Comparative Study of Mutual Funds and Fixed Deposit by Sangram
Comparative Study of Mutual Funds and Fixed Deposit by Sangram
Comparative Study of Mutual Funds and Fixed Deposit by Sangram
PROJECT ON
COMPARETIVE STUDY OF MUTUAL FUNDS AND
FIXED DEPOSIT
BY
SANGRAM KESHARI DASH
UNIVERSITY REGD NO-
IN PARTIAL FULLFILLMENT OF THE
BACHELOR OF BUSSINESS ADMINISTRATION
UNDER THE GUIDANCE OF
External Guide
Mr. Sagar kamal,
Channel Manager of ICICI Securities
Internal guide
Mr. Soumya P. Bala
ACKNOWLEDGEMENT
DECLARATION
TABLE OF CONTENTS
OBJECTIVES:
The study will give an overview about mutual funds and bank fixed deposit. And
also will give brief comparison between mutual fund and bank fixed deposit. It will
help investors to take effective investment decision.
The research has been undertaken from the investor point of view and hence will be
important to investors as follow:
1. To study/ find the various scheme at mutual fund investment as well as bank
fixed deposit.
2. To study the pros and consequences of the mutual fund and bank fixed deposit
investment.
EXECUTIVE SUMMARY
A growing India offers opportunity across the various investments, a substantial part of
financial wealth. Therefore investment plays an important role in growth of these
economies. Also there is rapid growth in income of peoples in India due to some factors
because of this investment is increased day by day in various investment options. As
income range rapidly increasing there is need to increase awareness among the people
related with various investment option and different schemes.
The project is an attempt to study or awareness among the people related with some
investment option and also the preference of people while implementing the same. It
provides thorough knowledge of different aspects related with the behavior of people for
mutual fund as compare to bank fixed deposit. The report is divided in four parts. The first
part is dealing with information related with advantage and disadvantage Bank fixed
deposit. Second is concept of advantage and disadvantage mutual fund. Third is concept
of research methodology. Fourth deals with interpretation of data collected.
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Most of metro cities people like to put the money in market related schemes instead of
dumping it in the bank lockers, so it is quite obvious that they want to invest their money
in profitable venture. But still people prefer to go for traditional schemes as well for safety
and security purpose.
Now a day’s people become more sensible while choosing any type of investment. It is
more important to have good knowledge and understanding related with such scheme
which will help to choose better and safety investment tools.
ICICI Securities sees its role as 'Creating Informed Access to the Wealth of
the Nation' for its diversified set of clients that include corporates,
financial institutions, high net-worth individuals and retail investors.
Headquartered in Mumbai, ICICI Securities operates out of 66 cities and
towns in India and global offices in Singapore and New York.
It is also term as TERM OR TIME Deposit. They are considered to be very safe
investment as it denotes a larger class of investments with varying levels of
liquidity. Here, interest rate varies between from 4 to 11 percent. The tenure of a
Fixed Deposit is vary from 7, 15, or 45 days to 1.5 years and can be high as 10 years.
B. TIME DEPOSIT:- If we deposit our money has an FD in the bank it becomes a Time
Deposit on which No cheque is drawn. They are paid on maturity at a particular
time.
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B. REGULAR INCOME:- Fixed deposit earn fixed interest rates for their
entire tenure, which is usually compounded quarterly. So, those who want an
income on a regular basis can invest into fixed deposit and use the interest rate
as their income. This makes a fixed deposit very popular way of investing money
for retirees.
C. LIQUIDITY:- Bank deposits have good liquidity. They can be closed and the
principal withdrawn within a few hours in some banks to a couple of days in
others.
The other option is to take a loan on the fixed deposit. Banks lend up to 90%
of the principal of the deposit. Interest charged for this is only about 1 to 2 per
cent and only for the period that we have used the cash (The feature works
like an over-draft against the fixed deposit).
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B. RISK:- Perhaps the main reason for investment in bank deposits is safety
of the principal. The capital (only up to Rs1,00,000 though) has the highest
safety compared to any other investment as it is guaranteed by the Deposit
Insurance & Credit Guarantee Scheme of India. All banks operating in India
are covered under this scheme.
IN SHORT
The risk faced when investing in bank deposits is the interest rate risk. This is
associated with the lost opportunity to invest in an instrument that has a
higher return. Getting out of a fixed deposit can be costly (up to 1 per cent of
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2)MUTUAL FUND
The first introduction of a mutual fund in India occurred in 1961, when the Government
of India launched Unit Trust of India (UTI). Until 1987, UTI enjoyed a monopoly in the
Indian mutual fund market. Then a host of other government-controlled Indian financial
companies came up with their own funds. These included State Bank of India, Canara
Bank, and Punjab National Bank. This market was made open to private players in 1993.
