summer project vishwanath

8/8/2019 Summer Project Vishwanath

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A PROJECT REPORT ON

AWARENESS OF MUTUAL FUNDS IN FINANCIAL PLANNING

WITH REFERENCE TO

LIFE GUARD ADVISORY SERVICES PVT. LTD.

A Summer project Report Submitted in Partial Fulfillment of award of MBA Degree

Project Guide :

Prof. Prakash Chawla

Submitted by : Submitted to

Vishwanath chauhan (14) SKPIMCS

S. K. PATEL INSTITUTE OF MANAGEMENT & COMPUTER STUDIES

Gandhinagar, India

July 2010


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CERTIFICATE

This is to certify that Mr. VISHWANATH CHAUHAN of S. K. Patel Institute of

Management and Computer Studies, Gandhinagar have submitted his Summer Project titled,AWARENESS OF MUTUAL FUNDS IN FINANCIAL PLANNING in the year 2010

in partial fulfillment of Kadi Sarva Vishwavidyalaya requirements for the award of the title

ofMaster of Business Administration.

Prof. Sonu V. Gupta Prof. Prakash M. Chawla Prof. Prakash M. Chawla

Director Coordinator Summer Project Guide

Date:


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DECLARATION

I, hereby, declare that the summer Project titled, AWARENESS OF MUTUAL FUNDS

IN FINANCIAL PLANNING is original to the best of my knowledge and has not beenpublished elsewhere. This is for the purpose of partial fulfillment of Kadi Sarva

Vishwavidyalaya requirements for the award of the title ofMaster of Business

Administration, only.

Students Name Signature

Vishwanath Chauhan


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PREFACE

In todays world, only theoretical knowledge is not sufficient for man. Every man must

have Practical Knowledge about a particular field or company. With the help of Practicalknowledge a man can learn more than the theoretical Knowledge.

India is one of the fastest growing economies in the world due to which the income

level of people in India is increasing and along with it the savings and investments are also

growing. Due to liberalization and deregulation which was announced in New Industrial

Policy 1991, has dismantled barriers in the financial market, allowed the entry of new players

and created environment for efficient allocation of resources. One of the important industries

in emerging financial market is the mutual fund industry.

The mutual fund industry has played a significant role in the development of capitalmarket, growth of corporate sectors and financial intermediation. As mutual fund industry in

India is relatively new, the level of awareness among the people is less but with the increase

in level of awareness the mutual fund industry is also growing. The government has also

announced the regulatory measures for the growth of mutual fund industry and protection of

investors in mutual funds. Here we have attempted to study mutual fund industry in India,

comparison of mutual fund companies and schemes offered by them and investment behavior

of consumers.


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ACKNOWLEDGEMENT

Through this acknowledgement, I would like to thank all of them, who helped me to

prepare this report. First of all I am thankful to the KADI SARVA VISHWAVIDYALAYA

university and the Director Prof. Sonu Gupta for including such summer project in MBA

program.

I forward my gratitude to my project guide Prof. Prakash Chawla for giving me

precious guideline for preparation of summer report and providing solution to all my queries.

I sincerely thankful to the Director of Life Guard Advisory Services Pvt. Ltd. Mr.

Mitesh Acharya for providing me a great opportunity to get practical knowledge.

I heartily thankful to all the respondent for giving me kind support in filling

questionnaire and giving their precious time.


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TABLE OF CONTENTS

Chapter no. Contents Page No.

* Certificate I

* Declaration II

* Preface III

* Acknowledgements IV

* Table of Contents V

* Executive Summary VI

1 Introduction 1

2 Research Methodology 2

3 Industry Profile 9

4 Company Profile 37

5 Data Interpretation and Analysis 41

6 Research Findings & Conclusions 49

7 Suggestions & Recommendations 50

* Bibliography

* Annexure


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EXECUTIVE SUMMARY

The Indian mutual fund industry came into existence with the establishment of Unit Trust of

India in 1964. Unit Trust of India was not efficient enough to expand the mutual fund

market. In late 1980s nationalized bank sponsored mutual funds came into existence which

helped mutual fund industry to expand its market.

The private sector mutual fund entered the industry during early 1990s with greater variety

of products and better services. They introduced different kinds of products satisfying the

needs of the different classes of investors.

The major limitation of mutual fund industry in India is the lack of awareness among the

investors. Most of the investors are not at all aware about what is mutual fund? How it

functions? How money collected from investors are invested, etc against which in America

more than eighty million people or one half of the households invest in mutual funds. That

means that, in the United States alone, trillions of dollars are invested in mutual funds.

Mutual fund industry depends on gaining the trust of investors. Once the investors trust is

gained it is easy to convince them to invest in mutual funds. The investors are attracted based

on the performance of the mutual funds rather than winning the trust of investors. The

performance of mutual funds is variable, sometimes it may go up and sometimes it may

come down. It is also not sure that the past performance will be repeated in the current

period. Still the investors are attracted based on the past performance of mutual funds. The

Indian mutual fund industry should come out of this limitation. They should try to attract the

investors by gaining their trust rather than showing the past performance of mutual funds.

Most of the investors are not aware about the professional fund managers of the mutual

funds. They invest in the mutual funds based of the returns which mutual fund yields. The

investors are not aware that the fund managers of mutual funds do systematic analysis of thecompanies in which they are going to invest; they give suggestions to the companies which

are not performing well. Therefore the mutual fund industry should try to promote about

their professional fund managers, which would help the industry to attract the investors and

expand its market.


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The mutual fund industry in India is still in the developing stage. Many of the mutual fund

companies are presently functioning in the urban area, but in country like India where the

substantial part of total population lives in the rural area, also the mutual fund companies

needs to expand their business in the unexplored rural areas which will lead to the substantial

increase in the total amount which is invested in mutual funds.

The basic functioning of mutual fund depends on the equity and debt market. The portfolio

of different mutual funds companies constitutes of the investments in any of these markets

depending upon the type and scheme of mutual fund.

Whenever any of the above mentioned market goes down the respective fund is affected. For

example if the market has gone down by 30% but the mutual funds NAV has gone down

only by 10% than the investor should understand that the fund manager of such scheme is

really efficient. But rather than having such a long view the investors thought is limited to

short run and they think that the scheme in which they have invested is not good and they

withdraw their money by incurring losses which is one of the major limitation of the

investors investing in mutual funds, which the mutual fund company must try to overcome

by increasing the awareness regarding the basic functioning of mutual funds and making the

customers aware regarding the difference between the absolute and relative returns.

In research methodology I have made questionnaire on Awareness of Mutual Funds In

Financial Planning. In that I got it filled by 50 respondents and then I have analyzed it and

made some suggestions and recommendations for the same and I have also made a

conclusion from the research.


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Chapter 1: Introduction

These days life seems to be more complicated than ever, with precious little time for a walk

in the park or settling down with a good book, leave alone taking time from ones busy lifeschedule to make and monitor wise personal investment decisions.

If you dont have the time, the inclination or the expertise to make and manage investments

in the complex equity or the debt markets directly, consider investing in mutual funds.

Further there are different categories of mutual funds to meet your diverse set of financial

needs. It is a kind of product in which the investor have to stay for longer period to get good

amount of return. But the present scenario is that people wants to earn more in shorter

duration, which is only possible in equity with high amount of risk.

In this project I have made a small kind of survey on AWARENASS OF MUTUAL FUNDIN FINANCIAL PLANNING. In that I have asked certain basic questions related to mutual

funds and the investment behavior. I personally feel that in India there is not much awareness

regarding mutual funds. In India there are so many companies of mutual fund the people are

getting more different schemes for their investments.

In Life Guard Advisory I was used to make advisors for them who can sell their financial

products. For this they have provided training about how to talk to the common people, how

to start the introduction etc. Advisor of the company can sell life insurance, general

insurance, equity, real estate etc.


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Chapter 2: Research Methodology

a. Research Objective: The main objective of research is to know how much the

common people is aware about the mutual funds and to see that what amount of

percentage of people are investing in it. And what is their knowledge about the same.

b. Scope of the study:

y The study will be helpful to the company for getting information about theawareness of Mutual Funds in the population.

y The study will be helpful have a complete knowledge about the Mutual fundsIndustry.

y The study will be useful to have a view about the investors needs, way ofinvesting and what they actually want while investing.

y The study will be helpful to have the knowledge about the performance ofdifferent AMCs.

c. Methods of Data Collection:

I. Sampling:

I have taken following steps:

1. Define the population:a. Element: Awareness of Mutual Funds in Financial Planningb. Sampling Unit: Business and salaried persons, professionals.c. Extent: Ahmedabadd. Time: 15 days

2. Identify the sampling frame: Locality of a city using corporation listing.1. Specify sampling unit: Owner of a business, employee of organization, head of a

family.


