Professional Documents
Culture Documents
Undertaken at ANAND RATHI SHARES AND STOCK BROKER LTD. PUNE, MAHARASHTRA
ACKNOWLEDGEMENT With regard to my Project with Mutual Fund I would like to thank each and every one who offered help, guideline and support whenever required. First and foremost I would like to express gratitude to Manager Aplit Jaiswal, Pune and other staffs for their support and guidance in the Project work.. I am extremely grateful to my guide, Mangesh sir for their valuable guidance and timely suggestions. I would like to thank all faculty members of Anandrathi shares and stock broker ltd for the valuable guidance& support. I would also like to extend my thanks to my members and friends for their support .And lastly, I would like to express my gratefulness to the parents for seeing me through it all.
PIYUSH CHAUHAN
DECLERATION
I hereby declare that this Project Report entitled THE MUTUAL FUND IS BETTER INVESTMENT PLAN in Anand Rathi Shares and Stock Broker ltd ,Pune submitted in the partial fulfillment of the requirement of Post Graduate Diploma in Management (PGDM) FIN+MKT,is based on primary & secondary data found by me in various departments, books, magazines and websites & Collected by me in under guidance of MANGESH KUKADHAR.
EXECUTIVE SUMMARY
In few years Mutual Fund has emerged as a tool for ensuring ones financial well being. Mutual Funds have not only contributed to the India growth story but have also helped families tap into the success of Indian Industry. As information and awareness is rising more and more people are enjoying the benefits of investing in mutual funds. The main reason the number of retail mutual fund investors remains small is that nine in ten people with incomes in India do not know that mutual funds exist. But once people are aware of mutual fund investment opportunities, the number who decide to invest in mutual funds increases to as many as one in five people. The trick for converting a person with no knowledge of mutual funds to a new Mutual Fund customer is to understand which of the potential investors are more likely to buy mutual funds and to use the right arguments in the sales process that customers will accept as important and relevant to their decision. This Project gave me a great learning experience and at the same time it gave me enough scope to implement my analytical ability. The analysis and advice presented in this Project Report is based on market research on the saving and investment practices of the investors and preferences of the investors for investment in Mutual Funds. This Report will help to know about the investors Preferences in Mutual Fund means Are they prefer any particular Asset Management Company (AMC), Which type of Product they prefer, Which Option (Growth or Dividend) they prefer or Which Investment
MUTUAL FUND IS BETTER INVESTMENT PLAN. The data collected has been well organized and presented. I hope the research findings and conclusion will be of use.
CONTENTS
COMPANY PROFILE INTRODUCTION OBJECTIVES AND SCOPE RESEARCH METHODOLOGY DATA ANALYSIS AND INTERPRETATION CONCLUSIONS SUGGESTIONS & RECOMMENDATIONS BIBLIOGRAPHY
Company Profile
ORGANIZATION HISTORY a. Company Profile
MILESTONES:-
1994: Started activities in consulting and Institutional equity sales with staff of 15 1995:
2003: Wealth Management assets cross Rs1500 crores Retail Branch network exceeds 50 Insurance broking launched Launch of Wealth Management services in Dubai 2004: Retail Branch network expands across 100 locations within India Commodities brokerage and real estate services introduced Wealth Management assets cross Rs3000crores Institutional equities business relaunched and senior research team put in place 2005: Retail Branch network expands across 130 locations within India Real Estate Private Equity Fund Launched 2006: AnandRathi Middle East, WOS acquires membership of Dubai Gold & Commodity Exchange (DGCX) Ranked amongst South Asia's top 5 wealth managers for the ultra-rich by Asia
AR Core Strengths
Breadth of Services In line with its client-centric philosophy, the firm offers to its clients the entire spectrum of financial services ranging from brokerage services in equities and c o mm o d i t i e s , d i s t r i b u t i o n o f mu t u a l f u n d s , I P O s a n d insurance products, reale s t a t e , i n v e s t m e n t b a n k i n g , m e r g e r a n d a c q u i s i t i o n s , c o r p o r a t e f i n a n c e a n d corporate advisory. Clients deal with a relationship manager who leverages and brings together the product specialists from across the firm to create an optimum solution to the client needs.
