Comparative Analysis of Different Kinds of Mutual Funds-1

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Comparison Of Different Kinds

Of Mutual Funds And StudyOf Investors Behavior

Towards Mutual Funds

Gitarattan International Business School

Affiliated to

Guru Gobind Singh Indraprastha University

Guided By: Submitted By:

Ms Manish Mohpatra Bharti Rai

Roll no- 12319103910

MBA(2010-2012)

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DECLARATION

This is to certify that the project report titled Comparison of Different kinds of mutual funds

study of investors behavior towards mutual funds has been accomplished by Anurag

Rastogi.

This project is being submitted in the partial fulfilment of requirements for the award of the Post

Graduate Diploma in International Marketing (PGDIM) from Sri Guru Gobind Singh College of

Commerce. This work has not been submitted by her anywhere else for the award of any

degree or diploma. All sources of information and help have been duly mentioned and

acknowledged.

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ACKNOWLEDGEMENT

Preparing a project report of this nature is an arduous task and I was fortunate enough to get the supportfrom a large number of people to whom I shall always remain grateful.

I would like to give a special thanks to and Ms Manisha Mohpatra (project mentor), for the valuable

advice, guidance, and precious time and support that they have offered in making this project a success.

Last but not the least I would also like to thank all the respondents for giving their precious time and

relevant information required for completing the project.

BHARTI RAI

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TABLE OF CONTENTS

Chapter No. Subject Page No.

Ch.#1.0 Introduction

1.1 History and AMFI & Its Role 5-9

1.2 Objectives of the project 10

1.2 Types of mutual funds and their benefits 11-16

1.3 Major Players 17

1.4 SWOT of Industry 20

Ch.#2.0 Company Profile 25-32

2.1 SWOT of the company 33

2.3 Mutual Funds schemes comparison 33-35

2.4 SIP Vs Lump Sum plans 36

Ch 3.0 Methodology and Analysis

3.1 Research Methodology 43

3.2 Analysis and Diagrammatic representation 44-55

Ch 4.0 Limitation of the study 56

Ch 5.0 Recommendations 57

Ch.6.0 Conclusion 58

Ch 7.0 Bibliography 59

Annexure 60-62

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HISTORY OF MUTUAL FUNDS

Massachusetts Investors Trust (now MFS Investment Management) was founded on March 21, 1924,

and after one year, it had 200 shareholders and $392,000 in assets. The entire industry, which included a

few closed ended funds, represented less than $10 million in 1924.

Huge downfall in the stock market in 1929 hindered the growth of mutual funds. As the stock market

crashed so in this response, Congress passed the Securities Act of 1933 and the securities Exchange

Act of 1934. These laws require that a fund be registered with the Securities and Exchange Commission(SEC) and provide prospective investor with a prospectus that contains all required disclosures about the

fund, the securities themselves, and fund manager. The SEC helped draft the investment Company Act

1940, which sets forth the guidelines with which all SEC- registered funds today must comply.

By the end of the 1960s, there were approximately 270 funds costing $48 billion in assets. The first retail

index fund, First Index Investment Trust, was formed in 1976 and headed by John Bogle, who

conceptualized many of the key tenets of the industry in his 1951 senior thesis at Princeton University. It

is now called the Vanguard 500 index fund and is one of the worlds largest mutual funds with value more

than $100 billion in assets.

A key factor in mutual fund growth was the 1975 change in the Internal Revenue Code allowing

individuals to open individual open accounts (IRAs). Even people already enrolled in corporate pension

plans could contribute a limited amount depending on individuals.

The mutual fund industry started in India in a small way with UTI act creating what was effectively a small

saving decision with the RBI. Over the period of 35 yrs. this grew fairly successfully and gave investors a

good return, and therefore in 1989, public sector banks and financial institutions were allowed to float

mutual funds and their success emboldened the government to allow the private sector to foray into this

area. The initial years of the industry also saw the emerging years of the Indian equity market, when anumber of mistakes were made and hence the mutual funds scheme, which invested in lesser known

stocks and at very high levels, became loss leaders for retail investor, for whom the mutual fund is

actually intended, has not yet returned to the industry in a big way. But to be fair, the industry too has

focused on bringing in the large investors, so that it can create a significant corpus, which can make the

retail investors fell more secure

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ASSOCIATION OF MUTUAL FUNDS IN INDIA ( AMFI) AND ITS ROLE

AMFI is the apex body of all the registered asset management companies. It was incorporated on August

22, 1995 as a non profit organization. As of now, all the 32 asset management companies that have

launched mutual funds schemes are its members. The objective of AMFI is to develop the Indian mutual

funds industry on profession, healthy and ethical lines. It also aims to enhance and maintain standards in

all areas in a view to protecting and promoting the interests of the mutual funds and their units holders.

AMFI interacts with SEBI, RBI and the government on all matters concerning the mutual fund industry. It

also provides training and certification to agent distributors and for all intermediaries and others engaged

in the industry.

AMFI works through a number of committees, some of which are standing committees to address areas

where there is a need for constant vigil and improvements and other which are adhoc committees

continued to address specific issues.

SECURITIES AND EXCHANGE BOARD OF INDIA

Securities and Exchange Board of India (SEBI) was established in 1988 to regulate and develop the

growth of the capital market. In the year 1992, Securities and Exchange board of India Act was pass to

protect the interest of the investors in securities and to promote the development of, and to regulate the

securities market.

As far as mutual funds are concerned, SEBI formulates the policies and regulates the mutual funds to

protect the interest of investors. In 1993, SEBI notified regulations for the mutual funds. After this

notification, mutual funds sponsored by private sector entities were allowed to enter the capital market. All

mutual funds whether promoted by public sector or private sector entities including those promoted by

foreign entities are governed by the same set of regulations released by SEBI. There is no distinction in

regulatory requirements for these mutual funds and all are subject to monitoring and inspection by SEBI.

HISTORY OF INDIAN MUTUAL FUNDS

The mutual fund industry started in India started in 1963 with the formation of Unit Trust of India, at the

initiative of government of India and RBI. 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 delinked from the RBI and the industrial Development Bank of India (IDBI)

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took over the regulatory and administrative control in place of Reserve Bank of India. Unit scheme was

the first scheme launched by UTI in 1964.

SECOND PHASE-1987-1993 (Entry Of Public Sector Funds)

1987 marked the entry of non UTI, public sector banks set up public sector funds, and Life Insurance

corporation of India(LIC) and General Insurance Corporation of India (GIC). SBI mutual fund was the first

non UTI mutual fund established in June 1987 followed by Canbank Mutual fund(Dec 87), Punjab

National Bank Mutual Fund (Aug 89), Indian Bank Mutual fund (Nov 89), Bank of India (June 90), Bank of

Baroda Mutual Fund (Oct 92). LIC establishes its Mutual Fund in June 1989 while GIC has set up its

mutual funds in Dec 1990. At the end of 1993, mutual fund industry had assets under management of Rs.

47,004 crores.

THIRD PHASE -1993-2003 (ENTRY OF PRIVATE SECTOR FUNDS)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund Industry, giving

the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual

Funds Regulations came into being, under which all mutual funds, except UTI were to be registered and

governed. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and

revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund)

Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds

in India and also the industry has witnessed several mergers and acquisitions. As at the end of January

2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.

44,541 crores of asset management was way ahead of other mutual funds.

FOURTH PHASE- SINCE FEBRUARY 2003

In February 2003 following the repeal of Unit Trust of India Act 1963 UTI was bifurcated into two separate

entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.

29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme assured

return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an

administrator and under the rules framed by Government of India and does not come at the purview ofthe Mutual Fund Regulations.