An investment vehicle that is made up of a pool of funds collected from many investors
for the purpose of investing in securities such as stocks, bonds, money market
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instruments and similar assets. Mutual funds are operated by money managers, who
invest the fund's capital and attempt to produce capital gains and income for the fund's
investors. A mutual fund's portfolio is structured and maintained to match the investment
objectives.
One of the main advantages of mutual funds is that they give small investors access to
professionally managed, diversified portfolios of equities, bonds and other securities,
which would be quite difficult (if not impossible) to create with a small amount of capital.
Each shareholder participates proportionally in the gain or loss of the fund. Mutual fund
units, or shares, are issued and can typically be purchased or redeemed as needed at the
fund's current net asset value (NAV) per share, which is sometimes expressed as NAVPS.
In the context of mutual funds, NAV per units is computed once a day based on the closing
market prices of the securities in the fund’s portfolio. All mutual funds buy and sell orders
are processed at the NAV of the trade date.
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1. OPEN-ENDED:- This scheme allows investors to buy or sell units at any point in
time. This does not have a fixed maturity date.
A. DEBT/ INCOME:- A major part of the investable fund is channelized
towards debentures, government securities, and other debt instruments.
Although capital appreciation is low (compared to the equity mutual funds),
this is a relatively low risk-low return investment avenue which is ideal for
investors seeing a steady income.
c. Tax Saving:- As the name suggests, this scheme offers tax benefits to
its investors. The funds are invested in equities thereby offering long-
term growth opportunities. Tax saving mutual funds (called Equity
Linked Savings Schemes) has a 3-year lock-in period.
Mutual funds have been a popular investment vehicle for investors. Their simplicity along
with other attributes provides great benefit to investors with limited knowledge, time or
money. To help us decide whether mutual funds are best for us, we are going to look at
some reasons to consider investing in mutual funds.
There are risks involved in buying mutual funds. These investment vehicles can experience
market fluctuations and sometimes provide returns below the overall market. Also, the
advantages gained from mutual funds are not free: many of them carry loads, annual
expense fees and penalties for early withdrawal.
The chart above shows that while fixed deposits assure capital safety and guaranteed returns,
mutual funds over a sufficiently long horizon have given much higher returns. Mutual fund
returns are much higher in the 5 year time horizons starting 2002 to 2006. In the 2006 – 2011
and 2007 – 2012 time horizons, fixed deposits have given higher returns, no doubt as a result of
the severe market downturns in 2008 and 2011. Again starting 2009, mutual funds have started
to give better returns. When evaluating risk return trade-off between mutual funds and fixed
deposits, investors should compare their returns over sufficiently long period comprising of both
bull markets and bear markets, as discussed above. The investment horizon is also of vital
importance in determining the risk return trade off. It suffices to say that, if the investment
horizon in our example was short, say 1 to 2 years, mutual funds would have had more periods
of underperformance.
Conclusion
In conclusion, we will go back to risk perception. Ultimately, the investor’s perception of risk
influences his or her risk appetite. As discussed in our article, Measuring Risk Tolerance of
Investors, the investment decision of the investor should be governed by his or her risk
tolerance and not risk appetite. However, when it comes to actual decision making, one cannot
wish away the influence of the investor’s perception of equity markets on their decision making.
In this article, we have shown that if the investor remains invested for a sufficiently long time
horizon, equity funds can give good returns despite difficult market conditions.
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Data interpretation is that in which we analysis the whole collected data &
tries to give it in simple words to be understandable.
We have used some charts (Pie chart, column chart, cylinder chart, cone
chart) and hypothesis tests (chi-square one sample T- test etc.)
3.5 LIMITATIONS:-
Percentage 51 24 24 1 100
The above schedule and the diagram mentioned below explain the relationship
between different ages of respondents investing either in Mutual Fund or Bank Fixed
Deposits.
FIG.3.2
AGE GROUP
1%
24% 21-30
31-40
51% 41-50
24% Above 50
The above figure shows that the age group of 21-30 respondents investing more
either in Mutual Fund or Bank Fixed Deposits i.e. (51%) and age group of above 50
makes less investment i.e. (1%).
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Table 3.3 Date Was Collected For Analyzing Whether Customer Have Ever
Invested In Any Kind Of Investment:
Yes/No Yes No Total
Frequency 45 6 51
Percentage 88 12 100
The above schedule and the diagram mentioned below reflects whether customer
have ever Invested in any kind of Investment.
