A

PROJECT REPORT

ON

“ MUTUAL FUNDS: A STUDY OF LUMPSUM- INVESTMENT & SYSTEMATIC INVESTMENT

PLAN (SIP)”

SUBMITTED

To

CENTRE FOR ONLINE LEARNING

Dr. D.Y .PATIL VIDYAPEETH, PUNE

IN PARTIAL FULFILMENT OF DEGREE OF

MASTER OF BUSINESS ADMISTRATION

BY

PRANJAL KALPESH MEHTA

PRN:21093802

BATCH 2021-2023

1
 Dr. D.Y. Patil Vidyapeeth’s
CENTRE FOR ONLINE LEARNING,
Sant Tukaram Nagar, Pune.

CERTIFICATE

This is to certify that Mr./Ms. PRANJAL KALPESH MEHTA

PRN - 21093802

has completed his/her internship at Qollabb

starting from___________ to _______________.

His / Her project work was a part of the MBA (ONLINE LEARNING)

The project is on Mutual Funds: A Study of Lumpsum- Investment & Systematic Investment Plan
(SIP). Which includes research as well as industry practices. He/ She was very sincere and
committed in all tasks.

Course Coordinator Director

_________________ ___________________

Date -

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 COMPANY LETTER
(TO BE PROVIDED BY THE COMPANY WHERE THE PROJECT WILL BE

CARRIED OUT)

To whomsoever it may concern

This is to certify that Mr./Ms. PRANJAL KALPESH MEHTA

PRN - 21093802

has completed his/her internship at _______________________________________

starting from___________ to _______________.

His / Her project work was a part of the MBA (ONLINE LEARNING)

The project is on Mutual Funds: A Study of Lumpsum- Investment & Systematic Investment Plan
(SIP).

Which includes research as well as industry practices. He/ She was very sincere and
committed in all tasks.

Signature & Seal of Industry Guide

3
 DECLARATION BY STUDENT

This is to declare that I have carried out this project work myself in part fulfillment of the
M.B.A Program of Centre for Online Learning of Dr. D.Y. Patil Vidyapeeth’s, Pune – 411018

The work is original, has not been copied from anywhere else, and has not been submitted to
any other University / Institute for an award of any degree / diploma.

Date: - Signature: -

Place: Name:

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 ACKNOWLEDGEMENT
I hereby acknowledge their sincere gratitude to for giving me an opportunity to Center For
Online Learning Dr. D Y Patil Vidyapeeth, Pune undergo the MBA course and to undertake
the project work successfully.
I would like to articulate gratitude to their Faculty Guide Director Mrs. Nima Gandhi and,
Compny Guide Director Mrs. Sabitha Anand and My mentor Mrs. Kirtee Jamdade mam in
Dr. D Y Patil Vidyapeeth, Pune for their valuable and great support for their project work and
also guiding me time to time at each stage of their project and giving suggestions as and
when required.
I would also like to express my gratitude to the management commerce staff and faculty is
for providing an opportunity to undertake the project successfully.
Last but not the least they would like to of deepest and heartiest gratitude to their family
members and friends who supported me at each stage of the project and guided me in
completing the project work successfully

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 EXECUTIVE SUMMARY
The objective of my report was twofold. I tried to understand the basics of Mutual Funds and
also what is their current popularity in terms of how do investors rate them against other
investment instruments. To analyze the same, I tried to draw conclusions between investment
trends in Mutual Funds and an investors age, income, profession, gender etc. I also tried to
find out and analyze what considerations the investors keep in mind before making an
investment in Mutual Funds. This data was collected with the help of a questionnaire and
then findings are depicted graphically in this report so as to have an insight as to how Mutual
Fund Industry is gaining popularity. I also tried to find out whether people are aware about
SIP’s (Systematic Investment Plan) which is a popular tool of investment under Mutual
Funds. And to outline the major difference between two popular modes of investments i.e.
Lump sum Investments & SIP’s. Finally, I came out with a conclusion and certain
suggestions based on my own analysis which seem feasible to me looking at the present
condition. For information about Mutual Funds, I referred to various journals, magazines and
explored various websites.

OBJECTIVE
❖ To understand and analyze the current popularity of Mutual Funds among the customers
and identify the potential customer group.

❖ To do a analysis between Lump sum investments & Systematic Investment Plan.

❖ To provide viable suggestions for effective Portfolio Management.

SUGGESTIONS
❖ Recommendation to the company would be to create portfolios for customers based on
their requirement and need which would help in better understanding of the investor and
specific targeting.

❖ Govt. India must do some awareness programs with the mutual fund companies in order to
make the people more knowledgably and aware.

❖ Investor should choose systematic investment plan rather than lump-sum for investment.