1999- YEAR OF THE FUNDS

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. 1999 saw as the year of resurgence of the

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mutual funds and the regaining of investor confidence in these MFs. This time around all the participants

are involved in the revival of the funds of the AMCs, the unit holders, the other related parties. However

the sole factor that gave lifer to the revival of the funds was the Union Budget on mutual funds taxation

benefits are provided later.

It provided centre stage to the mutual funds, made them more attractive and provide acceptability among

the investors. The union budget exempted mutual fund dividend given out by equity oriented schemes

from tax, both at the hands of the investors as well as the mutual fund. No longer were the mutual funds

interested in selling the concept of mutual funds they wanted to talk business which would mean to

increase asset base, and to get asset base and investor base they had to be fully armed with a whole lot

of schemes for every investor. So new schemes for new IPOs were inevitable. The quest to attract

investor extended beyond just new schemes. The funds started to regulate themselves and were all out

winning the trust and confidence of the investors under the aegis of the Association of Mutual Funds of

India (AMFI).

2003-2004: A retrospect

The year 2003 was extremely eventful for mutual funds. The aggressive competition in the business took

its toll and two more mutual funds bit the dust. Alliance decided to remain in the ring after a highly public

bidding war did not yield an acceptable price, while Zurich has been sold to HDFC Mutual. The growth of

the industry continued to be corporate focused barring a few initiatives by mutual funds to expand the

retail base.

Large money brought with it the problems of low retention and consequently low profitability, which is one

of the problems plaguing the business. But at the same time the industry did see a spectacular growth in

assets, particularly among the private sector players, on the back of the continuing debt bull run.

Equity did not find favor with investors since the market was lack-luster and performances of funds,

barring a few, were quite disappointing for the investors. The other aspect of this issue is that institutional

investors do not usually favor equity. It is largely a retail segment product and without retail depth, most

mutual funds have been unable to tap this market.

Overall FY2003 can be summed up as the year of the maturing of the mutual fund industry. It was the

year when fund houses went through turmoil and consolidation and the strong ones emerged stronger.Investors too became savvier, and began investing based on far more scientific criteria than the past, and

with clearly defined investment horizons. Distribution gave way increasingly to intermediation and more

and more distributors graduated to providing technical advise to their clients. Thus the industry has come

of age in FY2003, and we hope that FY2004 and beyond will see us come out of a stormy adolescence to

become a trusted avenue for saving.

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The history of the Indian Mutual fund industry can be traced to the formation of UTI in 1963. This was a

joint initiative of the government of India an RBI. It held monopoly for nearly 30 years. Since 1987, non-

UTI mutual funds entered the scenario. These consisted of LIC, GIC and public-sector bank backed

Indian mutual funds. SBI Mutual fund was the first of this kind. 1993 saw the entry of private sector

players on the Indian Mutual Funds scene. Mutual Fund Regulations were revised in 1996 toaccommodate changing market needs.

With the Sensex on a scorching bull rally, many investors prefer to trade on stocks themselves. Mutual

funds are more balanced since they diversify over a large number of stocks and sectors. In the rally of

2000, it was noticed that mutual funds did better than the stocks mainly due to prudent fund management

based on the virtues of diversification.

Some of the major players on the Indian mutual fund scene:

ABN AMRO Mutual Fund

Benchmark Mutual Fund

Birla Sunlife Mutual Fund

IDFC Mutual Fund

SBI Mutual Fund

Canara Bank Mutual Fund

UTI Mutual Fund

Deutsche Mutual Fund

DSP Merrill Lynch Mutual Fund

Escorts Mutual Fund

Fidelity Mutual Fund

In India, SEBI (the Securities and Exchange Board of India) is the regulating authority that SEBI

formulates policies and regulates the mutual funds to protect the interest of the Indian investors. There

have been revisions and amendments from time to time.

Even mutual funds promoted by foreign entities come under the purview of SEBI when operating in India.

SEBI has revised its regulations to allow Indian mutual funds to invest in gold.

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OBJECTIVES

To gain knowledge of different kinds of mutual funds in the market.

To gain knowledge and get acquainted with mutual fund industry

and its general operations.

Comparative study of mutual funds.

To know how in general customers go about in making an investment.

To know how the customers manage the risk involved in an investment.

To know why customers go for an investment in Mutual Funds Industry

To gather knowledge about the various mutual funds players and assessment

in the mutual funds sector.

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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 marketinstruments such as shares, debentures

and other securities. The income earned throughthese investments and the capital appreciation realised

are shared by its unit holdersin 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 small savings of all the investors

are put together to increase the buying power and hire a professional manager to invest and monitor the

money. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual

Funds. Mutual fundscheme has a defined investment objective and strategy .A mutual fund is nothing

more than a collection of stocks and bonds. investors can think of a mutual fund as a company that brings

together a group of people and invests their money in stocks, bonds, and other securities. Each investor

owns shares, which represent a portion of the holdings of the fund.

Investors can make money from a mutual fund in three ways:

1) Income is earned from dividends on stocks and interest on bonds. A fund paysout nearly all of the

income it receives over the year to fund owners in the form of a

2) If the fund sells securities that have increased in price, the fund has a capital gain.Most funds also

pass on these gains to investors in a distribution.

3) If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in

price. investors can then sell your mutual fund shares for a profit.

Funds also usually give investors a choice either to receive a check for distributions or to reinvest the

earnings and get more shares.Mutual Fund is a 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

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 moneymarket

instruments, and/or other securities.The mutual fund will have a fund manager

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that trades the pooled money on a regular basis. 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 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 unitholders.

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, professionally managed basket of securities at a relatively low cost 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) whichregulates securities markets before it can collect funds from the public.Mutual funds can give investors

access to emerging

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MUTUAL FUNDS TYPES1. OPEN ENDED FUNDS

Open ended schemes do not have fixed maturity, they offer anytime liquidity the investor buy sell

the units at net asset value (NAV) related prices. Open-end funds raise money by selling shares of

the fund to the public, much like any other type of company which can sell stock in itself to the

public. Mutual funds then take the money they receive from the sale of their shares (along with

any money made from previous investments) and use it to purchase various investment vehicles,

such as stocks, bonds and money market instruments.

2. CLOSE ENDED FUNDS

These funds have stipulated maturity ranging from 2 yrs. to 15 yrs. Investor can invest directly in

the scheme at time of initial issue. Thereafter you can buy or sell the units of scheme on the stock

exchange where they are listed. The market price at stock exchange could vary from scheme NAV

on account of demand and supply situation unit holder expectation and other market factors.

These schemes are generally traded at a discount to their NAV but close to maturity the discount

narrows.

3. GROWTH / EQUITY ORIENTED SCHEMES

These schemes aim to provide capital appreciation over medium to long term. These schemes

normally invest a majority of their funds in equities. Such funds have comparatively high risks and

these schemes normally invest a major part of their corpus in equities. These schemes provide

different options to the investors like dividend option, capital appreciation, etc. and the investors

may choose an option depending on their preferences. The investors must indicate the options in

the application form.

The mutual funds also allow the investors to change the options at a later date. Growth schemes

are good for investors having a long-term outlook seeking appreciation over a period of time.

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4. INCOME / DEBT ORIENTED SCHEME

The aim of income funds is to provide regular and steady income to investors. Such schemes

generally invest in fixed income securities such as bonds, corporate debentures, Government

securities and money market instruments. Such funds are less risky compared to equity schemes.

These funds are not affected because of fluctuations in equity markets. However, opportunities of

capital appreciation are also limited in such funds. The NAVs of such funds are affected because

of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to

increase in the short run and vice versa. However, long term investors may not bother about these

fluctuations. These are ideal for retired people with a need for capital stability and regular income

and investors who need some income to supplement their earnings.

