2310 Mutual Funds Fair Project
2310 Mutual Funds Fair Project
2310 Mutual Funds Fair Project
Mutual funds have been one of the most preferred investment instruments. They are
looked upon by individual investors as financial intermediaries/ portfolio managers who process
information, identify investment opportunities, formulate investment strategies, invest funds and
monitor progress at a very low cost. Thus the success of mutual funds is essentially the result of
the combined efforts of competent fund managers and alert investors. A competent fund manager
should analyze investor behavior and understand their needs and expectations, to gear up the
performance in order to meet investors’ requirements. The project “Mutual fund investors –
expectations & strategies in changing scenario” is to understand the changing sentiments,
expectations & strategies of the investor.
The volatility of stock market has affected the mutual funds sales. There has been a plunge in the
sales of mutual funds. The expectations & strategies of the investors have changed. This has
become a challenge for fund houses. Investors’ preference has changed. Now they are not sure
about what the investors want. This project aims at understanding their behavior & thus giving
recommendations to SCB for meeting these challenges. Thus, to analyze the difference between
investors’ expectations & investment managers’ approach.
The project will seek to cover all the fundamental aspects related to mutual funds & investment
in mutual funds. The project will also cover the various problems of the global scenario that has
affected the Indian market. Then it will analyze the behavior of investors in changing scenario.
There will also be a comparative analysis of some of the star ranked mutual funds as per the
expectations of the investors, so as to understand whether the star ranked mutual funds are
catering to the requirements & expectations of the investors or not.
Basically, the project is to understand the investors, behavior. This project also covers that what
are the opportunities for such investment products.
IMPORTANCE OF THE STUDY
Various investment options are having significant importance in human general and professional
life. This era can safely be attributed as technology resolution. The many options of investment
has imbibed into the lives of millions of people. Rapid investment advancement has introduced
major changes in the worldwide economic and business atmosphere. Research on customer
attitude and adoption showed there are several factors predetermining the consumer’s attitude
towards mutual funds investment such as person’s demography, motivation and behavior
towards different investment options. It has been found that consumer’s attitudes towards mutual
funds are influenced by the prior experience of savings and new investment options. The
adaptation of mutual funds forced consumers to consider concerns about savings, tax benefits,
and other sources of income options and the protection of future. Mutual funds requires perhaps
the most consumer involvement as it require the consumer to maintain and interact with
additional new investment options. Consumer who invest in mutual funds invest it on ongoing
basis and need to acquire a certain comfort level with the various mutual funds schemes.
In this study consumer attitude or intention to investment is evaluated by perceived
investment, perceived risk and investment pattern by frequency and duration of mutual funds’
investments.
NATURE AND FORM OF RESULTS
All result will be depicted through:-
Graphs : Bar diagram
Pie-charts
Tables
RESEARCH DESIGNS:-
The research group will use the descriptive research design where the main contact technique
will be the survey method. This method will use because it will help us to get the required
responses from the individual based on various parameters such as age, gender, occupation, etc.
SAMPLE SIZE:-
The sampling unit of our study will include males and females (age group 25 to Above 55 years)
from middle and upper middle class, professionals and non-professionals. The sample size will
consist of approximately sampling units.
The sample size for the survey is 30.
RESEARCH OBJECTIVE:-
HYPOTHESIS:-
Set 1
Ho: - Perceived investment has a positive impact on Mutual Funds
H1:- Perceived investment has a negative impact on Mutual Funds.
Set 2
Ho: - Changing condition in mutual funds investment has positive effect on mutual funds.
H1:- Changing condition in mutual funds investment has negative effect on mutual funds.
DATA COLLECTION:-
We will use both the primary as well as the secondary form of data collection. The primary
data will be collected by the survey method wherein working adults will be interviewed.
We will refer to secondary data which is available in the form of published articles in
books, newspapers and internet websites.
So the research will use the Descriptive research design wherein the main tool used would
be the survey method.
