Mutual fund is the better investment plan

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Mutual fund is the better investment plan

  1. 1. Mutual fund is the better investment plan INTRODUCTION Mutual funds have become a hot favorite of millions of people all over the world. The driving force of mutual fund is the ‘safety of the principal’ guaranteed, plus the added advantage of capital appreciation together with the income earned in the form of interest or dividend. People prefer Mutual Funds to bank deposits, life insurance and even bond because with a little money, they can get into the investment game. One can own string blue chips like ITC, TISCO, Reliance etc., through mutual funds. Thus, mutual funds act as a gateway to enter into big companies hitherto inaccessible to an ordinary investor with his small investment. In the current economic scenario interest rates are falling and fluctuation I the share market have put investors in confusion. One finds it difficult to take decision on investment. This is primarily, because of investments are risky in nature and investors have to consider various factors before investing in investment avenues. Over the past decades mutual funds have grown intensely in popularity and have experienced a Considerable growth rate. Mutual funds are popular because they make it easy for small investors to invest their money in a diversified pool of securities. As the mutual fund industry has evolved over the years, there have arisen many questions about the nature of operations and characteristics of these funds. Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns. The study will guide the new investor who wants to invest in equity and mutual fund schemes by providing knowledge about how to measure the risk and return of particular scrip or mutual fund scheme. Mutual fund industry today is one of the most preferred investment avenues in India. Like all investment, they also carry certain risks. The investors compare the risks & expected fields after adjustment to tax on various instrument while taking investments decision. H.R.I.H.E, Hassan 1
  2. 2. Mutual fund is the better investment plan Stock markets have been one of the major avenues for investing. Investors have been focusing their attention mostly on large capitalization stocks. They used to invest most of their money only in large capitalization stocks. But, lately it has been observed that few medium capitalization stocks have been giving returns better than large capitalization stocks. Portfolio manager evaluates his portfolio performance and identifies the source of strength and weakness. The evaluation of portfolio provides a feed back about the performance to evolve better management strategy. Even though evaluation of portfolio performance is considered to be the last stage of investment process, it is a continuous process. The managed portfolios are commonly known as mutual funds. Various managed portfolio are prevalent in the capital market. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The fund’s Net Asset value (NAV) is determined each day. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders. Meanings: Mutual Fund A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities. Portfolio A collection of various company shares, fixed interest securities or money-market instruments. People may talk grandly of 'running a portfolio' when they own a couple of shares but the characteristic of a serious investment portfolio is diversity. It should show a spread of investments to minimize risk - brokers and investment advisers warn against 'putting all your eggs in one basket'. H.R.I.H.E, Hassan 2
  3. 3. Mutual fund is the better investment plan Portfolio Management Portfolio management involves deciding what assets to include in the portfolio, given the goals of the portfolio owner and changing economic conditions. Selection involves deciding what assets to purchase, how many to purchase, when to purchase them, and what assets to divest. These decisions always involve some sort of performance measurement, most typically expected return on the portfolio, and the risk associated with this return (i.e. the standard deviation of the return). Portfolio Evaluation Portfolio evaluation refers to the evaluation of the performance of the portfolio. It is essentially the process of comparing the return earned on a portfolio with the return earned on one or more other portfolios or on a benchmark portfolio. Portfolio evaluation essentially comprises two functions, performance measurement and performance evaluation. Equity Funding The term equity funding is the exchange of money for a share of business. This allows you to obtain funds for your business without incurring any debt. Selling equity means taking on investors. Many small businesses raise equity by bringing in investors to make their business succeed and get a return on investment. Debt Funding The term debt funding refers to money that it borrowed and has to be repaid over a period of time; this is normally re-paid with interest. This debt funding can either be short term or long term. In a short term sense the full amount to be repaid is done so within a year. In a long term sense the repayments will go on for over a year. H.R.I.H.E, Hassan 3
  4. 4. Mutual fund is the better investment plan Advantages of mutual fund • Portfolio Diversification • Professional management • Reduction / Diversification of Risk • Liquidity • Flexibility & Convenience • Reduction in Transaction cost • Safety of regulated environment • Choice of schemes • Transparency Disadvantages of mutual fund • No control over Cost in the Hands of an Investor • No tailor-made Portfolios • Managing a Portfolio Funds • Difficulty in selecting a Suitable Fund Scheme H.R.I.H.E, Hassan 4
  5. 5. Mutual fund is the better investment plan 1.1 Problem statement In the current economic scenario interest rates are falling and fluctuation in the share market has put investors in confusion. One finds it difficult to take decision on investment. This is primarily, because investments are risky in nature and investors have to consider various factors before investing in investment avenues 1.2 Objectives:  To get an insight knowledge about mutual fund  Understanding the different ratio and portfolios so as to tell the distributors about these terms ,by this ,managing relationship with the distributors  To evaluate consumer feedback on Mutual Fund  To know the mutual fund performance levels on present market  To know the awareness of mutual fund among different groups of investors 1.3 Scope of the study A big boom has been witnessed in Mutual Fund Industry in recent times. A large number of new players have entered the market and trying to gain market share in this rapidly improving market. The study will help to know the preferences of the customers, which company, portfolio, mode of investment, and option for getting return and so on they prefer. This project report may help the company to make further planning and strategy 1.4 Research Methodology This report is based on primary as well secondary data, however primary data collection was given more importance since it is overhearing factor in attitude studies. One of the most important users of research methodology is that it helps in identifying the problem, collecting, analyzing the required information data and providing an alternative solution to the problem .It also helps in collecting the vital information that is required by H.R.I.H.E, Hassan 5
  6. 6. Mutual fund is the better investment plan the top management to assist them for the better decision making both day to day decision and critical ones. 1.4.1 Sample size: The sample size of my project is limited to 200 people only. Out of which only 120 people had invested in Mutual Fund. Other 80 people did not have invested in Mutual Fund. 1.4.2 Sample design: Sampling is a practice a researcher uses to draw data on people, places, or things to study. Sampling allows statisticians to draw conclusions about a whole by examining a part. It enables us to estimates characteristics of a population by openly observing a portion of the entire population. The whole that the researcher wants to know something about is the population is called a sample. Data has been presented with the help of bar graph, pie charts, line graphs etc. 1.4.3 Procedure data collection methods The sample was selected of them who are the customers/visitors of Allegro advisor private limited, irrespective of them being investors or not or availing the services or not. It was also collected through personal visits to persons, by formal and informal talks and through filling up the questionnaire prepared. The data has been analyzed by using mathematical/Statistical tool. 1.4.4 Techniques for data analysis Research is totally based on primary data. Secondary data can be used only for the reference. Research has been done by primary data collection, and primary data has been collected by interacting with various people. The secondary data has been collected through various journals and websites. H.R.I.H.E, Hassan 6
