ACCOMPLISHED UNDER

THE
GUIDANCE OF
MR. PAWAN KUMAR
(ASSISTANT MANAGER, PRUDENT CAS LTD., CHANDIGARH)

MR. JIGNESH BHUVA

DIPANVITA YADAV

NORTH SALES HEAD

ROLLNO. - 18

PRUDENT CAS LTD.

MFM- 2 nd SEMESTER

NEW DELHI

FACULTY OF COMMERCE
(BANARAS HINDU UNIVERSITY)

ACKNOWLEDGEMENT

Firstly, I would like to thank my Faculty of Commerce (Banaras Hindu

University), where Ive got the platform of summer training so that I can
use my theoretical knowledge in practical world.
Secondly, I would like to provide my gratitude towards my Dean
Dr. A.K.Tripathi and Prof. Dr. O.P.Rai who took their initiative for the
development of the students of Faculty of Commerce, BHU and as a result
of that they have provided the summer training as one of the part of our
course i.e. Master of Financial Management.
Thirdly, I would like to thank Mr. Pawan Kumar (Assistant
Manager, Prudent CAS Ltd., Chandigarh) who has guided me to
understand the working of his company and helped me in the
accomplishment of my project report.
Fourthly, I would like to thank Miss Neha Jasrotia(Customer
Relationship Manager, Prudent CAS Ltd., Chandigarh) and Mr.Vikas
O. Rawat (Relationship Manager, Prudent CAS Ltd., Chandigarh) who
have also helped me in understanding the working of their company and for
providing their support and make me feel like the part of their company and
their life. Ive enjoyed their company.
Fifthly, I would like to thanks all the advisors of Prudent CAS
Ltd.,Chandigarh.
Lastly, I would like to provide my gratitude towards Mr.Jignesh
Bhuva (North Sales Head, Prudent CAS Ltd, New Delhi) who has given
me the opportunity as a trainee in his esteemed company. Without his
support Ill never able to be the part of Prudent Cas Ltd.
I am greatful, the most, towards my parents and my god,
without the support of whom I would never able to have this opportunity.
Thanks to all to be with me.

CONTENTS

1. EXECUTIVE SUMMARY.4
2. INTRODUCTION TO THE PROJECT...................8
3. ABOUT PRUDENT CAS LTD...12
4. WHAT IS FINANCIAL PLANNING?................................................................17

5. INTRODUCTION OF MUTUAL FUNDS..36

6. CARRER OPPORTUNITIES IN THE FIELD OF FINANCIAL
PLANNING62
7. LIFE INSURANCE AGENT VS. MUTUAL FUND AGENT...74

8. CONCLUSION..................77

EXECUTIVE SUMMARY

The topic of this project report is Career Opportunities in the Field of Financial Planning.
What opportunities are available for a person in the field of mutual funds and how he/she can be
a good financial planner? The project report is totally based of these two questions.
The period after economic reforms has witnessed an increasing contribution of service sector in
GDP which has reached to more than 60% with an annualized growth rate of more than 10%.
One of the necessary ingredients of inclusive growth is the demographic dividend (i.e. the
employability to the young working population between age group of 15-59 years). With these
strengths, the service sector is estimated to have the potential for creating 40 million jobs and
generating additional $ 200 billion annual income by 2020. Among services, BFSI i.e. banking,
financial services and insurance are more crucial because these are the sectors which are directly
or indirectly related to the growth of other sectors. Planning the funds so generated requires
skilled people in order to advise on more investible avenues and also the appreciation of the
same. The importance of financial planning in this context becomes more relevant and hence the
profession which in other way is a consultancy or advisory service in itself.
Financial Planning is one of the fastest-growing professions across the world and with a huge
demand-supply gap in India as the youngsters planning a career in Financial Planning have a
bright future and can take advantage of many opportunities coming across in the financial
services sector as discussed above.

Financial Planners and their Role

As clear from the name, financial planners are the professionals who plan the funds or money of
their clients which is not only a tricky business but also challenging and difficult task. Every
individual wants to save and invest the funds for future to fulfill the liabilities and other social
commitments be it higher education to children, marriage of children, retirement, house
construction, medical and health purpose or any other. Financial planners offer their advice to the
persons on their investment and saving options to achieve their social, personal, professional
goals and commitments arising in future. Most people need guidance on where to invest, how to
save taxes, the best insurance scheme (life as well as medical), which avenue to invest in, which
stock to hold and which to sell, how to plan future career of their college going children and their
own retirement. For all such services; planners come into picture for rendering expert advice and
consultancy to their clients on utilizing the hard earned money and its better use for achieving
financial goals. The services provided by financial planners are not restricted to individuals but
also the corporate and institutional clients such as mutual funds, merchant banks, retirement
funds, insurance companies, portfolio management firms, stock investment companies, banks,
financial institutions, tax consultancy and pension managers also require their services. Thus, the
financial professionals working as financial planners can be categorized as individual and
institutional. The following role and functions are performed by the financial planners:
They identify the financial and personal goals of their clients and the time period of
investments or savings for planning the funds.
Financial planners assess and evaluate the capacity and financial strength of their clients for
better utilization of funds with them.
They study the market potential, investment avenues, instruments of investment, financial
products available and educate, suggest and advice to the clients.
They assess the risk-return of the investment options with the help of analytical techniques and
in consonance with the risk bearing and risk taking capacity of their clients.
Tax consultancy is an area where financial planners are useful because they are in touch with
the latest taxation structure by the government and thus they suggest their clients to invest the
amount of money in tax-saving instruments for better return and assured appreciation.
They are also responsible for guiding and suggesting their clients about the comparative returnrisk profile of the invested funds in different instruments.

 They keep their clients abreast with the updates on financial products having different
characteristics to suit their individual requirements.
Financial planners also help their clients by advising them about the right time to invest and
proper timing to divest or divert their money from one option to the other and for what time
period to remain invested in a particular instrument.
They help the clients by providing quick and immediate service according to their needs and
also process the documents and accomplish paper work formalities required thereby saving their
time.
Managing the wealth of their client HNIs (High Net worth Individuals) or corporate isone of
the functions performed by the financial planners.
Financial planners do financial analysis, business analysis, research related to financial and
expense performance, rate of return, depreciation, working capital and are also involved in
preparation of financial forecasts, budgets and analyze trends in revenue, expense, capital
expenditures and other related areas.
Retirement and insurance planning is also an area where financial planners have a role to play.
They advise their client on various pension schemes and insurance products with risk-return
profiling.
In addition to the above duties the financial planners frequently make their clients aware about
the recent policy changes and economic environment which may affect the investment made by
them and accordingly advise, revise or modify their investment strategies.
Employment Avenues in Financial Planning
In view of the duties and responsibilities of financial planners there lies vast scope of
employment in the following fields:
Initially a financial planner can start his career with a wealth management firms, HNI, tax
consultancy, insurance product distributors, pension funds, financial services firm, banks and
financial institutions offering financial products at an entry level position i.e. trainee or
executive. Later on with the experience he can be absorbed in middle level management on
position of sales manager, wealth manager, relationship manager etc. On gaining more expertise
and experience in this filed he/she can rise to the position of functional head of the department
with increased responsibilities such as regional or area heads of his employer. If you have got the

specialization in anyone of the areas of financial investment then salary is no limit. Retirement
funds, HNIs and insurance require professionals with specialised experience of these products.
New opportunities lie in the field of financial planning of real estate and trusts which is still
untapped with lot of potential. In private companies there is always a huge demand for financial
planners. Experienced Financial Planners can find satisfying careers in investment banking,
financial consulting, and financial analysis and insurance companies.
Knowledge Process Outsourcing (KPO) firms provide employment to financial planners as Data
Analyst, Market Researcher, Client Development Analyst, Derivatives Analyst, Equity Analyst,
Research Associate etc. Similarly financial planners are much sought after in the brokerage
houses for positions such as research analysts, business analysts, research associates and
technical analysts etc.
Banks require qualified and experienced financial planners for managing their investment
advisory wing, managers for financial institutional investments and Investment Relationship
Manager for their portfolio and merchant banking divisions. For the trade finance divisions
relationship managers are required by banks. For retail division and mutual funds wings, the
professionals in financial planning are appointed by banks in various capacities. NBFCs (NonBanking Finance Companies), AMCs (Asset Management Companies) and financial planning
companies also recruit financial planning professionals at various positions.
Self-employment is also the option for those professionals who want to tap the existing potential
in their home towns or cities. A desired qualification with a set of skills is necessary conditions
for becoming a successful financial planner. The only thing required is interpersonal relations
and skills with fundamental knowledge of investment and financial planning. Financial planning
is a fee based service and the fees may be in form of commission from the client or fixed
depending upon the nature and type of advice and return on investment.
Journalism is an area where financial planners can capitalize their expertise provided they
possess writing, analytical and presentation skills with a passion for imparting financial
knowledge to the public with convincing ability analytical authenticity. In print media they can
be regular columnists on various specialized products or they can act as panel experts on
electronic media covering investment and business news.
Increasing financial literacy is gaining importance nowadays and laymen who are interested in
spreading basic knowledge of financial planning, retirement, wealth creation, asset management
and investment can be associated with the authoring of literature and books on the subject.

Financial Planners are supposed to possess interpersonal skills can deliver lectures, impart
education, organize seminars to literate and convince the people of various social and economic
backgrounds. Also there is enough potential in teaching, training and research in the area of
Financial Planning. Even financial planning and consultancy can be done on internet using
networking sites following professional and ethical code of conduct.
Skill Set Required for Financial Planning
Aside from a possessing professional qualification and desired
certificate/degree/diploma, the various skills and proficiency required to be a
financial planner include; interpersonal skills, convincing personality,
patience, strong Commitment to client, effective communication, positive
attitude, strong analytical ability, problem solving skills, latest information
about environment and legislations related to tax, business or profession,
initiative, creativity, relationship management, soft skills on computers,
logical mindset, presentation and knowledge of local dialect for establishing
better connectivity with the clients and time management skills.

INTRODUCTION TO THE PROJECT

The report is totally based on the career of financial planners and their future as a financial
planner.
A job in financial services is not only dynamic and challenging; it also puts you at the very heart
of money management. The financial services sector is home to over half a million jobs and
represents over five percent of the countrys GDP.
With hundreds of possible career choices within the realms of banking, insurance and
investment, financial services offers you the opportunity to create innovative wealth management
solutions while helping your organization reach its corporate goals.

FINANCIAL PLANNER:
Same job, different title: Financial advisor (with certification), financial analyst, financial
consultant, financial manager
Financial planners are financial architects. Their goal is to strengthen a clients fiscal foundation
by looking at the big picture: evaluating key financial data, finding weaknesses in the structure,
and recommending appropriate solutions depending on the specific circumstances of the
individual or organization theyre working with.
Planners are highly valued for their aptitude in research and critical thinking, and their excellent
communication skills come in handy when preparing assessment reports or explaining complex
financial ideas to clients.
Financial planners are often employed by banks, mutual and pension management companies,
insurance companies, and securities firms, and many work independently as well. A background
in business, accounting, finance, or statistics is ideal for an aspiring financial planner, and those
working in the highest corporate levels often obtain MBAs. Additionally, earning a designation,
such as Certified Financial Planner (CFP), will allow you to gain credibility and support your
knowledge and work experience in the role.
The Agent:
RELATIONSHIP MANAGER or AGENT/BROKER
Same job, different title: Financial advisor (no certification), accounts representative
If you love meeting people and nurturing strong working relationships, client-facing positions
like these are often a good fit. Agents, brokers and relationship managers are the lifeblood of the
financial services industry, and their work often determines the longevity and success of the
organization they work for.
The main goal of financial product agents is to attract new prospects to the company, nurture the
interactions it keeps with its current customers and persuade former clients to return. They are
instrumental in maintaining a companys good relations and keeping the customers trust in their
product or service, which is achieved mainly through sales activities and business processes such
as marketing, customer service and technical support. Agents also regularly conduct trend
analysis and submit service level reports to gauge their companys performance against industry
standards.