ORIGIN OF MUTUAL FUND IN INDIA
The history of mutual funds dates backs to 19th century when it was introduced in
Europe, in particular, Great Britain. Robert Fleming set up in 1968 the first investment trust
called foreign and colonial investment trust which promised to manage the finance of the
moneyed classes of Scotland by spreading the investment over a number of different stocks.
This investments trust and other investment trusts which were subsequently set up in Brittan
and the U.S, resembled today’s close ended mutual funds. The first mutual in the U.S.,
Massachusetts investor’s trust, was set up in March 1924. This was the open ended mutual
fund.
The stock market crash in 1929, the Great Depression, and the outbreak of the
Second World War slackened the pace of mutual fund industry, innovations in products and
services increased the popularity of mutual funds in the 1990 and 1960. The first
international stock mutual fund was introduced in the U.S. in 1940. In 1976, the first tax
exempt municipal bond funds emerged and in 1979, the first money market mutual funds
were created. The latest additions are the international bond fund in 1986 and arm funds in
1990. This industry witnessed substantial growth in the eighties and nineties increase in the
number of mutual funds, schemes, assets and shareholders. In the US, the mutual fund
industry registered a tenfold growth the eighties. Since 1996, mutual fund assets have
exceeded bank deposits. The mutual fund industry virtually rival each other in size.
GROWTH OF MUTUAL FUND IN INDIA
By the year 1970, the industry had 361 funds with combined total assets of 47.6 billion
dollars in 10.7 million shareholder’s account. However, from 1970 and on wards rising interest
rates, stock market stagnation, inflation and investor some other reservations about the
profitability of mutual funds, adversely affected the growth of mutual funds. Hence mutual funds
realized the need to introduce new types of mutual funds, which were in true with changing
requirements and interests of the investors. The 1970’s saw a new kind of funds innovation;
funds with no sales commissions called “no load funds”. The largest and most successful no load
family of funds is the is the vanguard funds, created by John Boggle in 1977.
In the series of new product, the first money market mutual fund (MMMF) was started in
November 1971. This new concept signaled a dramatic chance in mutual fund industry. Most
importantly, it attracted new small and individual investors to mutual fund concept and sparked a
surge of creativity in the industry.
MUTUAL FUNDS
CONCEPT:-
A mutual fund is a pool of money, collected from investors, and is invested according to
certain investment objectives. A mutual fund is created when investors put their money together.
It is therefore a pool of the investors’ funds. The most important characteristic of mutual fund is
that the contribution and the beneficiaries of the fund are the same class of people, namely the
investors. The term mutual means that investors contribute to the pool, and also benefit from the
pool. There are no other claimants to the funds. The pool of funds held mutually by investors is
the mutual fund.
A mutual fund’s business is to invest the funds thus collected, according to the wishes of
the investors who created the pool. In many market these wishes are articulated as “investment
mandates”. Usually, the investors appoint professional investment managers, to manage their
funds. The same objectives achieved when professional investment managers create a product
and offer it for investment to the investors. This product represents a share in the pool and pre-
states investment objectives.
CHARACTERISTICS OF MUTUAL FUNDS
A mutual fund actually belongs to the investors who have pooled their funds. The
ownership of the mutual fund is in the hands of the investors.
A mutual fund is managed by the investment professionals and other service providers,
who earn a fee for their services, from the fund.
The pool of funds is invested in a portfolio of marketable investments. The value of the
portfolio is updated every day.
The investor’s share in the fund is denominated by “units” the value of the units change
with the change in the portfolio’s value, every day. The value of one unit of investment is
called the Net Assets Value or NAV.
The investment portfolio of the mutual fund is created according to the stated investment
objective of the fund.
ADVANTAGES
Portfolio Diversification: -
By offering readymade diversified portfolios, mutual funds
enable investors to hold diversified portfolio. Though investors can create their own
diversified portfolios, the costs of creating and monitoring such portfolios can be high,
apart from the fact that investors may lack the professional expertise to manage such a
portfolio.
Professional Management: -
Mutual fund are managed by investment managers who are
appointed by trustees and bound by the investment management agreement, on the how
and why of their investment management functions.
