest in #utual *unds will reall% "ick u" $en will t$e infatuation of t$e small
inestors wit$ "rimar% markets end And w$en will t$e mutual fund gain t$e t%"e of
clout in t$e stock market t$at t$eir counter"arts in t$e nited States of America enjo%.
$e +ndian inestor6 beliees in "la%ing t$e market on $is own6 and will continue
to do so till t$e time $is "erce"tion c$anges5 w$ic$ t$e% undoubtedl% will. *inancialinstitutions and mutual funds6 leaing t$e small inestor wit$ no ot$er o"tion e0ce"t t$e
mutual fund to "ut $is saings in.6 will ultimatel% dominate t$e markets but for t$is to
$a""en6 industr% will $ae to be "atient and "roe t$at it can "roe inestors wit$ better
returns t$an t$e markets. Plus t$e% will $ae to make t$eir o"erations muc$ more
trans"arent and inestor friendl%. ell if we look at t$e trend and t$e figure of last one
%ear number it seems t$e s$ift $as started to $a""en towards mutual fund s$ifting t$e
$e objectie of t$is "roject is to suggest t$e customers to inest in mutual fund on t$e basis of t$eir ages b% com"aring t$e to" 1 o"en ended funds w$ic$ are t$e marketleaders in t$e mutual fund industr%.
$e "roject would also reeal t$at w$ic$ A#( is t$e market leader and
will facilitate in getting t$e better understanding from t$e inestor side. $is would $el"Standard ($artered A#( in making marketing strategies w$ic$ would $el" eliminate t$es$ortcomings and become t$e market leader in all t$e "ers"ecties.
$e Standard ($artered Frou" was formed in 1& t$roug$ a merger of two banks< $eStandard 'ank of 'ritis$ Sout$ Africa founded in 1&36 and t$e ($artered 'ank of +ndia6
Australia and ($ina6 founded in 1!3.
'ot$ com"anies were keen to ca"italise on t$e $uge e0"ansion of trade and to earn t$e$andsome "rofits to be made from financing t$e moement of goods from /uro"e to t$e/ast and to Africa.
Standard ($artered $as a $istor% of oer 1! %ears in banking and o"erates in man% oft$e worldGs fastest5growing markets wit$ an e0tensie global network of oer 164
branc$es 7including subsidiaries6 associates and joint entures8 in oer ! countries in t$eAsia Pacific ,egion6 Sout$ Asia6 t$e #iddle /ast6 Africa6 t$e nited Hingdom and t$e
Americas.
As one of t$e worldGs most international banks6 Standard ($artered em"lo%s almost&6 "eo"le6 re"resenting oer 1 nationalities6 worldwide. $is diersit% lies at t$e$eart of t$e 'ankGs alues and su""orts t$e 'ankGs growt$ as t$e world increasingl%
becomes one market.
it$ strong organic growt$ su""orted b% strategic alliances and ac9uisitions and drien b% its strengt$s in t$e balance and diersit% of its business6 "roducts6 geogra"$% and "eo"le6 Standard ($artered is well "ositioned in t$e emerging trade corridors of Asia6Africa and t$e #iddle /ast.
Standard ($artered deries oer "er cent of "rofits from Asia6 Africa and t$e #iddle/ast. Sering bot$ (onsumer and $olesale 'anking customers worldwide6 t$e 'ankcombines dee" local knowledge wit$ global ca"abilit% to offer a wide range of innoatie
"roducts and serices as well as award5winning solutions.
rusted across its network for its standard of goernance and cor"orate res"onsibilit%6Standard ($artered takes a long term iew of t$e conse9uences of its actions to ensure
t$at t$e 'ank builds a sustainable business t$roug$ social inclusion6 enironmental "rotection and good goernance.
Standard ($artered is also committed to all its stake$olders b% liing its alues in itsa""roac$ towards managing its "eo"le6 e0ceeding e0"ectations of its customers6 making adifference in communities and working wit$ regulators.
Standard ($artered #utual *und is well5establis$ed fund $ouse and is s"onsored b% t$eStandard ($artered Frou". S(#* were among t$e first to launc$ an actie management
debt fund5t$e D%namic 'ond *und 5 t$at $ad t$e ca"abilit% to mimic a cas$ fund or anincome fund de"ending on market situations. $e S$ort term and #edium term funds t$atwere uni9uel% "ositioned at arious "oints along t$e interest rate cure wit$ t$e soleobjectie of ma0imi;ing alue to inestors wit$ different inestment time $ori;ons.
