comparision of mutul fund and other investment modes 1111

7/31/2019 Comparision of Mutul Fund and Other Investment Modes 1111

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PROJECT REPORT ON

Mutual Fund

(A of investmentor securities Ltd.)

SUBMITTED BY:

Nilay patel

SUBMITTED TO:

Vjkm institute of management and

computer studies

Vadu

GUIDED BY:

Pro. Hetal joshi


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ACKNOWLEDGEMENT

To acknowledge is very great way to show your gratitude towards the

persons who have contributed in your success in one or other way.

I find words inadequate to express my gratitude to the companys

Branch Manager Mr.dilip p. patel for providing me an opportunity to carry out

my summer training as such a well reputed and leading stock broking

company InvestMentor Securities Ltd.

thanks also to companys Branch Manager Mr.Dilip patel for his

continuous guidance and supervision and support during the training period. I

would also like to thank to Mr.Bhavin patel who have spared sometime and

helped me out to carry on my project work successfully at the best level.

I would like to thank Mr.pritesh patel who has guided me for my project

work and provided encouragement through out my training period..


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index


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EXECUTIVE SUMMERY

As a management students, we are very well know that practical Knowledge

plays an important role and it is much important than theoretical syllabus. So

for this purpose our college is making the programme for us so that I can get

project at industrial unit

Stock Broking Company is growing sector in InvestMentor securities Ltd which

is running at last 20 years in this field. InvestMentor securities is pioneer in

Online trading facility in this industry. We have undertake project of

Organizational Study of InvestMentor securities at AHMEDABAD

During the Training period I have been aware about company and Stock

Market.

I have tried our level best to prepare this report including all the points. I am

sure you will acknowledge our report.


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1

PREFACE

I know that training is for the development and enhancement of the

knowledge in particular field. It can never be possible to make a mark in

todays competitive era only with theoretical knowledge when industries

are developing at global level, practical knowledge of administration and

management of business is very important. Hence, practical study is of

great importance to M.B.A. student.

With a view to expand the boundaries of thinking, I have undergone SIP at

InvestMentor Securities Ltd. I have made a deliberate to collect the

required information and fulfill training objective.


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Welcome To InvestMentor Online

InvestMentor Securities Ltd (ISL) is a leading stock broker of Gujarat, India.

ISL has a seat on India's largest stock exchange National Stock Exchange of


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India ltd (NSE), Bombay Stock Exchange (BSE), Multi-Commodity Exchange

(MCX) and is also an active depository participant with India's largest

depository National Securities Depository Ltd (NSDL).

InvestMentor Online (IMO) is our online arm to extend our product and

services from geographical barriers and to reach investors from other

countries through Internet. The trading interface provides real-time

streaming quotes, manages your portfolio and many more features

InvestMentor Securities Offer :

Equity, Derivatives and Commodities Broking

Depository Services

Online Trading

Mutual Funds and IPO

Online transfer of funds.

NRI Services

Auto pay-in of share

introduction

InvestMentor Securities Ltd (ISL) is a leading stock broker of Gujarat, India.

ISL has a seat on India's largest stock exchange-National Stock Exchange of

India ltd (NSE), Bombay Stock Exchange(BSE), Multi-Commodity

Exchange(MCX) and also has active membership as a Depository Participant

(DP) with India's largest depository National Securities Depository Ltd (NSDL).

We are located in the center of financial district and are easily accessible from

any part of Gujarat state. We are a team of dedicated, experienced stock

market professionals committed to deliver world-class services at the most


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competitive rates.

We are connected to the central order matching system of the NSE through a

very reliable satellite based VSAT connection. This offers our clients access

and ability to get real time quotes and make trades. We are proud to say that

we are able to provide investors and traders a trading system that if not better

is as good as that available in advanced markets like US and Japan. With

Depository Participant (DP) operations, we are able to provide one-stop

integrated solution to our clients? investment needs.

InvestMentor was promoted by a dynamic and ambitious group of

entrepreneurs in 1995 during the period when Indian capital markets weregoing through an unprecedented bear market and brokerage industry was in

middle of fierce competitive environment. ISL not only survived in this tough

time but also firmly established itself and opened full service branches in

leading cities of North Gujarat like Unjha, Kalol, Mehsana, Kadi, Palanpur within

a short span of three years. ISL was among the first few to sense the

opportunities that Depositories in India had to offer and became a DP with

National Securities Depository Ltd in early 1999. InvestMentor is profitable on

net level from very first year and has been paying dividends every year since

then. We have recently deployed Computer-to-Computer Link (CTCL) to

provide link to our main trading server from any remote place through a dial

up or ISDN connection. With this facility already tested and verified, many

independent investment firms are offering online trading access to their

clients through us.

As a next step, we are actively exploring possibilities to make our trading

infrastructure available worldwide through Internet. InvestMentor Online is an

important step for us to reach Non-Resident Indians, a community that is a

crown-jewel for modern India and also highly recognized and respected all

over the world. Recent liberalization and opening up of Indian economy and


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capital markets to foreign investors have resulted into a strong growth rate for

Indian economy. We at InvestMentor take this as a beginning of a long-term

bull market and strongly believe that today's India offers a highly competitive

investment alternative for NRIs. Presence of all leading US institutional

investors and multinational companies in India is a clear evidence for the

future to come.

There are probably as many ways to set up a store catalog as there are sites

on the web. The examples below are only an example of how your

catalog/products page can appear.

Equity & Derivatives Broking:

ISL's Equity broking Division has an unbroken tradition of trust and

performance stemming from the philosophy of providing value added broking

services. As a trading cum Clearing Member of BSE, NSE, BSE F&O and


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NSEF&O, the organization provides full trading and clearing services to its

clients. The broking Division has extended its services beyond the standard

broking practices by helping and managing decisions for its clients a service

that has created unrivaled benchmark in the industry. With the onset of online

trading we at ISL Broking Division exploit the potential of the internet as a

powerful facilitator. As a result, the ISL Broking has achieved a true synthesis

of trading and technology?with solid advice and personalized care along with

the cutting edge advanced trading systems in place. We believe in fast,

efficient, quality-based service with immediate execution and the timely pay-

in and pay-out of deliveries and funds, resulting in substantial cost savings for

our customers. Our services such as daily updates, immediate confirmation oftrades, SMS Alerts, personalized counseling for investment/disinvestment

trading with us is an enriching experience for our clients.