Reduction in Risk: -
Mutual funds invest in a portfolio of securities. This means that all the
funds are not invested in the same investment avenue. It is well known that risk and return of
various investment options do not move uniformly or in sympathy with one another. Therefore,
holding a portfolio that is diversified across investment avenues is a wise way to manage risk.
When such a portfolio is liquid and marked to market, it enables investors to continuously
evaluate the portfolio and manage their risks more efficiently.
Liquidity: -
Most of the funds being sold today are open-ended. That is, investors can sell
their existing units, or buy new units, at any point of time, at prices that are related to the
NPV of the fund on the date of the transaction. This enables investors to enjoy a high
level of liquidity on their investment.
DISADVANTAGES
No tailor-made portfolio:-
Mutual fund portfolios are created and marketed by AMCs,
into which investors invest. They cannot create tailor made portfolios.
BY BY
STRUCTUR INVESTMENT BY NATURE
E OBJECTIVE
OPEN GROWTH
ENDED EQUITY DEBT BALANCE
OPTION FUNDS FUNDS D FUNDS
SCHEMES
PRIMARY INCOME
INTERVAL MARKET FUNDS
BALANCE FUNDS
SCHEMES D
SCHEMES
SECTOR
SPECIFIC MIPs
FUNDS
MONEY
MARKET
SCHEMES
TAX
SAVING SHORT
FUNDS TERM
(ELSS) PLANS(SIP)
INDEX
FUNDS LIQUID
FUNDS
OTHER
FUNDS
TYPES OF MUTUAL FUNDS
There are various types of mutual fund schemes available in the market. Currently there are 5373
mutual funds schemes available in the Indian market. Broadly the various types of mutual funds are
differentiated on the basis of:
On the basis of STRUCTURE, mutual funds can be divided into 3 types:
Interval schemes:-
Interval Schemes are that scheme, which combines the features of open-ended
and close-ended schemes. The units may be traded on the stock exchange or may be open for sale or
redemption during pre-determined intervals at NAV related prices.
On the basis of INVESTMENT OBJECTIVE, mutual funds can be divided into 4 types:
Growth Option:-
Growth Schemes are also known as equity schemes. The aim of these schemes is to
provide capital appreciation over medium to long term. These schemes normally invest a major part
of their fund in equities and are willing to bear short-term decline in value for possible future
appreciation.
In it incomes earned are retained in the investment portfolio, & allowed to grow, rather than being
distributed to the investors.
The return to the investors is at the rate at which his initial investment has grown over the period for
which he was invested in fund. The NAV will vary with the value of the investment portfolio while
the number of unit held will remain constant.
Income Scheme:-
Income Schemes are also known as debt schemes. The aim of these schemes is to
provide regular and steady income to investors. These schemes generally invest in fixed income
securities such as bonds and corporate debentures. Capital appreciation in such schemes may be
limited.
Balanced Funds:-
Funds that invest both in debt & equity markets are called balanced funds.
Balanced Schemes aim to provide both growth and income by periodically distributing a part of the
income and capital gains they earn. A typical balanced fund would be almost equally invested in
both the markets. A balanced fund also tends to provide investors exposure to both equity & debt
markets in one product. Therefore the benefits of diversification get further enhanced, as equity &
debt markets have different risk and return profiles.
a) Equity Funds:-
These funds invest a maximum part of their corpus into equities holdings. The
structure of the fund may vary different for different schemes and the fund manager’s outlook on
different stocks. Equity funds can be further divided into 4 types:
b) Debt Funds:-
Debt funds are those that pre-dominantly invest in debt securities. Since most debt
securities pay periodic interest to investors, these funds are also known as income funds. However,
investing in debt products can also offer a growth option to their investors. The universe of debt
securities comprises of long term instruments such as bond issues by central & state governments,
public sector organizations, public financial institutions & private sector companies; and short term
instruments such as call money lending, commercial papers, certificates of deposit; & treasury bills.