5. BALANCED FUND

The aim of balanced funds is to provide both growth and regular income as such schemes investboth in equities and fixed income securities in the proportion indicated in their offer documents.

These are appropriate for investors looking for moderate growth. They generally invest 40-60% in

equity and debt instruments. These funds are also affected because of fluctuations in the share

prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared

to pure equity funds.

6. MONEY MARKET or LIQUID FUND

These funds are also income funds and their aim is to provide easy liquidity, preservation of

capital and moderate income. These schemes invest exclusively in safer short-term instruments

such as treasury bills, certificates of deposit, commercial paper and inter-bank call money,

government securities, etc. Returns on these schemes fluctuate much less compared to other

funds depending upon interest rates prevailing in market. These funds are appropriate for

corporate and individual investors as a means to park their surplus funds for short periods.

7. GILT FUND

These funds invest exclusively in government securities. Government securities have no default

risks. NAVs of these schemes also fluctuate with change in interest rates and other economicfactors as in the case with income or debt oriented schemes.

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8. INDEX FUNDS

Index Funds replicate the portfolio of a particular index such as the BSE Sensitive Index, S&P

NSE 50 index (Nifty), etc. These schemes invest in the securities in the same weightage

comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall

in the index, though not exactly by the same percentage due to some factors known as tracking

error in technical terms. Necessary disclosures in this regard are made in the offer document of

the mutual fund scheme. There are also exchange traded index funds launched by the mutual

funds which are traded on the stock exchanges.

They are passively managed funds wherein the fund manager invests in the fund stock comprising

the index in similar weights. Index fund while reducing the risk associated with the market, offer

many benefits to investor.

9. TAX SAVING SCHEME

These scheme offer tax rebate to the investors under the tax law as prescribed from time to time.

The government offer tax incentives on investments in specific avenues like equity-linked saving

schemes (ELSS), pension scheme, infrastructure schemes. These are ideal for investors seeking

tax rebates.

10.INDUSTRY SPECIFIC or SECTOR SCHEME

These funds invest in specific industries or sectors. Sectoral fund schemes are ideal for investors

who have already decided to invest in a particular sector or segment.

Benefits Of Investing In Mutual FundsProfessional Management

Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated

investment research team that analyses the performance and prospects of companies and select suitable

investments to achieve the objectives of the scheme.

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Diversification

Mutual Funs invest in a number of companies across a broad cross-section of industries and sectors.

This diversification reduces the risk because seldom do all stocks decline at the same time and in the

same proportion. You achieve this diversification through a Mutual Fund with far less money than you can

do on your own.

Convenient Administration

Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad

deliveries, delayed payments and follow-up with brokers and companies. Mutual Funds save your time

and make investing easy and convenient.

Return Potential

Over a medium to long-term, Mutual Funds have a potential to provide higher return as they invest in a

diversified basket of selected securities.

Low Costs

Mutual Funds are relatively a less expensive way to invest compared to directly investing in the capital

markets because the benefits of benefit of scale in brokerage, custodial and other fees translate into

lower costs for investors.

Liquidity

In open-end schemes, the investor gets the money back promptly at net asset value related prices from

the Mutual Fund. In close-ended schemes, the units can be sold on a stock exchange at the prevailing

market price or the investor can avail the facility of direct repurchase at NAV related prices by the MF..

Transparency

You get regular information on the value of your investment in addition to disclosure on the specific

investments made by your scheme, the proportion invested in each class of assets and the fund

managers investment strategy and outlook.

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Flexibility

Through futures such as regular investment plans, regular withdrawal plans and dividend reinvestment

plans, you can systematically invest or withdraw funds according to your needs and convenience.

Affordability

Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of

its large corpus allows even a small investor to take the benefit of its investment strategy.

Choice of Schemes

Mutual Funds offer a family of schemes suits your varying needs over a life time.

Well Regulated

All mutual funds are registered with SEBI and they function within the provisions of strict regulations

designed to protect the interests of investors. The operations of mutual funds are monitored by SEBI.

Mutual funds Vs other Investments

Mutual funds offer several advantages over investing in individual stocks. For example, the transaction

costs are divided among all the mutual fund shareholders, who also benefit by having a third party

(professional fund managers), apply expertise and dedicate time to manage and research investment

options. However, despite the professional management, mutual funds are not immune to risks. They

share the same risks associated with the investments made. If the fund invests primarily in stocks, it is

usually subject to the same ups and downs and risks as the stock market.

Share Classes

Mutual funds offer more than one class options. For example, a fund can offer class A and class B

shares. Each class will invest in the same pool (or investment portfolio) of securities and will have the

same investment objectives and policies. But each class will have different shareholder services and / or

distributions arrangements with different fees and expenses. These differences are suppose to reflect

different costs involved in servicing investors in various classes:

For example: one class may be sold through brokers with a front end load, and other class may be sold

directly to the public with no load but some fee included in the classs expenses (sometimes referred to

as class C shares). Still a third class might have a minimum investment of $1,00,00,000 and be

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available only to financial institutions (a so called institutional share class). In some cases, by

aggregating regular investments made by many individuals, a retirement plan (such as 401(k) plan) may

qualify to purchase institutional shares ( and gain the benefit of their typically lower expense ratios) even

though no members of the plan would qualify individually. As a result, each class will likely have different

performance results.

A multi-class structure offers investors the ability to select a fee and expense structure that is most

appropriate for their investment goals (including the length of time that they expect to remain invested in

the fund).

NAV

A mutual fund is a common investment vehicle where the assets of the fund belong directly to the

investors. Investors subscriptions are accounted for by the fund not as liabilities or deposits but as Unit

Capital. On the other hand, the investment made on the behalf of the investors is reflected on the assetside and are the main constituent of the balance sheet. The funds Net Assets are therefore defined as the

assets liabilities. As there are many investors in the funds, it is common practice for mutual funds to

compute share of each investor on the basis of the value of net assets per share/unit, commonly known

as Net Asset Value (NAV).

The following are the regulatory requirements and accounting definitions laid down by SEBI

NAV = Net Assets of the schemes / no. of units outstanding i.e. market value of investments +

receivables + other accrued income + other assets.

Accrued expenses other payables other liabilities

No. of units outstanding as at the NAV date. For the purpose of the NAV calculation, the day on which

NAV is calculated by a fund is known as the valuation date.

Funds NAV is affected by four sets of factors:

Purchase and sale of investment securities

Valuation of all investment securities held

Other assets and liabilities, and

Units sold or redeemed

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MEASURING MUTUAL FUND PERFORMANCE

CHANGE IN NAV THE MOST COMMON MEASURE

PURPOSE- If an investor wants to compute the return on investment between two dates; he can simply

use the Per Unit Net Asset Value at the beginning and the end periods, and calculate the change in the

value of NAV between the two dates in absolute and percentage terms.

FORMULA

For NAV change in absolute terms:

NAV at the end of the period / NAV at the beginning of the period

For NAV change in percentage terms:

(Absolute change in NAV/NAV at the beginning)*100

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MAJOR PLAYERS

SBI MUTUAL FUNDS

SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an desirable track

record in judicious investments and consistent wealth creation. The fund traces its origin to SBI

- Indias largest banking enterprise. The institution has grown vastly since its inception and

today it is India's largest bank, patronized by over 80% of the top corporate houses of the

country.

This Fund is a joint venture between the State Bank of India and Socit Gnrale AssetManagement, one of the worlds leading fund management companies that manages

over US$ 500 Billion all over the world.

