A project report on awareness of mutual funds 1

AdvanceDiplomainBankingandInsurance
A project report
on
Awareness of Mutual Funds
Submitted to: Dr. JAY TRIVEDI,
S.K. College of Business Management, HNGU, PATAN
Under the Guidance of: Mr. Nisarg Khamar,
[faculty member of advancediploma in banking and insurance,
S.K. College of Business Management HNGU, PATAN]
Submitted by: Swati. M. Suthar,
Nirali. D. Nayi.
[SEM: 2ND
]
S.K. College of Business Management HNGU, PATAN.

CERTIFICATE BY THE GUIDE
This is to certify that the contents of this report entitled “Awareness of Mutual
Fund Investmentamong investors of PATAN city.” submitted to S.K. COLLEGE of
Business Managementin AdvanceDiploma in Banking and Insurance, (Sem-2)is
original research work carried out by him/her/them under my supervision. This
report has not been submitted either partly or fully to any other University or
Institute for award of any degree or diploma.
Name: Swati. M. Suthar,
Nirali. D. Nayi.
[Advance Diploma in Banking and Insurance, sem: -2,
S. K. College of Business Management,
HNGU, Patan.]

PREFACE
I amextremely happywith to comeoutwith this projecton awarenessofmutual
funds for the disciple, I havedivided the projectin small topic such as title page,
preface, acknowledgement, introduction, main content, research data analysis
and questionnaires all point so that the disciple can understood properly.
A large data given in project about awareness of mutual funds so that disciple
can usethis data in their subjectof banking. I am surethatthis projectwill cater
all your need for banking subject.
I preparethis project from the collecting the data from internet websites of the
mutual funds.so that disciple can use this data freely for their preparation.
However, if you find any, please let me know, because that will help me to
improve for further.
Date: 11/12/2016 Swati. M. Suthar
Place: HNGU, Patan. Nirali. D. Nayi.

ACKNOWLEDGMENT
We have been able to prepare our report successfully and we acknowledge a
special thanks to all those people without whose supportit was impossible to
make the project report. We would hereby take this opportunity to show our
gratitude towards all our mentors for what we have learnt during our banking
project. A good response, feedback and co-operation given by whole staff
helped out in gaining knowledge and solving our queries. The successful
completion of this projectcould nothavebeen possiblewithoutthe cooperation
and support of our faculty guide and investors who have given complete
information for the project. We feel immense pleasure to thank Mr. Nisarg
Khamar from S.K. College of Business Management, HNGU, Patan. For making
available all facilities in fulfilling the requirements for the research work. We
forward our appreciation to respected coordinator of the Dr. Jay Trivedi faculty
of S.K. College of Business Management, HNGU, Patan.
Date:11/12/2016 Swati. M. Suthar
Place: HNGU, Patan. Nirali. D. Nayi

EXECUTIVE SUMMARY
Starting out as an industry with a single player, the UTI, in 1963, themutual
fund industry in India has come a long way sincethen. Today, close to 30
players, offering over 460 schemes, dotthe industry landscape. The industry
has gained enormously in size as reflected in its assets under management
which now stand at a whopping Rs.1,75,918 cr., as on July 31, 2005 from
Rs.1,00,000crorein early 2000. Further, theemergence of Patan city a major
investment destination has done a world of good to the mutual fund industry
in an India as it is witnessing entry of many big names in the global investment
management business. Theentry of major global players like Morgan Stanley,
Principal, Sun life, and Fidelity, while Vanguard is mulling over its India debut,
augurs well for the industry as not only these global investment management
firms bring with them the expertise gained internationally but also bring the
best international practices in terms of performances and investor services
which will benefit the industry and will go a long way in helping it catch up with
its counter parts in developed markets like the US and the UK.

Table of contents
Sr No. PARTICULARS PAGE No.
 Certificate by the Guide II
 Preface III
 Acknowledgement IV
 Executivessummary V
1 Introduction ofMutual Fund 1
1.1 What isMutual Fund?
1.2 Conceptof Mutual Fund
1.3 Historyof the Mutual Fund Industry
1.4 Global scenario
1.5 Organisationof Mutual Fund
1.6 Processof Mutual Fund
1.7 How to investinMutual Fund?
1.8 Regulatoryof mutual fundinIndia
1.9 Typesof Mutual Fundschemes
1.10 Procedure forregisteringaMutual fundwithSEBI
1.11 SEBI registeredMutual FundCompanies
1.12 Pointerstomeasure Mutual fundperformance
1.13 How to reduce riskwhile investing?
1.14 Advantagesof Mutual fund
1.15 Disadvantagesof Mutual fund
2 Literature Review
3 Research Methodology
4 Data analysis and interpretation
4.1 Chi-Square Test
4.2 Anovatest
5 Findings
6 Recommendations
7 Conclusion
8 Limitationsof the study
9 Bibliography
10 Annexure

Chapter: 1
Introduction

[1] WHAT IS MUTUAL FUND
A mutual fund is a collectiveinvestment scheme,which specializesin investing a pool of money
collectedfrom investors for the purpose of investing in securitiessuch as stocks, bonds, money
market instruments and similar assets.
One of the main advantages of mutual funds is that they give small investors access to
professionally managed, diversified portfolios of equities, debt instruments i.e. TFCs and Govt.
Securities and other securities, which otherwise would be quite difficult (if not impossible) to
create with a small amount of capital. The income earned through these investments and the
capital appreciations realized are shared with its unit holders in proportion to the number of
units owned by them.
A mutual fund is a professionally managed investment fund that pools money from many
investors to purchase securities. While there is no legal definition of the term "mutual fund", it
is most commonlyappliedto open-end investment companies,which arecollectiveinvestment
vehicles that are regulated and sold to the general public on a daily basis. They are sometimes
referred to as "investment companies" or "registered investment companies". Hedge funds
arenot mutual funds, primarilybecausethey cannot be sold to the general public.In the United
States mutual funds must be registered with the U.S. Securities and Exchange Commission,
overseen by a board of directorsor board of trustees, and managedby a Registered Investment
Advisor. Mutual funds are subject to an extensive and detailed regulatory regime set forth in
the Investment company Act of 1940. Mutual funds are not taxed on their income and profits
if they comply with certain requirements under the U.S. Internal Revenue Code.
Mutual funds have both advantages and disadvantages compared to direct investing in
individual securities. Today they play an important role in household finances, most notably in
retirement planning.
There are three types of U.S. mutual funds: open-end funds, unit investment trusts, and closed-
end funds. The most common type, open-end funds, must be willing to buy back shares from
investors every business day. Exchange-traded funds (ETFs) are open-end funds or unit
investment trusts that trade on an exchange. Non-exchange-traded open-end funds are most
common, but ETFs have been gaining in popularity.
Mutual funds are generally classified by their principal investments. The four main categories
of funds are money market funds, bond or fixed income funds, stock or equity funds, and
hybrid funds. Funds may also be categorized as index (or passively managed) or actively
managed.
Investors in a mutual fund pay the fund’s expenses, which reduce the fund's returns and
performance. There is controversy about the level of these expenses.