S(#* manage our sc$emes t$roug$ well5researc$ed and t$oroug$l% tested "rocesses liket$e 3 D *actor 7*or debt funds and $el"s us in "redicting interest rate moements8 and t$e/9uit% (ircle "rocess.
S(#* also "ioneered seeral serice initiaties t$at $el"ed increase transactional ease. +twas t$e first mutual fund to initiate<
18 Across t$e counter redem"tions for all classes of inestors in li9uid funds628 One (all *ree number 122&&22 accessible across 1!3 cities
Standard ($artered #utual *und currentl% manages assets in e0cess of ,s. 134crores 7 SD 2. 'illion 8 and $as touc$ed t$e lies of more t$an lak$s of inestorsresiding in more t$an 1 +ndian towns.
A#( is managing currentl% 3 o"en ended funds i;<
.2 Standard C'artered C-assi3 E4uit! Fund 5Laun3'ed at 6 Aug /7782:
A8 >ow t$e mone% is inested under t$is fund<
a8 #one% is inested in a diersified "ortfolio of com"anies.
b8 $e mone% is inested across sectors of t$e econom% and arious markets ca"s totake adantage of t$e o""ortunities t$at e0ist in time.
c8 $ere is strict limit on sectors and com"anies to ensure a trul% diersidiedinestment.
a8 Sector ,otation< o take adantage of growt$ o""ortunities in arious sectors of t$eeconom%.
b8$eme Selection< o take adantage of arious macroeconomic t$emes t$at "la% outin wa%s t$at en$ances cor"orate "rofitabilit% eg. +nfrastructure6 consum"tion etc.
c8#arket ca"itali;ation< +nesting in com"anies $aing a largeImidIsmall ca" toen$ance or "rotect returns de"ending on market conditions.
d8 Stock selection< +nesting in com"anies on t$e basis of A#(’s in5$ouse researc$6in order to get an edge on market knowledge.
(8 *or w$om is t$is fund releant<
*or conseratie inestors w$o $ae a 253 %ear $ori;on.
D8 'enc$mark< 'S/ 2 +nde0
/2 Standard C'artered I1,eria- E4uit! Fund5Laun3'ed at .9 Mar /7792:
A8 >ow t$e mone% is inested under t$is fund <
a8 #one% is inested in a "ortfolio of $ig$ 9ualit%6 well known +ndian com"anies.
b8 $e mone% is inested in com"anies t$at are well recogni;ed6 $ae a "roen trackrecord6 strong brands6 low financial risk etc.
c8$ese com"anies s$ow t$e "romise of e0$ibiting $ig$ growt$ outside t$e +ndians$ores and establis$ t$emseles as global "la%ers.
'8 *und Strategies <
a8Flobalisation< +ndian (om"anies w$ic$ $ae cross t$e countr%’s boundries to besignificant "la%ers in t$e global landsca"e.
b8 Domestic demand< ake adantage of t$e $ig$ growt$ o""ortunities t$at domesticdemand offers in t$e backdro" of $ig$ FDP growt$ rates for +ndia.
c8 /merging sectors< ake adantage of o""ortunities t$at a growing econom% "roides b% wa% of emergence of new sectors of "rominence eg.,etailing6 aiationtelecom etc.
*or conseratie inestors w$o $ae a 153 %ear $ori;on.
D8 'enc$mark< 'S/ 2 +nde0.
02 Standard C'artered #re1ier E4uit! Fund5Laun3'ed at /8 Se, /7782:
A8 >ow t$e mone% is inested under t$is fund <
a8 $e fund $as a bias towards a "ortfolio of com"anies w$ic$ are going to undergotransformatonal c$anges in t$eir business "ros"ectus.
b8 $e mone% is inested in com"anies t$at are at an earl% stage in t$eir life5c%cle andare at t$e start of a "eriod of $ig$ growt$ and "rofitabilit%.
c8$e inestments will attem"t to ca"ture s$ifts in t$e business enironment wit$regard to new business o""ortunities6 new tec$nologies6 new trends etc.