  7. 7. Mutual fund is the better investment plan 1.5 Limitation of the study  Some of the persons were not so responsive.  Possibility of error in data collection because many of investors may have not given actual answers of my questionnaire.  Sample size is limited to 200 visitors of Allegro advisor private limited out of the 120 had invested in Mutual Fund.  The sample size may not adequately represent the whole market H.R.I.H.E, Hassan 7
  8. 8. Mutual fund is the better investment plan COMPANY PROFILE 2.1 Industry Scenario Mutual fund provides an opportunity for an investor. The benefit of diversification and the advantages of the return of capital market with less risk. Mutual fund's birth place is America. It was registered in 1882, until the beginning of foreign company by holding establishing their business in India. UTI was only mutual funds Company by holding almost all entire market shares. In simple mutual fund in India was a monopoly market for UTI. Why do investors pour money in Unit trust funds? The whole point is to leave the direct investing; stock or bond picking decision to the professionals, as they don't have the time, knowledge, skills and expertise to manage the money themselves. When selecting a unit trust fund, investors tend to trust and rely on the fund's track record. It is course greatly determined by the investments mangers behind the fund. We frequently have expectations of events in our lives. We expect the traffic to be smooth because of school holidays. We also expect that when it rains heavily, the traffic will be bad, based on historical experience. It's no different for the fund managers. They set their expectations of markets and plan their investments strategies and decisions accordingly. Expectations are constantly built into markets especially after an anticipated event (economic or otherwise) to explain why a particular stock or the market in general went up or down. The explanation for this behavior is pretty simple. Investors, especially professional investors, are rational human beings. They set their expectations on how things are going to pan out and then make key investment decisions based on these expectations. A Successful fund manager must be creative, innovative and understand all the essential financial concepts like the cost of capital, price earnings ratio, dividend yields, discounted cash flows and portfolio theory. With these concepts, he supposedly can derive valuations of stock. Then, he buys an undervalued stock and sells it becomes overvalued. H.R.I.H.E, Hassan 8
  9. 9. Mutual fund is the better investment plan One must have an interest in markets not only when they're hot but also when they're cold. A good fund manager has the ears of a fox and is able to figure out the huge amount of noise coming from the various markets in order to pick the right pieces of pies. The experience of the fund manager plays a large part in fund managing. Experience gives a fund manager the material with to mix and match hypothesis. While history rarely repeats itself, as the timing may be off or the reaction may be more intense, it gives a guide with to forecast future outcomes. The fund manager should be rational about his view of the markets or a particular stock, draw a conclusion and instinctively act on it. In more difficult situation, a fund manager must keep an open mind; markets can go either way and the fund manager is merely waiting for the appropriate data to confirm or deny his hypothesis. A great fund can sense when they’re in sync with the market; when they feel that the 'force' is with them. However, even the best fund manager can lose his hearing and sight just when he thinks he has skills down pat. A successful fund manager is one who is able to pick to himself up and start searching again for the right decision. It’s an art to be able to hold strongly onto one's beliefs even through paper losses and volatility. A good fund manager has to know macroeconomics and valuation methodologies well, but it's still not enough. He has to be able to make expectations well. In other words, he has to anticipate what the market, comprising all investors and market participants, will focus on next, extrapolate the outcome and position his portfolio ahead of time for that out come to materialize. This must be done over and over again and often is revised because the fund manager will sometimes be wrong. Markets will always test a fund manager's conviction or expectations. A great fund manager will understand rational expectations in markets and constantly feel its pulses. Managing money successfully is purely a form of art. A mutual fund is just the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund. H.R.I.H.E, Hassan 9
  10. 10. Mutual fund is the better investment plan Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns. Mutual Fund like most developed and developing countries the mutual fund cult has been catching on in India. There are various reasons for this. Mutual funds make it easy and less costly for investors to satisfy their need for capital growth, income and/or income preservation. And in addition to this a mutual fund brings the benefits of diversification and money management to the individual investors, providing an opportunity for the financial success that was once available only to a select few. Understanding Mutual funds is easy as their such a simple concepts: a mutual fund is a company that pools the of money of many investors – its shareholders – to invest in a variety of different securities. Investments may be in stock, bonds, money market security or some combination of these. Those securities are professionally managed on behalf of the shareholder, and each investor holds a pro rata share of the portfolio – entitled to any profits when the securities are sold, but subject to any losses in value as well. For the individual investors, mutual funds provides the benefits of having someone else manage your investments and diversify your money over many different securities that may not be available or affordable to you otherwise. Today, minimum investment requirements on many funds are low enough that even the smallest investors can get started in mutual funds. A mutual fund by its very nature is diversified – its assets are invested in many different securities. Beyond that, there are many different types of mutual funds with different objectives and levels of growth potential, furthering your chances to diversification. H.R.I.H.E, Hassan 10
  11. 11. Mutual fund is the better investment plan 2.2 Company Profile Allegro Capital Advisors Pvt. Ltd. is a leading Indian full service investment bank that builds value across a spectrum of clients, including the government, corporations, financial institutions, high net worth individuals and professionals. 2.2.1 Overview Allegro Capital Advisors Pvt. Ltd. is a leading Indian full service investment bank that builds value across a spectrum of clients, including the government, corporations, financial institutions, high net worth individuals and professionals. We are in the business of managing the assets of individuals and corporate. Our collective experience at doing so dates back several decades and our team is rated to be amongst the best wealth managers in India today. This bears testimony in the fact that our ever growing list of corporate clients includes senior and middle management from organizations that include Intel, IBM, HP, Coke, Pepsi, Whirlpool Corporation, Hindustan Levers, 3M, Gillette and Cisco amongst others. Allegro's Services are broadly classified into:  Capital Markets advisory services  Corporate Finance Services including equity and debt placement, debt restructuring and Mergers &Acquisitions  Investment Advisory Services covering retail and corporate investment and wealth management services, Portfolio Management Services, Secondary market execution services and Insurance Advisory Services Asset Management that involves building a INR 1 billion restructuring fund At Allegro, there is the realization that every one of its clients has a distinct financial goal broken down into unique needs, a distinct investment history, a defined propensity to save and finally a varying appetite at being exposed to investment risks. Allegro's approach at managing the wealth of its clients is built on the foundation that every one of its financial advisors is a custodian of his client's wealth. Furthermore, each client relationship is driven by the need to fulfill the financial goal that a client has set at the beginning of the relationship. And since the financial goal lays out an investment plan across an extended period of time, this relationship with a client is virtually set in perpetuity. H.R.I.H.E, Hassan 11