Mutual fund is an investment company that pools money from shareholders and invests in a
variety of securities, such as stocks, bonds and money market instruments. Most open-end
Mutual funds stand ready to buy back (redeem) its shares at their current net asset value,
which depends on the total market value of the fund's investment portfolio at the time of
redemption. Most open-end Mutual funds continuously offer new shares to investors. Also
known as an open-end investment company, to differentiate it from a closed-end investment
company. Mutual funds invest pooled cash of many investors to meet the fund's stated
investment objective. Mutual funds stand ready to sell and redeem their shares at any time at
the fund's current net
asset value: total fund assets divided by shares outstanding.
In Simple Words, Mutual fund is a mechanism for pooling the resources by issuing units to the
investors and investing funds in securities in accordance with objectives as disclosed in offer
document.
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. The profits or losses are shared by the
investors in proportion to their investments. The Mutual funds normally come out with a
number of schemes with different investment objectives which are launched from time to
time.
In India, A Mutual fund is required to be registered with Securities and Exchange Board of India
(SEBI) which regulates securities markets before it can collect funds from the public. In Short,
a Mutual fund is a common pool of money in to which investors with common investment
objective place their contributions that are to be invested in accordance with the stated
investment objective of the scheme.
The investment manager would invest the money collected from the investor in to assets that
are defined/ permitted by the stated objective of the scheme. For example, an equity fund
would invest equity and equity related instruments and a debt fund would invest in bonds,
debentures, gilts etc. Mutual fund is a suitable investment for the common man as it offers an
opportunity to invest in a diversified,professionallymanagedbasket of securitiesat a relatively
low cost.
Mutual fund is the pool of the money, based on the trust who invests the savings of a number
of investors who shares a common financial goal, like the capital appreciation and dividend
earning. The money thus collect is then invested in capital market instruments such as shares,
debenture, and foreign market. Investors invest money and get the units as per the unit value
which we called as NAV (net assets value). Mutual fund is the most suitable investment for the
common man as it offers an opportunity to invest in diversified portfolio management, good
research team, professionally managed Indian stock as well as the foreign market, the main
aim of the fund manager is to taking the scrip that have under value and future will rising, then
fund manager sell out the stock. Fund manager concentration on risk – return trade off, where
minimize the risk and maximize the return through diversification of the portfolio. The most
common features of the mutual fund unit are low cost. The below I mention the how the
transactions will have done or working with mutual fund.

(1.1) CONCEPT OF THE 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.
1] Investors
2] Pool their money with
3] Fund manager
4] Investing
5] Securities
6] Generates
7] Returns
8] Passed on back to
(1.2) GROWTH OF MUTUAL FUND INDUSTRY:
The history of mutual funds dates supports to 19th century when it was introduced in Europe,
in particular, Great Britain. Robert Fleming set up in 1868 the first investment trust called
Foreign and colonial investment trust which promised to manage the finances of the moneyed
classes of Scotland by scattering the investment over a number of different stocks. This
investment trust and other investment trusts which were afterward set up in Britain and the
U.S., resembled today’s close – ended mutual funds. The first mutual fund in the U.S.,
Massachusetts investor’s trust, was set up in March 1924. This was the open – ended mutual
fund.
The stock market crash in 1929, the Great Depression, and the outbreak of the Second World
War slackened the pace of growth of the mutual fund industry. Innovations in products and
services increased the popularity of mutual funds in the 1950s and 1960s. The first

international stock mutual fund was introduced in the US in 1940. In 1976, the first tax –
exempt municipal bond funds emerged and in 1979, the first money market mutual funds
were created. The latest additions are the international bond fund in 1986 arm funds in 1990.
This industry witnessed substantial growth in the eighties and nineties when there was a
significant increase in the number of mutual funds, schemes, assets, and shareholders. In the
US the mutual fund industry registered s ten – fold growth the eighties. Since 1996, mutual
fund assets have exceeded bank deposits. The mutual fund industry and the banking industry
virtually rival each other in size.
A Mutual fund is type of Investment Company that gathers assets form investors and
collectively invests in stocks, bonds, or money market instruments. The investment company
concepts date to Europe in the late 1700s, according to K. Geert Rouwenhost in the Origins
Mutual Funds, when “a Dutch Merchant and Broker Invited subscriptions from investor with
limited means.” The materialization of “investment Pooling “in England in the 1800s brought
the concept closer to U.S. shores. The enactment of two British Laws, the Joint Stock
Companies Acts of 1862 and 1867, permitted investors to share in the profits of an investment
enterprise, and limited investor liability to the amount of investment capital devoted to the
enterprise.
Maybe more outstandingly, the Britishfund model established a direct linkwith U.S. Securities
markets, serving finance the development of the post – Civil War U.S. economy. The Scottish
American Investment Trust, formed on February1, 1873 by fund pioneer Robert Fleming,
invested in the economic potential of the United States, Chiefly through American railroad
bonds. Many other trusts followed that not only targeted investment in America, but led to
the introduction of the fund investing concept on U.S. shores in the late 1800 and early 1900s.
Nov. 1925. All these funds were open – ended having redemption feature. Similarly, they had
almost all the features of a good modern Mutual Funds – like sound investment policies and
restrictions, open end ness, self – liquidating features, a publicized portfolio, simple capital
structure, excellent and professional fund management and diversification etc.…….and hence
they are the honoured grand – parents of today’s funds. Prior to these
funds all the initial investment companies were closed – ended companies. Therefore, it can
be said that although the basic concept of diversification and professional fund management,
were picked by U.S.A. from England Investment Companies “The Mutual Fund is an American
Creation.”
Because of their exclusive feature, open – ended Mutual Funds rapidly became very popular.
By 1929, there were 19 open – ended Mutual Funds in USA with total assets of $ 140 million.
But the 1929 Stock Market crash followed by great depression of 1930 ravaged the U.S.
Financial Market as well as the Mutual Fund Industry. This necessitated stricter regulation for