Demat Services:

In these times of T+2 settlement system having a demat account linked to

your trading account becomes really convenient and an attractive proposition


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and that too, especially if its free. The non trading members also can avail of

our depository services at very attractive rates. You receive regular account

reports and an efficient services at all the times. We are the member of one of

India?s largest depository NSDL and the services are available at all our

branches across Gujarat. We have a team of professionals and the latest

technological expertise dedicated exclusively to our Demat department and

also we have some of the best NCFM trainers, apart from a large network of

branches making our service quick, convenient and efficient. In fact we are

prepared for the time when t+1 pay-in and pay-out becomes a reality.

Speed-e:

This is the facility we provide to the clients who are unable to visit the office

premises to give the delivery out instruction slip personally. It is one of the

latest technological use for transacting the slip by sitting at ones place or

office. This is not only provides the convenience of making the transaction

easier but it also makes it faster.

IDEAS :

One of the most exciting services of getting to know ones balance in theaccount. Just subscribe and enter your user id and password and all your

account holding and transactions is just a click away.


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Commodities:

InvestMentor Commodities is our arm to extend our Broking Services into

Commodity Markets

Mutual Funds & IPO :

We provide extensive guidance for investments through Mutual Funds and

IPO. Our team of experts help you select the best suited Fund and IPO to

investment and provide time to guidance for exit and entry.

MEMBERSHIP OF INVESTMENTOR SECURITIES

LTD

InvestMentor is a member of following Indian Exchanges.

National Stock Exchange of India Ltd.

Bombay Stock Exchange

National commodity And Derivatives Exchange

Multi-commodity Exchange

ADVANTAGES OF ONLINE TRADINNG WITH

INVESTMENTOR SECURITIES LTD

Angel provides following valuable advantages to its online trading

customers.


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Multiple exchanges on a single screen BSE, NSE, NSE -F&O, MCX and NCDEX

Hot keys similar to brokers terminal

Streaming quotes

In-depth research and technical charts Intra-day calls

24X7 back-office

Auto pay-in and pay-out of shares

Instant transfer of funds

Highly secure and confidential

INTRODUCTION OF MUTUAL FUND AND OTHERINVESTMENTS

At independence the Indian economy was predominantly agrarian. Most of the population

was employed in agriculture, and most of those people were very poor. Although there was

considerable growth in the 1950s, the long-term rates of growth were less positive than India's

politicians desired and less than those of many other Asian countries. The rate of growth improved

in the 1980s. From FY 1980 to FY 1989, the economy grew at an annual rate of 5.5 percent, or 3.3

percent on a per capita basis. Industry grew at an annual rate of 6.6 percent and agriculture at a rate

of 3.6 percent. A high rate of investment was a major factor in improved economic growth.

Investment went from about 19 percent of GDP in the early 1970s to nearly 25 percent in the early

1980s. India, however, required a higher rate of investment to attain comparable economic growth

than did most other low-income developing countries, indicating a lower rate of return on

investments. Part of the adverse Indian experience was explained by investment in large, long-

gestating, capital-intensive projects.

Private savings financed most of India's investment, but by the mid-1980s further growth in

private savings was difficult because they were already at quite a high level. As a result, during the

late 1980s India relied increasingly on borrowing from foreign sources.


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By the 20th and the 21st century the level of savings made by the people increased

tremendously. These savings were invested in some or the other modes available either for

contingency purpose or to secure future. The major fields of investment were insurance , bank

fixed deposits, private fixed deposits, post office savings, government securities, gold/silver,

stocks, mutual funds , IPO(initial public offering), real property etc.

.

.

MUTUAL FUNDS

INTRODUCTION

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 invested by the fund

manager in different types of securities depending upon the objective of the scheme.

These could range from shares to debentures to money market instruments. The

income earned through these investments and the capital appreciation realized by

the scheme is shared by its unit holders in proportion to the number of units owned

by them (pro rata). Thus a Mutual Fund is the most suitable investment for the

common man as it offers an opportunity to invest in a diversified, professionally

managed portfolio at a relatively low cost. Anybody with an inventible surplus of as

little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme

has a defined investment objective and strategy.


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Mutual funds provide a way for people to pool their money together to create a

larger fund which is looked after by a professional fund manager. This fund is then

divided into equal shares, called units.

Following the stock, bond or money markets and taking advantage of the best

investment opportunities is a full time job requiring a great deal of knowledge,

research and in-depth analysis. Many people do not have the time or expertise to

undertake this. With mutual funds, professional fund managers and analysts do all

this for you. You benefit from their expertise.

Thus a Mutual Fund is the most suitable investment for the common man as it offers an

opportunity to invest in a diversified, professionally managed basket of securities at a relatively

low cost. The flow chart below describes broadly the working of a mutual fund:

Figure 1 Mutual Fund Operation Flow Chart


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BENEFITS OF MUTUAL FUNDS

Mutual Funds offer several benefits to an investor such as potential return, liquidity,

transparency, income growth, good post tax return and reasonable safety. There are number of

options available for an investor offered by a mutual fund.

Before investing in a Mutual Fund an investor must identify his needs and preferences.

While selecting a Mutual Fund's schemes he should consider the effect of inflation rate,

diversification of investment, the time period of investment and the risk factors. There are various

types of risk factors as:

Market Risk

Credit Risk

Interest Rate Risk

Inflation Risk

Political Environment

A Mutual Fund is an ideal investment vehicle where a number of investors come together

to pool their money with common investment goal. Each Mutual Fund with different type of

schemes is managed by respective Asset Management Company (AMC). An investor can invest

his money in one or more schemes of Mutual Fund according to his choice and becomes the unit

holder of the scheme. The invested money in a particular scheme of a Mutual Fund is then invested

by fund manager in different types of suitable stock and securities, bonds and money market

instruments. Each Mutual Fund is managed by qualified professionals, who use this money to

create a portfolio which includes stock and shares, bonds, gilt, money-market instruments or

combination of all. Thus Mutual Fund will diversify your portfolio over a variety of investment

vehicles. Mutual Fund offers an investor to invest even a small amount of money.