  12. 12. Mutual fund is the better investment plan Allegros' advisors are trained to take a highly analytical and solution - driven approach while making investment decisions for their clients, an approach that sees clients move closer to achieving their financial goal with every passing year. Allegro neither 'sells' financial products nor does it lay pre-conditions to investing. Its fee based advisory services ensures that it adopts a consultative approach to managing wealth. Advice therefore, is independent and client centric. Allegros' service offering is perhaps the widest in industry. The scope of its services encompasses the entire spectrum of financial needs of an individual right from planning to investing, managing and complying with Indian tax regulations. Allegro maintains perhaps the lowest client to advisor ratio in industry. Its multi tiered relationship approach ensures continuity in a relationship besides ensuring seamlessness so that a client is supported by expert whenever required. 2.2.2 Management Team naKasp - Chairman and CEO  Kunal Kashyap - Chairman and CEO H.R.I.H.E, Hassan 12
  13. 13. Mutual fund is the better investment plan - 2 6 yr s + ex pe ri en ce in b ui ld in g an d m an ag in g la rg e or ga H.R.I.H.E, Hassan 13
  14. 14. Mutual fund is the better investment plan  Shyam Powar H.R.I.H.E, Hassan 14
  15. 15. Mutual fund is the better investment plan k e - o u t s , P r i v a t e E q u i t y a n d I P O H.R.I.H.E, Hassan 15
  16. 16. Mutual fund is the better investment plan  Gautam Benjamin  Sanjay Mansabdar H.R.I.H.E, Hassan 16
  17. 17. Mutual fund is the better investment plan JP M or ga n, B an k of A m er ic a an d A zu ra C ap it al A d vi so rs (c H.R.I.H.E, Hassan 17
  18. 18. Mutual fund is the better investment plan  Sandeep Lalwani 2.2.3 Value Advantage  Independent Allegro is an independent, unbiased advisor to its clients. Our advice is free from the compulsions associated with representing manufacturers of financial products. It is unaffected by the limitations of operating in a compartmentalized business group. We, therefore, have the credibility and operational edge to be independent while consistently placing our client's interest first.  Informed The diverse experience and skills of our team together with top sources of market and industry information, enables us to provide the best advice to our clients - corporate, institutions or individuals. Our methodology, people development, analysis and research processes are of the highest standard. We make it our business to be fully informed about our client needs, while closely following products and industry trends.  Innovative Solutions at Allegro are the result of innovative tools and investment ideas that seamlessly integrate business lines based on trends, expertise and a time-tested approach to being custodians of our clients' financial interests. Alternative investment strategies, the focus on restructuring debt or our pioneering initiative to advise corporations on H.R.I.H.E, Hassan 18
  19. 19. Mutual fund is the better investment plan public offerings, bear testimony to Allegro's ability to offer solutions that are out-of-the- box. We believe there are no packaged, off-the-shelf solutions. Every recommendation made by our team fits into a customized plan that is outlined at the commencement of a relationship. Each proposal is backed by proprietary, focused research, fund management expertise and the lowest client-to-advisor ratio in the industry. 2.2.4 Security and Privacy Policy The site you are about to view follows Allegro's Privacy Policy. The site is maintained by Allegro Capital. Allegro's Web site collects no personally identifying information about individuals except when specifically and knowingly provided by such individuals. In addition, Allegro's site may place a "cookie" in the browser files of a user's computer. The cookie itself does not contain any personally identifying information although it will enable the site to relate a user's use of the site to information that the user has specifically and knowingly provided to Allegro. Allegro may use a user's personally identifying information for editorial purposes. Allegro may also use such information for marketing and promotional purposes and may share the information with companies that it has pre- screened. Individuals always have the ability to stop their information from being used for such purposes.  Terms of Use The site you are viewing follows Allegro's Privacy Policy. The site is maintained by Allegro Capital.  Linked Web sites The Allegro Web site may include links to and/or advertisements by other companies or Web sites. These other entities may collect personal information, including identification information from you. Please be advised that Allegro is not responsible for H.R.I.H.E, Hassan 19
  20. 20. Mutual fund is the better investment plan the privacy practices or the content of such Web sites and this privacy statement does not cover the information practices of such sites. Allegro does not receive any personal information about visitors to the Allegro Web site from any third party, including any information collected by or through links to third party Web sites and/or advertisements on the Allegro Web site.  Online Security While Allegro strives to protect its user's personal information and privacy, no data transmission over the Internet can be guaranteed to be 100% secure. As a result, while Allegro stores your personal information in data networks that are password protected, we cannot ensure or warrant the security of any information you transmit to or receive from us through our Web site and online services.  Trademarks All logos used and products named are trade names and trademarks of their 2.2.5 Marketing Offices North India South India Kota Trivandrum Ajmer Kottayam Udaipur Calicut Jodhpur Vijayawada Ludhiana Mangalore Jalandhar West India Madgaon ,Vasco  Branch Offices/ Corporate Office Bangalore 'C'Block,SiliconTerraces,30/1HosurMainRoad, Koramangla,Bangalore-560095,India Phone+918060607888 H.R.I.H.E, Hassan 20
  21. 21. Mutual fund is the better investment plan FaxNo+918041216785 Contact-: mailto:bangalore@allegroadvisors.com North India South India Delhi Chennai Contact-: Contact-: chennai@allegroadvisors.com mailto:delhi@allegroadvisors.com Hyderabad Gurgaon Contact-: hyderabad@allegroadvisors.com Contact-: gurgaon@allegroadvisors.com Cochin Jaipur Contact-: cochin@allegroadvisors.com Contact-: jaipur@allegroadvisors.com Coimbatore Chandigarh Contact-: coimbatore@allegroadvisors.com Contact-: chandigarh@allegroadvisors.com West India Goa Mumbai Contact-: goa@allegroadvisors.com Contact-: Pune mailto:mumbai@allegroadvisors.com Contact-: pune@allegroadvisors.com  LOGO OF ALLEGROADVISORS We bring to bear our extensive relationship with financial institutions to address the unique needs of our clients H.R.I.H.E, Hassan 21
  22. 22. Mutual fund is the better investment plan S tr at e g ic a s s e s s m e n t, b u si n e s s p la n fi n al iz at i o n , a H.R.I.H.E, Hassan 22
  23. 23. Mutual fund is the better investment plan  Mergers & Acquisitions Our team drawn from Big 4 firms and banks, with deep investment banking experience positions us attractively to identify targets, structure and execute transactions across a spectrum of industries Acquisitions/ JV assistance H.R.I.H.E, Hassan 23
  24. 24. Mutual fund is the better investment plan T a r g et i d e n ti fi c at i o n a n d e v al u at i o n T r a n s a ct H.R.I.H.E, Hassan 24
  25. 25. Mutual fund is the better investment plan  Distressed Assets Allegro is widely acknowledged as the leader in distressed assets advisory and has advised on some of the most high profiles deals in India Debt take-out e n ts  Debt Restructuring Assisting in business plan finalization Assessing capital structure Negotiating with existing lenders on restructuring package Project management  Investment Management Allegro's Investment Management Group is responsible for managing assets on a discretionary basis across retail, high net worth and corporate clients. Allegro Capital Advisors Pvt Ltd is registered as a Portfolio Manager with the Securities and Exchange Board of India (Registration Number: INP000002437). On this platform Allegro has created distinct investment strategies to suit a wide variety of client goals and risk preferences that are able to constitute core elements of most asset allocation strategies. These strategies encompass most of the liquid asset classes including equities, mutual funds fixed income and precious metals, among others. The Investment Management Group aims to bring Institutional quality investing to all our clients. H.R.I.H.E, Hassan 25