Keys to succeed in these roles are strong interpersonal skills and an ability to communicate
complex financial ideas or products in clear and simple terms. The capacity to work in both
leadership and team positions is equally valued, and an engaging personality is an asset to any
job that requires face-to-face interaction.
The Proofreaders:
CLAIMS ADJUSTER
Same job, different title: Claims analyst
While sales agents are tasked with finding and closing the deals, claims adjusters fulfil the
equally important role of ensuring that the clients claims match the companys eligibility
standards. This involves evaluating submitted claims for accuracy, collecting any additional
relevant material and even personally inspecting the evidence related to the claim. Preparing
documentation for denial or approval is also part of the job, as is working with data analyst
software to track industry trends.
While they are often associated with insurance companies, banks and large retail firms also hire
claims analysts to handle their customer complaint and fraud departments. Training usually
involves acquiring a certificate or degree in the field they intend to work in, which is supported
by credentials in specific office procedures as well as billing and claims processing.
An eye for detail, good communication and negotiation skills, multitasking abilities, and an
extensive knowledge of the field are assets to this role. Though a degree in business, accounting,
math, or statistics may ease transition into the industry, graduates from different academic
backgrounds possessing the necessary skills and traits have also experienced success as claims
adjusters.
The Informant:
INVESTMENT BANKING ANALYST
Though investment banking is notorious for being one of the most difficult industries to break
into, it is also one of the most challenging and rewarding jobs a business student could hope to
obtain.
Investment banking analysts are tasked with producing the information companies need to make
investment decisions. This involves many different business functions, chief of which are

10

analyzing financial statements, constructing financial models, preparing reports on prospective

investment sectors, researching market trends, managing trades, and assembling presentations or
internal meetings for management. Those working in large firms usually specialize in a specific
sector, product type or geographic region.
Analysts work closely with superiors to support the investment banking team, which is why
diligent and self-motivated team players are highly valued in this field. A bachelors degree in
finance, accounting, business, or economics is a must, and candidates are expected to possess
excellent problem-solving, quantitative and analytical skills, a strong work ethic and the ability
to work accurately under pressure.
Proficiency in handling spreadsheets is extremely important to an aspiring analyst, as is
extensive knowledge about industry news and goings-on. Investment banking analysts are
usually encouraged or required to obtain certification as Chartered Financial Analyst (CFA),
which is a globally-recognized designation.
The Team Player:
FINANCIAL PROJECT SPECIALIST
Ever wondered how large institutions manage to juggle all the projects they have going on at the
same time? Simple: work in teams.
The key members of these project teams are called project specialists, and their main goal is to
provide support to management by delivering initiatives within the established budget and time
line. Their work spans several business processes: program and project development,
dissemination of relevant information, and participation in work groups and committees, as well
as implementation and monitoring of the projects results. This includes budget allocation,
facilitating meetings with project members and delivering regular presentations or status reports
to superiors.
Project specialists need to be computer proficient and excellent oral and written communicators,
and they must be able to thrive under challenging conditions. Multitasking is a common
component of the job, and working knowledge of basic revenue models, profit and loss and costto-completion projections will be valuable in managing budgets.
A background in finance, accounting, business or economics is expected, and companies value
candidates who have specialized or meaningful work experience in information technology

11

management, systems administration, financial management, project management, and business

research.

ABOUT

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Prudence: The exercise of good judgment, common sense, and caution, especially in the
conduct of practical matters
Incorporated in year 2000 with a clear vision of providing financial services to individuals and
corporate to help them to achieve their financial goals. It has created a niche segment over a
period to time with an excellent quality client base. Over the past few years Prudent Corporate
Advisory Services has created in-house capabilities of analyzing funds on various parameters
before suggesting them to clients.
The team approach worked wonders and in the short-span of just one decade, the Prudent Group
has emerged as a well diversified financial services firm offering a wide range of financial
products and services such as Mutual Funds, Equities, Commodity & Derivatives, Fixed Income
Products, Life/General Insurance and Real Estate through various companies listed below.
Prudent Corporate Advisory Services Ltd.
As the flagship company, Prudent Corporate Advisory Services remains the primary arm of the
Prudent Group. It offers financial services to individuals and corporate to help them achieve their
financial goals through Mutual Funds, Debt and Third party products.
Besides having a large pool of their own clients, the company also manages its geographicallyspread business operations through a unique platform for Channel Partners/Business Associates
which helps them to grow and expand their services & support through sales and marketing,
technology, operations, back- office support, training & consultation.
The journey of Prudent CAS started from Ahmadabad and in a span of 13 years we are present
in 37 cities in 10 states with 47 branches.
Prudent Broking Services Pvt. Ltd.

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Incorporated in 2004, Prudent Broking Services Pvt. Ltd is a Stock Broking and Depository
Participant service provider. Company is a member with Bombay Stock Exchange (BSE) &
National Stock exchange (NSE) & Central Depository Services (India) Limited (CDSL).
Company is in the process of creating its national presence by opening offices in various parts of
the country.
Prudent Properties.
The Property sector is an important part of the asset class, but the effort and paperwork involved
in purchasing the same can be intimidating. Prudent Property provides real estate solutions not
only in creating an asset class but is also helping the customers in buying their dream realty,
whether it is homes or offices.

PRUDENT CAS LTD:-AN OVERVIEW

Prudent CAS (Corporate Advisory Services) Ltd, known as Prudent Fund Manager established in
2000 is a registered investment company offering fee-based money management, financial
planning, and investment advisory services. It focus on each client, build investment strategies
tailored to specific client needs, and regularly review those strategies to increase the likelihood
of success. It would like to know the clients goals and aspirations. So that it can determine an
investing strategy that helps you achieve your full potential.
Prudent believes in understanding the customer needs and offering the product that can match his
requirement (marketing) as against just selling what product is already available. Owing to the
inherent professional expertise we first study and understand the investment requirements and
circumstances. Th experts assess the investors' need and their risk profile. Once the entire
comparative analysis is done then the best possible option is advised to the investors. The best
possible option provides the proper asset allocation to various asset classes and also the
estimated risk involved.
This helps us to provide our clients an optional basket of funds rather than selling the typical
available funds. This approach lets us set our focus on the quality work rather than the just the
quantity.

14

PRUDENT INFRASTRUCTURE AND CLIENTS:Presently, Prudent operate from four key and 21 other locations of Gujarat.
Each of our branches is fully furnished with an excellent infrastructure and latest systems to
service the clients independently. We have been successful in making a remarkable presence in
all these locations. Team Prudent consists of more than 80 professionals having expertise in the
fields like clients servicing, research, sales, technology etc.
PRUDENT LAURELS:Prudent have been accredited many times by various Assets management company (AMCs) for
outstanding performance in fund mobilization. Some of the prestigious awards we won are:
Won consequently for four years in a row the most prestigious Prudential ICICI Chairman Gold
Award in FY 2002, 2003, 2004 and 2005
Rated 9th best independent Financial Advisor in all India by Franklin Templeton for the year
2002.
SBI Mutual Fund in FY 2002 selected us as a chairman club member.
Selected consequently for 2 years in a row by Standard Chartered AMC for their Hall of Fame in
FY 2002 and 2003.
Consecutive 5 times winner of CNBC Best Financial Advisor Award2008-09, 2009-10, 2010-11,
2011-2012,2013-2014

HEAD OFFICE:701, SEARS TOWER, GULABI TEKARA, OFF. C.G ROAD

AHAMEDABAD- 380006
TELEFAX: +91-79-26464627. 26402436
EMAIL: info@prudentcorporate.com

15

Website: www.prudentcorporate.com
www.prudentchannel.com

It caters the market through Direct & Indirect channel. We were recruited at indirect channel
headed by Mr. Jignesh Bhuva.
Address:-SCO -215-216-217, cabin-307
3rd floor, sector-34/A,
Chandigarh-160022, Punjab.
Contact No: - 0172-4015998
Prudent CAS Ltd. is the National distributors and deals in the various Company like Reliance
Asset Management Company, ICICI Prudential Asset Management Company, Kotak
Life Insurance, Religare Mutual Fund etc.
GEOGRAPHICAL AREAS OF OPERATION OF THE COMPANY:
Prudent, presently, have over 30 offices in 6 states (Gujarat, Rajasthan, Delhi, Maharashtra,
Haryana, Madhya Pradesh) with over Rs 2000 crores plus of asset.

NATURE OF THE ORGANIZATION:Prudent is a service based distribution company which is in the business of distribution of and
marketing research of financial products like (mutual funds, insurance). It mainly operates in
functional areas of finance, marketing & sales for financial products.

COMPANYS VISION & MISSION:Vision: - Providing Professional services in area of Personal and Corporate Investment.

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Mission: - To help Investor in their Wealth Creation.

PRODUCT RANGE OF THE COMPANY:
Prudent CAS Ltd plans the financial needs in customised way. It analyses market trend and
investment buckets in turn to have maximum returns. Prudent CAS Ltd serves with array of
financial planning.
Spectrum of Products in which Prudent has an expertise:

Mutual Funds.
Investment Consultancy.
Equity and Derivatives broking.
RBI Relief funds and Infrastructure Bonds.
Life Insurance.
Gold selling

SIZE (IN TERMS OF MANPOWER & TURNOVER) OF ORGANIZATION:

Prudent, presently has manpower of 400 employees.

It has a sales turnover of Rs 600-700 crore out of which profit turnover is around 50
crore.

MARKET SHARE AND POSITION OF THE COMPANY IN THE INDUSTRY:

S The
S total market shares of industry are 5 Lac Crore and the prudent is capturing 3 Thousand
Crore. It captures 60% of the market.
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ORGANIZATION STRUCTURE OF THE COMPANY:
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What is Financial Planning?

Financial planning is the process of developing a personal roadmap for your financial well being.
The inputs to the financial planning process are:

your finances, i.e., your income, assets, and liabilities,

your goals, i.e., your current and future financial needs and
Your appetite for risk.

The output of the financial planning process is a personal financial plan that tells you how to use
your money to achieve your goals, keeping in mind inflation, real returns, and taxes. In short,
financial planning is the process of systematically planning your finances towards achieving your
short-term and long-term life goals. Most of the people nurture dreams of owning a bigger house
or car, exploring the world, giving their children the best possible education, a blissful
retirement, etc. Basically, these dreams are life goals. Consider this example: Mr and Mrs
Khanna, 35 and 32 respectively, have a three year old son. Both work in private sector
companies. Mr Khanna plans to retire when hes 50. From their current one bedroom rented
suburban Mumbai apartment, the Khannas hope to move to their own two bedroom apartment
costing around Rs 25 lakh within the next five years. They own a small car, for which they have
availed of a loan. Mr. Khanna reckons that he will need Rs 15 lakh for his sons higher education
15 years later. He also wants to build a corpus of Rs 75 lakh for his retirement. While
distinguishing short term goals from long term goals, you must keep in mind that, as a general
rule, any life goal that needs to be met within five years can be considered as short term. Beyond
that, any other goal can be classified as long term. By this classification, the Khannas goals can

18

be classified as follows:
Using a similar yardstick, you may classify your own life goals. Each of them needs financing.
How you plan your finances, to have the right amount at your disposal at the right time, is what
financial planning is about.
Importance of financial planning: Can you manage without financial planning? Many people
do, but they may findoften when its too latethat they dont have the means to achieve their
life goals. For example, people today realize the importance of living life to the fullest.
Consequently, many opt for early retirement from full time jobs, as compared to a few decades
ago, when most people worked until the maximum retirement age of 58-60 years. The average
person can, today, expect to live a healthy life well into his or her seventies or eighties, which
means that retirement life is almost as long as working life. Financially, it implies that savings
(after taking into account inflation) should be enough, not just to maintain the same lifestyle for
almost 25-30 years, with no new income, but also to take care of medical expenses, which are
usually high the older a person gets. Planning for all this is a tall order for anyone. Thats why
its critical for everyone to plan their finances from an early age. So, what do you need to know
about yourself when thinking about a Financial Plan? Your financial plan entirely depends upon
how much effort you are willing to put in. This means not just having a good handle on the
details of your income and expenses, assets and liabilities, but more importantly on the following
items:
1.
2.
3.
4.

