Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Wealthy individuals and institutions have always had access to professional money
managers. They also have the wherewithal to properly diversify their holdings. These
are the two major disadvantages for the small time individual investor – the relatively
small size of their portfolio does not allow them to properly diversify and most top
money managers require a minimum of $250,000 (or more) to open an account.
Mutual funds provide the answer for the individual investor. Most have very low
initial investment requirements and some have no minimum requirement at all – you
can start investing with as little as $100.00 or even less!
It is by pooling the money of many individuals that mutual funds are able to provide
the diversification and money management (along with many other advantages) that
were once reserved only for the wealthy.
Professional money managers take this pool of money and invest it in a wide variety
of stocks, bonds, or other securities depending on the investment objective, or goal, of
the particular fund. It is the investment objective of the fund that guides the manager
in selecting the various securities for the fund.
It is the investment objective of the mutual fund that also guides the investor on which
funds to invest in. Since different investors have different objectives, there are a
number of different kinds of mutual funds, i.e., some mutual funds may provide
monthly income while others seek long-term capital appreciation.
Mutual funds can be classified according to their investment objective. Some of the
classifications include money market funds, growth funds, balanced funds, income
funds, and many others. We will discuss the many different types of funds and their
characteristics elsewhere on this website. (See Categories of Mutual Funds.)
When you invest in a mutual fund you hope that the value will rise and you can
eventually sell your shares for a profit. This is one of the ways you can profit with
mutual funds. Another way is through capital gains. When a mutual fund sells a
security for a higher price than it originally paid for it, it is known as a capital gain.
Most mutual funds distribute their capital gains to shareholders at least annually, some
more often. The last way to profit with mutual funds is with dividends or interest. If
the fund has invested in bonds or dividend-paying stocks, it must pass the dividends
or interest earned on to its shareholders. Like capital gains, this is done at least
annually.
When you invest your money in a mutual fund, you buy shares in that fund. To
determine the price of those shares, each day the fund adds up the total value of the
securities held in its portfolio. This total is divided by the number of shares
outstanding. The resulting figure is known as the Net Asset Value or NAV.
To find out the value of your holdings, you simply multiply the number of shares you
own by the net asset value. The NAV of most funds is listed in most daily newspapers.
The NAV will change daily depending on how well the underlying securities of the
fund perform. If the securities held by the fund go up in value so will the value of
your shares.
OPEN END & CLOSED END MUTUAL FUNDS
As stated above, mutual funds are generally classified according to the investment
objective of the fund. They are also classified according to how they are bought and
sold. There are open- or closed-end funds and there are load or no-load funds.
An open-end mutual fund is a mutual fund that continuously issues new shares as
needed and buys them back when investors wish to sell. There is no limit to how
many shares an open-end fund can sell. The buy and sell price is based on the net
asset value of the fund. The majority of mutual funds on the market today are open-
end funds and are the type we are concerned with in this tutorial.
Load funds are simply mutual funds with a sales charge, or load. Load funds are
generally sold by stockbrokers, financial planners, or other financial salespeople who
charge you a commission every time you buy new shares. Under rules set by the
National Association of Securities Dealers (NASD), the maximum charge or load
allowed is 8.5% which is deducted from the amount of your investment. On a $1,000
investment, for example, you are really beginning with just $915.00. The difference
goes to the salesperson who sold you the shares. This is known as a front-end load.
There may also be a fee charged when you redeem, or sell, your shares. This fee,
known as a back-end load, may be the only charge or it may be in addition to the
front-end load.
No-load funds are mutual funds with no sales charge. They are generally bought
directly from the fund. 100% of your money is invested in shares of the particular
fund. Similar to no-load funds are funds known as low-load funds. These are funds
with a load of between 1% and 3% and are bought either directly from the fund or
through financial salespeople.
One other fee to be aware of is the so-called 12b-1 fee (named after the SEC
regulation that authorized it). This regulation allows mutual funds to charge up to
1.25% of their net asset value to pay for such things as advertising and marketing
expenses. If a fund charges 12b-1 fees (about 40% do) it must be stated in the
prospectus.
In this tutorial we are only concerned with open-end mutual funds. This author further
suggests learning all you can about mutual funds and sticking with no-load or low-
load mutual funds. There is no evidence that load funds perform better than no-load
funds. Unless you need help in selecting a fund, go with a no-load fund and save the
sales charge. Over time that “small” fee can mean many thousands of dollars to you.