mutual funds and for Financial Sectors. Hence, to protect the interest of the common investors,
U.S. Government passed various Acts, such a Securities Act 1933, SecuritiesExchangeAct 1934
and the Investment Companies Act 1940. A committee called the National Committee of
Investment Company (Now, Investment Company Institute), was also formed to co – operate
with the Federal RegulatoryAgencyand to keep informedof trends in Mutual Fund Legislation.
As a resultof these measure,the Mutual Fund Industry began to develop speedilyand the total
net assets of the Mutual Funds Industry increased from $ 448 million in 1940 to $ 2.5 billion in
1950. The number of shareholder’saccounts increasedfrom 296000, to more than one Million
during 1940 – 1951. “As a result of renewed interest in Mutual Fund Industry they grew at 18%
annual compound rate reaching peak of their rapid growth curve in the late 1960s.”
(1.3) ORGANIZATION STRUCTURE OF MUTUAL FUNDS
Mutual funds have organization structure as per their Security Exchange Board of India
guideline, Security Exchange Board of India specified authority and responsibility of Trustee
and Aeest Management Companies. The objectives are to controlling, to promoted, to
regulate, to protected the investors right and efficient trading of units. Operation of Mutual
fund start with investors save their money on mutual fund, then Mutual Fund manager
handling the funds and strategic investment on scrip. As per the objectives of particular
scheme manager selected scrips. Unit value will become high when fund manager investment
policy generatesthe return on capital market. Unit return depends on fund return and efficient
capital market. Also affects international capital market, liquidity and at last economic policy.
Below the graph indicates how the process was going on to investors to earn returns. Mutual
fund manager having high responsibility inside of return and how to minimize the risk. When
fund provided high return with high risk, investors attract to invest more fund for same
scheme.
The Mutual fund organization as per the SEBI formation and necessary formation is needed for
sooth activities of the companies and achieved the desire objectives. Transfer agent and
custodian play role for dematerialization of the fund and unit holders hold the account
statement, but custody of the unit is on particular Asset Management Company. Custodian
holds all the fund units on dematerialization form. Sponsor had decided the responsibility of
custodian when investor to purchase the fund and to sell the unit. Application forms,
transaction slip and other requests received by transfer agent, middle men between investors
and Assets Management Companies.

(1.4) ORIGIN OF MUTUAL FUND IN INDIA
The history of mutual funds dates backs to 19th century when it was introduced in Europe, in
particular,GreatBritain.RobertFleming set up in 1968 the first investment trust calledForeign
and Colonial Investment Trust which promised to manage the finances of the moneyed classes
of Scotland by spreading the investment over a number of different stocks. This investment
trust and other investments trusts which were subsequently set up in Britain and the US,
resembled today’s close – ended mutual funds. The first mutual in the U.S., Massachusetts
investor’s Trust, was set up in March 1924. This was the open – ended mutual fund.
•AMC
•SEBI
•UNIT HOLDERS
•TRUSTEES
THEMUTUAL FUNDSSPONSROSTRANSFER AGENTCUSTODIAN
The stock market crash in 1929, the Great Depression, and the outbreak of the Second World
War slackened the pace of mutual fund industry, innovations in products and services
increased the popularity of mutual funds in the 1990s and 1960s. The first international stock
mutual fund was introduced in the U.S. in 1940. In 1976, the first tax – exempt municipal bond
funds emerged and in 1979, the first money market mutual funds were created. The latest
additions are the international bond fund in 1986 and arm funds in 1990. This industry
witnessed substantial growth in the eightiesand nineties when there was a significantincrease
in the number of mutual funds, schemes, assets, and shareholders. In the US, the mutual fund
industry registered a ten – fold growth the eighties. Since 1996, mutual fund assets have
exceeded bank deposits. The mutual fund industry and the banking industry virtually rival each
other in size.

(1.5) GROWTH OF MUTUAL FUNDS IN INDIA
By the year 1970, the industry had 361 Funds with combined total assets of 47.6 billion dollars
in 10.7 million shareholder’s account. However, from 1970 and on wards rising interest rates,
stock marketstagnation,inflationand investors some other reservations about the profitability
of Mutual Funds, adversely affected the growth of mutual funds. Hence Mutual Funds realized
the need to introduce new types of Mutual Funds, which were in tune with changing
requirements and interests of the investors. The 1970’s saw a new kind of fund innovation;
Funds with no sales commissions called “no load “funds. The largest and most successful no
load family of funds is the Vanguard Funds, created by John Bogle in 1977.
In the series of new product, the First Money Market Mutual Fund (MMMF) e.g. The Reserve
Fund” was started in November 1971. This new concept signalled a dramatic change in Mutual
Fund Industry. Most importantly,it attractednew small andindividual investors to mutual fund
concept and sparked a surge of creativity in the industry.
(1.6) PROCESS OF MUTUAL FUND
In the above graph shows how Mutual Fund works and how investor earns money by investing
in the Mutual Fund. Investors put their saving as an investment in Mutual Fund. The Fund
Manager who is a person who takes the decisions where the money should be invested in
securities according to the scheme’s objective. Securities include Equities, Debentures, Govt.

Securities, Bonds, and Commercial Paper etc. These Securities generates returns to the Fund
Manager. The Fund Manager passes back return to the investor
(1.7) WHAT IS THE PROCEDURE FOR REGISTERING A MUTUAL FUND
WITH SEBI?
An applicant proposing to sponsor a Mutual fund in India must submit an application in Form
A along with a fee of Rs.25, 000. The application is examined and once the sponsor satisfies
certain conditions such as being in the financial services business and possessing positive net
worth for the last five years, having net profit in three out of the last five years and possessing
the general reputation of fairness and integrity in all business transactions, it is required to
complete the remaining formalities for setting up a Mutual fund.
These include inter alia, executing the trust deed and investment management agreement,
setting up a trustee company/board of trustees comprising two- thirds independent trustees,
incorporating the asset management company (AMC), contributing to at least 40% of the net
worth of the AMC and appointing a custodian. Upon satisfying these conditions, the
registration certificate is issued subject to the payment of registration fees of Rs.25.00 lacs for
details; see the SEBI (Mutual funds) Regulations, 1996.
(1.8) REGULATORY OF MUTUAL FUND IN INDIA
• SEBI
The capital market regulates the mutual funds in India. SEBI requires all mutual funds to be
registered with them. SEBI issues guidelines for all mutual funds operations-investment,
accounts, expenses etc. Recently, it has been decided that Money Market Mutual Funds of
registered mutual funds will be regulated by SEBI through (Mutual Fund) Regulations 1996.
• RBI
RBI, a supervisor of the Banks owned Mutual Funds-As banks in India come under the
regulatory Jurisdiction of RBI, banks owned funds to be under supervision of RBI and SEBI. RBI
has supervisory responsibility over all entities that operate in the money markets.
• Ministry of finance (MOF)
Ministry of Finance ultimately supervises both the RBI and the SEBI and plays the role of apex
authority for any major disputes over SEBI guidelines.