Time Horizon and Goals

Risk Tolerance
Liquidity Needs
Inflation

Need for Growth or Income

No doubt there are other factors that are important as well, but we believe that the above five
require a more detailed study on your part. Time Horizon and Goals: It is important to
understand what your goals are, and over what time period you want to achieve your goals. Some
goals are short term goals those that you want to achieve within the year. For such goals its
important to be conservative in ones approach and not take on too much risk. For long term
goals, however, one can afford to take on more risk and use time to ones advantage. Risk
Tolerance: Every individual should know what their capacity to take risk is. Some investments

19

can be more risky than others. These will not be suitable for someone of a low risk profile, or for
goals that require you to be conservative. Crucially, ones risk profile will change across lifes
stages. As a young person with no dependants or financial liabilities, one might be able to take
on lots of risk. However, if this young person gets married and has a child, he/she will have
dependants and higher fiscal responsibilities. His/her approach to risk and finances cannot be the
same as it was when he/she was single. Liquidity Needs: When do you need the money to meet
your goal and how quickly can you access this money. If you invest in an asset to and expect to
sell the asset to supply you funds to meet a goal, understand how easily you can sell the asset.
Usually, money market and stock market related assets are easy to liquidate. On the other hand,
something like real estate might take you a long time to sell. Inflation: Inflation is a fact of our
economic life in India. The bottle of cold drink that you buy today is almost double the price of
what you paid for ten years ago. At inflation or slightly above 4% per annum, a packet of biscuits
that costs you Rs 20 today will cost you Rs. 30 in ten years time. Just imagine what the cost of
buying a car or buying a home might be in ten years time! The purchasing power of your money
is going down every year. Therefore, the cost of achieving your goals need to be seen in what the
inflated price will be in the future. Need for Growth or Income: As you make investments, think
about whether you are looking for capital appreciation or income. Not all investments satisfy
both requirements. Many people are buying apartments, but are not renting them out even after
they take possession. So, this asset is generating no income for them and they are probably
expecting only capital appreciation from this. A young person should usually consider investing
for capital appreciation to take advantage of their young age. An older person however might be
more interested in generating income for themselves. Benefits of financial planning. Heres a list
of the benefits that a well chalked out financial plan can bring about:

Helps monitor cash flows and reduces unnecessary expenditure.

Enables maintenance of an optimum balance between income and expenses.
Helps boost savings and create wealth.
Helps reduce tax liability.
Maximizes returns from investments.
Creates wealth and ensures better wealth management to achieve life goals.
Financially secures retirement life.
Reviews insurance needs and therefore also ensures that dependents are financially
secure in the unfortunate event of death or disability.
Lastly, it also ensures that a will is made.

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Financial planning can help you achieve peace of mind

since:

The Financial Planning Process

Hopefully, youre now convinced that you definitely need a piece of the
action. What next? When you actually get right down to it, financial
planning consists of a series of steps. This section examines each of
these steps in detail.

Step 1: Identify your current financial situation

21

Sit down with all the earning members of your family and gather all
information about your sources of income, debts, assets, liabilities, etc.
This gives you a picture of your current financial situation.

Step 2: Identify your goals

Ask each member to list what they think are current and future family
goals. Prioritize each goal by establishing consensus and put a time
period against each, i.e., when you will need the finances to achieve that
goal. If possible, quantify each goal. This exercise enables recognition of
short term and long term goals, and how much money you need for each.

Step 3: Identify financial gaps

Once you know where you stand financially, and where you want to be,
i.e., how much you have or can expect regular sources of income to
generate, and how much you need to fulfil various goals.

A simple calculation gives you an idea of the shortfall. This is important,

because, identifying the right investments to cover the shortfall depends
on you quantifying the income from your investments.

Step 4: Prepare your personal financial plan

Now review various investment options such as stocks, mutual funds,
debt instruments such as PPF, bonds, fixed deposits, gilt funds, etc. and
identify which instrument(s) or a combination thereof best suits your
needs. The time frame for your investment must correspond with the
time period for your goals.

22

Step 5: Implement your financial plan

Its now time to put things into action. Gather necessary documents,
open necessary bank, demat, trading accounts, liaise with brokers and
get started.
Most importantly, start investing and stick to your plan.

Step 6: Periodically review your plan

Financial planning is not a one-time activity. A successful plan needs
serious commitment and periodical review (once in six months, or at a
major event such as birth, death, inheritance). You should be prepared to
make minor or major revisions to your current financial situation, goals
and investment time frame based on a review of the performance of your
investments.

Financially challenged individuals who feel this is just beyond them, can
of course always consult professional financial planners, who takes one
through the whole process. Being a long term commitment, financial
planning goes on until one meets his last goal. It is also a personal
decision, which implies that a person must select someone who he is
comfortable with, and can build a long term relationship that is mutually
beneficial.

Tips for making the most of the financial planning process:

1. Start now. Even if you are in your mid thirties or forties, its
better to start now than dawdle for another five years. Every day
counts.
2. Be honest with yourself. Seek help when needed.
3. Set sensible, measurable goals for yourself. Be realistic in your

23

expectations of the results of financial planning.

4. Review your plan and financial situation periodically and adjust
as needed.
5. Always review the performance of your investments; pull out if
neded and reinvest the money elsewhere.
6. Be hands-on. Its your money and no one else will do your
worfor you.

Features of a good financial plan

How do you evaluate the quality and effectiveness of your financial
plan? Well, heres a checklist you can use.

Does it indicate your current financial situation?

Does it list out all your goals in measurable terms?
If professional help is sought, your financial planner will ensure
that your financial plan also contains the following:
List of possible risks and a risk management plan.
Expected returns from each investment.
A mapping between the investments and goals, i.e., how each
investment helps you
Details of one time and recurring fees charged by him.

Reviewing your Finances

You should begin with a review of your current financial position. Start with a top down
approach. Do the following to ascertain your position:
Total assets + Total savings Total debt = Your position
Work it down further by doing a cash flow analysis
Monthly income Monthly expenses = Your cash flow

24

Where are you spending money?

Clothing, entertainment, eating out

Identify opportunities to save money

Eg: eating out lesser could save you Rs 1000 per month
Setting Goals:
Buying a new car, buying a house, taking a vacation, educating your children etc
Understand the tradeoffs:

Lesser money in the short term for clothing, entertainment etc

Set clear targets and time frames to achieve your goals
Saving Rs 2000 per month will help educate your children
Saving Rs 1000 per month will help fund your vacation

Creating A Financial Plan

Include a mix of short and long term goals
1.
2.
3.
4.
5.
6.
7.

Convert your goals into rupee amount and set a deadline to achieve them
Diversify your investments according to your risk profile
Look for ways to minimize tax
Dont forget insurance
Start retirement planning
Get professional advice in required
Dont wait, implement your plan today

Review your plan:

Life is always changing, so it is important to review your plan if any of the following:

Your circumstances change

Through marriage, new dependants etc
Your rules change
Through taxation etc
Investment climate changes
Through market boom and busts

Tips To Stay On Track

1.
2.
3.
4.
5.
6.

Stay focused on your lifestyle goals

Dont be distracted by fear or greed
Diversify your investments according to your risk profile
Keep a long term view
Review your plan regularly
Get advice from a professional

25

INTRODUCTION OF MUTUAL FUNDS:

The Indian mutual fund industry has witnessed significant growth in the past few years driven by
several favourable economic and demographic factors such as rising income levels, and the
increasing reach of Asset Management Companies and distributors. However, after several years
of relentless growth, the industry witnessed a fall of 8% in the assets under management in the
financial year 2008-2009 that has impacted revenues and profitability. Whereas, in 2009-10 the
industry is on the road of recovery.

History of Mutual Funds

The mutual fund industry in India started in 1963 with the formation of
Unit Trust of India, at the initiative of the Government of India and
Reserve Bank of India. The history of mutual funds in India can be broadly
divided into four distinct phases.
First Phase 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament.
It was set up by the Reserve Bank of India and functioned under the
Regulatory and administrative control of the Reserve Bank of India. In
1978 UTI was de-linked from the RBI and the Industrial Development Bank
of India (IDBI) took over the regulatory and administrative control in place
of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the
end of 1988 UTI had Rs.6, 700 Crores of assets under management.
Second Phase 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by
public sector banks and Life Insurance Corporation of India (LIC) and
General Insurance Corporation of India (GIC). SBI Mutual Fund was the
first non- UTI Mutual Fund established in June 1987 followed by Canbank
Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian
Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual
Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had
set up its mutual fund in December 1990.

26

At the end of 1993, the mutual fund industry had assets under
management of Rs.47, 004 Crores.
Third Phase 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the
Indian mutual fund industry, giving the Indian investors a wider choice of
fund families. Also, 1993 was the year in which the first Mutual Fund
Regulations came into being, under which all mutual funds, except UTI
were to be registered and governed. The erstwhile Kothari Pioneer (now
merged with Franklin Templeton) was the first private sector mutual fund
registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The industry
now functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has witnessed
several mergers and acquisitions. As at the end of January 2003, there
were 33 mutual funds with total assets of Rs. 1, 21,805 Crores. The Unit
Trust of India with Rs.44, 541 Crores of assets under management was
way ahead of other mutual funds
Fourth Phase since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963
UTI was bifurcated into two separate entities. One is the Specified
Undertaking of the Unit Trust of India with assets under management of
Rs.29, 835 crores as at the end of January 2003, representing broadly, the
assets of US 64 scheme, assured return and certain other schemes. The
Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and
does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and
LIC. It is registered with SEBI and functions under the Mutual Fund
Regulations. With the bifurcation of the erstwhile UTI which had in March
2000 more than Rs.76,000 Crores of assets under management and with
the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund.

27

Regulatory Framework
Securities and Exchange Board of India (SEBI)
The Government of India constituted Securities and Exchange Board of India, by an
Act of Parliament in 1992, the apex regulator of all entities that either raise funds in
the capital markets or invest in capital market securities such as shares and
debentures listed on stock exchanges. Mutual funds have emerged as an important
institutional investor in capital market securities. Hence they come under the
purview of SEBI. SEBI requires all mutual funds to be registered with them. It issues
guidelines for all mutual fund operations including where they can invest, what
investment limits and restrictions must be complied with, how they should account
for income and expenses, how they should make disclosures of information to the
investors and generally act in the interest of investor protection. To protect the
interest of the investors, SEBI formulates policies and regulates the mutual funds.
MF either promoted by public or by private sector entities including one promoted
by foreign entities is governed by these Regulations. SEBI approved Asset
Management Company (AMC) manages the funds by making investments in various
types of securities. Custodian, registered with SEBI, holds the securities of various
schemes of the fund in its custody. According to SEBI Regulations, two thirds of the
directors of Trustee Company or board of trustees must be independent.
b) Association of Mutual Funds in India (AMFI)

With the increase in mutual fund players in India, a need for mutual fund association in
India was generated to function as a non-profit organisation. Association of Mutual Funds in
India (AMFI) was incorporated on 22nd August, 1995.
AMFI is an apex body of all Asset Management Companies (AMC) which has been registered
with SEBI. Till date all the AMCs are that have launched mutual fund schemes are its member. It
functions under the supervision and guidelines of its Board of Directors.
Association of Mutual Funds India has brought down the Indian Mutual Fund Industry
to a professional and healthy market with ethical line enhancing and maintaining standards. It
follows the principle of both protecting and promoting the interests of mutual funds as well as
their unit holders.
c) The objectives of Association of Mutual Funds in India

28

The Association of Mutual Funds of India works with 30 registered AMCs of the country.
It has certain defined objectives which juxtaposes the guidelines of its Board of Directors. The
objectives are as follows:
This mutual fund association of India maintains high professional and ethical standards in all areas of
operation of the industry.
It also recommends and promotes the top class business practices and code of conduct which is followed
by members and related people engaged in the activities of mutual fund and asset management. The
agencies who are by any means connected or involved in the field of capital markets and financial
services also involved in this code of conduct of the association.
AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry.
Association of Mutual Fund of India do represent the Government of India, the Reserve Bank of India
and other related bodies on matters relating to the Mutual Fund Industry.
It develops a team of well qualified and trained Agent distributors. It implements a program of training
and certification for all intermediaries and other engaged in the mutual fund industry.
AMFI undertakes all India awareness program for investors in order to promote proper understanding of
the concept and working of mutual funds.
At last but not the least association of mutual fund of India also disseminate information on Mutual Fund
Industry and undertakes studies and research either directly or in association with other bodies.
Concept of Mutual Fund
A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial
goal. 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 to 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. The flow chart below describes the
working of a mutual fund:

29

Mutual fund operation flow chart

Mutual funds are considered as one of the best available investments as compare to others. They are very
cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can
purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the
biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns.
Organization of a Mutual Fund
There are many entities involved and the diagram below illustrates the organizational set up of a mutual
fund

Organization of Mutual Fund

Types of Mutual Fund schemes in INDIA:

30

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk
tolerance and return expectations.

