A dissertation on mutual fund and investor’s behaviour

1. A DISSERTATION ON
MUTUAL FUND AND INVESTOR’S BEHAVIOUR
Submitted for partial fulfillment of award of
Post Graduate Diploma in Management
(PGDM)
By
Gunjan Tripathi
Name of Guide
Prof. Manoj Kumar Dash

2. Abstract
The mutual fund industry is still in growth stage and retail investors have not
really warmed up to the idea of investing in the stock market owing to the
volatility which jeopardizes the continuous above average returns starting from a
very short period which a retail customer wants & also there is a plethora of
choices which as many as 35 AMCs in India & every one with almost all types of
funds. In the debt market people still feel comfortable excepting a lower post tax
return from bank FDs, post office saving & bonds rather than going for a debt
fund which indicate a higher yield.
This reports talks about classification of mutual
funds schemes according to different objective & later on performance evaluation
is done using NAV and finally questionnaire has been prepared to know the
consumer behavior towards mutual fund.

3. ACKNOWLEDGEMENT
Any accomplishment requires the effort of many people and this work is no
difference. I have been fortunate enough to get help and guidance from many
people. It is a pleasure to acknowledge them, though it is still an inadequate
appreciation for their contribution.
I would not have completed this journey without the help, guidance & support of
certain people who acted as guides and friends along the way. I would like to
express my deepest and sincere thanks to my faculty guide Prof. Manoj Kumar
Dash for his invaluable guidance and help. The project could not be completed
without their support and guidance.
He acted as a continuous source of inspiration and motivated me throughout the
duration of the project.
Again I sincerely thanks of him.
Submitted with regards:
GUNJAN TRIPATHI

4. Abstract
Acknowledgement
Table of contents
Chapter1. Introduction
• Introduction of Mutual Fund
• Objective of Study
• Scope
• Methodology
• Limitations
Chapter2. Mutual Fund Industry
• History of Mutual Fund
• Regulatory Framework
• Legal Structure
• Classification
• Types
Chapter3. Performance Measures
• Investment Plans
• Different features of various funds
• Net Asset Value
• Performance measures of Mutual Funds
Chapter4. Investor’s point of view

5. • Stages of Life Cycle
• Classification of Life cycle
Chapter5. Analysis
• Analysis of Questionnaire
• Suggestions
• Conclusion
Appendices
Annexure

7. MUTUAL FUNDS
Introduction:
Mutual fund is a pool of money collected from investors and is invested according
to certain investment options. A mutual fund is a trust that pools the saving of a
no. of investors who share a common financial goal. A mutual fund is created
when investors put their money together. It is, therefore, a pool of investor’s
fund. 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 no. of units owned by them.
The most important characteristics of a fund are that the contributors and the
beneficiaries of the fund are the same class of people namely the investors. The

8. term mutual fund means the investors contribute to the pool and also benefit
from the pool. The pool of funds held mutually by investors is the mutual fund.
A mutual fund business is to invest the funds thus collected according to the
wishes of the investors who created the pool. Usually the investors appoint
professional investment managers create a product and offer it for investment to
the investors. This project represents a share in the pool and pre status
investment objectives.
Thus, a mutual fund is the most suitable investment for a common man as it
offers an opportunity to invest in a diversified, professionally managed basket of
securities at relatively low cost.

10. ORGANIZATION OF MUTUAL FUNDS
There are many entities involved and the diagram below illustrates the
organizational set up of a mutual fund:

11. FEATURES THOSE INVESTORS LIKE IN MUTUAL FUND:
If mutual funds are emerging as the favorite investment vehicle it is because of
the many advantages. They have over other forms and avenues of investing
parties for the investors who has limited resources available in terms of capital
and ability to carry out detailed reserves and market monitoring. These are the
major advantages offered by mutual fund to all investors:
• Professional Management: Mutual Funds provide the services of
experienced and skilled professionals, backed by a dedicated
investment research team that analyses the performance and prospects
of companies and selects suitable investments to achieve the objectives
of the scheme.
• Diversification: Mutual Funds invest in a number of companies across
a broad cross-section of industries and sectors. This diversification
reduces the risk because seldom do all stocks decline at the same time
and in the same proportion. You achieve this diversification through a
Mutual Fund with far less money than you can do on your own.
• Convenient Administration: Investing in a Mutual Fund reduces
paperwork and helps you avoid many problems such as bad deliveries,
delayed payments and follow up with brokers and companies. Mutual
Funds save your time and make investing easy and convenient.
• Return Potential: Over a medium to long-term, Mutual Funds have the
potential to provide a higher return as they invest in a diversified basket
of selected securities.
• Low Costs: Mutual Funds are a relatively less expensive way to invest
compared to directly investing in the capital markets because the

12. benefits of scale in brokerage, custodial and other fees translate into
lower costs for investors.
• Liquidity: In open-end schemes, the investor gets the money back
promptly at net asset value related prices from the Mutual Fund. In
closed-end schemes, the units can be sold on a stock exchange at the
prevailing market price or the investor can avail of the facility of direct
repurchase at NAV related prices by the Mutual Fund.
• Transparency: You get regular information on the value of your
investment in addition to disclosure on the specific investments made
by your scheme, the proportion invested in each class of assets and the
fund manager's investment strategy and outlook.
• Flexibility: Through features such as regular investment plans, regular
withdrawal plans and dividend reinvestment plans, you can
systematically invest or withdraw funds according to your needs and
convenience.
• Affordability: Investors individually may lack sufficient funds to invest
in high-grade stocks. A mutual fund because of its large corpus allows
even a small investor to take the benefit of its investment strategy.
• Well Regulated: All Mutual Funds are registered with SEBI and they
function within the provisions of strict regulations designed to protect
the interests of investors. The operations of Mutual Funds are regularly
monitored by SEBI.