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Mutual Funds offer several benefits to an investor that unmatched by the other investment

options. The major benefits are good post-tax returns and reasonable safety, the other benefits in

investing in Mutual Funds are

Professional Management: Mutual Funds employ the services of experienced and skilled

professionals and dedicated investment research team. The whole team analyses the performance

and balance sheet of companies and selects them to achieve the objectives of the scheme

Potential Return: Mutual Funds have the potential to provide a higher return to an

investor than any other option over a reasonable period of time.

Diversification: Mutual Funds invest in a number of companies across a wide cross section of

industries and sectors.

Liquidity: The investor can get the money promptly at the net asset value related prices from the

Mutual Funds open-ended schemes. In close-ended schemes, the units can be sold on a stock

exchange at the prevailing market price.

Low Cost: Investment in Mutual Funds is a less expensive way in comparison to a

direct investment in capital market.

Transparency: Mutual Funds have to disclose their holdings, investment pattern and the

necessary information before all investors under a regulation framework.

Flexibility: Investment in Mutual Funds offers a lot of flexibility with features of schemes such as

regular investment plan, regular withdrawal plans and dividend reinvestment plans enabling

systematic investment or withdrawal of funds.

Affordability: Small investors with low investment fund are unable to high-grade or blue chip

stocks. An investor through Mutual Funds can be benefited from a portfolio including of high

priced stock.

Well regulated: All Mutual Funds are registered with SEBI, and SEBI acts a watchdog, so the

Mutual Funds are well regulated.


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DISADVANTAGES

Mutual funds are good investment vehicles to navigate the complex and unpredictable world of

investments. However, even mutual funds have some inherent drawbacks. Understand these before

you commit your money to a mutual fund.

No assured returns and no protection of capital

If you are planning to go with a mutual fund, this must be your mantra: mutual funds do not offer

assured returns and carry risk. For instance, unlike bank deposits, your investment in a mutual fund

can fall in value. In addition, mutual funds are not insured or guaranteed by any government body

(unlike a bank deposit, where up to Rs 1 lakh per bank is insured by the Deposit and Credit

Insurance Corporation, a subsidiary of the Reserve Bank of India).

There are strict norms for any fund that assures returns and it is now compulsory for funds to

establish that they have resources to back such assurances. This is because most closed-end funds

that assured returns in the early-nineties failed to stick to their assurances made at the time of

launch, resulting in losses to investors.

Restrictive gains

Diversification helps, if risk minimization is your objective. However, the lack of investment focus

also means you gain less than if you had invested directly in a single security


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ORGANISATION OF MUTUAL FUNDS

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

set up of a mutual fund:

Figure 2 Organization of a Mutual Fund

Mutual funds have a unique structure not shared by other entities such as companies or firms .The

structure of mutual funds in India is governed by SEBI (Mutual Fund) Regulations, 1996. These

regulations make it mandatory for mutual funds to have a three tier structure of Sponsor

Trustee Asset Management Company (AMC). The sponsor is the promoter of the mutual fund

and also appoints the Trustees, custodians, and the AMC with prior approval of SEBI. The

sponsor establishes the mutual fund and registers the same with SEBI. Sponsor must contribute at

least 40% of the capital of the AMC. The trustees are responsible to the investors in the mutual

fund, and appoint the AMC on the advice of sponsors for managing the investment portfolio. The

trustee of one mutual fund cannot be a trustee of other mutual fund. The trustee of one mutual fund

cannot be a trustee of other mutual fund. The Indian Trust Act governs trustees. If the trustee is a


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company then the Companies Act also governs it. The AMC is the business face of the mutual

fund, as it manages all the affairs of the mutual fund. Only the SEBI registered AMCs can be

appointed as investment managers of mutual fund. AMC must have minimum net worth of Rs. 10

crore, at all times. An AMC too cannot be an AMC or trustees of other mutual fund.

TYPES OF MUTUAL FUNDS

A Mutual Fund may float several schemes which may be classified on the basis of its structure, its

investment objectives and other objectives.

A.

MUTUAL FUND SCHEMES BY STRUCTURE

Open-Ended Funds: Open-Ended fund scheme is open for subscription all through year. An

investor can buy or sell the units at "NAV" (Net Asset Value) related price at any time.

Close-Ended Funds: A Close-Ended fund is open for subscription only during a specified period,

generally at the time of initial public issue. The Close-Ended fund scheme is listed on the some

stock exchanges where an investor can buy or sell the units of this type of scheme.

Interval Funds: Interval Funds combines both the features of Open-Ended funds and Close-Ended

funds.

B. MUTUAL FUND SCHEMES BY INVESTMENT OBJECTIVES


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Growth Funds: The objective of Growth Fund scheme is to provide capital

appreciation over the medium to long term. This type of scheme is an ideal scheme

for the investors seeking capital appreciation for a long period.

Income Funds: The Income Fund schemes objective is to provide regular and steady

income to investors.

Balanced Funds: The objective of Balanced Fund schemes is to provide both growth

and regular income to investors.

Money Market Funds: The objectives of Money market funds are to provide easy

liquidity, regular income and preservation of income.

C. OTHER FUNDS

Tax Saving Schemes:The objective of Tax Saving schemes is to offer tax rebates to

the investors under specific provisions of the Indian Income Tax Laws. Investments

made under some schemes are allowed as deduction u/s 88 of the Income Tax Act.

Industry specific Schemes: Industry specific schemes invest only in the industries

specified in the offer document of the schemes.

Sectorial Schemes: The scheme invest particularly in a specified industries or initial

public offering.