❖ Most People have a knowledge of a mutual fund by sources of a internet, because day to
day internet use are increase and minimum people are get knowledge of mutual fund
investment from sales representatives.

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CONCLUSION
Analyzing the above data, we can say that currently less than half the sample population
invests in MFs. And among these people in age groups 18-30 years and 31-45 years and those
having their income in 5- 10 lacs are the group who are investing the maximum. The people
in the age group 56 & above are the ones who are most reluctant to opt for Mutual Funds as
they still consider the traditional investment instruments like FD’s, Post office schemes to be
safer. Also among the people who are currently not investing in MFs are the ones who are not
aware about MFs and do not have the required knowledge.

We target the above-mentioned customer group and influence them through suggestions and
advise. Also another recommendation to the company would be to create portfolios for
customers based on their requirement and need which would help in better understanding of
the investor and specific targeting.

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 INDEX
CHAPTER TOPIC PAGE NO.
NO.

1.
Introduction 9-21

2.
Objective of study 22

3.
Research Methodology 23-24

4.
Company Profile 25-32

5. Review of Literature 33-34

6. Data Analysis & Interpretations

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 CHAPTER 1
INTRODUCTION

In mutual funds industry many investors contribute to form a common pool of money. This
pool of money is invested in accordance with a stated objective. The ownership of fund is
thus joint or mutual the fund belongs to all investors. A single investor’s ownership of fund is
in the same proportion as the amount of the contribution made by him bears to the total
amount of fund. A mutual fund uses the money collected from investors to buy those assets
which are specifically permitted by its stated objective. Thus a growth fund would buy
mainly equity assets-ordinary shares, preference shares, warrants etc. An income fund would
buy mainly debt instruments such as debentures and bonds. The funds assets are owned by
the investors in the same proportion as their contribution bears to the total contribution of all
investors put together.

Working of Mutual Fund

Source: moneycontrol.com
The risk-return Matrix below shows that as compared to various investment options Mutual
Funds offer High Returns with Lower Risk to the investors.

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 Risk Return Matrix

Source: mutualfundindia.com

Advantages of Mutual Funds

1) Professional management:
Fund managers are professionals who track the market on an on-going basis. With their
mix of professional qualification and market knowledge, they are better placed than the
average investor to understand the markets.

2) Portfolio Diversification:
Since a Mutual Fund scheme invests in number of stocks and/or debentures, the
associated risks are greatly reduced.

3) Reduction of transaction Cost:

When compared to direct investments in the capital market, Mutual Funds cost less. This
is due to savings in brokerage costs, demat costs, depository costs etc.

4) Liquidity:
Investments in Mutual Funds are completely liquid and can be redeemed at their Net
Assets Value-related price on any working day.

5) Transparency:
You will always have access to up-to-date information on the value of your investment in
addition to the complete portfolio of investments, the proportion allocated to different
assets and the fund manager’s investment strategy.

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6)Flexibility:
Through features such as Systematic Investment Plans, Systematic Withdrawal Plans and
Dividend Investment Plans, you can systematically invest or withdraw funds according to
your needs and convenience.
7)Safety:
All Mutual Funds are registered with SEBI and function within the provisions and regulations
that protect the interests of investors. AMFI is the supervisory body of the Mutual Funds
industry.

TYPES OF MUTUAL FUNDS

Funds are generally distinguished from each other by their investment objective and types of
securities they invest in.
a) Broad fund types by nature of investments
Mutual funds may invest in equities, bonds or other income securities, or short term
money market securities. So we have equity, bond and money market or liquid funds.
All these invest in financial assets. But there are funds that invest in physical assets
like real estate funds.
b) Broad fund type by investment objective
Growth funds invest for medium to long term capital appreciation. Income funds
invest to generate regular income and less for capital appreciation. Value funds invest
in equities that are considered under-value today and whose values will be unlocked
in the future.
c) Broad Fund types by risk profile
Equity funds have greater risk of capital loss than a debt fund that seeks to protect the
capital while looking for income. Liquid funds are exposed to less risk than even bond
funds since they invest in short term fixed income securities as compared to longer
term portfolios of bond funds.

There are a wide variety of Mutual Fund schemes that cater to your needs, whatever
your age, financial position, risk tolerance and return expectation. Whether as the
foundation of your investment program or as a supplement, Mutual Fund schemes can
help you meet your financial goals.

The different types of Mutual Funds are as follows:

Diversified Equity Mutual Fund Scheme

A mutual fund scheme that achieves the benefits of diversification by investing in the
stocks of companies across many sectors. As a result, it minimizes the risk of
exposure to a single company or sector.