'8 *und strategies<
a8A#( rel% on in5$ouse "rimar% researc$ of com"anies in t$is "ortfolio.$is re9uiresmeeting u" wit$ to" management6 em"lo%ees6 dealers6 trade bodies etc.
b8$e inde"endent mindset to "ick5u" s"ecific stocks on t$e basis of large amounts of$omework makes t$is fund uni9ue and reflects A#(’s belief and e0"ertise.
(8 (ould t$ere be risks associated wit$ suc$ a fund<
$ere t$ere is t$e "ros"ect of great wealt$ to be made t$ere is also t$e realit% of risk.
D8 *or w$om is t$is fund releant<
*or inestors w$o $ae a 35! %ear $ori;on a long term "lan and t$e disci"line to sta% b% it.
A 1utua- fund is a form of collectie inestment t$at "ools mone% from man% inestorsand inests t$eir mone% in stocks6 bonds6 s$ort5term mone% market instruments6 ot$ersecurities etc. +n a mutual fund6 t$e fund manager trades t$e fundGs underl%ing securities
reali;ing ca"ital gains or losses6 and collects t$e t$e diidend or interest income. $einestment "roceeds are t$en "assed along to t$e indiidual inestors.
A mutual fund is created w$en inestor "ut t$eir mone% toget$er. +t is t$erefore a "ool oft$e inestor’s funds.
$e term mutual means t$at inestors contribute to t$e "ool and also benefit from t$e "ool. $ere are no ot$er claimants to funds. $e "ool of funds $el" mutuall% b% inestorsis t$e mutual fund.
A mutual fund business is to inest t$e funds t$us collected according to t$e wis$es oft$e inestors w$o created t$e "ool t$e inested a""oints "rofessional inestmentmangers6 to mange t$eir funds.
$*'<A7 C(A<ACE<!C! '2 (E $UUA" 2U7=
1. A mutual fund actuall% belongs to t$e inestors w$o $ae "ooled t$eir funds$e owners$i" of t$e mutual fund is in t$e $and of t$e inestor
2. A mutual fund is managed b% inestment "rofessional and ot$er serice "roiders w$o earn a fee for t$eir serices from t$e fund
3. $e "ool of funds is inested in a "ortfolio of marketable inestments. $ealue of t$e "ortfolio is u"date eer% da%.
4. $e inestor’s s$are in t$e fund is denominated b% C=+E. $e alue of t$eunit c$anges wit$ c$anges in t$e "ortfolio alue eer% da% t$e alue of t$e unitof inestment is called as t$e =et Assets :alue or =A:.
!. $e inestment "ortfolio of t$e fund is created according to t$e statedinestment objecties of t$e fund.
#utual *unds are financial intermediaries w$ic$ "ool t$e saings of numerousindiiduals and inest t$e mone%6 t$us related in a diersified "ortfolio of securitiesincluding e9uit%6 bonds debentures and ot$er mone% market instruments6 t$us s"reading
and reducing risk. $e objectie of mutual fund is to ma0imi;e t$e return to t$e inestorw$o "artici"ates in e9uit% indirectl% t$roug$ mutual funds.
/en t$oug$ t$e mutual fund industr% grown in asset alue from ,s.) (rores to266I5 (rores toda%6 t$is is just t$e ti" of t$e iceberg. According to most *und#anagers6 t$e real boom is %et to come.
$e sum of ,s.266I5 (rores re"resents just 3J 5 4J of t$e total market ca"itali;ation of 2!66 (rore. $is com"ares "oorl% wit$ t$e S6w$ere t$e mutual funds $ae nearl% K &. billion of market ca"itali;ation of roug$l%
,s.) (rore6 barel% 3J 5 4J of total market ca"itali;ation.
$is is not e0"ected6 because mutual fund $istor% in +ndia6 w$ic$ dates back to1&46 w$en t$e first o"en5ended mutual fund sc$eme nit5&4 was launc$ed b% nit rustof +ndia6 is still dominated b% it. $e focus initiall% was income earning securities6 wit$onl% 2 J of t$e (or"us going into e9uit%. $e earl% ’s saw ot$er sc$emes like t$egrowing income6 fi0ed income6 and mont$l% income being introduced b% t$e +. 'ut itwas onl% in 1& t$at t$e first "ure Frowt$ e9uit% sc$eme #aster s$are was launc$ed.
15 was anot$er landmark %ear in t$e $istor% of mutual funds. *or t$e fisttime6 t$e mono"ol% of + oer t$e industr% was broken. $e goernment allowed "ublicsector banks and insurance com"anies to enter t$is sector to bring in some com"etition.