B
y
S
t
r
u
c
t
u
r
e

l
s

aa
n
M

fi

tt

ii

oo

u
u

u
d

n
s

Overview of existing schemes existed in mutual fund category:

BY STRUCTURE
a) Open - Ended Schemes: An open-end fund is one that is available for subscription all through the
year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value
("NAV") related prices. The key feature of open-end schemes is liquidity.
b) Close - Ended Schemes: A closed-end fund has a stipulated maturity period which generally ranging
from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest
in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the
scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors,
some close-ended funds give an option of selling back the units to the Mutual Fund through periodic
repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is
provided to the investor.
c) 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.
Overview of existing schemes existed in mutual fund category:
BY NATURE

31

a) Equity fund: 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 managers outlook on different stocks.
The Equity Funds are sub-classified depending upon their investment objective, as follows:

Diversified Equity Funds

1. Mid-Cap Funds
2. Sector Specific Funds
3. Tax Savings Funds (ELSS)
a) Equity Funds: Equity investments are meant for a longer time horizon, thus Equity funds rank high on
the risk-return matrix.
b) 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.
c) 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.
d) Income Funds: Invest a major portion into various debt instruments such as bonds, corporate
debentures and Government securities.
e) Monthly income plans ( 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.
f) Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds
primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs).
Some portion of the corpus is also invested in corporate debentures.
g) 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.

32

h) Balanced 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 provides growth and the debt part provides stability in returns.
Further the mutual funds can be broadly classified on the basis of investment parameter. It means 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 can invest
accordingly.
By investment objective:
a) 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.
b) 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.
c) 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.
d) 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
a) Tax Saving Schemes:
Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under
Sec.80C of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are
eligible for rebate.
b) Index Schemes:
Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the
Nifty 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.

33

c) 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. Ex- 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.

PROCESS OF INVESTING IN MUTUAL FUND

a) Identify Your Investment Needs:Your financial goals will vary, based on your age, lifestyle, financial independence, family commitments
and level of income and expenses among many other factors. Therefore, the first step is to assess your
needs. You can begin by defining your investment objectives and needs, which could be regular income,
buying a home or finance a wedding or educate your children or a combination of all these needs, the
quantum of risk you are willing to take and your cash flow requirements.
b) Choose the Right Mutual Fund:The important thing is to choose the right mutual fund scheme, which suits your requirements. The offer
document of the scheme tells you its objectives and provides supplementary details like the track record
of other schemes managed by the same Fund Manager.
c) Select the Ideal Mix of Schemes:Investing in just one Mutual Fund scheme may not meet all your investment needs. Your may consider
investing in a combination of schemes to achieve your specific goals.
d) Invest Regularly:The best approach is to invest a fixed amount at specific intervals, say every month. By investing a fixed
sum each month, you buy fewer units when the price is higher and more units when the price is low, thus
bringing down your average cost per unit. This is called rupee cost averaging and do investors all over the
world follow a disciplined investment strategy.
e) Start Early:-

34

It is desirable to start investing early and stick to a regular investment plan. If you start now, you will
make more than if you wait and invest later. The power of compounding lets you earn income on income
and your money multiplies at a compounded rate of return.
f) The Final Step:All your need to do now is to for online application forms of various mutual fund schemes and start
investing. You may reap the rewards in the years to come.
INVESTMENT STRATEGIES:a) Systematic Investment Plan:Under this a fixed sum is invested each month on a fixed date of a month. Payment is made through post
dated cheques or direct debit facilities. The investor gets fewer units when the NAV is high and more
units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA)
b) Systematic Transfer Plan:Under this an investor invests in debt oriented fund and gives instructions to transfer a fixed sum, at a
fixed interval, to an equity scheme of the same mutual fund.
c) Systematic Withdrawal Plan:If someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month.

35

RISK Vs RETURN

MEASURING AND EVALUATING MUTUAL FUND PERFORMANCE:Every investor investing in the mutual funds is driven by the motto of either wealth creation or wealth
increment or both. Therefore its very necessary to continuously evaluate the funds performance with the
help of factsheets and newsletters, websites, newspapers and professional Variation in the funds
performance advisors like BIRLA mutual fund services. If the investors ignore the evaluation of funds
performance then he can lose hold of it any time. In this ever-changing industry, he can face any of the
following problems:
The funds performance can slip in comparison to similar funds.
There may be an increase in the various costs associated with the fund.

36

Beta, a technical measure of the risk associated may also surge.

The funds ratings may go down in the various lists published by independent rating agencies.
It can merge into another fund or could be acquired by another fund house.

Performance measures:a) Equity funds :-The performance of equity funds can be measured on the basis of: NAV Growth, Total
Return; Total Return with Reinvestment at NAV, Annualized Returns and Distributions, Computing Total
Return (Per Share Income and Expenses, Per Share Capital Changes, Ratios, Shares Outstanding), the
Expense Ratio, Portfolio Turnover Rate, Fund Size, Transaction Costs, Cash Flow, Leverage.
b) Debt fund:-Likewise the performance of debt funds can be measured on the basis of: Peer Group
Comparisons, The Income Ratio, Industry Exposures and Concentrations, NPAs, besides NAV Growth,
Total Return and Expense Ratio.
c) Liquid funds:-The performance of the highly volatile liquid funds can be measured on the basis of
Fund Yield, besides NAV Growth, Total Return and Expense Ratio. To measure the funds performance,
the comparisons are usually done with a market index. Funds from the same peer group.
WHY HAS IT BECOME ONE OF THE LARGEST FINANCIAL INSTRUMENTS
If we take a look at the recent scenario in the Indian financial market then we can find the market flooded
with a variety of investment options which includes mutual funds, equities, fixed income bonds, corporate
debentures, company fixed deposits, bank deposits, PPF, life insurance, gold, real estate etc. All these
investment options could be judged on the basis of various parameters such as- return, safety
convenience, volatility and liquidity. Measuring these investment options on the basis of the mentioned
parameters, we get this in a tabular form
Fluctuation in investment options:Return

Safety

Volatility

Liquidity

Convenience

Equity

High

Low

High

High

Moderate

Bonds

Moderate

High

Moderate

Moderate

High

Co.
Debentures

Moderate

Moderate

Moderate

Low

Low

37

Co. FDs

Moderate

Low

Low

Low

Moderate

Bank
Deposits

Low

High

Low

High

High

PPF

Moderate

High

Low

Moderate

High

Life
Insurance

Low

High

Low

Low

Moderate

Gold

Moderate

High

Moderate

Moderate

Gold

Real Estate

High

Moderate

High

Low

Low

Mutual

High

High

Moderate

High

High

Funds

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 safety which doesnt makes it
favourite among persons who have low risk- appetite. Even the convenience involved with investing in
equities is just moderate.
Now looking at bank deposits, it scores better than equities at all fronts but lags badly in the parameter of
utmost important i.e.; it scores low on return , so its not an happening option for person who can afford
to take risks for higher return. The other option offering high return is real estate but that even comes with
high volatility and moderate safety level, even the liquidity and convenience involved are too low. Gold
have always been a favourite among Indians but when we look at it as an investment option then it
definitely doesnt gives a very bright picture. Although it ensures high safety but the returns generated
and liquidity are moderate. Similarly the other investment options are not at par with mutual funds and
serve the needs of only a specific customer group. Straightforward, we can say that mutual fund emerges
as a clear winner among all the options available.
The reasons for this being:
a) Mutual funds combine the advantage of each of the investment products:-

38

Mutual Fund is one such option which can invest in all other investment options. Its principle of
diversification allows the investors to taste all the fruits in one plate. Just by investing in it, the investor
can enjoy the best investment option as per the investment objective.
b) Dispense the shortcomings of the other options:Every other investment option has more or less 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.
c) 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 book profit and can reinvest the amount again in money market instruments.
HOW DO INVESTORS CHOOSE BETWEEN FUNDS?
When the market is flooded with mutual funds, its a very tough job for the investors to choose the best
fund for them. Whenever an investor thinks of investing in mutual funds, he must look at the investment
objective of the fund. Then the investors sort out the funds whose investment objective matches with that
of the investors. Now the tough task for investors start, they may carry on the further process themselves
or can go for advisors like BIRLA. Of course the investors can save their money by going the direct route
i.e. through the AMCs directly but it will only save 1-2.25% (entry load) but could cost the investors in
terms of returns if the investor is not an expert. So it is always advisable to go for MF advisors. The mf
advisors thoughts go beyond just investment objectives and rate of return. Some of the basic tools which
an investor may ignore but an mf advisor will always look for are as follow:
a) Rupee Cost Averaging:The investors going for Systematic Investment Plans (SIP) and Systematic Transfer Plans (STP) may
enjoy the benefits of RCA (Rupee Cost Averaging). Rupee cost averaging allows an investor to bring
down the average cost of buying a scheme by making a fixed investment periodically, like Rs 5,000 a
month and nowadays even as low as Rs. 500 or Rs. 100. In this case, the investor is always at a profit,
even if the market falls. In case if the NAV of fund falls, the investors can get more number of units and
vice-versa. This results in the average cost per unit for the investor being lower than the average price per
unit over time.

39

The investor needs to decide on the investment amount and the frequency. More frequent the investment
interval, greater the chances of benefiting from lower prices. Investors can also benefit by increasing the
SIP amount during market downturns, which will result in reducing the average cost and enhancing
returns. Whereas STP allows investors who have lump sums to park the funds in a low-risk fund like
liquid funds and make periodic transfers to another fund to take advantage of rupee cost averaging.
b) Rebalancing:Rebalancing involves booking profit in the fund class that has gone up and investing in the asset class that
is down. Trigger and switching are tools that can be used to rebalance a portfolio. Trigger facilities allow
automatic redemption or switch if a specified event occurs. The trigger could be the value of the
investment, the net asset value of the scheme, level of capital appreciation, level of the market indices or
even a date. The funds redeemed can be switched to other specified schemes within the same fund house.
Some fund houses allow such switches without charging an entry load.
To use the trigger and switch facility, the investor needs to specify the event, the amount or the number of
units to be redeemed and the scheme into which the switch has to be made. This ensures that the investor
books some profits and maintains the asset allocation in the portfolio.
c) Diversification:Diversification involves investing the amount into different options. In case of mutual funds, the investor
may enjoy it afterwards also through dividend transfer option. Under this, the dividend is reinvested not
into the same scheme but into another scheme of the investor's choice.
For example, the dividends from debt funds may be transferred to equity schemes. This gives the investor
a small exposure to a new asset class without risk to the principal amount. Such transfers may be done
with or without entry loads, depending on the MF's policy.
d) Tax efficiency:Tax factor acts as the x-factor for mutual funds. Tax efficiency affects the final decision of any investor
before investing. The investors gain through either dividends or capital appreciation but if they havent
considered the tax factor then they may end loosing.
Debt funds have to pay a dividend distribution tax of 12.50 per cent (plus surcharge and education fess)
on dividends paid out. Investors who need a regular stream of income have to choose between the
dividend option and a systematic withdrawal plan that allows them to redeem units periodically. SWP
implies capital gains for the investor.