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Sectoral Equity Mutual Fund Scheme
A mutual fund scheme which focuses on investments in the equity of companies
across a limited number of sectors -- usually one to three.
Index Funds
These funds invest in the stocks of companies, which comprise major indices such as
the BSE Sensex or the S&P CNX Nifty in the same weightage as the respective
indices.

Equity Linked Tax Saving Schemes (ELSS)

Mutual Fund schemes investing predominantly in equity and offering tax rebates to
investors under section 80 C of the Income Tax Act. Currently rebate u/s 80C can be
availed up to a maximum investment of Rs 1, 00,000. A lock-in of 3 years is
mandatory.

Monthly Income Plan Scheme

A mutual fund scheme which aims at providing regular income (not necessarily
monthly, don't get misled by the name) to the unit holder, usually by way of dividend,
with investments predominantly in debt securities (up to 95%) of corporate and the
government, to ensure regularity of returns, and having a smaller component of equity
investments (5% to 15%) to ensure higher return.

Income schemes
Debt oriented schemes investing in fixed income securities such as bonds, corporate
debentures, Government securities and money market instruments.

Floating-Rate Debt Fund

A fund comprising of bonds for which the interest rate is adjusted periodically
according to a predetermined formula, usually linked to an index.

Gilt Funds
These funds invest exclusively in government securities.

Balanced Funds
The aim of balanced funds is to provide both growth and regular income as such
schemes invest both in equities and fixed income securities in the proportion indicated
in their offer documents. They generally invest 40-60% in equity and debt
instruments.

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Fund of Funds
A Fund of Funds (FoF) is a mutual fund scheme that invests in other mutual fund
schemes. Just as fund invests in stocks or bonds on your behalf, a FoF invests in other
mutual fund schemes.

Risk and Return

Asset Management Company

The AMC so appointed is required to be approved by SEBI. Once approved, the
AMC functions under the supervision of its own Board of Directors, and also under
the direction of the Trustees and SEBI. The AMC of a mutual fund must have a net
worth of at least Rs.10 crores at all times. the AMC cannot act as a trustee of any
other mutual fund. To ensure the independence of the asset management company,
SEBI mandates that a minimum of 50% of the directors of the board of the asset
management company should be independent directors.

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14
MUTUAL FUND INDUSTRY
❖ The Asset Management Companies (AMCs) managing the Mutual Funds levy a load as a
percentage of NAV at the time of entry into the Schemes or at the time of exiting from the
Schemes.

❖ Entry Load - It is the load charged by the fund when an investor invests into the fund. It
increases the price of the units to more than the NAV and is expressed as a percentage of
NAV.

❖ Exit Load - It is the load charged by the fund when an investor redeems the units from the
fund. It reduces the price of the units to less than the NAV and is expressed as a percentage of
NAV.

❖ Cost of Churning/Turnover cost - It refers to the costs associated with the churning (or
changes made to the holdings) of the portfolio. Portfolio changes have associated costs of
brokerage, custody fees, transaction fees and registration fees, which lower the returns. The
quantum depends on the management style of the fund manager.

❖ Expense Ratio - The Expenses of a mutual fund include management fees and all the fees
associated with the fund's daily operations. Expense Ratio refers to the annual percentage of
fund's assets that is paid out in expenses.

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TAXATION
Income

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THEORIES OF INVESTMENT PLANNING

Harnessing the power of compounding

The first principle of investment planning is to invest for the long term and let the money
grow on a compound basis. It is to be understood that investment is a lifetime activity and not
an ado process. It is seen that more frequent the compounding, the greater is the capital. Thus
it is advised for investors with long term horizon to go for the growth option in schemes,
meaning reinvestment of dividends to benefit from power of compounding.

Choosing a strategy to maximize returns on investment

There are different ways of investing. One strategy may suit different investors and another
will be appropriate for another type. The strategies are:

CHOOSING THE RIGHT PLANNING STRATEGIES

The following are the key concepts that should be noted:

❖ Timing investments and cashing out-In terms of when to invest it is advisable to clients
when they have the money because they will give their money more time to grow. The
question of when to cash out needs more thought and skills. Some are listed below:

❖ When the goal has arrived and the purpose for which the investments were made has to be
addressed.

❖ If the market overall appears overvalued in terms of fundamentals and historic valuations.

❖ A buy and hold strategy works well in a good mutual fund if the client is willing to wait
out a full market cycle because fund managers do the buying and selling based on their
research and analysis. In this regard it must be noted it is the investor who has to take the
decision to enter or exit an asset class and it is not the fund manager’s role to time entry or
exit irrespective of market movements.

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❖ Planning & investing early-it is wise for the investors to develop good financial planning
habits early in life such as saving, budgeting, regularly investing and periodically reviewing
finances to meet changes in life stages and to handle contingencies.