13. DISADVANTAGES OF MUTUAL FUNDS:
Above I have mentioned the various advantages of Mutual Funds but it
also suffers from a lot of drawbacks as the market is volatile and it is
ever affected by national as well as international factors, these days we
can see that crude oil prices in International market has become an
important factor in determining the market movement. Here are some
disadvantages as cited by me and by survey:
• Fluctuating Returns: Mutual funds are like many other investments
without a guaranteed return: there is always the possibility that the
value of your mutual fund will depreciate. Unlike fixed-income
products, such as bonds and Treasury bills, mutual funds experience
price fluctuations along with the stocks that make up the fund. When
deciding on a particular fund to buy, you need to research the risks
involved - just because a professional manager is looking after the
fund, that doesn't mean the performance will be always good.
• Diversification: Although diversification is one of the keys to
successful investing, many mutual fund investors tend to over
diversify. The idea of diversification is to reduce the risks associated
with holding a single security; over diversification (also known as
diversification) occurs when investors acquire many funds that are
highly related and, as a result, don't get the risk reducing benefits of
diversification.
At the other extreme, just because you own mutual funds doesn't

14. mean you are automatically diversified. For example, a fund that
invests only in a particular industry or region is still relatively risky.
For example: Sectoral Funds
• Cash, Cash and More Cash: As you know already, mutual funds pool
money from thousands of investors, so everyday investors are
putting money into the fund as well as withdrawing investments. To
maintain liquidity and the capacity to accommodate withdrawals,
funds typically have to keep a large portion of their portfolios as
cash. Having ample cash is great for liquidity, but money sitting
around as cash is not working for you and thus is not very
advantageous.
• Costs: Mutual funds provide investors with professional
management, but it comes at a cost. Funds will typically have a range
of different fees that reduce the overall payout. In mutual funds, the
fees are classified into two categories: shareholder fees and annual
operating fees.
The shareholder fees, in the forms of loads and redemption fees are
paid directly by shareholders purchasing or selling the funds. The
annual fund operating fees are charged as an annual percentage -
usually ranging from 1-3%. These fees are assessed to mutual fund
investors regardless of the performance of the fund. As you can
imagine, in years when the fund doesn't make money, these fees only
magnify losses.

15. OBJECTIVE
The main objective of this study is:
1. To know various factors considered by the customers while going to invest
in the mutual fund.
2. To study the working of mutual fund.
3. To study the characteristics of mutual fund this attracts the customers.
4. What an investors consider for safe investment and better returns.

16. SCOPE
1. The project will provide us the better platform to understand the history,
growth and various aspects of mutual fund.
2. It will also help to understand the behavior of Indian investment towards
mutual fund.
3. Also with the help of this project one can better understand the different
types of mutual funds working in India.

17. RESEARCH METHODOLOGY
Methodology:
Marketing research is the process of collecting and analyzing marketing
information and ultimately arrived at certain conclusion. Management in any
organization needs information about potential marketing plans and to change
the market place. Marketing Research includes all the activities that enable an
organization to obtain the information. This research is very important in strategy
formulation and feedback of any organizational plan.
Research Design:
1. DATA:
Primary data: Personal interaction with the respondent through
questionnaire.
Secondary data: Information through websites, books, fact sheet of
various funds etc.
2. SOURCES:
Books, Magazines, articles, Journals.
3. AREA OF STUDY:
NCR region.
4. SAMPLING PROCEDURE:
Random sampling method.
5. TOOLS & TECHNIQUES:

18. Simple statistical methods.
LIMITATIONS
1. This project is limited in scope as the survey is conducted with a
shortage of time constraint and also based on secondary data.
2. The answer given by the respondents may be biased due to several
reasons or could be attachment to a particular bank.
3. Due to ignorance factor some of the respondents were not able to give
correct answer.
4. The respondent were not disclosing their exact portfolio because they
have a fear in their mind that they can come under tax slab.

20. 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 Reserve Bank and the
Government of India. The objective was to attract small investors and
introduce them to market investments. Since the, the history of mutual
fund in India can be broadly divided into three distinct phases.
Phase 1- 1964-1987 (Unit Trust of India)
• An Act of Parliament established Unit Trust of India (UTI) on 1963. 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, followed by ULIP in 1971, CGGA 1986 Mastershare 1987. UTI was
the only player in the market enjoying the monopoly. At the end of 1988
UTI had Rs.6, 700 crores of assets under management .It was huge
mobilization on funds.
• So, Unit Trust of India was the first mutual fund set up in India in the
year 1963. In early 1990s, Government allowed public sector banks and
institutions to set up mutual funds.

21. • In the year 1992, Securities and exchange Board of India (SEBI) Act was
passed. The objectives of SEBI are – to protect the interest of investors
in securities and to promote the development of and to regulate the
securities market.
• As far as mutual funds are concerned, SEBI formulates policies and
regulates the mutual funds to protect the interest of the investors. SEBI
notified regulations for the mutual funds in 1993. Thereafter, mutual
funds sponsored by private sector entities were allowed to enter the
capital market. The regulations were fully revised in 1996 and have
been amended thereafter from time to time. SEBI has also issued
guidelines to the mutual funds from time to time to protect the interests
of investors.
• All mutual funds whether promoted by public sector or private sector
entities including those promoted by foreign entities are governed by
the same set of Regulations. There is no distinction in regulatory
requirements for these mutual funds and all are subject to monitoring
and inspections by SEBI. The risks associated with the schemes
launched by the mutual funds sponsored by these entities are of similar
type. It may be mentioned here that Unit Trust of India (UTI) is not
registered with SEBI as a mutual fund (as on January 15, 2002). The
total amount mobilized was 2175 crores and assets under
management were 6700 crores.
Phase 2- 1987-1993(entry of public sector)

22. • 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 Can
bank 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.In phase 2
also UTI was the undisputed leader.
• At the end of 1993, the mutual fund industry had assets under
management of Rs.47,004 crores. It was the time when mindset of the
consumer changed to some extent.
Phase 3- 1993-1996(emergence of private 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

23. 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. Indian mutual fund
industry also saw many joint venture of foreign fund management
companies with Indian promoters. Competition increased the investor
servicing technique. Investor started becoming selective. 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.
Phase 4-1996(SEBI regulation for mutual funds)
• 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. 1999
marks the beginning of a new phase in the history of the mutual fund

24. industry in India, a phase of significant in terms of both amounts
mobilized from investor and asset under management.
• The size of the industry is growing rapidly, as seen by the figure of asset
under management that has gone from over Rs. 113,005 crores, a
growth of nearly 60%in just one year. Within the growing industry, by
March 2000, the relative market shares of different players in terms of
amount mobilized and assets management having undergone a change.
• 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 June 2007
there are 33 players in the mutual fund industry.