40

If it is short-term, then the SWP is suitable only for investors in the 10-per-cent-tax bracket. Investors in
higher tax brackets will end up paying a higher rate as short-term capital gains and should choose the
dividend option.
If the capital gain is long-term (where the investment has been held for more than one year), the growth
option is more tax efficient for all investors. This is because investors can redeem units using the SWP
where they will have to pay 10 per cent as long-term capital gains tax against the 12.50 per cent DDT
paid by the MF on dividends.
All the tools discussed over here are used by all the advisors and have helped investors in reducing risk,
simplicity and affordability. Even then an investor needs to examine costs, tax implications and minimum
applicable investment amounts before committing to a service.

Advantages of Mutual Funds:Diversification It can help an investor diversify their portfolio with a minimum investment. Spreading
investments across a range of securities can help to reduce risk. A stock mutual fund, for example,
invests in many stocks .This minimizes the risk attributed to a concentrated position. If a few securities in
the mutual fund lose value or become worthless, the loss maybe offset by other securities that appreciate
in value. Further diversification can be achieved by investing in multiple funds which invest in different
sectors.
b) Professional Management- Mutual funds are managed and supervised by investment professional.
These managers decide what securities the fund will buy and sell. This eliminates the investor of the
difficult task of trying to time the market.
Well regulated- Mutual funds are subject to many government regulations that protect investors from
fraud.
c) Liquidity- It's easy to get money out of a mutual fund.
d) Convenience- we can buy mutual fund shares by mail, phone, or over the Internet.
e) Low cost- Mutual fund expenses are often no more than 1.5 percent of our investment. Expenses for
Index Funds are less than that, because index funds are not actively managed. Instead, they automatically
buy stock in companies that are listed on a specific index
f) Transparency- The mutual fund offer document provides all the information about the fund and the
scheme. This document is also called as the prospectus or the fund offer document, and is very detailed
and contains most of the relevant information that an investor would need.

41

g) Choice of schemes there are different schemes which an investor can choose from according to his
investment goals and risk appetite.
h) Tax benefits An investor can get a tax benefit in schemes like ELSS (equity linked saving scheme)

Terms used in Mutual Fund:Asset Management Company (AMC)

An AMC is the legal entity formed by the sponsor to run a mutual fund. The AMC is usually a private
limited company in which the sponsors and their associates or joint venture partners are the shareholders.
The trustees sign an investment agreement with the AMC, which spells out the functions of the AMC. It is
the AMC that employs fund managers and analysts, and other personnel. It is the AMC that handles all
operational matters of a mutual fund from launching schemes to managing them to interacting with
investors.
Fund Offer document
The mutual fund is required to file with SEBI a detailed information memorandum, in a prescribed format
that provides all the information about the fund and the scheme. This document is also called as the
prospectus or the fund offer document, and is very detailed and contains most of the relevant information
that an investor would need
Trust
The Mutual Fund is constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882
by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908. The Trust appoints
the Trustees who are responsible to the investors of the fund.
Trustees
Trustees are like internal regulators in a mutual fund, and their job is to protect the interests of the unit
holders. Trustees are appointed by the sponsors, and can be either individuals or corporate bodies. In
order to ensure they are impartial and fair, SEBI rules mandate that at least two-thirds of the trustees be
independent, i.e., not have any association with the sponsor.
Trustees appoint the AMC, which subsequently, seeks their approval for the work it does, and reports
periodically to them on how the business being run.
Custodian

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A custodian handles the investment back office of a mutual fund. Its responsibilities include receipt and
delivery of securities, collection of income, and distribution of dividends and segregation of assets
between the schemes. It also track corporate actions like bonus issues, right offers, offer for sale, buy
back and open offers for acquisition. The sponsor of a mutual fund cannot act as a custodian to the fund.
This condition, formulated in the interest of investors, ensures that the assets of a mutual fund are not in
the hands of its sponsor. For example, Deutsche Bank is a custodian, but it cannot service Deutsche
Mutual Fund, its mutual fund arm.

NAV
Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is
the net asset value of the scheme divided by the number of units outstanding on the Valuation Date. The
NAV is usually calculated on a daily basis. In terms of corporate valuations, the book values of assets less
liability.
The NAV is usually below the market price because the current value of the funds assets is higher than
the historical financial statements used in the NAV calculation.

Market Value of the Assets in the Scheme + Receivables + Accrued Income

- Liabilities - Accrued Expenses
NAV = -----------------------------------------------------------------------------------------------No. of units outstanding

Where,
Receivables: Whatever the Profit is earned out of sold stocks by the Mutual fund is called Receivables.
Accrued Income: Income received from the investment made by the Mutual Fund.
Liabilities: Whatever they have to pay to other companies are called liabilities.
Accrued Expenses: Day to day expenses such as postal expenses, Printing, Advertisement Expenses etc.

43

Calculation of NAV:Scheme ABN

Scheme Size Rs. 5, 00, 00,000 (Five Crores)
Face Value of Units Rs.10/Scheme Size
---------------------------

5, 00, 00,000
=

-------------------

Face value of units

= 50, 00,000

10

The fund will offer 50, 00,000 units to Public.

Investments: Equity shares of Various Companies.
Market Value of Shares is Rs.10, 00, 00,000 (Ten Crores)

Rs. 10, 00, 00,000

NAV

= --------------------------

= Rs.20/-

50, 00,000 units

Thus, each unit of Rs. 10/- is Worth Rs.20/It states that the value of the money has appreciated since it is more than the face value.
Sale price
Is the price we pay when we invest in a scheme? Also called Offer Price. It may include a sales load.
Repurchase price
Is the price at which units under open-ended schemes are repurchased by the Mutual Fund. Such prices
are NAV related.

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Redemption Price
Is the price at which close-ended schemes redeem their units on maturity? Such prices are NAV related.
Sales load
Is a charge collected by a scheme when it sells the units. Also called, Front-end load. Schemes that do
not charge a load are called No Load schemes.
Repurchase or Back-end Load
Is a charge collected by a scheme when it buys back the units from the unit holders.
CAGR (compounded annual growth rate)
The year-over-year growth rate of an investment over a specified period of time. The compound annual
growth rate is calculated by taking the nth root of the total percentage growth rate, where n is the number
of years in the period being considered.

Fund Management:a) Actively managed funds:

Mutual Fund managers are professionals. They are considered professionals because of their knowledge
and experience. Managers are hired to actively manage mutual fund portfolios. Instead of seeking to
track market performance, active fund management tries to beat it. To do this, fund managers "actively"
buy and sell individual securities. For an actively managed fund, the corresponding index can be used as
a performance benchmark.
Is an active fund a better investment because it is trying to outperform the market? Not necessarily. While
there is the potential for higher returns with active funds, they are more unpredictable and more risky.
From 1990 through 1999, on average, 76% of large cap actively managed stock funds actually
underperformed the S&P 500. (Source - Schwab Center for Investment Research)

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b) Actively managed fund styles:

Some active fund managers follow an investing "style" to try and maximize fund performance while
meeting the investment objectives of the fund. Fund styles usually fall within the following three
categories.
c) Fund Styles:
Value: The manager invests in stocks believed to be currently undervalued by the market.
Growth: The manager selects stocks they believe have a strong potential for beating the market.
Blend: The manager looks for a combination of both growth and value stocks.
To determine the style of a mutual fund, consult the prospectus as well as other sources that review
mutual funds. Don't be surprised if the information conflicts. Although a prospectus may state a specific
fund style, the style may change. Value stocks held in the portfolio over a period of time may become
growth stocks and vice versa. Other research may give a more current and accurate account of the style
of the fund.
Passively Managed Funds:
Passively managed mutual funds are an easily understood, relatively safe approach to investing in broad
segments of the market. They are used by less experienced investors as well as sophisticated institutional
investors with large portfolios. Indexing has been called investing on autopilot. The metaphor is an
appropriate one as managed funds can be viewed as having a pilot at the controls. When it comes to flying
an airplane, both approaches are widely used.
A high percentage of investment professionals, find index investing compelling for the
following reasons:
Simplicity. Broad-based market index funds make asset allocation and diversification easy.
Management quality. The passive nature of indexing eliminates any concerns about human error or
management tenure.
Low portfolio turnover. Less buying and selling of securities means lower costs and fewer tax
consequences.
Low operational expenses. Indexing is considerably less expensive than active fund management.

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Asset bloat. Portfolio size is not a concern with index funds.

Performance. It is a matter of record that index funds have outperformed the majority of managed funds
over a variety of time periods.

Risk. Every type of investment, including mutual funds, involves risk. Risk refers to the possibility that
you will lose money (both principal and any earnings) or fail to make money on an investment. A fund's
investment objective and its holdings are influential factors in determining how risky a fund is. Reading
the prospectus will help you to understand the risk associated with that particular fund.
Generally speaking, risk and potential return are related. This is the risk/return trade-off. Higher risks are
usually taken with the expectation of higher returns at the cost of increased volatility. While a fund with
higher risk has the potential for higher return, it also has the greater potential for losses or negative
returns. The school of thought when investing in mutual funds suggests that the longer your investment
time horizon is the less affected you should be by short-term volatility. Therefore, the shorter your
investment time horizon, the more concerned you should be with short-term volatility and higher risk.

Defining Mutual fund risk:Different mutual fund categories as previously defined have inherently different risk characteristics and
should not be compared side by side. A bond fund with below-average risk, for example, should not be
compared to a stock fund with below average risk. Even though both funds have low risk for their
respective categories, stock funds overall have a higher risk/return potential than bond funds.
Of all the asset classes, cash investments (i.e. money markets) offer the greatest price stability but have
yielded the lowest long-term returns. Bonds typically experience more short-term price swings, and in
turn have generated higher long-term returns. However, stocks historically have been subject to the
greatest short-term price fluctuationsand have provided the highest long-term returns. Investors
looking for a fund which incorporates all asset classes may consider a balanced or hybrid mutual fund.
These funds can be very conservative or very aggressive. Asset allocation portfolios are mutual funds
that invest in other mutual funds with different asset classes. At the discretion of the manager(s),
securities are bought, sold, and shifted between funds with different asset classes according to market
conditions.
Mutual funds face risks based on the investments they hold. For example, a bond fund faces interest rate
risk and income risk. Bond values are inversely related to interest rates. If interest rates go up, bond
values will go down and vice versa. Bond income is also affected by the change in interest rates. Bond
yields are directly related to interest rates falling as interest rates fall and rising as interest rise. Income
risk is greater for a short-term bond fund than for a long-term bond fund.

47

Similarly, a sector stock fund (which invests in a single industry, such as telecommunications) is at risk
that its price will decline due to developments in its industry. A stock fund that invests across many
industries is more sheltered from this risk defined as industry risk.
Following is a glossary of some risks to consider when investing in mutual funds:
Call Risk. The possibility that falling interest rates will cause a bond issuer to redeemor callits highyielding bond before the bond's maturity date
Country Risk. The possibility that political events (a war, national elections), financial problems (rising
inflation, government default), or natural disasters (an earthquake, a poor harvest) will weaken a country's
economy and cause investments in that country to decline.
Credit Risk. The possibility that a bond issuer will fail to repay interest and principal in a timely manner.
Also called default risk.
Currency Risk. The possibility that returns could be reduced for Americans investing in foreign
securities because of a rise in the value of the U.S. dollar against foreign currencies. Also called
exchange-rate risk.
Income Risk. The possibility that a fixed-income fund's dividends will decline as a result of falling
overall interest rates.
Industry Risk. The possibility that a group of stocks in a single industry will decline in price due to
developments in that industry.