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2. Selection of sampling method: Convenience non probability method.3. Determination of sample size: For descriptive research, I had taken 50 as the sample

size.

II. Data collection sources:

Data Sourceso Primary:o Secondary:

Research Approacheso Survey

Research instrumentso Questionnaire

Sampling Plano Any earning person

d. Data analysis:

SWOT ANALYSISSWOT Analysis of any industry means analyzing that industrys strength, weakness and

opportunities and threats of that industry.

STRENGTHS

1. Large Scope : Life Guard provides a good facility to the advisors to sell the mutualfunds of 33 different companies. So it has a large scope to grow.

2. Diversification :- If any investor wants to transfer his fund to different scheme orcompany then it is easily possible because it is dealing with so many AMCs.

3. Convenient administration:- Life Guard provides a good quality to its customers likethey are informing customers about the latest NAV, what is the situation in the market

etc.


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WEAKNESSES

1. Lack of Management: In Life Guard the work is not done with the planning andadmistration this is the reason why it is lagging behind in the competition.

2. Lack of proper marketing :- The marketing efforts carried out by various othercompetitors are very high and Life Guard is not having any kind of such

advertisements and promotion.

3. Lack of knowledgeable employees: Life Guard is not having sufficientknowledgeable employees with it. It is the big weakness of it.

OPPORTUNITIES

1. Interest Rate: Govt. has let the interest rate down. Before some years the rate wasaround 13% so investor were preferred to invest in the bank deposit for getting higher

return in the past. Now a days economic condition is strong which has let the interest

rate down to 5 to 6%.

This is an Opportunities for the Mutual Fund that it can give the more return on

diversify portfolio management. Investor can get return more than he can anticipate.

2. Investment Pattern: In present scenario, Investors investment pattern is getting higherreturn with a less risk. Before 5 to 6 year investor were more trustworthy with Govt.

and Post Office. While Now a days they have diversify their investment pattern.

This can led to success of Mutual Fund. Mutual Fund is only investment media where

one can have all types of investment pattern. So it can be stated for investorsattractiveness to the industry.

3. Investors Profile: The literacy level in India is growing. Investors are being educated,so they consider all facts and have good investment opportunity.

Mutual Fund concept can be well explained to the qualified investors. It is

opportunity for the industry.

4. Bull Equity Market: Currently equity market is in the boom period. The indexes arerapidly increasing. Nifty has crossed the level of 5000 and Sensex over 17000. The

equity holders are getting more return or gains. Mutual Fund industry has good

potential in the equity market. Investors can be pulled to the market with havinginvestment in the equity scheme.

Mutual Fund provides several types of equity Scheme which can easily track the

equity investors perspective. It provides long term capital appreciation and as well as

dividend.

5. Rapid growth in economy and saving: Indian economy is currently in growing level.In the past the country was in underdeveloped country while now it is a developing


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country. The GDP growth is round about 6 to 7%. Economy has got success in

reducing the inflation rate which is 4.4%. The effect of this kind of economy is that

the people have more income, while low inflation rate tends to increase in saving.

This is good opportunity for the Mutual Fund industry. It can attract the investors by

showing them the emergence of fund or diversification.

6. Commodities Fund: With approval for the Real Estate Funds in place, there is a hugeopportunity for Mutual Funds to explore values through investment in commodities,

bullion, metal etc.

THREATS

1. Rules & Regulation: Mutual Fund has to work under rules and Regulation guided bySEBI, AMFI and RBI. It has some limitation under the law. Law board has given

protection to the investor this is the threats for the industry.

2. Investors Awareness: Still investors are not aware of the Mutual Fund and itsscheme. Investors have lower awareness regarding the companies concerning with

Mutual Fund. Some investors fill difficulty in understanding Mutual Fund concept

and its scheme objectives.

This unawareness has proved to be failure aspect for the industry. Industry can not

cover potential market.

3. Richness: Mutual Funds have failed to reach to the interior of the country. Currentlymajor players have their market from metro and big cities. Still the way to the small

towns and villages is open. Industry is in lack of Richness.


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Porters Five-Force Analysis of Mutual Fund Industry

1. Rivalry among competing sellers:

A. Types of Schemes:

All companies provide different types of schemes, which are best, suited to theinvestors objectives. Companies in the industry are more and more concern tothe investors objective and try to give them same.

Threat of new

entrants

Rivalry

Among

competition

Bargaining power

of buyers

Bargaining power

of suppliers

Threat of substitutes


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B. Better Services:In the industry companies are trying to provide better services to the investors.Competitors are providing better communication facility as well as theguidelines.

C. Switching Cost:Rivalry is strong because of cost of switching the scheme is low. Investors caneasily switchover to another company or scheme. When investor feels betterreturn or security then he will switch over to the other company or scheme.

2. The potential entry of new competitors:

Until 1987, the UTI was the sole Mutual Fund in India. Then Banks, LIC and GIC

floated Mutual Fund. In the past 1992 public and private financial institution with

foreign collaboration came in the market.

Thus we can see the entry of new competitors is high. Banking companies, NBFCs,

Merchant Bankers, Insurances Companies are now entering into the Mutual Fund asthe purpose of diversified business.

New entrance increase in the competition and decline market share of exiting

company. In the Mutual Fund industry the investors loyalty level is very low. So, the

investors will switchover the new company which gives him high returns.

3. Competitive Pressure from substitute products:

Equity shares, Bank Deposits, Insurance etc. are substitute of the Mutual Fund.

Currently there is boom period in the stock market as investor prefers to invest

directly to the stock market. Risk aversion people prefer the insurance or post office

schemes. New insurance company gives the better product and security for the long

term plan.

4. Suppliers(Investor) Bargaining Power:

We can consider the investor investing in Mutual Funds is the supplier of the

company. For bargaining power to suppliers provide different scheme to the investor

which is reach the investor objective like High Liquidity, High Return, Low Risk,

Safety against investment. Investors are prefer those security which fulfill their

investment objective. There are so many companies in the market which give

different kinds of schemes. Investor can choose the best scheme according to his

objective and bargain for the same. Companies are facing threats from the bargain

power of investors. Investor can easily switchover the scheme and cost of switching is

also low. Investor fully utilizes their bargain skill while choosing the fund.


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5. Bargaining Power of Customer (Listed Companies):

We can consider the Listed Companies in Indian Stock market, Stock Market, Govt.

Security, and Money Market etc. are the customer of the Mutual Fund. Blue chip

companies attract the Mutual Fund companies to invest in their securities. Companies

are more concentrate on Mutual Fund companies because of there is wide scope of

investment in Mutual Fund.

e. Limitations of study:

1) The project covers a survey of only 50 respondents. Hence we admit that thesample size was very small as compare to population in city.

2) Advanced statistical devices like correlation-regression or hypothesis testing werenot employed.

3) The respondents have answered weirdly to some of the questions. Hence someconclusions could be biased.

4) For the purpose of study, sample size was selected. It is a representative ofpopulation but may not provide accurate results.

5) As practical knowledge of this type was experienced first time, there might besome flaws in the research.


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In India, as in most countries, these sponsors need approval from a regulator, SEBI

(Securities exchange Board of India) in our case. SEBI looks at track records of the sponsor

and its financial strength in granting approval to the fund for commencing operations.

A sponsor then hires an asset management company to invest the funds according to the

investment objective. It also hires another entity to be the custodian of the assets of the fund

and perhaps a third one to handle registry work for the unit holders (subscribers) of the fund.

In the Indian context, the sponsors promote the Asset Management Company also, in which

it holds a majority stake. In many cases a sponsor can hold a 100% stake in the Asset

Management Company (AMC). E.g. Birla Global Finance is the sponsor of the Birla Sun

Life Asset Management Company Ltd., which has floated different Mutual Funds schemes

and also acts as an asset manager for the funds collected under the schemes.