  26. 26. Mutual fund is the better investment plan 2.2.7 Investment Management Philosophy:  A Fundamental Basis Allegro portfolios have a strong grounding in research, both at a macro level, as well as down to specific securities. The investment process is in general a combination of top down and bottom up processes. The former essentially focuses on identifying, and allocating capital to the economic themes and trends that are likely to be profitable over the next six to twelve months while the objective of the latter is security and trade selection that will implement, most effectively, those themes and trends to which capital has been allocated. Overlaid over this philosophy is a robust portfolio and risk management process that controls market and credit risk and ensures that client portfolios are not exposed to risks beyond what is reasonably allowable for the strategy. We focus on real numbers and analysis rather than merely judgment and employ analysts dedicated to quantitative research, portfolio construction and management.  Risk Management We believe that operational and settlement risks are equally critical to the process of generating returns and have put in place strong operations and technology processes to ensure that such risks are monitored and accounted for. We partner with financially strong and well capitalized institutions in the financial services and technology space for our third party requirements in order to be able to provide quality services to our clients.  Process and people We do not believe in clustering business around star managers - instead we put our faith in time tested investment and portfolio management processes that stay true to investment goals. While we believe that our people are biggest asset, our faith is in the processes that a team has put together, not a single individual.  Transparent and Client Aligned Last, but not least, we believe in a transparent approach to our business and implement this via disclosures, reporting and where necessary, explanation of our views and strategy and their risks and limitations. H.R.I.H.E, Hassan 26
  27. 27. Mutual fund is the better investment plan 2.2.8 The Team: Allegro's Investment Management Team draws on considerable experience in the Asset Management and Financial Markets area. Our Portfolio Managers, Analysts and Operations staffs have considerable experience in International and Domestic markets across a variety of asset classes. We believe that an amalgamation of this eclectic experience allows us to translate ideas to successful actions in the process of return generation. 2.2.9 Private Banking With a mission to help accumulate, grow and manage the wealth of high net worth individuals, professionals, family groups and businesses, Allegro's Private Banking Practice offers personalized financial planning and legal advisory services. Our advice covers investments across asset classes and ranges from capital markets, debt instruments, real estate, and private equity opportunities, to select corporate finance requirements. For clients with multiple asset managers and a diverse portfolio, we offer a holistic 'Fund of Funds' approach that is in complete synergy with the unbiased nature of our advice. We also collaborate with specialists for estate advisory, tax and legal services, so becoming a "family office" to our clients. Pioneers of independent lifecycle management services in India, Allegro runs the largest fee paying investment advisory service in the country. Our advice covers the entire spectrum of an individual's financial need, from investment planning and execution to tax planning and compliance. Goals, set across a perpetuity, are assiduously worked upon by advisors keeping in mind the gradual and limited growth in corpus and the risk profile of this segment. 2.2.10 Retail On July 1, 2007 Allegro Capital launched India's first true "Supermarket" of financial products. Every Allegro branch offers over 18 different categories of financial products from over a 100 companies representing the entire spectrum of what's available anywhere in India. Stock Broking, Life & General Insurance, Gold, Mutual Funds, Gold traded funds, IPO's, Loans & Advances, Money transfer, Private Banking, Portfolio Management Services, Real Estate & Property Management Services and International H.R.I.H.E, Hassan 27
  28. 28. Mutual fund is the better investment plan Investments Products are on offer to every customer who walks into a branch , but without bias of a company and in a seamless borderless manner. The customer gets choice, comparisons and advice on what is best suited to him or her. This approach keeps the clients financial interest at the centre of its business model and is at a complete variance of the existing approach of most financial institutions such as banks and insurance companies to "sell" their products, whatever the need of the client. For instance, if the customer walks into an Allegro branch with INR 10000, he or she can invest the money in a mutual fund, in insurance, in shares, in gold, in gold chits, or RBI bonds with no pressure to choose the kind of products or the company it comes from. Advisors, specialized in the range of asset classes would help customers look at options and choose a product that is best suited to their requirements. Allegro represents all leading financial brands, and services of India and the state we are present in. Mutual funds from all Asset Management companies including Reliance, ABN, Fidelity, ICICI etc, Broking on the NSE, BSE, Post office savings instruments, gold loans, General and Life Insurance from all private and public companies including LIC, ICICI Prudential, Kotak Mutual, HDFC Standard life, MetLife, Gold from Tanishq and International investment products from Close Brothers are just some of the investment products on offer. The financial supermarket branches are now spread across Kerala, Karnataka, Tamil Nadu and Andra Pradesh. The All India phase 1 launch will be complete by March 2008. 2.2.11 Network Allegro Capital Advisors Pvt. Ltd. with a wide regional and national presence has the ability to reach its clients with ease. Our teams of financial advisors and specialists have the expertise, local and global contacts and awareness to create optimum solutions that meet our client's financial needs and goals. Our highly experienced, well connected team works on all types of Corp Finance transactions - including Domestic and Cross border Mergers & Acquisitions, IPO Advisory, Private Equity, Distressed Assets, Corporate & Capital Restructuring. Our strategic partnership with Close Brothers Group, amongst the largest international investment banking advisory groups in the mid market segment, offers us the unique advantage of offering Indian corporations a seamless service across Europe, North America, Asia, Africa and Australia. H.R.I.H.E, Hassan 28
  29. 29. Mutual fund is the better investment plan 2.2.12 Swot Analysis  Strength:  It is one of the biggest Businesses in India  It portfolios up to 12 different investment companies.  It includes huge number of employees  It is having merger & acquisition with 5 and more companies to increase its growth.  It elaborates its Network throughout the world.  Weakness:  Comparatively it has less branch offices geographically.  It has high level competition  Opportunities:  It has unlimited geographical locations for business  It has an opportunity to serve different kinds of customers  Due to consistent level of competition there is an opportunity to improve its performance  Threats:  It has different tax rates & policies for different locations  Difficult to manage every company’s response H.R.I.H.E, Hassan 29
  30. 30. Mutual fund is the better investment plan REVIEW OF LITERATURE 3.1 Introduction of Mutual Fund A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The SEBI (MF) Regulations, 1993 defines mutual fund as “A fund established in the form of a trust by a sponsor to raise monies by the trustees through the sale of units to the public under one or more schemes for investing in securities in accordance with these regulations.”  An overview Mutual fund industry in India began with setting up of Unit Trust of India (UTI) in 1964 by the government of India. During last 39 years UTI has grown to be a dominant player in the industry. The UTI is governed by a special legislation, the Unit Trust of India Act 1963. In 1987 public sector banks and insurance companies were permitted to set up mutual funds and accordingly in 1987 six public sectors banks have set up mutual funds. Also the two insurance companies LIC and GIC established the mutual funds. Securities Exchange Board of India (SEBI) formulated the mutual fund regulation in 1993, which for the first time established a comprehensive regulatory framework for the mutual fund industry. Since then several mutual funds have been set up the private and joint sectors. 3.2 What is mutual fund? A mutual fund collects the savings from small investors, invest them in government and other corporate securities and earn income through interest and H.R.I.H.E, Hassan 30