• Company low board
Registrar of companies is called Company Low Board. AMCs of Mutual Funds are companies
registered under the companies Act 1956 and therefore answerable to regulatory authorities
empowered by the Companies Act.
• Stock exchange
Stock Exchanges are Self-regulatory organizations supervised by SEBI. Many closed ended
funds of AMCs are listed as stock exchanges and are traded like shares.
• Office of the public trustee
Mutual Fund being public trust is governed by the Indian Trust Act 1882. The Board of trustee
or the Trustees Company is accountable to the office of public trustee, which in turn reports
to the Charity commissioner.
(1.9) SEBI REGISTERED MUTUAL FUND
1. FORTIS Mutual fund
2. Alliance Capital Mutual fund,
3. AIG Global Investment Group Mutual fund
4. Benchmark Mutual fund,
5. Baroda Pioneer Mutual fund
6. Birla Mutual fund
7. Bharti AXA Mutual fund
8. CanaraRobeco Mutual fund
9. CRB Mutual fund (Suspended)
10. DBS Chola Mutual fund,
11. Deutsche Mutual fund
12. DSP Blackrock Mutual fund,
13. Edelweiss Mutual fund

14. Escorts Mutual fund,
15. Franklin Templeton Mutual fund
16. Fidelity Mutual fund
17. Goldman Sachs Mutual fund
18. HDFC Mutual fund,
19. HSBC Mutual fund,
20. ICICI Securities Fund,
21. IL & FS Mutual fund,
22. ING Mutual fund,
23. ICICI Prudential Mutual fund
24. IDFC Mutual fund,
25. JM Financial Mutual fund
26. JP Morgan Mutual fund
27. Kotak Mahindra Mutual fund,
29. LIC Mutual fund
31. Morgan Stanley Mutual fund
32. Mirae Asset Mutual fund
33. Principal Mutual fund
34. Quantum Mutual fund,
35. Reliance Mutual fund
36. Religare AEGON Mutual fund
37. Sahara Mutual fund,
38. SBI Mutual fund
39. Shriram Mutual fund

40. Sundaram BNP Paribas Mutual fund,
41. Taurus Mutual fund
42. Tata Mutual fund,
43. UTI Mutual fund

[2] TYPES OF MUTUAL FUNDS
1.8 TYPES OF MUTUAL FUNDS
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.
By Structure
Open Ended Funds
Close Ended Funds
Interval Funds
By Investment Objectives
Growth Funds
Income Funds
Balanced Funds
Money Market Funds
Other Schemes
Tax Saving Funds
Special Funds
Index Funds
Sector Specific Funds

(2.1) Open-ended
These aremutual funds which continually createnew units or redeemissued units on demand.
They are also called Unit Trusts. The Unit holders buy the Units of the fund or may redeem
them on a continuous basis at the prevailing Net Asset Value (NAV). These units can be
purchased and redeemed through Management Company which announces offer and
redemption prices daily
Open-end mutual funds must be willing to buy back their shares from their investors at the
end of every business day at the net asset value (NAV) computed that day. Most open-end
funds also sell shares to the public every day; these shares are also priced at NAV. A
professional investment manager oversees the portfolio, buying and selling securities as
appropriate. The total investment in the fund will vary based on share purchases, share
redemptions and fluctuation in market valuation. There is no legal limit on the number of
shares that can be issued.
Open-end funds are the most common type of mutual fund. At the end of 2015, there were
8,116 open-end mutual funds in the United States with combined assets of $15.7 trillion.
(2.2) Close-ended
These funds have a fixed number of shares like a public company and are floated through an
IPO. Once issued, they can be bought and sold at the market rates in secondary market (Stock
Exchange). The market rate is announced daily by the stock exchange.
Closed-end funds generallyissuesharesto the public only once, when they arecreatedthrough
an initial public offering. Their shares arethen listedfor trading on a stock exchange. Investors
who no longer wish to invest in the fund cannot sell their shares back to the fund (as they can
with an open-end fund). Instead, they must sell their shares to another investor in the market;
the price they receive may be significantly different from NAV. It may be at a "premium" to
NAV (i.e., higher than NAV) or, more commonly, at a "discount" to NAV (i.e., lower than NAV).
A professional investment manager oversees the portfolio, buying and selling securities as
appropriate.
At the end of 2015, there were558 closed-end funds inthe United States with combined assets
of $261 billion.
(2.3) Unit investment trusts
Unit investment trusts (UITs) can only issue to the public once, when they are created. UITs
generally have a limited life span, established at creation. Investors can redeem shares directly
with the fund at any time (similar to an open-end fund) or wait to redeem them upon the trust's

termination. Less commonly, they can sell their shares in the open market. Unit investment
trusts do not have a professional investment manager; their portfolio of securities is established
at the UIT's creation and does not change.
At the end of 2015, there were 5,188 UITs in the United States with combined assets of $94
billion.
(2.4) Growth schemes
These schemes, also commonly called Equity Schemes, seek to invest a majority of their funds in
equities and a small portion in money market instruments. Such schemes have the potential to
deliver superior returns over the long term. However, because they invest in equities, these
schemes are exposed to fluctuations in value especially in the short term.
(2.5) Income schemes
These schemes, also commonly called Debt Schemes, invest in debt securities such as corporate
bonds, debentures and government securities. The prices of these schemes tend to be more stable
compared with equity schemes and most of the returns to the investors are generated through
dividends or steady capital appreciation. These schemes are ideal for conservative investors or
those not in a position totake higher equity risks, such asretired individuals. However, ascompared
to the money market schemes they do have a higher price fluctuation risk and compared to a Gilt
fund they have a higher credit risk.
(2.6) Balanced schemes
These schemes are commonly known as Hybrid schemes. These schemes invest in both equities as
well as debt. By investing in a mix of this nature, balanced schemes seek to attain the objective of
income and moderate capital appreciation and are ideal for investors with a conservative, long-
term orientation.

(2.7) Tax saving schemes
Investors are being encouraged to invest in equity markets through Equity Linked Savings Scheme
(“ELSS”) by offering them a tax rebate. Units purchased cannot be assigned /
transferred/ pledged / redeemed / switched – out until completion of 3 years from the date of
allotment of the respective Units.
The Scheme is subject to Securities & Exchange Board of India (Mutual Funds) Regulations, 1996
and the notifications issued by the Ministry of Finance (Department of Economic Affairs),
Government of India regarding ELSS.
Subject to such conditions and limitations, as prescribed under Section 88 of the Income-tax Act,
1961.
(2.8) Index schemes
The primary purpose of an Index is to serve as a measure of the performance of the market as a
whole, or a specific sector of the market. An Index also serves as a relevant benchmark to evaluate
the performance of mutual funds. Some investors are interested in investing in the market in
general rather than investing in any specific fund. Such investors are happy to receive the returns
posted by the markets. As it is not practical to invest in each and every stock in the market in
proportion to its size, these investors are comfortable investing in a fund that they believe is a good
representative of the entire market. Index Funds are launched and managed for such investors.
(2.9) Sector specific schemes
Sector Specific Schemes generally invests money in some specified sectors for example: “Real
Estate” Specialized real estate funds would invest in real estate’s directly, or may fund real estate
developers or lend to them directly or buy shares of housing finance companies or may even buy
their securitized assets.