Products

The main products in which customers deals in hope of profit maximization trusting on the company are:

Equity schemes (Example: Magnum Equity Fund, Magnum Global Fund, Magnum Index Fund,

Magnum Midcap Fund, Magnum Multicap Fund, SBI Bluechip Fund)

Debt schemes (Example: Magnum Guilt fund -long term, Magnum Children saving plan)

Balanced schemes (Example: Magnum Balanced Funds)

HDFC MUTUAL FUND (AMC):

HDFC Asset Management Company Ltd (AMC) came into existence under the Companies Act, 1956, on

December 10, 1999, and was approved to act as an Asset Management Company for the HDFC MutualFund by SEBI vide its letter dated July 3, 2000.

In terms of the Investment Management Agreement, the Trustee has appointed the HDFC Asset

Management Company Limited to manage its Mutual Fund. The paid up capital of the AMC is Rs. 24.162

crore.

The Sponsor of Zurich India Mutual Fund, Zurich Insurance Company (ZIC), following a review of its

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overall strategy, had decided to divest its Asset Management business in India. The AMC had entered

into an agreement with ZIC to acquire the business, subject to necessary regulatory approvals.

On obtaining the approvals by regulatory, the following Schemes of Zurich India Mutual Fund have

merged to HDFC Mutual Fund on June 19, 2003.

The AMC is managing 24 open ended schemes and 13 close ended schemes.

HDFC Growth Fund (HGF), HDFC Balanced Fund (HBF), HDFC Income Fund (HIF), HDFC Liquid Fund

(HLF), HDFC Long Term Advantage Fund (HLTAF), HDFC Children's Gift Fund (HDFC CGF), HDFC Gilt

Fund (HGILT), HDFC Short Term Plan (HSTP), HDFC Index Fund, HDFC Floating Rate Income Fund

(HFRIF), HDFC Equity Fund (HEF), HDFC Top 200 Fund (HT200), HDFC Capital Builder Fund (HCBF),

HDFC TaxSaver (HTS) these are open ended scheme of the fund.

And the close ended schemes are HDFC Fixed Maturity Plans - Series II, HDFC Fixed Maturity Plans -

Series III, HDFC Fixed Maturity Plans - Series IV, HDFC Fixed Maturity Plans - Series V, HDFC Fixed

Maturity Plans - Series VI, HFDC Fixed Maturity Plans - Series VII, HFDC Fixed Maturity Plans - Series

VIII, HFDC Fixed Maturity Plans - Series IX.

RELIANCE MUTUAL FUND:

Reliance Mutual Fund (RMF) is one of Indias top Mutual Funds, with Average Assets Under

Management of Rs. 1,02,730 Crs (AAUM for 31st May 09 ) and an investor base of over 72.30 Lacs.

Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group, is one of the fastest growing

mutual funds across country. RMF offers investors a well-rounded portfolio of products to fulfill varying

investor requirements and has presence in 118 cities all over the country. Reliance Mutual Fund

constantly and continuously endeavors to launch innovative products and customer service initiatives to

increase value and returns to investors. "Reliance Mutual Fund schemes are managed by Reliance

Capital Asset Management Limited., a subsidiary of Reliance Capital Limited, which holds 93.37% of the

paid-up capital of Reliance Capital Asset Management Limited, the balance paid up capital being held by

minority shareholders."

Mission statement of RMF is:

To create and nurture a world-class, high performance environment aimed at delighting our customers

Reliance Capital Asset Management Limited (RCAM) is a registered company under the Companies Act,

1956 was appointed to act as the Investment Manager of Reliance Mutual Fund.

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RCAM was approved as the Asset Management Company for the Mutual Fund by SEBI on June 30,

1995. The Mutual Fund has entered into an Investment Management Agreement (IMA) with RCAM dated

May 12, 1995 and was amended on August 12, 1997 in line with SEBI (Mutual Funds) Regulations, 1996.

Consistent to this IMA, RCAM is legally authorized to act as Investment Manager of Reliance MutualFund. The net worth of the Asset Management Company including preference shares as on September

30, 2007 is Rs.151.02 crores. The total net worth of the Asset Management Company as on March 31,

2008 is Rs 709.39 crores.

TATA MUTUAL FUNDS : EXPERTISE THAT IS TRUSTED

Backing provided by one of the most trusted and valued brands in India, Tata Mutual Fund has earned

the trust of lacs of investors with its consistent performance and world-class service and better returns.

Tata Mutual Fund manages around Rs. 21,304.00 crores as on May 31, 2009 worth of assets across its

varied offerings. Tata Mutual Fund offers an investment option for everyone, whether one is a

businessman or salaried professional, a pension holder or housewife, an aggressive investor or a

conservative capital builder.

The Tata Asset Management philosophy is centered on consistency as well as long-term results. Tata

Asset Management aims at overall excellence, within the framework of transparent and rigorous risk.

Consistency: Company strives to deliver consistent results through its value-based investing method.

Flexibility: Tata Mutual Fund offers investors a broad range of managed investment products in various

asset classes and risk parameters, with operational flexibility to suit their different investment needs.

Stability: Companys commitment is to provide the highest quality of service and integrity is the

foundation upon which it builds trust with its clients.

Service: Tata offer a wide range of services to assist investors have a fulfilling and rewarding financial

planning experience with. Company has designed its services keeping in mind the needs of investors,

giving them a smooth and hassle-free financial planning process.

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SWOT OF INDUSTRY

STRENGTHS:

Less risky compared to direct trading of shares

Professional management

Diversified portfolio

Low at operational cost

WEAKNESS:

Expenses (entry & exit loads) born by investors

Portfolios are not made according to the customers choice

Customer does not have the custody of the investments

Documentation is complicated

OPPORTUNITY:

Simplify the documentation

Abolish entry loads

Reduce the lock in period for ELSS funds

Fixed deposits rates are going down that attracts the investors to invest in Mutual Funds

THREATS:

With abolishment of entry load no incentive will be there for the distributors to sell the funds.

Instability in the market.

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COMPANY PROFILE

Overview of Bonanza as a whole:-

A financial powerhouse! Thats what Bonanza is for you! Established in the year 1994, Bonanza

developed into one of the largest financial services and broking house in India within a short span of time.

Today, Bonanza is the fastest growing financial service with 5 mega group companies under it. With

diligent effort, acknowledged industry leadership and experience, Bonanza has spread its trustworthy

tentacles all over the country with pan-India presence across more than 1632 outlets spread across 535

cities.

With a smorgasbord of services across all verticals in finance, Bonanzas offers you the perfect blend of

financial services right from Equity Broking, Advisory Services that cover Portfolio Management Services,

Mutual Fund Investments, and Insurance to exceptional Depository Services.

Bonanza believes in being technologically advanced so that we can offer you our tech-savvy customers

- an integrated and innovative platform to trade online as well as offline. Besides, we also have one of thefinest and most dedicated research teams with experts who have in-depth, unsurpassed knowledge of

the market place. All this and more makes Bonanza the perfect place for you to take your first step in the

direction of financial success.

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Vision & Values

Vision

To be one of the most trusted and globally reputed financial distribution companies.

Values

Customer-centric approach

At Bonanza, customers come first. And their satisfaction is not just our top priority but also the

driving force for us, every single day.

Transparency

Honesty is our forte. We believe in dealing on thoroughly ethical grounds, being fair andtransparent with our customers.

Meritocracy

We recognize and appreciate efforts put in by our employees. And we, as a matter of fact, rewardand distinguish each one of them, ceaselessly.

Solidarity

We believe in sharing a forthright and respectful relationship with ourbusiness partners and employees. We consider them both as our teamassociates, who work together. Succeed together.