  31. 31. Mutual fund is the better investment plan dividends, besides capital gains. It works on the principle of ‘small drops of water make a big ocean’ A mutual fund is just the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund. Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns. It works principle of ‘small drops of water make a big ocean’. For instance, if one has Rs 1000 to invest, it may not fetch very much on its own .But when it is pooled with Rs.1000 each from a lot of other people, then, one could create a ‘big fund’ large enough to invest in a wide varieties of shares and debentures on a commanding scale and thus, to enjoy the economies of large scale operations. Hence, a mutual fund is nothing but a form of collective investment. It is formed by the coming together of a number of investors who transfer their surplus funds to a professionally qualified organization to manage it. To get the surplus funds from investors, the fund adopts a simple technique. Each fund is divided into a small fraction called “units” of equal value. Each investor is allocated units in proportion to the size of his investment. Thus, every investor, whether big or small, will have a stake in the fund and can enjoy the wide portfolio of the investment held by the fund. Hence, mutual funds enable millions of small and large investors to participate in and derive the benefit of the capital market growth. H.R.I.H.E, Hassan 31
  32. 32. Mutual fund is the better investment plan Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. This pool of money is invested in accordance with a stated objective. The joint ownership of the fund is thus “Mutual”, i.e. the fund belongs to all investors. 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 the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fund is an investment tool that allows small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The fund’s Net Asset value (NAV) is determined each day. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual fund are known as unit holders. H.R.I.H.E, Hassan 32
  33. 33. Mutual fund is the better investment plan 3.2.1 Definition Mutual Funds Definition refers to the meaning of Mutual Fund, which is a fund, managed by an investment company with the financial objective of generating high Rate of Returns. These asset management or investment management companies collects money from the investors and invests those money in different Stocks, Bonds and other financial securities in a diversified manner. Before investing they carry out thorough research and detailed analysis on the market conditions and market trends of stock and bond prices. These things help the fund managers to speculate properly in the right direction 3.3 History Of Mutual Funds In India The end of millennium marks 36 years of existences of mutual funds in this country. The ride through these 36 years is not been smooth. Investor’s opinion is still divided. While some are for mutual funds others are against it. UTI commenced its operation from July 1964. The impetus for establishing a formal institution came from the desire to increase propensity of the middle and lower groups to save and invest. UTI came into existence during a period market by great political and economical uncertainty in India. With war on borders and economic turmoil that depressed the financial market, entrepreneurs were hesitant to enter capital market. The already existing companies found it difficult to raise fresh capital, as investors did not respond adequately to new issues. UTI commenced its operation from July 1964 “With a view to encouraging savings and investments and participations in the income, profits and gains accruing to the corporation from the acquisition, holding management and disposal of securities”. Different provisions of the UTI Act laid down the structure of management, scope of business, power and function of the Trust as well as accounting, disclosures and regulatory requirements for the trust.  1999-2000 year of the fund: Mutual funds have been around for a long period of time, to be precise for 36 years but the year 1999 saw immense future potential and developments in this sector. This year signaled the year of resurgence of Mutual funds and the regaining of investors’ confidence in these mutual funds. This time around all the participants are involved in the revival of the funds, the AMC's, the unit holders. The other related parties. However, the sole factor that gave life to the revival of the funds was the Union Budget. The Budget H.R.I.H.E, Hassan 33
  34. 34. Mutual fund is the better investment plan brought a large number of changes in the on one stroke. An insight of the Union Budget on Mutual funds taxation in provided later. The fund started to regulate them and was all out on winning and trust and confidence of the investors under the agencies of the ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI). The quest to attract investors extended beyond just new schemes. One can say that industry is moving from infancy to adolescence, the industry is maturing and the investors and funds are frankly opening discussing difficulties opportunities and compulsions. 3.4 Growth Of Mutual Fund In India 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 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 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. At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 corers. H.R.I.H.E, Hassan 34
  35. 35. Mutual fund is the better investment plan  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 corers. The Unit Trust of India with Rs.44, 541 corers 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 corers 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. H.R.I.H.E, Hassan 35
  36. 36. Mutual fund is the better investment plan 3.5 Overview of existing schemes existed in mutual fund category Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry. Concept of Mutual Fund Many investors with common financial objectives pool their money Investors on a proportionate basis. Get mutual fund units for the sum contributed to the pool The money collected from investors is invested into shares, debentures & other securities by the fund manager The fund manger realizes gains or losses, & collects divided or interest income Any capital gains or losses from such investments are passed on to the investors in proportion of the number of units held by them When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors H.R.I.H.E, Hassan 36
  37. 37. Mutual fund is the better investment plan 3.6 Scope Of Mutual Fund As stated earlier, a mutual fund is nothing but a pool of the investor’s fund. The special feature of a mutual fund is that the contributors and the beneficiaries of the fund are one and the same class of people i.e., investors. Nobody else can claim that fund. Since the investors themselves contribute to the pool of fund and enjoy it and its fruits, the term’ Mutual ‘have been employed. The important features of a mutual fund are the following: 1. A mutual fund belongs to those who have contributed to that fund and thus, the ownership of the fund lies in the hands of the investors. 2. The pool of funds collected is invested in a portfolio of marketable securities. 3. Generally the investment portfolio of the mutual fund is created according to the objective of the fund. For example a sectoral mutual fund invests its funds in a specific sector like IT sector, oil sector etc. 4. The investors share in the fund is represented by “units “just like shares in the case of share capital of a company. The unit value depends upon the value of the portfolio held by the fund. Hence, the value changes almost every day and it is called Net Asset Value. H.R.I.H.E, Hassan 37
  38. 38. Mutual fund is the better investment plan The entire mutual fund industry operates in a very organized way. The investors, known as unit holders, handover their savings to the AMCs under various schemes. The objective of the investment should match with the objective of the fund to best suit the investors’ needs. The AMCs further invest the funds into various securities according to the investment objective. The return generated from the investments is passed on to the investors or reinvested as mentioned in the offer document. H.R.I.H.E, Hassan 38