[3] Structure
In the United States, a mutual fund is registered with the Securities and Exchange Commission
(SEC). Open-end and closed-end funds are overseen by a board of directors (if organized as a
corporation) or board of trustees (if organized as a trust). The Board is charged with ensuring
that the fund is managed in the best interests of the fund's investors and with hiring the fund
manager and other service providers to the fund.
The sponsor or fund management company, often referred to as the fund manager, trades (buys
and sells) the fund's investments in accordance with the fund's investment objective. A fund
manager must be a registered investment adviser. Funds that are managed by the same company
under the same brand are known as a fund family or fund complex.
Mutual funds are not taxed on their income and profits as long as they comply with
requirements established in the U.S. Internal Revenue Code. Specifically, they must diversify
their investments, limit ownership of voting securities, distribute most of their income
(dividends, interest, and capital gains net of losses) to their investors annually, and earn most
of the income by investing in securities and currencies.[1] There is an exception: net losses
incurred by a mutual fund are not distributed or passed through to fund investors but are
retained by the fund to be able to offset future gains.
The characterization of a fund's income is unchanged when it is paid to shareholders. For
example, when a mutual fund distributes dividend income to its shareholders, fund investors
will report the distribution as dividend income on their tax return. As a result, mutual funds are
often called "pass-through" vehicles, because they simply pass on income and related tax
liabilities to their investors.
Mutual funds may invest in many kinds of securities. The types of securities that a particular
fund may invest in are set forth in the fund's prospectus, a legal document which describes the
fund's investment objective, investment approach and permitted investments. The investment
objective describes the type of income that the fund seeks. For example, a capital appreciation
fund generally looks to earn most of its returns from increases in the prices of the securities it
holds, rather than from dividend or interest income. The investment approach describes the
criteria that the fund manager uses to select investments for the fund.
A mutual fund's investment portfolio is continually monitored by the fund's portfolio manager
or managers.
Hedge funds are not considered a type of (unregistered) mutual fund. While hedge funds are
another type of collective investment vehicle, they are not governed by the Investment
Company Act of 1940 and are not required to register with the SEC (though hedge fund
managers must register as investment advisers).

Sponsor
Sponsor is the person who acting alone or in combination with another body corporate
establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the
Investment managed and meet the eligibility criteria prescribed under the Securities and
Exchange Board of India (Mutual Fund) Regulations, 1996. The sponsor is not responsible or
liable for any loss or shortfall resulting from the operation of the Schemes beyond the initial
contribution made by it towards setting up of the Mutual Fund.
Trust
The Mutual Fund is constituted asa trust in accordancewith the provisions of the Indian Trusts
Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908.

Trustee
Trustee is usually a company (corporate body) or a Board of Trustees (body of individuals). The
main responsibility of the Trustee is to safeguard the interest of the unit holders and ensure
that the AMC functions in the interest of investors and in accordance with the Securities and
Exchange Board of India (Mutual Funds) Regulations, 1996, the provisions of the Trust Deed
and the Offer Documents of the respective Schemes. At least 2/3rd directors of the Trustee
are independent directors who are not associated with the Sponsor in any manner.
Asset Management Company (AMC)
The AMC is appointed by the Trustee as the Investment Manager ofthe Mutual Fund. The AMC
is required to be approved by the Securities and Exchange Board of India (SEBI) to act as an
asset management company of the Mutual Fund. At least 50% of the directors of the AMC are
independent directors who are not associated with the Sponsor in any manner. The AMC must
have a net worth of at least 10 cores at all times.
Registrar and transfer agent
The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the
Mutual Fund. The Registrar processes the application form, redemption requests and
dispatches account statements to the unit holders. The Registrar and Transfer agent also
handles communications with investors and updates investor records.

Mutual funds are operated by assets management companies (AMCs) which exists in the form
of a public limited company registered under through the establishment of a Trust Deed,
entered between the Asset Management Company and the Trustee, with due approval from
the SECP under the Non-Banking Finance Companies (Establishment and Regulation) Rules,
2003 (the “Rules”). The Trustee performs the functions of the custodian of the assets of the
Fund. The trustee ensures that the Fund Manager takes the investment decisions within the
defined investment policy of the mutual fund. Under Pakistan law, banks and central
depository companies, approved by the SECP, can act as trustee.
At present Central Depository Company of Pakistan (CDC) is acting as Trustee of most of the
funds of the industry.
The Securities & Exchange Commission of Pakistan (SECP) is the regulator of mutual funds
industry and is very stringent in issuing licenses to fund management companies, especially in
the case of Collective Investment Scheme (CIS). The SECP also carries out continuous
monitoring of mutual funds through reports that the mutual funds have to file with the SECP
on a regular basis. In addition, SECP conducts on-site inspections of the AMCs.
[4]HowdoMutualFunds determine their Unit Price?
A fund's Net Asset Value (NAV) represents the price per unit. The NAV is equal to the market
worth of assets held in the portfolio of a Fund, minus liabilities, divided by the number of units
outstanding.
NAV = Current Market Value of all the Assets – Liabilities
Total Number of Units Outstanding
In order to determine the sale price of the unit sales load is added to the NAV. In case there is
no sales load the NAV will be the sale price as well as the redemption price. The sale and
redemption priceis declared on a daily basis by the Funds and can be viewed on their websites.
[5] CATEGORIES OF MUTUAL FUND
SECP the Regulator has categorized the Schemes of mutual funds as under: -
(5.1) Equity Scheme:
An equity scheme or equity fund is a fund that invests in Equities more commonly known as
stocks. The objective of an equity fund is long-term growth through capital appreciation,
although dividends and capital gain realized are also sources of revenue.

(5.2) Balanced Scheme:
These funds provide investors with a single mutual fund that invests in both stocks and debt
instruments and with this diversification aimed at providing investors a balance of growth
through investment in stocks and of income from investments in debt instruments.
(5.3) Asset Allocation Fund:
These Funds may invest its assets in any type of securities at any time in order to diversify its
assets across multiple types of securities & investment styles available in the market.
(5.4) Fund of Fund Scheme:
Fund of Funds are those funds, which invest in other mutual funds. These funds operate a
diverse portfolio of equity, balanced, fixed income and money market funds (both open and
closed ended).
[6] Advantages and disadvantages
According to Pozen and Hamacher, mutual funds have advantages and disadvantages over
investing directly in individual securities, namely:
(6.1) Advantages
 Increased diversification:
 A fund normally holds many securities; diversification decreases risk.
 Daily liquidity: Shareholders of open-end funds and unit investment trusts may sell
their holdings back to the fund at the close of every trading day at a price equal to the
closing net asset value of the fund's holdings.
 Professional investment management: Open-and closed-end funds hire portfolio
managers to supervise the fund's investments.
 Ability to participate in investments that may be available only to larger investors. For
example, individual investors often find it difficult to invest directly in foreign markets.
 Service and convenience: Funds often provide services such as check writing.
 Government oversight: Mutual funds are regulated by the SEC
 Ease of comparison: All mutual funds are required to report the same information to
investors, which makes them easy to compare.