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Milestones

4th largest in terms of no. of offices for 2008-2009*.

Top Equity Broking House in terms of branch expansion for2008*.

6th in terms of Trading terminals in for two consecutive years 2007- 2008*.

9th in terms of Sub Brokers for2007*

Nominated among the Top 3 for the "Best Financial Advisor Awards 08" in the category of

National Distributors Retail instituted by CNBC-TV18 and OptiMix.

Nominated among the Top 3 for the "Best Financial Advisor Awards 09" in the category of

National Distributors Retail instituted by CNBC-TV18 and OptiMix

Awarded by BSE Major Volume Driver

04-05,06-07,07-08 .

Ranked 2nd by UTI MF & CNBC TV 18 Financial Awards 2009 in the category Best Financial

Advisor- Retail.

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Bonanza as a company:-

Different areas of the company Which includes:

1.Bonanza Portfolio Ltd. Member: NSE, BSE, NSDL, CDSL

Distribution:PMS, Mutual Funds, IPO.

2. Bonanza Commodity Brokers Pvt. Ltd. NCDEX AND MCX Commodity

Derivatives.

3. Bonanza Global DMCC Dubai Gold and Commodity

Exchange(U.A.E)

4. Bonanza Financial Academy Arbitrage curse

NCF

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Brokerage and account opening fees at BonanzaPortfolio Ltd.:-

CHARGES DEMAT ACCOUNT

1. Rate of account opening Client can open general demat and

Trading account with company by

paying Rs.500/- and there will be AMC

of Rs.250/- per year.

2 .Rate of brokerages Intraday: - For intraday transaction the

rate of brokerage is nominal i.e. 0.02%

on each transaction.

Delivery: - For delivery the rate of

brokerage is 0.20% on each

transaction.

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Commodity trading: - The rate of

brokerage in commodity trading is

0.02%.

FUND PERFORMANCETop Performers

Scheme % Returns

DSP BR World Gold Fund (G) 9.03

AIG World Gold Fund (G)4.95

Birla Sun Life CEF - Global PMP (G)4.94

SBI Magnum SFU - Emerging Businesses Fund (G)

4.52

ICICI Pru FMCG Fund - (G) 4.48

Sundaram Energy Opportunities Fund (G) 2.16

Religare Mid Cap Fund (G) 2.09

Birla Sun Life Small & Midcap Fund (G) 2.04

Reliance Long-Term Equity Fund (G) 1.99

ICICI Pru R.I.G.H.T. Fund (G) 1.95

*Returns upto 1 yr are absolute and over 1 yr are CAGR

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https://www.bonanzaonline.com/MutualFund/Scheme-Profile/5467/DSP-BR-World-Gold-Fund-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/7651/AIG-World-Gold-Fund-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/9373/Birla-Sun-Life-CEF---Global-PMP-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/2186/SBI-Magnum-SFU---Emerging-Businesses-Fund-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/279/ICICI-Pru-FMCG-Fund---(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/279/ICICI-Pru-FMCG-Fund---(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/6196/Sundaram-Energy-Opportunities-Fund-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/4211/Religare-Mid-Cap-Fund-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/4741/Birla-Sun-Life-Small-and-Midcap-Fund-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/4741/Birla-Sun-Life-Small-and-Midcap-Fund-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/3725/Reliance-Long-Term-Equity-Fund-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/10657/ICICI-Pru-RIGHT-Fund-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/5467/DSP-BR-World-Gold-Fund-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/7651/AIG-World-Gold-Fund-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/9373/Birla-Sun-Life-CEF---Global-PMP-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/2186/SBI-Magnum-SFU---Emerging-Businesses-Fund-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/279/ICICI-Pru-FMCG-Fund---(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/6196/Sundaram-Energy-Opportunities-Fund-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/4211/Religare-Mid-Cap-Fund-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/4741/Birla-Sun-Life-Small-and-Midcap-Fund-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/3725/Reliance-Long-Term-Equity-Fund-(G)https://www.bonanzaonline.com/MutualFund/Scheme-Profile/10657/ICICI-Pru-RIGHT-Fund-(G)


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Mutual Fund Rating Radar

Check Whether You Are Invested Into The Right Fund

Are you rattled with the most buzzing question amongst mutual funds? To Buy or to Sell Fund A. Justselect the fund you are invested / investing and get the opinion of our in-house MF Research team aboutthe fund.

The ratings are based purely on the basis of past performance, volatility, statistical ratios, company and

sector concentration of the fund along with few qualitative parameters as well. We also take into

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consideration factors like the costs/expense ratios of funds, corpus size, and funds adherence to

mandate in the last 5 years. The research process does not have any bias towards any fund house /

mutual fund. Funds which have not completed a year as on 31-December-2009 have not been rated.

The funds are ranked on the said parameters and are divided in 5 divisions. The five divisions account

for top 10%, next 25%, middle 30%, next 25% and bottom 10% of funds which are ranked 5-Star, 4-

Star, 3-Star, 2-Star and 1-star respectively.

SWOT OF THE COMPANYSTRENGTH:

Top performing funds that have 5 star ratings from ICRA

Funds in all the categories from open ended equity, Sectoral funds, Debt funds & ELSS funds

Choice of choosing any SIP date to the customer

WEAKNESS:

Products not advertised extensively

Short term returns are not that good

OPPORTUNITIES:

Improve the marketing of the products

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Fixed deposits rates are going down that attracts the investors to invest in Mutual Funds

THREAT:

Increasing competition in the industry

Global slowdown affected the MF industry badly and the retail investors are not ready to invest in

the market though it is growing but not at a expected growth rate.

Intense Competition and easy availability of substitutes.

MUTUAL FUND SCHEMES COMPARISON

Below is a comparison between different mutual fund schemes on the basis of their investment

objectives, portfolio of investments and the level of risk associated.

Equity Funds

Types Investment

Objectives

Portfolio of

Investments

Risk Associated

Aggressive

Growth Funds

Capital

Appreciation

Invest in less

researched shares of

speculative nature

Highly Volatile

Growth Funds Capital Invest in companies Volatile but less than

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Appreciation that are expected to

outperform the market

in the future

Aggressive growth

funds

Specialty Funds CapitalAppreciation

They follow statedcriteria for

investments and their

portfolio comprises of

only those companies

that meet their

criteria.

Concentrated andhence are riskier than

diversified funds

Diversified

Equity Funds

Capital

Appreciation

A small portion of

investment in liquidmoney market,

diversified equity

funds invest mainly in

equities without

concentration on a

particular sector.

Well diversified and

reduce sector-specificor company-specific

risk

Equity Index

Funds

Capital

Appreciation

Portfolio of these

funds comprises ofthe same companies

that form the index

and is constituted in

the same proportion

as the index.

Risk associated is the

same as that of thebenchmark index.

Broader indices (like

S&P CNX Nifty or BSE

Sensex) are less risky

than narrow indices

(like BSEBANKEX or

CNX Bank Index)

Value Funds CapitalAppreciation

Value funds invest inthose companies that

have sound

fundamentals and

whose share prices

are currently under-

These funds areexposed to a lower

risk level as compared

to growth funds or

specialty funds

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valued.

Equity Income

or Dividend

Yield Funds

To generate

high

recurringincome and

steady

capital

appreciation

Investments are

made in those

companies whichissue high dividends

(such as Power or

Utility companies).