Basis Of Comparison Of Various Schemes Of Mutual Funds:-

a) Beta:-

Beta is used to measure the risk. It basically indicates the level of volatility associated with the fund as
compared to the market. In case of funds, beta would indicate the volatility against the benchmark index.
It is used as a short term decision making tool. A beta that is greater than 1 means that the fund is more
volatile than the benchmark index, while a beta of less than 1 means that the fund is less volatile than the
benchmark index. A fund with a beta very close to 1 means the funds performance closely matches the
index or benchmark.
The success of beta is heavily dependent on the correlation between a fund and its benchmark. Thus, if
the funds portfolio doesnt have a relevant benchmark index then a beta would be grossly inappropriate.
For example if we are considering a banking fund, we should look at the beta against a. bank index

48

Beta measures the sensitivity of the stock to the market. For example if beta=1.5; it means the stock price
will change by 1.5% for every 1% change in SENSEX. It is also used to measure the systematic risk.
Systematic risk means risks which are external to the organization like competition, government policies.
They are non-diversifiable risks.
Beta is calculated using regression analysis; Beta can also be defined as the tendency of a security's
returns to respond to swings in the market. A beta of 1 indicates that the security's price will move with
the market. A beta less than 1 means that the security will be less volatile than the market. A beta greater
than 1 indicates that the security's price will be more volatile than the market. For example, if a stock's
beta is 1.2, it's theoretically 20% more volatile than the market.
Beta>11thenxaggressivexstocks
If1beta<1xthen1defensive1stocks
If beta=1 then neutral
So, its a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the
market as a whole.
Many utilities stocks have a beta of less than 1. Conversely, most hi-tech NASDAQ-based stocks have a
beta greater than 1, offering the possibility of a higher rate of return but also posing more risk.

b) Alpha:-

This measure was developed by Michael Jenson and is sometimes referred to as differential return
method. This measure involves evaluation of the returns that the fund has generated vs. the returns
actually expected out of the fund given the level of its systematic risk. The surplus between the two
returns is called Alpha, which measures the performance of a fund compared with the actual
returns over the period. Required return of a fund at a given level of risk (Bi) can be calculated as,

Ri=Rf+Bi(Rm-Rf)
Where,

Rm=Average market return during the period.

Ri= Return on fund
Rf= Risk free rate of return
Bi= Beta of the fund

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After calculating Rm, Alpha can be obtained by subtracting required return from the actual return of the
fund.
Higher Alpha represents superior performance of the fund and vice- versa.
c) Leverage Factor:
It reports the comparison of the total risk in the fund with the total risk in the market portfolio and can be
used in making investment decisions. It is calculated by dividing market standard deviation by the fund
standard deviation.
Li = Standard deviation of the market
Standard deviation of the fund
e.g. a leverage factor greater than one implies that standard deviation of the fund is less than standard
deviation of the market index, and that the investor should consider levering the fund by borrowing
money and invest in that particular fund. While this would tend to increase the risk of investment
somewhat, there would be a greater than proportional increase in returns. On the other hand leverage
factor less than one implies that the risk of fund is greater than risk of market index and the investor
should consider unlevering the fund by selling of the part of the holding in the fund and investing the
proceeds I a risk free security, such as treasury bill in this way returns on the investment reduce
somewhat, there would be an greater than proportional reduction in risk.
d) Standard Deviation:
In simple terms standard deviation is one of the commonly used statistical parameter to measure risk,
which determines the volatility of a fund. Deviation is defined as any variation from a mean value
(upward & downward). Since the markets are volatile, the returns fluctuate every day. High standard
deviation of a fund implies high volatility and a low standard deviation implies low volatility.
A measure of the dispersion of a set of data from its mean. The more spread apart the data is, the higher
the deviation. Standard deviation is applied to the annual rate of return of an investment to measure the
investment's volatility (risk).
A volatile stock would have a high standard deviation. The standard deviation tells us how much the
return on the fund is deviating from the expected normal returns.
Standard deviation can also be calculated as the square root of the variance.
R-Squared (R2)

50

R squared is the square of R (i.e.; coefficient of correlation). It describes the level of association
between the funds market volatility and market risk. The value of R- squared ranges from0 to1. A high Rsquared (more than 0.80) indicates that beta can be used as a reliable measure to analyze the performance
of a fund. Beta should be ignored when the r-squared is low as it indicates that the fund performance is
affected by factors other than the markets.
For example:
Case 1

Case 2

R2

0.65

0.88

1.2

0.9

In the above tableR2 is less than 0.80 in case 1, implies that it would be wrong to mention that the fund is
aggressive on account of high beta. In case 2, the r- squared is more than 0.85 and beta value is 0.9. It
means that this fund is less aggressive than the market.

How To Pick The Right Mutual Fund

Identifying Goals and Risk Tolerance:Before acquiring shares in any fund, an investor must first identify his or her goals and desires for the
money being invested. Are long-term capital gains desired, or is a current income preferred? Will the
money be used to pay for college expenses, or to supplement a retirement that is decades away. One
should consider the issue of risk tolerance. Is the investor able to afford and mentally accept dramatic
swings in portfolio value? Or, is a more conservative investment warranted? Identifying risk tolerance is
as important as identifying a goal. Finally, the time horizon must be addressed. Investors must think about
how long they can afford to tie up their money, or if they anticipate any liquidity concerns in the near
future. Ideally, mutual fund holders should have an investment horizon with at least five years or more.
Style and Fund Type :If the investor intends to use the money in the fund for a longer term need and is willing to assume a fair
amount of risk and volatility, then the style/objective he or she may be suited for is a fund. These types of
funds typically hold a high percentage of their assets in common stocks, and are therefore considered to
be volatile in nature. Conversely, if the investor is in need of current income, he or she should acquire
shares in an income fund. Government and corporate debt are the two of the more common holdings in an
income fund. There are times when an investor has a longer term need, but is unwilling or unable to

51

assume substantial risk. In this case, a balanced fund, which invests in both stocks and bonds, may be
the best alternative.
Charges and Fees :Mutual funds make their money by charging fees to the investor. It is important to gain an understanding
of the different types of fees that you may face when purchasing an investment.
Some funds charge a sales fee known as a load fee, which will either be charged upon initial investment
or upon sale of the investment. A front-end load/fee is paid out of the initial investment made by the
investor while a back-end load/fee is charged when an investor sells his or her investment, usually prior
to a set time period. To avoid these sales fees, look for no-load funds, which don't charge a front- or
back-end load/fee. However, one should be aware of the other fees in a no-load fund, such as the
management expense ratio and other administration fees, as they may be very high.
The investor should look for the management expense ratio. The ratio is simply the total percentage
of fund assets that are being charged to cover fund expenses. The higher the ratio, the lower the investor's
return will be at the end of the year.
Evaluating Managers/Past Results:Investors should research a fund's past results. The following is a list of questions that perspective
investors should ask themselves when reviewing the historical record:
Did the fund manager deliver results that were consistent with general market returns?
Was the fund more volatile than the big indexes (it means did its returns vary dramatically throughout the
year)?
This information is important because it will give the investor insight into how the portfolio manager
performs under certain conditions, as well as what historically has been the trend in terms of turnover and
return. Prior to buying into a fund, one must review the investment company's literature to look for
information about anticipated trends in the market in the years ahead.
Size of the Fund:Although, the size of a fund does not hinder its ability to meet its investment objectives. However, there
are times when a fund can get too big. For example - Fidelity's Magellan Fund. Back in 1999 the fund
topped $100 billion in assets, and for the first time, it was forced to change its investment process to
accommodate the large daily (money) inflows. Instead of being nimble and buying small and mid cap
stocks, it shifted its focus primarily toward larger capitalization growth stocks. As a result, its
performance has suffered.

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Fund Transactional Activity:Portfolio Turnover:Measure how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is
calculated by taking either the total amount of new securities purchased or the amount of securities sold
-whichever is less - over a particular period, divided by the total net asset value (NAV) of the fund. The
measurement is usually reported for a 12-month time period.
Historical Performance:The investor should see the past returns of the fund and should compare it with the peer group fund.
Whatever the objective, the mutual fund is an excellent medium to accumulate financial assets and grow
them over time to achieve any of these goals.
Systematic Investment Plan (SIP):SIP is similar to a Recurring Deposit. Every month on a specified date an amount you choose is invested
in a mutual fund scheme of your choice. The dates currently available for SIPs are the 1st, 5th, 10th,
15th, 20th and the 25th of a month. There are many benefits of investing through SIP.
Benefit 1:Become A Disciplined Investor
Being disciplined - Its the key to investing success. With the Systematic Investment Plan you commit an
amount of your choice (minimum of Rs. 500 and in multiples of Rs. 100 thereof*) to be invested every
month in one of our schemes.
Think of each SIP payment as laying a brick. One by one, youll see them transform into a building.
Youll see your investments accrue month after month. Its as simple as giving at least 6 post dated
monthly cheques to us for a fixed amount in a scheme of your choice. Its the perfect solution for irregular
investors.
Benefit 2:Reach Your Financial Goal
Imagine you want to buy a car a year from now, but you dont know where the down-payment will come
from. SIP is a perfect tool for people who have a specific, future financial requirement. By investing an
amount of your choice every month, you can plan for and meet financial goals, like funds for a childs
education, a marriage in the family or a comfortable postretirement life.

53

Benefit 3:Take Advantage of Rupee Cost Averaging

Most investors want to buy stocks when the prices are low and sell them when prices are high. But timing
the market is time consuming and risky. A more successful investment strategy is to adopt the method
called Rupee Cost Averaging. We can reap this benefit by investing the amounts through a SIP.
Benefit 4:Grow Your Investment With Compounded Benefits
It is far better to invest a small amount of money regularly, rather than save up to make one large
investment. This is because while you are saving the lump sum, your savings may not earn much interest.
With HDFC MF SIP, each amount you invest grows through compounding benefits as well. That is, the
interest earned on your investment also earns interest.
Benefit 5:Do All This Effortlessly
Investing with SIP is easy. Simply give us post-dated cheques or opt for an Auto Debit from your bank
account for an amount of your choice (minimum of Rs. 500 and in multiples of Rs. 100 thereof*) and
well invest the money every month in a fund of your choice. The plans are completely flexible. You can
invest for a minimum of six months, or for as long as you want. You can also decide to invest quarterly
and will need to invest for a minimum of two quarters. All you have to do after that is sit back and watch
your investments accumulate.

CAREER OPPORTUNITIES IN THE FIELD OF FINANCIAL PLANNING

In view of the duties and responsibilities of financial planners there lies vast scope of
employment in the following fields:
Initially a financial planner can start his career with a wealth management firms, HNI, tax
consultancy, insurance product distributors, pension funds, financial services firm, banks and
financial institutions offering financial products at an entry level position i.e. trainee or
executive. Later on with the experience he can be absorbed in middle level management on

54

position of sales manager, wealth manager, relationship manager etc. On gaining more expertise
and experience in this filed he/she can rise to the position of functional head of the department
with increased responsibilities such as regional or area heads of his employer. If you have got the
specialization in anyone of the areas of financial investment then salary is no limit. Retirement
funds, HNIs and insurance require professionals with specialised experience of these products.
New opportunities lie in the field of financial planning of real estate and trusts which is still
untapped with lot of potential. In private companies there is always a huge demand for financial
planners. Experienced Financial Planners can find satisfying careers in investment banking,
financial consulting, and financial analysis and insurance companies.
Knowledge Process Outsourcing (KPO) firms provide employment to financial planners as Data
Analyst, Market Researcher, Client Development Analyst, Derivatives Analyst, Equity Analyst,
Research Associate etc. Similarly financial planners are much sought after in the brokerage
houses for positions such as research analysts, business analysts, research associates and
technical analysts etc.
Banks require qualified and experienced financial planners for managing their investment
advisory wing, managers for financial institutional investments and Investment Relationship
Manager for their portfolio and merchant banking divisions. For the trade finance divisions
relationship managers are required by banks. For retail division and mutual funds wings, the
professionals in financial planning are appointed by banks in various capacities. NBFCs (NonBanking Finance Companies), AMCs (Asset Management Companies) and financial planning
companies also recruit financial planning professionals at various positions.
Self-employment is also the option for those professionals who want to tap the existing potential
in their home towns or cities. A desired qualification with a set of skills is necessary conditions
for becoming a successful financial planner. The only thing required is interpersonal relations
and skills with fundamental knowledge of investment and financial planning. Financial planning
is a fee based service and the fees may be in form of commission from the client or fixed
depending upon the nature and type of advice and return on investment.
Journalism is an area where financial planners can capitalize their expertise provided they
possess writing, analytical and presentation skills with a passion for imparting financial
knowledge to the public with convincing ability analytical authenticity. In print media they can
be regular columnists on various specialized products or they can act as panel experts on
electronic media covering investment and business news.