Portfolio Diversification
Mutual Funds invest in a well-diversified portfolio of securities which enables investor to hold
a diversified investment portfolio (whether the amount of investment is big or small).
Professional Management
Fund manager undergoes through various research works and has better investment
management skills which ensure higher returns to the investor than what he can manage on his
own.
Less Risk
Investors acquire a diversified portfolio of securities even with a small investment in a Mutual
Fund. The risk in a diversified portfolio is lesser than investing in merely 2 or 3 securities.
Low Transaction Costs
Due to the economies of scale (benefits of larger volumes), mutual funds pay lesser transaction
costs. These benefits are passed on to the investors.
Liquidity
An investor may not be able to sell some of the shares held by him very easily and quickly,
whereas units of a mutual fund are far more liquid.
Choice of Schemes
Mutual funds provide investors with various schemes with different investment objectives.
Investors have the option of investing in a scheme having a correlation between its investment
objectives and their own financial goals. These schemes further have different plans/options
Transparency
Funds provide investors with updated information pertaining to the markets and the schemes.
All material facts are disclosed to investors as required by the regulator.
Flexibility
Investors also benefit from the convenience and flexibility offered by Mutual Funds. Investors
can switch their holdings from a debt scheme to an equity scheme and vice-versa. Option of
systematic (at regular intervals) investment and withdrawal is also offered to the investors in
most open-end schemes.

Safety
Mutual Fund industry is part of a well-regulated investment environment where the interests
of the investors are protected by the regulator. All funds are registered with SEBI and complete
transparency is forced.
(6.2) Disadvantages:
 Fees
 Less control over timing of recognition of gains
 Less predictable income
 No opportunity to customize
Costs Control Not in the Hands of an Investor
Investor has to pay investment management fees and fund distribution costs as a percentage
of the value of his investments (as long as he holds the units), irrespective of the performance
of the fund
No Customized Portfolios
The portfolio of securities in which a fund invests is a decision taken by the fund manager.
Investors have no right to interfere in the decision making process of a fund manager, which
some investors find as a constraint in achieving their financial objectives.
Difficulty in Selecting a Suitable Fund Scheme
Many investors find it difficult to select one option from the plethora of funds/schemes/plans
available. For this, they may have to take advice from financial planners in order to invest in
the right fund to achieve their objectives

[7] WHAT ARE MUTUAL FUNDS?
(7.1) Shariah Compliant (Islamic) Scheme:
Islamic funds are those funds which invest in Shariah Compliant securities i.e. shares, Sukuk,
Ijara sukuks etc. as may be approved by the Shariah Advisor of such funds. These funds can be
offered under the same categories as those of conventional funds.
(7.2) Capital Protected Scheme:
In this type of scheme, the payment of original investment is guaranteed with any further
capital gain which may accrue at the end of the contractual term of the Fund. Such funds are
for a specific period.
(7.3) Index Tracker Scheme:
Index funds invest in securities to mirror a market index, such as the KSE 100. An index fund
buys and sells securities in a manner that mirrors the composition of the selected index. The
fund's performance tracks the underlying index's performance.
(7.4) Money Market Scheme:
Money Market Funds are among the safest and most stable of all the different types of mutual
funds. These funds invest in short term debt instruments such as Treasury bills and bank
deposit.
.
(7.5) Income Scheme:
These funds focus on providing investors with a steady stream of fixed income. They invest in
short term and long term debt instruments like TFCs, government securities like T-bills/ PIBs,
or preference shares.
(7.6) Aggressive Fixed Income Scheme:
The aim of aggressive income fund is to generate a high return by investing in fixed income
securities while taking exposure in medium to lower quality of assets also.
(7.7) Commodity Scheme:
These schemes enable small investors to take advantage of gains in commodities such as gold
through pooled investments. They invest at least 70%of their assets in commodity futures
contracts, which include both cash-settled and deliverable contracts.

An investor can invest in any of the above categories of funds in accordance with his
requirements and appetite for risk. For example, those who want to earn high returns over a
longer period can invest in Equity Funds whereas those who want to invest for short term with
reasonable return can invest in Money Market Fund.
[8] WHY INVESTMENT IN MUTUAL FUNDS:
Mutual funds make saving and investing simple, accessible, and affordable. The advantages of
mutual fund include the following:
(8.1) Accessibility
Mutual funds units are easy to buy.
(8.2) Liquidity
Mutual fund unit holders can convert their units into cash on any working day. They will
promptly receive the current value of their investment. Investors do not have to find a buyer;
the fund buys back (redeems) the units.
[9] TAX CREDIT ON INVESTMENT TO INDIVIDUAL
According to Section 62 of the Income Tax Ordinance, 2001, a “resident’ tax payer other than
a company, is entitled to tax credit on investment in new shares offered to public by a public
company listed on a stock exchange in Pakistan. This tax credit is available on the lower of (a)
the amount of actual Cost of Investment (b) 20% of Taxable Income for the tax year or (c) Rs.
1 million. The tax credit availed on acquisition of such shares will be need to be paid back, if
such shares are disposed of within 24 months of the date of acquisition. Units of Mutual Funds
are covered under the definition of shares as per Income Tax Ordinance, 2001.
In case of self-employed individuals, the maximum tax credit of Rs. 220,417 is available on
annual taxable income of Rs. 6 million or more at an average tax rate of 22% whereas Rs.
203,571 is the maximum tax credit available on annual taxable income of Rs. 7million or more
at an average tax rate of 20%.