These funds are

generally exposed to

the lowest risk level ascompared to other

equity funds

Income / Debt Fundsand Money Market Funds

Types Investment

Objectives

Portfolio of

Investments

Risk Associated

Diversified

Debt Funds

To generate fixed

current income

These funds invest in

all securities issued

by entities belonging

to all sectors of the

market

Low volatility,

default risk

remains

High Yield

Debt funds

To earn higher

interest returns

Invest in securities

issued by those

issuers who are

considered to be of

"below investment

grade"

More volatile and

bear higher

default risk than

diversified debt

funds

AssuredReturn

Funds

To offer assuranceof annual returns to

investors through

out the stated lock-

in period

Predominantly debtsecurities

A low-riskinvestment

opportunity

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Fixed Term

Plan Series

To generate some

expected returns in

a short period

Usually invest in

debt / income

schemes

Low risk fund

Money-Market

Funds

Recurring incomeand capital safety

Invest in short-term(maturing within one

year) interest bearing

debt instruments

Safest mutualfund investment

option, interst

rate risk remains

Types Investment

Objectives

Portfolio of

Investments

Risk Associated

Balanced

Funds

To generate regular

income, moderatecapital appreciation

and at the same

time minimizing the

risk of capital

erosion

Debt securities,

convertible securities,and equity and

preference shares

held in a relatively

equal proportion

Limited risk to

principal andmoderate long-

term growth

Growth-and-

Income

Funds

Capital growth and

some current

income


companies having

potential for capitalappreciation and

those known for

issuing high

dividends

Safer as

compared to

growth funds andriskier than

income funds

Asset

Allocation

Funds

Capital Growth and

income generation


financial assets or

non-financial

(physical) assets

Success of these

funds depends

upon the skills of

a fund managerin anticipating

market trends

GROWTH VS. DIVIDEND

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Its important to first get an overview of the two options before we venture into explaining why there is a

discrepancy between them. Broadly, mutual funds have two options - growth and dividend. Under the

dividend option, income generated by the mutual fund scheme on its investments is distributed to the

investor. This income/dividend is not assured by the mutual fund and is linked closely to the performance

of stock/debt markets. The investor can choose to either encash the dividend or re-invest it in the samemutual fund scheme (through the dividend re-investment facility).

Under the growth option, the investor does not receive an income; in this case the growth option NAV

already reflects the growth in investments (if any) registered by the mutual fund. If the investor is in need

of an income, he can redeem (either completely or partially depending on his investment objective) his

units; the difference in the growth option between the time he bought the mutual fund and redeemed it is

effectively his income.

The Common Perception Investors believe that after the dividend is distributed, growth NAV and

dividend NAV do not appreciate or depreciate in the same proportion. In other words they believe that

since the growth NAV is higher than the dividend NAV, it has appreciated more than the dividend NAV.

Therefore, they think that they are better off selecting the growth option as opposed to the dividend

option. While there are several reasons why investors must choose a particular option (growth or

dividend), this is certainly not one of them, mainly because the reality behind the discrepancy between

the two options is far from the perception. To know when to select which option, read our article on this

subject:

What happens when dividend is declared? Once a dividend is declared by the mutual fund, the

dividend option NAV diminishes to the extent of the dividend declared. The growth option NAV on the

other hand remains unchanged (for simplicitys sake we have ignored the market movement on that

particular day). The diminution in the dividend option NAV equals the amount of dividend declared.

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What investors should do

As we have impressed no matter what option the investor chooses, dividend and growth NAVs will

appreciate/depreciate based on the market movement; there is no other factor at play over here. Which

option (growth or dividend) to select is dictated entirely by the investors investment objective and

income/liquidity constraints.

Investment funds fall under two broad definitions - income and growth. An income fund provides investors

with earnings from the dividends of the companies into which the fund manager puts money. A growth

fund looks to grow the original sum invested as much as possible, or sometimes by a set amount.

To provide a stream of income to investors, fund managers look for companies that pay out relatively high

dividends. "An income stock generates lots of cash and pays some of it out as dividends," explains Hugh

Yarrow, co-manager of the Rathbone Income fund.

"Such companies are slightly more mature and don't need to put cash back into the business, so they

give it to investors. A growth company, on the other hand, will tend to use its cash-flow to invest back into

the business."

Whether you chose an income fund or a growth fund as your first investment depends on your

circumstances and aims. With their more mature companies, income funds are often seen as less risky.

However, this doesn't mean growth funds invest exclusively in high-risk young companies.

Ed Burke runs the Invesco Perpetual UK Growth fund: "I'm looking to have a high quality group of

companies that can generate good levels of free cash-flow per share," he explains.

However, income-producing stocks are included in growth funds because the income, when reinvested,

forms an important part of a company's total returns over the long term. "Usually a company growing its

dividend has a strong franchise and is capable of growing the cash-flow per share," Burke adds.

Picking a fund

Generally speaking, younger investors may want to go for growth as they have a long investing future in

front of them to recoup any losses. Those in later life can't afford to take such risks with their money and

may be better advised to stick to safer investments. Certainly, investments in a pension need to be lower

risk, particularly towards the time the investor is approaching retirement.

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Peak performance

Some growth funds performed way beyond expectations during the dotcom boom at the end of the

1990s. Fund managers made the most of rising prices in telecoms media and technology companies to

achieve some outstanding returns for investors. But the boom was an anomaly and couldn't defy gravityforever. Today, growth managers don't expect a repeat of the quick profits made during that time.

"Since 2000 there has been a return to the basic principles of investment, and dividends are an important

part of that," explains Burke. In other words, managers who got their fingers burnt in the boom are careful

not to invest in companies that promise over the top growth, because of the risks to investors' money.

Equity income funds have a steadier track record, and over the long term income provides about half the

total return of the equity market, points out Yarrow. He adds: "Income stocks also outperform when the

market is weakening because of their defensive qualities."

Best of both worlds

It is possible to buy an income fund and a growth fund to capitalize on the advantages that come with

each type of investing. The charges on each type of fund are similar and selecting a good example of

each type of fund could spread risk, giving exposure to a variety of companies.

Some investment houses manage both income and growth funds, which provide a little of each style in

the same fund. But, explains Gee, there are only a handful of these funds: "There's nothing wrong with

those funds, but there is less choice," she says. "If you have a bit of money you can chose income and

growth options from a whole variety of funds, which is better."

Debt Funds

Debt Funds invest in long-term borrowing of the government or corporate issuers at fixed rates of interest.

These funds earn their returns from the interest payments that they receive from bonds / gilts and the

fluctuations in the market price of their holdings. A Debt Fund is suitable for investors with a low risk

appetite.

Equity Funds

Equity funds typically invest in stocks of companies. Compared to Debt and Hybrid Funds, these are

high-return funds. Here's a tip: equities investments give the best results if you enter give your

investments 3-5 years to grow.

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Open and closed-end funds are both pools of investor money and they are both managed by

professionals to maximize diversification within a set strategy. The difference is in how the fund is

structured in terms of ownership.

An open-end fund issues and redeems shares on demand, whenever investors put money into the fund

or take it out. This happens routinely every day and the total assets of the fund grow and shrink as money

flows in and out. That means the more investors buy the Vanguard 500 Index fund, for instance, the more

shares there will be. There's no limit to the number of shares the fund can issue. Nor is the value of each

individual share affected by the number outstanding, since net asset value (NAV) is determined solely by

the change in prices of the stocks or bonds the fund owns, not the size of the fund itself.

A closed-end fund is a different animal. Like a company, it issues a set number of shares in an initial

public offering and they trade on an exchange. A fund like France Growth Fund trades on the New York

Stock Exchange just like any other stock. Its share price is determined not by the total value of the assets

it holds, but by investor demand for the fund.

Investing in closed-end funds can be very confusing for the novice investor and we don't recommend it.