❖ Having realistic Expectations-Financial planning is a common-sense approach to

managing one’s finances to reach one’s life goals. Therefore, the return expectation should be
realistic.

❖ Investing regularly-investment strategies like rupees cost averaging, double rupee cost
averaging and value cost averaging can bring down the cost of investments and have been
known to harness the power of compounding to deliver superior results over time.

ASSET ALLOCATION TOOL

50/50 Portfolio of Mutual Funds
Bogle suggests the holding of different kinds of combinations of portfolio of funds:

1.A Basic Managed Portfolio------ 50% in Diversified Equity Value Funds

25% in Govt. Securities Fund
25% in High Grade Corporate Bond Funds
2. A Basic Indexed Portfolio-------- 50% in Index Funds 50% in Bond Market Portfolio
3. A Simple Managed Portfolio----- 85% in Balanced 60/40 Fund 15% in Medium Term
Bond
4. A Complex Managed Portfolio----20% in Diversified Equity Funds
20% in Aggressive Growth Funds
10% in Specialty Funds
30% in Long Term Bond Funds
20% in Short term Bond Funds
5. A Readymade Portfolio ----------- Single Index Funds with 60/40 equity/bond holdings.

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Strategic Asset Allocation

Bogle classifies investors in terms of their lifecycle phases. During the Accumulation Phase,
an investor would be building assets by periodic investments of capital and reinvestment of
all dividends received. During the Distribution Phase, he will stop adding assets and start
receiving dividends as income. In conjunction with the investors’ age he recommends the
following strategic allocations:
Older Investors in Distribution Phase : 50/50 (equity/debt)
Younger Investors in Distribution Phase : 60/40
Older Investors in Accumulation Phase : 70/30
Younger Investors in Accumulation Phase: 80/20

Thus younger investors can be more aggressive while older investors take a more
conservative approach. Similarly, investors in Accumulation Phase can take greater risk than
those who need income in Distribution Phase.

Asset Allocation Strategy

The four types of investors that are striving for long-term growth:
1. The general conventionalist is looking for long-term, steady growth and does not want to
take risk of stock markets. 50% of the population falls into this category.
2. The enterprising conventionalist is also looking for long-term growth but is willing to
tolerate minor fluctuations in stock prices. 35% of investors are enterprising conventionalists.
3. Safety-seekers can tolerate market fluctuations to a point. Daily and minor fluctuations
are largely irrelevant. >14% of investors are safety-seekers.
4. non-conventionalists care less about market or price fluctuations and look to find value
and opportunities in every market.
Though each of these investors can achieve satisfactory results over the long run, their
psychologies will greatly affect how they should be invested.

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SOME FACTS FOR THE GROWTH OF MUTUAL FUNDS IN INDIA

❖ 100% growth in the last 6 years.

❖ Number of foreign AMCs is in the queue to enter the Indian markets.

❖ Our saving rate is over 23%, highest in the world. Only channelizing these savings in
mutual funds sector is required.

❖ We have approximately 29 mutual funds which is much less than US having more than
800. There is a big scope for expansion.

❖ 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are
concentrating on the 'A' class cities. Soon they will find scope in the growing cities.

❖ Mutual fund can penetrate rural like the Indian insurance industry with simple and limited
products.

❖ SEBI allowing the MF's to launch commodity mutual funds.

❖ Introduction of Financial Planners who can provide need based advice.

1.6 Key Terms

❖ Assets Management Company: A highly regulated organization that pools money from
many people into portfolio structured to achieve certain objectives. Typically an AMC
manages several funds – open ended/ close ended across several categories- growth, income,
balanced.

❖ Balanced Fund: A hybrid portfolio of stocks and bonds.

❖ Close Ended Fund: They neither issue nor redeem fresh units to investors. Some closed
ended funds can be bought or sold over the stock exchange if the fund is listed. Else, investor
have to wait till redemption date to exit. Most listed close ended funds trade at discount to the
NAV.

❖ Open Ended Fund: A diversified and professionally managed scheme, it issues fresh units
to incoming investors at NAV plus any applicable sales charge, and it redeems shares at NAV
from sellers, less any redemption fees.

❖ Entry/ Exit Load: A charge paid when an investor buys/sells a fund. There could be a
load at the time of entry or exit, but rarely at both times.

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❖ Growth/Equity Fund: A fund holding stocks with good or improving profit prospects.
The primary emphasis is on appreciation.

❖ Net Assets Value: A price or value of one unit of a fund. It is calculated by summing the
current market values of all securities held by the fund, adding the cash and any accrued
income, then subtracting liabilities and dividing the result by the number of units outstanding.