Let’s look at an example:
Let’s assume you invest $10,000 in each of two funds, one a no-load fund and the
other a load fund with an 8.5% load. Let’s further assume both funds earn an identical
15% average annual return. After 5 years, the no-load fund would outperform the load
fund by $1,710; after 10 years, $3,439; and after 20 years the no-load fund would
outperform the load fund by $13,911 – more than your original total investment!
$10,000 invested:
15% average annual total return:
No-Load Load Difference
5 Years 20,114 18,404 1,710
10 Years 40,456 37,017 3,439
20 Years 163,665 149,754 13,911
As the above example shows, it does pay to stay with no-load or low-load funds.
NEED FOR THE STUDY
The main purpose of doing this project was to know about mutual fund and its
functioning. This helps to know in details about mutual fund industry right from its
inception stage, growth and future prospects.
The project study will be undertaken to ascertain the asset allocation, entry load,
exit load, risk and returns associated with the mutual funds. Ultimately this would
help in understanding the benefits of mutual funds to investors.
SCOPE OF THE STUDY
In my project the scope is limited to some prominent mutual funds in the mutual
fund industry. I analyzed the funds depending on their schemes like equity, income,
balance. But there is so many other schemes in mutual fund industry like specialized
funds, index funds etc.
To give a brief idea about the benefits available from Mutual Fund
investment.
To study the selected equity and income mutual fund schemes and
analyses them
To achieve the objective of study data relating to the mutual funds will be
collected.
DATA SOURCES
1. Primary
2. Secondary
PRIMARY:
The data, which has being collected for the first time and it is the original data.
In this project the primary data has been taken from HSE staff and guide of the
project.
SECONDARY:
The secondary information is mostly taken from websites, books, journals, etc.
LIMITATIONS:
S.Narayan Rao, et. al., evaluated performance of Indian mutual funds in a bear
market through relative performance index, risk-return analysis, Treynor’s ratio,
Sharpe’s ratio, Sharpe’s measure , Jensen’s measure, and Fama’s measure. The study
used 269 open-ended schemes (out of total schemes of 433) for computing relative
performance index. Then after excluding funds whose returns are less than risk-free
returns, 58 schemes are finally used for further analysis. The results of performance
measures suggest that most of mutual fund schemes in the sample of 58 were able to
satisfy investor’s expectations by giving excess returns over expected returns based on
both premium for systematic risk and total risk.
Mishra, et al., (2002) measured mutual fund performance using lower partial
moment. In this paper, measures of evaluating portfolio performance based on lower
partial moment are developed. Risk from the lower partial moment is measured by
taking into account only those states in which return is below a pre-specified “target
rate” like risk-free rate.
COMPANY PROFILE
&
INDUSTRY PROFILE
H S E PROFILE
THE HYDERABAD STOCK EXCHANGE LIMITED
ORIGIN:
The Securities Contracts (Regulation) Act 1956 was enacted by the Parliament,
passed into Law and the rules were also framed in 1957. The Government of India
brought the Act and the Rules into force from 20th February 1957.
The HSE was first recognized by the Government of India on 29th September
1958, as Securities Regulation Act was made applicable to twin cities of Hyderabad
and Secunderabad from that date.
OBJECTIVES:
The Exchange was established on 18th October 1943 with the main objective to
create, protect and develop a healthy Capital Market in the State of Andhra Pradesh to
effectively serve the Public and Investor’s interests.
The property, capital and income of the Exchange, as per the Memorandum and
Articles of Association of the Exchange, shall have to be applied solely towards the
promotion of the objects of the Exchange. Even in case of dissolution, the surplus
funds shall have to be devoted to any activity having the same objects, as Exchange or
be distributed in Charity, as may be determined by the Exchange or the High Court of
judicature. Thus, in short, it is a Charitable Institution.
The Hyderabad Stock Exchange Limited is now on its stride of completing its 65th
year in the history of Capital ‘Markets’ serving the cause of saving and investments.
The Exchange has made its beginning in 1943 and today occupies a prominent place
among the Regional Stock Exchanges in India. The Hyderabad Stock Exchange has
been promoting the mobilization of funds into the Industrial sector for development of
industrialization in the State of Andhra Pradesh.
