A

Topic
on Dissertation
Mutual Fund Investment through
Systematic Investment Plan
(The better way to invest in Mutual Fund)
BY

BABAR KISAN TUKARAM

MBA (FINANCE)
UNDER THE GUIDANCE OF
PROF. AJIT DESHPANDE
SUBMITTED TO
UNIVERSITY OF PUNE
SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR
THE AWARD OF DEGREE IN MASTER OF BUSINESS ADMINISTRATION
(2015-16)

PUNE DISTRICT EDUCATION ASSOCIATION'S

COLLEGE OF ENGINEERING
MANJARI, PUNE-412307. INDIA.
TEL NO: (020)26996625 FAX:(020) 26996275

COLLEGE OF ENGINEERING

CERTIFICATE
This is to certify that the Dissertation topic MUTUAL FUND
INVESTMENT THROUGH S.I.P. carried out by BABAR KISAN
TUKARAM, MBA Final year of Pune District Education
Association's COLLEGE OF ENGINEERING as a fulfillment of
MBA degree of the University of Pune. He has worked under our
supervision and guidance and also he has completed his dissertation
satisfactorily.

(Prof. Ajit Deshpande)

Guide & HOD

ACKNOWLEDGEMENT
I take this opportunity to express my deep sense of gratitude, thanks and regards
towards all of those who have directly or indirectly helped me in the successful
completion of this dissertation.
I present my sincere thanks to Prof. Ajit Deshpande & Prof. Gudmithe for their
wonderful support and inspirable guidance.
I also thanks, Prof. Vikas Hirulkar, who have sincerely supported me with the
valuable insights into the completion of this Dissertation.
I am grateful to all faculty members of PDEs College of Engineering and my
friends who have helped me in successful completion of this dissertation.

Date :

(BABAR KISAN TUKARAM)

Aim & Objectives :

Aim : To understand the potential benefits of mutual fund.

Objectives1. To find out how to sell different instruments related to mutual fund through S.I.P.
2. To explore the opportunity among small as well as big investor.
3. To get the maximum investor in the market of India.
4. To generate long term capital appreciation from a portfolio i.e. invested pre-dominantly in
equity & equity related instruments.

What is a Systematic Investment Plan? How does it work?

What is a Systematic Investment Plan?

A Systematic Investment Plan or SIP is a smart and hassle free mode for investing money in mutual
funds. SIP allows you to invest a certain pre-determined amount at a regular interval (weekly, monthly,
quarterly, etc.). A SIP is a planned approach towards investments and helps you inculcate the habit of
saving and building wealth for the future.
How does it work?
A SIP is a flexible and easy investment plan. Your money is auto-debited from your bank account and
invested into a specific mutual fund scheme. You are allocated certain number of units based on the
ongoing market rate (called NAV or net asset value) for the day.
Every time you invest money, additional units of the scheme are purchased at the market rate and added
to your account. Hence, units are bought at different rates and investors benefit from Rupee-Cost
Averaging and the Power of Compounding.
Rupee-Cost Averaging
With volatile markets, most investors remain skeptical about the best time to invest and try to 'time' their
entry into the market. Rupee-cost averaging allows you to opt out of the guessing game. Since you are a
regular investor, your money fetches more units when the price is low and lesser when the price is
high. During volatile period, it may allow you to achieve a lower average cost per unit.
Power of Compounding
Albert Einstein once said, "Compound interest is the eighth wonder of the world. He who understands it,
earns it... he who doesn't... pays it." The rule for compounding is simple - the sooner you start investing,
the more time your money has to grow.
Example
If you started investing Rs. 10000 a month on your 40th birthday, in 20 years time you would have put
aside Rs. 24 lakhs. If that investment grew by an average of 7% a year, it would be worth Rs. 52.4 lakhs
when you reach 60.

However, if you started investing 10 years earlier, your Rs. 10000 each month would add up to Rs. 36
lakh over 30 years. Assuming the same average annual growth of 7%, you would have Rs. 1.22 Cr on
your 60th birthday - more than double the amount you would have received if you had started ten years
later!
Other Benefits of Systematic Investment Plans
Disciplined Saving - Discipline is the key to successful investments. When you invest through SIP, you
commit yourself to save regularly. Every investment is a step towards attaining your financial objectives.
Flexibility - While it is advisable to continue SIP investments with a long-term perspective, there is no
compulsion. Investors can discontinue the plan at any time. One can also increase/ decrease the amount
being invested.
Long-Term Gains - Due to rupee-cost averaging and the power of compounding SIPs have the potential
to deliver attractive returns over a long investment horizon.
Convenience - SIP is a hassle-free mode of investment. You can issue a standing instruction to your
bank to facilitate auto-debits from your bank account.
SIPs have proved to be an ideal mode of investment for retail investors who do not have the resources to
pursue active investments.