'ut it was onl% in 136 w$en t$e "riate sector was gien t$e green signal to floatmutual funds6 t$at e0citement and com"etition came. =ot onl% did t$e Foernmentallowed +ndian com"anies to float mutual funds6 it een allowed foreign funds to set ins$o" in +ndia and float funds. $us6 in one stroke6 t$is sector was trul% "riati;ed.
oda% t$ere are about 12514 "riate "la%ers in t$e market including foreign fundssuc$ as #organ Stanle%6 besides t$e nine "ublic sector "la%ers and +. oget$er6 t$ese
funds $ae mobili;ed around ,s.&! (rore from t$e market. $e collections could $ae been better6 $ad not t$e "ublic sector funds been bus% com"l%ing wit$ t$e S/'+guidelines "ertaining to t$e formation of asset management com"anies etc.
'ut t$e best is %et to come. A number of com"anies $ae "lans to float mutualfunds at arious stages of im"lementation. Some of t$e major names w$ic$ are likel% tocome to t$e market are ata Sons in collaboration wit$ Hleinwort 'enson6 +( (lassic
wit$ $read needle ,6 O""en$eimer of S6 "lus a $ost of ot$ers. And according toconseratie guesstimates6 mutual funds are set to collect oer ,s.1 (rore from t$emarket t$is %ear.
$e reason for suc$ confidence is t$at wit$ S/'+ firm about t$e small inestortaking t$e mutual fund route to inestments in t$e stock market6 and t$e regulator%c$anges making it muc$ more difficult to get allotments in "rimar% markets6 small
inestors will not be left wit$ man% o""ortunities.
$e structure of mutual fund in +ndia is goerned b% S/'+ 7#A? *=D8
regulations 1&. $ese regulations make it mandator% for mutual funds to $ae a t$ree5
tier structure of SPO=SO,5,S//5ASS/ #A=AF/#/= (O#PA=B 7A#(8.
Con3e,t and ro-e of Mutua- Fund
A Mutua- Fund is common "ool of mone% into w$ic$ +nestor "lace t$eircontributions t$at are to be inested in accordance wit$ a stated objectie. $e owners$i"of t$e *und is t$us joint or CmutualEL t$e fund belongings to all inestors.
A single inestor’s owners$i" of t$e fund is in t$e same "ro"ortion as t$e amountof t$e contribution made b% $im or $er bears to t$e total amount of t$e fund.
A #utual fund uses t$e mone% collected from inestors to bu% t$ose assets6 w$ic$
are s"ecificall% "ermitted b% its stated inestment objectie. $us6 an /9uit% *und would bu% mainl% /9uit% assets5ordinar% s$ares6 "reference s$ares6 warrants etc. A bond fundwould mainl% bu% debt instruments suc$ as debentures6 bonds or goernment securities+t is t$ese assets6 w$ic$ are owned b% t$e inestors in t$e same "ro"ortions as t$erecontribution bears to t$e total contribution of all inestors "ut toget$er.
$en an inestor subscribes to a mutual fund6 $e or s$e bu%s a "art of t$ese assets ort$e "ool of funds t$at are outstanding at t$at time. +t’s no different from bu%ingCs$aresE of a joint stock com"an%6 in w$ic$ case t$e "urc$ase makes t$e inestor a
"art owner of t$e com"an% and its assets. +n fact6 in t$e SA6 a #utual fund isconstituted as an inestment com"an% and an inestor Cbu%s into t$e fundE6 meaning$e bu%s t$e s$ares of t$e fund. +n +ndia6 a mutual fund is constituted as a rust and t$einestor subscribes to t$e Cunits C issued b% t$e fund6 w$ic$ is w$ere t$e term unitrust comes from.
T!,es of Mutua- Funds S3'e1es
Sc$emes floated b% t$e arious mutual funds are essentiall% of two t%"es6 namel% o"en5
ended and close5ended. $e basic c$aracteristics of t$ese two t%"es of mutual fund
O"en5ended sc$emes are aailable for subscri"tion all t$e %ear round e0cluding t$e "eriod of book5closing. $e% ma% or ma% not $ae a s"ecified redem"tion "eriod. $esale and re"urc$ase "rices are fi0ed b% t$e mutual fund concerned from time to time,e"urc$ases are generall% allowed al s"ecified rated.