Index schemes: Such schemes links with the performance of BSE sensex or NSE.


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Loan Funds: Loan Funds charges a commission each time when you buy or sale

units in the fund.

No-Loan Funds: No-Loan Funds does not charge a commission on purchase or sale

of the units in the fund.


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OTHER INVESTMENTS

Savings form an important part of the economy of any nation. With the savings invested in variousoptions available to the people, the money acts as the driver for growth of the country. Indian

financial scene too presents a plethora of avenues to the investors. Though certainly not the best or

deepest of markets in the world, it has reasonable options for an ordinary man to invest his savings.

A short briefing about each form of investment is given below:

BANKS

Considered as the safest of all options, banks have been the roots of the financial systems in India.Promoted as the means to social development, banks in India have indeed played an important role

in the rural upliftment. For an ordinary person though, they have acted as the safest investment

avenue wherein a person deposits money and earns interest on it. The two main modes of

investment in banks, savings accounts and fixed deposits have been effectively used by one and

all. However, today the interest rate structure in the country is headed southwards, keeping in line

with global trends. With the banks offering little above 9 percent in their fixed deposits for one

year, the yields have come down substantially in recent times. Add to this, the inflationary

pressures in economy and you have a position where the savings are not earning. The inflation is

creeping up, to almost 8 percent at times, and this means that the value of money saved goes down

instead of going up. This effectively mars any chance of gaining from the investments in banks.

When you deposit a certain sum with the bank at a fixed rate of interest and for specified time

period it is called a bank Fixed Deposit (FD). At maturity, you are entitled to receive the principal

amount as well as the interest earned at the pre-specified rate during that period.

The rate of interest for Bank Fixed Deposits varies between 4 and 6 per cent,

depending on the maturity period of the FD and the amount invested. The interest

can be calculated


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monthly, quarterly, half-yearly, or annually, and varies from bank to bank. They are

one the most common savings avenue, and account for a substantial portion of an

average investor's savings.

The facilities vary from bank to bank. Some services offered are withdrawal through

cheques on maturity; break deposit through premature withdrawal, and overdraft

facility etc.

Duration

Interest Rates (%

p.a.)

(effective 5th May

2003)

7 days to 14 days (Rs.15 lacs and above) 4.00

15 days to 45 days 4.25

46 days to 179 days 5.00

180 days to less than 1 year 5.25

1 year to less than 2 years 5.50

2 years to less than 3 years 5.75

3 years and above 6.00

Source: State Bank of India

Table : Interest Rates Payable on Deposits


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POST OFFICE SCHEMES

Just like banks, post offices in India have a wide network. Spread across the nation, they offer

financial assistance as well as serving the basic requirements of communication. Among all saving

options, Post office schemes have been offering the highest rates. Added to it is the fact that the

investments are safe with the department being a Government of India entity. So the two basic and

most sought for features, those of return safety and quantum of returns were being handsomely

taken care of. Though certainly not the most efficient systems in terms of service standards and

liquidity, these have still managed to attract the attention of small, retail investors. However, with

the government announcing its intention of reducing the interest rates in small savings options, this

avenue is expected to lose some of the investors. Public Provident Funds act as options to save for

the post retirement period for most people and have been considered good option largely due to the

fact that returns were higher than most other options and also helped people gain from tax benefits

under various sections. This option too is likely to lose some of its sheen on account of reduction

in the rates offered. Post office savings consists of

National Savings Certificates: National Savings Certificates (NSC) is an assured return scheme,

armed with powerful tax rebates under Section 88 of the Income Tax Act, 1961. Interest

is payable at 8 per cent, compounded half-yearly for a duration of 6 years.

National Savings Scheme: National Savings Scheme (NSS) offers an assured

return and tax rebates under Section 88 of the Income Tax Act, 1961. The rate

of interest is 7.5 per cent per annum, compounded annually.

Kisan Vikas Patra: Kisan Vikas Patra (KVP) doubles your money in 8 years

and 7 months with the advantage of premature withdrawal. KVP is sold through

all Head Post Offices and other authorized post offices throughout India. The

rate of return is 8.41 per cent, compounded annually.

Monthly Income Scheme: The post-office monthly income scheme (MIS)

provides for monthly payment of interest income to investors. It is meant for

investors who want to invest a lump-sum amount initially and earn interest on


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a monthly basis for their livelihood. The scheme is, therefore, a boon for retired

persons. The post-office MIS gives a return of 8 per cent plus a bonus of 10 per

cent on maturity. However, this 10 per cent bonus is not available in case of

premature withdrawals.

Recurring Deposit: A Post-Office Recurring Deposit Account (RDA) is akin to

a Recurring Deposit in a bank, where you invest a fixed amount on a monthly

basis. The deposit has a fixed tenure, and the scheme is a powerful tool for

regular savings. As the name says, the RDA is a systematic way of saving

money. The scheme is meant for investors who want to deposit a fixed amount

regularly, in order to get a tidy sum after five years. If you invest Rs 10 every

month, you will get back Rs 728.90 after 5 years.

Time Deposit: A Time Deposit is an investment option that pays annual

interest rates between 6.25 and 7.5 per cent, compounded quarterly, and is

available through post-offices across the country.


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COMPANY FIXED DEPOSITS

Another often-used route to invest has been the fixed deposit schemes floated

by companies. Financial institutions and Non-Banking Finance Companies (NBFCs)

also accept such deposits. Deposits thus mobilized are governed by the CompaniesAct under Section 58A. These deposits are unsecured, i.e., if the company defaults,

the investor cannot sell the company to recover his capital, thus making them a risky

investment option. NBFCs are small organizations, and have modest fixed and

manpower costs. Therefore, they can pass on the benefits to the investor in the form

of a higher rate of interest.

NBFCs suffer from a credibility crisis. So be absolutely sure to check the credit

rating. AAA rating is the safest. According to latest RBI guidelines, NBFCs and

companies cannot offer more than 14 per cent interest on public deposits.

