CHAPTER-2

2.1 .REVIEW OF LITERATURE

Books

My Khan, (2007) Says that a mutual fund may invest money collected under any of its schemes
only in (a) securities (b) money market instruments (c) privately placed debentures (d)
securitized debt instruments both assets- backed (e) gold- gold related (f) real estate assets (g)
infrastructure debt instruments and assets. The investment should be in accordance with the
investors objectives of the relevant schemes money collected under any money market scheme of
mutual fund should be invested only in money market instruments.1

S.Mohan, (2010) Says that Mutual fund help the small and medium sized investors to
participate in today's complex and modern financial scenario. Investors can participate in the
mutual fund by buying the units of the fund. The income earned through these investment and
capital appreciation realized by the schemes and shared by its unit holders in proportion to the
number of the units owned by them.2

G.Ramesh Babu, (2005) Says that Risk is the essence of the valuation of a financial
instruments. The value of financial assets depends upon many factors. Risk means a chance the
expected gain profit or return may not materialized. The actual outcome of the investment may
be less than the expected outcome. The risk must be considered in determining the value and
making the investment choices. Risk and return are the foundations for maximizing the
shareholders wealth.3

Donald E, (2011) Says that Mutual fund dynamic financial Institutions play a crucial role in an
economy by mobilizing Savings, and investing them in the capital markets. Thus mutual funds
establish a link between Savings and the capital market. They mobilize funds in the savings
market and act as complementary to banking.4

Gupta S.P, (1991) Says that the mutual play an active role in promoting healthy capital market.
The mutual fund increases liquidity in the money market. The asset holding pattern of mutual
fund all over the world indicates the dominant role of mutual funds in money and capital market.
Mutual Funds have been identified as one of the important factors pushing up the market prices
of securities. Mutual fund in India have emerged as a critical institutional linkage among various
financial segments like savings, capital markets and the corporate sectors. Above all, Mutual
Funds have given a new direction to the flow of personal savings and enabled small and medium
investors in remote rural and semi-urban areas to reap the benefits.5

Suresh Babu, (2003) Says that Mutual fund being an institutional investment agency are treated
as a suitable vehicle specially for small investors, who normally feel shy of the capital market
and are unable to predict its conditions. Through different schemes, mutual funds can provide
expert advice and Portfolio Management by reducing unsystematic risk, while offering good
Returns.6

Madhusudan V, (2008) Says that Mutual fund as an investment option have become very
attractive for retail investors who are interested in the financial market but do not have the time,
expertise and experience in good stock picking.

Investor in is greenhorn when it comes to financial markets; the causes maybe many the lack
opportunity, lack of conceptual understanding and the influence of affixed income orientation in
Indian culture. At present salaried person’s savings are more often deposited in mutual funds as
they are found to be a better Investment avenue as mutual fund is gaining so much of importance
and most of the investors preferring mutual funds it is essential to find out the factors influencing
the investors before selecting the mutual fund company.7

Avadhani V.A, (2003) Says that Now what is bank rates have fallen down and are generally
below the inflation rate. Therefore, keeping large amounts of money in bank is not is not a wise
option, as in real terms the value of money decreases over a period of time. One of the alternate
option is to invest the money in stock market. But a common investor is not informed and
competent enough to understand the in intricacies of stock market. this is where mutual Funds
come to rescue. A mutual fund is a group of investors operating through a fund manager to
purchase a diverse portfolio stocks and bonds. 8

Andrew Peterson, (2012) Says that a mutual fund company is an investment company that
pulls money from clients to invest in stocks and other securities chosen by a fund manager, a
group of managers, to create a Portfolio. Each fund company may contain many mutual funds.
When an investor buys shares of a mutual fund there actually purchasing a variety group of
securities that diversifies the investment and reduces the risk. This is different form from buying
shares of a stock which ties the investor’s money to the fortunes of one company. If investors
where to purchase all of those investment securities individually, they would pay commissions
on each transaction. With a mutual fund,

Matthe p, (2008) Says that Since a mutual fund is a financial instrument that comprises aa
collection of stocks, bonds, or other investments, it is priced differently than individual stocks.
Mutual funds are priced only once at the end o each trading day, rather than in real-time, as each
individual fund investment could vary second-by-second causing the mutual fund price to change
a great deal from one moment to the next. At the close of the arket wen the securities have
stopped trading, the fund’s price i calculated using the closing price of the individual securities
that comprises the portfolio.10

John C, (2010) Says that the investment choice is now offered by mutual funds are many and
varied. Before we look at all the options I first show how the now- proven principles of passively
managed, lo- cost market indicators funds have worked in mutual experience.11