Why Should You Invest in Mutual Funds?

When considering investment opportunities, the first challenge that almost every investor faces is a
plethora of options. From stocks, bonds, shares, money market securities, to the right combination of two
or more of these, however, every option presents its own set of challenges and benefits.
So why should investors consider mutual funds over others to achieve their investment goals?
Mutual funds allow investors to pool in their money for a diversified selection of securities, managed by
a professional fund manager. It offers an array of innovative products like fund of funds, exchangetraded funds, Fixed Maturity Plans, Sectoral Funds and many more.
Whether the objective is financial gains or convenience, mutual funds offer many benefits to its
investors.

Beat Inflation
Mutual Funds help investors generate better inflation-adjusted returns, without spending a lot of time
and energy on it. While most people consider letting their savings 'grow' in a bank, they don't consider
that inflation may be nibbling away its value.
Suppose you have Rs. 100 as savings in your bank today. These can buy about 10 bottles of water. Your
bank offers 5% interest per annum, so by next year you will have Rs. 105 in your bank.
However, inflation that year rose by 10%. Therefore, one bottle of water costs Rs. 11. By the end of the
year, with Rs. 105, you will not be able to afford 10 bottles of water anymore.
Mutual Funds provide an ideal investment option to place your savings for a long-term inflation adjusted
growth, so that the purchasing power of your hard earned money does not plummet over the years.
Expert Managers
Backed by a dedicated research team, investors are provided with the services of an experienced fund
manager who handles the financial decisions based on the performance and prospects available in the
market to achieve the objectives of the mutual fund scheme.
Convenience
Mutual funds are an ideal investment option when you are looking at convenience and timesaving
opportunity. With low investment amount alternatives, the ability to buy or sell them on any business
day and a multitude of choices based on an individual's goal and investment need, investors are free to
pursue their course of life while their investments earn for them.
Low Cost
Probably the biggest advantage for any investor is the low cost of investment that mutual funds offer, as
compared to investing directly in capital markets. Most stock options require significant capital, which
may not be possible for young investors who are just starting out.
Mutual funds, on the other hand, are relatively less expensive. The benefit of scale in brokerage and fees
translates to lower costs for investors. One can start with as low as Rs. 500 and get the advantage of long
term equity investment.
Diversification
Going by the adage, 'Do not put all your eggs in one basket', mutual funds help mitigate risks to a large
extent by distributing your investment across a diverse range of assets. Mutual funds offer a great
investment opportunity to investors who have a limited investment capital.
Liquidity
Investors have the advantage of getting their money back promptly, in case of open-ended schemes
based on the Net Asset Value (NAV) at that time. In case your investment is close-ended, it can be
traded in the stock exchange, as offered by some schemes.

Higher Return Potential

Based on medium or long-term investment, mutual funds have the potential to generate a higher return,
as you can invest on a diverse range of sectors and industries.
Safety &Transparency
Fund managers provide regular information about the current value of the investment, along with their
strategy and outlook, to give a clear picture of how your investments are doing.
Moreover, since every mutual fund is regulated by SEBI, you can be assured that your investments are
managed in a disciplined and regulated manner and are in safe hands.
Every form of investment involves risk. However, skilful management, selection of fundamentally sound
securities and diversification can help reduce the risk, while increasing the chances of higher returns
over time.
Determine Your Investment Objectives and Understanding Your Risk Profile
Like any purchase decision, your selection of a mutual fund scheme should be based on your
expectations and the funds' ability to fulfill these goals. It is important to be clear about your investment
objective before you enter into a buying decision.
If you are planning to build a mutual fund portfolio, the first step is to examine your current situation.
Ask yourself questions like:
1. Why am I investing in a mutual fund?
2. What kind of returns do I expect?
3. What portion of my net worth would I like to set aside for investments?
4. What do I intend to use the gains for? How many years do I have?
5. What is my investment objective?
a. Capital Appreciation
b. Capital Preservation
c. Achieving sustainable long term growth
d. Combination of Income and Capital growth
6. What kind of risk am I willing to take in the long run?