GROWTH:
The number of members of the Exchange was 55 in 1943, 117 in 1993 and increased
to 300 with 869 listed companies having paid up capital of Rs.19128.95 crores as on
31/03/2000. The business turnover has also substantially increased to Rs. 1236.51
crores in 1999-2000. The Exchange has got a very smooth settlement system.
GOVERNING BOARD:
P.C.Shrimal
DR.Bramaiah
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 the. 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.
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 Regulations, and with recent mergers
taking place among different private sector funds, the mutual fund industry has
entered its current phase of consolidation and growth. As at the end of September,
2004, there were 29 funds, which manage assets of Rs.153108 crores under 421
Schemes.
ADVANTAGES OF MUTUAL FUNDS:
There are numerous benefits of investing in mutual funds and one of the key
reasons for its phenomenal success in the developed markets like US and UK is the
range of benefits they offer, which are unmatched by most other investment avenues.
We have explained the key benefits in this section. The benefits have been broadly
split into universal benefits, applicable to all schemes, and benefits applicable
specifically to open-ended schemes. Universal Benefits
The Indian Mutual Fund has passed through three phases. The first phase was
between 1964 and 1987 and the only player was the Unit Trust of India, which had a
total asset of Rs. 6,700 crores at the end of 1988. The second phase is between 1987
and 1993 during which period 8 Funds were established (6 by banks and one each by
LIC and GIC). The total assets under management had grown to 61,028 crores at the
end of 1994 and the number of schemes was 167.
The third phase began with the entry of private and foreign sectors in the Mutual Fund
industry in 1993. Kothari Pioneer Mutual Fund was the first Fund to be established by
the private sector in association with a foreign Fund.
The securities and Exchange Board of India (SEBI) came out with comprehensive
regulation in 1993 which defined the structure of Mutual Fund and Asset Management
Companies for the first time.
Several private sectors Mutual Funds were launched in 1993 and 1994. The share of
the private players has risen rapidly since then.
Currently there are 34 Mutual Fund organizations in India managing 1,02,000 crores.
DATA ANALYSIS
To summarize the findings of any project study the data collected needs analysis of
the raw data can be made meaningful, simple and appropriate. Presentations of such
interpretations help to draw conclusion from the analyzed data. This analysis is based
on the data collected from the companies belonging to the sectors namely,
Manufacturing
IT (software development)
Marketing (software marketing)
Health care
Medical transcription
Publications
Consultants
Training and development
Exports
Pharmaceutical
Construction Companies are grouped depending on the staff size and
infrastructure of the companies as follows:
Small
Small to medium
Medium
Medium to large
Large
The responses collected from each and every respondent through the questionnaire are
Table no. 1:
Interpretation
From the above table of 100 investors showing the details of income or salary class to
which they belong to the income class below 10001 to 15000 per month. 10% of the
investors belong 15001 to 30000 of income class, 40% of the investors belong 8000
Interpretation:
From the above table of 100 investors showing the details of investment to which
they belong to 20% of the investors belong less than 25000 per annum, 40% of
investors belong 25000 to 50000 of income class, 40% of the investors belong 50000
to 100000 of income class, and no investor above 100000 and above income category
Table No: 3 Factor influenced you to invest
Interpretation
The above table shows the factors influencing to invest. 20% of the investors are
purpose of retirement, 40% of the investors are Purpose of tax benefit and 40% of the
Mutual Funds 1 6 1 5 6 2 6 1 1 2
Fixed Deposits 2 4 2 6 1 6 4 2 4 6
Shares& securities 6 5 6 1 .2 5 5 5 1 2
Bonds 5 1 5 1 3 4 1 3 2 4
Post Office 3 3 4 2 5 3 i 4 5 4
Real Estate 4 2 i 4 4 1 2 6 1 6
Interpretation
From the Above graph we find that the investors generally prefer Mutual Funds and
Bonds and these type occupy the first place, followed by Real Estate, Post Office,
Interpretation
From Table No: 5 and Graph No: 5 we find that 20 respondents are not interested in
Interpretation
From the Table No: 6, we find that 40% are invested in ICICL 18% are invested in
ABN. 6% are invested in CHOLA, 24% are invested in BIRLA while 6% each in
Investment Time %
Less than 1 Year 20
1 Year to 2 Years 80
2 Years to 3 Years 0
3 Years and More 0
Interpretation
Form Table No 7 we found that 20% are less than one-year period and 80% are more
Yes 80 80
No 20 20
Interpretation
From Table No 8 the umber of respondents heard about Chola are about 80% and
Sources No Of respondents %
Adds 40 22
Friends 60 33
Magazines 30 17
News Papers 50 28
Interpretation:
From the Table No 9 we found that 50% through newspapers, 30% through
magazines, 60% through friends, 40% through adds and other sources.