25. Major Mutual Fund Companies in India
ABN AMRO Mutual Fund
ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee
(India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset
Management (India) Ltd. was incorporated on November 4, 2003. Deutsche
Bank A G is the custodian of ABN AMRO Mutual Fund.
Bank of Baroda Mutual Fund (BOB Mutual Fund)
Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30,
1992 under the sponsorship of Bank of Baroda. BOB Asset Management
Company Limited is the AMC of BOB Mutual Fund and was incorporated on
November 5, 1992. Deutsche Bank AG is the custodian.
HDFC Mutual Fund
HDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely

26. Housing Development Finance Corporation Limited and Standard Life
Investments Limited.
HSBC Mutual Fund
HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and
Capital Markets (India) Private Limited as the sponsor. Board of Trustees,
HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual Fund.
State Bank of India Mutual Fund
State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to
launch offshore fund, the India Magnum Fund with a corpus of Rs. 225 cr.
approximately. Today it is the largest Bank sponsored Mutual Fund in India.
They have already launched 35 Schemes out of which 15 have already yielded
handsome returns to investors. State Bank of India Mutual Fund has more
than Rs. 5,500 Crores as AUM. Now it has an investor base of over 8 Lakhs
spread over 18 schemes.
Unit Trust of India Mutual Fund
UTI Asset Management Company Private Limited, established in Jan 14, 2003,
manages the UTI Mutual Fund with the support of UTI Trustee Company
Private Limited. UTI Asset Management Company presently manages a corpus
of over Rs.20000 Crore. The sponsors of UTI Mutual Fund are Bank of Baroda
(BOB), Punjab National Bank (PNB), State Bank of India (SBI), and Life
Insurance Corporation of India (LIC). The schemes of UTI Mutual Fund are

27. Liquid Funds, Income Funds, Asset Management Funds, Index Funds, Equity
Funds and Balance Funds.
Franklin Templeton India Mutual Fund
The group, Franklin Templeton Investments is a California (USA) based
company with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of
the largest financial services groups in the world. Investors can buy or sell the
Mutual Fund through their financial advisor or through mail or through their
website. They have Open end Diversified Equity schemes, Open end Sector
Equity schemes, Open end Hybrid schemes, Open end Tax Saving schemes,
Open end Income and Liquid schemes, closed end Income schemes and Open
end Fund of Funds schemes to offer.
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 organization.
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 members. 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 lines enhancing
and maintaining standards. It follows the principle of both protecting and
promoting the interests of mutual funds as well as their unit holders.

28. The objectives of Association of Mutual Funds (AMFI) in India
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 a high professional and ethical standard 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 does 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 programme 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

29. information’s on Mutual Fund Industry and undertakes studies and research
either directly or in association with other bodies.
Regulatory Framework
Regulatory Jurisdictions of SEBI:
SEBI is the apex regulatory of capital markets. SEBI has enacted the SEBI (Mutual
Fund) regulation 1996 which provides the scope of regulation of Mutual Fund in
India. All mutual funds are required to be mandatory registered with SEBI. The
structure and formation of Mutual Funds, appointment of key functionaries,
operations of Mutual Funds, accounting and disclosure norms, rights and
obligations of functionaries and investors, investment restrictions, compliance and
penalties all are defined under the SEBI registration. Mutual Fund has to be
sending half yearly compliance reports to SEBI and promote all information about
their operations.
Regulatory Jurisdiction of RBI:
RBI is the monetary authority of the country and is also the regulatory of banking
system. Earlier bank sponsored mutual fund were under the dual regulatory control
of RBI and SEBI. These provisions are no longer in vogue. SEBI is the regulator of
all mutual funds. The present position is that RBI is involved with the mutual fund
industry only to the limited extent of being the regulator of the sponsor of bank
sponsored mutual funds.
Role of Ministry of Finance in Mutual Fund:

30. The finance ministry is the supervisor of both RBI and SEBI. The ministry of
finance is also the appellate authority under SEBI Regulation. Aggrieved parties
can make appeal to the Ministry of Finance on the SEBI ruling relating the Mutual
Fund.
Role of Companies Act in Mutual Fund:
The AMC and the Trustee Company may be structured as limited companies,
which may come under the regulatory purview of the Company Law Board (CLB).
The provisions of the Companies Act 1956, is applicable to these forms of
organization. The company law Board is the apex regulatory authority for
company. Any grievance agency the AMC or the trustee can be addressed to the
company law board for redresses.
Role of Stock Exchange:
If a mutual fund is listed its scheme on stock exchange such listing are subject to
the listing regulation of Stock Exchange. Mutual Funds have to sign the listing
agreement and abide by its provisions which primarily deal with the periodic
notification and disclosure of information that may impart the trading of listed
units.

31. Legal Structure
Mutual Fund has a unique structure not shared with other entities such as
companies or the firms. It is important for the employees and agents to be aware of
the special nature of the structure because it determines the rights and
responsibilities of the fund’s constitutes viz. sponsor trustee, custodian, transfer
agents and of course the AMC. The legal structure also drives the inter relationship
between these constituents.
Like other countries India has a legal framework within which Mutual Funds must
be constituted along one unique structure as unit trust. A mutual fund in India is
allowed to issue open ended and a close ended under a common legal structure.
Therefore, a mutual fund may have several different schemes under it at any point
of time.
THE FUND SPONSOR: Sponsor is defined by the SEBI regulation as any
person who acting alone or in combination with another body corporate establishes
a mutual fund. The sponsor of a fund is taken as he gets the fund registered with
the SEBI.
The sponsor will form a trust and appoints the Board of trustee. The sponsor will
also generally appoint the AMC as the fund managers. The sponsor, either directly
or acting through the trustee will also appoints a custodian to hold the fund asset.
All these appointments are made in accordance with the guidelines of SEBI.

32. As per the existing SEBI regulations for a person to quantify as the sponsor he
must contribute at least 40% of the net worth of the AMC and possess a second
final track over a period of 5 years prior to registration.
MUTUAL FUND AS A TRUST: A mutual fund is constituted in form of a public
trust created under the INDIA TRUST ACT, 1882. The fund sponsor act as the
settlers of the trust contributing to its initial capital and appoints a Trustee to hold
the asset of the trust for the benefits of the unit holders who are the beneficiaries of
the trust. The fund then invites investors to contribute their money in a common
pool by subscribing to units issued by various schemes established by the trust unit
being the evidence of their beneficial interest in the fund.
TRUSTEE: The trust – the mutual fund may be managed by a board of trustee – a
body of individuals or a trust company- a corporate body. Most of the funds in
India are managed by the board of trustee while the board is governed by the
provisions of the Indian Trust Act where the trustee is a corporate body, it would
also be required to comply the provisions of the Companies Act 1956 the board as
an independent body act as the protector of the interest of the unit holders. The
trustees do not directly manage the portfolio of securities. For this specialist
function, they appoint the AMC. They ensure that the fund is managed by the
AMC as per the defined objective in accordance with the trust deed and regulations
of SEBI. The trust is created through a document called the Trust Deed and is
executed by the fund sponsor in favor of the trustee. The trust deed is required to
be stamped as registered under the provisions of the Indian Regulatory Act and
regulation with SEBI clause in the trust deed, inter alias, deal with the
establishment of the trust, the appointment of the trustee , their powers and duties
and the obligation of the trustee towards the unit holders and the AMC. These
clauses also specify activity that the fund / AMC can’t undertake. The third
schedule of the SEBI (Mutual Fund) Regulatory Act,1996 specifies the content of
the Trust Deed.