Be Clear About Your Investment Objectives

Investment objectives can be broadly classified into:

1. Generating an additional source of income

2. Financing future needs
a. Buying a home
b. Building a retirement corpus
c. Child's education and marriage
d. Legacy Planning
3. Increasing savings/ Inducing savings
4. Reducing tax liability
5. Protecting your savings from inflation
Evaluate Your Risk Appetite
To fulfill any investment objective, investors should first evaluate their risk appetite. While some
investors are satisfied by investing in a low-risk : low-return scheme, others are willing to endure shortterm loss for long-term potential gains.
A risk profile offers you suggestions about the investment options that best suit your needs and lifestyle.
Factors That Determine Your Risk Appetite
1. Current Scenario - Your age, financial dependents, assets and liabilities, sources of income, level of
engagement (active or passive investor) and investible capital
2. Past Experience - Knowledge about investment products, inclination to learn, nature and composition
of the last held portfolio and its performance

3. Future Outlook - Time horizon available to fulfill the investment objectives, liquidity requirements
in the near future, importance of tax savings vis-a-vis return on investment
4. Investment Attitude - Willingness towards risk taking, ability to withstand short-term notional losses
in return for long-term high returns
Based on your responses, an experienced MF advisor can determine your risk appetite and classify you
as a conservative, assertive or an aggressive investor (there could be as many as five to seven investor
classifications suggesting different debt-equity allocations).
Mutual Fund Types Based on Risk Profile
Your risk appetite is an important factor while choosing the mutual funds scheme/s that fits your goals of
growth, stability and timeframe.
1. A conservative investor's primary objective is to preserve the capital and receive regular income.
They have a low tolerance for risk and hence a major chunk of their investment should be allocated to
debt or money market mutual funds like income schemes, FMPs, etc.
2. A moderately aggressive investor is the one who is willing to take controlled risk for moderate
returns. Such investors are generally recommended a mix of balanced, income, and index schemes so
that they can benefit from a balanced portfolio.
3. Aggressive investors consider risk as an opportunity and leverage their experience and knowledge to
take intelligent financial decisions. The major share of their investment, therefore, goes to growth and
equity schemes.
For most investment schemes, risk and returns are directly proportional. It is important to create the right
balance between the two based on your objectives and risk appetite.
Different Types and Kinds of Mutual Funds
The mutual fund industry of India is continuously evolving. Along the way, several industry bodies are
also investing towards investor education. Yet, according to a report by Boston Analytics, less than 10%
of our households consider mutual funds as an investment avenue. It is still considered as a high-risk
option.
In fact, a basic inquiry about the types of mutual funds reveals that these are perhaps one of the most
flexible, comprehensive and hassle free modes of investments that can accommodate various types of
investor needs.
Various types of mutual funds categories are designed to allow investors to choose a scheme based on
the risk they are willing to take, the investable amount, their goals, the investment term, etc.

Let us have a look at some important mutual fund schemes under the following three categories
based on maturity period of investment:
I. Open-Ended - This scheme allows investors to buy or sell units at any point in time. This does not
have a fixed maturity date.
1. Debt/ Income - In a debt/income scheme, a major part of the investable fund are channelized towards
debentures, government securities, and other debt instruments. Although capital appreciation is low
(compared to the equity mutual funds), this is a relatively low risk-low return investment avenue which
is ideal for investors seeing a steady income.
2. Money Market/ Liquid - This is ideal for investors looking to utilize their surplus funds in short term
instruments while awaiting better options. These schemes invest in short-term debt instruments and seek
to provide reasonable returns for the investors.
3. Equity/ Growth - Equities are a popular mutual fund category amongst retail investors. Although it
could be a high-risk investment in the short term, investors can expect capital appreciation in the long
run. If you are at your prime earning stage and looking for long-term benefits, growth schemes could be
an ideal investment.
3.i. Index Scheme - Index schemes is a widely popular concept in the west. These follow a passive
investment strategy where your investments replicate the movements of benchmark indices like Nifty,
Sensex, etc.
3.ii. Sectoral Scheme - Sectoral funds are invested in a specific sector like infrastructure, IT,
pharmaceuticals, etc. or segments of the capital market like large caps, mid caps, etc. This scheme
provides a relatively high risk-high return opportunity within the equity space.
3.iii. Tax Saving - As the name suggests, this scheme offers tax benefits to its investors. The funds are
invested in equities thereby offering long-term growth opportunities. Tax saving mutual funds (called
Equity Linked Savings Schemes) has a 3-year lock-in period.
4. Balanced - This scheme allows investors to enjoy growth and income at regular intervals. Funds are
invested in both equities and fixed income securities; the proportion is pre-determined and disclosed in
the scheme related offer document. These are ideal for the cautiously aggressive investors.