History of Mutual Fund IndustryThe end of millennium marks 36 years of existence of Mutual Funds in this country.

The ride through these 36 years is not been smooth. Investor opinion is still divided.

While some are for Mutual Funds others are against it.

Source : www.finance.indiamart.com


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First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by

the Reserve Bank of India and functioned under the Regulatory and administrative control of

the Reserve Bank of India. UTI commenced its operations from July 1964. The impetus for

establishing a formal institution came from the desire to increase the propensity of the middle

and lower groups to save and to invest. UTI came into existence during a period marked by

great political and economic uncertainty in India. With war on the borders and economic

turmoil that depressed the financial market, entrepreneurs were hesitant to enter capital

market.

The already existing companies found it difficult to raise fresh capital, as investors did not

respond adequately to new issues. Earnest efforts were required to canalize savings of the

community into productive uses in order to speed up the process of industrial growth.

The then Finance Minister, T.T. Krishnamachari set up the idea of a unit trust that would be"open to any person or institution to purchase the units offered by the trust. However, this

institution as we see it, is intended to cater to the needs of individual investors, and even

among them as far as possible, to those whose means are small." His ideas took the form of

the Unit Trust of India, an intermediary that would help fulfill the twin objectives of

mobilizing retail savings and investing those savings in the capital market and passing on the

benefits so accrued to the small investors.

UTI commenced its operations from July 1964 "with a view to encouraging savings and

investment and participation in the income, profits and gains accruing to the Corporation

from the acquisition, holding, management and disposal of securities." Different provisions

of the UTI Act laid down the structure of management, scope of business, powers and

functions of the Trust as well as accounting, disclosures and regulatory requirements for the

Trust.

In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India

(IDBI) took over the regulatory and administrative control in place of RBI. The first scheme

launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6700 Crores of

assets under management. One thing is certain the fund industry is here to stay. The

industry was one-entity show till 1986 when the UTI monopoly was broken when SBI and

Canbank Mutual Fund entered the arena. This was followed by the entry of others like BOI,

LIC, GIC, etc. sponsored by public sector banks. Starting with an asset base of Rs0.25bn in

1964 the industry has grown at a compounded average growth rate of 26.34% to its current

size of Rs1130bn.


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Second Phase 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector Mutual Funds set up by public sector banks

and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India

(GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987

followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89),

Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund

(Oct 92). LIC established its Mutual Fund in June 1989 while GIC had set up its Mutual

Fund in December 1990.At the end of 1993, the Mutual Fund industry had assets under

management of Rs. 47,004 crores.

Third Phase 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian Mutual Fund

industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the yearin which the first Mutual Fund Regulations came into being, under which all Mutual Funds,

except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged

with Franklin Templeton) was the first private sector Mutual Fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and

revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI

(Mutual Fund) Regulations 1996.

The number of Mutual Fund houses went on increasing, with many foreign Mutual Funds

setting up funds in India and also the industry has witnessed several mergers and

acquisitions. As at the end of January 2003, there were 33 Mutual Funds with total assets of

Rs. 1, 21,805 Crores. The Unit Trust of India with Rs. 44,541 Crores of assets under

management was way ahead of other Mutual Funds.

Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was

bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of

India with assets under management of Rs. 29,835 Crores as at the end of January 2003,representing broadly, the assets of US 64 scheme, assured return and certain other schemes.

The Specified Undertaking of Unit Trust of India, functioning under an administrator and

under the rules framed by Government of India and does not come under the purview of the

Mutual Fund Regulations.


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The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is

registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation

of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under

management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual

Fund Regulations, and with recent mergers taking place among different private sector funds,

the Mutual Fund industry has entered its current phase of consolidation and growth. As at the

end of August 31, 2003, there were 31 funds, which manage assets of Rs. 1,21,040 Crores

under 380 schemes.

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 accordingto 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

professional man, who uses 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 amountof money.

Mutual Funds schemes are managed by respective Asset Management Companies sponsored

by financial institutions, banks, private companies or international firms. The biggest Indian

AMC is UTI while Alliance, Franklin Templeton etc are international AMC's.

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.


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Mutual Funds as Trusts:

A mutual fund is India is constituted in the form of a Public Trust created under the Indian

Trusts Act, 1882. The Fund Sponsor acts as the Settler of the Trust, contributing to its initial

capital and appoints a Trustee to hold the assets of the Trust for the benefit of the unit-

holders, who are the beneficiaries of the Trust. The fund then invites investors to contributetheir money in the common pool, by subscribing to units issued by various schemes

established by the trust as evidence of their beneficial interest in the fund.

Trustees:

A Board of Trustees a body of individuals or a Trust Company - a corporate body, may

manage the Trust -the mutual fund. Board of Trustees manages most of the funds in India.

While the provisions of the Indian Trusts Act, will govern the Board of Trustees where the

Trustee is a corporate body, it would also be required to comply with the provisions of the

Companies Act, 1956. The Board of the Trustees does not directly manage the portfolio ofsecurities. For this specialist function, they appoint an Asset Management Company. They

ensure that the fund is managed by the AMC as per the defined objectives and in accordance

with the Trust Deed and SEBI Regulations.

The Asset Management Company:

The role of an Asset Management Company (AMC) is to act as the investment manager of

the Trust under the Board supervision and direction of the Trustees. The AMC is required to

be approved and registered with SEBI as an AMC. The Trustees are empowered to terminate

the appointment of the AMC and may appoint a new AMC with the prior approval of theBoard and unit-holders. The sponsor, or Board of Trustees, if so authorized, appoints the

Asset Management Company (AMC) which would, in the name of the Trust, float and then

manage the different investment scheme as per SEBI Regulations and as per the AMC

Agreement it signs with the Trustees. The AMC of a mutual fund must have a net worth of at

least of Rs. 10 crores at all times. The AMC cannot act as a trustee of any other mutual fund.

AMC controls the operations and functioning of a Mutual Fund. It is very critical to the

performance of a Mutual Fund as it decides on the style of functioning, people who are going

to manage the funds, the commitment to service quality and overall supervision.

The financial strength and the commitment of the AMC sponsors to the business are very key

issues. This is because most AMCs lose money in the first few years of operations. In most

cases, these losses are much more than the capital requirements stipulated by SEBI. Hence, a

sponsor which is financially weak or which cannot capital to the business either because of

its inability or unwillingness will result in an unhealthy operation. There will be a tendency


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to cut corners and unwillingness to spend money to expand operations. This is the last place

where high quality persons would want to remain and work. The AMC then remains stunted

and the sponsors lose interest. The worst affected are the investors. This is exactly what has

happened with some AMCs promoted by Indian business houses.

This is also a problem that has afflicted some of the AMCs floated by nationalized banks. In

these organizations, the traditional thinking is prevalent which can be summarized as "money

is power". Since Mutual Fund business did not have access to too much money, a posting in

the AMC became punishment postings for some personnel who were not doing well in the

parent organization or who lost out in the organizational politics. The management of the

banks also did not allow these AMCs to become independent viable businesses. The CEOs

of the AMCs did not have any clue of the Mutual Fund business and neither were they

interested in it the entire effort was spent in getting a posting back in the parent. The fund

managers had no experience in the activity making a mockery of "professional

management". The sad results are there to see. Some of the parents had to provide funds to bridge the gap in "assured return schemes". It looks extremely likely that some of these

AMCs will no longer exist in a few years.

Discover the Origins of Mutual Fund InvestingWhen three Boston securities executives pooled their money together in 1924 to create the

first mutual fund, they had no idea how popular mutual funds would become.

The idea of pooling money together for investing purposes started in Europe in the mid-1800s. The first pooled fund in the U.S. was created in 1893 for the faculty and staff of

Harvard University. On March 21st, 1924 the first official mutual fund was born. It was

called the Massachusetts Investors Trust.

The first investment trust established in Scotland by Robert Fleming and the first mutual

fund of the World The Massachusetts Investors Trust, open-ended scheme was launched

in Boston, USA in 1924.

In contrast, there are over 10,000 mutual funds in the U.S. today totaling around $7 trillion

(with approximately 83 million individual investors) according to the Investment CompanyInstitute.

. Mutual funds are very popular today, known for ease-of-use, liquidity, and unique

diversification capabilities.


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A Mutual Fund is the ideal investment vehicle for todays complex financial scenario.