Since these funds are traded on the open market, most sell at a discount to their underlying asset value

for a number of reasons. Most investors who buy closed-end funds look for those with solid returns that

are trading at large discounts. They bet that the spread between the discount and the underlying asset

value will close. If you don't understand the mechanics of evaluating the discount spread, however, you're

better off sticking to open-end funds

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COMPARISON OF DIFFERENT MUTUAL FUNDS

By FIIs as on Jul 3, 2010 Amount in Rs.

Crores

Nature GrossPur.

GrossSale

Net

Equity 2302.70 1900.80 401.9

Debt 1478.60 299.40 1179.2

By MFs as on Jul 2, 2010 Amount in Rs.

Crores

Nature GrossPur.

GrossSale

Net

Equity 755.70 962.80 -207.1

Debt 5103.60 1222.50 3881.1

Open Ended & Close Ended Funds

Open and closed-end funds are both pools of investor money and they are both managed by

professionals to maximize diversification within a set strategy. The difference is in how the fund is

structured in terms of ownership.

An open-end fund issues and redeems shares on demand, whenever investors put money into the fund

or take it out. This happens routinely every day and the total assets of the fund grow and shrink as money

flows in and out. That means the more investors buy the Vanguard 500 Index fund, for instance, the more

shares there will be. There's no limit to the number of shares the fund can issue. Nor is the value of each

individual share affected by the number outstanding, since net asset value (NAV) is determined solely by

the change in prices of the stocks or bonds the fund owns, not the size of the fund itself.

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A closed-end fund is a different animal. Like a company, it issues a set number of shares in an initial

public offering and they trade on an exchange. A fund like France Growth Fund trades on the New York

Stock Exchange just like any other stock. Its share price is determined not by the total value of the assets

it holds, but by investor demand for the fund.

Investing in closed-end funds can be very confusing for the novice investor and we don't recommend it.

Since these funds are traded on the open market, most sell at a discount to their underlying asset value

for a number of reasons. Most investors who buy closed-end funds look for those with solid returns that

are trading at large discounts. They bet that the spread between the discount and the underlying asset

value will close. If you don't understand the mechanics of evaluating the discount spread, however, you're

better off sticking to open-end funds.

Open-Ended funds and closed-ended funds can be regarded as two main collective investment

instruments. Open-Ended funds (OEFs) are funds which stay open; there is no fixed number of shares

and are usually not traded on exchanges (eg: mutual funds). Closed-Ended funds (CEFs) have fixed

number of shares and are traded through exchanges just like stocks. Here are the key differences

between open-ended and closed-ended funds.

1. Whenever an investor buys shares of open-ended funds the funds asset rise as money is added

(equal to the price of shares) to the asset pool, and whenever an investor liquidates shares the

funds asset decline as money is taken from the pool of assets. But in closed end funds as buying

and selling activities not directly affect funds asset.

2. The value of open-ended funds is equal to their Net Asset Value (NAV). But value of closed-

ended funds can deviate from NAV. Positive deviation is named as premium and negative

deviation as discount.

3. The expense ratio of open-ended funds is often higher than closed-ended funds. This is because

CEFs do not have to deal with regular creation and redemption of shares.

4. As closed ended funds are traded on exchanges, they are bound to obey some rules which make

them more transparent to investors, especially to its shareholders.

5. Because of their low expense ratio, CEFs are allowed to invest more in illiquid securities than

OEFs.

6. For creating and redeeming shares, open-ended funds are forced to keep some part of their

asset as money, where as closed-ended funds can invest all (most) of their asset to build a

portfolio of stocks or other securities.

7. In periods of market panic, for rising money in hand, open-ended fund managers can be forced to

sell some asset of their portfolio which they want to hold and this can harm the liquidity and

balance of the fund. This is not a problem with closed-ended funds as buying and selling

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activities are between market participants (investors, brokers and market makers) and the fund is

not directly involved in it.

SIP OR LUMPSUM OR LONG TERM INVESTMENT,

WHICH ONE IS BETTER

Moral of the story is both styles of investments give good returns in equities if held for the long-term. As

long as you remain invested in the right fund, SIP or lump sum Investments both do well.

Historically, investors have earned an average of 15 per cent annualised per annum if they remained

invested for more than 10 years.

Why the sudden importance of SIP and why everybody and her/his aunt is suggesting SIPs? Well, here

are the main reasons:

SIPs help you in avoiding timing the market

It instills discipline towards investments

You do not necessarily have to invest a big amount

SIP helps you in being a regular investor

All said and done remember that the basic purpose of investing is to get money when you need it the

most. Hence invest wisely.

Some trends never go out of fashion. Probably because they are time tested and proven. Taking a leaf

out of the age-old piggy bank concept, fund houses are now re-inventing the systematic investment plans

(SIPs). The product, a great success globally so far, has proved to be a great way to accumulate wealth

for retail investors with low risk appetite. The virtues of rupee cost averaging and compounding has made

it a popular plan to invest with.

Drawing from this success, a few fund houses have launched daily SIPs in India. The new product plans

to collect a small sum from an individual on a daily basis and invest in the market, much like depositing a

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penny in a piggy bank. To help you decode the new product, heres a pocket guide on daily SIPs and

things you must keep in mind before investing in it.

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Research MethodologyTitle Comparative Analysis of Different kinds of mutual funds study of investors behavior

towards mutual funds

Purpose:

The purpose of methodology is to describe the process involved in research work. This

includes the overall research design, data collection method, the field survey and the

analysis of data.

Research Objective:

To gauge the pattern of investment by the investors and their inclination towards the

mutual funds investment and also take a deep insight of what all factors are important

before doing an investment

Research Design:

Appropriate and structured questionnaire was designed.

Surveyed a sample of 100 investors.

Sources of Data:

Primary data

Secondary data

Method Used-

The method used for the research isJudgmental Non Probability sampling method.

Analysis:

The important factors and data collected were sequentially analyzed and graphed.

Limitations of the Study:

The sample size is only 100 so the sample may not be truly representative of the Delhi

population.

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Analysis and Diagramatic RepresentationQ1 What is your age?

Age bracket Percentage

a) 25-35 36

b) 35-45 28

c) 45-55 24

d) 55 and above 12

Interpretation-

Majority of the respondents were in the age group of 25-35 and 35-45. And this is the time

period where generally people like to make more investments as they are earning good in

this stage.

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Q2 What is your income bracket?

Income Percentage

a) 1.5-3 lakh rupees 15

b) 3-5 lakh rupees 32

c) 5-8 lakh rupees 29

d) 8 lakh and above 24

Interpretation-

Out of the total 65 respondents the income bracket majorly was in the 3-5 lakh rupees

bracket. Just 15% of the respondents were in the 1.5-3lakh bracket.

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What is your source of information while

investing in mutual funds?

Source Percentage

a) Internet 19

b) Newspaper 12

c) Financial Advisor 28

d) Friends 20

e) Television 21

Interpretation-

The study shows that while making the investment in any mutual fund generally the

investors prefer taking a professional support ie of a financial advisor or reports and articles

on the net. News programs on TV are also a good source.

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Q4. Are you a regular or a new investor in mutual fund?

Type Percentage

a) REGULAR 46

b) NEW 54

Interpretation-

There was a fair mix of the experienced and nave invetors in the mutual funds industry out

of the sample of 100 investors.

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Q5. Which type of fund you prefer the most?

Type Percentage

a) Regular income 31

b) Debt 19

c) Diversified Equity 27

d) Sector funds 9

e) ELSS (tax shield) 14

Interpretation-

This simply shows that the people surveyed rely more on constant incomes and in equity

instruments rather than debt funds.

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Q6. Which Features attract you the most while choosing a specific Mutual Fund?