II. Closed-Ended - In India, this type of scheme has a stipulated maturity period and investors can
invest only during the initial launch period known as the NFO (New Fund Offer) period.
1. Capital Protection - The primary objective of this scheme is to safeguard the principal amount while
trying to deliver reasonable returns. These invest in high-quality fixed income securities with marginal
exposure to equities and mature along with the maturity period of the scheme.
2. Fixed Maturity Plans (FMPs) - FMPs, as the name suggests, are mutual fund schemes with a defined
maturity period. These schemes normally comprise of debt instruments which mature in line with the
maturity of the scheme, thereby earning through the interest component (also called coupons) of the
securities in the portfolio. FMPs are normally passively managed, i.e. there is no active trading of debt
instruments in the portfolio. The expenses which are charged to the scheme, are hence, generally lower
than actively managed schemes.
III. Interval - Operating as a combination of open and closed ended schemes, it allows investors to trade
units at pre-defined intervals.
Which scheme should I invest in?
When it comes to selecting a scheme to invest in, one should look for customized advice. Your best bet
are the schemes that provide the right combination of growth, stability and income, keeping your risk
appetite in mind.
Genesis
As the name suggests, a 'mutual fund' is an investment vehicle that allows several investors to pool their
resources in order to purchase stocks, bonds and other securities.

These collective funds (referred to as Assets Under Management or AUM) are then invested by an
expert fund manager appointed by a mutual fund company (called Asset Management Company or
AMC).
The combined underlying holding of the fund is known as the 'portfolio', and each investor owns a
portion of this portfolio in the form of units.

History
The mutual fund industry in India began in 1963 with the formation of the Unit Trust of India (UTI) as
an initiative of the Government of India and the Reserve Bank of India. Much later, in 1987, SBI Mutual
Fund became the first non-UTI mutual fund in India.
Subsequently, the year 1993 heralded a new era in the mutual fund industry. This was marked by the
entry of private companies in the sector. After the Securities and Exchange Board of India (SEBI) Act
was passed in 1992, the SEBI Mutual Fund Regulations came into being in 1996. Since then, the Mutual
fund companies have continued to grow exponentially with foreign institutions setting shop in India,
through joint ventures and acquisitions.
As the industry expanded, a non-profit organization, the Association of Mutual Funds in India (AMFI),
was established on 1995. Its objective is to promote healthy and ethical marketing practices in the Indian
mutual fund Industry. SEBI has made AMFI certification mandatory for all those engaged in selling or
marketing mutual fund products.

Why should one invest in a mutual fund?

1. MFs are managed by professional fund managers, responsible for making wise investments according
to market movements and trend analysis.
2. MFs allow you to invest your savings across a variety of securities and diversify your assets according
to your objectives, and risk tolerance.
3. MFs provide investors the freedom to earn on their personal savings. Investments can be as less as Rs.
500.
4. MFs offer relatively high liquidity.
5. Certain mutual fund investments are tax efficient. For example, domestic equity mutual funds
investors do not need to pay capital gains tax if they remain invested for a period of above 1 year.

What are the different types of mutual funds?

Each mutual fund scheme has its own objective that determines its assets allocation and investment
strategy.

These are classified according to their maturity period, or investment objective. One can also classify
mutual funds as 'open ended funds' - where investors may invest or redeem at any point in time and
'close ended funds' - where investors can invest only during the initial launch period known as the NFO
(New Fund Offer) period.
Mutual funds classified according to their investment objective range from Equity Funds (with
substantial risk), to Money Market Funds (which are very safe). Other types include debt schemes, index
funds, balanced funds, etc.

How does one earn returns in a mutual funds?

After investing your money in a mutual fund, you can earn returns in two forms:
1. In the form of dividends declared by the scheme
2. Through capital appreciation - meaning an increase in the value of your investments.

Conclusion :
To conclude, I wish to state that an investor must always be alive to the present situation. Selection of
mutual fund after analyzing its track record, investment of some amount regularly in SIP, investment of
maximum amount whenever opportunity arises and finally regular systematic withdrawal / redemption
after a suitable period can prove most beneficial to the investor. People do not have any awareness
regarding systematic investment planning, they do have a knowledge regarding mutual fund but not fully
conversant. Few investor do understand systematic investment planning as like mutual fund that why
they dont want to take the risk.

References :
1. www.myuniverse.com
2. www.policybazaar.com
3. www.economictimes.com
4. www.investing.com