55

Increasing financial literacy is gaining importance nowadays and laymen who are interested in
spreading basic knowledge of financial planning, retirement, wealth creation, asset management
and investment can be associated with the authoring of literature and books on the subject.
Financial Planners are supposed to possess interpersonal skills can deliver lectures, impart
education, organize seminars to literate and convince the people of various social and economic
backgrounds. Also there is enough potential in teaching, training and research in the area of
Financial Planning. Even financial planning and consultancy can be done on internet using
networking sites following professional and ethical code of conduct.
Financial Planners and their Role
As clear from the name, financial planners are the professionals who plan the funds or money of
their clients which is not only a tricky business but also challenging and difficult task. Every
individual wants to save and invest the funds for future to fulfill the liabilities and other social
commitments be it higher education to children, marriage of children, retirement, house
construction, medical and health purpose or any other. Financial planners offer their advice to the
persons on their investment and saving options to achieve their social, personal, professional
goals and commitments arising in future. Most people need guidance on where to invest, how to
save taxes, the best insurance scheme (life as well as medical), which avenue to invest in, which
stock to hold and which to sell, how to plan future career of their college going children and their
own retirement. For all such services; planners come into picture for rendering expert advice and
consultancy to their clients on utilizing the hard earned money and its better use for achieving
financial goals. The services provided by financial planners are not restricted to individuals but
also the corporate and institutional clients such as mutual funds, merchant banks, retirement
funds, insurance companies, portfolio management firms, stock investment companies, banks,
financial institutions, tax consultancy and pension managers also require their services. Thus, the
financial professionals working as financial planners can be categorized as individual and
institutional. The following role and functions are performed by the financial planners:
They identify the financial and personal goals of their clients and the time period of
investments or savings for planning the funds.
Financial planners assess and evaluate the capacity and financial strength of their clients for
better utilization of funds with them.
They study the market potential, investment avenues, instruments of investment, financial
products available and educate, suggest and advice to the clients.

56

 They assess the risk-return of the investment options with the help of analytical techniques and
in consonance with the risk bearing and risk taking capacity of their clients.
Tax consultancy is an area where financial planners are useful because they are in touch with
the latest taxation structure by the government and thus they suggest their clients to invest the
amount of money in tax-saving instruments for better return and assured appreciation.
They are also responsible for guiding and suggesting their clients about the comparative returnrisk profile of the invested funds in different instruments.
They keep their clients abreast with the updates on financial products having different
characteristics to suit their individual requirements.
Financial planners also help their clients by advising them about the right time to invest and
proper timing to divest or divert their money from one option to the other and for what time
period to remain invested in a particular instrument.
They help the clients by providing quick and immediate service according to their needs and
also process the documents and accomplish paper work formalities required thereby saving their
time.
Managing the wealth of their client HNIs (High Net worth Individuals) or corporate isone of
the functions performed by the financial planners.
Financial planners do financial analysis, business analysis, research related to financial and
expense performance, rate of return, depreciation, working capital and are also involved in
preparation of financial forecasts, budgets and analyze trends in revenue, expense, capital
expenditures and other related areas.
Retirement and insurance planning is also an area where financial planners have a role to play.
They advise their client on various pension schemes and insurance products with risk-return
profiling.
ASSET MANAGEMNT COMPANY
WHAT IS AMC? A company that invests its clients' pooled fund into securities that match its
declared financial objectives. Asset management companies provide investors with more
diversification and investing options than they would have by themselves.

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CAREER IN AMC:

Fund Management
In a mutual fund, the Fund Manager, who is also known as the portfolio manager, decides about
the investment of the fund's underlying securities (money received from investors for
investment), realizing capital gains or losses, and collects the dividend or interest income. The
investment proceeds are then passed along to the individual investors.
Whos required? Here, deep economic analysis is required for effective investment decision
making and therefore professionals from Commerce, Economics, Finance, Mathematics and
Management background are required. Chartered Accountants, MBA Finance, Financial
Analysts, Economics Masters, Statistics Masters are in huge demand. The pay package for such
professionals ranges between Rs. 3 lacs Rs. 6 lacs p.a. approx.
Operations
Investments on the recommendation & directions of the Fund Manager are actually required to
be done through series of trading transactions; for which Dealers are required.
National Stock Exchange (NSE) has a facility for testing and certification by launching NSE's
Certification in Financial Markets (NCFM). NCFM is an online testing system, a revolutionary
concept in administration of examinations and the only one of its kind today in the country. It
tests the practical knowledge and skills required to operate in the financial markets in a secure
and unbiased manner and awards certificates based on relative merits thus ensuring that the
calibre of persons entering this field is kept high in the best interests of a mature and vibrant
market.
It has been specified by SEBI that all brokers/dealers in the stock market have to
mandatorily obtain the NCFM certification.
The various Certification Modules are: Derivatives Market (Dealers) Module, Capital Market
(Dealers) Module, Debt Market (Basic) Module, Surveillance in Stock Exchanges Module,
NSDL - Depository Operations Module, Commodities Market Module, Corporate Governance
Module, Compliance Officers (Brokers) Module, Compliance Officers (Corporates) Module,
Information Security Auditors Module (Part-1 & Part- 2).
The certification remains valid for 5 years from the date of the test for all modules except
Derivatives Market (Dealers) Module, Commodities Market Module and Information Security
Auditors Module.
Whos required? Candidates having knowledge of Capital Markets, Derivatives, Equities, Stock
Exchange functioning, etc. are required along with certifications in one or more above mentioned

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Modules. The pay package ranges between Rs. 90 thousand to Rs. 1.20 lacs p.a. approx.
The Registrar & Custodian is a trust company, bank or similar financial institution responsible
for holding and safeguarding the securities owned within a mutual fund. A mutual fund's
custodian may also act as the mutual fund's transfer agent, maintaining records of unit holders
transactions and balances.
Whos required?Here, candidates from Secretarial, Legal background and semi-qualified
professionals are required. The pay package ranges between Rs. 80 thousand Rs 1.20 lacs p.a.
approx.

Marketing
The AMC launches various schemes through which it invites investors to put their money. To
reach the retail investors and provide them with the information about the schemes, extensive
marketing is done through various channels of the media.
The distribution / selling of these schemes are done through Agents, Advisors, Third-party
Distributors.
SEBI has made mandatory for any entity / person engaged in marketing and selling of mutual
fund products to pass AMFI certification test (Advisors Module) and obtain registration number
from AMFI. This certification remains valid for 5 years from the date of the test.
The Association of Mutual Funds in India (AMFI) is dedicated to developing the Indian Mutual
Fund Industry on professional, healthy and ethical lines and to enhance and maintain standards in
all areas with a view to protecting and promoting the interests of mutual funds and their unit
holders.

AMFI: The Association of Mutual Funds in India (AMFI) is the self-governing association of
mutual funds in India. Incorporated on August 22, 1995, as a non-profit organisation, it counts
the 46 asset management companies that are registered with the Securities and Exchange Board
of India (SEBI) as its members.
Whos required? Here, graduates having the AMFI certification can work as Business
Development Managers / Relationship Managers / Advisors for the marketing and distribution of
the mutual fund schemes. Relationship Managers / Advisors assist investors in their financial
planning by recommending them ideal investment portfolio and build a customer relation. The

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pay package ranges from Rs. 1.5 lacs to Rs. 2 lacs approx.
NCFM and AMFI certifications can be taken by anybody. There are no restrictions of age or
qualifications for anyone to take these Tests. These certification tests are automated online
examinations conducted on computer. One does not need any prior knowledge of computers to
be able to take the test.
Conclusion:
Mutual Fund industry provides huge job opportunities and has tremendous scope for making a
career in mutual funds.
CAREER AS AN ADVISOR:
Career Planning in AMFI Certified Mutual Fund Advisor
There is a great opportunity exists for Financial Planners in India as >35% of the world's youth
live in India of which 54% are below 25 Years of age and it is assumed that by year 2013, India
will have 33% productive youth. Why Mutual Fund? Mutual Funds are the products that are not
much penetrated in Indian market as compared to Insurance. So there is a great opportunity
exists for young youth who are interested to make their career in Financial Planning as there are
approximately more than 15 lacs Insurance Agents available whereas the Mutual Funds Agents
are less than 50000 in the market. So there is less competition for selling the Mutual Funds.

Now coming to the question of why one should sell Mutual Funds? There are number of reasons
can be listed for the answer. Lets us see one by one in brief why one should sell Mutual Fund
products.
1. It is easy to make more clients by selling mutual funds because as told earlier the
penetration of Mutual Funds in Indian market is low as compared to Insurance Products. So there
is more opportunity to acquire clients. As you become certified consultant you know the product
well and hence higher success ratio to begin with the selling Mutual Funds.
2. Less competition in market as again informed earlier there are very less Mutual Funds
Agents available in India (AMFI Certification is Mandatory to sell Mutual Funds) as compared
to Insurance Products. So you can easily sell the product. Also there is a huge demand of Quality
Mutual Funds Agent across the Mutual Fund Companies.

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3. With this Certification your client will be more satisfied as he knows that you have
thorough knowledge of product as you have completed the AMFI Certification. With mutual
funds in your offering, you are in a much better position to fully meet the clients financial and
investment needs.
4. Good Source of Income: Mutual Fund Agents gets attractive income in terms of commission.
Mutual fund is one product today that potentially has no limits to the volumes that you can
generate. Unlike insurance, where income is based on the premium you collect, in mutual funds
income is only the amount collected as well as on the entire AUM (Assets Under Management)
that you mobilise. Over long term you make much more money than doing insurance or any such
product!!!
5. Strong Industry Growth ahead: Indian economy growth is intact. There is a very strong
growth of mutual funds ahead. The reasons are many good product, low penetration, huge
market, growing income, changing mindset, lack of other attractive investment products, etc.
Mutual funds have all the products to match the different needs of different investors.
6. Retention & Loyalty of the Clients: People today look for easy, fast, and single service point
that provides them with solutions that meets their multiple needs. The client would probably
invest in mutual funds some day or later. Why not You do the same before anyone else gets to
your client?
7. Greater choice of products: Mutual Fund products basket is very big and varied meeting
every individuals need and capacity. The basket would include pure Equity funds (Diversified /
Sectoral / Index Funds) to pure Debt funds (Gilt / Income / Short Term Plans / Floating / Liquid
Funds) to Hybrid funds (MIPs / Balance / Arbitrage Funds) to the Tax Saving ELSS.
The first step in becoming a Mutual Fund Advisor is appearing for AMFI Certification
Examination. You can refer my resource AMFI Certified Mutual Fund Advisor. After clearing
the same and taking the registration number (ARN code) you can start advising and selling
mutual fund.

CAREER IN INSURANCE SECTOR

What are the best opportunities within insurance careers?