  39. 39. Mutual fund is the better investment plan 3.7 Importance Of Mutual Funds The mutual fund industry has grown at a phenomenal rate in the recent past. One can witness a revolution in the mutual fund industry in view of its importance to the investors in general and the country’s economy at large. The following are some of the important advantages of mutual funds.  Channelizing Savings for Investment: Mutual funds act as a vehicle in galvanizing the savings of the people by offering various schemes suitable to the various classes of customers for the development of the economy as a whole. A number of schemes are being offered by MFs so as to meet the varied requirements of the masses, and thus, savings are directed towards capital investments directly.  Providing Better Yields: The pooling of funds from a large number of customers enables the fund to have large funds at its disposal. Due to these large funds, mutual funds are able to buy cheaper and sell dearer than the small and medium investors. Thus, they are able to command better market rates and lower rates of brokerage .So; they provide better yields to their customers.  Promoting Industrial Development: The economic development of any nation depends upon its industrial advancement and agricultural development. All industrial units have to raise their funds by resorting to the capital market by the issue of shares and debentures. The mutual funds not only create a demand for these capital instruments but also supply large sources of funds to the markets, and thus, the industries are assured of their capital requirements. In fact the entry of mutual funds has enhanced the demand for India’s stocks and bonds. Thus, mutual funds provide financial resources to the industries at market rates. H.R.I.H.E, Hassan 39
  40. 40. Mutual fund is the better investment plan  Keeping the Money Market Active: Individual investors can not have any access to money market instruments since the minimum amount of investment is out of his reach. On the other hand, mutual funds keep the money market active by investing money on the money market instruments. In fact ,The availability of more money market instruments itself is a good sign for a developed money market which is essential for the successful functioning of the central bank in a country. Thus mutual funds provide stability to share prices, safety to investors and resources to prospective entrepreneurs.  Introducing Flexible Investment Schedule: Some mutual funds have permitted the investors to exchange their units from one scheme to another and this flexibility is a great boon to investors. Income units can be exchanged for growth units depending upon the performance of the funds. One cannot derive such flexibility in any other investments.  Providing Greater Affordability and Liquidity: Even very small investors can afford to invest in Mutual Funds. They provide an attractive and cost effective alternative to direct purchase of shares. In the absence of MFs, small investors cannot think of participating in a number of investments with such a merge sum. Again, there is greater liquidity. Units can be sold to the Fund at any time at the Net Asset Value and thus quick access to liquid cash is assured.  Simplified Record Keeping: An investor with just an investment in 500 shares or so in 3 or 4 companies has to keep proper records of dividend payments, bonus issues, price movements, purchase or sale instruction, brokerage and other related items. It is tedious and it consumes a lot of time. One may even forget to record the rights issue and may have to forfeit the same. Thus, record keeping is the biggest problem for small and medium investors. Now, mutual funds offers a single investment source facility, i.e., a single buy order of 100 units from a mutual fund is equivalent to investment in more than 100 companies. H.R.I.H.E, Hassan 40
  41. 41. Mutual fund is the better investment plan  Reducing the Marketing Cost of New Issues: The mutual fund helps to reduce the marketing cost of the new issues. The promoters used to allot a major share of the Initial Public Offering to the mutual funds and thus they are saved from the marketing cost of such issues.  Providing Research Service: A mutual fund is able to command vast resources and hence it is a possible for it to have an in depth study and carry out research on corporate securities. Each fund maintains a large research team which constantly analyses the companies and the industries and recommends the fund to buy or sell a particular share. Thus, investments are made purely on the basis of a thorough research. Since research involves a lot of times, efforts and expenditure, an individual investors cannot take up this work. By investing in a mutual fund, the investor gets the benefit of the research done by the fund. H.R.I.H.E, Hassan 41
  42. 42. Mutual fund is the better investment plan 3.8 Advantages Of Mutual Fund  Diversification: An investor undertakes risk if he invests all his funds in a single scrip. Mutual funds invest in a number of companies across various industries and sectors. This diversification reduces the risk of the investment.  Professional Management: An investor lacks the knowledge of the capital market operations and does not have large resources to reap the benefits of investment. Hence, he requires the help of an expert. Mutual funds are managed by professional managers who have the requisite skills and experiences to analyses the performance and prospectus of companies.  Regulatory oversight: Mutual funds are subject to many government regulations that protect investors from fraud.  Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a call, and you've got the cash.  Convenience: You can usually buy mutual fund shares by mail, phone, or over the Internet. It reduces paperwork, saves time and makes investment easy.  Low cost: Mutual fund expenses are often no more than 1.5 percent of your investment. Expenses for Index Funds are less than that, because index funds are not actively managed. Instead, they automatically buy stock in companies that are listed on a specific index  Transparency: Mutual funds transparently declare their portfolio every month. Thus, an investor knows where his/her money is being deployed and in case they are not happy with the portfolio they can withdraw at a short notice.  Tax benefits: Mutual fund investors now enjoy income tax benefits. Dividends received from mutual funds’ debt schemes are tax exempt to the overall limit of Rs 9000 allowed under section SOL of the Income Tax Act. H.R.I.H.E, Hassan 42
  43. 43. Mutual fund is the better investment plan 3.9 Disadvantage Of Mutual Fund  No Guarantees: No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money.  Fees and commissions: All funds charge administrative fees to cover their day-to- day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund.  Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made.  Management risk: When you invest in a mutual fund, you depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the manage does not perform as well as you had hoped, you might not make as much money on your investment as you expected H.R.I.H.E, Hassan 43
  44. 44. Mutual fund is the better investment plan 3.10 Organization of a Mutual Fund UNIT HOLDERS Sponsors Trustees AMC THE MUTUAL FUND Transfer Agent Custodian SEBI 3.11 Investment Strategies 1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed date of a month. Payment is made through post dated cheques or direct debit facilities. The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA) 2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund. 3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month H.R.I.H.E, Hassan 44
  45. 45. Mutual fund is the better investment plan 3.12 RISK V/S. RETURN: The risk return trade-off indicates that if investor is willing to take higher risk then correspondingly he can expect higher returns and vice versa if he pertains to lower risk instruments, which would be satisfied by lower returns. For example, if an investors opt for bank FD, which provide moderate return with minimal risk. But as he moves ahead to invest in capital protected funds and the profit-bonds that give out more return which is slightly higher as compared to the bank deposits but the risk involved also increases in the same proportion H.R.I.H.E, Hassan 45