Debt funds tend to create a variety of options for investors by choosing one or more of these
segments of the debt markets in their investment portfolio. Debt funds can be further divided into 5
types:
Gilt Funds:-
A gilt fund invests only in securities that are issued by the government, & therefore
does not carry any credit risk. These funds invest in short & long-term securities issued by the
government. These funds are preferred by institutional investors who have to invest only in
government paper. These funds also enable retail investors to participate in the market for
government securities, which is otherwise a large-ticket wholesale market.
Income Funds:-
These funds invest a major portion into various debt instruments such as bonds,
corporate debentures and Government securities
MIPs:-
These funds invest maximum of their total corpus in debt instruments while they take
minimum exposure in equities. It gets benefit of both equity and debt market. These scheme
ranks slightly high on the risk-return matrix when compared with other debt schemes.
Liquid funds:-
These funds are also known as Money Market Schemes, These funds provide easy
liquidity and preservation of capital. These schemes invest in short-term instruments like
Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-
term cash management of corporate houses and are meant for an investment horizon of 1day to 3
months. These schemes rank low on risk-return matrix and are considered to be the safest
amongst all categories of mutual funds.
c) Balanced Funds:-
As the name suggest they, are a mix of both equity and debt funds. They
invest in both equities and fixed income securities, which are in line with pre-defined
investment objective of the scheme. These schemes aim to provide investors with the best of
both the worlds. Equity part provides growth and the debt part provides stability in returns.
CONSTITUTION OF A MUTUAL FUNDS:-
The structure of mutual funds in India is governed by the SEBI (mutual fund) Regulations,
1996. These regulations make it mandatory for mutual funds to have a three-tier structure of
Sponsor-Trustee-Asset Management Company (AMC). The sponsor is the promoter of the
mutual fund, & appoints the Trustees. The trustees are responsible to the investors in the mutual
fund, & appoint the AMC for managing the investment portfolio. The AMC is the business face
of the mutual fund, as it manages all the affairs of the mutual fund. The mutual fund & the AMC
have to be registered with SEBI.
SEBI regulations also provide for who can be a sponsor, trustee & AMC, & specify the format
of agreements between these entities. These agreements provide for the rights, duties &
obligations of these three entities. These agreements provide for the rights, duties & obligations
of these three entities.
Sponsor:-
The sponsor is the promoter of the mutual fund. The sponsor establishes the mutual fund &
registers the same with SEBI.
Sponsor appoints the trustees, custodians & the AMC with prior approval of SEBI, & in
accordance with SEBI Regulations.
Sponsor must have at least 5-year track record of business interest in the financial markets.
Sponsor must have been profit making in at least 3 of the above 5 years.
Sponsor must contribute at least 40% of the capital of the AMC.
Trustee:-
The mutual fund, which is a trust, is managed either by a Trust company or a board of Trustees. It
is the responsibility of the trustees to protect the interest of investors, whose fund is managed by the
AMC. The AMC & other functionaries are functionally accountable to the trustees.
NAV represents the actual value of per unit of a fund. It is calculated as:-
Income:-
This is the interest income earned by debt securities or dividend income earned by stocks in the
portfolio.
Profit:-
This is the capital gain realized by selling a security (debt or equity) at a price higher than its
purchase price.
Loss:-
This is the capital loss suffered by selling a security (debt or Equity) at a lower price than its
purchase price.
Expenses:-
This is the actual expenses incurred by the fund. For example, fees paid to AMC, custodians,
registrars etc., SEBI restricts the expenses that can be paid by the fund.
Mutual fund offers a variety of options to investors, in the manner in which the returns
from their investments are structured. At a broad level, the investors have 3 options which are:
Dividend Option:-
Investors, who choose a dividend option on their investments, will
receive dividends from the mutual funds, as & when dividends are declared. Dividends
are paid in the form of warrants, or are directly credited to investors’ bank account. .
Growth option:-
Investors who do not require periodic income distributions can choose the
growth option, where the income earned are retained in the investment portfolio, &
allowed to grow, rather than being distributed to the investors. Investors with longer-term
investment horizons, & limited requirements for income, choose this option. The return
to the investors is at the rate at which his initial investment has grown over the period for
which he was invested in the fund. The NAV of the investor choosing this option will
vary with the value of the investment portfolio, while the number of units held will
remain constant.