33. ASSET MANAGEMENT COMPANY
Its appointment and function:
The role of AMC is to act as the investment manager of the trust. The sponsor, or
the trustee, if so authorized by the trust deed appoints the AMC. The AMC so
appointed is required to be approved by the SEBI. Once approved, the AMC
functions under the supervision of its own directors and also under the direction of
the trustee and the SEBI. The trustees are empowered to terminate the appointment
of the AMC by majority and appoint a new one with the prior approval of the SEBI
and the unit holders.
The AMC would, in the name of the trust, float and then manage the direct
investment schemes as per regulations of the SEBI and as per Investment
Management Agreement it signs with the trustee. Chapter IV of SEBI (MF)
Regulations, 1996 describes the issue relevant to appointment, eligibility criteria
and the restrictions on the business activities and obligations of the AMC.
The AMC of the mutual fund have a net worth of at least Rs. 10 crores at all the
time. Directors of the AMC, both independent and non independent should have
adequate professional experience in the financial services and should be
individuals of high moral standing, a condition also applicable to other key
personnel of the AMC. The AMC cannot act as a trustee of any other mutual fund.
Besides it’s role as advisory services and consulting, provided these activities are
run independently of one another rand the AMC resources ( such as personnel,
system etc.) are properly segregated by activity. The AMC must always act in the
interest of the unit holders and report to the trustee with respect to its activities.

34. TYPES OF MUTUAL FUNDS

35. Schemes according to Maturity Period
A mutual fund scheme can be classified into open-ended scheme or close-
ended scheme depending on its maturity period.
Open-ended Fund/ Scheme:
An open-ended fund or scheme is one that is available for subscription and
repurchase on a continuous basis. These schemes do not have a fixed maturity
period. Investors can conveniently buy and sell units at Net Asset Value (NAV)
related prices which are declared on a daily basis. The key feature of open-end
schemes is liquidity.
Close-ended Fund/ Scheme:
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years.
The fund is open for subscription only during a specified period at the time of
launch of the scheme. 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 the units 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 i.e. either repurchase facility or through listing on
stock exchanges. These mutual funds schemes disclose NAV generally on
weekly basis.
Schemes according to Investment Objective

36. A scheme can also be classified as growth scheme, income scheme, or
balanced scheme considering its investment objective. Such schemes may be
open-ended or close-ended schemes as described earlier. Such schemes may
be classified mainly as follows:
Growth / Equity Oriented Scheme:
The aim of growth funds is to provide capital appreciation over the medium to
long- term. Such schemes normally invest a major part of their corpus in
equities. Such funds have comparatively high risks. These schemes provide
different options to the investors like dividend option, capital appreciation,
etc. and the investors may choose an option depending on their preferences.
The investors must indicate the option in the application form. The mutual
funds also allow the investors to change the options at a later date.
Income / Debt Oriented Scheme:
The aim of income funds is to provide regular and steady income to investors.
Such schemes generally invest in fixed income securities such as bonds,
corporate debentures, Government securities and money market instruments.
Such funds are less risky compared to equity schemes. These funds are not
affected because of fluctuations in equity markets. However, opportunities of
capital appreciation are also limited in such funds. The NAVs of such funds are
affected because of change in interest rates in the country. If the interest rates
fall, NAVs of such funds are likely to increase in the short run and vice versa.
However, long term investors may not bother about these fluctuations.
Balanced Fund:
The aim of balanced funds is to provide both growth and regular income as
such schemes invest both in equities and fixed income securities in the
proportion indicated in their offer documents. These are appropriate for

37. investors looking for moderate growth. They generally invest 40-60% in
equity and debt instruments. These funds are also affected because of
fluctuations in share prices in the stock markets. However, NAVs of such funds
are likely to be less volatile compared to pure equity funds.
Money Market or Liquid Fund:
These funds are also income funds and their aim is to provide easy liquidity,
preservation of capital and moderate income. These schemes invest
exclusively in safer short-term instruments such as treasury bills, certificates
of deposit, commercial paper and inter-bank call money, government
securities, etc. Returns on these schemes fluctuate much less compared to
other funds. These funds are appropriate for corporate and individual
investors as a means to park their surplus funds for short periods.
Gilt Fund:
These funds invest exclusively in government securities. Government
securities have no default risk. NAVs of these schemes also fluctuate due to
change in interest rates and other economic factors as is the case with income
or debt oriented schemes.
Index Funds
Index Funds replicate the portfolio of a particular index such as the BSE
Sensitive index, S&P NSE 50 index (Nifty), etc These schemes invest in the
securities in the same weightage comprising of an index. NAVs of such
schemes would rise or fall in accordance with the rise or fall in the index,
though not exactly by the same percentage due to some factors known as
"tracking error" in technical terms. Necessary disclosures in this regard are
made in the offer document of the mutual fund scheme.

38. Sector specific funds/schemes:
These are the funds/schemes which invest in the securities of only those
sectors or industries as specified in the offer documents. e.g. 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.
They may also seek advice of an expert.
Tax Saving Schemes
These schemes offer tax rebates to the investors under specific provisions of
the Income Tax Act, 1961 as the Government offers tax incentives for
investment in specified avenues. e.g. Equity Linked Savings Schemes (ELSS).
Pension schemes launched by the mutual funds also offer tax benefits. These
schemes are growth oriented and invest pre-dominantly in equities. Their
growth opportunities and risks associated are like any equity-oriented
scheme.
Load or no-load Fund
A Load Fund is one that charges a percentage of NAV for entry or exit. That is,
each time one buys or sells units in the fund, a charge will be payable. This
charge is used by the mutual fund for marketing and distribution expenses.

39. Suppose the NAV per unit is Rs.10. If the entry as well as exit load charged is
1%, then the investors who buy would be required to pay Rs.10.10 and those
who offer their units for repurchase to the mutual fund will get only Rs.9.90
per unit. The investors should take the loads into consideration while making
investment as these affect their yields/returns. However, the investors should
also consider the performance track record and service standards of the
mutual fund which are more important. Efficient funds may give higher
returns in spite of loads.
A no-load fund is one that does not charge for entry or exit. It means the
investors can enter the fund/scheme at NAV and no additional charges are
payable on purchase or sale of units.