❖ Interest Rate Risk: The risk borne by fixed-interest securities, and by borrowers with
floating rate loans, when interest rates fluctuate. When interest rates rise, the market value of
fixed-interest securities declines and vice versa.

❖ Capital Market risk: Capital Market Risk is the risk arising due to changes in the Stock
Market conditions.

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 CHAPTER -2
OBJECTIVES

❖ To understand and analyze the current popularity of Mutual Funds among the customers
and identify the potential customer group.

❖ To develop model portfolios based on client’s profile and requirements.

❖ To do a analysis between Lump sum investments & Systematic Investment Plan.

❖ To provide viable suggestions for effective Portfolio Management.

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 CHAPTER 3
RESEARCH METHODOLOGY

Problem statement
The investment advisory division needs to know who the potential customers for selling
Mutual Funds are and wants to develop Model Portfolios for clients based on their profile and
requirements. Also identifying the major preference of investors between lump sum
investments and Systematic Investment Plan SIPs.

Relevance
This analysis would help the company to gauge who its potential customers are and how the
investment advisory division can target them. The funds picked by an average investor are
those that are heavily advertised and sell aggressively. Most of them buy on brand names and
not on basis of fundamental analysis or professional information. Thus this analysis would be
helpful in this regard.
After introducing the topic we will now move on to the methodology adopted for the study.
This chapter deals with the methodology adapted for the collection of the data for sample
case study. This includes understanding of the universe of the study and the locale of the
study. The universe and the locale of our study provide an insight into the relevance of
portfolio management services and the places where we can apply our findings.

Universe of the study

The universe of the study encompasses all the investors, both, individual and corporate where
Mutual Funds have some relevance.

Locale
The scope of our locale is investors present in Pune.

Sample Study
The sample size selected was 100. The investors who were surveyed were majorly
shopkeepers.

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Data Collection
The present study has been done based on primary and secondary source of data.

Primary Research
The primary data was collected with the help of questionnaire which was to the respondent
about their awareness related to Mutual Funds and getting an insight on the type of previous
investments they were indulged in so that we can analyze the trends in investments. The data
regarding the following areas was collected from a sample of 100 people.

❖ Profile of Investor

❖ Risk taking capacity o investor

❖ Reasons for investing or not investing in various investment options

❖ Kinds of mutual funds preferred

❖ Criteria that customer gives importance to while selecting a mutual fund

Secondary Research
Secondary date was used to support the primary data. The major sources of information were
various books, journals, research articles, documentaries and the World Wide Web.

SAMPLING PLAN

❖ Target population was people above 18 years

❖ Sample size was restricted to people in Pune

❖ Sample size was 100

Analysis of Data
The data is analyzed through both qualitative and quantitative measures. Statistical analysis
as well as in depth analysis was done based on the information collected from both primary
and secondary data and this data was then organized into tables so as to ease the analysis part
of the study.

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 CHAPTER 4
COMPANY PROFILE
When it comes to investing, everyone has unique needs based on their own objectives and
risk profile. While many investment avenues such as fixed deposits, bonds etc. exist, it is
usually seen that equities typically outperform these investments, over a longer period of
time. Hence they are of the opinion that, systematic investment in equity allows one to create
substantial wealth. However, investing in equity is not as simple as investing in bonds or
bank deposits, because only proper allocation of portfolio gives maximum returns with
moderate risk, and this requires expertise and time. Thus their Investment Advisory Services
help in investing the money in equity through different Mutual Fund Schemes.

Vision
▪ Our vision is to be the leading Finance Company and continue to retain the leadership
position for Mutual Funds Products.

Mission

❖ We will specialize in financing products based on applications and build on the

competence developed in its focus area. We will target all segments of vehicle financing and
deploy the skills acquired through an in-depth understanding of the chosen product market.

❖ We will provide products and services tailored to the needs of our most favored customer,
and always meet their needs. In case of demand-supply mismatch of funds, we will do
everything to find a solution.

❖ We help to develop better products by providing first-hand information received from the
target market.

When it comes to investing, everyone has unique needs based on their own objectives and
risk profile. While many investment avenues such as fixed deposits, bonds etc. exist, it is
usually seen that equities typically outperform these investments, over a longer period of
time. Hence they are of the opinion that systematic investment in equity allows one to create
substantial wealth. However, investing in equity is not as simple as investing in bonds or
bank deposits, because only proper allocation of portfolio gives maximum returns with
moderate risk, and this requires expertise and time. Thus their Investment Advisory Services
help in investing the money in equity through different Mutual Fund Scheme.