Re-investment Option:-
Investors re-invest the dividends that are declared by the mutual
fund, back into the fund itself, at NAV that is prevalent at the time of re-investment. In
this option, the number of units held by the investor will change with every re-
investment. The value of the units will be similar to that under the dividend option.
TAX PLANNING AND MUTUAL FUNDS
Investors in India opt for the tax saving mutual fund schemes for the simple reason
that it helps them to save money. The tax savings mutual funds or the equity linked savings
schemes receive certain tax exemptions under section 88 of the Income Tax Act. That is one
of the reasons why the investors in India add the tax savings mutual fund schemes to their
portfolio. The tax saving mutual fund schemes are one of the important types of mutual
funds in India that investors can option for their money to save. There are several companies
in India that offer-tax-saving mutual fund in the country.
India is at the first stage of a revolution that has already peaked in the U.S. The U.S.
boasts of an assets base that is much higher than its bank deposits. In India, mutual fund assets
are not even 10% of the bank deposits, but this trend is beginning to change. Recent figures
indicate that in the first quarter of the current fiscal year mutual fund assets went up by 115%
whereas bank deposits rose by only 17%. This is forcing a large number of banks to adopt the
concept of narrow banking wherein the deposits are kept in gilt and some other assets which
improves liquidity and reduces risk. The basic fact lies that banks cannot be ignored and they
will not close down completely. Their role as intermediaries cannot be ignored. It is just that
mutual funds are going to change the way banks do business in the future.
COMPARISON OF INVESTMENT IN BANK V/S MUTUAL FUNDS
Classes of funds: -
Many mutual funds offer more than one class of shares. For example,
you may have seen a fund that offers “Class A” AND “Class B” shares. Each class will
invest in their same “pool” of securities and will have the same investment objectives and
policies. But each class will have different shareholders services and distribution
arrangements with different fees and expenses. As a result, each class will likely have
different performance results.
MUTUAL FUNDS
QUESTIONNAIRE
1. Name :-
2. Age :-
3. Gender :- Male
Female
11. From how long would you like to hold equity funds investment?
1 to 3 years
3 to 7 years
7 to 9 years
12. From how long would you like to hold debt funds investment?
3 to 6 years
6 to 9 years
16. Where do you gather information about the performance of different mutual funds
schemes?
Financial Institutions
Brokers
T.V Channels
Internet
17. What will be the future of equity mutual funds in India as per you?
Bullish
Bearish
Can’t say
1. Age :-
Age
Above 55 25-35
13% 20%
25-35
45-55
27% 35-45
35-45 45-55
40% Above 55
Gender
Female
40%
Male Male
60%
Female
Graduate
Post Graduate
Professional
Qualification
8
4
7
3 6
5
2 4
3
1 2 2
1
0
H.S.C And Below Graduate Post Graduate Professional
Male Female
Occupation
8
Male Female
7
4
7
3 6
2 4 4
3 3
1 2
1
0
Business Person Private employee Professional Government employee
Out of the total male survey, majority of them are worked in private sector companies.
Out of the total female survey, majority of them are worked in government service.
5. Total Annual Income :- Below 5,00,000
6,00,000 to 15,00,000
16,00,000 to 25,00,000
Above 26,00,000
Annual Income
7%
27% 36%
Below 5,00,000
6,00,000 to 15,00,000
16,00,000 to 25,00,000
30% Above 26,00,000
Interest
10%
Yes
No
90%
Out of the total survey, most of the males are interested in mutual funds investment.
Out of the total survey, 96% respondent are interested in the mutual funds investment.
Out of the total survey, only 4% respondent are not interested in mutual funds investment.
7. Do you invest in mutual funds?
Yes
No
Investment
No
10%
Yes
No
Yes
90%
According to the survey, 96% respondent are invested in the mutual funds.
According to the survey, only 4% respondent are not invested in mutual funds.
8. What percentage of your investment is invested in mutual funds?
Less than 25%
25% to 50%
51% to 75%
More than 75%
Percenate of investment
15% 22%
Out of the total income most of the respondent are invest in mutual funds.