Table No.10: Opinions about Mutual Fund Investment
Interpretation
From the above table we find that the maximum number of the respondents response
respond that the Mutual Fund Investment is Very Good and Good respectively.
Table No.11: Most important investment goal
Interpretation
From the above responses obtained from 100 respondents 10% of the respondents
look at low risk investment options, while 50% of the respondents say that they are
ready to take risk and look forward for risky market option and 40% of the
Interpretation
From the above graph we find that when there is drop in the value of investment by
20% then many of the investors go on to hold the investment with an assumption that
the value would improve in future (40%), while 20% of the investors would look
forward to sell of their total or part of their investment or hope to get profit.
Table No.13: Need of portfolio review
Interpretation:
From the Table No: 13 we find that the number of respondents who require daily
review of their portfolio are 10, 20 respondents require portfolio review every
fortnight, 60 respondents say that they require quarterly portfolio review while 10
respondents say that they would go for a portfolio review once in a year
Table No.14: Investment Advisor perceptions with respect to respondents
Reasons Yes No
1 8 0
2 2 6
3 5 3
4 6 2
Interpretation
From the above table we can see that many investors rely upon the information
provided by the advisors and trust the information provided by the advisors. As the
Investor education has been one of the issues. During the study researcher found that
many of the customers are not completely aware of mutual funds and the industry. So people
will prefer bank deposits as the best investment avenue, which will serve their investment
needs and the safer one.
People who are aware of mutual funds find of mutual funds as one the good investment
option that will give better returns with moderate risk.
Over 40% of the investors fall in the annual income below Rs.1lakh.
Over 40% of the investors have a monthly savings of Rs.25000 toRs.50000 & 40% of the
investors have a monthly savings of
Rs.50000 to Rs.100000.
Friends and relatives act as the major influences in formulating
investment portfolios.
Most of the investors invest to gain tax benefits & children's
benefits and they belong to upper income.
Knowledge about mutual funds and their various schemes is
moderate among investors.
More than 80% of the investors are ready to park their money for a
period of 1-2 years.
Over 50% of the investors believe that mutual funds are taking risk
when market fluctuates.
More than 60% of the investors are interested to have quarterly
portfolio review.
People who are aware of mutual funds as on of the good
investment option that will give better returns with moderate risk.
CONCLUSIONS
Investment goals vary from person to person. While somebody wants security, others might give
more weight-age to returns alone. With the objectives defining any range, it is obvious that the
products required will vary as well.
The mutual fund industry is still in its infancy stage as compared to the developed market in US,
where the banking industry and the mutual fund industry rival each other as investment vehicles
but in India to reach that stage will require lot of efforts on the part of the fund houses.
Investor education has been one of the issues. The investor did not focused upon the issues such
as, why a person wanted to invest or whether a particular product suited him or not. While
educating the customer might not have been on the cards earlier, the things are beginning to
change now.
SUGGESTIONS
In India most of the people are middle level they cannot invest heavy amount. So mutual fund is
right investment for such people.
The company should come up in the future with some more schemes in such a way that should
give returns, safe and liquidity so that the investors should get better confidence and believe it.
In the share market lot of fluctuations will be present so in mutual fund they have average better
returns, so that the investors will be safe.
In the present scenario customer needs good returns and the investment should have better
returns, should be safe and possess liquidity. These three terms should be present.
The company star performance like Chola Mid-cap. So it needs to come up with innovative
products as to establish itself on its own.
The investors need to be properly educated about the mutual funds products and on how best to
utilize their benefits by designing a proper investment portfolio.
BIBLIOGRAPHY
www.zensec.com
www.pruicici.com
www.vaiucrcsearchonlinc.com
www.mutuaifandindia.com
www.amfiindia.com
www.nscindia.com
Referred Books
Making mutual funds work for you - The investors concise guide AMFI
Security analysis and portfolio management by punithavathy pandian.
Security Analysis and Portfolio Management— Prasanna Chandra.