Markets for equity shares, bonds and other fixed income instrument, real estate, derivatives

and other asset have become information driven.

Price changes in these assets are driven by global events occurring in the faraway places. A

typical individual is unlikely to have the knowledge, skills inclination and time to keep trackof events, understand their implications and act speedily. An individual also finds it difficult

to keep track of ownership of his assets, investment, brokerage dues and bank transactions,

etc.

Advantages of Mutual FundMutual Funds serve as a link between the saving public and the capital markets. They

mobilize savings from the investors and bring them to borrowers in the capital markets.

Today Mutual Funds are fast emerging as the favorite investment vehicle because of the

many advantages they have over other forms and avenues of investing. The major advantages

offered by Mutual Funds to all investors are:

y Professional ManagementMutual Funds provide the services of experienced and skilled professionals, backed

by a dedicated investment research team that analyses the performance and prospects

of companies and selects suitable investments to achieve the objectives of the scheme.

y DiversificationMutual Funds invest in a number of companies across a broad cross-section of

industries and sectors. This diversification reduces the risk because seldom do allstocks decline at the same time and in the same proportion. You achieve this

diversification through a Mutual Fund with far less money than you can do on your

own.

y Convenient AdministrationInvesting in a Mutual Fund reduces paperwork and helps you avoid many problems

such as bad deliveries, delayed payments and follow up with brokers and companies.

Mutual Funds save your time and make investing easy and convenient.

y Low CostMutual Funds are a relatively less expensive way to invest compared to directly

investing in the capital markets because the benefits of scale in brokerage, custodial

and other fees translate into lower costs for investors.

y LiquidityIn open-end schemes, the investor gets the money back promptly at net asset value

related prices from the Mutual Fund. In closed-end schemes, the units can be sold on


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a stock exchange at the prevailing market price or the investor can avail of the facility

of direct repurchase at NAV related prices by the Mutual Fund.

y TransparencyYou get regular information on the value of your investment in addition to disclosure

on the specific investments made by your scheme, the proportion invested in each

class of assets and the fund manager's investment strategy and outlook.

y FlexibilityThrough features such as regular investment plans, regular withdrawal plans and

dividend reinvestment plans, you can systematically invest or withdraw funds

according to your needs and convenience.

y AffordabilityInvestors individually may lack sufficient funds to invest in high-grade stock. A

Mutual Fund because of its large corpus allows even a small investor to take the

benefit of its investment strategy.

y Choice of schemesMutual Funds offer a family of schemes to suit your varying needs over a lifetime.

y Well RegulatedAll Mutual Funds are registered with SEBI and they function within the provision of

strict regulations designed to protect the interests of investors. The operations of

Mutual Funds are regularly monitored by SEBI.

Drawbacks of Investing In Mutual FundDrawbacks of investing in Mutual Funds are given below:

y Potential lossUnlike a bank deposit, the investment in a Mutual Fund could fall in value, as the

fund is nothing but a portfolio of different securities. Apart from a few assured returns

schemes, the fund does not guarantee any minimum percentage of return.

y The Diversification PenaltyWhile diversification reduces the risk of loss from holding a single security, it also

limits the larger gains if a single security increases dramatically in value. Also,

diversification does not protect the unit holders totally from an overall decline in the

market.

y Risks and CostsChanging market conditions can create fluctuations in the value of a Mutual Fund

investment. There are fees and expenses associated with investing in Mutual Funds

that do not usually occur when purchasing individual securities directly. As with any

type of investment, there are drawbacks associated with Mutual Funds.


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y No GuaranteesThe value of your Mutual Fund investment, unlike a bank deposit, could fall and be

worth less than the principle initially invested. And, while a money market fund seeks

a stable share price, its yield fluctuates, unlike a certificate of deposit. In addition,

Mutual Funds are not insured or guaranteed by an agency of the U.S. government.

Bond funds, unlike purchasing a bond directly, will not re-pay the principle at a set

point in time.

y CostsIn some cases, the efficiencies of fund ownership are offset by a combination of sales

commissions, 12b-1 fees, redemption fees, and operating expenses. If the fund is

purchased in a taxable account, taxes may have to be paid on capital gains. Keep

track of the cost basis of your initial purchase and new shares that are acquired by

reinvesting distributions. It's important to compare the costs of funds you are

considering. Always look at "net" returns when comparing fund performances. Net

return is the bottom line; an investment's true return after all costs is deducted.

Prospectuses will not contain all the costs that affect the net return on your

investment. This is why it is important to compare net returns whether or not the fund

in a no-load or load fund.

y ExpensesBecause Mutual Funds are professionally managed investments, there are

management fees and operating expenses associated with investing in a fund. These

fees and expenses charged by the fund are passed onto shareholders and deducted

from the fund's return.

These expenses are typically expressed as the expense ratio - the percent of fund

assets spent (annually) on day-to-day operations. Expense ratios can vary widely

among funds. Expense ratios for Mutual Funds commonly range from 0.2% to 2.0%,

depending on the fund. Consult the fund's prospectus to determine the expense ratio

for a specific fund.

Should an investor invest in a mutual fund despite its limitations?Yes. Investor should invest some part or their investment portfolio in mutual funds. In

fact some investors may be better off by putting their entire portfolio in mutual funds.

This is on account of the following reasons:

y On their own, uninformed investors could perform much worse than mutual funds.y Diversification of risks which is difficult for an investor to achieve with the small

amount of funds at his disposal

y Possibility of investing in small amounts as and when the investor has funds to invest


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y Unquestioned service of transaction processing, tracking of investments, collectingdividends/interest warrants etc.

y Debt funds in India offer exposure to a diversified portfolio of bonds/debentures,which is possible, only if the investor is investing millions of rupees. Further, they

offer easy liquidity and tax benefits. Debt funds thus offer a great proposition that isimpossible for ordinary investors to replicate on their own. This proposition compares

favorably against competing investments like small savings.

y Investors require analytical capability and access to research and information andneed to spend an enormous amount of time to make investment decisions and keep

monitoring them. Some people have the inclination and the time to make better

decisions than fund managers do, but the vast majority does not. Those who can are

advised to invest some part of their money into funds, especially debt funds, to

diversify their risk. They may also note that one of the objectives of this site is to help

them improve the odds in their favor.

Are mutual funds safe? Are returns on mutual funds guaranteed by Governmentof India, or Reserve Bank or any other government body?

Any mutual fund is as safe or unsafe as the assets that it invests in. There are two

basic categories of mutual funds with others being variations or mixtures of these.

Firstly, there are those that invest purely in equity shares (called equity funds or

growth funds") and secondly, there are those that invest purely in bonds, debentures

and other interest bearing instruments called "income" or "debt" funds. The NAV of

growth funds fluctuates in line with the fluctuation of the shares held by them. They

can also witness face substantial erosion in value, which could be permanent in some

cases. On the other hand, prices of debt instruments fluctuate to a much lesser degree

and an income fund is extremely unlikely to face erosion in value especially of the

permanent kind.

Most mutual funds have qualified and experienced personnel, who understand the

risks of investing. But, nobody is immune from making mistakes. However, funds

diversify the investment portfolio substantially so that default in any single

investment (in the case of an income fund) will not affect the overall performance of afund in a significant manner. In the event of default of a part of the portfolio, an

income fund is extremely unlikely to face erosion in face value.

Generally, mutual funds are not guaranteed by anybody. However, in the Indian

context, some of the mutual funds have floated "guaranteed" or "assured" return

schemes which guarantee a certain annual return or guarantee a buyback at a specified

price after some time. Examples of these include funds floated by the UTI, Canbank


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Mutual Fund, SBI Mutual Fund, LIC Mutual Fund etc. Many of these funds have not

earned returns that they promised and the asset management companies of the

respective mutual funds or their sponsors have made good their promises. The biggest

case pertains to the US 64, which never guaranteed any returns but is being bailed out

by the Government due to the millions of individuals who have invested in it.

Types of Mutual FundsMutual Fund schemes may be classified on the basis of its structure and its

investments.

A) By Structure:

Open-End Funds:

Available for sale and repurchase at all times based on the net asset values. Unit capital of the fund is not fixed Fund size and its total investment go up if more new subscriptions

come In than redemption s and vice versa.