Feature Preference Percentage

a) Flexibility 10

b) Return 26

c) Managed by professional people 11

d) Risk Diversion 22

e) Less Expenses 31

Interpretation-

Minimization of the investment cost and getting a good return by diversifying their

investment portfolio are the basic factors that an investor keeps in mind before investing

any specific mutual fund type.

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Q7. What type of Mutual Fund Scheme you prefer?

Type Preference Percentage

a) Open Ended Scheme 68

b) Close Ended Scheme 32

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Q8. What type of return you expect?

Return Time Period Percentage

Monthly 16

Quarterly 20

Semi annual 28

Annual 38

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Q9. What is your investment horizon?

Investment Time Horizon Percentage

Up to 6 months 10

Up to 1 year 21

Up to 2 years 26

Up to 3 years 24

Up to 5 years 12

5 years and above 7

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Q10. What are your near future liabilities?

Liability Preference Percentage

Child marriage 16

Children Education 28

Parents medical expenses 19

Debt 26

Others 11

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Q11) Would you be interested in knowing more about mutual funds than what

your current knowledge is?

a) yes [61]

b) no [39]

Interpretation-

Majority investors were interested in knowing more about the mutual funds investment

techniques and schemes, which is a good sign for the mutual fund industry.

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LIMITATIONS OF THE STUDYWhile surveying I encounter with some problems like-

A survey should involve a larger sample size otherwise the findings of the survey cannot begeneralized.

A larger sample size may increase the time and cost of collecting the primary data with the help

of questionnaire, so I kept the sample size small.

Companies generally dont entertain students for survey purposes; it is not allowed to get the

questionnaire filled.

Many of the respondents were not willing to fill the questionnaire.

Some people were not willing to respond and few of them who responded were in hurry hence

the active participation was lacking. Due to which I faced difficulties in collecting informations

regarding our questionnaire.

Another problem which I face was that people were hesitating to give information about their

views freely.

Many people dont even know the concept of mutual funds, so it means awareness about the

industry needs to be generated.

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RECOMMENDATIONS Forms should be readily available with the distributors.

They should promote/advertise aggressively.

Simplify the forms, make them easy to fill

More lucrative incentives for the distributors.

Educate the investors that they can invest in the mutual funds directly through fund houses

without any entry and exit loads.

There is lack of awareness among people about mutual funds so there should be more

advertising and other promotional campaigns to make them aware.

People are more interested in investing in equity funds rather than debt funds because

companies are promoting more for equity funds. Companies should equally promote debt funds

also as the provide security to customers.

Companies should give knowledge to its customer about its computerized operations.

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CONCLUSIONThis report is a comparison between different kinds of mutual funds traded in India. It studies various

factors, which affects common investors decision for investment in mutual fund and stock market.

Moreover it discusses the various measures of revival of common investor confidence in the Indian stock

market.

The report includes all the basics about the mutual funds, the history of the mutual fund industry as well

as its rise in India. It also includes the complete profile of the mutual funds industry that consist all the

major players in the market, different types of the funds offer to the investor, their performance in during

the last three years with the special focus on funds by Birla Sunlife Mutual Funds AMC LTD. During the

study it also appeared that investors give preference to the age factor, while investing there surplus

money and consider analyst recommendation, NAV of funds and performance in past few years.

The study involved the comparative analysis of the different mutual funds available to the investors. The

different funds available to an investor are debt fund, equity fund, sectoral fund etc. The different options

to an investor are growth, dividend etc. During the study I came up to a point that majority of the mutual

funds investors are investing by the open ended scheme and many are very much willing to gather more

information about mutual funds which is a very good indicator for the industry. And it has also been

observed that in a very short time period Birla Sun Life AMC Ltd has emerged out as a major player in the

market.

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BIBLIOGRAPHYWebsites

www.bonannzaonline .com

www.mutualfundsindia.com

www.wikipedia.com

www.economywatch.com/mutual-funds/index-fund.html

www.investopedia.com

www.reliancemf.com

www.sbimutualfund.com

www.economywatch.com/mutual-funds.html

www.valuesearchonline.com

www.godmind.co.in

www.mutualfundadvisorindia.in

www.google.com

Magazines and Newspapers

The Economic Times

.BusinessLine and Business Standard newspapers

Business Today and Business week.

Books and Articles

Sharma, Sandhir Research Methodology 3rdedition. Chapter-4th Data Analysis Methods

Kothari K.C. Research Methodology 2ndedition Chapter 7th Techniques of researching.

Maheshwari N. S. Financial Management

Sankaran, Sankaran Indian Mutual Funds Handbook

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http://www.bonannzaonline/http://opt/scribd/conversion/Documents%20and%20Settings/anuraag/Application%20Data/Microsoft/Word/www.mutualfundsindia.comhttp://www.wikipedia.com/http://opt/scribd/conversion/Documents%20and%20Settings/anuraag/Application%20Data/Microsoft/Word/www.economywatch.com/mutual-funds/index-fund.htmlhttp://www.investopedia.com/http://www.reliancemf.com/http://www.sbimutualfund.com/http://www.economywatch.com/mutual-funds.htmlhttp://www.valuesearchonline.com/http://www.godmind.co.in/http://www.mutualfundadvisorindia.in/http://opt/scribd/conversion/Documents%20and%20Settings/anuraag/Application%20Data/Microsoft/Word/www.google.comhttp://www.bonannzaonline/http://opt/scribd/conversion/Documents%20and%20Settings/anuraag/Application%20Data/Microsoft/Word/www.mutualfundsindia.comhttp://www.wikipedia.com/http://opt/scribd/conversion/Documents%20and%20Settings/anuraag/Application%20Data/Microsoft/Word/www.economywatch.com/mutual-funds/index-fund.htmlhttp://www.investopedia.com/http://www.reliancemf.com/http://www.sbimutualfund.com/http://www.economywatch.com/mutual-funds.htmlhttp://www.valuesearchonline.com/http://www.godmind.co.in/http://www.mutualfundadvisorindia.in/http://opt/scribd/conversion/Documents%20and%20Settings/anuraag/Application%20Data/Microsoft/Word/www.google.com


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ANNEXURE

QUESTIONNAIRE ON MUTUAL FUNDS

NAME :

AGE : .

ADDRESS : .

OCCUPATION :

1. What is your age?

a) 25-35 years

b) 35-45 years

c) 45-55 years

d) 55 and above

2. What is your income bracket?

a) 1.5-3 lakh rupees

b) 3-5 lakh rupees

c) 5-8 lakh rupees

d) 8 lakhs and above

3. What is your source of information while investing in mutual funds?

a) Internet

b) Newspaper

c) Financial Advisor

d) Friends

e) Television

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4. Are you a regular or a new investor in mutual fund?

a) REGULAR b) NEW

5. Which type of fund you prefer the most?

a) Regular income [ 31]

b) Debt [ 19]

c) Diversified Equity [ 27]

d) Sector funds [ 9]

e) ELSS (tax shield) [14 ]

6 . Which Features attract you the most while choosing a specific Mutual Fund?

a) Flexibilityb) Return

c) Managed by professional people

d) Risk Diversion

e) Less Expenses

7. What type of Mutual Fund Scheme you prefer?

a) Open Ended Scheme

b) Close Ended Scheme

8. What type of return you expect?

a) Monthly b) Quarterly

c) Semi annually d) Annually

9. What is your investment horizon?

Up to 6 months

Up to 1 year

Up to 2 years

Up to 3 years

Up to 5 years5 years and above

10. What are your near future liabilities?

Child marriage

Children Education

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Parents medical expenses

Debt

Comparative Analysis of Different Kinds of Mutual Funds-1

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