[10] History
The first mutual funds were established in Europe. One researcher credits a Dutch merchant
with creating the first mutual fund in 1774. Mutual funds were introduced to the United States
in the 1890s, and they became popular in the 1920s.
These early U.S. funds were generally closed-end funds with a fixed number of shares that
often traded at prices above the portfolio value. The first open-end mutual fund, called the
Massachusetts Investors Trust (now part of the MFS family of funds), with redeemable shares
was established on March 21, 1924. However, closed-end funds remained more popular than
open-end funds throughout the 1920s. In 1929, open-end funds accounted for only 5% of the
industry's $27 billion in total assets.[4]
After the stock market crash of 1929, Congress passed a series of acts regulating the securities
markets in general and mutual funds in particular. The Securities Act of 1933 requires that all
investments sold to the public, including mutual funds, be registered with the SEC and that
they provide prospective investors with a prospectus that discloses essential facts about the
investment. The Securities and Exchange Act of 1934 requires that issuers of securities,
including mutual funds, report regularly to their investors; this act also created the Securities
and Exchange Commission, which is the principal regulator of mutual funds. The Revenue Act
of 1936 established guidelines for the taxation of mutual funds, while the Investment Company
Act of 1940 governs their structure.
When confidence in the stock market returned in the 1950s, the mutual fund industry began to
grow again. By 1970, there were approximately 360 funds with $48 billion in assets.[5] The
introduction of money market funds in the high interest rate environment of the late 1970s
boosted industry growth dramatically. The first retail index fund, First Index Investment Trust,
was formed in 1976 by The Vanguard Group, headed by John Bogle; it is now called the
"Vanguard 500 Index Fund" and is one of the world's largest mutual funds, with more than
$220 billion in assets as of November 30, 2015.[6]
Fund industry growth continued into the 1980s and 1990s. According to Pozen and Hamacher,
growth was the result of three factors: a bull market for both stocks and bonds, new product
introductions (including tax-exempt bond, sector, international and target date funds) and wider
distribution of fund shares.[7] Among the new distribution channels were retirement plans.
Mutual funds are now the preferred investment option in certain types of fast-growing
retirement plans, specifically in 401(k) and other defined contribution plans and in individual
retirement accounts (IRAs), all of which surged in popularity in the 1980s. Total mutual fund
assets fell in 2008 as a result of the financial crisis of 2007–08.
In 2003, the mutual fund industry was involved in a scandal involving unequal treatment of
fund shareholders. Some fund management companies allowed favoured investors to engage
in late trading, which is illegal, or market timing, which is a practice prohibited by fund policy.
The scandal was initially discovered by former New York Attorney General Eliot Spitzer and
led to a significant increase in regulation.
At the end of 2015, there were over 15,000 mutual funds in the United States with combined
assets of $18.1 trillion, according to the Investment Company Institute (ICI), a trade association

of U.S. investment companies. The ICI reports that worldwide mutual fund assets were $33.4
trillion on the same date.[8]
Mutual funds play an important role in U.S. household finances; in mid-2015, 43% of U.S.
households held mutual fund. Their role in retirement planning is particularly significant.
Roughly half of the assets in individual retirement accounts and in 401(k) and other similar
retirement plans were invested in mutual funds.[8] Mutual funds now play a large and decisive
role in the valuation of tradeable assets such as stocks and bonds.
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
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. 6,700crores 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
cr.
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. 1,21,805crores.
The Unit Trust of India with Rs. 44,541crores 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. 29,835crores as at the end of January 2003,
7
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. 76,000crores 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.

Leading complexes
As of September 2015, the top ten open-end fund managers in North America were:[10]
1. The Vanguard Group
2. Fidelity Investments
3. American Funds (Capital Group)
4. JPMorgan Chase
5. T. Rowe Price
6. BlackRock
7. Franklin Templeton Investments
8. PIMCO
9. Dimensional Fund Advisors
[11] Investments and classification
Mutual funds are normally classified by their principal investments, as described in the
prospectus and investment objective. The four main categories of funds are money market
funds, bond or fixed income funds, stock or equity funds, and hybrid funds. Within these
categories, funds may be sub classified by investment objective, investment approach or
specific focus.
The SEC requires that mutual fund names be consistent with a fund's investments. For example,
the "ABC New Jersey Tax-Exempt Bond Fund" would generally have to invest, under normal
circumstances, at least 80% of its assets in bonds that are exempt from federal income tax, from
the alternative minimum tax and from taxes in the state of New Jersey.[11]
Bond, stock, and hybrid funds may be classified as either index (passively managed) funds or
actively managed funds.
(11.1) Money market funds
Money market funds invest in money market instruments, which are fixed income securities
with a very short time to maturity and high credit quality. Investors often use money market
funds as a substitute for bank savings accounts, though money market funds are not insured by
the government, unlike bank savings accounts.
Money market funds strive to maintain a $1.00 per share net asset value, meaning that investors
earn interest income from the fund but do not experience capital gains or losses. If a fund fails
to maintain that $1.00 per share because its securities have declined in value, it is said to "break
the buck". Only two money market funds have ever broken the buck—Community Banker's
U.S. Government Money Market Fund in 1994 and the Reserve Primary Fund in 2008.

In 2014, the SEC approved significant changes in money market fund regulation. Beginning in
October 2016, money market funds that are sold to institutional investors and that invest in
non-government securities will no longer be allowed to maintain a stable $1.00 per share net
asset value. Instead, these funds will be required to have a floating net asset value.
At the end of 2015, money market funds accounted for 18% of open-end fund assets.
(11.2) Bond funds
Bond funds invest in fixed income or debt securities. Bond funds can be sub-classified
according to the specific types of bonds owned (such as high-yield or junk bonds, investment-
grade corporate bonds, government bonds or municipal bonds) and by the maturity of the bonds
held (short-, intermediate- or long-term). Bond funds may invest in primarily U.S. securities
(domestic or U.S. funds), in both U.S. and foreign securities (global or world funds), or
primarily foreign securities (international funds).
At the end of 2015, bond funds accounted for 22% of open-end fund assets.
(11.3) Stock funds
Stock or equity funds invest in common stocks which represent an ownership share (or equity)
in corporations. Stock funds may invest in primarily U.S. securities (domestic or U.S. funds),
in both U.S. and foreign securities (global or world funds), or primarily foreign securities
(international funds). They may focus on a specific industry or sector.
A stock fund may be sub classified along two dimensions: (1) market capitalization and (2)
investment style (i.e., growth vs. blend/core vs. value). The two dimensions are often displayed
in a grid known as a "style box".
Market capitalization ("cap") indicates the size of the companies in which a fund invests, based
on the value of the company's stock. Each company's market capitalization equals the number
of shares outstanding times the market price of the stock. Market capitalizations are typically
divided into the following categories, with approximate market capitalizations in parentheses:
 Micro cap (below $300 million)
 Small cap (below $2 billion)
 Mid cap
 Large cap (at least $10 billion)
Funds can also be classified in these categories based on the market caps of the stocks that it
holds.
Stock funds are also sub classified according to their investment style: growth, value, or blend
(or core). Growth funds seek to invest in stocks of fast-growing companies. Value funds seek
to invest in stocks that appear cheaply priced. Blend funds are not biased toward either growth
or value.

At the end of 2015, stock funds accounted for 52% of the assets in all U.S. mutual funds.
(11.4) Hybrid funds
Hybrid funds invest in both bonds and stocks or in convertible securities. Balanced funds, asset
allocation funds, target date or target risk funds and lifecycle or lifestyle funds are all types of
hybrid funds.
Hybrid funds may be structured as funds of funds, meaning that they invest by buying shares
in other mutual funds that invest in securities. Many fund of funds invest in affiliated funds
(meaning mutual funds managed by the same fund sponsor), although some invest in
unaffiliated funds (i.e., managed by other fund sponsors) or some combination of the two.
At the end of 2015, hybrid funds accounted for 9% of the assets in all U.S. mutual funds.
Index (passively managed) versus actively managed
Main articles: Index fund and active management
An index fund or passively managed fund seeks to match the performance of a market index,
such as the S&P 500 index, while an actively managed fund seeks to outperform a relevant
index through superior security selection.