Close-End Funds:

One time sale of fixed number of units. Investors are not allowed to buy or redeem the units directly from the funds. Some

funds offer repurchase after a fixed period. Listed on stock exchange and investors can buy or sell units through exchange. May betraded at a discount or premium to NAV based on investors perception about the fundsfuture performance and other market factors.A closed-end fund has a stipulated maturity period which generally ranging from 3 to15 years. The fund is open for subscription only during a specified period. Investors caninvest in the scheme at the time of the initial public issue and thereafter they can buy orsell the units of the scheme on the stock exchanges where they are listed. In order toprovide an exit route to the investors, some close-ended funds give an option of sellingback the units to the Mutual Fund through periodic repurchase at NAV related prices.SEBI Regulations stipulate that at least one of the two exit routes is provided to the

investor.

IntervalFunds

Interval funds combine the features of open-ended and close-ended schemes. They are

open for sale or redemption during pre-determined intervals at NAV related prices.


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B) By Investment Objective:-

Money/Cash Market Funds:

Instruments having less than one year maturity;

Treasury bills issued by government Certificates of deposit issued by governments

Commercial paper issued by companies

Interbank call money

Aim to provide easy liquidity, preservation of capital and moderate income.

Gilt Funds:

Securities maturity over a year;

Invested in government securities are called dated securities Virtually zero risk of default it is backed by the government

It is more sensitive to market interest rates

Debt/Income Funds:

Investment in debt instruments issued not only by Government but also by private

companies, banks and financial institution and other entities such as infrastructure

companies.

Target low risk and stable income for investors.

Have higher price fluctuation as compared to money market funds due to interest rate

fluctuation.

Have higher risk of default by borrowers as compared to Gilt funds.

Debt funds can be categorized further based on their risk profiles.

Carry both credit risk and interest rate risk.

Equity Funds:

Invest a major portion of their surplus in equity shares issued by cos, acquired directlyin initial public offering or through secondary market and keep a part in cash to take

care of redemption.

Risk is very high than debt funds but offer very high growth potential for the capital.

It can be further categorized based on investment strategy.

It must have along term objectives.

Balanced Funds:

Has a portfolio of debt instrument, convertible securities, preference and equity shares.


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Almost equal proportion of debt/money market securities and equities. Normally funds

maintain a ratio of 55:45 or 60:40 some funds allocate a flexible proportion based on

market conditions.

Aim is to gain income, capital appreciation and preservation of capital.

Ideal for investors for a conservative and long term orientation.

Load Funds:

A Load Fund is one that charges a commission for entry or exit. That is, each time you buy

or sell units in the fund, a commission will be payable. Typically entry and exit loads range

from 1% to 2%. It could be worth paying the load, if the fund has a good performance

history.

No-Load Funds:

A no-Load Fund is one that does not charge a commission for entry or exit. That is, no

commission is payable on purchase or sale of units in the fund. The advantage of a no load

fund is that the entire corpus is put to work.Other Schemes:-

Tax saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the Indian

Income Tax laws as the Government offers tax incentives for investment in specified

avenues. Investments made in Equity Linked Savings Schemes (ELSS) and pension Schemes

are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides

opportunities to investors to save capital gains u/s 54EA by investing in Mutual Funds,

provided the capital asset has been sold prior to April 1, 2000 and the amount is invested

before September 30, 2000.

Special Schemes:-

Industry Specific SchemesIndustry Specific Schemes invest only in the industries specified in the offer

document. The investment of these funds is limited to specific industries like

InfoTech, FMCG and Pharmaceuticals etc.

Index SchemesIndex Funds attempt to replicate the performance of a particular index such as the

BSE Sense or the NSE 50


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Sector SchemesSector Funds are those, which invest exclusively in a specified industry or a group of

industries or various segments such as 'A' Group shares or initial public offerings.

The cost associated with mutual fund investmentIn addition to loads a mutual fund also charges asset management fees, and certainother expenses. These charges imposed by mutual funds are meant to compensate the

fund for the expenses it incurs in managing assets, processing transactions and paying

brokerages. For instance every redemption request involves not only administrative

processing costs but also other costs associated with raising money to pay off the

outgoing investor.

Mutual Funds cannot, however, be arbitrary in the imposition of these charges. For

instance, regulations stipulate that the difference between the repurchase and the

resale price cannot exceed 7 per cent of sale price, and that recurring expenses cannot

exceed 2.5 per cent of average weekly net assets.

Loads:

y Entry Load/Sale LoadIt is the charge imposed on the investor at the time his entry into the fund. Thus, the

investor has to pay for the value of the units plus an additional charge. This additional

charge is called the entry/sale load.

y Exit Load/Repurchase LoadIt is the charge imposed on the investor at the time of his exit from the scheme.

Operationally, therefore, the mutual fund will pay back to the investor the value of the

units reduced by the charge levied on exit.

y Contingent Deferred Sales ChargeA mutual fund may not want to charge an exit load in all the cases. In such a case the

mutual fund may impose charges based on the time of withdrawal. Thus, a fund

desirous of long-term investors may stipulate that the exit charge will keep reducing

with duration of investment. Such a charge is called Contingent Deferred Sales

Charge. The asset management company is entitled to levy a contingent deferred sales

charge for redemption during the first four years after purchase, not exceeding 4% of

the redemption proceeds in the first year, 3% in the second year, 2% in the third year

and 1% in the fourth year. In order to charge a CDSC the scheme has to be a no load

scheme as per the regulation laid down by SEBI. The idea behind charging CDSC is

the recovery of expenses incurred on promotion or distribution of the scheme


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y Switchover/Exchange FeeIt is the fees charged by a fund when the investor decides to switch his investment

from one scheme of the fund to another scheme from the same fund family.

y Recurring Expenses:Apart from loads, mutual funds also charge some other expenses. Even here

regulations stipulate the ceiling on each head. Some of the fees charged by the fund

are:

Investment Management & Advisory Fees - As the name explains this ismeant to remunerate the asset management company for managing the

investor's money.

Trustee Fees - is the fees payable to the trustees for managing the trust. Custodian Fees - is the fees paid by the fund to its custodians, the

organization which handles the possession of the securities invested in by

the fund. Registrar and Transfer Agents Charges - is the fees payable to the registrar

and the transfer agents for handling the formalities related to the transfer of

units and other related operations.

Broker/Dealer Remuneration, Audit Fees, Cost of Funds Transfer, Cost ofproviding a/c statements, Cost of Statutory Advertisements.

Factors affecting selection of mutual fund:

Investment needsIt is necessary to decide the purpose for which the investment is being made. This

is because the investment avenue can vary depending upon the needs of the

potential investor. For instance if one is investing for some event like retirement

or for marriage of children and there is plenty of time to go, then it is better to

invest in equity-dominated funds.

Risk profileIt is essential to invest in accordance with one's risk bearing capability. Equity

funds therefore are not suitable for those with little risk appetite as volatile equity

markets can impact fund returns.

Time frame of InvestmentGenerally, equity funds are considered to be performers over a relatively long

period of time. In the short term they are prone to fluctuations of the market. So,

at the time of the withdrawal of investment an equity fund may not have given any


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returns. In such a case an equity fund is not the solution. An income fund or a

money market scheme is ideal in the situation.

Consider liquidityThis is linked to the above point. If the time frame of investment is short then it is

not really advisable to invest in close-ended schemes. Units of these schemes are

generally listed on stock exchanges, and past experience has shown that they

quote at a heavy discount to their value. On the other hand if one is willing to

invest for a certain defined period a close-ended scheme may do the job. Further,

liquidity of the scheme in terms of its ability to liquidate its portfolio should also

be looked into.

Service Levels / ExpensesWith the top funds offering similar returns service level has become the

differentiating factor. It is important to choose a fund that offers efficient servicein terms of prompt delivery of account statement and quick redressal of the

investor grievances. An investor also needs to consider the expense ratios of the

funds he proposes to invest in.

TransparencyIt is another crucial factor. It is better to choose a fund that is open about its

investments, its investment style, and in its communication with its investors.

Process of Mutual Funds:


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In the above graph shows how Mutual Fund works and how investor earns money by

investing in the Mutual Fund. Investors put their saving as an investment in Mutual Fund.

The Fund Manager who is a person who takes the decisions where the money should be

invested in securities according to the schemes objective. Securities include Equities,

Debentures, Govt. Securities, Bonds, and Commercial Paper etc. These Securities generates

returns to the Fund Manager. The Fund Manager passes back return to the investor.