25
 THEORETICAL BACKGROUND

A Systematic Investment Plan is not a type of mutual fund. It is a method of investing in a

mutual fund. An SIP is a method of investing a fixed sum, on a regular basis, in a mutual fund
scheme. It is similar to regular saving schemes like a recurring deposit. An SIP allows one to
buy units on a given date each month, so that one can implement a saving plan for
themselves. A SIP can be started with as small as Rs 500 per month in ELSS schemes to Rs
1,000 per month in diversified equity schemes. Buy low sell high, just four words sum up a
winning strategy for the stock markets. But timing the market is not easy for everyone. In
timing the markets one can miss the larger rally and may stay out while the markets were
doing well. Therefore, rather than timing the market, investing month after month will ensure
that one is invested at the high and the low, and make the best out of an opportunity that
could be tough to predict in advance.

Benefits of Systematic Investment Plan

Power of compounding: The power of compounding underlines the essence of making
money work if only invested at an early age. The longer one delays in investing, the greater
the financial burden to meet desired goals. Saving a small sum of money regularly at an early
age makes money work with greater power of compounding with significant impact on
wealth accumulation.
Investment experts always recommend that one must start investing early in life. One of the
main reasons for doing this is the benefit of compounding. It can be explained with the
following example.
Person X Person Y
Amt./Annum 25000 25000
Investment started at the age 35 35
Discounting rate 10% 10%
Corpus at the age of 60 41.12lakh 24.59lakh

There is difference of investment of Rs.1.25 lakh only but the difference in corpus is Rs.16.53
lakh which is because of compounding. The longer the (compounding) period, higher the
returns
Rupee cost averaging: Timing the market consistency is a difficult task. Rupee cost
averaging is anautomatic market timing mechanism that eliminates the need to time one's
investments. Here one need not worry about where share prices or interest are headed as
investment of a regular sum is done at regular intervals; with fewer units being bought in a
declining market and more units in a rising market. Although SIP does not guarantee profit, it
can go a long way in minimizing the effects of investing in volatile markets.

26
This means you are averaging out your cost. If you invest Rs 1000 a month at a price of Rs
20 a unit, you will have bought 50 units (1000/20). But at a price of Rs 10 per unit, you will
have bought 100 units (1000/10). Investing a fixed sum regularly means averaging out the
cost, as you get fewer units when the price goes up and more when the price goes down.
SIP ensures averaging of rupee cost as consistent investment ensures that average cost per
unit fits in the lower range of average market price. An investor can either give postdated
cheques or ECS instruction and the investment will be made regularly in the mutual fund
desired for the required amount. SIP generally starts at minimum amounts of Rs.1000/- per
month and upper limit for using an ECS is Rs.25000/- per instruction. For instance, if one
wishes to invest Rs.1, 00,000/- per month, then they need to do it on four different dates.
Convenience: SIP can be operated by simply providing postdated cheques with the
completed enrolment form or give ECS instructions. The cheques can be banked on the
specified dates and the units credited into the investor's account. The SIP facility is available
in the Principal Income Fund, Monthly Income Plan, Child Benefit Fund, Balanced Fund,
Index Fund, Growth Fund, Equity fund and Tax Savings Fund.

SIP investor

It is easy to become a systematic investor. One needs to plan the saving effectively and set
aside some amount of money every month for investment purposes in a fund that is ideally a
diversified equity fund or balanced fund. Post dated cheques can be given to the fund house.
The investor is at liberty to exit from the scheme depending on the market conditions.

Why is SIP beneficial than Lump-Sum Investment

Because the benefits of regular investments are manifold. Firstly, you stand to gain better
returns through an SIP than if you invest a lump sum of money in one go and stay invested
for the same period of time.
The table below shows you the NAV returns and the SIP returns from six different mutual
funds over a five-year period and since inception. SIPs always score over lump sum
investment in the five-year plus (since inception) period. In the five-year period though, SIP
and lump sum investments seem to be scoring equally.

27
 Name of fund NAV SIP NAV SIP
appreciation appreciation appreciation appreciation
(5 years) (5 years) (Since (Since
inception) inception)
Franklin India 44.18 45.82 15.04 34.3
Opportunities
Fund
Templeton 42.84 40.54 21.43 28.69
India Growth
Fund
HDFC Capital 47.07 46.95 16.14 24.75
Builder Fund
HDFC Tax 53.93 53.13 38.33 43.18
Saver
Birla Sunlife 55 57.01 41 40.49
Equity fund
Birla Sunlife 45.57 46.12 40.64 41.14
Tax Relief 96