Management Team The senior Management comprises a diverse talent pool that brings together rich experience from across industry as well as financial services. Mr. Anand Rathi - Group Chairman
Introduction
ASPECTS. Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. This pool of money is invested in accordance with a stated objective. The joint ownership of the fund is thus Mutual, i.e. the fund belongs to all investors. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fund is an investment tool that allows small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The funds Net Asset value (NAV) is determined each day. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces
Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk-return matrix. 2. Debt funds: The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are further classified as:
Gilt Funds: Invest their corpus in securities issued by Government, popularly known as Government of India debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government.
Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities.
MIPs: Invests 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.
Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of
Liquid Funds: Also known as Money Market Schemes, These funds provides 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.
3. 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 predefined investment objective of the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part provide growth and the debt part provides stability in returns.
Further the mutual funds can be broadly classified on the basis of investment parameter viz, Each category of funds is backed by an investment philosophy, which is pre-defined in the objectives of the fund. The investor can align his own investment needs with the funds objective and invest accordingly.
BY INVESTMENT OBJECTIVE
Growth Schemes: 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.
Income Schemes: 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 Schemes: Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50).
Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money.
OTHER SCHEMES
Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.
Index Schemes: Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each stock to the total holding will be identical to the stocks index weightage. And hence, the returns from such schemes would be more or less equivalent to those of the Index. Sector Specific Schemes: These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time.
Types of returns There are three ways, where the total returns provided by mutual funds can be enjoyed by investors: Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all income it receives over the year to fund owners in the form of a distribution.
If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution. If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit.
Documents required (PAN mandatory): Proof of identity : 1. Photo PAN card 2. In case of non-photo PAN card in addition to copy of PAN card any one of the following: driving license/passport copy/ voter id/ bank photo pass book.
Offer document: An offer document is issued when the AMCs make New Fund Offer(NFO). Its advisable to every investor to ask for the offer document and read it before investing. An offer document consists of the following: Standard Offer Document for Mutual Funds (SEBI Format) Summary Information Glossary of Defined Terms Risk Disclosures Legal and Regulatory Compliance Expenses Condensed Financial Information of Schemes Constitution of the Mutual Fund Investment Objectives and Policies Management of the Fund Offer Related Information. Key Information Memorandum: a key information memorandum, popularly known as KIM, is attached along with the mutual fund form. And thus every investor get to read it. Its contents are: 1 Name of the fund. 2. Investment objective 3. Asset allocation pattern of the scheme. 4. Risk profile of the scheme 5. Plans & options 6. Minimum application amount/ no. of units
Costs associated:
Expenses: AMCs charge an annual fee, or expense ratio that covers administrative expenses, salaries, advertising expenses, brokerage fee, etc. A 1.5% expense ratio means the AMC charges Rs1.50 for every Rs100 in assets under management. A fund's expense ratio is typically to the size of the funds under management and not to the returns earned. Normally, the costs of running a fund grow slower than the growth in the fund size - so, the more assets in the fund, the lower should be its expense ratio Loads: Entry Load/Front-End Load (0-2.25%)- its the commission charged at the time of buying the fund to cover the cost of selling, processing etc. Exit Load/Back- End Load (0.25-2.25%)- it is the commission or charged paid when an investor exits from a mutual fund, it is imposed to discourage withdrawals. It may reduce to zero with increase in holding period.
Return Equity Bonds Co. Debentures Co. FDs Bank Deposits PPF Life Insurance Gold Real Estate Mutual Funds High Moderate Moderate Moderate Low Moderate Low Moderate High High
Safety Low High Moderate Low High High High High Moderate High
Volatility High Moderate Moderate Low Low Low Low Moderate High Moderate
Liquidity High Moderate Low Low High Moderate Low Moderate Low High
Convenienc e Moderate High Low Moderate High High Moderate Gold Low High
We can very well see that mutual funds outperform every other investment option. On three parameters it scores high whereas its moderate at one. comparing it with the other options, we find that equities gives us high returns with high liquidity but its volatility too is high with low
II)dispense the shortcomings of the other options: every other investment option has more or les some shortcomings. Such as if some are good at return then they are not safe, if some are safe then either they have low liquidity or low safety or both.likewise, there exists no single option which can fit to the need of everybody. But mutual funds have definitely sorted out this problem. Now everybody can choose their fund according to their investment objectives.