Net Asset Value (NAV)The net asset value of the fund is the cumulative market value of the assets fund

net of its liabilities. In other words, if the fund is dissolved or liquidated, by

selling off all the assets in the fund, this is the amount that the shareholders would

collectively own. This gives rise to the concept of net asset value per unit, which

is the value, represented by the ownership of one unit in the fund. It is calculated

simply by dividing the net asset value of the fund by the number of units.However, most people refer loosely to the NAV per unit as NAV, ignoring the

"per unit". We also abide by the same convention.

Calculation of NAV

The most important part of the calculation is the valuation of the assets owned by

the fund. Once it is calculated, the NAV is simply the net value of assets divided

by the number of units outstanding. The detailed methodology for the calculation

of the asset value is given below.

Asset value is equal to

Sum of market value of shares/debentures

+ Liquid assets/cash held, if any

+ Dividends/interest accrued

Amount due on unpaid assets

Expenses accrued but not paid

Details on the above items


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For liquid shares/debentures, valuation is done on the basis of the last or closing

market price on the principal exchange where the security is traded.

For illiquid and unlisted and/or thinly traded shares/debentures, the value has to be

estimated. For shares, this could be the book value per share or an estimated market

price if suitable benchmarks are available. For debentures and bonds, value is

estimated on the basis of yields of comparable liquid securities after adjusting for

illiquidity. The value of fixed interest bearing securities moves in a direction

opposite to interest rate changes Valuation of debentures and bonds is a big problem

since most of them are unlisted and thinly traded. This gives considerable leeway to

the AMCs on valuation and some of the AMCs are believed to take advantage of

this and adopt flexible valuation policies depending on the situation.

Interest is payable on debentures/bonds on a periodic basis say every 6 months. But,

with every passing day, interest is said to be accrued, at the daily interest rate, whichis calculated by dividing the periodic interest payment with the number of days in

each period. Thus, accrued interest on a particular day is equal to the daily interest

rate multiplied by the number of days since the last interest payment date.

Usually, dividends are proposed at the time of the Annual General meeting and

become due on the record date. There is a gap between the dates on which it

becomes due and the actual payment date. In the intermediate period, it is deemed to

be "accrued". Expenses including management fees, custody charges etc. are

calculated on a daily basis.

Eligibility for investing Mutual Fund in IndiaMutual Funds have been emerging as a big financial intermediary in India. In a

vast country like India it is a challenge to market these funds. Fund distributors

are a very important link between the fund management industry and the

investors. However, it is equally essential to know who can invest in Mutual

Funds in India. Mutual Funds in India are open to investment for:

A. Residents Including:-

1. Resident Indian Individuals2. Indian Companies3. Indian Trusts / Charitable Institutions4. Banks


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5. Non-Banking Finance Companies6. Insurance Companies7. Provident Funds

B. Non Residents including:-

1. Non-Resident Indians2. Other Corporate Bodies (OCBs)

C. Foreign Entities:-

1. Foreign Institutional Investors (FIIs) registered with SEBI

y Foreign citizens and other foreign entities are not allowed to invest in Mutual Fundsin India.

Organization Legal Structure of Mutual Fund

The Fund Sponsor:

Sponsor is defined under SEBI regulations as any person who, acting alone or in

combination with another body corporate, establishes a mutual fund. The sponsor of a fund is

akin to the promote of a company as he gets the fund registered with SEBI. The sponsor will

form a Trust and appoint a Board of Trustees. The sponsor will also generally appoint an

Asset Management Company as fund managers. The sponsor, either directly or acting


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through the Trustees, will also appoint a Custodian to hold the fund assets. All these

appointments are made in accordance with SEBI Regulations.

As per the existing SEBI regulations, for a person to qualify as a sponsor, he must contributeas least 40% of the net worth of the AMC and possess a sound financial track record over

five year prior to registration.

AMCs operating currently are:

Name of the Asset Management Company Website

AEGON Asset Management Company Pvt. Ltd. N/A

AIG Global Asset Management Company (India) Pvt. Ltd. www.aiginvestments.co.in

Axis Asset Management Company Ltd. www.axismf.com

Baroda Pioneer Asset Management Company Limited www.barodapioneer.in

Benchmark Asset Management Company Pvt. Ltd. www.benchmarkfunds.com

Bharti AXA Investment Managers Private Limited www.bhartiaxa-im.com

Birla Sun Life Asset Management Company Limited www.birlasunlife.com

Canara Robeco Asset Management Company Limited www.canararobeco.com

Deutsche Asset Management (India) Pvt. Ltd. www.dws-india.com

DSP BlackRock Investment Managers Private Limited www.dspblackrock.com

Edelweiss Asset Management Limited www.edelweissmf.com

Escorts Asset Management Limited www.escortsmutual.com

FIL Fund Management Private Limited fidelity.co.in

Fortis Investment Management (India) Pvt. Ltd. www.fortisinvestments.in

Franklin Templeton Asset Management (India) PrivateLimited

www.franklintempletonindia.com

Goldman Sachs Asset Management (India) PrivateLimited

www.gsam.in

HDFC Asset Management Company Limited www.hdfcfund.com

HSBC Asset Management (India) Private Ltd. www.assetmanagement.hsbc.com/in

ICICI Prudential Asset Mgmt.Company Limited www.icicipruamc.com

IDBI Asset Management Ltd. www.idbimutual.co.in

IDFC Asset Management Company Private Limited www.idfcmf.com

ING Investment Management (India) Pvt. Ltd. www.ingim.co.in

JM Financial Asset Management Private Limited www.JMFinancialmf.com


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JPMorgan Asset Management India Pvt. Ltd. www.jpmorganmf.com

Kotak Mahindra Asset Management CompanyLimited(KMAMCL)

www.kotakmutual.com

L&T Investment Management Limited www.lntmf.com

LIC Mutual Fund Asset Management Company Limited www.licmutual.comMirae Asset Global Investments (India) Pvt. Ltd. www.miraeassetmf.co.in

Morgan Stanley Investment Management Pvt.Ltd. www.morganstanley.com/indiamf

Motilal Oswal Asset Management Company Limited www.motilaloswal.com/assetmanagement/

Peerless Funds Management Co. Ltd. www.peerlessmf.co.in

Pramerica Asset Managers Private Limited www.pramericamf.com

Principal Pnb Asset Management Co. Pvt. Ltd. www.principalindia.com

Quantum Asset Management Co. Private Ltd. www.QuantumAMC.com

Reliance Capital Asset Management Ltd. www.reliancemutual.com

Religare Asset Management Company Limited www.religaremf.com

Sahara Asset Management Company Private Limited www.saharamutual.com

SBI Funds Management Private Limited www.sbimf.com

Shinsei Asset Management (India) Pvt. Ltd. www.shinseifunds.com

Sundaram BNP Paribas Asset Management CompanyLimited

www.sundarambnpparibas.in

Tata Asset Management Limited www.tatamutualfund.com

Taurus Asset Management Company Limited www.taurusmutualfund.com

UTI Asset Management Company Ltd www.utimf.com

Comparison by Nature of Investment ProductInvestors certainly look for the best returns on different options. However, to

determine which option is better, the comparison should also be made in terms of

other benefits that the investor ought to look for in any investment. Besides

returns, other potential benefits of any investment also include the safety of the

capital, the risk or the stability of returns, the liquidity of access to the funds when

needed, and the convenience with which the investment can be managed.

The table below compares the investment options discussed in the previous

section under the broad heads viz. return, safety, volatility, liquidity and

convenience.


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Return Safety Volatility Liquidity Convenience

Equity High Low High High/Low Moderate

FI Bonds Moderate High Moderate Moderate High

Corporate

Debentures Moderate Moderate Moderate Low Low

Company Fixed

Deposits Moderate Low Low Low Moderate

Bank Deposits Low Low Low High High

PPF Moderate High Low Moderate High

Life Insurance Low High Low Low Moderate

Gold Moderate High Moderate Moderate Low

Real Estate High Moderate High Low Low

Mutual Funds High High Moderate High High

Although the table provides a qualitative evaluation of various financial products, the

comparison serves as a useful guide toward determining the best option.