Why does SIP give such high returns in the long term?
This is a phenomenon called Rupee Cost Averaging. This is when you invest a sum of money
in regular installments over fixed intervals, rather than as a lump sum at one go. The strange
thing about it is that the regular investor always makes more money even if the starting price,
finishing price and average price are the same. Look at the following table that compares a Rs
100,000 investment over six months. The unit price of the MF is varying through the six
months, but starts and ends the same. But the SIP investor ends with 2036 units paying an
average price of Rs 50, while the Lump sum investor ends up with 2000 units.
SIP
Month Price of units Amount No of units Amount No of units
invested bought invested bought
1 50 100,000 2000 10,000 200
2 47 10,000 213
3 55 10,000 182
4 45 10,000 222
5 52 10,000 192
6 45 10,000 222
7 40 10,000 250
8 68 10,000 147
9 48 10,000 208
10 50 10,000 200
Total units 2000 2036
bought

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While the lump sum investor sees erosion of his capital during the six months as his NAV
drops to Rs 40 at its lowest, the SIP investor does not see his capital go through such dizzying
oscillations as his money is being injected at a much slower rate. In other words, he is
limiting his exposure to the market volatility. Moreover, as the price falls, he acquires more
units, benefiting from it, just as he acquires fewer units when it rises. On the whole, his cost
of acquiring units falls, a smart way to take advantage of the inherent market volatility.
Remember though, that an SIP only reduces your market risk and does not assure profits. So
whether the market is doing well or not, you will always be better off investing in an SIP and
your breakeven for an SIP will always be lower. Reaching this breakeven or crossing it is of
course not guaranteed.

ANALYSIS
Thus it can be summarized from the comparison that:

❖ Lump sum investments do better than SIP investments in any rising market, averaging
does not make sense in that case if one believes that market history will continue to be true in
the future.

❖ If looking for long-term, then it is better to put in the money today as Lump sum
Investments and sit tight, rather than spread it over the period provided one have sufficient
cash balance to invest.

Choosing a Mutual Fund

Once you've identified your reasons for including mutual funds in your portfolio, the next
step is to select the fund or funds that will give you the best performance. Remember,
however, that the mutual funds you pick must fit your overall strategy and make sense with
the rest of your portfolio. First, you should decide what types of funds you want, and then
choose ones in those areas; or if you've already selected (or already own) some good funds,
fill in the gaps. You can use a screen to put together a list of candidates (or skip this if you
already know which ones you're interested in), and then research them by getting the fund's
prospectus. Most of the information below is provided in the first few pages of the fund's
prospectus. You can also find more information from the mutual fund company's website or
from its annual report.
Performance
Investigate performance, both before and after taxes. Look at the fund's historical
performance over a long period of time (3, 5, and 10 years). Why? Because there's a positive
correlation between past and future results (although the correlation is far from exact, as
some funds do very well one year and very poorly the next). It's dangerous to focus only on
recent performance: it could be a fluke, or the manager could be good only in bull markets.

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Keep the following questions in mind when investigating the performance of a particular
mutual fund:

❖ Is the performance consistent?

❖ How is the performance when compared with peers and indices? If you expect that a fund
you're considering won't keep up with the indices, you should just get an index fund instead.

❖ How is the performance after taxes and costs (front and back-end loads and expenses) are
factored in? This is what will end up in your pocket.

❖ Also investigate the mutual fund's investment style. Consider the following:

❖ Growth or Income? Large cap or small? U.S. or international?

❖ Does the fund's investment style match your goals? Has the style been consistent through
time?

❖ What level of risk do they take on? Are you comfortable with this? Does the performance
reflect this level of risk? (if the fund takes above average risk, performance should be above
average)

❖ The strategies that they use: short selling, leverage, derivatives, market timing.

Look beyond the name of the fund to determine the style; names aren't always indicative of
the true style. For example, a fund that started out as a small cap may have ballooned in
assets to the point where it's forced to buy larger cap stocks, but the name of the fund
wouldn't have changed. Specific holdings might give some clues as to investment style. Keep
in mind that mutual funds are only required to divulge their holdings twice a year, and few do
it more frequently, so by the time you find out what they have, their holdings have probably
changed. Also, many funds 'window dress' their portfolios with yesterday's winners to make
the reports look good, so these semi-annual reports aren't a perfect indicator of investment
style.
Manager
This is important because the manager makes most of the buy and sell decisions. If the
manager has been leading the fund for a long time, you can be confident that the fund's
investment style and strategy (discussed above) are the manager's. If not, determine the
manager's style based on previous funds that have been managed by him/her. Take a look at
what the manager says in the annual report and the prospectus. Find out if the manager has
substantial personal assets invested in the fund. If not, find out why.
Fund Family
Different fund families have different policies, areas of expertise, and services. You should
check out several of them to find out their particular policies and services.