III) Returns get adjusted for the market movements: as the mutual funds are managed by experts so they are ready to switch to the profitable option along with the market movement. Suppose they predict that market is going to fall then they can sell some of their shares and
IV) Flexibility of invested amount: Other then the above mentioned reasons, there exists one more reason which has established mutual funds as one of the largest financial intermediary and that is the flexibility that mutual funds offer regarding the investment amount. One can start investing in mutual funds with amount as low as Rs. 500 through SIPs and even Rs. 100 in some cases.
Company.
2. To know the Preferences for the portfolios.
3. To know why one has invested or not invested in SBI Mutual fund
4. To find out the most preferred channel.
Research Methodology
Objective of research;
The main objective of this project is concerned with getting the opinion of people regarding mutual funds and what they feel about availing the services of financial advisors. I have tried to explore the general opinion about mutual funds. It also covers why/ why not investors are availing the services of financial advisors. Scope of the study: The research was carried on in the Pune Region of India. I have visited people randomly nearby my locality, different shopping malls, small retailers etc.
Data sources: Research is totally based on primary data. Secondary data can be used only for the reference. Research has been done by primary data collection, and primary data has been collected by interacting with various people. The secondary data has been collected through various journals and websites and some special publications of Anandrathi. Sampling: Sampling procedure:
The sample is selected in a random way, irrespective of them being investor or not or availing the services or not. It was collected through mails and personal visits to the known persons, by formal and informal talks and through filling up the questionnaire prepared. The data has been analyzed by using the measures of central tendencies like mean, median, mode. The group has been selected and the analysis has been done on the basis statistical tools available. Sample size:
Data has been presented with the help of bar graph, pie charts, line graphs etc. Limitation: Time limitation. Research has been done only at Pune. Some of the persons were not so responsive.
QUESTIONNAIRE
1. Personal Details: (a). Name:(b). Add: (c). Age:(d). Qualification:Graduation/PG (e). Occupation. Pl tick () Govt. Ser Pvt. Ser Business Agriculture Others Under Graduate Others Phone:-
(g). What is your monthly family income approximately? Pl tick (). Up to Rs.10,000 Rs. 10,001 to 15000 Rs. 15,001 to 20,000 Rs. 20,001 to 30,000 Rs. 30,001 and above
2. What kind of investments you have made so far? Pl tick (). All applicable. a. Saving account e. Post Office-NSC, etc b. Fixed deposits f. Shares/Debentures c. Insurance g. Gold/ Silver d. Mutual Fund h. Real Estate
3. While investing your money, which factor will you prefer? . (a) Liquidity (b) Low Risk (c) High Return
(d) Trust
4. Are you aware about Mutual Funds and their operations? Pl tick ().
Yes
No
6. Have you ever invested in Mutual Fund? Pl tick (). 7. If not invested in Mutual Fund then why? (a) Not aware of MF (b) Higher risk (c) Not any specific reason
8. If yes, in which Mutual Fund you have invested? Pl. tick (). All applicable. a. SBIMF b. UTI c. HDFC d. Reliance e. Kotak f. Other. Specify
9. If invested in SBIMF, you do so because (Pl. tick (), all applicable). a. SBIMF is associated with State Bank of India. b. They have a record of giving good returns year after year. c. Agent Advice
10. If NOT invested in SBIMF, you do so because (Pl. tick () all applicable). a. You are not aware of SBIMF. b. SBIMF gives less return compared to the others. c. Agent Advice 11. When you plan to invest your money in asset management co. which AMC will you prefer? Assets Management Co. a. SBIMF b. UTI c. Reliance d. HDFC e. Kotak f. ICICI
12. Which Channel will you prefer while investing in Mutual Fund?
13. When you invest in Mutual Funds which mode of investment will you prefer? Pl. tick (). a. One Time Investment b. Systematic Investment Plan (SIP)
14. When you want to invest which type of funds would you choose? a. Having only debt portfolio b. Having debt & equity portfolio. c. Only equity portfolio.
15. How would you like to receive the returns every year? Pl. tick (). a. Dividend payout b. Dividend re-investment c. Growth in NAV
16. Instead of general Mutual Funds, would you like to invest in sectorial funds? Please tick (). Yes No
Data analysis:
.what is the most important reason for not investing in mutual funds? (only for above 65
participants)
Lack of knowledge about mutual funds 25 Enjoys investing in other options 10 Its benefits are not enough to drive you 18 for investment No trust over the fund managers 12
Totally ignorant Partial knowledge of MFs Aware of only scheme in which invested Good knowledge of MFs
28 37 46 24
6% 23%
71%
Graduate/Post Graduate
Under Graduate
Others
Interpretation:
Occupation
Govt. Service Pvt. Service Business Agriculture Others .