37% respondent are invest 25% to 50% of their part of income.
26% respondent are invest 50 to 75 of their part of income.
9. You have invest in which type of mutual fund scheme?
Equity Funds
Debt Funds
Hybrid Funds
Type of scheme
12
11
10
10
4
3
2
1 1 1
0
Equity funds Debt funds Hybrid funds
Male Female
According to the survey, Most of the respondent are invest in equity funds and debt funds
schemes.
Male respondent are more invested in equity funds.
Very few female respondent are invested in mutual funds.
10. From how long would you like to hold equity funds investment?
1 to 3 years
3 to 7 years
7 to 9 years
7 to 9 years
7% 1 to 3 years
29%
3 to 7 years
64%
Out of the total survey, 29% respondent are invest for 1 to 3 years.
Out of the total survey, 64% respondent are invest for 3 to 7 years.
Out of the total survey, Only 7% respondent are invest for 7 to 9 years.
11. From how long would you like to hold debt funds investment?
1 to 3 years
3 to 6 years
6 to 9 years
9%
18%
1 to 3 years
3 to 6 years
73%
6 to 9 years
Out of the total survey, 73% respondent are invest for 1 to 63years.
Out of the total survey, 18% respondent are invest for 3 to 6 years.
Out of the total survey, 9% respondents are invest for 6 to 9 years.
12. If equity funds then in which category?
Diversified equity funds
Mid-cap funds
Sector specified funds
Tax savings funds
0
Diversified equity funds Mid-cap funds Sector specific funds Tax savings funds
Male Female
Income Funds
55%
Factor to prefer
14%
Most of the people take high risk and high return option for investment.
54% respondent are take a higher risk.
Information gather
4%
29% 26%
Financial Institutions
Brokers
T.V channels
41% Internet
Can't say
26%
Bullish Bullish
56%
Bearish Bearish
18% Can't say
Out of the total survey, 56% respondent are said future of equity mutual funds is a bullish.
Out of the total survey, 18% respondent are said a future of the equity mutual funds is bearish.
Out of the total survey, 26% respondent are said a future of equity mutual funds is can’t say.
FINDINGS:-
96% people are interested in mutual funds investment and also they are invested in
mutual funds.
37% people are invest 25% to 50% of their total annual income in mutual funds.
46% people are invest in tax saving funds in equity funds category.
55% people are invest in income funds in debt funds category as a second source of
income.
54% people are take a higher risk, and higher return while investing their money.
41% people are get an information from the source of T.V Channels.
56% people are said an equity mutual fund market is a bullish in nature.
ANALYSIS:-
According to the research the study has positive effect, to perceived investment in
mutual funds.
According to the research the study has positive effect, to understand the effect of the
changing condition on the mutual funds.
CONCLUSION:-
Perceived investment in mutual funds is an important factor for investing money in the
various schemes.
Perceived investment in the various schemes are also very important factor. Mutual fund
bring together a group of people and invest their money in stocks, bonds, and other
securities.
Perceived risk is the biggest reason why people still don’t invest in mutual funds.
The disadvantages of mutual funds are high cost, over-diversification, possible tax
consequences and the inability of management to guarantee a superior return.
Mutual funds have lots of costs. Cost can be broken down into ongoing fees and
transaction fees.
Mutual funds are easy to buy and sell. We can either buy them directly from the fund
company or through a third party.
The integration of Mutual funds in the India will take a sometime it’s not going to happens
in the future.
BIBILOGRAPHY
https://www.mutualfundindia.com
https:/www.fundsindia.com
https://www.amfiindia.com
https://em.m.wikipedia.org
https://investeasy.reliance mutual.com
https://www.nseindia.com
https://www.investopedia.com
https://www.moneycontrol.com
https://www.bseindia.com
The Economics Times
Jeffery Lawrence, (2005), “Leading the Way”
ICFAI Press, “Mutual Funds”, (2004)
“Mutual Funds Handbook”, (2004), Invest India Economic Foundation Private
Limited.
Sundar Sankaran, “Indian Mutual Funds Handbook”, Vision Books