Companies have used fixed deposit schemes as a means of mobilizing funds

for their operations and have paid interest on them. The safer a company is rated, the

lesser the return offered has been the thumb rule. However, there are several

potential roadblocks in these. First of all, the danger of financial position of the

company not being understood by the investor lurks. The investors rely on

intermediaries who more often than not, dont reveal the entire truth. Secondly,

liquidity is a major problem with the amount being received months after the due

dates. Premature redemption is generally not entertained without cuts in the returns

offered and though they present a reasonable option to counter interest rate risk

(especially when the economy is headed for a low interest regime), the safety of

principal amount has been found lacking. Many cases like the Kuber Group and DCM

Group fiascoes have resulted in low confidence in this option.


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SHARES

Shares, also called scrip, are the basic building blocks of a company. A company's ownership is

determined on the basis of its shareholding. Shares are, by far, the most glamorous investment

option for the simple reason that, over the long term, they offer the highest returns. Predictably,

they're also the riskiest investment option. The BSE Sensex is the most popular index that tracks

the movements of shares of 30 blue-chip companies on a weighted average basis. The rise and fall

in the value of the Sensex, measured in points, broadly indicates the price-movement of the value

of shares. Of late, technology has played a major role in enhancing the efficiency, safety, and

transparency of the markets. The introduction of net trading has made it possible for an investor to

trade in shares at the click of a mouse.

Types of shares

A company may have many different types of shares that come with different

conditions and rights.

There are four main types of shares:

Ordinary Shares: Ordinary shares are standard shares with no special rights or

restrictions. They have the potential to give the highest financial gains, but also have

the highest risk. Ordinary shareholders are the last to be paid if the company iswound up.

PreferenceShares: Preference shares typically carry a right that gives the holder

preferential treatment when annual dividends are distributed to shareholders.

Cumulative Preference Shares: Cumulative preference shares give holders the

right that, if a dividend cannot be paid one year, it will be carried forward to

successive years.

Redeemable Shares: Redeemable shares come with an agreement that the

company can buy them back at a future date. A company cannot issue only

redeemable shares.


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INSURANCE

A life insurance policy is a contract between an individual (termed as insured) and an

insurance company (insurer) to pay the insured, or his nominated heirs, a specified

sum of money on the happening of an event. The event could be the expiry of theinsurance policy or the death of the insured before the expiry (date of maturity) of the

policy as per the terms of the policy.

In a simple example, a person takes an insurance policy and nominates his wife as

the beneficiary. On the death of this person, his wife gets the amount for which the

life insurance policy was purchased. There are many variants of a life insurance

policy:

1. Whole Life Assurance Plans: These are low-cost insurance plans where the sum

assured is payable on the death of the insured

2. Endowment Assurance Plans: Under these plans, the sum assured is pay-able

on the maturity of the policy or in case of death of the insured individual before

maturity of the policy.

3. Term Assurance Plans: Under these plans, the sum assured is payable only onthe death of the insured individual before expiry of the policy.

4. Pension Plans: These plans provide for either immediate or deferred pension for

life. The pension payments are made till the death of the annuitant (per-son who has

a pension plan) unless the policy has provision of guaranteed period.

Life Insurance Corporation (LIC) is a government company. Tillrecently, the LIC was the sole provider of life insurance policies to

the Indian public. However, the Insurance Regulatory &

Development Authority (IRDA) has now issued licenses to a few

private companies to conduct the business of life insurance.


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DATA ANALYSIS

RESARCH METHODOLOGY

HYPOTHESIS: Investors still prefer the traditional funds for investment instead the more modern

methods like mutual fund

RESEARCH OBJECTIVE

To study

Investment pattern of investors.

Key factors to be considered before investing.

Mutual funds scope and acceptance of mutual fund as means of investment as compared to

other investment.

TYPE OF SURVEY

The questionnaire based survey is selected for conducting the research. The questionnaire based

survey is selected because it is the most effective and efficient way to conduct research of investors

investing in mutual fund since they just have to give their opinion for the question asked by the

researcher and also they can just select from the alternatives given in the questionnaire.

SAMPLING

Non-Probability Sampling

For the study the sampling technique used is that of Non Probability Sampling and the method is

that of Convenience Sampling which represents the non probability samples


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that can be restricted. Under this method there is freedom to choose whomever the researcher

finds.

SAMPLE SIZE

The population defined for the study is any investor and into any kind of investment. The

population defined would give inferences. So the population is divided here in different classes.

All the professionals, service, businessmen and would include any person who make any kind of

investment became my population. The sample size is approximately size is kept 100 randomly.

TYPE OF QUESTIONNAIRE

The questionnaire designed contained

Dichotomous questions

Multiple-choice questions

Thus it was easy for the investors to select from the alternatives, the alternative which suits them

the best. The data or the data the information collected from the respondents were the respondents

were then compiled, tabulated and classified for analysis and interpretation with the use of

Microsoft Excel, Microsoft Word etc.

LIMITATION:

Every research has certain limitation to it. So also the research conducted had certain limitation.

They are stated as under:

The respondents were not very much co-operative as they didnt want to disclose their level

of investments.

The investors of were difficult to be traced, as there was no database available for the same.

People generally hesitated to answer the questionnaire thinking that the questionnaire is a

way to market some particular mode of investment.


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Insufficient knowledge of every kind of investment sometimes sticks a respondent at

particular answer, which inversely affect towards the objective of study.

At the time of survey some of the respondents are busy in their work, which had restricted

them from answering.

The respondents where not able to justify their stand at points and hence this proved to be a

limitation of the study.


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DATA ANALYSIS AND INTERPRETATON

PERCENTAG E OF INCOME SAVED BY THE GENERAL MASS

The chart represents the percentage of the income the respondents generally save. From the above

chart it is clear that a large number of investors save between the range of 10 to 20% percent of

their income. Nearly equal numbers of investor save less than 10%. Only 10% of the investors

surveyed saved more than 30% of their income. The respondents who saved between the range of

20 to 30 % was around 21%


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THE PURPOSE SAVING SERVES

Contingency

Secured Future

Others

The chart represents the purpose for which the people make a saving. It is pretty clear from the

chart that the maximum number of respondents (i.e.83%) saves to secure their future. Secure future

can be anything from their childrens studies or marriage or for themselves. The next importance is

given for contingency purpose. The others purpose could be tax benefits or excess money and no

specific purpose. The respondents could be generally being termed as to be more concerned about

the future and hence they can be termed as safe players.