/ac$ o"en5ended sc$eme must $ae a minimum cor"us of ,s.! crore. +n case t$e fundmanager is not able to raise t$is amount at t$e time of issue6 or & J of t$e targetedamount w$ic$eer is $ig$er6 t$e entire subscri"tion must be returned to t$e inestor.
CLOSE;ENDED SCEMES
$ese are o"en for subscri"tion onl% during a s"ecified "eriod. Fenerall% t$e redem"tion
dates are also s"ecified w$en t$e inestor can redeem t$eir units. $e duration of t$issc$eme aries< normall% it is !5) %ears. ,e"urc$ase during t$e interening "eriod ma% orma% not be allowed. Some of t$e sc$emes t$oug$ $ae a re"urc$ase facilit% after acertain "eriod. #an% of t$ese sc$emes are listed in stock e0c$anges6 e0ce"t for some oft$e close5ended income sc$emes .
E4uit! Oriented S3'e1es <$ese sc$emes6 also commonl% called Frowt$ Sc$emes6 seek to inest a majorit% of t$eirfunds in e9uities and a small "ortion in mone% market instruments. Suc$ sc$emes $aet$e "otential to delier su"erior returns oer t$e long term. >oweer6 because t$e% inestin e9uities6 t$ese sc$emes are e0"osed to fluctuations in alue es"eciall% in t$e s$ortterm.
/9uit% sc$emes are $ence not suitable for inestors seeking regular income or needingto use t$eir inestments in t$e s$ort5term. $e% are ideal for inestors w$o $ae along5term inestment $ori;on. $e =A: "rices of e9uit% fund fluctuates wit$ marketalue of t$e underl%ing stock w$ic$ are influenced b% e0ternal factors suc$ as social6
"olitical as well as economic. >D*( Frowt$ *und6 >D*( a0 saer and >D*(+nde0 *und are e0am"les of e9uit% sc$emes.
De"t Based S3'e1es: $ese sc$emes6 also commonl% called +ncome Sc$emes6 inest indebt securities suc$ as cor"orate bonds6 debentures and goernment securities. $e "ricesof t$ese sc$emes tend to be more stable com"ared wit$ e9uit% sc$emes and most of t$e
returns to t$e inestors are generated t$roug$ diidends or stead% ca"ital a""reciation.$ese sc$emes are ideal for conseratie inestors or t$ose not in a "osition to take$ig$er e9uit% risks6 suc$ as retired indiiduals. >oweer6 as com"ared to t$e mone%market sc$emes t$e% do $ae a $ig$er "rice fluctuation risk and com"ared to a Filt fundt$e% $ae a $ig$er credit risk.
INCOME SCEMES < $ese sc$emes "roide returns in t$e formof diidends. $e returns ma% be cumulatie or non5cumulatie on amont$l%6 9uarterl%6 or %earl% basis. #utual *unds carr% market risks
and are "ro$ibited b% S/'+ from declaring an% guaranteed rate ofreturns. $e mone% under suc$ sc$emes are "redominantl% inestedin fi0ed income securities like debentures6 bonds6 Foernmentsecurities etc.
Li4uid In3o1e S3'e1es: Similar to t$e +ncome sc$eme but wit$ as$orter maturit% t$an +ncome sc$emes. An e0am"le of t$is sc$eme is
t$e >D*( ?i9uid *und.
Mone! Market S3'e1es: $ese sc$emes inest in s$ort terminstruments suc$ as commercial "a"er 7C(PE86 certificates of de"osit7C(DE86 treasur% bills 7C5'illE8 and oernig$t mone% 7C(allE8. $esc$emes are t$e least olatile of all t$e t%"es of sc$emes because of
usuall% does not $ae to worr% about credit risk since Foernment Debt is generall%credit risk free. >D*( Filt *und is an e0am"le of suc$ a sc$eme.
<B$ID SCEMES :
$ese sc$emes are commonl% known as balanced sc$emes. $ese sc$emes inest
in bot$ e9uities as well as debt. '% inesting in a mi0 of t$is nature6 balanced sc$emesseek to attain t$e objectie of income and moderate ca"ital a""reciation and are ideal forinestors wit$ a conseratie6 long5term orientation. >D*( 'alanced *und and >D*(($ildren’s Fift *und are e0am"les of $%brid sc$emes.