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Service
One can get this information directly from the fund. Call them or look in the prospectus.
• Account information and availability
• Newsletters
• Annual reports

❖ Checking accounts

❖ Phone redemption and switching

❖ Phone account info and quotes (24 hrs?)

❖ Web account info and quotes (24 hrs?)

❖ Hours of live representative

❖ Wrap accounts

❖ Margin loans

❖ Other Considerations

❖ Loads and other fees

Minimum investment
Here are a few additional tips to consider when choosing mutual funds for your portfolio:
You don't need to own a lot of different mutual funds. A handful should be enough to achieve
diversification, because each of them in turn invests in dozens of stocks, bonds, etc.
Consider dollar cost averaging, the practice of investing the same amount each month. This is
an easy way to ignore the market fluctuations and focus on the long-term picture
The above advice should get you started on the right path. You will probably discover other
things to consider as you investigate further. To gather more information, check out mutual
fund magazines, talk to others about their strategies, and check out some fund ratings.
Buying and Redeeming Share
Depending on the mutual fund you decide to purchase, you might be able to buy shares
directly from the fund. This would allow you to sidestep any brokerage commissions. For
some mutual funds, however, you may need to go through a broker; check with the fund to
find out which methods they allow. A third alternative is to go through a mutual fund
supermarket where you can easily move your money between funds with a single account. Be
aware that not all mutual funds participate in supermarkets, although hundreds do.

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There will probably also come a time when you want to sell, or redeem, your shares. For
example, if you find that your fund is not meeting your expectations or if your particular set
of investing objectives happens to change, then you might decide to sell shares in one or
more of your mutual funds and look into other funds or other investments entirely. Check out
your fund's prospectus in order to find out the details of their redemption process. Most funds
allow you to redeem by telephone, but some might require that you send in a form.

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 CHAPTER 5
REVIEW OF LITERATURE

Perceptual study of systematic investment plan (SIP) a case study of service class. Author-
Dr. B.S.Hundal (2019), Saurabh Grover, professor department of commerce and business
management GNDU Amritsar. Systematic investment plan is a disciplinedway of investing,
where you make regular investments according to set calender youcreate. Systematic
investing is a time-tested discipline that makes it easy to invest automatically. This paper is
an attempt to study the perception of service class peopletowards systematic investment plan.
Factor analysis and cluster analysis have beenused to study the same and found that service
class have positive attitude towards investment in these plans.

S. Umambheswari, M. Ashok kumar (2013) when one knows the existence of a new thing is
known as awareness. External sources are responsible for creating, modifying and shaping
investment decision of investors. Television, radio, print media, personal consultation for
expert, relatives, friends etc are responsible for decision investment decision.

R. Areepriya, p. Gurusamy (2020) additional income or growth in value can be achieved by

investment. Waiting for rewards is the main characteristic of investment. Investment is
allocation monetary resources to get return over given period. Surplus funds are invested with
different channels by salaried class people. This research analyses the different investment
avenues.

J. Paul Sundar (2021) the study analyses the behavior of an investor. This study bringsout
the relationship between risk of investment and protection of investment. Nearly 59
respondents stick to the protection of investment rather risk for good returns.Respondents
have protecting investment as a main priority.

M. Nandhini, D. Sivasakth (2020) mutual fund is the most likely investment for the
common manas it provides an opportunity to invest in a diversified professionally managed
securities at a relatively low cost. Main objective of investment is wealth accumulation for
investor according to these study. Mutual funds provide moderate rate of returns on
investment with minimum risk.

Ashly lynn joseph, M Prakash (2019) buing of financial product or any valued itemwith
anticipation of positive returns will received in the future is called as investment. Study
analyses the different investment optionssuch as bonds, cash, real estate etc.

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Samreen lodhi (2019) the determines the influence of financial litracy, accounting
information, openness to experience on decision making of investors. Investments are
categorized as risk taker or risk averter. Risk taking preference investment in shares, risk
aversion, information asymmetry and share investment.

Shaarma R. (2018) in his study he discoversthe investment objectives ofselected mutual

fund investors and to identify the types of mutual fund schemes preference by elected mutual
fund investors. The results presented that the main objective behind to invest in mutual fund
is good return, safety and tax benefit. The research also suggested that the growth schemes
and balanced schemes are most preferred in comparison to other schemes. Male and female
respondents do not significantally different across investment experience.

Sharma, S. (2018) have mentioned about the ELSS of mutual fund Equity Linked Savings
Scheme (ELSS) is a type of mutual fund, which invests the corpus in equity and the equity
related products. These schemes offer tax rebates to the investors underspecific provisions of
the Indian Income Tax ELSS is open-ended; hence can be subscribed to and exited from at
any point of time.

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 CHAPTER 6
DATA ANALYSIS & INTERPRETATION

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