It is clear from the above that equity investing in general has good potential in terms of

return, liquidity and convenience. However, as discussed in the previous section, individual

stocks can give varied performance, one stock being more liquid than another or one stock

giving lower return that another. For this reason, equity investing is fraught with risk and is

not ideal for every individual investor. It is recommended only for investors who are willing

to invest the time required for research in stock selection (or have access to sound financial

advice) and possess the capacity to bear the inherent risk.

Bonds issued by institutions are an attractive option, particularly now with the liquidity that

accompanies their listing on stock exchanges. Bonds are a stable option in terms of fixed

returns, and are recommended for the risk-averse investor. However, bonds can lose value

when general interest rates go up. Bonds are also subject to credit risk or risk of default by


40/62

the borrower. In indicated by the credit rating assigned to the bonds. In the absence of credit

rating, it is extremely difficult for the investor to decide on the quality of the bonds or

debentures. The secondary market in corporate bonds in India is also very thin, leading to

lack of liquidity for the investors who wish to sell.

Company fixed deposits fall short on several counts and recommended only if the issuingcompany and the deposits on offer are rated highly by credit rating agencies.

The major advantage of bank deposits relative to other product is the liquidity they offer.

Banks are usually willing to give loans against fixed deposits at a nominal charge over the

interest rate applicable to the deposits. Deposit rates offered by banks vary as per RBI

directives and the interest rate scenario in the economy. Bank deposits score high on safety,

as the return of capital is guaranteed to the depositor by the bank. However, the financial

soundness of the bank is important to look at.

PPF combines stability with a respectable return. Its tax-exempt status makes it an attractivemechanism for the small investor to build his saving portfolio. However, the lock in period

involved in PPF means that the investor loses out in terms of liquidity, particularly during the

early years of the scheme. Being a government supported investment, PPF scores very high

on safety, compared even to bank deposits.

Insurance could become a serious investment vehicle once the insurance market in India is

opened to private players. In todays scenario, the opportunity cost in terms of return is too

high for insurance to be compared on even terms with the other options. Its liquidity is also

extremely low, though safety is considered high at present for the government-owned LIC as

the only insurer.


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Mutual Funds & Assets Under Management(Rs.in crores)

Mutual Fund Name No. of

Schemes*

Corpus Under management

As on Corpus As on Corpus Net

inc/dec in

corpus

AIG Global Investment

Group Mutual Fund44

Jun 30,

2010801.90

May 31,

2010787.21 14.69

Axis Mutual Fund 60Jun 30,

20102,521.73

May 31,

20104,753.39 -2231.66

Baroda Pioneer Mutual Fund 31

May 29,

2009 3,874.76

Apr 30,

2009 2,653.02 1221.74

Benchmark Mutual Fund 17Feb 29,

20084,954.72 Jan 31, 2008 5,611.00 -656.276

Bharti AXA Mutual Fund 45Jun 30,

2010671.55

May 31,

2010758.98 -87.43

Birla Sun Life Mutual Fund 219Feb 28,

200949,983.17 Jan 31, 2009 44,798.22 5184.95

Canara Robeco Mutual Fund 89Jun 30,

20106,599.56

May 31,

201010,381.33 -3781.77

Deutsche Mutual Fund 120Jun 30,

20108,548.24

May 31,

20109,302.37 -754.123

DSP Blackrock Mutual Fund 96Jun 30,

201018,457.07

May 31,

201019,721.83

-1264.764

Edelweiss Mutual Fund 41Jun 30,

2010

291.79May 31,

2010

316.86 -25.07

Escorts Mutual Fund 30Jun 30,

2010198.05

May 31,

2010195.75 2.3

Fidelity Mutual Fund 61Jun 30,

20107,700.74

Apr 30,

20107,524.24 176.506


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Fortis Mutual Fund 107Jun 30,

20105,267.00

May 31,

20106,815.18 -1548.18

Franklin Templeton Mutual

Fund171

Jun 30,

201034,211.87

Apr 30,

201036,066.84 -1854.97

HDFC Mutual Fund 174Jun 30,

201080,907.56

May 31,

201096,114.57

-15207.01

HSBC Mutual Fund 88Jun 30,

20105,235.29

May 31,

20105,406.71 -171.429

ICICI Prudential Mutual

Fund331

May 29,

200968,324.06

Mar 31,

200951,456.11

16867.947

IDFC Mutual Fund 175Aug 31,

200924,002.59 Jul 31, 2009 24,214.88 -212.284

ING Mutual Fund 92Apr 30,

200857,575.02

Mar 31,

20088,608.29

48966.73

JM Financial Mutual Fund 90Jun 30,

20105,424.29

May 31,

20108,159.68

-2735.393

JPMorgan Mutual Fund 31Jun 30,

20103,722.51

May 31,

20103,663.95 58.56

Kotak Mahindra Mutual

Fund121

Jun 30,

201026,139.38

May 31,

201036,776.24

-10636.858

L&T Mutual Fund 66Jun 30,

20103,093.90

May 31,

20105,378.96 -2285.06

LIC Mutual Fund 62Jun 30,

201025,556.82

May 31,

201036,204.22 -10647.4

Mirae Asset Mutual Fund 37Mar 31,

2010215.25

Sep 30,

2009250.36 -35.11

Morgan Stanley Mutual

Fund11

Jun 30,

20102,259.38

May 31,

20102,267.26 -7.88

Peerless Mutual Fund 22Jun 30,

2010748.22

May 31,

20101,086.68 -338.46


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PRINCIPAL Mutual Fund 85Jun 30,

20106,448.66

May 31,

20107,837.90 -1389.24

Quantum Mutual Fund 11Jun 30,

2010102.88

May 31,

201099.18 3.7

Reliance Mutual Fund 191Jun 30,

201097,864.72

May 31,

2010109,485.69

-11620.97

Religare Mutual Fund 91Mar 31,

20109,418.36

Apr 30,

20098,618.52 799.84

Sahara Mutual Fund 44Jun 30,

2010742.81

May 31,

2010735.86 6.95

SBI Mutual Fund 118Jun 30,

201034,188.44

May 31,

201033,738.17 450.27

Shinsei Mutual Fund 11Jun 30,

2010253.61

May 31,

2010291.80 -38.19

Sundaram BNP Paribas

Mutual Fund146

Jun 30,

201012,571.71

May 31,

201013,651.56 -1079.85

Tata Mutual Fund 170Jun 30,

201017,111.39

May 31,

201021,168.00 -4056.61

Taurus Mutual Fund 49Dec 31,

2008209.23

Oct 31,

2008210.68 -1.445

UTI Mutual Fund 211May 31,

201073,277.52

Apr 30,

201080,636.36 -7358.84


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Chapter 4: Company Profile(LIFE GUARD ADVISORY SERVICES PVT. LTD.)

VISIONTo be the leader in our field of business through,

- Total Customer Satisfaction- Commitment to Excellence- Determination to Succeed with strict adherence to compliance- Successful Wealth Creation of our Customers

MISSIONEnsure creation of the desired value for our customers, employees and associates,

through constant improvement, innovation and commitment to service & quality. Toprovide solutions which meet expectations and maintain high professional & ethicalstandards along with the adherence to the service commitments .

TOP LEVEL MANAGEMENTBesides the Directors from family members, In The Board of Directors:

Mr. Mitesh Acharya Managing Director

Mr. Rajendra Acharya Director

PRODUCTSLife Guard Advisoryis dealing in several products in investment field to achieve itsgoal. Life Guard Advisoryis always working hard for clients' satisfaction that's whycompany always finds different criteria and different field. Our current presence is inbelow fields. Life Guard Advisory Services Pvt. Ltd. is basically selling the followingfinancial products,

- Life Insurance (Nine companies)- Non Life Insurance (Seven companies)- Mutual Fund (Thirty-three AMCs)- Equity (F&O, Commodity)- Real Estate


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- Fixed Deposits (F.D)- Currency- Loan

HistoryLife Guard Advisory Services Pvt. Ltd. was started by Mr.Mitesh R. Acharya in 2002.

Life Guard Advisory is a premier integrated financial services provider, and ranked

among the top in the ahmedabad. in all its business segments, services over 3000

individual investors in various capacities.

Life Guard Advisorycovers the entire spectrum of financial services such as

Distribution of financial products like mutual funds, bonds, fixed deposit, life Insurance

and non lifeinsurance.When the investor comes toLife Guard Advisory, he/she only comes, never feel likegoing back because of the trust and respect for our ability to device growth-oriented

innovative solutions to their complex transactions and investment.