40. INVESTMENT PLANS
The term investment plans generally refers to the services that the funds provide to
the investors offering different ways to invest. The different investment plans are
important consideration in the investment decisions because they determine the
level of flexibility available to the investors. Alternate investment plans offered by
the fund allow the investor freedom with respect to investing at one time or at
regular intervals, making transfers to different schemes within the same fund
family or receiving income at specified intervals or accumulating distributions.
Some of the investment plans offered are as follows:
Automatic Reinvestment Plans (ARP):
In India many funds offered two options under the same scheme the dividend
option and growth option. The dividend option or the automatic reinvestment plan
a (ARP) allows the investors to reinvest in additional units the amount of dividend
or other distribution made by the fund, instead of receiving them in cash.

41. Reinvestment takes place at the ex-dividend NAV. The ARP ensures that the
investors reap the benefits of compounding in his investments. Some fund allows
reinvestments into reinvestments into other schemes in the fund family.
By using an automatic reinvestment plan, an investor is able to easily make
use of his or her investment gains to produce further gains, taking
advantage of compounding. Over a period of years, the added value
produced by automatic reinvestment can turn out to be worth a substantial
sum.
Automatic Investment Plans (AIP):
These requires the investor to invest a fixed sum periodically, thereby
lettering the investor save in a disciplined and phased manner. The mode
of investment could be through debit to the investor’s salary or bank
account.
Such plans are also known as Systematic Investment Plans. But mutual
funds do not offer this facility on all schemes. Typically they restrict it to
their plain vanilla scheme like diversified equity funds, income funds and
balanced funds. SIP works best in equity funds. It enforces saving
discipline and helps you profit from market volatility – you buy more units
when the market is down and fewer when the market is up.
This is one of the best ways to save money. By "paying themselves first"
many people find they invest more in the long run. Their investments are
treated as another part of their regular budget. It also forces a person
to pay for investments automatically, which prevents them from being able
to spend all of their disposable income.
Systematic Withdrawal Plan:
Such plans allow the investors to make systematic withdrawal from his fund
investment account on a periodic basis, thereby providing the same benefit
as regular income. The investor must withdraw a specific minimum amount
with the facility to have withdrawal amounts sent to his residence by
cheque or credited directly into his bank account. The amount withdrawn is
treated as redemption of units at the applicable NAV as specified in the
offer document. For example: the withdrawal could be at NAV on the first
day of the month of payment. The investor is usually required to maintain a
minimum balance in his bank account under this plan. Agents and the

42. investors should understand that the systematic withdrawal plans are
different from the monthly income plans, as the former allow investors to
get back the principal amount invested while the latter only pay the income
part on a regular basis.
In short we can say that a systematic withdrawal plan is a financial plan
that allows a shareholder to withdraw money from an existing mutual fund
portfolio at predetermined intervals. The money withdrawn through a
systematic withdrawal plan can be reinvested in another portfolio or used to
pay for something else. Often, a systematic withdrawal plan is used to fund
expenses during retirement. However, this type of plan may be used for
other purposes as well.
Systematic Transfer Plans (STP):
These plans allow the customers to transfer on a periodic basis a specified
amount from one scheme to another within the same fund family- meaning
two schemes by the same AMC and belonging to the same fund. A transfer
will be treated as the redemption of the units from the scheme from which
the transfer is made. Such redemption or investment will be at the
applicable NAV for the respective schemes as specified in the offer
document.
It is necessary for the investor to maintain a minimum balance in the
scheme from which the transfer is made. Both UTI and other private funds
now generally offer these services to the investors in India. The service
allows the investors to maintain his investment actively to achieve his
objectives. Many funds do not even change any transaction fees for this
service.

43. EQUITY FUND
An open ended Equity scheme:
Fund features:
Who should invest?
The scheme is suitable for investors seeking effective diversification by spreading
the risks without compromising the return.
Investment objective
The objective is to provide investors long term capital appreciation.
Liquidity
Sale and repurchase on all business days.
NAV calculation

44. All business days.
Redemption proceeds
Will be dispatched within three business days.
Tax benefits
Indexation benefits, No Gift tax, No wealth tax.
Minimum applicable amount
New investors: Rs. 5000
Existing investors: Rs. 500
INDEX FUND
An open ended Index scheme:
Fund features:
Who should invest?
The scheme is suitable for investors seeking capital appreciation commensurate
with that of market.
Investment objective
The objective is to invest in the securities that comprise S&P CNX Nifty in the
same proportion so as to attain results commensurate with the Nifty.
Investment option
a. Growth b. Dividend
Liquidity

45. Sale and repurchase on all business days.
NAV calculation
All business days.
Redemption proceeds
Will be dispatched within three business days.
Tax benefits
Indexation benefits, No Gift tax, No wealth tax
Minimum applicable amount
New investors: Rs. 5000
BALANCED FUND
An open ended balanced scheme:
Fund features:
Who should invest?
The scheme is suitable for investors who seek long term growth and wish to avoid
the risk if investing solely in equities. It provides a balanced exposure to both
growth and income producing assets.
Investment objective
The objective is to provide periodic return and capital appreciation through a
judicious equity and debt instruments, while simultaneously aiming to minimize
capital erosion.
Liquidity
Sale and repurchase on all business days.

46. NAV calculation
All business days.
Redemption proceeds
Will be dispatched within three business days.
Tax benefits
Indexation benefits, No Gift tax, No wealth tax
Minimum applicable amount
New investors: Rs. 5000
Existing investors: Rs. 500
TAX SAVING FUND
Open- ended linked saving scheme:
Fund features:
Who should invest?
The scheme is suitable for investors seeking income tax rebate under section 88(2)
of Income Tax Act along with long term appreciation from investment in equities.
Investment objective
The objective is of the scheme is to build a high quality growth oriented portfolio
to provide long term capital gains to investors. The scheme aims at providing
return through capital appreciation over the file of the scheme.
Liquidity
Sale and repurchase on all business days.
NAV calculation

47. All business days.
Redemption proceeds
Will be dispatched within three business days.
Tax benefits
Tax –rebate under section 88, indexation benefits, No Gift tax, No wealth tax.
Special features
Personal accident insurance.
Lock –in period
3 years
Minimum applicable amount: Rs. 500
The importance of accounting knowledge
The balance sheet of a mutual fund is different from the normal balance sheet of a
bank or a company. All the fund assets belong to the investors and are held in the
fiduciary capacity for them. Mutual fund employees need to be aware of the
special requirement concerning accounting for the fund’s assets, liabilities and
transactions with investors and the outsiders like banks, custodians and registrars.
This knowledge will help them better understand their responsibilities and their
place in the organization, by getting an overview of the functioning of the fund.
Even the mutual fund agents need to understand the accounting for the funds
transaction with investors and how the fund accounts for its assets and liabilities,
as the knowledge is essential for them to perform their basic role in explaining the
mutual fund performance to the investor.
For example, unless the agent knows how the NAV is computed, he cannot use
even simple measures such as NAV change to assess the fund performance. He
also should understand the impact of dividends paid out by the fund or entry/exit
loads paid by the investors on the calculation of the NAV and therefore the fund
performance.