Kathleen s, (1998) Says that over the past 10 years, mutual fund assets have ballooned 600
percent. Mutual Funds continue to proliferate and play an integral part in many investors
portfolios. And many investors persist in believing that the biggest influence on their
performance is investment decision made by their fund managers. So, the question of how
effectively mutual fund manager performs their functions and the extent (if any) to which they
add value through active management grows increasingly important.12

Gloria Garrett Samson, (1996) Says that when a fund’s manager factors taxes into investment
decisions investors should be better. Each January millions of mutual funds investors open their
1099s to face the grim news of how much taxable income and then they will have to report. But
in the past five years no new type of fund has provided more good news for certain investors
than tax-managed mutual funds. When an investor holds mutual fund outside IRAs and other
tax-deferred retirement accounts,.Many mutual fund shareholders find taxes on interest, dividend
and realized gains are the largest cause they face.13
Randall, (2002) Says that International Monetary Fund influences the economic policies of the
countries to which it lends country experts and officials who represent boring Nations content
that the IMF experts tremendous influence although they disagree about whether that influence is
benign or harmful. Quantitative researches, on the other hand, have tended to find little evidence
that the IMF influences national economic policies.14

Lynda Lee Adams (1998) Says that In the first session of my “Successful fund Raising” class I
instruct students to draw a circle on a piece of paper and to divide the circle into three sections,
labelling each section and it represents there guess as to the percentages of all U.S. philanthropy
that come from (1) individuals (2) foundations, and (3) corporations individual are single people
and families who contribute to non-profit organisations. Foundations are legally created entities
required to donate a certain percentage of their assets to non-profit organisations. corporations
are profit making entities allowed to give contribution to non profit organisations.15

Albert R, (2004) Says that public pension schemes, all social security schemes, as they are
known in some countries, have long been recognised as having major economic and social
implications. In addition to their obvious social welfare objective of providing adequate
retirement incomes for the aged, public pension schemes can influence economic performance
and capital accumulation through their effect on taxes and intergenerational transfers. 16

Charles A, (2000) Says that Mutual Fund remains a cost-effective way for any investor to
achieve a diversified portfolio of stocks and bonds. Fund investing was a Leap of faith. You
trusted in the manager. But fund investing was also something more. It was a way for the
average person one with neither great wealth nor market to get into the stock market.17

Charles A, (2000) Says that it might seem that everyone owns mutual funds these days, but the
truth is that no one actually needs to. You can get everything a mutual fund delivers by investing
in individual stocks in fact, there are there are all kinds of websites, online communities and
clubs that will tell you that funds are Passé.18

Austin Murphy, (2000) Says that A large number of different assets exist into which a favour
can invest cash not currently needed, and investor must choose the what combination best suits
there in western care needs. Because more money is considered to bring more happiness or
utility, investors generally seek to maximize the return on their mutual fund Investments.
Although maximizing investor return and wealth is usually assume to increase an individual’s
happiness or utility, the marginal utility of wealth and conception is normally found to decline
with increase in the level of wealth and conception.19

K.Thomas liaw, (2012) Says that In an effort to enhance investors economic decision making
and to increase financial literacy in the marketplace, state and federal governments requires
mutual fund companies to provide disclosure within mutual fund advertising. With the
importance and growth of individual investment and financial management, consumer groups as
well as policy makers have suggested that financial companies should provide advertising
disclosures that could assist investor’s information processing.20

William F, (2007) Says that Against this backdrop, in order to provide guidance to mutual fund
companies and thereby facilitate more effective financial disclosures in advertising, Federal
Trade Commission (FTC) and the securities and exchange Commission (SEC) developed and
provided guidelines about the required types and acceptable standards for affirmative disclosures
in policy statement and orders specifically, the FTC views advertising disclosures as a
information remedies that can reduce potential advertising discloses information remedies that
can reduce potential advertising deception or unfairness. Under the FTC’s and unfairness
authority and deception jurisdiction, the SEC issues and enforces trade regulation that pertain to
add claims and disclosures for all mutual funds products.21

Brooke Herrington, (2008) Says that Following the development of Capital asset pricing
model (CAPM), several studies use this model and its extension to evaluate the ex post
performance of mutual fund. Past literature analyze we performance on the basis of a given
investment horizon, one month. However, there a difference risks attitudes for mutual funds with
various investment policies. Then, the holding periods for invested assets as well as the tune-gap
to gust the portfolio composition and their weights under management differ for various funds.
Thus to evaluate all types of fund performance based on the same investment horizon seems to
be unreasonable.22

Jan Toporowski, (2000) Says that The buying and selling of existing stock is important in
ensuring that quoted firms remain efficient and seek to maximize their profit. The stock market
and courageous efficiency and profitability of firm and thereby benefit the economy in general.23