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THE FACTORS TAKEN INTO ACCOUNT BEFORE INVESTING

Risk

Liquidity

Return

Tenure

Others

This chart represents the factors that investors consider before making an investment. From the

above chart it is clear that the investors take into account more than one factor before making

an investment. Risk factor has been the prime concern for the investors for making an

investment. 81% of the respondents consider risk as being one of the main factors to be

considered before making an investment. Further the return was considered to be important forthe investments. 44% respondents considered return to be an important factor whereas 14 %

respondents considered liquidity to be an important factor. Risk was considered to be more

important than Liquidity and Returns. The respondents gave least importance to the tenure

factor. The others over here could be the past records of the investment opportunity or the

goodwill of the same


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PERSONS CONSULTED BEFORE MAKING AN INVESTMENT DECISION.

Family and Relatives

Peer

Expert and Professionals

Self

4 7

5

3 3

0

5 0

R E S P O N

T S

I N V E S T M E N T C O N

F a m i ly a n d R e la t iv e sP e e r s E x p e r ts a n d P r o f e s s ioS e l

This chart represents the people whose opinions are generally taken by the investors before making

an investment. It is clear from the above diagram that more than one persons opinion is taken into

consideration before making an investment. Maximum number of respondents consults family and

relatives opinion before making an investment followed by experts and professionals. Large

number of people do not consult anybody but rely on their intuition and their own experience and

knowledge while making an investment. People consulting experts before making an investment

have been increasing over the years but it still has a very long way to go.


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INVESTMENT AVENUES PREFERED

The above chart represents the avenue where investments are made. It is clear that the investors

chose more than one avenue as part of their investment. Insurance is a field where people are

keener to make an investment followed by Bank FD/Company FD and stocks. Mutual fund was

not much preferable only 50% of the respondents were actual investors in the mutual fund

industry. Gold/Silver (i.e. bullion) and the IPO (initial public offering) were the least preferred

amongst the respondents as an avenue for investment. Others over here could include real property.

Even Government securities had a noticeable number of investors. Post office schemes proved to

be a very encouraging area of investment.

INVESTMENT AVENUES

95

79

67

58

6

75

50

819

010

20

30

40

50

60

70

80

90

100

1

RES

PON

DEN

TS

Insurance Bank FD/Company FD

Post Office Savings Government Securities

Gold/Silver Stocks

Mutual Fund IPO

Others


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MODES OF AWARENESS FOR MUTUAL FUNDS

4 8

3

1 8 1 5

10

2 0

4 0

6 0

R E S P O N

E N T S

1

M O D E S O F AW A R E

N e ws pa pe r A udio / V ide o A dve r tis

M a ga zine s P ro fe s s io na ls

O the rs

This input was basically required from the respondents who didnt invest in mutual funds. This

means that this question was meant for 50 respondents who did not invest in mutual fund. This

chart represents the ways in which respondents who are not investing into mutual funds came to

know about mutual funds. Newspapers have been the best mode of advertising for mutual fund

.About 96% people have come to know about mutual fund through newspaper advertisement

followed by magazines. The share of professionals has been less as compared to other modes. This

says there is lot of scope further. Magazines and other mode has been the least contributor.


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SCHEMES OF MUTUAL FUND THAT THE GENERAL MASS WAS AWARE OF

15

5

33

8

0

5

10

15

20

25

30

35

RESPOND

ENTS

SCHEMES OF MUTUAL FUND

Equity Debt MIP Balanced Not Aware

This chart represents the schemes of mutual funds of which respondents not investing in mutual

funds are aware of. MIP i.e. monthly Income Plan seems to be more popular amongst the

respondents. So that could be an area where the mutual fund industry can cash in. The popularity

was followed by equity schemes and by debt schemes. There were 8 respondents out of 50 i.e.

fairly 16% who were not aware about any schemes of mutual fund industry. The prime concern of

the industry people should over here be to educate people regarding the mutual fund industry and

its various schemes and how it can prove to be beneficial to an ordinary man.


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FUTURE OF MUTUAL FUND

F U T U R E O F M U T

6 2

3 4

4

Y E S N O C A N T

The above chart represents the inclination of the respondents to invest in the mutual fund industry.

31 of the 50 respondents are not investing in mutual fund industry and are not willing to do so.

Hence it becomes important for the mutual fund industry try to overcome the barriers for these

respondents and persuade them to invest in mutual fund. This would be a tough job but can prove

to be a good potential market. There are about 4% respondents out of these 50 respondents who are

not able to give an opinion whether they would be interested in investing in the mutual fund

industry. To get them invest in the same would be relatively easy job. There are only 17

respondents who are willing to invest in mutual fund and hence they can be easily converted into

mutual fund investors.


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REASONS FOR NOT CHOOSING MUTUAL FUND AS AN INVESTMENT AVENUE

Less Secured

Unfavorable market conditions

Bad Past Record of MFs

Unfavorable Returns

Others

9 10 10

26 22

0

20

40

RESPOND

ENTS

REASONS

UNFAVOURABLE MARKET CONDITIONS PAST RECORDS

UNFAVOURABLE RETURNS LESS SECURED

OTHERS

This chart represents the reasons why the respondents were not investing in mutual fund. Over here

there was no single main reason that was restricting the respondents to invest in mutual fund. The

other reasons over here were lack of knowledge, the feeling that it is not backed by any legislative

body, not interested and satisfied with other forms of investment. The main reason over here was

lack of knowledge and fear as they believed that it was not backed by any body and hence theirinvestment was not protected. It is this category that mutual fund industry can cash in. They can

start educating people about the mutual fund and hence can widen their base. The other reason was

that respondents considered it to be less secured than the other investments. Security seemed to be

a threat for the respondents. Even the past bad records of the mutual fund industry seemed to be a

reason for their disinterest in the mutual fund. There were respondents who thought that the returns


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PROCEDURE OF MUTUAL FUND

P R O C E D U R E O F M U T U AL

1 6 %

8 4 %

Y E S NO

This chart represents the respondents, who invested in mutual fund, view whether they found the

procedure of the mutual fund too long. It is a general believe that the procedure of mutual fund is

too long. The reason for this is that the forms of mutual fund forms were very long as compared to

other forms of investment like shares etc. But the respondents at large did not find it too complex

because it was their agents who took the pain. Hence their work load was too less.