48. The mutual funds in India are required to follow the accounting policies as laid
down by the SEBI (Mutual Fund) Regulations 1996 and amendments in 1998.
NET ASSET VALUE
The performance of a particular scheme of a mutual fund is denoted by Net
Asset Value (NAV). Mutual funds invest the money collected from the
investors in securities markets. In simple words, Net Asset Value is the market
value of the securities held by the scheme. Since market value of securities
changes every day, NAV of a scheme also varies on day to day basis. The NAV
per unit is the market value of securities of a scheme divided by the total
number of units of the scheme on any particular date. For example, if the
market value of securities of a mutual fund scheme is Rs 200 lakhs and the
mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the
NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the
mutual funds on a regular basis - daily or weekly - depending on the type of
scheme.
The net asset value of the fund is the cumulative market value of the assets
fund net of its liabilities. In other words, if the fund is dissolved or liquidated,
by selling off all the assets in the fund, this is the amount that the shareholders
would collectively own. This gives rise to the concept of net asset value per

49. unit, which is the value, represented by the ownership of one unit in the fund.
It is calculated simply by dividing the net asset value of the fund by the
number of units. However, most people refer loosely to the NAV per unit as
NAV, ignoring the "per unit". We also abide by the same convention.
Calculation of NAV:
The most important part of the calculation is the valuation of the assets
owned by the fund. Once it is calculated, the NAV is simply the net value of
assets divided by the number of units outstanding. The detailed methodology
for the calculation of the asset value is given below.
Asset value is equal to
Sum of market value of shares/debentures
+ Liquid assets/cash held, if any
+ Dividends/interest accrued
Amount due on unpaid assets
Expenses accrued but not paid
For liquid shares/debentures, valuation is done on the basis of the last or
closing market price on the principal For illiquid and unlisted and/or thinly
traded shares/debentures, the value has to be estimated. For shares, this
could be the book value per share or an estimated market price if suitable
benchmarks are available. For debentures and bonds, value is
estimated on the basis of yields of comparable liquid securities
after adjusting for illiquidity. The value of fixed interest bearing
securities moves in a direction opposite to interest rate changes.

50. Valuation of debentures and bonds is a big problem since most of
them are unlisted and thinly traded. This gives considerable
leeway to the AMCs on valuation and some of the AMCs are
believed to take advantage of this and adopt flexible valuation
policies depending on the situation exchange where the security is
traded.
Interest is payable on debentures/bonds on a periodic basis say every 6
months. But, with every passing day, interest is said to be accrued, at the daily
interest rate, which is calculated by dividing the periodic interest payment
with the number of days in each period. Thus, accrued interest on a particular
day is equal to the daily interest rate multiplied by the number of days since
the last interest payment date.
Usually, dividends are proposed at the time of the Annual General meeting
and become due on the record date. There is a gap between the dates on
which it becomes due and the actual payment date. In the intermediate
period, it is deemed to be "accrued".
Expenses including management fees, custody charges etc. are calculated on a
daily basis.

51. MUTUAL FUND PERFORMANCE
THE INVESTORS PROSPECTIVE:
The investor would actually be interested in tracking the value of investment,
whether he invests directly in the market or indirectly through the mutual funds.
He would have to make intelligent decisions on whether he gets an acceptable
return on his investment in the fund selected by him or if he needs to switch to the
fund. He, therefore, needs to understand the basis of appropriate performance
measurement for the funds and acquire the basic knowledge of the different
measures of evaluating the performance of a fund. Only then would he be in the
position to judge correctly whether his fund is performing well or not.
THE ADVISOR’S PROSPECTIVE:
If you are an intermediary recommending a mutual fund to a potential investor, he
would expect you to give him proper advice on which funds have a good
performance track record. If you want to be an effective investment advisor, then

52. you too have to know how to measure and evaluate the performance of the
different funds available to the investors. The need to compare the performance of
the different funds requires the advisors to have knowledge of the correct and
appropriate measures of evaluating the fund performance.
Different Performance Measures
Remember that there are many ways to evaluate the performance of the fund. One
must find the most suitable measure, depending upon the type of fund one is
looking at, the stated investment objective of the fund and even depending on the
current financial market condition. Let us discuss few common measures.
Change in NAV: The most common measure.
Purpose: If the investor wants to compute the return on investment between two
dates, he can simply use the Per Unit Net Asset Value at the beginning and the end
periods and calculate the change in the value of the NAV between the two dates in
absolute and percentage terms.
Formula: For NAV change in absolute terms:
(NAV at the end of the period)- (NAV at the beginning of the period)

53. For NAV change in percentage terms:
(Absolute change in NAV/NAV at the beginning)*100
If period covered is less/more than one year: for annualized NAV change
[{(absolute change in NAV/NAV at the beginning)/months covered)*12}*100]
Suitability
NAV change is the most commonly used by the investors to evaluate fund
performance and so is also most commonly published by the mutual fund
managers. The advantage of this measure is that it is easily understood and applies
to virtually any type of fund.
Interpretation
Whether the return in term of NAV growth is sufficient or not should be
interpreted in light of the investment objective of the fund, current market
condition and alternative investment returns. Thus, a long term growth fund or
infrastructure fund will give lower returns when the market is in bearish phase.
Limitation:
However, this measure does not always give the correct picture, in case where the
fund has distributed to the investors a significant amount of the dividends in the
interim period.
If in the above example, year end NAV was Rs.22 after declaration and payment of
dividend of Re.1, the NAV change of 10% gives an incomplete picture.
Therefore, it is suitable for evaluating growth funds and accumulation plans of debt
and equity funds, but should be avoided for income funds and funds with
withdrawal plans.
Return on investment:
Purpose:
The short coming of the simple total return is overcome by the total return with
reinvestment of the dividends in the funds itself at the NAV on the date of

54. distribution. The appropriate measure of the growth of the investor’s mutual fund
holding is therefore, the return on investment.
Formula
[(units held dividend/ex-dividend NAV)*end NAV]- begin NAV*100
Suitability
Total return with distribution s reinvested at NAV is a measure accepted by mutual
fund tracking agencies such as Cresedence in MUMBAI and value research in
New Delhi. It is appropriate for measuring performance of accumulation plans,
monthly/quarterly income schemes that distribute interim dividends.
The income ratio:
Formula:
A fund’s income ratio is defined as its net investment income dividend by its net
assets for this period.
Purpose/suitability:
This ratio is useful measure for evaluating income-oriented funds, particularly debt
funds. It is not recommended for the funds that concentrate on capital appreciation.
Limitation:
The income ratio can not considered in isolation, it should be used only to
supplement the analysis based on the expense ratio and total return.