Inter)a- S3'e1es: $ese sc$emes combine t$e features of o"en5ended and closed5endedsc$emes. $e% ma% be traded on t$e stock e0c$ange or ma% be o"en for sale orredem"tion during "re5determined interals at =A: based "rices.
*rom t$e inestments "oint of iew t$e e0isting sc$emes can be furt$er diided into 4
major categories <
1. G$OWT SCEMES < $ese are usuall% close5ended sc$emes. $e aim of suc$sc$emes is to "roide ca"ital a""reciation to t$eir inestors and accordingl% asubstantial "art of t$e (or"us is inested in e9uities an conertible debenturesSuc$ sc$emes are usuall% listed in t$e major stock e0c$anges and t$e ca"ital
2. a""reciation is reflected in t$eir market alue i.e. =A:. $e% ma% or ma% notdeclare diidends een t$oug$ t$e declaration of annual diidends re"resents t$e$ealt$ of a sc$eme.
3. E=%IT<;LINKED SCEMES 5ELSS2 : $ese are "o"ularl% known as ta05 "lanning sc$emes . $e% are essentiall% close5ended growt$ sc$emes in nature$e% are floated b% almost all t$e "ublic sector mutual funds in t$e last 9uarter ofeac$ financial %ear6 some of t$e essential c$aracteristics are <
a. +nestment u" to a ceiling of ,s.166I come under Section ( of t$e+ncome a0 Act.
b. ,e"urc$ase is allowed after a s"ecified "eriod5 usuall% 3 %ears.
c. During t$e lock5in "eriod of 3 %ears t$eir units cannot be traded6 "ledged ortransferred.
+AL%E;ADDED SCEMES : t$e% are in addition to t$e growt$Iincome sc$emes.Some of t$e mutual funds sc$emes $ae "roision for Malue addition’. $is is usuall%in t$e nature of "ersonal insurance coer for accidents6 etc. F+( #utual *und was t$e
a8 S!ste1ati3 In)est1ent #-an 5SI#2: Allows %ou to sae a "art of %our incomeregularl%. Also used to reduce risk w$en inesting in sc$emes targeting aggressiegrowt$.
b8 S!ste1ati3 Wit'dra(a- #-an 5SW#2: Allows %ou to wit$draw a "art of %our
inestment regularl%. sed w$en %ou want to wit$draw %our inestment for a s"ecificregular "a%ment6 like insurance "remium "a%ments of mont$l%I9uarterl% fre9uenc%.
c8 Auto1ati3 de"it: Saes t$e $assle of writing a c$e9ue w$en making an inestment.Bour account is debited automaticall% for t$e amount inested.
d8 Di)idend #-an :
A8 Diidend Pa%out< nder t$is "lan inestor can redeem $isI$er diidend at s"ecifictimes.
'8 Diidend ,einestment< nder t$is "lan inestor’s diidend is reinested back to it’s "rinci"al amount w$ic$ t$erefore increase t$e number of units inestor is $olding.
e8 Gro(t': nder t$is "lan income generated from inestment will "ut back to it’sinested amount w$ic$ t$erefore increases t$e alue of eac$ unit customer is $olding.
?2 #ost #ur3'ase Monitoring:
Once %ou $ae inested in an ongoing fund6 e0"ect a "eriod of two to t$ree da%s before
%ou receie an account statement on t$e address mentioned b% %ou in %our a""licationform.
a8 T'e A33ount State1ent
Bour account statement indicates %our current $olding in t$e sc$eme t$at %ou $aeinested.
b8 T'e transa3tion s-i,: $e transaction sli" at t$e end of t$e account statement can beused for additional "urc$ases6 redem"tions or to intimate t$e mutual fund on an% c$ange
in bank mandatesIaddress.
32 NA+: $e =A:s of all t$e o"en5ended sc$emes are "ublis$ed at t$e fundGs websitefinancial news"a"ers and A#*+ 7Association of #utual *unds8 web5sitewww.amfiindia.com.
/er% A#( adice t$at eer% inestor s$ould monitor t$e $isI$er units =A: "eriodicall% but A#( also recommend t$eir unit $olders to not get swa%ed b% s$ort termconsiderations in deciding t$eir e0it.
$ede1,tion: +n case of o"en ended funds inestor can redeem $isI$er inested amount.#ost funds take 153 da%s to credit %our account wit$ %our redem"tion "roceeds.