  46. 46. Mutual fund is the better investment plan 3.13 CATEGORIES OF MUTUAL FUND: Mutual funds can be classified as follows: In the investment market, one can find a variety of investors with different needs, objectives and risk capacities. For instance, a young businessman would like to get more capital appreciation for his funds and he would be prepared to take greater risks than a person who is just on the verge of his retiring age. So, it is very difficult to offer one fund to satisfy all the requirements of investors. One fund is not suitable to meet the vast requirements of all investors. Therefore, many types of funds are available to the investors. It is completely left to the discretion of the investors to choose any one of them depending upon has requirements and his risk taking capacity.  Based on their structure: H.R.I.H.E, Hassan 46
  47. 47. Mutual fund is the better investment plan  Open-ended funds: Under this scheme, the size of the fund and /or the period of the fund are not pre-determined. The investors can buy and sell the units from the fund, at any point of time. For instance, the unit scheme (1964) of the Unit Trust of India is open –ended one, both in terms of period and target amount. Anybody can buy this unit at any time and sell it also at any time at his discretion. • The Main Features of the Open-ended Funds are: 1. The main objective of this fund is income generation. The investors get dividend, rights or bonuses as rewards for their investments. 2. These units are not publicly traded but, the fund is ready to repurchase them and resell them at any time. 3. Generally the listed prices are very close to their Net Asset Value .The Fund fixes different prices for their purchases and sales.  Close-ended funds: These funds raise money from investors only once. Therefore, after the offer period, fresh investments can not be made into the fund. If the fund is listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of close- ended funds provided liquidity window on a periodic basis such as monthly or weekly. Redemption of units can be made during specified intervals. Therefore, such funds have relatively low liquidity. • The main features of the close-ended funds are: 1. The main objective of this fund is capital appreciation. 2. The whole fund is available for the entire duration of the scheme and there will not be any redemption demands before its maturity .Hence, the fund manager can manage the investments efficiently and profitably without the necessity of maintaining any liquidity. 3. From the investors’ point of view, it may attract more tax since the entire. Capital appreciation is realized in at one stage itself. 4. Generally the prices of close-end scheme units are quoted at a discount of up to 40 percent below their Net Asset Value (NAV). H.R.I.H.E, Hassan 47
  48. 48. Mutual fund is the better investment plan  Based on their investment objective:  Equity funds: These funds invest in equities and equity related instruments. With fluctuating share prices, such funds show volatile performance, even losses. However, short term fluctuations in the market, generally smoothens out in the long term, thereby offering higher returns at relatively lower volatility. At the same time, such funds can yield great capital appreciation as, historically, equities have outperformed all asset classes in the long term. Hence, investment in equity funds should be considered for a period of at least 3-5 years. It can be further classified as:  Index funds- In this case a key stock market index, like BSE Sensex or Nifty is tracked. Their portfolio mirrors the benchmark index both in terms of composition and individual stock weightages.  Equity diversified funds- 100% of the capital is invested in equities spreading across different sectors and stocks.  Dividend yield funds- it is similar to the equity diversified funds except that they invest in companies offering high dividend yields.  Thematic funds- Invest 100% of the assets in sectors which are related through sometheme. e.g. -An infrastructure fund invests in power, construction, cements sectors etc.  Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will invest in banking stocks.  Balanced fund: Their investment portfolio includes both debt and equity. As a result, on the risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments. Following are balanced funds classes:  Debt-oriented funds -Investment below 65% in equities.  Equity-oriented funds -Invest at least 65% in equities, remaining in debt. H.R.I.H.E, Hassan 48
  49. 49. Mutual fund is the better investment plan  Debt fund: They invest only in debt instruments, and are a good option for investors averse to idea of taking risk associated with equities. Therefore, they invest exclusively in fixed-income instruments like bonds, debentures, Government of India securities; and money market instruments such as certificates of deposit (CD), commercial paper (CP) and call money. Put your money into any of these debt funds depending on your investment horizon and needs.  Liquid funds- These funds invest 100% in money market instruments, a large portion being invested in call money market.  Gilt funds ST- They invest 100% of their portfolio in government securities of and T-bills.  Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments which have variable coupon rate.  Arbitrage fund- They generate income through arbitrage opportunities due to mis-pricing between cash market and derivatives market. Funds are allocated to equities, derivatives and money markets. Higher proportion (around 75%) is put in money markets, in the absence of arbitrage opportunities.  Gilt funds LT- They invest 100% of their portfolio in long-term government securities.  Income funds LT- Typically; such funds invest a major portion of the portfolio in long-term debt papers. METHODOLOGY 4.1 Type of Research: Descriptive method has been used in this research for the collection of data .As the research is related to the study of consumer behavior, which can more effectively be studied through direct question, experimental research will not be much effective. Also, considering the constraint, descriptive research is the most suitable design for this research.  Qualitative research H.R.I.H.E, Hassan 49
  50. 50. Mutual fund is the better investment plan Qualitative research allows you to explore perceptions, attitudes and motivations and to understand how they are formed. It provides depth of information which can be used in its own right or to determine what attributes will subsequently be measured in quantitative studies. Verbatim quotes are used in reports to illustrate points and this brings the subject to life for the reader. However, it relies heavily on the skills of the moderator, is inevitably subjective and samples are small. Techniques include group discussions/workshop sessions, paired interviews, individual in-depth interviews and mystery shopping (where the researcher plays the role of a potential student, etc in order to replicate the overall experience).  Quantitative research Quantitative research is descriptive and provides hard data on the numbers of people exhibiting certain behaviors’, attitudes, etc. It provides information in breadth and allows you to sample large numbers of the population .  Descriptive research: Descriptive research is used to obtain information concerning the current status of the phenomena to describe "what exists" with respect to variables or conditions in a situation. The methods involved range from the survey which describes the status quo, the correlation study which investigates the relationship between variables, to developmental studies which seek to determine changes over time.  Statement of the problem.  Identification of information needed to solve the problem.  Selection or development of instruments for gathering the information.  Identification of target population and determination of sampling procedure.  Design of procedure for information collection.  Collection of information.  Analysis of information. H.R.I.H.E, Hassan 50
  51. 51. Mutual fund is the better investment plan  Generalizations and/or predictions. 4.2 Source of Data: Data which is collected for the first time is called primary data. In the study primary data includes the data which is collected from the customer directly with interaction. The study includes data got with personal interaction.  Primary and Secondary Data: The appraiser or market analyst must know what they are and what affects them. All data used in appraisals and market studies should be current, relevant, reliable, accurate, and conceptually correct. This article presents a discussion of each of these terms and their significance in the context of the data and in the analysis. The article then discusses the nature of potential errors that can affect primary and secondary data. Several categories of errors can exist. The analyst needs to be able to recognize the error, understand its significance and evaluate the applicability of that data in the analysis. Secondary data--Information from secondary sources, i.e., not directly compiled by the analyst; may include published or unpublished work based on research that relies on primary sources of any material other than primary sources used to prepare a written work. Secondary data has been gathered by others for their own purposes, but the data could be useful in the analysis of a wide range of real property. In general, secondary data exists in published sources.  Methods for Obtaining Primary Data: The analyst can obtain primary data through the process of direct observation or by explicit questioning of people.  Observation: H.R.I.H.E, Hassan 51