55. Tracking mutual fund performance
Having identified appropriate measures and benchmarks for the mutual fund
available in the market, the challenge is to track the fund performance on a regular
basis.
This is indeed the key towards maximizing wealth through mutual fund investing.
Proper tracking allow the investor to make informed & timely decisions regarding
his fund portfolio whether to acquire attractive funds, dispose off poor performers
or switch between funds /plans.
To be able to track fund performance, the first step is to find the relevant
information on NAV, expenses cash flow, appropriate indices and so on. The
following are the sources information in India.

56. Mutual Funds Annual and Periodic Reports
These include data on the funds financial performance, so indicators such as
income/expense ratios & total return can be computed on the basis of this data. The
annual report includes a listing of the funds portfolios holding at market value,
statement of revenue & expenses, unrealized appreciation/depreciation at year end
and the change in the net assets. On the basis of the annual report, the investors can
develop a perspective on the quality of the fund’s assets and portfolio
concentration and risk profile, besides computing returns. He can also assess the
quality of the fund management company by reviewing their entire scheme’s
performance. The profit and loss account part of the annual report will also give
details of transaction costs such as brokerage paid, custodian/registrar fees and
stamp duties.
Mutual Fund’s Website
With the increasing spread of the interest as a medium, all mutual funds have their
own websites. SEBI even require funds to disclose certain types of the information
on these sites- for example, the Portfolio Composition. Similarly, AMFI itself has a
websites, which displays its member’s entire fund NAV information.
Financial papers:
Daily newspaper such as Economic Times provides daily NAV figures for the
open end schemes and share prices of the close ended listed schemes. Besides,
weekly supplement of the economic newspaper give more analytical information
on the fund performance.
For example- Business Standard – the smart investor gives total returns over 3
months, 1 year and 3 years periods besides the fund size and ranking with the other
funds separately for Equity, Balanced, Debt, Money Market, short term debt and
tax planning funds.
Similarly, Economic Times weekly supplement gives additional data on open end
schemes such as Loads and Dividends besides the NAV and other information and
performance data on closed end scheme.
Fund Tracking Agencies:

57. In India, agencies such as Credence and value research are a source of information
for the mutual fund performance data and evaluation. This data is available only on
request and payment.
Newsletters:
Many stockbrokers, mutual fund agent and banks and non-ranking firms catering
to retail investors publish their own newsletters, sometimes free or else for their
subscribes, giving fund performance data and recommendations.
Prospectus:
SEBI regulations for mutual fund require the fund sponsors to disclose
performance data relating to schemes being managed by the concerned AMC such
as beginning and end of the year.

58. LIFE CYCLE STAGES
Life cycle guide to financial planning
Financial goal and plans depends to a large extent on the expenses and cash flow
requirements of individuals. It is well known that the age of the investors is an
important determinant of financial goals. Therefore, financial planners have
segmented investors according to certain stages.

59. LIFE CYCLE STAGE FINANCIAL NEEDS ABILITY TO INVEST CHOICE OF
INVESTNENT
Childhood Stage Taken care of by Investment of gifts Long term
parents
Young unmarried Immediate and Limited due to Liquid plans and
short term higher spending short term
investment some
exposure to equity
and pension
products
Young married Short & Limited due to Medium –long
stage intermediate term. higher spending term investment.
Housing and cash flow Ability to take risks
insurance needs requirement also Fixed income
consumer finance limited insurance & equity
needs
Young Married Medium-long term Limited Financial Medium-long term
with children children’s planning needs are investments.
education. highest at this Ability to take risks
Holodays & stage is deal for Portfolio of
consumer finance discipline spending products for
Housing and saving growth and long
regularly term
Married with older Medium term Higher saving Medium term
children needs for children rations investment with
recommended for high liquidity
intermittent for needs Portfolio of
intermittent cash products including
flows higher equity debt and
pension plans
Retirement stage Short to medium Lower saving Medium term
term ratios , Higher investment
requirement for preference for
regular cash flows liquid and income
generating
products low
appetite for risky

60. investment
CHARACTERISSTION OF THE LIFE CYCLE OF INVESTORS
Life cycle can be broadly classified into phases:
• Birth and education
• Earning Years
• Retirement
On an average, the first stage lasts for 22 years, the second for 38 years and the
last for 25-30 years.

61. The earning year is when income and expenses are highest. The retirement stage
is when incomes are low and expenses are high.
CLASSIFICATION OF INVESTORS NEEDS
Needs are generically classified into protection needs and investment needs.
Protection needs refer to needs that have to be primarily taken care of to protect
the living standards, current requirements and survival requirement of investors.
Need for retirement income and need for insurance cover are protection needs.
Investment needs are additional financial needs that can be served through
saving and investments. These are needs for children’s professional growth.

62. Analysis of Questionnaire
I visited to 45 people with my questionnaire related to awareness of mutual
fund out of them 40 responds me. I have analyzed in my survey on the basis of

63. these respondents feedback. Once the questionnaire were filled then the next
work that comes up is the analysis of the data arrived.
We find out that more businessmen were inclined towards investing in
current account. The ladies were inclined to invest their money in Gold and
jewelleries. Service class people and retired class people prefer more saving
and fixed deposits. People with high income prefer to take risk for higher
return. They want to invest in the mutual fund.
Similarly, people are interested in knowing what the returns of their
investment are. Similar large numbers of people are equally interested in the
safety of their funds. There are the people who want easy liquidity of money
and these are basically business people who have a deal in the ready cash all
the time. Surprisingly, while a large number of people are aware of the tax
benefit a very small number of them only 9 are interested in it.
While a large number of people are area of mutual fund comparing a very less
number invests into it. On asking how they get knowledge of mutual fund a
large number of them attributed to print media. Even banks today follow the
role of the investment advisors. Very few get any information from the e-
media or
Hence, AMCs must increase the awareness about their product through
Electronic media (TVs, Cables, Radios etc.) as well as and should not just
constrained itself to the print advertisement. Those who do not read
newspaper.

70. CONCLUSION
The mutual fund industry is growing at a tremendous pace. A large number of
plans have come up from different financial resources. With the stock market
soaring the investors are attracted towards these schemes.
Only a small segment of the investors still in Mutual Funds and the main
source sources of information still are the financial advisors followed by
advertisements in different media. The Indian investors generally invest over
a period of 2-3 years. Also there is a tendency to invest in fixed deposits due to
the security attached to it.
In order to excel and make mutual funds a success, companies still need to
create awareness and understand the psyche of the Indian customer.