#ortfo-io Di)ersifi3ation N #utual *unds normall% inest in a well5diersified "ortfolio or securities w$ere t$e inestor can $old a diersified inestment "ortfolio een wit$ a small amount of inestment.
#rofessiona- Manage1ent N $e inestors does not $ae t$e skills and t$eresources of t$eir own to succeed in toda%’s fast moing6 global and so"$isticatedmarkets. $ereb% t$e% benefits from t$e "rofessional management skills broug$t in
b% t$e fund in t$e management of inestor’s "ortfolio.
Di)ersifi3ation of $isk; Since t$e inestor ac9uires a diersified "ortfolio6 it reduces arisk of loss as com"ared to inesting directl% in one or two s$ares or debentures or ot$erinstruments. $ile inesting in a "ool of funds wit$ ot$er inestors an% loss6 on one ortwo securities is also s$ared wit$ ot$er inestors. $is risk reduction is one
of t$e most im"ortant benefits of a collectie inestment e$icle like t$e mutualfund.
$edu3tion of Transa3tion Costs W$en going t$roug$ a fund t$e inestor $as t$e benefit of economies of scale6 funds "a% lesser cost because of larger olumes6 andt$is benefit is "assed onto its inestors.
Li4uidit!5 +nestment in a mutual fund is more li9uid as an inestor can li9uidatet$e inestment6 b% selling t$e unit to t$e fund if o"en5end6 or selling t$em in amarket if t$e fund is close5end and collect funds at t$e end of t$e "eriod s"ecified
b% t$e mutual fund or t$e stock market.
Con)enien3e and F-ei"i-it! #utual *und management com"anies offer man%inestor serices w$ere in t$e inestor can easil% transfer t$eir $oldings from onesc$eme to t$e ot$er6 get u"dated market information6 and so on.
DISAD+ANTAGES OF M%T%AL F%NDS:
No Contro- o)er 3ost N An inestor in #utual *unds $as no control oer t$eoerall cost inesting as $e "a%s inestment management fees as long as $eremains wit$ t$e fund. >e also "a%s fund distribution costs6 w$ic$ $e would notincur in direct inesting.
No Tai-or;1ade #ortfo-ios N+nestors w$o inest on t$eir own can build t$eirown "ortfolios w$ereas inesting t$roug$ funds inoles delegating t$is decisionto t$e fund managers.
Managing ,ortfo-io of fund ; Aailabilit% of t$e large number of funds canactuall% mean too muc$ c$oice for t$e inestor w$erein $e needs an adice onselecting a fund to ac$iee $is objecties6 to suit t$e situation w$en $e selectsindiidual s$ares or bonds to inest in.
+nestor tends to constantl% com"are one form of inestment wit$ anot$er+nestors certainl% look for t$e best returns for different o"tion. >oweer6 to determinew$ic$ o"tion is better6 t$e com"arison s$ould be made in terms of ot$er benefits t$at t$einestor oug$t to look for in an% inestment.
• #utual *unds and Securities inestment are subject to market risks and t$ere can be assurance or guarantee t$at t$e sc$eme objecties will be ac$ieed.
• As wit$ an% inestment in securities6 t$e =et Asset :alue of nit issued under t$e
Sc$eme ma% go u" or down de"ending on t$e arious factors and farces affectingt$e ca"ital markets.
• Past "erformance of t$e S"onsors and t$eir affiliates I A#( I #utual *und and its
sc$eme do not indicate t$e future "erformance of t$e sc$emes of t$e #utual *und.
• $e S"onsors are not res"onsible or liable for an% loss or s$ortfall resulting from
t$e o"erations of t$e sc$eme be%ond t$e contribution of ,s 1 lak$ eac$ made b%t$em towards t$e cor"us of t$e #utual *und.
As "er S/'+ circular ref. S/'+I+#DI(+, =o. 1I22)1I3 dated December 126 23read wit$ circular ref S/'+I+#DI(+, =O. 1I42!2I! dared une 146 2!6 it is s"ecifiedinter alias t$at eac$ "ortfolio under a sc$eme s$ould $ae a minimum of 2 inestors andno single inestor s$ould account for more t$an 2!J of t$e cor"us of suc$ "ortfolio.
12 >ig$ e0"ense ratio means it will affect t$e returns negatiel%.28 ?ong enure means *und is more trusted.