  52. 52. Mutual fund is the better investment plan Observation as a data gathering technique focuses attention on an observable fact or inanimate entity such as a building or on an observable action or behavior by an animate entity such as a homeowner or shopper. Observation of an inanimate object is the easier of the two activities, but it is not free from error or misinterpretation. 4.3 Data collection instrument This report is based on primary as well secondary data, however primary data collection was given more importance since it is overhearing factor in attitude studies. One of the most important users of research methodology is that it helps in identifying the problem, collecting, analyzing the required information data and providing an alternative solution to the problem .It also helps in collecting the vital information that is required by the top management to assist them for the better decision making both day to day decision and critical ones. 4.4 Sample size: The sample size of my project is limited to 200 people only. Out of which only 120 people had invested in Mutual Fund. Other 80 people did not have invested in Mutual Fund. 4.5 Sample design: Sampling is a practice a researcher uses to draw data on people, places, or things to study. Sampling allows statisticians to draw conclusions about a whole by examining a part. It enables us to estimates characteristics of a population by openly observing a portion of the entire population. The whole that the researcher wants to know something about is the population is called a sample. Data has been presented with the help of bar graph, pie charts, line graphs etc. 4.6 Procedure data collection methods H.R.I.H.E, Hassan 52
  53. 53. Mutual fund is the better investment plan The sample was selected of them who are the customers/visitors of Allegro advisor private limited, irrespective of them being investors or not or availing the services or not. It was also collected through personal visits to persons, by formal and informal talks and through filling up the questionnaire prepared. The data has been analyzed by using mathematical/Statistical tool. 4.7 Techniques for data analysis Research is totally based on primary data. Secondary data can be used only for the reference. Research has been done by primary data collection, and primary data has been collected by interacting with various people. The secondary data has been collected through various journals and websites. DATA INTERPRETATION & ANALYSIS 1. (a) Age distribution of the Investors of Allegro Advisor Private Limited Age Group <= 30 31-35 36-40 41-45 46-50 >50 No. of 12 18 30 24 20 16 Investors H.R.I.H.E, Hassan 53
  54. 54. Mutual fund is the better investment plan 35 Investors invested in Mutual Fund 30 25 20 15 30 24 10 18 20 16 5 12 0 <=30 31-35 36-40 41-45 46-50 >50 Age group of the Investors Interpretation: According to this chart out of 120 Mutual Fund investors of Allegro Capital Advisors Pvt. Ltd. Private Limited the most are in the age group of 36-40 yrs. i.e. 25%, the second most investors are in the age group of 41-45yrs i.e. 20% and the least investors are in the age group of below 30 yrs. (b). Educational Qualification of investors of Allegro Capital Advisors Pvt. Ltd. Private Limited Educational Qualification Number of Investors Graduate/ Post Graduate 88 Under Graduate 25 Others 7 Total 120 H.R.I.H.E, Hassan 54
  55. 55. Mutual fund is the better investment plan 6% 23% 71% Graduate/Post Graduate Under Graduate Others Interpretation: Out of 120 Mutual Fund investors 71% of the investors in Allegro Capital Advisors Pvt. Ltd. Private Limited are Graduate/Post Graduate, 23% are Under Graduate and 6% are others. H.R.I.H.E, Hassan 55
  56. 56. Mutual fund is the better investment plan (C). Occupation of the investors of Allegro Capital Advisors Pvt. Ltd. Private Limited Occupation No. of Investors Govt. Service 30 Pvt. Service 45 Business 35 Agriculture 4 Others 6 . 50 45 40 35 No. of Investors 30 25 45 20 35 15 30 10 5 4 6 0 e ce re s s c er s tu vi vi ne th ul er r Se i O us ic S gr t. t. B Pv ov A G Occupation of the customers Interpretation: In Occupation group out of 120 investors, 38% are Pvt. Employees, 25% are Businessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are in others. H.R.I.H.E, Hassan 56
  57. 57. Mutual fund is the better investment plan (d). Monthly Family Income of the Investors of Allegro Capital Advisors Pvt. Ltd. Private Limited Income Group No. of Investors <=10,000 5 10,001-15,000 12 15,001-20,000 28 20,001-30,000 43 >30,000 32 50 45 40 No. of Investors 35 30 25 20 43 15 32 28 10 5 12 5 0 <=10 10-15 15-20 20-30 >30 Income Group of the Investorsn (Rs. in Th.) Interpretation: In the Income Group of the investors of Allegro Capital Advisors Pvt. Ltd. Private Limited , out of 120 investors, 36% investors that is the maximum investors are in the monthly income group Rs. 20,001 to Rs. 30,000, Second one i.e. 27% investors are in the monthly income group of more than Rs. 30,000 and the minimum investors i.e. 4% are in the monthly income group of below Rs. 10,000 (2) Investors invested in different kind of investments. H.R.I.H.E, Hassan 57
  58. 58. Mutual fund is the better investment plan Kind of Investments No. of Respondents Saving A/C 195 Fixed deposits 148 Insurance 152 Mutual Fund 120 Post office (NSC) 75 Shares/Debentures 50 Gold/Silver 30 Real Estate 65 65 Kinds of Investment 30 50 er ilv /S 75 ld Go 120 C) NS 152 e( fic Of 148 e nc st ra Po 195 su In c A/ 0 50 100 150 200 250 ng vi Sa No.of Respondents Interpretation: From the above graph it can be inferred that out of 200 people, 97.5% people have invested in Saving A/c, 76% in Insurance, 74% in Fixed Deposits, 60% in Mutual Fund, 37.5% in Post Office, 25% in Shares or Debentures, 15% in Gold/Silver and 32.5% in Real Estate. 3. Preference of factors while investing H.R.I.H.E, Hassan 58
  59. 59. Mutual fund is the better investment plan Factors (a) Liquidity (b) Low (c) High (d) Trust Risk Return No. of 40 60 64 36 Respondents 18% 20% 32% 30% Liquidity Low Risk High Return Trust Interpretation: H.R.I.H.E, Hassan 59
  60. 60. Mutual fund is the better investment plan Out of 200 People, 32% People prefer to invest where there is High Return, 30% prefer to invest where there is Low Risk, 20% prefer easy Liquidity and 18% prefer Trust 4. Awareness about Mutual Fund and its Operations Response Yes No No. of Respondents 135 65 33% 67% Yes No Interpretation: H.R.I.H.E, Hassan 60
  61. 61. Mutual fund is the better investment plan From the above chart it is inferred that 67% People are aware of Mutual Fund and its operations and 33% are not aware of Mutual Fund and its operations. 5. Source of information for customers about Mutual Fund Source of information No. of Respondents Advertisement 18 Peer Group 25 Bank 30 Financial Advisors 62 70 60 Respondents 50 40 No. of 30 62 20 25 30 10 18 0 Advertisement Peer Group Bank Financial Advisors Source of Information Interpretation: From the above chart it can be inferred that the Financial Advisor is the most important source of information about Mutual Fund. Out of 135 Respondents, 46% know about Mutual fund Through Financial Advisor, 22% through Bank, 19% through Peer Group and 13% through Advertisement. H.R.I.H.E, Hassan 61
  62. 62. Mutual fund is the better investment plan 6. Investors invested in Mutual Fund Response No. of Respondents YES 120 NO 80 Total 200 Yes No 60% 40% Interpretation: Out of 200 People, 60% have invested in Mutual Fund and 40% do not have invested in Mutual Fund. H.R.I.H.E, Hassan 62
  63. 63. Mutual fund is the better investment plan 7. Reason for not invested in Mutual Fund Reason No. of Respondents Not Aware 65 Higher Risk 5 Not any Specific Reason 10 6% 13% 81% Not Aware Higher Risk Not Any Interpretation: Out of 80 people, who have not invested in Mutual Fund, 81% are not aware of Mutual Fund, 13% said there is likely to be higher risk and 6% do not have any specific reason. H.R.I.H.E, Hassan 63
  64. 64. Mutual fund is the better investment plan 8. Investors invested in different Assets Management Co. (AMC) Name of AMC No. of Investors SBIMF 55 UTI 75 HDFC 30 Reliance 75 ICICI Prudential 56 Kotak 45 Others 70 H.R.I.H.E, Hassan 64

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