71. SUGGESTIONS
Investor’s point of view:
The question that entire customer, irrespective of the age group and financial
status, think of is- Are mutual funds are a safe option? What makes them safe?
The basis of mutual fund industry’s safety is the way the business is defined
and regulation of law. Since the mutual fund invests in the capital market
instruments, so proper knowledge is essential.
Hence the essential requirement is well informed seller and equally informed
buyer who understands and helped them to understand the product (here we
can say the capital market and the money market instruments) is the essential
pre-conditions.
Being prudent investor one should:
• Ask one’s agent to give details of different schemes and match the
appropriate ones.
• Go to the company records or the fund house regarding any queries if
one is not satisfied by the agents.
• Investors should always keep an eye on the performance of the scheme
and other good schemes as well which are available in the market for
the closed comparison.
• Never invest blindly in the investments before going through the fact
sheets, annual reports etc. of the company. Since, according to the

72. guidelines of SEBI, the AMCs are bound to disclose all the relevant data
that is necessary for the investment purpose of investors.
Company’s point of view:
Following measures can be taken by the company for getting higher
investments in the mutual fund schemes:
• Educate the agents or the salesmen properly so that they can take up
the queries of the customer effectively.
• Set up separate customer care divisions where the customers can
anytime pose their query, regarding the scheme or the current NAV
etc. These customer care units can work out in accordance with the
requirements of the customer and facilitates them to choose the
scheme that suits their financial status.
• Conduct seminars or programs about mutual fund where each and
every minute information about the product is outlined including the
risk factor associated with the different classes of assets.

73. Appendices:
Marketing of Mutual Funds.
The present marketing strategies of mutual find can be divided into main
knowledge into main headings-
• Direct Marketing.
• Selling Through Intermediaries.
• Joint Calls.
Direct Marketing: This constitutes 20% of the total sales of mutual funds.
Some of the important tools used in this type of selling are:
Personal Selling: In this case the customer support officer of the fund at a
particular branch takes appointment from the potential prospects. Once the
appointment is fixed, the branch officer (also called Business Development
Associate) then meet the prospect and gives him all details about the various
schemes being offered by his fund. This conversion rate in this month of
selling is in between 30-40%.
Tele Marketing: In this case the emphasis is the people about the fund. The
names and phone number of people are picked at random from telephone
directory. Sometimes people belonging to a particular profession are also

74. contacted through phone and their informed about the fund. Generally the
conversion rate in form of marketing is 15-20%.
Direct Mail: This is one common methods followed by all Mutual Funds.
Addresses of people are picked at random from telephone directory. The
customer support office then mails the literature of the scheme offered by the
fund. The follow up starts after 3-4 days of mailing the literature. The CSO
calls on the people to whom the literature was mailed. Answer their queries
and is generally successful in taking appointment with these people. It is then
job of BDA to try his best to convert that prospect into customer.
Advertisement in Newspaper & Magazines: The funds regularly advertise
in business newspaper and magazines besides in leading national dailies. The
purpose is to keep investors aware the schemes offered by the fund and their
performance in recent part.
Hoarding and Banners: In this case the hoarding and banners of the fund are
put at important locations of the city where the movement of the people is
very high. Generally such hoardings are put near UTI offices in order to tap
people who are at present investing in UTI schemes. The hoarding and
banners generally contain information either about one particular scheme or
brief information about all schemes of the fund.
Selling Through Intermediaries: Intermediaries contribute towards 80% of
total sales of mutual fund. These are the people/distributors who are in direct
touch with the investors. They perform an important role in attracting new
customers. Most of these intermediaries are also involved in selling shares
and other investment instruments. They do commendable jobs in convincing
investors to invest in mutual funds. A lot depends on after sales services

75. offered by the intermediaries to the customer. Customer prefer to work with
those intermediaries who give them right information about the fund and
keep them abreast with the latest change taking place in the market especially
if they have any bearing on the fund in which they have invested.
Regular Meeting with Distributors: Most of the funds conduct
monthly/bimonthly meeting with their distributors. The objective is to hear
their complaint regarding services aspect from fund side and other queries
related to market situation. Sometimes special training programmes are also
conducted for the new agent/distributor. Training involves giving details
about the products of the fund, their present performance in the market, what
the competitors are doing and what they can do to increase the sales of the
fund.
Joint calls: This is generally done when the prospect seems to be a high net
worth investors. The BDA and the agent (who is located close to HNI’s
residence or area of operation) together visit the prospect and brief them
about the fund. The conversion rate is very high in this situation (Generally
around 60%). Both the funds and the agent provide even after sale services in
the particular case.

76. Frequently Used Terms
NAV: It 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 number of
units. Outstanding on valuation date
Sales Price: it is the price you pay when you invest in a scheme. It is also
called offer price. It may include sales load
Repurchase Price: Price at which a close – ended scheme repurchase its units
& it may include a back- end load.
Redemption price: Price at which open ended scheme repurchase their units
& close- ended redeem their unit on maturity. Their prices are NAV related.
Sales Load: charge collected by a scheme when it sells the units also keep as
front end load. Schemes that do not change a load-No Load Schemes

77. Questionnaire
1. Name of the customer
Mr. / Mrs. / Ms.
2. Address/ Contact
3. What is the age group you face in?
i. 20-30
ii. 30-40
iii. 40-50
iv. 50-60
v. Above 60
4. What is your occupation?
i. Service
ii. Business
iii. Professional
iv. Dependent

78. v. Retired
5. What is the per month income of your family?
i. < 10,000
ii. 10-30,000
iii. 30-50,000
iv. > 50,000
6. Which type of investment you prefer?
i. Current saving
ii. Fixed deposits
iii. Shares
iv. Bonds/debentures
v. Mutual fund
vi. Gold/real estates
7. What is your objective for investing?
i. Income generation
ii. Tax saving
iii. Others
8. What is your priority while investing your money?
i. Safety
ii. Higher returns
iii. Liquidity

79. iv. Tax benefits
9. Are you aware of mutual fund?
i. Yes
ii. No
10.Have you ever invested in mutual fund?
i. Yes
ii. No
11.From where you get information about mutual fund?
i. Print media
ii. Electronic media
iii. Friends/relatives
iv. Broker/investment
v. Banks
12.What has been the reason of your not investing into the mutual fund?
i. Lack of confidence
ii. Imperfect knowledge
iii. Find Govt. Securities/bonds better
iv. Other reasons