No. of Investors
20 65 35 4 11
Interpretation:
In Occupation group out of 120 investors, 38% are Pvt. Employees, 25% are Businessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are in others.
18%
20%
32%
30%
Liquidity
Low R k is
H hR ig eturn
Trus t
Interpretation:
Out of 135 People, 32% People prefer to invest where there is High Return, 30% prefer to invest where there is Low Risk, 20% prefer easy Liquidity and 18% prefer Trust
Interpretation:
25%
15%
F ncia Advisor ina l B nk a AMC
60%
Interpretation:
Out of 135 Investors 60% preferred to invest through Financial Advisors, 25% through AMC and 15% through Bank.
35%
65%
S IP
Interpretation:
Out of 135 Investors 65% preferred One time Investment and 35 % Preferred through Systematic Investment Plan.
In Pune most of the Investors were Graduate or Post Graduate and below
In Occupation group most of the Investors were pvt. employees, the second
most Investors were govt. employees and the least were associated with Agriculture.
numbers, the second most were in the Income group of more than Rs.30,000 and the least were in the group of below Rs. 10,000..
most preferred Low Risk then liquidity and the least preferred Trust.
Only 67% Respondents were aware about Mutual fund and its operations
Most of the Investors had invested in Reliance or UTI Mutual Fund, ICICI
Prudential has also good Brand Position among investors, SBIMF places after ICICI Prudential according to the Respondents.
Mutual Fund, the second most preferred ICICI Prudential, SBIMF has been preferred after them. 60% Investors preferred to Invest through Financial Advisors, 25% through
65% preferred One Time Investment and 35% preferred SIP out of both
type of Mode of Investment The most preferred Portfolio was Equity, the second most was Balance
(mixture of both equity and debt), and the least preferred Portfolio was Debt portfolio. Maximum Number of Investors Preferred Growth Option for returns, the
Most of the Investors did not want to invest in Sectoral Fund, only 21%
Conclusion
Running a successful Mutual Fund requires complete understanding of the peculiarities of the Indian Stock Market and also the psyche of the small investors. This study has made an attempt to understand the financial behavior of Mutual Fund investors in connection with the preferences of Brand (AMC), Products, Channels etc. I observed that many of people have fear of Mutual Fund. They think their money will not be secure in Mutual Fund. They need the knowledge of Mutual Fund and its related terms. Many of people do not have invested in mutual fund due to lack of awareness although they have money to invest. As the awareness and income is growing the number of mutual fund investors are also growing. Brand plays important role for the investment. People invest in those Companies where they have faith or they are well known with them. There are many AMCs in Pune but only some are performing well due to Brand awareness. Some AMCs are not performing well although some of the schemes of them are giving good return because of not awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc. they are well known
aware of the benefits. Nobody will invest until and unless he is fully convinced. Investors should be made to realize that ignorance is no longer bliss and what they are losing by not investing. Mutual funds offer a lot of benefit which no other single option could offer.
But most of the people are not even aware of what actually a mutual fund is? They only see it as just another investment option. So the advisors should try to change their mindsets. The advisors should target for more and more young investors. Young investors as well as persons at the height of their career would like to go for advisors due to lack of expertise and time. Mutual Fund Company needs to give the training of the Individual
Financial Advisors about the Fund/Scheme and its objective, because they are the main source to influence the investors.
enquire about the risk tolerance of the investors/customers, their need and time (how long they want to invest). By considering these three things they can take the customers into consideration.
Younger people aged under 30 will be a key new customer group into the
future, so making greater efforts with younger customers who show some interest in investing should pay off. Customers with graduate level education are easier to sell to and there is a
large untapped market there. To succeed however, advisors must provide sound advice and high quality.
by Assets Management companies very recently in the industry. SIP is easy for monthly salaried person as it provides the facility of do the investment in EMI. Though most of the prospects and potential investors are not aware about the SIP. There is a large scope for the companies to tap the salaried persons.
BIBLIOGRAPHY