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There are a wide range of careers in insurance, from insurance agent careers to insurance adjuster
careers, plus careers in insurance sales, insurance broker careers, life insurance sales careers, etc.
As well as different job titles there are also a number of different sectors for you to consider from
life insurance careers and careers in medical insurance to pet insurance careers, plus specialist
careers in risk management insurance, state farm insurance careers and farmer insurance careers.
Insurance companies
Insurance companies take on the risk of financial loss to individuals and organisations, in return
for the payment of regular premiums.
Most companies specialise in either life and health policies, which tend to be personal, or
property and casualty, which tend to be corporate in some respect. Sometimes, they also
specialise in group or individual policies. Some larger companies cover different kinds of risks,
meaning that both underwriter and agent must be familiar with the different lines. Business
insurance, for instance, requires an assessment of the firm's whole operation.
Underwriters are the main link between the insurance company and the insurance sales agent.
They are responsible for calculating the level of risk and therefore the size of the premium
piayments, before writing the policies.
The Insurance sales agents act as intermediaries and, to an extent, advisors, and rarely make
decisions about accepting or rejecting applications. Their interest is to ensure that clients gain the
best protection for their lives, health, and property. They either work exclusively for one
insurance company, or act independently as brokers, representing several companies. In addition
to selling policies, agents and brokers may help clients to submit their claims after a loss.
Occupational Careers in Insurance
The following administrative support occupations, including clerical, account for 40% of
insurance-related jobs:

Insurance policy processing clerks.

General office clerks.
Insurance claims clerks.
Office and administrative support supervisors and managers.
Secretaries.
Adjustment clerks.

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Bookkeeping, accounting, and auditing clerks.

Receptionists and information clerks.
File clerks.
Word processors and typists.
Data entry keyers.

Executive, administrative, and managerial occupations comprise most of the remaining

percentage, including:

Insurance adjusters, examiners, and investigators.

General managers and top executives.
Insurance underwriters.
Claims examiners, property and casualty insurance.
Accountants and auditors.
Financial managers.

Marketing and sales occupations include:

Insurance sales careers.

Marketing and sales worker supervisors.
Professional specialty occupations include:
Computer systems analysts, engineers, and scientists.

Technicians and related support occupations include:

Computer programmers.
Legal assistants and technicians, except clerical.

Typical tasks in insurance careers

Insurance Sales Agents often visit prospective and existing customers' homes and places of
business to market new products and provide services. On a typical day, the agent's work might
include:

Preparing reports and records.

Identifying possible new clients.
Helping policyholders submit claims, if they have suffered a loss.
Offering and/or providing other financial services.

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Underwriters are usually based in the insurance company's head or main office. Some of those
working in property and casualty can be based in regional offices.
INSURANCE INDUSTRY JOBS
Listed are the insurance industry job titles that have been targeted as possible career
opportunities within the insurance industry:
There are many titles that are not included and we suggest further research to review other job
possibilities in the industry.
Actuary
Actuaries use their analytical skills to predict the risk of writing insurance policies on property,
businesses and the lives and health of individuals. Why does automobile insurance cost so much
more if you are under the age of 25? Because an actuary somewhere found that the risk of
insuring automobiles is highly age-dependent. Actuaries are a crucial part of the insurance
process because they use statistical and mathematical analysis to determine the risk of providing
coverage. To perform effectively, actuaries must be informed about general societal trends and
legislative developments that could affect risk. Actuaries can work either within insurance
companies or for government, pension planning organizations or third-party advisors.
Agent and Broker
Agents and brokers advise people and organizations on how to protect the things they value by
purchasing the right insurance contracts. They are the first ones contacted for insurance purposes
after an accident, fire or injury. An understanding of insurance contracts is essential to this type
of occupation. A career as an agent or broker can be financially rewarding. This occupation is
highly time-flexible, requires some background in business and good people skills.
Claims Adjuster
Adjusters negotiate insurance claims with those who have experienced a loss. The adjuster is
responsible for reaching a claim settlement that is fair to all parties involved. Those who are
successful in this occupation are resourceful, tactful and good with people. Some adjusters work
in the field, while others work in an office setting. Claims adjusters often have to travel to clients'
insured properties to inspect damage, in addition to processing the financial aspects of paying
claims.

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Service Representatives
Service representatives are the link in the field between the agents who sell policies and the
insurance companies who write policies. Field representatives must be good listeners and
communicators. This position requires learning about the products of many insurance companies
and establishing a good rapport with those companies. A background in liberal arts can be a great
preparation for this type of position.
Loss Control Specialist
Loss control specialists work to keep accidents and losses to a minimum. They visit factories,
shop floors and businesses to identify potential hazards and help to eliminate them. In the health
insurance arena they work with organizations to promote preventive healthcare in the workplace
or to limit exposure to certain types of ailments. This occupation requires an understanding of
safety management or engineering. A combination of a technical major and a business major
would be good preparation for a career as a loss control specialist.
Risk Manager
A risk manager is employed by an organization to help identify the risks that it faces and to make
recommendations for successfully dealing with these risks. The recommendations may include
the purchase of insurance, adoption of precautionary measures and presentations to upper
management. Risk managers are involved in the management of employee benefit plans.
Valuable skills for this occupation include knowledge of the insurance industry and business
practice, as well as good presentation skills.
Medical Case Coordinator
Health care case coordinators specialize in arranging and securing services for people with
chronic, acute or terminal illnesses, such as cancer, Alzheimers disease or AIDS. Some work
with patients that have substance abuse problems or mental health disorders. Medical and public
health social workers often serve as case coordinators, while other professionals in the field have
a background in health care management rather than social work.
Underwriter
Underwriters decide whether to provide insurance to applicants seeking coverage. An
underwriter evaluates an applicants exposure to risk and decides whether an applicant meets an

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insurers standards. An underwriter may also become involved in setting prices for insurance
applicants.
Underwriters assess known risks by:
Analysing data held on software applications. Studying consultants reports.Requesting and
analysing medical reports. Assessing reports from actuaries.
An increasing number of employees are spending time working by phone in call centres,
undertaking the following tasks:

Answering questions.
Providing information.
Entering data to produce quotations and estimates.
Taking claims information.
Answering medical questions.

Prospects for Insurance Careers

Employment of sales agents and underwriters has slowed down, due to the advances made
through development of software applications that considerably decrease data processing time.
Mergers of insurance companies have also led to few positions and jobs being combined.
Currently, the new jobs are in the growing fields of insurance, such as retirement planning and
long-term care insurance. Career prospects continue to be better in health / medical insurance,
rather than property, casualty and life insurance.
A successful insurance sales agent who also has strong organisational and people skills may
advance to become a manager in a local office. Sometimes it is possible to advance to an
executive position. However, once a good client base has been built up, it's often better to remain
in sales work, gaining a good sales commission. Some may go on to establish their own
independent agency or brokerage firm.

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LIFE INSURANCE AGENT VS. MUTUAL FUND AGENT

Do you know your mutual fund agents earning, agent who sells you mutual funds as well as
charge fee (fee based financial planners) or few online portals (where you feel so comfort to
invest online? Let us compare this issue in detail.
Let us say that tenure of investment is 15 years and investor is ready to invest yearly
Rs.1,00,000. Insurance agent as usual offers a traditional plan saying secured and no risk.
Whereas the Mutual Fund agent created a portfolio for you and recommended few mutual fund
products to invest. Now let us see what is the earnings from both the format of agents.
Insurance Agents Earnings:-Usually for traditional plans insurance commission will as high as
around 35% and this is called first year commission and rest of years commission is called as
renewal commission. But for 2nd and 3rd years it will be around 7.5%. From 4th year onward it

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will be fixed at 5%. That is the reason why insurance agents lure you by sharing commission in
first year of your buy. Because they are looking for long term 5% return what they get from you.
Mutual Fund Agents Earnings:-Mutual fund agents usually get four types of commissions
which are as below
1) One time transaction charge-This is fixed as Rs.150 for new investors of mutual fund and
Rs.100 for existing investors. This is the cost which will be deducted from your invested amount.
We need to neglect this cost as it is not high, one time and actually agent will bear this much to
close the sale. This will be deducted from your invested amount either one time if you have
invested lump sum or Rs.25 per month if you invested through SIP.
2) Upfront Commission-This is the commission which will be paid by mutual fund companies
to agents and it included in the total expense of mutual funds. Hence you will not feel the heat of
these expenses but indirectly you are paying for it. Your mutual fund agent will receive it
whenever you invest newly. This commission varies from product to product, high in ELSS
funds (around 4.5% to 1%), equity schemes (around 0.5% to 2.5%) and low in debt funds
(around 0.2% to 0.8%).
3) Trial Commission-One of the undisclosed commission structure which you will not come to
know is this trail commission. This commission structure range from 0.5% to 1% based on the
products and mutual companies. This will be paid to your agents even if you not invest also but if
your investment stayed without withdrawal. This will be paid on your total net worth or asset
under management. Suppose agent have around 100 clients and including all of them he have
asset under management is around Rs.5 Crores then 0.5% of Rs.5 Cr is Rs.2,50,000 annually.
If next year due to good market condition or additional investment by existing clients it grown to
Rs.10 Cr then his next year commission will be Rs.5,00,000. But at the same time few clients
withdrawn their money or total asset under him depreciated due to bad market condition to
Rs.2.5 Cr then he will receive Rs.1,25,000 in that year.
This trial commission structure is actually created with good intention to protect investors in
giving them good fund selection. If agents advice is good and investors money grows then both
agents and investor will get profit otherwise both will be looser. But more to investor than agent.
4) Fee based on AUM of Client-This structure of collecting fee was emerged once the ban on
entry-load. It depends on agents to agents. It usually ranges from 1% to 2% based on the service
and value agents provide you. I saw lot agents charge this fee saying they will not get anything

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from investor investment as nothing will be disclosed to client either upfront or trial (both are
adjusted in NAV itself). Investors are thus fooled that the only expenses to them is the fee they
are paying to their agents. But remember that mutual fund companies will not pay this fee to
agent, instead he need to collect it from investors.
Now after understanding earning ways for both life insurance and mutual fund agents, it is now
time to check who earns more. For calculation purpose I considered Life Insurance commission
structure as-1st year commission 35% (including bonus commission), 2nd and 3rd yr
commission 7.5% and from 4th year onward it is 5%.
For mutual fund advisers earning, I consider upfront as 0.5% and trial also 0.5%. But excluded
the fee they charge as of now. Also I considered equity mutual fund investment with growth of
12%.
In both the cases yearly investment is Rs.1,00,000 and time period is 15 years. I considered 15
yrs period, because normally insurance agents will sell you the product more than 15 years as
their earnings are also based on the term of the policies. Below is the calculation and result.

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From above table you noticed that in the beginning period insurance agents earnings are high
and after 4th year it is constant till end. Whereas mutual fund agents earnings are low at
beginning but drastically improved as AUM grows. When you compare the earnings at end, both
are almost equal.
So can you buy life insurance product? Nobecause you are buying product to fulfill your
financial dreams but not your agents. Hence what I am not pointing here is buy life insurance
products as investment. Instead I am pointing is how few mutual fund agents hide their earnings
and disclose the earnings of life insurance agents.
Nothing is free on this earthincluding my advice. But their need to be some value addition and
customer centric approach. I found few investors who are still paying entry load as their SIPs
were started before entry load ban and still continues.

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CONCLUSION:
In the field of mutual funds, there is great opportunity to make a career of
oneself. You will earn unimaginable amount as a brokerage if you will practice
as an agent and a good salary if will work as an agent. Its true that you have
to do hard work for winning the heart of people as well as making aware of
them about the right way and most profitable way of investment but once
you will make yourself established as an esteemed agent nobody will stop
you from getting success in this field.
Apart from this, one will help people in investment of their savings in right
direction which will help them in the way they want. One will help in
mobilising the savings in whole economy which will help in managing the
funds of different companies as well as will upgrade the economy of a
country.

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