STATEMENT:
On t$e basis of aboe descri"tion we can state t$at SA=DA,D (>A,/,/DP,/#+/, /@+B *=D $as $ig$ e0"ense ratio 72.38 and small tenure.$ile*,A=H?+= +=D+A P,+#A and >D*( P,D/=(/ $as low e0"ense ratio and longtenure.
18 >ig$ PI/ ratio means *und is er% actiel% manage.28 ?arge #arket (a"itali;ation reeals Organi;ation’s strong "osition in t$e market aswell as Organi;ation’s long term growt$.38 ?arge Assets reeals Organi;ation’s strong financial "osition and S$are$oldersSecurit%.
STATEMENT:On t$e basis of aboe mentioned descri"tion we can state t$at SA=DA,D(>A,/,/D P,/#+/, /@+B *=D $as $ig$est PI/ ratio but small #arket (a"and Assets.$ile >D*( P,D/=(/ $as $ig$ PI/ ratio6 moderate #arket (a" andlargest Assets w$ereas A'= A#,O OPPO,=++/S $as $ig$ PI/ ratio6 largest#arket (a" and low Assets.
'ecause of =on5Aailabilit% of figures for some *unds we cannot gie an% commentunder t$is "arameter. >oweer on t$e basis of aailable data we can conclude t$at*,A=H?+= +=D+A P,+#A - AA /@+B OPPO,=++/S are little risk% funds.
=A:< =et Asset :alue s$ows t$e "er unit alue of a mutual fund unit t$at an inestor is$olding. >ig$I?ow =A: s$ows t$at b% $ow muc$ amount t$e inested amount isa""reciated or de"reciated.
STATEMENT:
On t$e basis of aboe descri"tion we can state t$at ,/?+A=(/ F,O> $as t$e$ig$est all time $ig$ 7!2 weeks $ig$8 =A: 324.4
$ile SA=DA,D(>A,/,/D P,/#+/, /@+B $as t$e all time low 7!2 weekslow8 =A: .&
On t$e basis of aboe table we can state t$at S ( Premier /9uit% - S ( (lassic /9uit%fund are less risk% in com"arison to t$eir benc$mark inde0 'S/52 as t$eir 'eta alues
are less t$en 1 as well as t$e% also $ae better returns t$en benc$mark inde0 as t$eirAl"$a alues are "ositie.
+n a general "ers"ectie t$ere are 3 basic moties be$ind $olding t$e cas$ <
18 S"eculatie
28 Precautionar%
38 ransactional
After t$e intense market sure% on mutual fund inestment is done we $ae bifurcated "eo"le in 2 segments. e $ae done bifurcation mainl% on t$e basis of life stages. Aftersure% we found t$at "eo"le at t$e age range of 2! %ears to 4 %ears w$o come under t$eincome bracket of ,s. 1! to ,s. 3 "er mont$ $ae more risk a""etite and t$e%can easil% take $uge risk because of t$eir s"eculatie be$aior t$en to t$e "eo"le w$o areat t$e age range of !! %ears and aboe and come under t$e same income bracket7$oweer "eo"le on t$is edge of t$eir life c%cle are mostl% de"end eit$er on t$eir famil%members or on "ension or on t$eir lifetime saings or inestments for e.g ?ife +nsurance6Post Office saings6 'ank saings account6 $ouse rent6 *D’s etc.8 $ae less riska""etite . $e% don’t want to take $ig$ risk on t$eir $ard earned mone% and are $a""%wit$ inestments if it is giing conseratie returns but secure t$eir "rinci"al amount.
Also "eo"le at t$e age of !! and aboe are in great need of cas$ in $and because at t$isage most of t$em are done wit$ t$eir inestments. $erefore t$e% are more interested ininestments w$ic$ can get t$em sufficient cas$ at regular interals.
+n general "eo"le at t$e age range of 2! %ears to 3! %ears are er% s"eculatie6 and because t$e% are earning regular income so t$e% don’t need to $old muc$ cas$ in needt$e% can also afford t$eir dail% e0"enses er% easil%. $erefore t$e% are more interestedin inestments w$ic$ are little more risk% but can get t$em $andsome returns. As "eo"leat t$is age $ae $uge future needs for e.g $aing t$eir own $ome and so t$e% also moreinterested in long term inestments.
>ence on t$e basis of t$is sure% and anal%sis we $ae done aboe we recommendfollowing funds to t$ese 2 segments of inestors.