Mr. M.R. Acharya starting from march 2002 as a insurance agent working with lic. in a

very short time Mr. M.R. Acharya getting good position in first year. Each and every

year become no 1 in his branch level and also get, success in division level. After this

success more company joint with him.

Mr M. R. Acharya has AMFI Certified and work as a individual advisor. Than after also

continues fully successful in mutual fund. After this success we starting Life Guard

Advisory Insurance Servicesin July 2007 Life Guard Advisory Insurance Services

starting Indirect channel in all way like Life, Non Life and Mutual fund very

successfully. We are thankful to our customer and channel partner. Now we rename as a

Life Guard AdvisoryServices in2008.

PAST RECOGNITIONSome of the awards & recognitions that we have received in past

Year 2002

For Outstanding Performance presented by LICBRANCH MANAGER AT ISANPUR AHMEDABAD

Year 2002:

For Outstanding Performance presented by LIC


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DIVISIONAL MANAGER AT RILIF ROAD A`BAD.

Year 2003:

For Outstanding Performance presented by LIC.

Year 2004:

Among Most Valued Business by Life.

Year 2005:

For Outstanding Performance by founder president of institute of excellence atMumbai.

Year 2005:

For Outstanding Performance by CEO of institute of excellence at Mumbai .

Year 2006:CERTIFIED BY FOUNDER PRESIDENT OF INSTITUTE OF EXCELLENCE ASCORPORATE AGANCY MODULE.

CURRENT SCENARIOCurrently Life Guard has the following achievements,

- 300+ Associated Financial Advisors- 3000+ Clients- 41.01 Rs. Crores of Assets Under Advice- 90 Employees- 10 Locations across Gujarat

Life Guard is proving the opportunity to sell the all the products like life

insurance, non-life insurance, mutual fund, loan etc. in a single code without

any kind of exams.

y LIFE GUARD SERVICESService As per Client Need

We are Investment Company, and providing much kind of services in investment

fields. Mainly, we are focusing on Mutual Funds and Insurance. We always give good


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service to all our clients. We always do our work in systematic manner thats why we

have divided our service life cycle in following manner.

1. Need Of Client :First of all our executive will understand clients need , what client require

exactly like high return ,or liquid return etc.

2. Suggestion:Then after executive will suggest to client then in which sector client has toinvest to achieve his need.

3. Investment :After deciding in which sector client wants to invest then executive will doneinvestment in particular sector at same time.

4. As On Date Valuation :After Investment company will help to receive all statements and alldocuments from particular company or AMC.

5. After Sales Service :After sales company is providing many kind of service to satisfy clients likedaily valuation report , daily nav awareness etc. You can check daily valuationreport on our website and also can receive email from our side. We ProvideLots of Reports which are as below...

1. Valuation Report

2. Statement3. Daily SIP/STP Alerts4. Consolidate Report5. Daily Valuation Report On Email etc...


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Chapter 5: Data Interpretation and Analysis

1. Gender of the Respondents:

Interpretation: The chart above shows the gender of the respondents. The samplesize comprised of 94% male respondents and 6% female respondents.

2. Age of the Respondents:

94%

6%

GenderMale Female

36%

38%

16%

10%

0%

Age

20-30 years 31-40 years 41-50 years 51-60 years more than 60


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Interpretation: The above chart reveals various age groups of Respondents whoform the sample size. Majority of investors are at the age between 31-40 because of

they have stable source of income.

3. What is your Occupation Status?

Interpretation: The above Chart shows the Occupation followed by the Respondents.The analysis show that from the 50 Respondent about 34% were Private Employees

Working in an Private Organization, 28% were Business class People, 10% were

Professionals and 28% being Government Employees.

4. What is your Educational Qualification?

28%

28%

34%

10%

Occupation

Business Govt. Service Private employee Profession

48%

40%

12%

Education Qualificaion

Under Graduate Graduate Post Graduate


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Interpretation: The above chart shows the Educational Qualification of theRespondents, that 40% of Respondents were Graduates, the other ratios were 48%

were Under Graduates, 12% Post Graduates.

5. What is your Average Annual Family Income?

Interpretation: This above chart shows the analysis of the Annual Family income ofthe Respondents. It was analyzed that 14% were having their Annual Family income

between200001 to 30000, 2% were earning more than 400000 , 36% were earning

between 100001 to 200000 , 44% were having their income less than 100000 and 4%

were earning between 300001 to 400000.

6. How much percentage of income do you save?

44%

36%

14%

4% 2%

Annual Family Income

< 100000 100001-200000 200001-300000 300001-400000 > 400000

64%

24%

8%4%

Savings

< 10% 10-20% 20-30% > 30%


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Interpretation: The above chart shows the Percentage of Investment of respondentsincome. The analysis shows that 64% of respondents were investing less than 10% of

their income in investment, because of their low salary, different other factors as Lic

Premium and having a fear to lose their money in investments, 24 % were having

investments between 10 20 %, 4% of the Respondents invested more than 30% oftheir Income, these are the respondents who have high end salary and invest to have a

enjoy the taxation policy. 8% of the respondents invested 20 30% of their income.

7. Do you make financial planning of tour investment?

Interpretation: only 34% of the respondents are saying that they are makingfinancial planning of their investments and remaining are not planning their

investments.

8. Which financial instruments are part of your portfolio?

34%

66%

Financial Planning

Yes No

37%

30%

11%

5%

4%

4%3%

3%2% 1%

Investment Portfolio

Insurance

Bank Savings

Mutual Funds

Real Estate

Equity

Government Securities

Post Office

Bank FD


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Interpretation: The above chart shows the Respondents area of Investment of theirsavings. 30% of the Respondents invested their savings in Bank A/c, 11% Invested in

Mutual Funds, 4% invests in Government Securities,( as respondents finds the safest

way to secure returns with 0% risk), 3% invests in Bank Fixed Deposits, 37%

invests in Life Insurance as an investment, 4% invest in Equity Sector, 5% In RealEstate and 3% in Post Office Schemes and 1% opted for the company deposits

9.Normally, how long you stay after investing in mutual fund?

Interpretation: The above chart shows the Duration of the Time Horizon. It has beenfound that 43% of the respondents keep it for less than 1 year, and 22% invest 1 5

years, 14% of the respondent keep Time Horizon as per the scheme suitable to them,

14% keep Time Horizon between 5 to 10 years, for long term schemes of SIP and

ELSS, 7% respondents invest till 10 years.

43%

22%

14%

7%

14%

Time Horizon

< 1 Year 1-5 Year 5-10 Year > 10 As per Scheme


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10.Which type of funds are preferred by you?

Interpretation: The above chart shows that about 20% of respondents invest theirmoney in Equity type of mutual fund, 13% of respondents invest their money in Debt

type of mutual fund, 47% of respondents invest their money in Equity and Debt both

i.e in Balanced fund type of mutual fund, 7% of respondents invest their money in

Foreign Equity type of mutual fund, 13% of respondents invest their money in money

market.

11.How much % of return, you get from investing in mutual fund?

12.Interpretation: The above chart shows the Average Rate of Return earned annuallywhile investing in Mutual Funds. The analysis shows that 14% of the respondents

20%

13%

47%

7%

13%

Type ofFund in M.F

Equity Debt Balanced Foreign Equity Money Market

7%

22%

14%43%

14%

Return From M.F

< 5% 5-10% 10-15% 15-20% 20-25%


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earn 10 to 15% annually, 22% of the respondents earns 5 to 10%, 43% of the

respondents earns 15- 20%, and 7% of the respondents earns less than 5%.

13.Which kind of scheme for investment you prefer?

14.Interpretation: The above chart shows the scheme of Investing in Mutual Funds. It isseen that 79% of respondents invest in SIP (Systematic Investment Plan), where one

have to invest in installments and remaining are investing in lump sum amount.

15.Are you satisfied with mutual funds and its returns?

I

79%

21%

Scheme Preference

SIP Lump Sum

86%

14%

Satisfy with M.F

Yes No


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16.Interpretation: The above chart shows the Satisfaction level of the investors forinvesting in Mutual Fund and its Returns. The analysis shows that 86% of the

respondents are satisfied with Investing in Mutual Funds, and their returns, the reason

is its good returns, liquidity,

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