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MUTUAL FUND AS COMPARED TO OTHER MODES OF INVESTMENT IN SOME

SELECTED FACTORS

RISK FACTOR

This chart represents the preference of respondents of mutual fund over as far as the risk factor is

considered. From the above chart it is quite clear that mutual fund is considered to be more risky ascompared to other forms of investment. About 62% of the respondents investing in mutual fund are

of the opinion that mutual fund is more risky as against other forms of investment. There were few

respondents that were of the opinion that it was relatively same for every form of investment. But

there were about 34% of the respondents who thought that mutual funds were less risky then other

forms of investment. The risk factor was generally attributed to the volatile market and the

unpredictable companys market.

17

31

2

0

20

40

RESPONDENTS

RISK FACTOR

LESSMORE

INDIFERRENT


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LIQUIDITY FACTOR

LIQUIDIT

1 0

3 5

5

L E S S M O R E IN D IF F E R E

This chart represents the preference of respondents of mutual fund over as far as the liquidity

factor is considered. From the above chart it is quite clear that mutual fund is considered to be

more liquid than the other form of investment. The investors seem to be satisfied with mutual fund

as far as the liquidity factor was concerned. There were few who considered the position to be not

very satisfactory. And there were dew who considered it to be same as the other forms of

investments.


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RETURNS

RETURNS

36%

62%

2%

LESS MORE INDIFERRENT

This chart represents the preference of respondents of mutual fund over as far as the return factor is

considered. From the above chart it is quite clear that mutual fund is considered to be giving more

returns than the other forms of investment. The returns of mutual fund are considered to be fairer

than are other forms of investment. There were very few who considered the returns to be unfair

and still few who consider that the returns were fair in all forms of investment.


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TAX BENEFITS

TAX BENEFITS

22%

50%

28%

LESS MORE INDIFERRENT

This chart represents the preference of respondents of mutual fund over as far as the tax benefits

are considered. From the above chart it is quite clear that mutual fund is considered more

beneficial as far as tax savings are considered. The tax savings of mutual fund industry is better for

50% of the respondents as compared to other forms of investment. There were 28% respondents

who considered who considered the savings to be equal in every form of investment. There were

very few respondents who considered the tax savings from other investment to be better in other

investments.


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SUMMARY OF THE ANALYSIS

What motivates a person or an organization to buy securities, rather than spending

their money immediately? The most common answer is savings -- the desire to pass

money from the present into the future. People and organizations anticipate future

cash needs, and expect that their earnings in the future will not meet those needs.

You may be willing to invest to make something happen that might not, otherwise --

you could invest to build a museum, to finance low-income housing, or to re-claim

urban neighborhoods. The dividends from these kinds of investments may not be

economic, and thus they are difficult to compare and evaluate. For most investors,

charitable goals aside, the key measure of benefit derived from a security is the rate

of return.

It is clear that the investors are basically quite conservative and hence are not ready to take

any risk with their hard earned money. They are very conscious and hence are not ready to take

any risk. The mutual fund is not very new concept in India it still seems that the mutual fund has

still a very long way to go before they would get highly established. The maximum numbers of

investors still prefers traditional investments like insurance, fixed deposits and shares and seems to

be satisfied and hence are not interested in investing in mutual funds. Even the concept of IPO

(Initial Public Offering) seems to be less accepted concept. So the hypothesis for the study that the

investors still prefer traditional methods of investment has not proved to be completely wrong from

the analysis done, which is very evident from the above charts. The number of investors investing

in mutual fund seems to be very less as compared to investments modes like insurance, fixed

deposits and shares.


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FINDINGS

The findings from the study are as under:

The people are basically of conservative nature and hence are very precautious about their

hard earned money. Hence they would like to play it safe when it comes to spending of

their money.

Security and returns are the two main reasons that are taken into consideration before

making an investment.

Bank fixed deposits and post office savings seem to be most preferred one among the

investors because it is considered to be the most secured one.

Shares and mutual funds were considered to be very risky and hence that seemed to be the

last choice of the general mass

Amongst mutual fund and shares people preferred shares because the possessed complete

knowledge about the shares but had very little knowledge about the mutual fund industry.

The people who do not invest in mutual fund basically fear that they are less secured as

compared with other investments.

The others were aware about the concept of mutual fund but were not full aware of its

intricacy hence were not interested in investing in it.

Most of the investors who invest in Mutual Fund substitute the same against the Bank

Deposits, insurance and other saving schemes. The investors are not willing to invest in

mutual fund industry unless they are guaranteed about minimum returns.

The increase in mutual fund and various schemes have left many investors confused as to

which scheme to opt for even if they want to invest in mutual fund.


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The increase in Mutual fund and various schemes have increased competition. Hence it has

been remarked by many investors mutual funds are too busy trying to race against each

other. As a result they lose their stabilizing factor in the market.

Many investors are not aware about the asset allocation principles stated by renowned

theorists of the mutual fund industry.

CONCLUSIONS

The Ground rules of Investing

Moses gave to his followers 10 commandments that were to be followed till eternity. The world of

investments too has several ground rules meant for investors who are novices in their own right

and wish to enter the myriad world of investments. These come in handy for there is every

possibility of losing what one has if due care is not taken.