FIG.3.3
INVESTMENT
12%
Yes
No
88%
The above figure shows that 88% of Customer are interested in of Investment and
12% Customers are not interested in any type of investment.
Table 3.4 Date was collected for analyzing Investment Options most
preferable for investment either in Mutual Fund or in Bank Fixed Deposits:
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Percentage 61 39 100
The above Investment Option’s schedule and the Investment Option diagram
mentioned below reflects number of respondents investing either in Mutual Fund or
in Bank Fixed Deposits.
FIG.3.4
INVESTMENT OPTION
61%
The above figure shows that Bank fixed deposits is more preferable (61%) than
Mutual Funds (39%).
Table 3.5 Date Was Collected For Analyzing Reasons For Selecting Mutual
Fund Or Bank Fixed Deposits:
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The above schedule and the diagram mentioned below reflects number of
respondent’s reason for investing either in Mutual Fund or in Bank Fixed Deposits.
FIG.3.5
12%
Rate Of Interest
41% Low risk
Tax Saving
47%
The above figure shows that bank fixed deposit is more preferable if Risk is Low i.e.
(47%) then Tax Saving (12%).
Table 3.6 Date Was Collected For Analyzing What Factors Considered By
Customers For Investment In Mutual Fund Or Fixed Deposits:
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The above schedule and the diagram mentioned below reflects factors
customers consider for investment in Mutual Fund or Fixed Deposits.
FIG.3.6
The above figure shows that Preservation of capital (40%) is a major factor
considered by consumers for investment rather than investing for Conservation
Growth (8%)
Table 3.7 Date Was Collected For Analyzing Which Investments Option Is
More Risky:
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Percentage 4 96 100
The above Investment Option’s schedule and the diagram mentioned below reflects
which investments option is more risky between Mutual Fund and Fixed Deposits.
FIG.3.7
INVESTMENT OPTION
4%
96%
The above figure shows about 96% of Customer finds more risk in investment in
Mutual Fund then Bank Deposits.
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Percentage 53 47 100
The schedule and the diagram mentioned below reflects knowledge of Schemes in
investment options between Mutual Fund and Fixed Deposits.
FIG.3.8
KNOWLEDGE OF SCHEMES
Yes
47% No
53%
The above figure shows that about 53% customers have knowledge of Schemes
available in Mutual Fund and Bank Fixed Deposits and 47% don’t have idea about
schemes.
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Table 3.9 Date Was Collected For Analyzing Investment In Which Sector
Will Make Benefit For Customers:
Percentage 61 39 100
The schedule and the diagram mentioned below reflects investment sector which is
more beneficial according to investors.
FIG.3.9
BENEFICIAL SECTOR
Public Sector
39%
Private Sector
61%
The above figure shows that Public Sector (61%) is more beneficial than Private
Sector (39%).
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Table 3.10 Date Was Collected For Analyzing Investment Type Preferred By
Investors:
Percentage 41 59 100
The schedule and the diagram mentioned below reflect Investment type preferred
by investors.
Fig.3.10
INVESTMENT TYPE
Short term
41%
Long Term
59%
The above figure shows that Long Term investment (59%) is more preferred than Short
term investment (41%).
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Table 3.11 Date Was Collected For Analyzing Investment Option Referred
By Investors:
Percentage 63 37 100
The schedule and the diagram mentioned below reflect Investment option referred
by investors.
FIG.3.11
63%
The above figure shows that Bank Fixed Deposits (63%) is recommended highly
than Mutual Fund investment (37%).
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CONCLUSIONS
A. On the basis of conclusion it has been seen that many people prefer to invest
their money in bank fixed deposit as compare to Mutual funds
C. Mutual fund is introduced in 1961, till 54years after mutual funds not change
the mind set of people. Till present traditional investment is dominating
other investments.
D. Data collected also reveals that peoples are investing their some part of their
income.
E. It also has been found that people are preferring public sector as beneficial.
F. People invest their money in low risk instrument as a first preference not
choose high rate of return. People are more focused preservation of capital
as factor for their investment.
G. Majority of people are feeling mutual fund is more risky than bank fixed
deposits. But people don’t know bank also give only 1 lac grantee of their
fixed deposit investment.
Reference (sources)
WEBSITES
➢ http://mutualfund.birlasunlife.com
➢ http://www.tatamutualfund.com
➢ https://www.valueresearchonline.com
➢ http://www.moneycontrol.com
➢ http://economictimes.indiatimes.com
➢ http://www.sebi.gov.in