Chapter: - 2
Literature Review

LITERATURE REVIEW
Literature on mutual fund performance evaluation is enormous. A few research studies that
have influenced the preparation of this paper substantially are discussed in this section.
Sharpe, William F. (1966) suggested a measure for the evaluation of portfolio performance.
Drawing on results obtained in the field of portfolio analysis, economist Jack L. Treynor has
suggested a new predictor of mutual fund performance,one that differsfromvirtuallyall those
used previously by incorporating the volatility of a fund's return in a simple yet meaningful
manner. Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio performance
(Jensen’s alpha) that estimates how much a manager’s forecasting ability contributes to fund’s
returns. As indicated by Statman (2000), the e SDAR of a fund portfolio is the excess return of
the portfolio over the return of the benchmark index, where the portfolio is leveraged to have
the benchmark index’s standard deviation.
S. Narayan Rao, evaluated performance of Indian mutual funds in a bear market through
relative performance index, risk-return analysis, Treynor’s ratio, Sharpe’s ratio, Sharpe’s
measure, Jensen’s measure, and Fama’s measure. The study used 269 open-ended schemes
(out of total schemes of 433) for computing relative performance index. Then after excluding
funds whose returns are less than risk-free returns, 58 schemes are finally used for further
analysis. The results of performance measures suggest that most of mutual fund schemes in
the sample of 58 were able to satisfy investor’s expectations by giving excess returns over
expected returns based on both premium for systematic risk and total risk. Bijan Roy, et. al.,
conducted an empirical study on conditional performance of Indian mutual funds. This paper
uses a technique called conditional performance evaluation on a sample of eighty-nine Indian
mutual fund schemes. Thispaper measuresthe performanceof various mutual funds with both
unconditional and conditional form of CAPM, Treynor- Mazuy model and Henriksson-Merton
model. The effect of incorporating lagged information variables into the evaluation of mutual
fund managers’ performance is examined in the Indian context. The results suggest that the
use of conditioning lagged information variables improves the performance of mutual fund
schemes, causing alphas to shift towards right and reducing the number of negative timing
coefficients. Mishra, et al., (2002) measured mutual fund performance using lower partial
moment. In this paper, measures of evaluating portfolio performance based on lower partial
moment are developed. Risk from the lower partial moment is measured by taking into

account only those states in which return is below a pre-specified “target rate” like risk-free
rate. KshamaFernandes (2003)
28
evaluated index fund implementation in India. In this paper, tracking error of index funds in
India is measured.The consistency and level oftracking errorsobtained by some well-runindex
fund suggests that it is possible to attain low levels of tracking error under Indian conditions.
At the same time, there do seem to be periods where certain index funds appear to depart
from the discipline of indexation. K. Pendaraki et al. studied construction of mutual fund
portfolios, developed a multi-criteria methodologyandapplied itto the Greek marketof equity
mutual funds. The methodology is based on the combination of discrete and continuous multi-
criteria decision aid methods for mutual fund selection and composition. UTADIS multi-criteria
decision aid method is employed in order to develop mutual fund’s performance models. Goal
programming model is employed to determine proportion of selected mutual funds in the final
portfolios. ZakriY.Bello (2005) matched a sample of socially responsible stock mutual funds
matched to randomly selected conventional funds of similar net assets to investigate
differences in characteristics of assets held, degree of portfolio diversification and variable
effects of diversificationon investment performance.Thestudy found that sociallyresponsible
funds do not differ significantly from conventional funds in terms of any of these attributes.
Moreover, the effect of diversification on investment performance is not different between
the two groups. Both groups underperformed the Domini 400 Social Index and S &P 500 during
the study period.

Chapter: 3
Research
Methodology

RESEARCH PROPOSAL Main Objective:
“Awareness of Mutual Fund among Investors of Patan City”
The Indian mutual fund industry is a very large industry consisting of number of investors. In
this era of competition different investors have different investment objectives. As the human
behaviour is unpredictable, this study helps in finding out the necessary facts regarding
investors’ opinion and perceptions regarding mutual fund investment. The main objectives of
the study are: 1. To study the growth of mutual fund industry in India. 2. To analyse the
investors awareness and perception regarding investing in mutual funds. 3. To find out the
investors opinion regarding major deficiencies in the working of the mutual fund industry 4. To
find out the suggestions from the investors that can help in plugging out these deficiencies
Research Methodology
3.1 Research Design Descriptive study
Descriptive studies are under taken in many circumstances. When the researcher is interested
in knowing the characteristics of certain group such as age, gender, occupation, educational
level or income, a descriptive study may be necessary. Other cases when a descriptive study
could be taken up are when researcher is interested in knowing the proportion of people in a
given population who are investing in mutual fund a particular manner or determining the
relationship between two or more variables. The objective of such a study is to answer the
“who, what, when, where and how” of the subject under investigation.
3.2 Population Definition
The target population was the investors and non-investors of Patan city.
3.3 Sampling Frame
In these of type research study we cannot use sampling frame.
3.4 Sampling Size
This research consists of the 280 sample size for undergone this research project.
3.5 Sampling Method
In these research study we use convince non-probability sampling method for fill the
Questionnaire.

3.6 Approach
Survey approach using questionnaire.
3.7 Measure Used
For conducting this research, we are used structure questionnaire in which we are used the
different scales for collecting the information.
3.8 Area of the study
The research has been conducted in Patan city.

Chapter: 4
Data Analysis
& Interpretation

Chi-Square Test: -
1. BASED ON GENDER (Q-)
2. Ho: There is no significantdifference betweengenderand preference of investment.
H1: There is significant difference between gender and preference of investment.
Test Statistics
Gender Wheredo you prefer to investyourmoney?
Chi- Square 11.200a 213.250b
DF 1 4
Asymp.Sig .001 .000
INTERPRETATION:
The significantlevelislessthan0.05 so that alternative hypothesisisacceptedandthe null
hypothesisisrejected.Therefore,we cansaythat there isno significantlydifference between
genderandpreference of investment.
ANOVA TEST:-
4.1BASED ON AGE
4.1.1
Ho: There isno significantdifference betweenage andaware of the mutual fundinvestment.
H1: There is significantdifference betweenage andaware of the mutual fundinvestment.
Descriptive
I am aware of the Mutual Fund Investment.
N Mean Std. Deviation Std. Error
18-25
26-35
Above 36
Total
27
155
98
280
3.44
3.15
3.16
3.18
1.086
1.155
1.190
1.160
.209
.093
.120
.069

ANOVA
I am aware of the Mutual FundInvestment.

A project report on awareness of mutual funds 1

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A project report on awareness of mutual funds 1