1. Assess yourself: Self-assessment of ones needs; expectations and risk

profile is of prime importance failing which; one will make more mistakes in

putting money in right places than otherwise. One should identify the degree of

risk bearing capacity one has and also clearly state the expectations from theinvestments. Irrational expectations will only bring pain.

2. Try to understand where the money is going: It is important to identify

the nature of investment and to know if one is compatible with the investment.

One can lose substantially if one picks the wrong kind of fund. In order to avoid

any confusion it is better to go through the literature such as offer document

and fact sheets that companies provide on their funds.

3. Don't rush in picking funds, think first: One first has to decide what he

wants the money for and it is this investment goal that should be the guiding

light for all investments done. It is thus important to know the risks associated

with the fund and align it with the quantum of risk one is willing to take. One

should take a look at the portfolio of the funds for the purpose. Excessive


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exposure to any specific sector should be avoided, as it will only add to the risk

of the entire portfolio. Identifying the proposed investment philosophy of the

fund will give an insight into the kind of risks that it shall be taking in future.

4. Invest. Dont speculate: A common investor is limited in the degree of risk

that he is willing to take. It is thus of key importance that there is thought

given to the process of investment and to the time horizon of the intended

investment. One should abstain from speculating which in other words would

mean getting out of one fund and investing in another with the intention of

making quick money. One would do well to remember that nobody can

perfectly time the market so staying invested is the best option unless there

are compelling reasons to exit.

5. Dont put all the eggs in one basket: This old age adage is of utmost

importance. No matter what the risk profile of a person is, it is always

advisable to diversify the risks associated. So putting ones money in different

asset classes is generally the best option as it averages the risks in each

category. Thus, even investors of equity should be judicious and invest some

portion of the investment in debt. Diversification even in any particular asset

class (such as equity, debt) is good. Not all fund managers have the same

acumen of fund management and with identification of the best man being a

tough task; it is good to place money in the hands of several fund managers.

This might reduce the maximum return possible, but will also reduce the risks.

6. Be regular: Investing should be a habit and not an exercise undertaken at

ones wishes, if one has to really benefit from them. As we said earlier, since it

is extremely difficult to know when to enter or exit the market, it is importantto beat the market by being systematic. The basic philosophy of Rupee cost

averaging would suggest that if one invests regularly through the ups and

downs of the market, he would stand a better chance of generating more

returns than the market for the entire duration.


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7. Do your homework: It is important for all investors to research the avenues available to

them irrespective of the investor category they belong to. This is important because an

informed investor is in a better decision to make right decisions. Having identified the risks

associated with the investment is important and so one should try to know all aspects

associated with it. Asking the intermediaries is one of the ways to take care of the problem.

8. Find the right funds: Finding funds that do not charge much fees is of

importance, as the fee charged ultimately goes from the pocket of the investor.

This is even more important for debt funds as the returns from these funds are

not much. Funds that charge more will reduce the yield to the investor. Finding

the right funds is important and one should also use these funds for tax

efficiency. Investors of equity should keep in mind that all dividends are

currently tax-free in India and so their tax liabilities can be reduced if the

dividend payout option is used. Investors of debt will be charged a tax on

dividend distribution and so can easily avoid the payout options.

9. Keep track of your investments: Finding the right fund is important but

even more important is to keep track of the way they are performing in the

market. If the market is beginning to enter a bearish phase, then investors of

equity too will benefit by switching to debt funds as the losses can be

minimized. One can always switch back to equity if the equity market starts to

show some buoyancy.

10.Know when to sell your mutual funds: Knowing when to exit a fund too is

of utmost importance. One should book profits immediately when enough has

been earned i.e. the initial expectation from the fund has been met with. Other

factors like non-performance, hike in fee charged and change in any basic

attribute of the fund etc. are some of the reasons for to exit.

Investments in any funds are not risk-free and so investments warrant some

caution and careful attention of the investor. Investing funds can be a dicey

business for people who do not remember to follow these rules diligently, as

people are likely to commit mistakes by being ignorant or adventurous enough to


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take risks more than what they can absorb. This is the reason why people would

do well to remember these rules before they set out to invest their hard-earned

money.

SUGGESTIONS

The Indian Investment Industrys development and success would depend on various issues such

as:

Educate the people: There are lots of alternatives available in the present time. But

because of lack of knowledge people are not ready to try them. Even because of the fear to

try new ones the investment industry has limited it self. The same can be done through

arranging events that promote such innovations.

Preconceptions rule: The preconceptions that a person carries tries rule his investment

decisions. The past record of shares and mutual fund restrict the people in investing in thesame. Though the rules and regulations have changed a lot but there are still people who

are not ready to accept such facts.

Let them know where there amount in reinvested: The investors should know that the

amount that is invested in the company how the funds are used and for what purpose .They


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have the right to know where are their funds reinvested i.e. the companies should be

transparent.

Do not cut others line for showing yourself bigger: The promoters to promote their funds

degrading the other modes of investment and hence this limits their investment scopes

itself because this act degrades the company in the eyes of the customers

Lead through Innovation: Although there is enough room in the market, unfortunately in

Indian market, all mutual funds have been chasing the same set of investors with the same

set of products and inducements. Product differentiation is the first step towards escaping

competition and attracting more investors.

Rebuild investors confidence: For a long term growth of the industry, it is a must to win

the confidence of the investors and there is no way to do this other than bringing in more

transparency in the operations, proper communications between the market players and

their customers.

Manage risks through derivatives: India has a wide range of derivatives products in the

market. Mutual Fund should also come forward with more of such products. In the

Business World dated 24th November 2003 there was news that Benchmark fund is coming

out with an Equity Arbitrage Fund called Dynamic Arbitrage Fund. Otherwise SEBI has

not allowed any AMC to float a hedge fund in India.

Educate investors about the principles: There is no doubt that investors education is

one area, which has to be concentrated upon in the mutual fund industry. The Mutual funds

must come forward to make funds understandable to them. The must be made aware about

various asset allocation principles.

comparision of mutul fund and other investment modes 1111

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