Comparative Study of Investment in Equity & Mutual Fund Schemes

COMPARISON OF SELECTED EQUITY CAPITAL AND MUTUAL FUND SCHEMES IN RESPECT THEIR RISK
Table: 4.31 INVESTMENT AVENUES Mutual Fund Equity Capital RISK 12.25 11.64

RISK

12.4 12.2 12 11.8 11.6 11.4 11.2

Mutual Fund 12.25

Equity Capital 11.64

RISK

Fig: 4.8 ANALYSIS: Mutual funds have the risk on an average of 12.25% Equity shares have the risk on an average of 11.64%. INTERPRETATION: Equity capital and Mutual fund schemes are subjected to market risk. Based on the above analysis equity capital have an average risk of 11.64% which is compared to mutual fund ACHARYA INSTITUTE OF MANAGEMENT & SCIENCES, BANGALORE. Page 79

Comparative Study of Investment in Equity & Mutual Fund Schemes risk of 12.25% is lower. Those who would like to take risk can go for mutual fund investments.

COMPARISON OF SELECTED EQUITY CAPITAL AND MUTUAL FUND SCHEMES IN RESPECT THEIR RETURN
Table: 4.32 INVESTMENT AVENUES Mutual Fund Equity Capital

RETURN 1.91 1.85

RETURN

1.92 1.9 1.88 1.86 1.84 1.82

Mutual Fund 1.91

Equity Capital 1.85

RETURN

Fig: 4.9 ANALYSIS: Mutual funds has an average of 1.91% Equity shares has an average of 1.85% INTERPRETATION: Equity capital and Mutual fund schemes are subjected to market risk. Based on the above analysis equity capital have an average return of 1.85% which is compared to mutual ACHARYA INSTITUTE OF MANAGEMENT & SCIENCES, BANGALORE. Page 80

Comparative Study of Investment in Equity & Mutual Fund Schemes fund risk of 1.91% is lower. Those who would like to take risk can go for mutual fund investments for higher returns and those who dont like to take more risk can go for equity capital for minimum return.

FINDINGS AND SUGGESTIONS

Saving money is not enough. Each of us also need to invest ones savings intelligently in order to have enough money available for funding the higher education of ones children, for buying a house, or for ones own golden years. FINDINGS

Investments in both equity capital and mutual fund schemes are subjected to market risk. Now a days investments in equity and mutual fund schemes are increases because of falling interest rates and awareness of equity capital and mutual fund schemes in the minds of investors. ONGC has a highest risk factor of 12.84% and NTPC has a lowest risk factor of 8.81%, where as benchmark risk is 10.88% which shows investing in equity is more risky. TCS has a highest return on a monthly average of 3.58% and NTPC has a lowest return on a monthly average of 0.60%, where as benchmark return is only 1.07% which shows higher the risk higher the return. Sundaram BNP Paribas fund has higher risk factor of 14% with a return of 2.09% where as Birla Sun Life Midcap Fund has higher risk factor of 13.01% with a return of 2.02% per month.

ACHARYA INSTITUTE OF MANAGEMENT & SCIENCES, BANGALORE. Page 81

Comparative Study of Investment in Equity & Mutual Fund Schemes On the basis of above analysis mutual funds have a risk factor on an average 12.25%, and their average returns is 1.91% per month On the basis of above analysis Equity shares have a risk factor on an average 11.64%, and their average return is 1.85% per month

On the basis of above statements it has proved that higher the risk higher the return and lower the risk lower the return. Investment in mutual fund schemes gives diversified portfolio to investors. Standard deviation is one of the best ways for finding risk of scrips mutual fund units.

SUGGESTIONS
Indian capital market is attracting more and more foreign institutional investors (FIIs) because of economic stability and increasing growth rate, it leads to gradual increase in the stock market indices. This is the right time to invest in share and mutual funds because of above reason. Interest rates are falling gradually and equity markets are booming because of this reason investors can move from bank deposits to mutual funds and equities.

Five basic norms of smart investing: Investors must have a portfolio approach to wealth. One must analyze one's risk appetite. ACHARYA INSTITUTE OF MANAGEMENT & SCIENCES, BANGALORE. Page 82

Comparative Study of Investment in Equity & Mutual Fund Schemes One must possess a long-term outlook Never forget to do homework and analysis. It is essential to have control over one's emotions. Investment in both equity capital and mutual fund schemes are subjected to market risk. Following are the recommendations given to investors for investing rationally in equity capital and mutual fund schemes

Aggressive Growth Funds Investors who can assume the risk of potential loss in value of their investment in the hope of achieving substantial and rapid gains they are not suitable for investors who must conserve their principal or who must maximize current income. Growth Funds Although growth funds are more conservative than aggressive growth funds, they are still relatively volatile. They are suitable for growth-oriented investors but not investors who are unable to assume risk or who are dependent on maximizing current income from their investments. Growth and Income Funds Growth and income funds have low to moderate stability of principal and moderate potential for current income and growth. They are suitable for investors who can assume some risk to achieve growth of capital but who also want to maintain a moderate level of current income. Fixed-Income Funds Fixed-income funds are suitable for investors who want to maximize current income and who can assume a degree of capital risk in order to do so. Again, carefully read the prospectus to learn if a fund's investment policy with respect to yield and risk coincides with your own objectives. ACHARYA INSTITUTE OF MANAGEMENT & SCIENCES, BANGALORE. Page 83

Comparative Study of Investment in Equity & Mutual Fund Schemes Balanced/Equity Income funds Balanced and equity income funds are suitable for conservative investors who want high current yield with some growth. Money Market Funds Money market funds are suitable for conservative investors who want high stability of principal and moderate current income with immediate liquidity.

CONCLUSION

The study will guide the new investor who wants to invest in equity and mutual fund schemes by providing knowledge about how to measure the risk and return of particular scrip or mutual fund scheme. The study recommends new investors to go for mutual funds rather than equities, because of high risk and market instability.

Mutual fund play vital role in an economy by mobilizing savings and investing them in the capital market, thus establish a link between savings and capital market. The awareness about mutual fund is being increasing every day and more number of investors is investing in mutual funds in India, today its one of the safest investment in the country. The biggest advantage of mutual fund is attracting the investors in the diversified investment and transparency in the operation of the asset management company.

From the research calculation it is found that the average risk of equities based on sample size is 11.64% & they are earning 1.85% returns per month where as mutual funds average risk based on sample size is 12.25% & they are earning 1.91% per month. So the investors who are ready to take higher risk for getting higher return should go for mutual ACHARYA INSTITUTE OF MANAGEMENT & SCIENCES, BANGALORE. Page 84

Comparative Study of Investment in Equity & Mutual Fund Schemes fund investment and investors who are happy with minimum return with lesser risk should go for equity investment. On the basis of research it has proved that higher the risk higher the return and lower the risk lower the return.

ACHARYA INSTITUTE OF MANAGEMENT & SCIENCES, BANGALORE. Page 85